Vacation Ownership Contract Receivables

6 Months Ended

Jun. 30, 2011

Vacation Ownership Contract Receivables

Vacation Ownership Contract Receivables

 4.   Vacation Ownership Contract Receivables

The Company generates vacation ownership contract receivables by extending financing to the purchasers of its VOIs. Current and long-term vacation ownership contract receivables, net consisted of:

	June 30,			December 31,
	2011			2010
Current vacation ownership contract receivables:
Securitized	$	259		$	266
Non-securitized		75			65
		334			331
Less: Allowance for loan losses		(37	)		(36	)
Current vacation ownership contract receivables, net	$	297		$	295
Long-term vacation ownership contract receivables:
Securitized	$	2,263		$	2,437
Non-securitized		663			576
		2,926			3,013
Less: Allowance for loan losses		(325	)		(326	)
Long-term vacation ownership contract receivables, net	$	2,601		$	2,687

During the three and six months ended June 30, 2011, the Company's securitized vacation ownership contract receivables generated interest income of $83 million and $165 million, respectively. During the three and six months ended June 30, 2010, such amounts were $81 million and $161 million, respectively.

Principal payments that are contractually due on the Company's vacation ownership contract receivables during the next twelve months are classified as current on the Consolidated Balance Sheets. During the six months ended June 30, 2011 and 2010, the Company originated vacation ownership contract receivables of $454 million and $474 million, respectively, and received principal collections of $391 million and $388 million, respectively. The weighted average interest rate on outstanding vacation ownership contract receivables was 13.2% and 13.1% at June 30, 2011 and December 31, 2010, respectively.

The activity in the allowance for loan losses on vacation ownership contract receivables was as follows:

	Amount
Allowance for loan losses as of December 31, 2010	$	(362	)
Provision for loan losses		(159	)
Contract receivables write-offs, net		159
Allowance for loan losses as of June 30, 2011	$	(362	)

In accordance with the guidance for accounting for real estate timesharing transactions, the Company recorded a provision for loan losses of $80 million and $159 million as a reduction of net revenues during the three and six months ended June 30, 2011, respectively, and $87 million and $174 million during the three and six months ended June 30, 2010, respectively.

Credit Quality for Financed Receivables and the Allowance for Credit Losses

The basis of the differentiation within the identified class of financed VOI contract receivable is the consumer's FICO score. A FICO score is a branded version of a consumer credit score widely used within the U.S. by the largest banks and lending institutions. FICO scores range from 300 — 850 and are calculated based on information obtained from one or more of the three major U.S. credit reporting agencies that compile and report on a consumer's credit history.  

The Company updates its records for all active VOI contract receivables with a balance due on a rolling monthly basis so as to ensure that all VOI contract receivables are scored at least every six months. The Company groups all VOI contract receivables into four different categories: FICO scores ranging from 700 to 850, 600 to 699, Below 600 and No Score (primarily comprised of consumers for whom a score is not readily available, including consumers declining access to FICO scores and non U.S. residents). The following table details an aged analysis of financing receivables using the most recently updated FICO scores (based on the update policy described above):

	As of June 30, 2011
	700+		600-699		<600		No Score			Total
Current	$	1,389	$	978	$	386	$	378		$	3,131
31—60 days		10		18		27		7			62
61—90 days		6		11		20		3			40
91—120 days		2		7		15		3			27
Total	$	1,407	$	1,014	$	448	$	391	(*)	$	3,260

	As of December 31, 2010
	700+		600-699		<600		No Score			Total
Current	$	1,415	$	990	$	426	$	356		$	3,187
31—60 days		10		23		34		6			73
61—90 days		7		14		22		4			47
91—120 days		5		10		19		3			37
Total	$	1,437	$	1,037	$	501	$	369	(*)	$	3,344

        ­ ­

^(*)   The total no score contract receivables balances of $391 million and $369 million as of June 30, 2011 and December 31, 2010, respectively, include $327 million and $309 million, respectively, of contract receivables at Wyndham Vacation Resorts Asia Pacific.

The Company ceases to accrue interest on VOI contract receivables once the contract has remained delinquent for greater than 90 days. At greater than 120 days, the VOI contract receivable is written off to the allowance for loan losses. In accordance with its policy, the Company assesses the allowance for loan losses using a static pool methodology and thus does not assess individual loans for impairment separate from the pool.