Today, it is clear that the economy is heading towards full recovery. For the timeshare industry, this means getting to their profitable status and the number of owners trying to get out of their timeshares would be lessened. This could also have another positive effect on timeshare ABS delinquencies. Recently, total US timeshare ABS delinquencies fell in first quarter of 2010 according to the latest timeshare ABS index from Fitch Ratings.
The decline in delinquencies reflects not only historical seasonal improvement that timeshare loans usually see in the spring, but also an improvement year-over-year. According to Director Brad Sohl, though still above historical norms, the US timeshare ABS delinquencies are slowly migrating back to pre-recession levels.
The total delinquencies for 1Q’10 were 4.64%. That is down from 4.89% at the end of 4Q’09, following seasonal patterns which were typically seen in timeshare ABS. Meanwhile, the delinquencies decreased by approximately 15% from 5.43% in 1Q’09.
In March 2010, monthly defaults remained at 0.83%. That’s consistent with 0.83% in 4Q’09 and 0.81% for 1Q’09. On an annualized basis, defaults were 9.53% for the index in March. That’s higher than the 9.44% observed in 4Q’09. However, March’s annualized default rate was slightly lower than the rate for the prior two months.
Due to the expected stable performance and ample credit enhancement levels, the Fitch’s Rating Outlook for Timeshare ABS remains Stable. This may mean that such vacation accommodation business is now illustrating a positive performance after the last two years’ economic challenges. On the other hand, Fitch’s timeshare ABS index is an aggregation of performance statistics on pools of securitized timeshare loans originated by various developers. The expected cumulative gross defaults on underlying transactions can range from 10% to above 20% while delinquencies and defaults may vary on an absolute basis.