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Guarantees
 3 Months Ended
Mar. 31, 2023
Guarantees  
Guarantees
Note 20 – Guarantees
At
 
March
 
31,
 
2023
 
the
 
Corporation
 
had
 
a
 
liability
 
of
 
$
0.2
 
million
 
(December
 
31,
 
2022
 
-
 
$
0.3
 
million),
 
which
 
represents
 
the
unamortized balance of the obligations
 
undertaken in issuing the
 
guarantees under the standby letters
 
of credit. Management does
not anticipate any material losses related to these
 
instruments.
From time to time, the Corporation securitized mortgage loans into guaranteed mortgage-backed securities subject to limited, and in
certain instances, lifetime credit
 
recourse on the loans
 
that serve as
 
collateral for the
 
mortgage-backed securities. The Corporation
has not
 
sold any
 
mortgage loans
 
subject to
 
credit recourse
 
since 2009.
 
At March
 
31, 2023,
 
the Corporation
 
serviced $
0.6
 
billion
(December 31,
 
2022 -
 
$
0.6
 
billion) in residential
 
mortgage loans
 
subject to
 
credit recourse
 
provisions, principally loans
 
associated
with FNMA
 
and FHLMC
 
residential mortgage
 
loan securitization
 
programs. In
 
the event
 
of any
 
customer default,
 
pursuant to
 
the
credit recourse
 
provided, the
 
Corporation is
 
required to
 
repurchase the
 
loan or
 
reimburse the
 
third party
 
investor for
 
the incurred
loss.
 
The
 
maximum
 
potential
 
amount
 
of
 
future
 
payments
 
that
 
the
 
Corporation
 
would
 
be
 
required
 
to
 
make
 
under
 
the
 
recourse
arrangements
 
in
 
the
 
event
 
of
 
nonperformance by
 
the
 
borrowers
 
is
 
equivalent
 
to
 
the
 
total
 
outstanding
 
balance
 
of
 
the
 
residential
mortgage
 
loans
 
serviced
 
with
 
recourse
 
and
 
interest,
 
if
 
applicable.
 
During
 
the
 
quarter
 
ended
 
March
 
31,
 
2023,
 
the
 
Corporation
repurchased approximately $
1
 
million of unpaid principal balance in mortgage loans subject to the credit recourse provisions (March
31,
 
2022
-
$
3
 
million).
 
In
 
the
 
event
 
of
 
nonperformance
 
by
 
the
 
borrower,
 
the
 
Corporation
 
has
 
rights
 
to
 
the
 
underlying
 
collateral
securing the
 
mortgage loan. The
 
Corporation suffers
 
ultimate losses on
 
these loans when
 
the proceeds from
 
a foreclosure sale
 
of
the property underlying
 
a defaulted mortgage
 
loan are less
 
than the outstanding
 
principal balance of
 
the loan plus
 
any uncollected
interest
 
advanced
 
and
 
the
 
costs
 
of
 
holding
 
and
 
disposing
 
the
 
related
 
property.
 
At
 
March
 
31,
 
2023
 
the
 
Corporation’s
 
liability
established to cover the estimated credit loss exposure related to loans sold
 
or serviced with credit recourse amounted to $
6
 
million
(December 31, 2022 - $
7
 
million).
The following table shows the changes in the Corporation’s liability of estimated losses related to loans serviced with credit recourse
provisions during the quarters ended March 31, 2023
 
and 2022.
Quarters ended March 31,
(In thousands)
2023
2022
Balance as of beginning of period
$
6,897
$
11,800
Provision (benefit) for recourse liability
(654)
46
Net charge-offs
(379)
(1,511)
Balance as of end of period
$
5,864
$
10,335
When the
 
Corporation sells or
 
securitizes mortgage loans,
 
it generally makes
 
customary representations and
 
warranties regarding
the characteristics of the loans
 
sold. To
 
the extent the loans do
 
not meet specified characteristics, the Corporation may
 
be required
to
 
repurchase such
 
loans
 
or
 
indemnify for
 
losses
 
and
 
bear
 
any
 
subsequent
 
loss
 
related
 
to
 
the
 
loans.
 
During
 
the
 
quarter
 
ended
March 31,
 
2023, the
 
Corporation purchased
 
$
134
 
thousand under
 
representation and
 
warranty arrangements
 
compared to
 
$
927
thousand
 
during the
 
quarter ended
 
March
 
31,
 
2022. A
 
substantial amount
 
of
 
these
 
loans reinstate
 
to
 
performing status
 
or
 
have
mortgage insurance, and thus the ultimate losses
 
on the loans are not deemed significant.
From
 
time
 
to
 
time, the
 
Corporation sells
 
loans and
 
agrees to
 
indemnify the
 
purchaser for
 
credit
 
losses
 
or
 
any
 
breach
 
of
 
certain
representations and warranties made in connection with
 
the sale. At March 31,
 
2023, the Corporation’s liability for
 
estimated losses
associated
 
with
 
indemnifications
 
and
 
representations
 
and
 
warranties
 
related
 
to
 
loans
 
sold
 
by
 
BPPR
 
amounted
 
to
 
$
0.6
 
million
(December 31, 2022 - $
0.6
 
million).
Servicing agreements
 
relating to
 
the mortgage-backed
 
securities programs
 
of FNMA,
 
FHLMC and
 
GNMA, and
 
to mortgage
 
loans
sold or serviced to certain other investors, including FHLMC,
 
require the Corporation to advance funds to make
 
scheduled payments
of principal,
 
interest, taxes
 
and insurance,
 
if such
 
payments have
 
not been
 
received from
 
the borrowers.
 
At March
 
31, 2023,
 
the
Corporation serviced
 
$
10.9
 
billion in
 
mortgage loans
 
for third-parties,
 
including the
 
loans serviced
 
with credit
 
recourse (December
31, 2022
 
- $
11.1
 
billion). The
 
Corporation generally
 
recovers funds
 
advanced pursuant
 
to these
 
arrangements from
 
the mortgage
owner, from
 
liquidation proceeds when the
 
mortgage loan is foreclosed
 
or, in
 
the case of
 
FHA/VA loans,
 
under the applicable FHA
and
 
VA
 
insurance
 
and
 
guarantees
 
programs.
 
However,
 
in
 
the
 
meantime,
 
the
 
Corporation
 
must
 
absorb
 
the
 
cost
 
of
 
the
 
funds
 
it
advances
 
during
 
the
 
time
 
the
 
advance
 
is
 
outstanding.
 
The
 
Corporation
 
must
 
also
 
bear
 
the
 
costs
 
of
 
attempting
 
to
 
collect
 
on
delinquent and defaulted mortgage loans. In
 
addition, if a defaulted loan
 
is not cured, the mortgage
 
loan would be canceled as
 
part
of the foreclosure proceedings and the Corporation
 
would not receive any future servicing income with
 
respect to that loan. At March
31,
 
2023,
 
the
 
outstanding
 
balance
 
of
 
funds
 
advanced
 
by
 
the
 
Corporation under
 
such
 
mortgage
 
loan
 
servicing
 
agreements
 
was
approximately
 
$
57
 
million
 
(December
 
31,
 
2022
 
-
 
$
42
 
million).
 
To
 
the
 
extent
 
the
 
mortgage
 
loans
 
underlying
 
the
 
Corporation’s
servicing portfolio experience
 
increased delinquencies, the Corporation
 
would be required
 
to dedicate additional
 
cash resources to
comply with its obligation to advance funds as well
 
as incur additional administrative costs related
 
to increases in collection efforts.
Popular,
 
Inc. Holding
 
Company (“PIHC”) fully
 
and unconditionally guarantees
 
certain borrowing
 
obligations issued by
 
certain of
 
its
100
% owned consolidated
 
subsidiaries amounting to
 
$
94
 
million at March
 
31, 2023 and
 
December 31, 2022.
 
In addition, at
 
March
31,
 
2023
 
and
 
December
 
31,
 
2022,
 
PIHC
 
fully
 
and
 
unconditionally
 
guaranteed
 
on
 
a
 
subordinated
 
basis
 
$
193
 
million
 
of
 
capital
securities (trust preferred securities) issued by
 
wholly-owned issuing trust entities to the
 
extent set forth in the
 
applicable guarantee
agreement. Refer
 
to Note
 
18 to
 
the Consolidated
 
Financial Statements
 
in the
 
2022 Form
 
10-K for
 
further information
 
on the
 
trust
preferred securities.