Another Drop in Stockton’s Credit Rating

Stockton’s credit rating is once again downgraded by Wall Street for the third time in the present year. With this, Moody’s Investors Service warns that another lowering of the ratings can happen again anytime soon.

The reduction in rating shows investors that Stockton is becoming a financial risk.

Stockton’s struggling budget comes with the bad economy, high rate of unemployment and increasing number of home foreclosures.

This year, Stockton started with an Aa3 rating. This showed investors very minimal risk to repay the debt it took out in the past years amounting to $137.7 million. The debt was used to build infrastructures and repair damaged parks, roads and neighborhoods.

In the months of January and June this year, reductions in ratings already occurred. In the recent announcement, the city’s credit ratings moved to Baa1, a signal to investors that the city is moderately risky.

The rating downgrade moves the city four levels below its state in the beginning of the year. It is still three steps away from reaching junk status.

Moody’s, an agency that analyzes and provides credit ratings also lowered two of the individual bonds of Stockton. One is a taxable pension obligation bond. The other is a lease-revenue refunding bond.

The entire downgrade occurred after the city accepted a balanced budget by removing $37 million from its general fund. In the fiscal year’s first quarter, the city needs to cover for a budget shortfall amounting to $4 million.

The city told investors in the past month that it may not settle its debt on a redevelopment project they did in 2006. This is based on filed documents at the Securities and Exchange Commission of the United States.

Susan Mayer, the city’s Chief Financial Officer, said that the lower rating did not come as a surprise. She said that this simply shows the challenges that have already been shared with the investment community and the elected leaders.

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If you are one of those many people with no credit or bad credit, you surely have a difficult time in obtaining a loan or getting a credit card. Fortunately, there are different financial institutions providing credit cards that do not require a credit check. Although these credit cards usually charge higher interest and charges, they are a good way to improve your credit standing. But, if you are thinking of getting these cards, you should consider some facts before obtaining them.

Fact 1: Most of these cards are not credit cards

Most cards that do not require a credit check are really not credit cards. They are mostly prepaid debit cards. Since you have to deposit your money to be able to use the card, you are actually not borrowing anything from the card company. This is the reason why there is no risk in taking them. If you are having a difficult time controlling your spending, then this is the right option for you.

Fact 2: Your card providers report to the credit bureaus

Whether you have a low limit or a prepaid debit card, there is a great chance that your transactions will be accounted for by the major credit agencies. Because of this, the use of the cards is a good way to enhance your credit score. Moreover, there are cards that give you a small loan that you can pay in full for 12 months. If you can pay on time, your scores will be greatly improved. At the same time, you can show the lenders that you have already changed your financial behavior.

Fact 3: Credit Cards with No-Credit Check Have High APRs

One of the attractive features of a prepaid or loan card compared to a credit card is that it does not require a credit check. But, most of these cards charge high interest rates. This is the card company’s way of safeguarding themselves against the chance that you will be in more debt because of your previous bad rating.

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Business Aspects to Consider in a Financial Review

If you are a business owner, your company is as important as your health. Because of this, it is also essential that you conduct a regular review with a reliable banker of your company’s financial situation as religiously as you visit the doctor for medical consultation.

Reviews of your business’ finances are important for your company especially with the constant changes and developments in a business. This will ensure that your business has the right services and products for your customers. It will also help you making the decision to take a new loan or credit line for expansion. It is also beneficial before making repairs or buying new equipment. Business improvements are a great way to keep attracting both new and old customers.

But, what are some of the aspects that you must look at when conducting a financial review? Here are the main ones:

1. Loans and Credit Lines
Regardless if your business needs a new loan or not, it is still best to ask the bank of the different loan types and credit lines they can offer. Find out if there are loans specifically for purchasing equipment, real estate, leases or construction. Also, if you own a small business, you may want to find out if it provides Small Business Association loans because this can free up cash flow if you are eligible. Establishing a credit line is also a good business practice.

2. Convenience Banking
Determine if the bank has an online banking system that is easy to use, safe and convenient. Also, find out if the bank’s system can meet your business’ daily banking transactions. Familiarize yourself with the website to know the types of programs they provide.

3. Managing Treasury
You must review financial statements with your banker to know the possible improvements that you can do with your business and to find out where you can save money. You may also want to check the kinds of treasury management services the bank provides like remote deposit, check imaging, fraud prevention or lock box.

4. Business Relationship with Bank
Finally, evaluate your relationship with the bank. Ask yourself if the bank knows your goals and understands your business. Think about the type of relationship you have with the bank if you can consider it as a good one. Assess if you can trust them with your business. Choose a banker that gives time to know your business and understand it thoroughly.

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Take Advantage of Low FHA Mortgage Rates

In the past week, mortgage rates reached another low record. This is one of the news regarding the terrible economic condition. The current rate on FHA mortgage declined to 3.990% with an annual percentage rate of 5.318%. This is once again another big chance for individuals and families who have existing FHA mortgages and for those who are thinking of getting an FHA mortgage.

If you are one of those with an FHA mortgage in your house, you can take full advantage of the streamline refinance program for your mortgage. This program will help you save extra money from your mortgage payments. Oftentimes, FHA streamline refinances do not ask for a new appraisal that is why the process takes faster than a usual refinance program. If you are paying your mortgage at a rate of at least 4.5%, you can inquire from different mortgage servicers to know the amount of savings you can have when you decide to refinance.

On the other hand, if you do not yet own a home as of this time but are thinking of purchasing one, now may be the best time to go for it. Even without enough funds to put in a down payment, you might be able to obtain a mortgage via the FHA. This type of mortgage may only ask you to pay at least 3.5% of your dream home’s purchase price as your minimum down payment. Because of this, FHA mortgage is popular to many homebuyers. There are also many mortgage servicers these days that are willing to assist you in getting an FHA mortgage especially if you have a good credit standing.

The housing market is offering the best mortgage rates so far. Although this may not be a good sign for the economy, it can benefit existing homeowners and those who have been planning to purchase their own homes but are waiting for the most affordable rates.

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As a support to their clients’ efforts to meet the requirements of the Federal Deposit Insurance Corporation’s (FDIC) Large Bank Pricing Rule, specifically in the subprime loan reporting that will start effective Oct 1, 2011, Experian is creating a complete product to be made available to its banking clients. The company, known for being a leader in global informatio

n services, will allow its clients to use its credit attributes together with its debt-to-income insight model (SM) in order to deliver the complete reporting requirements needed on subprime loans.

The latest reporting requirements for large banks, qualified as having at least $10 billion in assets, describes a subprime loan as a type of installment or revolving loan with one or more of the following properties: First, at least two 30-day delinquencies in the past year or at least one 60 day delinquencies in the last two years. A second requirement is foreclosure, judgment, charge-off or repossession in the previous 24 months. The third is bankruptcy in the last five years. Fourth is a debt service to income ratio of at least 50% which limits the ability to pay for the living expenses of the family once the entire amount of the debt-service monthly requirement is deducted.

With the company’s combined delivery of the needed reporting characteristics, the clients are provided with an option that they can rely on and easily access as they address their requirements in reporting. With this, clients must also check with their regulatory and legal compliance specialists regarding their specific reporting requirements.

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Michele Pearson, Experian’s Consumer Information Services Vice President, says that once the new regulation takes effect, the FDIC rates of the bank will be directly affected by the composition of its assets. This then becomes a different situation from the present environment, where the charges in the insurance rates of deposits are based on its size. The implication of this is that banks that have subprime loan amounts which are considered of a higher risk may have higher charges in their FDIC insurance rates. Pearson further adds that their company is committed to provide their clients with the complete products that will help them comply and maintain their usual business without experiencing any interruption.

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