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contract is converted to a mandatory delivery contract within the
60-day optional delivery period, the mortgage may not be
delivered”. (Emphasis added.) The contractual terms
specifically provide that an originator has the right, but not an
obligation, to sell the mortgage to petitioner. The prior
approval purchase contract specified the mortgage that petitioner
was obligated to purchase if an originator exercised its option.
To participate in the prior approval program, an originator would
execute and deliver to petitioner a Form 6, which set forth the
details of a specific mortgage to be delivered.
Despite the language of the prior approval purchase
contracts, respondent argues that the form of the contracts does
not create an option. In support of his argument, respondent
quotes the Sellers’ & Servicers’ Guide, which states: “‘Under
this program, [petitioner] will contract with the [originator]
before the closing date of the mortgage to purchase a multifamily
mortgage on a specific existing project.’” Respondent argues
that the terms contain an explicit offer to purchase by
petitioner and an explicit acceptance by an originator.
We agree that petitioner has made an explicit offer to
purchase an originator’s mortgage; this is consistent with an
option contract. In fact, an essential characteristic of an
option contract is that one party is obligated to perform, while
the other party may decide whether or not to exercise his rights
under the contract. U.S. Freight Co. v. United States, 190 Ct.
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