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Financial Guarantee Liability | 3 Months Ended
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Mar. 31, 2023
Guarantees [Abstract] |
Financial Guarantee Liability | Financial Guarantee Liability Newmark shares risk of loss for loans originated under the Fannie Mae DUS and Freddie TAH programs and could incur losses in the event of defaults under or foreclosure of these loans. Under the loss-share guarantee, Newmark’s maximum contingent liability to the extent of actual losses incurred is approximately 33% of the outstanding principal balance on Fannie Mae DUS or Freddie TAH loans. Risk-sharing percentages are established on a loan-by-loan basis when originated, with most loans at 33% and “modified” loans at lower percentages. Under certain circumstances, risk-sharing percentages can be revised subsequent to origination or Newmark could be required to repurchase the loan. In the event of a loss resulting from a catastrophic event that is not required to be covered by borrowers’ insurance policies, Newmark can recover the loss under its mortgage impairment insurance policy. Any potential recovery is subject to the policy’s deductibles and limits. At March 31, 2023, the credit risk loans being serviced by Newmark on behalf of Fannie Mae and Freddie Mac had outstanding principal balances of $27.8 billion with a maximum potential loss of approximately $8.4 billion. At December 31, 2022, the credit risk loans being serviced by Newmark on behalf of Fannie Mae and Freddie Mac had outstanding principal balances of approximately $27.6 billion with a maximum potential loss of approximately $8.4 billion. Newmark’s current estimate of expected credit losses considers various factors, including, without being limited to, historical default and losses, current delinquency status, loan size, terms, amortization types, the forward-looking view of the primary risk drivers (debt-service coverage ratio and loan-to-value) based on forecasts of economic conditions and local market performance. During the three months ended March 31, 2023 and 2022, there were increases to the loss sharing liability of $2.8 million and $0.2 million, respectively. A loan is considered to be delinquent once it is 60 days past due. As of March 31, 2023, there was one delinquent loan that had an outstanding principal balance of $7.3 million, with a maximum loss exposure of $2.4 million. Proceeds from the liquidation of the asset is estimated to be approximately $7.4 million based on current estimate of fair value. Newmark’s share of the loss would approximate $0.5 million. During the three months ended March 31, 2023, Newmark settled the one credit risk loan that was in foreclosure as of December 31, 2022. Newmark's share of the loss was $1.2 million. As of December 31, 2022, there was one loan in foreclosure that had an outstanding principal balance of $22.8 million, with a maximum loss exposure of $7.6 million. Proceeds from the liquidation of the asset is estimated to be approximately $20.0 million based on current estimate of fair value at December 31, 2022. Newmark's share of the loss would approximate $1.5 million. As of December 31, 2022, there was one delinquent loan that had an outstanding principal balance of $7.3 million, with a maximum loss exposure of $2.4 million. Proceeds from the liquidation of the asset is estimated to be approximately $4.2 million based on current estimate of fair value. Newmark’s share of the loss would approximate $1.1 million. The provisions for risk-sharing were included in “Operating, administrative and other” on the accompanying unaudited condensed consolidated statements of operations as follows (in thousands):
Balance, January 1, 2022 | $ | 25,989 |
Provision for expected credit losses | 1,740 |
Balance, December 31, 2022 | 27,729 |
Provision for expected credit losses | 2,803 |
Credit loss settlement | (1,248) |
Balance, March 31, 2023 | $ | 29,284 |

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- Definition The entire disclosure for each guarantee obligation, or each group of similar guarantee obligations, including (a) the nature of the guarantee, including its term, how it arose, and the events or circumstances that would require the guarantor to perform under the guarantee; (b) the maximum potential amount of future payments (undiscounted) the guarantor could be required to make under the guarantee; (c) the current carrying amount of the liability, if any, for the guarantor's obligations under the guarantee; and (d) the nature of any recourse provisions under the guarantee, and any assets held either as collateral or by third parties, and any relevant related party disclosure. Excludes disclosures about product warranties. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 460 -URI https://asc.fasb.org/topic&trid=2155896 + Details
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