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GUARANTEES | 9 Months Ended
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Sep. 30, 2024
Guarantees [Abstract] |
GUARANTEES | GUARANTEES At September 30, 2024 and December 31, 2023, the notional amount of the obligations undertaken in issuing the guarantees under standby letters of credit represented a liability of $23.9 million and $24.0 million, respectively. OFG has a liability for residential mortgage loans sold subject to credit recourse pursuant to FHLMC’s, GNMA’s, and FNMA’s residential mortgage loan sales and securitization programs. At September 30, 2024 and December 31, 2023, the unpaid principal balance of residential mortgage loans sold subject to credit recourse under the residential mortgage loan sales programs was $92.6 million and $98.7 million, respectively. The estimated losses to be absorbed under the credit recourse arrangements were recorded as a liability when the credit recourse was assumed and are updated on a quarterly basis. At September 30, 2024, OFG's liability for estimated credit losses related to loans sold with credit recourse amounted to $41 thousand (December 31, 2023– $102 thousand). On May 1, 2023, OFG and a third-party servicer terminated a subservicing agreement by mutual agreement. Pursuant to such termination, the third-party servicer assumed the direct servicing of the subserviced loans pursuant to FNMA’s residential mortgage loans sales program, thereby relieving OFG of its corresponding recourse obligation under that program. The following table shows the changes in OFG’s liability for estimated losses from credit recourse agreements, included in the consolidated statements of financial condition during the quarters and nine-month periods ended September 30, 2024 and 2023:
| Quarter Ended September 30, |  | Nine-Month Period Ended September 30, |  |  |  |  |  |  |  |
| 2024 |  | 2023 |  | 2024 |  | 2023 |  |  |  |  |  |  |  |
| (In thousands) |  |  |  |  |  |
Balance at beginning of period | $ | 59 |  |  | $ | 150 |  |  | $ | 102 |  |  | $ | 147 |  |  |  |  |  |  |  |  |
Net recoveries (charge-offs/terminations) | (18) |  |  | 25 |  |  | (61) |  |  | 28 |  |  |  |  |  |  |  |  |
Balance at end of period | $ | 41 |  |  | $ | 175 |  |  | $ | 41 |  |  | $ | 175 |  |  |  |  |  |  |  |  |
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 120 days delinquent, in which case OFG is obligated to repurchase the loan. If a borrower defaults, pursuant to the credit recourse provided, OFG is required to repurchase the loan or reimburse the third-party investor for the incurred loss. The maximum potential amount of future payments that OFG would be required to make under the recourse arrangements is equivalent to the total outstanding balance of the residential mortgage loans serviced with recourse and interest, if applicable. During the quarters ended September 30, 2024 and 2023, OFG repurchased $14 thousand and $251 thousand, respectively, in mortgage loans. During the nine-month periods ended September 30, 2024 and 2023, OFG repurchased $254 thousand and $861 thousand, respectively, in such mortgage loans. If a borrower defaults, OFG has rights to the underlying collateral securing the mortgage loan. OFG suffers losses on these mortgage loans when the proceeds from a foreclosure sale of the collateral property are less than the outstanding principal balance of the loan, any uncollected interest advanced, and the costs of holding and disposing the related property. When OFG sells or securitizes mortgage loans, it generally makes customary representations and warranties regarding the characteristics of the loans sold. OFG’s mortgage operations division groups conforming mortgage loans into pools that are exchanged for FNMA and GNMA mortgage-backed securities, which are generally sold to private investors, or are sold directly to FNMA or other private investors for cash. As required under such mortgage-backed securities programs, quality review procedures are performed by OFG to ensure that asset guideline qualifications are met. To the extent the loans do not meet specified characteristics, OFG may be required to repurchase such loans or indemnify for losses and bear any subsequent loss related to the loans. During the quarter ended September 30, 2024, OFG repurchased $1.4 million (September 30, 2023 –$2.5 million) of unpaid principal balance in mortgage loans, excluding mortgage loans subject to such credit recourse provision. During the nine-month period ended September 30, 2024, OFG repurchased $3.3 million (September 30, 2023- $8.9 million). At September 30, 2024 and December 31, 2023, OFG had a $356 thousand and a $405 thousand liability, respectively, for the estimated credit losses related to these loans. During the quarters ended September 30, 2024 and 2023, OFG recognized $18 thousand and $25 thousand in gains, net of reserves, respectively, from the repurchase of residential mortgage loans sold subject to credit recourse, and $222 thousand in losses and $199 thousand in gains, respectively, from the repurchase of residential mortgage loans as a result of breaches of customary representations and warranties. During the nine-month periods ended September 30, 2024 and 2023,OFG recognized $60 thousand and $147 thousand, respectively, in gains from the repurchase of residential mortgage loans sold subject to credit recourse, and $145 thousand in losses and $103 thousand in gains, respectively, from the repurchase of residential mortgage loans as a result of breaches of customary representations and warranties. At September 30, 2024, OFG serviced $5.6 billion (December 31, 2023 - $5.6 billion) in mortgage loans for third parties, including subserviced mortgage loans. 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 OFG to advance funds to make scheduled payments of principal, interest, taxes and insurance, if such payments have not been received from the borrowers. OFG 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 guarantee programs. However, in the meantime, OFG must absorb the cost of the funds it advances during the time the advance is outstanding. OFG 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 OFG would not receive any future servicing income with respect to that loan. At September 30, 2024, the outstanding balance of funds advanced by OFG under such mortgage loan servicing agreements was approximately $4.5 million (December 31, 2023 - $4.2 million). To the extent the mortgage loans underlying OFG’s servicing portfolio experience increased delinquencies, OFG 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.

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- Definition The entire disclosure for each guarantee obligation, or each group of similar guarantee obligations, including (a) the nature of the guarantee, including its term, how it arose, and the events or circumstances that would require the guarantor to perform under the guarantee; (b) the maximum potential amount of future payments (undiscounted) the guarantor could be required to make under the guarantee; (c) the current carrying amount of the liability, if any, for the guarantor's obligations under the guarantee; and (d) the nature of any recourse provisions under the guarantee, and any assets held either as collateral or by third parties, and any relevant related party disclosure. Excludes disclosures about product warranties. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 460 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 4 -Subparagraph (a)(4) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482425/460-10-50-4 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 460 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 4 -Subparagraph (a)(5) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482425/460-10-50-4 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Topic 460 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 4 -Subparagraph (d) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482425/460-10-50-4 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Topic 460 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 4 -Subparagraph (e) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482425/460-10-50-4 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Topic 460 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 4 -Subparagraph (a)(2) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482425/460-10-50-4 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Topic 460 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 4 -Subparagraph (a)(3) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482425/460-10-50-4 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Topic 460 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/460/tableOfContent Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Topic 460 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 4 -Subparagraph (b)(3) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482425/460-10-50-4 + Details
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