The proverbial winter blues kicked for U.S. timeshare ABS in the last three months of 2012.
Delinquencies on securitized timeshare loans increased to 3.55% in the fourth quarter of from 3.28% in the third quarter, according to the latest index results from Fitch Ratings.
Fourth quarter delinquencies were down moderately from 3.82% a year earlier, however.
Fitch said delinquency trends have largely “normalized” at their historical levels after increasing dramatically in 2008 and 2009.
As expected, defaults also rose, to 0.75% in the fourth quarter from 0.60% in the third quarter, but remained at the same level observed at the same time last year.
Fitch has a “stable” outlook for timeshare ABS. That’s partially because these deals are structured in such a way that leverage decreases over time. They also have ample levels of credit enhancement.
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.