CREDIT: Much About Agreements!

Posted on January 11, 2025 by Dr. David Edward Marcinko MBA MEd CMP™

By Staff Reporters

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Credit report with score on a desk

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Credit analysis is a form of financial analysis used primarily to determine the financial strength of the issuer of a security, and the ability of that issuer to provide timely payment of interest and principal to investors in the issuer’s debt securities. Credit analysis is typically an important component of security analysis and selection in credit-sensitive bond sectors such as the corporate bond market and the municipal bond market.

Credit default swap index (CDX) is a credit derivative, based on a basket of CDS, which can be used to hedge credit risk or speculate on changes in credit quality.

Credit default swaps (CDS) are credit derivative contracts between two counterparties that can be used to hedge credit risk or speculate on changes in the credit quality of a corporation or government entity.

Credit quality reflects the financial strength of the issuer of a security, and the ability of that issuer to provide timely payment of interest and principal to investors in the issuer’s securities. Common measurements of credit quality include the credit ratings provided by credit rating agencies such as Standard & Poor’s and Moody’s. Credit quality and credit quality perceptions are a key component of the daily market pricing of fixed-income securities, along with maturity, inflation expectations and interest rate levels.

Credit Rating Agency (CRA) is a company that assigns credit ratings for issuers of certain types of debt obligations as well as the debt instruments themselves. In the United States, the Securities and Exchange Commission (SEC) permits investment banks and broker-dealers to use credit ratings from “Nationally Recognized Statistical Rating Organizations” (NRSRO) for similar purposes. As of January 2012, nine organizations were designated as NRSROs, including the “Big Three” which are Standard and Poor’s, Moody’s Investor Services and Fitch Ratings.

Credit rating downgrade, by a credit rating agency (Standard & Poor’s, Moody’s or Fitch) means reducing its credit rating for a debt issuer and/or security. This is based on the agency’s evaluation, indicating, to the agency, a decline in the issuer’s financial stability, increasing the possibility of default. A downgrade should not to be confused with a default; a debt security can be downgraded without defaulting. And, conversely, a debt issuer can suddenly default without being downgraded first–credit ratings and credit rating agencies are not infallible.

Credit ratings are measurements of credit quality provided by credit rating agencies. Those provided by Standard & Poor’s typically are the most widely quoted and distributed, and range from AAA (highest quality; perceived as least likely to default) down to D (in default). Securities and issuers rated AAA to BBB are considered/perceived to be “investment-grade”; those below BBB are considered/perceived to be non-investment-grade or more speculative.

Credit risk is the inability or perceived inability of the issuers of debt securities to make interest and principal payments will cause the value of those securities to decrease. Changes in the credit ratings of debt securities could have a similar effect.

Credit Risk Transfer Securities (CRTS) are unsecured obligations of the GSEs (Government Sponsored Enterprises). Although cash flows are linked to prepays and defaults of the reference mortgage loans, the securities are unsecured loans, backed by general credit rather than by specified assets.

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PHYSICIAN CREDIT: Ratings, Scoring, Errors and Repair Services

Posted on December 12, 2024 by Dr. David Edward Marcinko MBA MEd CMP™

ALMOST ALL ABOUT CREDIT

By Staff Reporters

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Credit Rating and Scoring

The category in which a credit agency classifies you is based upon payment history.  Recently, credit reporting agencies have shifted away from ratings to a system known as credit scoring. Your score is determined by proprietary formulas that are based on your credit history, the higher the better. The practical benefits of this scoring system are numerous.

First, medical professionals do not need to be experts at deciphering credit reports since the same scoring system is used by many different companies.

Correcting Credit Report Errors

A credit bureau is not the place to get an item to be fixed on your credit report. Rather, you must take it up directly with the credit issuer. In any case, a late payment noted on a credit report by a durable medical equipment vendor, for example, has to be addressed directly with that merchant. The DME merchant then has 30 days to acknowledge your complaint and respond to you. In the meantime, you do not have to pay for the disputed items.  Most credit errors cannot be reported or kept on your credit report for more than seven years.

For legitimate late payments you should contact the credit grantor and negotiate to take one of the following steps. Be tenacious, and either remove the late payment or write a letter explaining that the problem has been resolved and you now are a good credit risk again. This letter is a powerful tool and should be saved with other permanent financial records. The industry term for it is a letter of correction.

Credit Repair Services

Credit repair services are oversold and their claims tend to be exaggerated. They do not have an inside track to the consumer reporting agencies.  Good credit repair services are experienced in communicating with creditors and can help with legitimate repairs.  They cannot restore your credit rating or your good name. 

However, realize that with some time and effort you can accomplish the same results yourself.

CITE: https://www.r2library.com/Resource/Title/0826102549

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CREDIT: All About Contractual Agreements

Posted on October 31, 2024 by Dr. David Edward Marcinko MBA MEd CMP™

By Staff Reporters

SPONSOR: http://www.MarcinkoAssociates.com

DEFINITIONS

What Is CREDIT? Credit is a contractual agreement in which a borrower receives a sum of money or something else of value and commits to repaying the lender later, typically with interest. Credit is also the creditworthiness or credit history of an individual or a company. Good credit tells lenders you have a history of reliably repaying what you owe on loans. Establishing good credit is essential to getting a loan.

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Credit Analysis is a form of financial analysis used primarily to determine the financial strength of the issuer of a security, and the ability of that issuer to provide timely payment of interest and principal to investors in the issuer’s debt securities. Credit analysis is typically an important component of security analysis and selection in credit-sensitive bond sectors such as the corporate bond market and the municipal bond market.

Credit Default Swap Index (CDX) is a credit derivative, based on a basket of CDS, which can be used to hedge credit risk or speculate on changes in credit quality.

Credit Default Swaps (CDS) are credit derivative contracts between two counter parties that can be used to hedge credit risk or speculate on changes in the credit quality of a corporation or government entity.

Credit Quality reflects the financial strength of the issuer of a security, and the ability of that issuer to provide timely payment of interest and principal to investors in the issuer’s securities. Common measurements of credit quality include the credit ratings provided by credit rating agencies such as Standard & Poor’s and Moody’s. Credit quality and credit quality perceptions are a key component of the daily market pricing of fixed-income securities, along with maturity, inflation expectations and interest rate levels.

Credit Rating Agency (CRA) is a company that assigns credit ratings for issuers of certain types of debt obligations as well as the debt instruments themselves. In the United States, the Securities and Exchange Commission (SEC) permits investment banks and broker-dealers to use credit ratings from “Nationally Recognized Statistical Rating Organizations” (NRSRO) for similar purposes. As of January 2012, nine organizations were designated as NRSROs, including the “Big Three” which are Standard and Poor’s, Moody’s Investor Services and Fitch Ratings.

A Credit Rating Downgrade by a credit rating agency (such as Standard & Poor’s, Moody’s or Fitch), of reducing its credit rating for a debt issuer and/or security. This is based on the agency’s evaluation, indicating, to the agency, a decline in the issuer’s financial stability, increasing the possibility of default (defined below). A downgrade should not to be confused with a default; a debt security can be downgraded without defaulting. (And, conversely, a debt issuer can suddenly default without being downgraded first–credit ratings and credit rating agencies are not infallible.)

Credit Ratings are measurements of credit quality provided by credit rating agencies). Those provided by Standard & Poor’s typically are the most widely quoted and distributed, and range from AAA (highest quality; perceived as least likely to default) down to D (in default). Securities and issuers rated AAA to BBB are considered/perceived to be “investment-grade”; those below BBB are considered/perceived to be non-investment-grade or more speculative.

Credit Risk is the risk that the inability or perceived inability of the issuers of debt securities to make interest and principal payments will cause the value of those securities to decrease. Changes in the credit ratings of debt securities could have a similar effect.

Credit Risk Transfer Securities (CRTS) are the unsecured obligations of the GSEs (Government Sponsored Enterprises). Although cash flows are linked to prepays and defaults of the reference mortgage loans, the securities are unsecured loans, backed by general credit rather than by specified assets.

CITE: https://www.r2library.com/Resource/Title/0826102549

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Physician’s Acquiring Real-Estate

Posted on April 3, 2009 by Dr. David Edward Marcinko MBA MEd CMP™

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Innovative Funding in Difficult Times

[Staff Reporters]mortgaged-house

Real estate can be acquired by physician-investors, even in these difficult times, in many different ways. For example, through direct purchase, participation in a real estate partnership vehicle with other investors [such as general partnerships, limited partnerships, various corporate entities, and, in most states, limited liability companies (LLCs), and investments in real estate securities such as Real Estate Investment Trusts (REITs).

Section 1031

Real estate also can be acquired through tax-deferred exchanges under Section 1031 of the IRS Code, in which a client “trades” one investment property for another, deferring the taxes due on the sale of the exchanged property. This allows the doctor to reinvest “pre-tax” dollars in another real estate investment, potentially benefiting from appreciation on the larger investment. The physician may also exchange one larger property into two or several smaller properties and pay tax consequences on each one as those properties are sold as cash is needed.

Tax and Risk Management

The way a physician takes ownership of real estate will affect the tax treatment of income and profit. For example, having an LLC-owned investment property will provide him/her with the same protection from individual liability as a corporation, while allowing him/her to have much more favorable tax treatment. Real estate can be bought directly by purchasing it in the following manners:

1. Paying cash,

2. Paying a cash down payment and acquiring a loan,

3. Paying cash to the seller who is financing, or

4. Financing the purchase by using either new real estate financing, seller financing, or credit borrowing when a lender is willing to loan solely on the strength of, and the financial statement of, the borrower, or a combination of these.

Trading and Secured Loans

Real estate also can be acquired by trading other valuable assets, sometimes in combination with financing. A client can obtain interests in real estate by making loans on real estate assets that are secured by a deed of trust or a mortgage. Another method is to invest as a participating lender. In such an instance the borrower needs to agree to provide equity kickers or participation in cash flow whereby the lender (doctor) can benefit directly from the real estate performance.fp-book21

Equity Participation Plans

With an equity participation, the physician-investor can profit or gain from the sale of the property, sometimes in a preferential manner (i.e., the money the doctor loaned is returned, with interest, and a predetermined percentage or portion of the gain is given to the owner/borrower before distribution of the sales proceeds). Similarly, the doctor can participate in annual cash flow, giving a fixed or a fluctuating amount depending on the performance of the investment. As a lender, many of the benefits of ownership of real estate are not available to the MD, but the doctor should have a security interest in the property and no direct responsibility for operation of the real estate investment. Also, if possible, the borrower should provide additional guarantees of performance. The borrower could do this by providing additional security, such as the deeds of trust on the borrower’s house, other real-estate, and the acquired property; bank letters of credit; or guarantees of performance from people other than the party to whom the money is originally loaned.archway

Assessment

If a physician-investor is considering acquiring or lending on real estate, s/he should check with his professional advisors, including accountants and attorneys, before proceeding. The doctor’s attorney should review any contracts or agreements before the client signs anything. The physician also will need a due diligence review to ascertain both the relative values of the real estate on which money is being loaned and the borrower’s track record and background.

Conclusion

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