Credit Enhancement Receivable, Credit Enhancement Deposit and Contingent Liability

3 Months Ended

Mar. 31, 2021

Credit Enhancement Receivable Contingent Liability And Credit Enhancement Deposit [Abstract]

Credit Enhancement Receivable, Credit Enhancement Deposit and Contingent Liability

Newmark was a party to a Credit Enhancement Agreement (“CEA”), dated March 9, 2012, with German American Capital Corporation and Deutsche Bank Americas Holding Corporation (together, the “DB Entities”). On October 20, 2016, the DB Entities assigned the CEA to Deutsche Bank AG Cayman Island Branch, a Cayman Island Branch of Deutsche Bank AG (“DB Cayman”). Under the terms of these agreements, DB Cayman provided Newmark with varying levels of ongoing credit protection, subject to certain limits, for Fannie Mae and Freddie Mac loans subject to loss-sharing (see Note 23 — “Financial Guarantee Liability”) in Newmark’s servicing portfolio as of March 9, 2012. DB Cayman also reimbursed Newmark for any losses incurred due to violation of underwriting and servicing agreements that occurred prior to March 9, 2012. In accordance within the terms of the CEA, Newmark paid all amounts due to the DB Entities on March 23, 2021 fulfilling the Company's obligations under the agreement. For the three months ended March 31, 2021 and 2020, there were no reimbursements under the CEA.

Newmark's servicing portfolio consisted of the following loss-sharing components (in thousands):


	March 31, 2021		December 31, 2020
Total credit risk loan portfolio	$	24,599,846	$	24,048,754
Maximum DB Cayman credit protection	—		18,689

Maximum pre-credit enhancement loss exposure	$	7,351,405	$	7,172,509
Maximum DB Cayman credit protection	—		6,230
Maximum loss exposure without any form of credit protection	$	7,351,405	$	7,166,279

Credit enhancement receivable

As of March 31, 2021 and December 31, 2020, there were no credit enhancement receivables.

Credit enhancement deposit

The CEA required the DB Entities to deposit $25.0 million into Newmark’s Fannie Mae restricted liquidity account (see Note 9 — “Capital and Liquidity Requirements”). On of March 23, 2021, Newmark returned the credit enhancement deposit of $25 million to the DB Entities.

The $25.0 million deposit was included in “Accounts payable, accrued expenses and other liabilities” and "Other long-term liabilities", respectively, on the accompanying unaudited condensed consolidated balance sheets as of December 31, 2020.

Contingent liability

Under the CEA, Newmark was required to pay DB Cayman, on March 9, 2021, an amount equal to 50% of the positive difference, if any, between (a) $25.0 million, and (b) Newmark’s unreimbursed loss-sharing payments from March 9, 2012 through March 9, 2021 on Newmark’s servicing portfolio as of March 9, 2012. On March 23, 2021 Newmark paid DB Cayman the entire outstanding amount. The balance of the contingent liability was $12.3 million as of December 31, 2020 and was included in “Accounts payable, accrued expenses and other liabilities” on the accompanying unaudited condensed consolidated balance sheets.