ONE prescription for avoiding another real estate bubble is that banks tighten up mortgage requirements. Now, a new Federal Reserve report indicates that lenders have indeed been doing just that.

A majority of banks are less likely to offer loans to people with a FICO credit score of 620 and a 10 percent down payment than they were in 2006, according to the report. Lenders were also less likely to do so even for those with a score of 720.

Such stricter standards have drawn the attention of Ben S. Bernanke, the chairman of the Federal Reserve, who last week told a bankers group that “current standards may be limiting or preventing lending to many creditworthy borrowers.”

For those with lower

By CHRISTOPHER BJORK And DAVID ROMAN

MADRID—Bad debts held by Spanish banks rose to a 17-year high in March and the cost of insuring the debt of two major Spanish banks against default hit a record Friday a day after the sector was hit by a downgrade, underscoring the continuing challenges posed by the country’s five-year property slump.

The central bank said that 8.37% of the loans held by banks, or €147.97 billion ($ 188 billion), were more than three months overdue for repayment in March, up from 8.3% in February and the highest since September 1994. The total number of non-performing loans is now almost 10 times higher than the level reported in 2007, just as Spain’s decade-high property boom peaked.

The rapid deterioration of the loan books was one of four reasons cited by Moody’s Investors Service for its downgrade of the credit ratings of Banco Santander SA,

By NATASHA BRERETON-FUKUI

SINGAPORE—Hong Kong and Singapore banks would be resilient to a mild slowdown in the euro zone, but a severe recession could spur a jump in non-performing loans and a credit crunch, with European lenders likely to withdraw en masse, Standard & Poor’s Ratings Services said Thursday.

A report by the credit-rating firm acknowledged that the banks would benefit from a buffer against an expected modest worsening in loan quality and credit losses, amid weakening economic growth, thanks to their risk-management capabilities, robust profitability and modest nonperforming loans.

It added that the Monetary Authority of Singapore was likely to continue monetary-policy easing for the rest of 2012, and noted that the government also had room for fiscal stimulus.

But should the euro zone experience a prolonged and severe recession, the loan quality of Hong Kong and Singapore banks “could substantially deteriorate,” the report warned.

“In a worst-case scenario, Hong Kong and Singaporean banks’ stand-alone credit profiles could be threatened by a range of factors,” S&P cred……….. continues on Wall Street Journal.

NEW YORK, May 16 (IFR) – Credit risk for US companies is expected to improve from the second half, based on a baseline stress test scenario that assumes US economic fundamentals will remain solid despite weak job numbers and continued higher oil prices, according to Moody’s Analytics.

“We’ve seen an increase in corporate credit spreads over the past twelve months, which follows a 23% rise in the default rate for US public companies,” said Danielle Ferry, senior research analyst at Moody’s Analytics, a unit of Moody’s Corp.

“Most movement in spreads is being driven by short-term jitters and not fundamental drivers. So based on expectations that the US economy is on track to recover, we expect credit quality to show improvement in the second half of the year.”

The forecast is based on stressed EDF — expected default frequency — a newly-launched credit metric, based on one-year expected default probabilities under a variety of macroecono……….. continues on Reuters.

Chesapeake credit downgraded, company boosts loan

(AP) – 2 hours ago 

NEW YORK (AP) — Standard & Poor’s lowered Chesapeake Energy’s credit rating Tuesday, questioning how quickly the company could remedy its financial woes.

Chesapeake shares dropped more than 6 percent to the lowest level since March 2009.

The credit ratings agency believes that Chesapeake will struggle to generate enough cash to pay off its debts as natural gas prices plunge. Standard & Poor’s also noted that the “mounting turmoil” from CEO Aubrey McClendon’s personal financial dealings could make it tougher for the company to raise money in the future.

Chesapeake said Tuesday that it boosted the size of an unsecured term loan from Goldman Sachs Bank USA and affiliates of Jefferies Group Inc. from $ 3 billion to $ 4 billion.

Chesapeake said the $ 3.8 billion in net proceeds from the loan will be used to repay debt under a revolving credit facility, and for general business purposes. The company said it was increasing the loan because of strong investor demand.

S&P pushed Chesapeake further into junk investment territory by dropping its rating a notch to “BB-,” saying the company “……….. continues on The Associated Press.

Lenddo, which helps people build credit with small loans and a social-based Klout-like scoring system, raised an $ 8 million first round of funding Tuesday.

The brains behind Lenddo, co-founders Jeff Stewart and Richard Eldridge and chief scientist Dr. Naveen Agnihotri, think a person’s social graph can be a better indicator of trustworthiness than a credit score. Anyone who’s ever tried to get a loan or credit card without prior credit knows it’s a circular problem, one that is infinitely more difficult in emerging economies. Lenddo helps individuals in these countries break out of the cycle with small loans up to one month’s pay.

The company takes the wealth of data from your many social networks (including Facebook, LinkedIn, Twitter), looks at the people in your Lenddo Trusted Network (family, friends, co-workers), verifies you have a full-time job, and uses predictive algorithms to confirm your identity and calculate if you are a risk. There are three types of algorithms it uses: Bayesian (pattern matching), validators (verifying your identity and the information you’ve given), homophily (you’re likely to associate with people similar to you).

“It turns out, who is willing to endorse you is a po……….. continues on VentureBeat.