Commitment Fee


Also found in: Dictionary, Financial.
Related to Commitment Fee: Management fee, Upfront Fee

Commitment Fee

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.

References in periodicals archive ?
The Lender charged a no commitment fee and the loan has a sliding scale penalty in the case of prepayment.
The process transaction interest, commitment fee, and possibly of the Civil Code.
If a mortgage originator chose to deliver nothing, it would forfeit the nonrefundable portion of the commitment fee paid to Freddie Mac.
The Fund has also made access to funds from the CCL simpler and faster in the event of crisis, and reduced the interest rate and commitment fee on any lines of credit.
The two A$500,000 payments comprise the A$1million Commitment Fee agreed as part of the joint venture.
35) Like cancellation fees, the commitment fee is to compensate the arbitrators for lost employment.
8 billion rights offering and be paid a standby commitment fee equal to 4 per cent of the gross proceeds.
Schneider obtained a commitment letter from the banks, under which they agreed to provide acquisition financing; as consideration, Schneider agreed to pay a nonrefundable loan commitment fee and to indemnify the banks for any legal fees associated with the commitment of funds.
65 per cent with commitment fee of 35 per cent of margin.
In the process the transaction rate and the commitment fee, other costs too, can not be accepted free of charge.
Payment of the previously negotiated $10 million commitment fee is now payable in two installments of $5 million on March 1, 2011 and $5 million on April 30, 2011.