Commitment Fee

(redirected from Commitment Fees)
Also found in: Dictionary, Financial.
Related to Commitment Fees: Upfront Fee, Management 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 DENR was penalized with payment of commitment fees that totaled P10,707,776.93 due to the delay in the implementation of the Forest Management Project (FMP) and the Integrated Natural Resources and Environmental Management Project (INREMP) that were financed by foreign lending agencies.
'A review was conducted to estimate how much of the commitment fees paid in 2017 may be attributed to implementation delay,' a document from the Neda said.
A total of P24.94 million in commitment fees had to be paid to the Japan International Cooperation Agency because of the delays in the Central Luzon Link Expressway Project, the Arterial Road Bypass Project II, the Pasig-Marikina River Channel Improvement Project Phase II, the Flood Risk Management Projects for the Cagayan, Tagolaon and Imus Rivers, and 84 road upgrading projects.
He said the refund of the monies initially paid and the cancelation of the promissory notes amounted to termination of the contract.He added that one of the clauses in the contract provided that the agreement be-came effective when signed by parties, in addition to payment of the commitment fees.
All other terms of the Loan Agreement remain in effect unamended, including the above-mentioned interest rates and commitment fees, as well as the condition precedent to drawdown that nothing has occurred since the closing of the Loan Agreement on November 18, 2014 (the "Closing Date") which could reasonably be expected to have a material adverse effect on the Company (as defined in the Loan Agreement).
The Fortress agreement, which can be increased to the same $150 million, lowers commitment fees, allows Arcapita to shop for better terms from other lenders, and limits the circumstances under which Fortress can terminate the loan.
Using a sample of 90 nonfinancial corporations, the authors find that credit line usage is positively related to total sales, borrowed reserves, and whether collateral is used to secure the loan; and it is negatively related to interest rate costs (specifically, risk premiums and commitment fees).
AIG will pay 8.50 percentage points over 3-month LIBOR, putting the current rate at well over 11 percent, but it will also pay commitment fees.
In this case, the taxpayer treated loan purchase commitment fees it received as option premiums; see Federal Home Loan Mortgage Corp.
That is, does he or she have all any necessary appraisals fees, good faith deposits, down payments, commitment fees, closing cost, etc., to see this deal through?
The smallest participants in loan syndications -- including Japanese financial institutions and regional banks -- are no longer interested in participating for a paltry share of commitment fees. And the large merged banks are lending less even to creditworthy borrowers, due to regulatory limitations on the loans that can be allocated to a single borrower.
Next, the Article examines arbitrators' policies regarding cancellation and commitment fees. Survey results highlighted confusion about whether arbitrators were prohibited by a jurisdiction's laws or ethical rules.