Loans Held for Sale

Loans held for sale consisted of the following:



	June 30, 2019		December 31, 2018
	(in millions)
Commercial loans:
Real estate, including construction	$	66	$	27
Global banking	85		367
Total commercial	151		394
Consumer loans:
Residential mortgages	40		65
Other consumer	—		53
Total consumer	40		118
Total loans held for sale	$	191	$	512

Commercial Loans Included in commercial loans held for sale are certain loans that we no longer intend to hold for investment and transferred to held for sale which totaled $23 million and $285 million at June 30, 2019 and December 31, 2018, respectively. During both the three and six months ended June 30, 2019, we reversed nil of the lower of amortized cost or fair value adjustment previously recorded on commercial loans held for sale as a component of other income (loss) in the consolidated statement of income as a result of an increase in fair value due to improved pricing compared with reversing less than $1 million and $3 million during the three and six months ended June 30, 2018, respectively.

Commercial loans held for sale also includes certain loans that we have elected to designate under the fair value option which consists of loans that we originate in connection with our participation in a number of syndicated credit facilities with the intent of selling them to unaffiliated third parties as well as loans that we purchase from the secondary market and hold as hedges against our exposure to certain total return swaps. The fair value of these loans totaled $128 million and $109 million at June 30, 2019 and December 31, 2018, respectively. See Note 10, "Fair Value Option," for additional information.

Consumer Loans Included in residential mortgage loans held for sale are agency-eligible residential mortgage loans which are originated and held for sale to third parties, currently on a servicing retained basis. Gains and losses from the sale of these residential mortgage loans are reflected as a component of other income (loss) in the consolidated statement of income.

During the first quarter of 2019, we transferred $53 million of student loans that were previously classified as other consumer loans held for sale back to held for investment as we now intend to hold these loans for the foreseeable future.

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. Interest rate risk for agency-eligible residential mortgage loans held for sale is partially mitigated through an economic hedging program to offset changes in the fair value of these mortgage loans held for sale, from the time of commitment to sale, attributable to changes in market interest rates. Revenue associated with this economic hedging program, which is reflected as a component of other income (loss) in the consolidated statement of income, was losses of $1 million and $2 million during the three and six months ended June 30, 2019, respectively, compared with losses of less than $1 million during both the three and six months ended June 30, 2018.

Valuation Allowances Excluding the commercial loans designated under the 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 through other revenues. The valuation allowance on consumer loans held for sale was $2 million and $4 million at June 30, 2019 and December 31, 2018, respectively. The valuation allowance on commercial loans held for sale was $1 million and $3 million at June 30, 2019 and December 31, 2018, respectively.