Nj gosh I'm sorry you had to pay this up front. I would imagine that this was done to get you to commit and to not "rate shop" or back out. However, like I said, I've only seen this done as an application fee and have never seen it be 1% of the loan amount. When a rate is locked-the lender sets aside that money so it cannot be used. Lenders do not like when there is "fall out" as that means they lost the use of that money for the time it was locked for you.
Did you sign anything stating that this was non-refundable? If not then you may have some recourse. In fact, you still may be able to get it back but I'll have to do some checking for you on RESPA.