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Friday’s Letter from America: Timeshare Foreclosure

Welcome to this week’s edition of Letter from America, this week Irene Parker answers a question asked by many consumers when it comes down to loans/mortgages for the purchase of timeshare. This is very much a problem for our US readers as in Europe and especially in the UK all loan agreements are considered personal loans to purchase a product, any default on the loan agreement is a civil matter and is dealt with by the County Courts. The courts can order the repayment or send in the bailiffs to seize personal property to the value of the loan. The timeshare will not be seized as the loan is not collateralised by the timeshare, after all, it is worthless.

There are not many figures available on County Court Judgements made for defaults on these loans, mainly because they are listed as personal debts not attached to anything but a debt to the lender. For instance, you may have taken out a loan for home improvements, this is treated exactly the same as a loan for timeshare. It should also be pointed out that a County Court Judgement commonly known as a CCJ destroys any credit rating and will prevent you from getting any further finance. Now, considering the average age of timeshare purchasers, they are of a generation that will pay off these defaults as a debt is a debt and to receive a CCJ is out of the question. It should also be pointed out that even if consumers receive a CCJ, they are unlikely to advertise the fact on these timeshare forums, after all, it could be very embarrassing.

Is a Timeshare Foreclosure an Installment Loan Foreclosure or a Mortgage Foreclosure? 

See the source image

Is a Timeshare Foreclosure Considered Mortgage Foreclosure? 

https://gustancho.com/timeshare-foreclosure-considered-mortgage-foreclosure

On the credit report yes, but not with mortgage lenders:  Per HUD mortgage lending guidelines, a timeshare is not treated as a regular foreclosure and is treated as consumer debt. 

The U.S. Department of Housing and Urban Development (HUD), the parent of FHA) classifies timeshare mortgages as installment loans and not real estate loans.

By Irene Parker

July 23, 2021

Over the past year, there have been six disturbing reports that indicate timeshare developers are becoming more aggressive in pursuing members who default on loans. If the reports listed below obtained from credible sources are accurate, timeshare buyers should NEVER finance a timeshare, and timeshare attorneys will be provided substantial job security. If you get sued, you need an attorney. There is nothing to prevent a timeshare company from suing a member, but it is more difficult to collect on a timeshare judgment as the loan is not collateralized with anything but the timeshare.

Last week on TIMESHARE TALKS Jessica Burke of Virginia Beach Timeshare Rentals discussed the benefits of renting timeshares. Renting avoids the initial outlay, and more importantly, gives the consumer time to evaluate different timeshares so as to make an informed decision as to which timeshare might be right for their family. Host John Raymond is a licensed timeshare broker and founder of Resort Reseller. Timeshares can be purchased on the secondary market for a fraction of the cost.  

https://tarda.org/f/should-i-buy-a-timeshare-or-rent-one

The lead spokesperson for ARDA-ROC, the timeshare industry lobby’s consumer advocacy arm, encouraged judicial foreclosure in about-face quotes:

“The best thing we can do with exit (is) judicial foreclosure, ruin the credit and enforce the contract,” said Ken McKelvey, chair of the American Resort Development Association-Resort Owners Coalition, according to letterhead minutes of the April 10, 2019 ARDA-ROC meeting.  (Contacted about the meeting notes, ARDA did not dispute their authenticity but said that in the minutes, McKelvey’s quotes were taken out of context.)

At a 2019 Florida legislative workshop I attended, Mr. McKelvey testified:  

“Most of the developers I know and certainly most of the timeshare managers I know, and I managed timeshare properties for thirty years… every single resort had a dissolution policy, every single one (one). There was a way to get out. You had to come to your management company, and based on what the board of directors instructed us to do in the terms if they had to pay a fee or if they had to be current, whatever those situations were, we did not have a one that did not have a dissolution policy and a hardship policy….” 

Timeshare members donate $5 to $10 per contract to ARDA-ROC in mostly “opt-out” donations. These donations are not as voluntary as they sound. When I asked that the $7 not be charged to my credit card along with my maintenance fees, it was charged anyway. When I called to ask that the $7 be removed, I was told they had to fill out an internal form to do so. That was back in January. Another member recently reported they had to call three times to have the $7 removed. Collectively, ARDA-ROC raises approximately $5 million a year from members.  

Following are five additional disturbing reports:

  1. One developer’s contract used to specifically state that they do not pursue summary judgments. That language has been removed.
  2. Eric Olsen, an attorney of 42 years, was quoted in Kiplinger, to the ire of timeshare developers, when asked what happens when someone stops paying: “I ran this often-asked question by Salem, Ore.-based attorney Eric Olsen, founder of HELPS, a national nonprofit law firm that helps lower-income seniors with debt they can’t afford to pay. Olsen concluded our interview by urging readers to, “Consider walking away from the timeshare, as they generally have no value. Stop paying and ignore their communications.   It will eventually get foreclosed and owing any deficiency is highly unlikely.” Kiplinger, April 26, 2021  
  3. Westgate’s VP of Mortgage Services stated in recent court documents that Westgate “probably” has a 30% default rate. Westgate’s lenders can’t be happy with that high default rate. Other developers have default rates that exceed 20%.
  4. Hilton Grand Vacations and Orange Lake/Holiday Inn have sued members defaulting on loans, according to one exit provider.
  5. Another source reported an upsurge in attorney hiring.    

What does this mean to timeshare members and owners?

According to HomeGuidesSF:

The company may sue you in civil court to obtain a judgment. If the judge issues a judgment against you, the management company may garnish your wages or levy your bank account to get the money you owe.

Deeded timeshare owners face a different dilemma. If you stop paying on your timeshare loan, you face foreclosure. Foreclosure is the process whereby the lender files to take possession of the property and sell it at auction to recover the money you owe. There are two main types of foreclosure: judicial and non-judicial foreclosure. In a judicial foreclosure, the lender files a foreclosure lawsuit and takes you to court. The judge may issue a deficiency judgment for the remaining balance due after the auction. A non-judicial foreclosure is basically a paperwork shuffle. Your contract authorizes the trustee to sell the timeshare in the event you stop paying on it. You receive the official Notice of Default and the Notice of Sale. In California, the majority of foreclosures are non-judicial foreclosures where the lender cannot receive a deficiency judgment after the sale of the property.

https://homeguides.sfgate.com/can-sued-not-paying-timeshare-51679.html

Yahoo Finance reporter Abigail Fisher recommends timeshare stocks because consumers are tricked into signing contracts they can’t get out of: 

Best Stocks to Buy According to Hedge Funds

We find evil companies to be a very rewarding hunting ground to uncover long-term stock winners. In our opinion companies like Philip Morris (PM), Facebook (FB), Apple Inc. (AAPL), Alphabet (GOOGLE) are evil companies that delivered 1000% or more gains to their investors.

In this article we are going to look at another set of evil companies that use high pressure sales tactics to trick consumers into signing complex long-term contracts that they don’t understand: timeshare marketing companies. Check out this Reddit post where the user is asking several questions about Wyndham timeshare cancellation. This person was able to cancel and receive a full refund, but many consumers don’t cancel within the 7-day or 10-day window specified in their contracts.

https://finance.yahoo.com/news/best-timeshare-stock-buy-according-135051667.html

How would this reporter feel if the buyer tricked, was her grandmother? Tiffany’s parents were kept for 11 hours, their IDs withheld. They lost their two deeds they had since 1998, and $34,000. They were told that if they didn’t convert their deed to points, maintenance fees would increase from their current fees of $2,000 to $6,000. The transaction resulted in maintenance fees of $6,000 which they could not afford. Tiffany’s interview: 

https://tarda.org/f/how-giving-up-deeded-timeshares-turned-into-tragedy

Many timeshare members and owners, who report unfair or deceptive sales and marketing practices, are senior citizens in their 60s, 70s, some in their 80s and 90s. They have maintained lifelong high credit scores, but are faced with little choice but to default on a timeshare loan if the resort dismisses their complaint because they signed a contract. There is little to no secondary market. Coupled with interest rates ranging from 12% to 20% (higher if credit card financing), a timeshare can become a financial nightmare. About a third of those reaching out are younger. The youngest was 19 and pregnant when she signed a perpetual timeshare contract at midnight – after a six-hour presentation.

Timeshare members can negotiate directly with their resort to resolve a dispute, but expect to be challenged with: 

  • You signed a contract,
  • Your allegations are unsubstantiated, 
  • We are not responsible for what our sales agents say,
  • You didn’t question this on the recorded closing (because you believed the sales agent or were coached on what to say or not say). 

How can this posturing and ongoing war between developers and those providing exit services be healthy for the timeshare industry? 

People, members of the media, and even the Federal Trade Commission have started addressing why thousands of members reach seeking release from an unwanted timeshare. The FTC lists Timeshare Sales at #7 on their current Top Ten Scam list and Timeshare Resales (fake buyers) #10.

Related Articles: FTC:  Timeshares: Yes? No? Maybe?

https://salinapost.com/posts/5de93b95-4ba0-4acb-8527-80dd7effccaf

Top Ten Scams

https://www.aarp.org/money/scams-fraud/info-2020/ftc-top-scams.html

Senior Defaults

https://www.linkedin.com/pulse/senior-timeshare-defaults-irene-parker/

HOAs Benefit from Onsite and Offsite Timeshare Resale Programs

https://tarda.org/f/hoas-benefit-from-onsiteoffsite-timeshare-resale-programs

Thank you Irene, a very interesting article and I hope it helps to answer some of the questions we receive.

It should also be pointed out that in the UK, one bank, Shawbrook Bank, did acknowledge a few years ago that they did not carry out their due diligence when authorising timeshare loans, meaning many agreements were signed without the affordability checks. The bank set aside around  £9 million to cover any defaults on these loans as they would have had great difficulty in enforcing these loan agreements in the County Courts. The CEO at the time was forced to resign as he was the one that arranged the agreements with the timeshare companies.

Another point is all timeshare sales companies must be authorised in order to broker these loans, before April 1st, 2014 these would have been authorised by The Office of Fair Trading and from that date by the Financial Conduct Authority. A case that Inside Timeshare has been following was the validation of these agreements by Barclays Partner Finance for loans brokered by Azure Service Ltd who were not authorised. This validation order would legalise the loan agreement and make it enforceable in law.

Inside Timeshare has already uncovered many timeshare companies who brokered loan agreements with various lenders and have found that the vast majority have never been authorised. This investigation is ongoing and is being used to end loan agreements.

That is all for this week, have a great weekend, and join us again next week for more news and information on the murky world of timeshare.

Friday’s Letter from America: Exit Industry on Trial.

Welcome to this week’s edition of Letter from America, today our regular contributor Irene Parker and the story on the legal battle between Westgate Resorts and Timeshare Exit Team. The number of “exit” companies coming into existence has rattled the industry, not just in the US but also in Europe, all as a result of the industry making it very hard or almost impossible to terminate a contract and membership. So is the industry to blame for creating a problem in the first place?

Westgate Resorts v Timeshare Exit Team – Settled

Case 6:18-cv-01088-GAP-DCI

http://flowjournal.org/wp-content/uploads/2013/10/Image-1-The-Queen-of-Versailles.png

The Queen of Versailles Mansion built by Westgate’s Founder

By Irene Parker

July 16, 2021

The jury trial of Westgate Resorts v Timeshare Exit Team (TET), filed July 9, 2018, was scheduled to begin Tuesday, July 13, 2021. I had intended to attend the trial, but the parties settled. Settlement terms are confidential and neither side will comment on the outcome. 

The crux of the argument was whether TET and their agents instructed or influenced owners to stop making payments. Also at issue was whether TET violated the Florida Deceptive and Unfair Trade Practices Act. Westgate sought to recover the balances on the unpaid mortgage and maintenance and tax fees caused by TET’s alleged interference. 

TET contended that as agents of their customers, they were privileged to interfere with Westgate contracts. According to the standard federal jury instructions, if a jury finds that a third party gave honest advice and that it was in a timeshare owner’s best interest to breach a timeshare contract, then the third party cannot be held liable for tortiously interfering with the timeshare contract.

Timeshare Wars

Given the volume of lawsuits that have been filed against exit providers, including attorneys and law firms, what seems to really be on trial is the legitimacy of the exit industry. Should disgruntled or desperate members be allowed to have professionals help them try to extract them from a timeshare? 

Making the wrong decision to buy a timeshare can be devastating. Westgate’s corporate representative in court documents stated that Westgate’s current default rate is approximately 30%. A timeshare contract typically exists in perpetuity, with little to no secondary market. Unaffordability is exacerbated by an interest rate typically financed at the highest rate allowed, 17.99%. 

The resale market for timeshare properties is almost nonexistent. An example provided in court documents showed the median purchase price of a timeshare in Osceola County in 2016 was $22,990. The average resale price, two years later, was approximately $10. 

What Happens When a Westgate Owner Defaults?

According to Joint Pre-Trial Statements – not much happens. 

Out of 621 original owners, Westgate only brought foreclosure proceedings against 244 accounts. Of the 86 remaining owners, only four testified they were foreclosed. With respect to the 86 owners Westgate decided to foreclose upon, none testified that their credit was damaged as a result of nonjudicial foreclosure, or were aware of any such impact. Westgate had not sought deficiency judgments as a matter of policy and is not entitled to under Florida law and the law of almost every state. 

Westgate could change its policy to pursue judicial foreclosure and seek deficiency judgments. This would allow them to place liens on real property or garnish wages, etc. 

Nonjudicial foreclosure is quicker and costs less than judicial foreclosure. Non-deeded points, rapidly replacing deeded timeshares, are not eligible for judicial foreclosure. The buyer is a “member” with no beneficial interest in real property. However, that member could be sued for the balance due on a promissory note.  

ARDA-ROC encourages judicial foreclosure according to letterhead minutes of the April 10, 2019 ARDA-ROC meeting at ARDA’s World annual conference. ROC stands for Resort Owners Coalition, the Owners’ advocacy arm of the timeshare industry lobby. Kenneth McKelvey is Chairman of ARDA-ROC.

“The best thing we can do with exit (is) judicial foreclosure, ruin the credit and enforce the contract,” McKelvey said. 

This is in contrast to how Mr. McKelvey testified at a Florida legislative workshop March 12, 2019: 

“Most of the developers I know and certainly most of the timeshare managers I know, and I managed timeshare properties for thirty years… every single resort had a dissolution policy, every single one (one). There was a way to get out. You had to come to your management company, and based on what the board of directors instructed us to do in the terms if they had to pay a fee or if they had to be current, whatever those situations were, we did not have a one that did not have a dissolution policy and a hardship policy….” 

Reports from Westgate owners 

Out of 18 Westgate owners who contacted me or another volunteer as this lawsuit worked its way to trial, only five were able to exit their timeshare. Several had no outstanding loan. I advised one couple, both diagnosed with cancer, to contact Westgate’s Legacy Department via ARDA’s Responsible Exit website. They reported back that the Legacy representative transferred them to a supervisor who informed them, “We don’t take timeshares back and that’s not our website.” I told them about this lawsuit. They reached out to one of the attorneys involved after we discovered a Resort Trades article that listed Westgate as a founder of ARDA’s Responsible Exit program. This couple was ultimately able to relinquish their timeshare. 

Another owner, aged 90, and his wife, are currently in default because Westgate contested their paying the broker who found a buyer his $800 commission.  

The Queen of Versailles and Property Man     

My intended retirement to move to Florida and return to my first occupational love, teaching piano lessons, was disrupted in July of 2015 when I turned on the television at a resort in Orlando and saw the Queen of Versailles mansion pictured above. The show was Property Man on FOX, hosted by the late Las Vegas attorney Bob Massi, who sadly died of cancer in 2019.  The Queen of Versailles is a documentary about Westgate owners, David and Jackie Siegel’s palatial 90,000 square foot home. The documentary took Best Director at Sundance one year

I had just endured a pathetic sales presentation experience. I wrote to Mr. Massi about my experience. Remarkably, a FOX producer responded asking if I would be willing to be interviewed. The producer said the show had not intended to be about timeshare, but they were flooded with timeshare complaints. Not wanting to appear on national television unprepared, I began what has turned into a seven year effort to alert potential timeshare buyers as to the pitfalls that can occur when not enough due diligence goes into the decision to buy a timeshare. 

Timeshare resale brokers I’ve spoken with, who charge no money upfront to list a timeshare, refuse Westgate listings due to obstacles they say are placed in their way. Resorts that do not allow a secondary market breed generations who want nothing to do with timeshare after hearing parents and grandparents bemoan their difficulty relinquishing a burdensome timeshare.  

TIMESHARE TALKS is an interactive YouTube forum launched to promote a secondary market and educate the consumer as to the need to comparison shop by calling a legitimate timeshare resale broker before buying a timeshare. John Kushman is a broker with Timeshare Specialists.  John was also interviewed by Bob Massi in a segment that aired prior to mine. John’s website lists nearly 150 timeshare resale scams, with an impressive amount of timeshare crime intelligence gathering. Organized crime rings instruct unsuspecting timeshare owners to wire money to Mexico, the Dominican Republic or Hong Kong. 

https://tarda.org/f/timeshare-specialists%E2%80%99-timeshare-exit-scam-hotline

The exit industry for primary residences is called realtors, and in cars, used car dealers. Stifling the secondary market and silencing the known exit-providing players via thousands of billable hours gives rise to boiler rooms with common-sounding names. TET produced 1,071,751 customer documents concerning an initial 2,069 Westgate accounts. 

Should anyone buy a timeshare if it can lead to financial ruin?

If developers begin to attach personal assets and garnish wages, how can it be prudent to ever buy a timeshare? If an adverse life event happens over the life of a 17.99% loan, or maybe the owner just doesn’t want it anymore, lives could be financially ruined. Clearly, the goal needs to be consumer awareness if the industry moves in this direction.      

Bankruptcy may be of no salvation. According to one attorney, since timeshares have virtually no resale value, it could be deemed an “abandoned asset” so not liquidated. After seven years of bankruptcy protection, the unfortunate timeshare owner learns that they have NOT been foreclosed and receives a bill for seven years of maintenance fees and the loan balance, with late fees. This actually happened to one timeshare owner in California.      

If a timeshare default is the only credit report black mark, and the lender is informed as to why the member defaulted, especially if experiencing unfair and deceptive practices, the lender may be sympathetic. This too has happened. 

The bottom line – If aggressive collection tactics ensue, don’t buy a timeshare unless you pay cash, but know that if a cash buyer later learns they were duped, a refund is more difficult to negotiate than a loan cancellation. Instead of media spin about there being no problems in this industry, issues should be addressed and a secondary market is necessary for the health of the industry and the consumer. 

Related articles:      

The Dashiell’s article

http://insidetimeshare.com/the-tuesday-slot-7/

Thank you Irene for this week’s article, as usual, you have covered and explained the main points for our many readers, one thing is very clear from this article, it is the timeshare owner who once again is stuck in the middle!

That is all for this week, have a great weekend and join us again next week. 

Friday’s Letter from America: Timeshare Fraud

Welcome to the latest edition of Letter from America, again Inside Timeshare thanks Irene for her time in preparing this week’s Letter and also all those that contributed with information and proofreading. Today’s article follows on from previous ones which focus on the industry and the related scams. Timeshare owners from both sides of the pond and indeed the world are all familiar with the tactics that have been employed to fleece them of their hard-earned cash. These articles are to highlight this ongoing problem and make the industry change of its own volition, failing that, then governments need to step in and legislate as they have in Spain. The ball is squarely in the court of the industry.

CRIMESHARE: Anatomy of an Ongoing Timeshare Resale Scam

See the source image

In representation of XYZ Properties and Mr. ABC, we are thrilled to inform you that your membership has been appraised and has obtained an offer to be purchased (for $300,000). Please find attached to this email our statement of intent. 

Email from a wire fraud expert 

By Irene Parker

June 18, 2021 

Retired Canadian Military Armed Forces Police Officer Earl Sharpe was concerned enough to share on TIMESHARE TALKS about how he and his wife Faith were scammed by a resort in Mexico, and by a sophisticated ring of timeshare exit criminals. Those defrauded by a dark web exit scam or a dishonest timeshare sales agent have long memories. Earl volunteers to help research scams for those who have been contacted with bogus offers to buy or sell their timeshare. 

Earl told me about Timeshare Specialists, Inc., an honest timeshare resale company that has gathered the names of over 100 resale and transfer scams to try to prevent scams before they happen. I have my own shorter list. It is alarming to me that I did not recognize any of the names. One of the entities actually went by the name Just Fly Corp! (Claiming to be part of the legitimate company/website)   

https://timesharespecialists.com/timeshare-scam-database/

As explained by Timeshare Specialist’s website: 

Most timeshare owners never see it coming. They think they’ve just closed a deal to sell their property when in reality they’ve just been scammed out of thousands, sometimes tens of thousands of dollars!

Also alarming is the orchestrated level of sophistication. When I attempted to insert the statement of intent mentioned in the email above into this article, it would not allow the offer to be displayed. That’s never happened to me before. 

Earl is not ready to disclose the real name of XYZ Properties because he has not yet finished researching the scam. It would be amusing, if not so tragic, this disclaimer appearing at the bottom of the email Earl received:  

Disclaimer: The information in this e-mail and any documents and files transmitted with it are confidential and for the use of the intended recipient only. If you are not the intended recipient, please delete the message and statements immediately and notify the sender. Alternatively, please contact XYZ Properties on telephone 877 xxx xxxx. Any unauthorized dissemination or copying of this E-mail, or any misuse or wrongful disclosure of the information contained in it, is strictly prohibited and may be considered illegal.

What’s the problem? What’s the solution?

In 2017, Red Week reported that at least 1.15 million timeshare owners want out of their timeshares. The California Real Estate Commissioner’s warning from 2017 holds true today: “The glut of properties and owners desperate to get rid of them has created easy prey for unscrupulous timeshare exit companies.”

http://sanfrancisco.cbslocal.com/2017/07/07/questionable-timeshare-exit-companies-profit-off-desperation/

The article mentions that the trade association for the timeshare industry (ARDA) advises owners who want to get rid of their timeshares to contact the resort directly to see if they can work out an exit solution. It also advised that timeshare owners not pay an upfront fee to anyone offering help getting rid of a timeshare. However, ARDA-ROC advised one timeshare member to contact an ARDA member to list their points (that have no resale value) – and pay an upfront fee. Such listings quickly grow cold. 

It was a pleasure speaking with you today.  I am sorry to hear about your experience.  I would recommend calling their customer service department and file a formal complaint…… 

ARDA has a list of timeshare advertising and resale companies. Please click here to access the list of ARDA members specializing in timeshare advertising and resale. Please note: there is an up-front fee for these advertising services and that fee varies by company and advertising package selected. We always recommend using an ARDA-member company for your resale needs to avoid being the victim of a scam, however, you can also list your timeshare “for sale by owner” on websites such The Timeshare Users Group or eBay, just note these groups are not affiliated with ARDA

Thank you again for contacting ARDA-ROC. If you have any additional questions, please let me know.  

Sincerely,

B G

ARDA-ROC Consumer Support

TIMESHARE TALKS

If you would be interested in sharing your timeshare experience, bad or good, contact host John Raymond, founder, and owner of Resort Reseller. We thank Earl, our first official guest, his wife Faith, and Service Dog Raven, who has been drafted as our official Timeshare Talks mascot. Earl’s interview, linked in this article, includes good advice from former timeshare executive Wayne C. Robinson, author of Everything About Timeshares

https://tarda.org/f/crimeshare-%E2%80%93-a-sophisticated-timeshare-resale-scam

Wayne worked at many resorts throughout Mexico and the Caribbean and is well aware of the tactics Earl and his wife Faith experienced. Consider subscribing to Timeshare Talks to help us spread the words: 

Buyers Beware!

The Canadian Government issued a warning about Mexico timeshares (surprising published by Yucatan Times), and the Canada travel advisory for Mexico  provided tips on their website on what you should do before purchasing a timeshare:

  • gather as much information as possible
  • review carefully the contract; anything not included in the contract will not be honored
  • provide your credit card only if you are sure you want to make the purchase
  • keep copies of all correspondence

At some resorts, the presentation won’t happen if you don’t provide your credit card in advance. There are many reports of people who could not leave a presentation because the sales agents refused to return their credit card and driver’s license. 

I would add to the due diligence list what consumer advocates advise – never buy the same day an offer is presented. One wonders if this industry would survive if that rule were to be applied. 

Related articles: 

The Solution: What’s a Legacy Resort and Why are they Struggling?  

https://tarda.org/f/what%E2%80%99s-a-legacy-resort-and-why-are-they-struggling

TOWB is about Transparency in Timeshare:

https://tarda.org/f/towb-is-about-transparency-in-timeshare

Earl and Faith’s Mexico timeshare experience: 

https://tarda.org/f/memorial-day-honors-all-who-died-serving-our-country

Thank you all again for your contributions, Inside Timeshare wishes you all a very happy weekend.