Note 7. Vacation Ownership Notes Receivable

Notes receivable (net of reserves) related to our vacation ownership loans consisted of the following (in millions):


	March 31, 2015			December 31, 2014
Vacation ownership loans – securitized	$	256		$	274
Vacation ownership loans – unsecuritized		345			331

		601			605
Less: current portion
Vacation ownership loans – securitized		(46	)		(47	)
Vacation ownership loans – unsecuritized		(39	)		(36	)

	$	516		$	522

We include the current and long-term maturities of unsecuritized VOI notes receivable in accounts receivable and other assets, respectively, in our consolidated balance sheets.

We record interest income associated with VOI notes in our vacation ownership and residential sales and services line item in our consolidated statements of income. Interest income related to our VOI notes receivable was as follows (in millions):


	Three Months Ended March 31,
	2015		2014
Vacation ownership loans – securitized	$	9	$	13
Vacation ownership loans – unsecuritized		12		8

	$	21	$	21

The following table presents future maturities of gross VOI notes receivable (in millions) and interest rates:


	Securitized			Unsecuritized			Total
2015	$	37		$	38		$	75
2016		50			32			82
2017		47			35			82
2018		40			37			77
2019		34			39			73
Thereafter		72			233			305

Balance at March 31, 2015	$	280		$	414		$	694

Weighted average interest rates at March 31, 2015		13.05	%		12.95	%		12.99	%

Range of interest rates		6.0% to 17.0%			5.0% to 17.0%			5.0% to 17.0%

For the vacation ownership and residential segment, we record an estimate of expected uncollectibility on our VOI notes receivable as a reduction of revenue at the time we recognize profit on a timeshare sale. We hold large amounts of homogeneous VOI notes receivable and, therefore, assess uncollectibility based on pools of receivables. In estimating loss reserves, we use a technique referred to as static pool analysis, which tracks uncollectible notes for each year’s sales over the life of the respective notes and projects an estimated default rate that is used in the determination of our loan loss reserve requirements. As of March 31, 2015 and December 31, 2014, the average estimated default rate for our pools of receivables was approximately 9.1% and 9.2%, respectively.

The activity and balances for our loan loss reserve were as follows (in millions):


	Securitized			Unsecuritized			Total
Balance at December 31, 2014	$	28		$	68		$	96
Provisions for loan losses		(1	)		4			3
Write-offs		—			(6	)		(6	)
Other		(3	)		3			—

Balance at March 31, 2015	$	24		$	69		$	93


Balance at December 31, 2013	$	43		$	60		$	103
Provisions for loan losses		(2	)		5			3
Write-offs		—			(5	)		(5	)
Other		(3	)		3			—

Balance at March 31, 2014	$	38		$	63		$	101

We use the origination of the notes by brand (Sheraton, Westin, and Other) and the Fair Isaac Corporation (FICO) scores of the buyers as the primary credit quality indicators to calculate the loan loss reserve for the vacation ownership notes, as we believe there is a relationship between the default behavior of borrowers and the brand associated with the vacation ownership property they have acquired, supplemented by the FICO scores of the buyers. In addition to quantitatively calculating the loan loss reserve based on our static pool analysis, we supplement the process by evaluating certain qualitative data, including the aging of the respective receivables and current default trends by brand and origination year.

Balances of our VOI notes receivable by brand and by FICO score were as follows (in millions):


	As of March 31, 2015
	700+		600-699		<600		No Score		Total
Sheraton	$	155	$	132	$	15	$	63	$	365
Westin		184		85		5		38		312
Other		9		2		—		6		17

	$	348	$	219	$	20	$	107	$	694


	As of December 31, 2014
	700+		600-699		<600		No Score		Total
Sheraton	$	157	$	134	$	15	$	62	$	368
Westin		186		88		6		36		316
Other		9		2		—		6		17

	$	352	$	224	$	21	$	104	$	701

Given the significance of our pools of VOI notes receivable, a change in the projected default rate can have a significant impact to our loan loss reserve requirements, with a 0.1% change estimated to have an impact of approximately $5 million.

We consider a VOI note receivable delinquent when it is more than 30 days outstanding. Delinquent notes receivable amounted to $43 million and $42 million as of March 31, 2015 and December 31, 2014, respectively. All delinquent loans are placed on nonaccrual status, and we do not resume interest accrual until payment is made. We consider loans to be in default upon reaching 120 days outstanding, at which point, we generally commence the repossession process. Uncollectible VOI notes receivable are charged off when title to the unit is returned to us. We generally do not modify vacation ownership notes that become delinquent or upon default.

Past due balances of VOI notes receivable were as follows (in millions):


	Total Receivables		Current		Delinquent
	Total Receivables		Current		30-59 Days		60-89 Days		>90 Days		Total
As of March 31, 2015	$	694	$	651	$	9	$	6	$	28	$	43
As of December 31, 2014	$	701	$	659	$	9	$	4	$	29	$	42