##### 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, 2006.
 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
  o þ 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, 2006 and
December 31, 2005
    
    
    3Consolidated Statements of Operations for the periods
ended September 30, 2006 and 2005
    
    
    4Consolidated Statements of Comprehensive Income (Loss) for the periods
ended September 30, 2006 and 2005
    
    
    5Consolidated Statements of Cash Flows for the nine months
ended September 30, 2006 and 2005
    
    
    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 and Reports on Form 8-K
    
    
    34Signatures
    
    
    35Certification of Chief Executive Officer by Rule 13a-14(a)Certification of Chief Financial Officer by Rule 13a-14(a)Certification of CEO and CFO by Rule 13a-14(b)
  2




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Part I. Financial Information
 
 Item 1. Financial Statements
 Origen Financial, Inc.
 
 Consolidated Balance Sheets
 (In thousands, except share data)
 September 30, 2006 and December 31, 2005
 September 30,
    
    
    December 31,2006
    
    
    2005(Unaudited)ASSETSAssetsCash and cash equivalents
    
    $
    3,343
    
    
    $
    8,307Restricted cash
    
    
    13,867
    
    
    
    13,635Investments held to maturity
    
    
    41,540
    
    
    
    41,914Loans receivable, net of allowance for losses of
$8,412 and $10,017, respectively
    
    
    904,865
    
    
    
    768,410Furniture, fixtures and equipment, net
    
    
    3,300
    
    
    
    3,558Goodwill
    
    
    32,277
    
    
    
    32,277Other assets
    
    
    24,954
    
    
    
    24,902Total assets
    
    $
    1,024,146
    
    
    $
    893,003LIABILITIES AND STOCKHOLDERS EQUITYLiabilitiesWarehouse financing
    
    $
    61,018
    
    
    $
    65,411Securitization financing
    
    
    710,011
    
    
    
    578,503Repurchase agreements
    
    
    23,582
    
    
    
    23,582Notes payable  servicing advances
    
    
    1,458
    
    
    
    2,212Other liabilities
    
    
    25,607
    
    
    
    23,344Total liabilities
    
    
    821,676
    
    
    
    693,052Stockholders EquityPreferred stock, $.01 par value, 10,000,000 shares
authorized; 125 shares issued and outstanding at
September 30, 2006 and December 31, 2005
    
    
    125
    
    
    
    125Common stock, $.01 par value, 125,000,000 shares
authorized; 25,785,901 and 25,450,726 shares issued
and outstanding at September 30, 2006 and December
31, 2005, respectively
    
    
    258
    
    
    
    255Additional paid-in-capital
    
    
    219,437
    
    
    
    218,366Accumulated other comprehensive income (loss)
    
    
    (1,044
    )
    
    
    907Distributions in excess of earnings
    
    
    (16,306
    )
    
    
    (19,702
    )Total stockholders equity
    
    
    202,470
    
    
    
    199,951Total liabilities and stockholders equity
    
    $
    1,024,146
    
    
    $
    893,003
 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 data)
 For the periods ended September 30, 2006 and 2005
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Interest IncomeTotal interest income
    
    $
    18,807
    
    
    $
    15,408
    
    
    $
    54,072
    
    
    $
    43,196Total interest expense
    
    
    11,451
    
    
    
    7,714
    
    
    
    31,328
    
    
    
    19,805Net interest income before loan losses
    
    
    7,356
    
    
    
    7,694
    
    
    
    22,744
    
    
    
    23,391Provision for loan losses
    
    
    1,598
    
    
    
    6,697
    
    
    
    4,924
    
    
    
    10,372Impairment of purchased loan pool
    
    
    
    
    
    
    428
    
    
    
    
    
    
    
    428Net interest income after loan losses
and impairment
    
    
    5,758
    
    
    
    569
    
    
    
    17,820
    
    
    
    12,591Non-interest Income
    
    
    4,362
    
    
    
    3,874
    
    
    
    12,750
    
    
    
    10,550Non-interest ExpensesPersonnel
    
    
    5,719
    
    
    
    5,887
    
    
    
    17,986
    
    
    
    17,065Loan origination and servicing
    
    
    402
    
    
    
    371
    
    
    
    1,114
    
    
    
    1,165Write-down of residual interest
    
    
    
    
    
    
    724
    
    
    
    
    
    
    
    724Loss on recourse buyout
    
    
    
    
    
    
    869
    
    
    
    
    
    
    
    869State business taxes
    
    
    76
    
    
    
    74
    
    
    
    251
    
    
    
    264Other operating
    
    
    2,169
    
    
    
    2,600
    
    
    
    6,327
    
    
    
    6,616Total non-interest expense
    
    
    8,366
    
    
    
    10,525
    
    
    
    25,678
    
    
    
    26,703Net income before cumulative effect of
change in accounting principle
    
    $
    1,754
    
    
    $
    (6,082
    )
    
    $
    4,892
    
    
    $
    (3,562
    )Cumulative effect of change in
accounting principle
    
    
    
    
    
    
    
    
    
    
    46
    
    
    
    NET INCOME (LOSS)
    
    $
    1,754
    
    
    $
    (6,082
    )
    
    $
    4,938
    
    
    $
    (3,562
    )Weighted average common shares
outstanding, basic
    
    
    25,203,558
    
    
    
    24,980,889
    
    
    
    25,099,157
    
    
    
    24,845,216Weighted average common shares
outstanding, diluted
    
    
    25,247,421
    
    
    
    24,980,889
    
    
    
    25,174,272
    
    
    
    24,845,216Earnings (loss) per common share before
cumulative effect of change in
accounting principle:Basic
    
    $
    0.07
    
    
    $
    (0.24
    )
    
    $
    0.19
    
    
    $
    (0.14
    )Diluted
    
    $
    0.07
    
    
    $
    (0.24
    )
    
    $
    0.19
    
    
    $
    (0.14
    )Earnings (loss) per common share:Basic
    
    $
    0.07
    
    
    $
    (0.24
    )
    
    $
    0.20
    
    
    $
    (0.14
    )Diluted
    
    $
    0.07
    
    
    $
    (0.24
    )
    
    $
    0.20
    
    
    $
    (0.14
    )
 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, 2006 and 2005
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Net income (loss)
    
    $
    1,754
    
    
    $
    (6,082
    )
    
    $
    4,938
    
    
    $
    (3,562
    )Other comprehensive income (loss):Net unrealized gain (loss) on interest
rate swaps designated as cash flow
hedges
    
    
    (4,790
    )
    
    
    2,154
    
    
    
    (1,942
    )
    
    
    1,056Reclassification adjustment for net
realized (gains) losses included in
net income
    
    
    (2
    )
    
    
    114
    
    
    
    (9
    )
    
    
    273Total other comprehensive income (loss)
    
    
    (4,792
    )
    
    
    2,268
    
    
    
    (1,951
    )
    
    
    1,329Comprehensive income (loss)
    
    $
    (3,038
    )
    
    $
    (3,814
    )
    
    $
    2,987
    
    
    $
    (2,233
    )
 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, 2006 and 2005
 Nine Months EndedSeptember 30,2006
    
    
    2005Cash Flows From Operating ActivitiesNet income (loss)
    
    $
    4,938
    
    
    $
    (3,562
    )Adjustments to reconcile net income to cash provided by operating
activities:Provision for loan losses
    
    
    4,924
    
    
    
    10,372Investment impairment
    
    
    114
    
    
    
    Impairment of purchased loan pool
    
    
    
    
    
    
    428Impairment of residual interest
    
    
    
    
    
    
    724Depreciation and amortization
    
    
    4,502
    
    
    
    4,086Compensation expense recognized under share-based compensation plans
    
    
    1,409
    
    
    
    1,903Cumulative effect of change in accounting principle
    
    
    (46
    )
    
    
    Increase in other assets
    
    
    (1,957
    )
    
    
    (1,054
    )(Decrease) Increase in accounts payable and other liabilities
    
    
    (606
    )
    
    
    703Net cash provided by operating activities
    
    
    13,278
    
    
    
    13,600Cash Flows From Investing ActivitiesIncrease in restricted cash
    
    
    (232
    )
    
    
    (4,310
    )Purchase of investment securities
    
    
    
    
    
    
    (4,106
    )Origination and purchase of loans
    
    
    (214,548
    )
    
    
    (216,613
    )Principal collections on loans
    
    
    63,990
    
    
    
    41,313Proceeds from sale of repossessed houses
    
    
    8,661
    
    
    
    8,697Capital expenditures
    
    
    (506
    )
    
    
    (1,650
    )Net cash used in investing activities
    
    
    (142,635
    )
    
    
    (176,669
    )Cash Flows From Financing ActivitiesDividends paid
    
    
    (1,542
    )
    
    
    (4,072
    )Repurchase and retirement of common stock
    
    
    (288
    )
    
    
    (449
    )Proceeds from securitization financing
    
    
    200,646
    
    
    
    165,274Repayment of securitization financing
    
    
    (69,276
    )
    
    
    (50,599
    )Proceeds from advances under repurchase agreements
    
    
    
    
    
    
    5,243Repayment of advances under repurchase agreements
    
    
    
    
    
    
    (360
    )Proceeds from warehouse financing
    
    
    201,868
    
    
    
    207,848Repayment of warehouse financing
    
    
    (206,261
    )
    
    
    (168,307
    )Change in servicing advances, net
    
    
    (754
    )
    
    
    1,539Net cash provided by financing activities
    
    
    124,393
    
    
    
    156,117NET DECREASE IN CASH AND CASH EQUIVALENTS
    
    
    (4,964
    )
    
    
    (6,952
    )Cash and cash equivalents, beginning of period
    
    
    8,307
    
    
    
    9,293Cash and cash equivalents, end of period
    
    $
    3,343
    
    
    $
    2,341Supplemental disclosures of cash flow information:Interest paid
    
    $
    30,849
    
    
    $
    19,011Supplemental non cash financing activities:Non-vested common stock issued as unearned compensation
    
    $
    2,400
    
    
    $
    2,156Loans transferred to repossessed assets and held for sale
    
    $
    13,874
    
    
    $
    15,437
 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)
 Note 2  Recent Accounting Pronouncements (Continued)
         8




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Origen Financial, Inc.
Notes to Consolidated Financial Statements (Unaudited)
 Note 2  Recent Accounting Pronouncements (Continued)
     9




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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 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Numerator:Net income
    
    $
    1,754
    
    
    $
    (6,082
    )
    
    $
    4,938
    
    
    $
    (3,562
    )Preferred stock dividends
    
    
    (4
    )
    
    
    (4
    )
    
    
    (12
    )
    
    
    (12
    )Income available to common shareholders
    
    $
    1,750
    
    
    $
    (6,086
    )
    
    $
    4,926
    
    
    $
    (3,574
    )Denominator:Weighted average common shares for
basic EPS
    
    
    25,204
    
    
    
    24,981
    
    
    
    25,099
    
    
    
    24,845Effect of dilutive securities:Weighted average non-vested stock
awards
    
    
    43
    
    
    
    
    
    
    
    75
    
    
    
    Weighted average common shares for
diluted EPS
    
    
    25,247
    
    
    
    24,981
    
    
    
    25,174
    
    
    
    28,845Basic EPS
    
    $
    0.07
    
    
    $
    (0.24
    )
    
    $
    0.20
    
    
    $
    (0.14
    )Diluted EPS
    
    $
    0.07
    
    
    $
    (0.24
    )
    
    $
    0.20
    
    
    $
    (0.14
    )
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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
  11




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Origen Financial, Inc.
Notes to Consolidated Financial Statements (Unaudited)
 Note 5  Loans Receivable
  September 30, 2006
    
    
    December 31, 2005Manufactured housing loans  securitized
    
    $
    851,499
    
    
    $
    695,701Manufactured housing loans  unsecuritized
    
    
    61,097
    
    
    
    85,949Accrued interest receivable
    
    
    4,660
    
    
    
    4,078Deferred fees
    
    
    (160
    )
    
    
    (2,100
    )Discount on purchased loans
    
    
    (3,391
    )
    
    
    (4,773
    )Allowance for purchased loans
    
    
    (428
    )
    
    
    (428
    )Allowance for loan loss
    
    
    (8,412
    )
    
    
    (10,017
    )$
    904,865
    
    
    $
    768,410
   No. of
    
    Principal
    
    % ofDays delinquent
    
    Loans
    
    Balance
    
    Portfolio31-60
    
    
    122
    
    
    $
    4,861
    
    
    
    3.7
    %61-90
    
    
    41
    
    
    
    1,640
    
    
    
    1.2
    %Greater than 90
    
    
    99
    
    
    
    4,158
    
    
    
    3.1
    %
 Note 6  Allowance for Loan Losses
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Balance at beginning of period
    
    $
    8,779
    
    
    $
    5,729
    
    
    $
    10,017
    
    
    $
    5,315Provision for loan losses1
    
    
    1,598
    
    
    
    6,697
    
    
    
    4,924
    
    
    
    10,372Transfers from recourse liability
    
    
    
    
    
    
    123
    
    
    
    
    
    
    
    2,036Gross charge-offs
    
    
    (4,202
    )
    
    
    (5,512
    )
    
    
    (12,825
    )
    
    
    (15,719
    )Recoveries
    
    
    2,237
    
    
    
    2,873
    
    
    
    6,296
    
    
    
    7,906Balance at end of period
    
    $
    8,412
    
    
    $
    9,910
    
    
    $
    8,412
    
    
    $
    9,910
 
 1
    
    The provision for loan losses for the three
and nine months ended September 31, 2005 includes approximately $3.5 million
related to the effects of Hurricane Katrina and Hurricane Rita. 12




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Origen Financial, Inc.
Notes to Consolidated Financial Statements (Unaudited)
 Note 7 Debt
  September 30,
    
    
    December 31,2006
    
    
    2005Warehouse financing
    
    $
    61,018
    
    
    $
    65,411Securitization financing
    
    
    710,011
    
    
    
    578,503Repurchase agreements
    
    
    23,582
    
    
    
    23,582Notes payable  servicing advances
    
    
    1,458
    
    
    
    2,212$
    796,069
    
    
    $
    669,708
 Warehouse Financing  Citigroup
 Securitization Financing  2004-A Securitization
 Securitization Financing  2004-B Securitization
 13




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Origen Financial, Inc.
Notes to Consolidated Financial Statements (Unaudited)
 Note 7 Debt (Continued)
 Securitization Financing  2005-A Securitization
 Securitization Financing  2005-B Securitization
 Securitization Financing  2006-A Securitization
 Repurchase Agreements Citigroup
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##### Table of Contents



Origen Financial, Inc.
Notes to Consolidated Financial Statements (Unaudited)
 Note 7  Debt (Continued)
 Note Payable  Servicing Advances JPMorgan Chase Bank, N.A. 
  September 30, 2006
    
    December 31, 2005Average
    
    Average
    
    Average
    
    AverageBalance
    
    Rate
    
    Balance
    
    RateWarehouse financing  Citigroup
    
    $
    129,327
    
    
    
    6.9
    %
    
    $
    139,539
    
    
    
    5.2
    %Securitization financing  2004-A securitization
    
    
    129,728
    
    
    
    5.3
    %
    
    
    154,295
    
    
    
    4.9
    %Securitization financing  2004-B securitization
    
    
    128,656
    
    
    
    5.5
    %
    
    
    149,499
    
    
    
    5.1
    %Securitization financing  2005-A securitization
    
    
    142,572
    
    
    
    5.2
    %
    
    
    101,441
    
    
    
    5.1
    %Securitization financing  2005-B securitization
    
    
    148,205
    
    
    
    5.7
    %
    
    
    7,228
    
    
    
    5.5
    %Securitization financing  2006-A securitization
    
    
    26,889
    
    
    
    6.1
    %
    
    
    
    
    
    
    Repurchase agreements  Citigroup
    
    
    23,582
    
    
    
    5.8
    %
    
    
    22,793
    
    
    
    4.2
    %Note payable  servicing advances  JPMorgan
Chase Bank, N.A.
    
    
    454
    
    
    
    9.6
    %
    
    
    710
    
    
    
    7.5
    %
  Note 8  Share-Based Compensation Plan
   15




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Origen Financial, Inc.
Notes to Consolidated Financial Statements (Unaudited)
 Note 8  Share-Based Compensation Plan (Continued)
  Stock Options
   WeightedWeighted
    
    
    AverageAverage
    
    
    RemainingNumber of
    
    
    Exercise
    
    
    ContractualOptions
    
    
    Price
    
    
    TermOptions outstanding at January 1, 2006
    
    
    255,500
    
    
    $
    10.00
    
    
    
    7.9Granted
    
    
    
    
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    
    
    
    
    Forfeited
    
    
    (7,000
    )
    
    $
    10.00
    
    
    
    7.8Options outstanding at September 30, 2006
    
    
    248,500
    
    
    $
    10.00
    
    
    
    7.1Options exercisable at September 30, 2006
    
    
    248,500
    
    
    $
    10.00
    
    
    
    7.1
  16




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Origen Financial, Inc.
Notes to Consolidated Financial Statements (Unaudited)
 Note 8  Share-Based Compensation Plan (Continued)
 Three Months
    
    
    Nine MonthsEnded
    
    
    EndedSeptember 30,
    
    
    September 30,2005
    
    
    2005Net income available to common shareholders
    
    $
    (6,086
    )
    
    $
    (3,574
    )Stock option compensation cost
    
    $
    (3
    )
    
    $
    (10
    )Pro forma net income available to common
shareholders
    
    $
    (6,089
    )
    
    $
    (3,584
    )Basic income per share as reported
    
    $
    (0.24
    )
    
    $
    (0.14
    )Pro forma basic income per share
    
    $
    (0.24
    )
    
    $
    (0.14
    )Diluted income per share as reported
    
    $
    (0.24
    )
    
    $
    (0.14
    )Pro forma diluted income per share
    
    $
    (0.24
    )
    
    $
    (0.14
    )
 Non-Vested Stock Awards
      WeightedNumber of
    
    
    AverageNon-Vested
    
    
    Grant DateStock Awards
    
    
    Fair ValueNon-vested at January 1, 2006
    
    
    469,837
    
    
    $
    8.02Granted
    
    
    390,000
    
    
    
    6.15Vested
    
    
    (269,493
    )
    
    
    8.63Forfeited
    
    
    (8,001
    )
    
    
    7.18Non-vested at September 30, 2006
    
    
    582,343
    
    
    $
    6.51
 17




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##### Table of Contents



Origen Financial, Inc.
Notes to Consolidated Financial Statements (Unaudited)
 Note 9  Derivative Instruments and Hedging Activities
    Cash Flow Hedge Instruments
  18




---



##### Table of Contents



Origen Financial, Inc.
Notes to Consolidated Financial Statements (Unaudited)
 Note 9  Derivative Instruments and Hedging Activities (Continued)
  Derivatives Not Designated as Hedge Instruments
  Note 10  Stockholders Equity
  Note 11  Subsequent Events
  19




---



##### Table of Contents



Item 2.
    
    Managements Discussion and Analysis of Financial Condition
and Results of Operations
  
    
    the performance of our manufactured housing loans;
    
    our ability to borrow at favorable rates and terms;
    
    the supply of manufactured housing loans;
    
    interest rate levels and changes in the yield curve;
    
    our ability to use hedging strategies to mitigate 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;
   20




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##### Table of Contents



Item 2.
    
    Managements Discussion and Analysis of Financial Condition
and Results of Operations
 Overview
  Recent Developments
  Critical Accounting Policies
    21




---



##### 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, 2006 and 2005.
 Net Income
  Interest Income
    2006
    
    
    2005Average
    
    
    
    
    
    
    Yield/
    
    
    Average
    
    
    
    
    
    
    Yield/Balance
    
    
    Interest
    
    
    Rate
    
    
    Balance
    
    
    Interest
    
    
    RateInterest earning assets:Manufactured housing loans1
    
    $
    877,190
    
    
    $
    17,637
    
    
    
    8.04
    %
    
    $
    696,151
    
    
    $
    14,329
    
    
    
    8.23
    %Investment securities
    
    
    41,229
    
    
    
    937
    
    
    
    9.09
    %
    
    
    41,298
    
    
    
    973
    
    
    
    9.42
    %Other
    
    
    16,665
    
    
    
    233
    
    
    
    5.59
    %
    
    
    15,862
    
    
    
    106
    
    
    
    2.67
    %Total
    
    $
    935,084
    
    
    $
    18,807
    
    
    
    8.05
    %
    
    $
    753,311
    
    
    $
    15,408
    
    
    
    8.18
    %Interest bearing liabilities2:Loan funding facilities
    
    $
    751,735
    
    
    $
    11,077
    
    
    
    5.89
    %
    
    $
    570,319
    
    
    $
    7,433
    
    
    
    5.21
    %Repurchase agreements
    
    
    23,582
    
    
    
    365
    
    
    
    6.19
    %
    
    
    24,263
    
    
    
    267
    
    
    
    4.40
    %Notes payable  servicing advance
    
    
    367
    
    
    
    9
    
    
    
    9.81
    %
    
    
    721
    
    
    
    14
    
    
    
    7.77
    %Total
    
    $
    775,684
    
    
    $
    11,451
    
    
    
    5.90
    %
    
    $
    595,303
    
    
    $
    7,714
    
    
    
    5.18
    %Net interest income and interest rate spread
    
    
    
    
    
    $
    7,356
    
    
    
    2.14
    %
    
    
    
    
    
    $
    7,694
    
    
    
    3.00
    %Net yield on average interest earning assets3
    
    
    
    
    
    
    
    
    
    
    3.15
    %
    
    
    
    
    
    
    
    
    
    
    4.09
    %
 
 1
    
    Net of loan servicing fees.2
    
    Includes facility fees.3
    
    Amount is calculated as annualized net
interest income divided by total average interest earning assets. 22




---



##### 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
    
    $
    3,726
    
    
    $
    (418
    )
    
    $
    3,308Investment securities
    
    
    (2
    )
    
    
    (34
    )
    
    
    (36
    )Other
    
    
    5
    
    
    
    122
    
    
    
    127Total interest income
    
    $
    3,729
    
    
    $
    (330
    )
    
    $
    3,399Interest bearing liabilities:Loan funding facilities
    
    $
    2,364
    
    
    $
    1,280
    
    
    $
    3,644Repurchase agreements
    
    
    (7
    )
    
    
    105
    
    
    
    98Notes payable  servicing advances
    
    
    (7
    )
    
    
    2
    
    
    
    (5
    )Total interest expense
    
    $
    2,350
    
    
    $
    1,387
    
    
    $
    3,737Decrease in net interest income
    
    
    
    
    
    
    
    
    
    $
    (338
    )
 Non-interest Income
  Provision for Losses
   23




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##### Table of Contents



Item 2.
    
    Managements Discussion and Analysis of Financial Condition
and Results of Operations
 Non-interest Expenses
      Comparison of the nine months ended September 30, 2006 and 2005.
 Net Income
  Interest Income
   24




---



##### Table of Contents



Item 2.
    
    Managements Discussion and Analysis of Financial Condition
and Results of Operations
  2006
    
    
    2005Average
    
    
    
    
    
    
    Yield/
    
    
    Average
    
    
    
    
    
    
    Yield/Balance
    
    
    Interest
    
    
    Rate
    
    
    Balance
    
    
    Interest
    
    
    RateInterest earning assets:Manufactured housing loans1
    
    $
    828,294
    
    
    $
    50,665
    
    
    
    8.16
    %
    
    $
    642,902
    
    
    $
    40,097
    
    
    
    8.32
    %Investment securities
    
    
    41,313
    
    
    
    2,814
    
    
    
    9.08
    %
    
    
    40,143
    
    
    
    2,803
    
    
    
    9.31
    %Other
    
    
    16,618
    
    
    
    593
    
    
    
    4.76
    %
    
    
    16,312
    
    
    
    296
    
    
    
    2.42
    %Total
    
    $
    886,225
    
    
    $
    54,072
    
    
    
    8.14
    %
    
    $
    699,357
    
    
    $
    43,196
    
    
    
    8.24
    %Interest bearing liabilities2:Loan funding facilities
    
    $
    705,377
    
    
    $
    30,270
    
    
    
    5.72
    %
    
    $
    517,515
    
    
    $
    19,115
    
    
    
    4.92
    %Repurchase agreements
    
    
    23,582
    
    
    
    1,026
    
    
    
    5.80
    %
    
    
    22,337
    
    
    
    653
    
    
    
    3.90
    %Notes payable  servicing advance
    
    
    454
    
    
    
    32
    
    
    
    9.40
    %
    
    
    623
    
    
    
    37
    
    
    
    7.92
    %Total
    
    $
    729,413
    
    
    $
    31,328
    
    
    
    5.73
    %
    
    $
    540,475
    
    
    $
    19,805
    
    
    
    4.89
    %Net interest income and interest rate spread
    
    
    
    
    
    $
    22,744
    
    
    
    2.41
    %
    
    
    
    
    
    $
    23,391
    
    
    
    3.35
    %Net yield on average interest earning assets3
    
    
    
    
    
    
    
    
    
    
    3.42
    %
    
    
    
    
    
    
    
    
    
    
    4.46
    %
  Volume
    
    
    Rate
    
    
    TotalInterest earning assets:Manufactured housing loans
    
    $
    11,563
    
    
    $
    (995
    )
    
    $
    10,568Investment securities
    
    
    82
    
    
    
    (71
    )
    
    
    11Other
    
    
    6
    
    
    
    291
    
    
    
    297Total interest income
    
    $
    11,651
    
    
    $
    (775
    )
    
    $
    10,876Interest bearing liabilities:Loan funding facilities
    
    $
    6,939
    
    
    $
    4,216
    
    
    $
    11,155Repurchase agreements
    
    
    36
    
    
    
    337
    
    
    
    373Notes payable  servicing advances
    
    
    (10
    )
    
    
    5
    
    
    
    (5
    )Total interest expense
    
    $
    6,965
    
    
    $
    4,558
    
    
    $
    11,523Decrease in net interest income
    
    
    
    
    
    
    
    
    
    $
    (647
    )
 Non-interest Income
  
 1
    
    Net of loan servicing fees.2
    
    Includes facility fees.3
    
    Amount is calculated as annualized net
interest income divided by total average interest earning assets. 25




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##### Table of Contents



Item 2.
    
    Managements Discussion and Analysis of Financial Condition
and Results of Operations
 Provision for Losses
  Non-interest Expenses
     26




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##### Table of Contents



Item 2.
    
    Managements Discussion and Analysis of Financial Condition
and Results of Operations
 Receivable Portfolio and Asset Quality
     September 30, 2006
    
    December 31, 2005Principal balance of loans receivable
    
    $
    912,596
    
    
    $
    781,650Number of loans receivable
    
    
    19,580
    
    
    
    17,277Average loan balance
    
    $
    47
    
    
    $
    45Weighted average loan coupon1
    
    
    9.51
    %
    
    
    9.56
    %Weighted average initial term
    
    20 years
    
    20 years
  September 30, 2006
    
    December 31, 2005No. of
    
    Principal
    
    % of
    
    No. of
    
    Principal
    
    % ofDays delinquent
    
    Loans
    
    Balance
    
    Portfolio
    
    Loans
    
    Balance
    
    Portfolio31-60
    
    
    240
    
    
    $
    8,701
    
    
    
    1.0
    %
    
    
    215
    
    
    $
    8,182
    
    
    
    1.0
    %61-90
    
    
    84
    
    
    
    2,991
    
    
    
    0.3
    %
    
    
    68
    
    
    
    2,561
    
    
    
    0.3
    %Greater than 90
    
    
    147
    
    
    
    5,600
    
    
    
    0.6
    %
    
    
    192
    
    
    
    7,480
    
    
    
    1.0
    %
   
 1
    
    The weighted average loan coupon includes an
imbedded servicing fee rate resulting from securitization or sale of the loan
but accounted for as a financing. 27




---



##### Table of Contents



Item 2.
    
    Managements Discussion and Analysis of Financial Condition
and Results of Operations
     Loan Pool Unpaid Principal Balance (dollars in thousands) 1
 2002 and2001 and prior
    
    subsequentAt December 31, 2005Dollars
    
    $
    56,622
    
    
    $
    732,033Percentage of total
    
    
    7.2
    %
    
    
    92.8
    %At September 30, 2006Dollars
    
    $
    48,475
    
    
    $
    868,071Percentage of total
    
    
    5.3
    %
    
    
    94.7
    %
 Static Pool Performance (dollars in thousands) 1
 2002 and2001 and prior
    
    subsequentNine months ended September 30, 2006Dollars defaulted
    
    $
    4,055
    
    
    $
    9,819Net recovery percentage
    
    
    37.1
    %
    
    
    48.4
    %Net losses
    
    $
    3,495
    
    
    $
    5,507
 
 1
    
    Includes owned portfolio, repossessed
inventory and loans sold with recourse. 28




---



##### Table of Contents



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




---



##### 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
    31




---



##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures About Market Risk
    Maturity0 to 3
    
    
    4 to 12
    
    
    1 to 5
    
    
    Over 5months
    
    
    months
    
    
    years
    
    
    years
    
    
    TotalAssetsCash and equivalents
    
    $
    3,343
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    3,343Restricted cash
    
    
    13,867
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,867Investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    41,540
    
    
    
    41,540Loans receivable, net
    
    
    31,735
    
    
    
    89,613
    
    
    
    358,654
    
    
    
    424,863
    
    
    
    904,865Furniture, fixtures and equipment, net
    
    
    206
    
    
    
    619
    
    
    
    2,475
    
    
    
    
    
    
    
    3,300Goodwill
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    32,277
    
    
    
    32,277Other assets
    
    
    11,354
    
    
    
    6,374
    
    
    
    4,680
    
    
    
    2,546
    
    
    
    24,954Total assets
    
    $
    60,505
    
    
    $
    96,606
    
    
    $
    365,809
    
    
    $
    501,226
    
    
    $
    1,024,146Liabilities and Stockholders EquityWarehouse financing
    
    $
    15,255
    
    
    $
    45,763
    
    
    $
    
    
    
    $
    
    
    
    $
    61,018Securitization financing
    
    
    24,901
    
    
    
    70,316
    
    
    
    281,422
    
    
    
    333,372
    
    
    
    710,011Repurchase agreements
    
    
    23,582
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23,582Notes payable  servicing advances
    
    
    1,458
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,458Other liabilities
    
    
    20,579
    
    
    
    356
    
    
    
    
    
    
    
    4,672
    
    
    
    25,607Total liabilities
    
    
    85,775
    
    
    
    116,435
    
    
    
    281,422
    
    
    
    338,044
    
    
    
    821,676Preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    125
    
    
    
    125Common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    258
    
    
    
    258Additional paid-in-capital
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    219,437
    
    
    
    219,437Accumulated other comprehensive loss
    
    
    (4
    )
    
    
    (32
    )
    
    
    177
    
    
    
    (1,185
    )
    
    
    (1,044
    )Distributions in excess of earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16,306
    )
    
    
    (16,306
    )Total stockholders equity
    
    
    (4
    )
    
    
    (32
    )
    
    
    177
    
    
    
    202,329
    
    
    
    202,470Total liabilities and stockholders equity
    
    $
    85,771
    
    
    $
    116,403
    
    
    $
    281,599
    
    
    $
    540,373
    
    
    $
    1,024,146Interest sensitivity gap
    
    $
    (25,266
    )
    
    $
    (19,797
    )
    
    $
    84,210
    
    
    $
    (39,147
    )Cumulative interest sensitivity gap
    
    $
    (25,266
    )
    
    $
    (45,063
    )
    
    $
    39,147
    
    
    
    Cumulative interest sensitivity gap to
total assets
    
    
    (2.47
    )%
    
    
    (4.40
    )%
    
    
    3.82
    %
    
    
    
  32




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##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures About Market Risk
  Contractual MaturityThere-2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    after
    
    
    TotalInterest sensitive assetsLoans receivable
    
    $
    31,735
    
    
    $
    117,678
    
    
    $
    103,867
    
    
    $
    91,615
    
    
    $
    80,775
    
    
    $
    479,195
    
    
    $
    904,865Average interest rate
    
    
    9.51
    %
    
    
    9.51
    %
    
    
    9.51
    %
    
    
    9.51
    %
    
    
    9.51
    %
    
    
    9.51
    %
    
    
    9.51
    %Interest bearing deposits
    
    
    17,669
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,669Average interest rate
    
    
    4.76
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4.76
    %Investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    41,540
    
    
    
    41,540Average interest rate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9.08
    %
    
    
    9.08
    %Interest rate swap asset
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3Average interest rate
    
    
    5.33
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5.33
    %Total interest sensitive
assets
    
    $
    49,407
    
    
    $
    117,678
    
    
    $
    103,867
    
    
    $
    91,615
    
    
    $
    80,775
    
    
    $
    520,735
    
    
    $
    964,077Interest sensitive
liabilitiesWarehouse financing
    
    $
    15,255
    
    
    $
    45,763
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    61,018Average interest rate
    
    
    7.19
    %
    
    
    7.19
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7.19
    %Securitization financing
    
    
    24,901
    
    
    
    92,337
    
    
    
    81,500
    
    
    
    71,886
    
    
    
    63,381
    
    
    
    376,006
    
    
    
    710,011Average interest rate
    
    
    5.89
    %
    
    
    5.89
    %
    
    
    5.89
    %
    
    
    5.89
    %
    
    
    5.89
    %
    
    
    5.89
    %
    
    
    5.89
    %Repurchase agreements
    
    
    23,582
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23,582Average interest rate
    
    
    6.19
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6.19
    %Note payable  servicing
advance
    
    
    1,458
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,458Average interest rate
    
    
    9.81
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9.81
    %Interest rate swap liability
    
    
    
    
    
    
    232
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,140
    
    
    
    3,372Average interest rate
    
    
    
    
    
    
    5.44
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5.44
    %
    
    
    5.44
    %Total interest sensitive
liabilities
    
    $
    65,196
    
    
    $
    138,332
    
    
    $
    81,500
    
    
    $
    71,886
    
    
    $
    63,381
    
    
    $
    379,146
    
    
    $
    799,441
 33




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##### Table of Contents



Item 4. Controls and Procedures
   
 PART  II OTHER INFORMATION
 
 ITEM 6. Exhibits and Reports on Form 8-K
  Exhibit No.
    
    Description
    
    Method of Filing10.1
    
    Employment  Agreement dated July
14, 2006 among Origen Financial Inc., Origen Financial L.L.C and
Ronald A. Klein*
    
    
    (1
    )31.1
    
    Certification of Chief Executive
Officer Required by Rule 13a-14(a) of
the Securities Exchange Act of 1934, as
amended.
    
    
    (2
    )31.2
    
    Certification of Chief Financial
Officer Required by Rule 13a-14(a) of
the Securities Exchange Act of 1934, as
amended.
    
    
    (2
    )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.
    
    
    (2
    )
 
      (i)
    
    Form 8-K, filed July 18, 2006, furnished for the purpose of
reporting, under Items 1.01 (Entry into a Material Definitive Agreement) and 9.01
(Financial Statements and Exhibits), the entry into an employment agreement
between Origen Financial, Inc., and our Chief Executive Officer, Ronald A. Klein.(ii)
    
    Form 8-K, filed August 9, 2006, furnished for the purpose of
reporting, under Item 2.02 (Results of Operations and Financial Condition), our
preliminary unaudited financial results for the quarter ended June 30, 2006.
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##### Table of Contents



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



ORIGEN FINANCIAL, INC.
EXHIBIT INDEX
 Exhibit No.
    
    Description
    
    Method of Filing10.1
    
    Employment  Agreement dated July
14, 2006 among Origen Financial Inc., Origen Financial L.L.C and
Ronald A. Klein*
    
    
    (1
    )31.1
    
    Certification of Chief Executive
Officer Required by Rule 13a-14(a) of
the Securities Exchange Act of 1934, as
amended.
    
    
    (2
    )31.2
    
    Certification of Chief Financial
Officer Required by Rule 13a-14(a) of
the Securities Exchange Act of 1934, as
amended.
    
    
    (2
    )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.
    
    
    (2
    )
 
    36