Note 2.—Mortgage Loans Held-for-Sale

A summary of the unpaid principal balance (UPB) of mortgage LHFS by type is presented below:


	June 30,		December 31,
	2020		2019
Government (1)	$	1,889	$	51,019
Conventional (2)		19,259		436,040
Non-qualified mortgages (NonQM)		11,223		274,834
Fair value adjustment (3)		(2,952)		20,250
Total mortgage loans held-for-sale	$	29,419	$	782,143

(1)

Includes all government-insured loans including Federal Housing Administration (FHA), Veterans Affairs (VA) and United States Department of Agriculture (USDA).

(2)

Includes loans eligible for sale to Federal National Mortgage Association (Fannie Mae or FNMA) and Federal Home Loan Mortgage Corporation (Freddie Mac or FHLMC).

(3)

Changes in fair value are included in gain (loss) on sale of loans, net in the accompanying consolidated statements of operations and comprehensive (loss) earnings.

At June 30, 2020 and December 31, 2019, the Company had $3.5 million and $4.5 million, respectively, in UPB of mortgage LHFS that were in nonaccrual status as the loans were 90 days or more delinquent. The carrying value of these nonaccrual loans at June 30, 2020 and December 31, 2019 were $3.0 million and $4.2 million, respectively.

Gain (loss) on sale of loans, net in the consolidated statements of operations and comprehensive (loss) earnings, is comprised of the following for the three and six months ended June 30, 2020 and 2019:


	For the Three Months Ended				For the Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
(Loss) gain on sale of mortgage loans	$	(21,853)	$	27,822	$	25,639	$	41,430
Premium from servicing retained loan sales		64		416		1,753		1,999
Unrealized gains (losses) from derivative financial instruments		936		5,175		(5,341)		4,566
Losses from derivative financial instruments		(113)		(2,300)		(11,035)		(3,354)
Mark to market gain (loss) on LHFS		22,291		4,864		(23,202)		8,334
Direct origination expenses, net		(260)		(4,974)		(9,517)		(8,129)
Change in provision for repurchases		386		(1,531)		(5,009)		(3,160)
Gain (loss) on sale of loans, net	$	1,451	$	29,472	$	(26,712)	$	41,686