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TIMESHARE FINANCING RECEIVABLES
 9 Months Ended
Sep. 30, 2023
Receivables [Abstract]  
TIMESHARE FINANCING RECEIVABLES TIMESHARE FINANCING RECEIVABLES
We define our timeshare financing receivables portfolio segments as (i) originated and (ii) acquired. On August 2, 2021 (the “Acquisition Date”), we acquired Dakota Holdings, Inc., the parent of Diamond Resorts International (“Diamond” or “Legacy-Diamond”) (the “Diamond Acquisition”). Our originated portfolio represents timeshare financing receivables that existed both prior to and following the Acquisition Date, excluding Legacy-Diamond (“Legacy-HGV”) and timeshare financing receivables originated by Legacy-Diamond subsequent to the Acquisition Date. Our acquired portfolio includes all timeshare financing receivables acquired from Legacy-Diamond as of the Acquisition Date.
The following table presents the components of each portfolio segment by class of timeshare financing receivables:
OriginatedAcquired
($ in millions)September 30,
2023		December 31,
2022		September 30,
2023		December 31,
2022
Securitized$837 $788 $202 $262 
Unsecuritized(1)
1,146 971 337 447 
Timeshare financing receivables, gross$1,983 $1,759 $539 $709 
Unamortized non-credit acquisition premium(2)
— — 30 41 
Less: allowance for financing receivables losses(473)(404)(258)(338)
Timeshare financing receivables, net$1,510 $1,355 $311 $412 
(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)Non-credit premium of $97 million was recognized at the Acquisition Date, of which $30 million and $41 million remains unamortized as of September 30, 2023 and December 31, 2022, respectively.
In August 2023, we completed a securitization of approximately $293 million of gross timeshare financing receivables and issued approximately $187 million of 5.72% notes, $79 million of 6.11% notes, and $27 million of 6.94% notes due January 2038. 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 notes from the transaction are presented as non-recourse debt. The proceeds were used to pay down in part some of the existing debt and for other general corporate purposes. See Note 7: Consolidated Variable Interest Entities and Note 10: Debt and Non-recourse Debt for additional information.
As of December 31, 2022, we had timeshare financing receivables of $105 million securing the Timeshare Facility. As of September 30, 2023, we did not have any timeshare financing receivables securing the Timeshare Facility.
We record an estimate of variable consideration for defaults as a reduction of revenue from financed VOI sales at the time revenue is recognized. 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 nine months ended September 30, 2023 and 2022, we recorded an adjustment to our estimate of variable consideration of $117 million and $101 million, respectively.
We recognize interest income on our timeshare financing receivables as earned. As of September 30, 2023 and December 31, 2022, we had interest receivable outstanding of $15 million and $13 million, respectively, on our originated timeshare financing receivables. As of September 30, 2023 and December 31, 2022, we had interest receivable outstanding of $2 million and $4 million, respectively, on our acquired timeshare financing receivables. Interest receivable is included in Other Assets within 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 September 30, 2023, our originated timeshare financing receivables had interest rates ranging from 1.5% to 25.8%, a weighted-average interest rate of 14.7%, a weighted-average remaining term of 8.3 years and maturities through 2038. Our acquired timeshare financing receivables had interest rates ranging from 2.0% to 25.0%, a weighted-average interest rate of 15.7%, a weighted-average remaining term of 7 years and maturities through 2033.
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. During the nine months ended September 30, 2023 and 2022, we reversed $55 million and $52 million, respectively, of accrued interest income. 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.
Acquired Timeshare Financing Receivables with Credit Deterioration
Our acquired timeshare financing receivables were deemed to be purchased 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 financing receivable 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. 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 financing receivable losses which became the historical cost basis for that portfolio going forward.
The allowance for financing receivable 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 financing receivable losses for our acquired timeshare financing receivables. Subsequent changes to the allowance for financing receivable losses are recorded as adjustments to the provision.
Our gross acquired timeshare financing receivables as of September 30, 2023 mature as follows:
Acquired Timeshare Financing Receivables
($ in millions)SecuritizedUnsecuritizedTotal
Year
2023 (remaining three months)$14 $15 $29 
202430 31 61 
202531 35 66 
202632 38 70 
202732 41 73 
Thereafter63 177 240 
Total$202 $337 $539 
Originated Timeshare Financing Receivables
Our originated timeshare financing receivables as of September 30, 2023 mature as follows:
Originated Timeshare Financing Receivables
($ in millions)SecuritizedUnsecuritizedTotal
Year
2023 (remaining three months)$26 $32 $58 
202499 78 177 
2025102 87 189 
2026103 95 198 
2027103 105 208 
Thereafter404 749 1,153 
Total$837 $1,146 $1,983 
Allowance for Financing Receivables Losses
The changes in our allowance for financing receivables losses were as follows:
($ in millions)
Originated
Acquired
Balance as of December 31, 2022$404 $338 
Provision for financing receivables losses(1)
115 2 
Write-offs(55)(94)
Inventory recoveries— 21 
Upgrades(2)
9 (9)
Balance as of September 30, 2023$473 $258 
($ in millions)
Originated
Acquired
Balance as of December 31, 2021$280 $482 
Provision for financing receivables losses(1)
101 — 
Write-offs(52)(63)
Inventory recoveries— 14 
Upgrades(2)
45 (45)
Balance as of September 30, 2022$374 $388 
(1)Includes incremental provision for financing receivables losses, net of activity related to the repurchase of defaulted and upgraded securitized timeshare financing receivables.
(2)Represents the initial change in allowance resulting from upgrades of Acquired loans. Upgraded Acquired loans and their related allowance are included in the Originated portfolio segment.
Credit Quality of Timeshare Financing Receivables
Legacy-HGV Timeshare Financing Receivables
We evaluate this portfolio collectively for purposes of estimating variable consideration, since we hold a large group of homogeneous timeshare financing receivables which are individually immaterial. We monitor the collectability of our receivables on an ongoing basis. There are no significant concentrations of credit risk with any individual counterparty or groups of counterparties. We use a technique referred to as static pool analysis as the basis for estimating expected defaults and determining our allowance for financing receivables losses on our timeshare financing receivables. For the static pool analysis, we use certain key dimensions to stratify our portfolio, including FICO scores, equity percentage at the time of sale and certain other factors. The adequacy of the related allowance is determined by management through analysis of several factors, such as current economic conditions and industry trends, as well as the specific risk characteristics of the portfolio including assumed default rates, aging and historical write-offs of these receivables. The allowance is maintained at a level deemed adequate by management based on a periodic analysis of the mortgage portfolio.
Our gross balances by average FICO score of our Legacy-HGV timeshare financing receivables were as follows:
 Legacy-HGV Timeshare Financing Receivables
($ in millions)September 30, 2023December 31, 2022
FICO score
700+$835 $763 
600-699304 270 
<60038 37 
No score(1)
186 174 
Total$1,363 $1,244 
(1)Timeshare financing receivables without a FICO score are primarily related to foreign borrowers.
The following table details our gross Legacy-HGV timeshare financing receivables by the origination year and average FICO score as of September 30, 2023:
($ in millions)20232022202120202019PriorTotal
FICO score
700+$290 $233 $102 $36 $67 $107 $835 
600-699100 86 38 14 24 42 304 
<60010 11 5 2 3 7 38 
No score(1)
58 43 21 13 20 31 186 
Total$458 $373 $166 $65 $114 $187 $1,363 
Current period gross write-offs$— $6 $10 $5 $8 $15 $44 
(1)Timeshare financing receivables without a FICO score are primarily related to foreign borrowers.
As of September 30, 2023 and December 31, 2022, we had ceased accruing interest on timeshare financing receivables with an aggregate principal balance of $88 million and $76 million, respectively. The following tables detail an aged analysis of our gross timeshare receivables balance:
Legacy-HGV Timeshare Financing Receivables
September 30, 2023
($ in millions)SecuritizedUnsecuritizedTotal
Current$632 $621 $1,253 
31 - 90 days past due9 13 22 
91 - 120 days past due4 3 7 
121 days and greater past due2 79 81 
Total$647 $716 $1,363 
Legacy-HGV Timeshare Financing Receivables
December 31, 2022
($ in millions)SecuritizedUnsecuritizedTotal
Current$631 $520 $1,151 
31 - 90 days past due9 8 17 
91 - 120 days past due3 2 5 
121 days and greater past due4 67 71 
Total$647 $597 $1,244 
Legacy-Diamond Timeshare Financing Receivables
We evaluate these portfolios collectively for purposes of estimating variable consideration, since we hold a large group of homogeneous timeshare financing receivables which are individually immaterial. We monitor the collectability of our receivables on an ongoing basis. There are no significant concentrations of credit risk with any individual counterparty or groups of counterparties. We use a technique referred to as static pool analysis as the basis for estimating expected
defaults and determining our allowance for financing receivables losses on our timeshare financing receivables. The adequacy of the related allowance is determined by management through analysis of several factors, such as current economic conditions and industry trends, as well as the specific risk characteristics of the portfolio including assumed default rates, aging and historical write-offs of these receivables. The allowance is maintained at a level deemed adequate by management based on a periodic analysis of the mortgage portfolio.
Our gross balances by average FICO score of our Legacy-Diamond acquired and originated timeshare financing receivables were as follows:
Legacy-Diamond Acquired Timeshare Financing Receivables
($ in millions)September 30, 2023December 31, 2022
FICO score
700+$278 $373 
600-699203 265 
<60045 55 
No score(1)
13 16 
Total$539 $709 
(1)Timeshare financing receivables without a FICO score are primarily related to foreign borrowers.
Legacy-Diamond Originated Timeshare Financing Receivables
($ in millions)September 30, 2023December 31, 2022
FICO score
700+$377 $321 
600-699207 163 
<60029 26 
No score(1)
7 5 
Total$620 $515 
(1)Timeshare financing receivables without a FICO score are primarily related to foreign borrowers.
The following tables detail our gross Legacy-Diamond acquired and originated timeshare financing receivables by the origination year and average FICO score as of September 30, 2023:
Legacy-Diamond Acquired Timeshare Financing Receivables
($ in millions)20232022202120202019PriorTotal
FICO score
700+$— $— $50 $60 $71 $97 $278 
600-699— — 36 39 50 78 203 
<600— — 9 10 8 18 45 
No score(1)
— — 1 4 1 7 13 
Total$— $— $96 $113 $130 $200 $539 
Current period gross write-offs$— $— $9 $18 $30 $37 $94 
(1)Timeshare financing receivables without a FICO score are primarily related to foreign borrowers.
Legacy-Diamond Originated Timeshare Financing Receivables
($ in millions)20232022202120202019PriorTotal
FICO score
700+$151 $171 $55 $— $— $— $377 
600-69977 98 32 — — — 207 
<60010 13 6 — — — 29 
No score(1)
3 3 1 — — — 7 
Total$241 $285 $94 $— $— $— $620 
Current period gross write-offs$— $5 $6 $— $— $— $11 
(1)Timeshare financing receivables without a FICO score are primarily related to foreign borrowers.
As of September 30, 2023 and December 31, 2022, we had ceased accruing interest on Legacy-Diamond timeshare financing receivables with an aggregate principal balance of $369 million and $377 million, respectively. The following tables detail an aged analysis of our gross timeshare receivables balance:
Legacy-Diamond Timeshare Financing Receivables
September 30, 2023
($ in millions)SecuritizedUnsecuritizedTotal
Current$363 $392 $755 
31 - 90 days past due15 20 35 
91 - 120 days past due6 8 14 
121 days and greater past due8 347 355 
Total$392 $767 $1,159 
Legacy-Diamond Timeshare Financing Receivables
December 31, 2022
($ in millions)SecuritizedUnsecuritizedTotal
Current$373 $442 $815 
31 - 90 days past due13 19 32 
91 - 120 days past due4 8 12 
121 days and greater past due13 352 365 
Total$403 $821 $1,224