##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C.
 FORM 10-Q
 þ
    
    Quarterly report pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934
 FOR THE QUARTERLY PERIOD ENDED September 30, 2008
 OR
 o
    
    Transition report pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934
 For the Transition Period
From ______ to ______
 COMMISSION FILE NUMBER 000-50721
 Origen Financial, Inc.
  Delaware
    
    20-0145649(State of Incorporation)
    
    (I.R.S. Employer Identification No.)27777 Franklin Rd.Suite 1700Southfield, MI
    
    48034(Address of Principal Executive Offices)
    
    (Zip Code)
  þ o
  Large accelerated filer o
Accelerated filer þ
Non-accelerated filer o(Do not check if a smaller
reporting company)
Smaller reporting company o o þ




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##### 



Origen Financial, Inc.
 Index
 PagePart I
    
    Financial InformationItem 1.
    
    Financial Statements (Unaudited)Consolidated Balance Sheets  as of September 30, 2008 and December 31, 2007
    
    
    3Consolidated Statements of Operations for the periods ended September 30, 2008 and 2007
    
    
    4Consolidated Statements of Comprehensive Income for the periods ended September 30, 2008 and 2007
    
    
    5Consolidated Statements of Cash Flows for the nine months ended September 30, 2008 and 2007
    
    
    6Notes to Consolidated Financial Statements
    
    
    7Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    20Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    32Item 4.
    
    Controls and Procedures
    
    
    34Part II
    
    Other InformationItem 6.
    
    Exhibits
    
    
    35Signatures
    
    
    36EX-31.1EX-31.2EX-32.1
  2




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##### Table of Contents



Part I. Financial Information
 
 Item 1. Financial Statements
 Origen Financial, Inc.
 
 Consolidated Balance Sheets
 (In thousands, except
share and per share data)
As of September 30, 2008 and December 31, 2007
 September 30,
    
    
    December 31,2008
    
    
    2007(Unaudited)ASSETSAssetsCash and cash equivalents
    
    $
    13,852
    
    
    $
    10,791Restricted cash
    
    
    14,436
    
    
    
    16,290Investments held to maturity
    
    
    9,748
    
    
    
    32,393Loans receivable, net of allowance for losses of
$8,972 and $7,882, respectively
    
    
    941,046
    
    
    
    1,193,916Servicing advances
    
    
    
    
    
    
    6,298Servicing rights
    
    
    
    
    
    
    2,146Furniture, fixtures and equipment, net
    
    
    479
    
    
    
    2,974Repossessed houses
    
    
    4,148
    
    
    
    4,981Other assets
    
    
    11,904
    
    
    
    14,412Total assets
    
    $
    995,613
    
    
    $
    1,284,201LIABILITIES AND STOCKHOLDERS EQUITYLiabilitiesWarehouse financing
    
    $
    
    
    
    $
    173,072Securitization financing
    
    
    799,836
    
    
    
    884,650Repurchase agreements
    
    
    
    
    
    
    17,653Notes payable  related party
    
    
    29,280
    
    
    
    14,593Other liabilities
    
    
    46,974
    
    
    
    45,848Total liabilities
    
    
    876,090
    
    
    
    1,135,816Stockholders EquityPreferred stock, $.01 par value, 10,000,000 shares
authorized; 125 shares issued and outstanding at
September 30, 2008 and December 31, 2007, $1,000
per share liquidation preference
    
    
    125
    
    
    
    125Common stock, $.01 par value, 125,000,000 shares
authorized; 25,926,149 and 26,015,275 shares issued
and outstanding at September 30, 2008 and December
31, 2007, respectively
    
    
    260
    
    
    
    260Additional paid-in-capital
    
    
    225,541
    
    
    
    221,842Accumulated other comprehensive loss
    
    
    (20,433
    )
    
    
    (20,012
    )Distributions in excess of earnings
    
    
    (85,970
    )
    
    
    (53,830
    )Total stockholders equity
    
    
    119,523
    
    
    
    148,385Total liabilities and stockholders equity
    
    $
    995,613
    
    
    $
    1,284,201
 The accompanying notes are an integral part of these financial statements.
 3




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Origen Financial, Inc.
Consolidated Statements of Operations (Unaudited)
(In thousands, except share and per share data)
For the periods ended September 30, 2008 and 2007
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Interest IncomeTotal interest income
    
    $
    23,471
    
    
    $
    23,471
    
    
    $
    67,896
    
    
    $
    66,586Total interest expense
    
    
    14,222
    
    
    
    15,622
    
    
    
    46,739
    
    
    
    42,618Net interest income before loan losses and
impairment of purchased loan pool
    
    
    9,249
    
    
    
    7,849
    
    
    
    21,157
    
    
    
    23,968Provision for loan losses
    
    
    4,649
    
    
    
    2,191
    
    
    
    11,021
    
    
    
    5,785Impairment of purchased loan pool
    
    
    329
    
    
    
    
    
    
    
    596
    
    
    
    Net interest income after loan losses and
impairment of purchased loan pool
    
    
    4,271
    
    
    
    5,658
    
    
    
    9,540
    
    
    
    18,183Non-interest income (loss)Servicing income
    
    
    
    
    
    
    620
    
    
    
    1,303
    
    
    
    1,803Losses on loans held for sale
    
    
    
    
    
    
    
    
    
    
    (22,377
    )
    
    
    Other
    
    
    991
    
    
    
    201
    
    
    
    (3,919
    )
    
    
    625Total non-interest income (loss)
    
    
    991
    
    
    
    821
    
    
    
    (24,993
    )
    
    
    2,428Non-interest ExpensesPersonnel
    
    
    7,254
    
    
    
    3,995
    
    
    
    16,696
    
    
    
    13,046Loan origination and servicing
    
    
    3,252
    
    
    
    318
    
    
    
    3,871
    
    
    
    1,045State business taxes
    
    
    96
    
    
    
    105
    
    
    
    378
    
    
    
    327Other operating
    
    
    1,452
    
    
    
    1,568
    
    
    
    5,470
    
    
    
    4,692Total non-interest expense
    
    
    12,054
    
    
    
    5,986
    
    
    
    26,415
    
    
    
    19,110Income (loss) from continuing operations
before income taxes
    
    
    (6,792
    )
    
    
    493
    
    
    
    (41,868
    )
    
    
    1,501Income tax expense (benefit)
    
    
    12
    
    
    
    (17
    )
    
    
    75
    
    
    
    (17
    )Income (loss) from continuing operations
    
    
    (6,804
    )
    
    
    510
    
    
    
    (41,943
    )
    
    
    1,518Income from discontinued operations, net
of income taxes
    
    
    5,631
    
    
    
    2,320
    
    
    
    11,004
    
    
    
    5,846NET INCOME (LOSS)
    
    $
    (1,173
    )
    
    $
    2,830
    
    
    $
    (30,939
    )
    
    $
    7,364Weighted average common shares
outstanding, basic
    
    
    25,926,149
    
    
    
    25,365,778
    
    
    
    25,610,227
    
    
    
    25,289,680Weighted average common shares
outstanding, diluted
    
    
    25,926,149
    
    
    
    25,431,398
    
    
    
    25,610,227
    
    
    
    25,382,607Basic earnings per common share:Income (loss) from continuing operations
    
    $
    (0.26
    )
    
    $
    0.02
    
    
    $
    (1.64
    )
    
    $
    0.06Income from discontinued operations
    
    
    0.22
    
    
    
    0.09
    
    
    
    0.43
    
    
    
    0.23Net income (loss)
    
    $
    (0.04
    )
    
    $
    0.11
    
    
    $
    (1.21
    )
    
    $
    0.29Diluted earnings per common share:Income (loss) from continuing operations
    
    $
    (0.26
    )
    
    $
    0.02
    
    
    $
    (1.64
    )
    
    $
    0.06Income from discontinued operations
    
    
    0.22
    
    
    
    0.09
    
    
    
    0.43
    
    
    
    0.23Net income (loss)
    
    $
    (0.04
    )
    
    $
    0.11
    
    
    $
    (1.21
    )
    
    $
    0.29
 The accompanying notes are an integral part of these financial statements.
 4




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Origen Financial, Inc.
Consolidated Statements of Comprehensive Income (Loss) (Unaudited)
(In thousands)
For the periods ended September 30, 2008 and 2007
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Net income (loss)
    
    $
    (1,173
    )
    
    $
    2,830
    
    
    $
    (30,939
    )
    
    $
    7,364Other comprehensive income:Net unrealized losses on interest rate swaps
    
    
    (2,587
    )
    
    
    (10,401
    )
    
    
    (4,559
    )
    
    
    (3,801
    )Reclassification adjustment for net (gains)
losses included in net income (loss)
    
    
    (20
    )
    
    
    (35
    )
    
    
    4,139
    
    
    
    (259
    )Total other comprehensive income
    
    
    (2,607
    )
    
    
    (10,436
    )
    
    
    (420
    )
    
    
    (4,060
    )Comprehensive income (loss)
    
    $
    (3,780
    )
    
    $
    (7,606
    )
    
    $
    (31,359
    )
    
    $
    3,304
 The accompanying notes are an integral part of these financial statements.
 5




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Origen Financial, Inc.
Consolidated Statements of Cash Flows (Unaudited)
(In thousands)
For the nine months ended September 30, 2008 and 2007
 2008
    
    
    2007Cash Flows From Operating ActivitiesNet income (loss)
    
    $
    (30,939
    )
    
    $
    7,364Adjustments to reconcile net income to cash provided by (used
in) operating activities:Provision for loan losses
    
    
    11,021
    
    
    
    5,785Impairment of purchased loan pool
    
    
    596
    
    
    
    Losses on loans held for sale
    
    
    22,377
    
    
    
    Gain on sale of servicing platform assets
    
    
    (6,523
    )
    
    
    Gain on sale of origination and insurance platform assets
    
    
    (551
    )
    
    
    Depreciation and amortization
    
    
    4,926
    
    
    
    4,012Compensation expense recognized under share-based compensation
plans
    
    
    2,963
    
    
    
    1,189Proceeds from loan sales
    
    
    162,336
    
    
    
    Decrease in servicing advances
    
    
    1,079
    
    
    
    1,851Increase in other assets
    
    
    (3,154
    )
    
    
    (6,592
    )Increase in other liabilities
    
    
    4,963
    
    
    
    1,087Net cash provided by operating activities
    
    
    169,094
    
    
    
    14,696Cash Flows From Investing Activities(Increase) decrease in restricted cash
    
    
    1,855
    
    
    
    (253
    )Proceeds from sale of investments
    
    
    22,400
    
    
    
    Proceeds from sale of servicing operation assets
    
    
    37,047
    
    
    
    Proceeds from sale of origination and insurance operation assets
    
    
    1,000
    
    
    
    Origination and purchase of loans
    
    
    (44,989
    )
    
    
    (298,611
    )Principal collections on loans
    
    
    74,859
    
    
    
    77,985Proceeds from sale of repossessed houses
    
    
    7,667
    
    
    
    8,047Capital expenditures, net
    
    
    284
    
    
    
    (482
    )Net cash provided by (used in) investing activities
    
    
    100,123
    
    
    
    (213,314
    )Cash Flows From Financing ActivitiesNet proceeds from issuance of common stock
    
    
    
    
    
    
    121Retirement of common stock
    
    
    (123
    )
    
    
    (331
    )Dividends paid
    
    
    (1,200
    )
    
    
    (4,662
    )Proceeds upon termination of hedging transaction
    
    
    
    
    
    
    672Payment upon termination of hedging transaction
    
    
    (4,198
    )
    
    
    (57
    )Proceeds from securitization financing
    
    
    
    
    
    
    184,389Repayment of securitization financing
    
    
    (84,910
    )
    
    
    (82,550
    )Proceeds from advances under repurchase agreements
    
    
    1,888
    
    
    
    Repayment of advances under repurchase agreements
    
    
    (19,541
    )
    
    
    (6,688
    )Proceeds from warehouse financing
    
    
    30,800
    
    
    
    301,255Repayment of warehouse financing
    
    
    (203,872
    )
    
    
    (194,088
    )Proceeds from notes payable  related party
    
    
    46,000
    
    
    
    15,000Repayment of notes payable  related party
    
    
    (31,000
    )
    
    
    Net change in notes payable  servicing advances
    
    
    
    
    
    
    (2,185
    )Net cash provided by (used in) financing activities
    
    
    (266,156
    )
    
    
    210,876NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    
    
    3,061
    
    
    
    12,258Cash and cash equivalents, beginning of period
    
    
    10,791
    
    
    
    2,566Cash and cash equivalents, end of period
    
    $
    13,852
    
    
    $
    14,824Supplemental disclosures of cash flow information:Cash paid for interest
    
    $
    45,008
    
    
    $
    41,314Cash paid for income taxes
    
    $
    144
    
    
    $
    25Non-cash financing activities:Non-vested common stock issued as unearned compensation
    
    $
    
    
    
    $
    1,037Loans transferred to repossessed houses and held for sale
    
    $
    15,775
    
    
    $
    14,261
 The accompanying notes are an integral part of these financial statements
 6




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Origen Financial, Inc.
 
 Notes to Consolidated Financial Statements (Unaudited)
 Note 1  Basis of Presentation
    Note 2  Recent Accounting Pronouncements
   7




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Origen Financial, Inc.
Notes to Consolidated Financial Statements (Unaudited)
  8




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Origen Financial, Inc.
Notes to Consolidated Financial Statements (Unaudited)
 Note 3  Per Share Data
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Numerator:Income (loss) from continuing operations
    
    $
    (6,804
    )
    
    $
    510
    
    
    $
    (41,943
    )
    
    $
    1,518Preferred stock dividends
    
    
    (4
    )
    
    
    (4
    )
    
    
    (12
    )
    
    
    (12
    )Income (loss) from continuing
operations available to common
shareholders
    
    $
    (6,808
    )
    
    $
    506
    
    
    $
    (41,955
    )
    
    $
    1,506Denominator:Weighted average common shares for
basic EPS
    
    
    25,926
    
    
    
    25,366
    
    
    
    25,610
    
    
    
    25,290Effect of dilutive securities:Incremental shares  non-vested stock
awards
    
    
    
    
    
    
    42
    
    
    
    
    
    
    
    85Incremental shares  stock purchase
warrants
    
    
    
    
    
    
    23
    
    
    
    
    
    
    
    8Weighted average common shares for
diluted EPS
    
    
    25,926
    
    
    
    25,431
    
    
    
    25,610
    
    
    
    25,383Income (loss) from continuing
operations per share, basic
    
    $
    (0.26
    )
    
    $
    0.02
    
    
    $
    (1.64
    )
    
    $
    0.06Income (loss) from continuing
operations per share, diluted
    
    $
    (0.26
    )
    
    $
    0.02
    
    
    $
    (1.64
    )
    
    $
    0.06
   9




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Origen Financial, Inc.
Notes to Consolidated Financial Statements (Unaudited)
  Note 4 Investments
  Investments Accounted for Under the Provisions of SFAS No. 115
  Investments Accounted for Under the Provisions of SOP 03-3
  10




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Origen Financial, Inc.
Notes to Consolidated Financial Statements (Unaudited)
 Note 5  Loans Receivable
  September 30, 2008
    
    
    December 31, 2007Manufactured housing loans  securitized
    
    $
    962,449
    
    
    $
    1,051,015Manufactured housing loans  unsecuritized
    
    
    2,271
    
    
    
    144,926Accrued interest receivable
    
    
    4,923
    
    
    
    5,608Deferred loan origination costs
    
    
    3,301
    
    
    
    5,612Discount on originated loans
    
    
    (18,573
    )
    
    
    Discount on purchased loans
    
    
    (2,844
    )
    
    
    (4,450
    )Allowance for purchased loans
    
    
    (1,509
    )
    
    
    (913
    )Allowance for loan losses
    
    
    (8,972
    )
    
    
    (7,882
    )$
    941,046
    
    
    $
    1,193,916
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Balance at beginning of period
    
    $
    8,518
    
    
    $
    7,342
    
    
    $
    7,882
    
    
    $
    8,456Provision for loan losses
    
    
    4,649
    
    
    
    2,191
    
    
    
    11,021
    
    
    
    5,785Transferred to loans held-for-sale
    
    
    
    
    
    
    
    
    
    
    (313
    )
    
    
    Gross charge-offs
    
    
    (6,450
    )
    
    
    (4,909
    )
    
    
    (17,959
    )
    
    
    (15,137
    )Recoveries
    
    
    2,255
    
    
    
    2,865
    
    
    
    8,341
    
    
    
    8,385Balance at end of period
    
    $
    8,972
    
    
    $
    7,489
    
    
    $
    8,972
    
    
    $
    7,489
 Note 6  Debt
  September 30,
    
    
    December 31,2008
    
    
    2007Warehouse financing
    
    $
    
    
    
    $
    173,072Securitization financing
    
    
    799,836
    
    
    
    884,650Repurchase agreements
    
    
    
    
    
    
    17,653Notes payable  related party
    
    
    29,280
    
    
    
    14,593$
    829,116
    
    
    $
    1,089,968
 Securitization Financing  2004-A Securitization
  11




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Origen Financial, Inc.
Notes to Consolidated Financial Statements (Unaudited)
 Securitization Financing  2004-B Securitization
  Securitization Financing  2005-A Securitization
  Securitization Financing  2005-B Securitization
  Securitization Financing  2006-A Securitization
  12




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Origen Financial, Inc.
Notes to Consolidated Financial Statements (Unaudited)
 Securitization Financing  2007-A Securitization
  Securitization Financing  2007-B Securitization
  Notes Payable  Related Party
   September 30, 2008
    
    December 31, 2007Average
    
    Average
    
    Average
    
    AverageBalance
    
    Rate
    
    Balance
    
    RateWarehouse financing  Citigroup (1)
    
    $
    57,722
    
    
    
    6.2
    %
    
    $
    170,002
    
    
    
    7.2
    %Securitization financing  2004-A securitization
    
    
    90,891
    
    
    
    5.9
    %
    
    
    104,871
    
    
    
    5.7
    %Securitization financing  2004-B securitization
    
    
    91,049
    
    
    
    6.0
    %
    
    
    106,089
    
    
    
    5.7
    %Securitization financing  2005-A securitization
    
    
    103,090
    
    
    
    5.5
    %
    
    
    118,918
    
    
    
    5.4
    %Securitization financing  2005-B securitization
    
    
    113,555
    
    
    
    5.9
    %
    
    
    128,903
    
    
    
    5.8
    %Securitization financing  2006-A securitization
    
    
    161,494
    
    
    
    6.7
    %
    
    
    181,267
    
    
    
    6.0
    %Securitization financing  2007-A securitization
    
    
    165,563
    
    
    
    6.5
    %
    
    
    119,196
    
    
    
    5.9
    %Securitization financing  2007-B securitization
    
    
    120,960
    
    
    
    7.0
    %
    
    
    26,561
    
    
    
    6.9
    %Repurchase agreements  Citigroup
    
    
    3,336
    
    
    
    5.2
    %
    
    
    20,811
    
    
    
    6.1
    %Notes payable  related party (2)
    
    
    30,298
    
    
    
    17.6
    %
    
    
    4,433
    
    
    
    12.9
    %Notes payable  servicing advances (3)
    
    
    
    
    
    
    
    
    
    
    129
    
    
    
    14.0
    %
 
 (1)
    
    Included facility fees. This facility was paid off in full and terminated in April
2008.(2)
    
    Includes the amortization of the fair value of the related stock purchase warrants.(3)
    
    Includes non-use fees. This facility was paid off in full and terminated in September
2007.  13




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Origen Financial, Inc.
Notes to Consolidated Financial Statements (Unaudited)
 Note 7  Share-Based Compensation Plan
  Note 8  Derivative Instruments and Hedging Activity
    14




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Origen Financial, Inc.
Notes to Consolidated Financial Statements (Unaudited)
 Cash Flow Hedge Instruments
    15




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Origen Financial, Inc.
Notes to Consolidated Financial Statements (Unaudited)
 Derivatives Not Designated as Hedge Instruments
  Note 9  Fair Value Measurements
      16




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Origen Financial, Inc.
Notes to Consolidated Financial Statements (Unaudited)
  September 30, 2008Assets/Fair Value Measurement Using
    
    
    Liabilities atLevel1
    
    
    Level 2
    
    
    Level 3
    
    
    Fair ValueAssetsDerivative assets
    
    $
    
    
    
    $
    111
    
    
    $
    
    
    
    $
    111Total assets
    
    $
    
    
    
    $
    111
    
    
    $
    
    
    
    $
    111LiabilitiesDerivative liabilities
    
    $
    
    
    
    $
    20,810
    
    
    $
    
    
    
    $
    20,810Total liabilities
    
    $
    
    
    
    $
    20,810
    
    
    $
    
    
    
    $
    20,810
   Note 10  Going Concern
    17




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##### Table of Contents



Origen Financial, Inc.
Notes to Consolidated Financial Statements (Unaudited)
  Note 11  Discontinued Operations
 .
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Revenues from discontinued operations
    
    $
    492
    
    
    $
    4,996
    
    
    $
    11,565
    
    
    $
    13,977Gain on sale of discontinued operations
    
    
    6,523
    
    
    
    
    
    
    
    6,523
    
    
    
    Income (loss) from discontinued operations before taxes
    
    $
    5,639
    
    
    $
    2,286
    
    
    $
    11,012
    
    
    $
    5,820Income tax expense (benefit)
    
    
    8
    
    
    
    (34
    )
    
    
    8
    
    
    
    (26
    )Income (loss) from discontinued operations, net of income
taxes
    
    $
    5,631
    
    
    $
    2,320
    
    
    $
    11,004
    
    
    $
    5,846
 18




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##### Table of Contents



Origen Financial, Inc.
Notes to Consolidated Financial Statements (Unaudited)
 Note 12  Related Party Transactions
   Note 13  Stockholders Equity
  Note 14  Subsequent Events
 Downgrade of Ambac Assurance Corporation
  19




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
  
    
    the risk that the inability to raise additional capital to meet our existing debt
obligations could threaten our ability to continue as a going concern;
    
    the performance of our manufactured housing loans;
    
    our ability to borrow at favorable rates and terms;
    
    conditions in the asset-backed securities market generally and the manufactured housing
asset-backed securities market specifically, including rating agencies views on the
manufactured housing industry;
    
    interest rate levels and changes in the yield curve (which is the curve formed by the
differing Treasury rates paid on one, two, three, five, ten and thirty year term debt);
    
    our ability to use hedging strategies to insulate our exposure to changing interest
rates;
    
    changes in, and the costs associated with complying with, federal, state and local
regulations, including consumer finance and housing regulations;
    
    applicable laws, including federal income tax laws;
    
    general economic conditions in the markets in which we operate;
   Overview
  20




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Recent Developments
      
    
    In February 2008, to satisfy our warehouse lender, we sold an asset-backed bond for
$22.5 million, in order to fully pay off $19.6 million of repurchase agreements secured by
this bond and three other bonds that we continue to hold.
    
    On March 13, 2008, because of the absence of a profitable exit in the securitization
market and reduced pricing in the whole loan market, we ceased originating loans for our
own account.
    
    Because of the unavailability of a profitable financing in the securitization market,
on March 14, 2008, we sold our portfolio of approximately $174.6 million in aggregate
principal balance of unsecuritized loans with a carrying value of approximately $175.7
million for approximately $155.0 million.
    
    We used the proceeds from the loan sale primarily to pay off the outstanding loan
balance of approximately $146.4 million on our warehouse credit facility, which expired on
March 14, 2008.
    
    On April 8, 2008 we completed a $46.0 million secured financing transaction with a
related party. The proceeds from this financing and other funds were used to pay off the
outstanding balance of approximately $46.7 million on our supplemental advance credit
facility which would have expired on June 13, 2008. The facility was terminated on April
8, 2008.
 21




---



##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 
    
    On April 30, 2008 we entered into an agreement for the sale of our servicing platform
assets to Green Tree. The transaction was approved by our stockholders as part of an Asset
Disposition and Management Plan at our annual meeting of stockholders held on June 25,
2008. On July 1, 2008, we completed the sale of our servicing platform assets to Green Tree
for $37.0 million. The proceeds were used to repay approximately $28.0 million in related
party debt.
    
    On July 31, 2008, we completed a sale of certain assets of our loan origination and
insurance business to a newly formed venture, the managing member of which is a wholly
owned affiliate of ManageAmerica, a nationally recognized provider of services to the
manufactured housing industry.
    
    As a result of the developments discussed above, we have decreased our workforce by 88%
since December 31, 2007.
  Going Concern
  Critical Accounting Policies
    22




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Results of Operations
 Comparison of the three months ended September 30, 2008 and 2007
 Net Income
  Net Interest Income
    2008 (1)
    
    
    2007 (1)Average
    
    
    
    
    
    
    Yield/
    
    
    Average
    
    
    
    
    
    
    Yield/Balance
    
    
    Interest
    
    
    Rate
    
    
    Balance
    
    
    Interest
    
    
    RateInterest earning assets:Manufactured housing loans (2)
    
    $
    956,493
    
    
    $
    23,103
    
    
    
    9.66
    %
    
    $
    1,121,697
    
    
    $
    22,460
    
    
    
    8.01
    %Investment securities
    
    
    9,660
    
    
    
    303
    
    
    
    12.55
    %
    
    
    41,263
    
    
    
    961
    
    
    
    9.32
    %Other interest earning assets
    
    
    27,605
    
    
    
    76
    
    
    
    1.10
    %
    
    
    22,534
    
    
    
    235
    
    
    
    4.17
    %Total
    
    $
    993,758
    
    
    $
    23,482
    
    
    
    9.45
    %
    
    $
    1,185,494
    
    
    $
    23,656
    
    
    
    7.98
    %Interest bearing liabilities (3):Loan funding facilities
    
    $
    818,312
    
    
    $
    12,935
    
    
    
    6.32
    %
    
    $
    999,962
    
    
    $
    15,227
    
    
    
    6.09
    %Repurchase agreements
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,893
    
    
    
    298
    
    
    
    6.31
    %Other interest bearing liabilities (4)
    
    
    30,678
    
    
    
    1,287
    
    
    
    16.78
    %
    
    
    3,133
    
    
    
    103
    
    
    
    13.15
    %Total
    
    $
    848,990
    
    
    $
    14,222
    
    
    
    6.70
    %
    
    $
    1,021,988
    
    
    $
    15,628
    
    
    
    6.12
    %Net interest income and interest rate
spread
    
    
    
    
    
    $
    9,260
    
    
    
    2.75
    %
    
    
    
    
    
    $
    8,028
    
    
    
    1.86
    %Net yield on average interest earning
assets (5)
    
    
    
    
    
    
    
    
    
    
    3.73
    %
    
    
    
    
    
    
    
    
    
    
    2.71
    %
 
 (1)
    
    Includes amounts for continuing and discontinued operations.(2)
    
    Net of loan servicing fees.(3)
    
Included facility fees.(4)
    
    Included non-use fees and the amortization of the fair value of the related stock
purchase warrant.(5)
    
    Amount is calculated as net interest income divided by total average interest earning
assets. 23




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
  Volume
    
    
    Rate
    
    
    TotalInterest earning assets:Manufactured housing loans
    
    $
    (3,308
    )
    
    $
    3,951
    
    
    $
    643Investment securities
    
    
    (736
    )
    
    
    78
    
    
    
    (658
    )Other interest earning assets
    
    
    53
    
    
    
    (212
    )
    
    
    (159
    )Total interest income
    
    $
    (3,991
    )
    
    $
    3,817
    
    
    $
    (174
    )Interest bearing liabilities:Loan funding facilities
    
    $
    (2,766
    )
    
    $
    474
    
    
    $
    (2,292
    )Repurchase agreements
    
    
    (298
    )
    
    
    
    
    
    
    (298
    )Other interest bearing liabilities
    
    
    906
    
    
    
    278
    
    
    
    1,184Total interest expense
    
    $
    (2,158
    )
    
    $
    752
    
    
    $
    (1,406
    )Increase in net interest income
    
    
    
    
    
    
    
    
    
    $
    1,232
 Provision for Losses
  Impairment of Purchased Loan Pool
  Non-interest Income
  Non-interest Expenses
  24




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
   Results of Operations
 Comparison of the nine months ended September 30, 2008 and 2007
 Net Income
  Net Interest Income
   25




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
  2008 (1)
    
    
    2007 (1)Average
    
    
    
    
    
    
    Yield/
    
    
    Average
    
    
    
    
    
    
    Yield/Balance
    
    
    Interest
    
    
    Rate
    
    
    Balance
    
    
    Interest
    
    
    RateInterest earning assets:Manufactured housing loans (2)
    
    $
    1,041,481
    
    
    $
    66,464
    
    
    
    8.51
    %
    
    $
    1,047,526
    
    
    $
    63,522
    
    
    
    8.09
    %Investment securities
    
    
    13,679
    
    
    
    1,273
    
    
    
    12.41
    %
    
    
    41,249
    
    
    
    2,874
    
    
    
    9.29
    %Other interest earning assets
    
    
    23,834
    
    
    
    334
    
    
    
    1.87
    %
    
    
    19,406
    
    
    
    667
    
    
    
    4.58
    %Total
    
    $
    1,078,994
    
    
    $
    68,071
    
    
    
    8.41
    %
    
    $
    1,108,181
    
    
    $
    67,063
    
    
    
    8.07
    %Interest bearing liabilities (3):Loan funding facilities
    
    $
    904,325
    
    
    $
    42,606
    
    
    
    6.28
    %
    
    $
    924,976
    
    
    $
    41,503
    
    
    
    5.98
    %Repurchase agreements
    
    
    3,336
    
    
    
    129
    
    
    
    5.16
    %
    
    
    21,967
    
    
    
    1,018
    
    
    
    6.18
    %Other interest bearing liabilities(4)
    
    
    30,298
    
    
    
    4,004
    
    
    
    17.62
    %
    
    
    1,176
    
    
    
    116
    
    
    
    13.15
    %Total
    
    $
    937,959
    
    
    $
    46,739
    
    
    
    6.64
    %
    
    $
    948,119
    
    
    $
    42,637
    
    
    
    6.00
    %Net interest income and interest
rate spread
    
    
    
    
    
    $
    21,332
    
    
    
    1.77
    %
    
    
    
    
    
    $
    24,426
    
    
    
    2.07
    %Net yield on average interest
earning assets (5)
    
    
    
    
    
    
    
    
    
    
    2.64
    %
    
    
    
    
    
    
    
    
    
    
    2.94
    %
 
 (1)
    
    Includes amounts for continuing and discontinued operations.(2)
    
    Net of loan servicing fees.(3)
    
    Included facility fees.(4)
    
    Included non-use fees and the amortization of the fair value of the related stock
purchase warrant.(5)
    
    Amount is calculated as net interest income divided by total average interest earning
assets.  Volume
    
    
    Rate
    
    
    TotalInterest earning assets:Manufactured housing loans
    
    $
    (367
    )
    
    $
    3,309
    
    
    $
    2,942Investment securities
    
    
    (1,921
    )
    
    
    320
    
    
    
    (1,601
    )Other interest earning assets
    
    
    152
    
    
    
    (485
    )
    
    
    (333
    )Total interest income
    
    $
    (2,136
    )
    
    $
    3,144
    
    
    $
    1,008Interest bearing liabilities:Loan funding facilities
    
    $
    (927
    )
    
    $
    2,030
    
    
    $
    1,103Repurchase agreements
    
    
    (863
    )
    
    
    (26
    )
    
    
    (889
    )Other interest bearing liabilities
    
    
    2,873
    
    
    
    1,015
    
    
    
    3,888Total interest expense
    
    $
    1,083
    
    
    $
    3,019
    
    
    $
    4,102Decrease in net interest income
    
    
    
    
    
    
    
    
    
    $
    (3,094
    )
 26




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Provision for Losses
  Impairment of Purchased Loan Pool
  Non-interest Income
  Non-interest Expenses
    27




---



##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Receivable Portfolio and Asset Quality
 Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities
   September 30, 2008
    
    December 31, 2007Number of loans receivable
    
    
    20,271
    
    
    
    24,416Average loan balance
    
    $
    48
    
    
    $
    49Weighted average loan coupon (1)
    
    
    9.44
    %
    
    
    9.45
    %Weighted average initial term
    
    20 years
    
    20 years
 
 (1)
    
    The weighted average loan coupon includes an imbedded servicing fee rate resulting from the
securitization of the loans that are accounted for as financings.  September 30, 2008
    
    December 31, 2007No. of
    
    Principal
    
    % of
    
    No. of
    
    Principal
    
    % ofDays delinquent
    
    Loans
    
    Balance
    
    Portfolio
    
    Loans
    
    Balance
    
    Portfolio31 60
    
    
    213
    
    
    $
    7,832
    
    
    
    0.8
    %
    
    
    268
    
    
    $
    9,451
    
    
    
    0.8
    %61 90
    
    
    74
    
    
    
    3,326
    
    
    
    0.3
    %
    
    
    84
    
    
    
    3,496
    
    
    
    0.3
    %Greater than 90
    
    
    186
    
    
    
    8,703
    
    
    
    0.9
    %
    
    
    170
    
    
    
    7,484
    
    
    
    0.6
    %
   28




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
  Liquidity and Capital Resources
    29




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    .
   30




---



##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    Recent Accounting Pronouncements
  31




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##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures About Market Risk
    Expected Maturity0 to 3
    
    
    4 to 12
    
    
    1 to 5
    
    
    Over 5months
    
    
    months
    
    
    years
    
    
    years
    
    
    TotalAssetsCash and equivalents
    
    $
    13,852
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    13,852Restricted cash
    
    
    14,436
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,436Investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,748
    
    
    
    9,748Loans receivable, net
    
    
    23,650
    
    
    
    104,404
    
    
    
    429,033
    
    
    
    383,959
    
    
    
    941,046Furniture, fixtures and equipment, net
    
    
    38
    
    
    
    120
    
    
    
    321
    
    
    
    
    
    
    
    479Repossessed houses
    
    
    2,074
    
    
    
    2,074
    
    
    
    
    
    
    
    
    
    
    
    4,148Assets held for sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other assets
    
    
    2,214
    
    
    
    1,670
    
    
    
    3,400
    
    
    
    4,620
    
    
    
    11,904Total assets
    
    $
    56,264
    
    
    $
    108,268
    
    
    $
    432,754
    
    
    $
    398,327
    
    
    $
    995,613Liabilities and Stockholders EquitySecuritization financing
    
    $
    29,488
    
    
    $
    89,811
    
    
    $
    325,630
    
    
    $
    354,907
    
    
    $
    799,836Notes payable  related party
    
    
    
    
    
    
    
    
    
    
    29,280
    
    
    
    
    
    
    
    29,280Other liabilities
    
    
    23,811
    
    
    
    370
    
    
    
    1,539
    
    
    
    21,254
    
    
    
    46,974Total liabilities
    
    
    53,299
    
    
    
    90,181
    
    
    
    356,449
    
    
    
    376,161
    
    
    
    876,090Preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    125
    
    
    
    125Common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    260
    
    
    
    260Additional paid-in-capital
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    225,541
    
    
    
    225,541Accumulated other comprehensive loss
    
    
    43
    
    
    
    (10
    )
    
    
    173
    
    
    
    (20,639
    )
    
    
    (20,433
    )Distributions in excess of earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (85,970
    )
    
    
    (85,970
    )Total stockholders equity
    
    
    43
    
    
    
    (10
    )
    
    
    173
    
    
    
    119,317
    
    
    
    119,523Total liabilities and stockholders equity
    
    $
    53,342
    
    
    $
    90,171
    
    
    $
    356,622
    
    
    $
    495,478
    
    
    $
    995,613Interest sensitivity gap
    
    $
    2,922
    
    
    $
    18,097
    
    
    $
    76,132
    
    
    $
    (97,151
    )Cumulative interest sensitivity gap
    
    $
    2,922
    
    
    $
    21,019
    
    
    $
    97,151
    
    
    
    Cumulative interest sensitivity gap to total assets
    
    
    0.29
    %
    
    
    2.11
    %
    
    
    9.76
    %
    
    
    
   32




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##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures About Market Risk
     Interest Rate SensitivityThere-2008
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    2012
    
    
    after
    
    
    TotalInterest sensitive assetsInterest bearing deposits
    
    $
    23,834
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    23,834Average interest rate
    
    
    1.87
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.87
    %Investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,763
    
    
    
    9,763Average interest rate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12.35
    %
    
    
    12.35
    %Loans receivable, net
    
    
    24,633
    
    
    
    142,902
    
    
    
    128,840
    
    
    
    113,782
    
    
    
    100,154
    
    
    
    478,955
    
    
    
    989,266Average interest rate
    
    
    9.45
    %
    
    
    9.45
    %
    
    
    9.45
    %
    
    
    9.45
    %
    
    
    9.45
    %
    
    
    9.45
    %
    
    
    9.45
    %Derivative asset
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    111
    
    
    
    111Average interest rate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5.26
    %
    
    
    5.26
    %Total interest sensitive
assets
    
    $
    48,467
    
    
    $
    142,902
    
    
    $
    128,840
    
    
    $
    113,782
    
    
    $
    100,154
    
    
    $
    488,829
    
    
    $
    1,022,974Interest sensitive
liabilitiesSecuritization financing
    
    
    29,488
    
    
    
    115,332
    
    
    
    97,294
    
    
    
    83,223
    
    
    
    71,034
    
    
    
    403,465
    
    
    
    799,836Average interest rate
    
    
    6.29
    %
    
    
    6.29
    %
    
    
    6.29
    %
    
    
    6.29
    %
    
    
    6.29
    %
    
    
    6.29
    %
    
    
    6.29
    %Notes payable  related
party
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    29,280
    
    
    
    
    
    
    
    
    
    
    
    29,280Average interest rate (1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17.62
    %
    
    
    
    
    
    
    
    
    
    
    17.62
    %Derivative liability
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,810
    
    
    
    20,810Average interest rate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5.28
    %
    
    
    5.28
    %Total interest sensitive
liabilities
    
    $
    29,488
    
    
    $
    115,332
    
    
    $
    97,294
    
    
    $
    112,503
    
    
    $
    71,034
    
    
    $
    424,275
    
    
    $
    849,926
 
 (1)
    
    Includes the amortization of the fair value of the related stock purchase warrant. 33




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##### Table of Contents



Item 4. Controls and Procedures
   34




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##### Table of Contents



PART II OTHER INFORMATION
 
 ITEM 6. Exhibits
  EXHIBIT INDEX
 Exhibit No.
    
    Description
    
    Method of Filing31.1
    
    Certification of Chief Executive Officer Required by
Rule 13a-14(a) of the Securities Exchange Act of 1934,
as amended.
    
    
    (1
    )31.2
    
    Certification of Chief Financial Officer Required by
Rule 13a-14(a) of the Securities Exchange Act of 1934,
as amended.
    
    
    (1
    )32.1
    
    Certification of Chief Executive Officer and Chief
Financial Officer Required by Rule 13a-14(b) of the
Securities Exchange Act of 1934, as amended.
    
    
    (1
    )
 
 (1)
    
    Filed herewith. 35




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##### Table of Contents



SIGNATURES
   ORIGEN FINANCIAL, INC.BY:
    /s/ W. Anderson Geater, Jr.W. Anderson Geater, Jr., ChiefFinancial Officer and Secretary
(Duly authorized officer and principal
financial officer) 36




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##### Table of Contents



ORIGEN FINANCIAL, INC.
EXHIBIT INDEX
 Exhibit No.
    
    Description
    
    Method of Filing31.1
    
    Certification of Chief Executive Officer
Required by Rule 13a-14(a) of the
Securities Exchange Act of 1934, as
amended.
    
    
    (1
    )31.2
    
    Certification of Chief Financial Officer Required by
Rule 13a-14(a) of the Securities Exchange Act of 1934,
as amended.
    
    
    (1
    )32.1
    
    Certification of Chief Executive Officer and Chief
Financial Officer Required by Rule 13a-14(b) of the
Securities Exchange Act of 1934, as amended.
    
    
    (1
    )
 
 (2)
    
    Filed herewith. 37