Loren Johnson, CMPS

Investors knew that the economy was in tough shape in December, and there was little reaction to today's Employment report. The economy lost -524K jobs in December, which was very close to the consensus forecast. The Unemployment Rate jumped to 7.2%, the highest level since 1993, from a revised 6.8% in November. 2.6 million jobs were lost in 2008, mostly during the final four months of the year. The manufacturing and construction sectors remained weak, while there were small gains in education and health care. Average hours worked fell to a record low, which may be a leading indicator for additional future layoffs. Surprisingly, Average Hourly Earnings, a proxy for wage growth, increased at a faster than expected 3.7% annual rate.

The consensus outlook is that the economy will remain weak through at least the first half of 2009. The question is whether a pickup will be seen during the second half of the year or whether the weakness will extend into 2010.

No more economic data will be released today.

The Fed announced that it purchased $10.2 billion in agency MBS between January 5 and January 7. The Fed may purchase up to $500 billion by the end of June.

There was stronger than average demand for the 10-yr Treasury auction. The Dow fell 25 points.

Jobless Claims announced this morning were lower than expected, and tomorrow the Employment report will be released at 8:30 et, and the consensus is for a loss of 500K jobs in December.

President-elect Obama again warned about the negative impact of failing to pass an economic stimulus plan.

Changes are finally coming to the "art" of credit scoring, the mathematical modeling of assigning a number score to how a Consumer uses credit. Soon, two of the three credit reporting bureaus will use a new model. Fair Isaac, the developer of FICO scores, has made the biggest change to its mathematical credit score model since it was introduced in 1989. Scores will still be on a 300- to 850-point scale. But the company estimates that 40% to 50% of borrowers' scores could go up or down by more than 20 points because of how the new model fine-tunes the variables it uses to evaluate consumers' credit use behavior.

For creditors, the new FICO score promises to reduce the risk of defaults, improving the predictability of defaults by 5% to 15%. Delinquencies are at their highest rate since 1992, when the economy was also in a recession.

Equifax and TransUnion will be the first credit reporting bureaus to roll out the changes over the next year. As credit has tightened because of the financial crisis, FICO scores are becoming increasingly important for borrowers looking to qualify for favorable terms. That puts high scorers in even a better position for pricing on loans.

Piggybacking - upping a score on someone else's back - won't be ruled out in the new FICO score. But it will make using that route to establishing credit harder and lengthier. The authorized user provision allows young adults to create a credit history by using and paying off accounts held by their parents. But it has also been subject to abuse, with high credit scorers selling their names to borrowers looking to improve scores. Fair Isaac estimates that 30% of U.S. credit card holders, or 60-75 million people, are authorized users. Fair Isaac has increased the number of groups that customers fall into from 10 to 12, taking into more account the number and magnitude of credit problems. Infrequent problem borrowers will no longer be lumped in with habitual delinquents. The new FICO model also focuses less on how many accounts a borrower has and more on the amount of balances carried.

The bottom line- know what your credit report looks like now, and work on improving any areas you can over the next 6 months. Sounds like another good New Year's resoloution to me!

Today's economic data had little impact. November Pending Home Sales fell -4% to 82.3, below the consensus of 88.0, to a record low. December ISM Services came in a little higher than expected, while December Factory Orders fell short. The FOMC Minutes from the December 16 Fed meeting showed broad support for the rate cut to a 0.00% to 0.25% target rate and for the use of unconventional tools. Fed officials were concerned about the risk that the economic slowdown will last longer than expected.

Surprisingly, though, with MBS prices remaining near the highs for the day, some investors issued unfavorable repricing this afternoon. This was most likely due to capacity constraints. MBS markets gained for a second day following the Fed's announcement about MBS purchases, while Treasuries were mostly lower. The Dow gained 60 points. No economic data will be released tomorrow.

To me, it's always fun to notice how crowded my workout place is every January. I know that if I put up with the slight wait to do my 'work', that within a few weeks....it will all return to normal. Why? Because of human nature. It's HARD to change things long-term, and most of us are too busy, distracted, or tired to make the effort to break our normal cycles of life.

I wrote a big column yesterday on changing your mindset for the new year. I wrote that in part for self-help....because I need to do it also! I'm trying to change my work 'style', knowing that if I don't, i'll be like all those folks who don't show up to the Health Club in March...with no changes for the better.

So.....how are YOUR resoloutions for change going after 3 days? Making more phone calls? Going to network meetings? Finally getting that mailer out to your clients?

Whatever you need to do, I hope it's working for you. If we all just change a bit for the better, think how that will elevate all of us in the Real Estate Business!

Good Luck!