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Capital Markets—They’re Back!

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Capital Markets—They’re Back! 

By Howard Nusbaum

July 10, 2012 

AIF Research 

It was just a couple of short years ago that seven of the ten dependable timeshare lenders withdrew from finance. It was a bleak scenario that many in our industry hoped would never happen.

Luckily, this year paints a brighter picture. ARDA’s International Foundation (AIF) has just released its latest Financial Performance study, and the numbers look very healthy. Here are a few facts from the study:

Hypothecation of receivables: The average interest rate and average advance rate increased when compared to 2010. The average interest rate increased by 0.3 percentage points from 5.6 percent to 5.9 percent. The average advance rate has increased 1.4 percentage points from 79.2 percent to 80.6 percent. Eighteen respondents provided information on hypothecations of receivables that occurred during 2011, totaling $693 million.  

Portfolio sales and securitizations: For respondents that reported securitizations in both 2010 and 2011, the average transaction size of securitizations and advanced rates increased, while average interest rates declined. The average transaction size of reported securitizations increased 5.1 percent from $245.0 million to $257.4 million. The average advance rate has increased 13.0 percentage points from 81.2 percent to 94.2 percent. The six separate securitization transactions reported by survey respondents in 2011 represented a total value of $1.4 billion, measured as the gross value of the sales contracts securitized.  

These stats indicate positive movement in our industry. As you know, the environment certainly has changed and I believe it’s for the better. New lenders have entered the financial marketplace, like Capital One. Some regional and local banks have gotten involved, too. And, of course, the security markets are once again providing financing to the vacation ownership industry’s largest developers on favorable terms. All of this is improving the environment and outlook.  

Timeshare buyers are paying larger down payments and have much higher FICO scores than five years ago. Timeshare receivables have also performed well throughout, and certainly much better than other classes of loans like credit card, auto, and student loans.

We are looking forward to this trend continuing and believe that it will. For more information on the study, please contact Darla Zanini at dzanini@arda.org.


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