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Timeshare Financing Receivables
 9 Months Ended
Sep. 30, 2022
Receivables [Abstract]  
Timeshare Financing Receivables Timeshare Financing Receivables
We define our timeshare financing receivables portfolio segments as (i) originated and (ii) acquired. The following table presents the components of each portfolio segment by class of timeshare financing receivables:
 
Originated(2)
Acquired(2)
($ in millions)September 30,
2022		December 31,
2021		September 30,
2022		December 31,
2021
Securitized$856 $587 $363 $523 
Unsecuritized(1)
799 810 440 515 
Timeshare financing receivables, gross$1,655 $1,397 $803 $1,038 
Unamortized non-credit acquisition premium(3)
— — 47 74 
Less: allowance for financing receivables losses(374)(280)(388)(482)
Timeshare financing receivables, net$1,281 $1,117 $462 $630 
(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.
(2)Acquired timeshare financing receivables include all timeshare financing receivables of Legacy-Diamond as of the Acquisition Date. Originated timeshare financing receivables include all Legacy-HGV timeshare financing receivables and Legacy-Diamond timeshare financing receivables originated after the Acquisition Date.
(3)Non-credit premium of $97 million was recognized at the Acquisition Date, of which $47 million remains unamortized as of September 30, 2022.
In August 2022, we completed a securitization of $269 million of gross timeshare financing receivables and issued approximately $153 million of 4.30 percent notes, $73 million of 4.74 percent notes, $26 million of 5.57 percent notes, and $17 million of 8.73 percent notes due January 2037. The securitization transaction did not qualify as a sale and, accordingly, no gain or loss was recognized. The transaction is considered a secured borrowing, and the proceeds from the transaction are presented as non-recourse debt. The proceeds were primarily used to pay down the remaining borrowings of our Timeshare Facility and general corporate operating expenses. See Note 13: Debt and Non-recourse Debt for additional information.
In April 2022, we completed a securitization of $246 million of gross timeshare financing receivables and issued approximately $107 million of 3.61 percent notes, $84 million of 4.10 percent notes, $22 million of 4.69 percent notes, and $33 million of 6.79 percent notes due June 2034. The securitization transaction did not qualify as a sale and, accordingly,
no gain or loss was recognized. The transaction is considered a secured borrowing, and the proceeds from the transaction are presented as non-recourse debt. The proceeds were primarily used to pay down the remaining borrowings of one of our conduit facilities and general corporate operating expenses. See Note 13: Debt and Non-recourse Debt for additional information.
As of September 30, 2022 and December 31, 2021, we had timeshare financing receivables with a carrying value of $9 million and $131 million, respectively, securing 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. For the nine months ended September 30, 2022, we recorded an adjustment to our estimate of variable consideration of $101 million.
We recognize interest income on our timeshare financing receivables as earned. As of September 30, 2022 and December 31, 2021, we had interest receivable outstanding of $12 million and $9 million, respectively, on our originated timeshare financing receivables, which represent all Legacy-HGV timeshare financing receivables and timeshare financing receivables originated by Legacy-Diamond subsequent to the Acquisition Date. As of September 30, 2022 and December 31, 2021, we had interest receivable outstanding of $4 million and $7 million on our acquired timeshare financing receivables, which represents all timeshare financing receivables of Legacy-Diamond as of the Acquisition Date. Interest receivable is included in Other Assets within our 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 September 30, 2022, our originated timeshare financing receivables had interest rates ranging from 1.5 percent to 25.8 percent, a weighted-average interest rate of 14.2 percent, a weighted-average remaining term of 8.2 and maturities through 2037. Our acquired timeshare financing receivables had interest rates ranging from 2.0 percent to 25.0 percent, a weighted-average interest rate of 15.7 percent, a weighted-average remaining term of 7.6 years and maturities through 2032.
Acquired Timeshare Financing Receivables with Credit Deterioration
As part of the Diamond Acquisition, we acquired existing portfolios of timeshare financing receivables. Acquired timeshare financing receivables include all timeshare financing receivables of Legacy-Diamond as of the Acquisition Date and were deemed to be purchase credit deteriorated financial assets. These notes receivable were initially recognized at their purchase price, represented by the acquisition date fair value, and subsequently “grossed-up” by our acquisition date assessment of the allowance for credit losses. The difference over which par value of the acquired purchased credit deteriorated assets exceeds the purchase price plus the initial allowance for credit losses is reflected as a non-credit premium and is amortized as a reduction to interest income under the effective interest method.
The fair value of our acquired timeshare financing receivables as of the Acquisition Date was determined using a discounted cash flow method, which calculated a present value of expected future risk-adjusted cash flows over the remaining term of the respective timeshare financing receivables. which calculated a present value of expected future cash flows based on scheduled principal and interest payments over the term of the respective timeshare financing receivables. Consequently, the fair value of the acquired timeshare financing receivables recorded on our consolidated balance sheet as of the Acquisition Date included an estimate of expected credit losses which became the historical cost basis for that portfolio going forward.
The allowance for credit losses for our acquired timeshare financing receivables is remeasured at each period end and takes into consideration an estimated measure of anticipated defaults and early repayments. We consider historical Legacy-Diamond timeshare financing receivables performance and the current economic environment in the re-measurement of the allowance for credit losses for our acquired timeshare financing receivables. Subsequent changes to the allowance for credit losses are recorded as additions to or reversals of credit losses in our consolidated statements of operations through provision for credit losses.
Our acquired timeshare financing receivables as of September 30, 2022 mature as follows:
Acquired Timeshare Financing Receivables
($ in millions)SecuritizedUnsecuritizedTotal
Year
2022 (remaining)$10 $8 $18 
202341 34 75 
202445 38 83 
202548 42 90 
202651 47 98 
Thereafter168 271 439 
$363 $440 $803 
Originated Timeshare Financing Receivables
Originated timeshare financing receivables represent all Legacy-HGV timeshare financing receivables and timeshare financing receivables originated by Legacy-Diamond subsequent to the Acquisition Date. Our originated timeshare financing receivables as of September 30, 2022 mature as follows:
Originated Timeshare Financing Receivables
($ in millions)SecuritizedUnsecuritizedTotal
Year
2022 (remaining)$24 $19 $43 
2023100 52 152 
2024104 59 163 
2025105 66 171 
2026105 73 178 
Thereafter418 530 948 
$856 $799 $1,655 
Allowance for Financing Receivables Losses
The changes in our allowance for financing receivables losses were as follows:
($ in millions)Originated Acquired
Balance as of December 31, 2021$280 $482 
Provision for financing receivables losses(1)
101 — 
Write-offs(52)(63)
Upgrades(2)
45 (31)
Balance at September 30, 2022$374 $388 
($ in millions)
Originated
Acquired
Balance as of December 31, 2020$211 $— 
Provision for financing receivables losses(1)
77 — 
Initial allowance for PCD financing receivables acquired during the period— 469 
Write-offs(50)(7)
Balance at September 30, 2021$238 $462 
(1)Includes incremental provision for financing receivables losses, net of activity related to the repurchase of defaulted and upgraded securitized timeshare financing receivables.
(2)Represents the initial change in allowance resulting from upgrades of Acquired loans. Upgraded Acquired loans and their related allowance are included in the Originated portfolio segment.
Credit Quality of Timeshare Financing Receivables
Legacy-HGV Timeshare Financing Receivables
We evaluate this portfolio collectively for purposes of estimating variable consideration, since we hold a large group of homogeneous timeshare financing receivables which are individually immaterial. We monitor the collectability of our receivables on an ongoing basis. There are no significant concentrations of credit risk with any individual counterparty or groups of counterparties. We use a technique referred to as static pool analysis as the basis for estimating expected defaults and determining our allowance for financing receivables losses on our timeshare financing receivables. For static pool analysis, we use certain key dimensions to stratify our portfolio, including FICO scores, equity percentage at the time of sale and certain other factors. The adequacy of the related allowance is determined by management through analysis of several factors, such as current economic conditions and industry trends, as well as the specific risk characteristics of the portfolio including assumed default rates, aging and historical write-offs of these receivables. The allowance is maintained at a level deemed adequate by management based on a periodic analysis of the mortgage portfolio.
Our gross balances by average FICO score of our Legacy-HGV timeshare financing receivables were as follows:
 Legacy-HGV Timeshare Financing Receivables
($ in millions)September 30,
2022		December 31,
2021
FICO score
700+$734 $703 
600-699264 248 
<60036 35 
No score(1)
167 166 
$1,201 $1,152 
(1)Timeshare financing receivables without a FICO score are primarily related to foreign borrowers.
The following table details our Legacy-HGV timeshare financing receivables by the origination year and average FICO score as of September 30, 2022:
($ in millions)20222021202020192018PriorTotal
FICO score
700+$258 $157 $55 $98 $68 $98 $734 
600-69987 58 20 35 25 39 264 
<60011 8 3 5 3 6 36 
No score(1)
41 30 19 29 19 29 167 
$397 $253 $97 $167 $115 $172 $1,201 
(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 September 30, 2022 and December 31, 2021, we had ceased accruing interest on timeshare financing receivables with an aggregate principal balance of $71 million and $83 million, respectively. The following tables detail an aged analysis of our gross timeshare receivables balance:
Legacy-HGV Timeshare Financing Receivables
September 30, 2022
($ in millions)SecuritizedUnsecuritizedTotal
Current$687 $427 $1,114 
31 - 90 days past due8 8 16 
91 - 120 days past due2 3 5 
121 days and greater past due1 65 66 
$698 $503 $1,201 
Legacy-HGV Timeshare Financing Receivables
December 31, 2021
($ in millions)SecuritizedUnsecuritizedTotal
Current$569 $488 $1,057 
31 - 90 days past due6 6 12 
91 - 120 days past due2 2 4 
121 days and greater past due2 77 79 
$579 $573 $1,152 
Legacy-Diamond Timeshare Financing Receivables
We evaluate this portfolio collectively for purposes of estimating variable consideration, since we hold a large group of homogeneous timeshare financing receivables which are individually immaterial. We monitor the collectability of our receivables on an ongoing basis. There are no significant concentrations of credit risk with any individual counterparty or groups of counterparties. We use a technique referred to as static pool analysis as the basis for estimating expected defaults and determining our allowance for financing receivables losses on our timeshare financing receivables. For static pool analysis, we use certain key dimensions to stratify our portfolio, including FICO scores, equity percentage at the time of sale and certain other factors. The adequacy of the related allowance is determined by management through analysis of several factors, such as current economic conditions and industry trends, as well as the specific risk characteristics of the portfolio including assumed default rates, aging and historical write-offs of these receivables. The allowance is maintained at a level deemed adequate by management based on a periodic analysis of the mortgage portfolio.
Our gross balances by average FICO score of our Legacy-Diamond acquired and originated timeshare financing receivables were as follows:
Legacy-Diamond
Acquired Timeshare Financing Receivables
($ in millions)September 30, 2022December 31, 2021
FICO score
700+$423 $601 
600-699300 356 
<60063 70 
No score(1)
17 11 
$803 $1,038 
(1)Timeshare financing receivables without a FICO score are primarily related to foreign borrowers.
Legacy-Diamond
Originated Timeshare Financing Receivables
($ in millions)September 30, 2022December 31, 2021
FICO score
700+$282 $172 
600-699144 60 
<60024 11 
No score(1)
4 2 
$454 $245 
(1)Timeshare financing receivables without a FICO score are primarily related to foreign borrowers.
The following tables detail our Legacy-Diamond acquired and originated timeshare financing receivables by the origination year and average FICO score as of September 30, 2022:
Legacy-Diamond Acquired Timeshare Financing Receivables
($ in millions)20222021202020192018PriorTotal
FICO score
700+$— $75 $91 $109 $71 $77 $423 
600-699— 50 55 78 46 71 300 
<600— 12 15 13 6 17 63 
No score(1)
— 1 5 2 1 8 17 
$— $138 $166 $202 $124 $173 $803 
(1)Timeshare financing receivables without a FICO score are primarily related to foreign borrowers.
Legacy-Diamond Originated Timeshare Financing Receivables
($ in millions)20222021202020192018PriorTotal
FICO score
700+$200 $82 $— $— $— $— $282 
600-69998 46 — — — — 144 
<60014 10 — — — — 24 
No score(1)
3 1 — — — — 4 
$315 $139 $— $— $— $— $454 
(1)Timeshare financing receivables without a FICO score are primarily related to foreign borrowers.
The accrued interest on our Legacy-Diamond timeshare financing receivables is accrued based on the contractual provisions of the loan documents, which is suspended at the earlier of (i) the customer’s account becoming over 90 days delinquent, or (ii) the completion of cancellation or foreclosure proceedings. Once suspended, we reverse all prior recognized interest income as well. 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 become owner of the deed for the foreclosed unit.
As of September 30, 2022 and December 31, 2021, we had ceased accruing interest on Legacy-Diamond timeshare financing receivables with an aggregate principal balance of $400 million and $369 million, respectively. The following tables detail an aged analysis of our gross timeshare receivables balance:
Legacy-Diamond Timeshare Financing Receivables
September 30, 2022
($ in millions)SecuritizedUnsecuritizedTotal
Current$483 $341 $824 
31 - 90 days past due17 16 33 
91 - 120 days past due5 5 10 
121 days and greater past due16 374 390 
$521 $736 $1,257 
Legacy-Diamond Timeshare Financing Receivables
December 31, 2021
($ in millions)SecuritizedUnsecuritizedTotal
Current$496 $385 $881 
31 - 90 days past due15 18 33 
91 - 120 days past due6 5 11 
121 days and greater past due14 344 358 
$531 $752 $1,283