Loans Held for Sale, at Fair Value

6 Months Ended

Jun. 30, 2020

Trade and Loans Receivables Held-for-sale, Net, Not Part of Disposal Group [Abstract]

Loans held for sale, at fair value represent originated loans that are typically financed by short-term warehouse facilities (see Note 21 — “Warehouse Facilities Collateralized by U.S. Government Sponsored Enterprises”) and sold within 45 days from the date the mortgage loan is funded. Newmark initially and subsequently measures all loans held for sale at fair value on the accompanying unaudited condensed consolidated balance sheets. The fair value measurement falls within the definition of a Level 2 measurement (significant other observable inputs) within the fair value hierarchy. Electing to use fair value allows a better offset of the change in the fair value of the loans and the change in fair value of the derivative instruments used as economic hedges. Loans held for sale had a cost basis and fair value as follows (in thousands):



	Cost Basis		Fair Value
June 30, 2020	$	1,064,271	$	1,089,429
December 31, 2019	210,116		215,290

As of June 30, 2020 and December 31, 2019, all of the loans held for sale were either under commitment to be purchased by Freddie Mac or had confirmed forward trade commitments for the issuance and purchase of Fannie Mae or Ginnie Mae mortgage-backed securities that will be secured by the underlying loans. As of June 30, 2020 and December 31, 2019, there were no loans held for sale that were 90 days or more past due or in nonaccrual status.

During the period prior to its sale, interest income on a loan held for sale is calculated in accordance with the terms of the individual loan. Interest income on loans held for sale was $6.3 million and $6.5 million for the three months ended June 30, 2020 and 2019, respectively, and $12.1 million and $15.1 million for the six months ended June 30, 2020 and 2019, respectively. Interest income on loans held for sale is included in “Management services, servicing fees and other” on the accompanying unaudited condensed consolidated statements of operations. Gains for the fair value adjustments on loans held for sale were $10.9 million and $12.4 million for the three months ended June 30, 2020 and 2019, respectively, and $25.2 million and $25.7 million for the six months ended June 30, 2020 and 2019, respectively. These gains were included in “Gains from mortgage banking activities/originations, net” on the accompanying unaudited condensed consolidated statements of operations.