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Loans Held for Sale | 6 Months Ended
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Jun. 30, 2021
Loans Held For Sale |
Loans Held for Sale | 4) Loans Held for Sale The Company has elected the fair value option for loans held for sale. Changes in the fair value of the loans are included in mortgage fee income. Interest income is recorded based on the contractual terms of the loan and in accordance with the Company’s policy on mortgage loans held for investment and is included in mortgage fee income on the condensed consolidated statement of earnings. See Note 8 to the condensed consolidated financial statements for additional disclosures regarding loans held for sale. The following is a summary of the aggregate fair value and the aggregate unpaid principal balance of loans held for sale for the periods presented:
Aggregate fair value - Loans Held for Sale |  |  |  |
|  | As of June 30 2021 |  | As of December 31 2020
Aggregate fair value |  | $ | 296,728,086 |  |  | $ | 422,772,418 |
Unpaid principal balance |  |  | 287,867,995 |  |  |  | 406,407,323 |
Unrealized gain |  |  | 8,860,091 |  |  |  | 16,365,095 |
Mortgage Fee Income Mortgage fee income consists of origination fees, processing fees, interest income and certain other income related to the origination and sale of mortgage loans held for sale. Major categories of mortgage fee income for loans held for sale are as follows:
Schedule of Mortgage Fee Income for Loans Held for Sale |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Three Months Ended June 30 |  | Six Months Ended June 30
|  | 2021 |  | 2020 |  | 2021 |  | 2020
Loan fees |  | $ | 9,154,621 |  |  | $ | 15,226,535 |  |  | $ | 18,694,577 |  |  | $ | 22,940,750 |
Interest income |  |  | 2,188,380 |  |  |  | 2,601,605 |  |  |  | 4,500,181 |  |  |  | 4,282,063 |
Secondary gains |  |  | 56,020,876 |  |  |  | 49,422,815 |  |  |  | 124,459,809 |  |  |  | 77,269,683 |
Change in fair value of loan commitments |  |  | (482,863 | ) |  |  | 5,278,100 |  |  |  | (168,397 | ) |  |  | 8,553,132 |
Change in fair value of loans held for sale |  |  | (1,114,632 | ) |  |  | 2,363,713 |  |  |  | (8,060,513 | ) |  |  | 2,742,010 |
Provision for loan loss reserve |  |  | (608,569 | ) |  |  | (1,524,435 | ) |  |  | (1,269,232 | ) |  |  | (2,137,544 | )
Mortgage fee income |  | $ | 65,157,813 |  |  | $ | 73,368,333 |  |  | $ | 138,156,425 |  |  | $ | 113,650,094 |
Loan Loss Reserve When a repurchase demand corresponding to a mortgage loan previously held for sale and sold to a third-party investor is received from a third-party investor, the relevant data is reviewed and captured so that an estimated future loss can be calculated. The key factors that are used in the estimated loss calculation are as follows: (i) lien position, (ii) payment status, (iii) claim type, (iv) unpaid principal balance, (v) interest rate, and (vi) validity of the demand. Other data is captured and is useful for management purposes; the actual estimated loss is generally based on these key factors. The Company conducts its own review upon the receipt of a repurchase demand. In many instances, the Company is able to resolve the issues relating to the repurchase demand by the third-party investor without having to make any payments to the investor. The following is a summary of the loan loss reserve that is included in other liabilities and accrued expenses:
Schedule of loan loss reserve which is included in other liabilities and accrued expenses |  |  |  |
|  | As of June 30 2021 |  | As of December 31 2020
Balance, beginning of period |  | $ | 20,583,618 |  |  | $ | 4,046,288 |
Provision on current loan originations (1) |  |  | 1,269,232 |  |  |  | 4,938,214 |
Additional provision for loan loss reserve |  |  | — |  |  |  | 16,506,030 |
Charge-offs, net of recaptured amounts |  |  | (19,440,198 | ) |  |  | (4,906,914 | )
Balance, end of period |  | $ | 2,412,652 |  |  | $ | 20,583,618 |
(1) | Included in mortgage fee income
The Company maintains reserves for estimated losses on current production volumes. For the six months ended June 30, 2021, $1,269,232 in reserves were added at a rate of 4.5 basis points per loan, the equivalent of $450 per $1,000,000 in loans originated. This is an increase over the six months ended June 30, 2020, when reserves were added at a rate of 2.5 basis points per loan originated, the equivalent of $250 per $1,000,000 in loans originated. The Company also increased its loan loss reserve for the year ended December 31, 2020 by an additional $16,506,030 to account for changes in estimates specific to settlements of loan losses. See Note 11 for additional information regarding mortgage loan loss settlements and charge-offs. The economic impact of COVID-19 and subsequent government action has increased the potential for losses due to early payoff penalties and potential for losses due to increased delinquency. The unique nature of these current events creates significant difficulty for forecasting potential future losses. The Company will continue to monitor data and economic conditions in order to maintain adequate loss reserves on current production. Thus, the Company believes that the final loan loss reserve as of June 30, 2021, represents its best estimate for adequate loss reserves on loans sold.

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