Timeshare Financing Receivables

3 Months Ended

Mar. 31, 2019

Receivables [Abstract]

Timeshare Financing Receivables

Note 5: Timeshare Financing Receivables

Timeshare financing receivables were as follows:

	March 31, 2019
($ in millions)	Securitized and Pledged			Unsecuritized(1)			Total
Timeshare financing receivables	$	618		$	662		$	1,280
Less: allowance for financing receivables losses		(39	)		(130	)		(169	)
	$	579		$	532		$	1,111

	December 31, 2018
($ in millions)	Securitized and Pledged			Unsecuritized(1)			Total
Timeshare financing receivables	$	660		$	632		$	1,292
Less: allowance for financing receivables losses		(43	)		(129	)		(172	)
	$	617		$	503		$	1,120

⁽¹⁾ Includes amounts used as collateral to secure a non-recourse revolving timeshare receivable credit facility ("Timeshare Facility") as well as amounts held as future collateral for upcoming securitization activities.

As of March 31, 2019 and December 31, 2018, we had $183 million and $190 million, respectively, of gross timeshare financing receivables securing the outstanding debt balance of our Timeshare Facility. We recognize interest income on our timeshare financing receivables as earned. We record an estimate of variable consideration for estimated defaults 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, 2019 mature as follows:

($ in millions)	Securitized and Pledged			Unsecuritized			Total
Year
2019 (remaining)	$	63		$	48		$	111
2020		84			55			139
2021		83			61			144
2022		80			66			146
2023		78			70			148
Thereafter		230			362			592
		618			662			1,280
Less: allowance for financing receivables losses		(39	)		(130	)		(169	)
	$	579		$	532		$	1,111

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 financing receivables losses 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.

We recognize interest income on our timeshare financing receivables as earned. The interest rate charged on the notes correlates to the risk profile of the customer at the time of purchase and the percentage of the purchase that is financed, among other factors. As of March 31, 2019, our timeshare financing receivables had interest rates ranging from 5.25 percent to 20.50 percent, a weighted-average interest rate of 12.31 percent, a weighted-average remaining term of 7.7 years and maturities through 2031.

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

	March 31,		December 31,
($ in millions)	2019		2018
FICO score
700+	$	837	$	843
600-699		232		237
<600		27		27
No score(1)		184		185
	$	1,280	$	1,292

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

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

As of March 31, 2019 and December 31, 2018, we had ceased accruing interest on timeshare financing receivables with an aggregate principal balance of $68 million and $69 million, respectively. The following tables detail an aged analysis of our gross timeshare financing receivables balance:

	March 31, 2019
($ in millions)	Securitized and Pledged		Unsecuritized		Total
Current	$	604	$	587	$	1,191
31 - 90 days past due		9		12		21
91 - 120 days past due		3		4		7
121 days and greater past due		2		59		61
	$	618	$	662	$	1,280

	December 31, 2018
($ in millions)	Securitized and Pledged		Unsecuritized		Total
Current	$	648	$	556	$	1,204
31 - 90 days past due		8		11		19
91 - 120 days past due		3		3		6
121 days and greater past due		1		62		63
	$	660	$	632	$	1,292

The changes in our allowance for financing receivables losses were as follows:

	March 31, 2019
($ in millions)	Securitized and Pledged			Unsecuritized			Total
Balance as of December 31, 2018	$	43		$	129		$	172
Write-offs		—			(17	)		(17	)
Provision for financing receivables losses(1)		(4	)		18			14
Balance as of March 31, 2019	$	39		$	130		$	169

	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 financing receivables losses(1)		(5	)		17			12
Balance as of March 31, 2018	$	22		$	122		$	144

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