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Guarantees
9 Months Ended
Sep. 30, 2024
Guarantees  
Guarantees
Note 19 – Guarantees
At September
 
30, 2024,
 
the Corporation
 
recorded a
 
liability of
 
$
1
 
million (December
 
31, 2023
 
- $
1
 
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
 
September
 
30, 2024,
 
the Corporation
 
serviced
 
$
511
million
 
(December
 
31,
 
2023
 
-
 
$
561
 
million)
 
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 and nine months
 
ended September
30,
 
2024,
 
the
 
Corporation
 
repurchased
 
approximately
 
$
0.5
 
million
 
and
 
$
1.5
 
million,
 
respectively,
 
of
 
unpaid
 
principal
 
balance
 
in
mortgage loans subject
 
to the credit
 
recourse provisions (September 30,
 
2023
-
$
0.4
 
million and $
2.0
 
million, respectively).
 
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 September
 
30, 2024,
 
the Corporation’s
 
liability established
 
to cover
 
the estimated
credit loss exposure related to loans sold or serviced
 
with credit recourse amounted to $
3
 
million (December 31, 2023 - $
4
 
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 and nine months
 
ended September 30, 2024 and 2023.
 
 
 
 
 
 
 
 
 
 
 
Quarters ended September 30,
Nine months ended September 30,
(In thousands)
2024
2023
2024
2023
Balance as of beginning of period
$
4,058
$
6,223
$
4,211
$
6,897
Provision (benefit) for recourse liability
(808)
228
(768)
52
Net charge-offs
(54)
(54)
(247)
(552)
Balance as of end of period
$
3,196
$
6,397
$
3,196
$
6,397
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.
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 September 30, 2024, the
Corporation serviced $
9.2
 
billion in mortgage loans for third-parties, including the loans serviced with credit recourse (December 31,
2023 - $
9.9
 
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
 
September
30,
 
2024,
 
the
 
outstanding
 
balance
 
of
 
funds
 
advanced
 
by
 
the
 
Corporation under
 
such
 
mortgage
 
loan
 
servicing
 
agreements
 
was
approximately
 
$
45
 
million
 
(December
 
31,
 
2023
 
-
 
$
49
 
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
 
September 30,
 
2024 and
 
December 31,
 
2023, respectively.
 
In
addition, at both
 
September 30, 2024 and
 
December 31, 2023, 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
 
2023
 
Form
 
10-K
 
for
 
further
information on the trust preferred securities.