Commitment Fee

Author:Jeffrey Lehman, Shirelle Phelps

Page 27

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...

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