Derivatives

9 Months Ended

Sep. 30, 2020

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Newmark accounts for its derivatives at fair value and recognizes all derivatives as either assets or liabilities on the accompanying unaudited condensed consolidated balance sheets. In its normal course of business, Newmark enters into commitments to extend credit for mortgage loans at a specific rate (rate lock commitments) and commitments to deliver these loans to third-party investors at a fixed price (forward sale contracts). In addition, Newmark has entered into the Nasdaq Forwards (see Note 1 — “Organization and Basis of Presentation”) that are accounted for as derivatives.

The fair value of derivative contracts, computed in accordance with Newmark’s netting policy, is set forth below (in thousands):


	As of September 30, 2020						As of December 31, 2019
Derivative contract	Assets		Liabilities		Notional Amounts(1)		Assets		Liabilities		Notional Amounts(1)
Rate lock commitments	$	45,561	$	1,133	$	378,546	$	32,035	$	12,124	$	1,396,827
Nasdaq Forwards	18,959		—		267,480		26,502		—		267,480
Forward sale contracts	9,625		41,730		1,889,144		14,389		13,537		1,606,943
Total	$	74,145	$	42,863	$	2,535,170	$	72,926	$	25,661	$	3,271,250

(1)Notional amounts represent the sum of gross long and short derivative contracts, an indication of the volume of Newmark’s derivative activity, and do not represent anticipated losses.

The change in fair value of rate lock commitments and forward sale contracts related to mortgage loans are reported as part of “Gains from mortgage banking activities/originations, net” on the accompanying unaudited condensed consolidated statements of operations. The change in fair value of rate lock commitments are disclosed net of $0.7 million and $0.2 million of income for the three months ended September 30, 2020 and September 30, 2019, respectively, and $1.6 million of expenses for the nine months ended September 30, 2020 and September 30, 2019, respectively. The changes in fair value of rate lock commitments are reported as part of “Compensation and employee benefits” on the accompanying unaudited condensed consolidated statements of operations.

Gains and losses on derivative contracts which are included on the unaudited condensed consolidated statements of operations were as follows (in thousands):


	Location of gain (loss) recognized in income for derivatives	Three Months Ended September 30,				Nine Months Ended September 30,
		2020		2019		2020		2019
Derivatives not designed as hedging instruments:
Nasdaq Forwards	Other income (loss), net	$	(5,771)	$	(8,214)	$	(7,543)	$	(37,181)
Rate lock commitments	Gains from mortgage banking activities/originations, net	(3,951)		5,734		46,004		27,113
Rate lock commitments	Compensation and employee benefits	(677)		236		(1,576)		(1,620)
Forward sale contracts	Gains (loss) from mortgage banking activities/originations, net	16,187		12		(32,105)		(24,404)
Total		$	5,788	$	(2,232)	$	4,780	$	(36,092)

Derivative assets and derivative liabilities are included in “Other current assets”, “Other assets” and the “Accounts payable, accrued expenses and other liabilities”, on the accompanying unaudited condensed consolidated balance sheets.