If a borrower is allowed to accept their own service provider, what tolerance category does this fall under?

When a borrower is permitted to choose their own service provider, this situation falls under the unlimited tolerance category. In this category, there are no restrictions on how much the service charges may vary from the estimates provided in the Loan Estimate. This means that as long as the service is not required by law to be performed by a specific provider, the lender must allow the borrower the flexibility to engage a provider of their choosing without imposing any limits on the amount charged.

The unlimited tolerance category is typically associated with services that are not required to be provided by the lender's chosen service provider. Since the borrower can opt for their own service provider, the actual costs may differ significantly from those projected in the initial disclosures, and the lender is obligated to honor that choice without limiting the amount that can be charged.

In contrast, categories like limited and zero tolerance impose specific restrictions on how much costs may vary, especially concerning services required by the lender or fees covered by the lender’s service provider. Thus, when a borrower selects their own provider, it opens up the possibility of varying costs, which is characteristic of the unlimited tolerance category.