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Collateralized Receivables and Transfers of Financial Assets
 12 Months Ended
Dec. 31, 2019
Transfers and Servicing [Abstract]  
Transfers of Financial Assets Collateralized Receivables and Transfers of Financial Assets

Prior to November 2019, we completed various transactions with an unrelated entity involving our notes receivable under which we received cash proceeds in exchange for relinquishing our right, title, and interest in certain notes receivable. We had no further obligations or rights with respect to the control, management, administration, servicing, or collection of the installment notes receivable. However, we were subject to certain recourse provisions requiring us to purchase the underlying homes collateralizing such notes, in the event of a note default and subsequent repossession of the home by the unrelated entity. The recourse provisions were considered to be a form of continuing involvement which precluded establishing legal isolation, a necessary condition for derecognition of a financial asset, and therefore these transferred loans did not meet the requirements for sale accounting. We continued to recognize these transferred loans and we also recognized the cash proceeds on our Consolidated Balance Sheets and referred to them as collateralized receivables and as secured borrowings on collateralized receivables respectively.

In November 2019, the facts and circumstances regarding the recourse provisions, to which we remain subject, evolved such that the purchasers become subject to substantive economic risk.  Accordingly, we reassessed the legal isolation analysis in consultation with legal counsel, and concluded that the transaction now achieved the sale accounting requirements for the transferred notes receivable. Following the derecognition guidance, we (a) derecognized the transferred financial assets, (b) applied the guidance in ASC paragraphs 860-20-25-1 and 860-20-30-1 on recognition and measurement of assets obtained and liabilities incurred in the sale, and (c) recognized in earnings a $0.6 million gain on sale.

There was no balance of collateralized receivables at December 31, 2019. The balance of the collateralized receivables was $106.9 million (net of allowance of $0.8 million) as of December 31, 2018. The receivables had a weighted average interest rate and maturity of 9.9 percent and 14.1 years as of December 31, 2018.

There was no balance of secured borrowing as of December 31, 2019. The balance of the secured borrowing was $107.7 million as of December 31, 2018.

The amount of interest income and expense recognized was $8.0 million, $11.2 million and $13.2 million for the years ended December 31, 2019, 2018, and 2017, respectively.
  
The change in the aggregate gross principal balance of the collateralized receivables is as follows (in thousands):
 
December 31, 2019
 
December 31, 2018
Beginning balance
$
107,731

 
$
129,182

Principal payments and payoffs from our customers
(11,408
)
 
(12,577
)
Principal reduction from repurchased homes
(5,973
)
 
(8,874
)
Derecognition of collateralized receivables
(90,350
)
 
—

Total activity
(107,731
)
 
(21,451
)
Ending balance
$
—

 
$
107,731



The following table sets forth the allowance for the collateralized receivables (in thousands):
 
December 31, 2019
 
December 31, 2018
Beginning balance
$
(807
)
 
$
(936
)
Lower of cost or market write-downs
140

 
660

(Increase) / decrease to reserve balance
80

 
(531
)
Gain on derecognition of collaterized receivables
587

 
—

Total activity
807

 
129

Ending balance
$
—

 
$
(807
)