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Fitch: Defaults Still Peaking for U.S. Timeshare ABS as Delinquencies Retreat
Press Release
Source: Fitch Ratings
On Wednesday August 12, 2009, 10:47 am EDT
CHICAGO--(BUSINESS WIRE)--Total defaults on U.S. timeshare asset-backed securities (ABS) hit another peak in second quarter-2009 (2Q'09), according to the latest timeshare ABS index from Fitch Ratings. One positive outlier that has emerged, due to seasonal patterns, is that delinquencies have receded in recent months, indicating that some moderate improvement in default activity is possible for the latter half of the year.
"Despite the seasonal improvement, delinquency and default performance of timeshare receivables continues to be weak relative to historical standards," stated Director Brad Sohl. "However, ample credit enhancement within these transactions should continue to ensure limited negative rating actions."
Most timeshare ABS are structured with significant levels of credit enhancement to senior classes, shielding those classes from some potential downgrades. While a few transactions include less enhanced subordinate classes, to date these classes have been able to support multiples of expected losses commensurate with current ratings. As such, Fitch's outlook for asset performance remains declining while the Rating Outlook remains Stable for the U.S. timeshare ABS sector.
Total delinquencies decreased to 4.89% in 2Q'09, down over 12% from the all time high of 5.58% realized in February of this year. This modest reduction is consistent with the seasonal performance improvement that is typically seen in timeshare ABS. However, total delinquencies remain at elevated levels relative to historical experience, and are up approximately 37% year over year.
Monthly defaults of .88% for June up nearly 48% from .52% for the prior year reached the highest observed level for the index, as US timeshare borrowers continue to struggle in the current economic environment. On an annualized basis, default experience continues to breach historical peaks, reaching 8.75% for the index in June. However, as delinquencies have trended downward recently, Fitch expects default levels to moderate slightly in the coming months.
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.
Press Release
Source: Fitch Ratings
On Wednesday August 12, 2009, 10:47 am EDT
CHICAGO--(BUSINESS WIRE)--Total defaults on U.S. timeshare asset-backed securities (ABS) hit another peak in second quarter-2009 (2Q'09), according to the latest timeshare ABS index from Fitch Ratings. One positive outlier that has emerged, due to seasonal patterns, is that delinquencies have receded in recent months, indicating that some moderate improvement in default activity is possible for the latter half of the year.
"Despite the seasonal improvement, delinquency and default performance of timeshare receivables continues to be weak relative to historical standards," stated Director Brad Sohl. "However, ample credit enhancement within these transactions should continue to ensure limited negative rating actions."
Most timeshare ABS are structured with significant levels of credit enhancement to senior classes, shielding those classes from some potential downgrades. While a few transactions include less enhanced subordinate classes, to date these classes have been able to support multiples of expected losses commensurate with current ratings. As such, Fitch's outlook for asset performance remains declining while the Rating Outlook remains Stable for the U.S. timeshare ABS sector.
Total delinquencies decreased to 4.89% in 2Q'09, down over 12% from the all time high of 5.58% realized in February of this year. This modest reduction is consistent with the seasonal performance improvement that is typically seen in timeshare ABS. However, total delinquencies remain at elevated levels relative to historical experience, and are up approximately 37% year over year.
Monthly defaults of .88% for June up nearly 48% from .52% for the prior year reached the highest observed level for the index, as US timeshare borrowers continue to struggle in the current economic environment. On an annualized basis, default experience continues to breach historical peaks, reaching 8.75% for the index in June. However, as delinquencies have trended downward recently, Fitch expects default levels to moderate slightly in the coming months.
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.