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 MARCH 31, 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
  incorporation or organization)                             Identification No.)


 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  April  30,  2007,  there  were  50,922,631  outstanding  shares  of  the
registrant's shares of beneficial interest.


<PAGE>



                                TABLE OF CONTENTS

                           CENTERLINE HOLDING COMPANY

                                    FORM 10-Q

<TABLE>
<CAPTION>

                                                                                                   PAGE
<S>             <C>          <C>                                                                    <C>
PART I
                Item 1.      Financial Statements                                                    3
                Item 2.      Management's Discussion and Analysis of Financial Condition and
                                 Results of Operations                                              35
                Item 3.      Quantitative and Qualitative Disclosures about Market Risk             48
                Item 4.      Controls and Procedures                                                50

PART II
                Item 1.      Legal Proceedings                                                      51
                Item 1A.     Risk Factors                                                           51
                Item 2.      Unregistered Sales of Equity Securities and Use of Proceeds            51
                Item 3.      Defaults Upon Senior Securities                                        52
                Item 4.      Submission of Matters to a Vote of Security Holders                    52
                Item 5.      Other Information                                                      52
                Item 6.      Exhibits                                                               52

SIGNATURES                                                                                          53

</TABLE>


                                       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>

                                                                                 March 31,     December 31,
                                                                                   2007            2006
                                                                                -----------    -----------
                                                                                (Unaudited)

                                                      ASSETS

<S>                                                                             <C>            <C>
Cash and cash equivalents                                                       $    99,297    $   178,907
Restricted cash                                                                      16,081         14,843
Mortgage revenue bonds-at fair value  (Note 2)                                    2,460,894      2,397,738
Other investments (Note 3)                                                          315,362        338,920
Goodwill and intangible assets, net (Note 4)                                        532,757        542,277
Deferred costs and other assets, net (Note 5)                                       162,084        196,145
Loan to affiliate (Note 15)                                                          10,190         15,000
Investments held by consolidated partnerships (Note 9)                            5,337,259      4,965,907
Other assets of consolidated partnerships (Note 9)                                  972,941      1,038,779
                                                                                -----------    -----------

Total assets                                                                    $ 9,906,865    $ 9,688,516
                                                                                ===========    ===========

                                              LIABILITIES AND EQUITY

Liabilities:
   Financing arrangements (Note 6)                                              $ 1,875,544    $ 1,801,170
   Notes payable (Note 6)                                                           443,540        591,165
   Preferred shares of subsidiary (subject to mandatory repurchase)                 273,500        273,500
   Accounts payable, accrued expenses and other liabilities (Note 8)                203,409        214,344
   Notes payable and other liabilities of consolidated partnerships (Note 9)      2,664,412      2,700,154
                                                                                -----------    -----------

Total liabilities                                                                 5,460,405      5,580,333
                                                                                -----------    -----------

Minority interests in consolidated subsidiaries (Note 10)                           232,559        247,390
                                                                                -----------    -----------
Preferred shares of subsidiary (not subject to mandatory repurchase)                104,000        104,000
                                                                                -----------    -----------
Limited partners' interests in consolidated partnerships                          3,159,062      2,806,661
                                                                                -----------    -----------

Commitments and contingencies (Note 17)

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                                                  92,946         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; 52,892 issued
       and 51,188 outstanding in 2007 and 52,746 issued and 51,343
       outstanding in 2006)                                                         679,558        709,142
   Treasury shares of beneficial interest - common, at cost (1,704 shares in
    2007 and 1,403 shares in 2006)                                                  (33,817)       (28,018)
   Accumulated other comprehensive income                                           107,507         66,863
                                                                                -----------    -----------
Total shareholders' equity                                                          950,839        950,132
                                                                                -----------    -----------

Total liabilities and equity                                                    $ 9,906,865    $ 9,688,516
                                                                                ===========    ===========

</TABLE>

     See accompanying notes to condensed condolidated financial statements.

                                       3
<PAGE>



                   CENTERLINE HOLDING COMPANY AND SUBSIDIARIES
                   CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                                                                Three Months Ended
                                                                                     March 31,
                                                                              ----------------------
                                                                                 2007         2006
                                                                              ---------    ---------
<S>                                                                           <C>          <C>
Revenues:
   Mortgage revenue bond interest                                             $  37,063    $  36,522
   Other interest income                                                         12,557        5,944
   Fee income                                                                    14,635       16,071
   Other revenues                                                                 5,594        5,357
   Revenues of consolidated partnerships (Note 9)                                47,316        8,245
                                                                              ---------    ---------
     Total revenues                                                             117,165       72,139
                                                                              ---------    ---------

Expenses:
   Interest expense                                                              28,302       17,107
   Interest expense of consolidated partnerships (Note 9)                        22,909        6,946
   Interest expense - distributions to preferred shareholders of subsidiary       4,724        4,724
   General and administrative (Note 13)                                          57,424       32,567
   Depreciation and amortization                                                 11,498        8,913
   Loss on impairment of mortgage revenue bonds and other assets (Note 2)        16,447           --
   Other expenses of consolidated partnerships (Note 9)                          23,753       15,281
                                                                              ---------    ---------
     Total expenses                                                             165,057       85,538
                                                                              ---------    ---------

Loss before other income                                                        (47,892)     (13,399)

Other income (loss):
    Equity and other (loss) income                                                 (250)         510
    Gain on sale or repayment of mortgage revenue bonds and other assets          2,379        5,430
    Loss on investments held by consolidated partnerships (Note 9)              (57,600)     (62,149)
                                                                              ---------    ---------

Loss before allocations                                                        (103,363)     (69,608)

Allocations:
   Income allocated to preferred shareholders of subsidiary                      (1,556)      (1,556)
   Minority interests in consolidated subsidiaries, net of tax (Note 10)          6,117       (5,879)
   Loss allocated to partners of consolidated partnerships                       81,111       88,781
                                                                              ---------    ---------

(Loss) income before income taxes                                               (17,691)      11,738
Income tax benefit                                                                2,946        2,919
                                                                              ---------    ---------

Net (loss) income                                                             $ (14,745)   $  14,657
                                                                              =========    =========

Allocation of net (loss) income to:
   4.4% Convertible CRA preferred shareholders                                $   1,188    $   1,188
   Common shareholders                                                          (14,152)      11,962
   Convertible CRA shareholders                                                  (1,781)       1,507
                                                                              ---------    ---------

Total                                                                         $ (14,745)   $  14,657
                                                                              =========    =========

Net (loss) income per share (Note 14):
   Basic and diluted                                                          $    (.27)   $    0.23
                                                                              =========    =========

Weighted average shares outstanding:
   Basic                                                                         57,957       58,578
                                                                              =========    =========
   Diluted                                                                       57,957       58,895
                                                                              =========    =========

Dividends declared per share                                                  $    0.42    $    0.42
                                                                              =========    =========

</TABLE>

     See accompanying notes to condensed condolidated financial statements.

                                       4
<PAGE>



                   CENTERLINE HOLDING COMPANY AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                                                            Three Months Ended March 31,
                                                                            ---------------------------
                                                                                 2007        2006
                                                                              ---------    ---------
<S>                                                                           <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net (loss) income                                                          $ (14,745)   $  14,657
   Adjustments to reconcile net income (loss) to net cash provided by
    operating activities:
       Gain on sale or repayment of mortgage revenue bonds and other assets        (653)        (891)
       Loss on impairment of mortgage revenue bonds and other assets             16,447           --
       Depreciation and amortization                                             11,498        8,913
       Equity in income (loss) of unconsolidated entities                           250         (510)
       Distributions received from equity investees                                  --        1,374
       Income allocated to preferred shareholders of subsidiary                   1,556        1,556
       Income allocated to minority interests in consolidated subsidiaries       (6,117)       5,879
       Non-cash compensation expense                                              9,057        2,035
       Other non-cash expense                                                     3,514        1,342
       Deferred taxes                                                               (54)          --
       Reserves for bad debt                                                     13,642        6,413
   Changes in operating assets and liabilities:
    Mortgage servicing rights                                                    (1,173)      (3,951)
    Mortgage loans held for sale                                                 73,082       95,412
    Loan to affiliate                                                             4,810           --
    Deferred revenues                                                            (2,053)      (2,502)
    Restructuring costs payable                                                    (778)          --
    Receivables                                                                  26,175      (26,793)
    Other assets                                                                    991       (9,178)
    Accounts payable, accrued expenses and other liabilities                    (14,506)     (12,766)
                                                                              ---------    ---------
Net cash provided by operating activities                                       120,943       80,990
                                                                              ---------    ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Acquisition and funding of mortgage revenue bonds                            (28,393)     (60,675)
   Repayments of  mortgage revenue bonds                                          8,001       31,509
   Acquisition of notes receivable                                              (12,155)      (1,250)
   Repayments of notes receivable                                                 3,026          667
   Acquisitions of subsidiaries, net of cash acquired                                --          113
   Advances to partnerships                                                     (32,369)     (28,103)
   Collection of advances to partnerships                                        22,230       38,120
   Deferred investment acquisition costs                                         (1,218)         (46)
   Increase in cash and cash equivalents - restricted                            (1,238)         (94)
   Increase in marketable securities                                            (31,160)          --
   Other investing activities                                                    (6,692)      (1,172)
   Equity investments                                                            (7,391)          --
                                                                              ---------    ---------

Net cash used in investing activities                                           (87,359)     (20,931)
                                                                              ---------    ---------

</TABLE>

                                   (continued)

     See accompanying notes to condensed condolidated financial statements.

                                       5
<PAGE>



                   CENTERLINE HOLDING COMPANY AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                                                       Three Months Ended March 31,
                                                                       ----------------------------
                                                                             2007         2006
                                                                          ---------    ---------
<S>                                                                       <C>          <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
   Distributions to shareholders                                            (26,385)     (25,914)
   Distributions to preferred shareholders of subsidiary                     (1,556)      (1,556)
   Distributions to minority interests in consolidated subsidiaries          (8,883)      (8,916)
   Proceeds from financing arrangements                                     146,800       96,968
   Repayments of financing arrangements                                     (72,426)      (4,701)
   Decrease in notes payable                                               (147,625)    (105,531)
   Minority interest contribution                                             3,225           --
   Retirement of minority interests and special preferred voting shares      (2,803)          --
   Treasury stock purchases                                                  (3,529)          --
   Deferred financing costs                                                     (12)          --
                                                                          ---------    ---------

Net cash used in financing activities                                      (113,194)     (49,650)
                                                                          ---------    ---------

Net (decrease) increase in cash and cash equivalents                        (79,610)      10,409
Cash and cash equivalents at the beginning of the year                      178,907      161,295
                                                                          ---------    ---------

Cash and cash equivalents at the end of the period                        $  99,297    $ 171,704
                                                                          ---------    ---------

Acquisition activity:
   Redemption of preferred stock and advances                                          $   7,170
   Assets acquired                                                                        (8,421)
   Liabilities assumed                                                                     1,364
                                                                                       ---------
Net cash paid for acquisitions                                                         $     113
                                                                                       =========

Non-cash investing and financing activities:
        Share grants issued                                               $   8,998    $   3,662
        Conversion of SCUs to common shares                               $      --    $     358
        Treasury stock purchases via employee withholding                 $   2,270    $     435

</TABLE>

     See accompanying notes to condensed condolidated financial statements.

                                       6
<PAGE>



                   CENTERLINE HOLDING COMPANY AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2007
                                   (UNAUDITED)



NOTE 1 - GENERAL

A. PRINCIPLES OF CONSOLIDATION

Centerline  Holding  Company,  formerly known as  CharterMac,  is a full service
investing  and finance  company with a core focus on real estate.  The unaudited
condensed  consolidated  financial statements include the accounts of Centerline
Holding  Company,  it's 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) ("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  December 31, 2006,  the latest  practical date available (see
Note 9).

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 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  invests  in real  estate
               finance products, including first mortgage loans, B-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 15). It invests in similar  real
               estate  products such as the Direct Loan funds 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
                                 MARCH 31, 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, formerly known as ARCap Investors,  L.L.C.
          ("Investors") and other loans to or investments in entities associated
          with Commercial Real Estate, including AMAC.

     3.   Asset Management, 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
               the CMBS  securitizations  in which  either  we,  or the funds we
               manage, invest; and
          o    Asset management  services to the other  Centerline  segments and
               AMAC.

     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 financial  statements
contain  all  adjustments  (consisting  of only  normal  recurring  adjustments)
necessary to present  fairly the financial  statements  of the interim  periods.
Given the seasonal nature of our business, 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   unaudited   condensed
consolidated  financial  statements be read in conjunction with the consolidated
financial  statements  and notes thereto  included in our Form 10-K for the year
ended  December  31,  2006.  That filing on Form 10-K  contains a summary of our
significant  accounting  policies.  There have been no material changes to these
items since December 31, 2006. New accounting  pronouncements  pending  adoption


                                       8
<PAGE>



                   CENTERLINE HOLDING COMPANY AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2007
                                   (UNAUDITED)



that may have a  significant  impact  on our  unaudited  condensed  consolidated
financial statements are also described below.

We are responsible for the unaudited condensed consolidated financial statements
included  in this  document.  Our  unaudited  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 11 regarding the impact of adoption).

In September 2006, the FASB issued SFAS No. 157, FAIR VALUE MEASUREMENTS,  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.


                                       9
<PAGE>



                   CENTERLINE HOLDING COMPANY AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2007
                                   (UNAUDITED)



NOTE 2 - MORTGAGE REVENUE BONDS

A. SUMMARY

The following table summarizes our mortgage revenue bond portfolio:

<TABLE>
<CAPTION>

                                                 March 31,          December 31,
      (In thousands)                               2007                2006
-------------------------                       -----------         -----------
<S>                                             <C>                 <C>
Amortized cost basis                            $ 2,730,978         $ 2,727,372
Gross unrealized gains                              139,451             101,364
Gross unrealized losses                             (22,869)            (33,670)
                                                -----------         -----------
Subtotal/fair value                               2,847,560           2,795,066
  Less: eliminations (1)                           (386,666)           (397,328)
                                                -----------         -----------
Total fair value                                $ 2,460,894         $ 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>
MARCH 31, 2007

Number of bonds                                 33             70            103
Fair value                                $251,719       $435,767       $687,486
Gross unrealized loss                     $ 11,717       $ 11,152       $ 22,869

                                          --------------------------------------
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
                                 MARCH 31, 2007
                                   (UNAUDITED)



The following summarizes the maturity dates of mortgage revenue bonds we held as
of March 31, 2007:

<TABLE>
<CAPTION>

                                                                          Weighted
                                           Outstanding                     Average
    (Dollars in thousands)                 Bond Amount     Fair Value   Interest Rate
------------------------------             -----------     ----------   -------------
<S>                                        <C>             <C>                <C>
Due in less than one year                  $   16,453      $   16,361         5.97%
Due between one and five years                 61,207          60,248         5.60
Due after five years                        2,671,149       2,770,951         6.61
                                           ----------      ----------      -------
Total / weighted average                    2,748,809       2,847,560         6.58%
                                                                           =======
   Less: eliminations (1)                    (395,763)       (386,666)
                                           ----------      ----------
Total                                      $2,353,046      $2,460,894
                                           ==========      ==========

</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 three months
ended March 31, 2007:

<TABLE>
<CAPTION>

                                                                Weighted         Weighted
                                                                 Average          Average
                                                    Face      Construction       Permanent
         (Dollars in thousands)                    Amount     Interest Rate    Interest Rate
--------------------------------------            --------    -------------    --------------
<S>                                                <C>             <C>              <C>
Construction/rehabilitation properties             $20,142         6.50%            5.70%
Lease up properties                                  7,100         6.40             6.40
Additional funding of existing bonds                 1,151         6.00             6.00
                                                   -------      -------          -------
    Total                                          $28,393         6.45%            5.88%
                                                   =======      =======          =======

</TABLE>

The following table  summarizes  mortgage  revenue bonds repaid during the three
months ended March 31, 2007:

<TABLE>
<CAPTION>

                                              Net Book                  Realized
           (In thousands)                      Value       Proceeds       Loss
---------------------------------             --------     --------     --------
<S>                                            <C>          <C>          <C>
Non-participating, not stabilized              $2,627       $2,622       $   (5)

</TABLE>

C. SECURITIZED OR PLEDGED ASSETS

At March 31, 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  $386.7
million are eliminated in consolidation as noted in the tables above.

D. IMPAIRMENT

During 2007, we recognized  approximately $16.4 million of mortgage revenue bond
impairment  charges.  Of this amount,  $13.7 million is related to the change in
our strategy in recovering  investments associated with troubled developers (see
discussion  under  PRC/CRG/ERC in Note 17). The change in strategy,  while still
not  finalized,  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  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.


                                       11
<PAGE>



                   CENTERLINE HOLDING COMPANY AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2007
                                   (UNAUDITED)



Two 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>

                                                             March 31,  December 31,
                     (In thousands)                            2007        2006
------------------------------------------------------       --------   -----------
<S>                                                          <C>         <C>
Equity Method Investments
   Investment in equity interests in LIHTC properties        $ 63,219    $ 53,492
   Co-investment in commercial real estate equity fund          3,448       3,066
Available for Sale
   Resecuritization certificates                               98,980     102,357
   Marketable securities                                       31,758       1,465
Other
   Mortgage loans held for sale                                49,377     122,459
   Notes receivable                                            60,946      46,477
   Other investments                                            7,634       9,604
                                                             --------    --------
            Total other investments                          $315,362    $338,920
                                                             ========    ========

</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 March 31,  2007,
approximately  $19.8  million  of  these  investments  were  guaranteed  by  the
developers.

B. CO-INVESTMENT IN COMMERCIAL REAL ESTATE EQUITY FUND

Centerline  Urban Capital I, LLC,  formerly known as CharterMac  Urban Capital I
LLC  ("CUC"),  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.


                                       12
<PAGE>



                   CENTERLINE HOLDING COMPANY AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2007
                                   (UNAUDITED)



C. RESECURITIZATION CERTIFICATES

Resecuritization  certificates  pertain to retained  investments in trusts which
hold CMBS investments and which were sponsored by Investors.  Those we hold (not
including  the  certificates  held at the fund  level  detailed  in Note 9) were
comprised of the following as of March 31, 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                $     --      $ 15,704      $ 20,602        20.81 %
   AAA                                26,150        13,702        25,397        25.66
   BBB+                               12,536         5,083         9,127         9.22
   BBB                                 9,402         3,468         6,214         6.28
   BBB-                                9,402         2,644         5,664         5.72
   BB+                                24,454         8,033        12,705        12.84
   BB                                  8,501         2,015         3,544         3.58
   BB-                                11,635         2,083         4,145         4.19
   B+                                 13,273         2,167         2,920         2.95
   B                                  11,486         1,104         1,805         1.82
   B-                                 11,635           951         1,671         1.69
   Non-rated                          59,365         3,390         4,671         4.72
   Non-rated interest only                --           427           515         0.52
                                    --------      --------      --------     --------
                                    $197,839      $ 60,771      $ 98,980       100.00 %
                                    ========      ========      ========     ========

</TABLE>

At March 31, 2007, the AAA interest only  certificate  had a notional  amount of
$539.6  million and the  non-rated  interest  only  certificates  had a combined
notional amount of $196.5 million.

Fair  value of the  resecuritization  certificates  is  determined  assuming  no
defaults on the underlying  collateral  loans and according to the payment terms
of the underlying loans,  which generally do not allow prepayment  without yield
maintenance  except during the last three months of a loan.  The discount  rates
take into account any risk of default.  The  remaining key  assumptions  used in
measuring fair value at the resecuritization date were as follows:

<TABLE>
<CAPTION>

                                   Face Amount at      Fair Value at      Weighted      Discount Rate
                                  Resecuritization   Resecuritization   Average Life   Applied to Cash
  (Dollars in thousands)               Date               Date             (yrs)            Flows
--------------------------        ----------------   ----------------   ------------   ---------------
<S>                                   <C>               <C>                <C>             <C>
Security rating:
 AAA interest only                    $     --          $ 29,827              --            8.19%
 AAA                                    26,150            26,180            8.73            6.14
 BBB+                                   12,536             9,900           11.27            9.76
 BBB                                     9,402             6,830           11.78           11.01
 BBB-                                    9,402             6,291           12.16           12.26
 BB+                                    24,454            13,202           11.87           13.78
 BB                                      8,501             3,765           12.36           17.21
 BB-                                    11,635             4,283           12.65           19.86
 B+                                     13,273             2,878           12.34           29.72
 B                                      11,486             1,832           12.83           40.55
 B-                                     11,635             1,708           13.03           43.51
 Non-rated                             131,397            15,139           14.79           53.94
 Non-rated interest only                    --               839              --           36.36
                                      --------          --------       ---------       ---------
Total                                 $269,871          $122,674
                                      ========          ========

</TABLE>

At the  resecuritization  date, the AAA interest only certificate had a notional
amount of $545.4  million and the  non-rated  interest only  certificates  had a
combined notional amount of $197.5 million.


                                       13
<PAGE>



                   CENTERLINE HOLDING COMPANY AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2007
                                   (UNAUDITED)



At  March  31,  2007,  the   sensitivity  of  the  current  fair  value  of  the
resecuritization certificates to potential adverse changes was as follows:

<TABLE>
<CAPTION>

                                                         Expected        Discount Rate Applied
                                                       Credit Loss           to Cash Flows
                                                    ------------------   ---------------------
                                         Weighted                           1.0%        2.0%
                                          Average      1%         2%      Adverse     Adverse
 (Dollars in thousands)    Fair Value   Life (yrs)  CDR (1)    CDR (1)     Change      Change
------------------------   ----------   ----------  -------    -------    --------    -------
<S>                         <C>            <C>       <C>       <C>          <C>       <C>
Security rating:
AAA interest only           $20,602         5.90      0.78 %     0.27 %    (2.59)%     (4.07)%
AAA                          25,397         8.99     (0.67)     (0.88)     (6.56)     (12.59)
BBB+                          9,127        11.50     (1.15)     (7.30)     (7.15)     (13.63)
BBB                           6,214        11.67     (1.50)    (51.72)     (6.98)     (13.31)
BBB-                          5,664        11.73     (3.07)    (59.80)     (6.77)     (12.92)
BB+                          12,705        11.03     (5.12)    (60.70)     (6.43)     (12.31)
BB                            3,544        11.49     (7.60)    (65.04)     (5.96)     (11.39)
BB-                           4,145        11.65    (10.56)    (63.53)     (5.49)     (10.51)
B+                            2,920        11.41     (7.72)    (55.12)     (4.86)      (9.33)
B                             1,805        12.26    (13.21)    (46.66)     (3.44)      (6.64)
B-                            1,671        12.56    (20.40)    (47.46)     (3.00)      (5.82)
Non-rated                     4,671           --    (31.07)    (45.75)     (2.01)      (3.93)
Non-rated interest only         515         7.97    (51.25)    (57.68)     (1.88)      (3.16)
                            -------

Total                       $98,980
                            =======

</TABLE>

(1) Constant Default Rate

The coupon  interest rates on the principal  classes range from 4.0% to 5.7% and
range from 0.1% to 1.1% on the interest  only  classes.  During the three months
ended March 31, 2007, we received  approximately $4.9 million of interest income
from retained resecuritization certificates.

Delinquencies   on  the  collateral   loans   underlying  the   resecuritization
certificates totaled 0.4% at March 31, 2007. At March 31, 2007, actual losses to
date were 8.0% of the original pool balances, and projected remaining losses are
estimated at 13.2% of the original pool balances.

D. MARKETABLE SECURITIES

Marketable  securities at March 31, 2007,  primarily represent the investment of
cash balances at Centerline  Financial LLC  ("Centerline  Financial"),  formerly
known as Centerbrook Financial LLC, our Credit Risk Products subsidiary.

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  at March 31,  2007,  primarily  represent  the fair  value of
investments in first-mortgage and mezzanine loans originated through Investors.


                                       14
<PAGE>



                   CENTERLINE HOLDING COMPANY AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2007
                                   (UNAUDITED)



NOTE 4 - GOODWILL AND INTANGIBLE ASSETS, NET

Goodwill and intangible assets consisted of the following:

<TABLE>
<CAPTION>

                                                  March 31,        December 31,
        (In thousands)                              2007               2006
------------------------------                   ----------        -----------
<S>                                               <C>               <C>
Goodwill                                          $344,974          $345,806
Other intangible assets, net                       123,605           127,686
Mortgage servicing rights, net                      64,178            68,785
                                                  --------          --------

Total                                             $532,757          $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 March 31, 2007                                             $ 344,974
                                                                      =========

</TABLE>

The  addition  to  goodwill  relates to the  adoption  of FIN 48 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
10), as the deferred tax impact of such redemptions served to effectively reduce
the purchase price of the subsidiary of which they were issued to finance.

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
---------------------------------------   ---------- -----------------------   -----------------------   ------------------------
                                                     March 31,   December 31,  March 31,   December 31,  March 31,   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     $ 27,698      $ 25,590     $ 75,302     $ 77,410
  Partnership service contracts                9.4     47,300       47,300       17,868        16,604       29,432       30,696
  General partner interests                    8.5      6,016        6,016        1,955         1,774        4,061        4,242
  Joint venture developer relationships        5.0      4,800        4,800        3,155         2,915        1,645        1,885
  Internally developed software                3.0      1,390        1,390          279           163        1,111        1,227
  Mortgage banking broker relationships        5.0      1,080        1,080          450           396          630          684
  Other identified intangibles                 9.3      4,427        4,427        3,776         3,658          651          769
                                           -------   --------     --------     --------      --------     --------     --------
Weighted average life/subtotal                13.6    168,013      168,013       55,181        51,100      112,832      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     $ 55,181      $ 51,100     $123,605     $127,686
                                                     ========     ========     ========      ========     ========     ========

</TABLE>


                                       15
<PAGE>



                   CENTERLINE HOLDING COMPANY AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2007
                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                                        Three Months Ended
   (In thousands)                                            March 31,
--------------------                                    ------------------
                                                         2007        2006
                                                        ------      ------
<S>                                                     <C>         <C>
Amortization expense                                    $4,081      $3,924
                                                        ======      ======

</TABLE>

The amortization of "other identified  intangibles"  (approximately $472,000 per
year) is included as a reduction  to mortgage  revenue bond  interest  income as
they pertain to the acquisition of such bond investments.

NOTE 5 - DEFERRED COSTS AND OTHER ASSETS

The components of deferred costs and other assets were as follows:

<TABLE>
<CAPTION>

                                                                             March 31,   December 31,
                             (In thousands)                                    2007          2006
--------------------------------------------------------------------------   ---------   ------------
<S>                                                                          <C>          <C>
Deferred financing and other costs                                           $  33,834    $  32,472
Less: Accumulated amortization                                                  (7,376)      (6,718)
                                                                             ---------    ---------

Net deferred costs                                                              26,458       25,754

Real estate owned, net of accumulated depreciation of $1.5 million in 2007
   and $1.3 million in 2006                                                     41,440       41,743
Interest receivable                                                             22,305       23,606
Fees receivable, net                                                            13,772       23,313
Deposits receivable                                                             17,915       18,863
Due from unconsolidated partnerships, net                                        9,156       31,466
Furniture, fixtures and leasehold improvements, net                              9,108        8,502
PRS/CRG/ERC advances, net                                                        5,468       13,780
Income taxes receivable                                                          7,439          714
Interest rate swaps at fair value (Note 7)                                       1,554        2,236
Other                                                                            7,469        6,168
                                                                             ---------    ---------

Total                                                                        $ 162,084    $ 196,145
                                                                             =========    =========

</TABLE>

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 17). The above balances are net
of eliminations  with liabilities of consolidated  partnerships of $26.9 million
at March 31, 2007, and $24.3 million at December 31, 2006.

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 and
our corporate  revolver relates to the level of origination  activity,  which is
typically  higher at the end of a year than at the end of the first quarter (see
also Note 3).


                                       16
<PAGE>



                   CENTERLINE HOLDING COMPANY AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2007
                                   (UNAUDITED)



NOTE 7 - DERIVATIVE INSTRUMENTS

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 Bond Market  Association  Municipal Swap Index ("BMA")
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 BMA or
LIBOR index.

At  inception,  we  designate  these swaps as hedging  instruments  in cash flow
hedges with the hedging  relationships item being the variable interest payments
on our floating  rate debt.  We assess both at the inception of the hedge and on
an ongoing basis whether the swap agreements are effective in offsetting changes
in the  cash  flows  of the  hedged  financing.  Amounts  in  accumulated  other
comprehensive  income  will be  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 March 31,
Counterparty                            (in millions)        Inception Date     Expiration Date      Rate
--------------------------------------------------------------------------------------------------------------
                                      2007         2006
                                    --------     --------
<S>                                   <C>          <C>        <C>                <C>                 <C>
CASH FLOW HEDGES:
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           --     August 2006        August 2009         5.25%
Bank of America                        100.0        100.0     January 2005       January 2010        3.265%
                                    --------     --------
   Subtotal cash flow hedges           725.0        450.0
                                    --------     --------
FAIR VALUE SWAP:
Bank of America                           --         26.0     November 2005      November 2014       4.92%
                                    --------     --------
Total                                 $725.0       $476.0
                                    ========     ========

</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 swaps in the  hedging  relationships  experienced  some
ineffectiveness.  We recorded  ineffectiveness of approximately  $200,000 during
the first quarters of 2006 and 2007.

In the first  quarter of 2006, we also 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 in the second quarter of 2006.  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 net income.


                                       17
<PAGE>



                   CENTERLINE HOLDING COMPANY AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2007
                                   (UNAUDITED)



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>

                                                        March 31,      December 31,
     (In thousands)                                       2007            2006
----------------------                                  --------       -----------
<S>                                                      <C>              <C>
Net liability position                                   $3,406           $1,997
Net asset position                                       $1,554           $2,236

</TABLE>

Interest expense included the following expense (income) related to our swaps:

<TABLE>
<CAPTION>

                                                                Three months ended
                                                                    March 31,
                                                                ------------------
                       (In thousands)                             2007     2006
-------------------------------------------------------------    ------   ------
<S>                                                              <C>      <C>
Interest expense                                                 $ 695    $  96
Interest income                                                   (688)    (181)
Change in fair value of free  standing  swap assigned to AMAC       --     (750)
                                                                 -----    -----

Total                                                            $   7    $(835)
                                                                 =====    =====

</TABLE>

We estimate that  approximately $2.2 million of the net unrealized gain included
in accumulated  other  comprehensive  income will reduce interest expense within
the next twelve months.

Certain of our consolidated  partnerships also had interest rate swaps accounted
for as hedges as of March 31, 2007 (see Note 9).

NOTE 8 - ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER LIABILITIES

Accounts  payable,  accrued  expenses  and other  liabilities  consisted  of the
following:

<TABLE>
<CAPTION>

                                                           March 31,   December 31,
                  (In thousands)                             2007         2006
-----------------------------------------------            ---------   -----------
<S>                                                        <C>          <C>
Deferred revenues                                          $ 90,108     $ 92,564
Distributions payable                                        41,603       41,554
Accounts payable                                             13,877       18,626
Salaries and benefits                                        23,973       29,551
Accrued fund organization and offering expenses               9,228       11,860
Escrow/deposits payable                                       3,845        5,570
Accrued interest payable                                      7,010        5,825
Interest rate swaps at fair value (Note 7)                    3,406        1,997
Restructuring accrual                                           350        1,128
FIN 48 liability (Note 11)                                    2,085           --
Other                                                         7,924        5,669
                                                           --------     --------

Total                                                      $203,409     $214,344
                                                           ========     ========

</TABLE>


                                       18
<PAGE>



                   CENTERLINE HOLDING COMPANY AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2007
                                   (UNAUDITED)



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>

        (In thousands)                                                   Total
------------------------------                                          -------
<S>                                                                     <C>
Employee termination costs
   Balance at January 1, 2007                                           $   964
   Additions                                                                259
   Payments                                                              (1,034)
                                                                        -------
   Balance at March 31, 2007                                                189
                                                                        -------

Lease termination costs
   Balance at January 1, 2007                                               164
   Payments                                                                  (3)
                                                                        -------
   Balance at March 31, 2007                                                161
                                                                        -------

Total                                                                   $   350
                                                                        =======

</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 (3.3 years).


                                       19
<PAGE>



                   CENTERLINE HOLDING COMPANY AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2007
                                   (UNAUDITED)



NOTE 9 - CONSOLIDATED PARTNERSHIPS

Consolidated partnerships consist of four groups:

     o    Funds we manage to acquire LIHTC equity ("LIHTC Partnerships");
     o    Property  level  partnerships  for which we have  assumed  the role of
          general partner ("Property Partnerships");
     o    Funds we manage which invest in CMBS and  associated  resecuritization
          trusts ("CMBS Partnerships"); and
     o    A fund we manage which invests in real estate debt  products  ("Direct
          Loan Partnership").

Financial information for the LIHTC and Property Partnerships are as of December
31, 2006, the latest  practical date.  Information  with respect to the CMBS and
Direct Loan Partnerships is as of March 31, 2007.

Assets and liabilities of consolidated  partnerships  consisted of the following
at:

<TABLE>
<CAPTION>

                                                           March 31, 2007                        December 31, 2006
                                               --------------------------------------  --------------------------------------
                                                LIHTC and     CMBS and                  LIHTC and      CMBS and
                                                 Property    Direct Loan                 Property    Direct Loan
                (In thousands)                 Partnerships  Partnerships     Total    Partnerships  Partnerships     Total
---------------------------------------------  ------------  ------------  ----------  ------------  ------------  ----------
<S>                                             <C>           <C>          <C>          <C>           <C>          <C>
Investments in property partnerships            $3,582,019    $       --   $3,582,019   $3,546,208    $       --   $3,546,208
Investments in CMBS - available for sale                --       942,487      942,487           --       719,645      719,645
Investments in resecuritization
   certificates  - available for sale                   --       597,638      597,638           --       597,491      597,491
Notes receivable                                        --       213,722      213,722           --       101,156      101,156
Other investments                                       --         1,393        1,393           --         1,407        1,407
                                                ----------    ----------   ----------   ----------    ----------   ----------
Investments held by consolidated partnerships    3,582,019     1,755,240    5,337,259    3,546,208     1,419,699    4,965,907
                                                ----------    ----------   ----------   ----------    ----------   ----------

Land, buildings and improvements, net
   of accumulated depreciation                     543,248            --      543,248      576,171            --      576,171
Cash                                               257,516        16,428      273,944      277,860        27,213      305,073
Other assets                                       114,982        40,767      155,749      123,890        33,645      157,535
                                                ----------    ----------   ----------   ----------    ----------   ----------
Other assets of consolidated partnerships          915,746        57,195      972,941      977,921        60,858    1,038,779
                                                ----------    ----------   ----------   ----------    ----------   ----------

Total assets                                    $4,497,765    $1,812,435   $6,310,200   $4,524,129    $1,480,557   $6,004,686
                                                ==========    ==========   ==========   ==========    ==========   ==========

Financing arrangements                          $       --    $  687,742   $  687,742   $       --    $  709,219   $  709,219
Notes payable                                      569,590        81,500      651,090      594,477            --      594,477
Due to property partnerships                       811,540            --      811,540      925,301            --      925,301
Repurchase agreements                                   --       301,284      301,284           --       243,955      243,955
Other liabilities                                  199,803        12,953      212,756      215,628        11,574      227,202
                                                ----------    ----------   ----------   ----------    ----------   ----------

Total liabilities                               $1,580,933    $1,083,479   $2,664,412   $1,735,406    $  964,748   $2,700,154
                                                ==========    ==========   ==========   ==========    ==========   ==========

</TABLE>

A. INVESTMENTS IN PROPERTY PARTNERSHIPS AND DUE TO PROPERTY PARTNERSHIPS

The LIHTC Partnerships invest in property level partnerships that neither we nor
the LIHTC  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 capital  commitments of the LIHTC  Partnerships in those property
partnerships  that have not yet been spent. As those  commitments are spent, the
"investments in property partnerships" balance increases.


                                       20
<PAGE>



                   CENTERLINE HOLDING COMPANY AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2007
                                   (UNAUDITED)



B. INVESTMENTS IN CMBS

The CMBS Partnerships invest in and hold CMBS Investments. Such investments held
by these partnerships were comprised of the following as of March 31, 2007:

<TABLE>
<CAPTION>


                                                                         Percentage of
(Dollars in thousands)           Face       Accreted Cost   Fair Value     Fair Value
----------------------        ----------    -------------   ----------   -------------
<S>                           <C>            <C>            <C>              <C>
Security rating:
   BBB-                       $  117,693     $  111,425     $  110,963        11.77 %
   BB+                           169,317        147,805        148,908        15.80
   BB                            179,516        150,649        151,825        16.11
   BB-                           196,490        141,077        144,374        15.32
   B+                            103,754         68,638         69,906         7.42
   B                              95,078         55,354         57,405         6.09
   B-                            141,610         69,257         76,850         8.15
   Non-rated                     492,455        166,497        182,256        19.34
                              ----------     ----------     ----------     --------
                              $1,495,913     $  910,702     $  942,487       100.00 %
                              ==========     ==========     ==========     ========

</TABLE>

C. INVESTMENTS IN RESECURITIZATION CERTIFICATES

The CMBS  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 March 31, 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     $106,545      $109,783       18.37 %
   AA                                    66,600       64,276        66,018       11.05
   A                                     47,000       45,174        47,097        7.88
   A-                                    23,900       24,043        24,421        4.09
   BBB+                                 101,338       96,636        98,980       16.56
   BBB                                   55,381       50,558        51,932        8.69
   BBB-                                 121,294      114,159       118,102       19.76
   BB+                                   47,820       21,856        31,249        5.23
   BB                                    12,158        4,935         7,078        1.18
   BB-                                   12,157        4,443         6,369        1.07
   B+                                    21,073        6,834         9,806        1.64
   B                                     11,348        2,613         3,771        0.63
   B-                                    12,158        2,107         3,058        0.51
   Non-rated                            180,960        9,765        16,220        2.71
   Non-rated interest only                   --        4,987         3,754        0.63
                                       --------     --------      --------     -------
                                       $825,087     $558,931      $597,638      100.00 %
                                       ========     ========      ========     =======

</TABLE>

At March 31, 2007, the non-rated  certificates had a combined notional amount of
$1.4 billion.

The  following  tables  and  discussion  relate  only to those  resecuritization
certificates  associated with assets sold by the CMBS  Partnerships that met the
sale requirements of SFAS No. 140.

                                       21
<PAGE>



                   CENTERLINE HOLDING COMPANY AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2007
                                   (UNAUDITED)



Fair  value of the  resecuritization  certificates  is  determined  assuming  no
defaults on the underlying  collateral  loans and according to the payment terms
of the underlying loans,  which generally do not allow prepayment  without yield
maintenance  except during the last three months of a loan.  The discount  rates
take into account any risk of default.  The  remaining key  assumptions  used in
measuring fair value at the resecuritization date were as follows:

<TABLE>
<CAPTION>

                                                                                 Weighted      Discount Rate
                                    Face Amount at          Fair Value at         Average     Applied to Cash
 (Dollars in thousands)         Resecuritization Date   Resecuritization Date    Life (yrs)        Flows
------------------------        ---------------------   ---------------------   ------------  ---------------
<S>                                   <C>                     <C>                  <C>             <C>
Security rating:
 BB+                                  $ 47,820                $ 29,599              9.90            9.80%
 BB                                     12,158                   6,671             10.32           11.20
 BB-                                    12,157                   5,991             10.45           12.50
 B+                                     21,073                   9,210             10.79           13.90
 B                                      11,348                   3,520             11.06           18.70
 B-                                     12,158                   2,853             11.20           23.20
 Non-rated                             186,416                  16,493             12.83           49.40
 Non-rated interest only                    --                   2,080              9.06           63.20
                                      --------                --------
Total                                 $303,130                $ 76,417
                                      ========                ========

</TABLE>

At the resecuritization date, the non-rated certificates had a combined notional
amount of $648.4 million.

At  March  31,  2007,  the   sensitivity  of  the  current  fair  value  of  the
resecuritization certificates to potential adverse changes is as follows:

<TABLE>
<CAPTION>

                                                                  Expected                Discount Rate Applied to
                                                                 Credit Loss                     Cash Flows
                                                          --------------------------     --------------------------
                                            Weighted                                        1.0%            2.0%
                                 Fair        Average         1.0%             2.0%        Adverse         Adverse
 (Dollars in thousands)          Value      Life (yrs)     CDR (1)          CDR (1)        Change          Change
------------------------        -------     ----------    ---------        ---------     ----------      ----------
<S>                             <C>           <C>          <C>              <C>            <C>             <C>
Security rating:
BB+                             $31,249        9.90         (4.40)%         (75.60)%       (7.20)%         (13.70)%
BB                                7,078       10.32         (5.90)          (75.20)        (7.20)          (13.70)
BB-                               6,369       10.45         (7.80)          (73.90)        (7.00)          (13.40)
B+                                9,806       10.79         (9.30)          (72.40)        (6.90)          (13.20)
B                                 3,771       11.06        (12.10)          (66.40)        (6.20)          (11.80)
B-                                3,058       11.20        (13.80)          (60.30)        (5.40)          (10.40)
Non-rated                        16,220       12.83        (24.40)          (40.40)        (2.10)           (4.20)
Non-rated interest only             994        9.06        (65.60)          (65.60)        (3.10)           (3.10)
                                -------
Total                           $78,545
                                =======

</TABLE>

(1) Constant Default Rate

The  coupon  interest  rate on the  principal  classes  is 4.0%  and 0.2% on the
interest  only class.  During the three months  ended March 31,  2007,  the CMBS
Partnerships  received  approximately  $3.2  million  of  interest  income  from
retained resecuritization certificates.

Delinquencies   on  the  collateral   loans   underlying  the   resecuritization
certificates totaled 0.4% at March 31, 2007. At March 31, 2007, actual losses to
date were 0.8% of the original pool balance,  and projected remaining losses are
estimated at 24.3% of the original pool balance.


                                       22
<PAGE>



                   CENTERLINE HOLDING COMPANY AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2007
                                   (UNAUDITED)



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 March 31, 2007 were
as follows:

<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        $ 15,000     $  2,552          5.54 %       --       8.32 %
Bridge loans, fixed rate             25,696       25,696          9.48       7.07 %       --
B-notes, variable rate               40,000       32,504         14.77         --       9.64
B-notes, fixed rate                  27,985       23,208         10.33       7.93         --
Mezzanine loans, variable rate      141,748      108,336         43.09         --       8.87
Mezzanine loans, fixed rate          45,492       21,426         16.79      10.21         --
                                   --------     --------       -------    -------    -------
Total / Average                    $295,921     $213,722        100.00%      8.40 %     8.94 %
                                   ========     ========       =======    =======    =======

</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 March 31,
                                                       ---------------------------
           (In thousands)                                  2007            2006
------------------------------------                     --------        --------
<S>                                                      <C>             <C>
Rental income                                            $12,151         $ 6,271
Interest and other income                                 35,165           1,974
                                                         -------         -------

Total revenues                                           $47,316         $ 8,245
                                                         =======         =======

Interest expense                                         $22,909         $ 6,946

Asset management fees                                      6,339           4,635
Property operating expenses                                4,989           3,397
General and administrative expenses                        5,794           3,389
Depreciation and amortization                              5,889           3,376
Other expenses                                               742             484
                                                         -------         -------
   Subtotal                                               23,753          15,281
                                                         -------         -------

Total expenses                                           $46,662         $22,227
                                                         =======         =======

</TABLE>


                                       23
<PAGE>



                   CENTERLINE HOLDING COMPANY AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2007
                                   (UNAUDITED)



NOTE 10 - MINORITY INTERESTS IN CONSOLIDATED SUBSIDIARIES

Minority interests in consolidated subsidiaries consisted of the following:

<TABLE>
<CAPTION>

                                                       March 31,      December 31,
         (In thousands)                                  2007             2006
---------------------------------                     ----------      ------------
<S>                                                    <C>              <C>
Convertible Special Common Units
   ("SCUs") of a subsidiary                            $213,563         $231,262
Convertible Special Membership
   Units ("SMUs") of a subsidiary                         4,952            5,110
Convertible Special Common
   Interests ("SCIs") of a
   subsidiary                                             4,565            4,758
Other                                                     9,479            6,260
                                                       --------         --------

Total                                                  $232,559         $247,390
                                                       ========         ========

</TABLE>

Income (loss) allocated to minority interests, net of tax, was as follows:

<TABLE>
<CAPTION>

                                                    Three Months Ended
                                                         March 31,
                                                  -----------------------
   (In thousands)                                   2007           2006
--------------------                              --------       --------
<S>                                               <C>            <C>
SCUs                                              $(5,956)       $ 5,729
SMUs                                                  (79)           150
SCIs                                                  (76)            --
Other                                                  (6)            --
                                                  -------        -------

Total                                             $(6,117)       $ 5,879
                                                  =======        =======

</TABLE>

A. SCUS

During 2007,  the holder of 132,000 SCUs  redeemed the units,  for which we paid
approximately  $2.8  million in cash.  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 March 31,  2007,  primarily  represent  the 10%
interest in Centerline  Financial  Holdings LLC,  formerly  known as Centerbrook
Holdings LLC ("CFH") owned by Natixis Capital Markets Inc. ("Natixis") (formerly
IXIS Capital Markets North America, Inc.).

NOTE 11 - 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 March 31, 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


                                       24
<PAGE>



                   CENTERLINE HOLDING COMPANY AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2007
                                   (UNAUDITED)



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.

NOTE 12 - COMPREHENSIVE INCOME

Comprehensive income was as follows:

<TABLE>
<CAPTION>

                                                                          Three months Ended
                                                                               March 31,
                                                                       -----------------------
                          (In thousands)                                 2007          2006
------------------------------------------------------------------     ---------     ---------
<S>                                                                    <C>           <C>
Net (loss) income                                                      $(14,745)     $ 14,657
Net unrealized (loss) gain on interest rate derivatives                  (1,063)          591
Net unrealized gain (loss) on marketable and equity securities               17          (285)
Net unrealized loss on other investments                                 (1,793)           --
Net unrealized gain (loss) on mortgage revenue bonds:
   Unrealized gain (loss) during the period                              44,135       (13,685)
   Reclassification adjustment for net gain included in net income         (653)         (891)
                                                                       --------      --------
Comprehensive income                                                   $ 25,898      $    387
                                                                       ========      ========

</TABLE>

NOTE 13 - GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative expenses consisted of the following:

<TABLE>
<CAPTION>

                                                           Three Months Ended
                                                               March 31,
                                                        ------------------------
         (In thousands)                                   2007            2006
--------------------------------                        --------        --------
<S>                                                     <C>              <C>
Salaries and benefits                                   $36,860          $19,902
Other general and administrative                         20,564           12,665
                                                        -------          -------

Total                                                   $57,424          $32,567
                                                        =======          =======

</TABLE>

NOTE 14 - 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.


                                       25
<PAGE>



                   CENTERLINE HOLDING COMPANY AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2007
                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                           Three Months Ended March 31, 2007    Three Months Ended March 31, 2006
                                          -----------------------------------   ---------------------------------
(In thousands, except per share amounts)    Income      Shares      Per Share    Income       Shares    Per Share
----------------------------------------  ----------   --------     ---------   ---------   ---------   ---------
<S>                                       <C>             <C>       <C>         <C>            <C>      <C>
 Net (loss) income                        $  (14,745)                           $  14,657
 Preferred dividends                           1,188                                1,188
                                          ----------                            ---------
 Net (loss) income allocable to              (15,933)     57,957    $   (0.27)     13,469      58,578   $    0.23
   shareholders (Basic EPS)
                                                                    =========                           =========
 Effect of dilutive securities                    --          --                       --         317
                                          ----------   ---------                ---------   ---------
 Diluted EPS                              $  (15,933)     57,957    $   (0.27)  $  13,469      58,895   $    0.23
                                          ==========   =========    =========   =========   =========   =========

</TABLE>

NOTE 15 - RELATED PARTY TRANSACTIONS

A. 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 investment  funds which we
manage and are included in "Other expenses of consolidated partnerships".

During the quarter ended March 31, 2007, we acquired two mortgage  revenue bonds
for  properties  developed by a subsidiary of TRCLP.  LIHTC funds 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,  also  acquired  participation
interests with AMAC in two loans secured by properties developed by TRCLP.

B. 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 fees  earned to differ  significantly  from the
previous agreement absent the effect of AMAC's growth.

We have extended an unsecured revolving credit facility to AMAC to provide it up
to $50.0 million,  bearing  interest at LIBOR plus 3.0%,  which is to be used by
AMAC to purchase new investments and for general corporate purposes. As of March
31, 2007, $10.2 million was outstanding under this facility. 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.

During March 2007, AMAC entered into an agreement with CRESS with respect to its
investment  in a CDO issued by Nomura CRE CDO  2007-2,  LTD.  Under the terms of
this agreement,  CRESS temporarily held an investment in the name of AMAC as its
nominee pending permanent financing to be obtained by AMAC but did not carry the
investment on its balance sheet. As of March 31, 2007,  AMAC owed  approximately
$5.0  million  to  CRESS  at a  weighted  average  interest  rate of  5.92%,  in
connection  with this  investment.  In April 2007,  AMAC  obtained the permanent
financing and paid the amount due to CRESS.

In the first quarter of 2007, our Commercial Real Estate subsidiaries originated
approximately  $203.7  million in loans on behalf of AMAC and,  pursuant  to the
advisory  agreement,  received  approximately  $792,000 of mortgage banking fees
from the  borrowers.  We record  these  fees in "Fee  income"  in the  condensed
consolidated statements of income.


                                       26
<PAGE>



                   CENTERLINE HOLDING COMPANY AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 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  servicing
functions as well as special servicing of any loans in default.  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.

C. INCOME STATEMENT IMPACT

(Fees paid) and income earned were as follows:

<TABLE>
<CAPTION>

                                                                         Three Months Ended
                                                                             March 31,
                                                                     -------------------------
                        (In thousands)                                  2007           2006
---------------------------------------------------------------      -----------    ----------
<S>                                                                  <C>            <C>
TRCLP shared service fee expense                                     $      (143)   $     (163)
TRCLP property management services expense                           $    (1,073)   $   (1,000)
AMAC asset management and incentive management fees and expense
   reimbursements                                                    $     1,007    $      952
AMAC credit facility interest income                                 $        97    $       --
AMAC servicing fee income                                            $       130    $       --

</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
                                 MARCH 31, 2007
                                   (UNAUDITED)



The following table provides more information regarding our segments:

<TABLE>
<CAPTION>

                                                                                         Three Months Ended
                                                                                             March 31,
                                                                                    ----------------------------
                  (In thousands)                                                        2007            2006
----------------------------------------------------                                ------------    ------------
<S>                                                                                 <C>             <C>
REVENUES
   Affordable Housing                                                               $     60,592    $     62,030
   Commercial Real Estate (1)                                                             13,426          11,870
   Asset Management (1)                                                                   13,992           6,499
   Credit Risk Products                                                                    3,260              --
   Corporate Group                                                                         7,145           3,383
   Consolidated Partnerships (2)                                                          50,045           9,286
   Elimination of intersegment transactions                                              (31,295)        (20,929)
                                                                                    ------------    ------------
Consolidated Revenues                                                               $    117,165    $     72,139
                                                                                    ============    ============

CAD
   Affordable Housing                                                               $     15,061    $     25,485
   Commercial Real Estate (1)                                                              4,527           3,104
   Asset Management (1)                                                                    6,494           3,510
   Credit Risk Products                                                                      964            (556)
   Unallocated corporate costs                                                           (22,404)        (16,288)
                                                                                    ------------    ------------
Consolidated CAD                                                                           4,642          15,255

   Reconciliation of CAD to net (loss) income:
      Fees deferred for GAAP (3)                                                             942           1,154
      Depreciation and amortization expense                                              (11,498)         (8,913)
      Interest income yield adjustments (4)                                               (2,296)           (158)
      Gain on sale of loans (5)                                                            1,881           4,623
      Loss on impairment of assets                                                       (16,447)             --
      Tax adjustment (6)                                                                  (1,204)            (32)
      Non-cash compensation (7)                                                           (9,182)         (2,352)
      Difference between subsidiary equity
      distributions and       income allocated to
      minority interests (8)                                                              14,919           3,025
      Non-cash equity income                                                               1,995            (204)
      Preferred dividends                                                                  1,188           1,188
      Other, net                                                                             315           1,071
                                                                                    ------------    ------------
Consolidated Net (Loss) Income                                                      $    (14,745)   $     14,657
                                                                                    ============    ============

DEPRECIATION AND AMORTIZATION
   Affordable Housing                                                               $        234    $        765
   Commercial Real Estate (1)                                                              4,444           3,693
   Asset Management (1)                                                                       26              23
   Credit Risk Products                                                                        1              --
   Corporate Group                                                                         6,593           4,432
   Consolidated Partnerships                                                                 200              --
                                                                                    ------------    ------------
Consolidated Depreciation and Amortization                                          $     11,498    $      8,913
                                                                                    ============    ============


                                                                                      March 31,     December 31,
                                                                                        2007            2006
                                                                                    ------------    ------------

IDENTIFIABLE ASSETS
   Affordable Housing                                                               $  2,908,614    $  2,866,346
   Commercial Real Estate (1)                                                            227,592         390,886
   Asset Management (1)                                                                   13,185          13,754
   Credit Risk Products                                                                   92,950          52,337
   Consolidated partnerships (2)                                                       6,351,639       6,046,429
   Corporate Group                                                                       785,479         794,619
   Elimination of intersegment balances                                                 (472,594)       (475,855)
                                                                                    ------------    ------------
Consolidated Identifiable Assets                                                    $  9,906,865    $  9,688,516
                                                                                    ============    ============

</TABLE>


                                       28
<PAGE>



                   CENTERLINE HOLDING COMPANY AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 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 - 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
PRS construction  affiliate was general contractor (the "GCG  Partnerships") for
which the general partner interest owned by PRS or an affiliate were transferred
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 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.


                                       29
<PAGE>



                   CENTERLINE HOLDING COMPANY AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2007
                                   (UNAUDITED)



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   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.  While the strategy  remains  under
review,  the initial assessment of four of the mortgage revenue bonds has caused
us to recognize an impairment charge of approximately $13.7 million (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 $5.5 million in the first quarter of 2007.

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        Funds is       Credit      Centerline      Parties    Upon Full    Outstanding
                              Revenue         Equity    Intermediated    Holds GP       Provided      Draw      at March 31,
                  Number        Bond          Partner       Funds         Interest       Equity       Down          2007
                 --------   -----------     ----------  -------------   ----------      --------   ---------   -------------
<S>                 <C>          <C>             <C>         <C>             <C>           <C>     <C>           <C>
            PRS PARTNERSHIPS
 Lease-Up           10            9               5           3               5             5      $ 103,831     $  88,248
 Rehab               1            1               1           1               1            --         19,300        20,229
 Stabilized          2            2              --          --              --             2         18,377        19,438
                  ----------------------------------------------------------------------------------------------------------
 Subtotal           13           12               6           4               6             7        141,508       127,915
                  ----------------------------------------------------------------------------------------------------------

            CRG PARTNERSHIPS
 Lease-Up            4            2               4           3               2            --         19,931        19,864
 Rehab               2            2               2           2               2            --         61,888        62,828
                  ----------------------------------------------------------------------------------------------------------
 Subtotal            6            4               6           5               4            --         81,819        82,692
                  ----------------------------------------------------------------------------------------------------------

            GCG PARTNERSHIPS
 Construction        1            1               1           1              --            --         16,600        16,600
 Lease-Up            1            1               1          --              --            --         13,170        13,781
                  ----------------------------------------------------------------------------------------------------------
 Subtotal            2            2               2           1              --            --         29,770        30,381
                  ----------------------------------------------------------------------------------------------------------

            ERC PARTNERSHIPS
 Construction        2            2               2           2               2            --         16,950        17,896
 Lease-Up           14           13              14          13              14            --        111,670       115,099
 Stabilized          2            2               2           1               2            --          9,392         9,878
                  ----------------------------------------------------------------------------------------------------------
 Subtotal           18           17              18          16              18            --        138,012       142,873
                  ----------------------------------------------------------------------------------------------------------
 Total              39           35              32          26              28             7      $ 391,109     $ 383,861
                  ==========================================================================================================
 Total eliminated in consolidation                                                                 $ 286,111     $ 279,074
                                                                                                  ==========================

</TABLE>


                                       30
<PAGE>



                   CENTERLINE HOLDING COMPANY AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2007
                                   (UNAUDITED)



Our potential exposure falls into three categories as follows:

         Cash required to bring the  properties to break-even  operation - As of
              March 31, 2007, advances  outstanding totaled  approximately $26.9
              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 the
              strategy  ultimately  adopted  with  respect  to  recovery  on any
              individual  mortgage  revenue  bond 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 $13.5 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.

         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 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  March  31,  2007,  our  Commercial  Real  Estate  subsidiaries  had  forward
commitments  under Fannie Mae and Freddie Mac programs of  approximately  $232.3
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 $156.4 million.  Approximately  $49.4
million of this  amount  was funded as of March 31,  2007,  and is  included  in
"Other   Investments"  as  "Mortgage  Loans  Held  for  Sale".  The  balance  of
approximately $107.0 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 $17.7 million by the end of 2007.


                                       31
<PAGE>



                   CENTERLINE HOLDING COMPANY AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2007
                                   (UNAUDITED)



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 $4.4
million at March 31, 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 March 31, 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.

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 March 31,  2007,  pursuant  to these  agreements,  was
approximately $834.8 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 March 31,
2007,  that  reserve  was  approximately  $13.1  million,   which,  we  believe,
represents our actual potential losses at that time.

As of March 31, 2007, we maintained  collateral consisting of treasury notes and
Fannie Mae and Freddie Mac securities of approximately $12.5 million and a money
market account of approximately  $900,000,  which is included in restricted cash
in  the  condensed  consolidated  balance  sheet,  to  satisfy  the  Fannie  Mae
collateral requirements of $11.3 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  covers  this letter of credit
requirement.  At March 31, 2007, commitments under this reimbursement  agreement
totaled $3.0 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  15  outstanding
agreements to provide the specified returns:


                                       32
<PAGE>



                   CENTERLINE HOLDING COMPANY AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2007
                                   (UNAUDITED)



     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  $1.1
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. The fair
value of these obligations, representing the deferral of the fee income over the
obligation  periods,  was $23.7  million as of March 31,  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.

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  $186.9  million as of March 31, 2007. The fair
value of these obligations, representing the deferral of the fee income over the
obligation  periods,  was  $880,000 as of March 31, 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 March 31,  2007,  we had  unused  letters  of credit  totaling  $5.0  million
described in the MORTGAGE LOAN LOSS SHARING AGREEMENTS above.

LEGAL CONTINGENCIES

Claims have been asserted  against  subsidiaries  of the Company 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 March 31, 2008 and the


                                       33
<PAGE>



                   CENTERLINE HOLDING COMPANY AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2007
                                   (UNAUDITED)



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.  The Company is unable at the present  time to estimate  what  potential
losses, if any, may arise in connection with this litigation.

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

We participate  as co-investor in the CMBS and Direct Loan funds we sponsor.  As
of March 31, 2007, our remaining unfunded capital commitments were $7.9 million.

NOTE 18 - SUBSEQUENT EVENTS

In April  2007,  our Board of  Trustees  authorized  an  increase of 1.5 million
shares to our share repurchase plan, bringing the total repurchase authorization
to 3.0 million shares.


                                       34
<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, and in Part II, Item 1.A. RISK FACTORS, in this document.  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 addition, we incurred  restructuring costs associated
with planned integration activities and incurred increased non-cash compensation
costs  following  the  acquisition  due to  non-vested  share grants and 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.  Various  start-up  costs were incurred in 2006 in connection
with this subsidiary.


                                       35
<PAGE>



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

THREE MONTHS ENDED MARCH 31, 2007 AND 2006
------------------------------------------

The  following is a summary of our  operations  for the three months ended March
31, 2007 and 2006:

<TABLE>
<CAPTION>

                                              % of                        % of
   (In thousands)               2007        Revenues        2006        Revenues      % Change
--------------------        -----------   ------------  -----------   ------------  ------------
<S>                         <C>              <C>        <C>              <C>          <C>
Revenues                    $   117,165      100.0 %    $    72,139      100.0 %        62.4 %
(Loss) income before                                                                        %
  income taxes              $   (17,691)     (15.1)%    $    11,738       16.3 %      (250.7)
Net (loss) income           $   (14,745)     (12.6)%    $    14,657       20.3 %      (200.6)%

</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.

We  recorded a net loss for the 2007  quarter as  compared  to net income in the
2006 quarter.  Much of the decline 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.

REVENUES

Our revenues were as follows:

<TABLE>
<CAPTION>

                                                    For the Three Months Ended March 31,
                                                -------------------------------------------
             (In thousands)                         2007           2006          % Change
--------------------------------------          ------------   -------------    -----------
<S>                                             <C>            <C>                      <C>
Mortgage revenue bond interest income           $     37,063   $      36,522            1.5 %

Other interest income                                 12,557           5,944          111.3

Fee income                                            14,635          16,071           (8.9)

Other revenues:
   Construction service fee                            1,265           1,148           10.2
   Expense reimbursements                              1,079           1,227          (12.1)
   Rental income of real estate owned                  1,433           1,041           37.7
   Administration fees                                   596             401           48.6
   Prepayment penalties                                  659             812          (18.8)
   Other                                                 562             728          (22.8)
                                                ------------    ------------    -----------
Total other revenues                                   5,594           5,357            4.4
                                                ------------    ------------    -----------

Subtotal                                              69,849          63,894            9.3
                                                ------------    ------------    -----------

Revenues of consolidated partnerships                 47,316           8,245          473.9
                                                ------------    ------------    -----------

   Total revenues                               $    117,165   $      72,139           62.4 %
                                                ============    ============    ===========

</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 11.4%.

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

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


                                       36
<PAGE>



     o    interest  generated  by  CMBS  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.

The 2006 quarter included  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  partnerships  consolidated as part of the Investors  acquisition
          (see Note 9);
     o    an  increase  in  the  number  of  LIHTC   Partnerships  due  to  fund
          sponsorship activity; and
     o    an increase in the number of Property  Partnerships over the past year
          which we have taken  control of to protect our  investments  (see Note
          17).

Results of consolidated partnerships are also discussed below.

Offsetting  the  revenue  gains is the  elimination  of  revenues  earned by our
subsidiaries  in  transactions  with  LIHTC 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.

In the first quarters of 2007 and 2006, the following  amounts were  eliminated,
as they represented transactions between consolidated partnerships and our other
component businesses:

<TABLE>
<CAPTION>

                                              For the Three Months Ended March 31,
                                          -------------------------------------------
            (In thousands)                    2007           2006          % Change
-------------------------------------     ------------   ------------     -----------
<S>                                       <C>            <C>                   <C>
Mortgage revenue bond interest income     $      5,347   $      1,539           247.4%
Other interest income                               --             52          (100.0)
Fee income                                      10,710          9,826             9.0
Other revenues                                   1,371          1,235            11.0
                                          ------------    -----------     -----------

Total                                     $     17,428   $     12,652            37.7%
                                          ============    ===========     ===========

</TABLE>


                                       37
<PAGE>



EXPENSES

Our expenses were as follows:

<TABLE>
<CAPTION>

                                                                    For the Three Months Ended March 31,
                                                                  ----------------------------------------
                        (In thousands)                               2007            2006        % Change
--------------------------------------------------------------    -----------    ------------   ----------
<S>                                                               <C>            <C>                <C>
Interest expense                                                  $    28,302    $    17,107         65.4%
                                                                  -----------    -----------
Interest expense - preferred shares of subsidiary                       4,724          4,724           --
                                                                  -----------    -----------

Salaries and benefits                                                  36,860         19,902         85.2
Other general and administrative                                       20,564         12,665         62.4
                                                                  -----------    -----------    ---------
  Subtotal general and administrative                                  57,424         32,567         76.3
                                                                  -----------    -----------    ---------

Depreciation and amortization                                          11,498          8,913         29.0
Loss on impairment of assets                                           16,447             --           --
                                                                  -----------    -----------    ---------
  Subtotal before consolidated partnerships                           118,395         63,311         87.0
                                                                  -----------    -----------    ---------

Interest expense of consolidated LIHTC and Property
  partnerships                                                          7,185          6,946          3.4
Interest expense of consolidated CMBS and Direct Loan
  partnerships                                                         15,724             --           --
                                                                  -----------    -----------    ---------
                                                                       22,909          6,946        229.8
                                                                  -----------    -----------    ---------
Other expenses of consolidated LIHTC and Property partnerships         23,199         15,281         51.8
Other expenses of consolidated CMBS and Direct Loan
  partnerships                                                            554             --           --
                                                                  -----------    -----------    ---------
                                                                       23,753         15,281         55.4
                                                                  -----------    -----------    ---------
  Subtotal expenses of consolidated partnerships                       46,662         22,227        109.9
                                                                  -----------    -----------    ---------

Total expenses                                                    $   165,057    $    85,538         93.0%
                                                                  ===========    ===========    =========

</TABLE>

The  increase in interest  expense  reflects  the higher  amount of average debt
outstanding (approximately $2.3 billion in the first quarter of 2007 as compared
to $1.7  billion  in the first  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 BMA 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 4.8% in the
first quarter of 2007 as compared to 3.8% in the first 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 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
$1.5 million for deferred  participation  compensation  related to CMBS funds we
sponsor and $2.2  million of  severance  costs,  primarily  associated  with the
retirement of an executive officer.


                                       38
<PAGE>



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  (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 decreased fund origination costs within
our  Affordable  Housing  segment  due to the  lower  level of fund  sponsorship
activity.

Depreciation and amortization expenses were higher in the 2007 period, primarily
due to  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 March
31, 2006, due to mortgage origination activity within our Commercial Real Estate
segment.

Loss on impairment of assets related to seven mortgage  revenue bonds associated
with six properties  experiencing  substandard performance and the change in our
strategy with respect to protecting  our investment in certain assets (see Notes
2 and 17).

Other expenses of the consolidated LIHTC 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  and  Property
partnerships  are  absorbed  by their  equity  partners;  as such,  they have an
insignificant impact on our net income.

Expenses  of  consolidated  CMBS  partnerships  represent  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.

OTHER ITEMS

<TABLE>
<CAPTION>

                                                         For the Three Months Ended March 31,
                                                       ----------------------------------------
                  (In thousands)                           2007           2006       % Change
----------------------------------------------------   ------------   ------------  -----------
<S>                                                    <C>            <C>                <C>
 Equity and other (loss) income                        $       (250)  $        510       (149.0)%

 Gain on sale or repayment of loans                    $      1,624   $      4,539        (64.2)%
 Gain on sale or repayment of mortgage revenue
   bonds and other assets                                       755            891        (15.3)
                                                       ------------   ------------  -----------
                                                       $      2,379   $      5,430        (56.2)%
                                                       ------------   ------------  -----------

 Income allocated to preferred shareholders of
   subsidiary                                          $     (1,556)  $     (1,556)          -- %
                                                       ------------   ------------  -----------

 Loss (income) allocated to SCUs                       $      5,956   $     (5,729)      (204.0)%
 Loss (income) allocated to SMUs                                 79           (150)      (152.7)
 Loss allocated to SCIs                                          76             --           --
 Other                                                            6             --           --
                                                       ------------   ------------  -----------
 Total loss (income) allocated to minority
   interests                                           $      6,117   $     (5,879)      (204.0)%

 Loss allocated to partners of consolidated
   partnerships                                        $     81,111   $     88,781         (8.6)%

</TABLE>

Equity  and other  (loss)  income  decreased  since we no longer  recognize  our
proportionate  share of Investors  earnings through equity income  subsequent to
our  acquisition in August 2006. The loss for the quarter  primarily  relates to
losses  from tax  advantaged  investment  vehicles  similar to those we sponsor.
Equity income from our  investment in CMBS funds is eliminated in  consolidation
but  positively  impacts our net  income.  For the first  quarter of 2007,  this
amount was approximately $6.7 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.


                                       39
<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 and Property  partnerships,  of which we have absorbed
an insignificant  portion  (approximately  $3,000) 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 March 31,
                                                          --------------------------------------------
                     (In thousands)                           2007           2006          % Change
--------------------------------------------------------- -------------- --------------  -------------

                               MORTGAGE REVENUE BOND INVESTING STATISTICS
<S>                                                        <C>           <C>                <C>
New mortgage revenue bond acquisitions                     $    20,142   $    34,579        (41.8)%
Funding of mortgage revenue bonds acquired in prior
  years                                                          1,151            --           --
Acquisitions related to prior period forward commitments         7,100        26,096        (72.8)
                                                           -----------   -----------   ----------
Total acquisition and funding activity                     $    28,393   $    60,675        (53.2)%

Mortgage revenue bonds repaid                              $     2,622   $    26,908        (90.3)%

Average portfolio balance (fair value)                     $ 2,744,922   $ 2,366,617         16.0 %

Weighted average permanent interest rate of bonds
  acquired                                                        5.88 %        5.82 %
Weighted average yield of portfolio                               6.35 %        6.56 %
Average borrowing rate (includes fees and effect of
  swaps)                                                          4.40 %        3.77 %
Average BMA rate                                                  3.59 %        3.08 %


                                   LIHTC FUND SPONSORSHIP STATISTICS

Equity raised by LIHTC funds                               $     6,444   $    60,905        (89.4)%
Equity invested by LIHTC funds (1)                         $   113,979   $   149,764        (23.9)%


Mortgage revenue bond interest income (1)                  $    43,130   $    40,218          7.2 %
Other interest income (1)                                          311           621        (49.9)
Fee income from fund sponsorship (1)                            12,930        17,432        (25.8)
Expense reimbursements                                           2,218         2,069          7.2
Other revenues (1)                                               2,003         1,690         18.5
                                                           -----------   -----------   ----------
                                                           $    60,592   $    62,030         (2.3) %
                                                           ===========   ===========   ==========

Interest expense and securitization fees (1)               $    23,961   $    14,704         63.0 %
Loss on impairment of assets                               $    16,447   $        --           --
Gain on repayments of mortgage revenue bonds               $       742   $       889        (16.5)%

CAD (2)                                                    $    15,061   $    25,485        (40.9)%
                                                           ===========   ===========   ==========

</TABLE>

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


                                       40
<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 three months of 2007.

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 BMA rates.

We recognized  impairment on seven mortgage revenue bonds in the 2007 period
and none in the 2006 period.

Of the 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.  While the
strategy  remains under review,  the initial  assessment of four of the mortgage
revenue bonds has 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 17 to the  condensed  consolidated  financial
statements.

The  remainder  of  the  impairment  charge  pertained  to two  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.

The  decrease in fund  sponsorship  revenues  reflects  the lower volume of fund
activity  in the first  quarter of 2007 as  compared to the same period in 2006,
both from the level of equity raised and equity invested.  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 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.

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 first  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.


                                       41
<PAGE>



COMMERCIAL REAL ESTATE

The table below shows selected information  regarding our Commercial Real Estate
activities:

<TABLE>
<CAPTION>

                                                          For the Three Months Ended March 31,
                                                      -------------------------------------------
                 (In thousands)                           2007            2006         % Change
------------------------------------------------      -------------   ------------    -----------
<S>                                                   <C>             <C>                    <C>
Mortgage originations                                 $     456,516   $    281,156           62.4 %
                                                      -------------   ------------    -----------
Primary servicing mortgage portfolio at March 31      $   8,535,220   $  8,935,959           (4.5)%
                                                      -------------   ------------    -----------
Carrying value of mortgage servicing rights at                                                    %
  March 31                                            $      53,473   $     62,589          (14.6)

Mortgage origination fees (1)                         $       2,382   $      2,108           13.0 %
Mortgage servicing fees                                       4,609          5,037           (8.5)
Other fee income                                                729            749           (2.7)
Other interest income (1)                                     4,734          2,279          107.7
Prepayment penalties                                            653            807          (19.1)
Other revenues                                                  319            890          (64.2)
                                                      -------------   ------------    -----------
    Total                                             $      13,426   $     11,870           13.1%
                                                      =============   ============    ===========

                                                      -------------   ------------    -----------
Gain on sale of mortgages                             $       1,636   $      4,541          (64.0) %
                                                      =============   ============    ===========

                                                      -------------   ------------    -----------
Equity income                                         $       6,740   $        714             --
                                                      =============   ============    ===========

                                                      -------------   ------------    -----------
CAD (2)                                               $       4,527   $      3,104           45.8 %
                                                      =============   ============    ===========

</TABLE>

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

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

The  increase in mortgage  origination  fees for the  quarter was  generally  in
proportion  to the  increase  in  originations  offset  by the  average  rate of
origination  fees  being  impacted  by  the  higher   proportion  of  non-agency
originations and the spread  compression in the market.  Fannie Mae originations
decreased and  Centerline  Direct  originations  increased from the prior period
because loan production focused its efforts on originating loans for our lending
program  for AMAC and CRESS  ("Centerline  Direct").  Freddie  Mac  originations
increased  sharply  because  of a large  portfolio  of loans  originated  in the
current year.

Mortgage  originations  for the three  months  ended March 31 are broken down as
follows:

<TABLE>
<CAPTION>

  (In thousands)              2007           % of total             2006            % of total
------------------       -------------       ----------         -------------       ----------
<S>                      <C>                      <C>           <C>                      <C>
Fannie Mae               $      69,181             15.2  %      $     209,466             74.5  %
Freddie Mac                    144,720             31.7                50,625             18.0
Centerline Direct              203,685             44.6                    --               --
Conduit and other               38,930              8.5                21,065              7.5
                         -------------       ----------         -------------       ----------
Total                    $     456,516            100.0  %      $     281,156            100.0  %
                         =============       ==========         =============       ==========

</TABLE>

Servicing
---------

Primary  servicing fees declined due to a decrease in the servicing fee rate and
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.


                                       42
<PAGE>



Other
-----

The decrease in  prepayment  penalties  relates to a lower 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.  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 Three Months Ended March 31,
                                                      ----------------------------------------
                 (In thousands)                            2007          2006        % Change
----------------------------------------------        -------------   -----------   ----------
<S>                 <C>                               <C>             <C>                 <C>
Mortgage portfolio at March 31:
  Primary servicing (1)                               $  22,870,536   $ 8,935,959        155.9 %
  Special servicing                                         164,927            --           --
Carrying value of mortgage servicing rights at
  March 31                                                   10,705            --           --
                                                      -------------   -----------   ----------

Other interest income (2)                             $       5,266   $     2,216        137.6 %

Asset management fees (2)                                     3,441         2,616         31.5
Servicing fees (2)                                            2,879         1,667         72.7
Other fees (2)                                                2,092            --           --
                                                      -------------   -----------   ----------
  Subtotal                                                    8,412         4,283         96.4
                                                      -------------   -----------   ----------

Other income (2)                                                314            --           --
                                                      -------------   -----------   ----------
                                                      $      13,992   $     6,499        115.3 %
                                                      =============   ===========   ==========

CAD (3)                                               $       6,494   $     3,510         85.0 %
                                                      =============   ===========   ==========

</TABLE>

(1)  Includes  sub-servicing  on  Commercial  Real  Estate  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
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.


                                       43
<PAGE>



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

Segment CAD for the first  three  months of 2007 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.

<TABLE>
<CAPTION>

CREDIT RISK PRODUCTS

                                                         For the Three Months Ended March 31,
                                                      -----------------------------------------
        (In thousands)                                    2007            2006        % Change
------------------------------                        -------------   ------------   ----------
<S>                                                   <C>             <C>                  <C>
Credit intermediation fees (1)                        $       2,335             --           --
Other interest income (1)                                       925             --           --
                                                      -------------   ------------   ----------
                                                      $       3,260   $         --           --
                                                      =============   ============   ==========

CAD (2)                                               $         964   $       (556)          -- %
                                                      =============   ============   ==========

</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 $1.2 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, but in which we have no equity interest or, in the case
of 13 partnerships, an insignificant equity interest.

     LIHTC AND PROPERTY PARTNERSHIPS

     Our  Affordable  Housing  segment  earns fees from LIHTC  Partnerships  and
     interest on mortgage revenue bonds for which Property  Partnerships are the
     obligors.  The LIHTC Partnerships are tax credit equity investment funds we
     sponsor and manage. The Property Partnerships are partnerships for which we
     have assumed the role of general partner.


                                       44
<PAGE>



     The increased revenue,  expense, equity loss and allocation amounts in 2007
     are due to the addition of 12 LIHTC Partnerships over the past year and the
     assumption of the general partner interests in 17 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  $3,000,  which  represents our
     nominal ownership. As a result, the consolidation of these partnerships has
     an insignificant impact on our net income.

     CMBS AND DIRECT LOAN PARTNERSHIPS

     CMBS 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 three months ended March 31,
2007 and 2006.  The  effective  tax rate on a  consolidated  basis for the three
months  ended March 31, 2007 and 2006 was 16.7% and (24.6)%,  respectively.  The
effective  rate for our  corporate  subsidiaries  that were subject to taxes was
16.0%  and  31.0%  for  the  three   months  ended  March  31,  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
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.


                                       45
<PAGE>



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 to provide short-term
and long-term liquidity:

     o    a $100.0  million  warehouse  line,  used for mortgage  banking needs,
          which  matures  on May 31,  2007,  and we expect  to enter  into a new
          facility or a further extension of this line upon maturity;
     o    a $250.0 million  revolving  credit  facility,  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;
     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 March 31, 2007, we had  approximately  $242.2 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.

In  addition  to the  credit  lines  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 March 31,  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.

Liquidity Requirements after March 31, 2007
-------------------------------------------

During May 2007, equity distributions will be paid as follows:

<TABLE>
<CAPTION>

                                        (In thousands)
                                        --------------
<S>                                      <C>
Common/CRA shareholders                  $     25,327
SCU/SMU/SCI holders                             8,807
4.4% CRA Preferred shareholders                 1,188
Preferred shareholders of a subsidiary          6,281

                                         ------------

Total                                    $     41,603
                                         ============

</TABLE>

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 three months ended March 31, 2007,  there was a net decrease in cash and
cash  equivalents  as  compared to a net  increase  during the  comparable  2007
period.  A larger  increase in 2006 in operating cash flows was more than offset
by a larger increase in cash used in investing and financing activities.


                                       46
<PAGE>



Operating  cash  flow in 2007 was $40.0  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.  A lower level of cash inflows related
to  mortgage  loan sale  settlements  in the  current  year period was more than
offset by more favorable inflows related to receivables and other assets.

Cash used in  investing  activities  was higher in 2007 as compared to 2006 by a
margin of $66.4 million due to:

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

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

Financing outflows in the 2007 period were higher than in 2006 by $63.5 million.
While we had a net increase in the level of securitized borrowings, we sought to
reduce our credit  facility debt through cash management  initiatives  that also
lowered our overall cash position at the end of the period. The 2007 period also
reflected a large  amount of treasury  share  repurchases,  continuing a program
that we began in mid-2006,  partly  offset by funds  contributed  to  Centerline
Financial by the minority interest holder of that subsidiary.

Commitments, Contingencies and Off-Balance Sheet Arrangements
-------------------------------------------------------------

Note 17 to the condensed consolidated financial statements contains a summary of
our guarantees and off-balance sheet arrangements.

The  following  table  reflects our maximum  exposure and carrying  amount as of
March 31, 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    $       528
Operating deficit guarantees (1)                          7,567            154
ACC transition guarantees (1)                             3,245             --
Recapture guarantees (1)                                114,746            154
Replacement reserve (1)                                   3,132             44
Guarantee of payment (1)                                 14,720             --
LIHTC credit intermediation (2)                       1,098,475         23,669
Mortgage banking loss sharing agreements (3)            834,754         13,116
                                                   ------------    -----------

                                                     $2,120,160    $    37,665
                                                   ============    ===========

</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


                                       47
<PAGE>



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.

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

CONTRACTUAL OBLIGATIONS

The  following  table  provides our  commitments  as of March 31, 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)                       $   443,540   $   108,790   $   93,500   $   5,000    $   236,250
Notes payable of consolidated
   partnerships (3)                            569,590       147,743       65,147      20,549        336,151
Financing arrangements of consolidated
  partnerships (5)                             686,400            --        7,616     177,112        501,672
Notes payable of consolidated
  partnerships                                  81,500        81,500           --          --             --
Repurchase agreements of consolidated
  partnerships                                 301,284       301,284           --          --             --
Operating lease obligations                     77,047         8,796       16,958      15,008         36,285
Subleases                                       (7,673)       (1,214)      (2,553)     (2,616)        (1,290)
Unfunded investment commitments (4)            262,430       145,593      116,837          --             --
Financing arrangements (1)(2)                1,875,544     1,875,544           --          --             --
Preferred shares of subsidiary (subject
  to mandatory repurchase)                     273,500            --           --          --        273,500
                                           -----------   -----------   ----------   ---------    -----------

   Total                                   $ 4,563,162   $ 2,668,036   $  297,505   $ 215,053    $ 1,382,568
                                           ===========   ===========   ==========   =========    ===========

</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  ability and intent 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 4.87%.

(3)  Of the notes payable of consolidated partnerships, $421.8 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 $147.8 million is collateralized with the underlying  properties
     of  the  consolidated   operating   partnerships.   All  of  this  debt  is
     non-recourse to us.

(4)  Of  this  amount,  $232.3  million  represents  mortgage  loan  origination
     commitments with corresponding sale commitments.

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

As we are unable to project  the  timing of any  payments  related to our FIN 48
liability  (see Notes 8 and 11).  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   involving  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,


                                       48
<PAGE>



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.

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 BMA 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 March 31, 2007 total amount of our  liabilities  labeled on our unaudited
condensed  consolidated  balance  sheet  as  Financing  Arrangements  and  Notes
Payable,  $1.1 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 $11.4 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 $1.8 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 unaudited  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.  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 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 methodology used to estimate the portfolio fair
value, a 1% increase in market rates for tax-exempt investments would reduce the
estimated fair value of our portfolio of mortgage revenue bonds by approximately
$173.5  million and a 1% decrease  would result in an increase of  approximately
$194.7  million.  Changes in the  estimated  fair value of the mortgage  revenue
bonds 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


                                       49
<PAGE>



asset values.

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 the Company in the reports  that the Company  files or submits
     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 the Company's
     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 the Company's
     internal  control over financial  reporting (as defined in Rules  13a-15(f)
     and 15d-15(f)  under the Exchange  Act) that occurred  during the Company's
     quarter  ended  March 31,  2007,  that  have  materially  affected,  or are
     reasonably likely to materially affect, the Company's 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 small 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 the Company 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.

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


                                       50
<PAGE>



                           PART II. OTHER INFORMATION



ITEM 1.  LEGAL PROCEEDINGS

         Claims have been asserted  against  subsidiaries  of the Company 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, (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 March 31, 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

         There have been no material changes to the risk factors as disclosed in
         our filing on form 10-K for the year ended December 31, 2006.

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  first  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>
    January 1-31, 2007                  257           $20.40                 --
    February 1-28, 2007               1,283            19.39                 --
    March 1-31, 2007                299,179            19.28            293,971
                               ---------------    --------------    -----------------

    Total                           300,719           $19.28            293,971                  276,569
                               ===============    ==============    =================       ===============

</TABLE>

(1)  Some 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 2007,  our Board of Trustees  authorized an additional 1.5 million
     shares for our share  repurchase  program.  As the  authorization  was made
     after the end of the quarter  ended March 31,  2007,  the amount shown does
     not include the incremental shares.


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<PAGE>



ITEM 3.   DEFAULTS UPON SENIOR SECURITIES - None

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - None

ITEM 5.   OTHER INFORMATION - None

ITEM 6.   EXHIBITS


          10.1 Executive Employment Agreement,  dated as of January 15, 2007, by
               and between CharterMac Capital LLC and Nicholas A.C. Mumford.*

          10.2 Incentive Award  Agreement,  dated as of January 15, 2007, by and
               between Centerbrook Holdings LLC and Nicholas A.C. Mumford.*

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

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

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

          *    Filed herewith.


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<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:  May 10, 2007                By: /s/ Marc D. Schnitzer
                                       ---------------------
                                       Marc D. Schnitzer
                                       Managing Trustee, Chief Executive Officer
                                       and President
                                       (Principal Executive Officer)



Date:  May 10, 2007                By: /s/ Robert L. Levy
                                       ------------------
                                       Robert L. Levy
                                       Chief Financial Officer
                                       (Principal Financial Officer and
                                        Principal Accounting Officer)


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