Timeshare Financing Receivables

3 Months Ended

Mar. 31, 2021

Receivables [Abstract]

Timeshare Financing Receivables

Note 6: Timeshare Financing Receivables

Timeshare financing receivables were as follows:

	March 31, 2021
($ in millions)	Securitized			Unsecuritized(1)			Total
Timeshare financing receivables	$	730		$	417		$	1,147
Less: allowance for financing receivables losses		(54	)		(153	)		(207	)
	$	676		$	264		$	940

	December 31, 2020
($ in millions)	Securitized			Unsecuritized(1)			Total
Timeshare financing receivables	$	805		$	380		$	1,185
Less: allowance for financing receivables losses		(63	)		(148	)		(211	)
	$	742		$	232		$	974

⁽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, 2021 and December 31, 2020, we had timeshare financing receivables with a carrying value of $15 million and $17 million, respectively, securing the Timeshare Facility in anticipation of future financing 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. 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. In March 2020, we recorded an incremental $23 million revenue reduction related to the changes in estimates primarily driven by economic factors surrounding the COVID-19 pandemic. For the three months ended March 31, 2021 we recorded an adjustment to our estimate of variable consideration of $16 million.

Our timeshare financing receivables as of March 31, 2021 mature as follows:

($ in millions)	Securitized			Unsecuritized			Total
Year
2021 (remaining)	$	70		$	28		$	98
2022		95			37			132
2023		98			40			138
2024		100			42			142
2025		98			44			142
Thereafter		269			226			495
		730			417			1,147
Less: allowance for financing receivables losses		(54	)		(153	)		(207	)
	$	676		$	264		$	940

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 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 both March 31, 2021 and December 31, 2020, we had interest receivable outstanding of $7 million 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, 2021, our timeshare financing receivables had interest rates ranging from 1.5 percent to 19.5 percent, a weighted-average interest rate of 12.6 percent, a weighted-average remaining term of 7.4 years and maturities through 2036.

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

	March 31,		December 31,
($ in millions)	2021		2020
FICO score
700+	$	685	$	711
600-699		256		266
<600		35		36
No score(1)		171		172
	$	1,147	$	1,185

⁽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 the origination year and average FICO score as of March 31, 2021:

($ in millions)	2021		2020		2019		2018		2017		Prior		Total
FICO score
700+	$	42	$	114	$	196	$	130	$	85	$	118	$	685
600-699		13		43		72		48		30		50		256
<600		2		6		10		6		4		7		35
No score(1)		13		32		45		30		16		35		171
	$	70	$	195	$	323	$	214	$	135	$	210	$	1,147

⁽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, 2021 and December 31, 2020, we had ceased accruing interest on timeshare financing receivables with an aggregate principal balance of $111 million and $117 million, respectively. The following tables detail an aged analysis of our gross timeshare receivables balance:

	March 31, 2021
($ in millions)	Securitized		Unsecuritized		Total
Current	$	710	$	307	$	1,017
31 - 90 days past due		11		8		19
91 - 120 days past due		4		2		6
121 days and greater past due		5		100		105
	$	730	$	417	$	1,147

	December 31, 2020
($ in millions)	Securitized		Unsecuritized		Total
Current	$	783	$	265	$	1,048
31 - 90 days past due		11		9		20
91 - 120 days past due		5		3		8
121 days and greater past due		6		103		109
	$	805	$	380	$	1,185

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

	March 31, 2021
($ in millions)	Securitized			Unsecuritized			Total
Balance as of December 31, 2020	$	63		$	148		$	211
Provision for financing receivables losses(1)		(9	)		25			16
Write-offs		—			(20	)		(20	)
Balance as of March 31, 2021	$	54		$	153		$	207

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

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