Timeshare Financing Receivables

3 Months Ended

Mar. 31, 2020

Receivables [Abstract]

Timeshare Financing Receivables

Note 6: Timeshare Financing Receivables

Timeshare financing receivables were as follows:

	March 31, 2020
($ in millions)	Securitized and Pledged			Unsecuritized(1)			Total
Timeshare financing receivables	$	703		$	631		$	1,334
Less: allowance for financing receivables losses		(48	)		(164	)		(212	)
	$	655		$	467		$	1,122

	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

⁽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 securitization activities.

As of March 31, 2020, the carrying value of our timeshare financing receivables securing the outstanding debt balance of our Timeshare Facility was $191 million. As of December 31, 2019, we had no timeshare receivables pledged to the Timeshare Facility. 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. We record the difference between the timeshare financing receivable and the variable consideration included in the transaction price for the sale of the related VOI as an allowance for financing receivables and record the receivable net of the allowance. During the three months ended March 31, 2020, we recorded an adjustment to our estimate of variable consideration of $37 million, which includes a $23 million revenue reduction related to changes in estimates primarily driven by economic factors surrounding the COVID-19 pandemic.

Our timeshare financing receivables as of March 31, 2020 mature as follows:

($ in millions)	Securitized and Pledged			Unsecuritized			Total
Year
2020 (remaining)	$	69		$	43		$	112
2021		92			50			142
2022		93			54			147
2023		93			59			152
2024		92			63			155
Thereafter		264			362			626
		703			631			1,334
Less: allowance for financing receivables losses		(48	)		(164	)		(212	)
	$	655		$	467		$	1,122

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 estimating expected defaults and 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. As of March 31,2020, and December 31, 2019 we had $9 million of interest receivable outstanding included in our condensed consolidated balance sheets. 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, 2020, our timeshare financing receivables had interest rates ranging from 3.90 percent to 20.50 percent, a weighted-average interest rate of 12.52 percent, a weighted-average remaining term of 7.9 years and maturities through 2035.

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

	March 31,		December 31,
($ in millions)	2020		2019
FICO score
700+	$	812	$	818
600-699		291		292
<600		39		39
No score(1)		192		191
	$	1,334	$	1,340

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

The following table details the origination year of our gross timeshare financing receivables by FICO score as of March 31, 2020:

($ in millions)	2020		2019		2018		2017		2016		Prior		Total
FICO score
700+	$	78	$	266	$	178	$	115	$	75	$	100	$	812
600-699		22		92		64		41		27		45		291
<600		3		12		8		5		4		7		39
No score(1)		19		62		39		21		15		36		192
	$	122	$	432	$	289	$	182	$	121	$	188	$	1,334

⁽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, 2020 and December 31, 2019, we had ceased accruing interest on timeshare financing receivables with an aggregate principal balance of $84 million and $74 million, respectively. The following tables detail an aged analysis of our gross timeshare receivables balance:

	March 31, 2020
($ in millions)	Securitized and Pledged		Unsecuritized		Total
Current	$	683	$	540	$	1,223
31 - 90 days past due		13		14		27
91 - 120 days past due		4		4		8
121 days and greater past due		3		73		76
	$	703	$	631	$	1,334

	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

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

	March 31, 2020
($ in millions)	Securitized and Pledged			Unsecuritized			Total
Balance as of December 31, 2019	$	54		$	130		$	184
Write-offs		—			(9	)		(9	)
Provision for financing receivables losses(1)		(6	)		43			37
Balance as of March 31, 2020	$	48		$	164		$	212

	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

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