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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
  þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2005
  o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 Commission File No. 000-50721
 ORIGEN FINANCIAL, INC.
  Delaware
    
    20-0145649State of Incorporation
    
    I.R.S. Employer I.D. No.
 27777 Franklin Road
Suite 1700
Southfield, Michigan 48034
(248) 746-7000
 None
 Common Stock, Par Value $0.01 per Share
 o þ
 o þ
 þ o
 o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
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TABLE OF CONTENTS  PART IITEM 1. BUSINESSITEM 1A. RISK FACTORSITEM 1B. UNRESOLVED STAFF COMMENTSITEM 2. PROPERTIESITEM 3. LEGAL PROCEEDINGSITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERSPART IIITEM 5. MARKET FOR THE COMPANYS COMMON EQUITY AND RELATED STOCKHOLDER MATTERSITEM 6. SELECTED FINANCIAL DATAITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSUREITEM 9A. CONTROLS AND PROCEDURESITEM 9B. OTHER INFORMATIONPART IIIPART IVITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULESSIGNATURESEXHIBIT INDEXBy-laws of OrigenFifth Amendment to Credit Agreement effective as of 12/23/2005List of Origen's SubsidiariesConsent of Grant Thornton LLPCertification of Chief Executive Officer pursuant to Section 302Certification of Chief Financial Officer pursuant to Section 302Certification of CEO and CFO pursuant to Section 906    Table of Contents  As used in this report, Company, Us, We, Our and similar terms means Origen Financial,
Inc., a Delaware corporation, and, as the context requires, one or more of its subsidiaries.
 
 PART I
 
 ITEM 1. BUSINESS
 General
    www.origenfinancial.com
 Recent Developments
 Internal Audit Department
  Securitizations
  2




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Hometown America
  Loan Origination, Acquisition and Underwriting
 General
   Dealer, Broker and Correspondent Network
    3




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Underwriting
     4




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Third-Party Originations
  Acquisitions of Manufactured Housing Loans and Securities from Existing Securitizations
  Servicing
    5




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Securitizations
   Insurance
  Competition
   6




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Corporate Governance
  
    
    Our Board of Directors determined that each member of the Audit Committee of our Board
of Directors qualifies as an audit committee financial expert as such term is defined
under Item 401 of Regulation S-K. Each Audit Committee member is also independent as that
term is defined under applicable SEC and Nasdaq rules.
    
    Our Board of Directors adopted a Financial Code of Ethics for Senior Financial
Officers, which governs the conduct of our senior financial officers. A copy of this code
is available on our website at www.origenfinancial.com under the heading
Investors and subheading Corporate Governance and is also available in print to any
stockholder upon written request to Origen Financial, Inc., 27777 Franklin Road, Suite
1700, Southfield, Michigan 48034.
    
    Our Board of Directors established and adopted charters for each of its Audit,
Compensation and Nominating and Governance Committees. Each committee is comprised of
independent directors. A copy of each of these charters is available on our website at
www.origenfinancial.com under the heading Investors and subheading Corporate
Governance and is also available in print to any stockholder upon written request to
Origen Financial, Inc., 27777 Franklin Road, Suite 1700, Southfield, Michigan 48034.
    
    Our Board of Directors adopted a Code of Business Conduct and Ethics, which governs
business decisions made and actions taken by our directors, officers and employees. A copy
of this code is available on our website at www.origenfinancial.com under the
heading Investors and subheading Corporate Governance and is also available in print to
any stockholder upon written request to Origen Financial, Inc., 27777 Franklin Road, Suite
1700, Southfield, Michigan 48034. Additionally, the Company has created a Confidential
and Anonymous Ethics Complaint Hotline maintained with an independent third party so that
employees may confidentially report infractions against the Companys Code of Business
Conduct and Ethics to the Compliance Committee. Through this arrangement, each Compliance
Committee member has access to two-way anonymous communications with the reporting
employee. There are three submission methods (voicemail, email and web form). There is a
message management system that provides the member an up-to-date snapshot of all incoming
and outgoing communications. The ethics hotline is accessible through the Companys
intranet system.
    
    The Sarbanes Oxley Act of 2002 requires the establishment of procedures whereby each
member of the Audit Committee of our Board of Directors is able to receive confidential,
anonymous communications regarding concerns in the areas of accounting, internal controls
or auditing matters. We have established a Confidential and Anonymous Financial Complaint
Hotline, or whistleblower hotline, maintained with an independent third party. Through
this arrangement, each Audit Committee member has access to two-way anonymous
communications with the whistleblower. There are three submission methods (voicemail,
e-mail and web form). There is a message management system that provides the member an
up-to-date snapshot of all incoming and outgoing communications. The Whistleblower Hotline
is accessible through our website at www.origenfinancial.com under the heading
Investors.
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ITEM 1A. RISK FACTORS
  Risks Related to Our Business
 We may not generate sufficient revenue to make or sustain distributions to stockholders.
  We may not have access to capital to meet our anticipated needs.
  We incur indebtedness to fund our operations, and there is no limit on the total amount of
indebtedness that we can incur.
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We may not be able to securitize our manufactured housing loans or do so on favorable terms.
  
    
    conditions in the asset-backed securities markets generally;
    
    conditions in the manufactured housing asset-backed securities markets specifically,
including rating agencies views on the manufactured housing industry;
    
    the performance of the securities issued in connection with our securitizations;
    
    the nominal interest rate and credit quality of our loans;
    
    our relationship with our bond and other investors in our securities and loans;
    
    compliance of our loans with the eligibility requirements for a particular securitization;
    
    our ability to adequately service our loans, including our ability to obtain a servicer rating;
    
    adverse changes in state and federal regulations regarding high-cost and predatory lending; and
    
    any material negative rating agency action pertaining to certificates issued in our securitizations.
   Certain securitization structures may cause us to recognize income for accounting and tax purposes
without concurrently receiving the associated cash flow.
  Our business may not be profitable in the future.
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We depend on key personnel, the loss of whom could threaten our ability to operate our business
successfully.
  Future acquisitions of loan portfolios, servicing portfolios and other assets may not yield the
returns we expect.
  Our profitability may be affected if we are unable to effectively manage interest rate risk and
leverage.
  We may pay distributions that result in a return of capital to stockholders, which may cause
stockholders to realize lower overall returns.
  Some of our investments are illiquid and their value may decrease.
  10




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We may engage in hedging transactions, which can limit gains and increase exposure to losses.
  The competition we face could adversely affect our profitability.
   The success and growth of our business will depend upon our ability to adapt to and implement
technological changes.
  11




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We may experience capacity constraints or system failures that could damage our business.
  
    
    disruptions in servicing and originating loans;
    
    reduced borrower satisfaction;
    
    delays in the introduction of new loan services; or
    
    vulnerability to Internet hacker raids,
   If the prepayment rates for our manufactured housing loans are higher than expected, our results of
operations may be significantly harmed.
  If we are unable to maintain our network of retailers, brokers and correspondents, our loan
origination business will decrease.
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We may not realize the expected recovery rate on the resale of a manufactured house upon its
repossession or foreclosure.
  Data security breaches may subject us to liability or tarnish our reputation.
    Risks Related to the Manufactured Housing Industry
 Manufactured housing loan borrowers may be relatively high credit risks.
  13




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The manufactured housing industry has been in a downturn since 1998.
  Wide spreads between interest rates for manufactured housing loans and traditional site built
housing loans decrease the relative demand for manufactured houses.
  Any substantial economic slowdown could increase delinquencies, defaults, repossessions and
foreclosures and reduce our ability to originate loans.
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Our business may be significantly harmed by a slowdown in the economies of California or Texas, in
each of which we conduct a significant amount of business.
  Depreciation in the value of manufactured houses may decrease sales of new manufactured houses and
lead to increased defaults and delinquencies.
  Tax Risks of Our Business and Structure
 Distribution requirements imposed by law limit our flexibility in executing our business plan, and
we cannot assure stockholders that we will have sufficient funds to meet our distribution
obligations.
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We may suffer adverse tax consequences and be unable to attract capital if we fail to qualify as a
REIT.
   Our use of taxable REIT subsidiaries will cause income from our servicing and insurance activities
to be subject to corporate level tax and may cause us to restrict our business activities
  Our ability to sell and securitize our loans is limited due to various federal income tax rules
applicable to REITs.
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A portion of our income from assets held directly by or through a qualified REIT subsidiary that is
classified as a taxable mortgage pool may represent phantom taxable income.
  We may pay distributions that are in excess of our current and accumulated earnings and profits,
which may cause our stockholders to incur adverse federal income tax consequences.
  Other Risks
 We operate in a highly regulated industry and failure to comply with applicable laws and
regulations at the federal, state or local level could negatively affect our business.
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
    
    defaults under contracts we have with third parties, which could cause those contracts to be
terminated or renegotiated on less favorable terms;
    
    civil fines and penalties and criminal liability;
    
    loss of licenses, exemptions or other approved status, which could in turn require us
temporarily or permanently to cease our affected operations;
    
    demands for indemnification, loan repurchases or modification of our loans;
    
    class action lawsuits; and
    
    administrative enforcement actions.
 The increasing number of federal, state and local anti-predatory lending laws may restrict our
ability to originate or increase our risk of liability with respect to certain manufactured housing
loans and could increase our cost of doing business.
  We may be subject to fines, judgments or other penalties based upon the conduct of third parties
with whom we do business.
  18




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Common stock eligible for future sale may have adverse effects on our share price.
  Market interest rates may affect the value of our securities.
  Our rights and the rights of our stockholders to take action against our directors are limited,
which could limit stockholders recourse in the event of certain actions.
  Our board of directors may change our investment and operational policies and practices without a
vote of our stockholders, which limits stockholder control of our policies and practices.
  Certain provisions of Delaware law and our governing documents may make it difficult for a
third-party to acquire us.
 9.25% Ownership Limit.
 19




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Preferred Stock .
 Section 203.
 
 ITEM 1B. UNRESOLVED STAFF COMMENTS
  
 TEM 2. PROPERTIES
   
 ITEM 3. LEGAL PROCEEDINGS
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  20




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PART II
 
 ITEM 5. MARKET FOR THE COMPANYS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
 Market Information
  High
    
    LowFiscal Year Ended December 31, 2004Period from May 5, 2004 through June 30, 2004
    
    $
    8.33
    
    
    $
    7.50Third quarter
    
    $
    8.15
    
    
    $
    6.96Fourth quarter
    
    $
    7.80
    
    
    $
    6.67Fiscal Year Ended December 31, 2005First quarter
    
    $
    8.75
    
    
    $
    6.65Second quarter
    
    $
    7.64
    
    
    $
    6.58Third quarter
    
    $
    8.24
    
    
    $
    6.69Fourth quarter
    
    $
    7.66
    
    
    $
    6.37
  Distributionper shareFiscal Year Ended December 31, 2004First quarter
    
    $
    0.04Second quarter
    
    $
    0.06Third quarter
    
    $
    0.25Fourth quarter
    
    $
    0.04
    *Fiscal Year Ended December 31, 2005First quarter
    
    $
    0.06Second quarter
    
    $
    0.06Third quarter
    
    $
    0.06Fourth quarter
    
    $
    
 
 *
    
    Paid on March 31, 2005   21




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Equity Compensation Plan Information
  (a)
    
    
    (b)
    
    
    (c)Number of securitiesNumber of
    
    
    
    
    
    
    remaining available forsecurities to be
    
    
    Weighted-average
    
    
    future issuance underissued upon exercise
    
    
    exercise price of
    
    
    equity compensationof outstanding
    
    
    Outstanding
    
    
    plans (excludingoptions, warrants
    
    
    options, warrants
    
    
    securities reflected inPlan Category
    
    and rights
    
    
    and rights
    
    
    column (a))Equity compensation plans approved by shareholders
    
    
    255,500
    
    
    $
    10.00
    
    
    
    670,188Equity compensation plans not approved by shareholders
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/ATOTAL
    
    
    255,500
    
    
    $
    10.00
    
    
    
    670,188
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##### Table of Contents



ITEM 6. SELECTED FINANCIAL DATA
 Origen Financial, Inc.
    
    
    Origen Financial L.L.C (4)
    
    
    BFSC (4)Period fromOctober 8
    
    
    Period fromYear Ended
    
    
    Year Ended
    
    
    through
    
    
    January 1
    
    
    Year Ended
    
    
    Year EndedDecember 31,
    
    
    December 31,
    
    
    December 31,
    
    
    through October
    
    
    December 31,
    
    
    December 31,2005
    
    
    2004
    
    
    2003 (1)
    
    
    7, 2003
    
    
    2002
    
    
    2001(In thousands, except for per share data)Operating Statement Data:Interest income on loans
    
    $
    59,391
    
    
    $
    42,479
    
    
    $
    7,339
    
    
    $
    16,398
    
    
    $
    9,963
    
    
    $
    9,493Gain on sale and
securitization of loans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28
    
    
    
    2,719
    
    
    
    5,186Servicing and other
revenues
    
    
    14,651
    
    
    
    11,184
    
    
    
    2,880
    
    
    
    7,329
    
    
    
    7,703
    
    
    
    14,994Total revenue
    
    
    74,042
    
    
    
    53,663
    
    
    
    10,219
    
    
    
    23,755
    
    
    
    20,385
    
    
    
    29,673Interest expense
    
    
    28,468
    
    
    
    15,020
    
    
    
    2,408
    
    
    
    11,418
    
    
    
    5,935
    
    
    
    7,875Provisions for loan loss,
recourse liability and
write down of residual
interests
    
    
    13,633
    
    
    
    10,210
    
    
    
    768
    
    
    
    9,849
    
    
    
    18,176
    
    
    
    18,118Distribution of preferred
interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,662
    
    
    
    
    
    
    
    Other operating expenses
    
    
    34,600
    
    
    
    31,399
    
    
    
    5,546
    
    
    
    24,754
    
    
    
    25,461
    
    
    
    22,129Total expenses
    
    
    76,701
    
    
    
    56,629
    
    
    
    8,722
    
    
    
    47,683
    
    
    
    49,572
    
    
    
    48,122Income (loss)
before income taxes
    
    
    (2,659
    )
    
    
    (2,966
    )
    
    
    1,497
    
    
    
    (23,928
    )
    
    
    (29,187
    )
    
    
    (18,449
    )Provision (benefit) for
income taxes(2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,245Net income (Loss)
    
    $
    (2,659
    )
    
    $
    (2,966
    )
    
    $
    1,497
    
    
    $
    (23,928
    )
    
    $
    (29,187
    )
    
    $
    (19,694
    )Earning (loss)
per share  Diluted(3)
    
    $
    (0.11
    )
    
    $
    (0.14
    )
    
    $
    0.10
    
    
    $
    
    
    
    $
    
    
    
    $
    (7.63
    )Distributions paid per
share
    
    $
    0.22
    
    
    $
    0.35
    
    
    
    0.098
    
    
    
    
    
    
    
    
    
    
    
    Balance Sheet Data:Loans receivable, net of
allowance for losses
    
    $
    768,410
    
    
    $
    563,268
    
    
    $
    368,040
    
    
    $
    279,300
    
    
    $
    173,764
    
    
    $
    126,591Servicing rights
    
    
    3,103
    
    
    
    4,097
    
    
    
    5,131
    
    
    
    5,892
    
    
    
    7,327
    
    
    
    6,855Retained interests in
loan securitizations
    
    
    
    
    
    
    724
    
    
    
    749
    
    
    
    785
    
    
    
    5,833
    
    
    
    Goodwill
    
    
    32,277
    
    
    
    32,277
    
    
    
    32,277
    
    
    
    18,332
    
    
    
    18,332
    
    
    
    Cash and other assets
    
    
    89,213
    
    
    
    82,181
    
    
    
    37,876
    
    
    
    22,894
    
    
    
    22,492
    
    
    
    33,646Total assets
    
    $
    893,003
    
    
    $
    682,547
    
    
    $
    444,073
    
    
    $
    327,203
    
    
    $
    227,748
    
    
    $
    167,092Total debt
    
    
    669,708
    
    
    
    455,914
    
    
    
    277,441
    
    
    
    273,186
    
    
    
    196,031
    
    
    
    122,999Preferred interest in
subsidiary
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    45,617
    
    
    
    
    
    
    
    Other liabilities
    
    
    23,344
    
    
    
    23,167
    
    
    
    24,312
    
    
    
    22,345
    
    
    
    21,413
    
    
    
    53,335Members/Stockholders
Equity/Capital
    
    
    199,951
    
    
    
    203,466
    
    
    
    142,320
    
    
    
    (13,945
    )
    
    
    10,304
    
    
    
    (9,242
    )Other InformationCash Flow Data: (provided
by/(used in))From operating
activities
    
    $
    18,167
    
    
    $
    8,606
    
    
    $
    (8,841
    )
    
    $
    (7,642
    )
    
    $
    115,251
    
    
    $
    142,807From investing activities
    
    
    (229,183
    )
    
    
    (245,125
    )
    
    
    (85,665
    )
    
    
    (112,547
    )
    
    
    (188,277
    )
    
    
    (195,200
    )From financing activities
    
    
    210,030
    
    
    
    238,886
    
    
    
    100,254
    
    
    
    121,110
    
    
    
    73,032
    
    
    
    49,312Selected RatiosReturn on average assets
    
    
    (0.33
    )%
    
    
    (0.52
    )%
    
    
    1.43
    %
    
    
    (8.52
    )%
    
    
    (18.79
    )%
    
    
    (15.68
    )%Return on average equity
    
    
    (1.29
    )%
    
    
    (1.56
    )%
    
    
    4.21
    %
    
    
    (1352.96
    )%
    
    
    (91.29
    )%
    
    
    (165.30
    )%Average equity to average
assets
    
    
    25.63
    %
    
    
    33.03
    %
    
    
    33.91
    %
    
    
    0.63
    %
    
    
    20.58
    %
    
    
    4.22
    %
 
 (1)
    
    Origen Financial, Inc. began operations on October 8, 2003 as a REIT with Origen Financial
L.L.C. as a wholly-owned subsidiary.(2)
    
    As a REIT, Origen Financial, Inc. is not required to pay federal corporate income taxes on
its net income that is currently distributed to its stockholders. As a limited liability
company, Origen Financial L.L.C. does not incur income taxes. BFSC (defined in note (4) below)
was taxed as a regular C corporation during the periods indicated. 23




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(3)
    
    As a limited liability company, Origen Financial L.L.C. did not report earnings per share.
 (4)
    
    Bingham Financial Services Corporation (BFSC) and Origen Financial L.L.C. are our
predecessors for accounting purposes. However, we believe that their businesses, financial
statements and results of operations are quantitatively different from ours. Their results of
operations reflect capital constraints and corporate and business strategies, including
commercial mortgage loan origination and servicing, which are different than ours. We also
have elected to be taxed as a REIT. Accordingly, we believe the historical financial results
of Origen Financial L.L.C. and Bingham Financial Services Corporation are not indicative of
our future performance.
 24




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ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    Overview
   25




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Critical Accounting Policies
  26




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Transfers of Financial Assets:
 Loans Receivable:
 Allowance for Credit Losses:
 27




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Loan Pools and Debt Securities Acquired with Evidence of Deterioration of Credit Quality:
    Derivative Financial Instruments:
  28




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Stock Options:
 Goodwill Impairment:
 Real Estate Investment Trust:
 Financial Condition
 December 31, 2005 Compared to December 31, 2004
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2005
    
    
    2004Manufactured housing loans  securitized
    
    $
    695,701
    
    
    $
    401,995Manufactured housing loans  unsecuritized
    
    
    85,949
    
    
    
    170,978Accrued interest receivable
    
    
    4,078
    
    
    
    3,285Deferred fees
    
    
    (2,100
    )
    
    
    (3,100
    )Discount on purchased loans
    
    
    (4,773
    )
    
    
    (4,575
    )Allowance for purchased loans
    
    
    (428
    )
    
    
    Allowance for loan loss
    
    
    (10,017
    )
    
    
    (5,315
    )$
    768,410
    
    
    $
    563,268
  2005
    
    2004Number of loans receivable
    
    
    17,277
    
    
    
    13,358Average loan balance
    
    $
    45
    
    
    $
    43Weighted average loan coupon (a)
    
    
    9.56
    %
    
    
    9.86
    %Weighted average initial term
    
    20 years
    
    20 years
 
 (a)
    
    The weighted average loan coupon includes an imbedded servicing fee rate resulting from
securitization or sale of the loan, but accounted for as a financing.  2005
    
    2004No. of
    
    Principal
    
    % of
    
    No. of
    
    Principal
    
    % ofDays delinquent
    
    Loans
    
    Balance
    
    Portfolio
    
    Loans
    
    Balance
    
    Portfolio31-60
    
    
    215
    
    
    $
    8,182
    
    
    
    1.0
    %
    
    
    146
    
    
    $
    5,253
    
    
    
    0.9
    %61-90
    
    
    68
    
    
    
    2,561
    
    
    
    0.3
    %
    
    
    80
    
    
    
    3,014
    
    
    
    0.5
    %Greater than 90
    
    
    192
    
    
    
    7,480
    
    
    
    1.0
    %
    
    
    195
    
    
    
    7,637
    
    
    
    1.3
    %
  30




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31




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##### Table of Contents



Loan Pool Unpaid Principle Balance (dollars in thousands) 1
 2002 and2001 and prior
    
    subsequentAt December 31, 2005Dollars
    
    $
    56,622
    
    
    $
    732,033Percentage of total
    
    
    7.2
    %
    
    
    92.8
    %At December 31, 2004Dollars
    
    $
    115,346
    
    
    $
    514,027Percentage of total
    
    
    18.3
    %
    
    
    81.7
    %At December 31, 2003Dollars
    
    $
    150,015
    
    
    $
    312,289Percentage of total
    
    
    32.4
    %
    
    
    67.6
    %
 Static Pool Performance (dollars in thousands) 1
 2002 and2001 and prior
    
    subsequent2005Dollars defaulted
    
    $
    8,752
    
    
    $
    12,272Net recovery percentage
    
    
    39.9
    %
    
    
    49.4
    %Net losses
    
    $
    6,707
    
    
    $
    5,3122004Dollars defaulted
    
    $
    11,848
    
    
    $
    8,940Net recovery percentage
    
    
    37.8
    %
    
    
    49.2
    %Net losses
    
    $
    12,242
    
    
    $
    4,0042003Dollars defaulted
    
    $
    10,109
    
    
    $
    3,230Net recovery percentage
    
    
    34.0
    %
    
    
    48.1
    %Net losses
    
    $
    6,833
    
    
    $
    893
   
 1
    
    Includes owned portfolio, repossessed inventory and loans sold with recourse. 32




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##### Table of Contents



OriginalIssuance
    
    
    2005
    
    
    2004Origen 2004-A
    
    $
    200,000
    
    
    $
    138,257
    
    
    $
    167,887Origen 2004-B
    
    
    169,000
    
    
    
    136,229
    
    
    
    160,501Origen 2005-A
    
    
    165,300
    
    
    
    150,471
    
    
    
    Origen 2005-B
    
    
    156,187
    
    
    
    153,546
    
    
    
    $
    578,503
    
    
    $
    328,388
    33




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Results of Operations for the Years Ended December 31, 2005 and December 31, 2004
      2005
    
    
    2004Average
    
    
    
    
    
    
    Yield/
    
    
    Average
    
    
    
    
    
    
    Yield/Balance
    
    
    Interest
    
    
    Rate
    
    
    Balance
    
    
    Interest
    
    
    RateInterest earning assets:Manufactured housing loans
    
    $
    667,089
    
    
    $
    55,164
    
    
    
    8.27
    %
    
    $
    464,578
    
    
    $
    39,862
    
    
    
    8.58
    %Investment securities
    
    
    40,442
    
    
    
    3,761
    
    
    
    9.30
    %
    
    
    28,109
    
    
    
    2,397
    
    
    
    8.53
    %Other
    
    
    34,884
    
    
    
    466
    
    
    
    1.34
    %
    
    
    18,855
    
    
    
    220
    
    
    
    1.17
    %Total
    
    $
    742,415
    
    
    $
    59,391
    
    
    
    8.00
    %
    
    $
    511,542
    
    
    $
    42,479
    
    
    
    8.30
    %Interest bearing
liabilities:Loan funding facilities
    
    $
    544,002
    
    
    $
    27,465
    
    
    
    5.05
    %
    
    $
    344,502
    
    
    $
    14,582
    
    
    
    4.23
    %Repurchase agreements
    
    
    22,793
    
    
    
    950
    
    
    
    4.17
    %
    
    
    17,573
    
    
    
    399
    
    
    
    2.27
    %Notes payable  servicing advance
    
    
    710
    
    
    
    53
    
    
    
    7.46
    %
    
    
    553
    
    
    
    39
    
    
    
    7.05
    %Total
    
    $
    567,505
    
    
    $
    28,468
    
    
    
    5.02
    %
    
    $
    362,628
    
    
    $
    15,020
    
    
    
    4.14
    %Net interest income and interest rate spread
    
    
    
    
    
    $
    30,923
    
    
    
    2.98
    %
    
    
    
    
    
    $
    27,459
    
    
    
    4.16
    %Net yield on average interest earning assets
    
    
    
    
    
    
    
    
    
    
    4.17
    %
    
    
    
    
    
    
    
    
    
    
    5.37
    %
 34




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##### Table of Contents



Volume
    
    
    Rate
    
    
    TotalInterest earning assets:Manufactured housing loans
    
    $
    17,376
    
    
    $
    (2,074
    )
    
    $
    15,302Investment securities
    
    
    1,052
    
    
    
    312
    
    
    
    1,364Other
    
    
    187
    
    
    
    59
    
    
    
    246Total interest income
    
    $
    18,615
    
    
    $
    (1,703
    )
    
    $
    16,912Interest bearing liabilities:Loan funding facilities
    
    $
    8,444
    
    
    $
    4,439
    
    
    $
    12,883Repurchase agreements
    
    
    119
    
    
    
    432
    
    
    
    551Notes payable  servicing advances
    
    
    11
    
    
    
    3
    
    
    
    14Total interest expense
    
    $
    8,574
    
    
    $
    4,874
    
    
    $
    13,448Increase in net interest income
    
    
    
    
    
    
    
    
    
    $
    3,464
       35




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36




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Results of Operations for the Years Ended December 31, 2004 and December 31, 2003 (pro forma of
Origen Financial Inc.)
  2004
    
    
    2003(in thousands)Interest IncomeTotal interest income
    
    $
    42,479
    
    
    $
    23,737Total interest expense
    
    
    15,020
    
    
    
    13,826Net interest income before loan losses
    
    
    27,459
    
    
    
    9,911Provision for credit losses and impairment
    
    
    7,053
    
    
    
    5,533Net interest income after loan losses
    
    
    20,406
    
    
    
    4,378Non-interest income
    
    
    11,184
    
    
    
    10,237Non-interest ExpensesPersonnel
    
    
    21,947
    
    
    
    20,206Loan origination and servicing
    
    
    1,354
    
    
    
    1,199Provision for recourse liability
    
    
    3,132
    
    
    
    Write down of residual interest
    
    
    25
    
    
    
    5,084State business taxes
    
    
    312
    
    
    
    121Other operating
    
    
    7,786
    
    
    
    10,436Total non-interest expense
    
    
    34,556
    
    
    
    37,046Net loss
    
    $
    (2,966
    )
    
    $
    (22,431
    )
     37




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##### Table of Contents



2004
    
    
    2003Average
    
    
    
    
    
    
    Yield/
    
    
    Average
    
    
    
    
    
    
    Yield/Balance
    
    
    Interest
    
    
    Rate
    
    
    Balance
    
    
    Interest
    
    
    RateInterest earning assets:Manufactured housing loans
    
    $
    464,578
    
    
    $
    39,862
    
    
    
    8.58
    %
    
    $
    250,193
    
    
    $
    23,707
    
    
    
    9.48
    %Investment securities
    
    
    28,109
    
    
    
    2,397
    
    
    
    8.53
    %
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    18,855
    
    
    
    220
    
    
    
    1.17
    %
    
    
    3,449
    
    
    
    30
    
    
    
    0.87
    %Total
    
    $
    511,542
    
    
    $
    42,479
    
    
    
    8.30
    %
    
    $
    253,642
    
    
    $
    23,737
    
    
    
    9.36
    %Interest bearing
liabilities:Loan funding facilities
    
    $
    344,502
    
    
    $
    14,582
    
    
    
    4.23
    %
    
    $
    236,245
    
    
    $
    13,770
    
    
    
    5.83
    %Repurchase agreements
    
    
    17,573
    
    
    
    399
    
    
    
    2.27
    %
    
    
    
    
    
    
    
    
    
    
    Notes payable  servicing advances
    
    
    553
    
    
    
    39
    
    
    
    7.05
    %
    
    
    1,333
    
    
    
    56
    
    
    
    4.20
    %Total
    
    $
    362,628
    
    
    $
    15,020
    
    
    
    4.14
    %
    
    $
    237,578
    
    
    $
    13,826
    
    
    
    5.82
    %Net interest income and interest rate spread
    
    
    
    
    
    $
    27,459
    
    
    
    4.16
    %
    
    
    
    
    
    $
    9,911
    
    
    
    3.54
    %Net yield on average interest earning assets
    
    
    
    
    
    
    
    
    
    
    5.37
    %
    
    
    
    
    
    
    
    
    
    
    3.91
    %
  Volume
    
    
    Rate
    
    
    TotalInterest earning assets:Manufactured housing loans
    
    $
    20,314
    
    
    $
    (4,159
    )
    
    $
    16,155Investment securities
    
    
    2,397
    
    
    
    
    
    
    
    2,397Other
    
    
    134
    
    
    
    56
    
    
    
    190Total interest income
    
    $
    22,845
    
    
    $
    (2,230
    )
    
    $
    18,742Interest bearing liabilities:Loan funding facilities
    
    $
    6,310
    
    
    $
    (5,498
    )
    
    $
    812Repurchase agreements
    
    
    399
    
    
    
    
    
    
    
    399Notes payable  servicing advances
    
    
    (33
    )
    
    
    16
    
    
    
    (17
    )Total interest expense
    
    $
    6,676
    
    
    $
    (5,482
    )
    
    $
    1,194Increase in net interest income
    
    
    
    
    
    
    
    
    
    $
    17,548
   38




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39




---



##### Table of Contents



Liquidity and Capital Resources
      40




---



##### Table of Contents



41




---



##### Table of Contents



Less than
    
    
    1 - 3
    
    
    4 - 5Total
    
    
    1 year
    
    
    years
    
    
    years
    
    
    ThereafterNotes payable  Citigroup (1)
    
    $
    65,411
    
    
    $
    49,058
    
    
    $
    16,353
    
    
    $
    
    
    
    $
    Notes payable  2004-A securitization (2)
    
    
    138,257
    
    
    
    18,147
    
    
    
    32,203
    
    
    
    24,588
    
    
    
    63,319Notes payable  2004-B securitization (3)
    
    
    136,229
    
    
    
    17,881
    
    
    
    31,731
    
    
    
    24,227
    
    
    
    62,390Notes payable  2005-A securitization (4)
    
    
    150,471
    
    
    
    19,750
    
    
    
    35,048
    
    
    
    26,760
    
    
    
    68,913Notes payable  2005-B securitization (5)
    
    
    153,546
    
    
    
    20,154
    
    
    
    35,764
    
    
    
    27,307
    
    
    
    70,321Repurchase agreement (6)
    
    
    23,582
    
    
    
    23,582
    
    
    
    
    
    
    
    
    
    
    
    Operating leases
    
    
    4,321
    
    
    
    1,090
    
    
    
    1,729
    
    
    
    951
    
    
    
    551Total Contractual Obligations
    
    $
    671,817
    
    
    $
    149,662
    
    
    $
    152,828
    
    
    $
    103,833
    
    
    $
    265,494
 
 (1)
    
    Origen Financial L.L.C. and Origen Securitization Company, LLC, one of our special purpose
entity subsidiaries, are borrowers under the short-term securitization facility with
Citigroup.(2)
    
    Origen Financial L.L.C. through a special purpose entity, Origen Manufactured Housing
Contract Trust 2004-A, is the issuer of the notes payable under the 2004-A securitization.(3)
    
    Origen Financial L.L.C. through a special purpose entity, Origen Manufactured Housing
Contract Trust 2004-B, is the issuer of the notes payable under the 2004-B securitization.(4)
    
    Origen Financial L.L.C. through a special purpose entity, Origen Manufactured Housing
Contract Trust 2005-A, is the issuer of the notes payable under the 2005-A securitization.(5)
    
    Origen Financial L.L.C. through a special purpose entity, Origen Manufactured Housing
Contract Trust 2005-B, is the issuer of the notes payable under the 2005-B securitization.(6)
    
    Origen Financial L.L.C. is the borrower under the Citigroup repurchase agreement.   42




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##### Table of Contents



Forward-Looking Statements
  
    
    the performance of our manufactured housing loans;
    
    our ability to borrow at favorable rates and terms;
    
    the supply of manufactured housing loans;
    
    interest rate levels and changes in the yield curve (which is the curve formed by the
differing Treasury rates paid on one, two, three, five, ten and 30 year term debt);
    
    our ability to use hedging strategies to insulate our exposure to changing interest rates;
    
    changes in, and the costs associated with complying with, federal, state and local
regulations, including consumer finance and housing regulations;
    
    applicable laws, including federal income tax laws;
    
    general economic conditions in the markets in which we operate;
  43




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##### Table of Contents



ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
    Maturity0 to 3
    
    
    4 to 12
    
    
    1 to 5
    
    
    Over 5months
    
    
    months
    
    
    years
    
    
    years
    
    
    TotalAssetsCash and equivalents
    
    $
    8,307
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    8,307Restricted cash
    
    
    13,635
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,635Loans receivable, net
    
    
    25,339
    
    
    
    75,520
    
    
    
    315,637
    
    
    
    351,914
    
    
    
    768,410Investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    41,914
    
    
    
    41,914Furniture, fixtures and equipment, net
    
    
    285
    
    
    
    890
    
    
    
    2,383
    
    
    
    
    
    
    
    3,558Goodwill
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    32,277
    
    
    
    32,777Other assets
    
    
    10,486
    
    
    
    7,067
    
    
    
    4,675
    
    
    
    2,674
    
    
    
    24,902Total assets
    
    $
    58,052
    
    
    $
    83,477
    
    
    $
    322,695
    
    
    $
    428,779
    
    
    $
    893,003Liabilities and Stockholders EquityWarehouse financing
    
    $
    12,265
    
    
    $
    36,794
    
    
    $
    16,352
    
    
    $
    
    
    
    $
    65.411Securitization financing
    
    
    19,076
    
    
    
    56,855
    
    
    
    237,629
    
    
    
    264,943
    
    
    
    578.503Repurchase agreements
    
    
    23,582
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23.582Notes payable  servicing advances
    
    
    2,212
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,212Recourse liability
    
    
    15
    
    
    
    40
    
    
    
    137
    
    
    
    100
    
    
    
    292Other liabilities
    
    
    21,723
    
    
    
    299
    
    
    
    
    
    
    
    1,030
    
    
    
    23,052Total liabilities
    
    
    78,873
    
    
    
    93,988
    
    
    
    254,118
    
    
    
    266,073
    
    
    
    693,052Preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    125
    
    
    
    125Common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    255
    
    
    
    255Paid-in-capital
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    220,792
    
    
    
    220,792Accumulated other comprehensive loss
    
    
    (5
    )
    
    
    20
    
    
    
    128
    
    
    
    764
    
    
    
    907Unearned stock compensation
    
    
    (594
    )
    
    
    (815
    )
    
    
    (1,017
    )
    
    
    
    
    
    
    (2,426
    )Distributions in excess of earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (19,702
    )
    
    
    (19,702
    )Total stockholders equity
    
    
    (599
    )
    
    
    (795
    )
    
    
    (889
    )
    
    
    202,234
    
    
    
    199,951Total liabilities and stockholders equity
    
    $
    78,274
    
    
    $
    93,193
    
    
    $
    253,229
    
    
    $
    468,307
    
    
    $
    893,003Interest sensitivity gap
    
    $
    (20,222
    )
    
    $
    (9,716
    )
    
    $
    69,466
    
    
    $
    (39,528
    )Cumulative interest sensitivity gap
    
    $
    (20,222
    )
    
    $
    (29,938
    )
    
    $
    39,528
    
    
    
    Cumulative interest sensitivity gap to total assets
    
    
    (2.26
    )%
    
    
    (3.35
    )%
    
    
    4.43
    %
    
    
    
   44




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##### Table of Contents



Contractual MaturityThere-2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    after
    
    
    TotalInterest sensitive assetsLoans receivable
    
    $
    100,858
    
    
    $
    94,878
    
    
    $
    84,102
    
    
    $
    73,207
    
    
    $
    63,450
    
    
    $
    351,915
    
    
    $
    768,410Average interest rate
    
    
    9.56
    %
    
    
    9.56
    %
    
    
    9.56
    %
    
    
    9.56
    %
    
    
    9.56
    %
    
    
    9.56
    %
    
    
    9.56
    %Interest bearing deposits
    
    
    20,930
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,930Average interest rate
    
    
    1.33
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.33
    %Investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    41,914
    
    
    
    41,914Average interest rate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9.30
    %
    
    
    9.30
    %Total interest sensitive assets
    
    $
    121,788
    
    
    $
    94,878
    
    
    $
    84,102
    
    
    $
    73,207
    
    
    $
    63,450
    
    
    $
    393,829
    
    
    $
    831,254Interest sensitive liabilitiesWarehouse financing
    
    $
    49,058
    
    
    $
    16,353
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    65,411Average interest rate
    
    
    5.18
    %
    
    
    5.18
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5.18
    %Securitization financing
    
    
    75,932
    
    
    
    71,429
    
    
    
    63,317
    
    
    
    55,115
    
    
    
    47,768
    
    
    
    264,942
    
    
    
    578,503Average interest rate
    
    
    5.01
    %
    
    
    5.01
    %
    
    
    5.01
    %
    
    
    5.01
    %
    
    
    5.01
    %
    
    
    5.01
    %
    
    
    5.01
    %Repurchase agreements
    
    
    23,582
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23,582Average interest rate
    
    
    4.17
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4.17
    %Notes payable  servicing advance
    
    
    2,212
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,212Average interest rate
    
    
    7.46
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7.46
    %Recourse liability
    
    
    55
    
    
    
    44
    
    
    
    36
    
    
    
    30
    
    
    
    26
    
    
    
    100
    
    
    
    292Average interest rate
    
    
    10.93
    %
    
    
    10.93
    %
    
    
    10.93
    %
    
    
    10.93
    %
    
    
    10.93
    %
    
    
    10.93
    %
    
    
    10.93
    %Total interest sensitive liabilities
    
    $
    150,839
    
    
    $
    87,827
    
    
    $
    63,353
    
    
    $
    55,145
    
    
    $
    47,794
    
    
    $
    265,042
    
    
    $
    670,000
 45




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##### Table of Contents



ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 Managements Report on Internal Control Over Financial Reporting
         /s/ Ronald A. KleinRonald A, Klein, Chief Executive Officer/s/ W. Anderson Geater, Jr.W. Anderson Geater, Jr., Chief Financial Officer
  46




---



##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
    Internal
ControlIntegrated Framework
  
 47




---



##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
 Internal Control  Integrated Framework
    Internal Control  Integrated Framework Internal Control  Integrated Framework
   
 48




---



##### Table of Contents



Origen Financial, Inc.
Consolidated Balance Sheets
(In thousands, except share data)
As of December 31, 2005 and 2004
 2005
    
    
    2004ASSETSAssetsCash and cash equivalents
    
    $
    8,307
    
    
    $
    9,293Restricted cash
    
    
    13,635
    
    
    
    9,222Investments held to maturity
    
    
    41,914
    
    
    
    37,622Loans receivable, net of allowance for losses of $10,017 and $5,315, respectively
    
    
    768,410
    
    
    
    563,268Furniture, fixtures and equipment, net
    
    
    3,558
    
    
    
    2,336Goodwill
    
    
    32,277
    
    
    
    32,277Other assets
    
    
    24,902
    
    
    
    28,529Total assets
    
    $
    893,003
    
    
    $
    682,547LIABILITIES AND STOCKHOLDERS EQUITYLiabilitiesWarehouse financing
    
    $
    65,411
    
    
    $
    107,373Securitization financing
    
    
    578,503
    
    
    
    328,388Repurchase agreement
    
    
    23,582
    
    
    
    20,153Notes
payable  servicing advances
    
    
    2,212
    
    
    
    Recourse liability
    
    
    292
    
    
    
    6,603Other liabilities
    
    
    23,052
    
    
    
    16,564Total liabilities
    
    
    693,052
    
    
    
    479,081Stockholders EquityPreferred stock, $.01 par value, 10,000,000 shares authorized; 125 shares issued
and outstanding at December 31, 2005 and December 31, 2004
    
    
    125
    
    
    
    125Common stock, $.01 par value, 125,000,000 shares authorized; 25,450,726 and
25,215,400 shares issued and outstanding at December 31, 2005 and December 31,
2004, respectively
    
    
    255
    
    
    
    252Additional paid-in-capital
    
    
    220,792
    
    
    
    219,121Accumulated other comprehensive income (loss)
    
    
    907
    
    
    
    (1,807
    )Unearned stock compensation
    
    
    (2,426
    )
    
    
    (2,790
    )Distributions in excess of earnings
    
    
    (19,702
    )
    
    
    (11,435
    )Total stockholders equity
    
    
    199,951
    
    
    
    203,466Total liabilities and stockholders equity
    
    $
    893,003
    
    
    $
    682,547
 The accompanying notes are an integral part of these financial statements.
 49




---



##### Table of Contents



Origen Financial, Inc.
Consolidated Statements of Operations
(In thousands, except share data)
 OrigenOrigen Financial, Inc.
    
    

Financial L.L.C.Period from
    
    
    Period fromOctober 8
    
    
    January 1Year Ended
    
    
    Year Ended
    
    
    through
    
    
    throughDecember 31,
    
    
    December 31,
    
    
    December 31,
    
    
    October 7,2005
    
    
    2004
    
    
    2003
    
    
    2003Interest IncomeTotal interest income
    
    $
    59,391
    
    
    $
    42,479
    
    
    $
    7,339
    
    
    $
    16,398Total interest expense
    
    
    28,468
    
    
    
    15,020
    
    
    
    2,408
    
    
    
    11,418Net interest income before loan losses
and impairment
    
    
    30,923
    
    
    
    27,459
    
    
    
    4,931
    
    
    
    4,980Provision for credit losses
    
    
    12,691
    
    
    
    7,053
    
    
    
    768
    
    
    
    4,765Impairment of purchased loan pool
    
    
    428
    
    
    
    
    
    
    
    
    
    
    
    Net interest income after loan losses and
impairment
    
    
    17,804
    
    
    
    20,406
    
    
    
    4,163
    
    
    
    215Non-interest income
    
    
    14,651
    
    
    
    11,184
    
    
    
    2,880
    
    
    
    7,357Non-interest ExpensesPersonnel
    
    
    22,550
    
    
    
    21,947
    
    
    
    3,862
    
    
    
    16,344Loan origination and servicing
    
    
    1,603
    
    
    
    1,354
    
    
    
    258
    
    
    
    941Provision for recourse liability
    
    
    218
    
    
    
    3,132
    
    
    
    
    
    
    
    Write down of residual interest
    
    
    724
    
    
    
    25
    
    
    
    
    
    
    
    5,084Loss on recourse buyout
    
    
    792
    
    
    
    
    
    
    
    
    
    
    
    State business taxes
    
    
    369
    
    
    
    312
    
    
    
    103
    
    
    
    18Other operating
    
    
    8,858
    
    
    
    7,786
    
    
    
    1,323
    
    
    
    9,113Total non-interest expense
    
    
    35,114
    
    
    
    34,556
    
    
    
    5,546
    
    
    
    31,500NET INCOME (LOSS)
    
    $
    (2,659
    )
    
    $
    (2,966
    )
    
    $
    1,497
    
    
    $
    (23,928
    )Weighted average common shares outstanding
    
    
    24,878,116
    
    
    
    21,439,029
    
    
    
    15,060,000
    
    
    NAWeighted average common shares
outstanding, diluted
    
    
    24,878,116
    
    
    
    21,439,029
    
    
    
    15,171,364
    
    
    NAEarnings (loss) per common share:Basic
    
    $
    (0.11
    )
    
    $
    (0.14
    )
    
    $
    0.10
    
    
    NADiluted
    
    $
    (0.11
    )
    
    $
    (0.14
    )
    
    $
    0.10
    
    
    NA
 The accompanying notes are an integral part of these financial statements.
 50




---



##### Table of Contents



Origen Financial, Inc.
Consolidated Statements of Comprehensive Income (Loss)
(In thousands)
 Origen FinancialOrigen Financial, Inc.
    
    
    L.L.C.Period from
    
    
    Period fromOctober 8
    
    
    January 1Year Ended
    
    
    Year Ended
    
    
    through
    
    
    throughDecember 31,
    
    
    December 31,
    
    
    December 31,
    
    
    October 7,2005
    
    
    2004
    
    
    2003
    
    
    2003Net income (loss)
    
    $
    (2,659
    )
    
    $
    (2,966
    )
    
    $
    1,497
    
    
    $
    (23,928
    )Other comprehensive income:Net unrealized gain (loss) on interest rate swaps
    
    
    2,339
    
    
    
    (1,874
    )
    
    
    (20
    )
    
    
    (321
    )Reclassification adjustment for net realized
(gains) losses included in net income (loss)
    
    
    375
    
    
    
    87
    
    
    
    
    
    
    
    Total other comprehensive income (loss)
    
    
    2,714
    
    
    
    (1,787
    )
    
    
    (20
    )
    
    
    (321
    )Comprehensive income (loss)
    
    $
    55
    
    
    $
    (4,753
    )
    
    $
    1,477
    
    
    $
    (24,249
    )
 The accompanying notes are an integral part of these financial statements.
 51




---



##### Table of Contents



Origen Financial, Inc.
Consolidated Statements of Changes in Stockholders Equity
(In thousands, except share data)
 AccumulatedAdditional
    
    
    Other
    
    
    Unearned
    
    
    DistributionsPreferred
    
    
    Common
    
    
    Paid in
    
    
    Comprehensive
    
    
    Stock
    
    
    In Excess
    
    
    TotalStock
    
    
    Stock
    
    
    Capital
    
    
    Income (loss)
    
    
    Compensation
    
    
    Earnings
    
    
    EquityOrigen Financial L.L.C.Balance January 1, 2003
    
    $
    
    
    
    $
    
    
    
    $
    39,106
    
    
    $
    
    
    
    $
    
    
    
    $
    (28,802
    )
    
    $
    10,304Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (23,928
    )
    
    
    (23,928
    )Interest rate swap valuation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (321
    )
    
    
    
    
    
    
    
    
    
    
    (321
    )Balance October 7, 2003
    
    $
    
    
    
    $
    
    
    
    $
    39,106
    
    
    $
    (321
    )
    
    $
    
    
    
    $
    (52,730
    )
    
    $
    (13,945
    )Contribution to Origen Financial, Inc.
    
    
    
    
    
    
    
    
    
    
    (39,106
    )
    
    
    321
    
    
    
    
    
    
    
    52,730
    
    
    
    13,945Origen Financial, Inc.Balance October 8, 2003
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Issuance of common stock, net
    
    
    
    
    
    
    150
    
    
    
    142,066
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    142,216Issuance of restricted stock
    
    
    
    
    
    
    2
    
    
    
    1,223
    
    
    
    
    
    
    
    (1,225
    )
    
    
    
    
    
    
    Stock award amortization
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    111
    
    
    
    
    
    
    
    111Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,497
    
    
    
    1,497Net unrealized gain (loss) on
interest rate swaps
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (20
    )
    
    
    
    
    
    
    
    
    
    
    (20
    )Cash distribution declared ($0.10)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,484
    )
    
    
    (1,484
    )Balance December 31, 2003
    
    $
    
    
    
    $
    152
    
    
    $
    143,289
    
    
    $
    (20
    )
    
    $
    (1,114
    )
    
    $
    13
    
    
    $
    142,320Issuance of common stock, net
    
    
    
    
    
    
    96
    
    
    
    72,083
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    72,179Issuance of preferred stock, net
    
    
    125
    
    
    
    
    
    
    
    (38
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    87Issuance of restricted stock
    
    
    
    
    
    
    4
    
    
    
    4,034
    
    
    
    
    
    
    
    (4,038
    )
    
    
    
    
    
    
    Forfeiture of restricted stock
    
    
    
    
    
    
    
    
    
    
    (247
    )
    
    
    
    
    
    
    247
    
    
    
    
    
    
    
    Stock award amortization
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,115
    
    
    
    
    
    
    
    2,115Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,966
    )
    
    
    (2,966
    )Net unrealized gain (loss) on
interest rate swaps
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,874
    )
    
    
    
    
    
    
    
    
    
    
    (1,874
    )Reclassification adjustment for net
realized (gains) losses included in
net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    87
    
    
    
    
    
    
    
    
    
    
    
    87Cash distribution paid ($0.35)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,482
    )
    
    
    (8,482
    )Balance December 31, 2004
    
    $
    125
    
    
    $
    252
    
    
    $
    219,121
    
    
    $
    (1,807
    )
    
    $
    (2,790
    )
    
    $
    (11,435
    )
    
    $
    203,466Issuance of restricted stock
    
    
    
    
    
    
    3
    
    
    
    2,188
    
    
    
    
    
    
    
    (2,191
    )
    
    
    
    
    
    
    Retirement of restricted stock
    
    
    
    
    
    
    
    
    
    
    (449
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (449
    )Forfeiture of restricted stock
    
    
    
    
    
    
    
    
    
    
    (68
    )
    
    
    
    
    
    
    68
    
    
    
    
    
    
    
    Stock award amortization
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,487
    
    
    
    
    
    
    
    2,487Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,659
    )
    
    
    (2,659
    )Net unrealized gain (loss) on
interest rate swaps
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,339
    
    
    
    
    
    
    
    
    
    
    
    2,339Reclassification adjustment for net
realized (gains) losses included in
net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    375
    
    
    
    
    
    
    
    
    
    
    
    375Cash distribution paid ($0.22)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,608
    )
    
    
    (5,608
    )Balance December 31, 2005
    
    $
    125
    
    
    $
    255
    
    
    $
    220,792
    
    
    $
    907
    
    
    $
    (2,426
    )
    
    $
    (19,702
    )
    
    $
    199,951
 The accompanying notes are an integral part of these financial statements.
 52




---



##### Table of Contents



Origen Financial, Inc.
Consolidated Statements of Cash Flows
(In thousands)
 Origen FinancialOrigen Financial, Inc.
    
    
    L.L.C.Period from
    
    
    Period fromOctober 8
    
    
    January 1Year Ended
    
    
    Year Ended
    
    
    through
    
    
    throughDecember 31,
    
    
    December 31,
    
    
    December 31,
    
    
    October 7,2005
    
    
    2004
    
    
    2003
    
    
    2003Cash Flows From Operating ActivitiesNet income (loss)
    
    $
    (2,659
    )
    
    $
    (2,966
    )
    
    $
    1,497
    
    
    $
    (23,928
    )Adjustments to reconcile net income (loss)
to cash used in operating activities:Provision for credit losses and recourse
liability
    
    
    12,909
    
    
    
    10,185
    
    
    
    768
    
    
    
    4,765Impairment of purchased loan pool
    
    
    428
    
    
    
    
    
    
    
    
    
    
    
    Write-down of residual interest
    
    
    724
    
    
    
    25
    
    
    
    
    
    
    
    5,084Impairment of deferred purchase price
receivable
    
    
    
    
    
    
    168
    
    
    
    
    
    
    
    Depreciation and amortization
    
    
    5,822
    
    
    
    5,251
    
    
    
    765
    
    
    
    2,476Amortization of unearned stock compensation
    
    
    2,487
    
    
    
    2,114
    
    
    
    
    
    
    
    Proceeds from sale of loans
    
    
    761
    
    
    
    
    
    
    
    
    
    
    
    620Proceeds from deferred purchase price
receivable
    
    
    312
    
    
    
    731
    
    
    
    214
    
    
    
    735Increase in other assets
    
    
    (2,576
    )
    
    
    (4,833
    )
    
    
    (14,025
    )
    
    
    (3,404
    )Decrease in recourse liability
    
    
    (6,529
    )
    
    
    (5,269
    )
    
    
    (1,872
    )
    
    
    (2,708
    )Increase in accounts payable and other
liabilities
    
    
    6,488
    
    
    
    3,200
    
    
    
    3,812
    
    
    
    8,718Net cash provided by (used in) operating
activities
    
    
    18,167
    
    
    
    8,606
    
    
    
    (8,841
    )
    
    
    (7,642
    )Cash Flows From Investing Activities(Increase) decrease in restricted cash
    
    
    (4,413
    )
    
    
    (3,205
    )
    
    
    3,636
    
    
    
    (6,874
    )Purchase of investment securities
    
    
    (4,107
    )
    
    
    (37,622
    )
    
    
    
    
    
    
    Origination and purchase of loans
    
    
    (306,814
    )
    
    
    (269,825
    )
    
    
    (101,835
    )
    
    
    (144,146
    )Principal collections on loans
    
    
    75,571
    
    
    
    54,245
    
    
    
    11,683
    
    
    
    34,201Proceeds from sale of repossessed houses
    
    
    12,665
    
    
    
    11,942
    
    
    
    978
    
    
    
    5,083Capital expenditures
    
    
    (2,085
    )
    
    
    (660
    )
    
    
    (127
    )
    
    
    (811
    )Net cash used in investing activities
    
    
    (229,183
    )
    
    
    (245,125
    )
    
    
    (85,665
    )
    
    
    (112,547
    )Cash Flows From Financing ActivitiesNet proceeds from issuance of preferred stock
    
    
    
    
    
    
    95
    
    
    
    
    
    
    
    Net proceeds from issuance of common stock
    
    
    
    
    
    
    72,176
    
    
    
    141,616
    
    
    
    Retirement of restricted stock
    
    
    (449
    )
    
    
    
    
    
    
    
    
    
    
    Redemption of preferred interests in Origen
Securitization Company, LLC
    
    
    
    
    
    
    
    
    
    
    (45,617
    )
    
    
    Repayment of note payable-Sun Home Services
    
    
    
    
    
    
    
    
    
    
    (63,055
    )
    
    
    Proceeds from minority interest investment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    43,955Dividends paid
    
    
    (5,608
    )
    
    
    (9,966
    )
    
    
    
    
    
    
    Proceeds upon termination of hedging
transaction
    
    
    2,749
    
    
    
    
    
    
    
    
    
    
    
    Payment upon termination of hedging
transaction
    
    
    (410
    )
    
    
    (1,876
    )
    
    
    
    
    
    
    Proceeds from securitizations
    
    
    320,567
    
    
    
    368,801
    
    
    
    
    
    
    
    Repayment of notes payable  securitizations
    
    
    (70,498
    )
    
    
    (40,428
    )
    
    
    
    
    
    
    Proceeds from advances under repurchase
agreements
    
    
    5,243
    
    
    
    25,676
    
    
    
    
    
    
    
    28,915
 53




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##### Table of Contents



Origen FinancialOrigen Financial, Inc.
    
    
    L.L.C.Period from
    
    
    Period fromOctober 8
    
    
    January 1Year Ended
    
    
    Year Ended
    
    
    through
    
    
    throughDecember 31,
    
    
    December 31,
    
    
    December 31,
    
    
    October 7,2005
    
    
    2004
    
    
    2003
    
    
    2003Repayment of advances under repurchase
agreements
    
    
    (1,814
    )
    
    
    (5,523
    )
    
    
    
    
    
    
    (170,000
    )Proceeds from warehouse financing
    
    
    282,591
    
    
    
    341,380
    
    
    
    75,735
    
    
    
    640,824Repayment of warehouse financing
    
    
    (324,553
    )
    
    
    (507,412
    )
    
    
    (11,633
    )
    
    
    (422,584
    )Change in servicing advances, net
    
    
    2,212
    
    
    
    (4,037
    )
    
    
    3,208
    
    
    
    Net cash provided by financing activities
    
    
    210,030
    
    
    
    238,886
    
    
    
    100,254
    
    
    
    121,110NET (DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS
    
    
    (986
    )
    
    
    2,367
    
    
    
    5,748
    
    
    
    921Cash and cash equivalents, beginning of period
    
    
    9,293
    
    
    
    6,926
    
    
    
    1,178
    
    
    
    257Cash and cash equivalents, end of period
    
    $
    8,307
    
    
    $
    9,293
    
    
    $
    6,926
    
    
    $
    1,178Supplemental disclosures of cash flow
information:Interest paid
    
    $
    27,381
    
    
    $
    13,368
    
    
    $
    2,003
    
    
    $
    8,312Non cash financing activities:Restricted stock issued as unearned
compensation
    
    $
    2,191
    
    
    $
    3,791
    
    
    $
    1,225
    
    
    $
    Loans transferred from repossessed assets
and held for sale
    
    $
    20,233
    
    
    $
    22,330
    
    
    $
    2,534
    
    
    $
    9,541
 The accompanying notes are an integral part of these financial statements.
 54




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##### Table of Contents



Origen Financial, Inc.
Notes to Consolidated Financial Statements
 Note 1  Summary of Significant Accounting Policies
 Nature of Operations
    Basis of Financial Statement Presentation
  Revenue Recognition
  Use of Estimates in the Preparation of Financial Statements
  Cash and Cash Equivalents
  55




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##### Table of Contents



Origen Financial, Inc.
Notes to Consolidated Financial Statements
 Note 1  Summary of Significant Accounting Policies, continued:
 Loans Receivable
  Allowance for Credit Losses
  Investment Securities
  56




---



##### Table of Contents



Origen Financial, Inc.
Notes to Consolidated Financial Statements
 Note 1  Summary of Significant Accounting Policies, continued:
 Loan Pools and Debt Securities Acquired with Evidence of Deterioration of Credit Quality
     57




---



##### Table of Contents



Origen Financial, Inc.
Notes to Consolidated Financial Statements
 Note 1  Summary of Significant Accounting Policies, continued:
 Furniture, Fixtures and Equipment
  Furniture and fixtures
    
    7 yearsComputers
    
    5 yearsSoftware
    
    3 yearsLeasehold improvements
    
    Shorter of useful life or lease term
 Goodwill
  Other Assets
  58




---



##### Table of Contents



Origen Financial, Inc.
Notes to Consolidated Financial Statements
 Note 1  Summary of Significant Accounting Policies, continued:
 Servicing Rights
    Repossessed Houses
  Retained Interests in Loan Securitizations
  59




---



##### Table of Contents



Origen Financial, Inc.
Notes to Consolidated Financial Statements
 Note 1  Summary of Significant Accounting Policies, continued:
 Derivative Financial Instruments
     60




---



##### Table of Contents



Origen Financial, Inc.
Notes to Consolidated Financial Statements
 Note 1  Summary of Significant Accounting Policies, continued:
 Per Share Data
  Origen FinancialOrigen Financial, Inc.
    
    
    L.L.CPeriod from
    
    
    Period fromOctober 8
    
    
    January 1Year Ended
    
    
    Year Ended
    
    
    through
    
    
    throughDecember 31,
    
    
    December 31,
    
    
    December 31,
    
    
    October 7,2005
    
    
    2004
    
    
    2003
    
    
    2003Numerator:Net income (loss)
    
    $
    (2,659
    )
    
    $
    (2,966
    )
    
    $
    1,497
    
    
    
    N/APreferred stock dividends
    
    
    (16
    )
    
    
    (16
    )
    
    
    
    
    
    
    Income (loss) available to common
shareholders
    
    $
    (2,675
    )
    
    $
    (2,982
    )
    
    $
    1,497
    
    
    
    N/ADenominator:Weighted average common shares for
basic EPS
    
    
    24,878,116
    
    
    
    21,439,029
    
    
    
    15,060,000
    
    
    
    N/AEffect of dilutive securities:Weighted avg. restricted stk. awards
    
    
    
    
    
    
    
    
    
    
    111,364
    
    
    
    N/AWeighted average common shares for
diluted EPS
    
    
    24,878,116
    
    
    
    21,439,029
    
    
    
    15,171,364
    
    
    
    N/ABasic EPS
    
    $
    (0.11
    )
    
    $
    (0.14
    )
    
    $
    0.10
    
    
    
    N/ADiluted EPS
    
    $
    (0.11
    )
    
    $
    (0.14
    )
    
    $
    0.10
    
    
    
    N/A
  61




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##### Table of Contents



Origen Financial, Inc.
Notes to Consolidated Financial Statements
 Note 1  Summary of Significant Accounting Policies, continued:
 Stock Options
   Origen FinancialOrigen Financial, Inc.
    
    
    L.L.CPeriod from
    
    
    Period fromOctober 8
    
    
    January 1Year Ended
    
    
    Year Ended
    
    
    through
    
    
    throughDecember 31,
    
    
    December 31,
    
    
    December 31,
    
    
    October 7,2005
    
    
    2004
    
    
    2003
    
    
    2003Net income (loss) available to common
shareholders
    
    $
    (2,675
    )
    
    $
    (2,982
    )
    
    $
    1,497
    
    
    
    N/AStock option compensation cost
    
    
    21
    
    
    
    21
    
    
    
    2
    
    
    
    N/APro forma net income available to common
shareholders
    
    $
    (2,696
    )
    
    $
    (3,003
    )
    
    $
    1,495
    
    
    
    N/ABasic income (loss) per share as reported
    
    $
    (0.11
    )
    
    $
    (0.14
    )
    
    $
    0.10
    
    
    
    N/APro forma basic income (loss) per share
    
    $
    (0.11
    )
    
    $
    (0.14
    )
    
    $
    0.10
    
    
    
    N/ADiluted income (loss) per share as reported
    
    $
    (0.11
    )
    
    $
    (0.14
    )
    
    $
    0.10
    
    
    
    N/APro forma diluted income (loss) per share
    
    $
    (0.11
    )
    
    $
    (0.14
    )
    
    $
    0.10
    
    
    
    N/A
 Advertising Expense
  62




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##### Table of Contents



Origen Financial, Inc.
Notes to Consolidated Financial Statements
 Note 1  Summary of Significant Accounting Policies, continued:
 Recent Accounting Pronouncements
  
   Note 2  Company Formation
  Note 3  Investments
  63




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##### Table of Contents



Origen Financial, Inc.
Notes to Consolidated Financial Statements
  Note 4  Loans Receivable
  2005
    
    
    2004Manufactured housing loans  securitized
    
    $
    695,701
    
    
    $
    401,995Manufactured housing loans  unsecuritized
    
    
    85,949
    
    
    
    170,978Accrued interest receivable
    
    
    4,078
    
    
    
    3,285Deferred fees
    
    
    (2,100
    )
    
    
    (3,100
    )Discount on purchased loans
    
    
    (4,773
    )
    
    
    (4,575
    )Allowance for purchased loans
    
    
    (428
    )
    
    
    Allowance for loan loss
    
    
    (10,017
    )
    
    
    (5,315
    )$
    768,410
    
    
    $
    563,268
  2005
    
    
    2004Number of loans receivable
    
    
    17,277
    
    
    
    13,358Average loan balance
    
    $
    45
    
    
    $
    43Weighted average loan yield
    
    
    9.56
    %
    
    
    9.86
    %Weighted average initial term
    
    20 years
    
    20 years
 64




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##### Table of Contents



Origen Financial, Inc.
Notes to Consolidated Financial Statements
 Note 4  Loans Receivable, continued:
  2005
    
    
    2004Principal
    
    
    Percent
    
    
    Principal
    
    
    PercentCalifornia
    
    $
    225,675
    
    
    
    28.9
    %
    
    $
    137,514
    
    
    
    24.1
    %Texas
    
    
    87,018
    
    
    
    11.1
    %
    
    
    74,381
    
    
    
    13.0
    %New York
    
    
    46,501
    
    
    
    6.0
    %
    
    
    32,142
    
    
    
    5.6
    %Michigan
    
    
    36,933
    
    
    
    4.7
    %
    
    
    35,372
    
    
    
    6.2
    %Alabama
    
    
    29,288
    
    
    
    3.8
    %
    
    
    23,868
    
    
    
    4.2
    %Georgia
    
    
    26,938
    
    
    
    3.4
    %
    
    
    22,580
    
    
    
    4.0
    %Other
    
    
    329,297
    
    
    
    42.1
    %
    
    
    247,116
    
    
    
    42.9
    %Total
    
    $
    781,650
    
    
    
    100.0
    %
    
    $
    572,973
    
    
    
    100.0
    %
  2005
    
    
    2004Number of
    
    
    Principal
    
    
    Number of
    
    
    PrincipalOriginal Term In Years
    
    Loans
    
    
    Balance
    
    
    Loans
    
    
    Balance5 or less
    
    
    17
    
    
    $
    145
    
    
    
    8
    
    
    $
    906-10
    
    
    1,420
    
    
    
    28,119
    
    
    
    1,048
    
    
    
    20,42211-12
    
    
    181
    
    
    
    4,382
    
    
    
    123
    
    
    
    2,79613-15
    
    
    4,551
    
    
    
    135,319
    
    
    
    3,403
    
    
    
    97,29616-20
    
    
    8,450
    
    
    
    454,556
    
    
    
    6,258
    
    
    
    314,01521-25
    
    
    1,111
    
    
    
    51,386
    
    
    
    1,238
    
    
    
    56,37326-30
    
    
    1,547
    
    
    
    107,743
    
    
    
    1,280
    
    
    
    81,981Total
    
    
    17,277
    
    
    $
    781,650
    
    
    
    13,358
    
    
    $
    572,973
  2005
    
    2004No. of
    
    Principal
    
    % of
    
    No. of
    
    Principal
    
    % ofDays Delinquent
    
    Loans
    
    Balance
    
    Portfolio
    
    Loans
    
    Balance
    
    Portfolio31-60
    
    
    215
    
    
    $
    8,182
    
    
    
    1.0
    %
    
    
    146
    
    
    $
    5,253
    
    
    
    0.9
    %61-90
    
    
    68
    
    
    
    2,561
    
    
    
    0.3
    %
    
    
    80
    
    
    
    3,014
    
    
    
    0.5
    %Greater than 90
    
    
    192
    
    
    
    7,480
    
    
    
    1.0
    %
    
    
    195
    
    
    
    7,637
    
    
    
    1.3
    %
  65




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##### Table of Contents



Origen Financial, Inc.
Notes to Consolidated Financial Statements
 Note 5  Loan Pools and Debt Securities Acquired with Evidence of Deterioration of Credit Quality
  Loan Pools Acquired with Evidence of Deterioration of Credit Quality
  2005Outstanding balance
    
    $
    38,933Carrying amount, net of allowance of $428
    
    
    35,149
  2005Beginning balance
    
    $
    17,674Accretion
    
    
    (3,269
    )Additions due to purchases during the period
    
    
    1,375Reclassifications from non-accretable yield
    
    
    364Ending balance
    
    $
    16,144
   2005Contractually required payments receivable at acquisition
    
    $
    5,129Cash flows expected to be collected at acquisition
    
    
    2,962Basis in acquired loans at acquisition
    
    
    1,586
 66




---



##### Table of Contents



Origen Financial, Inc.
Notes to Consolidated Financial Statements
 Note 5  Loan Pools and Debt Securities Acquired with Evidence of Deterioration of Credit Quality,
continued:
 Debt Securities Acquired with Evidence of Deterioration of Credit Quality
  2005Outstanding balance
    
    $
    8,550Carrying amount, net
    
    
    3,740
  2005Beginning balance
    
    $
    7,834Accretion
    
    
    (664
    )Additions due to purchases during the period
    
    
    3,173Reclassifications from non-accretable yield
    
    
    (14
    )Ending balance
    
    $
    10,329
  2005Contractually required payments receivable at acquisition
    
    $
    4,999Cash flows expected to be collected at acquisition
    
    
    4,129Basis in acquired loans at acquisition
    
    
    956
 Note 6  Allowance for Credit Losses and Recourse Liability
  Origen FinancialOrigen Financial, Inc.
    
    
    L.L.CPeriod from
    
    
    Period fromOctober 8
    
    
    January 1Year Ended
    
    
    Year Ended
    
    
    through
    
    
    throughDecember 31,
    
    
    December 31,
    
    
    December 31,
    
    
    October 7,2005
    
    
    2004
    
    
    2003
    
    
    2003Balance at beginning of period
    
    $
    5,315
    
    
    $
    3,614
    
    
    $
    3,509
    
    
    $
    2,743Provision for loan losses
    
    
    12,691
    
    
    
    7,053
    
    
    
    768
    
    
    
    4,765Transfers from recourse liability
    
    
    2,036
    
    
    
    5,195
    
    
    
    1,486
    
    
    
    2,125Gross charge-offs
    
    
    (20,769
    )
    
    
    (19,385
    )
    
    
    (3,290
    )
    
    
    (10,942
    )Recoveries
    
    
    10,744
    
    
    
    8,838
    
    
    
    1,141
    
    
    
    4,818Balance at end of period
    
    $
    10,017
    
    
    $
    5,315
    
    
    $
    3,614
    
    
    $
    3,509
 67




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##### Table of Contents



Origen Financial, Inc.
Notes to Consolidated Financial Statements
 Note 6  Allowance for Credit Losses and Recourse Liability, continued:
  Origen FinancialOrigen Financial, Inc.
    
    
    L.L.CPeriod from
    
    
    Period fromOctober 8
    
    
    January 1Year Ended
    
    
    Year Ended
    
    
    through
    
    
    throughDecember 31,
    
    
    December 31,
    
    
    December 31,
    
    
    October 7,2005
    
    
    2004
    
    
    2003
    
    
    2003Balance at beginning of period
    
    $
    6,603
    
    
    $
    8,740
    
    
    $
    10,612
    
    
    $
    13,320Termination of Vanderbilt recourse
    
    
    (4,491
    )
    
    
    
    
    
    
    
    
    
    
    Provision for recourse liabilities
    
    
    218
    
    
    
    3,132
    
    
    
    
    
    
    
    Reimbursements for losses per recourse
agreements
    
    
    (2
    )
    
    
    (74
    )
    
    
    (386
    )
    
    
    (583
    )Transfers to allowance for credit losses
    
    
    (2,036
    )
    
    
    (5,195
    )
    
    
    (1,486
    )
    
    
    (2,125
    )Balance at end of period
    
    $
    292
    
    
    $
    6,603
    
    
    $
    8,740
    
    
    $
    10,612
  Note 7  Furniture, Fixtures and Equipment
  2005
    
    
    2004Furniture and fixtures
    
    $
    1,666
    
    
    $
    1,523Leasehold improvements
    
    
    763
    
    
    
    253Computer equipment
    
    
    1,087
    
    
    
    922Capitalized software
    
    
    1,229
    
    
    
    5444,745
    
    
    
    3,242Less: accumulated depreciation
    
    
    1,187
    
    
    
    906Balance at end of period
    
    $
    3,558
    
    
    $
    2,336
  68




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##### Table of Contents



Origen Financial, Inc.
Notes to Consolidated Financial Statements
 Note 8 Servicing Rights
  Origen FinancialOrigen Financial, Inc.
    
    
    L.L.C.Period from
    
    
    Period fromOctober 8
    
    
    January 1Year Ended
    
    
    Year Ended
    
    
    through
    
    
    throughDecember 31,
    
    
    December 31,
    
    
    December 31,
    
    
    October 7,2005
    
    
    2004
    
    
    2003
    
    
    2003Balance at beginning of period
    
    $
    4,097
    
    
    $
    5,131
    
    
    $
    5,892
    
    
    $
    7,327Loan portfolio repurchased
    
    
    
    
    
    
    
    
    
    
    (494
    )
    
    
    Write down to market value
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (434
    )Amortization
    
    
    (994
    )
    
    
    (1,034
    )
    
    
    (267
    )
    
    
    (1,001
    )Balance at end of period
    
    $
    3,103
    
    
    $
    4,097
    
    
    $
    5,131
    
    
    $
    5,892
  Note 9  Derivatives
   69




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##### Table of Contents



Origen Financial, Inc.
Notes to Consolidated Financial Statements
 Note 9  Derivatives, continued:
     Note 10  Loan Securitizations
   70




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##### Table of Contents



Origen Financial, Inc.
Notes to Consolidated Financial Statements
 Note 10  Loan Securitizations, continued:
      2005
    
    2004No. of
    
    Principal
    
    % of
    
    No. of
    
    Principal
    
    % ofDays delinquent
    
    Loans
    
    Balance
    
    Portfolio
    
    Loans
    
    Balance
    
    Portfolio31-60
    
    
    93
    
    
    $
    3,605
    
    
    
    2.4
    %
    
    
    125
    
    
    $
    4,988
    
    
    
    2.8
    %61-90
    
    
    43
    
    
    
    1,658
    
    
    
    1.1
    %
    
    
    57
    
    
    
    2,149
    
    
    
    1.2
    %Greater than 90
    
    
    203
    
    
    
    8,895
    
    
    
    5.9
    %
    
    
    237
    
    
    
    10,708
    
    
    
    6.1
    %
 Note 11  Debt
  2005
    
    
    2004Warehouse financing
    
    $
    65,411
    
    
    $
    107,373Securitization financing
    
    
    578,503
    
    
    
    328,388Repurchase agreements
    
    
    23,582
    
    
    
    20,153Notes payable  servicing advances
    
    
    2,212
    
    
    
    $
    669,708
    
    
    $
    455,914
 71




---



##### Table of Contents



Origen Financial, Inc.
Notes to Consolidated Financial Statements
 Note 11  Debt, continued:
 Warehouse Financing  Citigroup
 Securitization Financing  2004-A Securitization
 Securitization Financing  2004-B Securitization
 Securitization Financing  2005-A Securitization
 72




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##### Table of Contents



Origen Financial, Inc.
Notes to Consolidated Financial Statements
 Note 11  Debt, continued:
 Securitization Financing  2005-B Securitization
 Repurchase Agreements Citigroup
 Notes Payable  Servicing Advances JPMorgan Chase Bank, N.A. 
  2005
    
    2004Average
    
    Average
    
    Average
    
    AverageBalance
    
    Rate
    
    Balance
    
    RateWarehouse financing  Citigroup
    
    $
    139,539
    
    
    
    5.2
    %
    
    $
    139,115
    
    
    
    3.9
    %Securitization financing  2004-A securitization
    
    
    154,295
    
    
    
    4.9
    %
    
    
    163,088
    
    
    
    4.4
    %Securitization financing  2004-B securitization
    
    
    149,499
    
    
    
    5.1
    %
    
    
    42,299
    
    
    
    4.8
    %Securitization financing  2005-A securitization
    
    
    101,441
    
    
    
    5.1
    %
    
    
    
    
    
    
    Securitization financing  2005-B securitization
    
    
    7,228
    
    
    
    5.5
    %
    
    
    
    
    
    
    Repurchase agreements  Citigroup
    
    
    22,793
    
    
    
    4.2
    %
    
    
    17,573
    
    
    
    2.3
    %Note payable  servicing advances  JPMorgan Chase, N.A.
    
    
    710
    
    
    
    7.5
    %
    
    
    553
    
    
    
    7.0
    %
  73




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##### Table of Contents



Origen Financial, Inc.
Notes to Consolidated Financial Statements
 Note 12  Employee Benefits
   Note 13  Equity Incentive Plan
   2005
    
    2004
    
    2003Options outstanding, beginning of period
    
    
    267,500
    
    
    
    95,000
    
    
    
    Options granted
    
    
    
    
    
    
    198,000
    
    
    
    95,000Option price
    
    
    
    
    
    $
    10.00
    
    
    $
    10.00Options exercised
    
    
    
    
    
    
    
    
    
    
    Option price
    
    
    
    
    
    
    
    
    
    
    Options forfeited
    
    
    12,000
    
    
    
    25,500
    
    
    
    Options outstanding, December 31
    
    
    255,500
    
    
    
    267,500
    
    
    
    95,000Option price
    
    $
    10.00
    
    
    $
    10.00
    
    
    $
    10.00
  Remaining
    
    
    
    
    
    
    Number ofNumber of Options
    
    Contractual Life
    
    
    Exercise
    
    
    OptionsOutstanding
    
    In Years
    
    
    Price
    
    
    Exercisable95,000
    
    
    7.8
    
    
    $
    10.00
    
    
    
    63,333160,500
    
    
    8.1
    
    
    $
    10.00
    
    
    
    107,000255,500
    
    
    
    
    
    
    
    
    
    
    170,333
 74




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##### Table of Contents



Origen Financial, Inc.
Notes to Consolidated Financial Statements
 Note 13  Equity Incentive Plan, continued:
  Estimated weighted average fair value per share of options granted
    
    $
    0.40Assumptions:Annualized dividend yield
    
    
    12.00
    %Common stock price volatility
    
    
    15.00
    %Weighted average risk free rate of return
    
    
    4.00
    %Weighted average expected option term (in years)
    
    
    5.0
 Note 14  Stockholders Equity
      Declaration Date
    
    Record Date
    
    Date Paid
    
    Distribution per share
    
    Total Distribution(thousands)March 14, 2005
    
    March 24, 2005
    
    March 31, 2005
    
    $
    0.04
    
    
    $
    1,008April 27, 2005
    
    May 25, 2005
    
    May 31, 2005
    
    $
    0.06
    
    
    $
    1,528July 18, 2005
    
    August 22, 2005
    
    August 31, 2005
    
    $
    0.06
    
    
    $
    1,528October 26, 2005
    
    November 21, 2005
    
    November 30, 2005
    
    $
    0.06
    
    
    $
    1,528March 16, 2004
    
    March 16, 2004
    
    June 6, 2004
    
    $
    0.04
    
    
    $
    656July 22, 2004
    
    August 2, 2004
    
    August 30, 2004
    
    $
    0.06
    
    
    $
    1,507November 12, 2004
    
    November 22, 2004
    
    November 29, 2004
    
    $
    0.25
    
    
    $
    6,304
 75




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Origen Financial, Inc.
Notes to Consolidated Financial Statements
 Note 15  Income Taxes
      2005
    
    
    2004
    
    
    2003Amount
    
    
    Percentage
    
    
    Amount
    
    
    Percentage
    
    
    Amount
    
    
    PercentageOrdinary income
    
    $
    1,242
    
    
    
    22.2
    %
    
    $
    4,496
    
    
    
    53.1
    %
    
    $
    1,484
    
    
    
    100.0
    %Return of capital
    
    
    4,350
    
    
    
    77.8
    %
    
    
    3,971
    
    
    
    46.9
    %
    
    
    
    
    
    
    $
    5,592
    
    
    
    100.0
    %
    
    $
    8,467
    
    
    
    100.0
    %
    
    $
    1,484
    
    
    
    100.0
    %
  76




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##### Table of Contents



Origen Financial, Inc.
Notes to Consolidated Financial Statements
 Note 16  Liquidity Risks and Uncertainties
      77




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##### Table of Contents



Origen Financial, Inc.
Notes to Consolidated Financial Statements
 Note 17  Lease Commitments
  2006
    
    $
    1,0902007
    
    
    1,0602008
    
    
    6692009
    
    
    4782010
    
    
    473Thereafter
    
    
    551
  Note 18  Fair Value of Financial Instruments
   2005
    
    2004Estimated
    
    
    
    
    
    EstimatedCarrying
    
    Fair
    
    Carrying
    
    FairAmount
    
    Value
    
    Amount
    
    ValueAssetsCash and equivalents
    
    $
    8,307
    
    
    $
    8,307
    
    
    $
    9,293
    
    
    $
    9,293Restricted cash
    
    
    13,635
    
    
    
    13,635
    
    
    
    9,222
    
    
    
    9,222Loans receivable
    
    
    768,410
    
    
    
    776,272
    
    
    
    563,268
    
    
    
    572,672Loan sale proceeds receivable
    
    
    
    
    
    
    
    
    
    
    2,057
    
    
    
    2,057Servicing rights
    
    
    3,103
    
    
    
    3,310
    
    
    
    4,097
    
    
    
    5,023LiabilitiesAccounts payable and accrued expenses
    
    
    23,052
    
    
    
    23,052
    
    
    
    16,564
    
    
    
    16,564Recourse liability
    
    
    292
    
    
    
    292
    
    
    
    6,603
    
    
    
    6,603Warehouse financing
    
    
    65,411
    
    
    
    65,411
    
    
    
    107,373
    
    
    
    107,373Securitization financing
    
    
    578,503
    
    
    
    569,813
    
    
    
    328,388
    
    
    
    324,126Repurchase agreements
    
    
    23,582
    
    
    
    23,582
    
    
    
    20,153
    
    
    
    20,153Note payable  servicing advances
    
    
    2,212
    
    
    
    2,212
    
    
    
    
    
    
    
    
   78




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Origen Financial, Inc.
Notes to Consolidated Financial Statements
     Note 19  Related Party Transactions
      79




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##### Table of Contents



Origen Financial, Inc.
Notes to Consolidated Financial Statements
 Note 20  Selected Quarterly Financial Data (UNAUDITED)
  Quarter EndedDecember 31
    
    September 30
    
    June 30
    
    March 31Net interest income before loan losses and impairment
    
    $
    7,532
    
    
    $
    7,694
    
    
    $
    7,941
    
    
    $
    7,756Provision for credit losses and impairment
    
    
    2,319
    
    
    
    7,125
    
    
    
    1,645
    
    
    
    2,030Non interest income
    
    
    4,101
    
    
    
    3,874
    
    
    
    3,396
    
    
    
    3,280Non interest expense
    
    
    8,411
    
    
    
    10,525
    
    
    
    8,179
    
    
    
    7,999Net income (loss)
    
    
    903
    
    
    
    (6,082
    )
    
    
    1,513
    
    
    
    1,007Earnings (loss) per share  basic and diluted (2)
    
    $
    0.04
    
    
    $
    (0.24
    )
    
    $
    0.06
    
    
    $
    0.04
  Quarter Ended (1)December 31
    
    September 30
    
    June 30
    
    March 31Net interest income before loan losses and impairment
    
    $
    7,481
    
    
    $
    7,489
    
    
    $
    6,738
    
    
    $
    5,751Provision for credit losses and impairment
    
    
    2,131
    
    
    
    1,500
    
    
    
    1,531
    
    
    
    1,891Non interest income
    
    
    2,314
    
    
    
    2,976
    
    
    
    3,014
    
    
    
    2,880Non interest expense
    
    
    13,694
    
    
    
    7,556
    
    
    
    6,829
    
    
    
    6,477Net income (loss)
    
    
    (6,030
    )
    
    
    1,409
    
    
    
    1,392
    
    
    
    263Earnings (loss) per share  basic and diluted (2)
    
    $
    (0.24
    )
    
    $
    0.06
    
    
    $
    0.07
    
    
    $
    0.02
 
 (1)
    
    Certain reclassifications have been made to the quarterly data to conform with the
annual presentation with no net effect to net income or per share amounts.(2)
    
    Quarterly and year-to-date computations of per share amounts are made independently;
therefore, the sum of per share amounts for the quarters may not equal per share amounts
for the year. Note 21  Subsequent Events
  80




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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  
 ITEM 9A. CONTROLS AND PROCEDURES
     
 ITEM 9B. OTHER INFORMATION
  
 PART III
  81




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PART IV
 
 ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
   PageManagements Report on Internal Control Over Financial Reporting
    
    46Report of Independent Registered Public Accounting Firm
    
    47Report of Independent Registered Public Accounting Firm
    
    48Consolidated Balance Sheets as of December 31, 2005 and 2004
    
    49Consolidated Statements of Operations for the Years Ended December 31, 2005 and 2004, the Period
Ended December 31, 2003 and the Period Ended October 7, 2003
    
    50Consolidated Statements of Other Comprehensive Income (Loss) for the Years Ended December 31, 2005
and 2004, the Period Ended December 31, 2003 and the Period Ended October 7, 2003
    
    51Consolidated Statements of Changes in Stockholders Equity for the Years Ended December 31, 2005
and 2004, the Period Ended December 31, 2003 and the Period Ended October 7, 2003
    
    52Consolidated Statements of Cash Flows for the Years Ended December 31, 2005 and 2004, the Period
Ended December 31, 2003 and the Period Ended October 7, 2003
    
    53Notes to Consolidated Financial Statements
    
    55
   82




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##### Table of Contents



SIGNATURES
   ORIGEN FINANCIAL, INC., a
Delaware corporationBy:
    /s/ Ronald A. KleinRonald A. Klein, Chief Executive Officer  Name
    
    Title
    
    Date/s/ Ronald A. Klein
    
    Chief Executive Officer and Director
    
    March 15, 2006Ronald A, Klein/s/ W. Anderson Geater, Jr.

W. Anderson Geater, Jr.
    
    Chief Financial Officer and Principal
Accounting Officer
    
    March 15, 2006/s/ Paul A. Halpern
    
    Chairman of the Board
    
    March 15, 2006Paul A. Halpern/s/ Richard H. Rogel
    
    Director
    
    March 15, 2006Richard H. Rogel/s/ Gary A. Shiffman
    
    Director
    
    March 15, 2006Gary A. Shiffman/s/ Michael J. Wechsler
    
    Director
    
    March 15, 2006Michael J. Wechsler/s/ James A. Williams
    
    Director
    
    March 15, 2006James A. Williams
 83




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##### Table of Contents



EXHIBIT INDEX
 Exhibit
    
    
    
    Method ofNumber
    
    Description
    
    Filing1.1
    
    Sales Agreement dated August 29, 2005 between Origen Financial, Inc. (Origen), and
Brinson Patrick Securities Corporation
    
    
    (2
    )3.1.1
    
    Second Amended and Restated Certificate of Incorporation of Origen, filed October 7,
2003, and currently in effect
    
    
    (1
    )3.1.2
    
    Certificate of Designations for Origens Series A Cumulative Redeemable Preferred Stock
    
    
    (1
    )3.2
    
    By-laws of Origen
    
    
    (6
    )4.1
    
    Form of Common Stock Certificate
    
    
    (1
    )4.2
    
    Registration Rights Agreement dated as of October 8, 2003 among Origen, Lehman
Brothers Inc., on behalf of itself and as agent for the investors listed on Schedule A
thereto and those persons listed on Schedule B thereto
    
    
    (1
    )4.3
    
    Registration Rights Agreement dated as of February 4, 2004 between Origen and DB
Structured Finance Americas, LLC
    
    
    (1
    )4.4
    
    Form of Senior Indenture
    
    
    (2
    )4.5
    
    Form of Subordinated Indenture
    
    
    (2
    )10.1
    
    Contribution Agreement, dated October 8, 2003, among Origen and the entities set forth
on Appendix I thereto
    
    
    (1
    )10.2
    
    Common Stock Purchase Agreement dated October 8, 2003 between Lehman Brothers Inc. and
Origen
    
    
    (1
    )10.3
    
    Concurrent Private Placement Agreement dated October 8, 2003 among Origen and the
Purchasers (as defined therein)
    
    
    (1
    )10.4
    
    Private Placement Agreement dated
February 4, 2004 between Origen and DB Structured
Finance Americas, LLC
    
    
    (1
    )10.5
    
    2003 Equity Incentive Plan of Origen#
    
    
    (1
    )10.6
    
    First Amendment to 2003 Equity Incentive Plan of Origen#
    
    
    (5
    )10.7
    
    Form of Non-Qualified Stock Option Agreement#
    
    
    (1
    )10.8
    
    Form of Restricted Stock Award Agreement#
    
    
    (1
    )10.9
    
    Employment Agreement between Origen, Origen Financial L.L.C. and W. Anderson Geater#
    
    
    (1
    )10.10
    
    Employment Agreement between Origen, Origen Financial L.L.C. and Ronald A. Klein#
    
    
    (1
    )10.11
    
    Employment Agreement between Origen, Origen Financial L.L.C. and Mark Landschulz#
    
    
    (1
    )10.12
    
    Employment Agreement between Origen, Origen Financial L.L.C. and J. Peter Scherer#
    
    
    (1
    )
 84




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##### Table of Contents



Exhibit
    
    
    
    Method ofNumber
    
    Description
    
    Filing10.13
    
    Employment Agreement between Origen, Origen Financial L.L.C. and Benton Sergi#
    
    
    (4
    )10.14
    
    Origen Financial L.L.C. Endorsement Split-Dollar Plan dated November 14, 2003#
    
    
    (1
    )10.15
    
    Origen Financial L.L.C. Capital Accumulation Plan#
    
    
    (1
    )10.16
    
    First Amendment to Origen Financial L.L.C. Capital Accumulation Plan#
    
    
    (1
    )10.17
    
    Services and Interest Rebate Agreement dated October 8, 2003 between Origen Financial
L.L.C. and Sun Communities, Inc.
    
    
    (1
    )10.18
    
    Credit Agreement dated July 25, 2002 between Origen Financial L.L.C. and Bank One, NA
    
    
    (1
    )10.19
    
    First Amendment to Credit Agreement between Origen Financial L.L.C. and Bank One, NA
dated June 27, 2003
    
    
    (1
    )10.20
    
    Second Amendment to Credit Agreement between Origen Financial L.L.C. and Bank One, NA
dated October 23, 2003
    
    
    (1
    )10.21
    
    Third Amendment to Credit Agreement between Origen Financial L.L.C. and Bank One, NA
dated December 31, 2003
    
    
    (1
    )10.22
    
    Fourth Amendment to Credit Agreement effective as of December 31, 2004 between Origen
Financial L.L.C. and JPMorgan Chase Bank, N.A. (as successor by merger to Bank One,
NA)
    
    
    (3
    )10.23
    
    Fifth Amendment to Credit Agreement effective as of December 23, 2005 between Origen
Financial L.L.C. and JPMorgan Chase Bank, N.A.
    
    
    (6
    )10.24
    
    Lease dated October 18, 2002 between American Center LLC and Origen Financial L.L.C.
    
    
    (1
    )10.25
    
    Agency Agreement between American Modern Home Insurance Company, American Family Home
Insurance Company and OF Insurance Agency, Inc. dated December 31, 2003
    
    
    (1
    )21.1
    
    List of Origens Subsidiaries.
    
    
    (6
    )23.1
    
    Consent of Grant Thornton LLP
    
    
    (6
    )31.1
    
    Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
    
    
    (6
    )31.2
    
    Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
    
    
    (6
    )32.1
    
    Certification of Chief Executive Officer and Chief Financial Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
    
    
    (6
    )99.1
    
    Amended and Restated Charter of the Audit Committee of the Origen Board of Directors
and Audit Committee of the Origen Board of Directors
    
    
    (1
    )99.2
    
    Charter of the Compensation Committee of the Origen Board of Directors
    
    
    (1
    )
 85




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Exhibit
    
    
    
    Method ofNumber
    
    Description
    
    Filing99.3
    
    Charter of the Nominating and Governance Committee of the Origen Board of Directors
    
    
    (1
    )99.4
    
    Charter of the Executive Committee of the Origen Board of Directors
    
    
    (1
    )99.5
    
    Corporate Governance Guidelines
    
    
    (1
    )99.6
    
    Code of Business Conduct
    
    
    (1
    )99.7
    
    Financial Code of Ethics
    
    
    (1
    )
 
 (1)
    
    Incorporated by reference to Origen Financial, Inc.s Registration Statement on Form S-11 No.
33-112516, as amended.(2)
    
    Incorporated by reference to Origen Financial, Inc.s Registration Statement on Form S-3 No.
33-127931.(3)
    
    Incorporated by reference to Origen Financial, Inc.s Annual Report on Form 10-K for the year
ended December 31, 2004.(4)
    
    Incorporated by reference to Origen Financial, Inc.s Amendment to Annual Report on Form
10-K/A for the year ended December 31, 2004.(5)
    
    Incorporated by reference to Origen Financial, Inc.s Quarterly Report on Form 10-Q for the
quarter ended June 30, 2005.(6)
    
    Filed herewith.#
    
    Management contract or compensatory plan or arrangement. 86