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Commitment Fee

   Also found in: Financial 0.04 sec.

Compensation paid to a lender by a borrower for the lender's promise to give a mortgage at some future time.

A commitment fee, frequently employed in real estate transactions, is an expense separate from interest charged on the loan to be secured by the mortgage. The controversy surrounding nonrefundable commitment fees arises when a borrower decides not to proceed with the loan and then demands return of the fee on the premise that the lender has performed no services to earn it. The courts have consistently rejected this contention and held that the lender is entitled to the commitment fee either as Liquidated Damages for breach of contract or as compensation for earmarking the funds for loan to the borrower.


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? References in periodicals archive
The commitment fee included both refundable and nonrefundable portions.
In addition to all out-of-pocket expenses, the bank often charges a commitment fee of 1% of its loan amount.
32%, while the unfunded class A-S1VF notes will receive an ongoing commitment fee of 0.
 
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