- 28 -
to originators to justify selection of the prior approval
purchase contract and payment of the nonrefundable portion of the
commitment fee, rather than entering into an immediate delivery
purchase contract and risk default and the related sanctions.
Petitioner, on the other hand, is willing to make delivery
optional, and thereby give up the rights and remedies it would
have had under an immediate delivery contract, in return for the
nonrefundable portion of the commitment fee.
Respondent argues that the possible forfeiture of the 1.5-
percent refundable portion of the commitment fee makes it
virtually certain that the mortgage sale will be consummated,
negating any real option for an originator. Petitioner
acknowledges that potential loss of the refundable portion of the
commitment fee was intended to encourage an originator to sell
the mortgage if there was a mortgage to sell. Indeed, an
originator’s agreement to forfeit the nonrefundable portion
indicates its intent to follow through with the sale if possible.
But the possible inability to deliver and related sanctions were
apparently of sufficient concern to originators to justify
payment of the 0.5-percent nonrefundable portion in order to make
delivery optional. If such risk were not significant,
originators could simply have entered into mandatory delivery
contracts and avoided the nonrefundable fee.
Respondent cites Halle v. Commissioner, 83 F.3d 649 (4th
Cir. 1996), as authority for his argument that there was no
Page: Previous 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 NextLast modified: May 25, 2011