Question: I am very concerned about my shares of MBIA Inc. What are the prospects? — V.R., via the Internet

Answer: The world's largest bond insurer has taken charges on billions of dollars of exposure to bonds tied to subprime mortgages and derivatives.

It also faces new competition for bond insurance from Berkshire Hathaway Assurance, which has a stronger balance sheet.

It suffered a blow when Moody's Investors Service dropped MBIA's longtime AAA rating by five notches. Moody's also gave it a negative outlook based on limited financial flexibility and weakened businesses. Standard & Poor's Corp. and Fitch Ratings had reduced their ratings for MBIA by two notches.

MBIA insurance provides an unconditional guarantee to repay principal and interest on municipal bonds and asset-backed securities if the issuer defaults. Banks and brokerage firms carry large inventories of low-quality debt whose fortunes are linked to viability of bond insurers.

Despite MBIA's reputation for well-trained debt experts, those experts erred badly in insuring structured finance derivatives such as collateralized debt obligations and second-lien residential mortgage-backed securities.

Shares of MBIA (MBI) are down 78 percent this year following a decline of 75 percent last year. Moody's said the decline in MBIA's stock price makes it "extremely difficult to economically address potential capital shortfalls should markets continue to worsen."

The company had a $2.41 billion loss in the first quarter, its third consecutive quarterly loss. Although it maintains that loss levels are manageable despite the likelihood of further housing market deterioration, Moody's believes losses could materially affect capital levels.

Consensus Wall Street rating on MBIA shares is "hold," according to Thomson Financial, consisting of one "buy" and seven "holds."

Some pluses: MBIA is expanding internationally, and the longevity of the bonds it insures means consistent revenue. It also has a successful advisory subsidiary providing above-average returns.

MBIA's losses this year are expected to increase fourfold over last year's, according to Thomson, compared with the 19 percent drop in earnings forecast for the surety and title insurance industry.

Although $900 million of the $1.1 billion MBIA raised with a February stock offering was targeted for creation of a new AAA-rated subsidiary, regulators may not allow that, and large investors are urging that it be used to protect municipal-bond holders.

Q: I have heard that Mairs & Power Growth Fund is a unique fund worth looking into. Is this true? — F.R., via the Internet

A: It depends on how you feel about the Land of 10,000 Lakes.

Minnesota and surrounding states are the regional focus of this fund, which has been around since the Great Depression. Investment is done close to its home in St. Paul, because that is its area of competency, and portfolio managers like to visit nearby companies and meet management.

The $2.5 billion Mairs & Power Growth Fund (MPGFX) is down 14 percent over the past 12 months to rank near the lowest quarter of large growth and income funds. Its three-year annualized return of 2 percent places it in the bottom one-fourth of its peers, while the five-year return of 8 percent ranks in the top half.

"We recommend Mairs & Power Growth Fund as a fund you must be patient with and have reasonable expectations for," said Dan Culloton, analyst with Morningstar Inc. in Chicago, who considers it ideal for a value-conscious growth investor. "It is also very low cost, has extremely low turnover and is generally shareholder-friendly."

The fund invests in 50 stock names, has low volatility, below-average expenses and is tax-efficient. It invests in all market capitalizations but doesn't own a lot of energy or technology stocks. It can sometimes look out of favor, as it has most recently, because its region lags or its heavy focus on a few sectors isn't paying off.

Manager William Frels has been with the fund since 1999, while Mark Henneman became co-manager in 2006. They buy and hold strong growers. Their close-to-home philosophy flies in the face of funds that find it necessary to go global to compete.

More than one-third of Mairs & Power Growth Fund is in industrial materials, with significant holdings in health care and financial services. Top stocks are Emerson Electric Co., 3M Co., Medtronic Inc., Donaldson Co., Ecolab Inc., Target Corp., Wells Fargo & Co., Honeywell International Inc., Toro Co. and Johnson & Johnson.

This "no-load" (no sales charge) fund requires a minimum initial investment of $2,500 and has an annual expense ratio of 0.68 percent.

Q: How is my credit score calculated? What are the biggest factors? — N.P., via the Internet

A: The most common credit-scoring model is FICO, the Fair Isaac Corp. model, which ranges from 300 to 850. About 11 percent of people receive a score over 800, and 14 percent have a score below 600, with everyone else in between.

Your score is calculated using five categories:

About 35 percent is determined by your payment history, 15 percent by length of your credit history, 30 percent the amount you owe, 10 percent for new credit, and 10 percent for your credit mix.

"An old goat like me has a longer credit history and scores higher on that," said Catherine Williams, vice president of financial literacy for the Money Management International counseling service in Houston. "Leave your oldest accounts open to keep the length of your credit history as long as possible."

It takes a while to move a credit score, Williams said, so do not go overboard on new accounts and be sure to pay down what you owe. Keep balances low, build a long history and pay on time.

"If you score in the high 600s, that will get you a pretty good rate when you borrow, and basically anything over 700 is good," Williams said.


Andrew Leckey answers questions only through the column. Address inquiries to Andrew Leckey, P.O. Box 874702, Tempe, AZ 85287-4702, or by e-mail at [email protected]