Used by borrowers (in development) as a tool to get downstream financing. For example, long-term financing commitment used to secure construction loan.
In secondary marketing, a com-mitment to purchase mortgages with specific terms, understanding that delivery is unlikely. The commitment is issued for a fee paid by the seller to the purchaser. Synonymous with an optional delivery commitment.
An agreement by a lender to provide a certain amount of money on specific terms in the future. Neither party expects funding of the loan. This commitment enables the borrower to arrange construction financing from other sources. The commitment is issued for a fee and the lender is willing to disburse the committed funds in the event that a permanent loan on more favourable terms is not obtained.
commitment by an underwriter to purchase for resale any part of a new issue offered to current shareholders in a rights offering which remains unsubscribed.
An agreement between a corporation and investment firm that the firm will purchase whatever part of a stock issue that is offered in a rights offering that is not subscribed to in the two- to four- week standby period.
Agreement by lender to pay off construction loan with new long-term loan. Also refers to a secondary market concept that is not in great use today.
Agreement between an issuer and the standby underwriter.
A bank commitment to loan money up to a specified amount for a specific period, to be used only in a certain contingency.
Pledge by a permanent lender to fund a long-term loan to take out the construction lender upon successful completion of the building.
An agreement to purchase any shares left over after completion of a public offering. This is commonly done in a rights offering, where a standby underwriter agrees to purchase all shares not subscribed for by the existing shareowners. Initially, the function of an underwriter in a public offering was to insure that all the money would be raised by issuing a standby commitment. It was akin to a performance bond. Today, there is only a letter of intent between the underwriter and the company proposing to go public. The risk that the public offering will not occur, or that the offering price will decline substantially, is borne entirely by the company. It is not until hours before the effective date, after all the selling efforts have been completed, that the contemporary underwriters will sign an underwriting agreement to buy the shares at an agreed price.
An agreement between a real estate lender and a builder whereby the lender stands ready to make a certain loan amount available to the builder for a specified period of time. Normally, a fee for making such a commitment is charged by the lender to compensate the lender for the risk and legal liability in committing funds to the builder. Normally, the fee is forfeited if the funds are not borrowed.
A commitment from a lender to make a loan in a specified period of time on specified terms with the understanding that the borrower will not likely draw down the funds.
A commitment to purchase a loan or loans with specified terms, both parties understanding that delivery is not guaranteed. The commitment is issued for a fee, with willingness to fund in the event that a permanent loan is not obtained. Such commitments are typically used to enable the borrower to obtain construction financing at a lower cost on the assumption that permanent financing of the project will be available on more favorable terms when the improvements are complete and the project generates income.
Commitment by a lender to make available a sun of money at specified terms for a specified period for the financing of a project. The borrower pays a fee for the privilege of either executing the loan or allowing the commitment to lapse.