Guarantees

12 Months Ended

Dec. 31, 2024

Guarantees

Guarantees

Note 22 – Guarantees

The Corporation has obligations upon the occurrence of certain events under financial guarantees provided in certain contractual

agreements. Also, from time to time, the Corporation securitized mortgage loans into guaranteed mortgage-backed securities

subject in certain instances, to 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. Also, from time to time, the Corporation may

sell, in bulk sale transactions, residential mortgage loans and Small Business Administration (“SBA”) commercial loans subject to

credit recourse or to certain representations and warranties from the Corporation to the purchaser. These representations and

warranties may relate, for example, to borrower creditworthiness, loan documentation, collateral, prepayment and early payment

defaults. The Corporation may be required to repurchase the loans under the credit recourse agreements or representation and

warranties.

At December 31, 2024, the Corporation serviced $

495

 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 2024, the Corporation repurchased approximately $

2

 million of unpaid principal balance in mortgage loans subject to the

credit recourse provisions (2023 - $

2

 million). In the event of nonperformance by the borrower, the Corporation has rights to the

underlying collateral securing the mortgage loan. The Corporation suffers 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 December 31, 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 from these credit recourses agreements, included in the consolidated statements of financial condition during the

years ended December 31, 2024 and 2023.

Years ended

December 31,

(In thousands)

2024

2023

Balance as of beginning of period

$

4,211

$

6,897

Provision (benefit) for recourse liability

(1,280)

(1,989)

Net charge-offs

(320)

(698)

Balance as of end of period

$

2,611

$

4,211

The estimated losses to be absorbed under the credit recourse arrangements are recorded as a liability when the loans are sold and

are updated by accruing or reversing expense (categorized in the line item “Adjustments (expense) to indemnity reserves on loans

sold” in the consolidated statements of operations) throughout the life of the loan, as necessary, when additional relevant

information becomes available. The methodology used to estimate the recourse liability is a function of the recourse arrangements

given and considers a variety of factors, which include actual defaults and historical loss experience, foreclosure rate, estimated

future defaults and the probability that a loan would be delinquent. Statistical methods are used to estimate the recourse liability.

Expected loss rates are applied to different loan segmentations. The expected loss, which represents the amount expected to be

lost on a given loan, considers the probability of default and loss severity. The probability of default represents the probability that a

loan in good standing would become 90 days delinquent within the following twelve-month period. Regression analysis quantifies

the relationship between the default event and loan-specific characteristics, including credit scores, loan-to-value ratios, and loan

aging, among others. 

When the Corporation sells or securitizes mortgage loans, it generally makes customary representations and warranties regarding

the characteristics of the loans sold. The Corporation’s mortgage operations in Puerto Rico group conforming mortgage loans into

pools which are exchanged for FNMA and GNMA mortgage-backed securities, which are generally sold to private investors, or are

sold directly to FNMA for cash. As required under the government agency programs, quality review procedures are performed by

the Corporation to ensure that asset guideline qualifications are met. 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. The amount purchased under representation and warranty arrangements during the years ended December 31, 2024 and 

December 31, 2023 was not considered material for the Corporation.

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 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 December 31, 2024, the

Corporation serviced $

9.0

 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 December

31, 2024, the outstanding balance of funds advanced by the Corporation under such mortgage loan servicing agreements was

approximately $

44

 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 both December 31, 2024 and December 31, 2023, respectively.

In addition, at both December 31, 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 17 to the consolidated financial statements for further information on the trust

preferred securities.