Ratings

Standard & Poor's has rated 18 timeshare term securitizations with initial principal balances totaling $4.7 billion since the first quarter of 2001. Including the one term transaction rated in June 2006, the outstanding issuance amount for the 17 remaining transactions was approximately $2.1 billion, backed by nearly $2.4 billion in timeshare loan receivables (see chart 1).

Rated timeshare term issuance has grown fairly steadily over the past five years (see chart 2). Standard & Poor's rated one public transaction (Fairfield Funding Corp. III) and one confidential transaction in 2001. The Fairfield Funding transaction paid out on the April 2005 distribution date after Cendant/Fairfield exercised its clean-up call option. Issuance increased 62% year-over-year on a dollar basis in 2002 (two rated issuances), 27% in 2003 (three rated issuances), 28% in 2004 (five rated issuances), and 33% in 2005 (five rated issuances). We rated one term transaction in the second quarter of 2006; Marriott Vacation Club Owner Trust Series 2006-1's $250 million loan-backed notes (a summary of this issuance is outlined in appendix II). Standard & Poor's expects issuance to pick up in the second half of 2006, probably increasing to more than $1 billion before year-end.

Moreover, we expect to see continued securitization demand in the timeshare sector, particularly from large developers that require liquidity and cost-effective funding sources. Today, most developers offer financing to customers, either directly or through financing arms, to facilitate the purchase of timeshare interests. Additionally, demand for vacation ownership interests is expected to grow as the industry continues to evolve and reinvent itself, offering various flexible vacation ownership options to a myriad of obligors.

The terms "vacation ownership interest" (VOI) and "fractional interest" describe the two forms of ownership involved with timesharing. A consumer may purchase a fee-simple interest (or "deeded interest") in a specific real property asset or alternatively may buy the right to use a specific unit in a resort for a certain number of years, with no ownership interest in the underlying real estate. Within these categories, the following usage options are available:

• Fixed-week usage allows an owner to occupy the same unit at a specified resort within the same week each year.
• With the floating-week option, an owner can occupy a unit at a given resort for any week during a specified period (the "float" season), provided the owner reserves that week in advance and the unit is available.
• "Vacation clubs" offer further flexibility to VOI consumers, as they are essentially internal sponsor exchange systems that allow club members to use all current and planned resorts within the club according to club rules.
• A VOI in a points-based system gives the owner a defined number of points each year that can be used at some or all of the resorts within the system.

Most large developers that maintain multiple resorts, either in the U.S. or globally, use vacation clubs and points-based programs, or some combination of the two.

Increasing average loan sizes provide further evidence of the demand and evolution of the product. Loan balances that once averaged $7,000-$8,000 now often exceed $20,000 (depending on the developer and the product offered). Sierra* has been the largest issuer of timeshare transactions rated by Standard & Poor's to date and represents 40% of the dollar amount of issuance (see chart 3). Marriott follows, with 32%. Through June 2006, Sierra and Marriott had issued five and six term deals, respectively, since 2001 (the single Fairfield transaction is included in the Sierra totals). All of the Sierra trusts are backed by loans originated both by Fairfield Acceptance Corp. and Trendwest Resorts Inc. Fairfield and Trendwest became direct wholly owned subsidiaries of Wyndham Worldwide Corp. *The names of the Cendant trusts were amended following the spin-off of Cendant's Hospitality Services and Timeshare Resorts segment into Wyndham Worldwide Corp. Standard & Poor's does not expect this change to have any impact on the performance of these trusts since there will not be any changes in the servicing operations following the spin-off.

Standard & Poor's took no rating actions on transactions backed by timeshare loan receivables during the second quarter of 2006. We perform regular periodic reviews of all rated timeshare securitizations and use surveillance data to identify potential and emerging trends in rated transactions. Continuous surveillance ensures that our ratings continue to appropriately reflect the performance and ongoing risk profiles of these transactions. Some of our surveillance measures include the following:

• Analysis of monthly servicer reports detailing the performance of the underlying collateral;
• Comparison of actual defaults to initial expectations;
• Periodic telephone calls and on-site visits with key issuer and servicer management personnel to detect any emerging trends or changes in servicing standards;
• Monitoring of supporting ratings; and
• Keeping informed of related industry developments and events that could have an impact on the overall performance of the rated transactions.

The cost of catastrophe insurance for timeshare resorts has increased markedly this year, following changes made earlier in the year to catastrophe risk models by various catastrophe modeling firms. In response to these changes, Standard & Poor's revised its criteria for rating natural peril catastrophe bonds with U.S. hurricane risk exposure, which is detailed in an article titled, "Natural Peril Catastrophe Bond Criteria Revised; Certain Deals on CreditWatch negative," published June 2, 2006. Standard & Poor's subsequently discussed these criteria revisions with each of the timeshare securitization issuers, who all stated that they believe their insurance plans will provide adequate coverage to fully satisfy their representations and warranties within the trust indentures.

In some cases, the increased cost of insurance coverage will be passed on to owners in the form of higher maintenance charges. While we do not expect any significant changes in performance as result of the increased costs, the higher expenses involved certainly highlight one unique risk inherent in this asset class.

There were no marked fluctuations in any of the performance variables tracked in this index during the second quarter. The monthly index variables are weighted by issuer according to the beginning monthly pool balances, while the cumulative variables are weighted by issuer according to the initial pool balance, including any prefunding account balances (see definitions of variables in the appendix at the end of this report). We have found that most fluctuations in the index variables were caused by the addition of newly rated series with little seasoning. Soon thereafter, the trends tend to normalize as the newer pools age. When reviewing the performance charts (No. 4 through No. 10), it may be helpful to refer to the annual issuance amounts shown in chart 2.

Historical delinquency trends indicate some seasonality, and the recent quarter was no exception. Delinquencies generally decline between March and September, the peak travel seasons, and then increase from October through February (see chart 4). Obligors appear to be somewhat more vigilant in making timely payments during vacation months, which corresponds with when they want to actually use their properties. Obligors are barred from use when they are past due on payments. Overall delinquency trends improved during the recent quarter (even when the one month of performance data for the Marriott 2006-1 transaction is excluded). Weighted average total delinquencies ranged between 3.3% and 3.6% during the quarter ended June 30, 2006. Compared with the prior quarter, total delinquencies improved by 30 basis points (bps) (3.5% vs. 3.8%), as nearly all of the trusts exhibited a decrease in delinquencies. Additionally, compared with the second quarter of 2005 (4.4%), total delinquencies improved by 90 bps.

During the recent quarter, monthly defaults ranged from 0.4% to 0.5% but averaged 0.4%, which is even with the rate in the prior quarter (see chart 5). Compared with the same quarter in 2005, however, monthly defaults improved by 20 bps. Even though half of the trusts monitored by the TSPI reported improved quarterly average default rates during the recent quarter and roughly one-third posted rates that were flat quarter-over-quarter, the three trusts with higher default rates kept the monthly default rate flat for the overall index during the quarter.

More than 55% of all defaulted loans have been repurchased by sellers. The remaining 45% have been substituted out of the pools or liquidated, or the underlying properties have been remarketed.

During the recent quarter, the defaulted collateral in the BXG 2005-A transaction began to be remarketed, bringing the number of rated trusts regularly remarketing the collateral backing the defaulted loans on behalf of the trust to four (BXG 2002-A, BXG 2004-B, BXG 2005-A, and one confidential transaction). The inclusion of BXG 2005-A's cumulative gross and net loss data is the sole reason for the decline in the TSPI's cumulative gross and net loss figures (see chart 6) due to its limited history. In looking at the weighted average net recoveries these trusts have achieved (after deducting remarketing fees and expenses), it's worth noting that the rate increased to 53.3% as of June 2006 from 51.3% in June of 2004 (see charts 6 and 7). The average recoveries for these trusts ranged from 43.5% to 66.5% during the most recent quarter. With respect to chart 7, the reported weighted average recovery rate before April 2003 reflects the recoveries on just one transaction, since the BXG 2002-A trust had only four months of performance through that period and had yet to remarket any collateral backing defaulted loans.

Timeshare interest upgrades present a variable that is unique to the timeshare asset class. After a certain period of time, a timeshare owner may elect to "upgrade" to a higher-level VOI by purchasing new or additional VOIs in a particular system. The upgrade may allow the owner to vacation at more sought-after resorts during peak seasons, stay in a larger unit, or utilize more vacation time per year. In such cases, the developer typically will either repurchase an owner's existing VOI in order to sell the owner the upgraded VOI, or it may refinance the existing VOI with a sale of additional VOIs. Loan substitutions are also an option.

When loans that have been "upgraded" are repurchased out of a pool, the effect on the securitization is essentially the same as a full principal prepayment. An upgraded loan that is substituted out of the pool may be substituted back in if it meets the requirements of a qualifying substitute loan. Upgrades have averaged approximately 50 bps of the monthly pool balances going back to March 2001 (see chart 8). A notable exception occurred in August 2005, when $28.01 million of loans backing Cendant 2005-1, representing 4.68% of the beginning pool balance, were upgraded and repurchased out of the trust. Timeshare sales tend to peak during the summer months, and the upgrades occurring in August 2005 were related to higher-than-normal sales during the peak season. During the most recent quarter, upgrades were 0.7%, 0.8%, and 0.9% for April, May, and June respectively.

The weighted average monthly prepayment rate has averaged 94 bps (11.3% on an annualized basis) since March 2001, and it averaged 110 bps (13.2% on an annualized basis) of the monthly pool balances between June 2004 and June 2006 (see chart 9). During June 2006, the level of prepayments was 141 bps and ranged from 100 bps to 141 bps during the quarter. Compared with the prior quarter, the average level of prepayments increased by 10 bps. It also increased by 10 bps for the year-over-year comparison for the same quarter in 2005. It will be interesting to see if these rates drop over time, as developers have begun to adopt a "risk-based pricing" approach to the loans by offering lower rates to obligors with better credit histories. Repurchases of defaulted loans and upgraded loans are not included in the prepayment rate. It should be noted that VCH Portfolio Services Inc., the servicer for the SVO 2003-A and 2005-A VOI Mortgage Corp. transactions, does not report prepayments for these trusts.

Excess spread levels continue to exhibit relative strength. The average for the three months ended June 2006 was 7.9%, up 10 bps from the prior quarter but 50 bps lower than the historical average of 8.4% (see chart 10). The June 2006 excess spread rate of 7.7% was 30 bps lower than the 2005 average of 8.0% and 120 bps lower than the 2004 average of 8.9%.

Standard & Poor's will update its trust performance snapshot in conjunction with the release of each quarterly index. The purpose of the snapshot is to provide the market with an update on trust performance at a glance (see tables 2 and 3). Standard & Poor's has standardized definitions (see appendix I) to ensure that the data in the snapshot is comparable across all transactions. The delinquency and default trend columns indicate whether the current three-month rolling averages have increased, decreased, or remained flat relative to averages for the prior quarter. The snapshot also includes other important information, such as the top three state concentrations (by obligor loan balance) and the disclosed weighted average FICO scores as of the initial cutoff date.

Table 2 Select Timeshare Loan Collateral Characteristics
(As of initial cutoff date)
		Obligor concentration (%)
Transaction	Original W.A. seasoning	Domestic	Foreign	W.A. FICO	Top 3 state concentrations (obligor loan balance at cutoff) (%)
BXG Receivables Note Trust 2002-A	16	98.77	1.23	N.A.	NC 14.91, MI 8.86, SC 8.41
BXG Receivables Note Trust 2004-B	11	99.50	0.50	N.A.	NC 15.20, MI 10.00, SC 9.10
BXG Receivables Note Trust 2005-A	6.5	98.70	1.30	N.A.	NC 11.50, MI 8.30, MN 8.30
Marriott Vacation Club Trust 2002-1	15	90.94	9.06	703	CA 22.56, NY 7.19, NJ 5.71
Marriott Vacation Club Owner Trust 2004-1	6	93.63	6.37	707	CA 30.62, NY 5.38, TX 4.93
Marriott Vacation Club Owner Trust 2004-2	4	94.90	5.10	715	CA 28.45, NY 6.70, NJ 5.42
Marriott Vacation Club Owner Trust 2005-1	7	94.71	5.29	719	CA 26.10, NY 6.18, NJ 5.36
Marriott Vacation Club Owner Trust 2005-2	7	94.86	5.14	716	CA 28.29, NY 6.62, NJ 5.95
Marriott Vacation Club Owner Trust 2006-1	8	93.34	6.66	714	CA 25.75, NY 8.25, NJ 5.56
Sierra 2003-1 Receivables Funding Co. LLC	15	99.76	0.24	659	CA 23.50, WA 6.60, NC 4.90
Sierra 2003-2 Receivables Funding Co. LLC	12	99.73	0.27	661	CA 24.01, WA 7.40, NC 4.31
Sierra Timeshare 2004-1 Receivables Funding LLC	11	99.82	0.18	659	CA 25.23, WA 8.33, CO 3.93
Sierra Timeshare 2005-1 Receivables Funding LLC	12	99.84	0.16	670	CA 21.88, WA 8.82, OR 4.50
Sunterra Owner Trust 2004-1	33	96.80	3.20	688	AR 17.30, CA 16.89, FL 4.57
SVO 2003-A VOI Mortgage Corp	19	95.32	4.68	678	CA 20.18, CO 12.65, NY 7.34
SVO 2005-A VOI Mortgage Corp.	18	96.79	3.21	681	CA 26.29, AZ 8.41, NY 5.59
Other	31	73.27	26.73	N.A.	FL 12.63, NY 8.54, NJ 4.51
N.A.-Not available. W.A.-Weighted average.

Table 3 Timeshare Loan Trust Performance Snapshot
(As of March 31, 2006)
			Defaults (%)				Delinqency (%)		Default (%)
Transaction	Mos. of perform. (No.)	Pool factor (%)	Cum.	Cum. repurchased	Cum. subst'd	Cum. gross loss	3-mo avg.	Trend	3-mo avg.	Trend
BXG Receivables Note Trust 2002-A	43	33.43%	21.57	0.01	1.55	20.01	9.34	Down	1.00	Up
BXG Receivables Note Trust 2004-B	25	63.03%	12.90	0.00	0.17	12.73	7.47	Down	0.95	Flat
BXG Receivables Note Trust 2005-A	6	91.43%	1.35	0.00	0.88	0.47	5.23	Up	0.40	Up
Marriott Vacation Club Trust 2002-1	44	33.39%	5.76	5.76	0.00	0.00	2.72	Down	0.22	Down
Marriott Vacation Club Owner Trust 2004-1	25	50.05%	4.74	4.74	0.00	0.00	2.79	Down	0.25	Flat
Marriott Vacation Club Owner Trust 2004-2	20	51.77%	2.75	2.75	0.00	0.00	3.16	Down	0.29	Flat
Marriott Vacation Club Owner Trust 2005-1	13	64.94%	1.05	1.05	0.00	0.00	1.73	Down	0.19	Flat
Marriott Vacation Club Owner Trust 2005-2	8	71.84%	0.87	0.87	0.00	0.00	2.58	Down	0.31	Up
Marriott Vacation Club Owner Trust 2006-1	1	94.45%	0.00	0.00	0.00	0.00	0.00	N/A	N/A	N/A
Sierra 2003-1 Receivables Funding Co. LLC	40	20.25%	11.43	11.43	0.00	0.00	2.60	Down	0.39	Down
Sierra 2003-2 Receivables Funding Co. LLC	32	28.70%	10.78	10.78	0.00	0.00	2.69	Down	0.47	Down
Sierra Timeshare 2004-1 Receivables Funding LLC	26	36.52%	10.48	10.48	0.00	0.00	3.11	Down	0.48	Down
Sierra Timeshare 2005-1 Receivables Funding LLC	15	63.13%	4.26	4.26	0.00	0.00	2.41	Down	0.48	Down
Sunterra Owner Trust 2004-1	22	58.14%	4.93	0.00	4.93	0.00	4.30	Down	0.23	Flat
SVO 2003-A VOI Mortgage Corp.	32	44.00%	8.38	0.47	7.91	0.00	4.00	Down	0.36	Down
SVO 2005-A VOI Mortgage Corp.	8	83.01%	1.39	0.00	1.39	0.00	2.96	Up	0.32	Up
Other	64	28.50%	27.71	0.00	21.22	6.49	7.20	Down	1.00	Down
N/A-Not applicable.

The TSPI is a quarterly performance index that aggregates monthly performance information of Standard & Poor's rated timeshare transactions across a number of key risk-related variables.

The weighting for each trust is determined by dividing its outstanding pool balance by the sum of the aggregate outstanding pool balances. Monthly index variables are weighted according to the beginning monthly pool balances, and the cumulative variables are weighted according to the initial pool balances, including any prefunding account balances. We then determine the resultant timeshare loan weighted average performance variables by summing the result of each trust's variables multiplied by each master trust's respective weighting.

Appendix Table 1 Marriott Vacation Club Owner Trust 2006-1
Statistical portfolio characteristics as of April 30, 2006
Aggregate balance of VOI loans ($)	229,973,292
No. of VOI loans	11,123.00
Avg. loan balance ($)	20,675
Weighted avg. coupon (%)	13.27
Approx. excess spread (%)	7.00
Foreign obligors (%)	6.66
Weighted avg. downpayment (%)	13.02
Weighted avg. seasoning (mos.)	8
Weighted avg. remaining term (mos.)	121
Weighted avg. original term (mos.)	129
Weighted avg. credit score (domestic only)	714
Initial right-to-use loans (%)	10.78
Initial mortgage loans (%)	89.22

Appendix Table 2 Marriott Vacation Club Owner Trust 2006-1 Initial Ratings And Issuance Amounts
Class	Rating	Initial note balance (mil. $)
A	AAA	207.5
B	AA	12.5
C	A	16.25
D	BBB+	13.75
Total		250.00

Credit support for the class A through D notes is provided by:

• Subordination of 17.00% for class A, 12.00% for class B, and 5.50% for class C;
• A reserve account funded at closing for 0.50% of the cutoff date collateral amount, which remains constant for the life of the transaction;
• A precompletion reserve account;
• A force majeure loan and post-grace period force majeure loan* reserve account if aforementioned loan balances that have not become defaulted timeshare loans exceed 2.50% of the aggregate loan balance;
• Excess spread, currently estimated at approximately 7.00% per year; and
• Three performance-based triggers that, if breached, result in all cash being allocated to pay down the debt sequentially. The triggers are three-month average of delinquencies greater than 4.80%, three-month average of defaults greater than 0.80%, and cumulative defaults greater than 22.00%.

*A force majeure loan is a timeshare loan whereby a natural disaster or act of terror has had a direct impact on the obligor's ability to make payments due to disruption of employment or place of residence, as determined by the servicer, and for which the servicer has determined to defer loan payments for a specified grace period.

The cap on force majeure loans is 5% of the aggregate loan balance.

A timeshare loan shall cease to be a force majeure loan at the end of the grace period granted by the servicer, at which point such timeshare loan shall become a post-grace period force majeure loan.