Note 5: Timeshare Financing Receivables

Timeshare financing receivables were as follows:

	March 31, 2018
($ in millions)	Securitized and Pledged			Unsecuritized			Total
Timeshare financing receivables	$	429		$	789		$	1,218
Less: allowance for loan loss		(22	)		(122	)		(144	)
	$	407		$	667		$	1,074

	December 31, 2017
($ in millions)	Securitized and Pledged			Unsecuritized			Total
Timeshare financing receivables	$	471		$	741		$	1,212
Less: allowance for loan loss		(27	)		(114	)		(141	)
	$	444		$	627		$	1,071

The interest rate charged on the notes correlates to the risk profile of the borrower at the time of purchase and the percentage of the purchase that is financed, among other factors. As of March 31, 2018, our timeshare financing receivables had interest rates ranging from 5.3 percent to 20.5 percent, a weighted average interest rate of 12.2 percent, a weighted average remaining term of 7.7 years and maturities through 2029.

We pledge a portion of our timeshare financing receivables as collateral to secure a non-recourse revolving timeshare receivable credit facility (“Timeshare Facility”) with a borrowing capacity of $450 million. As of March 31, 2018 and December 31, 2017, we had $252 million and $143 million, respectively, of gross timeshare financing receivables securing the Timeshare Facility. We recognize interest income on our timeshare financing receivables as earned. We record an estimate of uncollectibility as a reduction of revenue from VOI sales at the time revenue is recognized on a VOI sale.

Our timeshare financing receivables as of March 31, 2018 mature as follows:

($ in millions)	Securitized and Pledged			Unsecuritized			Total
Year
2018 (remaining)	$	53		$	59		$	112
2019		69			67			136
2020		67			72			139
2021		61			78			139
2022		54			84			138
Thereafter		125			429			554
		429			789			1,218
Less: allowance for loan loss		(22	)		(122	)		(144	)
	$	407		$	667		$	1,074

We evaluate this portfolio collectively for purposes of estimating variable consideration, since we hold a large group of homogeneous timeshare financing receivables which are individually immaterial. We monitor the credit quality of our receivables on an ongoing basis. There are no significant concentrations of credit risk with any individual counterparty or groups of counterparties. We use a technique referred to as static pool analysis as the basis for determining our allowance for loan loss on our timeshare financing receivables. For static pool analysis, we use certain key dimensions to stratify our portfolio, including FICO scores, equity percentage at the time of sale and certain other factors. The adequacy of the related allowance is determined by management through analysis of several factors, such as current economic conditions and industry trends, as well as the specific risk characteristics of the portfolio including assumed default rates, aging and historical write-offs of these receivables. The allowance is maintained at a level deemed adequate by management based on a periodic analysis of the mortgage portfolio.

Our gross timeshare financing receivables balances by FICO score were as follows:

	March 31,		December 31,
($ in millions)	2018		2017
FICO score
700+	$	790	$	770
600-699		228		225
<600		28		28
No score⁽¹⁾		172		189
	$	1,218	$	1,212

⁽¹⁾	Timeshare financing receivables without a FICO score are primarily related to foreign borrowers.

We apply payments we receive for loans, including those in non-accrual status, to amounts due in the following order: servicing fees; interest; principal; and late charges. Once a loan is 91 days past due, we cease accruing interest and reverse the accrued interest recognized up to that point. We resume interest accrual for loans for which we had previously ceased accruing interest once the loan is less than 91 days past due. We fully reserve for a timeshare financing receivable in the month following the date that the loan is 121 days past due and, subsequently, we write off the uncollectible note against the reserve once the foreclosure process is complete and we receive the deed for the foreclosed unit.

As of March 31, 2018 and December 31, 2017, we had ceased accruing interest on timeshare financing receivables with an aggregate principal balance of $57 million and $49 million, respectively. The following tables detail an aged analysis of our gross timeshare financing receivables balance:

	March 31, 2018
($ in millions)	Securitized and Pledged		Unsecuritized		Total
Current	$	419	$	724	$	1,143
31 - 90 days past due		6		12		18
91 - 120 days past due		2		4		6
121 days and greater past due		2		49		51
	$	429	$	789	$	1,218

	December 31, 2017
($ in millions)	Securitized and Pledged		Unsecuritized		Total
Current	$	462	$	685	$	1,147
31 - 90 days past due		6		10		16
91 - 120 days past due		1		4		5
121 days and greater past due		2		42		44
	$	471	$	741	$	1,212

The changes in our allowance for loan loss were as follows:

	March 31, 2018
($ in millions)	Securitized and Pledged			Unsecuritized			Total
Balance as of December 31, 2017	$	27		$	114		$	141
Write-offs		—			(9	)		(9	)
Provision for loan loss⁽¹⁾		(5	)		17			12
Balance as of March 31, 2018	$	22		$	122		$	144

	March 31, 2017
($ in millions)	Securitized and Pledged		Unsecuritized			Total
Balance as of December 31, 2016	$	9	$	111		$	120
Write-offs		—		(7	)		(7	)
Securitization		28		(28	)		—
Provision for loan loss⁽¹⁾		—		11			11
Balance as of March 31, 2017	$	37	$	87		$	124

⁽¹⁾	Includes activity related to the repurchase of defaulted and upgraded securitized timeshare financing receivables, net of incremental provision for loan loss.