Derivatives

3 Months Ended

Mar. 31, 2021

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):


	March 31, 2021						December 31, 2020
Derivative contract	Assets		Liabilities		Notional Amounts(1)		Assets		Liabilities		Notional Amounts(1)
Rate lock commitments	$	9,048	$	5,471	$	242,615	$	21,034	$	2,977	$	296,972
Nasdaq Forwards	7,220		—		174,000		12,822		—		174,000
Forward sale contracts	9,239		6,482		1,059,774		7,632		14,971		1,359,482
Total	$	25,507	$	11,953	$	1,476,389	$	41,488	$	17,948	$	1,830,454

(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 $1.1 million and $1.4 million of expenses for the three months ended March 31, 2021 and 2020, 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 accompanying unaudited condensed consolidated statements of operations were as follows (in thousands):


	Location of gain (loss) recognized in income for derivatives	Three Months Ended March 31,
		2021		2020
Derivatives not designed as hedging instruments:
Nasdaq Forwards	Other income (loss), net	$	(5,602)	$	21,173
Rate lock commitments	Gains (loss) from mortgage banking activities/originations, net	4,694		60,163
Rate lock commitments	Compensation and employee benefits	(1,117)		(1,411)
Forward sale contracts	Gains (loss) from mortgage banking activities/originations, net	2,757		(77,680)
Total		$	732	$	2,245

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.