CHICAGO, IL (August 12, 2010) U.S. timeshare ABS delinquencies and defaults are down for the second straight quarter, though the trend will not last if seasonal patterns take hold, according to the latest timeshare ABS index from Fitch Ratings.
The decline in delinquencies in second-quarter 2010 (2Q’10) reflects both seasonal and year-over-year improvement. Defaults, while lagging delinquencies have begun to show a similar trend in 2Q’10. ‘The seasonal effect will fade in the latter half of the year, leading to modest increases in delinquencies,’ said Director Brad Sohl. ‘Nonetheless, year-over-year improvements will continue to hold.
Given the expected stable collateral performance and ample credit enhancement levels, Fitch’s Rating Outlook for Timeshare ABS remains Stable.
Timeshare delinquencies and defaults have returned to levels consistent with previous recessions. ‘Despite the improvement, current and emerging timeshare performance still illustrates a stressed U.S. consumer,’ said Sohl.
Total delinquencies for 2Q’10 were 3.61%, down from 4.64% at the end of 1Q’10. Meanwhile, delinquencies decreased by almost 25% from 4.79% in 2Q’09. This drop is somewhat exaggerated due to the addition of certain recently issued securitizations to the index. These transactions generally experience lower delinquency rates during their first several months. However, absent these transactions, the index still evidenced a drop in delinquencies of approximately 15%.
Monthly defaults dropped to .71% in June 2010, down from .83% at the end of both 1Q’10 and 4Q’09. On an annualized basis (rolling 12 months), defaults were 9.07% for the index in March, down from the 9.53% observed in 1Q’10. The annual default rate has dropped steadily after hitting its all-time peak of 9.57% in January of this year.
Fitch’s timeshare ABS index is an aggregation of performance statistics on pools of securitized timeshare loans originated by various developers. Expected cumulative gross defaults on underlying transactions can range from 10% to above 20%. While delinquencies and defaults may vary on an absolute basis, most transactions supporting the index exhibit similar overall trends.
The Fitch timeshare performance index summarizes average monthly delinquency (over 30 days) and gross default trends tracked in Fitch’s database of timeshare asset backed securities (ABS) dating back to January 1997 and is available on a quarterly basis.
Fitch’s quarterly index can be found at ‘www.fitchratings.com’ under the following headers:
Sectors >> Structured Finance >> ABS >> ABS Indices >> Timeshare
Additional information is available at ‘www.fitchratings.com‘
Brad Sohl, +1-312-368-3127
Du Trieu, +1-312-368-2091 (Chicago)
John Bella, +1-212-908-0243 (New York)
Sandro Scenga, +1-212-908-0278 (New York)
SOURCE: Fitch Ratings