Timeshare Financing Receivables

12 Months Ended

Dec. 31, 2019

Receivables [Abstract]

Timeshare Financing Receivables

Note 5: Timeshare Financing Receivables

Timeshare financing receivables were as follows:

	December 31, 2019
($ in millions)	Securitized and Pledged			Unsecuritized(1)			Total
Timeshare financing receivables	$	758		$	582		$	1,340
Less: allowance for financing receivables losses		(54	)		(130	)		(184	)
	$	704		$	452		$	1,156

	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.}

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. As of December 31, 2019, we had no timeshare receivables pledged to the Timeshare Facility.

In August 2019, we completed a securitization of $308 million of gross timeshare financing receivables, which included a $21 million cash deposit that was subsequently released upon pledging of qualified collateral, and issued approximately $216 million of 2.34 percent notes, $50 million of 2.54 percent notes and $34 million of 2.84 percent notes, which have a stated maturity date of July 25, 2033. The securitization transaction did not qualify as a sale and, accordingly, no gain or loss was recognized. The transaction is considered a secured borrowing; therefore, the proceeds from the transaction are presented as non-recourse debt (collectively, the “Securitized Debt”). The proceeds were primarily used to pay down the remaining borrowings on our Timeshare Facility and our Securitized Debt with a rate of 2.280%, due 2026 and general corporate operating expenses. See Note 14: Debt and Non-recourse Debt for additional information.

Our timeshare financing receivables as of December 31, 2019 mature as follows:

($ in millions)	Securitized and Pledged			Unsecuritized			Total
Year
2020	$	95		$	55		$	150
2021		96			47			143
2022		97			51			148
2023		97			55			152
2024		97			58			155
Thereafter		276			316			592
		758			582			1,340
Less: allowance for financing receivables losses		(54	)		(130	)		(184	)
	$	704		$	452		$	1,156

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 collectability of our receivables on an ongoing basis. There are no significant concentrations of collection 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 borrower at the time of purchase and the percentage of the purchase that is financed, among other factors. As of December 31, 2019, our timeshare financing receivables had interest rates ranging from 3.9 percent to 20.5 percent, a weighted-average interest rate of 12.49 percent, a weighted average remaining term of 7.9 years and maturities through 2034.

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

	December 31,
($ in millions)	2019		2018
FICO score
700+	$	818	$	790
600-699		292		280
<600		39		37
No score(1)		191		185
	$	1,340	$	1,292

⁽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 December 31, 2019 and 2018, we had ceased accruing interest on timeshare financing receivables with an aggregate principal balance of $74 million and $69 million, respectively. The following tables detail an aged analysis of our gross timeshare financing receivables balance:

	December 31, 2019
($ in millions)	Securitized and Pledged		Unsecuritized		Total
Current	$	743	$	502	$	1,245
31 - 90 days past due		9		12		21
91 - 120 days past due		3		4		7
121 days and greater past due		3		64		67
	$	758	$	582	$	1,340

	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:

($ in millions)	Securitized and Pledged			Unsecuritized			Total
December 31, 2016	$	9		$	111		$	120
Write-offs		—			(37	)		(37	)
Securitizations		28			(28	)		—
Provision for financing receivables losses(1)		(10	)		68			58
December 31, 2017		27			114			141
Write-offs		—			(38	)		(38	)
Securitizations		28			(28	)		—
Provision for financing receivables losses(1)		(12	)		81			69
December 31, 2018		43			129			172
Write-offs		—			(62	)		(62	)
Securitizations		27			(27	)		—
Provision for financing receivables losses(1)		(16	)		90			74
December 31, 2019	$	54		$	130		$	184

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