Loans Held for Sale

Loans held for sale consisted of the following:



At December 31,	2015		2014
	(in millions)
Commercial loans:
Construction and other real estate	1,895		100
Global banking	200		428
Total commercial	2,095		528
Consumer loans:
Residential mortgages	11		18
Other consumer	79		66
Total consumer	90		84
Total loans held for sale	$	2,185	$	612

During the fourth quarter of 2015, we transferred $1,889 million of certain commercial real estate loans to held for sale in order to better reflect the nature of our exposure and therefore more accurately depict returns on risk weighted assets. There was no lower of amortized cost or fair value adjustment recorded associated with this transfer as the transferred loans are performing.

We originate commercial loans in connection with our participation in a number of syndicated credit facilities with the intent of selling the loans to unaffiliated third parties. We also purchase commercial loans from the secondary market and hold the loans as hedges against our exposure to certain total return swaps. The commercial loans under these programs are classified as global banking loans held for sale and we have elected to designate these loans under the fair value option. The fair value of global banking loans held for sale under these programs was $151 million and $384 million at December 31, 2015 and 2014, respectively. See Note 15, "Fair Value Option," for additional information.

We sell all our agency eligible residential mortgage loan originations servicing released directly to PHH Mortgage Corporation ("PHH Mortgage"). Gains and losses from the sale of residential mortgage loans are reflected as a component of residential mortgage banking revenue in the accompanying consolidated statement of income (loss). Also included in residential mortgage loans held for sale are subprime residential mortgage loans with a fair value of $3 million and $4 million at December 31, 2015 and 2014, respectively which were previously acquired from unaffiliated third parties and from HSBC Finance Corporation ("HSBC Finance") with the intent of securitizing or selling the loans to third parties.

Loans held for sale are subject to market risk, liquidity risk and interest rate risk, in that their value will fluctuate as a result of changes in market conditions, as well as the credit environment. PHH Mortgage is obligated to purchase agency eligible loans from us as of the earlier of when the customer locks the mortgage loan pricing or when the mortgage loan application is approved. As such, we retain none of the risk of market changes in mortgage rates for these loans.

Other consumer loans held for sale reflects student loans which we no longer originate.

Excluding the commercial loans designated under fair value option discussed above, loans held for sale are recorded at the lower of amortized cost or fair value, with adjustments to fair value being recorded as a valuation allowance. The valuation allowance on consumer loans held for sale was $13 million and $15 million at December 31, 2015 and 2014, respectively. The valuation allowance on commercial loans held for sale was $21 million and $5 million at December 31, 2015 and 2014, respectively.