Loans Held for Sale

Loans held for sale consisted of the following:



	March 31, 2020		December 31, 2019
	(in millions)
Commercial loans:
Real estate, including construction	$	—	$	83
Business and corporate banking	—		35
Global banking	234		94
Total commercial	234		212
Consumer loans:
Residential mortgages	51		77
Total consumer	51		77
Total loans held for sale	$	285	$	289

Commercial Loans Included in commercial loans held for sale are 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 $206 million and $178 million at March 31, 2020 and December 31, 2019, respectively. See Note 10, "Fair Value Option," for additional information.

Commercial loans held for sale also includes certain loans that we no longer intend to hold for investment and were transferred to held for sale which totaled $28 million and $34 million at March 31, 2020 and December 31, 2019, respectively. During both the three months ended March 31, 2020 and 2019, we recorded no lower of amortized cost or fair value adjustments on commercial loans held for sale.

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 (loss).

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. Beginning with 2018 applications, 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 (loss), was losses of $3 million and $1 million during the three months ended March 31, 2020 and 2019, respectively.

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 $1 million and $2 million at March 31, 2020 and December 31, 2019, respectively. The valuation allowance on commercial loans held for sale was nil at both March 31, 2020 and December 31, 2019.