UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                    FORM 10-Q


(Mark One)


[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

                  FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2007


                                       OR


[ ]  TRANSITION  REPORT  PURSUANT  TO SECTION  13 OR 15(d) OF THE  SECURITIES
     EXCHANGE ACT OF 1934


                         Commission File Number 1-13237


                           CENTERLINE HOLDING COMPANY
                              (Formerly CharterMac)
         (Exact name of Registrant as specified in its Trust Agreement)


            DELAWARE                                     13-3949418
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
 incorporation or organization)

 625 MADISON AVENUE, NEW YORK, NEW YORK                    10022
(Address of principal executive offices)                 (Zip Code)


                                 (212) 317-5700
               Registrant's telephone number, including area code

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark whether the registrant is a large  accelerated  filer, an
accelerated  filer or a  non-accelerated  filer (as defined in Rule 12b-2 of the
Exchange Act). Large Accelerated filer [X] Accelerated filer [ ] Non-accelerated
filer [ ]

Indicate by check mark whether the  registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

As  of  July  31,  2007,  there  were  49,743,252   outstanding  shares  of  the
registrant's shares of beneficial interest.




<PAGE>

                                TABLE OF CONTENTS

                           CENTERLINE HOLDING COMPANY

                                    FORM 10-Q



                                                                            PAGE
PART I - FINANCIAL INFORMATION

Item 1.    Financial Statements                                                3
Item 2.    Management's Discussion and Analysis of Financial Condition
             and Results of Operations                                        39
Item 3.    Quantitative and Qualitative Disclosures about Market Risk         63
Item 4.    Controls and Procedures                                            65

PART II - OTHER INFORMATION

Item 1.    Legal Proceedings                                                  66
Item 1A.   Risk Factors                                                       66
Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds        68
Item 3.    Defaults Upon Senior Securities                                    68
Item 4.    Submission of Matters to a Vote of Security Holders                69
Item 5.    Other Information                                                  69
Item 6.    Exhibits                                                           69

SIGNATURES                                                                    70


                                       2
<PAGE>

                         PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

                   CENTERLINE HOLDING COMPANY AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
                                                                                  June 30,      December 31,
                                                                                    2007            2006
                                                                                ------------    ------------
                                                                                (Unaudited)
<S>                                                                             <C>             <C>
                                     ASSETS

Cash and cash equivalents                                                       $     97,524    $    178,907
Restricted cash                                                                       13,520          14,843
Mortgage revenue bonds-at fair value  (Note 2)                                     2,472,471       2,397,738
Other investments (Note 3)                                                           567,262         335,854
Investments in and loans to affiliates (Note 17)                                      82,682          65,849
Goodwill and intangible assets, net (Note 4)                                         524,519         542,277
Deferred costs and other assets, net (Note 5)                                        152,414         148,362
Investments held by consolidated partnerships (Note 15)                            5,597,754       4,965,907
Other assets of consolidated partnerships (Note 15)                                1,100,050       1,038,779
                                                                                ------------    ------------

Total assets                                                                    $ 10,608,196    $  9,688,516
                                                                                ============    ============

                             LIABILITIES AND EQUITY

Liabilities:

   Financing arrangements (Note 6)                                              $  1,872,973    $  1,801,170
   Notes payable (Note 6)                                                            817,823         591,165
   Preferred shares of subsidiary (subject to mandatory repurchase)                  273,500         273,500
   Accounts payable, accrued expenses and other liabilities (Note 8)                 218,066         214,344
   Liabilities of consolidated partnerships (Note 15)                              2,638,920       2,700,154
                                                                                ------------    ------------

Total liabilities                                                                  5,821,282       5,580,333
                                                                                ------------    ------------

Minority interests in consolidated subsidiaries (Note 9)                             224,930         247,390
                                                                                ------------    ------------
Preferred shares of subsidiary (not subject to mandatory repurchase)                 104,000         104,000
                                                                                ------------    ------------
Limited partners' interests in consolidated partnerships                           3,578,130       2,806,661
                                                                                ------------    ------------

Commitments and contingencies (Note 18)

Shareholders' equity:
   Beneficial owners equity:
     4.4% Convertible CRA preferred shares; no par value; 2,160 shares issued
       and outstanding in 2007 and 2006                                              104,498         104,498
     Convertible CRA shares; no par value; 6,552 shares issued and
       outstanding in 2007 and 2006                                                   90,623          97,499
     Special preferred voting shares; no par value (14,693 shares issued and
      outstanding in 2007 and 14,825 shares issued and outstanding in 2006)              147             148
     Common shares; no par value (160,000 shares authorized; 52,927 issued
       and 49,812 outstanding in 2007 and 52,746 issued and 51,343
       outstanding in 2006)                                                          668,665         709,142
   Treasury shares of beneficial interest - common, at cost (3,115 shares in
    2007 and 1,403 shares in 2006)                                                   (60,356)        (28,018)
   Accumulated other comprehensive income                                             76,277          66,863
                                                                                ------------    ------------
Total shareholders' equity                                                           879,854         950,132
                                                                                ------------    ------------

Total liabilities and equity                                                    $ 10,608,196    $  9,688,516
                                                                                ============    ============
</TABLE>

                                       3
<PAGE>

                   CENTERLINE HOLDING COMPANY AND SUBSIDIARIES
                   CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                          Three Months Ended             Six Months Ended
                                                               June 30,                      June 30,
                                                      --------------------------    --------------------------
                                                         2007            2006           2007           2006
                                                      -----------    -----------    -----------    -----------
<S>                                                   <C>            <C>            <C>            <C>
Revenues:
   Mortgage revenue bond interest
income                                                $    38,568    $    38,910    $    75,631    $    75,432
   Other interest income                                   14,672          6,583         27,229         12,527
   Fee income                                              16,576         18,272         31,211         34,343
   Other revenues                                           5,925          5,792         11,519         11,149
   Revenues of consolidated partnerships (Note 15)         59,323          9,366        106,639         17,611
                                                      -----------    -----------    -----------    -----------
     Total revenues                                       135,064         78,923        252,229        151,062
                                                      -----------    -----------    -----------    -----------

Expenses:
   Interest expense                                        29,042         24,085         57,344         41,193
   Interest expense of consolidated partnerships
   (Note 15)                                               24,002          5,611         46,314         12,557
   Interest expense - distributions to preferred
     shareholders of subsidiary                             4,725          4,725          9,449          9,449
   General and administrative (Note 12)                    42,940         39,861        100,364         72,427
   Depreciation and amortization                           10,993         14,615         22,491         23,528
   Loss on impairment of mortgage revenue bonds and
     other assets (Note 2)                                  2,938          2,271         19,385          2,271
   Other expenses of consolidated partnerships
   (Note 15)                                               28,612         16,258         52,962         31,539
                                                      -----------    -----------    -----------    -----------
     Total expenses                                       143,252        107,426        308,309        192,964
                                                      -----------    -----------    -----------    -----------

Loss before other income                                   (8,188)       (28,503)       (56,080)       (41,902)

Other income (loss):
   Equity and other (loss) income                           (154)         3,856           (404)         4,366
   Gain on sale or repayment of mortgage revenue
     bonds and other assets                                 1,209          2,538          3,588          7,968
   Loss on investments held by consolidated
     partnerships (Note 15)                               (82,711)       (77,930)      (140,311)      (140,079)
                                                      -----------    -----------    -----------    -----------

Loss before allocations                                   (89,844)      (100,039)      (193,207)      (169,647)

Allocations:
   Income allocated to preferred shareholders of
     subsidiary                                            (1,557)        (1,557)        (3,113)        (3,113)
   Minority interests in consolidated subsidiaries,
     net of tax (Note 9)                                   (1,708)        (1,651)         4,409         (7,530)
   Loss allocated to partners of consolidated
partnerships                                               97,776        107,090        178,887        195,871
                                                      -----------    -----------    -----------    -----------

Income (loss) before income taxes                           4,667          3,843        (13,024)        15,581
Income tax benefit                                            313            405          3,259          3,324
                                                      -----------    -----------    -----------    -----------

Net income
(loss)                                                      4,980          4,248         (9,765)        18,905

4.4% CRA Preferred dividend requirements                    1,188          1,188          2,376          2,376
                                                      -----------    -----------    -----------    -----------

Net income (loss) available to Common/CRA
shareholders                                          $     3,792    $     3,060    $   (12,141)   $    16,529
                                                      ===========    ===========    ===========    ===========

Net income (loss) per share (Note 13):
   Basic                                              $      0.07    $      0.05    $     (0.21)   $      0.28
                                                      ===========    ===========    ===========    ===========
   Diluted                                            $      0.06    $      0.05    $     (0.21)   $      0.28
                                                      ===========    ===========    ===========    ===========

Weighted average shares outstanding:
   Basic                                                   57,219         58,639         57,586         58,609
                                                      ===========    ===========    ===========    ===========
   Diluted                                                 58,393         58,919         57,586         58,961
                                                      ===========    ===========    ===========    ===========

Dividends declared per share                          $      0.42    $      0.42    $      0.84    $      0.84
                                                      ===========    ===========    ===========    ===========
</TABLE>

     See accompanying notes to condensed consolidated financial statements.

                                       4
<PAGE>

                   CENTERLINE HOLDING COMPANY AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                                                    Six Months Ended June 30,
                                                                                    --------------------------
                                                                                       2007            2006
                                                                                    -----------    -----------
<S>                                                                                 <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net (loss) income                                                                $    (9,765)   $    18,905
   Adjustments to reconcile net (loss) income to net cash provided by (usedin)
      operating activities:
      (Loss) gain on sale or repayment of mortgage revenue bonds and other assets          (671)          (912)
      Loss on impairment of mortgage revenue bonds and other assets                      19,385          2,271
      Depreciation and amortization                                                      22,491         23,528
      Equity in loss (income) of unconsolidated entities                                    404         (4,366)
      Distributions received from equity investees                                           --          2,255
      Income allocated to preferred shareholders of subsidiary                            3,113          3,113
      (Loss) income allocated to minority interests in consolidated subsidiaries         (4,409)         7,530
      Non-cash compensation expense                                                      16,257          3,468
      Other non-cash expense                                                              2,371          1,597
      Deferred taxes                                                                      1,188             --
      Reserves for bad debt                                                               5,533             --
   Changes in operating assets and liabilities:
      Mortgage servicing rights                                                          (2,117)        (5,924)
      Mortgage loans held for sale                                                       24,791        (66,771)
      Loan to affiliate                                                                 (42,600)       (27,042)
      Deferred revenues                                                                  11,183          3,796
      Restructuring costs payable                                                          (970)         1,995
      Receivables                                                                        28,310        (13,712)
      Other assets                                                                          735         (8,568)
      Accounts payable, accrued expenses and other liabilities                           (9,579)       (18,986)
                                                                                    -----------    -----------
Net cash provided by (used in) operating activities                                      65,650        (77,823)
                                                                                    -----------    -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Acquisition and funding of mortgage revenue bonds                                    (72,073)      (213,866)
   Repayments of  mortgage revenue bonds                                                 12,211         42,346
   Acquisition of notes receivable                                                     (115,280)        (1,986)
   Repayments of notes receivable                                                       104,430         27,584
   Acquisition of CMBS                                                                 (217,467)            --
   Acquisitions of subsidiaries, net of cash acquired                                        --            (31)
   Advances to partnerships                                                             (77,413)       (82,726)
   Collection of advances to partnerships                                                70,436         70,157
   Deferred investment acquisition costs                                                   (950)           573
   Decrease in restricted cash                                                            1,323         13,573
   Increase in marketable securities                                                    (32,036)       (23,116)
   Other investing activities                                                            (2,774)        (1,159)
   Equity investments                                                                   (12,298)            --
                                                                                    -----------    -----------

Net cash used in investing activities                                                  (341,891)      (168,651)
                                                                                    -----------    -----------
</TABLE>


                                   (continued)


     See accompanying notes to condensed consolidated financial statements.

                                       5
<PAGE>

                   CENTERLINE HOLDING COMPANY AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                                          Six Months Ended June 30,
                                                                          --------------------------
                                                                              2007           2006
                                                                          -----------    -----------
<S>                                                                       <C>            <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
   Distributions to shareholders                                              (52,899)       (51,830)
   Distributions to preferred shareholders of subsidiary                       (3,113)        (3,113)
   Distributions to minority interests in consolidated subsidiaries           (17,690)       (17,821)
   Proceeds from financing arrangements                                       146,802      1,007,298
   Repayments of financing arrangements                                       (74,999)      (836,212)
   Increase in notes payable                                                  226,658        102,481
   Minority interest contribution                                               3,225          3,300
   Retirement of minority interests and special preferred voting shares        (2,803)          (723)
   Treasury stock purchases                                                   (30,310)          (137)
   Deferred financing costs                                                       (13)        (1,883)
                                                                          -----------    -----------

Net cash provided by financing activities                                     194,858        201,360
                                                                          -----------    -----------

Net decrease in cash and cash equivalents                                     (81,383)       (45,114)
Cash and cash equivalents at the beginning of the year                        178,907        161,295
                                                                          -----------    -----------

Cash and cash equivalents at the end of the period                        $    97,524    $   116,181
                                                                          -----------    -----------

Acquisition activity:
--------------------
   Redemption of preferred stock and advances                                            $     7,170
   Assets acquired                                                                            (8,565)
   Liabilities assumed                                                                         1,364
                                                                                         -----------
Net cash paid for acquisitions                                                           $       (31)
                                                                                         ===========

Non-cash investing and financing activities:
      Share grants issued                                                 $     9,383    $     3,570
      Conversion of SCUs to common shares                                 $        --    $     1,426
      Treasury stock purchases via employee withholding                   $     2,848    $       573
</TABLE>


     See accompanying notes to condensed consolidated financial statements.

                                       6
<PAGE>

                   CENTERLINE HOLDING COMPANY AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2007
                                   (UNAUDITED)


NOTE 1 - GENERAL

A. PRINCIPLES OF CONSOLIDATION

Centerline  Holding  Company,  formerly  known as  CharterMac,  is,  through its
subsidiaries,  a full service investing and finance company with a core focus on
real  estate.  The  condensed  consolidated  financial  statements  include  the
accounts of  Centerline  Holding  Company,  its wholly owned and majority  owned
subsidiary  statutory trusts,  other non-trust  subsidiary companies it controls
and  entities  consolidated  pursuant to the  adoption of  Financial  Accounting
Standards Board ("FASB")  Interpretation  No. 46(R),  CONSOLIDATION  OF VARIABLE
INTEREST ENTITIES ("FIN 46(R)"). All intercompany accounts and transactions have
been eliminated in  consolidation.  Unless otherwise  indicated,  "the Company",
"we", "our", "us" and "Centerline",  as used throughout this document, refers to
Centerline Holding Company and its consolidated subsidiaries. For certain of the
entities identified throughout this document as "consolidated partnerships", the
financial  information  included  is as of and for the  periods  ended March 31,
2007, the latest practical date available (see Note 15).

B. ORGANIZATION

Effective  January 1, 2007,  we began  reporting  our  segment  results  under a
reorganized structure including five business segments:

     1.   Affordable  Housing,  which brings together the users and providers of
          debt and equity capital to the affordable  multifamily  rental housing
          industry, and includes:

          o    Mortgage  Revenue  Bond  Investing  - through  the parent and our
               subsidiaries,  we invest  primarily in tax-exempt  first mortgage
               revenue  bonds  issued  by  various  state or local  governments,
               agencies or authorities.  The proceeds of these mortgage  revenue
               bonds  are  used to  finance  the new  construction,  substantial
               rehabilitation,   acquisition,   or   refinancing  of  affordable
               multifamily  housing  properties  located  throughout  the United
               States; and
          o    Tax Credit Fund Management - through our subsidiaries,  we manage
               funds that  invest in  Low-Income  Housing  Tax Credit  ("LIHTC")
               properties.    Managing   these   funds   involves   origination,
               underwriting  and management  reporting.  With respect to certain
               LIHTC equity investment funds, our subsidiaries provide specified
               returns to investors.

     2.   Commercial  Real Estate,  which provides a broad spectrum of financing
          and investment products for multifamily,  office, retail,  industrial,
          mixed-use and other properties, and includes:

          o    High Yield CMBS Fund  Management - through our  subsidiaries,  we
               co-invest   in  and  manage  funds  that  invest  in  high  yield
               commercial mortgage-backed securities ("CMBS") investments;
          o    Direct  Loan Fund  Management  -  through  our  subsidiaries,  we
               co-invest  in and  manage a fund that  primarily  invests in real
               estate  finance   products,   including   first  mortgage  loans,
               subordinated notes, bridge loan and mezzanine loans;
          o    Management of American  Mortgage  Acceptance  Company  ("AMAC") -
               AMAC is a publicly-traded  real estate investment trust we manage
               through a  subsidiary  (see Note 17). It invests in similar  real
               estate  products such as the Direct Loan fund mentioned  above as
               well as CMBS,  collateralized  debt obligation ("CDO") securities
               and government insured mortgage securities;
          o    Real Estate  Equity Fund  Management - through a  subsidiary,  we
               co-invest in and manage a fund that invests in real estate equity
               joint ventures; and
          o    Debt Product Origination - through our subsidiaries, we originate
               and  underwrite  debt products for the funds we manage as well as
               third parties, including:
               o    The Federal National Mortgage Association ("Fannie Mae");
               o    The Federal Home Loan Mortgage Corporation ("Freddie Mac");

                                       7
<PAGE>

                   CENTERLINE HOLDING COMPANY AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2007
                                   (UNAUDITED)


               o    The Federal Housing Authority ("FHA");
               o    The Government  National Mortgage  Association  ("GNMA");  o
                    AMAC; and
               o    Insurance companies and conduits.

          o    Primary  Servicing  -  through  our   subsidiaries,   we  provide
               multifamily and commercial loan servicing for third parties.

          Through this  segment,  we may also invest in other  entities and hold
          investments  similar to those in the funds we manage. Such investments
          included  our  pre-acquisition  preferred  and common  investments  in
          Centerline  Investors  I LLC  ("Investors"),  formerly  known as ARCap
          Investors,  L.L.C.,  and other  loans to or  investments  in  entities
          associated with Commercial Real Estate, including AMAC.

     3.   Asset  Management,  which  comprises  activities  for  monitoring  and
          managing the Affordable  Housing and Commercial  Real Estate assets we
          own,  for  funds  we  manage,  and for  third  parties.  This  segment
          includes:

          o    Loan Servicing - through our subsidiaries, we provide primary and
               special loan servicing for third parties and special servicing on
               investments  in which  either we,  AMAC,  or the funds we manage,
               invest; and
          o    Asset  management  services for  investments in which we, AMAC or
               the funds we manage, invest.

     4.   Credit Risk  Products - through our  subsidiaries,  we provide  credit
          intermediation,    primarily    for   the   mortgage    revenue   bond
          securitizations in the Affordable Housing segment.

     5.   Consolidated  Partnerships,  which primarily include the LIHTC equity,
          high yield CMBS and direct loan investing  funds we manage through the
          Affordable  Housing and Commercial  Real Estate  segments and property
          partnerships  which we are required to consolidate in accordance  with
          various accounting pronouncements.

     In addition to these five  segments,  our  "Corporate"  group  includes our
     central administrative, financing and acquisition related costs, assets and
     liabilities.

     In prior years, we had operated in different  business segments and we have
     reclassified  the prior  year  results to  reflect  comparability  with the
     current structure.

C. BASIS OF PRESENTATION

The accompanying interim condensed  consolidated  financial statements have been
prepared  without  audit.  In the opinion of management,  the interim  condensed
consolidated  financial  statements contain all adjustments  (consisting of only
normal  recurring   adjustments)  necessary  to  present  fairly  the  financial
statements  of the interim  periods.  Given that some of our  businesses  have a
higher volume of transactions in the second and fourth  quarterly  periods,  the
operating  results for the interim  periods may not be indicative of the results
for the full year.

Certain  information and footnote  disclosures  normally  included in the annual
consolidated   financial  statements  prepared  in  accordance  with  accounting
principles generally accepted in the United States of America ("GAAP") have been
condensed  or  omitted.  It  is  suggested  that  these  condensed  consolidated
financial  statements  be read in  conjunction  with  the  audited  consolidated
financial  statements  and notes thereto  included in our Form 10-K for the year
ended December 31, 2006, which contains a summary of our significant  accounting

                                       8
<PAGE>

                   CENTERLINE HOLDING COMPANY AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2007
                                   (UNAUDITED)


policies.  There have been no material changes to these items since December 31,
2006. New accounting pronouncements pending adoption that may have a significant
impact on our condensed consolidated financial statements are described below.

We are responsible for the condensed  consolidated financial statements included
in this document.  Our condensed  consolidated financial statements are prepared
on the accrual basis of accounting in accordance  with GAAP. The  preparation of
financial  statements in conformity  with GAAP requires us to make estimates and
assumptions  that affect the reported  amounts of assets and liabilities and the
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements as well as the reported  amounts of revenues and expenses  during the
reporting period. Actual results could differ from those estimates.

Certain  amounts from prior years have been  reclassified to conform to the 2007
presentation, including the revisions to our segment reporting as noted above.

D. NEW ACCOUNTING PRONOUNCEMENTS

As of January 1, 2007, we adopted  Statement of Financial  Accounting  Standards
("SFAS") No. 156, ACCOUNTING FOR SERVICING OF FINANCIAL Assets ("SFAS No. 156").
SFAS No. 156 stipulates the accounting for mortgage  servicing  rights  ("MSRs")
and requires  that they be recorded  initially at fair value.  SFAS No. 156 also
permits,  but does not require,  that we may  subsequently  record those MSRs at
fair value with changes in fair value recognized in the statement of operations.
Alternatively, we may continue to amortize the MSRs over their projected service
periods. We elected to continue amortizing our MSRs and, therefore, there was no
impact on our condensed consolidated financial statements.

As of January 1, 2007, we adopted FASB  Interpretation  No. 48,  ACCOUNTING  FOR
UNCERTAINTY IN INCOME TAXES ("FIN 48").  FIN 48 sets a standard for  recognizing
tax benefits in a company's income statement based on a determination whether it
is more likely than not that the position would withstand audit,  without regard
for the  likelihood  of an audit  taking  place.  Assuming a position  meets the
"more-likely-than-not"  threshold,  FIN 48 also prescribes measurement standards
requiring  determination  of how much of the tax position  would  ultimately  be
allowed if challenged (see Note 10 regarding the impact of adoption).

In September 2006, the FASB issued SFAS No. 157, FAIR VALUE MEASUREMENTS  ("SFAS
No.  157"),  which  established a framework  for  calculating  the fair value of
assets and liabilities as required by numerous other accounting  pronouncements,
and expands  disclosure  requirements  of the fair values of certain  assets and
liabilities.  The  statement is  effective  as of our 2008 fiscal  year.  We are
currently  evaluating  the impact,  if any, that the adoption of this  Statement
will have on our consolidated financial statements.

In  February  2007,  the FASB issued  SFAS No.  159,  THE FAIR VALUE  OPTION FOR
FINANCIAL ASSETS AND FINANCIAL  LIABILITIES.  This statement was issued with the
intent to provide an  alternative  measurement  treatment for certain  financial
assets and liabilities.  The alternative  measurement would permit fair value to
be used for both initial and subsequent measurement,  with changes in fair value
recognized in earnings as those changes occur. This "Fair Value Option" would be
available on a contract by contract basis. The effective date for this statement
is the beginning of our 2008 fiscal year. We are currently assessing the impact,
if any, that the adoption would have on our  consolidated  financial  statements
should  we elect to adopt  it.  If we were to do so,  we  would  not  apply  its
provisions until SFAS No. 157 (described above) is adopted.

In June 2007, the American Institute of Certified Public  Accountants  ("AICPA")
issued  Statement of Position  ("SOP") 07-1,  CLARIFICATION  OF THE SCOPE OF THE
AUDIT AND  ACCOUNTING  GUIDE  INVESTMENT  COMPANIES  AND  ACCOUNTING  FOR PARENT
COMPANIES AND EQUITY METHOD  INVESTORS FOR INVESTMENTS IN INVESTMENT  COMPANIES.
This SOP provides guidance for determining whether an entity is within the scope
of the AICPA Audit and  Accounting  Guide  INVESTMENT  COMPANIES  (the "Guide").
Entities  that are  within  the  scope of the Guide are  required,  among  other
things,  to carry their  investments  at fair value,  with changes in fair value
included in earnings. The provisions of this SOP are effective for us on January

                                       9
<PAGE>

                   CENTERLINE HOLDING COMPANY AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2007
                                   (UNAUDITED)


1, 2008. We are currently  evaluating  this new guidance and have not determined
whether we will be required to apply the  provisions  of the Guide in presenting
our financial statements.

NOTE 2 - MORTGAGE REVENUE BONDS

A. SUMMARY

The following table summarizes our mortgage revenue bond portfolio:
<TABLE>
<CAPTION>
                                  June 30,     December 31,
          (In thousands)            2007           2006
     ------------------------   -----------    -----------
     <S>                        <C>            <C>
     Amortized cost basis       $ 2,766,987    $ 2,727,372
     Gross unrealized gains         117,921        101,364
     Gross unrealized losses        (19,145)       (33,670)
                                -----------    -----------
     Subtotal/fair value          2,865,763      2,795,066
       Less: eliminations (1)      (393,292)      (397,328)
                                -----------    -----------
     Total fair value           $ 2,472,471    $ 2,397,738
                                ===========    ===========
</TABLE>

     (1)  These bonds are either  recorded as  liabilities on the balance sheets
          of certain consolidated partnerships or are recorded as liabilities of
          real estate owned and are therefore eliminated in consolidation.

The fair  value  and gross  unrealized  losses of our  mortgage  revenue  bonds,
aggregated  by length of time that  individual  bonds have been in a  continuous
unrealized loss position, is summarized in the table below:
<TABLE>
<CAPTION>
                                   Less than     12 Months
          (Dollars in thousands)   12 Months      or More        Total
          ---------------------   -----------   -----------   -----------
          <S>                     <C>           <C>           <C>
          JUNE 30, 2007

          Number of bonds                  41            67           108
          Fair value              $   313,803   $   439,957   $   753,760
          Gross unrealized loss   $     6,878   $    12,267   $    19,145

                                  ---------------------------------------
          DECEMBER 31, 2006

          Number of bonds                  76            60           136
          Fair value              $   502,758   $   356,543   $   859,301
          Gross unrealized loss   $    22,355   $    11,315   $    33,670
</TABLE>

The unrealized  losses related to these mortgage revenue bonds are due primarily
to changes in interest  rates,  in that we calculate  present  values based upon
future  cash flows from the bonds and  discount  these cash flows at the current
rate that  approximates  market;  as rates rise, the fair value of our portfolio
decreases.  We have the intent and ability to hold these  bonds to recovery  and
have therefore concluded that these declines in value are temporary.

                                       10
<PAGE>

                   CENTERLINE HOLDING COMPANY AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2007
                                   (UNAUDITED)


The following summarizes the maturity dates of mortgage revenue bonds we held as
of June 30, 2007:
<TABLE>
<CAPTION>
                                                                                         Weighted
                                    Number of       Outstanding                           Average
     (Dollars in thousands)           Bonds         Bond Amount        Fair Value      Interest Rate
------------------------------   --------------    --------------    --------------    --------------
<S>                                         <C>    <C>               <C>                         <C>
Due in less than one year                     3    $       16,443    $       16,434              5.92%
Due between one and five years               26            63,229            61,699              5.61
Due after five years                        352         2,708,798         2,787,630              6.61
                                 --------------    --------------    --------------    --------------
Total / weighted average                    381         2,788,470         2,865,763              6.59%
                                                                                       ==============
   Less: eliminations (1)                   (44)         (395,462)         (393,292)
                                 --------------    --------------    --------------
Total                                       337    $    2,393,008    $    2,472,471
                                 ==============    ==============    ==============
</TABLE>

(1)   These bonds are either  recorded as  liabilities  on the balance sheets of
      certain  consolidated  partnerships or are recorded as liabilities of real
      estate owned and are therefore eliminated in consolidation.

B. PORTFOLIO ACTIVITY

The following table summarizes our acquisition activity for the six months ended
June 30, 2007:
<TABLE>
<CAPTION>
                                                                       Weighted         Weighted
                                                                        Average          Average
                                                                      Construction      Permanent
                                    Number of          Face            Interest          Interest
     (Dollars in thousands)         Bonds (1)        Amount (2)          Rate              Rate
------------------------------   --------------    --------------    --------------    --------------
<S>                                          <C>   <C>                         <C>               <C>
Construction/rehabilitation
  properties                                  7    $       49,652              6.21%             5.81%
Lease up properties                           2            20,880              6.40              6.40
Additional funding of existing
  bonds                                      --             1,541              6.38              6.38
                                 --------------    --------------    --------------    --------------
    Total                                     9    $       72,073              6.27%             5.99%
                                 ==============    ==============    ==============    ==============
</TABLE>

(1)  Number of additional  fundings not included as they are not additive to the
     number of bonds in the portfolio.
(2)  Original principal amount at issuance.

The  following  table  summarizes  mortgage  revenue bonds repaid during the six
months ended June 30, 2007:
<TABLE>
<CAPTION>
                                       Number of        Net Book                          Realized
        (In thousands)                   Bonds            Value          Proceeds           Loss
---------------------------------   --------------   --------------   --------------   --------------
<S>                                              <C> <C>              <C>              <C>
Non-participating, not stabilized                3   $        2,627   $        2,622   $           (5)
</TABLE>


C. SECURITIZED OR PLEDGED ASSETS

At June 30, 2007,  mortgage  revenue bonds with an aggregate  fair value of $2.3
billion  were  securitized  or pledged as  collateral  in relation to  financing
arrangements.  Of these,  44 bonds  with a fair  value of  approximately  $393.3
million are eliminated in consolidation as noted in the tables above.

D. IMPAIRMENT

During 2007, we recognized  approximately $19.4 million of mortgage revenue bond
impairment  charges,  of which $2.9 million was recognized in the second quarter
of 2007. Of this amount, $13.7 million, recognized in the first quarter of 2007,
is related to the change in our strategy in  recovering  investments  associated
with troubled  developers  (see  discussion  under  PRS/CRG/ERC in Note 18). The
change in  strategy  may  involve a change in the length of time we plan to hold
the  investments  or the  amount  of  funding  we may  provide  to  support  the

                                       11
<PAGE>

                   CENTERLINE HOLDING COMPANY AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2007
                                   (UNAUDITED)


underlying property.  As such, the estimated level and timing of cash flows used
to value the  properties  reduced  the  estimated  fair  values of the  mortgage
revenue bonds.

The other  impairments  resulted from substandard  performance at the underlying
properties.  For one property, there is a full interest forbearance in place and
re-issuance of the bond is expected to occur later in the year.

NOTE 3 - OTHER INVESTMENTS

Investments other than mortgage revenue bonds consisted of:
<TABLE>
<CAPTION>
                                                          June 30,    December 31,
                  (In thousands)                            2007          2006
-----------------------------------------------------   -----------   -----------
<S>                                                     <C>           <C>
Equity Method Investments
-------------------------
   Investment in equity interests in LIHTC properties   $    58,986   $    53,492
Available for Sale
------------------
   CMBS                                                     215,612            --
   Resecuritization certificates                             95,358       102,357
   Marketable securities                                     32,091         1,465
Other
-----
   Mortgage loans held for sale                              97,668       122,459
   Notes receivable                                          59,726        46,477
   Other investments                                          7,821         9,604
                                                        -----------   -----------
            Total other investments                     $   567,262   $   335,854
                                                        ===========   ===========
</TABLE>

A. INVESTMENTS IN EQUITY INTERESTS IN LIHTC PROPERTIES

Through a subsidiary, we acquire equity interests in property ownership entities
on a short-term  basis for  inclusion in  Affordable  Housing fund  offerings to
investors.  We expect to recapture  such amounts from the proceeds of the equity
and debt  financing  when the  investment  fund has  closed.  At June 30,  2007,
approximately   $25.2  million  of  the  investments   were  guaranteed  by  the
developers.

B. CMBS

CMBS investments we hold (not including those held at the fund level detailed in
Note 15) were comprised of the following as of June 30, 2007:
<TABLE>
<CAPTION>
                                                                                 Percentage of
(Dollars in thousands)        Face Amount     Accreted Cost     Fair Value        Fair Value
---------------------       --------------   --------------   --------------    --------------
<S>                         <C>              <C>              <C>                        <C>
Security rating:
   BBB-                     $       60,819   $       54,669   $       53,697             24.90%
   BB+                              36,150           31,411           31,082             14.42
   BB                               25,878           21,848           21,627             10.03
   BB-                              37,842           27,384           27,102             12.57
   B+                               21,140           14,285           14,153              6.56
   B                                20,547           12,981           12,871              5.97
   B-                               26,679           13,422           13,447              6.24
   Non-rated                       107,486           41,467           41,633             19.31
                            --------------   --------------   --------------    --------------
                            $      336,541   $      217,467   $      215,612            100.00%
                            ==============   ==============   ==============    ==============
</TABLE>

We intend to sell these  CMBS  investments  to a new CMBS fund  being  sponsored
through Investors (see Note 19).

                                       12
<PAGE>

                   CENTERLINE HOLDING COMPANY AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2007
                                   (UNAUDITED)



C. RESECURITIZATION CERTIFICATES

Resecuritization  certificates  pertain to our  retained  investments  in trusts
which hold CMBS investments and which were sponsored  through Investors or other
funds that Investors sponsored. The resecuritization  certificates which we hold
(not including the certificates held at the fund level detailed in Note 15) were
comprised of the following as of June 30, 2007:
<TABLE>
<CAPTION>
                                                                                 Percentage of
  (Dollars in thousands)       Face Amount    Accreted Cost      Fair Value         Fair Value
--------------------------   --------------   --------------   --------------    --------------
<S>                          <C>              <C>              <C>                        <C>
Security rating:
   AAA interest only         $           --   $       14,695   $       19,373             20.32%
   AAA                               26,150           13,940           24,453             25.64
   BBB+                              12,536            5,156            8,805              9.23
   BBB                                9,402            3,517            6,007              6.30
   BBB-                               9,402            2,597            5,495              5.76
   BB+                               24,454            7,922           12,446             13.05
   BB                                 8,501            1,962            3,481              3.65
   BB-                               11,635            2,005            4,155              4.36
   B+                                13,273            2,165            2,907              3.05
   B                                 11,486            1,083            1,801              1.89
   B-                                11,635              920            1,682              1.76
   Non-rated                         53,426            2,989            4,074              4.27
   Non-rated interest only               --              413              679              0.71
                             --------------   --------------   --------------    --------------
                             $      191,900   $       59,364   $       95,358            100.00%
                             ==============   ==============   ==============    ==============
</TABLE>

At June 30, 2007,  the AAA interest only  certificate  had a notional  amount of
$539.5  million and the  non-rated  interest  only  certificates  had a combined
notional amount of $78.4 million.

D. MARKETABLE SECURITIES

Marketable  securities  at June 30,  2007,  primarily  represents  a Fannie  Mae
discounted note. The note matures in October 2007.

E. MORTGAGE LOANS HELD FOR SALE

The  balance of mortgage  loans held for sale  fluctuates  based on  origination
volume and the timing of  corresponding  sales.  These loans are typically  sold
within  three  months of  origination  and  primarily  represent  loans  sold to
government sponsored entities, such as Fannie Mae, Freddie Mac and GNMA.

F. NOTES RECEIVABLE

Notes  receivable   primarily   represent  the  fair  value  of  investments  in
first-mortgage and mezzanine loans originated through Investors.

                                       13
<PAGE>

                   CENTERLINE HOLDING COMPANY AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2007
                                   (UNAUDITED)


NOTE 4 - GOODWILL AND INTANGIBLE ASSETS, NET

Goodwill and intangible assets consisted of the following:
<TABLE>
<CAPTION>
                                   June 30,     December 31,
        (In thousands)               2007           2006
------------------------------   ------------   ------------
<S>                              <C>            <C>
Goodwill                         $    344,974   $    345,806
Other intangible assets, net          119,523        127,686
Mortgage servicing rights, net         60,022         68,785
                                 ------------   ------------

Total                            $    524,519   $    542,277
                                 ============   ============
</TABLE>

A. GOODWILL

The following table provides information regarding goodwill, which we include in
our Corporate group:
<TABLE>
<CAPTION>
       (In thousands)              Total
----------------------------   ------------
<S>                            <C>
Balance at December 31, 2006   $    345,806
Additions                               432
Reductions                           (1,264)
                               ------------
Balance at June 30, 2007       $    344,974
                               ============
</TABLE>

The addition to goodwill  relates to the adoption of FIN 48 (see Note 10) as the
accrual  recorded  included a reserve for an uncertain tax position that existed
at Investors at the time we acquired it.

Reductions to the goodwill  balance  pertain to the redemption of SCUs (see Note
9), as the deferred tax impact of such redemption  served to effectively  reduce
the purchase price of the subsidiary of which they were issued to finance.

                                       14
<PAGE>

                   CENTERLINE HOLDING COMPANY AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2007
                                   (UNAUDITED)


B. OTHER INTANGIBLE ASSETS

The components of other identified intangible assets are as follows:
<TABLE>
<CAPTION>
                                  Estimated
                                   Useful
                                    Life                 Gross                   Accumulated
    (Dollars in thousands)       (in Years)         Carrying Amount              Amortization                     Net
------------------------------   -----------   -------------------------   -------------------------   -------------------------
                                                 June 30,    December 31,    June 30,    December 31,    June 30,    December 31,
                                                   2007          2006          2007          2006          2007         2006
                                               -----------   -----------   -----------   -----------   -----------   -----------
<S>                                     <C>    <C>           <C>           <C>           <C>           <C>           <C>
Amortized identified
  intangible assets:
  Transactional
   relationships                        16.7   $   103,000   $   103,000   $    29,805   $    25,590   $    73,195   $     7,410
  Partnership service
   contracts                             9.4        47,300        47,300        19,132        16,604        28,168        30,696
  General partner interests              8.5         6,016         6,016         2,137         1,774         3,879         4,242
  Joint venture developer
   relationships                         5.0         4,800         4,800         3,395         2,915         1,405         1,885
  Internally developed
   software                              3.0         1,390         1,390           396           163           994         1,227
  Mortgage banking broker
   relationships                         5.0         1,080         1,080           504           396           576           684
  Other identified
   intangibles (1)                       9.3         4,427         4,427         3,894         3,658           533           769
                                 -----------   -----------   -----------   -----------   -----------   -----------   -----------
Weighted average life/subtotal          13.6       168,013       168,013        59,263        51,100       108,750       116,913
                                 ===========

Unamortized identified
  intangible assets:
  Mortgage banking licenses
   and approvals with no
   expiration                                       10,773        10,773            --            --        10,773        10,773
                                               -----------   -----------   -----------   -----------   -----------   -----------

Total identified intangible
  assets                                       $   178,786   $   178,786   $    59,263   $    51,100   $   119,523   $   127,686
                                               ===========   ===========   ===========   ===========   ===========   ===========
</TABLE>

<TABLE>
<CAPTION>
                                                                              Three Months Ended           Six Months Ended
    (In thousands)                                                                  June 30,                    June 30,
------------------------------                                             -------------------------   -------------------------
                                                                              2007           2006          2007          2006
                                                                           -----------   -----------   -----------   -----------
<S>                                                                        <C>           <C>           <C>           <C>
Amortization expense (1)                                                   $     4,082   $     4,053   $     8,163   $     7,977
                                                                           ===========   ===========   ===========   ===========
</TABLE>

(1)  "Other  identified  intangibles"  pertain to the  acquisition  of  mortgage
     revenue bond  investments.  The  amortization  (approximately  $424,000 per
     year) is included as a reduction to mortgage revenue bond interest income.

                                       15
<PAGE>

                   CENTERLINE HOLDING COMPANY AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2007
                                   (UNAUDITED)


NOTE 5 - DEFERRED COSTS AND OTHER ASSETS

The components of deferred costs and other assets were as follows:
<TABLE>
<CAPTION>
                                                          June 30,     December 31,
                  (In thousands)                            2007           2006
-----------------------------------------------------   -----------    -----------
<S>                                                     <C>            <C>
Deferred financing and other costs                      $    32,020    $    32,472
Less: Accumulated amortization                               (6,569)        (6,718)
                                                        -----------    -----------

Net deferred costs                                           25,451         25,754

Real estate owned, net of accumulated depreciation of
   $1.7 million in 2007 and $1.3 million in 2006             41,613         41,743
Interest receivable                                          23,035         24,926
Fees receivable, net                                         18,069         19,456
Deposits receivable                                          14,540         18,863
Furniture, fixtures and leasehold improvements, net           9,508          8,502
Income taxes receivable                                       9,085            714
Interest rate swaps at fair value (Note 7)                    3,333          2,236
Other                                                         7,780          6,168
                                                        -----------    -----------

Total                                                   $   152,414    $   148,362
                                                        ===========    ===========
</TABLE>

NOTE 6 - FINANCING ARRANGEMENTS AND NOTES PAYABLE

Fluctuations  in our  borrowing  levels  correspond  to the level of  investment
activity in a given period.  Borrowing  under the mortgage loan warehouse  line,
our  corporate  revolver and our CMBS  repurchase  lines relates to the level of
origination activity (see also Note 3).

A. TERM LOAN AND REVOLVING CREDIT FACILITY

In June 2007, we exercised an accordion  option in our revolving credit facility
to increase the borrowing capacity from $250.0 million to $375.0 million.  As of
June 30, 2007, we had commitments  from revolving  credit facility  participants
for $320.0  million of the $375.0  million  and had  borrowings  outstanding  of
$262.0  million with a weighted  average  interest rate of 7.40%  (including the
impact of an interest rate swap).

B. CMC WAREHOUSE LINE

In May 2007, we closed a $300.0  million  warehouse  facility with Citicorp USA,
Inc.  ("Citi")  which  replaced  the $100.0  million  Bank of America  warehouse
facility.  The  facility  matures in May 2008 and bears  interest  at LIBOR plus
0.5%.  Mortgages  financed by such advances as well as the related servicing and
other  rights (see Notes 3 and 4) have been  pledged as  security  under the new
facility.  As of June 30, 2007,  $78.9 million was outstanding  with an interest
rate of 5.82%.

C. MULTIFAMILY ASAP PLUS FACILITY

Under this program with Fannie Mae,  mortgage loans are initially  funded by the
Centerline Mortgage Capital Inc. ("CMC"),  formerly known as CharterMac Mortgage
Capital, warehouse line. Subsequently, Fannie Mae funds approximately 99% of the
loan and CMC funds the remaining  1%. CMC is later  reimbursed by Fannie Mae for
the approximate 1% funding.  As of June 30, 2007, the outstanding  advances from
the ASAP Plus  agreement were $19.0 million,  with a weighted  average  interest
rate of 5.66%.

                                       16
<PAGE>

                   CENTERLINE HOLDING COMPANY AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2007
                                   (UNAUDITED)


D. CENTERLINE FINANCIAL LLC FACILITIES

As of July 1, 2007,  the amount  available  to borrow  under the $125.0  million
mezzanine debt facility was increased  from $31.0 million to $33.0  million,  as
calculated under Centerline  Financial's  operating  agreement.  No amounts were
outstanding under these facilities as of June 30, 2007.

NOTE 7 - DERIVATIVE INSTRUMENTS

A. CASH FLOW HEDGES OF DEBT

Our financing  arrangements and notes payable incur interest expense at variable
rates,  exposing us to interest rate risk. We have established a policy for risk
management  and  our  objectives  and  strategies  for  the  use  of  derivative
instruments to potentially  mitigate such risk. We currently manage a portion of
our interest rate risk resulting from the exposure to variable rates  (benchmark
rate) on our financing  agreements and notes payable through the use of interest
rate swaps indexed to the Securities  Industry and Financial Markets Association
Municipal Swap Index ("SIFMA")  rate, the most widely used  tax-exempt  floating
rate index, or to LIBOR.  Under each swap agreement,  for a specified  period of
time we are  required to pay a fixed rate of  interest  on a specified  notional
amount  to the  transaction  counterparty  and we  receive  a  floating  rate of
interest equivalent to the SIFMA or LIBOR index.

At inception,  we designate these swaps as cash flow hedging  instruments,  with
the hedged item being the variable  interest payments on our floating rate debt.
At the  inception of the hedge and on an ongoing  basis,  we assess  whether the
swap  agreements  are effective in  offsetting  changes in the cash flows of the
hedged  financing.   Amounts  in  accumulated  other  comprehensive  income  are
reclassified into earnings in the same period during which the hedged forecasted
transaction  affects  earnings.  Since  we are  hedging  the  variable  interest
payments in our floating rate debt, the forecasted transactions are the interest
payments.  An inherent risk of these swap  agreements is the credit risk related
to the counterparty's ability to meet terms of the contracts with us.

We have entered into swap agreements as follows:
<TABLE>
<CAPTION>
                                 Notional
                                Amount at
Counterparty                  (in millions)        Inception Date  Expiration Date      Rate
------------------------------------------------------------------------------------------------
                        June 30,     December 31,
                          2007           2006
                      ------------   ------------
<S>                   <C>            <C>            <C>             <C>           <C>
Bank of America       $      100.0   $      100.0   January 2005   December 2007          2.56%
Bank of America               50.0           50.0   January 2005   January 2008           3.27%
Bank of America               50.0           50.0   January 2005   January 2008           2.86%
Bank of America               50.0           50.0   January 2005   January 2009           3.08%
RBC Capital Markets          100.0          100.0   January 2005   January 2009           3.075%
Wachovia                     275.0          275.0   August 2006    August 2009            5.25%
Bank of America              100.0          100.0   January 2005   January 2010           3.265%
                      ------------   ------------
Total                 $      725.0   $      725.0
                      ============   ============
</TABLE>

We evaluate our interest rate risk on an ongoing  basis to determine  whether it
would be advantageous to engage in any further hedging transactions.

Certain of our cash flow hedges  experienced some  ineffectiveness.  We recorded
ineffectiveness  of  approximately  $200,000  and $400,000 for the three and six
months ended June 30, 2007, respectively.

We estimate that  approximately $2.7 million of the net unrealized gain included
in accumulated  other  comprehensive  income will reduce interest expense within
the next twelve months.

                                       17
<PAGE>

                   CENTERLINE HOLDING COMPANY AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2007
                                   (UNAUDITED)


Certain of our consolidated  partnerships also had interest rate swaps accounted
for as hedges as of June 30, 2007 (see Note 15).

B. FREE STANDING DERIVATIVES

In 2006,  we had an interest  rate swap with a notional  amount of $26.0 million
that  hedged the change in the fair value of a $26.0  million  investment.  This
swap was assigned to AMAC when we sold AMAC the related investment. Prior to its
assignment,  we did not  elect to  apply  hedge  accounting  to this  swap  and,
therefore,  the change in its fair value was  included  in  interest  expense as
detailed below.

One of our  Commercial  Real Estate  businesses  has entered into three interest
rate swap agreements in connection with a CMBS fund that we plan to close in the
third quarter of 2007. We do not apply hedge accounting to these swap agreements
and, accordingly, changes in the fair value of the swaps is included in interest
expense as detailed below.

C. FINANCIAL STATEMENT IMPACT

Interest  expense  included the following  (expense) income related to the swaps
described above:
<TABLE>
<CAPTION>
                                                        Three months ended             Six months ended
                                                              June 30,                     June 30,
                                                    --------------------------    --------------------------
                (In thousands)                          2007           2006           2007           2006
-------------------------------------------------   -----------    -----------    -----------    -----------
<S>                                                 <C>            <C>            <C>            <C>
Interest expense - cash flow hedges                 $       (29)   $        (3)   $       (32)   $       (36)
Interest income - cash flow hedges                        2,759            631          2,755            749
Change in fair value of free standing derivatives            (6)          (547)           (10)           203
                                                    -----------    -----------    -----------    -----------

Total                                               $     2,724    $        81    $     2,713    $       916
                                                    ===========    ===========    ===========    ===========
</TABLE>

Interest rate swaps for which we were in a net liability  position  ("out of the
money") are recorded in accounts payable, accrued expenses and other liabilities
and those for which we are in a net asset position ("in the money") are recorded
in deferred costs and other assets. The amounts recorded were as follows:
<TABLE>
<CAPTION>
                                                      June 30,     December 31,
                (In thousands)                          2007           2006
-------------------------------------------------   -----------    -----------
<S>                                                 <C>            <C>
Net liability position                              $       340    $     1,997
Net asset position                                  $     3,333    $     2,236
</TABLE>

                                       18
<PAGE>

                   CENTERLINE HOLDING COMPANY AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2007
                                   (UNAUDITED)


NOTE 8 - ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER LIABILITIES

Accounts  payable,  accrued  expenses  and other  liabilities  consisted  of the
following:
<TABLE>
<CAPTION>
                                                    June 30,    December 31,
                  (In thousands)                      2007          2006
-----------------------------------------------   -----------   -----------
<S>                                               <C>           <C>
Deferred revenues                                 $   102,091   $    92,564
Distributions payable                                  41,022        41,554
Accounts payable                                       14,250        18,626
Salaries and benefits                                  26,320        29,551
Accrued fund organization and offering expenses         9,122        11,860
Escrow/deposits payable                                 6,446         6,844
Accrued interest payable                                6,365         5,825
Interest rate swaps at fair value (Note 7)                340         1,997
Restructuring accrual                                     158         1,128
FIN 48 liability (Note 10)                              2,225            --
Other                                                   9,727         4,395
                                                  -----------   -----------

Total                                             $   218,066   $   214,344
                                                  ===========   ===========
</TABLE>

The restructuring accrual pertains to integration activities with respect to the
acquisition of Investors.  We recorded these costs in general and administrative
expenses  in the second  quarter of 2006.  A roll  forward of the  restructuring
costs (included within our Asset Management and Commercial Real Estate segments)
is as follows:
<TABLE>
<CAPTION>
                                  Employee              Lease
      (In thousands)         termination costs    termination costs          Total
--------------------------   -----------------    -----------------    -----------------
<S>                          <C>                  <C>                  <C>
Balance at January 1, 2007   $             964    $             164    $           1,128
Additions                                  165                   --                  165
Payments                                (1,129)                  (6)              (1,135)
                             -----------------    -----------------    -----------------
Balance at June 30, 2007     $              --    $             158    $             158
                             =================    =================    =================
</TABLE>

The restructuring  with respect to employee  terminations was completed in April
2007.  The accrual for lease  termination  costs will be paid over the remaining
term of the lease (3.0 years).

NOTE 9 - MINORITY INTERESTS IN CONSOLIDATED SUBSIDIARIES

Minority interests in consolidated subsidiaries consisted of the following:
<TABLE>
<CAPTION>
                                      June 30,     December 31,
          (In thousands)                2007          2006
---------------------------------   -----------   -----------
<S>                                 <C>           <C>
Convertible Special Common Units
   ("SCUs") of a subsidiary         $   206,921   $   231,262
Convertible Special Membership
   Units ("SMUs") of a subsidiary         4,858         5,110
Convertible Special Common
   Interests ("SCIs") of a
   subsidiary                             4,476         4,758
Other                                     8,675         6,260
                                    -----------   -----------

Total                               $   224,930   $   247,390
                                    ===========   ===========
</TABLE>

                                       19
<PAGE>

                   CENTERLINE HOLDING COMPANY AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2007
                                   (UNAUDITED)


Income (loss) allocated to minority interests, net of tax, was as follows:
<TABLE>
<CAPTION>
                          Three Months Ended          Six Months Ended
                               June 30,                    June 30,
                     --------------------------   --------------------------
(In thousands)           2007           2006          2007           2006
--------------       -----------    -----------   -----------    -----------
<S>                  <C>            <C>           <C>            <C>
SCUs                 $     1,929    $     1,632   $    (4,027)   $     7,361
SMUs                          26             19           (53)           169
SCIs                          25             --           (51)            --
Other                       (272)            --          (278)            --
                     -----------    -----------   -----------    -----------

Total                $     1,708    $     1,651   $    (4,409)   $     7,530
                     ===========    ===========   ===========    ===========
</TABLE>

A. SCUS

During 2007,  the holder of 132,000 SCUs  redeemed the units,  for which we paid
approximately  $2.8 million in cash based upon the market price of our shares at
the time of  redemption.  We also redeemed the special  preferred  voting shares
related to the converted SCUs at par ($0.01 per share).

B. OTHER

"Other"  minority  interests  at June  30,  2007,  primarily  represent  the 10%
interest  in  Centerline  Financial  Holdings  LLC  ("CFH"),  formerly  known as
Centerbrook  Holdings LLC,  owned by Natixis  Capital  Markets Inc.  ("Natixis")
(formerly IXIS Capital Markets North America, Inc.).

NOTE 10 - INCOME TAXES

We adopted the provisions of FIN 48 on January 1, 2007. As a result of adoption,
we  recognized  a charge of  approximately  $1.2 million to the January 1, 2007,
balance of beneficial  owners' equity and approximately  $432,000 to the January
1, 2007,  goodwill  balance (see Note 4). As of the adoption  date, we had gross
unrecognized tax benefits of approximately  $2.0 million and accrued interest of
approximately  $836,000.  Of this total,  $2.5 million  represents the amount of
unrecognized  tax benefits  that,  if  recognized,  would  favorably  affect the
effective  income tax rate in future  periods.  We do not anticipate  that these
unrecognized  tax benefits will  significantly  change due to the  settlement of
audits and the expiration of statute of  limitations  prior to June 30, 2008. We
recognize  interest and penalties  related to uncertain tax positions within our
income tax provision or benefit.

The Internal  Revenue Service is examining the  consolidated  corporate  federal
income tax  returns  of our  subsidiaries  subject to taxes for the tax  periods
ended June 30, 2003,  December 31, 2003 and December 31, 2004. The New York City
taxing  authority  is  examining  the  partnership  tax  returns  of  one of our
subsidiaries for the years ended December 31, 2003 and 2004. These  examinations
are in a preliminary stage and no significant issues have yet been raised.

                                       20
<PAGE>

                   CENTERLINE HOLDING COMPANY AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2007
                                   (UNAUDITED)


NOTE 11 - COMPREHENSIVE INCOME (LOSS)

Comprehensive income (loss), net of tax as applicable, was as follows:
<TABLE>
<CAPTION>
                                                                          Six months Ended
                                                                              June 30,
                                                                     --------------------------
                           (In thousands)                                2007           2006
------------------------------------------------------------------   -----------    -----------
<S>                                                                  <C>            <C>
Net (loss) income                                                    $    (9,765)   $    18,905
Net unrealized gain on interest rate derivatives                           2,867          2,189
Net unrealized (loss) gain on marketable and equity securities               (37)         4,524
Net unrealized (loss) gain on other investments                          (12,669)           450
Net unrealized gain (loss) on mortgage revenue bonds:
   Unrealized gain (loss) during the period                               19,906        (45,139)
   Reclassification adjustment for net gain included in net income          (653)          (912)
                                                                     -----------    -----------
Comprehensive (loss) income                                          $      (351)   $    19,983
                                                                     ===========    ===========
</TABLE>

NOTE 12 - GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative expenses consisted of the following:
<TABLE>
<CAPTION>
                                      Three Months Ended            Six Months Ended
                                            June 30,                    June 30,
                                   -------------------------   -------------------------
         (In thousands)                2007          2006          2007          2006
--------------------------------   -----------   -----------   -----------   -----------
<S>                                <C>           <C>           <C>           <C>
Salaries and benefits              $    27,028   $    18,059   $    63,888   $    37,961
Other general and administrative        15,912        21,802        36,476        34,466
                                   -----------   -----------   -----------   -----------

Total                              $    42,940   $    39,861   $   100,364   $    72,427
                                   ===========   ===========   ===========   ===========
</TABLE>

NOTE 13 - EARNINGS PER SHARE ("EPS")

For basic  EPS,  the number of shares  includes  common  shares and  Convertible
Community  Reinvestment Act Preferred Shares ("Convertible CRA Shares"),  as the
Convertible CRA Shares have the same economic benefits as common shares.  Income
for the  calculation  represents  net income or loss less dividends for our 4.4%
Convertible CRA Preferred Shares.

Diluted  EPS  is  calculated   using  the  weighted  average  number  of  shares
outstanding  during the period  plus the  additional  dilutive  effect of common
share  equivalents.  The  dilutive  effect  of  outstanding  share  options  and
non-vested share grants is calculated using the treasury stock method.  The 4.4%
Convertible CRA Preferred Shares and our subsidiaries'  convertible equity units
are not  included  in the  calculation  as their  assumed  conversions  would be
antidilutive.  In accordance  with SFAS No. 128,  EARNINGS PER SHARE,  no common
share  equivalents  are included in the Diluted EPS calculation in a period when
we report a net loss after  dividends  for the 4.4%  Convertible  CRA  Preferred
Shares.

                                       21
<PAGE>

                   CENTERLINE HOLDING COMPANY AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2007
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                               Three Months Ended June 30, 2007                Six months Ended June 30, 2007
                                          ------------------------------------------   --------------------------------------------
(In thousands, except per share amounts)     Income         Shares        Per Share       Income          Shares        Per Share
---------------------------------------   ------------   ------------   ------------   ------------    ------------    ------------
<S>                                       <C>                  <C>      <C>            <C>                   <C>       <C>
Net income (loss)                         $      4,980                                 $     (9,765)
Preferred dividends                              1,188                                        2,376
                                          ------------                                 ------------
Net income (loss) allocable to
shareholders (Basic EPS)                         3,792         57,219   $       0.07        (12,141)         57,586           (0.21)
                                                                        ============                                   ============
Effect of dilutive securities                       --          1,174                            --              --
                                          ------------   ------------                  ------------    ------------
Diluted EPS                               $      3,792         58,393   $       0.06   $    (12,141)         57,586           (0.21)
                                          ============   ============   ============   ============    ============    ============

<CAPTION>
                                               Three Months Ended June 30, 2006               Six months Ended September 30, 2006
                                          ------------------------------------------   --------------------------------------------
                                             Income         Shares        Per Share       Income          Shares        Per Share
---------------------------------------   ------------   ------------   ------------   ------------    ------------    ------------
<S>                                       <C>                  <C>      <C>            <C>                   <C>       <C>
Net income                                $      4,248                                 $     18,905
Preferred dividends                              1,188                                        2,376
                                          ------------                                 ------------
Net income allocable to shareholders
(Basic EPS)                                      3,060         58,639   $       0.05         16,529          58,609    $       0.28
                                                                        ============                                   ============
Effect of dilutive securities                       --            280                            --             352
                                          ------------   ------------                  ------------    ------------
Diluted EPS                               $      3,060         58,919   $       0.05   $     16,529          58,961    $       0.28
                                          ============   ============   ============   ============    ============    ============
</TABLE>

NOTE 14 - SHARE BASED COMPENSATION

A. THE PLAN

In June 2007,  our  shareholders  approved  the 2007  Incentive  Share Plan (the
"Plan") which replaced our existing Amended and Restated Incentive Share Plan.

The purpose of the Plan is designed to  attract,  retain and  motivate  eligible
persons and to provide incentives and rewards for superior performance.

The Plan allows for the issuance of share options,  share  appreciation  rights,
restricted shares,  restricted share units,  unrestricted shares, deferred share
units, and performance awards (collectively, the "Awards") to eligible persons.

The  Compensation   Committee  (the   "Committee")  of  our  board  of  trustees
administers the Plan.  Pursuant to the Plan, the maximum number of common shares
that may be awarded is the lesser of:

     o    10% of the number of total shares outstanding (as defined in the Plan)
          as of December 31 preceding issuances of such awards; or
     o    the limits  prescribed by the national  security  exchange or national
          quotation system on which the shares may then be listed.

Based on this  formula,  the  total  number  of  Awards  available  for grant is
approximately  7.5 million shares. No shares were granted under the Plan through
June 30, 2007.

The  Committee  will grant Awards under the Plan at its  discretion,  and it has
established  the  2007  Outperformance  Program  ("2007  OPP"),  and two  Annual
Incentive  Bonus Programs  (denominated  as "A" and "B") that provide for future
Awards  on  terms  the  Committee  has  established.  At this  time,  we can not
determine the amount or dollar value of Awards to be provided under any of these
programs because they depend on our future  performance,  and because individual
allocations are discretionary for each program.

                                       22
<PAGE>

                   CENTERLINE HOLDING COMPANY AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2007
                                   (UNAUDITED)


B. OUTPERFORMANCE PROGRAM

Under the 2007 OPP,  Award  recipients  will share in a performance  pool if our
total return to  shareholders  over the  three-year  period from January 1, 2007
through December 31, 2009 exceeds 37.5%. The size of the pool will be 11% of the
outperformance  return  amount in excess of the 37.5%  benchmark,  subject  to a
maximum  pool  of  $25.0  million.  The  outperformance  pool  will  be  paid to
participants in the form of restricted  share awards which will vest 50% on each
of  December  31,  2010  and  2011,  subject  to  the  participant's   continued
employment,  except as otherwise  provided in the 2007 OPP. We expect to account
for OPP  Awards as equity  awards  pursuant  to SFAS No.  123 (R),  SHARE  BASED
PAYMENT.


C. ANNUAL INCENTIVE BONUS PROGRAMS

The Annual  Incentive Bonus Programs  establish cash bonus pools for the payment
of annual bonuses of cash and restricted shares to eligible  persons.  Under the
programs,  we expect to issue  awards equal to 4.07% of our cash  available  for
distribution to shareholders ("CAD"). See Note 16 for a definition of CAD.


NOTE 15 - CONSOLIDATED PARTNERSHIPS

Consolidated partnerships consist of four groups:

     o    Funds our Affordable Housing businesses manage to acquire LIHTC equity
          ("LIHTC Fund Partnerships");
     o    Property  level   partnerships   for  which  our  Affordable   Housing
          businesses have assumed the role of general  partner ("LIHTC  Property
          Partnerships");
     o    Funds our  Commercial  Real Estate  businesses  manage which invest in
          CMBS   and    associated    resecuritization    trusts   ("CMBS   Fund
          Partnerships"); and
     o    A fund our Commercial  Real Estate  business  manages which invests in
          real estate debt products ("Direct Loan Fund Partnership").

Financial  information  for the LIHTC Fund and Property  Partnerships  are as of
March 31, 2007, the latest practical date.  Information with respect to the CMBS
Fund and Direct Fund Loan Partnerships is as of June 30, 2007.

                                       23
<PAGE>

                   CENTERLINE HOLDING COMPANY AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2007
                                   (UNAUDITED)


Assets and liabilities of consolidated partnerships consisted of the following:
<TABLE>
<CAPTION>
                                                         June 30, 2007                              December 31, 2006
                                           ------------------------------------------   ------------------------------------------
                                                           CMBS Fund                                    CMBS Fund
                                            LIHTC Fund        and                        LIHTC Fund        and
                                           and Property   Direct Loan                   and Property   Direct Loan
            (In thousands)                 Partnerships   Partnerships      Total       Partnerships   Partnerships      Total
----------------------------------------   ------------   ------------   ------------   ------------   ------------   ------------
<S>                                        <C>            <C>            <C>            <C>            <C>            <C>
Investments in property partnerships       $  3,726,899   $         --   $  3,726,899   $  3,546,208   $         --   $  3,546,208
Investments in CMBS - available for sale             --        954,732        954,732             --        719,645        719,645
Investments in resecuritization
   certificates  - available for sale                --        585,023        585,023             --        597,491        597,491
Notes receivable                                     --        330,466        330,466             --        101,156        101,156
Other investments                                    --            634            634             --          1,407          1,407
                                           ------------   ------------   ------------   ------------   ------------   ------------
Investments held by consolidated
   partnerships                               3,726,899      1,870,855      5,597,754      3,546,208      1,419,699      4,965,907
                                           ------------   ------------   ------------   ------------   ------------   ------------

Land, buildings and improvements, net
   of accumulated depreciation                  589,588             --        589,588        576,171             --        576,171
Cash                                            310,461         16,880        327,341        277,860         27,213        305,073
Other assets                                    120,254         62,867        183,121        123,890         33,645        157,535
                                           ------------   ------------   ------------   ------------   ------------   ------------
Other assets of consolidated
   partnerships                               1,020,303         79,747      1,100,050        977,921         60,858      1,038,779
                                           ------------   ------------   ------------   ------------   ------------   ------------

Total assets                               $  4,747,202   $  1,950,602   $  6,697,804   $  4,524,129   $  1,480,557   $  6,004,686
                                           ============   ============   ============   ============   ============   ============

Financing arrangements                       $       --   $    687,766   $    687,766      $      --   $    709,219   $    709,219
Notes payable                                   368,004        101,500        469,504        594,477             --        594,477
Repurchase agreements                                --        422,631        422,631             --        243,955        243,955
Due to property partnerships                    843,540             --        843,540        925,301             --        925,301
Other liabilities                               195,975         19,504        215,479        215,628         11,574        227,202
                                           ------------   ------------   ------------   ------------   ------------   ------------

Total liabilities                          $  1,407,519   $  1,231,401   $  2,638,920   $  1,735,406   $    964,748   $  2,700,154
                                           ============   ============   ============   ============   ============   ============
</TABLE>

A. INVESTMENTS IN PROPERTY PARTNERSHIPS AND DUE TO PROPERTY PARTNERSHIPS

The LIHTC Fund Partnerships  invest in property level  partnerships that neither
we nor the LIHTC  Fund  Partnerships  control  and which,  therefore,  we do not
consolidate.  "Investments  in  property  partnerships"  represents  the limited
partner  equity  investments  in  those  property  level  partnerships.  "Due to
property partnerships"  represents the unfunded capital commitments of the LIHTC
Fund  Partnerships  in those property  partnerships.  As those  commitments  are
funded,  the "investments in property  partnerships"  balance  increases and the
"due to property partnerships" balance decreases.

                                       24
<PAGE>

                   CENTERLINE HOLDING COMPANY AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2007
                                   (UNAUDITED)


B. INVESTMENTS IN CMBS

The CMBS Fund Partnerships invest in and hold CMBS investments. Such investments
held by these partnerships were comprised of the following as of June 30, 2007:
<TABLE>
<CAPTION>
                                                                                      Percentage of
  (Dollars in thousands)           Face         Accreted Cost       Fair Value         Fair Value
--------------------------   ---------------   ---------------   ---------------    ---------------
<S>                          <C>               <C>               <C>                         <C>
Security rating:
   BBB-                      $       139,474   $       131,074   $       122,455              12.82%
   BB+                               169,382           147,843           144,663              15.15
   BB                                160,969           134,438           132,201              13.85
   BB-                               201,935           145,318           144,615              15.15
   B+                                121,747            85,213            84,595               8.86
   B                                 100,343            57,992            58,737               6.15
   B-                                144,242            70,048            75,129               7.87
   CCC                                34,375            32,611            33,516               3.51
   Non-rated                         479,906           140,374           158,821              16.64
                             ---------------   ---------------   ---------------    ---------------
                             $     1,552,373   $       944,911   $       954,732             100.00%
                             ===============   ===============   ===============    ===============
</TABLE>

C. INVESTMENTS IN RESECURITIZATION CERTIFICATES

The CMBS Fund Partnerships retain interests ("resecuritization certificates") in
certain  securitized  assets that they have sold, as well as others purchased in
market transactions.  Investments in such resecuritization  certificates held by
these partnerships were comprised of the following as of June 30, 2007:
<TABLE>
<CAPTION>
                                                                                      Percentage of
  (Dollars in thousands)       Face Amount      Accreted Cost       Fair Value         Fair Value
--------------------------   ---------------   ---------------   ---------------    ---------------
<S>                          <C>               <C>               <C>                         <C>
Security rating:
   AAA                       $       111,900   $       106,837   $       107,790              18.44%
   AA                                 66,600            64,385            64,644              11.05
   A                                  47,000            45,244            45,946               7.85
   A-                                 23,900            24,031            23,778               4.06
   BBB+                              101,338            96,716            96,153              16.44
   BBB                                55,381            50,642            50,349               8.61
   BBB-                              121,294           114,189           115,623              19.76
   BB+                                47,820            22,150            30,860               5.27
   BB                                 12,158             5,005             6,982               1.19
   BB-                                12,157             4,510             6,294               1.08
   B+                                 21,073             6,938             9,746               1.67
   B                                  11,347             2,654             3,757               0.64
   B-                                 12,158             2,138             3,056               0.52
   Non-rated                         176,598             9,174            15,936               2.72
   Non-rated interest only                --             4,871             4,109               0.70
                             ---------------   ---------------   ---------------    ---------------
                             $       820,724   $       559,484   $       585,023             100.00%
                             ===============   ===============   ===============    ===============
</TABLE>

At June 30,  2007,  the  non-rated  interest  only  certificates  had a combined
notional amount of $1.4 billion.

D. NOTES RECEIVABLE

The Direct Loan  Partnership  invests in various  types of loans.  The aggregate
carrying  values,  allocated by product type and weighted  average  coupons,  of
notes receivable held by the Direct Loan Partnership as of June 30, 2007 were as
follows:

                                       25
<PAGE>

                   CENTERLINE HOLDING COMPANY AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2007
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                                  Allocation      Fixed          Variable
                                                                      by           Rate           Rate
                                        Total       Carrying       Product        Average        Average
      (Dollars in thousands)         Commitment       Value          Type          Yield          Yield
----------------------------------   -----------   -----------   -----------    -----------    -----------
<S>                                  <C>           <C>                 <C>             <C>            <C>
Product Type:
 Bridge loans, variable rate         $    16,500   $     7,253          3.99%                         8.79%
 Bridge loans, fixed rate                 32,696        31,765          7.90           7.06%
 Subordinated notes, variable rate        29,500        19,859          7.13                          9.78
 Subordinated notes, fixed rate           27,985        24,114          6.76           7.93
 Mezzanine loans, variable rate          231,797       189,996         55.98                          9.26
 Mezzanine loans, fixed rate              75,492        57,479         18.24           9.79
                                     -----------   -----------   -----------    -----------    -----------
Total / Average                      $   413,970   $   330,466        100.00%          8.26%          9.28%
                                     ===========   ===========   ===========    ===========    ===========
</TABLE>

E. FINANCING ARRANGEMENTS/ NOTES PAYABLE/ REPURCHASE AGREEMENTS

The funds use these debt facilities to finance investment  activity.  Changes in
the balances from December 31, 2006, are due to  transactions  undertaken in the
ordinary course of business.

F. REVENUES AND EXPENSES

Revenues and expenses of consolidated partnerships consisted of the following:
<TABLE>
<CAPTION>
                                                           Three Months Ended June 30,
                                      ---------------------------------------------------------------------
                                                             2007                                2006
                                      ---------------------------------------------------   ---------------
                                                          CMBS Fund
                                        LIHTC Fund           and                              LIHTC Fund
                                        and Property     Direct Loan                          and Property
          (In thousands)                Partnerships     Partnerships          Total          Partnerships
-----------------------------------   ---------------   ---------------   ---------------   ---------------
<S>                                   <C>                 <C>             <C>               <C>
Rental income                         $        13,277     $          --   $        13,277   $         7,393
Interest and other income                       4,167            41,879            46,046             1,973
                                      ---------------   ---------------   ---------------   ---------------

Total revenues                        $        17,444   $        41,879   $        59,323   $         9,366
                                      ===============   ===============   ===============   ===============

Interest expense                      $         5,263   $        18,739   $        24,002   $         5,611

Asset management fees                           6,264                --             6,264             5,891
Property operating expenses                     6,506                --             6,506             3,892
General and administrative expenses             4,704               472             5,176             2,754
Depreciation and amortization                   7,765               608             8,373             3,251
Other expenses                                  2,293                --             2,293               470
                                      ---------------   ---------------   ---------------   ---------------
   Subtotal                                    27,532             1,080            28,612            16,258
                                      ---------------   ---------------   ---------------   ---------------

Total expenses                        $        32,795   $        19,819   $        52,614   $        21,869
                                      ===============   ===============   ===============   ===============
</TABLE>

                                       26
<PAGE>

                   CENTERLINE HOLDING COMPANY AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2007
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                            Six Months Ended June 30,
                                      ---------------------------------------------------------------------
                                                             2007                                2006
                                      ---------------------------------------------------   ---------------
                                                          CMBS Fund
                                        LIHTC Fund           and                              LIHTC Fund
                                        and Property     Direct Loan                          and Property
          (In thousands)                Partnerships     Partnerships          Total          Partnerships
-----------------------------------   ---------------   ---------------   ---------------   ---------------
<S>                                   <C>                 <C>             <C>               <C>
Rental income                         $        25,428     $          --   $        25,428   $        13,663
Interest and other income                       7,826            73,385            81,211             3,948
                                      ---------------   ---------------   ---------------   ---------------

Total revenues                        $        33,254   $        73,385   $       106,639   $        17,611
                                      ===============   ===============   ===============   ===============

Interest expense                      $        12,448   $        33,866   $        46,314   $        12,557

Asset management fees                          12,603                --            12,603            10,524
Property operating expenses                    11,494                --            11,494             7,289
General and administrative expenses             9,944             1,026            10,970             6,144
Depreciation and amortization                  13,655             1,205            14,860             6,628
Other expenses                                  3,035                --             3,035               954
                                      ---------------   ---------------   ---------------   ---------------
   Subtotal                                    50,731             2,231            52,962            31,539
                                      ---------------   ---------------   ---------------   ---------------

Total expenses                        $        63,179   $        36,097   $        99,276   $        44,096
                                      ===============   ===============   ===============   ===============
</TABLE>

NOTE 16 - BUSINESS SEGMENTS

We operate in five business segments plus a corporate group as described in Note
1. Segment results  include all direct and contractual  revenues and expenses of
each  segment  and   allocations   of  indirect   expenses   based  on  specific
methodologies.  These  reportable  segments are  strategic  business  units that
primarily  generate  revenue  streams  that  are  distinctly  different  and are
generally  managed   separately.   Unallocated   corporate  costs  are  reported
separately.

The  table  below  includes  Cash  Available  for  Distribution  ("CAD"),  and a
reconciliation  from CAD to net (loss) income, as CAD is the performance measure
used by our chief decision-maker to allocate resources among the segments.

                                       27
<PAGE>

                   CENTERLINE HOLDING COMPANY AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2007
                                   (UNAUDITED)


The following table provides more information regarding our segments:
<TABLE>
<CAPTION>
                                                     Three Months Ended              Six Months Ended
                                                          June 30,                      June 30,
                                                 --------------------------    --------------------------
                (In thousands)                      2007            2006           2007          2006
----------------------------------------------   -----------    -----------    -----------    -----------
<S>                                              <C>            <C>            <C>            <C>
REVENUES
   Affordable Housing                            $    65,563    $    67,118    $   125,604    $   128,657
   Commercial Real Estate (1)                         15,133         12,839         28,680         24,778
   Asset Management (1)                               15,546          6,591         29,516         13,089
   Credit Risk Products                                4,159             10          7,552             10
   Corporate Group                                     7,626          5,702         16,706          9,980
   Consolidated Partnerships (2)                      60,756         11,421        109,504         20,708
   Elimination of intersegment transactions          (33,719)       (24,758)       (65,333)       (46,160)
                                                 -----------    -----------    -----------    -----------
Consolidated Revenues                            $   135,064    $    78,923    $   252,229    $   151,062
                                                 ===========    ===========    ===========    ===========

CAD
   Affordable Housing                            $    31,393    $    35,930    $    41,566    $    60,449
   Commercial Real Estate (1)                          6,012          3,368         10,931          3,995
   Asset Management (1)                                7,807          2,722         14,407          6,454
   Credit Risk Products                                4,315         (3,749)         8,065         (4,304)
   Unallocated corporate costs                       (22,651)       (14,322)       (43,452)       (27,390)
                                                 -----------    -----------    -----------    -----------
Consolidated CAD                                      26,876         23,949         31,517         39,204

   Reconciliation of CAD to net (loss) income:
      Fees deferred for GAAP (3)                     (10,285)       (10,574)        (9,343)        (9,420)
      Depreciation and amortization expense          (10,993)       (14,615)       (22,491)       (23,528)
      Interest income yield adjustments (4)           (2,313)          (464)        (4,609)          (623)
      Gain on sale of loans (5)                        1,000          2,190          2,880          6,813
      Loss on impairment of assets                    (2,939)        (2,271)       (19,385)        (2,271)
      Tax adjustment (6)                                   7           (187)        (1,196)          (219)
      Non-cash compensation (7)                       (3,870)        (1,061)       (13,052)        (3,413)
      Difference between subsidiary equity
      distributions and income allocated to
      minority interests (8)                           6,825          7,209         21,744         10,234
      Non-cash equity income                          (2,399)          (445)          (404)          (648)
      Preferred dividends                              1,188          1,188          2,376          2,376
      Other, net                                       1,883           (671)         2,198            400
                                                 -----------    -----------    -----------    -----------
Consolidated Net Income (Loss)                   $     4,980    $     4,248    $    (9,765)   $    18,905
                                                 ===========    ===========    ===========    ===========

DEPRECIATION AND AMORTIZATION
   Affordable Housing                            $       296    $     4,024    $       581    $     4,864
   Commercial Real Estate (1)                          3,777          5,065          8,225          8,760
   Asset Management (1)                                   40             27             66             50
   Credit Risk Products                                    3             --              4             --
   Corporate Group                                     6,677          4,565         13,215          8,920
   Consolidated Partnerships                             200            934            400            934
                                                 -----------    -----------    -----------    -----------
Consolidated Depreciation and Amortization       $    10,993    $    14,615    $    22,491    $    23,528
                                                 ===========    ===========    ===========    ===========
<CAPTION>

                                                                                 June 30,     December 31,
                                                                                   2007          2006
                                                                               -----------    -----------
<S>                                                                            <C>            <C>
IDENTIFIABLE ASSETS
   Affordable Housing                                                          $ 2,935,721    $ 2,866,346
   Commercial Real Estate (1)                                                      619,969        390,886
   Asset Management (1)                                                             12,178         13,754
   Credit Risk Products                                                            100,285         52,337
   Consolidated partnerships (2)                                                 6,739,418      6,046,429
   Corporate Group                                                                 664,777        794,619
   Elimination of intersegment balances                                           (464,152)      (475,855)
                                                                               -----------    -----------
Consolidated Identifiable Assets                                               $10,608,196    $ 9,688,516
                                                                               ===========    ===========
</TABLE>

                                       28
<PAGE>

                   CENTERLINE HOLDING COMPANY AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2007
                                   (UNAUDITED)


(1)  Includes  Investors  as of August 2006.
(2) Includes funds sponsored by Investors as of August 2006.
(3)  Represents  the net  difference  between  fees  received  at the  time of a
transaction  that  are  recognized  immediately  for CAD but  are  deferred  and
recognized over time for GAAP accounting (e.g.: fund sponsorship fees recognized
over the  relevant  service  periods)  or upon a later  event  (such as mortgage
origination fees recognized upon settlement of a loan sale).
(4) Represents the  adjustment  for  amortization  of bond discounts or premiums
that are recognized  immediately  for CAD but are deferred and  recognized  over
time for GAAP  accounting,  as well as the difference  between  actual  interest
income  received and income  recognized  under the effective  yield method.
(5) Represents non-cash gain recognized on sale of mortgage loans when servicing
rights are retained and gains on sales of mortgage revenue bonds.
(6) Represents the difference  between the tax benefit recorded and the net cash
amount we expect to pay or receive in relation to the current period.
(7) Represents the add-back of amortization of costs  recognized for share-based
compensation and non-cash compensation related to fund earnings.
(8) Represents the difference  between actual  distributions to SCU, SMU and SCI
holders  (which is based on the common share  distribution  rate) and accounting
allocation of earnings,  which is based on the  represented  portion of combined
common, CRA and subsidiary equity in allocating GAAP net income.

NOTE 17 - RELATED PARTY TRANSACTIONS

A. INVESTMENTS IN AND LOANS TO AFFILIATES

Investments in and loans to affiliates consisted of:
<TABLE>
<CAPTION>
                                              June 30,     December 31,
             (In thousands)                     2007           2006
------------------------------------------  ------------   ------------
<S>                                         <C>            <C>
Loan to AMAC                                $     57,600   $     15,000
Investment in AMAC                                 2,036             --
Co-investment in CUC                               3,777          3,066
PRS/CRG/ERC advances, net                         10,530         13,780
Due from unconsolidated partnerships, net          8,538         31,467
Fees receivable, net                                 201          2,536
                                            ------------   ------------
                                            $     82,682   $     65,849
                                            ============   ============
</TABLE>

Note: The above table does not include our co-investment of approximately  $70.0
million as of June 30, 2007,  and $65.0  million as of December 31, 2006, in the
CMBS and Direct  Loan Fund  Partnerships  we  consolidate,  as the  amounts  are
eliminated in consolidation.


LOAN TO AMAC

In June 2007, the borrowing  capacity of the revolving  credit  facility to AMAC
was increased from $50.0 million to $80.0 million and extended to June 2008 with
a one year optional  extension.  This facility,  bearing  interest at LIBOR plus
3.0%,  is to be used  by  AMAC  to  purchase  new  investments  and for  general
corporate  purposes.  Income we earn from this  facility  is  included in "Other
interest income".  In the opinion of management,  the terms of this facility are
consistent with those of loan transactions with independent third parties.

INVESTMENT IN AMAC

In March 2007, we entered into a share purchase plan under Rule 10b5-1 under the
Securities Exchange Act of 1934, as amended,  whereby we may purchase up to 9.8%
of the  outstanding  common  shares of AMAC in  open-market  purchases  based on
pre-determined  parameters.  Through June 30, 2007,  we purchased  approximately
199,000  common  shares under this plan.  We account for this  investment on the
equity method as we can exercise significant influence over AMAC's financial and
operating  policies via our advisory  agreement.  See also Note 19 regarding our
participation in the AMAC preferred share offering in July 2007.


                                       29
<PAGE>

                   CENTERLINE HOLDING COMPANY AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2007
                                   (UNAUDITED)


CO-INVESTMENT IN CUC

Centerline  Urban Capital I, LLC ("CUC"),  formerly  known as  CharterMac  Urban
Capital I LLC,  is an  investment  fund  with the  California  Public  Employees
Retirement System ("CalPERS") as majority  investor,  focusing on investments in
multifamily  properties in major urban markets. Our membership interest includes
a co-investment  obligation  amounting to 2.5% of capital  invested (see Note 18
regarding future funding commitments).

PRS/CRG/ERC ADVANCES

The advances due from PRS/CRG/ERC relate to the financial  difficulties of three
developers  and  our  subsequent  actions  to  protect  our  investments  in the
properties that were under development (see Note 18). The above balances are net
of eliminations  with liabilities of consolidated  partnerships of $26.9 million
at June 30, 2007, and $24.3 million at December 31, 2006.

DUE FROM UNCONSOLIDATED PARTNERSHIPS

This balance  represents monies advances to investment funds that we sponsor but
that we do not  control.  The decline in the balance  from  December  31,  2006,
relates to temporary loans made to investment funds during the fourth quarter of
2006, a substantial portion of which were repaid in the first quarter of 2007.

B. TRCLP

General and administrative  expenses include shared service fees paid or payable
to The Related Companies, L.P. ("TRCLP"), a company controlled by our chairman.

In  addition,  a  subsidiary  of  TRCLP  earned  fees  for  performing  property
management  services for various  properties held in LIHTC Fund  Partnerships we
manage and are included in "Other expenses of consolidated partnerships".

During the six months  ended June 30, 2007,  we acquired  two  mortgage  revenue
bonds  secured by  properties  developed  by a subsidiary  of TRCLP.  LIHTC Fund
Partnerships  that we  consolidate  also  provided  equity  financing  to  these
properties.   Centerline  Real  Estate  Special  Situations  Mortgage  Fund  LLC
("CRESS"),  formerly known as ARCap Real Estate Special Situations Mortgage Fund
LLC  (the  Direct  Loan  Fund   Partnership  we   consolidate),   also  acquired
participation  interests with AMAC in two loans secured by properties  developed
by TRCLP.

C. AMAC

We  collect  asset   management  and  incentive   management  fees  and  expense
reimbursements  from AMAC  pursuant  to an  advisory  agreement.  These fees and
reimbursements  are  included  in "Fee  income"  in the  condensed  consolidated
statements of income. We entered into a new advisory agreement,  effective as of
March  2007  whereby  the  basis of  certain  of the  fees we earn has  changed,
although we do not expect the amount of fees earned to differ significantly from
the previous agreement absent the effect of AMAC's growth.

During 2006, CRESS entered into a co-investment agreement with AMAC whereby both
will  participate  in  investment  opportunities  that  are  originated  by  our
subsidiaries and which meet mutual investment criteria.

During March 2007,  AMAC sold its economic  interest in a group of properties to
CRESS for approximately $12.0 million.

During 2007, our Commercial Real Estate  subsidiaries  originated  approximately
$244.9  million  in  loans on  behalf  of AMAC  and,  pursuant  to the  advisory
agreement, received approximately $1.0 million of mortgage banking fees from the
borrowers.  We record these fees in "Fee income" in the  condensed  consolidated
statements of income.

                                       30
<PAGE>

                   CENTERLINE HOLDING COMPANY AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2007
                                   (UNAUDITED)


We serve as the  collateral  manager  for AMAC's  $400.0  million  CDO.  We also
service all of the loans in AMAC's CDO, as well as other loans currently held by
AMAC  outside of the CDO. In this  capacity,  we perform all primary and special
servicing  functions.  Pursuant to the advisory agreement,  we receive fees from
AMAC based on the dollar  amount of loans we  service  and record  these fees in
"Fee income" in the condensed consolidated statements of income.

D. OTHER

Substantially  all fund origination  revenues in the Affordable  Housing segment
are received from LIHTC Fund Partnerships we have originated and manage, many of
which comprise the  partnerships  that we consolidate.  While  affiliates of our
Company hold equity  interests in the investment  funds' general  partner and/or
managing member/advisor, we have no direct investments in these entities, and we
do not guarantee  their  obligations.  We have agreements with these entities to
provide  ongoing  services on behalf of the  general  partners  and/or  managing
members/advisors,  and we receive  all fee income to which  these  entities  are
entitled.

As of June 30, 2007, our subsidiary  Centerline Affordable Housing Advisors LLC,
formerly known as CharterMac Capital LLC, controlled certain partnerships. Those
entities, in turn, were the general partners of investment  partnerships.  These
investment  partnerships,  in turn, were non-equity  managing  partners of local
partnerships that are obligors of certain of our mortgage revenue bonds.

In  connection  with the 2002  refinancing  of a  property  partly  owned by our
chairman,  we entered into an agreement  which allows the revenue bond to be put
to us should the owner of the  underlying  property  default on the bond. We, in
turn,  entered  into  agreements  which  allow us to put the bond to the general
partners of the owner who are  affiliates of the Company.  This right is secured
by collateral  assignments of the general partners' partnership interests in the
limited partnership which owns the underlying property.

E. INCOME STATEMENT IMPACT

(Fees paid) and income earned were as follows:
<TABLE>
<CAPTION>
                                                     Three Months Ended             Six Months Ended
                                                          June 30,                      June 30,
                                                 --------------------------    --------------------------
                  (In thousands)                     2007           2006           2007           2006
-----------------------------------------------  -----------    -----------    -----------    -----------
<S>                                              <C>            <C>            <C>            <C>
TRCLP shared service fee expense                 $      (139)   $      (153)   $      (282)   $      (316)
TRCLP property management services expense       $    (1,127)   $    (1,023)   $    (2,200)   $    (2,056)
AMAC asset management and incentive management
   fees and expense reimbursements               $       834    $       824    $     1,841    $     1,780
AMAC credit facility interest income             $       805    $       745    $       902    $       745
AMAC servicing fee income                        $       187    $        --    $       317    $        --
</TABLE>

NOTE 18 - COMMITMENTS AND CONTINGENCIES

PRS/CRG/ERC

PRS/ CRG

PRS Companies  ("PRS") and Capital Realty Group ("CRG") were sponsors of certain
property  partnerships  for which we hold mortgage revenue bonds and/or to which
investment funds we sponsor have contributed equity. A construction affiliate of
PRS  served  as  general  contractor  for  most of  these  partnerships.  Due to
financial  difficulties  experienced by PRS and its construction  affiliate,  we
ceased our business  dealings with PRS and acquired the general partner interest
in certain partnerships  sponsored by PRS as part of agreements reached in April
2005 (the "PRS Partnerships").  There were two additional projects for which the

                                       31
<PAGE>

                   CENTERLINE HOLDING COMPANY AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2007
                                   (UNAUDITED)


PRS construction  affiliate was general contractor (the "GCG  Partnerships") for
which the general partner interest owned by PRS or an affiliate were transferred
to us at the same time.

Likewise,  we entered into  agreements in April of 2005 with CRG with respect to
certain  partnerships  in which CRG served as sponsor (the "CRG  Partnerships").
The PRS financial  difficulties  created  construction  finance  shortfalls that
created liquidity  problems for these partnerships as well. In December of 2006,
we entered into an additional  agreement  with CRG to transfer to us the general
partner  interests  held by CRG in four  additional  properties.  This agreement
included the  termination of certain rights  retained by CRG with respect to the
CRG Partnerships in the 2005 Agreements and we have ceased our business dealings
with CRG.

The PRS Partnerships,  GCG Partnerships, and CRG Partnerships are set out in the
table below.

In addition  to the PRS  Partnerships,  CRG  Partnerships  and GCG  Partnerships
described  above, we own bonds that finance other  partnerships  associated with
PRS and CRG. In these partnerships, our funds are not the equity sponsor, and we
will  look  to  the  respective  equity  investor  to  take  control,   complete
construction and stabilize the partnerships.  Absent a satisfactory  resolution,
we may exercise our available remedies to protect our investments.

In 2005, we halted  construction  on one property,  and foreclosed upon and sold
the property in 2006 for our carrying basis. In 2006, we halted  construction on
another  property and sold our general partner and limited partner  interest and
have recovered our fund's investment in the project.

ERC

To protect our interests in properties  for which we had provided debt or equity
financing,  in October 2006 we reached an agreement with ERC, Inc. (a developer)
to acquire its general partner interests in partnerships it had sponsored. Those
partnerships are also summarized in the table below.

Two of the properties are under  construction,  and we expect that the equity of
the applicable property  partnerships is sufficient to cover the estimated costs
to  complete  these  two  properties.  We  may  have  to  advance  funds  to the
partnerships  after June 30, 2007, to cover operating costs until the properties
achieve stabilization, which amounts we do not expect to exceed $2.5 million. We
anticipate the future equity payments due these  partnerships will be sufficient
to repay the advances.

Summary of Impact
-----------------

In the first  quarter of 2007,  we  reassessed  our strategy with respect to the
ultimate recovery of our investments in these properties.  We have undertaken an
initiative  to  determine  the most  advantageous  strategy  for recovery on the
mortgage  revenue bonds.  The strategies to be followed for individual bonds may
involve  a change  in our  planned  holding  period of the asset or the level of
additional funding we may provide, if any. The initial assessment of four of the
mortgage  revenue  bonds  caused  us  to  recognize  an  impairment   charge  of
approximately  $13.7  million  in the first  quarter of 2007 (see Note 2) due in
part to the  revision  of the  estimated  level and timing of cash flows for the
valuation of the properties.  In connection with that determination,  management
concluded  that advances made to our  sponsored  funds in connection  with those
underlying  properties may not be fully recoverable and we recorded a reserve of
approximately $4.8 million in the first half of 2007.

                                       32
<PAGE>

                   CENTERLINE HOLDING COMPANY AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2007
                                   (UNAUDITED)


The partnerships are summarized as follows:
<TABLE>
<CAPTION>
                                                                                                      (In thousands)
                                                                                                 -------------------------
                                                                                                          Fair Value of
                          Centerline   Centerline                                                           Mortgage
                           Holds or      Capital                                               Loan         Revenue
                          Will Hold     Sponsored   Included in                   Third       Amounts        Bonds
                           Mortgage      Fund is       Credit      Centerline    Parties     Upon Full    Outstanding
                           Revenue       Equity     Intermediate    Holds GP     Provided      Draw        at June 30,
                Number       Bond        Partner       Funds        Interest      Equity       Down           2007
               --------   ----------   ----------   ------------   ----------   ----------   ----------   ------------
<S>                <C>         <C>          <C>          <C>            <C>          <C>     <C>          <C>
           PRS PARTNERSHIPS

Lease-Up           11          10            6            4              6            5      $  123,092   $    119,516
Stabilized          2           2           --           --             --            2          18,346         18,640
               -------------------------------------------------------------------------------------------------------
Subtotal           13          12            6            4              6            7         141,438        138,156
               -------------------------------------------------------------------------------------------------------

           CRG PARTNERSHIPS
Lease-Up            6           4            6            5              4           --          81,749         83,206
               -------------------------------------------------------------------------------------------------------
Subtotal            6           4            6            5              4           --          81,749         83,206
               -------------------------------------------------------------------------------------------------------

           GCG PARTNERSHIPS
Construction        1           1            1            1             --           --          16,600         16,600
Lease-Up            1           1            1           --             --           --          13,170         16,271
               -------------------------------------------------------------------------------------------------------
Subtotal            2           2            2            1             --           --          29,770         32,871
               -------------------------------------------------------------------------------------------------------

           ERC PARTNERSHIPS
Construction        2           2            2            2              2           --          16,950         17,700
Lease-Up           14          13           14           13             14           --         111,551        115,057
Stabilized          2           2            2            1              2           --           9,376          9,807
               -------------------------------------------------------------------------------------------------------
Subtotal           18          17           18           16             18           --         137,877        142,564
               -------------------------------------------------------------------------------------------------------
Total              39          35           32           26             28            7      $  390,834   $    396,797
               =======================================================================================================
Total eliminated in consolidation                                                            $  285,876   $    287,390
                                                                                             =========================
</TABLE>

Our potential exposure falls into three categories as follows:

         CASH REQUIRED TO BRING THE PROPERTIES TO BREAK-EVEN OPERATION - As of
              June 30, 2007, advances  outstanding  totaled  approximately $37.4
              million,  net of the reserve described above. These advances,  and
              additional loans, are assessed periodically for collectability and
              the  impact  on the  potential  impairment  of  existing  mortgage
              revenue bonds.  At present,  we do not anticipate  that any of the
              remaining advances would require a charge to expense,  although as
              the strategy with respect to recovery on any  individual  mortgage
              revenue bond is implemented, circumstances may require a change in
              that outlook.

              Based  on  current  lease-up  estimates  and  projected  costs  to
              complete  construction,  we estimate that the  properties,  in the
              aggregate,  may require  approximately  $9.5 million of additional
              cash  (to   supplement   cash  from   operations)  to  reach  full
              stabilization. While we expect that future equity contributions at
              the fund level may provide some of this support to the properties,
              we may need to  advance  some of this  amount and a portion of any
              such advances may be charged  directly to expense  depending  upon
              our assessment of the funds' ability to repay the advances.

                                       33
<PAGE>

                   CENTERLINE HOLDING COMPANY AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2007
                                   (UNAUDITED)


         POTENTIAL IMPACT ON MORTGAGE REVENUE BONDS - As  noted  above,  we
              recognized  impairment  with respect to four of the affected bonds
              in the first  quarter of 2007.  While we do not believe that there
              is other-than-temporary  impairment of any of the other bonds, the
              outcome of our strategic  plan with respect to this  portfolio may
              cause impairments to be recognized as other-than-temporary  should
              we determine that  disposition of the bond or other actions be the
              best course of action with respect to recovering our investment or
              if the cash flow  projections  are affected by planned  courses of
              action.   Any  such   additional   impairments,   should  they  be
              determined, can not currently be estimated.

         POTENTIAL COST TO PROVIDE SPECIFIED YIELDS - As noted in the  table
              above, 26 of the  partnerships  are part of equity funds for which
              we are  obligated to provide  specified  yields.  As  construction
              delays are likely to reduce the expected  yields of the properties
              themselves,  performance  of the funds is likely to be impacted as
              well. The  obligations,  however,  provide for expected  yields on
              pools of properties,  some of which are performing  above expected
              levels and the funds  themselves  often provide for adjustors that
              may  mitigate  the  negative  impact  that  would  arise  from the
              construction  delays  over the  guarantee  period  covered  by the
              agreements. Our current estimate given these factors, and assuming
              that the property level  partnerships meet their obligations under
              existing partnership  agreements,  is that no exposure under these
              agreements is probable at this time.

There can be no assurance  that a bankruptcy by or against PRS or its affiliates
or  against  ERC may  not  give  rise  to  additional  claims  concerning  these
partnerships.

FORWARD TRANSACTIONS

At  June  30,  2007,  our  Commercial  Real  Estate   subsidiaries  had  forward
commitments  under Fannie Mae and Freddie Mac programs of  approximately  $238.5
million  for  mortgages  to be  funded  in 2007  and  later,  and  each  lending
commitment has an associated sale commitment.  In addition,  those  subsidiaries
had commitments to sell mortgages totaling $249.3 million.  Approximately  $97.7
million of this amount was funded as of June 30, 2007, and is included in "Other
Investments"  as "Mortgage  Loans Held for Sale".  The balance of  approximately
$151.6 million is to be funded later in 2007.

We have  entered  into  transactions  to  purchase  mortgage  revenue  bonds  at
predetermined  prices  and  interest  rates,  but  only if  construction  of the
property is completed.  These forward commitments create derivative  instruments
under  SFAS No.  133,  which  have been  designated  as a cash flow hedge of the
anticipated  funding of the  mortgage  revenue  bonds and are  recorded  at fair
value,  with changes in fair value recorded in other  accumulated  comprehensive
income until the mortgage  revenue bonds are funded.  The total potential amount
we could be required to fund is $3.9 million by the end of 2007.

Additionally,  we have certain  other bonds that we fund on an as needed  basis.
The remaining balance to be funded on these drawdown bonds is approximately $4.1
million at June 30, 2007.

MORTGAGE LOAN LOSS SHARING AGREEMENTS

Pursuant  to a master  loss  sharing  agreement  under the Fannie Mae  Delegated
Underwriting  and Servicing  ("DUS")  program,  we assume  responsibility  for a
portion of any loss that may result from borrower defaults,  based on Fannie Mae
loss sharing formulas.  At June 30, 2007, a significant  proportion of our loans
sold to Fannie Mae consisted of Level I loans,  meaning,  in most cases, that we
are responsible for the first 5% of the unpaid  principal  balance and a portion
of any additional losses to a maximum of 20% of the original  principal balance;
Fannie  Mae  bears  any  remaining  loss.  Pursuant  to this  agreement,  we are
responsible for funding 100% of mortgagor  delinquency  (principal and interest)
and  servicing  (taxes,  insurance and  foreclosure  costs)  advances  until the
amounts  advanced  exceed  5% of the  unpaid  principal  balance  at the date of
default. Thereafter, we may request interim loss sharing adjustments which allow
us to fund 25% of such advances until final settlement under the agreement.

                                       34
<PAGE>


                   CENTERLINE HOLDING COMPANY AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2007
                                   (UNAUDITED)


We also participate in loss sharing  transactions  under Freddie Mac's Delegated
Underwriting  Initiative  Program  ("DUIP")  whereby we originate loans that are
purchased by Freddie Mac. The aggregate of all loans we may originate under this
program can not exceed $100.0 million.  Under the terms of our master  agreement
with Freddie Mac, we are obligated to reimburse Freddie Mac for a portion of any
loss that may result  from  borrower  defaults  on DUIP  transactions.  For such
loans,  if a default  occurs,  our share of the loss will be the first 5% of the
unpaid  principal  balance  and  25% of the  next  20% of the  remaining  unpaid
principal balance to a maximum of 10% of the unpaid principal balance.  The loss
on a defaulted  loan is calculated as the unpaid  principal  amount due,  unpaid
interest due and default  resolutions  costs  (taxes,  insurance,  operation and
foreclosure costs) less recoveries.

Our  maximum  exposure  at June 30,  2007,  pursuant  to these  agreements,  was
approximately $833.8 million  (representing what we would owe in accordance with
the loss sharing  percentages with Fannie Mae and Freddie Mac described above if
every loan  defaulted  and losses were  incurred in amounts  equal to or greater
than these  levels for which we are  responsible),  although  this amount is not
indicative  of our actual  potential  losses.  We maintain an allowance for loan
losses for loans  originated  under  these  product  lines at a level  that,  in
management's  judgment, is adequate to provide for estimated losses. At June 30,
2007,  that  reserve  was  approximately  $13.1  million,   which,  we  believe,
represents our actual potential losses at that time.

As of June 30, 2007, we maintained collateral consisting of commercial paper and
Fannie Mae and Freddie Mac securities of approximately $10.5 million and a money
market account of  approximately  $1.1 million,  which is included in restricted
cash in the  condensed  consolidated  balance  sheet,  to satisfy the Fannie Mae
collateral requirements of $11.1 million.

We are also  required  by the master  agreement  with  Freddie  Mac to provide a
letter of  credit  in the  amount of 8% of the  original  principal  balance  as
collateral security for payment of the reimbursement obligation. A reimbursement
agreement with the Bank of America to provide a master letter of credit covering
the collateral  requirement up to $8.0 million (8% of the $100.0 million allowed
under the DUIP)  covers this  letter of credit  requirement.  At June 30,  2007,
commitments under this reimbursement agreement totaled $6.4 million.

YIELD TRANSACTIONS

We have  entered  into  several  credit  intermediation  agreements  with either
Natixis or Merrill Lynch (each a "Primary Intermediator") to provide agreed-upon
rates of return  for  pools of  multifamily  properties  to funds  sponsored  by
Centerline Affordable Housing Advisors LLC ("AHA"), formerly known as CharterMac
Capital LLC. In return, we have or will receive fees,  generally at the start of
each  credit  intermediation  period.  There  are  a  total  of  16  outstanding
agreements to provide the specified returns:

     o    through the construction and lease-up phases of the properties;
     o    for the period from the  completion of the  construction  and lease-up
          phases through the operating phase of the properties; or
     o    covering both periods.

Total potential  exposure pursuant to these  transactions is approximately  $1.2
billion,  assuming the funds achieve no return whatsoever.  We have analyzed the
expected operations of the underlying properties and believe there is no risk of
loss at this time, as we have never yet been called upon to make payments  under
these  agreements.  Should our analysis of risk of loss change in the future,  a
provision  for  possible  losses  might be  required  pursuant  to SFAS  No.  5,
ACCOUNTING FOR CONTINGENCIES. The fair value of these obligations,  representing
the deferral of the fee income over the obligation periods, was $33.1 million as
of June 30,  2007.  This  amount  is  included  in  "deferred  revenues"  within
"Accounts  payable,  accrued  expenses and other  liabilities"  on our condensed
consolidated balance sheet. Refer also to PRS/CRG/ERC above, regarding potential
exposure under existing obligations.

                                       35
<PAGE>

                   CENTERLINE HOLDING COMPANY AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2007
                                   (UNAUDITED)


Some of the property-level  partnerships have financed their properties with the
proceeds of our mortgage revenue bonds. In a portion of these cases, the Primary
Intermediator has required that those mortgage revenue bonds be deposited into a
trust from which senior and  subordinated  trust  certificates  were issued with
approximately  50% of  these  trust  certificates  being  subordinated.  We have
financed a portion of these senior and subordinated trust  certificates  through
our fixed rate  securitization  transaction.  By placing  these  bonds into this
trust  structure  we have  restricted  our ability to  foreclose  on these bonds
without the consent of the Primary Intermediator.

OTHER CONTINGENT LIABILITIES

We have entered into several transactions pursuant to the terms of which we will
provide credit support to construction lenders for project completion and Fannie
Mae conversion.  In some instances,  we have also agreed to acquire subordinated
bonds to the extent the construction  period bonds do not fully convert. In some
instances, we also provide payment, operating deficit, recapture and replacement
reserve   guarantees  as  business   requirements   for   developers  to  obtain
construction  financing.  Our  maximum  aggregate  exposure  relating  to  these
transactions  was  approximately  $191.8  million as of June 30, 2007.  The fair
value of these obligations, representing the deferral of the fee income over the
obligation  periods,  was  $799,000 as of June 30,  2007.  To date,  we have had
minimal  exposure to losses under these  transactions and anticipate no material
liquidity requirements in satisfaction of any guarantee issued.

At June 30,  2007,  we had  unused  letters  of  credit  totaling  $1.6  million
described in MORTGAGE LOAN LOSS SHARING AGREEMENTS above.

Centerline  Financial has entered into two credit  intermediation  agreements to
provide for monthly  principal  and interest  debt service  payments only to the
extent there is a shortfall payment from the underlying property.  In return, we
receive  fees  monthly  based  on a  fixed  rate  until  the  expiration  of the
agreements  which occur in 2009 and 2023. Total potential  exposure  pursuant to
these  transactions is  approximately  $19.8 million as well as monthly interest
obligations,  assuming the bonds  default and cannot be sold.  The recourse upon
default would be to acquire the bond and foreclose on the underlying property at
which point the property would either be  rehabilitated  or sold. The fair value
of the  obligation,  representing  the  deferral  of the  fee  income  over  the
obligation  period,  was  approximately  $1.3 million as of June 30, 2007.  This
amount is included in "Deferred  revenues"  within  "Accounts  payable,  accrued
expenses and other liabilities" on our condensed consolidated balance sheet.

LEGAL CONTINGENCIES

Claims  have  been  asserted  against  our  subsidiaries  in  two  separate  but
interrelated lawsuits relating to two properties for which we have provided debt
and equity  financing,  but associated  with the same  developers.  The lawsuits
allege, among other things:

     o    breach of fiduciary duty;
     o    breach of the implied covenant of good faith and fair dealing;
     o    intentional misrepresentation, fraud and deceit;
     o    negligent misrepresentation; and
     o    tortious interference with contracts.

One of the lawsuits claims  unspecified  damages while the other lawsuit alleges
damages of at least $10 - 15 million. One suit (which alleges losses of at least
$10 million) is currently  scheduled to commence  trial on June 30, 2008 and the
other suit (with unspecified  damages claimed) is currently  scheduled for trial
in May 2008.  The  parties  have  engaged in  discovery  and have  entered  into
settlement  discussions seeking a global resolution of all of these disputes. If
such a settlement cannot be achieved, we intend to defend vigorously against the
claims.  We are unable at the present time to estimate what potential losses, if
any, may arise in connection with this litigation.

                                       36
<PAGE>

                   CENTERLINE HOLDING COMPANY AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2007
                                   (UNAUDITED)


We are subject to routine litigation and administrative  proceedings  arising in
the ordinary  course of business.  Management does not believe that such matters
will have a  material  adverse  impact on our  financial  position,  results  of
operations or cash flows.

FUNDING COMMITMENTS

CUC

Our membership interest in CUC (see Note 17) includes a co-investment obligation
amounting to 2.5% of capital  invested.  Based upon the current funding limit of
CUC, our remaining commitment as of June 30, 2007, was approximately $137,000.

INVESTMENTS IN CMBS AND DIRECT LOAN FUNDS

We participate  as co-investor in the CMBS and Direct Loan funds we sponsor.  As
of June 30, 2007, our remaining unfunded capital commitments were $7.9 million.

NOTE 19 - SUBSEQUENT EVENTS

SUBSEQUENT AMAC SHARE PURCHASES

In July  2007,  we  purchased  280,000  shares  of  7.25%  Series  A  Cumulative
Convertible  Preferred Shares issued by AMAC for $7.0 million in connection with
AMAC's public offering of such shares.  In addition,  we purchased an additional
106,400 common shares of AMAC for approximately  $953,000 pursuant to our 10b5-1
plan (see Note 17).

CMBS FUND PARTNERSHIPS

In August 2007, two of our CMBS Fund  Partnerships  resecuritized  approximately
$986.0  million  in face  amount of CMBS  certificates,  having a fair  value of
approximately $593.6 million, into a collateralized debt obligation offering and
issued  $453.0  million in face amount of notes with fixed rate coupons  ranging
from  6.07% to  7.42%.  The  proceeds  were used to repay  approximately  $295.5
million of variable rate repurchase  agreements and the balance will be returned
to the investors in the partnerships.

In August  2007,  Investors  closed  on an  additional  CMBS  Fund  Partnership,
consisting  of  total  accepted  capital  commitments  of  approximately  $379.0
million.  We  participate  as a  co-investor  in the  fund,  and have  committed
approximately $19.0 million of the total capital commitments of this fund.

RECENT MARKET EVENTS

In July and August 2007,  developments  in the market for many types of mortgage
products  (including  mortgage-backed   securities)  have  resulted  in  reduced
liquidity for these assets.  Although this  reduction in liquidity has been most
acute with regard to single-family subprime mortgage assets, to which we are not
exposed,  there has been an overall  reduction  in  liquidity  across the credit
spectrum of mortgage products.

As of the date of this filing,  the recent  market  developments  have not had a
negative impact on our Company or our liquidity. Management believes our current
financing  sources  and cash  flows from  operations  are  adequate  to meet our
ongoing liquidity needs for the near term.

                                       37
<PAGE>

While transactions we have closed during this period (as detailed above) give us
no reason to expect these developments will affect our liquidity, in the event a
further  reduction in market  liquidity  did impact us, we believe our immediate
and long-term  liquidity  requirements would be met primarily with cash and cash
equivalents  held by the Company ($111 million as of June 30, 2007),  along with
the availability on our corporate revolver ($58 million as of June 30, 2007).

RE-ISSUANCE OF STOCK OPTIONS

In July,  2007,  our  Compensation  and  Nominating  and  Governance  Committees
approved the  cancellation of outstanding  options to purchase our common shares
issued to Stephen M. Ross, our Chairman,  and the  substitution of the cancelled
options with new ones on substantially similar terms.

The Committees  took this action  because Mr. Ross  otherwise  likely would have
been subject to adverse tax consequences  under Section 409A ("Section 409A") of
the Internal Revenue Code of 1986, as amended,  that were unforeseen at the time
we granted the original options.  The Cancelled Option was issued to Mr. Ross in
consideration  of his  service  as the  Chairman  of the  Board of  Trustees  in
connection  with our  acquisition  of  Related  Capital  Company  (now  known as
Centerline Affordable Advisors LLC). The cancelled options had an exercise price
($17.78 per share) that was below the market value of our common shares ("in-the
money") on November 17,  2003,  the  effective  date of the  cancelled  options,
because the parties  previously  had agreed that the exercise  price would equal
the average of the closing  price of our common  shares for the 30 calendar days

immediately  preceding the public announcement of the acquisition.  For purposes
of  Section  409A,   the  holder  of  a  share  option  that  has  been  granted
"in-the-money",  to the extent  not vested as of January 1, 2005,  is subject to
adverse tax consequences.

The new  options,  which were  granted  with an exercise  price above the market
price of our common shares on the grant date:

     o    contain the identical  exercise price ($17.78 per Common Share) as the
          cancelled options;
     o    expire on the same date (November 17, 2013) as the cancelled options;
     o    grant an option to purchase the same number of Common Shares (800,000)
          that remained unexercised under the cancelled option; and
     o    provide for the same vesting  schedules  with respect to the remaining
          unvested  shares  under the  Cancelled  Option  (400,000  of which are
          vested  immediately,  200,000 of which are due to vest on November 17,
          2007 and 200,000 of which are due to vest on November 17, 2008).

Because the terms of the cancelled options and the new options are substantially
similar,  the  cancellation  and  re-grant  will have no  effect on  share-based
compensation expenses reported in our financial statements.

                                       38
<PAGE>

ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

Forward-Looking Statements
--------------------------

Certain   statements  made  in  this  report  may  constitute   "forward-looking
statements"  within the meaning of Section 27A of the Securities Act of 1933, as
amended,  and Section 21E of the  Securities  Exchange Act of 1934,  as amended.
These  forward-looking  statements  are not  historical  facts,  but  rather our
beliefs and expectations and are based on our current estimates, projections and
assumptions  about  our  Company  and  industry.  Words  such as  "anticipates,"
"expects,"  "intends,"  "plans,"  "believes,"  "seeks,"  "estimates" and similar
expressions  are  intended  to  identify   forward-looking   statements.   These
statements  are not guarantees of future  performance  and are subject to risks,
uncertainties  and other  factors,  some of which are  beyond our  control,  are
difficult to predict and could cause actual  results to differ  materially  from
those expressed or forecasted in the forward-looking  statements.  Some of these
risks include, among other things:

     o    adverse changes in real estate markets;
     o    competition with other companies;
     o    interest rate fluctuations;
     o    general economic and business conditions;
     o    environmental/safety requirements;
     o    changes in applicable laws and regulations;
     o    our tax treatment,  the tax treatment of our  subsidiaries and the tax
          treatment of our investments;
     o    risk of default  associated with the mortgage  revenue bonds and other
          securities held by us or our subsidiaries;
     o    risks associated with providing credit intermediation;
     o    risk of loss under mortgage loan loss sharing agreements;
     o    risk of loss from direct and indirect investments in CMBS;
     o    the risk that  relationships with key investors and developers may not
          continue;
     o    our ability to generate fee income may not continue; and
     o    risks related to the form and structure of our financing arrangements.

These  risks  are  more  fully  described  in our Form  10-K for the year  ended
December  31,  2006.  We  caution  you not to  place  undue  reliance  on  these
forward-looking  statements,  which reflect our view only as of the date of this
report.

Factors Affecting Comparability
-------------------------------

In August 2006, we acquired Investors. Prior to the acquisition, we had recorded
equity income from a 10.7%  investment in Investors  (included in our Commercial
Real Estate segment). Following the acquisition,  operating results of Investors
are included in our Commercial Real Estate,  Asset  Management and  Consolidated
Partnerships  segments. In the second quarter of 2006, we incurred restructuring
costs associated with planned  integration  activities and we incurred increased
non-cash  compensation  costs following the acquisition due to non-vested  share
grants and sharing of promote income related to funds we manage.

During  June  2006,  we  launched   Centerline   Financial  to  provide   credit
intermediation  products to the affordable  housing finance industry.  We expect
our majority  ownership of Centerline  Financial will enable us to prospectively
retain a significant  portion of the fees that we would have paid to third party
credit  providers.  We incurred various start-up costs in the first half of 2006
in connection with this subsidiary.

                                       39
<PAGE>

RESULTS OF OPERATIONS
---------------------

THREE MONTHS ENDED JUNE 30, 2007 AND 2006
-----------------------------------------

The following is a summary of our operations for the three months ended June 30,
2007 and 2006:
<TABLE>
<CAPTION>
                                                  % of                         % of
      (In thousands)               2007         Revenues         2006         Revenues      % Change
--------------------------      -----------    -----------   -----------    -----------    -----------
<S>                             <C>                 <C>      <C>                 <C>             <C>
Revenues                        $   135,064         100.0%   $    78,923         100.0%          71.1%
Income before income taxes      $     4,667           3.5%   $     3,843           4.9%          21.4%
Net income                      $     4,980           3.7%   $     4,248           5.4%          17.2%
</TABLE>

The  growth  in  revenues  was  due  mostly  to  revenues  earned  by  funds  we
consolidated  upon the acquisition of Investors in August 2006, and the interest
income of investments held by that subsidiary.

Net income  increased in the 2007 quarter as compared to the 2006 quarter.  Much
of the increase was due to higher  interest income from  investments  other than
mortgage  revenue  bonds,  partially  offset by increased  interest  expense (as
further described below).

REVENUES

Our revenues were as follows:
<TABLE>
<CAPTION>
                                           For the Three Months Ended June 30,
                                        ---------------------------------------
             (In thousands)                 2007          2006       % Change
-------------------------------------   -----------   -----------   -----------
<S>                                     <C>           <C>                  <C>
Mortgage revenue bond interest income   $    38,568   $    38,910          (0.9)%

Other interest income                        14,672         6,583         122.9

Fee income                                   16,576        18,272          (9.3)

Other revenues:
   Construction service fee                   1,130         1,103           2.4
   Expense reimbursements                       721           240         200.4
   Rental income of real estate owned         1,433         2,056         (30.3)
   Administration fees                          606           575           5.4
   Prepayment penalties                       1,394         1,233          13.1
   Other                                        641           585           9.6
                                        -----------   -----------   -----------
Total other revenues                          5,925         5,792           2.3
                                        -----------   -----------   -----------

Subtotal                                     75,741        69,557           8.9
                                        -----------   -----------   -----------

Revenues of consolidated partnerships        59,323         9,366         533.4
                                        -----------   -----------   -----------

   Total revenues                       $   135,064   $    78,923          71.1%
                                        ===========   ===========   ===========
</TABLE>

A large portion of the revenue increase was due to the Investors (formerly known
as ARCap Investors,  L.L.C.) acquisition.  Adjusting to include Investors in the
2006 period, revenues would have increased approximately 17.7%.

Mortgage revenue bond interest income and Fee income are discussed in RESULTS BY
SEGMENT below.

Other  interest   income   includes   income  from  CMBS  and   resecuritization
certificates  held in our Commercial  Real Estate segment and interest earned on
escrow balances in the Asset Management  segment.  The increase  compared to the
2006 period relates to:

     o    interest generated by CMBS and  resecuritization  certificates we hold
          through  Investors  (acquired  in August 2006 and thus for which there
          was no comparable 2006 amount); and

                                       40
<PAGE>

     o    higher cash balances  (predominantly the escrow accounts) coupled with
          increasing market interest rates for temporary investments.

Partially  offsetting these increases was the absence in 2007 of interest earned
on a loan to a  Commercial  Real  Estate  business.  That  loan  was  repaid  in
September 2006 and there is no comparable revenue in 2007.

Revenues of consolidated partnerships increased due to:

     o    CMBS Fund and Direct Loan Fund  partnerships  consolidated  as part of
          the Investors acquisition;
     o    an  increase  in the  number of LIHTC  Fund  Partnerships  due to fund
          sponsorship activity; and
     o    an increase in the number of LIHTC Property Partnerships over the past
          year which we have taken  control of to protect our  investments  (see
          Note 18).

Results of  consolidated  partnerships  are also discussed in RESULTS BY SEGMENT
below.

Offsetting  the  revenue  gains is the  elimination  of  revenues  earned by our
subsidiaries in transactions  with LIHTC Fund and Property  Partnerships we have
consolidated  but in which we have  virtually no equity  interest.  Although the
amounts are  eliminated  in  consolidation,  the net losses  recognized by those
partnerships in connection with these  transactions are absorbed by their equity
partners;  as such, the elimination in consolidation has an insignificant impact
on our  net  income.  Consolidation  of the  CMBS  Fund  and  Direct  Loan  Fund
partnerships  do not lead to  revenue  eliminations  as the  income we earn from
those  funds is in the form of  equity  income.  See  OTHER  INCOME  AND  INCOME
ALLOCATIONS below.

In the second  quarters of 2007 and 2006,  the  following  revenue  amounts were
eliminated,  as they represented transactions between consolidated  partnerships
and our other component businesses:
<TABLE>
<CAPTION>
                                                                  For the Three Months Ended June 30,
                                                             ---------------------------------------------
                      (In thousands)                             2007            2006           % Change
----------------------------------------------------------   ------------    ------------     ------------
<S>                                                          <C>             <C>                      <C>
Mortgage revenue bond interest income                        $      4,174    $      2,748             51.9%
Other interest income                                                  --              53               --
Fee income                                                         13,509          12,030             12.3
Other revenues                                                      1,211           1,828            (33.4)
                                                             ------------    ------------     ------------

Total                                                        $     18,894    $     16,659             13.4%
                                                             ============    ============     ============
</TABLE>

                                       41
<PAGE>

EXPENSES

Our expenses were as follows:
<TABLE>
<CAPTION>
                                                                  For the Three Months Ended June 30,
                                                             ---------------------------------------------
                      (In thousands)                             2007            2006           % Change
----------------------------------------------------------   ------------    ------------     ------------
<S>                                                          <C>             <C>                      <C>
Interest expense                                             $     29,042    $     24,085             20.6%
                                                             ------------    ------------
Interest expense - preferred shares of subsidiary                   4,725           4,725               --
                                                             ------------    ------------

Salaries and benefits                                              27,028          18,059             49.7
Other general and administrative                                   15,912          21,802            (27.0)
                                                             ------------    ------------     ------------
  Subtotal general and administrative                              42,940          39,861              7.7
                                                             ------------    ------------     ------------

Depreciation and amortization                                      10,993          14,615            (24.8)
Loss on impairment of assets                                        2,938           2,271             29.4
                                                             ------------    ------------     ------------
  Subtotal before consolidated partnerships                        90,638          85,557              5.9
                                                             ------------    ------------     ------------

Interest expense of consolidated LIHTC Fund and Property
  partnerships                                                      5,263           5,611             (6.2)
Interest expense of consolidated CMBS Fund and Direct Loan
  partnerships                                                     18,739              --               --
                                                             ------------    ------------     ------------
                                                                   24,002           5,611            327.8
                                                             ------------    ------------     ------------

Other expenses of consolidated LIHTC Fund and Property
  partnerships                                                     27,532          16,258             69.3
Other expenses of consolidated CMBS Fund and Direct Loan
  partnerships                                                      1,080              --               --
                                                             ------------    ------------     ------------
                                                                   28,612          16,258             76.0
                                                             ------------    ------------     ------------
  Subtotal expenses of consolidated partnerships                   52,614          21,869            140.6
                                                             ------------    ------------     ------------

Total expenses                                               $    143,252    $    107,426             33.3%
                                                             ============    ============     ============
</TABLE>

The  increase in interest  expense  reflects  the higher  amount of average debt
outstanding  (approximately  $2.5  billion  in the  second  quarter  of  2007 as
compared to $1.9 billion in the second  quarter of 2006).  The higher balance in
2007 reflects:

     o    the cost of the Investors acquisition;
     o    continuing  capital  deployment in the Affordable  Housing segment for
          mortgage revenue bond and LIHTC investments; and
     o    debt facilities of Investors used in Commercial Real Estate  investing
          and fund sponsorship activities.

In addition, our average borrowing rate increased in 2007 as compared to 2006 as
a result of increases in the SIFMA and LIBOR rates in both years.  The effect of
rate increases was tempered,  however, by a fixed rate securitization program in
place since mid-2006 and the interest rate swaps that we have in place,  some of
which are "in the money".  Our average  borrowing  rate increased to 4.7% in the
second quarter of 2007 as compared to 4.6% in the second quarter of 2006.

While our borrowing  costs have been  increasing  along with market  rates,  the
commencement  of  Centerline  Financial  has enabled us to retain a  significant
portion of credit  intermediation  fees which we have historically paid to third
parties in connection with securitizations in the Affordable Housing segment. In
addition, we anticipate Centerline Financial will enable us to lower our average
cost of capital through more effective leverage of our assets.

The  increase  in  salaries  and  benefits  expense  primarily  relates  to  the
approximately 100 employees added upon the Investors acquisition,  the continued
growth of our component businesses and approximately $4.6 million of incremental
non-cash  compensation  cost  related to shares  issued in  connection  with the
Investors acquisition.  In addition, salaries and benefits include approximately
$400,000  of  severance  costs.  Partially  offsetting  this was a  reversal  of
approximately $2.9 million of promote-sharing compensation in the period related
to CMBS funds we sponsor due to a lower projected level of promote income to the
Company.

                                       42
<PAGE>

Other general and  administrative  expenses were higher in the 2006 quarter than
in the 2007 period,  primarily due to the following  incremental  costs incurred
during the second quarter of 2006 related to corporate initiatives:

     o    $3.8 million of Centerline Financial start-up costs;
     o    $2.0 million of  restructuring  costs in anticipation of the Investors
          acquisition; and
     o    a  $1.4  million   termination   fee  paid  in  connection   with  the
          restructuring of our securitization programs.

The decrease in 2007 was partially offset by approximately $830,000 of fees paid
by Centerline Financial to Natixis (which fees commenced in the third quarter of
2006).

Depreciation and amortization expenses were higher in the 2006 period, primarily
due to a $3.4  million  write-off  of  deferred  costs  in 2006  related  to the
restructuring of our securitization programs.

Loss on impairment  of assets in both 2007 and 2006 related to mortgage  revenue
bonds associated with properties experiencing  substandard performance (see Note
2).

Other  expenses  of  the  consolidated  LIHTC  Fund  and  Property  partnerships
increased due to the increase in the number of consolidated  entities since June
2006.  Virtually all of the expenses of the consolidated LIHTC Fund and Property
partnerships  are  absorbed  by their  equity  partners;  as such,  they have an
insignificant impact on our net income.

Interest and Other expenses of consolidated  CMBS Fund  Partnerships  pertain to
funds we manage to syndicate investments in CMBS and associated resecuritization
trusts.  These  items were  incorporated  into our  financial  results  upon our
acquisition of Investors in the third quarter of 2006.

OTHER INCOME AND INCOME ALLOCATIONS
<TABLE>
<CAPTION>
                                                      For the Three Months Ended June 30,
                                                 ---------------------------------------------
                      (In thousands)                 2007            2006           % Change
----------------------------------------------   ------------    ------------     ------------
<S>                                              <C>             <C>                      <C>
Equity and other (loss) income                   $       (154)   $      3,856           (104.0)%

Gain on sale or repayment of loans               $      1,078    $      2,517            (57.2)%
Gain on sale or repayment of mortgage revenue
  bonds and other assets                                  131              21            523.8
                                                 ------------    ------------     ------------
                                                 $      1,209    $      2,538            (52.4)%
                                                 ------------    ------------     ------------

Income allocated to preferred shareholders of
  subsidiary                                     $     (1,557)   $     (1,557)             --%
                                                 ------------    ------------     ------------

Income allocated to SCUs                         $     (1,929)   $     (1,632)            18.2%
Income allocated to SMUs                                  (26)            (19)            36.8
Income allocated to SCIs                                  (25)             --               --
Other                                                     272              --               --
                                                 ------------    ------------     ------------
Total income allocated to minority interests     $     (1,708)   $     (1,651)             3.5%

Loss allocated to partners of consolidated
  partnerships                                   $     97,776    $    107,090             (8.7)%
</TABLE>

Equity  and other  (loss)  income  decreased  since we no longer  recognize  our
proportionate  share of  Investors  earnings  through  equity  income  after our
acquisition  in August 2006. The loss for the quarter  primarily  relates to our
investments in tax advantaged  investment  vehicles similar to those we sponsor.
Equity income from our investment in CMBS and Direct Loan funds is eliminated in
consolidation but positively  impacts our net income.  For the second quarter of
2007, this amount was approximately $2.9 million.  There is no comparable amount
in 2006 as this earnings stream began with our acquisition of Investors.

Gains  related to  mortgage  revenue  bonds and loans  fluctuate  in relation to
relative  activity  levels in the Affordable  Housing and Commercial Real Estate
businesses. See RESULTS BY SEGMENT below.

                                       43
<PAGE>

The income  allocation to SCUs,  SMUs and SCIs of  subsidiaries  represents  the
proportionate  share of after-tax  income  attributable to holders of subsidiary
equity as if they were all converted to common shares. "Other" minority interest
principally represents the portion of Centerline Financial owned by Natixis.

The loss  allocation to partners of  consolidated  partnerships  represents  the
operating  losses  of LIHTC  Fund and  Property  partnerships,  of which we have
absorbed  an  insignificant  portion  (approximately  $2,000)  and the  majority
ownership in CMBS and Direct Loan funds we sponsor.

Results by Segment
------------------

AFFORDABLE HOUSING

The table below shows  selected  information  regarding our  Affordable  Housing
activities:
<TABLE>
<CAPTION>
                                                                 For the Three Months Ended June 30,
                                                             ------------------------------------------
                      (In thousands)                             2007           2006         % Change
----------------------------------------------------------   -----------    -----------     -----------
<S>                                                          <C>            <C>             <C>
                               MORTGAGE REVENUE BOND INVESTING STATISTICS

New mortgage revenue bond acquisitions                       $    29,510    $   120,801           (75.6)%
Funding of mortgage revenue bonds acquired in prior
  years                                                              390         10,090           (96.1)
Acquisitions related to prior period forward commitments          13,780         22,300           (38.2)
                                                             -----------    -----------     -----------
Total acquisition and funding activity                       $    43,680    $   153,191          (71.5)%

Mortgage revenue bonds repaid                                $        --    $     5,075              --%

Average portfolio balance (fair value)                       $ 2,765,904    $ 2,533,417             9.2%

Weighted average permanent interest rate of bonds
  acquired                                                          6.03%          6.19%
Weighted average yield of portfolio                                 6.18%          6.34%
Average borrowing rate (includes fees and effect of
  swaps) (1)                                                        4.81%          4.36%
Average SIFMA rate                                                  3.77%          3.55%


                                   LIHTC FUND SPONSORSHIP STATISTICS

Equity raised by LIHTC funds                                 $   410,143    $   308,051           33.1 %
Equity invested by LIHTC funds (1)                           $   173,889    $   220,911           (21.3)%


Mortgage revenue bond interest income (1)                    $    42,742    $    39,692             7.7%
Other interest income (1)                                            335            369            (9.2)
Fee income from fund sponsorship (1)                              18,696         23,318           (19.8)
Expense reimbursements                                             1,574          1,912           (17.7)
Other revenues (1)                                                 2,216          1,827            21.3
                                                             -----------    -----------     -----------
                                                             $    65,563    $    67,188            (2.4)%
                                                             ===========    ===========     ===========

Interest expense and securitization fees (1)                 $    25,766    $    21,954            17.4%
Loss on impairment of assets                                 $     2,938    $     2,271            29.4%
Gain on repayments of mortgage revenue bonds                 $        --    $        20              --%

CAD (2)                                                      $    31,393    $    35,930           (12.6)%
                                                             ===========    ===========     ===========
</TABLE>

(1)  Prior to  intersegment  eliminations.
(2)  See Note 16 for a description of CAD.

                                       44
<PAGE>

Mortgage Revenue Bond Investing
-------------------------------

The increase in mortgage  revenue bond  interest  income is primarily due to the
increased  investment  base  resulting from new bonds funded during 2006 and the
first six months of 2007,  partially offset by a lower weighted average yield of
the portfolio over the same period.

While generally declining interest rates of bonds acquired has gradually lowered
the average yield of our portfolio, we continue to earn a positive spread on our
portfolio.  Corresponding with an increase in the average portfolio balance, our
level of  securitizations  increased  and,  along with  rising  interest  rates,
resulted in the  increase  in  interest  expense  and  securitization  fees.  By
entering into a fixed rate  securitization in 2006 and using interest rate swaps
to fix the rate on a large portion of our remaining securitizations,  we believe
that we have mitigated the impact on spreads of the increasing SIFMA rates.

We recognized  impairment  on two mortgage  revenue bonds in the 2007 period and
four in the 2006 period due to the  substandard  performance  of the  underlying
properties and/or revision of the interest rate of the bond.

LIHTC Fund Sponsorship
----------------------

Our LIHTC Fund sponsorship  activities  generate fees associated with sponsoring
tax-credit  equity investment funds, for assisting the funds in acquiring assets
and for providing  specified  yields to investors of certain  funds.  We receive
many of these fees at the time a fund  closes and  recognize  them over  various
periods as earned, ranging from less than one year to twenty years.

Although  the level of equity  raised  increased  over the  prior  year  period,
decreased fund sponsorship revenues reflects the lower volume of equity invested
in the second quarter of 2007 as compared to the same period in 2006.  Partially
offsetting  this decline was an increase in the fee rate realized  stemming from
changes in the mix of funds originated period over period. In addition,  certain
ongoing fees (such as partnership management fees that are collected at the time
of closing and  recognized  over several  years)  increased in the period due to
funds closed after the end of the 2006 quarter.

Other  ongoing fees are earned  based on the level of assets  under  management.
Despite a higher  population of funds,  those fees decreased in 2007,  primarily
attributable  to the timing of physical site visits from which we earn a portion
of the fees.  In  addition,  fees earned from older LIHTC funds  decline as they
dispose of assets.  Fee income in this segment also  declined as fees for credit
intermediation  of new funds are earned  directly  by our Credit  Risk  Products
segment.

Other
-----

Expense  reimbursement  and other  revenues in this segment  consist  largely of
service fees charged to entities (including consolidated partnerships) we manage
and  fluctuate  with the growth of the number of those  entities  and their cash
flows.

Affordable Housing CAD
----------------------

CAD for the second  quarter of 2007 includes a higher level of mortgage  revenue
bond interest income than in the 2006 quarter, offset by a decline in fee income
from lower  fund  sponsorship  and  investment  activity.  The net  increase  in
revenues, however, was less than the increase in securitization financing costs.

                                       45
<PAGE>

COMMERCIAL REAL ESTATE

The table below shows selected information  regarding our Commercial Real Estate
activities:
<TABLE>
<CAPTION>
                                                                 For the Three Months Ended June 30,
                                                             ------------------------------------------
                      (In thousands)                             2007           2006         % Change
----------------------------------------------------------   -----------    -----------     -----------
<S>                                                          <C>            <C>             <C>
Mortgage originations                                        $   670,378    $   458,047            46.4%
                                                             -----------    -----------     -----------
Primary servicing mortgage portfolio at June 30              $ 8,397,643    $ 9,180,858            (8.5)%
                                                             -----------    -----------     -----------
Carrying value of mortgage servicing rights at June 30       $    50,835    $    59,647           (14.8)%

Mortgage origination fees (1)                                $     1,584    $     2,683           (41.0)%
Mortgage servicing fees                                            4,579          5,087           (10.0)
Other fee income                                                   1,110            159           598.1
Other interest income (1)                                          5,756          2,700           113.2
Prepayment penalties                                               1,389          1,228            13.1
Other revenues                                                       715            982           (27.2)
                                                             -----------    -----------     -----------
    Total                                                    $    15,133    $    12,839            17.9%
                                                             ===========    ===========     ===========

Gain on sale of mortgages                                    $     1,209    $     2,518           (52.0)%
                                                             ===========    ===========     ===========

Equity income                                                $     2,883    $     3,993           (27.8)%
                                                             ===========    ===========     ===========

CAD (2)                                                      $     6,012    $     3,368            78.5%
                                                             ===========    ===========     ===========
</TABLE>

(1) Prior to intersegment eliminations.
(2) See Note 16 for a description of CAD.

Originations
------------

As depicted in the table below, Fannie Mae originations decreased and Centerline
Direct originations increased from the prior period because our loan origination
department  focused its efforts on originating loans for our lending program for
AMAC and CRESS  ("Centerline  Direct").  Despite an overall increase in mortgage
originations  for the quarter,  mortgage  origination fees decreased period over
period as the  average  rate of  origination  fees was  impacted  by the  higher
proportion of non-agency  originations  (generally generating lower originations
fee)  and  spread  compression  in  the  market.

Mortgage  originations  for the three  months  ended June 30 are broken  down as
follows:
<TABLE>
<CAPTION>
  (In thousands)          2007          % of total            2006           % of total
-----------------   ---------------   ---------------    ---------------   ---------------
<S>                 <C>                         <C>      <C>                         <C>
Fannie Mae          $       187,092              27.9%   $       213,318              46.6%
Freddie Mac                  33,060               4.9             39,390               8.6
Centerline Direct           428,587              63.9            151,200              33.0
Conduit and other            21,639               3.3             54,139              11.8
                    ---------------   ---------------    ---------------   ---------------
Total               $       670,378             100.0%   $       458,047             100.0%
                    ===============   ===============    ===============   ===============
</TABLE>

Servicing
---------

Primary  servicing fees declined due to a decrease in the servicing fee rate and
the higher proportion of non-agency and non-loss sharing loans in the portfolio.
This  trend  has also  affected  the  level of  mortgage  servicing  rights,  as
write-offs in connection  with the  prepayment of mortgages at higher  servicing
rates are replaced with new assets generating lower fee streams.  Generally,  as
our prepayments have increased, our mortgage servicing rights have decreased.

Investments
-----------

Increased  interest income in this segment reflects the acquisition of Investors
in  mid-2006  as  the  operations   acquired  hold  CMBS  and   resecuritization
certificates  for  investment.  During  the second  quarter  of 2006,  Investors
acquired approximately $215 million of CMBS investments intended to be sold to a
new CMBS fund it is sponsoring.

                                       46
<PAGE>

Other
-----

The increase in prepayment  penalties  relates to a higher level of  refinancing
activity in the current quarter as compared to last year.

Gain on sale of mortgages  relates  directly to the value of mortgage  servicing
rights recorded when loans are sold. The mortgage servicing rights, in turn, are
valued  based  on  projected  servicing  revenues,  which  decreased  in 2007 as
compared to 2006 due to lower servicing fee rates for new  originations as noted
above.

We act as general partner of the CMBS and Direct Loan funds we sponsor and own a
portion of the funds.  Equity income in this segment  primarily  represents  our
proportionate  share of profits as well as other allocations for general partner
services.  This  category  became  a part of this  segment  upon  the  Investors
acquisition  while the 2006 amount  represented  our income from our  membership
interest in Investors prior to full acquisition.

Commercial Real Estate CAD
--------------------------

The sharp increase in segment CAD is attributable  to the Investors  acquisition
and the addition of equity and interest income streams.  The increase was offset
by a lower  level of  equity  income  in the 2007  period  (recognized  from our
co-investments  in CMBS and Direct Loan  funds) as  compared to that  recognized
from our  membership  interest in Investors  prior to acquiring  that  business.
While  incremental  revenues were partially  offset by increased  infrastructure
costs that were due to the  addition of the  Investors  business and the overall
growth  of this  segment,  the  2006  period  included  restructuring  costs  in
anticipation of the acquisition.

ASSET MANAGEMENT

The table  below  shows  selected  information  regarding  our Asset  Management
activities:
<TABLE>
<CAPTION>
                                                             For the Three Months Ended June 30,
                                                         ------------------------------------------
                      (In thousands)                         2007           2006         % Change
------------------------------------------------------   ------------   ------------   ------------
<S>                                                      <C>            <C>                   <C>
Mortgage portfolio at June 30:
  Primary servicing (1)                                  $ 31,541,985   $  9,180,858          243.6%
  Special servicing                                           235,666             --             --
Carrying value of mortgage servicing rights at June 30          9,186             --             --
                                                         ------------   ------------   ------------

Other interest income (2)                                $      6,541   $      2,091          212.8%

Asset management fees (2)                                       3,588          2,835           26.6
Servicing fees (2)                                              3,220          1,665           93.4
Other fees (2)                                                  2,095             --             --
                                                         ------------   ------------   ------------
  Subtotal                                               $      8,903   $      4,500           97.8%
                                                         ------------   ------------   ------------
Other income (2)                                                  102             --             --
                                                         ------------   ------------   ------------
                                                         $     15,546   $      6,591          135.9%
                                                         ============   ============   ============

CAD (3)                                                  $      7,807   $      2,722          186.8%
                                                         ============   ============   ============
</TABLE>

(1)  Includes  sub-servicing of the Commercial Real Estate servicing  portfolio.
     Excludes  servicing on mortgage  revenue  bonds in the  Affordable  Housing
     segment.
(2)  Prior to  intersegment  eliminations.
(3)  See Note 16 for a description of CAD.

Revenues
--------

Revenues  increased  in the 2007  period as a result of the  servicing  business
added as part of the  Investors  acquisition.  The  remaining  revenues  in this
segment   represent   charges  to  other  segments  for  asset   management  and
subservicing on the assets under management in those  businesses.  The growth in
that revenue is  reflective  of the overall  growth of assets  under  management
throughout the Company, due to the sponsorship of new LIHTC funds and the growth

                                       47
<PAGE>

of our Commercial Real Estate business, particularly with regard to the business
done with AMAC,  CRESS and the CMBS funds.  The increase also includes  earnings
from  escrow  accounts  maintained  for  the  primary  servicing  portfolio  and
increased in 2007 due to higher balances as well as higher rates earned.

Asset Management CAD
--------------------
Segment  CAD for the 2007  period  was higher  than the same  period in 2006 due
primarily to the higher level of assets under management throughout the Company,
due in part to our acquisition of Investors.  In addition,  the  introduction of
new revenue streams upon the Investors acquisition also had a beneficial impact.
The  increase  was  partially  offset by a higher  level of  salaries  and other
infrastructure costs required to grow the business. We expect that the continued
expansion of this business and the expected  synergies from  combining  existing
operations with Investors should benefit segment CAD in future periods.

CREDIT RISK PRODUCTS
<TABLE>
<CAPTION>
                                                             For the Three Months Ended June 30,
                                                         ------------------------------------------
                      (In thousands)                         2007           2006         % Change
------------------------------------------------------   ------------   ------------   ------------
<S>                                                      <C>            <C>                   <C>
Credit intermediation fees (1)                           $      2,915   $         --             --%
Other fees (1)                                                    110             --             --
Other interest income (1)                                       1,134             10             --
                                                         ------------   ------------   ------------
                                                         $      4,159   $         10             --%
                                                         ============   ============   ============

CAD (2)                                                  $      4,315   $     (3,749)         215.1%
                                                         ============   ============   ============
</TABLE>

(1) Prior to  intersegment  eliminations.
(2) See Note 16 for a description  of CAD.

Revenues
--------

Fee income is related to the credit  intermediation  of  mortgage  revenue  bond
securitizations which began in mid-2006 with the launch of Centerline Financial.
The volume of credit  intermediation  provided to the Affordable Housing segment
now exceeds $1.3 billion.  We expect these fees to continue growing as we expand
our bond portfolio and the proportion of Affordable Housing securitizations that
involve credit intermediation by Centerline Financial.

Interest  income in this  segment  relates to the  investment  of cash  balances
maintained by Centerline Financial.

Credit Risk Products CAD
------------------------

CAD in this segment for 2006  represents  start up costs  incurred  prior to the
launch of Centerline  Financial.  The positive 2007 CAD results are entirely due
to  the   inception  of  the  business  in  mid-2006  and  the  absence  of  the
non-recurring  costs. As we continue to seek  opportunities  to provide services
external to Centerline, we expect revenues and CAD to benefit accordingly.

CONSOLIDATED PARTNERSHIPS

The results of consolidated  partnerships  reflected in our financial statements
are for entities we control according to the definitions of FIN 46(R), and other
partnerships   we  control.   With  respect  to  the  LIHTC  Fund  and  Property
Partnerships,  we have no equity interest or, in the case of 37 partnerships, an
insignificant  equity  interest.  With respect to CMBS Fund and Direct Loan Fund
Partnerships,  we have  ownership  of up to 25.0%  and also  receive  additional
equity income allocations as manager.

     LIHTC FUND AND PROPERTY PARTNERSHIPS

     Our Affordable  Housing segment earns fees from LIHTC Fund Partnerships and
     interest on mortgage  revenue bonds for which LIHTC  Property  Partnerships
     are the  obligors.  The  LIHTC  Fund  Partnerships  are tax  credit  equity

                                       48
<PAGE>

     investment funds we sponsor and manage. The LIHTC Property Partnerships are
     partnerships for which we have assumed the role of general partner.

     The increased revenue,  expense, equity loss and allocation amounts in 2007
     are due to the  addition of 15 LIHTC Fund  Partnerships  over the past year
     and the  assumption of the general  partner  interests in 20 LIHTC Property
     Partnerships.

     As third party  investors  hold  virtually  all of the equity  interests in
     these entities, we allocate all results of operations of these partnerships
     to those partners except for  approximately  $2,000,  which  represents our
     nominal ownership. As a result, the consolidation of these partnerships has
     an insignificant impact on our net income.

     CMBS FUND AND DIRECT LOAN FUND PARTNERSHIPS

     CMBS Fund and Direct Loan Fund  Partnerships  were included in this segment
     upon our acquisition of Investors in August 2006.

SIX MONTHS ENDED JUNE 30, 2007 AND 2006
---------------------------------------

The following is a summary of our  operations  for the six months ended June 30,
2007 and 2006:
<TABLE>
<CAPTION>
                                          % of                          % of
    (In thousands)         2007         Revenues         2006         Revenues     % Change
--------------------   ------------   ------------   ------------   -----------   -----------
<S>                    <C>                  <C>      <C>                 <C>          <C>
Revenues               $    252,229         100.0%   $    151,062        100.0%          67.0%
(Loss) income before
  income taxes         $    (13,024)         (5.2)%  $     15,581         10.3%       (183.6)%
Net (loss) income      $     (9,765)         (3.9)%  $     18,905         12.5%       (151.7)%
</TABLE>

The  growth  in  revenues  was  due  mostly  to  revenues  earned  by  funds  we
consolidated  upon the acquisition of Investors in August 2006, and the interest
income from investments held by that business.

We recorded a net loss for the 2007 period as compared to net income in the 2006
period.  Much of the current year loss was due to impairment  charges recognized
on mortgage  revenue bonds, a charge to reserve against  associated  receivables
and  non-cash  costs  stemming  from  the  acquisition  of  Investors,  such  as
amortization of restricted shares awarded in connection with the transaction and
amortization of intangible  assets acquired.  Other factors  contributing to the
net loss in the 2007 period were increased  interest  costs and severance  costs
associated with the departure of an executive officer.

                                       49
<PAGE>

REVENUES

Our revenues were as follows:
<TABLE>
<CAPTION>
                                             For the Six Months Ended June 30,
                                        ------------------------------------------
            (In thousands)                  2007           2006          % Change
-------------------------------------   -----------    -----------     -----------
<S>                                     <C>            <C>                   <C>
Mortgage revenue bond interest income   $    75,631    $    75,432             0.3%

Other interest income                        27,229         12,527           117.4

Fee income                                   31,211         34,343            (9.1)

Other revenues:
   Construction service fee                   2,395          2,250             6.4
   Expense reimbursements                     1,800          1,467            22.7
   Rental income of real estate owned         2,866          3,097            (7.5)
   Administration fees                        1,202            976            23.2
   Prepayment penalties                       2,053          2,046             0.3
   Other                                      1,203          1,313            (8.4)
                                        -----------    -----------     -----------
Total other revenues                         11,519         11,149             3.3
                                        -----------    -----------     -----------

Subtotal                                    145,590        133,451             9.1
                                        -----------    -----------     -----------

Revenues of consolidated partnerships       106,639         17,611           505.5
                                        -----------    -----------     -----------

   Total revenues                       $   252,229    $   151,062            67.0%
                                        ===========    ===========     ===========
</TABLE>

A large portion of the revenue  increase was due to the  Investors  acquisition.
Adjusting to include Investors in the 2006 period, revenues would have increased
approximately 14.7%.

Mortgage revenue bond interest income and Fee income are discussed in RESULTS BY
SEGMENT below.

Other  interest   income   includes   income  from  CMBS  and   resecuritization
certificates  held in our Commercial  Real Estate segment and interest earned on
escrow balances in our Asset Management  segment.  The increase  compared to the
2006 period relates to:

     o    interest generated by CMBS and  resecuritization  certificates we hold
          through  Investors  (acquired  in August 2006 and thus for which there
          was no comparable 2006 amount); and
     o    higher cash balances  (predominantly the escrow accounts) coupled with
          increasing market interest rates for temporary investments.

Partially  offsetting these increases was the absence in 2007 of interest earned
on a loan to a  Commercial  Real  Estate  business.  That  loan  was  repaid  in
September 2006 and there is no comparable revenue in 2007.

Revenues of consolidated partnerships increased due to:

     o    CMBS Fund and Direct Loan Fund  Partnerships  consolidated  as part of
          the Investors acquisition;
     o    an  increase  in the  number of LIHTC  Fund  Partnerships  due to fund
          sponsorship activity; and
     o    an increase in the number of LIHTC Property Partnerships over the past
          year which we have taken  control of to protect our  investments  (see
          Note 18).

Results of  consolidated  partnerships  are also discussed in RESULTS BY SEGMENT
below.

Offsetting  the  revenue  gains is the  elimination  of  revenues  earned by our
subsidiaries in transactions  with LIHTC Fund and Property  Partnerships we have
consolidated  but in which we have  virtually no equity  interest.  Although the
amounts are  eliminated  in  consolidation,  the net losses  recognized by those
partnerships in connection with these  transactions are absorbed by their equity
partners;  as such, the elimination in consolidation has an insignificant impact

                                       50
<PAGE>

on our  net  income.  Consolidation  of the  CMBS  Fund  and  Direct  Loan  Fund
partnerships  do not lead to  revenue  eliminations  as the  income we earn from
those  funds is in the form of  equity  income.  See  OTHER  INCOME  AND  INCOME
ALLOCATIONS below.

In the 2007 and 2006 periods, the following revenue amounts were eliminated,  as
they represented  transactions between  consolidated  partnerships and our other
component businesses:
<TABLE>
<CAPTION>
                                             For the six Months Ended June 30,
                                        ------------------------------------------
          (In thousands)                   2007           2006         % Change
-------------------------------------   -----------    -----------     -----------
<S>                                     <C>            <C>                   <C>
Mortgage revenue bond interest income   $     9,521    $     4,287           122.1%
Other interest income                            --            105              --
Fee income                                   24,218         21,856            10.8
Other revenues                                2,582          3,063           (15.7)
                                        -----------    -----------     -----------

Total                                   $    36,321    $    29,311            23.9%
                                        ===========    ===========     ===========
</TABLE>

EXPENSES

Our expenses were as follows:
<TABLE>
<CAPTION>
                                                                   For the Six Months Ended June 30,
                                                             ------------------------------------------
                      (In thousands)                             2007           2006         % Change
----------------------------------------------------------   -----------    -----------     -----------
<S>                                                          <C>            <C>                   <C>
Interest expense                                             $    57,344    $    41,193            39.2%
                                                             -----------    -----------     -----------
Interest expense - preferred shares of subsidiary                  9,449          9,449              --
                                                             -----------    -----------     -----------

Salaries and benefits                                             63,888         37,961            68.3
Other general and administrative                                  36,476         34,466             5.8
                                                             -----------    -----------     -----------
  Subtotal general and administrative                            100,364         72,427            38.6
                                                             -----------    -----------     -----------

Depreciation and amortization                                     22,491         23,528            (4.4)
Loss on impairment of assets                                      19,385          2,271           753.6
                                                             -----------    -----------     -----------
  Subtotal before consolidated partnerships                      209,033        148,868            40.4
                                                             -----------    -----------     -----------

Interest expense of consolidated LIHTC Fund and Property
  partnerships                                                    12,448         12,557            (0.9)
Interest expense of consolidated CMBS Fund and Direct Loan
  partnerships                                                    33,866             --              --
                                                             -----------    -----------     -----------
                                                                  46,314         12,557           268.8
                                                             -----------    -----------     -----------
Other expenses of consolidated LIHTC Fund and Property
  partnerships                                                    50,731         31,539            60.9
Other expenses of consolidated CMBS Fund and Direct Loan
  partnerships                                                     2,231             --              --
                                                             -----------    -----------     -----------
                                                                  52,962         31,539            67.9
                                                             -----------    -----------     -----------
  Subtotal expenses of consolidated partnerships                  99,276         44,096           125.1
                                                             -----------    -----------     -----------

Total expenses                                               $   308,309    $   192,964            59.8%
                                                             ===========    ===========     ===========
</TABLE>

The  increase in interest  expense  reflects  the higher  amount of average debt
outstanding  (approximately  $2.4 billion in the 2007 period as compared to $1.8
billion in the comparable 2006 period). The higher balance in 2007 reflects:

     o    the cost of the Investors acquisition;
     o    continuing  capital  deployment in the Affordable  Housing segment for
          mortgage revenue bond and LIHTC investments; and
     o    debt facilities of Investors used in Commercial Real Estate  investing
          and fund sponsorship activities.

In addition, our average borrowing rate increased in 2007 as compared to 2006 as
a result of increases in the SIFMA and LIBOR rates in both years.  The effect of
rate increases was tempered,  however, by a fixed rate securitization program in
place since mid-2006 and the interest rate swaps that we have in place,  some of
which are "in the money".  Our average  borrowing  rate increased to 4.7% in the
first half of 2007 as compared to 4.2% in the first half of 2006.

                                       51
<PAGE>

While our borrowing  costs have been  increasing  along with market  rates,  the
commencement  of  Centerline  Financial  has enabled us to retain a  significant
portion of credit  intermediation  fees which we have historically paid to third
parties in connection with securitizations in the Affordable Housing segment. In
addition, we anticipate Centerline Financial will enable us to lower our average
cost of capital through more effective leverage of our assets.

The  increase  in  salaries  and  benefits  expense  primarily  relates  to  the
approximately 100 employees added upon the Investors acquisition,  the continued
growth of our component businesses and approximately $9.2 million of incremental
non-cash  compensation  cost  related to shares  issued in  connection  with the
Investors acquisition.  In addition, salaries and benefits include approximately
$2.7 million of severance costs,  primarily associated with the retirement of an
executive  officer.  Partially  offsetting this was a reversal of  approximately
$1.5 million of promote-sharing  compensation  related to CMBS funds we sponsor,
due to a lower projected level of promote income to the Company.

The increase in other general and  administrative  expenses  primarily  resulted
from the following:

     o    higher infrastructure costs following the Investors acquisition;
     o    fees paid by Centerline  Financial to Natixis (which fees commenced in
          the third quarter of 2006); and
     o    costs incurred in relation to the Company's re-branding.

These increases were partially  offset by incremental  costs incurred during the
second  quarter of 2006 related to corporate  initiatives  (as  described in the
quarterly  discussion  above) with no  corresponding  costs in the current  year
period.

Depreciation and amortization  expenses were higher in the 2006 period primarily
due  to  a  $3.4  million  write-off  of  deferred  costs  in  2006  related  to
restructuring  of our  securitization  programs.  This was  partially  offset by
increased   amortization   of  mortgage   servicing   rights.   In  addition  to
approximately $14.5 million in mortgage servicing rights acquired as part of the
Investors  acquisition in August 2006, we recorded incremental assets since June
30, 2006, due to mortgage origination activity within our Commercial Real Estate
segment.

Loss on  impairment  of assets in 2007 related to nine  mortgage  revenue  bonds
associated with eight properties  experiencing  substandard  performance and the
change in our strategy  with respect to  protecting  our  investment  in certain
assets (see Notes 2 and 18).  The charge  recorded in 2006 related to four bonds
experiencing substandard  performance,  the terms for one of which we revised to
reduce the interest rate.

Other  expenses  of  the  consolidated  LIHTC  Fund  and  Property  partnerships
increased due to the increase in the number of consolidated entities since March
2006.  Virtually all of the expenses of the consolidated LIHTC Fund and Property
partnerships  are  absorbed  by their  equity  partners;  as such,  they have an
insignificant impact on our net income.

Interest and Other expenses of consolidated  CMBS Fund  Partnerships  pertain to
funds we manage to syndicate investments in CMBS and associated resecuritization
trusts.  These  items were  incorporated  into our  financial  results  upon our
acquisition of Investors in the third quarter of 2006.

                                       52
<PAGE>

OTHER INCOME AND INCOME ALLOCATIONS
<TABLE>
<CAPTION>
                                                       For the Six Months Ended June 30,
                                                 ------------------------------------------
                 (In thousands)                      2007           2006         % Change
----------------------------------------------   -----------    -----------     -----------
<S>                                               <C>            <C>                   <C>
Equity and other (loss) income                   $      (404)   $     4,366          (109.3)%

Gain on sale or repayment of loans               $     2,702    $     7,056           (61.7)%
Gain on sale or repayment of mortgage revenue
  bonds and other assets                                 886            912            (2.9)
                                                 -----------    -----------     -----------
                                                 $     3,588    $     7,968           (55.0)%
                                                 -----------    -----------     -----------

Income allocated to preferred shareholders of
  subsidiary                                     $    (3,113)   $    (3,113)           -- %
                                                 -----------    -----------     -----------

Loss (income) allocated to SCUs                  $     4,027    $    (7,361)         (154.7)%
Loss (income) allocated to SMUs                           53           (169)         (131.4)
Loss allocated to SCIs                                    51             --              --
Other                                                    278             --              --
                                                 -----------    -----------     -----------
Total loss (income) allocated to minority
  interests                                      $     4,409    $    (7,530)         (158.6)%

Loss allocated to partners of consolidated
  partnerships                                   $   178,887    $   195,871            (8.7)%
</TABLE>

Equity  and other  (loss)  income  decreased  since we no longer  recognize  our
proportionate  share of  Investors  earnings  through  equity  income  after our
acquisition  in August 2006.  The loss for the period  primarily  relates to our
investments in tax advantaged  investment  vehicles similar to those we sponsor.
Equity income from our investment in CMBS and Direct Loan funds is eliminated in
consolidation but positively impacts our net income.  For the 2007 period,  this
amount was approximately $9.6 million.  There is no comparable amount in 2006 as
this earnings stream began with our acquisition of Investors.

Gains  related to  mortgage  revenue  bonds and loans  fluctuate  in relation to
relative  activity  levels in the Affordable  Housing and Commercial Real Estate
businesses. See RESULTS BY SEGMENT below.

The  allocations  to  SCUs,  SMUs  and  SCIs  of  subsidiaries   represents  the
proportionate  share of  after-tax  loss or income  attributable  to  holders of
subsidiary  equity  as if they were all  converted  to  common  shares.  "Other"
minority  interest  principally  represents the portion of Centerline  Financial
owned by Natixis.

The loss  allocation to partners of  consolidated  partnerships  represents  the
operating  losses  of LIHTC  Fund and  Property  partnerships,  of which we have
absorbed  an  insignificant  portion  (approximately  $5,000)  and the  majority
ownership in CMBS and Direct Loan funds we sponsor.

                                       53
<PAGE>

Results by Segment
------------------

AFFORDABLE HOUSING

The table below shows  selected  information  regarding our  Affordable  Housing
activities:

<TABLE>
<CAPTION>
                                                                 For the Six Months Ended June 30,
                                                            ------------------------------------------
                     (In thousands)                              2007           2006         % Change
---------------------------------------------------------   -----------    -----------     -----------
<S>                                                         <C>            <C>                   <C>

                               MORTGAGE REVENUE BOND INVESTING STATISTICS

New mortgage revenue bond acquisitions                      $    49,652    $   155,380           (68.0)%
Funding of mortgage revenue bonds acquired in prior years         1,541         10,090           (84.7)
Acquisitions related to prior period forward commitments         20,880         48,396           (56.9)
                                                            -----------    -----------     -----------
Total acquisition and funding activity                      $    72,073    $   213,866           (66.3)%

Mortgage revenue bonds repaid                               $     2,622    $    31,983           (91.8)%

Average portfolio balance (fair value)                      $ 2,754,396    $ 2,475,526            11.3%

Weighted average permanent interest rate of bonds
  acquired                                                         5.99%          6.17%
Weighted average yield of portfolio                                6.18%          6.44%
Average borrowing rate (includes fees and effect of
  swaps)(1)                                                        4.85%          3.95%
Average SIFMA rate                                                 3.68%          3.32%


                                   LIHTC FUND SPONSORSHIP STATISTICS

Equity raised by LIHTC funds                                $   416,587    $   368,957            12.9%
Equity invested by LIHTC funds (1)                          $   287,868    $   370,675           (22.3)%


Mortgage revenue bond interest income (1)                   $    85,152    $    78,903             7.9%
Other interest income (1)                                           646            989           (34.7)
Fee income from fund sponsorship (1)                             32,644         41,562           (21.5)
Expense reimbursements                                            2,942          3,686           (20.2)
Other revenues (1)                                                4,220          3,517            20.0
                                                            -----------    -----------     -----------
                                                            $   125,604    $   128,657           (2.4)%
                                                            ===========    ===========     ===========

Interest expense and securitization fees (1)                $    50,322    $    36,742            37.0%
Loss on impairment of assets                                $    19,385    $     2,271           753.6%
Gain on repayments of mortgage revenue bonds                $       653    $       909           (28.2)%

CAD (2)                                                     $    41,566    $    60,449           (31.2)%
                                                            ===========    ===========     ===========
</TABLE>


(1)  Prior to intersegment eliminations.
(2)  See Note 16 for a description of CAD.

Mortgage Revenue Bond Investing
-------------------------------

The increase in mortgage  revenue bond  interest  income is primarily due to the
increased  investment  base  resulting from new bonds funded during 2006 and the
first six months of 2007,  partially offset by a lower weighted average yield of
the portfolio over the same period.

While generally declining interest rates of bonds acquired has gradually lowered
the average yield of our portfolio, we continue to earn a positive spread on our
portfolio.  Corresponding with an increase in the average portfolio balance, our
level of  securitizations  increased  and,  along with  rising  interest  rates,
resulted in the  increase  in  interest  expense  and  securitization  fees.  By
entering into a fixed rate  securitization in 2006 and using interest rate swaps
to fix the rate on a large portion of our remaining securitizations,  we believe
that we have mitigated the impact on spreads of the increasing SIFMA rates.

                                       54
<PAGE>

We recognized  impairment on nine mortgage  revenue bonds in the 2007 period and
four in the 2006 period, as described in the quarterly  discussion above. Of the
2007  charge  recorded,  $13.7  million  pertained  to a  portfolio  of property
partnerships  for which we assumed the general partner  interest in 2005. In the
first quarter of 2007,  we reassessed  our strategy with respect to the ultimate
recovery of our investments in these  properties.  The strategies to be followed
for individual  bonds may involve a change in our planned  holding period of the
asset or the level of  additional  funding we may  provide,  if any. The initial
assessment  of  four  of the  mortgage  revenue  bonds  caused  us to  recognize
impairment due in part to the revision of the estimated level and timing of cash
flows  for the  valuation  of the  properties.  See  also  notes 2 and 18 to the
condensed consolidated financial statements.

The  remainder  of the  2007  impairment  charge  pertained  to four  additional
properties with substandard  performance and the  restructuring of terms for one
of the associated mortgage revenue bonds.

LIHTC Fund Sponsorship
----------------------

Our LIHTC Fund sponsorship  activities  generate fees associated with sponsoring
tax-credit  equity investment funds, for assisting the funds in acquiring assets
and for providing  specified  yields to investors of certain  funds.  We receive
many of these fees at the time a fund  closes and  recognize  them over  various
periods as earned, ranging from less than one year to twenty years.

Although  the level of equity  raised  increased  over the  prior  year  period,
decreased fund sponsorship revenues reflects the lower volume of equity invested
in the first half of 2007. In addition,  the mix of fund sponsorships  served to
decrease the fee  realization  rate due to a higher  proportion  of  "corporate"
funds included in equity raised for the 2006 period.  Partially  offsetting this
decline,  certain  ongoing fees (such as  partnership  management  fees that are
collected at the time of closing and recognized over several years) increased in
the period due to funds closed after the end of the 2006 quarter.

Other  ongoing fees are earned  based on the level of assets  under  management.
Despite a higher  population of funds,  those fees decreased in 2007,  primarily
attributable  to the timing of physical site visits from which we earn a portion
of the fees.  In  addition,  fees earned from older LIHTC funds  decline as they
dispose of assets.  Fee income in this segment also  declined as fees for credit
intermediation  of new funds are earned  directly  by our Credit  Risk  Products
segment.

Other
-----

Expense  reimbursement  and other  revenues in this segment  consist  largely of
service fees charged to entities (including consolidated partnerships) we manage
and  fluctuate  with the growth of the number of those  entities  and their cash
flows.

Affordable Housing CAD
----------------------

CAD for 2007 includes a higher level of mortgage  revenue bond  interest  income
than in 2006 but lower fee income from fund sponsorship and investment activity.
The net decrease in revenues was  compounded  by the increase in  securitization
financing costs.

                                       55
<PAGE>

COMMERCIAL REAL ESTATE

The table below shows selected information  regarding our Commercial Real Estate
activities:
<TABLE>
<CAPTION>
                                                            For the Six Months Ended June 30,
                                                         ---------------------------------------
                   (In thousands)                            2007          2006       % Change
------------------------------------------------------   -----------   -----------   -----------
<S>                                                      <C>           <C>                 <C>
Mortgage originations                                    $ 1,126,894   $   739,203          52.4%
                                                         -----------   -----------   -----------
Primary servicing mortgage portfolio at June 30          $ 8,397,643   $ 9,180,858          (8.5)%
                                                         -----------   -----------   -----------
Carrying value of mortgage servicing rights at June 30   $    50,835   $    59,647         (14.8)%

Mortgage origination fees (1)                            $     3,967   $     4,791         (17.2)%
Mortgage servicing fees                                        9,188        10,125          (9.3)
Other fee income                                               1,839           908         102.5
Other interest income (1)                                     10,559         4,979         112.1
Prepayment penalties                                           2,042         2,035           0.3
Other revenues                                                 1,085         1,940         (44.1)
                                                         -----------   -----------   -----------
    Total                                                $    28,680   $    24,778          15.7%
                                                         ===========   ===========   ===========

Gain on sale of mortgages                                $     2,935   $     7,059         (58.4)%
                                                         ===========   ===========   ===========

Equity income                                            $     9,623   $     4,706         104.5%
                                                         ===========   ===========   ===========

CAD (2)                                                  $    10,931   $     3,995         173.6%
                                                         ===========   ===========   ===========
</TABLE>

(1) Prior to  intersegment  eliminations.
(2) See Note 16 for a description of CAD.


Originations
------------

As depicted in the table below, Fannie Mae originations decreased and Centerline
Direct originations increased from the prior period because our loan origination
department  focused its efforts on originating loans for our lending program for
AMAC and CRESS  ("Centerline  Direct").  Despite an overall increase in mortgage
originations  for the quarter,  mortgage  origination fees decreased period over
period as the  average  rate of  origination  fees was  impacted  by the  higher
proportion of non-agency  originations  (generally generating lower originations
fee) and spread compression in the market.

Mortgage  originations  for the six  months  ended  June 30 are  broken  down as
follows:
<TABLE>
<CAPTION>

(In thousands)           2007         % of total         2006         % of total
-----------------   -------------   -------------   -------------   -------------
<S>                 <C>                     <C>     <C>                      <C>
Fannie Mae          $     256,273            22.7%  $     422,784             57.2%
Freddie Mac               177,779            15.8          90,015             12.2
Centerline Direct         632,272            56.1         151,200             20.5
Conduit and other          60,570             5.4          75,204             10.1
                    -------------   -------------   -------------   -------------
Total               $   1,126,894           100.0%  $     739,203            100.0%
                    =============   =============   =============   =============
</TABLE>

Servicing
---------

Primary  servicing fees declined due to a decrease in the servicing fee rate and
the higher proportion of non-agency and non-loss sharing loans in the portfolio.
This  trend  has also  affected  the  level of  mortgage  servicing  rights,  as
write-offs in connection  with the  prepayment of mortgages at higher  servicing
rates are replaced with new assets generating lower fee streams.  Generally,  as
our prepayments have increased, our mortgage servicing rights have decreased.

Investments
-----------

Increased  interest income in this segment reflects the acquisition of Investors
in  mid-2006  as  the  operations   acquired  hold  CMBS  and   resecuritization
certificates  for  investment.  During  the second  quarter  of 2006,  Investors
acquired approximately $215.0 million of CMBS investments intended to be sold to
a new CMBS fund it is sponsoring.

                                       56
<PAGE>

Other
-----
The increase in prepayment  penalties  relates to a higher level of  refinancing
activity in the current year as compared to last year.

Gain on sale of mortgages  relates  directly to the value of mortgage  servicing
rights recorded when loans are sold. The mortgage servicing rights, in turn, are
valued  based  on  projected  servicing  revenues,  which  decreased  in 2007 as
compared to 2006 due to lower servicing fee rates for new  originations as noted
above.

We act as general partner of the CMBS and Direct Loan funds we sponsor and own a
portion of the funds.  Equity income in this segment  primarily  represents  our
proportionate  share of profits as well as other allocations for general partner
services.  This  category  became  a part of this  segment  upon  the  Investors
acquisition  while the 2006 amount  represented  our income from our  membership
interest  in  Investors  prior to full  acquisition.  Equity  income in the 2006
period  primarily  represented  our  membership  interest in Investors  prior to
acquiring the business.

Commercial Real Estate CAD
--------------------------

The sharp increase in segment CAD is attributable  to the Investors  acquisition
and the addition of equity and interest  income  streams.  These  increases were
partially offset by increased infrastructure costs that were due to the addition
of the Investors business and the overall growth of this segment.

ASSET MANAGEMENT

The table  below  shows  selected  information  regarding  our Asset  Management
activities:
<TABLE>
<CAPTION>
                                                             For the Six Months Ended June 30,
                                                         ----------------------------------------
                    (In thousands)                          2007           2006        % Change
------------------------------------------------------   -----------   -----------    -----------
<S>                                                      <C>           <C>                  <C>
Mortgage portfolio at June 30:
  Primary servicing (1)                                  $31,541,985   $ 9,180,858          243.6%
  Special servicing                                          235,666            --             --
Carrying value of mortgage servicing rights at June 30         9,186            --             --
                                                         -----------   -----------    -----------

Other interest income (2)                                $    11,807   $     4,308          174.1%

Asset management fees (2)                                      7,030         5,450           29.0
Servicing fees (2)                                             6,077         3,331           82.4
Other fees (2)                                                 4,186            --             --
                                                         -----------   -----------    -----------
  Subtotal                                               $    17,293   $     8,781           96.9%
                                                         -----------   -----------    -----------

Other income (2)                                                 416            --             --
                                                         -----------   -----------    -----------
                                                         $    29,516   $    13,089          125.5%
                                                         ===========   ===========    ===========

CAD (3)                                                  $    14,407   $     6,454          123.2%
                                                         ===========   ===========    ===========
</TABLE>

(1)  Includes  sub-servicing of the Commercial Real Estate servicing  portfolio.
     Excludes  servicing on mortgage  revenue  bonds in the  Affordable  Housing
     segment.
(2)  Prior to intersegment eliminations.
(3)  See Note 16 for a description of CAD.

Revenues
--------

Revenues  increased  in the 2007  period as a result of the  servicing  business
added as part of the  Investors  acquisition.  The  remaining  revenues  in this
segment   represent   charges  to  other  segments  for  asset   management  and
subservicing on the assets under management in those  businesses.  The growth in
that revenue is  reflective  of the overall  growth of assets  under  management
throughout the Company, due to the sponsorship of new LIHTC funds and the growth
of our Commercial Real Estate business, particularly with regard to the business

                                       57
<PAGE>

done with AMAC,  CRESS and the CMBS funds.  The increase also includes  earnings
from  escrow  accounts  maintained  for  the  primary  servicing  portfolio  and
increased in 2007 due to higher balances as well as higher rates earned.

Asset Management CAD
--------------------

Segment  CAD for  2007  period  was  higher  than the  same  period  in 2006 due
primarily to the higher level of assets under management throughout the Company,
due in part to our acquisition of Investors.  In addition,  the  introduction of
new revenue streams upon the Investors acquisition also had a beneficial impact.
The  increase  was  partially  offset by a higher  level of  salaries  and other
infrastructure costs required to grow the business. We expect that the continued
expansion of this business and the expected  synergies from  combining  existing
operations with Investors should benefit segment CAD in future periods.

CREDIT RISK PRODUCTS
<TABLE>
<CAPTION>
                                    For the Six Months Ended June 30,
                                 ---------------------------------------
        (In thousands)               2007          2006        % Change
------------------------------   -----------   -----------   -----------
<S>                              <C>           <C>                    <C>
Credit intermediation fees (1)   $     5,384   $        --            --%
Other fees (1)                           110            --            --
Other interest income (1)              2,058            10            --
                                 -----------   -----------   -----------
                                 $     7,552   $        10            --%
                                 ===========   ===========   ===========

CAD (2)                          $     8,065   $    (4,304)        287.4%
                                 ===========   ===========   ===========
</TABLE>

(1)  Prior to intersegment eliminations.
(2)  See Note 16 for a description of CAD.

Revenues
--------

Fee income is related to the credit  intermediation  of  mortgage  revenue  bond
securitizations which began in mid-2006 with the launch of Centerline Financial.
The volume of credit  intermediation  provided to the Affordable Housing segment
now exceeds $1.3 billion.  We expect these fees to continue growing as we expand
our bond portfolio and the proportion of Affordable Housing securitizations that
involve credit intermediation by Centerline Financial.

Interest  income in this  segment  relates to the  investment  of cash  balances
maintained by Centerline Financial.

Credit Risk Products CAD
------------------------

CAD in this segment for 2006  represents  start up costs  incurred  prior to the
launch of Centerline  Financial.  The positive 2007 CAD results are entirely due
to  the   inception  of  the  business  in  mid-2006  and  the  absence  of  the
non-recurring  costs. As we continue to seek  opportunities  to provide services
external to Centerline, we expect revenues and CAD to benefit accordingly.

CONSOLIDATED PARTNERSHIPS

The results of consolidated  partnerships  reflected in our financial statements
are for entities we control according to the definitions of FIN 46(R), and other
partnerships   we  control.   With  respect  to  the  LIHTC  Fund  and  Property
Partnerships,  we have no equity interest or, in the case of 37 partnerships, an
insignificant  equity  interest.  With respect to CMBS Fund and Direct Loan Fund
Partnerships,  we have  ownership  of up to 25.0%  and also  receive  additional
equity income allocations as manager.

     LIHTC FUND AND PROPERTY PARTNERSHIPS

     Our Affordable  Housing segment earns fees from LIHTC Fund Partnerships and
     interest on mortgage  revenue bonds for which LIHTC  Property  Partnerships

                                       58
<PAGE>

     are the  obligors.  The  LIHTC  Fund  Partnerships  are tax  credit  equity
     investment funds we sponsor and manage. The LIHTC Property Partnerships are
     partnerships for which we have assumed the role of general partner.

     The increased revenue,  expense, equity loss and allocation amounts in 2007
     are due to the  addition of 15 LIHTC Fund  Partnerships  over the past year
     and the  assumption of the general  partner  interests in 20 LIHTC Property
     Partnerships.

     As third party  investors  hold  virtually  all of the equity  interests in
     these entities, we allocate all results of operations of these partnerships
     to those partners except for  approximately  $5,000,  which  represents our
     nominal ownership. As a result, the consolidation of these partnerships has
     an insignificant impact on our net income.

     CMBS FUND AND DIRECT LOAN PARTNERSHIPS

     CMBS Fund and Direct Loan  Partnerships  were included in this segment upon
     our acquisition of Investors in August 2006.

INCOME TAXES
------------

A large majority of our pre-tax income is derived from the mortgage revenue bond
investing  within  our  Affordable  Housing  segment  and CMBS fund  sponsorship
activities in our Commercial Real Estate segment. The subsidiaries through which
we conduct these  activities are structured as  flow-through  entities and their
income is not generally subject to income taxes. Our other businesses,  however,
are  conducted  in  corporations  and are subject to income  taxes.  Because the
distributions  paid on the minority  interests in these  corporate  subsidiaries
effectively  provide a tax  deduction,  as well as other  factors  within  these
businesses, they often have losses for book purposes.

We provide for income taxes for these corporate  subsidiaries in accordance with
SFAS No. 109,  ACCOUNTING  FOR INCOME TAXES ("SFAS No. 109") which  requires the
recognition of deferred tax assets and  liabilities  for the expected future tax
consequences of temporary  differences  between the financial statement carrying
amounts and the tax bases of assets and liabilities.

The Company  recognized  an income tax benefit in the six months  ended June 30,
2007 and 2006. The effective tax rate on a consolidated basis for the six months
ended June 30, 2007 and 2006 was 23.7% and (21.3)%,  respectively. The effective
rate for our  corporate  subsidiaries  that were  subject to taxes was 12.0% and
15.6% for the six months ended June 30, 2007 and 2006, respectively.

The income tax  provision or benefit is affected by the book income or losses of
the taxable  businesses and tax  deductible  distributions  on their  subsidiary
equity.  Management determined that, in light of projected taxable losses in the
corporate  subsidiaries  for the  foreseeable  future,  all of the  deferred tax
assets will  likely not be realized  and hence a full  valuation  allowance  was
provided.  As the proportion of our pre-tax income contributed by the businesses
generating  taxable  income and losses  changes,  the  resulting  tax benefit or
provision  may appear  incongruous  with our  consolidated  income before income
taxes.

RECENTLY ISSUED ACCOUNTING STANDARDS
------------------------------------

See  NEW  ACCOUNTING  PRONOUNCEMENTS  in  Note 1 to the  condensed  consolidated
financial statements.

INFLATION
---------

Inflation  did not  have a  material  effect  on our  results  for  the  periods
presented.

LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

We fund our short-term  business needs  (including  investments)  primarily with
cash provided by  operations,  securitization  of  investments  and revolving or
warehouse  credit  facilities.  Our primary sources of capital to meet long-term
liquidity needs  (including  acquisitions)  are debt and various types of equity
offerings,  including equity of our subsidiaries.  We believe that our financing

                                       59
<PAGE>

capacity  and  cash  flow  from  current  operations  are  adequate  to meet our
immediate and long term liquidity requirements.  Nonetheless,  as business needs
warrant, we may issue other types of debt or equity in the future.

Debt and Securitizations
------------------------

Short-term liquidity provided by operations comes primarily from interest income
from  investments  we hold in excess of the  related  financing  costs,  and fee
income  receipts.  We typically  generate  funds for  investment  purposes  from
corresponding financing activities.

We have the following debt and  securitization  facilities  that provide us with
short-term and long-term liquidity:

     o    a $300.0  million  warehouse  line,  used for mortgage  banking needs,
          which matures in May 2008;

     o    a revolving  credit  facility with a capacity of $320.0  million as of
          June 30, 2007, used to acquire equity interests in property  ownership
          entities  prior  to the  inclusion  of  these  equity  interests  into
          investment  funds,  as well as for  other  corporate  purposes,  which
          matures in August 2009.  We expect  further  lender  commitments  that
          would raise the capacity of this facility to $375.0 million;

     o    securitizations  through the Merrill Lynch P-FLOATs/RITES  program and
          through  the  Goldman  Sachs  Floats/Residuals  program of a specified
          percentage  of the fair value of mortgage  revenue bonds not otherwise
          securitized or pledged as collateral; and

     o    repurchase  facilities  used to fund  investments by Investors and its
          subsidiaries as well as for general business purposes.

As of June 30, 2007, we had  approximately  $278.7  million  available to borrow
under these debt and securitization  facilities without exceeding limits imposed
by debt covenants and our by-laws and without  pledging  additional  collateral.
Our repurchase  facilities  provide us with liquidity based on specified advance
rates and the fair value of  collateral  assets.  Although  we (and the funds we
manage and  consolidate)  may experience  margin calls in the ordinary course of
business due to fluctuations in those fair values, as of the date of this filing
we have not experienced any significant  margin calls despite recent  turbulence
in the real estate finance markets.

In addition to the credit  facilities  detailed  above, we have a $453.0 million
fixed-rate mortgage revenue bond securitization  program and $250.0 million term
loan, both of which began in 2006 and were fully funded as of June 30, 2007. The
securitization  certificates have a weighted average term of eight years and the
term loan matures in 2012.

Equity
------

We have the  ability  to issue  $400.0  million  of  equity  or debt  securities
pursuant  to a shelf  registration  statement  we have  filed  with the SEC.  We
currently  have no plans to issue any such  securities  under this  registration
statement.  In  addition,  we have in the  past,  and may in the  future,  issue
securities in private  placements,  including,  without  limitation,  additional
issuances similar to our CRA Preferred Shares and 4.4% CRA Preferred Shares.

Liquidity Requirements after June 30, 2007
------------------------------------------

During August 2007, equity distributions will be paid as follows:
<TABLE>
<CAPTION>
                                                  (In thousands)
                                                   ------------
          <S>                                      <C>
          Common/CRA shareholders                  $     24,747
          SCU/SMU/SCI holders                             8,806
          4.4% CRA Preferred shareholders                 1,188
          Preferred shareholders of a subsidiary          6,281
                                                   ------------

          Total                                    $     41,022
                                                   ============
</TABLE>

                                       60
<PAGE>

Investors manages a new CMBS fund which commenced in August 2007 (see Note 19 to
the  condensed  consolidated  financial  statements).  As  a  co-investor,   our
commitment to the fund is approximately  $19.0 million,  which is expected to be
funded over time through December 31, 2009.

While the markets for CDO issuances and CMBS investments in the period following
the end of June 2007 has been  unfavorable in light of recent events in the real
estate finance industry,  we do not anticipate difficulty in closing the planned
CMBS investment fund through  Investors,  nor planned CDOs to be issued by those
funds in the third quarter of 2007.

Management is not aware of any trends or events,  commitments or  uncertainties,
which  have not  otherwise  been  disclosed  that  will or are  likely to impact
liquidity in a material way.

Summary of Cash Flows
---------------------

For the six months ended June 30, 2007,  there was a larger net decrease in cash
and cash  equivalents as compared to the comparable 2006 period.  A net increase
in 2007 operating  cash flows was more than offset by a larger  increase in cash
used in investing activities and lower cash provided by financing activities.

Operating  cash flow in 2007 was $143.5  million  higher  than in 2006.  Despite
incurring a net loss in the 2007 period  versus net income in the 2006  quarter,
the 2007 period  included  significantly  higher non-cash costs due primarily to
impairment  charges and bad debt  reserves.  The 2007 period  includes  positive
changes in  receivables  and  deferred  revenues  over the prior period and also
includes net cash inflows related to mortgage loan sale settlements  compared to
net cash outflows in the comparable 2006 period.

Cash used in  investing  activities  was higher in 2007 as compared to 2006 by a
margin of $173.2 million due to:

     o    investing activities related to CMBS and CMBS funds;
     o    a higher level of net investment in Affordable  Housing property level
          partnerships for sponsored funds; and
     o    a lower level of mortgage revenue bond repayments.

These  factors  were offset in part by a lower level of  mortgage  revenue  bond
originations in the 2007 period as compared to 2006.

Cash provided by financing activities in the 2007 period were lower than in 2006
by $6.5  million.  The 2007 period  reflects a large  amount of  treasury  share
repurchases,  continuing a program that we began in mid-2006, partly offset by a
net increase in the level of borrowings.

Commitments, Contingencies and Off-Balance Sheet Arrangements
-------------------------------------------------------------
Note 18 to the condensed consolidated financial statements contains a summary of
our guarantees and off-balance sheet arrangements.

                                       61
<PAGE>

The following table reflects our maximum exposure and carrying amount as of June
30, 2007, for guarantees we and our subsidiaries have entered into:
<TABLE>
<CAPTION>
                                                 Maximum        Carrying
              (In thousands)                     Exposure        Amount
--------------------------------------------   ------------   ------------
<S>                                            <C>            <C>
Development deficit guarantees (1)             $     43,521   $        479
Operating deficit guarantees (1)                      7,567            140
ACC transition guarantees (1)                         3,245             --
Recapture guarantees (1)                            114,746            140
Replacement reserve (1)                               3,132             40
Guarantee of payment (1)                             19,620             --
LIHTC credit intermediation (2)                   1,194,955         33,145
Mortgage banking loss sharing agreements (3)        835,541         13,116
Centerline Financial Credit Default Swaps(4)         19,815          1,304
                                               ------------   ------------
                                               $  2,242,142   $     48,364
                                               ============   ============
</TABLE>

(1) These guarantees generally relate to business requirements for developers to
obtain  construction  financing.  As part of our role as co-developer of certain
properties,  we issue these  guarantees in order to secure  properties as assets
for the funds we manage.  To date, we have had minimal  exposure to losses under
these   guarantees  and  anticipate  no  material   liquidity   requirements  in
satisfaction of any guarantee issued. The carrying values disclosed above relate
to the  fees we earn for the  transactions,  which we  recognize  as their  fair
values.

(2) We see these  transactions as opportunities to expand our Affordable Housing
business by offering broad capital solutions to customers.  To date, we have had
minimal exposure to losses and anticipate no material liquidity  requirements in
satisfaction of any  arrangement.  The carrying values disclosed above relate to
the fees we earn for the transactions, which we recognize as their fair values.

(3) The loss  sharing  agreements  with  Fannie Mae and Freddie Mac are a normal
part of the DUS and DUIP lender  programs and afford a higher level of fees than
we earn for other comparable funding sources. The carrying value disclosed above
is our estimate of potential exposure under the guarantees, although any funding
requirements  for such exposure is based on the contractual  requirements of the
underlying  loans we sell to Fannie Mae and Freddie Mac, which vary as to amount
and duration, up to a maximum of 30 years.

(4) We see these  transactions  as  opportunities  to  expand  our  Credit  Risk
Products business by offering broad capital solutions to customers.  To date, we
have had  minimal  exposure  to losses  and  anticipate  no  material  liquidity
requirements in satisfaction of any  arrangement.  The carrying values disclosed
above  relate to the fees we earn for the  transactions,  which we  recognize as
their fair values.

The maximum  exposure  amount is not indicative of our expected losses under the
guarantees.

                                       62
<PAGE>

CONTRACTUAL OBLIGATIONS

The following table provides our commitments as of June 30, 2007, to make future
payments under our debt agreements and other contractual obligations:
<TABLE>
<CAPTION>
                                                                    Payments due by period
                                          ----------------------------------------------------------------------------
                                                           Less than                                       More than
            (In thousands)                   Total           1 year         1-3 years       3-5 years       5 years
---------------------------------------   ------------    ------------    ------------    ------------    ------------
<S>                                       <C>             <C>             <C>             <C>             <C>
Notes payable (1)(2)                      $    817,823    $    310,198    $    267,000    $      5,000    $    235,625
Notes payable of consolidated
   partnerships (3)                            368,732         142,101          67,864          20,667         138,100
Financing arrangements of consolidated
  partnerships (4)                             686,400              --           8,271         212,264         465,865
Notes payable of consolidated
  partnerships                                 101,500         101,500              --              --              --
Repurchase agreements of consolidated
  partnerships                                 422,631         422,631              --              --              --
Operating lease obligations                     74,853           8,837          16,827          14,574          34,615
Subleases                                       (7,382)         (1,273)         (2,526)         (2,622)           (961)

Unfunded investment commitments (5)            406,114         264,072         142,042              --              --

Financing arrangements (1)(2)                1,872,973       1,872,973              --              --              --
Preferred shares of subsidiary (subject
  to mandatory repurchase)                     273,500              --              --              --         273,500
                                          ------------    ------------    ------------    ------------    ------------

   Total                                  $  5,017,144    $  3,121,039    $    499,478    $    249,883    $  1,146,744
                                          ============    ============    ============    ============    ============
</TABLE>

(1)  The amounts included in each category reflect the current expiration, reset
     or renewal date of each facility or security  certificate.  Management  has
     the intent and believes it has the ability to renew,  refinance or remarket
     the borrowings beyond their current due dates.

(2)  Recourse  debt  represents  principal  amount only.  The  weighted  average
     interest rate at period end, including the impact of our swaps, was 5.11%.

(3)  Of the notes payable of consolidated partnerships, $215.7 million relate to
     equity  subscriptions  and are guaranteed by certain equity partners of the
     investment funds. Per partnership agreements,  the equity partners are also
     obligated to pay the  principal  and interest on the notes.  The  remaining
     balance of $153.0 million is collateralized with the underlying  properties
     of  the  consolidated   operating   partnerships.   All  of  this  debt  is
     non-recourse to us.

(4)  Excludes  premiums and discounts of financing  arrangements of consolidated
     partnerships.

(5)  Of  this  amount,  $390.1  million  represents  mortgage  loan  origination
     commitments with corresponding sale commitments.

As we are unable to project  the  timing of any  payments  related to our FIN 48
liability  (see Notes 8 and 10),  no such  payments  are  included  in the table
above.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

We invest in certain financial instruments, primarily mortgage revenue bonds and
other bond related investments that are subject to various forms of market risk,
including  interest  rate risk.  We seek to prudently  and actively  manage such
risks to earn  sufficient  compensation to justify the undertaking of such risks
and to  maintain  capital  levels  which  are  commensurate  with  the  risks we
undertake.

The  assumptions  related to the  following  discussion  of market risk  involve
judgments   regarding  future  economic  market  conditions,   future  corporate
decisions and other interrelating  factors, many of which are beyond our control
and all of which are difficult or  impossible to predict with precise  accuracy.
Although  we  believe  that  the  assumptions   underlying  the  forward-looking
information  are  reasonable,  any of the  assumptions  could be inaccurate and,
therefore,  there  can be no  assurance  that  the  forward-looking  information
included herein will prove to be accurate. Due to the significant  uncertainties
inherent in  forward-looking  information,  the  inclusion  of such  information
should not be regarded as our representation that our objectives and plans would
be achieved.

                                       63
<PAGE>

INTEREST RATE RISK
------------------

The nature of our  investments  and the  instruments  used to raise  capital for
their acquisition expose us to income and expense volatility due to fluctuations
in market  interest rates.  Market  interest rates are highly  sensitive to many
factors,  including governmental  policies,  domestic and international economic
and  political  considerations  and other factors  beyond our control.  A rising
interest rate environment could reduce the demand for multifamily tax-exempt and
taxable  financing,  which could limit our ability to invest in mortgage revenue
bonds or to  structure  transactions.  Conversely,  falling  interest  rates may
prompt historical renters to become homebuyers, in turn potentially reducing the
demand for multifamily housing.

Our exposure to interest rate is twofold:

     o    the impact of variable interest rates on our earnings; and
     o    the impact of interest rates on the fair value of our assets.

IMPACT ON EARNINGS

Our  investments  in mortgage  revenue  bonds  generally  bear interest at fixed
rates, or pay interest according to the cash flows of the underlying properties,
which do not fluctuate with changes in market interest rates.

In contrast,  payments required under our variable-rate  securitization programs
fluctuate  with  market  interest  rates based on the SIFMA index and are re-set
weekly or every 35 days. In addition,  we have variable-rate debt related to our
credit and  warehouse  facilities,  with rates based on LIBOR.  Other  long-term
sources of capital,  such as our preferred shares of our subsidiary and our 4.4%
Convertible CRA preferred  shares,  carry a fixed dividend rate and as such, are
not impacted by changes in market interest rates.

Of the June 30, 2007 total amount of our  liabilities  labeled on our  condensed
consolidated  balance sheet as Financing  Arrangements  and Notes Payable,  $1.5
billion is variable rate debt and not hedged via interest rate swap  agreements.
We estimate that an increase of 1.0% in interest rates would decrease our annual
pre-tax income by approximately $15.1 million.

Conversely,  we have large escrow  balances  maintained by our  Commercial  Real
Estate business and we are entitled to the interest earned on those balances.  A
1.0% increase in interest rates would  therefore  increase our pre-tax income by
approximately $1.9 million.

We manage  interest rate risk through the use of interest  rate swaps,  interest
rate caps and forward bond origination commitments, as described in the notes to
our condensed  consolidated  financial  statements.  In addition,  we manage our
exposure by striving for diversification in our businesses to include those less
susceptible to interest rate changes and by managing our leverage.

IMPACT ON VALUATION OF ASSETS

Changes in market  interest  rates would also impact the estimated fair value of
our portfolio of mortgage revenue bonds and CMBS. We estimate the fair value for
each  revenue  bond as the present  value of its  expected  cash flows,  using a
discount  rate for  comparable  tax-exempt  investments.  Therefore,  as  market
interest rates for tax-exempt  investments increase, the estimated fair value of
our mortgage  revenue bonds and CMBS will  generally  decline,  and a decline in
interest  rates would be  expected  to result in an increase in their  estimated
fair values. For example, we estimate that, using the same methodologies used to
estimate the  portfolio  fair value,  a 1% increase in market rates would reduce
the estimated fair value of our portfolio of mortgage  revenue bonds and CMBS by
approximately  $145.6  million and a 1% decrease  would result in an increase of
approximately  $162.7  million.  Changes  in the  estimated  fair  value  of the
mortgage  revenue  bonds and CMBS do not impact our  reported  net  income,  net
income per share, distributions or cash flows, but are reported as components of
accumulated other comprehensive income and affect reported shareholders' equity,
and  may  affect  our  borrowing   capability  to  the  extent  that  collateral
requirements are sometimes based on our asset values.

                                       64
<PAGE>

ITEM 4.  CONTROLS AND PROCEDURES.

(a)      EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

         Our Chief Executive  Officer and Chief Financial Officer have evaluated
         the effectiveness of our disclosure controls and procedures (as defined
         in Rule 13a-15(e) or Rule  15a-15(e) of the Securities  Exchange Act of
         1934,  as  amended  (the  "Exchange  Act")) as of the end of the period
         covered  by this  quarterly  report.  Based  on such  evaluation,  such
         officers have concluded that our disclosure  controls and procedures as
         of the  end  of the  period  covered  by  this  quarterly  report  were
         effective to ensure that information  required to be disclosed by us in
         the reports  that we file or submit under the Exchange Act is recorded,
         processed, summarized and reported within the time periods specified in
         the SEC  rules  and  forms,  and to ensure  that  such  information  is
         accumulated and  communicated  to our  management,  including the Chief
         Executive Officer and Chief Financial Officer, as appropriate, to allow
         timely decisions regarding required disclosure.

         Management's   assessment  does  not  include   internal   controls  at
         Investors,  as the business was acquired in August 2006. This exclusion
         is  considered  appropriate  using  guidance  provided  by  the  SEC in
         "Management's  Report on Internal Control Over Financial  Reporting and
         Certification   of  Disclosure  in  Exchange  Act  Periodic   Reports".
         Management is currently  documenting  the key controls for the business
         processes and application  that may have a material impact on financial
         reporting and will complete its assessment by third quarter of 2007.

         We expect to grow in part through  acquisitions and joint ventures.  To
         the extent we make  acquisitions  or enter into  combinations  or joint
         ventures,  we  face  numerous  risks  and  uncertainties  combining  or
         integrating the relevant businesses and systems,  including the need to
         combine accounting and data processing systems and management  controls
         and to integrate  relationships with clients and business partners.  In
         the case of joint  ventures,  we are  subject to  additional  risks and
         uncertainties  in  that  we may  be  dependent  upon,  and  subject  to
         liability,  losses or reputation damage relating to, systems,  controls
         and personnel that are not under our control. In addition, conflicts or
         disagreements  between us and our joint venture partners may negatively
         impact the benefits to be achieved by the joint venture.

(b)      INTERNAL CONTROL OVER FINANCIAL REPORTING
         The  changes in our  internal  control  over  financial  reporting  (as
         defined in Rules  13a-15(f) and 15d-15(f)  under the Exchange Act) that
         occurred  during the quarter ended June 30, 2007,  that have materially
         affected,  or are reasonably likely to materially  affect, our internal
         control over financial reporting are as follows:

               o    The loan servicing, investor reporting, and asset management
                    functions of the agency portfolio (i.e., Fannie Mae, Freddie
                    Mac, GNMA, and other  investors)  were  transitioned  to our
                    Irving,  Texas  location  along  with  a  conversion  of the
                    servicing database to a new servicing system.
               o    The Corporate  Group revised the approval  authority  policy
                    for  debt  investments,   equity  (including  joint  venture
                    equity)   investments  and  guarantees  made  by  us  and/or
                    acquired  through  exercise  of its  rights  under  a  prior
                    investment, which was approved by the Board of Trustees.
               o    The  Treasury   department  of  the   Corporate   Group  was
                    consolidated across all business segments.
               o    The  Human  Resources  department  and  its  functions  were
                    transitioned to our New York corporate office from TRCLP.

         Management   has   reviewed   these   material   changes  and  obtained
         documentation  from the process  owners in order to conclude that these
         changes do not have a significant  material impact on our controls over
         financial reporting.

                                       65
<PAGE>

                           PART II - OTHER INFORMATION


ITEM 1.   LEGAL PROCEEDINGS.

          Claims have been asserted  against  subsidiaries of the Company in two
          separate but interrelated lawsuits:

               o    Silverwood  Alliance  Apartments,  LLC, et al. v. Affordable
                    Housing  Partnership  Alliance  LLC, et al.  (instituted  in
                    Pierce County  Superior  Court in the State of Washington in
                    July 2005); and

               o    Viewcrest   Bremerton   LLC  v.  Related   Capital   Housing
                    Partnership I, L.P. - Series 3, et al. (instituted in Pierce
                    County  Superior  Court in the State of  Washington  in June
                    2006).

          These  lawsuits  relate to two  properties  for which we have provided
          debt  and  equity   financing,   but  are  associated  with  the  same
          developers.  The lawsuits  allege,  among other things,  (i) breach of
          fiduciary duty; (ii) breach of the implied  covenant of good faith and
          fair dealing; (iii) intentional  misrepresentation,  fraud and deceit;
          (iv) negligent  misrepresentation;  and (v) tortious interference with
          contracts.  One of the lawsuits claims  unspecified  damages while the
          other lawsuit  alleges  damages of at least $10.0 - 15.0 million.  One
          suit  (which  alleges  losses of at least $10  million)  is  currently
          scheduled to commence  trial on June 30, 2008 and the other suit (with
          unspecified  damages claimed) is currently  scheduled for trial in May
          2008.  The parties  have  engaged in  discovery  and have entered into
          settlement  discussions  seeking a global  resolution  of all of these
          disputes. If such a settlement cannot be achieved, we intend to defend
          vigorously against the claims.

          We are subject to routine  litigation and  administrative  proceedings
          arising  in the  ordinary  course  of  business.  Management  does not
          believe that such matters will have a material  adverse  impact on our
          financial position, results of operations or cash flows.

ITEM 1A.  RISK FACTORS.

          1.   In addition to those risk factors disclosed in our filing on Form
               10-K for the year ended  December 31, 2006, we are now subject to
               the   following   additional   risk  as  a  result  of   proposed
               legislation.

               PROPOSED  LEGISLATION  MAY  ADVERSELY  AFFECT OUR  TREATMENT AS A
               PARTNERSHIP  FOR FEDERAL INCOME TAX PURPOSES,  WHICH MAY INCREASE
               OUR TAX LIABILITIES AND LOWER AFTER-TAX RETURNS TO SHAREHOLDERS.

                    Legislation  was  introduced  in the United States Senate on
                    June 14, 2007 (the "Proposed Senate Legislation") and in the
                    United States House of Representatives on June 20, 2007 (the
                    "Proposed House Legislation", and together with the Proposed
                    Senate  Legislation,  the "Proposed  Legislation")  that, if
                    enacted as proposed,  would tax publicly traded partnerships
                    that  directly or indirectly  derive income from  investment
                    adviser or asset management services as corporations.

                    Under the Proposed Legislation, the exception from corporate
                    treatment for a publicly traded  partnership would not apply
                    to any  partnership  that,  directly or indirectly,  has any
                    item  of  income  or  gain   (including   capital  gains  or
                    dividends),  the rights to which are derived  from  services
                    provided by any person as an investment  adviser, as defined
                    in the  Investment  Advisers  Act of  1940,  or as a  person
                    associated  with an investment  adviser,  as defined in that
                    act. Further,  the exception from corporate  treatment would
                    not apply to a partnership that, directly or indirectly, has
                    any  item of  income  or gain  (including  capital  gains or
                    dividends),  the  rights to which  are  derived  from  asset
                    management  services  provided by an investment  adviser,  a
                    person associated with an investment  adviser, or any person
                    related to either,  in  connection  with the  management  of
                    assets with  respect to which  investment  adviser  services
                    were  provided.  For purposes of the  Proposed  Legislation,
                    these  determinations are made without regard to whether the
                    person is  required to  register  as an  investment  adviser
                    under the Investment Advisers Act of 1940.

                                       66
<PAGE>

                    If the  Proposed  Senate  Legislation  were  enacted  in its
                    present  form,  it would  generally be applicable to taxable
                    years of a partnership  beginning on or after June 14, 2007.
                    In the case of a partnership  the interests in which on June
                    14, 2007 were  either  traded on an  established  securities
                    market or readily  tradeable  on a secondary  market (or the
                    substantial equivalent thereof), or which, on or before June
                    14, 2007, filed a registration statement with the Securities
                    and Exchange  Commission  under Section 6 of the  Securities
                    Act,  which was  required  solely  by  reason of an  initial
                    public  offering  of  interests  in  the  partnership,   the
                    Proposed Senate  Legislation  would be applicable to taxable
                    years of such  partnership  beginning  on or after  June 14,
                    2012. If the Proposed House  Legislation were enacted in its
                    present  form,  it would  generally be applicable to taxable
                    years of a partnership  beginning on or after June 20, 2007,
                    with  no   temporary   transitional   relief   for   certain
                    partnerships.

                    If the Proposed Legislation or a similar legislation were to
                    become  law,   it  is  possible   that  we  or  any  of  our
                    subsidiaries  (other than Centerline  Capital Group and CMC,
                    which are  treated  as  corporations)  could be  treated  as
                    publicly traded  partnerships  or associations  taxable as a
                    corporation  for  federal  income tax  purposes.  If we were
                    treated as a corporation  for federal income tax purposes in
                    any  taxable  year,  our  income  and  deductions  would  be
                    reported  only on our tax return  rather  than being  passed
                    through to our shareholders, and we would be required to pay
                    income tax at  corporate  rates on any portion of our income
                    that did not constitute tax exempt income. In this regard, a
                    portion  of our tax  exempt  income  would  be  included  in
                    determining  our  alternative  minimum  tax  liability.  The
                    imposition  of any such tax would  reduce the amount of cash
                    available  to  be  distributed  to  our   shareholders.   In
                    addition,   distributions  to  our  shareholders   would  be
                    ordinary  dividend income to such shareholders to the extent
                    of our  earnings and  profits,  which would  include our tax
                    exempt income as well as any other  taxable  income we might
                    have. Payments of such distributions would not be deductible
                    by us. If any of our  subsidiaries  (other  than  Centerline
                    Capital  Group and CMC,  which are treated as  corporations)
                    were  treated  as  a  corporation  for  federal  income  tax
                    purposes,  rather  than as a  partnership  or a  disregarded
                    entity, similar adverse consequences could result.

          2.   The following  sections of the risk factor titled "THE TAXABILITY
               OF OUR INCOME DEPENDS UPON THE APPLICATION OF TAX LAWS THAT COULD
               BE  CHALLENGED"  were included in our filing on Form 10-K for the
               year  ended  December  31,  2006,  but  are  included  here  with
               clarifications  as to the legal  review of our  mortgage  revenue
               bonds:

               "Substantial User Limitation"

                    Interest  on a mortgage  revenue  bond we own,  other than a
                    bond  the  proceeds  of which  are  loaned  to a  charitable
                    organization  described  in Section  501(c)(3)  of the Code,
                    will not be excluded  from gross income during any period in
                    which we are a "substantial user" of the properties financed
                    with  the  proceeds  of  such  mortgage  revenue  bond  or a
                    "related person" to a "substantial user."

                    A  "substantial  user"  generally  includes  any  underlying
                    borrower  and any  person or entity  that uses the  financed
                    properties on other than a de minimis  basis.  We would be a
                    "related  person" to a  "substantial  user" for this purpose
                    if, among other things,

                      o  the  same  person  or  entity  owned  more  than  a 50%
                         interest in both us and in the properties financed with
                         the  proceeds  of a  bond  owned  by us or  one  of our
                         subsidiaries; or
                      o  we owned a partnership  or similar  equity  interest in
                         the owner of a property financed with the proceeds of a
                         bond owned by us or one of our subsidiaries.

                    Greenberg  Traurig has reviewed most of the mortgage revenue
                    bonds we own, the  ownership of the obligors of our mortgage
                    revenue  bonds  and  the  ownership  of our  shares  and our
                    subsidiaries'  shares, and concurs in the conclusion that we
                    are not "substantial  users" of the properties financed with
                    the  proceeds  of the  mortgage  revenue  bonds  reviewed by
                    Greenberg Traurig, or related parties thereto.  There can be
                    no assurance, however, that the IRS would not challenge such
                    conclusion. If such challenge were successful,  the interest
                    received  on  any  bond  for  which  we  were  treated  as a
                    "substantial  user" or a "related  party"  thereto  would be
                    includable in federally taxable gross income.

                                       67
<PAGE>

                    SECURITIZATION PROGRAMS AND REVENUE PROCEDURE 2003-84

                    Many of the senior interests in securitization programs used
                    by us are held by tax-exempt money-market funds. For various
                    reasons,  money  market  funds  will only  acquire  and hold
                    interests  in  securitization   programs  that  comply  with
                    Revenue Procedure 2003-84, which provides for exemption from
                    Schedule   K-1    reporting    requirements    for   certain
                    partnerships.  Counsel  for the  securitization  programs we
                    currently use has advised us that the  partnerships in those
                    securitization  programs  currently meet the requirements of
                    Revenue Procedure 2003-84.

                    These   partnerships   intend  to  continue  to  meet  those
                    requirements,  which  include an income  test and an expense
                    test,  on an  ongoing  basis.  There  can  be no  assurance,
                    however,  that unforeseen  circumstances  might cause one or
                    more of the  securitization  partnerships to fail either the
                    income  test or the  expense  test,  which would cause these
                    securitization  partnerships  to have to comply  with all of
                    the  requirements  of subchapter K of the Code. In the event
                    one or more of the securitization partnerships was forced to
                    comply with the  provisions  of subchapter K of the Code, it
                    is likely that all of the tax-exempt money market funds that
                    hold the senior  interests  in those  securitizations  would
                    tender their  positions.  This would require the remarketing
                    agent to locate new  purchasers,  which were not  tax-exempt
                    money market funds,  for those  tendered  senior  interests.
                    This  would   probably   result  in  an   increase   in  the
                    distributions to the holders of the senior interests,  which
                    would reduce,  dollar for dollar,  the  distributions on the
                    residual interests in the  securitizations,  which are owned
                    by us through our subsidiaries

ITEM 2.   UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

          Securities purchased by us
          --------------------------

          The following table presents information related to our repurchases of
          our equity  securities  during  the  second  quarter of 2007 and other
          information related to our repurchase program:
<TABLE>
<CAPTION>
                         Purchases of Equity Securities

                         (a)             (b)              (c)                    (d)

                                                     Total number
                                                      of shares
                        Total         Weighted    purchased as part       Maximum number
                      number of        average       of publicly       of shares that may yet
                        shares       price paid    announced plans     be purchased under the
        Period      purchased (1)     per share      or programs        plans or programs (2)
----------------    -------------    ----------   -----------------    ----------------------
<S>                    <C>           <C>                  <C>                         <C>
April 1-30, 2007         280,553     $    18.75             276,569
May 1-31, 2007           471,635          18.47             468,869
June 1-30, 2007          658,310          19.09             657,397
                    -------------    ----------   -----------------

Total                  1,410,498     $    18.82           1,402,835                   325,712
                    =============    ==========   =================    ======================
</TABLE>

(1)  7,663  share  repurchases  were in payment of tax  withholding  obligations
     incurred by holders of newly vested  restricted  shares and were outside of
     our share repurchase program.

(2)  In April 2005, our Board of Trustees  authorized 1.5 million shares for our
     share repurchase  program.  In April 2007, our Board of Trustees authorized
     an additional 1.5 million shares under this program.

ITEM 3.   DEFAULTS UPON SENIOR SECURITIES.  None

                                       68
<PAGE>

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

          We held our annual meeting of  shareholders  on June 13, 2007. Jeff T.
          Blau, Robert A. Meister,  and Robert J. Dolan were elected as trustees
          for  three-year  terms  expiring  in 2010.  Continuing  to serve their
          current terms are the following trustees: Leonard W. Cotton, Robert L.
          Loverd,  Nathan  Gantcher,  Jerome Y.  Halperin,  Janice Cook Roberts,
          Stephen M. Ross,  Marc D.  Schnitzer  and Thomas W.  White.  The three
          individuals  elected, and the number of votes cast for and abstaining,
          with  respect  to each of them,  were as  follows  (no votes were cast
          "against"):

                                                     For       Abstain/Withheld
                                                  ----------   ----------------

               Jeff T. Blau
                 Common Shares                    43,899,774      3,672,052
                 Restricted Common Shares          1,833,287          9,228
                 Special Preferred Voting Shares  13,135,861             --

               Robert A. Meister
                 Common Shares                    45,605,596      1,966,230
                 Restricted Common Shares          1,833,287          9,228
                 Special Preferred Voting Shares  13,135,861             --

               Robert J. Dolan
                 Common Shares                    45,576,608      1,995,218
                 Restricted Common Shares          1,833,287          9,228
                 Special Preferred Voting Shares  13,135,861             --

          At the same meeting,  shareholders  approved our 2007 Incentive  Share
          Plan, which replaced our existing Amended and Restated Incentive Share
          Plan, and ratified Deloitte & Touche LLP as our independent registered
          public accounting firm. Votes cast were as follows:
<TABLE>
<CAPTION>
                                                                                                Broker
                                               For       Abstain/Withheld        Against       Non-votes
                                            ----------   ----------------    -------------    ----------
<S>                                         <C>                 <C>              <C>          <C>
Adoption of the 2007 Incentive Share Plan
  Common Shares                             18,128,555          1,299,015        5,795,379    22,348,877
  Restricted Common Shares                   1,833,287                 --            9,228            --
  Special Preferred Voting Shares           13,135,861                 --               --            --
</TABLE>

<TABLE>
<CAPTION>
                                               For       Abstain/Withheld        Against
                                            ----------   ----------------    -------------
<S>                                         <C>                 <C>              <C>
Ratification of Deloitte & Touche
  Common Shares                             46,053,436          1,021,943          496,447
  Restricted Common Shares                   1,814,916              7,363           20,236
  Special Preferred Voting Shares           13,089,301             46,560               --
</TABLE>


ITEM 5.   OTHER INFORMATION. None

ITEM 6.   EXHIBITS.

          31.1 Certification by the Chief Executive  Officer pursuant to Section
               302 of the Sarbanes-Oxley Act of 2002.*

          31.2 Certification by the Chief Financial  Officer pursuant to Section
               302 of the Sarbanes-Oxley Act of 2002.*

          32.1 Certification by the Chief Executive  Officer and Chief Financial
               Officer  pursuant  to Section  906 of the  Sarbanes-Oxley  Act of
               2002.*

          *    Filed herewith.

                                       69
<PAGE>

                                   SIGNATURES



Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.



                           CENTERLINE HOLDING COMPANY
                                  (Registrant)



Date:  August 9, 2007              By: /s/ Marc D. Schnitzer
                                       ---------------------
                                       Marc D. Schnitzer
                                       Managing Trustee, Chief Executive Officer
                                       and President
                                       (Principal Executive Officer)



Date:  August 9, 2007              By: /s/ Robert L. Levy
                                       ------------------
                                       Robert L. Levy
                                       Chief Financial Officer
                                       (Principal Financial Officer and
                                        Principal Accounting Officer)

                                       70
<PAGE>

                                                                    Exhibit 31.1



      CERTIFICATION BY THE CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302
                        OF THE SARBANES-OXLEY ACT OF 2002



I, Marc D. Schnitzer, hereby certify that:

     1.  I have  reviewed  this  quarterly  report on Form  10-Q for the  period
         ending June 30, 2007 of Centerline Holding Company;

     2.  Based  on my  knowledge,  this  report  does  not  contain  any  untrue
         statement of a material fact or omit to state a material fact necessary
         to make the statements made, in light of the circumstances  under which
         such  statements  were made, not misleading  with respect to the period
         covered by this report;

     3.  Based on my knowledge,  the financial  statements,  and other financial
         information  included in this  report,  fairly  present in all material
         respects the financial condition,  results of operations and cash flows
         of the registrant as of, and for, the periods presented in this report;

     4.  The  registrant's  other  certifying  officer and I are responsible for
         establishing  and  maintaining  disclosure  controls and procedures (as
         defined in Exchange Act Rules  13a-15(e)  and  15d-15(e))  and internal
         control  over  financial  reporting  (as defined in Exchange  Act Rules
         13a-15(f) and 15d-15(f)) for the registrant and have:

         a) Designed such  disclosure  controls and  procedures,  or caused such
         disclosure   controls  and   procedures   to  be  designed   under  our
         supervision, to  ensure  that  material  information  relating  to  the
         registrant,  including its consolidated subsidiaries,  is made known to
         us by others within those entities,  particularly  during the period in
         which this report is being prepared;

         b) Designed such internal control over financial  reporting,  or caused
         such internal control over financial reporting to be designed under our
         supervision,  to provide reasonable assurance regarding the reliability
         of financial reporting and the preparation of financial  statements for
         external  purposes in accordance  with  generally  accepted  accounting
         principles;

         c) Evaluated the effectiveness of the registrant's  disclosure controls
         and procedures and presented in this report our  conclusions  about the
         effectiveness of the disclosure controls and procedures,  as of the end
         of the period covered by this report based on such evaluation; and

         d)  Disclosed  in this report any change in the  registrant's  internal
         control over financial  reporting that occurred during the registrant's
         most  recent  fiscal  quarter  that  has  materially  affected,  or  is
         reasonably  likely to  materially  affect,  the  registrant's  internal
         control over financial reporting; and

     5.  The registrant's other certifying  officer and I have disclosed,  based
         on our most  recent  evaluation  of  internal  control  over  financial
         reporting,  to the registrant's auditors and the audit committee of the
         registrant's  board of trustees (or persons  performing  the equivalent
         functions):

         a) All significant  deficiencies and material  weaknesses in the design
         or operation of internal  control over  financial  reporting  which are
         reasonably  likely to  adversely  affect  the  registrant's  ability to
         record, process, summarize and report financial information; and

         b) Any fraud,  whether or not  material,  that  involves  management or
         other  employees  who  have a  significant  role  in  the  registrant's
         internal control over financial reporting.


         Date:  August 9, 2007                By:  /s/ Marc D. Schnitzer
                                                   ---------------------
                                                   Marc D. Schnitzer
                                                   Chief Executive Officer
                                                   (Principal Executive Officer)

                                       71
<PAGE>

                                                                    Exhibit 31.2



      CERTIFICATION BY THE CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302
                        OF THE SARBANES-OXLEY ACT OF 2002



I, Robert L. Levy, hereby certify that:

     1.  I have  reviewed  this  quarterly  report on Form  10-Q for the  period
         ending June 30, 2007 of Centerline Holding Company;

     2.  Based  on my  knowledge,  this  report  does  not  contain  any  untrue
         statement of a material fact or omit to state a material fact necessary
         to make the statements made, in light of the circumstances  under which
         such  statements  were made, not misleading  with respect to the period
         covered by this report;

     3.  Based on my knowledge,  the financial  statements,  and other financial
         information  included in this  report,  fairly  present in all material
         respects the financial condition,  results of operations and cash flows
         of the registrant as of, and for, the periods presented in this report;

     4.  The  registrant's  other  certifying  officer and I are responsible for
         establishing  and  maintaining  disclosure  controls and procedures (as
         defined in Exchange Act Rules  13a-15(e)  and  15d-15(e))  and internal
         control  over  financial  reporting  (as defined in Exchange  Act Rules
         13a-15(f) and 15d-15(f)) for the registrant and have:

         a) Designed such  disclosure  controls and  procedures,  or caused such
         disclosure   controls  and   procedures   to  be  designed   under  our
         supervision, to  ensure  that  material  information  relating  to  the
         registrant,  including its consolidated subsidiaries,  is made known to
         us by others within those entities,  particularly  during the period in
         which this report is being prepared;

         b) Designed such internal control over financial  reporting,  or caused
         such internal control over financial reporting to be designed under our
         supervision,  to provide reasonable assurance regarding the reliability
         of financial reporting and the preparation of financial  statements for
         external  purposes in accordance  with  generally  accepted  accounting
         principles;

         c) Evaluated the effectiveness of the registrant's  disclosure controls
         and procedures and presented in this report our  conclusions  about the
         effectiveness of the disclosure controls and procedures,  as of the end
         of the period covered by this report based on such evaluation; and

         d)  Disclosed  in this report any change in the  registrant's  internal
         control over financial  reporting that occurred during the registrant's
         most  recent  fiscal  quarter  that  has  materially  affected,  or  is
         reasonably  likely to  materially  affect,  the  registrant's  internal
         control over financial reporting; and

     5.  The registrant's other certifying  officer and I have disclosed,  based
         on our most  recent  evaluation  of  internal  control  over  financial
         reporting,  to the registrant's auditors and the audit committee of the
         registrant's  board of trustees (or persons  performing  the equivalent
         functions):

         a) All significant  deficiencies and material  weaknesses in the design
         or operation of internal  control over  financial  reporting  which are
         reasonably  likely to  adversely  affect  the  registrant's  ability to
         record, process, summarize and report financial information; and

         b) Any fraud,  whether or not  material,  that  involves  management or
         other  employees  who  have a  significant  role  in  the  registrant's
         internal control over financial reporting.


         Date:  August 9, 2007              By: /s/ Robert L. Levy
                                                ------------------
                                                Robert L. Levy
                                                Chief Financial Officer
                                                (Principal Financial Officer and
                                                 Principal Accounting Officer)

                                       72
<PAGE>


                                                                    Exhibit 32.1



        CERTIFICATION UNDER SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
            (UNITED STATES CODE, TITLE 18, CHAPTER 63, SECTION 1350)
                  ACCOMPANYING QUARTERLY REPORT ON FORM 10-Q OF
         CENTERLINE HOLDING COMPANY FOR THE QUARTER ENDED JUNE 30, 2007


In  connection  with the  Quarterly  Report on Form 10-Q of  Centerline  Holding
Company  for the  quarterly  period  ending  June 30,  2007,  as filed  with the
Securities and Exchange  Commission on the date hereof (the  "Report"),  Marc D.
Schnitzer,  as Chief  Executive  Officer of our Company,  and Robert L. Levy, as
Chief Financial Officer of our Company,  each hereby  certifies,  pursuant to 18
U.S.C. Section 1350, that:


    (1) The Report fully  complies  with the  requirements  of Section  13(a) or
15(d), as applicable, of the Securities Exchange Act of 1934; and


    (2) The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of our Company.





By:  /s/ Marc D. Schnitzer                 By:  /s/ Robert L. Levy
     ---------------------                      ------------------
     Marc D. Schnitzer                          Robert L. Levy
     Chief Executive Officer                    Chief Financial Officer
     (Principal Executive Officer)              (Principal Financial Officer and
     August 9, 2007                              Principal Accounting Officer)
                                                August 9, 2007


                                       73