UNITED STATES SECURITIES AND
    EXCHANGE COMMISSIONWashington, D.C.
    20549
      Form 10-K
  þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    December 31, 2006ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to   Commission file number
    001-11981
  MUNICIPAL MORTGAGE &
    EQUITY, LLC
 (Exact name of registrant as
    specified in its charter)
  Delaware(State or other jurisdiction
    of
    incorporation or organization)

52-1449733(IRS Employer
    Identification No.)621 East Pratt Street, Suite 300
    Baltimore, Maryland(Address of principal
    executive offices)

21202-3140(Zip Code)   Registrants
    telephone number, including area code
 (443) 263-2900
  Securities registered pursuant to Section 12(b) of the
    Act:
  Title of Each Class

Name of Each Exchange on Which RegisteredCommon Shares

None   Securities registered pursuant to Section 12(g) of the
    Act:
 Common Shares
  o þ
  o þ
  o þ
  Regulation S-K Form 10-K Form 10-K. o
  12b-2
 Large
    accelerated
    filer o
    Accelerated
    filer þ
    Non-accelerated
    filer o
    Smaller
    reporting
    company o   Rule 12b-2 o þ
      DOCUMENTS
    INCORPORATED BY REFERENCE
  Form 10-K




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Municipal
    Mortgage & Equity, LLC
  TABLE OF
    CONTENTS
   
 CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
    STATEMENTS


4EXPLANATORY NOTE


4PART I


6Item 1.

BUSINESS


6Item 1A.

RISK FACTORS


21Item 1B.

UNRESOLVED STAFF COMMENTS


33Item 2.

PROPERTIES


33Item 3.

LEGAL PROCEEDINGS


33Item 4.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY
    HOLDERS


34PART II


35Item 5.

MARKET FOR REGISTRANTS COMMON EQUITY,
    RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
    SECURITIES


35Item 6.

SELECTED FINANCIAL DATA


38Item 7.

MANAGEMENTS DISCUSSION AND ANALYSIS OF
    FINANCIAL CONDITION AND RESULTS OF OPERATIONS


40Item 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
    MARKET RISK


74Item 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


76Item 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
    ACCOUNTING AND FINANCIAL DISCLOSURE


76Item 9A.

CONTROLS AND PROCEDURES


78Item 9B.

OTHER INFORMATION


82PART III


82Item 10.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE
    GOVERNANCE


82Item 11.

EXECUTIVE COMPENSATION


89Item 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
    AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS


99Item 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS,
    AND DIRECTOR INDEPENDENCE


100Item 14.

PRINCIPAL ACCOUNTANT FEES AND SERVICES


105PART IV


106Item 15.

EXHIBITS AND FINANCIAL STATEMENT
    SCHEDULES


106SIGNATURES


S-1   2




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Index to
    Financial Statements
  Reports of Independent Registered Public
    Accounting Firm


F-1Consolidated Balance Sheets as of
    December 31, 2006 and 2005


F-4Consolidated Statements of Operations for the
    Years Ended December 31, 2006, 2005 and 2004


F-5Consolidated Statements of Comprehensive Income
    (Loss) for the Years Ended December 31, 2006, 2005 and
    2004


F-7Consolidated Statements of Shareholders
    Equity for the Years Ended December 31, 2006, 2005 and
    2004


F-8Consolidated Statements of Cash Flows for the
    Years Ended December 31, 2006, 2005 and 2004


F-9Notes to Consolidated Financial Statements


F-11  3




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CAUTIONARY
    STATEMENT REGARDING FORWARD-LOOKING STATEMENTS       EXPLANATORY
    NOTE  (Report) Form 10-K Form 10-K Form 10-K
  (KPMG). Form 10-K (PwC
    
    Changes in our application of Financial Accounting Standards
    Boards Financial Interpretations No. FIN 46(R),
    Consolidation of Variable Interest Entities-An
    Interpretation of ARB No. 51
    (FIN 46R) and other similar
    accounting pronouncements resulting in the inclusion in our
    consolidated financial statements of the assets, liabilities and
    non-controlling interests as well as income and expense of over
    200 additional entities, in which we have little or no ownership
    interest, but as to which under applicable accounting
    pronouncements, we are deemed to be the primary beneficiary or
    to have control, and thus require consolidation.
    Changes to the accounting for our Tax Credit Equity business
    including changes to the timing of recognition of organization
    and acquisition costs, changes in the measurement of capitalized
    interest, as well as changes in the recognition of syndication
    fees.
    Changes related to bond accounting including changes in the way
    we value our bond portfolio.
    Changes related to loan accounting including the way we account
    for certain loan fees and deferred origination costs, changes in
    the identification of non-accrual loans, and changes related to
    the specific and unallocated allowance for loan losses.
    Other changes in accounting relating to equity method
    investments, derivatives and mortgage servicing rights
    (MSRs).
    As a result of the restatement, we substantially increased our
    deferred tax assets, primarily due to the significant deferral
    of income related to the Tax Credit Equity accounting changes.
    Furthermore, we 4




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concluded that it was more likely than not that the deferred tax
    assets would not be realized resulting in the need for a
    valuation allowance against substantially all of our deferred
    tax assets.    (SEC)
     5




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PART I  Item 1.
    BUSINESS  Except as expressly indicated or unless the context otherwise
    requires, the Company, MuniMae,
    we, our or us means
    Municipal Mortgage & Equity, LLC, a Delaware limited
    liability company, and its majority owned subsidiaries.
  Although this Report is for the year ended December 31,
    2006, unless otherwise noted, the description below is of our
    business as it exists on the date of this Report.
  Overview
  Schedule K-1
     6




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(Low Income Housing
    Tax Credit Equity Funds LIHTC
    Funds) (GSEs (Fannie Mae) (Freddie Mac) (HUD) (Ginnie Mae)
  (GAAP)
   7




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(443) 263-2900. http://www.munimae.com, http://www.sec.gov.
  Effect of
    Current Market Conditions on Us
      
    There was a major reduction in the willingness of the
    institutions that in the past had been investors in the funds we
    manage or lenders to those funds to invest in new investment
    funds or to provide financing to new investment funds.
    We, like many companies, encountered increasing efforts by banks
    and other lenders to reduce their outstanding loans and loan
    commitments. Among other things, we were required to pay down or
    replace several short-term warehouse lines we used to accumulate
    certain types of assets until we could securitize or otherwise
    sell them, resulting in a net contraction in our warehouse
    borrowing capacity. As a result of the contraction of the
    warehouse borrowing capacity related to our Tax Credit Equity
    segment, during 2008 we had to sell assets into unfavorable
    markets, resulting in significant realized and expected losses.
    Since the fall of 2007, there have been very few buyers of newly
    securitized tax-exempt bonds, and what buyers there are have
    required yields that make it unprofitable for us to securitize
    bonds. Therefore, we stopped using securitization as a source of
    financing. In substantial part because of that, we ceased
    originating tax-exempt bonds.
    Due to a market anomaly that had led to a significant decline in
    the value both of our portfolio of state housing agency
    tax-exempt bonds and the interest rate swaps we had bought to
    hedge against such a decline, we were required to post
    $41.9 million of cash margin collateral between
    January 1, 2008 and early March 2008 (in addition to
    $13.0 million we had previously posted). In addition, we
    entered into collateral pledge arrangements in March 2008
    whereby, we pledged our 100% common stock ownership interest in
    TE Bond Sub, a wholly owned subsidiary holding the majority of
    our tax-exempt bonds, to Merrill Lynch Capital Services, Inc.
    (Merrill Lynch), our principal margin lender,
    to reduce our margin call risk by providing Merrill Lynch with
    additional margin call collateral for a portion of our portfolio
    and for other obligations related to our Tax Credit Equity
    business segment and our Merchant Banking business segment.
    Since March 2008, we have been liquidating assets and hedges
    that were the primary reasons for the collateral postings. At
    December 31, 2008 we did not have any liquid margin
    collateral posted for our portfolio of state housing agency
    tax-exempt bonds and related interest rate swaps; however, we
    still had our TE Bond Sub stock pledged to them. Merrill 8




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Lynch is able to exercise their discretion in determining the
    value of TE Bond Subs common stock as collateral, which
    may result in valuations that could require additional
    collateral pledges.  
    During 2008, in an effort to reduce our exposure to future
    margin calls and in an effort to recoup some or all of the cash
    margin collateral we had posted, we sold approximately
    $412.5 million of our state housing agency tax-exempt bonds
    for approximately $45.1 million less than we had paid for
    them and we lost another $12.3 million in liquidating
    hedging transactions that were designed to hedge our exposure to
    declines in value of the tax-exempt bonds. These losses consumed
    most of the cash margin collateral we had posted in and before
    early March 2008.
    The overall credit risk on our tax-exempt bond portfolio has
    improved between December 31, 2007 and
    December 31, 2008 as we have made strategic sales of some
    of our underperforming bonds. The underlying collateral of the
    bond portfolio, which is primarily affordable housing
    properties, continues to perform well even in light of this
    difficult economic environment. Our overall December 31,
    2008 credit risk on our loan portfolio reflects deterioration
    from December 31, 2007. As a result, we have had and
    probably will continue to have increases in our loan loss
    reserves and impairment charges related to this loan portfolio,
    of which, the unpaid principal balance was approximately
    $577.3 million at December 31, 2008.
    We have encountered a significant need for cash so that we could
    fund construction loan commitments we had made, meet our
    lenders need for us to reduce our exposure to them, and
    meet operating expenses, including the costs of developing and
    applying our accounting policies and preparing and auditing our
    financial statements for 2006 and our restated financial
    statements for 2005 and 2004. In order to satisfy our cash
    needs, we have had to sell assets, including both tax-exempt
    bonds and segments of our businesses, into very unfavorable
    markets.    The
    Evolution of Our Business
    
    In October 1999, we acquired Midland Financial Holdings, Inc.,
    primarily a delegated underwriter and servicer for Fannie Mae, a
    tax credit syndicator and an asset manager, in a strategic
    acquisition that diversified our operations.
    In July 2003, we acquired the Housing and Community Investment
    business (HCI) of Lend Lease Real Estate
    Investments, Inc., formerly the tax credit equity syndication
    division of Boston Financial Group, in a strategic acquisition
    that established us as a market leader in the tax credit equity
    syndication business.
    In February 2005, we acquired MONY Realty Capital, Inc.
    (MONY) from AXA Financial, Inc.,
    (AXA) formerly the investment manager for
    several of MONY Life Insurance Companys 9




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commercial real estate funds, in an acquisition that expanded
    our fund management business and brought us into the commercial
    real estate market with access to institutional investors.  
    In July 2005, we acquired Glaser Financial Group, Inc.,
    (Glaser) a commercial mortgage lender for
    market rate multifamily and senior housing, in an acquisition
    that increased our access to lending transactions,
    geographically expanded our operations and further diversified
    our activities not related to affordable housing.
    Beginning in December 2005, we reorganized our operations into
    an affordable housing business unit and a real estate finance
    business unit to:  
    better align our internal structure with our customer base;
    expand our business opportunities and capital
    relationships; and
    further consolidate our infrastructure to realize operational
    synergies and efficiencies to better support our strategic
    initiatives.  
    In May 2006, we acquired Reventures Management Company, LLC, a
    company that arranges financing for, and which develops, owns
    and operates renewable energy (e.g., solar energy, wind power
    and biomass) projects. This brought us into the renewable energy
    finance and development area.
    In 2007, we acquired several new lines of business including the
    George Elkins Mortgage Banking brokerage business and the
    Sustainable Land Fund, a company that was formed to structure
    and manage investments in land with environmental attributes
    such as wetlands, as well as making additional investments in an
    international housing joint venture.    Recent
    and Proposed Transactions and Termination of a
    Business
  Agreement
    to sell Agency loan origination and servicing business
  (Mud
    Duck
 10




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Sale of
    renewable energy business
    Possible
    sale of tax credit equity business
    Sale of
    recently acquired businesses
    Termination
    of asset management business
    What will
    remain
    Our
    Business
  As described under Recent and Proposed
    Transactions, we are in the process of selling two, and
    possibly three, aspects of our Business. If those transactions
    all take place, they will significantly alter the nature of our
    Business and substantially reduce both our assets and our
    revenues. The description below is of our business as it exists
    in April 2009, without giving effect to those transactions.
   11




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
    Our affordable housing division, which conducts activities
    related to affordable housing. Our affordable housing division
    is further subdivided into three reportable segments:  
    Tax Credit Equity, which creates investment funds, and finds
    investors for such funds, that receive tax credits for investing
    in affordable housing partnerships (referred to as syndication
    of low income housing tax credits)  we are actively
    seeking a buyer of this business, but do not have an agreement
    to sell it;
    Affordable Bonds, which originates, and invests in, tax-exempt
    bonds secured by affordable housing; and
    Affordable Debt, which originates and invests in loans secured
    by affordable housing.  
    Our real estate division conducts real estate finance
    activities. We manage the activities of this division through
    two reportable segments:  
    Agency Lending, which originates both market rate and affordable
    housing multifamily loans with the intention of selling them to
    GSEs, including Fannie Mae and Freddie Mac, or through programs
    created by them, or sells the permanent loans to third party
    investors as securitized mortgage backed securities guaranteed
    by Ginnie Mae and insured by HUD. In December 2008, we signed a
    contract to sell this aspect of our business; and
    Merchant Banking, which provides loan and bond originations and
    loan servicing and has been providing asset management,
    investment advisory and other services to institutional
    investors that finance or invest in various commercial real
    estate projects. In some cases we have originated commercial
    real estate loans for our own investment purposes. In late 2008
    and early 2009 we ceased providing investment advisory services
    to institutional investors.  
    Our renewable ventures division, which finances, owns and
    operates renewable energy and energy efficiency projects. It is
    managed as a reportable segment of its own. On February 26,
    2009, we signed a contract to sell substantially all of this
    business.     12




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Affordable
    Housing Division
    
    origination fees;
    construction administration fees;
    servicing fees;
    syndication fees;
    asset management fees, and
    guarantee fees    Tax
    Credit Equity Segment
  (Lower
    Tier Property Partnership)
  (GP Take Backs)
 13




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(guaranteed funds)
      Affordable
    Bond Segment
        Affordable
    Debt Segment
      Real
    Estate Division
   14




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
    net interest income on loans we own;
    proceeds of sales of loans to GSEs and other institutional
    investors;
    origination fees;
    asset management fees;
    servicing fees; and
    fees for miscellaneous services.    Agency
    Lending Segment
  (DUS) (FHA)
      Merchant
    Banking Segment
      
    We have provided advisory and management services with regard to
    direct and pooled investments in real estate assets for a number
    of pension funds that invest in (1) limited partnership
    interests in 15




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partnerships we originate to acquire commercial real estate; or
    (2) real estate-backed debt investments that we originate.  
    We have provided advisory and other services for several funds
    we did not create that hold investments in a broad range of
    property types, including office and industrial properties,
    apartments, retail properties, hotels, condominiums, and student
    housing, including investments in loans we originated.
    We have originated loans for institutional investors including
    pension funds.        Renewable
    Energy and Other Developing Businesses Division
  Renewable
    Energy Related Investments
  (ReVen)
    (promote income)
   16




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Developing
    Businesses
  (SA Fund)
      Federal
    Income Tax Considerations
  Treatment
    as a Partnership
  (PTP)
    Tax-exempt
    Status of Bonds We Hold
  (the Code)
  (predecessor)
 17




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(Foundation)
      tax-exempt (IRS)
  Tax
    Matters relating to Securitizations
  Tax-exempt
  start-up (Pre-2004 Partnerships)
 18




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Tax
    Effects on our Shareholders Resulting from our Taxable Income
    and Deductions
        Risk
    Management
    Investment Risk Management  Real Estate Investment
    Committee (REIC).
 19




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(MMA
    Financial) MMA Realty
    Capital MRC
    Balance Sheet Risk Management  Capital Committee
    (CC).
  Day to Day Risk Management.
  Competition
   20




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Employees
    Item 1A.
    RISK
    FACTORS    Risks
    Related to Current Market Conditions
  We
    have been directly and indirectly affected by the recent
    disruptions in credit markets.
    We
    have been severely affected by deterioration in the market for
    tax-exempt bonds and other instruments of the type we
    own.
    We
    have been forced to sell assets and business segments in order
    to raise funds we need to meet our cash needs.
   21




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As a
    result of reductions in revenues and substantial realized and
    unrealized losses in the carrying value of our municipal bonds
    and other investments due to severely adverse current market
    conditions, and to the high costs of preparing and auditing our
    financial statements, we are incurring significant operating
    losses.
      Most
    of our lenders have the right to require us to repay what we
    have borrowed or could require us to post additional
    collateral.
    If we
    were forced to sell all our pledged assets, the total sales
    price might not be sufficient to enable us to repay all our
    borrowings.
    We are
    facing defaults and delinquencies with respect to many of the
    debt instruments we hold.
   22




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General
    Risks Related to Our Business
  Economic
    conditions adversely affecting the real estate market have had a
    material adverse effect on us.
    
    high levels of unemployment and other adverse economic
    conditions, regionally or nationally;
    decreased occupancy and rent levels due to supply and demand
    imbalances;
    changes in interest rates that affect the value of the debt
    instruments or the value of the real estate that secures the
    debt instruments that we, the funds we manage or the investors
    we advise own, or that affect the availability of attractive
    investment opportunities;
    lack of mortgage financing and reduced availability of mortgage
    financing, each of which can affect the prices for which real
    estate can be sold or even the ability to sell real estate at
    any acceptable price; and
    changes in local or national laws or regulatory conditions that
    affect significant segments of the multifamily housing market,
    including environmental and other laws and regulations that
    affect the types of buildings that can be built or building
    materials that can be used, or that otherwise increase
    construction costs or limit land usage.  We
    might not be able to meet our funding commitments.
    We are
    exposed to the normal risks that affect construction lenders
    which could adversely affect our or our funds return on
    investment.
    
    underestimated construction or rehabilitation costs;
    delays;
    failure to obtain or maintain governmental approvals; and
    adverse weather and other unpredictable contingencies beyond the
    control of the developer.    lease-up lease-up
 23




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We are
    exposed to risks specific to real estate.
    We are
    sometimes subject to collateral calls and if we cannot meet the
    calls we may be deemed in default.
    The
    market value, availability or cost of our investments and
    investment opportunities could be adversely affected by changes
    in prevailing interest rates.
    We do
    not, and cannot, fully hedge against interest rate
    risks.
      We can
    lose money on the transactions we undertake to hedge against
    losses due to interest rate movements.
   24




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Our
    ability to find investors or make tax-exempt investments could
    be adversely affected by changes in government tax incentive
    programs.
  tax-exempt
  Substantial
    reduction or increased costs in the activities of GSEs that
    provide liquidity to the market for real estate related
    investments could adversely affect our business.
      Most
    of our assets are pledged as collateral for borrowings that
    could go into default causing us to suffer significant
    losses.
   25




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We
    must be careful not to become subject to the Investment Company
    Act of 1940 because if we were subject to that Act, we could be
    required to sell substantial portions of our assets at a time
    when we might not otherwise want to do so, and we could incur
    significant losses as a result.
    Risks
    Related to Our Financial Reporting
  There
    have been material weaknesses in our internal controls over
    financial reporting that have required us on three occasions to
    restate our financial statements with the assistance of outside
    accounting consultants, and until we have sufficient internal
    resources we may need continued substantial assistance from
    outside accounting consultants at considerable
    cost.
      The
    material weaknesses in our internal control over financial
    reporting substantially increase the cost of ensuring that there
    will not be misstatements in our financial
    statements.
   26




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We
    will continue to incur major costs in the preparation and audit
    of our financial statements, which could adversely affect our
    financial results.
    Our
    2007 and 2008 financial statements will not be filed with the
    SEC or provided to lenders when they are due, which means we
    will not meet a requirement of many of our loan agreements and
    unless we obtain waivers or forbearances, our lenders could
    terminate our lending agreements and require us to repay the
    sums we have borrowed, and if all of these loan amounts were
    currently declared due and payable, we would not have available
    resources sufficient to satisfy all of such loan
    amounts.
       The
    SEC Staff has inquired into the reasons for our restatements and
    if they decide to take any substantial action against us it
    could adversely affect our business.
    The
    book value of our assets is not necessarily the amount for which
    they could be sold at any point in time, and if we currently
    were forced to sell significant assets, we probably would not
    realize their full book value.
   27




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Risk
    Related to our Affordable Housing Division
  Affordable
    housing partnerships may not be able to repay their borrowings
    from us and that could adversely affect the return on the
    investment to us or to the funds we manage.
    As a
    sponsor of tax credit equity funds, we have exposure to risk of
    loss if we are unable to place partnership interests at
    sufficiently high prices.
    Economic
    conditions have substantially reduced demand for investments
    that generate tax credits, and therefore we have curtailed our
    efforts to identify investments that generate tax credits or to
    form LIHTC Funds.
    Substantially
    all of our investments are illiquid, which could prevent us from
    consummating sales on favorable terms and makes it difficult for
    us accurately to value our investment portfolio.
   28




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We
    have provided guarantees with respect to certain of the tax
    credit equity funds that we sponsored, and if we were to become
    obligated to perform on those guarantees our financial condition
    and results of operation could suffer.
    Noncompliance
    with various legal requirements by the affordable housing
    partnerships could impair our investors right to low
    income housing tax credits and have a negative impact on our
    business.
  15-year
  A
    significant portion of our interests in tax-exempt bonds and our
    residual interests in securitized asset pools have been pledged
    as collateral to support securitization programs.
     29




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Risks
    Related to Our Real Estate Division
  Substantially
    all of our investments are illiquid, which could prevent us from
    consummating sales on favorable terms and makes it difficult for
    us accurately to value our investment portfolio.
    The
    assets in which we invest may not realize the value forecasted
    at acquisition.
    A
    portion of our market rate investments are subordinated bonds or
    are junior in right of payment to other obligations and if the
    borrowers are unable to make all required payments, we may
    suffer losses.
    As a
    delegated underwriter and servicer in the Fannie Mae DUS program
    and Freddie Mac Program Plus program, we have agreed to share
    losses (up to specified levels) on loans that we underwrite and
    sell to Fannie Mae and Freddie Mac.
     30




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Our
    agency loan origination business is particularly dependent on
    maintaining our relationships with the GSEs that participate in
    the multifamily housing market and adverse changes to those
    relationships could cause our business and results of operations
    to suffer.
          Risks
    Relating to Ownership of Our Shares
  Our
    Board can issue an unlimited number of common or preferred
    shares, which could reduce our book value per common share and
    earnings per common share and the cash or other assets available
    for distribution per common share upon liquidation or
    otherwise.
  (NYSE)
  We
    have stopped paying dividends and it is unlikely we will resume
    paying them in the near future.
   31




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Our
    shareholders may be taxed on their respective shares of our
    taxable income, even if we do not make distributions to
    them.
  (AMT)
  We
    could have additional federal income tax obligations which would
    reduce the sums available for distribution to
    shareholders.
    One of
    our shareholders has the right to designate one, and in some
    circumstances two, of our directors, which is a right that is
    not available to any other of our shareholders.
    Provisions
    of our Operating Agreement may discourage attempts to acquire
    us.
    
    If any person or group, other than Shelter Development Holdings,
    Inc., SCA Tax-Exempt Fund, MME I Corporation, MME II Corporation
    or their affiliates, acquires 10% or more of our shares, that
    person or group cannot, with a very limited exception,
    (1) engage in a business combination with us (including an
    acquisition from us of more than 10% of our assets or more than
    5% of our shares) within five years after the person or group
    acquires the 10% or greater interest, unless our Board of
    Directors approved the business combination or approved the
    acquisition of a 10% or greater interest in us before it took
    place, or the business combination is approved by two-thirds of
    the members of our Board and holders of two-thirds of the shares
    that are not owned by the person or group that owns the 10% or
    greater interest; or (2) engage in a business combination
    with us until more than five years after the person or group
    acquires the 10% or greater interest, unless the business
    combination is recommended by our 32




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##### 



Board of Directors and approved by holders of 80% of our shares
    or of two-thirds of the shares that are not owned by the person
    or group that owns the 10% or greater interest.  
    If any person or group makes an acquisition of our shares that
    causes the person or group to be able to exercise between
    one-fifth and one-third of all voting power of our shares,
    between one-third and a majority of all voting power of our
    shares, or a majority or more of all voting power of our shares,
    the acquired shares will lose their voting power, except to the
    extent approved at a meeting by the vote of two-thirds of the
    shares not owned by the person or group, and we will have the
    right to redeem, for their fair market value, any of the
    acquired shares for which the shareholders do not approve voting
    rights.
    One third of our directors (except one, or in some circumstances
    two, directors designated by Shelter Development Holdings, Inc)
    are elected each year to three year terms. That could delay the
    time when somebody who acquires voting control of us could elect
    a majority of our directors.    Item 1B.
    UNRESOLVED
    STAFF COMMENTS    Item 2.
    PROPERTIES        Item 3.
    LEGAL
    PROCEEDINGS    No. 2404-VCL,
   33




---



##### 



No. 80-MDL-1961.
  (Navigant)
    Item 4.
    SUBMISSION
    OF MATTERS TO A VOTE OF SECURITY HOLDERS   34




---



##### 



PART II  Item 5.
    MARKET
    FOR REGISTRANTS COMMON EQUITY, RELATED SHAREHOLDER MATTERS
    AND ISSUER PURCHASES OF EQUITY SECURITIES    Common Shares


Cash DividendsHigh/Low Prices


per ShareFiscal Quarter

2008


2007


2006


2008


2007


2006First

$
17.50-4.20


$
32.20-25.64


$
27.50-25.85



33.00
¢


51.25
¢


49.25
¢Second


5.85-2.47



28.92-23.65



28.24-25.61



0.00



51.75



49.75Third


3.03-0.37



26.07-16.77



28.99-26.75



0.00



52.25



50.25Fourth


0.97-0.12



23.06-13.01



32.40-27.28



0.00



52.50



50.75     Schedule K-1s
 35




---



##### 



Performance
    Graph
  (NAREIT) (Peer Group)
  COMPARISON
    OF 7 YEAR CUMULATIVE TOTAL RETURN* Among
    Municipal Mortgage And Equity, LLC, The S&P 500 Index,
    The FTSE NAREIT Equity Index And A Peer Group
  
  *
    $100 invested on 12/31/01 in stock
    or index, including reinvestment of dividends. Fiscal year ending December 31.
 Copyright©

    2009 S&P, a division of The McGraw-Hill Companies Inc. All
    rights reserved.
  Comparative
    Total Return Analysis
  FTSEMMA


S&P 500


NAREIT Equity


Peer Group2001


100.00



100.00



100.00



100.002002


109.10



77.90



103.82



115.802003


113.90



100.24



142.37



162.132004


134.89



111.15



187.33



189.802005


138.06



116.61



210.12



138.912006


185.17



135.03



283.78



174.462007


92.89



142.45



239.25



101.802008


1.77



89.75



148.99



57.40  36




---



##### 



Unregistered
    Sales of Equity Securities
    Issuer
    Purchases of Equity Securities
   37




---



##### 



Item 6.
    SELECTED
    FINANCIAL DATA  Form 10-K Form 10-K Form 10-K
    As Restated


As Restated2006


2005 (3)


2004(in thousands, except per share data)CONSOLIDATED INCOME STATEMENT DATA:Interest, fee and other income

$
261,653


$
202,181


$
172,118Revenue from consolidated funds and
    ventures (1)


88,914



82,577



59,644Total revenue


350,567



284,758



231,762Interest expense and other expenses


(274,488
)


(238,089
)


(177,048
)Expenses from consolidated funds and
    ventures (1)


(150,764
)


(137,552
)


(125,662
)Total expenses


(425,252
)


(375,641
)


(302,710
)Net gains on asset sales and derivatives


33,050



23,270



933Net gains on sale of real estate from consolidated funds and
    ventures


52,479



19,655



5,805Equity in earnings of unconsolidated ventures


5,216



26,346



403Equity in losses from unconsolidated Lower Tier Property
    Partnerships held by consolidated funds and
    ventures (1)


(319,511
)


(281,162
)


(238,674
)Loss before income taxes, (income) loss allocable to
    non-controlling interests and discontinued operations


(303,451
)


(302,774
)


(302,481
)Income tax expense


3,323



2,929



2,923(Income) loss allocable to non-controlling interests:Distributions declared to perpetual preferred shareholders
    of subsidiary


(9,208
)


(4,962
)


(755
)Net losses allocable to non-controlling interests from
    consolidated funds and
    ventures (2)


360,011



327,761



294,840Income (loss) before discontinued operations


44,029



17,096



(11,319
)Discontinued operations


9,618



7,575



8,043Net income (loss)

$
53,647


$
24,671


$
(3,276
)EARNINGS PER SHARE:Common shares (basic earnings (loss) from continuing operations)

$
1.14


$
0.45


$
(0.32
)Basic earnings (loss) per common share


1.39



0.65



(0.09
)Common shares (diluted earnings (loss) from continuing
    operations)


1.12



0.45



(0.32
)Diluted earnings (loss) per common share


1.37



0.65



(0.09
)DISTRIBUTIONS PER SHARE:Common shares

$
2.00


$
1.92


$
1.84   38




---



##### 



As Restated


As Restated


As Restated2006


2005(3)


2004


2003(4)(in thousands, except per share data)CONSOLIDATED BALANCE SHEET DATA:Bonds (5)

$
1,770,113


$
1,392,934


$
1,276,055


$
1,055,840Other
    assets (6)


1,828,944



1,575,582



1,097,409



995,010Assets of consolidated funds and
    ventures (7)


4,884,757



4,600,400



3,817,889



3,203,827Total assets


8,483,814



7,568,916



6,191,353



5,254,677Debt (excluding mandatorily redeemable preferred
    shares) (8)


2,219,130



1,651,485



1,348,325



1,207,346Mandatorily redeemable preferred shares


162,168



162,150



162,133



162,117Other liabilities


581,018



453,184



228,424



194,096Liabilities of consolidated funds and
    ventures (7)


2,045,148



1,875,629



1,600,766



1,165,906Total liabilities


5,007,464



4,142,448



3,339,648



2,729,465Non-controlling interests in consolidated funds and
    ventures (7)


2,639,749



2,593,197



2,166,475



1,893,389Perpetual preferred shares


168,686



168,686



71,031



Total shareholders equity


667,915



664,585



614,199



631,823     (1)
    
    These amounts represent revenues
    and expenses of our consolidated funds and ventures.(2)
    
    These amounts primarily
    represent the losses related to the LIHTC Funds that are
    consolidated under FIN 46(R). Virtually all of the losses
    are allocated to the limited partners in the LIHTC Funds. This
    allocation is included in the Net losses allocable to
    non-controlling
    interest in consolidated funds and ventures. See Notes to
    Consolidated Financial Statements-Note 20, Consolidated
    Funds and Ventures included in this Report.(3)
    
    2005 includes approximately ten
    months of income and expense from MONY, a subsidiary of AXA,
    which was acquired February 18, 2005, and six months of income
    and expense from Glaser, which was acquired July 1,
    2005.(4)
    
    The 2003 column includes HCI,
    which was acquired July 1, 2003.(5)
    
    See Item 7.
    Managements Discussion and Analysis of Financial Condition
    and Results of Operation  Results of
    Operations for additional information on the increase of
    the bond portfolio.(6)
    
    In 2005, we acquired additional
    MSRs and loans held for sale through the Glaser acquisition. Our
    investments in unconsolidated Lower Tier Property
    Partnerships, which are part of the Tax Credit Equity business,
    also expanded. Both of these activities contributed to the
    increase of the other assets balance between 2004 and
    2005.(7)
    
    The assets, liabilities and
    non-controlling interests in consolidated funds and ventures
    increased over the 2003 to 2006 time period given the growth in
    our LIHTC Funds and the increases related to our GP Take
    Backs.(8)
    
    We relied on our funding sources
    to finance investments in our business as it continued to expand
    and grow. See Item 7. Managements Discussion and
    Analysis of Financial Condition and Results of
    Operation  Liquidity and Capital
    Resources and Notes to Consolidated Financial
    Statements-Note 11, Debt included in this Report for
    more information. 39




---



##### 



Item 7.
    MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS  Except as otherwise noted, this Managements Discussion
    and Analysis of Financial Condition and Results of Operations
    describes us as we existed on December 31, 2006 and the
    factors that affected our operating results during 2006, 2005
    and 2004. It does not take account of things that have happened
    since December 31, 2006, which have materially changed us
    and our businesses. See Item 1. Business.
  General
    Overview
      Schedule K-1
      
    The Affordable Housing Divisionconducts
    activities related to affordable housing and is further
    subdivided into three reportable segments, including:  
    Tax Credit Equitywhich creates investment funds and
    finds investors for such funds that receive tax credits for
    investing in affordable housing partnerships;
    Affordable Bondswhich originates and invests primarily
    in tax-exempt bonds secured by affordable housing; and
    Affordable Debtwhich originates and invests in loans
    secured by affordable housing.  
    The Real Estate Divisionconducts real estate
    finance activities and is further subdivided into two reportable
    segments:  
    Agency Lendingwhich originates both market rate and
    affordable housing multifamily loans with the intention of
    selling them to government sponsored entities (i.e., Fannie Mae
    and Freddie Mac) or through programs created by them, or sells
    the permanent loans to third party investors, for which the
    loans are guaranteed by Ginnie Mae and insured by HUD; and
    Merchant Bankingwhich provides loan and bond
    originations, loan servicing, asset management, investment
    advisory and other services to institutional investors that
    finance or invest in various commercial real estate projects. In
    some cases, we originate loans and bonds for our own investment
    purposes. 40




---



##### 




    The Renewable Ventures Divisionfinances, owns and
    operates renewable energy and energy efficiency projects. This
    division, in its entirety, is considered a reportable segment.      Critical
    Accounting Policies and Estimates
      Consolidated
    Funds and Ventures
  Consolidated Financial Statements (ARB 51) Issue No. 04-5, Determining Whether a General Partner, or the General
    Partners as a Group, Controls a Limited Partnership or Similar
    Entity When the Limited Partners have Certain Rights (EITF 04-5)
  
    the determination as to whether an entity is a variable interest
    entity (VIE). 41




---



##### 




    if the entity is considered a VIE, then the determination of
    whether we are the primary beneficiary of the VIE is needed and
    requires us to make judgments regarding: (1) the
    measurement of expected losses and returns related to the VIE
    and which party absorbs the most variability from those
    expectations, as well as (2) the existence of related party
    relationships between us and other investors in the entity, the
    relationship of the VIE to the various investors in the entity,
    and the design of the VIE.
    if the entity is required to be consolidated, then upon initial
    consolidation, we record the assets, liabilities and
    non-controlling interests at fair value. Substantially all of
    our consolidated entities are investment entities that own real
    estate or real estate related investments and as such there are
    judgments related to the forecasted cash flows to be generated
    from the investments such as rental revenue and operating
    expenses, vacancy, replacement reserves and tax benefits (if
    any). In addition, the determination of investor discount rates
    and capitalization rates is needed.    Valuation
    of Bonds and Retained Interests in Securitized
    Bonds
  (FASB) Accounting for Certain Investments in Debt and Equity
    Securities (SFAS 115)
  other-than-temporary
  FAS 115-1 FAS 124-1, The Meaning of Other-Than-Temporary Impairment and Its
    Application to Certain Investments (FSP FAS 115-1/124-1) No. 99-20, Recognition of Interest Income and Impairment on
    Purchased Beneficial Interests and Beneficial Interests that
    Continue to be Held by a Transferor in Securitized Financial
    Assets (EITF 99-20)
   42




---



##### 




    the length of time and the extent to which the fair value has
    been less than amortized cost;
    the financial condition of the underlying collateral (including
    our intent and ability to foreclose on the property) and whether
    we expect to recover all amounts due on a net present value
    basis; and
    the intent and ability to retain our investment in the bond for
    a period of time sufficient to allow for any anticipated
    recovery in fair value.    Allowance
    for Loan Losses
  Accounting by Creditors for Impairment of
    a Loan, an amendment of FASB Statements No. 5 and 15
    (SFAS 114) Accounting for Contingencies
    (SFAS 5)
      
    the borrowers overall financial condition and historical
    payment record;
    the prospects for support from any financially responsible
    guarantors; and
    the net realizable value of any collateral, if appropriate.   43




---



##### 



Valuation
    of Mortgage Servicing Rights
        Impairment
    on Equity Method Investments and Impairment on Real Estate in
    Lower Tier Property Partnerships
  Equity
    Method Investments
  other-than-temporary The Equity Method of Accounting
    for Investments in Common Stock (APB 18) No. 94-1, Accounting for Tax Benefits Resulting from Investments
    in Affordable Housing Projects (EITF 94-1)
  Equity
    method investments in affordable housing projects
  EITF 94-1,
  
    tax benefits associated with future federal and state tax
    credits;
    tax benefits associated with future net operating losses
    (primarily depreciation taken on the real estate asset);
    cash flows used by and generated from the multifamily housing
    projects; as well as
    any net cash generated from a sale or disposal of the property
    at the end of the investment period. 44




---



##### 



Equity
    method investments that are not affordable housing
    projects
    Real
    Estate in Lower Tier Property Partnerships
  deed-in-lieu Accounting for the Impairment or Disposal
    of Long-Lived Assets (SFAS 144)
      Income
    taxes
  (C corporations) pass-through
  Accounting for Income Taxes
    (SFAS 109)
 45




---



##### 



Restatement
    Changes
      (in thousands)Shareholders Equity as previously reported at
    December 31, 2005

$
768,319Cumulative impact of restatement adjustments:Accounting related to consolidated funds and ventures


(100,826
)Tax credit equity accounting


(41,272
)Bond accounting


61,194Other restatement adjustments


(17,524
)Total pre-tax adjustments


(98,428
)Tax valuation allowance


(41,338
)Tax effects of restatement adjustments


36,032Cumulative impact of restatement adjustments


(103,734
)Restated Shareholders Equity at December 31, 2005

$
664,585   Consolidation
    of Funds and Ventures
  EITF 04-5
    LIHTC
    Funds
    
    Non-guaranteed LIHTC Funds  Our prior FIN 46(R)
    analysis did not fully take into consideration the de facto
    agency relationship that existed between the general partner
    (i.e., the Company) and the limited partners of the LIHTC Funds.
    The de facto agency relationship requires us to evaluate which
    party is most closely associated with the LIHTC Funds. In all
    instances, we concluded that we were the party most closely
    associated with these LIHTC Funds and therefore we were the
    primary beneficiary and should have consolidated these funds. 46




---



##### 




    Guaranteed LIHTC Funds  The guaranteed LIHTC Funds
    were previously accounted for under the provisions of Statement
    of Financial Accounting Standards No. 66,
    Accounting for Sales of Real Estate
    (SFAS 66), resulting in the
    leasing method of accounting for these funds. We concluded we
    should have consolidated these funds in accordance with the
    provisions of FIN 46(R), rather than applying the leasing
    method under SFAS 66.    Consolidated
    Lower Tier Property Partnerships
    Tax
    Credit Equity Accounting
         47




---



##### 



Bond
    Accounting
    Tax
    Valuation Allowance
    Other
    Restatement Adjustments
    Results
    of Operations
     48




---



##### 



Section I.
    Summary of Consolidated Results
    ConsolidatedAs


AsRestated


Restated2006


2005 (1)


2004 (1)(in thousands)Revenue:Total interest income

$
188,653


$
146,982


$
123,280Total fee and other income


73,000



55,199



48,838Total revenue from consolidated funds and
    ventures (2)


88,914



82,577



59,644Total revenue


350,567



284,758



231,762Expenses:Interest expense


120,592



89,672



67,931Operating expenses


139,233



130,280



103,452Impairment and provision for credit losses


14,663



18,137



5,665Total expenses from consolidated funds and
    ventures (2)


150,764



137,552



125,662Total expenses


425,252



375,641



302,710Net gains on asset sales and derivatives


33,050



23,270



933Net gains on sale of real estate from consolidated funds and
    ventures


52,479



19,655



5,805Equity in earnings from unconsolidated ventures


5,216



26,346



403Equity in losses from unconsolidated Lower Tier Property
    Partnerships held by consolidated funds and
    ventures (2)


(319,511
)


(281,162
)


(238,674
)Loss before income taxes, (income) loss allocable to
    non-controlling interests and discontinued operations


(303,451
)


(302,774
)


(302,481
)Income tax expense


3,323



2,929



2,923(Income) loss allocable to non-controlling interests:Distributions declared to perpetual preferred shareholders
    of subsidiary


(9,208
)


(4,962
)


(755
)Net losses allocable to non-controlling interests from
    consolidated funds and
    ventures (2)


360,011



327,761



294,840Income (loss) before discontinued operations


44,029



17,096



(11,319
)Discontinued operations


9,618



7,575



8,043Net income (loss)

$
53,647


$
24,671


$
(3,276
)     (1)
    
    See Notes to Consolidated
    Financial Statements-Note 2, Restatement of Previously
    Issued Financial Statements.(2)
    
    These items relate to balances
    associated with MuniMaes consolidated funds and ventures
    where MuniMae generally has a nominal ownership interest, but
    has consolidated these entities (primarily due to FIN
    46(R)). 49




---



##### 



Interest
    Income
    ConsolidatedAs


AsRestated


Restated2006


2005


2004(in thousands)Interest on bonds

$
100,059


$
88,470


$
79,301Interest on loans


82,958



54,356



41,990Interest on short-term investments


5,636



4,156



1,989Total interest income

$
188,653


$
146,982


$
123,280     Year
    Ended 2006 Compared to Year Ended 2005
    (bp)
      Year
    Ended 2005 Compared to Year Ended 2004
     50




---



##### 



(bps)
    Fee
    and Other Income
    ConsolidatedAs


AsRestated


Restated2006


2005


2004(in thousands)Syndication fees

$
45,318


$
32,131


$
32,715Asset management and advisory fees


4,878



6,520



3,083Debt placement fees


2,106



5,355



2,926Guarantee fees


577



1,150



3,133Servicing fees


7,403



4,296



3,518Other


12,718



5,747



3,463Total fee and other income

$
73,000


$
55,199


$
48,838   Year
    Ended 2006 Compared to Year Ended 2005
      (Mezz II) (Mezz I)
 51




---



##### 



(B-Note
    Value Fund)
        Year
    Ended 2005 Compared to Year Ended 2004
         52




---



##### 



Revenue
    from Consolidated Funds and Ventures
    ConsolidatedAs


AsRestated


Restated2006


2005


2004(in thousands)Rental and other income from real estate

$
50,246


$
54,812


$
48,568Interest and other income


38,668



27,765



11,076Total revenue from consolidate funds and ventures

$
88,914


$
82,577


$
59,644     Year
    Ended 2006 Compared to Year Ended 2005
        Year
    Ended 2005 Compared to Year Ended 2004
     53




---



##### 



Interest
    Expense
    ConsolidatedAs


AsRestated


Restated2006


2005


2004(in thousands)Interest expense

$
120,592


$
89,672


$
67,931   Year
    Ended 2006 Compared to Year Ended 2005
  year-over-year year-over-year
  Year
    Ended 2005 Compared to Year Ended 2004
  year-over-year
 54




---



##### 



Operating
    Expenses
    ConsolidatedAs


AsRestated


Restated2006


2005


2004(in thousands)Salaries and benefits

$
78,187


$
79,970


$
62,933General and administrative


32,191



30,817



24,753Professional fees


15,710



12,089



9,279Depreciation and amortization


7,200



6,305



4,996Other


5,945



1,099



1,491Total operating expenses

$
139,233


$
130,280


$
103,452   Year
    Ended 2006 Compared to Year Ended 2005
            year-over-year
 55




---



##### 



Year
    Ended 2005 Compared to Year Ended 2004
            Impairment
    on Bonds and Provision for Credit Losses
    ConsolidatedAs


AsRestated


Restated2006


2005


2004(in thousands)Impairment on bonds

$
2,106


$
13,020


$
684Provision for credit losses


12,557



5,117



4,981Total impairments and valuation allowances related to investments

$
14,663


$
18,137


$
5,665   Year
    Ended 2006 Compared to Year Ended 2005
     56




---



##### 



Year
    Ended 2005 Compared to Year Ended 2004
    Expenses
    from Consolidated Funds and Ventures
    ConsolidatedAs


AsRestated


Restated2006


2005


2004(in thousands)Depreciation and amortization

$
15,725


$
19,585


$
21,705Interest expense


41,290



34,852



27,339Impairment on investments in unconsolidated Lower
    Tier Property Partnerships


48,431



30,327



35,585Other operating expenses


45,318



52,788



41,033Total expenses from consolidated funds and ventures

$
150,764


$
137,552


$
125,662     Year
    Ended 2006 Compared to Year Ended 2005
        sub-market
 57




---



##### 



Year
    Ended 2005 Compared to Year Ended 2004
        sub-market
    Net
    Gains on Asset Sales and Derivatives
    ConsolidatedAs


AsRestated


Restated2006


2005


2004(in thousands)Net gains (losses) on sale of bonds

$
8,355


$
6,398


$
(147
)Net gains on sale of loans


21,515



12,509



5,510Net (losses) gains on derivatives


(3,617
)


4,363



(4,430
)Net gains on sale of real estate


6,797







Total net gains on asset sales and derivatives

$
33,050


$
23,270


$
933   Year
    Ended 2006 Compared to Year Ended 2005
     58




---



##### 



mark-to-market
  deed-in-lieu
  Year
    Ended 2005 Compared to Year Ended 2004
          Net
    Gains on Sale of Real Estate from Consolidated Funds and
    Ventures
    ConsolidatedAs


AsRestated


Restated2006


2005


2004(in thousands)Net gains on sale of real estate from consolidated funds and
    ventures

$
52,479


$
19,655


$
5,805   Year
    Ended 2006 Compared to Year Ended 2005
   59




---



##### 



Year
    Ended 2005 Compared to Year Ended 2004
    Equity
    in Earnings from Unconsolidated Ventures
    ConsolidatedAs


AsRestated


Restated2006


2005


2004(in thousands)Equity in Earnings from Unconsolidated Ventures

$
5,216


$
26,346


$
403   Year
    Ended 2006 Compared to Year Ended 2005
    Year
    Ended 2005 Compared to Year Ended 2004
    Equity
    in Losses from Unconsolidated Lower Tier Property
    Partnerships held by Consolidated Funds and
    Ventures
    ConsolidatedAs


AsRestated


Restated2006


2005


2004(in thousands)Equity in losses from unconsolidated Lower Tier Property
    Partnerships held by consolidated funds and ventures

$
(319,511
)

$
(281,162
)

$
(238,674
)   Year
    Ended 2006 Compared to Year Ended 2005
   60




---



##### 



Year
    Ended 2005 Compared to Year Ended 2004
    Income
    Tax Expense
    ConsolidatedAs


AsRestated


Restated2006


2005


2004(in thousands)Income tax expense

$
3,323


$
2,929


$
2,923   (PTP)
  Distributions
    Declared to Perpetual Preferred Shareholders of
    Subsidiary
    ConsolidatedAs


AsRestated


Restated2006


2005


2004(in thousands)Distributions declared to perpetual preferred shareholders of
    subsidiary

$
(9,208
)

$
(4,962
)

$
(755
)   Year
    Ended 2006 Compared to Year Ended 2005
   61




---



##### 



Year
    Ended 2005 Compared to Year Ended 2004
    Net
    Loss Allocable to Non-Controlling Interests from Consolidated
    Funds and Ventures
    ConsolidatedAs


AsRestated


Restated2006


2005


2004(in thousands)Net loss allocable to non-controlling interests from
    consolidated funds and ventures

$
360,011


$
327,761


$
294,840   Year
    Ended 2006 Compared to Year Ended 2005
    Year
    Ended 2005 Compared to Year Ended 2004
   62




---



##### 



Discontinued
    Operations
    ConsolidatedAs


AsRestated


Restated2006


2005


2004(in thousands)Discontinued operations

$
9,618


$
7,575


$
8,043   Years
    Ended 2006, 2005 and 2004 Compared
    Section II.
    Summary of GAAP-adjusted Results
     63




---



##### 



Summary
    of GAAP-adjusted Results
  December 31, 2006GAAP


Adjustments


GAAP-adjustedRevenue:Interest income

$
188,653


$
6,572


$
195,225Fee and other income


73,000



37,953



110,953Revenue from consolidated funds and ventures


88,914



(88,914
)


Total revenue


350,567



(44,389
)


306,178Expenses:Interest expense


120,592



527



121,119Operating expenses


139,233



15,328



154,561Impairment and valuation allowances


14,663



1,581



16,244Expenses from consolidated funds and ventures


150,764



(150,764
)


Total expenses


425,252



(133,328
)


291,924Net gains on asset sales and derivatives


33,050



(2,589
)


30,461Net gains on sale of real estate from consolidated funds and
    ventures


52,479



(52,479
)


Equity in earnings from unconsolidated ventures


5,216



1,614



6,830Equity in losses from unconsolidated Lower Tier Property
    Partnerships held by consolidated funds and ventures


(319,511
)


319,511



Loss before income taxes, (income) loss allocable to
    non-controlling interests and discontinued operations


(303,451
)


354,996



51,545Income tax expense


3,323



(562
)


2,761Distributions declared to perpetual preferred shareholders of
    subsidiary


(9,208
)






(9,208
)Net losses allocable to non-controlling interests from
    consolidated funds and ventures


360,011



(360,011
)


Income before discontinued operations


44,029



(4,453
)


39,576Discontinued operations


9,618



(9,618
)


Net income

$
53,647


$
(14,071
)

$
39,576        64




---



##### 



not-for-profit
            Reconciliation
    of GAAP Net Income to GAAP-adjusted Net
    Income
  2006GAAP net income

$
53,647Adjustments from GAAP:LIHTC Funds


(3,184
)Consolidated Lower Tier Property Partnerships


(6,915
)Other


(4,536
)Income tax effect


564GAAP-adjusted net income

$
39,576      65




---



##### 



Summary
    of GAAP-adjusted Shareholders Equity
  2006Shareholders Equity

$
667,915Adjustments from GAAP:LIHTC Funds


25,029Consolidated Lower Tier Property Partnerships


65,043Other


(1,899
)Income tax effect


(4,417
)GAAP-adjusted Shareholders Equity

$
751,671       Liquidity
    and Capital Resources
    Liquidity
   66




---



##### 



Summary
    of Cash Flows
    As


AsRestated


Restated2006


2005


2004Cash and cash equivalents at beginning of period

$
140,213


$
92,881


$
51,008Net cash provided by (used in):Operating activities


(238,330
)


68,953



38,123Investing activities


(772,670
)


(1,235,401
)


(940,835
)Financing activities


919,872



1,213,780



944,585Net (decrease) increase in cash and cash equivalents


(91,128
)


47,332



41,873Cash and cash equivalents at end of period

$
49,085


$
140,213


$
92,881   Operating
    activities
      Investing
    activities
     67




---



##### 



ramp-up
  Financing
    activities
    non-controlling
  
  Capital
    Resources
   68




---



##### 



Weighted-Average2006


Interest
    Rate (1)(dollars in thousands)Line of credit facilities:Due within one year

$
322,502



8.0
%Repurchase facilities:Due within one year


211,825



6.5Senior interests and debt owed to securitization trusts:Due within one year


28,820



4.0Due after one year


1,112,644



4.1Notes payable and other debt:Due within one year


161,684



5.9Due after one year


206,155



7.1Subordinate debentures:Due after one year


175,500



8.6Total

$
2,219,130     (1)
    
    Certain institutions provide us
    with interest credits based on balances held in escrow related
    to our loan servicing portfolio. These credits are used to
    offset amounts charged for interest expense on outstanding line
    of credit balances. These weighted-average interest rates
    exclude the effects of any such interest credits.  Line of
    credit facilities
      2006AggregatePrincipal Purpose

Facilities


Balance(dollars in thousands)General bank lines of credit

Working capital

$
275,000


$
12,000Loan warehousing and taxable bond lines

Warehousing construction and permanent loans and taxable bonds


702,000



198,930Tax credit equity warehousing line

Property acquisition and working capital


165,000



111,572Total



$
1,142,000


$
322,502     Repurchase
    facilities
   69




---



##### 



Senior
    interests and debt owed to securitization trusts
    Net Proceeds Raised forthe Year EndedDecember 31, 2006(dollars in thousands)Securitizations:On balance sheet securitizations

$
550,784Off balance sheet securitizations


2,890   Notes
    payable and other debt
    Subordinate
    debentures
  (MFH)
  Covenant
    compliance
    Letters
    of credit
    Guarantees
   70




---



##### 



2006Maximum


CarryingExposure


Amount(dollars in thousands)Mortgage banking loss-sharing
    agreements (1)

$
574,136


$
4,174Indemnification
    contracts (2)


103,224



1,499Other financial/payment
    guarantees (3)


66,033



1,146Letters of credit
    guarantees (4)


50,924



$
794,317


$
6,819     (1)
    
    As a Fannie Mae DUS lender and
    Ginnie Mae loan servicer, we have exposure to losses and/or
    servicing advances relating to defaulted real estate mortgage
    loans sold under the Fannie Mae DUS program and loans that are
    mortgage backed securities sold to third parties that are
    guaranteed by Ginnie Mae and represent loans that are insured by
    HUD. More specifically, if the borrower fails to make a payment
    of principal, interest, taxes or insurance premiums on a DUS
    loan we originated and sold to Fannie Mae, we may be required to
    make servicing advances to Fannie Mae. Also, as a requirement of
    the DUS program, we have agreed to share in the loss of
    principal after foreclosure on Fannie Mae DUS loans. We maintain
    a reserve for the potential losses in an amount equal to the
    estimated fair value of the liability which is amortized and
    reflected as the carrying amount in the table above. We owed no
    cash payments to Fannie Mae under its DUS loss sharing agreement
    for the year ended December 31, 2006. Subsequent to
    December 31, 2006 and through December 31, 2008,
    we paid $0.4 million under the DUS loss-sharing agreement.
    In addition, we have exposure to losses related to defaulted
    real estate mortgage loans which are delivered to investors by
    us, guaranteed by Ginnie Mae and insured by HUD. Our exposure to
    these losses is limited to the amount which is not covered by
    the Ginnie Mae guarantee and HUD insurance, and is equal to
    approximately one months interest on each loan.(2)
    
    We have entered into
    indemnification contracts with investors in our LIHTC Funds to
    compensate them for losses resulting from a recapture of tax
    credits due to foreclosure or difficulties in reaching occupancy
    milestones with respect to LIHTC Funds. We owed no cash payments
    under these indemnification agreements for the year ended
    December 31, 2006. Subsequent to December 31, 2006,
    and through December 31, 2008, we have not made any
    payments related to these obligations.(3)
    
    We have entered into
    arrangements that require us to make payments in the event that
    a third party fails to perform on its financial obligations.
    Generally, we provide these guarantees in conjunction with the
    sale or placement of an asset with a third party. The terms of
    such guarantees vary based on the performance of the
    asset.(4)
    
    We provide a guarantee for the
    repayment of losses incurred under letters of credit issued by
    third parties.  Debt
    Related to Consolidated Funds and Ventures
    2006Weighted-Average

Weighted-AverageCarrying Amount


Face Amount


Interest
    Rates (1)

Maturity Date(dollars in thousands)LIHTC Funds:Bridge financing

$
374,025


$
374,025


LIBOR + 0.6%

RevolvingNotes
    payable (2)


530,483



550,781


6.17% (2)

September 2010Total LIHTC Funds


904,508



924,806Consolidated Lower Tier Property Partnerships:Mortgage debt


150,605



169,377


6.78%

December 2022Notes payable


312



312


5.00%

September 2038Total Lower Tier Property Partnerships


150,917



169,689Real Estate Funds:Notes payable


32,720



32,720


6.42%

July
    2007 (3)Total Real Estate Funds


32,720



32,720Total

$
1,088,145


$
1,127,215     (1)
    
    Excludes the impact of rate
    reduction programs. Certain institutions provide LIHTC Funds
    with interest credits based on cash balances held. These credits
    are used to offset amounts charged for interest expense on
    outstanding line of credit balances.(2)
    
    Notes payable of
    $357.0 million bear interest at LIBOR + 0.7%.(3)
    
    Total amount was paid off at
    June 30, 2007. 71




---



##### 



LIHTC
    Funds
    Consolidated
    Lower Tier Property Partnerships
      Real
    Estate Funds  B-Note Value Fund
      Other
    Capital Resources
  Common
    Shares
    Preferred
    Shares
   72




---



##### 



GSEs and
    Government Agencies
      Distribution
    Policy
      Contractual
    Obligations
   73




---



##### 



Payment due by PeriodLess than








More thanTotal


1 Year


1-3 Years


3-5 Years


5 Years(dollars in thousands)Line of credit facilities

$
322,502


$
322,502


$



$



$
Repurchase facilities


211,825



211,825











Senior interests and debt owed to securitization trusts


1,141,464



28,820



129,494



39,581



943,569Notes payable and other debt


367,839



161,683



100,589



98,737



6,830Subordinate
    debentures (1)


175,500











91,500



84,000Mandatorily redeemable preferred
    shares (2)


162,168















162,168Operating lease
    obligations (3)


40,830



6,469



10,908



9,515



13,938Capital lease obligations


976



546



397



33



Deferred business purchase
    cost (4)


10,250



10,250











Unfunded loan
    commitments (5)


494,989



406,592



88,397







Unfunded equity
    commitments (6)


1,219,854



1,219,854











Unfunded bond
    commitments (7)


58,352



58,352











Debt related to consolidated funds and
    ventures (8)


1,088,145



850,298



75,548



55,249



107,050Total

$
5,294,694


$
3,277,191


$
405,333


$
294,615


$
1,317,555     (1)
    
    Subordinate debentures relate to
    offerings of preferred securities from Trusts formed by one of
    our subsidiaries (MFH). See Notes to Consolidated
    Financial Statements-Note 11, Debt included in this
    Report.(2)
    
    Preferred shares subject to
    mandatory redemption relate to our mandatorily redeemable
    preferred shares issued by TE Bond Sub. Notes to
    Consolidated Financial Statements-Note 15,
    Shareholders Equity and Preferred Shares included in
    this Report.(3)
    
    We have entered into
    non-cancelable operating leases for office space and equipment,
    as well as software hosting agreements for various information
    systems initiatives. These leases and hosting agreements expire
    on various dates through 2016. See Notes to Consolidated
    Financial Statements-Note 14, Commitments and
    Contingencies included in this Report.(4)
    
    Deferred business purchase cost
    relates to the deferred portion of the purchase price in the
    Glaser acquisition and the resolved portion of the contingent
    consideration related to the ReVen asset acquisition. On
    January 25, 2007, we entered into Separation Agreements
    with each of the Glaser selling shareholders. The Separation
    Agreements included a cash payment of $0.5 million and the
    issuance of 472,068 shares for settlement of the remaining
    two installments of deferred purchase price and the acceleration
    of the contingent consideration. In May 2006, we acquired ReVen
    in an asset purchase transaction including a contingent
    consideration of $12.0 million when certain profitability
    milestones are met of which $2.3 million was resolved and
    accrued for at December 31, 2006. See Notes to
    Consolidated Financial Statements-Note 9, Acquisitions,
    Goodwill and Other Intangible Assets included in this
    Report.(5)
    
    Unfunded loan commitments are
    commitments to extend credit to a customer as long as there is
    no violation of any condition established in the contract. See
    Notes to Consolidated Financial Statements-Note 5,
    Loans Held for Investment and Loans Held for Sale included
    in this Report.(6)
    
    As the limited partner in real
    estate operating partnerships, we have committed to extend
    equity to real estate operating partnerships in accordance with
    the partnership documents. In addition, our consolidated LIHTC
    Funds have committed to extend equity to Lower
    Tier Property Partnerships, and the commitments of these
    consolidated entities are included. The timing of advancing
    money on these commitments is not dependent on the passage of
    time, but is dependent on various milestones and events
    occurring as detailed in the partnership agreements. Estimating
    the timing for each partnership is not practical and, as such
    all amounts are shown in the less than one year column. See
    Notes to Consolidated Financial Statements-Note 20,
    Consolidated Funds and Ventures included in this
    Report.(7)
    
    Unfunded bond commitments are
    agreements to disburse additional amounts of money to existing
    borrowers.(8)
    
    Debt related to consolidated
    ventures consists of Bridge financing and notes payable
    arrangements of our LIHTC Funds and mortgage debt related to GP
    Take Backs that we consolidated. See Notes to Consolidated
    Financial Statements-Note 20, Consolidated Funds and
    Ventures included in this Report.  Item 7A.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.  available-for-sale
 74




---



##### 



Interest
    Rate Risk
           75




---



##### 



Credit
    and Liquidity Risks
        Item 8.
    FINANCIAL
    STATEMENTS AND SUPPLEMENTARY DATA    Item 9.
    CHANGES
    IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
    FINANCIAL DISCLOSURE     76




---



##### 



Form 8-K Form 8-K Form 10-K Form 8-K
    Regulation S-K. Form 10-K Form 10-Q
  
    control environment;
    ineffective financial reporting process;
    accounting for tax credit equity business;
    accounting for deferral and recognition of bond and loan
    origination fees and direct costs;
    accounting for investments in partnerships using the equity
    method of accounting;
    identification and valuation of derivative financial
    instruments; and
    accounting for income taxes.  Form 8-K Form 10-K.
  Form 8-K
  Appointment
    of New Independent Registered Public Accounting Firm
  Regulation S-K Regulation S-K).
 77




---



##### 



Item 9A.
    CONTROLS
    AND PROCEDURES  Evaluation
    of Disclosure Controls and Procedures
  Rules 13a-15(e) 15d-15(e) (Exchange Act) Form 10-K
  Managements
    Report on Internal Control Over Financial Reporting
  Rule 13a-15(f)
  (SOX Act) (COSO)
     78




---



##### 



(PCAOB) An Audit of Internal Control over
    Financial Reporting That is Integrated with an Audit of
    Financial Statements (Auditing Standard
    No. 5)
    1.
    Entity Level Control Environment.  We did
    not maintain an effective entity level control environment,
    which is the foundation needed for effective internal control
    over financial reporting, as evidenced by the following
    weaknesses:  
    We focused disproportionately on an internal metric for
    assessing our performance, Cash Available for Distribution
    (CAD).
    We did not effectively invest in our infrastructure and support
    functions. As we rapidly expanded in breadth and complexity in
    significant part by acquiring companies, we did not effectively
    invest sufficient resources related to accounting expertise,
    information technology and other supporting functions that would
    have improved our ability to prepare accurate and timely
    financial statements.
    We did not effectively integrate our finance function with the
    business units so that business unit transactions were properly
    assessed from a GAAP accounting perspective.
    We did not maintain sufficient, formalized, and effective
    accounting and reporting policies nor did we maintain adequate
    controls with respect to the review and supervision of our
    accounting operations.
    Our internal audit function did not appropriately identify or
    address our risks, and it did not sufficiently document our
    processes and controls. We placed too great a reliance on
    nationally recognized consultants engaged to assist us in the
    design and assessment of our internal control over financial
    reporting and various aspects of our internal audit function and
    as a result we did not conduct a sufficient examination of our
    internal control environment. The ineffectiveness of our
    internal audit function adversely affected our ability to
    identify our control weaknesses and inhibited executive
    managements and the Audit Committees ability to
    monitor and assess the performance of our internal control
    processes.
    We placed too great a reliance on our prior independent
    registered public accountants and the fact that their
    auditors reports were unqualified for all periods in which
    they were our auditors, including all the annual periods that we
    have subsequently restated.    2.
    Consolidation Accounting.  We did not maintain
    effective controls over the accuracy of our accounting for our
    tax credit equity business and accounting for transactions where
    we assumed or acquired the general partner interest in Lower
    Tier Property Partnerships. More specifically, the
    consolidation accounting assessment related to these areas was
    not performed correctly and the revenue recognition related to
    the tax credit equity business needed to be corrected. 79




---



##### 



3.
    Bond Accounting.  We did not maintain effective
    controls over the determination of fair values related to our
    bond portfolio. More specifically, we did not review and
    validate the broker quotes supporting our bond values.4.
    Equity Method Accounting.  We did not maintain
    effective controls to ensure accurate application of the equity
    method of accounting for investments in certain partnerships.5.
    Accounting for Derivatives.  We did not
    maintain effective controls over the identification and
    valuation of certain derivative financial instruments.6.
    Accounting for Mortgage Servicing Rights.  We
    did not maintain effective controls over the determination of
    fair value related to our mortgage servicing rights.7.
    Accounting for Loans.  We did not maintain
    effective controls over the proper determination of:
    (1) loan classification; (2) loan loss reserves
    associated with loans held for investment; and
    (3) amortization of loan fees and costs.8.
    Purchase Accounting.  We did not maintain
    effective controls over the determination of fair value and the
    purchase price allocation for business combinations. In
    addition, we did not maintain effective controls necessary to
    ensure proper impairment testing of goodwill and intangibles.9.
    Accounting for Property and Equipment, Payroll and Accounts
    Payable.  We did not maintain effective controls
    over the accounting for property and equipment as well as
    payroll and accounts payable.  10.
    Contract Compliance.  We did not maintain
    internal controls sufficient to ensure that we complied with all
    of our contractual agreements. Specifically, we determined that
    during the second half of 2006 and the first half of 2007, we
    caused certain tax credit equity funds to hold cash reserves in
    bank accounts under arrangements that were inconsistent with the
    contractual requirements. These arrangements were terminated in
    2007 and the funds were reimbursed.    Remediation
    of Material Weaknesses
  Form 10-K
 80




---



##### 




    We now focus all our attention on ensuring that our financial
    reporting is in accordance with GAAP, and we no longer view CAD
    as an important metric for evaluating our performance.
    In late 2007, we hired a new CFO, a new Senior Vice President
    and business unit financial officer and a new Head of Internal
    Audit.
    We have developed, adopted and documented formal accounting and
    reporting policies with respect to all the types of transactions
    and relationships that were relevant to our restated 2004 and
    2005 financial statements and our 2006 financial statements.
    This includes policies regarding consolidation accounting, bond
    accounting, equity method accounting, accounting for
    derivatives, accounting for mortgage servicing rights,
    accounting for loans, purchase accounting, and accounting for
    property and equipment, payroll and accounts payable. We
    continue to develop formal accounting policies and procedures to
    ensure proper accounting for all aspects of types of
    transactions in which we might engage in the future but did not
    engage during 2004, 2005 or 2006 or prior years.
    Although we used a large number of consultants in connection
    with the preparation of our 2006 and our restated 2005 and 2004
    financial statements, we take responsibility for making the
    final determination of all matters relating to those financial
    statements, and management does not rely on the fact that an
    accounting treatment has been approved by an expert consultant
    as assuring that that accounting treatment is correct.    
    Revising our business methodology to integrate more effectively
    accounting implications in our evaluation of possible
    transactions.
    Adopting additional accounting policies as necessary to ensure
    proper accounting treatment for aspects of transactions in which
    we engage in the future that are not covered by our existing
    accounting policies.
    Revising our risk assessment processes to align them better with
    the changing nature and complexity of our various lines of
    business and with the way we will be assessing risk under
    Auditing Standard No. 5. 81




---



##### 



Changes
    in Internal Controls over Financial Reporting
  Form 10-K
  Item 9B.
    OTHER
    INFORMATION   PART III  Item 10.
    DIRECTORS,
    EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE  Corporate
    Governance Guidelines
  www.munimae.com
  Independence
    of Directors
    Qualification
    for Board Membership
   82




---



##### 



Process
    for Nominating Potential Director Candidates
    c/o Corporate
  Code of
    Ethics and Business Integrity
    Executive
    Session
    Communications
    with the Board of Directors
    c/o Corporate
  Available
    Information
  www.munimae.com Form 10-K, Form 10-Q, Form 8-K
 83




---



##### 



Directors
    Charles C. Baum,
  Richard O. Berndt,
  Eddie C. Brown
  Michael L. Falcone,
  Robert S. Hillman,
  Mark K. Joseph,
  Barbara B. Lucas,
  Douglas A. McGregor,
  Arthur S. Mehlman,
  Fred N. Pratt, Jr.,
 84




---



##### 



Board
    Committees
    Audit Committee.
  
    the integrity of our financial statements, the financial
    reporting process, and internal controls over financial
    reporting;
    the performance of our internal audit function;
    the appointment, engagement and performance of our independent
    registered public accounting firm and the evaluation of the
    independent registered public accounting firms
    qualifications and independence; and
    compliance with our Code of Ethics and Principles of Business
    Integrity, and legal and regulatory requirements, including our
    disclosure controls and procedures.  www.munimae
    Compensation Committee.
  
    review our executive compensation policy and programs to ensure
    that they (1) effectively motivate the CEO and other
    executive officers and key employees to achieve our financial
    goals and strategic objectives; (2) properly align the
    interests of these employees with the long-term interests of our
    shareholders; and (3) are sufficiently competitive to
    attract and retain the executive resources necessary for the
    successful management of our businesses;
    review trends in management compensation, oversee the
    development of new compensation plans (including
    performance-based, equity-based and other incentive programs as
    well as salary, bonus and deferred compensation arrangements)
    and, when appropriate, make recommendations to the Board
    regarding new plans and revisions to existing plans;
    annually review and approve corporate goals and objectives
    relevant to the compensation of our Chief Executive Officer and
    other executive officers and key employees, evaluate the
    performance of such individuals and approve the compensation for
    such individuals; 85




---



##### 




    annually evaluate the compensation of the members of the
    Board; and
    review our management succession plan for the Chief Executive
    Officer and other executive officers and key employees.  www.munimae.com
      (FPL)
    Governance Committee.
  
    developing and implementing corporate governance guidelines;
    identifying and recommending qualified individuals to serve as
    members of the Board;
    evaluating and recommending the size and composition of the
    Board and its Committees (including making determinations
    concerning composition of the Board and its Committees under the
    applicable requirements of the SEC and the NYSE); and
    monitoring a process to assess the effectiveness of the Board
    and its Committees.  www.munimae.com
 86




---



##### 



Director
    Attendance at Meetings
    Non-Director
    Executive Officers
    Earl W. Cole, III,
  Frank G. Creamer, Jr.,
  Melanie M. Lundquist
  Gary A. Mentesana tax-exempt
  Anthony Mifsud,
 87




---



##### 



Jenny Netzer
  Charles M. Pinckney co-founded
  Changes
    in Executive Officers Since December 31, 2006
    Section 16(a)
    Beneficial Ownership Reporting Compliance
   88




---



##### 



Item 11.
    EXECUTIVE
    COMPENSATION  Compensation
    Discussion and Analysis
  Form 10-K.
  Our
    Executive Compensation Objectives and Process
    
    To pay competitively as compared to professionals performing
    similar functions at companies similar to ours, in order to
    attract and retain our executive talent.
    To also take into consideration an executives relevant
    experience, individual performance, and impact on the
    accomplishment of our company-wide financial goals and strategic
    objectives.
    That a substantial portion of each executives total
    compensation should be at risk and based on the
    achievement of certain company financial and individual
    performance goals over both the short and longer-term as a means
    of encouraging continued loyalty and effort.    
    an annual compensation and market review by the Committee;
    an internal equity analysis, based on our internal wage approach
    for all of our employees including the named executive
    officers; and
    the recommendations of the Chief Executive Officer with respect
    to the compensation of each of the named executive officers
    other than himself, as discussed more fully below.  Compensation
    and Peer Group Review
    American Home Mortgage
    Investment Corp.

CharterMac (now known as
    Centerline Holding Co.)

MFA Mortgage Investments, Inc.
    (now known as MFA Financial, Inc.)CapitalSource Inc.

Annaly Capital Management, Inc.

Fieldstone Investment CorporationImpac Mortgage Holdings, Inc.

iStar Financial Inc.

Capital Trust, Inc.MortgageIT Holdings, Inc.

NorthStar Realty Finance Corp.

NovaStar Financial, Inc.RAIT Investment Trust

Redwood Trust, Inc.    89




---



##### 



th th th th
  Internal Equity.
  CEO Recommendations.
  Elements
    of our Executive Compensation Program
  Overview.
  
    base salaries;
    annual incentive bonuses, a cash bonus based on threshold,
    target and superior performance achievement; and
    long-term incentive awards, usually in the form of restricted
    shares that vest over a period of years, and to a lesser extent,
    options, that also vest over a period of years.    Base Salaries.
   90




---



##### 



and/or
  Annual Incentive Bonus.
  Name

Performance MetricMr. Falcone

80% company-wide, 20% individualMs. Lundquist

80% company-wide, 20% individualMr. Pinckney

33% company-wide, 33% business unit, 33% individualMs. Netzer

33% company-wide, 33% business unit, 33% individualMr. Mentesana

33% company-wide, 33% business unit, 33% individual       Growth Goal

CAD Growth


Mr. Falcone


Ms. Lundquist


Mr. Pinckney


Ms. Netzer


Mr. MentesanaThreshold


4
%

$
120,000


$
75,000


$
275,000



Up to


$
275,000Target


6
%


310,000



to



425,000


$
292,500
(1)


425,000Superior


10
%


467,500


$
150,000



575,000







575,000     (1)
    
    Ms. Netzers
    employment agreement also provided for up to $200,000 for
    superior business unit performance.   91




---



##### 



th
  Long-Term Incentive Awards.
  and/or
  Form 10-K
  Personal Benefits.
  Post-Employment.
  Share Ownership.
 92




---



##### 



Tax and Accounting Considerations 
    Performance-Based Compensation Section 162(m).
  Compensation
    Committee Report
           Summary
    Compensation Table
    Non-equityStock


Incentive PlanName and Principal Position

Year


Salary


Bonus (1)


Awards (2)


Compensation (3)


TotalMichael L. Falcone


2006


$
446,250


$
300,000


$
66,647


$
33,353


$
846,250CEO and President


2005



423,007



300,000



233,331



66,667



1,023,0052004



262,500



525,000



125,000



62,500



975,000Melanie M. Lundquist


2006



275,000



125,000



100,000







500,000CFO and Executive Vice


2005



200,961







499,984
(4)






700,945President (resigned 07/27/07)


2004



















Charles M. Pinckney


2006



325,000



160,000











485,000COO (resigned 12/31/08)


2005



286,539



160,000



133,331



66,667



646,5372004



262,500



399,998



149,981



50,000



862,479Jenny Netzer


2006



292,500



325,000



240,000







857,500Executive Vice President


2005



313,573



525,000











838,573(resigned 02/06/09)


2004



291,278



499,000



133,328



66,667



990,273Gary A. Mentesana


2006



325,000



150,000



66,647



33,353



575,000Executive Vice President


2005



289,231



300,000



66,666



33,333



689,2302004



270,000



233,330



66,664



33,333



603,327  93




---



##### 



(1)
    
    Amounts represent the cash
    awards earned by the named executive officer under our
    performance-based annual incentive bonus. For a discussion of
    the grant of these awards, see the Grants of Plan-based
    Awards Table and accompanying footnotes below. For a
    discussion of the performance goals relating to these awards,
    see Compensation Discussion &
    Analysis  Annual Incentive Bonus
    above.(2)
    
    Amounts include the cash and
    deferred share awards earned by the named executive officer
    under our performance-based long-term compensation. The awards
    vest one-fourth on the award date and one-fourth on each of the
    first three anniversaries of that date. The awards are payable
    on each vesting date 30% in cash and 70% with our common share
    or 100% with our common shares. The cash components are included
    under Non-Equity Incentive Plan Compensation and the deferred
    shares components are included in Stock Awards. Amounts include
    the dollar amount recognized for financial statement reporting
    purposes with respect to fiscal 2006 for each named executive
    officer, as computed in accordance with Statement of Financial
    Accounting Standards No. 123(R), Share-Based
    Payment (SFAS 123(R)),
    disregarding any estimates of forfeitures relating to
    service-based vesting conditions. Amounts in the Stock
    Awards column reflect total expense related to grants of
    deferred shares pursuant to our 2004 Share Incentive Plan.
    For a discussion of the assumptions used in the valuation of the
    awards included in the Stock Awards column, see
    Notes to Consolidated Financial Statements-Note 16,
    Stock-Based Compensation.(3)
    
    Amounts include the 30% cash
    portion of the deferred share awards earned by the named
    executive officer under our
    performance-based
    long-term compensation. The cash vests along with the shares,
    both vesting one-fourth on the award date and
    one-fourth
    on each of the first three anniversaries of that date.(4)
    
    Includes a deferred share award
    in the amount of $499,984, payable in two equal annual
    installments, granted to Ms. Lundquist at the time she
    entered in to her employment agreement.  Grants of
    Plan-Based Awards
    All OtherOptionsEstimated





Awards:





Grant DatePayouts Under


All Other


Number of


Exercise or


Fair Value ofNon-Equity


Stock Awards:


Securities


Base Price of


Stock andApproval


Incentive Plan


Number of


Underlying


Options


OptionsName

Grant Date


Date


Awards (2)


Shares (1)


Options (2)


Awards (3)


Awards (4)Michael L. Falcone


04/07/06



04/05/06


$
325,000







201,863


$
26.50


$
325,00003/17/06











2,515







26.50



66,647Melanie M. Lundquist


03/17/06











3,773







26.50



99,985Charles M. Pinckney


04/05/06



04/05/06



200,000







124,224



26.71
(6)


200,000Jenny Netzer


03/17/06











9,056
(5)






26.50



239,984Gary A. Mentesana


04/07/06



04/05/06



100,000







62,112



26.50



100,00003/17/06











2,515







26.50



66,647     (1)
    
    Amounts shown reflect deferred
    shares portion of awards under the 2004 Share Incentive
    Plan. These deferred shares vest based upon the executives
    continued service to MuniMae and vest one fourth on the award
    date and one-fourth on each of the first three anniversaries of
    that date; subject to certain acceleration provisions of the
    Plan, as discussed under Potential Payments upon
    Termination or Change in Control below. Awards for
    Messrs. Falcone and Mentesana are payable on each vesting
    date 30% in cash and 70% with shares of our Common Stock. Award
    for Ms. Lundquist and Ms. Netzer are payable on each
    vesting date 100% with our shares of our Common Stock. In
    addition, 1,886 shares of Ms. Lundquist award were
    forfeited upon her resignation on
    July 27, 2007.(2)
    
    Amounts shown include awards of
    stock options under the 2004 Share Incentive Plan. These
    stock options vest based upon the executives continued
    service to MuniMae and vest one-fourth on the award date and
    one-fourth on each of the first three anniversaries of that
    date.; subject to certain acceleration provisions of the Plan,
    as discussed under Potential Payments upon Termination or
    Change in Control below.(3)
    
    The exercise price of the stock
    options is equal to the closing price of MuniMae Common Stock on
    April 6, 2006, unless otherwise noted.(4)
    
    Amounts represent the cumulative
    grant date fair value of each equity award granted during fiscal
    2006 for each named executive officer, as computed in accordance
    with SFAS 123(R). For a discussion of the assumptions used
    in the valuation of the awards included in the All Other
    Stock Awards and All Other Option Awards
    columns, see Note 16 to our 2006 audited financial
    statements.(5)
    
    Amount represents an original
    award issued on March 17, 2006 that was subsequently
    amended to provide for an additional 4,025 common shares
    over the life of the award.(6)
    
    The exercise price of
    Mr. Pinckneys stock options is equal to the closing
    price of MuniMae Common Stock on April 4, 2006. 94




---



##### 



Outstanding
    Equity Awards at Fiscal Year End
    Option Awards


Stock AwardsNumber of


Number ofSecurities


Securities





OptionUnderlying


Underlying





Expiration Date


Number of


Market Value ofUnexercised


Unexercised


Option


and Vesting


Shares That


Shares ThatOptions


Options


Exercise


Date, As


Have Not


Have NotName

Exercisable


Unexercisable


Price


Applicable


Vested


Vested (1)Michael L. Falcone


50,466



151,397
(2)

$
26.50



04/07/162,513
(3)

$
80,9191,202
(4)


38,7041,837
(5)


59,1512,635
(6)


84,8471,886
(7)


60,729Melanie M. Lundquist


















2,829
(8)


91,0942,461
(9)


79,244Charles M. Pinckney


31,056



93,168
(2)


26.71



04/07/16962
(4)


30,9762,635
(6)


84,8476,769
(10)


217,962Jenny Netzer


















1,282
(4)


41,2806,792
(7)


218,7024,923
(11)


158,5213,953
(6)


127,287Gary A. Mentesana


15,528



46,584
(2)


26.50



04/07/161,256
(3)


40,443641
(4)


20,6401,317
(6)


42,4071,886
(7)


60,7293,046
(11)


98,087     (1)
    
    Market value calculated by
    multiplying the closing market price of MuniMaes Common
    Stock on December 31, 2006, or $32.20, by the number of
    unvested deferred shares.(2)
    
    The remaining unvested stock
    options vested/will vest in equal increments on February 1,
    2007, 2008 and 2009.(3)
    
    The remaining unvested deferred
    shares vested on January 9, 2007.(4)
    
    The remaining unvested deferred
    shares vested on February 1, 2007.(5)
    
    The remaining unvested deferred
    shares vested in equal increments on January 1, 2007 and
    2008.(6)
    
    The remaining unvested deferred
    shares vested in equal increments on February 1, 2007 and
    2008.(7)
    
    The remaining unvested deferred
    shares vested/will vest in equal increments on February 1,
    2007, 2008 and 2009.(8)
    
    All but 1,886 of these shares
    were forfeited on July 27, 2007 when Ms. Lundquist
    left MuniMae.(9)
    
    All 2,461 of these shares were
    forfeited on July 27, 2007 when Ms. Lundquist left
    MuniMae.(10)
    
    All 6,769 of these shares were
    forfeited on December 31, 2008 when Mr. Pinckney left
    MuniMae.(11)
    
    The remaining unvested deferred
    shares will vest in equal increments on April 6, 2007 and
    February 1, 2008, 2009, 2010 and 201, except that no
    portion of these shares will vest until the filing of the
    Companys 2006 Annual Report on
    Form 10-K. 95




---



##### 



OPTION
    EXERCISES AND STOCK VESTED
    Option Awards


Stock AwardsNumber of





Number of SharesShares Acquired


Value Realized


Acquired on


Value RealizedName

on Exercise


on
    Exercise (1)


Vesting


on
    Vesting (2)Michael L. Falcone


15,000


$
141,450



8,467


$
223,853Melanie M. Lundquist










10,132



266,866Charles M. Pinckney










4,578



120,630Jenny Netzer










11,640



316,610Gary A. Mentesana










3,668



97,111     (1)
    
    The amounts shown are calculated
    based on the difference between the closing market price of
    MuniMae Common Stock on the date of exercise and the exercise
    price of the options, multiplied by the number of shares for
    which the options were exercised (and does not reflect the value
    realized by each named executive officer after payment of
    related taxes, which was less).(2)
    
    The amounts shown are calculated
    based on the closing market price of MuniMae Common Stock on the
    date of vesting multiplied by the number of vested shares (and
    does not reflect the value realized by each named executive
    officer after payment of related taxes, which was
    less).  Pension
    Benefits
    Employment
    Agreements and other Agreements
  Mr. Falcone.
    Ms. Lundquist. separation
    agreement
  Other Named Executive Officers.
 96




---



##### 



Compensation
    of Directors
    Change in PensionValue and NonqualifiedFees Earned or


Restricted Share


Deferred CompensationName

Paid in
    Cash (1)


Awards (2)(3)


Earnings (4)


TotalCharles C. Baum

$
67,500


$
12,500


$
252,504


$
332,504Richard O. Berndt


45,000



12,500



214,586



272,086Eddie C. Brown


45,500



12,500



114,081



172,081Robert S. Hillman


72,500



12,500



251,402



336,402Barbara B. Lucas


53,500



12,500



77,930



143,930Douglas A. McGregor


69,000



12,500



196,847



278,347Arthur S. Mehlman


51,500



12,500



17,086



81,086Fred N. Pratt, Jr.


56,500



12,500



130,567



199,567     (1)
    
    Amounts shown include fees
    earned in 2006 and deferred at the election of the director as
    follows: Messrs. Baum, Berndt, Brown, Hillman, Pratt and
    Ms. Lucas made elections under the Non-Employee
    Directors Share Plans to defer 100% of their
    fees.(2)
    
    Amounts shown represent the
    dollar amount recognized for financial statement reporting
    purposes during fiscal 2006 for each director, as determined in
    accordance with SFAS 123(R), disregarding any estimates
    based on service-based vesting conditions. Awards include grants
    of restricted shares under the 2004 Non-Employee Directors
    Share Plan. The restricted shares granted to each non-employee
    director in fiscal 2006 had a full grant date fair value equal
    to $12,500, as determined in accordance with SFAS 123(R).
    For a discussion of the assumptions used in determining these
    values, see Notes to Consolidated Financial
    Statements-Note 16,
    Stock-Based Compensation.(3)
    
    Amounts shown include restricted
    shares granted in 2006 and deferred at the election of each of
    the following directors: Messrs. Baum, Brown, Hillman,
    Pratt and Ms. Lucas.(4)
    
    Amounts represent solely the
    determined aggregate change in the directors accumulated
    benefit under our deferred compensation program from
    December 31, 2005 to December 31, 2006. 97




---



##### 



Exercisable


Unexercisable


Unvested RestrictedName

Options


Options


SharesCharles C. Baum


25,000







Richard O. Berndt


17,000







440Eddie C. Brown


12,000







Robert S. Hillman


27,500







Barbara B. Lucas


2,333



4,667



Douglas A. McGregor


22,500







Arthur S. Mehlman


4,666



2,334



440Fred N. Pratt, Jr.


7,000







   Narrative
    to the Director Compensation Table
  (Plan)
     98




---



##### 



Compensation
    Committee Interlocks and Insider Participation
    Item 12.
    SECURITY
    OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
    RELATED SHAREHOLDER MATTERS    Amount and Nature ofName

Beneficial
    Ownership (2)

    (3)


Percent of
    Class (4)Directors:Mark K. Joseph


1,080,636
(5)


2.76Michael L. Falcone


303,111
(6)


*Charles C. Baum


39,000



*Richard O. Berndt


34,484



*Eddie C. Brown


12,000



*Robert S. Hillman


32,700



*Barbara B. Lucas


8,000



*Douglas A. McGregor


62,500



*Arthur S. Mehlman


8,494



*Fred N. Pratt, Jr.


7,000



*Non-Director
    Named Executive Officers:Melanie M. Lundquist


20,262



*Gary A. Mentesana


160,700



*Jenny Netzer


42,033



*Charles M. Pinckney


84,771



*All Directors and Executive Officers (17 persons)


1,904,071
(7)


4.86     *
    
    Represents less than 1.0% of the
    total number of common shares outstanding.(1)
    
    An address for each person
    listed in the table below is
    c/o Municipal
    Mortgage & Equity, LLC, Pier IV Building,
    621 E. Pratt Street, Suite 300, Baltimore, MD
    21202.(2)
    
    Includes shares of Common Stock
    beneficially owned by directors and executive officers alone, or
    jointly with spouses, minor children and relatives (if any) who
    have the same home as the director or executive officer. Also
    includes the following numbers of shares of Common Stock which
    could be acquired within 60 days of December 31, 2006
    pursuant to the exercise of stock options and/or the vesting of
    deferred/restricted shares: Mr. Joseph  2,600;
    Mr. Falcone  137,875; Mr. Baum 
    25,000; Mr. Berndt  17,000;
    Mr. Brown  12,000; Mr. Hillman 
    27,500; Ms. Lucas  2,333;
    Mr. McGregor  22,500;
    Mr. Mehlman  4,666; Mr. Pratt  99




---



##### 



7,000;
    Mr. Mentesana  65,672;
    Ms. Netzer  1,976; Mr. Pinckney 
    64,391; and directors and executive officers as a
    group  389,143.(3)
    
    Excludes deferred shares to
    which directors would have been entitled at a future date. At
    December 31, 2006 the deferred share account balances of
    the directors were: Mr. Baum  198,748;
    Mr. Berndt  97,905; Mr. Brown 
    74,013; Mr. Hillman  21,856;
    Ms. Lucas  2,138; Mr. McGregor 
    33,634; Mr. Pratt  177,432; and directors as a
    group  605,726.(4)
    
    Percent of class is based upon
    shares of Common Stock issued and outstanding, and shares which
    could be acquired within 60 days of December 31, 2006
    pursuant to the exercise of stock options and/or the vesting of
    deferred/restricted shares.(5)
    
    This amount includes
    754,674 shares of Common Stock held indirectly by
    Mr. Joseph as follows: SCA Associates 95-II Limited
    Partnership  277,982; SCA Associates 86-II Limited
    Partnership  203,140; The Shelter Policy
    Institute I, Inc.  187,466; SDC Associates
    Limited Partnership  50,786; Shelter Development
    Holdings, Inc.  26,729; SCA Custodial Co.
    Inc.  5,084; MME I Corporation  3,483; and
    MME II Corporation  4. Mr. Joseph disclaims
    beneficial ownership of such shares.(6)
    
    This amount includes
    45,439 shares of Common Stock held indirectly by
    Mr. Falcone as follows: SCA Associates 95-II Limited
    Partnership  26,741; SCA Associates 86-II Limited
    Partnership  6,094; SDC Associates Limited
    Partnership  12,026 and the Michael and Beth Falcone
    Foundation  578. Mr. Falcone disclaims
    beneficial ownership of such shares.(7)
    
    Excludes shares of Common Stock
    indirectly held by Mr. Falcone (except for the
    578 shares of Common Stock held by Mr. Falcone through
    the Michael and Beth Falcone Family Foundation) since these
    common shares are presented in the number of common shares
    beneficially owned by Mr. Joseph.  Securities
    Authorized for Issuance under Equity Compensation
    Plans
    Number of SecuritiesRemain for FutureNumber of Securities


Weighted-Average


Issuance Under Equityto be Issued Upon


Exercise Price of


Compensation PlansExercise of Outstanding


Outstanding


(Excluding SecuritiesEquity Compensation Plans

Options, Warrants


Options, Warrants


Reflected inApproved by Security Holders

and Rights


and
    Rights (1)


First Column)Employee shares incentive
    plans (2)


859,405


$
25.34



607,085Non-employee directors share
    plans (3)


128,517



23.28



359,223Total


987,922







966,308     (1)
    
    The weighted-average exercise
    price does not include the 233,256 shares issuable upon
    vesting of outstanding deferred shares from the Employee share
    incentive plans and 3,517 shares issuable upon vesting of
    outstanding restricted shares from the Non-employee
    directors share plans, respectively, which have no
    exercise price.(2)
    
    Includes the 1996, 1998, 2001
    and 2004 Share Incentive Plans.(3)
    
    Includes the 1996, 1998, 2001
    and 2004 Non-Employee Director Share Plans.  Item 13.
    CERTAIN
    RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
    INDEPENDENCE  MMA
    Multifamily Equity REIT, formerly Midland Multifamily Equity
    REIT and MRC Mortgage Investment Trust, formerly Midland
    Affordable Group Trust
  (MMER (MMIT)
   100




---



##### 



Transactions
    with Gallagher, Evelius & Jones LLP
  (GEJ)
  Transactions
    and Relationships with Entities Controlled by Mark
    Joseph
  The
    Shelter Group
  (Shelter Group)
    Tax Credit Equity Syndication Transactions.
  Revolving Loan Agreement.
 101




---



##### 



Bond
    Portfolio
        Special
    Shareholder and Dissolution Shareholder Relationships
   102




---



##### 



Other
    Affiliates of Mark Joseph
  Park View at Dundalk Apartments Project
  Not-for-Profit
    Entities controlled by our officers
  MuniMae Foundation, Inc.
  MuniMae Affordable Housing, Inc. (MMAH)
         103




---



##### 



Approval
    of Transactions with Related Persons
    Director
    Independence
   104




---



##### 



Item 14.
    PRINCIPAL
    ACCOUNTANT FEES AND SERVICES  Independent
    Registered Public Accounting Firm
    Fees
      (dollars in thousands)

2006


2005PwC:Audit
    fees (1)

$
3,177


$
3,381Audit related
    fees (2)






25Total audit and audit related fees


3,177



3,406Tax
    fees (3)


481



485All other fees






Total PwC fees

$
3,658


$
3,891KPMG:Audit fees

$
1,000


$
Audit related fees






Total audit and audit related fees


1,000



Tax fees






All other fees






Total KPMG fees

$
1,000


$
     (1)
    
    Audit fees include fees for the
    audit of the consolidated financial statements and of
    managements assessment of the effectiveness of our
    internal controls over financial reporting, separate audits of
    certain subsidiaries and tax credit funds, review of financial
    statements included in our Reports on
    Form 10-Q
    and services that are normally provided in connection with
    statutory and regulatory filings or engagements, including audit
    services provided in connection with statutory and regulatory
    filings or engagements.(2)
    
    Audit-related fees include the
    aggregate fees billed for assurance and related services that
    are reasonably related to the performance of the audit or review
    of our financial statements but do not fall under the caption
    Audit fees. These fees consisted of due diligence
    services related to acquisitions.(3)
    
    Tax fees include the aggregate
    fees billed for professional services for tax compliance, tax
    advice and tax planning. These fees consist of nominee gathering
    services and production of Schedules K-1s for investors,
    preparation of federal and state tax returns, earnings and
    profits studies and various other tax consultations.    Pre-approval
    Policies and Procedures
   105




---



##### 



PART IV  Item 15.
    EXHIBITS AND
    FINANCIAL STATEMENT SCHEDULES                           106




---



##### 



SIGNATURES      By:
    /s/  Michael
    L. Falcone   Title:
    Chief Executive Officer and President       By:

/s/  Michael
    L. Falcone

April 29, 2009Name: Michael L. FalconeTitle: Chief Executive Officer, President and Director
    (Principal Executive Officer)By:

/s/  David
    Kay

April 29, 2009Name: David KayTitle: Chief Financial Officer and Executive Vice President
    (Principal Financial Officer)By:

/s/  Mark
    K. Joseph

April 29, 2009Name: Mark K. JosephTitle: Chairman of the Board of DirectorsBy:

/s/  Charles
    C. Baum

April 29, 2009Name: Charles C. BaumTitle: DirectorBy:

/s/  Richard
    O. Berndt

April 29, 2009Name: Richard O. BerndtTitle: DirectorBy:

/s/  Eddie
    C. Brown

April 29, 2009Name: Eddie C. BrownTitle: DirectorBy:

/s/  Robert
    S. Hillman

April 29, 2009Name: Robert S. HillmanTitle: Director S-1




---



##### 



By:

/s/  Barbara
    B. Lucas

April 29, 2009Name: Barbara B. LucasTitle: DirectorBy:

/s/  Douglas
    A. McGregor

April 29, 2009Name: Douglas A. McGregorTitle: DirectorBy:

/s/  Arthur
    S. Mehlman

April 29, 2009Name: Arthur S. MehlmanTitle: DirectorBy:

/s/  Fred
    N. Pratt, Jr.

April 29, 2009Name: Fred N. Pratt, Jr.Title: Director  S-2




---



##### 



Report of
    Independent Registered Public Accounting Firm            1.
    Entity Level Control Environment.  The
    Company did not maintain an effective entity level control
    environment, which is the foundation needed for effective
    internal control over financial reporting, as evidenced by the
    following weaknesses:  
    The Company focused disproportionately on an internal metric for
    assessing its performance, Cash Available for Distribution
    (CAD), which did not sufficiently encourage
    employees to ensure financial reporting was in accordance with
    U.S. generally accepted accounting principles
    (GAAP).
    The Company did not effectively invest in its infrastructure and
    support functions. As the Company rapidly expanded in breadth
    and complexity in significant part by acquiring companies, it
    did not effectively invest sufficient resources related to
    accounting expertise, information technology and other
    supporting functions that would have improved its ability to
    prepare accurate financial statements.
    The Company did not effectively integrate its finance function
    with the business units so that business unit transactions were
    properly assessed from a GAAP accounting perspective.
    The Company did not maintain sufficient, formalized, and
    effective accounting and reporting policies nor did it maintain
    adequate controls with respect to the review and supervision of
    its accounting operations.
    The Companys internal audit function did not appropriately
    identify or address the Companys risks, and it did not
    sufficiently document processes and controls.
    The Company relied on its prior independent registered public
    accountants to function as a core element of internal control.  2.
    Consolidation Accounting.  The Company did not
    maintain effective controls over the accuracy of its accounting
    for the tax credit equity business and accounting for
    transactions where it assumed or acquired the general partner
    interest in lower tier property partnerships.3.
    Bond Accounting.  The Company did not maintain
    effective controls over the determination of fair values related
    to its bond portfolio and did not review or validate the broker
    quotes supporting its bond values.4.
    Equity Method Accounting.  The Company did not
    maintain effective controls to ensure accurate application of
    the equity method of accounting for investments in certain
    partnerships. F-1




---



##### 



5.
    Accounting for Derivatives.  The Company did
    not maintain effective controls over the identification and
    valuation of certain derivative financial instruments.6.
    Accounting for Mortgage Servicing Rights.  The
    Company did not maintain effective controls over the
    determination of fair value related to its mortgage servicing
    rights.7.
    Accounting for Loans.  The Company did not
    maintain effective controls over the proper determination of:
    (1) loan classification; (2) loan loss reserves
    associated with loans held for investment; and
    (3) amortization of loan fees and costs.8.
    Purchase Accounting.  The Company did not
    maintain effective controls over the determination of fair value
    and the purchase price allocation for business combinations. In
    addition, the Company did not maintain effective controls
    necessary to ensure proper impairment testing of goodwill and
    intangibles.9.
    Accounting for Property and Equipment, Payroll and Accounts
    Payable.  The Company did not maintain effective
    controls over the accounting for property and equipment as well
    as payroll and accounts payable.  10.
    Contract Compliance.  The Company did not
    maintain internal controls sufficient to ensure that it complied
    with all of its contractual agreements.11.
    Financial Reporting.  The Company did not
    implement effective processes and review procedures to ensure
    that the 2005 and 2004 restatement process and the 2006
    financial reporting process resulted in financial statements
    prepared in accordance with GAAP.              F-2




---



##### 



Report of
    Independent Registered Public Accounting Firm              Share Based Payment.
          F-3




---



##### 



Municipal
    Mortgage & Equity, LLC
  CONSOLIDATED
    BALANCE SHEETS
  As RestatedDecember 31,


December 31,2006


2005(dollars in thousands, except share data)ASSETSCash and cash equivalents

$
49,085


$
140,213Restricted cash


14,927



26,804Bonds available-for-sale (includes $1,641,222 and $1,194,686
    pledged as collateral)


1,770,113



1,392,934Loans held for investment, net of allowance for loan losses
    (includes $372,371 and $564,757 pledged as collateral)


514,900



708,274Loans held for sale (includes $360,353 and $73,693 pledged as
    collateral)


417,747



76,516Investments in unconsolidated ventures (includes $483,069 and
    $301,578 pledged as collateral)


539,542



352,521Accrued interest receivable


23,405



21,621Property and equipment, net


27,676



12,945Mortgage servicing rights, net


72,074



71,774Goodwill, net


102,428



97,846Other intangibles, net


17,528



21,100Derivative assets


7,052



7,161Other assets


42,580



38,807Assets of consolidated funds and ventures (Notes 1 and 20):Cash, cash equivalents and restricted cash (includes $6,518 and
    $5,307 of restricted cash)


289,543



327,831Loans (includes $31,500 and $180,528 pledged as collateral)


55,956



279,424Investments in unconsolidated Lower Tier Property
    Partnerships


4,174,337



3,655,733Real estate, net (includes $163,628 and $186,620 pledged as
    collateral)


320,880



260,033Other assets


44,041



20,844Assets held for sale (includes $0 and $47,521 pledged as
    collateral)






56,535Total assets of consolidated funds and ventures


4,884,757



4,600,400Total assets

$
8,483,814


$
7,568,916LIABILITIES AND SHAREHOLDERS EQUITYDebt:Line of credit facilities

$
322,502


$
388,811Repurchase facilities


211,825



Senior interests and debt owed to securitization trusts


1,141,464



767,376Notes payable and other debt


367,839



319,798Subordinate debentures


175,500



175,500Mandatorily redeemable preferred shares


162,168



162,150Guarantee obligations


6,819



6,993Accounts payable and accrued expenses


56,480



59,422Derivative liabilities


18,129



17,030Deferred revenue


97,617



88,704Other liabilities


65,922



48,639Unfunded equity commitments to investments in unconsolidated
    ventures


336,051



232,396Liabilities of consolidated funds and ventures (Notes 1 and
    20):Bridge financing


374,025



74,599Mortgage debt


150,605



182,375Notes payable


563,515



592,611Unfunded equity commitments to unconsolidated Lower
    Tier Property Partnerships


883,803



903,768Other liabilities


73,200



67,375Liabilities related to assets held for sale






54,901Total liabilities of consolidated funds and ventures


2,045,148



1,875,629Total liabilities


5,007,464



4,142,448Commitments and contingenciesNon-controlling interests in consolidated funds and ventures(net of $2,333,823 and $1,891,774 of subscriptions
    receivable)


2,639,749



2,593,197Perpetual preferred shareholders equity in a subsidiary
    company, liquidation preference of $173,000


168,686



168,686Shareholders equity:Common shares, no par value (38,591,580 and
    38,053,771 shares issued and outstanding and 102,689 and
    78,827 non-employee directors deferred shares issued at
    December 31, 2006 and 2005, respectively)


566,890



581,046Accumulated other comprehensive income


101,025



83,539Total shareholders equity


667,915



664,585Total liabilities and shareholders equity

$
8,483,814


$
7,568,916   The accompanying notes are an integral part of these
    consolidated financial statements.
 F-4




---



##### 



Municipal
    Mortgage & Equity, LLC
  CONSOLIDATED
    STATEMENTS OF OPERATIONS
  For the Years EndedDecember 31,As Restated


As Restated2006


2005


2004(dollars in thousands, except per share data)REVENUE:Interest income:Interest on bonds

$
100,059


$
88,470


$
79,301Interest on loans


82,958



54,356



41,990Interest on short-term investments


5,636



4,156



1,989Total interest income


188,653



146,982



123,280Fee and other income:Syndication fees


45,318



32,131



32,715Asset management and advisory fees


4,878



6,520



3,083Debt placement fees


2,106



5,355



2,926Guarantee fees


577



1,150



3,133Servicing fees


7,403



4,296



3,518Other income


12,718



5,747



3,463Total fee and other income


73,000



55,199



48,838Revenue from consolidated funds and ventures:Rental and other income from real estate


50,246



54,812



48,568Interest and other income


38,668



27,765



11,076Total revenue from consolidated funds and ventures


88,914



82,577



59,644Total revenue


350,567



284,758



231,762EXPENSES:Interest expense


120,592



89,672



67,931Salaries and benefits


78,187



79,970



62,933General and administrative


32,191



30,817



24,753Professional fees


15,710



12,089



9,279Depreciation and amortization


7,200



6,305



4,996Impairment on bonds


2,106



13,020



684Provision for credit losses


12,557



5,117



4,981Other expenses


5,945



1,099



1,491Expenses from consolidated funds and ventures:Depreciation and amortization


15,725



19,585



21,705Interest expense


41,290



34,852



27,339Impairment on investments in unconsolidated Lower
    Tier Property Partnerships


48,431



30,327



35,585Other operating expenses


45,318



52,788



41,033Total expenses from consolidated funds and ventures


150,764



137,552



125,662Total expenses


425,252



375,641



302,710Net gains (losses) on sale of bonds


8,355



6,398



(147
)Net gains on sale of loans


21,515



12,509



5,510Net (losses) gains on derivatives


(3,617
)


4,363



(4,430
)Net gains on sale of real estate


6,797







Net gains on sale of real estate from consolidated funds and
    ventures


52,479



19,655



5,805Equity in earnings from unconsolidated ventures


5,216



26,346



403Equity in losses from unconsolidated Lower Tier Property
    Partnerships held by consolidated funds and ventures


(319,511
)


(281,162
)


(238,674
)Loss before income taxes, (income) loss allocable to
    non-controlling interests and discontinued operations


(303,451
)


(302,774
)


(302,481
)Income tax expense


3,323



2,929



2,923(Income) loss allocable to non-controlling interests:Distributions declared to perpetual preferred shareholders of
    subsidiary


(9,208
)


(4,962
)


(755
)Net losses allocable to non-controlling interests from
    consolidated funds and ventures


360,011



327,761



294,840Income (loss) before discontinued operations


44,029



17,096



(11,319
)Discontinued operations


9,618



7,575



8,043Net income (loss)

$
53,647


$
24,671


$
(3,276
)   The accompanying notes are an integral part of these
    consolidated financial statements.
  F-5




---



##### 



Municipal
    Mortgage & Equity, LLC
  CONSOLIDATED
    STATEMENTS OF OPERATIONS  (continued)
  For the Years EndedDecember 31,As Restated


As Restated2006


2005


2004(dollars in thousands, except per share data)Basic earnings (loss) per common share:Earnings (loss) from continuing operations

$
1.14


$
0.45


$
(0.32
)Discontinued operations


0.25



0.20



0.23Earnings (loss) per common share

$
1.39


$
0.65


$
(0.09
)Weighted-average common shares outstanding


38,535



37,696



34,504Diluted earnings (loss) per common share:Earnings (loss) from continuing operations

$
1.12


$
0.45


$
(0.32
)Discontinued operations


0.25



0.20



0.23Earnings (loss) per common share

$
1.37


$
0.65


$
(0.09
)Weighted-average common shares outstanding


39,112



38,201



34,755   The accompanying notes are an integral part of these
    consolidated financial statements.
 F-6




---



##### 



Municipal
    Mortgage & Equity, LLC
  CONSOLIDATED
    STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
  For the Years EndedDecember 31,As Restated


As Restated2006


2005


2004(dollars in thousands)Net income (loss)

$
53,647


$
24,671


$
(3,276
)Other comprehensive income (loss):Unrealized gains (losses) on bonds available-for-sale:Unrealized net holding gains (losses) arising during the period


25,088



14,761



(3,561
)Reclassification of unrealized (gains) losses due to bond sales
    and other-than-temporary impairment activity


(4,266
)


10,202



(6,845
)Reclassification of unrealized gains due to consolidation of
    funds and ventures


(3,479
)


(849
)


(5,096
)Total unrealized gains (losses) on bonds available-for-sale


17,343



24,114



(15,502
)Currency translation adjustment


143



(65
)


Other comprehensive income (loss)


17,486



24,049



(15,502
)Comprehensive income (loss)

$
71,133


$
48,720


$
(18,778
)   The accompanying notes are an integral part of these
    consolidated financial statements.
 F-7




---



##### 



Municipal
    Mortgage & Equity, LLC
  CONSOLIDATED
    STATEMENTS OF SHAREHOLDERS EQUITY
  Common


Common


Accumulated OtherShares


Shares


Comprehensive(Number)


(Amount)


Income (Loss)


Total(dollars and shares in thousands, except per share data)Balance, December 31, 2003 As Previously Reported


32,507


$
629,677


$
(4,208
)

$
625,469Prior period restatement adjustments






(72,845
)


79,200



6,355Balance, December 31, 2003 As Restated


32,507



556,832



74,992



631,824Net loss






(3,276
)






(3,276
)Other comprehensive loss










(15,502
)


(15,502
)Distributions of $1.84 per share






(63,337
)






(63,337
)Options exercised


284



5,382







5,382Issuance of common shares, net of issuance costs


2,145



52,557







52,557Issuance of common shares under employee share plans


238











Common, restricted and deferred shares issued under the
    non-employee directors share plans


21



441







441Stock-based compensation






6,111







6,111Balance, December 31, 2004 As Restated


35,195



554,710



59,490



614,200Net income






24,671







24,671Other comprehensive income










24,049



24,049Distributions of $1.92 per share






(71,739
)






(71,739
)Options exercised


195



3,291







3,291Issuance of common shares, net of issuance costs


2,575



64,740







64,740Purchase of common shares


(56
)


(1,372
)






(1,372
)Issuance of common shares under employee share plans


202











Common, restricted and deferred shares issued under the
    non-employee directors share plans


22



474







474Stock-based compensation






6,271







6,271Balance, December 31, 2005 As Restated


38,133



581,046



83,539



664,585Net income






53,647







53,647Other comprehensive income










17,486



17,486Distributions of $2.00 per share






(77,103
)






(77,103
)Options exercised


195



3,838







3,838Issuance of common shares related to business acquisition


179



4,638







4,638Issuance of common shares under employee share plans


162











Restricted and deferred shares issued under the non-employee
    directors share plans


25



650







650Modification of equity classified awards






(3,390
)






(3,390
)Stock-based compensation






4,994







4,994Stock-based compensation awards settled in cash






(1,430
)






(1,430
)Balance, December 31, 2006


38,694


$
566,890


$
101,025


$
667,915   The accompanying notes are an integral part of these
    consolidated financial statements.
 F-8




---



##### 



Municipal
    Mortgage & Equity, LLC
  CONSOLIDATED
    STATEMENTS OF CASH FLOWS
  For the Years EndedDecember 31,As Restated


As Restated2006


2005


2004(dollars in thousands)CASH FLOWS FROM OPERATING ACTIVITIES:Net income (loss)

$
53,647


$
24,671


$
(3,276
)Adjustments to reconcile net income (loss) to net cash (used in)
    provided by operating activities:Net non-cash losses (gains) on derivatives


5,011



(6,638
)


(2,407
)Purchases, advances on and originations of loans held for sale


(1,226,404
)


(554,408
)


(117,251
)Proceeds from the sale of loans held for sale


880,271



533,952



161,751Principal payments received on loans held for sale


8,738



103



Net gains on sales of bonds and loans


(29,870
)


(18,907
)


(5,363
)Net gains on real estate


(59,276
)


(29,671
)


(17,063
)Provisions for credit losses and impairment


65,375



52,782



43,899Depreciation and amortization


24,562



24,174



21,936Stock compensation expense


8,278



6,745



6,552Equity in losses, net from investments in partnerships


314,295



254,816



238,271Distributions declared to perpetual preferred shareholders of
    subsidiary


9,208



4,962



755Net losses allocable to non-controlling interests


(370,257
)


(329,398
)


(301,311
)Distributions received from investments in partnerships


18,045



21,921



1,112Stock-based compensation awards settled in cash


(1,430
)






Net change in assets and liabilities:(Increase) decrease in derivative assets and liabilities


(2,923
)


4,884



(3,855
)(Increase) in accrued interest receivable


(2,706
)


(4,389
)


(1,350
)(Decrease) increase in accounts payable and accrued expenses


(2,949
)


13,850



13,360Increase in deferred revenue


32,639



12,329



5,966Changes in other assets and liabilities


37,416



57,175



(3,603
)Net cash (used in) provided by operating activities


(238,330
)


68,953



38,123CASH FLOWS FROM INVESTING ACTIVITIES:Advances on and purchases of bonds


(288,235
)


(284,706
)


(369,801
)Principal payments received on bonds


5,271



4,345



10,685Proceeds from the sale of bonds


139,941



139,366



98,456Advances on and originations of loans held for investment


(299,420
)


(637,950
)


(344,004
)Principal payments received on loans held for investment


574,507



320,545



229,800Proceeds from sale of loans


49,708







Purchases of real estate and property and equipment


(63,291
)


(7,912
)


(1,588
)Proceeds from the sale of real estate and property and equipment


95,604



43,275



40,011Acquisition of assets and businesses


(2,433
)


(58,824
)


Decrease (increase) in restricted cash and cash of consolidated
    funds and ventures


55,314



(66,464
)


5,626Investments in partnerships


(1,081,104
)


(730,618
)


(641,657
)Capital distributions received from investments in partnerships


41,468



43,542



31,637Net cash used in investing activities


(772,670
)


(1,235,401
)


(940,835
)CASH FLOWS FROM FINANCING ACTIVITIES:Net proceeds from borrowing activity


3,879,276



2,225,921



1,396,297Repayment of borrowings


(3,362,429
)


(1,873,655
)


(1,233,365
)Contributions from holders of non-controlling interests


671,343



803,692



769,499Distributions paid to holders of non-controlling interests


(186,023
)


(31,061
)


(53,479
)Issuance of common shares, net of purchases






63,368



52,557Issuance of perpetual preferred shares






97,655



71,031Distributions to perpetual preferred shareholders of
    subsidiary


(9,030
)


(3,692
)


Proceeds from stock options exercised


3,838



3,291



5,382Distributions to common shareholders


(77,103
)


(71,739
)


(63,337
)Net cash provided by financing activities


919,872



1,213,780



944,585Net (decrease) increase in cash and cash equivalents


(91,128
)


47,332



41,873Cash and cash equivalents at beginning of period


140,213



92,881



51,008Cash and cash equivalents at end of period

$
49,085


$
140,213


$
92,881   The accompanying notes are an integral part of these
    consolidated financial statements.
  F-9




---



##### 



Municipal
    Mortgage & Equity, LLC
  CONSOLIDATED
    STATEMENTS OF CASH FLOWS  (continued)
  For the Years EndedDecember 31,As Restated


As Restated2006


2005


2004(dollars in thousands)SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:Interest paid

$
151,641


$
111,337


$
84,094Income taxes paid


8,973



1,297



1,002Interest capitalized


22,130



10,981



11,372Non-cash investing and financing activities:Loans assumed and related debt


78,480







Bonds assumed and related debt


242,825



5,055



Common shares issued in the acquisition of business


4,638







Unfunded commitments for equity investments


83,690



224,480



285,198Transfer of loans to MRC Mortgage Investment Trust


155,899







Liabilities acquired through business acquisitions


6,833



10,308



Increase in assets/liabilities due to initial consolidation of
    funds and ventures


31,230



152,052



14,161Decrease in assets/liabilities due to deconsolidation of funds
    and ventures


61,083



63,616



24,588Unrealized gains (losses) included in other comprehensive income


17,343



24,114



(15,502
)   The accompanying notes are an integral part of these
    consolidated financial statements.
 F-10




---



##### 



NOTE 1 
    DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION  Description
    of the Business
  MuniMae, Company MMA
      
    The Affordable Housing Divisionconducts
    activities related to affordable housing and is further
    subdivided into three reportable segments, including:  
    Tax Credit Equitywhich creates investment funds and
    finds investors for such funds that receive tax credits for
    investing in affordable housing partnerships (referred to as
    syndication of affordable housing tax credit funds or Low Income
    Housing Tax Credit Funds  LIHTC
    Funds);
    Affordable Bondswhich originates and invests primarily
    in tax-exempt bonds secured by affordable housing; and
    Affordable Debtwhich originates and invests in loans
    secured by affordable housing.  
    The Real Estate Divisionconducts real estate
    finance activities and is further subdivided into two reportable
    segments:  
    Agency Lendingwhich originates both market rate and
    affordable housing multifamily loans with the intention of
    selling them to government sponsored entities (i.e., Federal
    National Mortgage Association (Fannie Mae)
    and the Federal Home Loan Mortgage Corporation (Freddie
    Mac)) or through programs created by them, or sells
    the permanent loans to third party investors and the loans are
    guaranteed by the Government National Mortgage Association
    (Ginnie Mae) and insured by the United States
    Department of Housing and Urban Development
    (HUD); and
    Merchant Bankingwhich provides loan and bond
    originations, loan servicing, asset management, investment
    advisory and other services to institutional investors that
    finance or invest in various commercial real estate projects. In
    some cases, the Company originates loans and bonds for its own
    investment purposes.  
    The Renewable Ventures Divisionfinances, owns and
    operates renewable energy and energy efficiency projects. This
    division, in its entirety, is considered a reportable segment.  Liquidity
    and Going Concern Uncertainty
   F-11




---



##### 



Use of
    Estimates
    Basis of
    Presentation
  (VIEs)
    (SPEs) Accounting for
    Transfers and Servicing of Financial Assets and Extinguishments
    of Liabilities-a replacement of FASB Statement
    No. 125 (SFAS 140)
  Consolidated
    Funds and Ventures
  Consolidated Financial
    Statements (ARB 51) Consolidation of
    Variable Interest Entities-An Interpretation of ARB
    No. 51 (FIN 46(R)) No. 04-5, Determining Whether a General Partner, or the General
    Partners as a Group, Controls a Limited Partnership or Similar
    Entity When the Limited Partners have Certain Rights (EITF 04-5) (Lower Tier Property Partnership)
  
    Partnerships that hold low income housing projects related to
    the Companys Tax Credit Equity business segment. These
    properties are generally sold to a LIHTC Fund and then
    syndicated to investors. As discussed below, the LIHTC Funds
    (which are consolidated by the Company) account for their
    investment in these unconsolidated Lower Tier Property
    Partnerships under the equity method; and
    Real estate partnerships where the Company has assumed the
    general partner role through a transfer of the general partner
    interest as a result of issues with the property or the
    developer (consolidated F-12




---



##### 



Lower Tier Property Partnerships or
    GP Take Backs). The real estate held by these
    consolidated Lower Tier Property Partnerships is
    predominantly low income multifamily housing projects and the
    Company has tax credit equity or tax exempt bond financing
    investments in these partnerships.      Cash
    and Cash Equivalents
    Restricted
    Cash
    Equity
    Method Investments
        The Equity Method of Accounting for Investments in
    Common Stock (APB 18)
 F-13




---



##### 



No. 94-1, Accounting for Tax Benefits Resulting from Investments
    in Affordable Housing Projects (EITF 94-1)
    Bonds
    Available-for-Sale
  Accounting for
    Certain Investments in Debt and Equity Securities (SFAS 115)
    (FASB) FAS 115-1 FAS 124-1, The Meaning of Other-Than-Temporary Impairment and Its
    Application to Certain Investments (FSP
    FAS 115-1/124-1) No. 99-20, Recognition of Interest Income and Impairment on
    Purchased Beneficial Interests and Beneficial Interests that
    Continue to be Held by a Transferor in Securitized Financial
    Assets (EITF 99-20)
    
    the length of time and the extent to which the fair value has
    been less than amortized cost;
    the financial condition of the underlying collateral (including
    the Companys intent and ability to foreclose on the
    property) and whether it expects to recover all amounts due on a
    net present value basis; and
    the intent and ability of the Company to retain its investment
    in the bond for a period of time sufficient to allow for any
    anticipated recovery in fair value.   F-14




---



##### 



Accounting for Nonrefundable Fees and
    Costs Associated with Originating or Acquiring Loans and Initial
    Direct Costs of Leases (SFAS 91)
  Loans
    Held for Investment
  (HFI)
      Allowance
    for Loan Losses
      
    the borrowers overall financial condition and historical
    payment record;
    the prospects for support from any financially responsible
    guarantors; and
    the net realizable value of any collateral, if appropriate.   F-15




---



##### 



Accounting by Creditors for Impairment of
    a Loan, an amendment of FASB Statements No. 5 and
    15 (SFAS 114)
  Accounting
    for Contingencies (SFAS 5
  Reserves
    for Losses on Unfunded Loan Commitments and Guarantee
    Obligations
    Loans
    Held for Sale
  (HFS) (LOCOM)
  Transfer
    of Financial Assets
      (DUS)
 F-16




---



##### 



Guarantors Accounting and Disclosure
    Requirements for Guarantees
    (FIN 45)
  available-for-sale
  Property
    and Equipment, net
  Accounting for
    Leases (SFAS 13)
  straight-line
  Mortgage
    Servicing Rights, net
  (MSRs)
    Goodwill
    and Other Intangibles, net
      
    Under the first step (indication of impairment), the fair value
    of the reporting unit (which is based on a discounted cash flow
    analysis) is compared to the carrying value of the reporting
    unit (including F-17




---



##### 



goodwill). If the fair value of the reporting unit is less than
    its carrying value, an indication of goodwill impairment exists
    for the reporting unit and the Company must perform step two of
    the impairment test.  
    Under step two (measurement of impairment), an impairment loss
    is recognized for any excess carrying amount of the reporting
    units goodwill over the implied fair value for that
    goodwill. The implied fair value of goodwill is determined by
    allocating the fair value of the reporting unit in a manner
    similar to a purchase price allocation, in accordance with
    Statement of Financial Accounting Standards No. 141,
    Business Combinations
    (SFAS 141). The residual fair
    value after this allocation is the implied fair value of the
    reporting units goodwill.  Accounting for the Impairment
    or Disposal of Long-Lived Assets (SFAS 144)
  Impairment
    on Real Estate in Lower Tier Property
    Partnerships
  and/or and/or
    Derivative
    Financial Assets and Liabilities
      Guarantee
    Obligations
  and/or
 F-18




---



##### 



Unfunded
    Equity Commitments
    EITF 94-1
  Syndication
    Fees
  92-1, Accounting for Real Estate Syndication Income (SOP 92-1 )
  Asset
    Management and Advisory Fees
      Debt
    Placement Fees
   F-19




---



##### 



Servicing
    Fees
    Stock-Based
    Compensation
  Share-Based Payment (SFAS 123(R)) Accounting for Stock Based
    Compensation (SFAS 123 ) Accounting for
    Stock Issued to Employees (APB
    25 )
    Earnings
    per Share
  (EPS)
  Income
    Taxes
  (taxable
    subsidiaries)
 F-20




---



##### 



New
    Accounting Pronouncements
  SFAS No. 155 
    Accounting for Certain Hybrid Financial
    Instruments
  Accounting for
    Certain Hybrid Financial Instruments, an amendment of FASB
    Statements No. 133 and 140 (SFAS 155)
  (DIG B40) Accounting for Derivative
    Instruments and Hedging Activities (SFAS 133)
    SFAS No. 156 
    Accounting for Servicing of Financial Assets
  Accounting for Servicing of
    Financial Assets, an amendment of SFAS No. 140,
    Accounting for Transfers and Servicing of Financial Assets and
    Extinguishments of Liabilities (SFAS 156)
  FIN 48 
    Accounting for Uncertainty in Income Taxes  an
    interpretation of FASB Statement No. 109
  Accounting for Uncertainty in Income Taxes (FIN 48)
  SFAS No. 157 
    Fair Value Measurements
  Fair Value
    Measurements (SFAS 157)
  SFAS No. 159 
    The Fair Value Option for Financial Assets and Financial
    Liabilities
  The Fair Value
    Option for Financial Assets and Financial Liabilities (SFAS 159)
 F-21




---



##### 



SFAS No. 160 
    Non-controlling Interests in Consolidated Financial
    Statements
  Non-controlling
    Interests in Consolidated Financial Statements  An
    Amendment of ARB No. 51 (SFAS 160)
  SFAS No. 141(R) 
    Business Combinations
  Business Combinations
    (SFAS 141(R))
  Staff
    Accounting Bulletin No. 109  Written Loan
    Commitments Recorded At Fair Value Through
    Earnings
  (SEC) Written Loan Commitments
    Recorded At Fair Value Through Earnings
    (SAB 109)
  FSP
    FIN 39-1 
    Amendment of FASB Interpretation No. 39
  FIN 39-1, Amendment of FASB Interpretation No. 39
    (FSP
    FIN 39-1) FIN 39-1 Offsetting of Amounts Related to Certain
    Contracts (FIN 39) FIN 39-1
  SFAS No. 161 
    Disclosures about Derivative Instruments and Hedging
    Activities
  Disclosures about Derivative
    Instruments and Hedging Activities
    (SFAS 161)
 F-22




---



##### 



FSP
    FAS 140-3 
    Accounting for Transfers of Financial Assets and Repurchase
    Financing Transactions
  FAS 140-3, Accounting for Transfers of Financial Assets and
    Repurchase Financing Transactions (FSP
    FAS 140-3) FAS 140-3
  NOTE 2 
    RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS
  (GAAP)
  Shareholders Equity


Net Income (Loss)Increase (Decrease)


Increase (Decrease)2005


2005


2004(dollars in thousands)As previously reported

$
768,319


$
87,404


$
47,336I.

Accounting related to consolidated funds and ventures


(100,826
)


(10,179
)


(24,901
)II.

Tax credit equity accounting


(41,272
)


(22,793
)


(9,726
)III.

Loan accounting


3,480



8,307



(1,999
)IV.

Provision for credit losses


(10,260
)


(5,016
)


(3,602
)V.

Equity method accounting


(7,475
)


(12,921
)


(65
)VI.

Derivative accounting


(9,990
)


(3,666
)


(5,132
)VII.

Bond accounting


61,194



(16,367
)


2,363VIII.

MSR accounting


8,093



1,784



113IX.

Other restatement adjustments


(1,372
)


(4,954
)


3,466Total pre-tax adjustments


(98,428
)


(65,805
)


(39,483
)X.

Tax valuation allowance


(41,338
)


(14,592
)


(21,396
)Tax effect of restatement adjustments


36,032



17,664



10,267After-tax adjustments
    (1)


(103,734
)


(62,733
)


(50,612
)As restated

$
664,585


$
24,671


$
(3,276
)     (1)
    
    The cumulative effect of the
    restatement adjustments at December 31, 2003, was a net
    increase in shareholders equity of $6.4 million,
    which is included in the cumulative effect on shareholders
    equity of $(103.7) million at December 31,
    2005.  I. Accounting
    Related to Consolidated Funds and Ventures
   F-23




---



##### 



EITF 04-5
    Cumulative Pre-taxImpact onTotal Assets


Shareholders Equity2005


2005(dollars in thousands)LIHTC Funds
    (1)

$
3,964,742


$
(23,534
)Consolidated Lower Tier Property Partnerships
    (2)


350,264



(77,302
)Real Estate Funds


283,729



Other


1,665



10Total assets of consolidated funds and ventures

$
4,600,400


$
(100,826
)     (1)
    
    Certain LIHTC Funds were
    historically consolidated by the Company in accordance with
    FIN 46(R). Specifically, the Company previously
    consolidated LIHTC Funds where the limited partner investors had
    not yet contributed their full capital commitments. In addition,
    the assets and liabilities of guaranteed funds were historically
    included in the Companys consolidated financial statements
    under the leasing method.(2)
    
    The assets and liabilities of
    certain Lower Tier Property Partnerships were historically
    included in the Companys consolidated financial statements
    in accordance with FIN 46(R).    LIHTC
    Funds
    
    Non-guaranteed LIHTC Funds  The Companys prior
    FIN 46(R) analysis did not fully take into consideration
    the de facto agency relationship that existed between the
    general partner (i.e., the Company) and the limited partners of
    the LIHTC Funds. The de facto agency relationship requires the
    Company to evaluate which party is most closely associated with
    the LIHTC Funds. In all instances, the Company concluded that it
    was the party most closely associated with these LIHTC Funds and
    therefore the Company was the primary beneficiary and should
    have consolidated these funds.
    Guaranteed LIHTC Funds  The guaranteed LIHTC Funds
    were previously accounted for under the provisions of Statement
    of Financial Accounting Standards No. 66,
    Accounting for Sales of Real Estate
    (SFAS 66), resulting in the
    leasing method of accounting for these funds. The Company should
    have consolidated these funds in accordance with the provisions
    of FIN 46(R), rather than applying the leasing method under
    SFAS 66.   F-24




---



##### 



Consolidated
    Lower Tier Property Partnerships
    Real
    Estate Funds
    
    B-Note Value Fund L.P.  The Company serves as
    the general partner of this fund and the Company also has a
    limited partner interest in the fund. As part of the
    restatement, the Company has determined that it controls this
    limited partnership as the unaffiliated limited partners do not
    have substantive participating or dissolution/kick-out rights.
    Real Estate Investment Partnerships  The Company is
    the general partner in the top tier of two multi-tier
    partnership structures. The Companys historical
    FIN 46(R) analysis did not consider the impact of
    restrictions on the transfer of the limited and general partner
    interests. The fact that the general and limited partners cannot
    transfer their interests without the others consent
    creates a de facto agency relationship and thus requires that
    the primary beneficiary be analyzed under the related party
    framework prescribed in FIN 46(R). Under the related party
    analysis, the Company is considered to be most closely
    associated with these entities and therefore is the primary
    beneficiary.    Other
  (MAH) (Foundation)
  II. Tax
    Credit Equity Accounting
     F-25




---



##### 



III. Loan
    Accounting
    IV. Provision
    for Credit Losses
    V. Equity
    Method Accounting
    VI. Derivative
    Accounting
   F-26




---



##### 



VII. Bond
    Accounting
        VIII. MSR
    Accounting
    IX. Other
    Restatement Adjustments
    
    The Company restated the purchase accounting for various
    business combinations, including the identification and
    recording at fair value of various acquired intangible assets
    and assumed liabilities (including guarantee obligations), as
    well as allocations of goodwill to reportable segments. The
    cumulative impact of these changes was a decrease in
    shareholders equity of $3.3 million (before income
    taxes) at December 31, 2005.
    The Company changed the way it depreciated certain property and
    equipment from a tax depreciation method to a GAAP compliant
    method. In addition, certain leases (primarily for equipment)
    that had been classified as operating leases were determined to
    be capital leases. The cumulative impact of these changes was to
    increase shareholders equity by $1.5 million (before
    income taxes) at December 31, 2005.
    As part of the restatement, the Company recognized additional
    guarantee liabilities as recourse obligations and recorded the
    amortization of the recourse obligations into income in a
    systematic and rational manner. The cumulative impact of these
    changes was to decrease shareholders equity by
    $0.5 million (before income taxes) at December 31,
    2005.
    The Company made other restatement adjustments, which were not
    significant individually and which resulted in a cumulative
    increase to shareholders equity of $0.9 million
    (before income taxes) at December 31, 2005. F-27




---



##### 



X. Tax
    Valuation Allowance
    Earnings
    Per Share
    2005


2004Basic earnings (loss) per share:As previously reported

$
2.31


$
1.37Total impact of restatement adjustments


(1.66
)


(1.46
)As restated

$
0.65


$
(0.09
)Diluted earnings (loss) per share:As previously reported

$
2.30


$
1.36Total impact of restatement adjustments


(1.65
)


(1.45
)As restated

$
0.65


$
(0.09
)    F-28




---



##### 



Municipal
    Mortgage & Equity, LLC
    CONSOLIDATED BALANCE SHEET*
  As Previously Reported


As RestatedDecember 31,


December 31,(dollars in thousands, except share data)

2005


2005ASSETSCash and cash equivalents

$
140,681


$
140,213Restricted cash


96,338



26,804Bonds available-for-sale


1,436,535



1,392,934Loans held for investment, net of allowance for loan losses


712,632



708,274Loans held for sale


91,196



76,516Investments in unconsolidated ventures


872,514



352,521Accrued interest receivable


22,100



21,621Property and equipment, net


9,496



12,945Real estate projects, net


148,015



Mortgage servicing rights, net


63,904



71,774Goodwill, net


133,299



97,846Other intangibles, net


26,289



21,100Derivative assets


3,975



7,161Other assets


74,763



38,807Total assets of consolidated funds and ventures






4,600,400Total assets

$
3,831,737


$
7,568,916LIABILITIES AND SHAREHOLDERS EQUITYDebt

$
1,729,156


$
1,475,985Subordinate debentures


172,750



175,500Mandatorily redeemable preferred shares


168,000



162,150Guarantee obligations


229,690



6,993Accounts payable and accrued expenses


43,887



43,032Interest payable


19,692



16,390Derivative liabilities


4,005



17,030Deferred revenue


116,579



88,704Other liabilities






48,639Unfunded equity commitments to investments in
    unconsolidated ventures






232,396Total liabilities of consolidated funds and ventures






1,875,629Total liabilities


2,483,759



4,142,448Commitments and contingenciesNon-controlling interests in consolidated funds and
    ventures


410,973



2,593,197Perpetual preferred shareholders equity in a subsidiary
    company, liquidation preference of $173,000


168,686



168,686Shareholders equity:Common shares, no par value


773,337



581,046Less unearned compensation (deferred shares)


(4,563
)


Accumulated other comprehensive income


(455
)


83,539Total shareholders equity


768,319



664,585Total liabilities and shareholders equity

$
3,831,737


$
7,568,916     *
    
    Amounts have been reclassified
    to conform to the current consolidated financial statement
    presentation, except for previously consolidated LIHTC Funds and
    GP Take Backs. F-29




---



##### 



Municipal
    Mortgage & Equity, LLC
  CONSOLIDATED
    STATEMENTS OF OPERATIONS *
  For The Years Ended December 31,As Previously


As Restated


As Previously


As Restated(dollars in thousands, except per share data)

Reported 2005


2005


Reported 2004


2004REVENUE:Interest incomeInterest on bonds

$
91,467


$
88,470


$
84,107


$
79,301Interest on loans


57,473



54,356



45,579



41,990Interest on short-term investments


5,214



4,156



3,882



1,989Total interest income


154,154



146,982



133,568



123,280Fee and other income:Syndication fees


42,977



32,131



41,009



32,715Asset management and advisory fees


33,528



6,520



12,733



3,083Debt placement fees


5,552



5,355



7,934



2,926Guarantee fees


19,127



1,150



10,610



3,133Servicing fees


9,318



4,296



4,578



3,518Other income


6,054



5,747



2,881



3,463Total fee and other income


116,556



55,199



79,745



48,838Revenue from consolidated funds and ventures:Rental and other income from real estate


22,345



54,812



16,435



48,568Interest and other income






27,765







11,076Total revenue from consolidated funds and ventures


22,345



82,577



16,435



59,644Total revenue


293,055



284,758



229,748



231,762EXPENSES:Interest expense


100,532



89,672



83,652



67,931Salaries and benefits


88,195



79,970



67,812



62,933General and administrative


32,329



30,817



25,976



24,753Professional fees


12,246



12,089



11,177



9,279Depreciation and amortization


21,210



6,305



12,613



4,996Impairment on bonds


3,153



13,020



4,170



684Provisions for credit losses


1,424



5,117



1,389



4,981Other expenses






1,099







1,491Expenses from consolidated funds and ventures:Depreciation and amortization






19,585







21,705Interest expense






34,852







27,339Impairment on investments in unconsolidated Lower
    Tier Property Partnerships






30,327







35,585Other operating expenses






52,788







41,033Total expenses from consolidated funds and ventures






137,552







125,662Total expenses


259,089



375,641



206,789



302,710Net gains (losses) on sale of bonds


7,332



6,398



304



(147
)Net gains on sale of loans


9,401



12,509



3,393



5,510Net gain on sale of investments in tax credit equity partnerships


10,005







3,019



Net gains (losses) on derivatives


8,320



4,363



941



(4,430
)Net gains on sale of real estate














Net gains on sale of real estate from consolidated funds and
    ventures






19,655







5,805Equity in earnings (losses) from unconsolidated ventures


39,313



26,346



(2,494
)


403Equity in losses from unconsolidated Lower Tier Property
    Partnerships held by consolidated funds and ventures


(102,734
)


(281,162
)


(175,701
)


(238,674
)Income (loss) before income taxes and (income) loss allocable
    to non-controlling interests and discontinued operations


5,603



(302,774
)


(147,579
)


(302,481
)Income tax (expense) benefit


(2,341
)


(2,929
)


6,508



(2,923
)(Income) loss allocable to non-controlling interests:Distributions declared to perpetual preferred shareholders of
    subsidiary


(4,962
)


(4,962
)


(755
)


(755
)Net losses allocable to non-controlling interests from
    consolidated funds and ventures


79,623



327,761



177,562



294,840Income (loss) before discontinued operations


77,923



17,096



35,736



(11,319
)Discontinued operations


9,481



7,575



11,080



8,043Income (loss) before cumulative effect of a change in
    accounting principle


87,404



24,671



46,816



(3,276
)Cumulative effect of a change in accounting principle










520



Net income (loss)

$
87,404


$
24,671


$
47,336


$
(3,276
)     *
    
    Amounts have been reclassified
    to conform to the current consolidated financial statement
    presentation, except for previously consolidated LIHTC Funds and
    GP Take Backs. F-30




---



##### 



2005


2004As





AsPreviously





Previously(dollars in thousands)

Reported


As Restated


Reported


As RestatedNet cash provided by operating activities

$
47,211


$
68,953


$
94,336


$
38,123Net cash used in investing activities


(682,529
)


(1,235,401
)


(686,555
)


(940,835
)Net cash provided by financing activities


683,118



1,213,780



634,274



944,585Net increase in cash and cash equivalents

$
47,800


$
47,332


$
42,055


$
41,873Cash and cash equivalents at beginning of period


92,881



92,881



50,826



51,008Cash and cash equivalents at end of period

$
140,681


$
140,213


$
92,881


$
92,881         NOTE 3 
    INVESTMENTS
    IN UNCONSOLIDATED VENTURES  Investments
    in Real Estate Entities
    Investments
    in Common Stock of Special Purpose Financing Entities
  (MFH) (Trusts) (Preferred Securities)
  (Debentures)
 F-31




---



##### 



Investments
    in Unconsolidated Lower Tier Property Partnerships
        (dollars in thousands)

Ownership%


2006


2005Investments in Real Estate Entities:International Housing Solutions S.a.r.l


49.0
%

$
503


$
1,017CAPREIT TERA Venture, LLC


35.0



47



CAPREIT Three M Venture


35.0



31,020



47,176PSP/MMA investment ventures


10.0



1,576



TriSail/MMA Realty Capital Partners I, LP


25.0



14,015



Williams Pointe Limited Partnership


60.0



6,562



Investments in Common Stock of Special Purpose Financing Entities


100.0



2,750



2,750Investments in Unconsolidated Lower Tier Property
    Partnerships
    (1)


99.99



483,069



301,578Total





$
539,542


$
352,521     (1)
    
    Included in Investments in
    Unconsolidated Lower Tier Property Partnerships are
    unfunded equity commitments to the Lower Tier Property
    Partnerships of $336.0 million and $232.4 million at
    December 31, 2006 and 2005, respectively. In addition, the
    Company has existing lending arrangements and commitments to
    lend to these partnerships totaling $9.1 million and
    $14.7 million at December 31, 2006 and 2005,
    respectively.     F-32




---



##### 



(dollars in thousands)

2006


2005Total assets

$
589,851


$
567,021Total liabilities


484,647



522,570   NOTE 4 
    BONDS
    AVAILABLE-FOR-SALE        2006Amortized


Unrealized


Unrealized(dollars in thousands)

Cost


Gains


Losses


Fair ValueMortgage revenue bonds

$
1,362,122


$
91,802


$
(2,815
)

$
1,451,109Other municipal bonds


302,595



9,366



(562
)


311,399Retained interests in securitized bonds


4,448



3,157







7,605Total

$
1,669,165


$
104,325


$
(3,377
)

$
1,770,113   2005Amortized


Unrealized


Unrealized(dollars in thousands)

Cost


Gains


Losses


Fair ValueMortgage revenue bonds

$
1,225,778


$
82,212


$
(4,618
)

$
1,303,372Other municipal bonds


79,746



4,734







84,480Retained interests in securitized bonds


3,805



1,277







5,082Total

$
1,309,329


$
88,223


$
(4,618
)

$
1,392,934   Mortgage
    Revenue Bonds
     F-33




---



##### 



Other
    Municipal Bonds
    Transfers
    of Financial Assets
      Maturity
  available-for-sale
  (dollars in thousands)

Amortized Cost


Fair ValueNon-Amortizing:Due in less than one year

$
2,012


$
2,005Due between one and five years


11,997



15,271Due between five and ten years


8,815



8,991Due after ten years


105,148



136,518Amortizing:


127,972



162,785Due at regular intervals between June 2007 and May
    2055 (1)


1,541,193



1,607,328$
1,669,165


$
1,770,113     (1)
    
    This represents the final
    maturity date of the bonds. F-34




---



##### 



Bond
    Sales
    Investment
    in Bonds with Unrealized Losses
    2006Less than 12


More than 12(dollars in thousands)

Months


Months


TotalNumber of bonds


15



17



32Fair value

$
97,229


$
106,764


$
203,993Unrealized losses


(1,086
)


(2,291
)


(3,377
)   2005Less than 12


More than 12(dollars in thousands)

Months


Months


TotalNumber of bonds


21



7



28Fair value

$
146,719


$
25,396


$
172,115Unrealized losses


(2,323
)


(2,295
)


(4,618
)         Impairment
    Unfunded
    Bond Commitments
   F-35




---



##### 



NOTE 5 
    LOANS
    HELD FOR INVESTMENT AND LOANS HELD FOR SALE    Construction loans lease-up
  Permanent loans lease-up
  Bridge loans
  Other loans
    Loans
    Held for Investment
    (dollars in thousands)

2006


2005Loan type:Construction

$
276,856


$
529,778Permanent


6,240



22,675Bridge


202,028



106,194Other


40,653



53,743525,777



712,390Allowance for loan losses


(10,877
)


(4,116
)Loans held for investment, net

$
514,900


$
708,274      F-36




---



##### 



(dollars in thousands)

2006


2005Impaired loans with an allowance for loan losses

$
25,278


$
8,999Impaired loans without an allowance for loan
    losses (1)


94,876



95,847Total impaired loans

$
120,154


$
104,846Allowance for loan losses on impaired
    loans (2)

$
7,290


$
3,128     (1)
    
    A loan is impaired when it is
    probable that a creditor will be unable to collect all amounts
    due according to the contractual terms of the loan agreement;
    however, when the discounted cash flows, collateral value or
    market price equals or exceeds the carrying value of the loan,
    the loan does not require an allowance under
    SFAS 114.(2)
    
    The allowance for loan losses on
    impaired loans is a specific component of the Companys
    overall allowance for loan losses.    (dollars in thousands)

2006


2005


2004Average recorded investment of impaired loans

$
113,791


$
101,951


$
95,975     Unfunded
    Loan Commitments
        Loans
    Held for Sale
    (dollars in thousands)

2006


2005Loan type:Construction

$
31,780


$
4,330Permanent


76,295



41,445Bridge


256,546



30,741Other


53,126



Loans held for sale

$
417,747


$
76,516  F-37




---



##### 



Agency
    Lending Programs
    
    Fannie Maes DUS program
    Freddie Mac Targeted Affordable Housing and Program Plus programs
    Ginnie Mae Mortgage Backed Security program
    Federal Housing Administration (FHA)
    HUDs Multifamily Accelerated Processing program  (MMIC)
  NOTE 6 
    ALLOWANCE
    FOR LOAN LOSSES AND PROVISION FOR CREDIT LOSSES    (dollars in thousands)

2006


2005


2004Balance-January 1,

$
4,116


$
4,370


$
1,266Provision for loan losses


12,180



4,830



4,870Write-offs


(5,419
)


(5,084
)


(1,766
)Balance-December 31,

$
10,877


$
4,116


$
4,370     (dollars in thousands)

2006


2005


2004Provision for loan losses

$
12,180


$
4,830


$
4,870Provision for credit losses on unfunded commitments


300



100



100Provision for loss sharing on servicing portfolio


77



187



11Provision for credit losses

$
12,557


$
5,117


$
4,981    F-38




---



##### 



NOTE 7 
    PROPERTY
    AND EQUIPMENT    Useful Life(dollars in thousands)

2006


2005


(in years)Property and equipment:Furniture and fixtures

$
2,863


$
2,868



7Equipment


2,355



2,313



5 to 7Leasehold improvements


8,609



7,953



up to 15Software


1,864



2,752



5Leased equipment


2,822



2,433



1 to 6Solar facilities


16,196







20 to 3034,709



18,319Accumulated depreciation


(7,033
)


(5,374
)Total

$
27,676


$
12,945           (dollars in thousands)2007

$
2502008


2502009


2502010


2502011


250Thereafter


3,739Total

$
4,989    F-39




---



##### 



NOTE 8 
    MORTGAGE
    SERVICING RIGHTS    (dollars in thousands)

2006


2005Balance-January 1,

$
71,774


$
17,528MSRs obtained through a business combination






51,184MSRs retained on sales of loans


14,040



11,316MSRs written off due to payoff of loans


(4,660
)


(3,048
)Amortization


(9,080
)


(5,302
)Recovery of valuation allowance






96Balance-December 31,

$
72,074


$
71,774         Weighted-average discount rate

10.36%Weighted-average call protection period

8.6 yearsFloat and escrow earnings rate

2.20% to 5.34%       (dollars in thousands)Fair value of MSRs at December 31, 2006

$
90,991Discount rate:Fair value after impact of +20% change


83,377Fair value after impact of +10% change


87,026Float and escrow earnings rate:Fair value after impact of -10% change


88,054Fair value after impact of -20% change


85,118Prepayment speed:Fair value after impact of +20% change


88,495Fair value after impact of +10% change


89,709  F-40




---



##### 



(dollars in thousands)2007

$
8,8792008


8,4392009


7,9342010


7,3452011


6,667Thereafter


32,810Total

$
72,074   NOTE 9 
    ACQUISITIONS,
    GOODWILL AND OTHER INTANGIBLE ASSETS  Acquisition
    of Glaser Financial Group (Glaser)
    
    Cash of $50.8 million;
    Three deferred payments of at least $4.0 million (the
    Deferred Purchase Price) on each of the first
    three anniversaries of the closing date (with an estimated fair
    value of $10.3 million);
    Transaction costs of $0.6 million; and
    Contingent consideration of approximately $5.0 million for
    achievement of certain operating performance thresholds.     F-41




---



##### 



(dollars in thousands)Assets:Loans held for sale

$
40,596Cash and cash equivalents


2,171Restricted cash


7,100Other assets


8,066Mortgage servicing rights


51,184Goodwill (1)


24,853Other intangible assets


8,925Total assets


142,895Liabilities:Short-term debt


53,267Accounts payable, accrued expenses and interest payable


1,109Deferred tax liabilities


24,240Other liabilities


2,618Total liabilities


81,234Fair value of net assets acquired

$
61,661     (1)
    
    Goodwill presented in the table
    does not reflect a reduction for the Companys realization
    of deferred tax assets as a result of the acquisition. See
    Goodwill section below.  Transaction
    Pipeline
    Years EndedDecember 31,(Unaudited)(dollars in thousands, except per share data)

2005


2004Revenue

$
291,756


$
248,935Net income (loss)


23,028



(2,878
)Net income (loss) per basic common share


0.61



(0.08
)Net income (loss) per diluted common share


0.60



(0.08
)   Other
    Acquisitions
    
    In May 2006, Reventures Management Company, LLC (subsequently
    renamed MMA Renewable Ventures, LLC (ReVen)),
    a renewable energy finance company, was acquired. The purchase
    price was comprised of $2.4 million paid in cash,
    $0.6 million paid with shares of common stock and
    contingent consideration of $12.0 million for achievement
    of certain operating performance thresholds. The transaction was
    treated as an asset purchase; accordingly no goodwill was
    recorded.
    In February 2005, MONY Realty Capital, Inc.
    (MONY), a subsidiary of AXA Financial, Inc.
    (AXA) that provides loan origination, asset
    management and investment advisory services primarily to
    institutional investors was acquired for a net purchase price of
    $9.7 million comprised of cash paid to AXA of
    $8.5 million and transaction costs of approximately
    $1.2 million. As part of the MONY purchase price
    allocation, the Company recorded $4.5 million of goodwill,
    $2.4 million of which is deductible for tax purposes.
    Goodwill associated with this acquisition was allocated to the
    Merchant Banking segment. F-42




---



##### 



Goodwill
    Tax Credit


Agency


Merchant(dollars in thousands)

Equity


Lending


Banking


TotalJanuary 1, 2005

$
71,104


$
16,802


$
1,248


$
89,154Acquisitions






24,853



4,452



29,305Deferred tax asset adjustment
    (1)






(20,613
)






(20,613
)December 31, 2005


71,104



21,042



5,700



97,846Acquisitions






4,497



85



4,582December 31, 2006

$
71,104


$
25,539


$
5,785


$
102,428     (1)
    
    The deferred tax liabilities
    recorded as part of the purchase accounting of Glaser will
    become future taxable income that provided the Company the
    ability to support the realization of a portion of the
    Companys deferred tax assets thus allowing the Company to
    reduce its valuation allowance recorded prior to the Glaser
    acquisition. The reduction of the valuation allowance is treated
    as a reduction of the acquired goodwill related to
    Glaser.    Other
    Intangible Assets
    Estimated Useful


Acquisition


Net Carrying Amount(dollars in thousands)

Life (in years)


Value


2006


2005Finite-lived intangible assets:Asset management contracts


8.2


$
4,430


$
1,063


$
2,963Customer relationships


3.6



14,281



4,707



2,914Transaction pipeline


3.4



8,835



847



2,429Other intangibles


4.9



2,609



211



2,094Weighted-average/subtotal


4.3



30,155



6,828



10,400Indefinite-lived intangible assets:License agreements


N/A



10,700



10,700



10,700Total other intangible assets, net





$
40,855


$
17,528


$
21,100   Finite-lived
   F-43




---



##### 



(dollars in thousands)2007

$
2,6432008


1,8772009


1,7922010


1872011


152Thereafter


177Total

$
6,828   HCI
  Indefinite-lived
    NOTE 10 
    DERIVATIVE
    FINANCIAL INSTRUMENTS       F-44




---



##### 



2006


2005Notional


Fair Value


Notional


Fair Value(dollars in thousands)

Amount


Assets


Liabilities


Amount


Assets


LiabilitiesInterest rate swaps

$
744,865


$
3,162


$
(3,565
)

$
337,850


$
3,827


$
(1,415
)Interest rate lock commitments


203,213



438



(1,471
)


215,595



1,234



(600
)Forward loan sales commitments


180,559



2,008



(396
)


157,860



1,071



(1,063
)Put options


113,074







(9,148
)


144,939







(11,068
)Bonds purchase commitments


24,240



1,444



(11
)


53,965



634



Total return swaps


8,200







(272
)


41,255



395



(199
)Embedded derivatives


1,212,207







(3,266
)


782,360







(2,685
)Total derivative financial instruments





$
7,052


$
(18,129
)





$
7,161


$
(17,030
)   Interest
    Rate Swaps
    SIFMA index LIBOR
  Interest
    Rate Lock Commitments
  IRLCs
  Forward
    Loan Sales Commitments
  (GSEs)
 F-45




---



##### 



Put
    Options
    Bond
    Purchase Commitments
  (CDD)
    Total
    Return Swaps
    Embedded
    Derivatives
    NOTE 11 
    DEBT   F-46




---



##### 



Weighted-





Weighted-Average





Average(dollars in thousands)

2006


Interest
    Rate (1)


2005


Interest
    Rate (1)Line of credit facilities:Due within one year

$
322,502



8.0
%

$
344,921



5.0
%Due after one year










43,890



5.9Repurchase facilities:Due within one year


211,825



6.5







Senior interests and debt owed to securitization trusts


1,141,464



4.1



767,376



3.8Notes payable and other debt:Due within one year


161,684



5.9



189,893



7.2Due after one year


206,155



7.1



129,905



7.1Subordinate debentures:Due after one year


175,500



8.6



175,500



8.6Total
    (2)

$
2,219,130






$
1,651,485     (1)
    
    Certain institutions provide the
    Company with interest credits based on balances held in escrow
    related to the Companys loan servicing portfolio. These
    credits are used to offset amounts charged for interest expense
    on outstanding line of credit balances. These weighted-average
    interest rates exclude the effects of any such interest
    credits.(2)
    
    See Note 15,
    Shareholders Equity and Preferred Shares, for
    discussion of the Companys debt related to mandatorily
    redeemable preferred shares and Note 20, Consolidated
    Funds and Ventures, for discussion of the Companys
    debt related to consolidated funds and ventures.  Line of
    Credit Facilities
    2006


2005Note

Interest Reference

Total





TotalCreditor

Ref.

Index

Line of Credit


Outstanding


Line of Credit


Outstanding(dollars in thousands)Bank of America

A

Various index rates based on

$
415,000


$
190,573


$
532,000


$
260,176prime or LIBOR plus spreadU.S. Bank

B

Prime rate or LIBOR plus spread


225,000



57,676



160,000



84,745WaMu

C

LIBOR plus spread


175,000



12,000







SunTrust Bank

D

LIBOR plus spread


30,000



28,253



30,000



21,890Compass Bank

E

LIBOR plus spread


22,000



22,000



22,000



22,000Synovus Bank

F

Prime plus/minus spread


60,000



12,000



60,000



Fifth Third Bank

G

Prime minus spread


20,000







20,000



MMIT

H

Prime minus spread


160,000







160,000



REIT

I

Prime


35,000







35,000



$
1,142,000


$
322,502


$
1,019,000


$
388,811     A.
    
    At December 31, 2006, the Company had two lines of credit
    outstanding with Bank of America. The first was a
    $250.0 million line with a maturity date of May 14,
    2007, used for the Companys Affordable Bond, Affordable
    Debt and Merchant Banking segments. This line was subsequently
    extended to May 12, 2008. On February 15, 2008,
    the Company paid off this line and it was terminated. The second
    line of credit was a $165.0 million line with a maturity
    date of May 3, 2007, used for the Companys Tax Credit
    Equity segment. The line was subsequently extended to
    May 1, 2008. In March 2008, this line was renegotiated by
    the parties, resulting in MMA Multifamily Equity REIT
    (REIT) replacing Bank of America as the
    lender under the agreement. The Company provides the REIT with
    investment F-47




---



##### 



management services (see Note 19, Related Party
    Transactions and Transactions with Affiliates). As part of
    transferring the line to the REIT, the agreement was amended to
    (a) reduce the maximum amount available to be borrowed
    under the line to the lesser of $38.6 million or an amount
    equal to 50 percent of the cost of certain collateral and
    (b) increase the interest rate to the greater of
    (i) LIBOR plus 700 basis points or
    (ii) 10.5 percent. All amounts owed under the
    agreement were to be repaid on or before September 30,
    2008, which was subsequently extended to June 30, 2009. The
    credit facility continues to be secured by equity interests
    owned by subsidiaries of the Company relating to affordable
    housing projects financed by them.At December 31, 2005, the Company had four lines of credit
    outstanding with Bank of America. The first two were the
    $250.0 million line and the $140.0 million line
    discussed above (the $140.0 million line was increased to
    $165.0 million in 2006). The remaining two lines of credit
    were a $72.0 million line and a $70.0 million line
    that were used to warehouse loans for MRC Mortgage Investment
    Trust (MMIT), an entity for which the Company
    acts as investment manager. See Note 19, Related
    Party Transactions and Transactions with Affiliates. These
    two lines were assumed by MMIT in December 2006.B.
    
    At December 31, 2006, the Companys
    $225.0 million line of credit with U.S. Bank was scheduled
    to mature on November 30, 2007. On July 25, 2006, the
    line of credit was increased from the
    December 31, 2005 commitment of $160.0 million to
    $310.0 million to facilitate the financing of three
    multifamily portfolio loan transactions. The revolving
    commitment subsequently was decreased to $225.0 million
    through December 31, 2006 and then to $180.0 million
    from January 1, 2007, to the maturity date. On
    November 30, 2007, the Company further extended the
    maturity of this facility through March 31, 2008. The loan
    matured on March 31, 2008; however, the loan was not paid
    off as the Company renegotiated the terms and on April 30,
    2008, executed an amendment to the facility. The key changes to
    this facility were that it (i) extended the Companys
    ability to request advances under the agreement beyond the
    agreements April 30, 2008 expiration date subject to
    the other changes made by the amendment; (ii) converted the
    agreement to a wholly discretionary facility so that U.S. Bank
    may decide at its sole discretion whether to make any advance
    requested by the Company from time to time under the agreement,
    and such advances will be payable upon demand;
    (iii) required the Company to payoff certain advances by
    May 22, 2008, which the Company did; and (iv) waived
    any default or event of default from the Companys failure
    to provide 2006 audited financial statements for the
    Companys borrowing subsidiary, MMIC, provided that such
    financial statements are provided on or before
    June 30, 2008, which the Company did.On November 14, 2008, the Company executed another
    amendment to the facility. The key changes to this facility were
    to (i) increase the minimum adjusted tangible net worth
    permitted from $27.0 million to $60.0 million;
    (ii) decrease the revolving commitment from
    $180.0 million to $50.0 million; (iii) increase
    the facility fee to 0.25% per annum on the revolving commitment
    and increase the interest rate that the Company pays on the
    revolving investment advances and revolving warehousing advances
    to 1.00% and 1.75%, respectively; and (iv) change the
    monthly reporting requirements to include unaudited financial
    statements for MMIC. U.S. Bank also waived any default or event
    of default from the Companys failure to provide 2007
    audited financial statements and compliance certificates for the
    months ended July 31, 2008 and August 31, 2008,
    for MMIC. The Company delivered the completed MMIC 2007 audited
    financial statements and compliance certificates to U.S. Bank on
    November 4, 2008.This line terminates at the earlier of (i) the date U.S.
    Bank terminates the loan due to an event of default; or
    (ii) on the date the Company repays all amounts outstanding.C.
    
    At December 31, 2006, the Company held two lines of credit
    with WaMu. The first line of credit entered into in May 2006 was
    a $70.0 million Warehousing Credit and Security Agreement
    to finance the acquisition of mortgage loans. On
    December 21, 2006, the Company decreased the size of the
    line from $70.0 million to $50.0 million. The line was
    set to mature on April 1, 2008; however, on
    November 30, 2007, the Company paid off and terminated
    the line of credit. The second line of credit entered into in
    May 2006 provided for WaMu to fund up to $125.0 million of
    certain qualifying mortgage loans from the Company. This
    facility was paid off at maturity on February 1, 2008. F-48




---



##### 



D.
    
    In August 2005, the Company entered into a revolving warehouse
    facility of up to $30.0 million with SunTrust Bank with a
    maturity date of August 31, 2008. In August 2008, the
    Company entered into an agreement with SunTrust Bank that
    prohibited additional advances above the $21.2 million
    outstanding at the date of the modification, increased the
    interest rate spread and extended the maturity date to
    November 28, 2008. In November 2008, the Company
    entered into an agreement with SunTrust Bank that required the
    Company to make a principal payment of $0.3 million in
    November 2008 and monthly principal payments of
    $0.1 million thereafter, increased the interest rate spread
    and extended the maturity date to May 20, 2009.E.
    
    In June 2005, the Company entered into a term financing facility
    of up to $22.0 million with Compass Bank with a maturity
    date of May 1, 2010.F.
    
    In December 2004, the Company renewed the $60.0 million
    facility with Synovus Bank with a new maturity date of
    February 23, 2007. In February 2007, the Company entered
    into an agreement with Synovus that increased the existing
    financing facility to $100.0 million and extended the
    maturity date of the facility to March 1, 2009. In November
    2008, the Company entered into an agreement with Synovus that
    extended the maturity date of the facility to May 31, 2009.G.
    
    The Company has a $20.0 million facility with Fifth Third
    Bank that has no specified maturity date. The Company is
    currently in the process of negotiating an amendment to this
    facility. The Company made a principal payment of
    $1.0 million in December 2008 and will continue to make
    monthly principal payments of $0.2 million thereafter until
    the outstanding balance is fully repaid and the line is
    terminated.H.
    
    In June 2002, the Company entered into a $160.0 million
    lending facility with MMIT with a stated maturity date of
    December 31, 2005. However, the facility is automatically
    extended for successive one year terms unless cancelled by MMIT.
    The facility was automatically extended through
    December 31, 2008. Since December 31, 2006, the
    Company has not drawn on this line and it was terminated in
    November 2008.I.
    
    In October 2003, the Company entered into a lending facility
    with the REIT with a stated maturity date of December 31,
    2005. However, the facility is automatically extended for
    successive one year terms unless cancelled by the REIT. The
    facility was automatically extended through December 31,
    2008. Since December 31, 2006, the Company has not drawn on
    this line and it was terminated in November 2008.  Repurchase
    Facilities
  Purchase
    Agreement Wachovia
  Senior
    Interests and Debt Owed to Securitization Trusts
   F-49




---



##### 




    Merrill Lynch, Pierce, Fenner & Smith Incorporated
    Puttable Floating Option Tax-Exempt Receipts
    (P-FLOATsSM)

    program for some of the Companys mortgage revenue bonds
    and other municipal bonds with Merrill Lynch Capital Services,
    Inc. (Merrill Lynch), Fannie Mae, Freddie Mac
    or Financial Security Assurance (FSA) as
    credit enhancement provider; and for the Companys
    high-investment grade other municipal bonds requiring no
    additional credit enhancement with Merrill Lynch as the
    liquidity provider;
    MuniMae Trust Program (MuniMae Trust)
    for some of the Companys mortgage revenue bonds with
    Freddie Mac as the credit enhancement and liquidity provider;
    Trust Inverse Certificates/Tender Option Certificates
    Trust Program (TIC/TOC Trust) for some
    of the Companys mortgage revenue bonds with MBIA Insurance
    Corporation (MBIA) as credit enhancement
    provider and Bayerische Landesbank (BLB) as
    the liquidity provider;
    Tax-Exempt Municipal Infrastructure Improvement
    Trust Program (Infrastructure Trust) for
    some of the Companys other municipal bonds using Compass
    Bank as the credit enhancement provider; and
    TEBS Tax-Exempt Multifamily Housing Certificates, a
    long-term fixed-rate pooled securitization program
    (Term Debt) for some of the Companys
    mortgage revenue bonds.           F-50




---



##### 



2006Nature of Senior

Credit Enhancement



Senior SecuritiesProgram

Security

Provider

Liquidity Provider

Outstanding(dollars in thousands)P-FLOATsSM

Weekly reset floating rate

Merrill Lynch, FSA or Fannie Mae

Merrill Lynch

$       721,145MuniMae Trust

Fixed

Freddie Mac

Freddie Mac

63,335TIC/TOC Trust

Weekly reset floating rate

MBIA

BLB

93,700Infrastructure Trust

Fixed

Compass Bank

N/A

40,292Term Debt

Fixed

N/A

N/A

191,509Other

Fixed, Weekly reset floating rate

SunTrust

SunTrust

31,483$ 1,141,464   2005Nature of Senior

Credit Enhancement



Senior SecuritiesProgram

Security

Provider

Liquidity Provider

Outstanding(dollars in thousands)P-FLOATsSM

Weekly reset floating
    rate (1)

Merrill Lynch, FSA or Fannie Mae

Merrill Lynch

$      522,869MuniMae Trust

Fixed

Freddie Mac

Freddie Mac

63,585TIC/TOC Trust

Weekly reset floating rate

MBIA

BLB

94,000Infrastructure Trust

Fixed

Compass Bank

N/A

40,772Other

Fixed, Weekly reset floating rate

SunTrust

SunTrust

46,150$ 767,376     (1)
    
    At December 31, 2005,
    $80.7 million of senior securities had a fixed-rate for a
    term of one to three years.  Notes
    Payable and Other Debt
    Subordinate
    Debentures
     F-51




---



##### 



Interest

Interest

Optional




DebenturesPreferred


Interest


Rate Reset

Rate After

Redemption




MaturityIssue Date

Trust

Securities


Rate


Date

Interest Reset Date

Date

Debentures


Date(dollars in thousands)May 2004 and September 2004

MFH Trust I

$
84,000



9.5
%

May 2014

Greater of 9.5% per annum or 6.0% plus 10 year U.S.
    Treasury Note rate

May 5, 2014

$
84,000


May 5, 2034March 2005

MFH Trust II


51,550



8.1


March 2015

3 month LIBOR plus 3.30%

March 30, 2010


51,550


March 30, 2035June 2005

MFH Trust III


39,950



7.6


June 2015

3 month LIBOR plus 3.30%

July 30, 2010


39,950


July 30, 2035   30-year
  Covenant
    Compliance and Debt Maturities
      (dollars in thousands)2007

$
696,0112008


100,5052009


842010


151,5902011


38,647Thereafter


90,829Total


1,077,666Senior interests and debt owed to securitizations trusts


1,141,464Total

$
2,219,130   Letters
    of Credit
   F-52




---



##### 



Capital
    Leases
      (dollars in thousands)2007

$
5462008


3172009


802010


272011


6Thereafter


Total minimum lease payments


976Less: Amount representing interest


(66
)Present value of net minimum lease payments

$
910   NOTE 12 
    FAIR
    VALUE OF FINANCIAL INSTRUMENTS  Disclosures about Fair Value of Financial
    Instruments SFAS 107
  Cash and cash equivalents, restricted cash
  Bonds available-for-sale
  Loans held for investment, net of allowance for loan losses
  Loans held for sale
  Mortgage servicing rights, net
  Derivative assets and liabilities
 F-53




---



##### 



Interest-only securities
  Line of credit and repurchase facilities
  Senior interests and debt owed to securitization trusts
  Notes payable and other debt
  Subordinate debentures and mandatorily redeemable preferred
    shares
  Guarantee obligations
  Assets and liabilities of consolidated funds and ventures:
  Cash and restricted cash
  Loans held for sale
  Bridge financing
  Mortgage debt
  Mortgage debt included in Liabilities related to assets held
    for sale
  Notes Payable
  Off-Balance Sheet Financial Instruments:
  Lending commitments
   F-54




---



##### 



2006


2005Carrying


Estimated


Carrying


EstimatedAmount


Fair Value


Amount


Fair Value(dollars in thousands)Assets:Cash and cash equivalents

$
49,085


$
49,085


$
140,213


$
140,213Restricted cash


14,927



14,927



26,804



26,804Bonds available-for-sale


1,770,113



1,770,113



1,392,934



1,392,934Loans held for investment, net of allowance for loan losses


514,900



516,428



708,274



706,360Loans held for sale


417,747



423,937



76,516



77,879Mortgage servicing rights, net


72,074



90,991



71,774



82,583Derivative assets


7,052



7,052



7,161



7,161Interest-only securities


10,659



10,659



9,547



9,547Assets of consolidated funds and ventures:Cash and restricted cash


289,543



289,543



327,831



327,831Loans held for sale


55,956



55,956



279,424



279,424Liabilities:Line of credit facilities


322,502



322,502



388,811



388,811Repurchase facilities


211,825



211,825







Senior interests and debt owed to securitization trusts


1,141,464



1,139,800



767,376



767,494Notes payable and other debt


367,839



367,839



319,798



319,798Subordinate debentures


175,500



172,346



175,500



175,023Mandatorily redeemable preferred shares


162,168



173,686



162,150



176,223Guarantee obligations


6,819



6,819



6,993



6,993Derivative liabilities


18,129



18,129



17,030



17,030Liabilities of consolidated funds and ventures:Bridge financing


374,025



374,025



74,599



74,599Mortgage debt


150,605



136,307



182,375



169,165Mortgage debt included inLiabilities related to assets held for sale










42,986



39,780Notes payable


563,515



560,461



592,611



589,217Notional


Estimated


Notional


EstimatedAmount


Fair Value


Amount


Fair ValueOff-Balance Sheet Financial Instruments:Lending Commitments

$
291,776


$
(483
)

$
376,341


$
(1,299
)  F-55




---



##### 



NOTE 13 
    GUARANTEES
    AND COLLATERAL  Guarantees
    2006


2005Note


Maximum


Carrying


Maximum


CarryingRef.


Exposure


Amount


Exposure


Amount(dollars in thousands)Mortgage banking loss-sharing agreements


A


$
574,136


$
4,174


$
492,823


$
3,832Indemnification contracts


B



103,224



1,499



102,975



1,582Other financial/payment guarantees


C



66,033



1,146



67,363



1,391Letters of credit guarantees


D



50,924







50,473



188$
794,317


$
6,819


$
713,634


$
6,993     A.
    
    As a Fannie Mae DUS lender and Ginnie Mae loan servicer, the
    Company has exposure to losses and/or servicing advances
    relating to defaulted real estate mortgage loans sold under the
    Fannie Mae DUS program and loans sold to third parties that are
    guaranteed by Ginnie Mae and insured by HUD. More specifically,
    if the borrower fails to make a payment of principal, interest,
    taxes or insurance premiums on a DUS loan the Company originated
    and sold to Fannie Mae, it may be required to make servicing
    advances to Fannie Mae. Also, as a requirement of the DUS
    program, the Company has agreed to share in the loss of
    principal after foreclosure on Fannie Mae DUS loans. The Company
    maintains a reserve for the potential losses in an amount equal
    to the estimated fair value of the liability which is amortized
    and reflected as the carrying amount in the table above. The
    Companys actual cash payments made to Fannie Mae under its
    DUS loss sharing agreement were zero for all three years ended
    December 31, 2006, 2005 and 2004. Subsequent to
    December 31, 2006 and through December 31, 2008, the
    Company paid $0.4 million under the DUS loss-sharing
    agreement. In addition, the Company has exposure to losses
    related to defaulted real estate mortgage loans which are
    delivered to investors by the Company, guaranteed by Ginnie Mae
    and insured by HUD. The Companys exposure to these losses
    is limited to the amount which is not covered by the Ginnie Mae
    guarantee and HUD insurance, and is equal to approximately one
    months interest on each loan.B.
    
    The Company has entered into indemnification contracts with
    investors in the Companys LIHTC Funds to compensate them
    for losses resulting from a recapture of tax credits due to
    foreclosure or difficulties in reaching occupancy milestones
    with respect to LIHTC Funds. The Companys actual cash
    payments made under these indemnification agreements were zero
    for all three years ended December 31, 2006, 2005 and 2004.
    Subsequent to December 31, 2006, and through
    December 31, 2008, the Company has not made any payments
    related to these obligations.C.
    
    The Company has entered into arrangements that require it to
    make payments in the event that a third party fails to perform
    on its financial obligations. Generally, the Company provides
    these guarantees in conjunction with the sale or placement of an
    asset with a third party. The terms of such guarantees vary
    based on the performance of the asset.D.
    
    The Company provides a guarantee for the repayment of losses
    incurred under letters of credit issued by third parties.   F-56




---



##### 



Collateral
    and restricted assets
    2006Investments inNote


Restricted


Tax-exempt


Taxable


Loans


Unconsolidated(dollars in thousands)

Ref.


Cash


Bonds


Bonds


Receivable


Ventures


TotalLIHTC Fund cash


A


$
6,518


$



$



$



$



$
6,518Guaranteed LIHTC Funds collateral


B



401



















401Bonds held in securitization trusts


C







1,174,844















1,174,844Collateral for securitization programs:


DMerrill Lynch P-Floats






1,415



123,120















124,535MBIA






4,200



54,951















59,151Multifamily Housing Trust










171,086















171,086Term Securitization Facility










52,793















52,793Notes payable, warehouse lending and lines of credit


E











22,000



732,724



483,069



1,237,793Other collateral


F



8,911



34,380



8,048











51,339Total





$
21,445


$
1,611,174


$
30,048


$
732,724


$
483,069


$
2,878,460   2005Investments inNote


Restricted


Tax-exempt


Taxable


Loans


Unconsolidated(dollars in thousands)

Ref.


Cash


Bonds


Bonds


Receivable


Ventures


TotalLIHTC Fund cash


A


$
5,307


$



$



$



$



$
5,307Guaranteed LIHTCFunds collateral


B



2,000



















2,000Bonds held in securitization trusts


C







765,004















765,004Collateral for securitization programs:


DMerrill Lynch P-Floats










113,631















113,631MBIA






17,000



84,926















101,926Multifamily Housing Trust










148,388















148,388Notes payable, warehouse lending and lines of credit


E











22,000



638,450



301,578



962,028Other collateral


F



7,804



52,593



8,144











68,541Total





$
32,111


$
1,164,542


$
30,144


$
638,450


$
301,578


$
2,166,825     A.
    
    Due to the consolidation of certain LIHTC Funds in accordance
    with FIN 46(R), legally restricted cash of the funds is reported
    in the Companys consolidated balance sheets. Restricted
    cash held within the LIHTC Funds is typically restricted for use
    on a specific property held by a LIHTC Fund.B.
    
    The Company may provide guarantees in connection with the
    syndication of certain LIHTC Funds. In connection with these
    guarantees, at times, the Company is required to pledge certain
    levels of collateral in the form of cash and cash equivalents,
    and letters of credit.C.
    
    Pursuant to SFAS 140 and FIN 46(R), included in the
    Companys consolidated balance sheets are bonds that are
    held in securitization trusts. At December 31, 2006 and
    2005, the Company had $1.2 billion and $765.0 million
    of bonds held in securitization trusts, respectively, and
    $7.6 million and $5.1 million of retained interests in
    bond securitizations, respectively.D.
    
    In order to facilitate the securitization of certain assets at
    higher leverage ratios than otherwise available to the Company,
    the Company has pledged additional bonds to a pool that acts as
    collateral for senior interests in certain securitization trusts
    and credit enhancement facilities. From time to time, cash or
    cash equivalents may also be posted to this pool. F-57




---



##### 



E.
    
    The Company pledges bonds, loans and investments in affordable
    housing projects as collateral for notes payable, warehouse
    lending arrangements and line of credit borrowings.F.
    
    The Company pledges collateral in connection with other
    guarantees, derivative transactions, first loss positions and
    leases. In addition, the Company may elect to pledge collateral
    on behalf of the Companys customers in order to facilitate
    credit and other collateral requirements.  NOTE 14 
    COMMITMENTS
    AND CONTINGENCIES  Operating
    Leases
        (dollars in thousands)2007

$
6,4692008


5,5892009


5,3192010


5,0522011


4,463Thereafter


13,938Total minimum future rental commitments

$
40,830     Litigation
    Other
   F-58




---



##### 



NOTE 15 
    SHAREHOLDERS
    EQUITY AND PREFERRED SHARES  Common
    Shares
      Operating Agreement
  Earnings
    Per Share
    2006


2005


2004Basic


Diluted


Basic


Diluted


Basic


Diluted(dollars and shares in thousands)Earnings (loss) from continuing operations

$
44,029


$
44,029


$
17,096


$
17,096


$
(11,319
)

$
(11,319
)Discontinued operations


9,618



9,618



7,575



7,575



8,043



8,043Net income (loss)

$
53,647


$
53,647


$
24,671


$
24,671


$
(3,276
)

$
(3,276
)Weighted-average shares outstanding
    (1)


38,535



38,535



37,696



37,696



34,504



34,504Dilutive securities:Options and employee deferred shares






184







269







251Deferred shares from acquisition






393







236







Adjusted weighted-average shares


38,535



39,112



37,696



38,201



34,504



34,755     (1)
    
    Includes both common shares
    issued and outstanding, as well as non-employee directors
    deferred shares for which a common share or a restricted share
    has not yet been issued, but does not include options and
    employee deferred shares that have not vested.  Preferred
    Shares
  TE Bond Sub
     F-59




---



##### 



Mandatorily
    Redeemable Preferred Shares
    FirstNumber of


Par Amount





Remarketing

Mandatory

RedemptionSeries

Issue Date

Shares


per Share


Dividend Rate


Date

Tender Date

DateSeries A

May 27, 1999


42


$
2,000,000



6.88
%

June 30, 2009

June 30, 2009


June 30, 2049Series A-1

October 9, 2001


8



2,000,000



6.30


June 30, 2009

June 30, 2009


June 30, 2049Series B

June 2, 2000


30



2,000,000



7.75


November 1, 2010

November 1, 2010


June 30, 2050Series B-1

October 9, 2001


4



2,000,000



6.80


November 1, 2010

November 1, 2010


June 30, 2050   A-1 A-1, A-1
    Perpetual
    Preferred Shareholders Equity in a Subsidiary
    Company
    FirstNumber of


Par Amount





Remarketing


OptionalSeries

Issue Date

Shares


per Share


Dividend Rate


Date


Redemption DateSeries A-2

October 19, 2004


10


$
2,000,000



4.90
%


September 30, 2014



September 30, 2014Series A-3

November 4, 2005


9



2,000,000



4.95



September 30, 2012



September 30, 2012Series A-4

November 4, 2005


8



2,000,000



5.13



September 30, 2015



September 30, 2015Series B-2

October 19, 2004


7



2,000,000



5.20



September 30, 2014



September 30, 2014Series B-3

November 4, 2005


11



2,000,000



5.30



September 30, 2015



September 30, 2015Series C

October 19, 2004


13



1,000,000



4.70



September 30, 2009



September 30, 2009Series C-1

October 19, 2004


13



1,000,000



5.40



September 30, 2014



September 30, 2014Series C-2

October 19, 2004


13



1,000,000



5.80



September 30, 2019



September 30, 2019Series C-3

November 4, 2005


10



1,000,000



5.50



September 30, 2015



September 30, 2015Series D

November 4, 2005


17



2,000,000



5.90



September 30, 2015



September 30, 2020    F-60




---



##### 



NOTE 16 
    STOCK-BASED COMPENSATION
  Plans Non-employee Directors plan Employees Stock-based Compensation
    plan
          Employees
    Stock-Based Compensation
  non-qualified
  Employee
    Common Stock Options
   F-61




---



##### 



Black-


Black-Lattice Model at


Lattice Model


Scholes


ScholesDecember 31,


2006


2005


20042006


Grant Date


Grant Date


Grant DateWeighted-average:Expected term in years
    (1)










6.5



6.5Annual risk-free interest rate


4.7
%


4.7
%


4.0
%


4.0
%Expected volatility


12.3
%


12.3
%


14.1
%


15.7
%Expected dividend yield


7.5
%


7.5
%


7.3
%


7.3
%     (1)
    
    The expected term of the option
    is an input into the Black-Scholes model; however, it is an
    output from the lattice model and was calculated to be
    4.1 years at December 31, 2006, and 5.8 years for
    the 2006 grant.  Share-Based Payment SAB 107
   F-62




---



##### 



Weighted-


Weighted-average


averageExercise


Remaining


AggregateNumber of


Price per


Contractual Life


IntrinsicOptions


Option


(in years)


Value(dollars and options in thousands, except per option data)Outstanding at January 1, 2004


712.7


$
18.17Granted






Exercised


(273.8
)


19.05Outstanding at December 31, 2004
    (1)


438.9



17.31



3.0


$
4,208Granted






Exercised


(180.2
)


17.67Outstanding at December 31, 2005
    (1)


258.7



17.30



2.1



2,469Granted


543.5



26.50Exercised


(176.1
)


17.63Outstanding at December 31, 2006
    (2)


626.1



25.34



8.2



4,293Options Exercisable at:December 31, 2004


438.9


$
17.31



3.0


$
4,208December 31, 2005


258.7



17.30



2.1



2,469December 31, 2006


218.5



23.19



6.2



1,970     (1)
    
    Options vested and expected to
    vest.(2)
    
    Includes 601.4 thousand options
    that have vested or expect to vest with a weighted-average
    exercise price of $25.30, a weighted-average remaining
    contractual life of 8.2 years and an intrinsic value of
    $4.2 million.      Employee
    Deferred Shares
     F-63




---



##### 



Weighted-averageGrant DateFair ValueNumber of Shares


per Share(shares in thousands, except per share data)Unvested shares at January 1, 2004


143.6


$
22.41Granted


419.1



25.14Forfeited


(1.6
)


24.15Vested


(237.4
)


24.16Unvested shares at December 31, 2004


323.7



24.57Granted


222.8



25.29Forfeited


(36.0
)


26.04Vested


(202.2
)


24.81Unvested shares at December 31, 2005


308.3



24.83Granted


167.7



27.08Forfeited


(20.1
)


25.40Vested
    (1)


(222.6
)


25.20Unvested shares at December 31, 2006


233.3



26.03Shares vested and expected to vest:December 31, 2004


308.3


$
24.59December 31, 2005


283.8



24.79December 31, 2006


218.1



26.01     (1)
    
    Includes 60.6 thousand shares
    settled in cash.    Equity-to-Liability
    Accounting Modification for the Employees Stock-Based
    Compensation Plan
      paid-in-capital, paid-in-capital
   F-64




---



##### 



paid-in-capital
  Non-employee
    Directors Stock-Based Compensation
  non-qualified
  Non-employee
    Director Common Stock Options
      Weighted-


Weighted-average


averageExercise


Remaining


AggregateNumber of


Price per


Contractual Life


IntrinsicOptions


Option


(in years)


Value(dollars and options in thousands, except per option data)Outstanding at January 1, 2004


180.0


$
21.96Granted


7.0



25.52Exercised


(10.0
)


15.84Expired/Forfeited


(25.0
)


20.88Outstanding at December 31,
    2004 (1)


152.0



22.73



6.7


$
681Granted


7.0



26.67Exercised


(15.0
)


19.38Expired/Forfeited






Outstanding at December 31,
    2005 (1)


144.0



23.27



6.1



375Granted






Exercised


(19.0
)


23.19Expired/Forfeited






Outstanding at December 31,
    2006 (1)


125.0



23.28



5.2



1,115Options Exercisable at:December 31, 2004


145.0


$
22.59



6.5


$
669December 31, 2005


132.3



23.01



5.9



373December 31, 2006


118.0



23.10



5.0



1,074     (1)
    
    Includes options vested and
    expected to vest.     F-65




---



##### 



Non-employee
    Director Restricted Shares and Deferred Shares
          Weighted-





Weighted-average





average





Weighted-Common


Grant Date Share


Restricted Shares


Grant Date Share


Deferred


average GrantShares Issued


Price


Issued


Price


Shares Issued


Date Share Price2006





$




879


$
28.43



23,862


$
28.052005


281



24.49



968



25.83



20,709



25.452004


1,980



25.00



490



25.49



18,417



25.10     NOTE 17 
    INCOME TAXES
    2006


2005


2004(dollars in thousands)Federal income tax expense:Current

$
118


$



$
Deferred


1,655



1,646



1,599State income tax expense:Current


1,330



1,064



1,112Deferred


220



219



212Income tax expense

$
3,323


$
2,929


$
2,923   (PTP)
 F-66




---



##### 



pass-through
    2006


2005


2004(dollars in thousands)Income (loss) before income taxes

$
56,970


$
27,600


$
(353
)Provision for income tax at federal statutory rate (35%)


19,940



9,660



(124
)Permanent differences:PTP income


(31,268
)


(20,106
)


(16,144
)State income taxes, net of federal tax effect


(989
)


(987
)


(1,713
)Meals and entertainment


125



154



110Tax credits


(3,098
)


(355
)


(519
)Other


178



(29
)


(83
)Change in valuation allowance


18,435



14,592



21,396Income tax expense

$
3,323


$
2,929


$
2,923     2006


2005(dollars in thousands)Deferred tax assets:Syndication fees

$
23,855


$
11,846Net operating loss, tax credits and other tax carryforwards


20,799



18,390Guarantee fees


8,953



9,746Asset management fees


9,235



6,752Origination fees


2,283



1,483Investments in partnerships


6,272



5,604Other


5,456



6,013Total deferred tax assets


76,853



59,834Less: valuation allowance


(39,161
)


(20,725
)Total deferred tax assets, net

$
37,692


$
39,109Deferred tax liabilities:Mortgage servicing rights, net

$
28,577


$
28,458Goodwill and intangible assets


16,148



18,296Other


4,461



1,975Total deferred tax liabilities

$
49,186


$
48,729  F-67




---



##### 



2006


2005


2004(dollars in thousands)Balance-January 1,

$
20,725


$
26,096


$
4,067Additions impacting income tax expense


18,436



14,592



21,396Additions directly impacting shareholders equity






650



633Reversal due to purchase accounting






(20,613
)


Balance-December 31,

$
39,161


$
20,725


$
26,096   Accounting
    for Income Taxes SFAS 109
      NOL
  NOTE 18 
    SEGMENT INFORMATION
    
    The Affordable Housing Divisionconducts
    activities related to affordable housing and is further
    subdivided into three reportable segments, including:  
    Tax Credit Equitywhich creates investment funds and
    finds investors for such funds that receive tax credits for
    investing in affordable housing partnerships;
    Affordable Bondswhich originates and invests primarily
    in tax-exempt bonds secured by affordable housing; and
    Affordable Debtwhich originates and invests in loans
    secured by affordable housing. F-68




---



##### 




    The Real Estate Divisionconducts real estate
    finance activities and is further subdivided into two reportable
    segments:  
    Agency Lendingwhich originates both market rate and
    affordable housing multifamily loans with the intention of
    selling them to government sponsored entities (i.e., Fannie Mae
    and Freddie Mac) or through programs created by them, or sells
    the permanent loans to third party investors, for which the
    loans are guaranteed by Ginnie Mae and insured by HUD; and
    Merchant Bankingwhich provides loan and bond
    originations, loan servicing, asset management, investment
    advisory and other services to institutional investors that
    finance or invest in various commercial real estate projects. In
    some cases, the Company originates loans and bonds for its own
    investment purposes.  
    The Renewable Ventures Divisionfinances, owns and
    operates renewable energy and energy efficiency projects. This
    division, in its entirety, is considered a reportable segment.  Affordable
    Housing Division
  (low
    income)
    Tax
    Credit Equity Segment
     F-69




---



##### 



Affordable
    Bond Segment
    Affordable
    Debt Segment
    Real
    Estate Division
    Agency
    Lending Segment
     F-70




---



##### 



Merchant
    Banking Segment
      
    The Company originates loans for institutional investors and for
    pension funds.
    The Company provides advisory and management services with
    regard to direct and pooled investments in real estate assets
    for a number of pension funds that invest in limited partner
    interests in partnerships the Company forms to acquire income
    producing real estate or real estate-backed debt investments
    that the Company originates.
    The Company provides advisory and other services for several
    funds it did not sponsor that hold investments in a broad range
    of property types, including office and industrial properties,
    apartments, retail properties, hotels, condominiums and student
    housing, including investments in loans the Company originated.    Renewable
    Ventures Division
           F-71




---



##### 



Segment
    Results
        Adjusted
    Revenue (1)2006


2005


2004(dollars in thousands)Tax Credit Equity

$
129,239


$
97,383


$
111,117Affordable Bonds


101,120



86,660



78,789Affordable Debt


23,318



21,488



25,556Agency Lending


26,703



16,793



9,263Merchant Banking


82,168



56,019



28,641Renewable Ventures


4,806







Total adjusted revenue

$
367,354


$
278,343


$
253,366     (1)
    
    Adjusted Revenue represents
    interest income, fees and other income and revenue from
    consolidated funds and ventures. Additional sources of income
    from asset sales, derivative activities and equity in earnings
    from investments are not included in revenue, but are included
    in adjusted earnings.  Adjusted Earnings (Loss)2006


2005


2004(dollars in thousands)Tax Credit Equity

$
59,519


$
37,916


$
54,209Affordable Bonds


36,545



53,037



40,350Affordable Debt


6,385



(6,539
)


(519
)Agency Lending


27,027



17,351



6,004Merchant Banking


21,554



29,024



7,740Renewable Ventures


685







Total adjusted earnings

$
151,715


$
130,789


$
107,784  F-72




---



##### 



Note


Revenue ReconciliationRef.


2006


2005


2004(dollars in thousands)Consolidated revenue





$
350,567


$
284,758


$
231,762Adjustments:Syndication, servicing and loan fees


A



63,173



46,284



56,611Impact of consolidated funds and ventures


B



(44,391
)


(50,915
)


(33,820
)Total corporate adjusted revenue






369,349



280,127



254,553Less:Corporate revenue


H



(1,995
)


(1,784
)


(1,187
)Total segment adjusted revenue





$
367,354


$
278,343


$
253,366   Note


Net Income (Loss) ReconciliationRef.


2006


2005


2004(dollars in thousands)Consolidated net income (loss)





$
53,647


$
24,671


$
(3,276
)Adjustments:Syndication, servicing, loan fees and costs


A



79,787



53,898



66,534Impact of consolidated funds and ventures


B



(11,099
)


19,778



32,232Depreciation and amortization


C



14,249



13,416



10,096Equity investments


D



2,715



(4,838
)


709Net gains (losses) on asset sales and derivatives


E



(16,641
)


(15,141
)


(19,758
)Provision for credit losses, net


F



7,137



45



3,185Impairment on bonds


G



2,106



13,020



684Total corporate adjusted earnings






131,901



104,849



90,406Add:Income tax expense






3,323



2,929



2,923Corporate expense


H



16,491



23,011



14,455Total segment adjusted earnings





$
151,715


$
130,789


$
107,784     A.
    
    The revenue adjustment relates to adding back fees that were
    collected in cash during the period, but deferred for GAAP
    purposes and removing income recognized in the period on a GAAP
    basis for cash collected in a prior period. In addition, the
    revenue adjustment includes an adjustment to remove the
    amortization expense of MSRs that is included in Servicing
    fees in the consolidated statements of operations. The
    adjusted earnings adjustment includes the revenue adjustments
    described above plus the net impact of SFAS 91 cost
    deferrals related to loan originations.B.
    
    Represents the non-cash impact of consolidated funds and
    ventures in which the Company is the primary beneficiary or has
    a controlling interest. The revenue adjustment represents the
    removal of revenue from consolidated funds and ventures
    ($89.0 million, $82.6 million and $59.6 million
    for the years ended December 31, 2006, 2005 and 2004,
    respectively), but includes revenue that the Company is entitled
    to as part of its ownership or other contractual interests
    (e.g., asset management fees for the LIHTC Funds). The earnings
    adjustment includes the revenue adjustments described above,
    plus the necessary expenses and other adjustments to reflect
    what management believes to be earnings based on legal and
    contractual relationships as opposed to consolidation
    accounting. The most significant adjustment is to remove the
    non-cash losses that the Company records under GAAP when its
    general partner interest and/or the non-controlling interest
    capital account is zero. See Note 2, Restatement of
    Previously Reported Results of Operations and Note 20,
    Consolidated Funds and Ventures for more information.C.
    
    Represents depreciation and amortization of intangible assets
    and debt issuance costs.D.
    
    Represents the adjustment to determine the cash income related
    to the Companys equity in earnings for investments in
    unconsolidated ventures. F-73




---



##### 



E.
    
    Represents the non-cash impact from sales of assets and
    derivatives. The primary adjustments are
    non-cash
    gains related to mortgage servicing rights that are recognized
    as a gain on sale of loans and non-cash gains (losses) due to
    derivative valuation changes. For impaired bonds that have been
    sold, any previously recognized bond impairment is included as a
    reduction of adjusted earnings to the extent it represents the
    realization of a loss.F.
    
    Represents the non-cash charge associated with the
    Companys provision for credit losses. Net charge-offs are
    included in adjusted earnings as they represent a cash loss as
    the Company does not expect to collect these amounts.G.
    
    Represents the non-cash charge associated with the impairment on
    bonds.H.
    
    Represents the Companys unallocated expenses that are not
    directly attributable to any one of the Companys segments,
    including expenses such as compensation and related costs,
    accounting and consulting fees, and depreciation on shared
    service assets.    NOTE 19 
    RELATED PARTY TRANSACTIONS AND TRANSACTIONS WITH
    AFFILIATES
  Transactions
    with REIT and MMIT
  and/or
  REIT
      MMIT
     F-74




---



##### 



Transactions
    with Gallagher Evelius & Jones LLP
  GEJ
      Transactions
    with the Shelter Group
  Shelter Group
      Shelter Loan
    Agreement
 F-75




---



##### 



Transactions
    with Real Estate Property Partnerships
  tax-exempt
  deed-in-lieu
  NOTE 20 
    CONSOLIDATED FUNDS AND VENTURES
      2006


2005(dollars in thousands)LIHTC Funds

$
4,471,272


$
3,964,742Consolidated Lower Tier Property Partnerships


343,801



350,264Solar Funds and Renewable Energy Projects


12,183



Real Estate Funds


56,683



283,729Other


818



1,665Total assets of consolidated funds and
    ventures (1)

$
4,884,757


$
4,600,400     (1)
    
    In general, the creditors of
    these consolidated funds and ventures have recourse only to the
    assets of those funds and ventures and do not have recourse to
    the Company, except where the Company provides a specific
    guarantee to the fund or venture.    LIHTC
    Funds
   F-76




---



##### 



Consolidated
    Lower Tier Property Partnerships
  deed-in-lieu and/or
    Solar
    Funds and Renewable Energy Projects
  Solar Funds and Renewable Energy
    Projects
  Real
    Estate Funds
        Other
   F-77




---



##### 



2006SolarConsolidated


Funds andLower Tier


RenewableNote

LIHTC


Property


Energy


Real EstateRef.

Funds


Partnerships


Projects


Funds


Other


Total(dollars in thousands)Assets:Cash, cash equivalents and restricted cash

A

$
271,474


$
16,831


$
793


$
2


$
443


$
289,543Loans

B














55,956







55,956Investments in unconsolidated Lower Tier Property
    Partnerships

C


4,173,963















374



4,174,337Real estate, net

D






320,880















320,880Other assets




25,835



6,090



11,390



725



1



44,041Total assets



$
4,471,272


$
343,801


$
12,183


$
56,683


$
818


$
4,884,757Liabilities:Bridge financing

F

$
374,025


$



$



$



$



$
374,025Mortgage debt

F






150,605















150,605Notes payable

F


530,483



312







32,720







563,515Unfunded equity commitments to unconsolidated Lower
    Tier Property Partnerships

C


883,803



















883,803Other liabilities




24,815



47,838



337



190



20



73,200Total liabilities



$
1,813,126


$
198,755


$
337


$
32,910


$
20


$
2,045,148Non-controlling interests



$
2,581,663


$
31,668


$
4,232


$
22,186


$



$
2,639,749  F-78




---



##### 



2005ConsolidatedLower TierNote

LIHTC


Property


Real EstateRef.

Funds


Partnerships


Funds


Other


Total(dollars in thousands)Assets:Cash, cash equivalents and restricted cash

A

$
298,893


$
27,641


$
5


$
1,292


$
327,831Loans

B










279,424







279,424Investments in unconsolidated Lower Tier Property
    Partnerships

C


3,653,587







1,773



373



3,655,733Real estate, net

D






260,033











260,033Other assets




12,262



6,055



2,527







20,844Assets held for sale

E






56,535











56,535Total assets



$
3,964,742


$
350,264


$
283,729


$
1,665


$
4,600,400Liabilities:Bridge financing

F

$
74,599


$



$



$



$
74,599Mortgage debt

F






182,375











182,375Notes payable

F


425,732



312



166,567







592,611Unfunded equity commitments to unconsolidated Lower
    Tier Property Partnerships

C


903,768















903,768Other liabilities




21,352



45,210



804



9



67,375Liabilities related to assets held for sale

E






54,901











54,901Total liabilities



$
1,425,451


$
282,798


$
167,371


$
9


$
1,875,629Non-controlling interests



$
2,471,392


$
17,735


$
104,070


$



$
2,593,197  F-79




---



##### 



2006Solar FundsConsolidated


andLower Tier


RenewableNote

LIHTC


Property


Energy


Real EstateRef.

Funds


Partnerships


Projects


Funds


Other


Total(dollars in thousands)INCOME STATEMENT COMPONENTS OF CONSOLIDATED FUNDS:Revenue:Rental and other income from real estate

G

$



$
50,246


$



$



$



$
50,246Interest and other income




15,322



156



49



23,095



46



38,668Total revenue




15,322



50,402



49



23,095



46



88,914Expenses:Depreciation and amortization

D






15,644



24



57







15,725Interest expense

F


17,620



15,327



60



8,283







41,290Impairment on investments in unconsolidated Lower
    Tier Property Partnerships

H


48,431



















48,431Other operating expenses




11,067



33,198



430



229



394



45,318Total expenses




77,118



64,169



514



8,569



394



150,764Net gains on sale of real estate from consolidated funds and
    ventures

I


52,479



















52,479Equity in (losses) earnings from unconsolidated Lower
    Tier Property Partnerships

C


(332,169
)










11,839



819



(319,511
)Net (loss) income




(341,486
)


(13,767
)


(465
)


26,365



471



(328,882
)Net (loss) income allocable to non-controlling interests

J


(371,145
)


(12,297
)


(465
)


23,896







(360,011
)Discontinued operations

K






9,618















9,618Net income allocable to MMA

J

$
29,659


$
8,148


$



$
2,469


$
471


$
40,747COMPOSITION OF NET INCOME ALLOCABLE TO MMA:Net Income (Loss)Allocable to MMA:Asset management fees

L

$
26,986


$



$



$
1,346


$



$
28,332Interest income

L


209



5,575











789



6,573Other income (expense)

L


46



(360
)






11







(303
)Net gains on sale of real estate

N






















Income (loss) allocated to MMA

M


4,369



(194
)






1,112







5,287Non-controlling interest income
    (losses) (1)

M


(11
)


3,127















3,116Other losses

M


(1,940
)














(318
)


(2,258
)Net income allocable to MMA



$
29,659


$
8,148


$



$
2,469


$
471


$
40,747     (1)
    
    There are losses related to the
    non-controlling interest holder, but allocated to MMA as these
    losses are in excess of the
    non-controlling
    interest holders capital accounts. Upon sale or
    disposition of the property or of the Companys GP
    interest, the Company will reverse the cumulative net losses
    previously recorded by the Company. F-80




---



##### 



2005ConsolidatedLower TierNote

LIHTC


Property


Real EstateRef.

Funds


Partnerships


Funds


Other


Total(dollars in thousands)INCOME STATEMENT COMPONENTS OF CONSOLIDATED FUNDS:Revenue:Rental and other income from real estate

G

$



$
54,812


$



$



$
54,812Interest and other income




14,234



1,910



11,577



44



27,765Total revenue




14,234



56,722



11,577



44



82,577Expenses:Depreciation and amortization

D






19,544



41







19,585Interest expense

F


10,321



20,102



4,429







34,852Impairment on investments in unconsolidated Lower
    Tier Property Partnerships

H


30,327















30,327Other operating expenses




17,389



34,735



381



283



52,788Total expenses




58,037



74,381



4,851



283



137,552Net gains on sale of real estate from consolidated funds and
    ventures

I


19,655















19,655Equity in (losses) earnings from unconsolidated Lower
    Tier Property Partnerships

C


(280,791
)






(601
)


230



(281,162
)Net (loss) income




(304,939
)


(17,659
)


6,125



(9
)


(316,482
)Net (loss) income allocable to non-controlling interests

J


(317,977
)


(12,219
)


2,435







(327,761
)Discontinued operations

K






7,575











7,575Net income (loss) allocable to MMA

J

$
13,038


$
2,135


$
3,690


$
(9
)

$
18,854COMPOSITION OF NET INCOME (LOSS) ALLOCABLE TO MMA:Net Income (Loss) Allocable to MMA:Asset management fees

L

$
20,463


$



$
2,448


$



$
22,911Interest income

L


165



2,613







368



3,146Other income (expense)

L


(896
)






611







(285
)Net gains on sale of real estate

N






10,016











10,016Income (loss) allocated to MMA

M


1,289



(93
)


631







1,827Non-controlling interest
    (losses) (1)

M






(10,401
)










(10,401
)Other losses

M


(7,983
)










(377
)


(8,360
)Net income (loss) allocable to MMA



$
13,038


$
2,135


$
3,690


$
(9
)

$
18,854     (1)
    
    There are losses related to the
    non-controlling interest holder, but allocated to MMA as these
    losses are in excess of the
    non-controlling
    interest holders capital accounts. Upon sale or
    disposition of the property or of the Companys GP
    interest, the Company will reverse the cumulative net losses
    previously recorded by the Company. F-81




---



##### 



2004ConsolidatedLower TierNote


LIHTC


Property


Real EstateRef.


Funds


Partnerships


Funds


Other


Total(dollars in thousands)INCOME STATEMENT COMPONENTS OF CONSOLIDATED FUNDS:Revenue:Rental and other income from real estate


G


$



$
48,568


$



$



$
48,568Interest and other income






11,043



23







10



11,076Total revenue






11,043



48,591







10



59,644Expenses:Depreciation and amortization


D







21,705











21,705Interest expense


F



7,923



19,416











27,339Impairment on investments in unconsolidated Lower
    Tier Property Partnerships


H



35,585















35,585Other operating expenses






9,253



31,651







129



41,033Total expenses






52,761



72,772







129



125,662Net gains on sale of real estate from consolidated funds and
    ventures


I



5,805















5,805Equity in (losses) earnings from unconsolidated Lower
    Tier Property Partnerships


C



(238,234
)






(634
)


194



(238,674
)Net (loss) income






(274,147
)


(24,181
)


(634
)


75



(298,887
)Net loss allocable to non-controlling interests


J



(286,791
)


(7,378
)


(671
)






(294,840
)Discontinued operations


K







8,043











8,043Net income (loss) allocable to MMA


J


$
12,644


$
(8,760
)

$
37


$
75


$
3,996COMPOSITION OF NET INCOME (LOSS) ALLOCABLE TO MMA:Net Income (Loss) Allocable to MMA:Asset management fees


L


$
18,851


$



$
37


$



$
18,888Interest income


L



105



3,317







596



4,018Other income (expense)


L



(3,317
)














(3,317
)Net gains on sale of real estate


N







11,258











11,258Loss allocated to MMA


M



(1,005
)


(130
)










(1,135
)Non-controlling interest
    (losses) (1)


M



(125
)


(23,205
)










(23,330
)Other losses


M



(1,865
)










(521
)


(2,386
)Net income (loss) allocable to MMA





$
12,644


$
(8,760
)

$
37


$
75


$
3,996     (1)
    
    There are losses related to the
    non-controlling interest holder, but allocated to MMA as these
    losses are in excess of the
    non-controlling
    interest holders capital accounts. Upon sale or
    disposition of the property or of the Companys GP
    interest, the Company will reverse the cumulative net losses
    previously recorded by the Company. F-82




---



##### 



A. Cash,
    cash equivalents and restricted cash
    B. Loans
    C. Investments
    in unconsolidated Lower Tier Property
    Partnerships
    2006


2005(dollars in thousands)LIHTC Funds:Funds investment in Lower Tier Property Partnerships

$
4,173,963


$
3,653,587Total assets of Lower Tier Property
    Partnerships (1)

$
12,523,738


$
11,096,473Total liabilities of Lower Tier Property
    Partnerships (1)


9,439,535



8,608,640Real Estate Funds:Funds investment in Lower Tier Property Partnerships

$



$
1,773Total assets of Lower Tier Property
    Partnerships (1)

$



$
31,043Total liabilities of Lower Tier Property
    Partnerships (1)






29,270     (1)
    
    The assets of the Lower
    Tier Property Partnerships primarily represent real estate
    and the related liabilities primarily represent mortgage
    debt.    2006


2005


2004(dollars in thousands)LIHTC Funds:Total net loss of Lower Tier Property Partnerships

$
(365,036
)

$
(306,477
)

$
(272,388
)Real Estate Funds:Total net income (loss) of Lower Tier Property Partnerships


13,759



(601
)


(634
)    F-83




---



##### 



D. Real
    estate, net
    2006


2005(dollars in thousands)Building, furniture and fixtures

$
339,783


$
268,035Accumulated depreciation


(58,616
)


(43,838
)Land


39,713



35,836Total

$
320,880


$
260,033       E. Assets
    held for sale and Liabilities related to assets held for
    sale
    2005(dollars in thousands)Assets held for sale:Restricted cash

$
6,178Real estate, net


48,625Other assets


1,732Total assets held for sale

$
56,535Liabilities related to assets held for sale:Mortgage payable

$
42,986Other liabilities


11,915Total liabilities related to assets held for sale

$
54,901  F-84




---



##### 



F.
    Bridge
    financing, Mortgage debt and Notes payable    2006Weighted-average

Weighted-averageCarrying Amount


Face Amount


Interest
    Rates(1)

Maturity Date(dollars in thousands)LIHTC Funds:Bridge financing

$
374,025


$
374,025


LIBOR + 0.6%

RevolvingNotes
    payable (2)


530,483



550,781


6.17% (2)

September 2010Total LIHTC Funds


904,508



924,806Consolidated Lower Tier Property Partnerships:Mortgage debt


150,605



169,377


6.78%

December 2022Notes payable


312



312


5.00%

September 2038Total Lower Tier Property Partnerships


150,917



169,689Real Estate Funds:Notes payable


32,720



32,720


6.42%

July
    2007 (3)Total Real Estate Funds


32,720



32,720Total

$
1,088,145


$
1,127,215     (1)
    
    Excludes the impact of rate
    reduction programs. Certain institutions provide LIHTC Funds
    with interest credits based on cash balances held. These credits
    are used to offset amounts charged for interest expense on
    outstanding line of credit balances.(2)
    
    Notes payable of
    $357.0 million bear interest at LIBOR + 0.7%.(3)
    
    Total amount was paid off at
    June 30, 2007.  2005Weighted-average

Weighted-averageCarrying Amount


Face Amount


Interest
    Rates(1)

Maturity Date(dollars in thousands)LIHTC Funds:Bridge financing

$
74,599


$
74,599


LIBOR + 1%

RevolvingNotes
    payable (2)


425,732



459,865


6.30% (2)

June 2010Total LIHTC Funds


500,331



534,464Consolidated Lower Tier Property Partnerships:Mortgage
    debt (3)


225,361



245,775


6.84%

February 2029Notes payable


312



312


5.00%

September 2038Total Lower Tier Property Partnerships


225,673



246,087Real Estate Funds:Notes payable


166,567



166,567


5.62%

July 2007Total Real Estate Funds


166,567



166,567Total

$
892,571


$
947,118     (1)
    
    Excludes the impact of rate
    reduction programs. Certain institutions provide LIHTC Funds
    with interest credits based on cash balances held. These credits
    are used to offset amounts charged for interest expense on
    outstanding line of credit balances.(2)
    
    Notes payable of
    $192.4 million bear interest at LIBOR + 0.7%.(3)
    
    The carrying amount includes
    $43.0 million of mortgage debt reported in
    Liabilities related to assets held for
    sale. F-85




---



##### 



Consolidated LowerTier PropertyLIHTC Funds


Partnerships


Real Estate Funds


Total(dollars in thousands)2007

$
781,286


$
36,292


$
32,720


$
850,2982008


35,396



2,436







37,8322009


27,224



10,492







37,7162010


16,079



2,679







18,7582011


33,926



2,565







36,491Thereafter


10,597



96,453







107,050Total

$
904,508


$
150,917


$
32,720


$
1,088,145   LIHTC
    Funds
    Consolidated
    Lower Tier Property Partnerships
      Real
    Estate Funds  B-Note Value Fund
     F-86




---



##### 



G. Rental
    and other income from real estate
    H. Impairment
    on investments in unconsolidated Lower Tier Property
    Partnerships
      I. Net
    gains on sale of real estate from consolidated funds and
    ventures
    J. Allocation
    of income and losses between non-controlling interests and the
    Company
    K. Discontinued
    operations
   F-87




---



##### 



2006


2005


2004(dollars in thousands)Revenue

$
2,847


$
3,528


$
3,347Expenses


2,660



3,974



5,429Net gains on sale of real estate






10,016



11,258Income before income (loss) allocable to non-controlling
    interests


(187
)


9,570



9,176Income (loss) allocable to non-controlling interests


(9,431
)


1,995



1,133Net income related to discontinued operations

$
9,618


$
7,575


$
8,043       2006


2005


2004(dollars in thousands)Assets:Real estate, net

$
68,573


$
60,718


$
30,295Other assets


8,379



2,181



1,831Total assets

$
76,952


$
62,899


$
32,126Liabilities:Mortgages payable

$
42,587



43,330



19,215Other liabilities


14,924



12,719



3,782Total liabilities

$
57,511


$
56,049


$
22,997Net gains on sale of real estate

$
1,227


$
10,016


$
11,258     L. Allocations
    of income to the Company based on contractual
    arrangements
  non-controlling
  M. Allocations
    of income based on legal ownership
   F-88




---



##### 



N. Foreclosed
    real estate sales
  deed-in-lieu
  NOTE 21 
    LIQUIDITY AND GOING CONCERN UNCERTAINTY
         F-89




---



##### 



NOTE 22 
    SUBSEQUENT EVENTS
    Bond
    portfolio
          Loan
    portfolio
   F-90




---



##### 



Goodwill
    and other intangibles
    Sales and
    disposals of businesses
  Oak Grove
  start-up
  Legal
    Contingencies
    Investment Manager Act
 F-91




---



##### 



Navigant
 F-92




---



##### 



EXHIBIT INDEX
  Incorporation byExhibit No.

Description

Reference2


Agreement of Merger, dated as of August 1, 1996, by and between
    SCA Tax Exempt Fund Limited Partnership and the Company

Incorporated by reference from the Companys Registration
    Statement on
    Form S-4
    (No. 33  99088)3
.1

Amended and Restated Certificate of Formation and Operating
    Agreement of the Company

Incorporated by reference from the Companys Annual Report
    on Form 10  K for the year ended
    December 31, 20023
.2

Third Amended and Restated Bylaws.

Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    filed on September 12, 20074
.1

Specimen Common Share Certificate

Incorporated by reference from the Companys Quarterly
    Report on
    Form 10-Q
    for the quarter ended September 30, 20054
.2

Indenture, dated as of May 3, 2004, by and between MMA Financial
    Holdings, Inc. and Wilmington Trust Company

Incorporated by reference from the Companys Annual Report
    on Form 10  K for the year ended
    December 31, 200410
.1

Credit Agreement, dated as of November 12, 2004, as amended,
    among MuniMae TEI Holdings, LLC, MMA Construction Finance, LLC
    and MMA Mortgage Investment Corporation, as borrowers, the
    Company, as guarantor, Bank of America, N.A., as administrative
    agent, U.S. Bank National Association, RBC Capital Markets and
    CitiCorp USA, Inc., as co-syndication agents, and the other
    lenders party thereto

Incorporated by reference from the Companys Current Report
    on Form 8  K filed on November 17, 200410
.2.1

Fifth Amended and Restated Revolving Loan and Letter of Credit
    Agreement (the Tax Credit Warehousing Agreement),
    dated as of November 4, 2005, by and among MMA Financial
    Warehousing, LLC and MMA Financial Bond Warehousing, LLC, as
    borrowers, the Company, MMA Financial Holdings, Inc., MMA Equity
    Corporation, MMA Financial TC Corp., MMA Financial BFGLP, LLC,
    MMA Financial BFRP, Inc., MMA Financial BFG Investments, LLC and
    MMA Special Limited Partner, Inc., as guarantors, and Bank of
    America, N.A., as administrative agent and lender, and the other
    lenders party thereto*

Incorporated by reference from the Companys Quarterly
    Report on
    Form 10-Q
    for the quarter ended September 30, 200510
.2.2

Guaranty Agreement, dated as of November 4, 2005, by Municipal
    Mortgage & Equity, LLC in favor of Bank of America, N.A.,
    in its capacity as agent for the banks under the Tax Credit
    Warehouse Agreement*

Incorporated by reference from the Companys Quarterly
    Report on
    Form 10-Q
    for the quarter ended September 30, 200510
.2.3

First Amendment, dated as of May 3, 2006, to the Tax Credit
    Warehousing Agreement.

Incorporated by reference from the Companys Quarterly
    Report on
    Form 10-Q
    for the quarter ended March 31, 2006 E-1




---



##### 



Incorporation byExhibit No.

Description

Reference10
.2.4

Fourth Amendment, dated as of July 11, 2006, to the Tax Credit
    Warehousing Agreement.

Incorporated by reference from the Companys Quarterly
    Report on
    Form 10-Q
    for the quarter ended March 31, 200610
.3.1

Amended and Restated Credit Agreement effective as of November
    16, 2005 between U.S. Bank National Association and MMA Mortgage
    Investment Corporation (the US Bank Credit
    Agreement).

Incorporated by reference from the Companys Annual Report
    on
    Form 10-K
    for the year ended December 31, 200510
.3.2

First Amendment, dated as of December 5, 2005, to the US Bank
    Credit Agreement.

Incorporated by reference from the Companys Annual Report
    on
    Form 10-K
    for the year ended December 31, 200510
.3.3

Second Amendment, dated as of December 14, 2005, to the US Bank
    Credit Agreement.

Incorporated by reference from the Companys Annual Report
    on
    Form 10-K
    for the year ended December 31, 200510
.3.4

Third Amendment, dated as of March 15, 2006, to the US Bank
    Credit Agreement.

Incorporated by reference from the Companys Annual Report
    on
    Form 10-K
    for the year ended December 31, 200510
.3.5

Fourth Amendment, dated as of July 24, 2006, to the US Bank
    Credit Agreement.

Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    filed on July 27, 200610
.4

Multifamily and Health Care Mortgage Loan Repurchase Agreement
    dated as of May 31, 2006 between MMA Mortgage Investment
    Corporation and Washington Mutual Bank.

Incorporated by reference from the Companys Current Report
    on Form 8  K filed on June 6, 200610
.5

Warehousing Credit and Security Agreement dated as of May 31,
    2006 between MMA Construction Finance, LLC and Washington Mutual
    Bank.

Incorporated by reference from the Companys Current Report
    on Form 8  K filed on June 6, 200610
.6

Municipal Mortgage & Equity, L.L.C. 1998 Share
    Incentive Plan

Incorporated by reference from the Companys Quarterly
    Report on
    Form 10-Q
    for the quarter ended September 30, 200510
.7

Municipal Mortgage & Equity, L.L.C. 1998 Non--Employee
    Directors Share Incentive Plan

Incorporated by reference from the Companys Quarterly
    Report on
    Form 10-Q
    for the quarter ended September 30, 200510
.8

Municipal Mortgage & Equity, L.L.C. 2001 Share
    Incentive Plan

Incorporated by reference from the Companys Quarterly
    Report on
    Form 10-Q
    for the quarter ended September 30, 200510
.9

Municipal Mortgage & Equity, L.L.C. 2001 Non--Employee
    Directors Share Incentive Plan

Incorporated by reference from the Companys Quarterly
    Report on
    Form 10-Q
    for the quarter ended September 30, 200510
.10

Municipal Mortgage & Equity, LLC 2004 Non--Employee
    Directors Share Plan

Incorporated by reference from the Companys Quarterly
    Report on Form 10  Q for the quarter ended
    September 30, 200410
.11.1

Employment Agreement by and between the Company and Mark K.
    Joseph dated as of July 1, 2003 (the M. Joseph
    Employment Agreement).

Incorporated by reference from the Companys Annual Report
    on
    Form 10-K
    for the year ended December 31, 200310
.11.2

Amendment to the M. Joseph Employment Agreement by and between
    the Company and Mark K. Joseph dated as of January 1, 2005.

Incorporated by reference from the Companys Annual Report
    on
    Form 10-K
    for the year ended December 31, 2004 E-2




---



##### 



Incorporation byExhibit No.

Description

Reference10
.11.3

Assignment and Assumption Agreement, dated as of January 1,
    2006, by and between the Company, MMA Financial, Inc. and Mr.
    Joseph.

Incorporated by reference from the Companys Annual Report
    on
    Form 10-K
    for the year ended December 31, 200510
.12.1

Employment Agreement by and between the Company and Michael L.
    Falcone dated as of July 1, 2005.

Incorporated by reference from the Companys Annual Report
    on
    Form 10-K
    for the year ended December 31, 200410
.12.2

Assignment and Assumption Agreement, dated as of January 1,
    2006, by and between the Company, MMA Financial, Inc. and Mr.
    Falcone.

Incorporated by reference from the Companys Annual Report
    on
    Form 10-K
    for the year ended December 31, 200510
.13

Employment Agreement by and between the Company and Gary A.
    Mentesana dated as of June 14, 2006.

Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    filed on June 19, 200610
.14

Amended No. 8, dated as of November 3, 2006, to the Fifth
    Amended and Restated Revolving Loan and Letter of Credit
    Agreement (the Tax Credit Warehousing Agreement),
    dated as of November 4, 2005, by and among MMA Financial
    Warehousing, LLC and MMA Financial Bond Warehousing, LLC, as
    borrowers, the Company, MMA Financial Holdings, Inc., MMA Equity
    Corporation, MMA Financial TC Corp., MMA Financial BFGLP, LLC,
    MMA Financial BFRP, Inc., MMA Financial BFG Investments, LLC and
    MMA Special Limited Partner, Inc., as guarantors, and Bank of
    America, N.A., as administrator agent and lender, and the other
    lenders party thereto.

Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    filed on November 8, 200610
.15

Master Repurchase Agreement by and among MMA Realty Capital
    Repurchase Subsidiary, LLC, Variable Funding Capital Company
    LLC, Wachovia Capital Markets, LLC, MMA Realty Capital, LLC, and
    Municipal Mortgage & Equity, LLC, dated as of November 13,
    2006.

Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    filed on November 17, 200610
.16

Guaranty Agreement by MMA Realty Capital, LLC, for the benefit
    of Wachovia Capital Markets, LLC, Variable Funding Capital
    Company LLC and other Secured Parties under the Repurchase
    Agreement, dated November 13, 2006.

Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    filed on November 17, 200610
.17

Back--up Guaranty Agreement by Municipal Mortgage & Equity,
    LLC, for the benefit of Wachovia Capital Markets, LLC, Variable
    Funding Capital Company LLC and the other Secured Parties under
    the Repurchase Agreement, dated November 13, 2006.

Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    filed on November 17, 200610
.18

Trust Agreement, dated as of November 1, 2006, by and among
    MuniMae TE Bond Subsidiary, LLC, as Trustor, MuniMae Portfolio
    Services, LLC, as Servicer, and U.S. Bank National Association,
    as Trustee.

Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    filed on November 22, 2006 E-3




---



##### 



Incorporation byExhibit No.

Description

Reference10
.19

Fifth Amendment, dated as of November 30, 2006, to the Amended
    and Restated Credit Agreement, as amended, between MMA Mortgage
    Investment Corporation and U.S. Bank National Association

Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    filed on December 5, 200610
.20

Fourth Amendment, dated as of December 1, 2006, to the Amended
    and Restated Credit Agreement, as amended, between MMA
    Construction Finance, LLC, MMA Mortgage Investment Corporation,
    the lender party thereto and Bank of America, N.A.

Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    filed on December 5, 200610
.21

Fourth Amendment and Completely Restated Loan Agreement dated as
    of February 23, 2007 by and between the registrant, MMA Capital
    Corporation, MMA Mortgage Investment Corporation, MMA
    Construction Finance, LLC, MMA Financial Holdings, Inc. and MMA
    Financial, Inc., on the one hand, and Synovus Bank of Tampa Bay,
    on the other hand.

Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    filed on March 1, 200710
.22

Guaranty Agreement by the registrant, MMA Financial Holdings,
    Inc. and MMA Financial, Inc. dated as of February 23, 2007.

Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    filed on March 1, 200710
.23

Renewal and Increase Promissory Note made by MMA Capital
    Corporation, MMA Mortgage Investment Corporation and MMA
    Construction Finance, LLC dated as of February 23, 2007.

Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    filed on March 1, 200710
.24

Solar Star NAFB, LLC Unit Transfer Agreement dated as of March
    21, 2007.

Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    filed on March 27, 200710
.25

Amendment No. 11, dated as of May 3, 2007, to that certain Fifth
    Amended and Restated Revolving Loan and Letter of Credit
    Agreement by and among MMA Financial Bond Warehousing, LLC and
    MMA Financial Warehousing, LLC, as borrowers, the other
    guarantors party thereto, Bank of America, N.A. as the agent and
    the banks and financial institutions from time to time party
    thereto.

Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    filed on May 9, 200710
.26

Amendment No. 1, dated as of May 3, 2007, to that certain
    Guaranty Agreement between Municipal Mortgage & Equity, LLC
    and Bank of America, N.A., as agent for the bank party to that
    certain Fifth Amended and Restated Revolving Loan and Letter of
    Credit Agreement

Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    filed on May 9, 2007 E-4




---



##### 



Incorporation byExhibit No.

Description

Reference10
.27

Second Amendment, dated as of May 14, 2007, to that certain
    Credit Agreement dated as of November 12, 2004 by and among
    MuniMae TEI Holdings, LLC, MMA Construction Finance, LLC and MMA
    Mortgage Investment Corporation (each subsidiaries of the
    registrant), as borrowers, Municipal Mortgage & Equity,
    LLC, as guarantor, Bank of America, N.A., as administrative
    agent, and the lender party thereto from time to time.

Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    filed on May 18, 200710
.28

Employment Agreement by and between MMA Financial, Inc. and
    Richard F. Brown dated as of June 25, 2007.

Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    filed on June 29, 200710
.29

Employment Agreement by and between MMA Financial, Inc. and
    Jenny Netzer dated as of June 27, 2007.

Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    filed on June 29, 200710
.30

Separation and Transition Agreement dated as of July 9, 2007, by
    and among Melanie M. Lundquist, Municipal Mortgage &
    Equity, LLC and MMA Financial, Inc.

Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    filed on July 16, 200710
.31

Employment Agreement of Charles M. Pinckney dated as of August
    28, 2007.

Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    filed on September 4, 200710
.32

Waiver and Fourth Amendment to Loan Documents dated as of
    October 15, 2007 among MuniMae TEI Holdings, LLC, MMA
    Construction Finance, LLC and MMA Mortgage Investment
    Corporation (each subsidiaries of the registrant), as borrowers,
    Municipal Mortgage & Equity, LLC, as guarantor, Bank of
    America, N.A., as administrative agent, and the lender party
    thereto from time to time.

Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    filed on October 19, 200710
.33

Amendment No. 12 dated as of November 1, 2007 to the Fifth
    Amended and Restated Revolving Loan and Letter of Credit
    Agreement dated as of November 4, 2005 (as amended and/or
    restated from time to time).

Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    filed on November 6, 200710
.34

Employment Agreement between David Kay and the Registrant dated
    as of November 7, 2007.

Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    filed on November 8, 200710
.35

Deferred Compensation Agreement between David Kay and the
    Registrant dated as of November 7, 2007.

Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    filed on November 8, 200710
.36

Letter Agreement with respect to that certain $200,000,000
    Master Repurchase Agreement between and among MMA Realty Capital
    Repurchase Subsidiary, LLC, Variable Funding Capital Company,
    LLC, Wachovia Capital Markets, LLC, MMA Realty Capital, LLC and
    Municipal Mortgage & Equity, LLC dated as of November 13,
    2006.

Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    filed on November 19, 2007 E-5




---



##### 



Incorporation byExhibit No.

Description

Reference10
.37

First Amendment dated as of November 21, 2007 to that certain
    $200,000,000 Master Repurchase Agreement by and among MMA Realty
    Capital Repurchase Subsidiary, LLC, Variable Funding Capital
    Company, LLC, Wachovia Capital Markets, LLC, MMA Realty Capital,
    LLC and Municipal Mortgage & Equity, LLC dated as of
    November 13, 2006.

Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    on November 28, 200710
.38

Letter Agreement with respect to that certain Fourth Amended and
    Completely Restated Loan Agreement dated as of February 23, 2007
    by and among Synovus Bank (formerly, United Bank and Trust), MMA
    Capital Corporation, MuniMae TEI Holdings, LLC, MMA Mortgage
    Investment Corporation, MMA Construction Finance, LLC, Municipal
    Mortgage & Equity, LLC, MMA Financial Holdings, Inc. and
    MMA Financial, Inc. (formerly, MuniMae Investment Services
    Corporation).

Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    filed on November 19, 200710
.39

Letter Agreement dated November 28, 2007 with respect to that
    certain Multifamily and Health Care Mortgage Loan Repurchase
    Agreement dated as of May 31, 2006 between MMA Mortgage
    Investment Corporation and Washington Mutual Bank, a federal
    association, and with respect to that certain Warehousing Credit
    and Security Agreement dated as of May 31, 2006 between MMA
    Construction Finance, LLC and Washington Mutual Bank.

Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    filed on December 4, 200710
.40

Second Amendment to Warehousing Credit and Security Agreement
    entered into as of November 30, 2007 by and between MMA
    Construction Finance, LLC, the registrant, as guarantor, and
    Washington Mutual Bank.

Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    filed on December 4, 200710
.41

Letter Agreement with respect to that certain Amended and
    Restated Credit Agreement, dated as of November 16, 2005 and as
    subsequently amended, between MMA Mortgage Investment
    Corporation and U.S. Bank National Association.

Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    filed on December 4, 200710
.42

Sixth Amendment dated as of November 30, 2007 to Amended and
    Restated Credit Agreement between MMA Mortgage Investment
    Corporation and U.S. Bank National Association.

Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    filed on December 4, 200710
.43

Letter Agreement between the registrant and Mr. Michael L.
    Falcone dated as of February 8, 2008.

Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    filed on February 8, 2008 E-6




---



##### 



Incorporation byExhibit No.

Description

Reference10
.44

Waiver and Fifth Amendment to Loan Documents dated as of
    February 15, 2008 among MuniMae TEI Holdings, LLC, MMA
    Constructions Finance, LLC and MMA Mortgage Investment
    Corporation (each subsidiaries of the registrant), as borrowers,
    Municipal Mortgage & Equity, LLC, as guarantor, Bank of
    America, N.A., as administrative agent, and the lenders party
    thereto from time to time.

Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    filed on February 22, 200810
.45

Amendment No. 14 dates as of February 15, 2008 to the Fifth
    Amended and Restated Revolving Loan and Letter of Credit
    Agreement dated as of November 4, 2005 (as amended and/or
    restated from time to time).

Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    filed on February 22, 200810
.46

Letter Agreement with respect to that certain Fourth Amended and
    Completely Restated Loan Agreement dated as of February 23, 2007
    by and among Synovus Bank (formerly, United Bank and Trust), MMA
    Capital Corporation, MuniMae TEI Holdings, LLC, MMA Mortgage
    Investment Corporation, MMA Construction Finance, LLC, Municipal
    Mortgage & Equity, LLC, MMA Financial Holdings, Inc. and
    MMA Financial, Inc.  (formerly, MuniMae Investment Services
    Corporation).

Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    filed on March 7, 200810
.47

A. Amendment to Swap Documents, dated as of March 6, 2008,
    hereof relating to that certain ISDA Master Agreement, dated as
    of December 5, 2003, between Merrill Lynch Capital Services,
    Inc. and MuniMae TEI Holdings, LLC, and related swap documents.B. Pledge Agreement, dated as of March 6, 2008, relating to
    the MuniMae TEI Holdings, LLC Swap Documents executed by MuniMae
    TEI Holdings, LLC in favor of Merrill Lynch Capital Services,
    Inc.;C. Amendment to Swap Documents, dated as of March 6, 2008,
    relating to that certain ISDA Master Agreement, dated as of
    April 28, 1997, between Merrill Lynch Capital Services, Inc. and
    MMA, and related swap documents (collectively, the
    MMA Swap Documents);D. Pledge Agreement, dated as of March 6, 2008, relating to
    the MMA Swap Documents executed by MuniMae TEI Holdings, LLC in
    favor of Merrill Lynch Capital Services, Inc.; E-7




---



##### 



Incorporation byExhibit No.

Description

ReferenceE. Guarantee of MuniMae TEI Holdings, LLC, dated as of
    March 6, 2008, in favor of Merrill Lynch Capital Services, Inc.
    relating to the MMA Swap Documents;F. Amendment to Swap Documents, dated as of March 6, 2008,
    relating to that certain ISDA Master Agreement, dated as of June
    14, 2004, between Merrill Lynch Capital Services, Inc. and MFH,
    and related swap documents (collectively, the MFH
    Swap Documents);G. Pledge Agreement, dated as of March 6, 2008, relating to
    the MFH Swap Documents executed by MuniMae TEI Holdings, LLC in
    favor of Merrill Lynch Capital Services, Inc.;H. Guarantee of MuniMae TEI Holdings, LLC, dated as of
    March 6, 2008, in favor of Merrill Lynch Capital Services, Inc.
    relating to the MFH Swap Documents;I. Amendment to Swap Documents, dated as of March 6, 2008,
    relating to that certain ISDA Master Agreement, dated as of
    February 1, 2007, between Merrill Lynch Capital Services, Inc.
    and MRC, and related swap documents (collectively, the
    MRC Swap Documents);J. Guarantee of MuniMae TEI Holdings, LLC, dated as of
    March 6, 2008, in favor of Merrill Lynch Capital Services, Inc.
    relating to the MRC Swap Documents;K. Pledge Agreement, dated as of March 6, 2008, relating to
    the MRC Swap Documents executed by MuniMae TEI Holdings, LLC in
    favor of Merrill Lynch Capital Services, Inc.;L. Agreement with Respect to Swap Collateral, dated as of
    March 6, 2008, between MuniMae TEI Holdings, LLC, Merrill Lynch
    Capital Services, Inc., Merrill Lynch, Pierce, Fenner &
    Smith, Inc., MMA and U.S. Bank Trust National Association, as
    collateral agent;M. Pledge Agreement relating to the Swap Collateral
    Agreement executed by MuniMae TEI Holdings, LLC in favor of
    Merrill Lynch Capital Services, Inc. and Merrill Lynch, Pierce,
    Fenner & Smith, Inc.; E-8




---



##### 



Incorporation byExhibit No.

Description

Reference10
.48

Letter Agreement with respect to that certain Amended and
    Restated Credit Agreement, dated as of November 16, 2005 and as
    subsequently amended, between MMA Mortgage Investment
    Corporation and U.S. Bank National Association.

Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    filed on March 21, 200810
.49

Sixth Amended and Restated Loan Agreement among MMA Multifamily
    Equity REIT and Municipal Mortgage & Equity, LLC and
    certain of its affiliates defined herein as the borrower and the
    guarantors, dated as of March 21, 2008.10
.50

First Amendment to Employment Agreement dates August 28, 2007
    between MMA Financial, Inc. and the registrants Chief
    Operating Officer, Charles M. Pinckney.

Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    filed on April 3, 200810
.51

Seventh Amendment dated as of March 27, 2008 to that certain
    Amended and Restated Credit Agreement, dated as of November 16,
    2005 and as subsequently amended, between MMA Mortgage
    Investment Corporation and U.S. Bank National Association.

Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    filed on April 3, 200810
.52

Eighth Amendment dated as of April 30, 2008 to that certain
    Amended and Restated Credit Agreement, dated as of November 16,
    2005 and as subsequently amended, between MMA Mortgage
    Investment Corporation and U.S. Bank National Association.

Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    filed on May 5, 200810
.53

Ninth Amendment dated as of November 14, 2008 to that certain
    Amended and Restated Credit Agreement, dated as of November 16,
    2005 and as subsequently amended, between MMA Mortgage
    Investment Corporation and U.S. Bank National Association.

Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    filed on November 20, 200810
.54

Ninth Amendment dated as of November 14, 2008 to that certain
    Amended and Restated Credit Agreement, dated as of November 16,
    2005 and as subsequently amended, between MMA Mortgage
    Investment Corporation and U.S. Bank National Association.

Incorporated by reference from the Companys Current Report
    on
    Form 8-K/A
    filed on November 21, 200810
.55

Letter Agreement dated November 24, 2008 with respect to that
    certain Fourth Amended and Completely Restated Loan Agreement
    dated as of February 23, 2007 by and among Synovus Bank
    (formerly, United Bank and Trust), MMA Capital Corporation,
    MuniMae TEI Holdings, LLC, MMA Mortgage Investment Corporation,
    MMA Construction Finance, LLC, Municipal Mortgage & Equity,
    LLC, MMA Financial Holdings, Inc. and MMA Financial, Inc.
    (formerly, MuniMae Investment Services Corporation).

Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    filed on December 1, 2008 E-9




---



##### 



Incorporation byExhibit No.

Description

Reference10
.56.1

Term Loan Agreement dated December 18, 2008 between MMA
    Financial Holdings, Inc. and Oak Grove Commercial Mortgage, LLC.

Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    filed on December 22, 200810
.56.2

Acquisition Agreement dated December 18, 2008 between MMA
    Mortgage Investment Corporation and Oak Grove Commercial
    Mortgage, LLC.

Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    filed on December 22, 200810
.57.1

Amendment to the Term Loan Agreement dated February 3, 2009
    between MMA Financial Holdings, Inc. and Oak Grove Commercial
    Mortgage, LLC.

Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    filed on February 4, 200910
.57.2

Amended and Restated Acquisition Agreement dated February 3,
    2009 between MMA Mortgage Investment Corporation and Oak Grove
    Commercial Mortgage, LLC.

Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    filed on February 4, 200910
.57

Purchase Agreement dated February 26, 2009 between MMA Renewable
    Ventures, LLC, MMA Renewable Ventures Finance, LLC and Fotowatio
    Renewable Ventures, Inc.

Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    filed on March 3, 200921


List of Subsidiaries31
.1

Certification of Chief Executive Officer pursuant to Section 302
    of the Sarbanes-Oxley Act of 2002.31
.2

Certification of Chief Financial Officer pursuant to Section 302
    of the Sarbanes-Oxley Act of 2002.32
.1

Certification of Chief Executive Officer pursuant to Section 906
    of the Sarbanes-Oxley Act of 2002.32
.2

Certification of Chief Financial Officer pursuant to Section 906
    of the Sarbanes-Oxley Act of 2002.     *
    
    Confidential treatment has been requested for certain portions
    of this Exhibit pursuant to
    Rule 24b-2
    of the Securities Exchange Act of 1934, as amended, which
    portions have been omitted and filed separately with the
    Securities and Exchange Commission. E-10