Introduction to Mortgage Servicing Examinations Training - March 2023

Mortgage, LLC Notes to Consolidated Financial Statements (continued) (Dollars in Thousands)

Gross Amounts Offset in the Consolidated Balance Sheets

Net Amounts Presented in the Consolidated Balance Sheets

Gross Amount of Recognized Assets or Liabilities

Offsetting of Derivative Assets Balance at December 31, 2021: Forward commitments ............................ $ Balance at December 31, 2020: Forward commitments ............................ $ Offsetting of Derivative Liabilities Balance at December 31, 2021: Forward commitments ............................ $ Balance at December 31, 2020: Forward commitments ............................ $

50,225 $

(32,888) $

17,337

35,746 $

(15,162) $

20,584

(54,922) $

35,011 $

(19,911)

(715,671) $

209,600 $

(506,071)

Counterparty Credit Risk

Credit risk is defined as the possibility that a loss may occur from the failure of another party to perform in accordance with the terms of the contract, which exceeds the value of existing collateral, if any. The Company attempts to limit its credit risk by dealing with creditworthy counterparties and obtaining collateral where appropriate. The Company is exposed to credit loss in the event of contractual nonperformance by its trading counterparties and counterparties to its various over-the-counter derivative financial instruments noted in the above Notional and Fair Value discussion. The Company manages this credit risk by selecting only counterparties that it believes to be financially strong, spreading the credit risk among many such counterparties, placing contractual limits on the amount of unsecured credit extended to any single counterparty, and entering into netting agreements with the counterparties as appropriate. Certain counterparties have master netting agreements. The master netting agreements contain a legal right to offset amounts due to and from the same counterparty. Derivative assets in the Consolidated Balance Sheets represent derivative contracts in a gain position, net of loss positions with the same counterparty and, therefore, also represent the Company’s maximum counterparty credit risk. The Company incurred zero credit losses due to nonperformance of any of its counterparties during the years ended December 31, 2021 and 2020.

13. Commitments, Contingencies, and Guarantees

Interest Rate Lock Commitments

IRLCs are agreements to lend to a client as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. The Company evaluates each client’s creditworthiness on a case ‑ by ‑ case basis. The number of days from the date of the IRLC to expiration of fixed and variable rate lock commitments outstanding at December 31, 2021 and 2020 was approximately 43 days on average.

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