**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**







**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 March 31, 2007**





 ̈  **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: 001-32171**





**Opteum
      Inc.**


**(Exact
      name of registrant as specified in its charter)**





**Maryland**
            
            **72-1571637****(State
                or other jurisdiction of**
              **incorporation
                or organization)**
            
            **(I.R.S.
                Employer**
              **Identification
                No.)**





**3305
      Flamingo Drive, Vero Beach, Florida 32963**


**(Address
      of principal executive offices) (Zip Code)**





**(772)
      231-1400**


**(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 þ NO  ̈





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer. See definition of “accelerated
      filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.





Large
                accelerated filer ̈
            
            Accelerated
                filerþ
            
            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 þ





As
      of May
      9, 2007, the number of shares outstanding of the registrant’s Class A Common
      Stock, $0.001 par value, was 24,558,184 ;
      the
      number of shares outstanding of the registrant’s Class B Common Stock, $0.001
      par value, was 319,388; and the number of shares outstanding of the registrant’s
      Class C Common Stock, $0.001 par value, was 319,388.













**OPTEUM INC.**




**INDEX**











PART
                I. FINANCIAL INFORMATION
            3ITEM
                1.FINANCIAL
                STATEMENTS.
            3Consolidated
                Balance Sheets as of March 31, 2007 (unaudited) and December 31,
                2006
            3Consolidated
                Statements of Operations for the three months ended March 31, 2007
                and
                2006
              (unaudited)
            4Consolidated
                Statement of Stockholders’ Equity for the three months ended March 31,
                2007 (unaudited)
            6Consolidated
                Statements of Cash Flows for the three months ended March 31, 2007
                and
                2006 (unaudited)
            7Notes
                to Consolidated Financial Statements (unaudited)
            9ITEM
                2.MANAGEMENT’S
                DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
              AND
                RESULTS OF OPERATIONS.
            36ITEM
                3.QUANTITATIVE
                AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
            52ITEM
                4.CONTROLS
                AND PROCEDURES.
            52PART
                II. OTHER INFORMATIONITEM
                1.LEGAL
                PROCEEDINGS.
            52ITEM
                1A.RISK
                FACTORS.
            52ITEM
                6.EXHIBITS.
            53














**PART
      I. FINANCIAL INFORMATION**


**ITEM
      1. FINANCIAL STATEMENTS.**


**OPTEUM
                INC.****CONSOLIDATED
                BALANCE SHEETS****(Unaudited)**ASSETS
            
            **March
                31, 2007**
            
            **December
                31, 2006**MORTGAGE
                BACKED SECURITIES:Pledged
                to counterparties, at fair value
            $
            2,930,510,017
            $
            2,803,019,180Unpledged,
                at fair value
            
            1,286,084
            
            5,714,860TOTAL
                MORTGAGE BACKED SECURITIES
            
            2,931,796,101
            
            2,808,734,040Cash
                and cash equivalents
            
            78,946,785
            
            92,506,282Mortgage
                loans held for sale, net
            
            402,560,006
            
            749,833,599Retained
                interests, trading
            
            101,974,381
            
            104,198,721Securities
                held for sale
            
            849,139
            
            857,788Mortgage
                servicing rights, net
            
            91,940,415
            
            98,859,466Receivables,
                net
            
            5,092,605
            
            5,958,329Principal
                payments receivable
            
            9,112,840
            
            12,209,825Accrued
                interest receivable
            
            14,481,468
            
            14,072,078Derivative
                asset
            
            482,507
            
            5,863,963Deferred
                tax asset, net
            
            -
            
            7,180,598Property
                and equipment, net
            
            9,140,121
            
            15,788,078Prepaid
                and other assets
            
            18,857,336
            
            21,571,169TOTAL
                ASSETS
            $
            3,665,233,704
            $
            3,937,633,936LIABILITIES
                AND STOCKHOLDERS' EQUITYLIABILITIES:Repurchase
                agreements
            $
            2,862,121,928
            $
            2,741,679,650Warehouse
                lines of credit and drafts payable
            
            405,240,442
            
            734,878,632Other
                secured borrowings
            
            124,270,815
            
            121,976,748Junior
                subordinated notes due to Bimini Capital Trust I & II
            
            103,097,000
            
            103,097,000Accrued
                interest payable
            
            20,558,256
            
            17,776,464Dividends
                payable
            
            1,267,645
            
            1,266,937Deferred
                tax liability, net
            
            4,281,956
            
            -Minority
                interest in consolidated subsidiary
            
            -
            
            770,563Accounts
                payable, accrued expenses and other
            
            26,620,709
            
            23,753,113TOTAL
                LIABILITIES
            
            3,547,458,751
            
            3,745,199,107STOCKHOLDERS'
                EQUITY:Preferred
                Stock, $0.001 par value; 10,000,000 shares authorized; designated
                1,800,000 Class A Redeemable and 2,000,000 Class B Redeemable; no
                shares
                issued and outstanding as of March 31, 2007 and December 31,
                2006
            
            -
            
            -Class
                A Common Stock, $0.001 par value; 98,000,000 shares designated: 24,556,219
                shares issued and outstanding as of March 31, 2007 and 24,515,717
                shares
                issued and outstanding as of December 31, 2006
            
            24,556
            
            24,516Class
                B Common Stock, $0.001 par value; 1,000,000 shares designated, 319,388
                shares issued and outstanding as of March 31, 2007 and December 31,
                2006
            
            319
            
            319Class
                C Common Stock, $0.001 par value; 1,000,000 shares designated, 319,388
                shares issued and outstanding as of March 31, 2007 and December 31,
                2006
            
            319
            
            319Additional
                paid-in capital
            
            336,325,956
            
            335,646,460Accumulated
                other comprehensive loss
            
            (72,775,359)
            
            (76,773,610)Accumulated
                deficit
            
            (145,800,838)
            
            (66,463,175)TOTAL
                STOCKHOLDERS' EQUITY
            
            117,774,953
            
            192,434,829TOTAL
                LIABILITIES AND STOCKHOLDERS’ EQUITY
            $
            3,665,233,704
            $
            3,937,633,936See
                notes to consolidated financial
                statements.











**OPTEUM
                INC.**
              **CONSOLIDATED
                STATEMENTS OF OPERATIONS**
              **(Unaudited)****Three
                Months Ended****March
                31, 2007**
            
            **March
                31, 2006**Interest
                income, net of amortization of premium and discount
            $
            53,877,464
            $
            60,280,985Interest
                expense
            
            (51,972,115)
            
            (56,189,361)NET
                INTEREST INCOME
            
            1,905,349
            
            4,091,624OTHER
                INCOME
            
            1,367,392
            
            1,748,142SERVICING
                (LOSS):Servicing
                fee income
            
            7,578,796
            
            6,299,224Fair
                value adjustments to mortgage servicing rights
            
            (12,221,653)
            
            (8,062,481)NET
                SERVICING LOSS
            
            (4,642,857)
            
            (1,763,257)NON-INTEREST
                INCOME:GAINS
                (LOSS) ON MORTGAGE BANKING ACTIVITIES
            
            (17,959,672)
            
            2,996,730LOSS
                ON SALES OF MORTGAGE BACKED SECURITIES
            
            (820,271)
            
            -TOTAL
                NET REVENUES (DEFICIENCY OF REVENUES)
            
            (20,150,059)
            
            7,073,239DIRECT
                REIT OPERATING EXPENSES
            
            228,247
            
            319,250GENERAL
                AND ADMINISTRATIVE EXPENSES:Impairment
                of property and equipment
            
            5,951,752
            
            -Impairment
                of goodwill and other intangible assets
            
            2,825,741
            
            -Compensation
                and related benefits
            
            8,064,709
            
            8,024,556Audit,
                legal and other professional fees
            
            2,313,350
            
            1,202,147Other
                interest
            
            2,133,758
            
            1,731,785Valuation
                allowance
            
            17,812,256
            
            1,341,609Occupancy
                and utilities
            
            3,625,906
            
            1,612,226Advertising
                and marketing
            
            957,229
            
            1,118,998Other
                administrative
            
            3,315,020
            
            5,074,915TOTAL
                GENERAL AND ADMINISTRATIVE EXPENSES
            
            46,999,721
            
            20,106,236TOTAL
                EXPENSES
            
            47,227,968
            
            20,425,486LOSS
                BEFORE INCOME TAXES
            
            (67,378,027)
            
            (13,352,247)INCOME
                TAX (PROVISION) BENEFIT
            
            (11,462,554)
            
            5,380,436NET
                LOSS BEFORE MINORITY INTEREST
            
            (78,840,581)
            
            (7,971,811)MINORITY
                INTEREST IN THE CONSOLIDATED SUBSIDIARY’S LOSS
            
            770,563
            
            -NET
                LOSS
            $
            (78,070,018)
            $
            (7,971,811)








**OPTEUM
                INC.**
              **CONSOLIDATED
                STATEMENTS OF OPERATIONS (con’t)**
              **(Unaudited)****Three
                Months Ended****March
                31, 2007**
            
            **March
                31, 2006**BASIC
                AND DILUTED NET LOSS PER SHARE OF:PER
                CLASS A REDEEMABLE PREFERRED SHARE
            $
            -
            $
            -CLASS
                A COMMON STOCK
            $
            (3.14)
            $
            (0.34)CLASS
                B COMMON STOCK
            $
            (3.14)
            $
            (0.34)WEIGHTED
                AVERAGE NUMBER OF SHARES OUTSTANDING USED IN COMPUTING BASIC AND
                DILUTED
                PER SHARE AMOUNTSCLASS
                A REDEEMABLE PREFERRED SHARES
            
            -
            
            1,223,208CLASS
                A COMMON STOCK
            
            24,534,374
            
            23,436,534CLASS
                B COMMON STOCK
            
            319,388
            
            319,388CASH
                DIVIDENDS DECLARED PER SHARE OF:CLASS
                A REDEEMABLE PREFERRED SHARE
            
            -
            $
            -CLASS
                A COMMON STOCK
            $
            0.05
            $
            0.11CLASS
                B COMMON STOCK
            $
            0.05
            $
            0.11See
                notes to consolidated financial
                statements.

















**OPTEUM
                INC.**
              **CONSOLIDATED
                STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited)**
              **Three
                Months Ended March 31, 2007**Common
                Stock,
              Amounts
                at par value
            Additional
                Paid-in
            Accumulated
                Other Comprehensive
            AccumulatedClass
                A
            Class
                B
            Class
                C
            Capital
            Loss
            Deficit
            TotalBalances,
                December 31, 2006
            $
                24,516
            $
                319
            $
                319
            $
                335,646,460
            $
                (76,773,610)
            $
                (66,463,175)
            $
                192,434,829Issuance
                of Class A Common Stock for board compensation and equity plan share
                exercises, net
            40
            -
            -
            43,126
            -
            
            43,166Cash
                dividends declared, March 2007
            -
            -
            -
            -
            -
            (1,267,645)
            (1,267,645)Amortization
                of equity plan compensation
            -
            -
            -
            739,945
            -
            -
            739,945Equity
                plan shares withheld for statutory minimum withholding
                taxes
            
            
            
            (103,575)
            
            
            (103,575)Reclassify
                net realized loss on security sales
            -
            -
            -
            -
            820,271
            -
            820,271Net
                loss
            -
            -
            -
            -
            -
            (78,070,018)
            (78,070,018)Unrealized
                gain on available-for-sale securities, net
            -
            -
            -
            -
            3,177,980
            -
            3,177,980Comprehensive
                loss
            -
            -
            -
            -
            -
            -
            (74,892,038)Balances,
                March 31, 2007
            $
                24,556
            $
                319
            $
                319
            $
                336,325,956
            $(72,775,359)
            $(145,800,838)
            $
                117,774,953See
                notes to consolidated financial
                statements.











**OPTEUM
                INC.****CONSOLIDATED
                STATEMENTS OF CASH FLOWS****(Unaudited)****Three
                Months Ended****March
                31, 2007**
            
            **March
                31, 2006**CASH
                FLOWS FROM OPERATING ACTIVITIES:Net
                loss
            $
            (78,070,018)
            $
            (7,971,811)Adjustments
                to reconcile net loss to net cash provided by operating
                activities:Loss
                (gain) on mortgage banking activities
            
            17,959,672
            
            (2,996,730)Amortization
                of premium and discount on mortgage backed securities
            
            2,390,095
            
            3,471,025Decrease
                (Increase) in residual interest in asset backed securities
            
            2,224,340
            
            (7,185,613)Originated
                mortgage servicing rights
            
            6,919,051
            
            (4,633,843)Decrease
                in mortgage loans held for sale
            
            330,065,610
            
            179,720,923Decrease
                in securities held for sale
            
            8,649
            
            935,300Derivative
                asset
            
            4,629,767
            
            -Stock
                compensation
            
            679,536
            
            657,468Minority
                interest in the consolidated subsidiary’s loss
            
            (770,563)
            
            -Depreciation
                and amortization
            
            1,154,116
            
            1,027,644Impairment
                of property and equipment
            
            5,951,752
            
            -Impairment
                of goodwill and other intangible assets
            
            2,825,741Deferred
                income tax (benefit) provision
            
            11,462,554
            
            (3,704,129)Loss
                on sales of mortgage backed securities
            
            820,271
            
            -Changes
                in operating assets and liabilities:Decrease
                in other receivables, net
            
            865,724
            
            17,855,238(Increase)
                in accrued interest receivable
            
            (409,390)
            
            (701,063)(Increase)
                decrease in prepaids and other assets
            
            (268,904)
            
            283,855Increase
                in accrued interest payable
            
            2,781,792
            
            4,406,495Increase
                in accounts payable, accrued expenses and other
            
            1,415,822
            
            2,682,552NET
                CASH PROVIDED BY OPERATING ACTIVITIES
            
            312,635,617
            
            183,847,311CASH
                FLOWS FROM INVESTING ACTIVITIES:From
                available-for-sale securities:Purchases
            
            (834,671,789)
            
            (432,101,265)Sales
            
            409,782,566
            
            -Principal
                repayments
            
            305,712,032
            
            321,984,757Purchases
                of property equipment, and other
            
            (300,917)
            
            (1,842,465)NET
                CASH USED IN INVESTING ACTIVITIES
            
            (119,478,108)
            
            (111,958,973)CASH
                FLOWS FROM FINANCING ACTIVITIES:Decrease
                in restricted cash
            
            -
            
            2,310,000Proceeds
                from repurchase agreements
            
            5,288,715,205
            
            4,609,404,826Principal
                payments on repurchase agreements
            
            (5,168,272,927)
            
            (4,533,048,362)Decrease
                in warehouse lines of credit, drafts payable and other secured
                borrowings
            
            (325,892,347)
            
            (185,565,000)Stock
                issuance and other costs
            
            -
            
            (128,384)Purchases
                of treasury stock
            
            -
            
            (4,500,327)Cash
                dividends paid
            
            (1,266,937)
            
            -NET
                USED IN FINANCING ACTIVITIES
            
            (206,717,006)
            
            (111,527,247)NET
                CHANGE IN CASH AND CASH EQUIVALENTS
            
            (13,559,497)
            
            (39,638,909)CASH
                AND CASH EQUIVALENTS, Beginning of the period
            
            92,506,282
            
            130,510,948CASH
                AND CASH EQUIVALENTS, End of the period
            $
            78,946,785
            $
            90,872,039














**OPTEUM
                INC.****CONSOLIDATED
                STATEMENTS OF CASH FLOWS (CONT’D)****(Unaudited)****Three
                Months Ended****March
                31, 2007**
            
            **March
                31, 2006**SUPPLEMENTAL
                DISCLOSURES OF CASH FLOW INFORMATION:Cash
                paid during the period for interest
            $
            51,324,081
            $
            53,514,651SUPPLEMENTAL
                SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:Unsettled
                security purchases
            $
            -
            $
            1,709,728Cash
                dividends declared and payable, not yet paid
            $
            (1,267,645)
            $
            2,645,853See
                notes to consolidated financial
                statements.














**OPTEUM INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(UNAUDITED)**


**March
      31, 2007**








**NOTE
      1.**  **ORGANIZATION
      AND SIGNIFICANT ACCOUNTING POLICIES**





**Organization
      and Business Description**





Opteum
      Inc., a Maryland corporation (“Opteum”), was originally formed in September 2003
      as Bimini Mortgage Management, Inc. (“Bimini”) for
      the
      purpose of creating and managing a leveraged investment portfolio consisting
      of
      residential mortgage backed securities (“MBS”). Opteum’s shares of Class A
      Common Stock are listed on the New York Stock Exchange and trade under the
      ticker symbol “OPX.” Opteum’s website is located at
      http://www.opteum.com.





On
      November 3, 2005, Opteum, then known as Bimini, acquired Opteum
      Financial Services, LLC (“OFS”). Upon
      closing of the transaction, OFS became a wholly-owned taxable REIT subsidiary
      (“TRS”) of Bimini. Under the terms of the transaction, Bimini issued 3.7 million
      shares of Class A Common Stock and 1.2 million shares of Class A Redeemable
      Preferred Stock to the former members of OFS. Bimini also agreed to a contingent
      earn-out of up to $17.5 million based on the achievement by OFS of certain
      specific financial objectives. For the period from the date of acquisition
      through March 31, 2007, such objectives were not met and there were no payments
      made in respect of the contingent earn-out.





On
      February 10, 2006, Bimini changed its name to Opteum Inc. At Opteum’s 2006
      Annual Meeting of Stockholders, the shares of Class A Redeemable Preferred
      Stock
      issued to the former members of OFS were converted into shares of Opteum’s Class
      A Common Stock on a one-for-one basis following the approval of such conversion
      by Opteum’s stockholders.





On
      December 21, 2006, Opteum sold to Citigroup Global Markets Realty Corp.
      (“Citigroup Realty”) a Class B non-voting limited liability company membership
      interest in OFS, representing 7.5% of all of OFS’s outstanding limited liability
      company membership interests, for $4.1 million. Immediately following the
      transaction, Opteum held Class A voting limited liability company membership
      interests in OFS representing 92.5% of all of OFS’s outstanding limited
      liability company membership interests. In connection with the transaction,
      Opteum also granted Citigroup Realty the option, exercisable on or before
      December 20, 2007, to acquire additional Class B non-voting limited liability
      company membership interests in OFS representing 7.49% of all of OFS’s
      outstanding limited liability company membership interests.





Opteum
      has elected to be taxed as a real estate investment trust (“REIT”) under the
      Internal Revenue Code of 1986, as amended (the “Code”). As a REIT, Opteum is
      generally not subject to federal income tax on its REIT taxable income provided
      that it distributes to its stockholders at least 90% of its REIT taxable income
      on an annual basis. OFS
      has
      elected to be treated as a taxable REIT subsidiary and, as such, is subject
      to
      federal, state and local income taxation. In addition, the ability of OFS to
      deduct interest paid or accrued to Opteum for federal, state and local tax
      purposes is subject to certain limitations.





As
      used
      in this document, references to “Opteum,” the parent company, the registrant,
      and to REIT qualifying activities or the general management of Opteum Inc.’s
      investment portfolio of MBS refer solely to “Opteum Inc.” Further, as used in
      this document, references to “OFS,” Opteum’s taxable REIT subsidiary or non-REIT
      eligible assets refer solely to Opteum Financial Services, LLC and its
      consolidated subsidiaries. References to the “Company” refer to Opteum and OFS
      on a consolidated basis. The assets and activities that are not REIT eligible,
      such as mortgage origination, acquisition and servicing activities, are
      conducted by OFS.





On
      April
      20, 2007, the Board of Managers of OFS, at the recommendation of the Board
      of
      Directors of Opteum, approved the closure of OFS’s wholesale and conduit
      mortgage loan origination channels in the second quarter of 2007. Additionally,
      in May 2007, OFS signed a binding agreement to sell its retail mortgage loan
      origination channel to a third party. The impact of these decisions on the
      March
      31, 2007 financial statements includes OFS recording impairment charges on
      goodwill and other intangible assets and on certain fixed assets (as further
      described below). See Note 19.





**Interim
      Financial Statements**





The
      accompanying interim financial statements reflect all adjustments, consisting
      of
      normal recurring items that, in the opinion of management, are necessary for
      a
      fair presentation of the Company’s financial position, results of operations,
      statement of stockholders’ equity and cash flows for the periods presented.
      These interim financial statements have been prepared in accordance with
      disclosure requirements for interim financial information and accordingly,
      they
      may not include all of the information and footnotes required by U.S. generally
      accepted accounting principles (“GAAP”) for annual financial statements. The
      operating results for the interim period ended March 31, 2007 are not
      necessarily indicative of results that can be expected for the year ended
      December 31, 2007. Certain prior year amounts were reclassified to conform
      to
      the 2007 presentation. The financial statements included as part of this Form
      10-Q should be read in conjunction with the financial statements and notes
      thereto included in the Company’s Annual Report on Form 10-K for the year ended
      December 31, 2006.





**Basis
      of Presentation and Use of Estimates**





The
      accompanying 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 management to make estimates and assumptions
      that affect the reported amounts of assets and liabilities and disclosure of
      contingent assets and liabilities at the date of the financial statements and
      the reported amounts of revenues and expenses during the reporting period.
      Significant estimates affecting the accompanying financial statements include
      the fair values of MBS, the prepayment speeds used to calculate amortization
      and
      accretion of premiums and discounts on MBS, the realizability of the deferred
      tax assets and related valuation allowance, the valuation allowance on mortgage
      loans held for sale, the amount of the impairment charges recorded on certain
      assets, the valuation of retained interests, trading and the fair value of
      mortgage servicing rights.





**Consolidation**





Opteum
      owned 100% of OFS until December 21, 2006, when a Class B non-voting interest
      representing 7.5% of OFS’s then outstanding limited liability company membership
      interest was sold to Citigroup Realty. Citigroup Realty’s proportionate share in
      the after-tax results of OFS’s operations are shown in the accompanying
      consolidated statements of operations and Citigroup Realty’s interests in the
      net equity of OFS is reflected as a liability on the accompanying consolidated
      balance sheets. The minority interest’s share of the loss for the three months
      ended March 31, 2007 has been limited to its investment; see Note
      2.




The
      accompanying consolidated financial statements include the accounts of Opteum
      and its majority-owned subsidiary, OFS, as well the wholly-owned and majority
      owned subsidiaries of OFS. All inter-company accounts and transactions have
      been
      eliminated from the consolidated financial statements.





As
      further described in Note 11, Opteum has a common share investment in two trusts
      used in connection with the issuance of Opteum’s junior subordinated notes.
      Pursuant to the accounting guidance provided in Financial Accounting Standards
      Board (“FASB”) Interpretation (“FIN”) No. 46, *Consolidation
      of Variable Interest Entities* ,
      Opteum’s common share investments in the trusts are not consolidated in the
      financial statements of Opteum, and accordingly, these investments are accounted
      for on the equity method.





**Cash
      and Cash Equivalents**





Cash
      and
      cash equivalents include cash on hand and highly liquid investments with
      original maturities of three months or less. The carrying amount of cash
      equivalents approximates its fair value as of March 31, 2007 and December
      31, 2006.





**Valuation
      of Mortgage Backed Securities**





The
      valuation of the Company's investments in MBS is governed by Statement of
      Financial Accounting Standards (“SFAS”) No. 107, *Disclosures about Fair Value of Financial Instruments* .
      SFAS
      No. 107 defines the fair value of a financial instrument as the amount at which
      the instrument could be exchanged in a current transaction between willing
      parties. All REIT securities are reflected in the Company's financial statements
      at their estimated fair value as of March 31, 2007 and December 31, 2006.
      Estimated fair values for MBS are based on the average of third-party broker
      quotes received and/or independent pricing sources when available. However,
      the
      fair values reported reflect estimates and may not necessarily be indicative
      of
      the amounts the Company could realize in a current market exchange.





In
      accordance with GAAP, the Company classifies its investments in MBS as either
      trading investments, available-for-sale investments or held-to-maturity
      investments. Management determines the appropriate classification of the
      securities at the time they are acquired and evaluates the appropriateness
      of
      such classifications at each balance sheet date. Although the Company intends
      to
      hold its MBS until maturity, it may, from time to time, sell any of its MBS
      as
      part of the overall management of the business. The Company classifies all
      of
      its securities as available-for-sale and assets so classified are carried on
      the
      balance sheet at fair value and unrealized gains or losses arising from changes
      in fair value are reported as other comprehensive income or loss as a component
      of stockholders' equity.




When
      the
      fair value of an available-for-sale security is less than amortized cost,
      management considers whether there is an other-than-temporary impairment in
      the
      value of the security.   The decision is based on the credit quality
      of the issue (agency versus non-agency and for non-agency, the credit
      performance of the underlying collateral), the security prepayment speeds,
      the
      length of time the security has been in an unrealized loss position and the
      Company's ability and intent to hold securities. As of March 31, 2007, the
      Company did not hold any non-agency securities in its portfolio. If, in
      management's judgment, an other-than-temporary impairment exists, the cost
      basis
      of the security is written down in the period to fair value and the unrealized
      loss is recognized in current period earnings.





**Mortgage
      Loans Held for Sale**




Mortgage
      loans held for sale represent mortgage loans originated and held by the Company
      pending sale to investors. The mortgages are carried at the lower of cost or
      market as determined by outstanding commitments from investors or current
      investor yield requirements calculated on the aggregate loan basis. Deferred
      net
      fees or costs are not amortized during the period the loans are held for sale,
      but are recorded when the loan is sold. The Company generally, but not always,
      sells or securitizes loans with servicing rights retained. These transfers
      of
      financial assets are accounted for as sales for financial reporting purposes
      when control over the assets has been surrendered. Control over transferred
      assets is surrendered when (i) the assets have been isolated from the Company;
      (ii) the purchaser obtains the right, free of conditions that constrain such
      purchaser from taking advantage of that right, to pledge or exchange the
      transferred assets and (iii) the Company does not maintain effective control
      over the transferred assets through an agreement to repurchase them before
      their
      maturity. These transactions are treated as sales in accordance with SFAS No.
      140 *Accounting for Transfers and Servicing of Financial Assets and Extinguishment
      of
      Liabilities* .
      Gains
      or losses on such sales are recognized at the time legal title transfers to
      the
      purchaser and are based upon the difference between the sales proceeds from
      the
      purchaser and the allocated basis of the loan sold, adjusted for net deferred
      loan fees and certain direct costs and selling costs. A valuation allowance
      is
      recorded to adjust mortgage loans held for sale to the lower of cost or
      market.





**Retained
      Interest, Trading**





The
      Company uses warehouse loan arrangements to finance the origination and purchase
      of pools of fixed and adjustable-rate residential mortgage loans (the “Mortgage
      Loans”). Subsequent to their origination or purchase, OFS either sells these
      Mortgage Loans to third-party institutional investors through bulk sale
      arrangements or through securitization transactions. The Company generally
      makes
      several representations and warranties regarding the performance of the Mortgage
      Loans in connection with each sale or securitization.





In
      a
      securitization, the Company accumulates the desired amount of Mortgage Loans
      and
      securitizes them in order to create marketable securities. First, pursuant
      to a
      Mortgage Loan Purchase Agreement (“MLPA”), the Company sells Mortgage Loans to
      Opteum Mortgage Acceptance Corporation (“OMAC”), the Company's wholly-owned
      special purpose entity created for the execution of these securitizations.
      Under
      this MLPA, the Company makes general representations and warranties for the
      Mortgage Loans sold by the Company to OMAC.





OMAC
      then
      deposits the Mortgage Loans purchased from the Company into a Real Estate
      Mortgage Investment Conduit (“REMIC”) trust where, pursuant to a Pooling and
      Servicing Agreement (“P&S Agreement”), the rights to the cash flows
      associated with such Mortgage Loans are sold to investors in the form of
      marketable debt securities. These securities, issued by the REMIC trust, are
      divided into different classes of certificates (the “Certificates”) with varying
      claims to payments received on the Mortgage Loans.





Certain
      of these Certificates are offered to the public (the “Public Certificates”)
      pursuant to a prospectus. These Public Certificates are sold to underwriters
      on
      the closing date pursuant to an underwriting agreement. The proceeds from the
      sale of the Public Certificates to the underwriters (less an underwriting
      discount) are ultimately transferred to the Company as partial consideration
      for
      the Mortgage Loans sold to OMAC pursuant to the MLPA.





Finally,
      subsequent to a securitization transaction as described above, the Company
      typically executes an additional net interest margin (“NIM”) securitization, or
“resecuritization” of the non-publicly offered Certificates, representing
      prepayment penalties and over-collateralization fundings (the “Underlying
      Certificates”). This NIM securitization is typically transacted as
      follows:





OMAC
      first deposits the Underlying Certificates into a trust (the “NIM Trust”)
      pursuant to a deposit trust agreement. The NIM Trust, pursuant to an indenture,
      then issues (i) notes (the “NIM Notes”) representing interests in the Underlying
      Certificates and (ii) an owner trust certificate (the “Owner Trust Certificate”)
      representing the residual interest in the NIM Trust. The NIM Notes are sold
      to
      third parties via private placement transactions. The net proceeds from the
      sale
      of the NIM Notes and the Owner Trust Certificate are then transferred from
      OMAC
      to the Company. The Owner Trust Certificates from the Company's various
      securitizations represent the retained interest, trading on the consolidated
      balance sheet and are carried at fair value with changes in fair value reflected
      in earnings.





**Mortgage
      Servicing Rights**




The
      Company recognizes mortgage servicing rights (“MSRs”) as an asset when separated
      from the underlying mortgage loans in connection with the sale of such loans.
      Upon sale of a loan, the Company measures the retained MSRs by allocating the
      total cost of originating a mortgage loan between the loan and the servicing
      right based on their relative fair values. The estimated fair value of MSRs
      is
      determined by obtaining a market valuation from a specialist who brokers MSRs.
      The broker, Interactive Mortgage Advisors, LLC, is 50% owned by OFS. To
      determine the market valuation, the broker uses a valuation model that
      incorporates assumptions relating to the estimate of the cost of servicing
      the
      loan, a discount rate, a float value, an inflation rate, ancillary income of
      the
      loan, prepayment speeds and default rates that market participants use for
      acquiring similar servicing rights. Gains or losses on the sale of MSRs are
      recognized when title and all risks and rewards have irrevocably passed to
      the
      purchaser of such MSRs and there are no significant unresolved
      contingencies.





In
      March
      2006, the FASB issued SFAS No. 156, *Accounting for Servicing of Financial Assets* .
      SFAS
      156 amends SFAS 140 with respect to the accounting for separately-recognized
      servicing assets and liabilities. SFAS 156 requires all separately-recognized
      servicing assets and liabilities to be initially measured at fair value and
      permits companies to elect, on a class-by-class basis, to account for servicing
      assets and liabilities on either a lower of cost or market value basis or a
      fair
      value measurement basis. The Company elected to early adopt SFAS 156 as of
      January 1, 2006, and to measure all mortgage servicing assets at fair value
      (and
      as one class). As a result of adopting SFAS 156, the Company recognized a $2.6
      million after-tax ($4.3 million pre-tax) increase in retained earnings as of
      January 1, 2006, representing the cumulative effect adjustment of re-measuring
      all servicing assets and liabilities that existed as of December 31, 2005,
      from
      a lower of amortized cost or market basis to a fair value basis.





**Property
      and Equipment, net**





Property
      and equipment, net, consisting primarily of computer equipment with a
      depreciable life of 3 years, office furniture with a depreciable life of 5
      to 12
      years, leasehold improvements with a depreciable life of 5 to 15 years, land
      which has no depreciable life and building with a depreciable life of 30 years,
      is recorded at acquisition cost and depreciated using the straight-line method
      over the estimated useful lives of the assets. Asset lives range from three
      years to thirty years depending on the type of asset.





In
      accordance with SFAS No. 144, *Accounting
      for the Impairment or Disposal of Long Lived Assets* (“SFAS
      144”), the closure and/or sale of mortgage loan origination channels (discussed
      in Note 19) required management to test the associated long lived assets for
      recoverability. In connection with the testing of recoverability of the long
      lived assets, OFS recorded an impairment charge of $6.0 million for the three
      months ended March 31, 2007. Further, in accordance with SFAS 144, such long
      lived assets were reported by OFS as held for use as of March 31, 2007, but
      these assets will be included in discontinued operations for the remainder
      of
      2007.





Property
      and equipment as of March 31, 2007 and December 31, 2006, is net of accumulated
      depreciation of $5.3 million and $4.3 million, respectively. Depreciation
      expense for the three months ended March 31, 2007 and 2006 was $1.0 million
      and
      $0.9 million, respectively.





**Goodwill
      and Other Intangible Assets**




Goodwill
      represents the excess of the purchase price over the fair value of net assets
      acquired in a business combination. The Company's goodwill all arose from the
      OFS merger.





In
      accordance with SFAS No. 142, *Goodwill
      and Other Intangible Assets* ,
      goodwill of a reporting unit (OFS) and other intangible assets (the *“Opteum* ”
trade
      name) not subject to amortization shall be tested for impairment on an annual
      basis and between annual tests if an event occurs or circumstances change that
      indicate the intangible asset might be impaired, which, in the case of goodwill
      of a reporting unit, is when such event or circumstances would more likely
      than
      not reduce the fair value of that reporting unit below its carrying amount.
      The
      closure and/or sale of the wholesale and conduit mortgage loan origination
      channels constituted such an event that would require impairment analyses on
      the
      goodwill and other intangibles not subject to amortization. Accordingly, OFS
      recorded impairment charges for both goodwill and other intangible assets not
      subject to amortization of approximately $2.8 million as of March 31,
      2007.





**Derivative
      Assets and Derivative Liabilities**





The
      Company's mortgage committed pipeline includes interest rate lock commitments
      (“IRLCs”) that have been extended to borrowers who have applied for loan funding
      and meet certain defined credit and underwriting criteria. Effective with the
      adoption of SFAS No. 133, *Accounting for Derivative Instruments and Hedging Activities* ,
      as
      amended, the Company classifies and accounts for the IRLCs as derivatives.
      Accordingly, IRLCs are recorded at their fair value with changes in fair
      value recorded to current earnings. Changes in fair value of IRLCs are
      determined based on changes in value of similar loans observed over the period
      in question. The Company uses other derivative instruments to economically
      hedge
      the IRLCs, which are also classified and accounted for as
      derivatives.




The
      Company's risk management objective for its mortgage loans held for sale
      includes use of mortgage forward delivery contracts designed as fair value
      derivative instruments to protect earnings from an unexpected change due to
      a
      decline in value. Effective with the adoption of SFAS No. 133, the Company's
      mortgage forward delivery contracts are recorded at their fair value with
      changes in fair value recorded to current earnings. The value of mortgage
      forward delivery contracts are obtained from readily available market sources.
      The Company also evaluates its contractual arrangements, assets and liabilities
      for the existence of embedded derivatives.




Derivative
      assets or liabilities arising from the Company's derivative activities are
      reported as separate line items in the accompanying consolidated financial
      statements in “Derivative Asset” or Derivative Liability.” IRLCs are included in
“Mortgage loans held for sale” in the accompanying consolidated balance sheets.
      Fluctuations in the fair market value of IRLCs and other derivatives employed
      are reflected in the consolidated statement of operations under the caption
      “Gains (losses) on mortgage banking activities.”





**Repurchase
      Agreements**





The
      Company finances the acquisition of its MBS through the use of repurchase
      agreements. Under these repurchase agreements, the Company sells securities
      to a
      repurchase counterparty and agrees to repurchase the same securities in the
      future for a price that is higher than the original sales price. The difference
      between the sales price that the Company receives and the repurchase price
      that
      the Company pays represents interest paid to the repurchase counterparty.
      Although structured as a sale and repurchase obligation, a repurchase agreement
      operates as a financing under which the Company pledges its securities as
      collateral to secure a loan which is equal in value to a specified percentage
      of
      the estimated fair value of the pledged collateral. The Company retains
      beneficial ownership of the pledged collateral. At the maturity of a repurchase
      agreement, the Company is required to repurchase the underlying MBS and
      concurrently receives back its pledged collateral from the repurchase
      counterparty or, with the consent of the repurchase counterparty, the Company
      may renew such agreement at the then prevailing rate. These repurchase
      agreements may require the Company to pledge additional assets to the repurchase
      counterparty in the event the estimated fair value of the existing pledged
      collateral declines. As of March 31, 2007 and December 31, 2006, the Company
      did
      not have any margin calls on its repurchase agreements that it was not able
      to
      satisfy with either cash or additional pledged collateral.





Original
      terms to maturity of the Company's repurchase agreements generally, but not
      always, range from one month to twelve months; however, the Company is not
      precluded from entering into repurchase agreements with shorter or longer
      maturities. Repurchase agreement transactions are reflected in the financial
      statements at their cost, which approximates their fair value because of the
      short-term nature of these instruments. Should a counterparty decide not to
      renew a repurchase agreement at maturity, the Company must either refinance
      elsewhere or be in a position to satisfy this obligation. If, during the term
      of
      a repurchase agreement, a counterparty files for bankruptcy, the Company could
      experience difficulty recovering its pledged assets and may have an unsecured
      claim against the counterparty's assets for the difference between the amount
      received by the Company and the estimated fair value of the collateral pledged
      to such counterparty.





**Interest
      Income Recognition on MBS**





MBS
      are
      recorded at cost on the date the MBS are purchased or sold, which is generally
      the trade date. Realized gains or losses from MBS transactions are determined
      based on the specific identified cost of the MBS. Interest income is accrued
      based on the outstanding principal amount of the MBS and their stated
      contractual terms. Premiums and discounts associated with the purchase of the
      MBS are amortized or accreted into interest income over the estimated lives
      of
      the MBS adjusted for estimated prepayments using the effective interest method.
      Adjustments are made using the retrospective method to the effective interest
      computation each reporting period. The adjustment is based on the actual
      prepayment experiences to date and the present expectation of future prepayments
      of the underlying mortgages and/or the current value of the indices underlying
      adjustable rate mortgage securities versus index values in effect at the time
      of
      purchase or the last adjustment period.





**Gain
      (Loss) on Sale of Loans**




Gains
      or
      losses on the sale of mortgage loans are recognized at the time legal title
      transfers to the purchaser of such loans based upon the difference between
      the
      sales proceeds from the purchaser and the allocated basis of the loan sold,
      adjusted for net deferred loan fees and certain direct costs and selling costs.
      The Company defers net loan origination costs and fees as a component of the
      loan balance on the balance sheet. Such costs are not amortized and are
      recognized into income as a component of the gain or loss upon sale.
      Accordingly, salaries, commissions, benefits and other operating expenses of
      $12.2 million and $16.0 million were capitalized as direct loan origination
      costs during the three months ended March 31, 2007 and 2006, respectively and
      reflected in the basis of loans sold for gain on sale recognition purposes.
      Loan
      fees related to the origination and funding of mortgage loans held for sale
      which were also capitalized, were $1.2 million and $1.6 million during the
      three
      months ended as of March 31, 2007 and 2006, respectively. The net gain/(loss)
      on
      sale of loans for the three months ended March 31, 2007 and 2006 was ($18.0)
      million and $3.0 million, respectively. The net loss on sale of loans is
      included with changes in fair market value of IRLCs and mortgage loans held
      for
      sale and reported as “Gains (loss) on mortgage banking activities” on the
      consolidated statement of operations.





**Servicing
      Fee Income**





Servicing
      fee income is generally a fee based on a percentage of the outstanding principal
      balances of the mortgage loans serviced by the Company (or by a subservicer
      where the Company is the master servicer) and is recorded as income as the
      installment payments on the mortgages are received by the Company or the
      subservicer.





**Comprehensive
      Income (Loss)**




In
      accordance with SFAS No. 130, *Reporting Comprehensive Income* ,
      the
      Company is required to separately report its comprehensive income (loss) each
      reporting period. Other comprehensive income refers to revenue, expenses, gains
      and losses that, under GAAP, are included in comprehensive income but are
      excluded from net income, as these amounts are recorded directly as an
      adjustment to stockholders' equity. Other comprehensive income (loss) arises
      from unrealized gains or losses generated from changes in market values of
      securities classified as available-for-sale.





Comprehensive
      (loss) is as follows:





(in
      thousands)





**(Unaudited)****Three
                Months Ended****March
                31, 2007**
            
            **March
                31, 2006**Net
                (loss)
            $
            (78,070)
            $
            (7,972)Plus
                unrealized gain (loss) on available-for-sale securities,
                net
            
            3,178
            
            (11,424)Comprehensive
                loss
            $
            (74,892)
            $
            (19,396)





**Stock-Based
      Compensation**





The
      Company adopted SFAS No. 123(R), *Share-Based Payment* ,
      on
      January 1, 2006, and this adoption did not have an impact on the Company, as
      the
      Company had previously accounted for stock-based compensation using the fair
      value based method prescribed by SFAS No. 123, *Accounting for Stock-Based Compensation* .
      For
      stock and stock-based awards issued to employees, a compensation charge is
      recorded against earnings based on the fair value of the award. For transactions
      with non-employees in which services are performed in exchange for the Company's
      common stock or other equity instruments, the transactions are recorded on
      the
      basis of the fair value of the service received or the fair value of the equity
      instruments issued, whichever is more readily measurable at the date of
      issuance. Opteum's
      stock-based compensation transactions resulted in an aggregate of $0.8 million
      of compensation expense for the three months ended March 31, 2007 and $0.8
      million of compensation expense for the three months ended March 31,
      2006.




**Earnings
      Per Share**





The
      Company follows the provisions of SFAS No. 128, *Earnings per Share* ,
      and the
      guidance provided in the FASB's Emerging Issues Task Force (“EITF”) Issue No.
      03-6, *Participating Securities and the Two-Class Method under FASB Statement
      No. 128, Earnings Per Share* ,
      which
      requires companies with complex capital structures, common stock equivalents
      or
      two (or more) classes of securities that participate in the declared dividends
      to present both basic and diluted earnings per share (“EPS”) on the face of the
      consolidated statement of operations. Basic EPS is calculated as income
      available to common stockholders divided by the weighted average number of
      common shares outstanding during the period. Diluted EPS is calculated using
      the
“if converted” method for common stock equivalents. However, the common stock
      equivalents are not included in computing diluted EPS if the result is
      anti-dilutive.





Outstanding
      shares of Class B Common Stock, participating and convertible into Class A
      Common Stock, are entitled to receive dividends in an amount equal to the
      dividends declared on each share of Class A Common Stock if, as and when
      authorized and declared by the Board of Directors. Following the provisions
      of
      EITF 03-6, shares of the Class B Common Stock are included in the computation
      of
      basic EPS using the two-class method and, consequently, are presented separately
      from Class A Common Stock.





The
      shares of Class C Common Stock are not included in the basic EPS
      computation as these shares do not have participation rights. The outstanding
      shares of Class C Common Stock, totaling 319,388 shares, are not included
      in the computation of diluted EPS for the Class A Common Stock as the conditions
      for conversion into shares of Class A Common Stock were not
      met.





**Income
      Taxes**





Opteum
      has elected to be taxed as a REIT under the Code. As further described below,
      Opteum's TRS, OFS, is a taxpaying entity for income tax purposes and is taxed
      separately from Opteum. Opteum will generally not be subject to federal income
      tax on its REIT taxable income to the extent that Opteum distributes its REIT
      taxable income to its stockholders and satisfies the ongoing REIT requirements,
      including meeting certain asset, income and stock ownership tests. A REIT must
      generally distribute at least 90% of its REIT taxable income to its
      stockholders, of which 85% generally must be distributed within the taxable
      year, in order to avoid the imposition of an excise tax. The remaining balance
      may be distributed up to the end of the following taxable year, provided the
      REIT elects to treat such amount as a prior year distribution and meets certain
      other requirements.





OFS
      and
      its activities are subject to corporate income taxes and the applicable
      provisions of SFAS No. 109, *Accounting for Income Taxes* .
      Deferred tax assets and liabilities are recognized for the future tax
      consequences attributable to differences between the financial statement
      carrying amounts of existing assets and liabilities and their respective tax
      basis. Deferred tax assets and liabilities are measured using enacted tax rates
      expected to apply to taxable income in the years in which those temporary
      differences are expected to be recovered or settled. The effect on deferred
      tax
      assets and liabilities of a change in tax rates is recognized in income in
      the
      period that includes the enactment date. To the extent management believes
      deferred tax assets will not be fully realized in future periods, a provision
      will be recorded so as to reflect the net portion, if any, of the deferred
      tax
      asset management expects to realize in the consolidated balance sheet of the
      Company.





In
      assessing the realizability of deferred tax assets, management considers whether
      it is more likely than not that some portion or all of the deferred tax assets
      will not be realized. The ultimate realization of deferred tax assets is
      dependant upon the generation of future taxable income during the periods in
      which those temporary differences become deductible. Management considers the
      scheduled reversal of deferred tax liabilities, projected future taxable
      income, and tax planning strategies in making this assessment, including the
      impacts of the Company’s current plans to close
      the OFS wholesale and conduit mortgage loan origination channels in the second
      quarter of 2007, and to sell the OFS retail mortgage loan origination channel
      to
      a third party.  At this time, management
      believes it is more likely than not that the Company will not realize the full
      benefits of the federal tax loss carryforwards, and that the Company will not
      realize any benefit of the state tax loss carryforwards and the other deferred
      tax assets.  Therefore, the Company has recorded a valuation allowance of
      $37.4 million against certain deferred tax assets at March 31, 2007. The Company
      believes deferred tax assets of $23.4 million for which there are future
      reversals of existing taxable temporary differences expected to result in tax
      gains are more likely than not realizable as of March 31, 2007.





**Recent
      Accounting Pronouncements**





On
      February 15, 2007, the FASB issued statement No. 159, *The
      Fair Value Option for Financial Assets and Financial Liabilities — Including an
      Amendment of FASB Statement No. 115* SFAS
      159.  This standard permits an entity to measure financial instruments and
      certain other items at estimated fair value. Most of the provisions of SFAS
      No. 159 are elective; however, the amendment to SFAS No. 115,
      Accounting for Certain Investments in Debt and Equity Securities, applies to
      all
      entities that own trading and available-for-sale securities.  The fair
      value option created by SFAS 159 permits an entity to measure eligible items
      at
      fair value as of specified election dates. The fair value option is generally
      applied instrument by instrument, is irrevocable unless a new election date
      occurs, and must be applied to the entire instrument and not to only a portion
      of the instrument.  SFAS 159 is effective as of the beginning of the first
      fiscal year that begins after November 15, 2007.   Under certain
      conditions, early adoption is permitted as of the beginning of the previous
      fiscal year.  The Company is currently evaluating the impact of SFAS 159,
      if any, on our consolidated financial statements.





In
      September 2006, the FASB issued SFAS No. 157, *Fair
      Value Measurements,* to
      eliminate the diversity in practice that exists due to the different definitions
      of fair value that are dispersed among the many accounting pronouncements that
      require fair value measurements and the limited guidance for applying those
      definitions. SFAS 157 is effective for financial statements issued for fiscal
      years beginning after November 15, 2007, and interim periods within those fiscal
      years. The Company is currently evaluating the impact, if any, of adopting
      SFAS
      157 on the financial statements.





In
      June
      2006, the FASB issued FASB Interpretation No. 48 *,
      Accounting for Uncertainty in Income Taxes — an interpretation of FASB
      Statement No. 109* (“FIN 48”), which clarifies the accounting for uncertainty in tax
      positions. This Interpretation requires that the Company recognize in its
      financial statements, the impact of a tax position, if that position is more
      likely than not of being sustained on audit, based on the technical merits
      of
      the position. The provisions of FIN 48 are effective as of the beginning
      of the 2007 fiscal year, with the cumulative effect, if any, of the change
      in accounting principle recorded as an adjustment to opening retained earnings.
      The Company adopted FIN 48 on January 1, 2007, and such adoption did not have
      a
      material impact on the Company’s consolidated financial position and results of
      operations.





In
      February 2006, the FASB issued SFAS No. 155, *Accounting
      for Certain Hybrid Financial Instruments — an amendment of FASB Statements
      No. 133 and 140* .
      SFAS
      155 (i) permits an entity to measure at fair value any financial instrument
      that
      contains an embedded derivative that otherwise would require bifurcation; (ii)
      establishes a requirement to evaluate interests in securitized financial assets
      to identify interests that are freestanding derivatives or that are hybrid
      financial instruments that contain an embedded derivative requiring bifurcation;
      and (iii) contains other provisions that are not germane to the Company. SFAS
      155 is effective for all financial instruments acquired or issued after the
      beginning of an entity’s first fiscal year beginning after September 15, 2006. A
      scope exception under SFAS 155 where by securitized interests that only contain
      an embedded derivative that is tied to the prepayment risk of the underlying
      prepayable financial asset, and for which the investor does not control the
      right to accelerate the settlement was adopted by the FASB. The MBS securities
      owned in the REIT portfolio fall under this scope exception. However, in the
      future, the Company may own securities that may not fall under the exception
      or
      the FASB may repeal the exception, in which case the Company would be subject
      to
      the provisions of SFAS 155. Should securities owned by the Company fall under
      the provisions of SFAS 155 in the future, the Company’s results of operations
      may exhibit volatility as certain of its future investments may be marked to
      market through the income statement. Currently, changes in the value of the
      Company’s MBS securities are recognized through other comprehensive income
      (loss), a component of stockholders equity.




**NOTE
      2. OPTEUM FINANCIAL SERVICES, LLC**





On
      November 3, 2005, Opteum acquired 100% of the equity interests of OFS
      through a merger with a wholly-owned subsidiary of Opteum. The results of
      operations of OFS have been included in the Company's consolidated financial
      statements since November 3, 2005.





At
      the
      date of the merger, the Company recorded intangible assets with finite lives
      in
      the amount of $2.1 million for proprietary software and $0.6 million for an
      unlocked loans pipeline.  The software intangible has a 36 month life
      without any significant residual value, and the unlocked loans intangible was
      reduced as the applicable loans were closed. During 2006, the unlocked
      loans pipeline was reduced to zero.  As of March 31, 2007, the software
      intangible had been fully amortized, with $1.3 million of amortization expense
      for the three months ended March 31, 2007.  As of March 31, 2007, the
      Company’s goodwill of $2.1 million was fully impaired and written off in
      accordance with SFAS 142. In addition the Company recorded an impairment charge
      of $0.7 **** million
      to reduce the trade name intangible asset to $0.6 **** million
      as of March 31, 2007, in accordance with SFAS 144. During the three months
      ended
      March 31, 2007, the goodwill was deemed fully impaired and its carrying value
      was reduced to zero.




On
      December 21, 2006, Opteum sold to Citigroup Realty a Class B non-voting limited
      liability company membership interest in OFS, representing 7.5% of all of OFS’s
      outstanding limited liability company membership interests. Immediately
      following the transaction, Opteum held Class A voting limited liability company
      membership interests in OFS representing 92.5% of all of OFS’s outstanding
      limited liability company membership interests. In connection with the
      transaction, Opteum also granted Citigroup Realty the option, exercisable on
      or
      before December 20, 2007, to acquire additional Class B non-voting limited
      liability company membership interests in OFS representing 7.49% of all of
      OFS’s
      outstanding limited liability company membership interests.




Citigroup
      Realty’s proportionate share in the after-tax results of OFS’s operations are
      shown in the accompanying statements of operation, and Citigroup Realty’s
      interests in the net equity of these subsidiaries is reflected as a liability
      on
      the accompanying balance sheets. However, during the three-months ended March
      31, 2007, the proportionate share of OFS loss exceeded the net investment
      attributable to Citigroup Realty. Therefore, the portion of the net loss of
      OFS
      that is attributable to Citigroup Realty’s interest that is in excess of their
      investment is charged against the Company. Citigroup Realty’s net investment on
      December 31, 2006 was $0.8 million. For the quarter ended March 31, 2007,
      Citigroup Realty’s interest in the net loss of OFS was limited to $0.8 million.
      The losses absorbed by the Company which are in excess of Citigroup Realty’s
      investment totaled approximately $5.1 million for the quarter ended March 31,
      2007. In future periods, the Company will be credited first for these absorbed
      losses before Citigroup Realty’s investment is reinstated.




**NOTE
      3. MORTGAGE LOANS HELD FOR SALE, NET**




Upon
      the
      closing of a residential mortgage loan or shortly thereafter, OFS will sell
      or
      securitize the majority of its mortgage loan originations. OFS also sells
      mortgage loans insured or guaranteed by various government-sponsored entities
      and private insurance agencies. The insurance or guaranty is provided primarily
      on a nonrecourse basis to OFS, except where limited by the Federal Housing
      Administration and Veterans Administration and their respective loan programs.
      As of March 31, 2007, OFS serviced approximately $9.4 billion of mortgage loans
      sold into the secondary market. All of OFS’s loans held for sale are pledged as
      collateral under the various financing arrangements described in Note 8.
      Mortgage loans held for sale consist of the following as of March 31, 2007
      and
      December 31, 2006:




(in
      thousands)




**March
                31, 2007**
            
            **December
                31, 2006**Mortgage
                loans held for sale, and other, net
            $
            416,620
            $
            741,545Deferred
                loan origination costs and other-net
            
            5,387
            
            9,188Lower
                of cost or market and valuation allowance
            
            (19,447)
            
            (899)$
            402,560
            $
            749,834







Included
      in mortgage loans held for sale above are IRLCs.  Fluctuations in the fair
      market value of IRLCs and other derivatives employed for hedging are reflected
      in the consolidated statement of operations under the caption “Gains on mortgage
      banking activities.”








**NOTE
      4. RETAINED INTEREST, TRADING**





Retained
      interest, trading is the subordinated interests retained by OFS resulting from
      securitizations and includes the over-collateralization and residual net
      interest spread remaining after payments to the Public Certificates and NIM
      Notes. Retained interest, trading represents the present value of estimated
      cash
      flows to be received from these subordinated interests in the future. The
      subordinated interests retained are classified as “trading securities” and are
      reported at fair value with unrealized gains or losses reported in
      earnings.




All
      of
      OFS’s securitizations were structured and are accounted for as sales in
      accordance with SFAS No. 140, *Accounting for Transfers and Servicing of Financial Assets and Extinguishments
      of Liabilities* .
      Generally, to meet the sale treatment requirements of SFAS No. 140, the REMIC
      trust is structured as a “qualifying special purpose entity” or QSPE, which
      specifically limits the REMIC trust's activities, and OFS surrenders control
      over the mortgage loans upon their transfer to the REMIC trust.




**Valuation
      of Investments.** OFS
      classifies its retained interests as trading securities and therefore records
      these securities at their estimated fair value. In order to value the unrated,
      unquoted, investments, OFS will record these assets at their estimated fair
      value utilizing pricing information available directly from dealers and the
      present value calculated by projecting the future cash flows of an investment
      on
      a publicly available analytical system. When a publicly available analytical
      system is utilized, OFS will input the following variable factors which will
      have an impact on determining the market value:




*Interest
      Rate Forecast* .
      The
      forward London Interbank Offered Rate (“LIBOR”) interest rate curve.




*Discount
      Rate* .
      The
      present value of all future cash flows utilizing a discount rate assumption
      established at the discretion of OFS to represent market conditions and value
      of
      similar instruments with similar risks. Discount rates used will vary over
      time.
      Management observes discount rates used for assets with similar risk profiles.
      In selecting which assets to monitor for variations in discount rates,
      management seeks to identify assets that share most, if not all of the risk
      attributes of the Company’s retained interests, trading. Such assets are
      typically traded between market participants whereby the discount rate is the
      primary variable.




*Prepayment
      Forecast* .
      The
      prepayment forecast may be expressed by OFS in accordance with one of the
      following standard market conventions: 1) Constant Prepayment Rate (CPR) or
      2)
      Percentage of a Prepayment Vector (PPV). Prepayment forecasts may be changed
      as
      OFS observes trends in the underlying collateral as delineated in the Statement
      to Certificate Holders generated by the REMIC trust’s Trustee for each
      underlying security. Prepayment forecast will also vary over time as the level
      of interest rates change, the difference between rates available to borrowers
      on
      adjustable rate versus fixed rate mortgages change and non-interest rate related
      variables fluctuate such as home price appreciation, among others.




*Credit
      Performance Forecast.* A
      forecast of future credit performance of the underlying collateral pool will
      include an assumption of default frequency, loss severity, and a recovery lag.
      In general, OFS will utilize the combination of default frequency and loss
      severity in conjunction with a collateral prepayment assumption to arrive at
      a
      target cumulative loss to the collateral pool over the life of the pool based
      on
      historical performance of similar collateral by the originator. The target
      cumulative loss forecast will be developed and noted at the pricing date of
      the
      individual security but may be updated by OFS consistent with observations
      of
      the actual collateral pool performance. The Company utilizes a third party
      source to forecast credit performance.




Default
      Frequency may be expressed by OFS in accordance with any of three standard
      market conventions: 1) Constant Default Rate (CDR) 2) Percentage of a Standard
      Default Assumption (SDA) curve, or 3) a vector or curve established to meet
      forecasted performance for specific collateral pools.




Loss
      Severity will be expressed by OFS in accordance with historical performance
      of
      similar collateral and the standard market conventions of a percentage of the
      unpaid principal balance of the forecasted defaults lost during the foreclosure
      and liquidation process.




During
      the first year of a new issue OFS may balance positive or adverse effects of
      the
      prepayment forecast and the credit performance forecast allowing for deviation
      between actual and forecasted performance of the collateral pool. After the
      first year OFS will generally adjust the Prepayment and Credit Performance
      Forecasts to replicate actual performance trends without balancing adverse
      and
      positive effects.




The
      following table summarizes OFS’s residual interests in securitizations as of
      March 31, 2007 and December 31, 2006:




(in
      thousands)





**Series**
            
            **Issue
                Date**
            
            **March
                31, 2007**
            
            **December
                31, 2006**HMAC
                2004-1
            
            March
                4, 2004
            $
            2,513
            $
            2,948HMAC
                2004-2
            
            May
                10, 2004
            
            1,655
            
            1,939HMAC
                2004-3
            
            June
                30, 2004
            
            566
            
            362HMAC
                2004-4
            
            August
                16, 2004
            
            1,776
            
            1,544HMAC
                2004-5
            
            September
                28, 2004
            
            3,996
            
            4,545HMAC
                2004-6
            
            November
                17, 2004
            
            8,828
            
            9,723OMAC
                2005-1
            
            January
                31, 2005
            
            10,236
            
            13,331OMAC
                2005-2
            
            April
                5, 2005
            
            13,676
            
            14,259OMAC
                2005-3
            
            June
                17, 2005
            
            16,458
            
            16,091OMAC
                2005-4
            
            August
                25, 2005
            
            13,938
            
            12,491OMAC
                2005-5
            
            November
                23, 2005
            
            10,034
            
            8,916OMAC
                2006-1
            
            March
                23, 2006
            
            14,024
            
            13,219OMAC
                2006-2
            
            June
                26, 2006
            
            4,274
            
            4,831Total
            
            
            $
            101,974
            $
            104,199





Key
      economic assumptions used in measuring the fair value of retained interests
      at
      the date of securitization resulting from securitizations completed during
      2006
      were as follows:





**2006**Prepayment
                speeds (CPR)
            36.25%Weighted-average-life
            4.18Expected
                credit losses
            0.74%Discount
                rates
            16.81%Interest
                rates
            Forward
                LIBOR Yield curve





As
      of
      March 31, 2007 and December 31, 2006, key economic assumptions and the
      sensitivity of the current fair value of residual cash flows to the immediate
      10% and 20% adverse change in those assumptions are as follows:





(in
      thousands)





**March
                31, 2007**
            
            **December
                31, 2006**Balance
                sheet carrying value of retained interests - fair value
            $
            101,974
            $
            104,199Weighted
                average life (in years)
            
            4.00
            
            4.26Prepayment
                assumption (annual rate)
            
            38.94%
            
            37.88%Impact
                on fair value of 10% adverse change
            $
            (6,748)
            $
            (8,235)Impact
                on fair value of 20% adverse change
            $
            (12,334)
            $
            (14,939)Expected
                credit losses (% of original unpaid principal balance)
            
            0.51%
            
            0.56%Impact
                on fair value of 10% adverse change
            $
            (2,602)
            $
            (3,052)Impact
                on fair value of 20% adverse change
            $
            (5,285)
            $
            (6,098)Residual
                cash-flow discount rate
            
            17.35%
            
            16.03%Impact
                on fair value of 10% adverse change
            $
            (4,407)
            $
            (4,575)Impact
                on fair value of 20% adverse change
            $
            (8,452)
            $
            (8,771)Interest
                rates on variable and adjustable loans and bonds
            
            Forward
                LIBOR Yield Curve
            
            Forward
                LIBOR Yield CurveImpact
                on fair value of 10% adverse change
            $
            (17,611)
            $
            (18,554)Impact
                on fair value of 20% adverse change
            $
            (33,568)
            $
            (39,292)





These
      sensitivities are hypothetical and should be used with caution. As the figures
      indicate, changes in fair value based upon a 10% variation in assumptions
      generally cannot be extrapolated because the relationship of the change in
      assumption to the change in fair value may not be linear. Also, in this table,
      the effect of the variation in a particular assumption on the fair value of
      the
      retained interest is calculated without changing any other assumption, in
      reality, changes in one factor may result in changes in another which may
      magnify or counteract the sensitivities. To estimate the impact of a 10% and
      20%
      adverse change of the Forward LIBOR curve, a parallel shift in the forward
      LIBOR
      curve was assumed based on the Forward LIBOR curve as of March 31, 2007 and
      December 31, 2006.





Static
      pool loss percentages are calculated by using the original unpaid principal
      balance of each pool of assets as the denominator. The following static pool
      loss percentages are calculated based upon all OFS securitizations that have
      been completed to date:





(in
      thousands)


**Series**
              **Issue
                  Date**
              **Original
                  Unpaid Principal Balance**
              **Actual
                  Losses Through March 31, 2007**
              **Projected
                  Future Credit Losses as of March 31, 2007**
              **Projected
                  Total Credit Losses as of March 31, 2007**HMAC
                  2004-1
              March
                  4, 2004
              $
                  309,710
              0.18%
              0.12%
              0.30%HMAC
                  2004-2
              May
                  10, 2004
              388,737
              0.38
              0.15
              0.53HMAC
                  2004-3
              June
                  30, 2004
              417,055
              0.17
              0.15
              0.32HMAC
                  2004-4
              August
                  16, 2004
              410,123
              0.14
              0.14
              0.28HMAC
                  2004-5
              September
                  28, 2004
              413,875
              0.10
              0.26
              0.36HMAC
                  2004-6
              November
                  17, 2004
              761,027
              0.23
              0.28
              0.51OMAC
                  2005-1
              January
                  31, 2005
              802,625
              0.10
              0.27
              0.37OMAC
                  2005-2
              April
                  5, 2005
              883,987
              0.07
              0.36
              0.43OMAC
                  2005-3
              June
                  17, 2005
              937,117
              0.04
              0.35
              0.39OMAC
                  2005-4
              August
                  25, 2005
              1,321,739
              0.01
              0.51
              0.52OMAC
                  2005-5
              November
                  23, 2005
              986,277
              0.01
              0.61
              0.62OMAC
                  2006-1
              March
                  23, 2006
              934,441
              0.00
              0.67
              0.67OMAC
                  2006-2
              June
                  26, 2006
              491,572
              0.00
              1.12
              1.12Total
              
              $
                  9,058,285





The
      table
      below summarizes certain cash flows received from and paid to securitization
      trusts:





(in
      thousands)





**March
                31, 2007**
            
            **March
                31, 2006**Proceeds
                from securitizations
            $
            -
            $
            939,305Servicing
                fees received
            
            5,310
            
            4,592Servicing
                advances
            
            605
            
            335Cash
                flows received on retained interests
            
            901
            
            1,016





The
      following information presents quantitative information about delinquencies
      and
      credit losses on securitized financial assets as of March 31, 2007 and December
      31, 2006:





(in
      thousands)





**As
                of Date**
            
            **Total
                Principal Amount of Loans**
            
            **Principal
                Amount of Loans 60 Days or more**
            
            **Net
                Credit Losses**March
                31, 2007
            $
            5,427,366
            $
            227,215
            $
            7,512December
                31, 2006
            
            5,849,013
            
            138,205
            
            5,210




**NOTE
      5.**  **MORTGAGE
      SERVICING RIGHTS, NET**





As
      permitted by the effective date provisions of SFAS No. 156, the Company early
      adopted SFAS No. 156 as of January
      1, 2006 with respect to the valuation of its MSRs. (See Note 1 - Mortgage
      Servicing Rights.) Activities for MSRs are
      summarized as follows for the three months ended March 31, 2007 and for the
      year
      ended December 31, 2006:





(in
      thousands)




**March
                31, 2007**
            
            **March
                31, 2006**Balance
                at beginning of period
            $
            98,859
            $
            86,082Adjustment
                to fair value upon adoption of SFAS 156 as of January 1,
                2006
            
            -
            
            4,298Additions
            
            5,303
            
            11,020Changes
                in fair value:Changes
                in fair value due to changes in market conditions and
                run-off
            
            (9,663)
            
            (6,918)Changes
                in fair value due to change in valuation assumptions
            
            (2,559)
            
            (1,145)Balance
                at end of period
            $
            91,940
            $
            93,337







The
      Company elected to account for all originated MSRs as one class and, therefore,
      all MSRs are carried at fair value. As a result of the early adoption of SFAS
      156, the carrying value of the MSRs were increased by approximately $4.3 million
      (pre-tax) as of January 1, 2006. As required by the provisions of SFAS 156,
      the
      net of tax effect was recorded as a cumulative effect adjustment to retained
      earnings of OFS as of January 1, 2006. In addition, changes in value due to
      run-offs of the portfolio are recorded as valuation adjustments instead of
      amortization.




The
      fair
      value of MSRs is determined using discounted cash flow techniques. Changes
      in
      fair value are the result of changes in market conditions, changes in valuation
      assumptions and run-off of the underlying mortgage loans. Changes in fair value
      due to run-off of the underlying mortgage loans and changes in value due to
      changes in market conditions are grouped together above. When the underlying
      assumptions used for valuation purposes are changed, the effect on fair value
      is
      presented separately. For the three months ended March 31, 2007 and 2006, such
      changes to the underlying assumptions resulted in changes in fair value of
      ($2.6) million and ($1.1) million, respectively. During the three months ended
      March 31, 2007 and 2006, the MSR value increased/(decreased) by ($6.9) million
      and $7.3 million, respectively. Additions to the servicing portfolio, net
      of run-off, for the three months ended March 31, 2007 and 2006, were $0.6
      million and $5.5 million, respectively. Estimates of fair value involve several
      assumptions, including the key valuation assumptions about market expectations
      of future prepayment rates, interest rates and discount rates. Prepayment rates
      are projected using a prepayment model. The model considers key factors, such
      as
      refinance incentive, housing turnover, seasonality and aging of the pool of
      loans. Prepayment speeds incorporate expectations of future rates implied by
      the
      forward LIBOR/swap curve, as well as collateral specific
      information.





As
      of
      March 31, 2007 and December 31, 2006, key economic assumptions and the
      sensitivity of the current fair value of MSR rights cash flows to the immediate
      10% and 20% adverse change in those assumptions are as follows: (Note: base
      case
      prepayment and discount rate assumptions are a weighted average of the values
      applied to the various mortgage loans).





(in
      thousands)





**March
                31, 2007**
            
            **December
                31, 2006**Prepayment
                assumption (annual rate) (PSA)
            
            406.8
            
            424.6Impact
                on fair value of 10% adverse change
            $
            (3,986)
            $
            (3,923)Impact
                on fair value of 20% adverse change
            $
            (7,535)
            $
            (7,557)MSR
                Cash-Flow Discount Rate
            
            14.39%
            
            14.50%Impact
                on fair value of 10% adverse change
            $
            (3,378)
            $
            (3,505)Impact
                on fair value of 20% adverse change
            $
            (6,480)
            $
            (6,727)





These
      sensitivities are entirely hypothetical and should be used with caution. As
      the
      figures indicate, changes in fair value based upon 10% and 20% variations in
      assumptions generally cannot be extrapolated to greater or lesser percentage
      variation because the relationship of the change in assumption to the change
      in
      fair value may not be linear. Also, in this table, the effect of the variation
      in a particular assumption on the fair value of the MSR is calculated without
      changing any other assumption. In reality, changes in one factor may result
      in
      changes in another which may magnify or counteract the
      sensitivities.





**NOTE
      6.**  **MORTGAGE
      BACKED SECURITIES**





As
      of
      March 31, 2007 and December 31, 2006, all of Opteum's MBS were classified
      as available-for-sale and, as such, were reported at their estimated fair value.
      Estimated fair value was determined based on the average of third-party broker
      quotes received and/or independent pricing sources when available.





The
      following are the carrying values of Opteum's MBS portfolio as of March 31,
      2007 and December 31, 2006:





(in
      thousands)





**March
                31, 2007**
            
            **December
                31, 2006**Hybrid
                Arms
            $
            516,598
            $
            76,488Adjustable
                Rate Mortgages
            
            1,821,445
            
            2,105,818Fixed
                Rate Mortgages
            
            593,753
            
            626,428Totals
            $
            2,931,796
            $
            2,808,734





The
      following table presents the components of the carrying value of Opteum's MBS
      portfolio as of March 31, 2007 and December 31, 2006:





(in
      thousands)





**March
                31, 2007**
            
            **December
                31, 2006**Principal
                balance
            $
            2,893,760
            $
            2,779,867Unamortized
                premium
            
            111,272
            
            116,114Unaccreted
                discount
            
            (461)
            
            (502)Gross
                unrealized gains
            
            1,218
            
            422Other-than-temporary
                losses
            
            -
            
            (9,971)Gross
                unrealized losses
            
            (73,993)
            
            (77,196)Carrying
                value/estimated fair value
            $
            2,931,796
            $
            2,808,734





The
      following table presents for Opteum's MBS investments with gross unrealized
      losses, the estimated fair value and gross unrealized losses aggregated by
      investment category, as of March 31, 2007:





(in
      thousands)





**Loss
                Position More than 12 Months**
            
            **Loss
                Position Less than 12 Months**
            
            **Total****Estimated**
              **Fair
                Value**
            
            **Unrealized**
              **Losses**
            
            **Estimated**
              **Fair
                Value**
            
            **Unrealized**
              **Losses**
            
            **Estimated**
              **Fair
                Value**
            
            **Unrealized**
              **Losses**Hybrid
                Arms
            $
            63,890
            $
            (1,697)
            $
            188,705
            $
            (638)
            $
            252,595
            $
            (2,335)Adjustable
                Rate Mortgages
            
            1,255,190
            
            (47,191)
            
            427,654
            
            (1,611)
            
            1,682,844
            
            (48,802)Fixed
                Rate Mortgages
            
            503,935
            
            (22,842)
            
            3,524
            
            (14)
            
            507,459
            
            (22,856)$
            1,823,015
            $
            (71,730)
            $
            619,883
            $
            (2,263)
            $
            2,442,898
            $
            (73,993)





The
      following table presents for Opteum's MBS investments with gross unrealized
      losses, the estimated fair value and gross unrealized losses aggregated by
      investment category, as of December 31, 2006:





(in
      thousands)





**Loss
                Position More than 12 Months**
            
            **Loss
                Position Less than 12 Months**
            
            **Total****Estimated**
              **Fair
                Value**
            
            **Unrealized**
              **Losses**
            
            **Estimated**
              **Fair
                Value**
            
            **Unrealized**
              **Losses**
            
            **Estimated**
              **Fair
                Value**
            
            **Unrealized**
              **Losses**Hybrid
                Arms and Balloons
            $
            67,437
            $
            (1,858)
            $
            -
            $
            -
            $
            67,437
            $
            (1,858)Adjustable
                Rate Mortgages
            
            1,232,644
            
            (46,715)
            
            348,901
            
            (2,591)
            
            1,581,545
            
            (49,306)Fixed
                Rate Mortgages
            
            515,067
            
            (25,662)
            
            48,604
            
            (370)
            
            563,671
            
            (26,032)$
            1,815,148
            $
            (74,235)
            $
            397,505
            $
            (2,961)
            $
            2,212,653
            $
            (77,196)





As
      of
      March 31, 2007, all of Opteum's MBS investments have contractual maturities
      greater than 24 months. Actual maturities of MBS investments are generally
      shorter than stated contractual maturities. Actual maturities of Opteum's MBS
      investments are affected by the contractual lives of the underlying mortgages,
      periodic payments of principal, and prepayments of principal.





The
      Company believes that the overall decline in fair value of MBS is not considered
      to be other-than-temporary as of March 31, 2007.  Accordingly, the write
      down to fair value is recorded in other comprehensive loss as an unrealized
      loss. **** Generally,
      the factors considered in making this determination include: the expected cash
      flow from the MBS investment, the general quality of the MBS owned, any credit
      protection available, current market conditions, and the magnitude and duration
      of the historical decline in market prices as well as Opteum's ability and
      intention to hold the MBS owned.   At December 31, 2006, the Company
      recorded a $10.0 million loss related to an other-than-temporary impairment
      on
      MBS securities identified for sale during the three months ended March 31,
      2007.
      Subsequent to the release of the Company’s annual report for the year ended
      December 31, 2006, the Company sold the balance of such assets and recorded
      an
      additional net loss of $0.8 million. The $0.8 million loss is classified as
      “Loss on sales of Mortgage Backed Securities” in the accompanying Statement of
      Operations. The Company has the present intent and ability to hold the remaining
      available for sale assets until their decline in fair market value could be
      recovered.





**NOTE
      7.**  **EARNINGS
      PER SHARE**





The
      Company follows the provisions of SFAS No. 128, *Earnings per Share* ,
      and the
      guidance provided in the FASB's EITF Issue No. 03-6, *Participating Securities and the two-class method under FASB Statement
      No. 128, Earnings Per Share* ,
      which
      requires companies with complex capital structures, common stock equivalents,
      or
      two classes of participating securities to present both basic and diluted EPS
      on
      the face of the statement of operations. Basic EPS is calculated as income
      available to common stockholders divided by the weighted average number of
      common shares outstanding during the period. Diluted EPS is calculated using
      the
“if converted” method for common stock equivalents.





The
      shares of Class B Common Stock, participating and convertible into
      Class A Common Stock, are entitled to receive dividends in an amount equal
      to the dividends declared on each share of Class A Common Stock if, as and
      when authorized and declared by the Board of Directors. The Class B Common
      Stock is therefore included in the computations of basic EPS using the two-class
      method, and consequently is presented separately from Class A Common
      Stock.





The
      Class C common shares are not included in the basic EPS computation as
      these shares do not have participation rights. The Class C common shares
      totaling 319,388 are not included in the computation of diluted Class A EPS
      as the conditions for conversion to Class A shares were not
      met.





Effective
      November 3, 2005, the Company issued 1.2 million shares of Class A
      Redeemable Preferred Stock, pursuant to the acquisition of OFS. Holders of
      shares of the preferred stock could not receive or accrue dividend payments
      prior to January 1, 2006. After January 1, 2006, and prior to March 31,
      2006, holders of Class A Redeemable Preferred Stock were entitled to receive
      dividends according to the formula described in the Company's amended Articles
      of Incorporation. For the Company's first quarter 2006 dividend declared on
      March 10, 2006, the shares of Class A Redeemable Preferred Stock, although
      considered to be participating securities, did not receive a dividend pursuant
      to the formula. Following the provisions of EITF 03-6, the Class A Redeemable
      Preferred Stock, a participating security prior to conversion on April 28,
      2006,
      was excluded in the computation of basic EPS using the two-class method.





The
      conversion of the Class A Redeemable Preferred Stock into shares of Class A
      Common Stock was approved by the stockholders at the Company's 2006 Annual
      Meeting of Shareholders on April 28, 2006, and the shares of Class A Redeemable
      Preferred Stock were converted into shares of Class A Common Stock on that
      date.
      For purposes of the EPS computation, the conversion of the shares of Class
      A
      Redeemable Preferred Stock into shares of Class A Common Stock has been
      accounted for as of April 28, 2006, and is included in the computation of basic
      EPS for the Class A Common Stock as of that date.





The
      Company has dividend eligible stock incentive plan shares that were outstanding
      during the three month periods ended March 31, 2007 and March 31, 2006. These
      stock incentive plan shares have dividend participation rights, but no
      contractual obligation to share in losses. Since there is no such obligation,
      these incentive plan shares are not included, pursuant to EITF 03-6, in the
      basic EPS computation for the Class A Common Stock, even though they are
      participating securities. For the computation of diluted EPS for the Class
      A
      Common Stock for the three month periods ended March 31, 2007 and 2006, 477,290
      incentive plan shares in 2007 and 650,320 incentive plan shares in 2006 are
      excluded as their inclusion would be anti-dilutive.





The
      table
      below reconciles the numerators and denominators of the basic and diluted EPS.





(in
      thousands)





**(Unaudited)****Three
                Months Ended****March
                31, 2007**
            
            **March
                31, 2006**Basic
                and diluted EPS per Class A common share:Numerator:
                net loss allocated to the Class A common shares
            $
            (77,068)
            $
            (7,863)Denominator:
                basic and diluted:Class
                A common shares outstanding at the balance sheet date
            
            24,556
            
            23,083Effect
                of weighting
            
            (22)
            
            353Weighted
                average shares-basic and diluted
            
            24,534
            
            23,436Basic
                and diluted EPS per Class A common share
            $
            (3.14)
            $
            (0.34)Basic
                and diluted EPS per Class B common share:Numerator:
                net loss allocated to Class B common shares
            $
            (1,002)
            $
            (109)Denominator:
                basic and diluted:Class
                B common shares outstanding at the balance sheet date
            
            319
            
            319Effect
                of weighting
            
            -
            
            -Weighted
                average shares-basic and diluted
            
            319
            
            319Basic
                and diluted EPS per Class B common share
            $
            (3.14)
            $
            (0.34)Basic
                and diluted EPS per Class A redeemable preferred share:Numerator:
                net loss allocated to Class A redeemable preferred
              shares
            $
            -
            $
            -Denominator:
                basic and diluted:Class
                A redeemable preferred shares outstanding at the balance sheet
              date
            
            -
            
            1,223,208Basic
                and diluted EPS per Class A redeemable preferred share
            $
            -
            $
            -




**NOTE
      8. WAREHOUSE LINES OF CREDIT AND DRAFTS PAYABLE**





OFS
      issues drafts or wires at loan settlement in order to facilitate the closing
      of
      mortgage loans held for sale. Drafts payable represent mortgage loans on which
      a
      closing has occurred prior to quarter end but the related drafts have not
      cleared the respective bank. Upon clearing the bank, the drafts are funded
      by
      the appropriate warehouse line of credit. Warehouse and aggregate lines of
      credit and loan sale agreements accounted for as financing consisted of the
      following as of March 31, 2007 and December 31, 2006:




(in
      thousands)




**Warehouse
                and aggregation lines of credit:**
            
            **March
                31, 2007**
            
            **December
                31, 2006**A
                committed warehouse line of credit for $100.0 million between OFS
                and
                Residential Funding Corporation ("RFC"). The agreement expired on
                February
                28, 2007 and was not renewed. RFC is now a party to the JPM syndicated
                facility below. The agreement provides for interest rates based upon
                one
                month LIBOR plus a margin between 1.00% and 2.50% depending on the
                product
                that was originated or acquired.
            $
            -
            $
            6,172A
                syndicated committed warehouse line of credit for $850.0 million
                between
                OFS and JP Morgan Chase (“JPM”). The agreement expires on May 30, 2007.
                The agreement provides for interest rates based upon one month LIBOR
                plus
                a margin of 0.60% to 1.50% depending on the product originated or
                acquired.
            
            192,110
            
            409,609An
                aggregation facility for $1.5 billion for the whole loan and servicing
                rights facility, collectively, (of which no more than $100.0 million
                may
                be allocated to the servicing rights facility) between HS Special
                Purpose,
                LLC, a wholly-owned subsidiary of OFS, and Citigroup Global Markets
                Realty
                Corp. (“Citigroup”) to aggregate loans pending securitization. The
                agreement expires on December 20, 2007. The agreement provides for
                interest rates based upon one month LIBOR plus a margin of
                0.30%.
            
            141,887
            
            5,358A
                $750.0 million purchase and security agreement between OFS and UBS
                Warburg
                Real Estate Securities, Inc. (“UBS Warburg”). The agreement expired on
                February 28, 2007 and was not renewed.
            
            -
            
            3,283Drafts
                payable
            
            5,090
            
            6,542Loan
                sale agreements accounted for as financings:An
                uncommitted $700.0 million purchase agreement between OFS and Colonial
                Bank. The facility is due upon demand and can be cancelled by either
                party
                upon notification to the counterparty. OFS incurs a charge for the
                facility based on one month LIBOR plus 0.50% for the first $300.0
                million
                purchased and one month LIBOR plus 0.75% for the amount used above
                and
                beyond $300.0 million. The facility is secured by loans held for
                sale and
                cash generated from sales to investors.
            
            66,153
            
            303,915Total
                warehouse lines and drafts payable
            $
            405,240
            $
            734,879







In
      addition to the RFC, JPM, Citigroup, UBS Warburg, and Colonial Bank facilities,
      OFS has purchase and sale agreements with Fannie Mae. These additional
      agreements allow OFS to accelerate the sale of its mortgage loan inventory,
      resulting in a more effective use of its warehouse facilities. OFS has a
      combined capacity of $100.0 million under these purchase and sale agreements.
      There were $6.0 million sold and being held under these agreements as of March
      31, 2007. The agreements are not committed facilities and may be terminated
      at
      the discretion of either party.




The
      facilities are secured by mortgage loans and other assets of OFS. The facilities
      generally contain various covenants pertaining to tangible net worth, net
      income, available cash and liquidity, leverage ratio, current ratio and
      servicing delinquency. As of March 31, 2007, OFS was not in compliance with
      respect to two covenants pertaining to tangible net worth with two lenders.
      OFS
      has obtained waivers from each lender for the covenant violations. However,
      OFS
      may violate such covenants again in the future. In the event the violations
      occur, OFS may be unable to obtain waivers. In the event waivers are not
      obtained, OFS would be in default under the terms of the agreements. In the
      event OFS defaulted under the terms of the agreement, the lenders could force
      OFS to liquidate the mortgage loans collateralizing the loan, seek payment
      from
      the Company as guarantor, or force OFS into an involuntary
      bankruptcy.





**NOTE
      9. OTHER SECURED BORROWINGS**





Other
      secured borrowings consisted of the following as of March 31, 2007 and December
      31, 2006:




(in
      thousands)




**March
                31, 2007**
            
            **December
                31, 2006**A
                committed warehouse line of credit for $150.0 million between OFS
                and JP
                Morgan Chase, that allows for a sublimit for originated Mortgage
                Servicing
                Rights. The agreement expires May 30, 2007. The agreement provides
                for
                interest rate based on LIBOR plus 1.50% to 1.85% depending on collateral
                type.
            $
            73,687
            $
            71,657Citigroup
                Global Realty Inc., working capital line of credit for $80.0 million
                secured by the retained interests in securitizations through OMAC
                2006-2.
                The facility expires on December 20, 2007. The agreement provides
                for
                interest rate based on LIBOR plus 1.00%
            
            50,584
            
            50,320$
            124,271
            $
            121,977





**NOTE
      10.**  **REPURCHASE
      AGREEMENTS**





Opteum
      has entered into repurchase agreements to finance most of its MBS security
      purchases. The repurchase agreements are short-term borrowings that bear
      interest at rates that have historically moved in close relationship to LIBOR.
      At March 31, 2007, Opteum had an outstanding amount of $2.9 billion with a
      net weighted average borrowing rate of 5.24% and these agreements were
      collateralized by MBS with a fair value of $2.9 billion. As of December 31,
      2006, Opteum had an outstanding amount of $2.7 billion with a net weighted
      average borrowing rate of 5.31%, and these agreements were collateralized by
      MBS
      with a fair value of $2.8 billion.





As
      of
      March 31, 2007, Opteum's repurchase agreements had remaining maturities as
      summarized below:





(in
      thousands)





**OVERNIGHT**
              **(1
                DAY OR LESS)**
            
            **BETWEEN
                2 AND**
              **30
                DAYS**
            
            **BETWEEN
                31 AND**
              **90
                DAYS**
            
            **GREATER
                THAN**
              **90
                DAYS**
            
            **TOTAL**Agency-Backed
                Mortgage Backed Securities:Amortized
                cost of securities sold, including accrued interest
                receivable
            $
            -
            $
            361,126
            $
            1,653,806
            $
            890,776
            $
            2,905,708Fair
                market value of securities sold, including accrued interest
                receivable
            $
            -
            $
            352,599
            $
            1,614,191
            $
            870,326
            $
            2,837,116Repurchase
                agreement liabilities associated with these securities
            $
            -
            $
            358,576
            $
            1,625,027
            $
            878,519
            $
            2,862,122Net
                weighted average borrowing rate
            
            -
            
            5.29%
            
            5.29%
            
            5.12%
            
            5.24%




As
      of  December 31,
      2006, Opteum's repurchase agreements had remaining maturities as summarized
      below:





(in
      thousands)





**OVERNIGHT**
              **(1
                DAY OR LESS)**
            
            **BETWEEN
                2 AND**
              **30
                DAYS**
            
            **BETWEEN
                31 AND**
              **90
                DAYS**
            
            **GREATER
                THAN**
              **90
                DAYS**
            
            **TOTAL**Agency-Backed
                Mortgage Backed Securities:Amortized
                cost of securities sold, including accrued interest
                receivable
            $
            —
            $
            859,344
            $
            807,488
            $
            1,149,309
            $
            2,816,141Fair
                market value of securities sold, including accrued interest
                receivable
            $
            —
            $
            833,436
            $
            793,702
            $
            1,106,228
            $
            2,733,366Repurchase
                agreement liabilities associated with these securities
            $
            —
            $
            842,094
            $
            805,595
            $
            1,093,991
            $
            2,741,680Net
                weighted average borrowing rate
            
            —
            
            5.31%
            
            5.33%
            
            5.29%
            
            5.31%




As
      of
      March 31, 2007, Opteum's repurchase agreements had the following
      counterparties, amounts at risk and weighted average remaining maturities:





(in
      thousands)





**Repurchase
                Agreement Counterparties**
            
            **Amount**
              **Outstanding**
            
            **Amount**
              **at
                Risk(1)**
            **Weighted
                Average**
              **Maturity
                of**
              **Repurchase**
              **Agreements**
              **in
                Days**
            **Percent**
              **of
                Total**
              **Amount**
              **Outstanding**Deutsche
                Bank Securities, Inc.
            $
            873,149
            $
            16,329
            168
            30.52
            %ING
                Financial Markets LLC
            
            699,520
            
            14,148
            91
            24.44JP
                Morgan Securities
            
            565,111
            
            14,065
            255
            19.74Nomura
                Securities International, Inc.
            
            328,640
            
            8,407
            48
            11.48Countrywide
                Securities Corp
            
            127,167
            
            4,708
            45
            4.44RBS
                Greenwich Capital
            
            98,613
            
            1,315
            38
            3.45Bank
                of America Securities, LLC
            
            54,120
            
            1,929
            52
            1.89Morgan
                Stanley
            
            33,650
            
            1,042
            10
            1.18HSBC
                Securities (USA) Inc
            
            31,537
            
            615
            6
            1.10Lehman
                Brothers
            
            27,045
            
            598
            60
            0.94Goldman
                Sachs
            
            23,570
            
            706
            151
            0.82Total
            $
            2,862,122
            $
            63,862
            
            100.00
            %





(1)  Equal
      to
      the fair value of securities sold, plus accrued interest income, minus the
      sum
      of repurchase agreement liabilities, plus accrued interest expense.





As
      of
      December 31, 2006, Opteum's repurchase agreements had the following
      counterparties, amounts at risk and weighted average remaining maturities:





(in
      thousands)





**Repurchase
                Agreement Counterparties**
            
            **Amount**
              **Outstanding**
            
            **Amount**
              **at
                Risk(1)**
            **Weighted
                Average**
              **Maturity
                of**
              **Repurchase**
              **Agreements**
              **in
                Days**
            **Percent**
              **of
                Total**
              **Amount**
              **Outstanding**Deutsche
                Bank Securities, Inc.
            $
            834,940
            $
            10,189
            28
            30.45
            %JP
                Morgan Securities
            
            652,936
            
            13,195
            98
            23.82Nomura
                Securities International, Inc.
            
            463,410
            
            13,405
            94
            16.90Washington
                Mutual
            
            333,587
            
            12,476
            24
            12.17Countrywide
                Securities Corp
            
            206,220
            
            4,401
            79
            7.52BNP
                Paribas
            
            92,155
            
            2,666
            18
            3.36Goldman
                Sachs
            
            70,068
            
            1,278
            122
            2.56Bank
                of America Securities, LLC
            
            54,120
            
            1,742
            136
            1.97UBS
                Investment Bank, LLC
            
            21,515
            
            231
            17
            0.78RBS
                Greenwich Capital
            
            12,729
            
            44
            7
            0.47Total
            $
            2,741,680
            $
            59,627
            
            100.00
            %





(1)  Equal
      to
      the fair value of securities sold, plus accrued interest income, minus the
      sum
      of repurchase agreement liabilities, plus accrued interest expense.





**NOTE
      11.**  **TRUST
      PREFERRED SECURITIES**





On
      May 17, 2005, Opteum completed a private offering of $50.0 million of trust
      preferred securities of Bimini Capital Trust I (“BCTI”), a Delaware statutory
      business trust sponsored by Opteum. BCTI used the proceeds of the private
      offering, together with Opteum's investment of $1.6 million in BCTI common
      equity securities, to purchase $51.6 million aggregate principal amount of
      Opteum's BCTI Junior Subordinated Notes with terms that parallel the terms
      of
      the BCTI trust preferred securities.





The
      BCTI
      trust preferred securities and Opteum's BCTI Junior Subordinated Notes have
      a
      fixed rate of interest until March 30, 2010, of 7.61% and thereafter,
      through maturity in 2035, the rate will float at a spread of 3.30% over the
      prevailing three-month LIBOR rate.  The BCTI trust preferred securities and
      Opteum's BCTI Junior Subordinated Notes require quarterly interest distributions
      and are redeemable at Opteum's option, in whole or in part and without penalty,
      beginning March 30, 2010 and at any date thereafter.  Opteum's BCTI
      Junior Subordinated Notes are subordinate and junior in right of payment of
      all
      present and future senior indebtedness. The proceeds from the private offering
      net of costs were approximately $48.5 million.




On
      October 5, 2005, Opteum completed a private offering of $50.0 million of trust
      preferred securities of Bimini Capital Trust II (“BCTII”), a Delaware statutory
      business trust sponsored by Opteum. BCTII used the proceeds of the private
      offering, together with Opteum's investment of $1.5 million in BCTII common
      equity securities, to purchase $51.5 million aggregate principal amount of
      Opteum's BCTII Junior Subordinated Notes with terms that parallel the terms
      of
      the BCTII trust preferred securities.





The
      BCTII
      trust preferred securities and Opteum's BCTII Junior Subordinated Notes have
      a
      fixed rate of interest until December 15, 2010, of 7.8575% and thereafter,
      through maturity in 2035, the rate will float at a spread of 3.50% over the
      prevailing three-month LIBOR rate. The BCTII trust preferred securities and
      Opteum's BCTII Junior Subordinated Notes require quarterly interest
      distributions and are redeemable at Opteum's option, in whole or in part and
      without penalty, beginning December 15, 2010, and at any date thereafter.
      Opteum's BCTII Junior Subordinated Notes are subordinate and junior in right
      of
      payment of all present and future senior indebtedness. The proceeds from the
      private offering net of costs were approximately $48.5 million.





Each
      trust is a variable interest entity pursuant to FIN No. 46 because the
      holders of the equity investment at risk do not have adequate decision making
      ability over the trust's activities. Since Opteum's investment in each trust's
      common equity securities was financed directly by the applicable trust as a
      result of its loan of the proceeds to Opteum, that investment is not considered
      to be an equity investment at risk pursuant to FIN No. 46. Since Opteum's common
      share investments in BCTI and BCTII are not a variable interest, Opteum is
      not
      the primary beneficiary of the trusts. Therefore, Opteum has not consolidated
      the financial statements of BCTI and BCTII into its financial statements. 
Based on the aforementioned accounting guidance, the accompanying consolidated
      financial statements present Opteum's BCTI and BCTII Junior Subordinated Notes
      issued to the trusts as liabilities and Opteum's investments in the common
      equity securities of BCTI and BCTII as assets. For financial statement purposes,
      Opteum records payments of interest on the Junior Subordinated Notes issued
      to
      BCTI and BCTII as interest expense.





**NOTE
      12. CAPITAL STOCK**





**Issuances
      of Class A Common Stock**





During
      the three months ended March 31, 2007, the Company issued a total of 5,974
      shares of Class A Common Stock to its independent directors for the payment
      of
      director fees for services rendered.





For
      the
      three months ended March 31, 2007, the Company issued 34,528 shares of its
      Class
      A Common Stock to employees pursuant to the terms of the stock incentive plan
      phantom share grants (see Note 14).





**Dividends**





On
      December 20, 2006, the Company’s Board of Directors declared a $0.05 per share
      cash dividend to the holders of its dividend eligible securities on the record
      date of January 3, 2007. The distribution totaling $1.3 million was paid on
      January 19, 2007.





On
      March
      9, 2007, the Company's Board of Directors declared a $0.05 per share cash
      dividend to the holders of its dividend eligible securities on the record date
      of March 26, 2007. The distribution totaling $1.3 million was paid on April
      13,
      2007.




**Other
      Classes of Common and Preferred Stock**





There
      was
      no change in the issued and outstanding shares of the Company’s Class B and
      Class C Common Stock or its Class A and Class B Redeemable Preferred Stock
      during the three month period ended March 31, 2007.





**NOTE
      13.**  **TRANSACTIONS
      WITH RELATED PARTIES**





During
      the three months ended March 31, 2007, OFS received aggregate payments of $0.4
      million from Southstar Funding, LLC (“Southstar Funding”) primarily in exchange
      for the performance of certain interim loan servicing functions. Southstar
      Funding is fifty percent owned by Southstar Partners, LLC (“Southstar
      Partners”). Certain officers of OFS, one of whom is also a director of Opteum,
      own membership interests in Southstar Partners. In addition, an officer of
      OFS
      as well as a former director of Opteum serves on the Board of Managers of
      Southstar Funding. As of March 31, 2007, there were no amounts due from or
      owed
      to Southstar Funding or Southstar Funding. Amounts paid for interim loan
      servicing were determined on an arms-length basis and are comparable to amounts
      charged to other, non-related parties.  On
      April
      11, 2007, Southstar Funding filed a voluntary petition under Chapter 7 of the
      U.S. Bankruptcy Code.





**NOTE
      14. STOCK INCENTIVE PLANS**




On
      December 1, 2003, Opteum adopted the 2003 Long Term Incentive Compensation
      Plan (the “2003 Plan”) to provide Opteum with the flexibility to use stock
      options and other awards as part of an overall compensation package to provide
      a
      means of performance-based compensation to attract and retain qualified
      personnel. The 2003 Plan was amended and restated in March 2004. Key
      employees, directors and consultants are eligible to be granted stock options,
      restricted stock, phantom shares, dividend equivalent rights and other
      stock-based awards under the 2003 Plan. Subject to adjustment upon certain
      corporate transactions or events, a maximum of 4,000,000 shares of the Class
      A
      Common Stock (but not more than 10% of the Class A Common Stock outstanding
      on
      the date of grant) may be subject to stock options, shares of restricted stock,
      phantom shares and dividend equivalent rights under the 2003 Plan.





During
      the three months ended March 31, 2007, Opteum granted 25,607 phantom shares
      to
      employees with an aggregate fair value of $0.2 million. Each phantom share
      represents a right to receive a share of Opteum's Class A Common Stock.
      Dividend equivalent rights were also granted on these phantom
      shares.





Phantom
      share awards are valued at the fair value of Opteum’s Class A Common Stock
      at the date of the grant. The total grant date value of all awards since the
      inception of the 2003 Plan is $10.0 million. The phantom share awards do not
      have an exercise price. The grant date value is being amortized to compensation
      expense on a straight-line basis over the vesting period of the respective
      award.  The phantom shares vest, based on the employees’ continuing
      employment, following a schedule as provided in the grant agreements, for
      periods through December **** 15,
      2009.




As
        of
        March 31, 2007, a total of 759,457 phantom share awards have been granted
        since
        the inception of the 2003 Plan, however 4,871 phantom shares have been forfeited
        due to the termination of the grantee’s employment. The future compensation
        charge that was eliminated by the forfeitures totaled $56,853.  Of the
        phantom shares not forfeited, 441,078 phantom shares have fully vested since
        inception of the 2003 Plan and 313,508 phantom shares remain unvested as
        of
        March 31, 2007.  Of the 441,078 phantom shares that have fully vested,
        276,296 phantom shares have been settled as of March 31, 2007, and an equivalent
        number of shares of the Company’s Class A Common have been issued to grantees or
        surrendered by grantees to pay income taxes.  As of March 31, 2007, there
        were 164,782 phantom shares that, although fully vested as of such date,
        had not
        been settled.  No phantom share awards have expired.
 
 For
        the
        three months ended March 31, 2007, 51,961 phantom shares were settled and
        an equivalent number of shares of the Company’s Class A Common Stock were issued
        to grantees or surrendered by grantees to pay income taxes.  For the three
        months ended March 31, 2006, 50,250 phantom shares were settled and an
        equivalent number of shares of the Company’s Class A Common Stock were issued to
        grantees or surrendered by grantees to pay income taxes.  As of
        March 31, 2007, there were 478,290 phantom shares outstanding that had not
        been settled as of such date, 313,508 of which were unvested and 164,782
        of
        which were vested.  Total compensation cost recognized for the three months
        ended March 31, 2007 and 2006 was $0.7 million and $0.7 million, respectively.
        Dividends paid on unsettled phantom shares are charged to retained earnings
        when
        declared.





Opteum
      also has adopted the 2004 Performance Bonus Plan (the “Performance Bonus Plan”). The
      Performance Bonus Plan is an annual bonus plan that permits the issuance of
      the
      Company’s Class A Common Stock in payment of stock-based awards made under the
      plan.  No stock-based awards have been made under and no shares of the
      Company’s stock have been issued under the Performance Bonus Plan.





**NOTE
      15.**  **SAVINGS
      INCENTIVE PLAN**





Opteum’s
      employees have the option to participate in the Opteum Inc., 401K Plan (the
      “Plan”). Under the terms of the Plan, eligible employees can make tax-deferred
      401(k) contributions and at Opteum’s sole discretion, Opteum can match the
      employees’ contributions. For the three months ended March 31, 2007 and 2006,
      Opteum made 401(k) matching contributions of $0.02 million and $0.02 million,
      respectively.




OFS’s
      employees have the option to participate in the Company Savings and Incentive
      Plan (the “Plan”). Under the terms of the Plan, eligible employees can make
      tax-deferred 401(k) contributions and at the OFS’s sole discretion, OFS can
      match the employees’ contributions as well as make annual profit-sharing
      contributions to the Plan. For the three months ended March 31, 2007 and 2006,
      OFS made 401(k) matching contributions of $0.2 million and $0.2 million,
      respectively.




**NOTE
      16.**  **COMMITMENTS
      AND CONTINGENCIES**





**Loans
      Sold to Investors** .
      Generally, OFS is not exposed to significant credit risk on its loans sold
      to
      investors. In the normal course of business, OFS provides certain
      representations and warranties during the sale of mortgage loans which obligate
      it to repurchase loans which are subsequently unable to be sold through the
      normal investor channels. The repurchased loans are secured by the related
      real
      estate properties, and can usually be sold directly to other permanent
      investors. There can be no assurance, however, that OFS will be able to recover
      the repurchased loan value either through other investor channels or through
      the
      assumption of the secured real estate.




OFS
      recognizes a liability for the estimated fair value of this obligation at the
      inception of each mortgage loan sale based on the anticipated repurchase levels
      and historical experience. The liability is recorded as a reduction of the
      gain
      on sale of mortgage loans and included as part of other liabilities in the
      accompanying financial statements.




Changes
      in the liability during the three months ended March 31, 2007 and
      2006:




(in
      thousands)




**For
                the Three Months Ended March 31, 2007**
            
            **For
                the Three Months Ended March 31, 2006**Balance—Beginning
                of period
            $
            7,136
            $
            2,038Provision
            
            12,674
            
            551Charge-Offs
            
            (6,345)
            
            (663)Balance—End
                of period
            $
            13,465
            $
            1,926







**Loan
      Funding and Delivery Commitments** .
      As of
      March 31, 2007, OFS has commitments to fund loans approximating  $142.3
      million. OFS hedges the interest rate risk of such commitments primarily with
      mandatory delivery commitments. The remaining commitments to fund loans with
      agreed-upon rates are anticipated to be sold through “best-efforts” and investor
      programs. OFS does not anticipate any material losses from such sales.




**Net
      Worth Requirements** .
      OFS is
      required to maintain certain specified levels of minimum net worth to maintain
      its approved status with Fannie Mae, HUD, and other investors. As of March
      31,
      2007 and 2006, the highest minimum net worth requirement applicable to OFS
      was
      approximately $2.2 million and $1.7 million, respectively. OFS had negative
      net
      worth of approximately ($68.4) million as of March 31, 2007. On April 16, 2007,
      $25.0 million of inter-company debt existing between OFS and Opteum was
      forgiven. On April 30, 2007, an additional $63.3 million of inter-company debt
      was forgiven. As of April 30, 2007, OFS has net worth in excess of the required
      minimum.




**Outstanding
      Litigation.**  The
      Company is involved in various lawsuits and claims, both actual and potential,
      including some that it has asserted against others, in which monetary and other
      damages are sought. These lawsuits and claims relate primarily to contractual
      disputes arising out of the ordinary course of the Company’s business. The
      outcome of such lawsuits and claims is inherently unpredictable. However,
      management believes that, in the aggregate, the outcome of all lawsuits and
      claims involving the Company will not have a material effect on the Company’s
      consolidated financial position or liquidity; however, any such outcome may
      be
      material to the results of operations of any particular period in which costs,
      if any, are recognized.





As
      part
      of the November 3, 2005 merger pursuant to which OFS became a wholly-owned
      subsidiary of Opteum, the parties to the Agreement and Plan of Merger and
      Reorganization (the “Merger Agreement”) agreed to special resolution procedures
      concerning certain litigation matters in which OFS was a party and that was
      pending at the time of the merger. Certain provisions of the Merger Agreement
      specified the manner in which four separate litigation matters would be treated
      for purposes of determining the rights and obligations of the parties to the
      Merger Agreement. In two of these matters, OFS was the plaintiff and was seeking
      money damages from third parties. In the other two matters, OFS was a defendant
      and was defending itself against claims for money damages.





Pursuant
      to the terms of the Merger Agreement, the former owners of OFS must indemnify
      the Company for any liabilities arising from the two matters in which OFS was
      a
      defendant. In addition, the former owners of OFS are entitled to receive any
      amounts paid to the Company upon the settlement or final resolution of the
      two
      matters in which OFS was the plaintiff.





**Guarantees** .
      Opteum
      has guaranteed the obligations of OFS and OFS’s wholly-owned subsidiary, HS
      Special Purpose, LLC, under their respective financing facilities with JPMorgan
      Chase and Citigroup described in Note 8. These guarantees will remain in effect
      so long as the applicable financing facilities remain in effect. If an Event
      of
      Default occurs under these financing facilities that are not cured or waived,
      Opteum may be required to perform under its guarantees. There is no specific
      limitation on the maximum potential future payments under these guarantees.
      However, Opteum’s liability under these guarantees would be reduced in an amount
      equal to the amount by which the collateral securing such obligations exceeds
      the amounts outstanding under the applicable facilities.





**NOTE
      17. SEGMENTS**




Opteum
      follows SFAS No. 131, *Disclosures
      about Segments of an Enterprise and Related Information.* The
      Company operates in two reportable segments: as a REIT and as an originator
      of
      mortgage loans. The REIT activities primarily involve Opteum investing in
      residential mortgage-related securities. OFS is a mortgage lender that
      originates loans.





The
      accounting policies of the segments are the same as those described in the
      summary of significant accounting policies in Note 1. The Company evaluates
      the performance of its REIT segment and mortgage origination business segment
      results based on net income. Each of the business segments’ net income or loss
      includes direct costs incurred at each segment’s operating level, plus a minimal
      amount of allocated corporate-level expenses.





The
      following table shows three months ended March 31, 2007 summarized financial
      information concerning the Company’s reportable segments.





(in
      thousands)





**REIT**
            
            **OFS**
            
            **TOTAL(1)**Net
                interest income
            $
            2,214
            $
            2,914
            $
            1,905Other
                losses, net
            
            (820)
            
            (21,235)
            
            (22,055)Inter-segment
                interest income
            
            3,222
            
            (3,222)
            
            -Income
                (loss) before income taxes
            
            (715)
            
            (66,663)
            
            (67,378)Impairment
                of goodwill and other intangible assets
            
            -
            
            2.8
            
            2.8Impairment
                of property, equipment
            
            -
            
            6.0
            
            6.0Other
                interest expense
            
            -
            
            2,134
            
            2,134Depreciation
                and amortization
            
            216
            
            938
            
            1,154Income
                tax expense (benefit)
            
            -
            
            11,463
            
            11,463Total
                assets
            
            3,102,012
            
            627,600
            
            3,660,952Capital
                expenditures
            
            4
            
            297
            
            301





(1)  Figures
      reflect the elimination of inter-company transactions between Opteum and
      OFS





The
      following table shows three months ended March 31, 2006 summarized financial
      information concerning the Company’s reportable segments.





(in
      thousands)





**REIT**
            
            **OFS**
            
            **TOTAL(1)**Net
                interest income
            $
            2,948
            $
            2,976
            $
            4,092Other
                revenues, net
            
            -
            
            2,982
            
            2,982Inter-segment
                interest income
            
            1,832
            
            (1,832)
            
            -Income
                (loss) before income taxes
            
            499
            
            (13,851)
            
            (13,352)Other
                interest expense
            
            -
            
            1,732
            
            1,732Depreciation
                and amortization
            
            184
            
            844
            
            1,028Income
                tax expense (benefit)
            
            -
            
            (5,380)
            
            (5,380)Total
                assets
            
            3,783,762
            
            954,228
            
            4,621,963Capital
                expenditures
            
            392
            
            1,450
            
            1,842





(1)  Figures
      reflect the elimination of inter-company transactions between Opteum and OFS.





The
      following information is needed to reconcile the segment amounts to the total
      information, which agrees to the amounts shown in the accompanying consolidated
      financial statements. During the consolidation process, loans receivable
      totaling $135.7 million at March 31, 2007 and $73.1 million at March 31, 2006,
      and the related interest income and accrued interest, which are recorded on
      Opteum’s segment financial statements, are eliminated against corresponding
      liabilities and expenses recorded on OFS’s segment financial statements. The
      interest income related to these loans is reported above as inter-segment
      interest income. There were no inter-segment gross revenues during the periods
      ended March 31, 2007 and March 31, 2006, except for this interest, and therefore
      all other revenues were from external sources.





No
      single
      customer accounted for more than 10% of revenues at OFS. For the REIT
      activities, approximately 91.3% of the interest income was derived from MBS
      issued by U.S. Government agencies.





**NOTE
      18. INCOME TAXES**





As
      more
      fully described in Note 2, Opteum acquired OFS on November 3, 2005. OFS is
      a
      TRS, which is a taxpaying entity for U.S. federal income tax purposes and is
      taxed separately from Opteum.





The
      income tax (provision) benefit is as follows for the three months ended March
      31, 2007 and 2006:





(in
      thousands)





Deferred
                income tax(provision)benefit:
            
            **Three
                Months ended March 31, 2007**
            
            **Three
                Months ended March 31, 2006**Federal
            $
            23,314
            $
            4,841State
            
            2,598
            
            539Deferred
                tax asset valuation allowance
            
            (37,375)
            
            -Total
                deferred income tax (provision) benefit
            $
            (11,463)
            $
            5,380





The
      effective income tax benefit for the three months ended March 31, 2007 and
      2006
      differs from the amount determined by applying the statutory Federal rate of
      35%
      as follows:





(in
      thousands)





**Three
                Months ended March 31, 2007**
            
            **Three
                Months ended March 31, 2006**Benefit
                of the net loss at the Federal tax rate
            $
            23,583
            $
            4,673Exclusion
                of REIT taxable income/(loss)
            
            (250)
            
            175Permanent
                tax differences
            
            (21)
            
            (8)State
                tax benefit, net of Federal tax effect
            
            2,600
            
            540Subtotal
            
            25,912
            
            5,380Deferred
                tax asset valuation allowance
            
            (37,375)
            
            -Total
                deferred income tax (provision) benefit
            $
            (11,463)
            $
            5,380





The
      tax
      affected cumulative temporary differences that give rise to deferred tax assets
      and liabilities as of March 31, 2007 and December 31, 2006, are as follows:





(in
      thousands)





**March
                31, 2007**
            
            **December
                31, 2006****Deferred
                tax assets:**Federal
                tax loss carry-forward
            $
            43,657
            $
            29,684State
                tax loss carry-forward
            
            7,360
            
            4,812Loan
                loss reserves, interest and other
            
            9,787
            
            5,056Mark-to-market
                adjustments
            
            -
            
            269**Total
                gross deferred tax assets**
            
            60,804
            
            39,821Valuation
                Allowance
            
            (37,375)
            
            -**Net
                deferred tax assets**
            $
            23,429
            $
            39,821**Deferred
                tax liabilities:**Capitalized
                cost of mortgage servicing rights
            $
            26,194
            $
            28,693Loan
                origination and other amounts
            
            1,517
            
            2,606Intangible
                assets
            
            -
            
            1,341**Total
                gross deferred tax liabilities**
            $
            27,711
            $
            32,640**Net
                deferred tax (liabilities) assets**
            $
            (4,282)
            $
            7,181





As
      described in Note 1, the Company adopted SFAS No. 156 as of January 1,
      2006.  As a result of this adoption, net deferred tax liabilities were
      increased by approximately $1.67 million.  As further described below, the
      Company recorded a deferred tax asset valuation allowance of approximately
      $37.4
      million during the three months ended March 31, 2007; there was no allowance
      recorded previously. **** As
      of
      March 31, 2007, the Company had an estimated federal tax net operating loss
      carryforward of $126.8 million, which begins to expire in 2025, and is fully
      available to offset future taxable income.




In
      assessing the realizability of deferred tax assets, management considers whether
      it is more likely than not that some portion or all of the deferred tax assets
      will not be realized. The ultimate realization of deferred tax assets is
      dependant upon the generation of future taxable income during the periods in
      which those temporary differences become deductible. Management considers the
      scheduled reversal of deferred tax liabilities, projected future taxable
      income, and tax planning strategies in making this assessment, including the
      impacts of the Company’s current plans to close
      the OFS wholesale and conduit mortgage loan origination channels in the second
      quarter of 2007, and to sell the OFS retail mortgage loan origination channel
      to
      a third party.  At this time, management
      believes it is more likely than not that the Company will not realize the full
      benefits of the federal tax loss carryforwards, and that the Company will not
      realize any benefit of the state tax loss carryforwards and the other deferred
      tax assets.  Therefore, the Company has recorded a valuation allowance of
      $37.4 million against certain deferred tax assets at March 31, 2007.  The
      Company believes deferred tax assets of $23.4 million for which there are future
      reversals of existing taxable temporary differences expected to result in tax
      gains are more likely than not realizable as of March 31, 2007. The amount
      of
      the deferred tax assets that the Company considers realizable could be increased
      in the future depending on the actual tax results from the OFS closing and
      sales
      activities described above.





**Tax
      differences on REIT income**





Taxable
      income, as generated by Opteum’s qualifying REIT activities, is computed
      differently from Opteum’s financial statement net income as computed in
      accordance with GAAP. Depending on the number and size of the various items
      or
      transactions being accounted for differently, the differences between Opteum’s
      REIT taxable income and Opteum’s financial statement net income (loss) can be
      substantial and each item can affect several years. Since inception through
      March 31, 2007, Opteum's REIT taxable income is approximately $16.4 million
      greater than Opteum's financial statement net income as reported in its
      financial statements.





For
      the
      three months ended March 31, 2007, Opteum's REIT taxable income was
      approximately $1.5 million greater than Opteum's financial statement net income
      from REIT activities. During 2007, Opteum's most significant items and
      transactions being accounted for differently include interest on inter-company
      loans with OFS, equity plan stock awards, depreciation of property and
      equipment, the accounting for debt issuance costs and losses realized on certain
      MBS sales. The debt issuance costs are being amortized, and property and
      equipment are being depreciated, over different useful lives for tax purposes.
      The future deduction of equity plan stock compensation against REIT taxable
      income is uncertain as to the amount, because the tax impact is measured at
      the
      fair value of the shares as of a future date, and this amount may be greater
      than or less than the financial statement expense already recognized by Opteum.
      For tax purposes, the loss on certain MBS sales are recognized when the
      transaction is completed; for financial statement purposes, approximately $10.0
      million of an other-than-temporary loss was recorded as a charge to earnings
      during the year ended December 31, 2006. For the three months ended March 31,
      2007, tax capital losses of approximately $10.8 million were realized; these
      capital losses are only available to the REIT to offset future capital gains,
      and therefore they do not reduce REIT taxable income.





**NOTE
      19. SUBSEQUENT EVENTS**





On
      April
      26, 2007, OFS entered into a binding agreement to sell a majority of its
      private-label and agency mortgage servicing portfolio, which had an aggregate
      unpaid principal balance of approximately $5.9 billion as of March 31, 2007.
      The
      aggregate sales proceeds will be used to repay debt that is currently secured
      by
      OFS’s mortgage
      servicing portfolio. The transaction, which is subject to various closing
      conditions, is expected to be completed by June 15, 2007. The transaction is
      not
      expected to result in a material gain or loss.





On
      April
      18, 2007, the Board of Managers of OFS approved the closure of OFS’s wholesale
      and conduit mortgage origination channels. On April 20, 2007, the wholesale
      and
      conduit mortgage loan origination channels ceased accepting applications for
      new
      mortgages from borrowers. The closure of the wholesale and conduit mortgage
      loan
      origination channels will result in charges associated with severance payments
      to employees and operating lease termination costs of approximately $2.0 million
      to be reported in the second quarter of 2007.





On
      May 7,
      2007, OFS signed a binding agreement to sell its retail mortgage loan
      origination channel to a third party. The purchase price is estimated at
      approximately $5.0 million plus the assumption of certain liabilities of OFS.
      The transaction is scheduled to close during the second quarter of
      2007.





The
      carrying amounts of the assets to be disposed of/sold related to the various
      mortgage loan origination channels were as follows; property and
      equipment with a carrying amount of $4.7 million and other intangible
      assets with a carrying amount of $0.6 million as of March 31, 2007. No
      liabilities are part of the disposal group.





In
      accordance with SFAS No. 144, the
      closure and/or sale of mortgage loan origination channels required management
      to
      test the associated long lived assets for recoverability. In connection with
      the
      testing of recoverability of the long lived assets, OFS recorded an impairment
      charge of $6.0 million for the three months ended March 31, 2007. Further,
      in
      accordance with SFAS 144, such long lived assets were reported by OFS as held
      for use as of March 31, 2007, but these assets will be included in discontinued
      operations for the remainder of 2007.





In
      accordance with SFAS No. 142, goodwill
      of a reporting unit (OFS) and other intangible assets (the *“Opteum* ”
trade
      name) not subject to amortization shall be tested for impairment on an annual
      basis and between annual tests if an event occurs or circumstances change that
      indicate the intangible asset might be impaired, which, in the case of goodwill
      of a reporting unit, is when such event or circumstances would more likely
      than
      not reduce the fair value of that reporting unit below its carrying amount.
      The
      closure and/or sale of the wholesale and conduit mortgage loan origination
      channels constituted such an event that would require impairment analyses on
      the
      goodwill and other intangibles not subject to amortization. Accordingly, OFS
      recorded impairment charges for both goodwill and other intangible assets not
      subject to amortization of approximately $2.8 million as of March 31,
      2007.








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


**Forward-Looking
      Statements**




When
      used
      in this Quarterly Report on Form 10-Q, in future filings with the
      Securities and Exchange Commission (the “Commission”) or in press releases or
      other written or oral communications, statements which are not historical in
      nature, including those containing words such as “anticipate,” “estimate,”
“should,” “expect,” “believe,” “intend” and similar expressions, are intended to
      identify “forward-looking statements” within the meaning of Section 27A of
      the Securities Act of 1933, as amended (the “Securities Act”), and
      Section 21E of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”).




These
      forward-looking statements are subject to various risks and uncertainties,
      including, but not limited to, those described or incorporated by reference
      in
      Part II - Item 1A - Risk Factors of this Form 10-Q. These and other risks,
      uncertainties and factors, including those described in reports that the Company
      files from time to time with the Commission, could cause the Company’s actual
      results to differ materially from those reflected in such forward-looking
      statements. All forward-looking statements speak only as of the date they are
      made and the Company does not undertake, and specifically disclaims, any
      obligation to update or revise any forward-looking statements to reflect events
      or circumstances occurring after the date of such statements.





The
      following discussion of the Company’s financial condition and results of
      operations should be read in conjunction with the consolidated financial
      statements and related notes included elsewhere in this report.





**Introduction**





As
      used
      in this document, discussions related to “Opteum,” the parent company, the
      registrant, and to real estate investment trust (“REIT”) qualifying activities
      or the general management of Opteum’s portfolio of mortgage backed securities
      (“MBS”) refer to “Opteum Inc.” Further, as used in this document, “OFS,”
Opteum’s taxable REIT subsidiary (“TRS”) or non-REIT eligible assets refer to
      Opteum Financial Services, LLC and its consolidated subsidiaries. Discussions
      relating to the “Company” refer to the consolidated entity (the combination of
      Opteum and OFS). The assets and activities that are not REIT eligible, such
      as
      mortgage origination, acquisition and servicing activities, are conducted by
      OFS.





Opteum
      Inc., formerly Bimini Mortgage Management, Inc., was formed in September 2003
      to
      invest primarily in but not limited to, residential mortgage related securities
      issued by the Federal National Mortgage Association (more commonly known as
      Fannie Mae), the Federal Home Loan Mortgage Corporation (more commonly known
      as
      Freddie Mac) and the Government National Mortgage Association (more commonly
      known as Ginnie Mae). Opteum attempts to earn a return on the spread between
      the
      yield on its assets and its costs, including the interest expense on the funds
      it borrows. It generally intends to borrow between eight and twelve times the
      amount of its equity capital in an attempt to enhance its returns to
      stockholders. This leverage may be adjusted above or below this range to the
      extent management or the Company’s Board of Directors deems necessary or
      appropriate. For purposes of this calculation, Opteum treats its junior
      subordinated notes as an equity capital equivalent. Opteum is self-managed
      and
      self-advised and has elected to be taxed as a REIT for U.S. federal income
      tax
      purposes.





On
      April
      26, 2007, OFS entered into a binding agreement to sell a majority of its
      private-label and agency mortgage servicing portfolio, which had an aggregate
      unpaid principal balance of approximately $5.67 billion as of March 31, 2007.
      The aggregate sales proceeds will be used to repay debt that is currently
      secured by OFS’s mortgage servicing portfolio. The transaction, which is subject
      to various closing conditions, is expected to be completed by June 15, 2007.
      The
      transaction is not expected to result in a material gain or loss.





On
      April
      28, 2007, the Board of Managers of OFS, at the recommendation of the Board
      of
      Directors of the Company, approved the closure of the wholesale and conduit
      mortgage loan origination channels. Both channels ceased accepting new
      applications for mortgage loans on April 20, 2007. On May 7, 2007, OFS signed
      a
      binding agreement to sell its retail mortgage loan origination channel to a
      third party as well. The proceeds of the transactions are approximately $5.0
      million plus the assumption of certain liabilities of OFS. Going forward OFS
      will not operate a mortgage loan origination business.





OFS
      was
      acquired by the Company in November 2005. As a result of the merger, OFS became
      a wholly-owned TRS of Opteum. OFS is subject to corporate income taxes and
      files
      separate federal and state income tax returns. OFS acquires and originates
      mortgages that are either sold to third parties or securitized by a wholly-owned
      special purpose entity, Opteum Mortgage Acceptance Corporation (“OMAC”). OFS
      services the mortgages securitized by OMAC. In addition, OFS typically retains
      an interest in the securitizations which represents its right to the residual
      cash flows from the transactions once all debt service costs of the securities
      sold and expenses have been met.





**Dividends
      to Stockholders**





In
      order
      to maintain its qualification as a REIT, Opteum is required (among other
      provisions) to annually distribute dividends to its stockholders in an amount
      at
      least equal to, generally, 90% of Opteum’s REIT taxable income. REIT taxable
      income is a term that describes Opteum’s operating results calculated in
      accordance with rules and regulations promulgated pursuant to the Internal
      Revenue Code.





Opteum’s
      REIT taxable income is computed differently from net income as computed in
      accordance with generally accepted accounting principles ("GAAP net income"),
      as
      reported in the Company’s accompanying consolidated financial statements.
      Depending on the number and size of the various items or transactions being
      accounted for differently, the differences between REIT taxable income and
      GAAP
      net income can be substantial and each item can affect several reporting
      periods. Generally, these items are timing or temporary differences between
      years; for example, an item that may be a deduction for GAAP net income in
      the
      current year may not be a deduction for REIT taxable income until a later year.





As
      a
      REIT, Opteum may be subject to a federal excise tax if Opteum distributes less
      than 85% of its taxable income by the end of the calendar year. Accordingly,
      Opteum’s dividends are based on its taxable income, as determined for federal
      income tax purposes, as opposed to its net income computed in accordance with
      GAAP (as reported in the accompanying consolidated financial statements).





**Results
      of Operations**





*PERFORMANCE
      OVERVIEW*





Described
      below are the Company’s results of operations for the three months ended March
      31, 2007, as compared to the Company’s results of operations for the three
      months ended March 31, 2006.





Consolidated
      net (loss) for the three months ended March 31, 2007, was ($78.1)
      million **** compared
      to ($8.0) million for the three months ended March 31, 2006. Consolidated net
      loss per basic and diluted share of Class A Common Stock was ($3.14) in the
      three months ended March 31, 2007, compared to $(0.34) of per share income,
      for
      the comparable prior period. The decline in consolidated net income/ (loss)
      was
      driven primarily by a material decline in the results of operations at OFS
      for
      the quarter.





Included
      in the Company’s consolidated results are $1.9 million of consolidated net
      interest income for the three months ended March 31, 2007, compared to
      $4.1 million of net interest income for the three months ended
      March 31, 2006. For the three months ended March 31, 2007,
      consolidated interest income of $53.9 million was partially offset by
      consolidated interest expense of $52.0 million. These figures are not reflected
      as annualized net yields on invested assets as was reported prior to the
      acquisition of OFS since the figures represent blended net interest earnings
      on
      both Opteum’s MBS portfolio and mortgage loans held for sale by OFS. The decline
      in net interest income owes principally to a lower average balance of mortgage
      loans held for sale at OFS. The net interest margin of 0.36% and 0.35% on the
      MBS portfolio of the Company was essentially unchanged for the three months
      ended March 31, 2007 and March 31, 2006, respectfully.





For
      the
      three months ended March 31, 2007 and 2006, the Company’s consolidated
      general and administrative costs were $47.0 million and $20.1 million,
      respectively. Operating expenses, which incorporate trading costs, fees and
      other direct costs, were $0.2 million and $0.3 million, for the three months
      ended March 31, 2007 and 2006, respectively. The impairment of property,
      equipment, goodwill and other intangible assets was $8.8 million for the three
      months ended March 31, 2007. In addition, the Company recorded a $37.4 million
      valuation allowance associated with OFS’s deferred tax asset for the three
      months ended March 31, 2007. The Company did not record any impairment for
      the
      three months ended March 31, 2006.








For
      the
      three months ended March 31, 2007, comprehensive (loss) was ($74.9) million
      including the net unrealized gain/ (loss) on available-for-sale securities
      of
      $3.2 million. For the three months ended March 31, 2006, comprehensive (loss)
      was ($19.4) million, including the net unrealized loss on available-for-sale
      securities of ($11.4) million. The factors resulting in the unrealized loss
      on
      available-for-sale securities are described below.





Comprehensive
      (loss) income is as follows:





(in
      thousands)





**(Unaudited)****Three
                Months Ended****March
                31, 2007**
            
            **March
                31, 2006**Net
                (loss) income
            $
            (78,070)
            $
            (7,972)Plus
                unrealized (loss) gain on available-for-sale securities,
                net
            
            3,178
            
            (11,424)Comprehensive
                loss
            $
            (74,892)
            $
            (19,396)





Unlike
      net income/(loss), unrealized gains/(losses) on available for sale securities
      is
      also a component of accumulated other comprehensive loss, which is a component
      of stockholders’ equity on the consolidated balance sheet. Accumulated other
      comprehensive loss is the difference between the fair market value of the
      portfolio of MBS securities and their cost basis. The unrealized gain on
      available for sale securities for the three months ended March 31, 2007 was
      driven by a combination of a decrease in short term rates for the period, which
      tends to increase the fair market value of the Company’s portfolio of MBS
      securities, and increased amortization of net premium for the period, which
      lowers the cost basis in the portfolio of MBS securities. The increased
      amortization for the period was the result of the continued upward resetting
      of
      ARM securities in the portfolio, which results in higher coupons on the
      securities relative to their booked yields, and therefore greater
      amortization.





The
      Company has negative retained earnings (titled “Accumulated deficit” in the
      stockholders’ equity section of the accompanying consolidated financial
      statements) as of March 31, 2007, partially because of the consequences of
      Opteum’s tax qualification as a REIT.  As is more fully described in the
“Dividends to Stockholders” section above, Opteum’s dividends are based on
      its REIT taxable income, as determined for federal income tax purposes, and
      not
      on its net income computed in accordance with GAAP (as reported in the
      accompanying consolidated financial statements).





For
      the
      three months ended March 31, 2007, Opteum's REIT taxable income was
      approximately $1.5 million greater than Opteum's net income computed in
      accordance with GAAP. A substantial portion of this amount is attributable
      to
      interest on inter-company loans with OFS as well as timing differences in the
      recognition of compensation expense attributable to phantom stock awards. In
      April of 2007, the Board of Directors of the Company approved a resolution
      to
      forgive up to $103.3 million of inter-company debt with OFS. Such action will
      reduce future interest income associated with the inter-company debt. With
      respect to the phantom stock awards, the future deduction of this temporary
      difference is uncertain as to the amount (the amount of the tax impact is
      measured at the fair value of the shares as of a future date and this amount
      may
      be greater than or less than the financial statement deduction already taken
      by
      Opteum). Since inception through March 31, 2007, Opteum's taxable income is
      approximately $16.4 million greater than Opteum's financial statement net income
      as computed in accordance with GAAP. For the three months ended March 31, 2007,
      tax capital loss of approximately $10.8 million were realized; these capital
      losses are only available to the REIT to offset future capital gains and
      therefore they do not reduce REIT taxable income.





Therefore,
      to the extent that Opteum’s cumulative taxable income is greater than
      cumulative GAAP net income and Opteum continues to pay out as dividends all
      of
      its REIT taxable income, the Company will continue to report a deficit in
      retained earnings on its balance sheet.





*PERFORMANCE
      OF OPTEUM’S MBS PORTFOLIO*





For
      the
      three month period ended March 31, 2007, the REIT generated $2.2 million of
      net
      interest income. Included in these results were $41.9 million of interest
      income, offset by $39.6 million of interest expense. Inclusive in these results
      is the quarterly retrospective adjustment of $1.8 million for the three month
      period ended March 31, 2007. The retrospective adjustment is described below
      under Critical Accounting Policies/Income Recognition. Net interest income
      is
      down approximately $2.5 million compared to the three month period ended March
      31, 2006. The decline is mostly the result of the approximately 18.4% decline
      in
      the investment securities held for the period.





Opteum
      had an ($0.8) million in losses from the sale of securities in the MBS portfolio
      during the three months ended March 31, 2007. For the three month period ended
      March 31, 2006, Opteum reported no gains/loss from the sale of MBS.





As
      of
      March 31, 2007, Opteum’s MBS portfolio consisted of $2.9 billion of
      agency or government MBS at fair value and had a weighted average yield on
      assets of 5.14% and a net weighted average borrowing cost of 5.24%. The
      following tables summarize Opteum’s agency and government mortgage related
      securities as of March 31, 2007:








**Asset
                Category**
            
            **Market
                Value**
              **(in
                thousands)**
            
            **Percentage
                of Entire Portfolio**
            
            **Weighted
                Average Coupon**
            **Weighted
                Average Maturity in Months**
            **Longest
                Maturity**
            **Weighted
                Average Coupon Reset in Months**
            **Weighted
                Average Lifetime Cap**
            **Weighted
                Average Periodic Cap**Adjustable-Rate
                MBS
            $
            1,821,445
            
            62.13%
            
            5.25%
            321
            1-Apr-44
            4
            10.40%
            1.82%Fixed-Rate
                MBS
            $
            593,753
            
            20.25%
            
            6.56%
            258
            1-Jan-37
            n/a
            n/a
            n/aHybrid
                Adjustable-Rate MBS
            $
            516,598
            
            17.62%
            
            5.41%
            346
            1-Jan-37
            35
            11.14%
            6.95%Total
                Portfolio
            $
            2,931,796
            
            100.00%
            
            5.55%
            313
            1-Apr-44
            11
            10.57%
            3.21%





**Agency**
            
            **Market
                Value**
              **(in
                thousands)**
            
            **Percentage
                of**
              **Entire
                Portfolio**Fannie
                Mae
            $
            2,326,347
            
            79.35%Freddie
                Mac
            
            271,037
            
            9.24%Ginnie
                Mae
            
            334,412
            
            11.41%**Total
                Portfolio**
            $
            2,931,796
            
            100.00%





**Entire
                Portfolio**Effective
                Duration (1)
            
            1.03Weighted
                Average Purchase Price
            $
            102.37Weighted
                Average Current Price
            $
            101.31





(1)
            Effective
                duration of 1.03 indicates that an interest rate increase of 1% would
                be
                expected to cause a 1.03% decline in the value of the MBS in the
                Company’s
                investment portfolio.





In
      evaluating Opteum’s MBS portfolio assets and their performance, Opteum’s
      management team primarily evaluates these critical factors: asset performance
      in
      differing interest rate environments, duration of the security, yield to
      maturity, potential for prepayment of principal and the market price of the
      investment.





Opteum’s
      portfolio of MBS will typically be comprised of adjustable-rate MBS, fixed-rate
      MBS, hybrid adjustable-rate MBS and balloon maturity MBS. Opteum seeks to
      acquire low duration assets that offer high levels of protection from mortgage
      prepayments. Although the duration of an individual asset can change as a result
      of changes in interest rates, Opteum strives to maintain a portfolio with an
      effective duration of less than 2.0. The stated contractual final maturity
      of
      the mortgage loans underlying Opteum’s portfolio of MBS generally ranges up to
      30 years. However, the effect of prepayments of the underlying mortgage
      loans tends to shorten the resulting cash flows from Opteum’s investments
      substantially. Prepayments occur for various reasons, including refinancing
      of
      underlying mortgages and loan payoffs in connection with home sales.





Prepayments
      on the loans underlying Opteum’s MBS can alter the timing of the cash flows from
      the underlying loans to the Company. As a result, Opteum gauges the interest
      rate sensitivity of its assets by measuring their effective duration. While
      modified duration measures the price sensitivity of a bond to movements in
      interest rates, effective duration captures both the movement in interest rates
      and the fact that cash flows to a mortgage related security are altered when
      interest rates move. Accordingly, when the contract interest rate on a mortgage
      loan is substantially above prevailing interest rates in the market, the
      effective duration of securities collateralized by such loans can be quite
      low
      because of expected prepayments. Although some of the fixed-rate MBS in Opteum’s
      portfolio are collateralized by loans with a lower propensity to prepay when
      the
      contract rate is above prevailing rates, their price movements track securities
      with like contract rates and therefore exhibit similar effective duration.





As
      of
      March 31, 2007, approximately 51.2% of Opteum’s 15-year fixed-rate coupon MBS
      and approximately 41.7% of Opteum’s 30-year fixed-rate coupon MBS contain only
      loans with principal balances of $85,000 or less. Because of the low loan
      balance on these mortgages, Opteum believes borrowers have a lower economic
      incentive to refinance and have historically prepaid more slowly than comparable
      securities.





The
      value
      of Opteum’s MBS portfolio changes as interest rates rise or fall. Opteum faces
      the risk that the market value of its assets will increase or decrease at
      different rates than that of its liabilities, including its hedging instruments.
      Opteum primarily assesses its interest rate risk by estimating the duration
      of
      its assets and the duration of its liabilities. Duration essentially measures
      the market price volatility of financial instruments as interest rates change.
      Opteum generally calculates duration using various financial models and
      empirical data and different models and methodologies can produce different
      duration numbers for the same securities.





The
      following sensitivity analysis shows the estimated impact on the fair value
      of
      Opteum's interest rate-sensitive investments as of March 31, 2007, assuming
      rates instantaneously fall 100 basis points, rise 100 basis points and rise
      200
      basis points:





(in
      thousands)





**Interest
                Rates Fall**
              **100
                Basis Points**
            
            **Interest
                Rates Rise**
              **100
                Basis Points**
            
            **Interest
                Rates Rise**
              **200
                Basis Points****Adjustable-Rate
                MBS**(Fair
                Value$1,821,445)Change
                in fair value
            $
            9,758
            $
            (9,758)
            $
            (19,516)Change
                as a percent of fair value
            
            0.54%
            
            (0.54)%
            
            (1.07)%**Fixed-Rate
                MBS**(Fair
                Value$593,753)Change
                in fair value
            $
            13,824
            $
            (13,824)
            $
            (27,647)Change
                as a percent of fair value
            
            2.33%
            
            (2.33)%
            
            (4.66)%**Hybrid
                Adjustable-Rate MBS**(Fair
                Value $516,598)Change
                in fair value
            $
            6,648
            $
            (6,648)
            $
            (13,297)Change
                as a percent of fair value
            
            1.29%
            
            (1.29)%
            
            (2.57)%**Cash**(Fair
                Value $****78,947)**Portfolio
                Total**(Fair
                Value $2,931,796)Change
                in fair value
            $
            30,230
            $
            (30,230)
            $
            (60,460)Change
                as a percent of fair value
            
            1.03%
            
            (1.03)%
            
            (2.06)%




The
      table
      below reflects the same analysis presented above but with the figures in the
      columns that indicate the estimated impact of a 100 basis point fall or rise
      adjusted to reflect the impact of convexity.





(in
      thousands)





**Interest
                Rates Fall**
              **100
                Basis Points**
            
            **Interest
                Rates Rise**
              **100
                Basis Points**
            
            **Interest
                Rates Rise**
              **200
                Basis Points****Adjustable-Rate
                MBS**(Fair
                Value $1,821,445)Change
                in fair value
            $
            4,566
            $
            (13,572)
            $
            (34,625)Change
                as a percent of fair value
            
            0.25%
            
            (0.75)%
            
            (1.90)%**Fixed-Rate
                MBS**(Fair
                Value $593,753)Change
                in fair value
            $
            9,305
            $
            (17,269)
            $
            (39,047)Change
                as a percent of fair value
            
            1.57%
            
            (2.91)%
            
            (6.58)%**Hybrid
                Adjustable-Rate MBS**(Fair
                Value $516,598)Change
                in fair value
            $
            4,385
            $
            (8,772)
            $
            (21,005)Change
                as a percent of fair value
            
            0.85%
            
            (1.70)%
            
            (4.07)%**Cash**(Fair
                Value $****78,947)**Portfolio
                Total**(Fair
                Value $2,931,796)Change
                in fair value
            $
            18,256
            $
            (39,612)
            $
            (94,677)Change
                as a percent of fair value
            
            0.62%
            
            (1.35)%
            
            (3.23)%





In
      addition to changes in interest rates, other factors impact the fair value
      of
      Opteum's interest rate-sensitive investments and hedging instruments, such
      as
      the shape of the yield curve, market expectations as to future interest rate
      changes and other market conditions. Accordingly, in the event of changes in
      actual interest rates, the change in the fair value of Opteum's assets would
      likely differ from that shown above and such difference might be material and
      adverse to Opteum's stockholders.





For
      reference, the table below shows the principal balance of Opteum’s investment
      securities, the net unamortized premium, amortized cost of securities held,
      average cost expressed as a price, the fair market value of investments and
      the
      fair market value expressed as a price for the current quarter and each of
      the
      previous eight quarters for the portfolio of MBS securities only.  The data
      in the table below does not include information pertaining to OFS.





(in
      thousands)





**Quarter
                Ended**
            
            **Principal**
              **Balance
                of**
              **Investment**
              **Securities
                Held**
            
            **Unamortized**
              **Premium
                (Net)**
            
            **Amortized
                Cost of**
              **Securities
                Held**
            **Amortized**
              **Cost/Principal**
              **Balance
                Held**
            
            **Fair
                Market**
              **Value
                of**
              **Investment**
              **Securities
                Held**
            **Fair
                Market**
              **Value/Principal**
              **Balance
                Held**At
                March 31, 2007
            $
            2,893,761
            $
            109,445
            $
            3,003,206
            103.78
            $
            2,931,796
            101.31At
                December 31, 2006
            
            2,779,867
            
            115,612
            
            2,895,479
            104.16
            
            2,808,734
            101.04At
                September 30, 2006
            
            3,055,791
            
            122,300
            
            3,178,091
            104.00
            
            3,080,060
            100.79At
                June 30, 2006
            
            3,396,910
            
            120,769
            
            3,517,679
            103.56
            
            3,407,288
            100.31At
                March 31,2006
            
            3,515,113
            
            111,361
            
            3,626,473
            103.17
            
            3,538,554
            100.67At
                December 31, 2005
            
            3,457,891
            
            112,636
            
            3,570,527
            103.26
            
            3,494,029
            101.05At
                September 30, 2005
            
            3,797,401
            
            113,393
            
            3,910,793
            102.99
            
            3,858,320
            101.60At
                June 30, 2005
            
            3,784,668
            
            114,673
            
            3,899,341
            103.03
            
            3,876,206
            102.42At
                March 31, 2005
            
            3,212,517
            
            109,390
            
            3,321,907
            103.41
            
            3,299,052
            102.69





The
      table
      below shows Opteum’s average investments held, total interest income, yield on
      average earning assets, average repurchase obligations outstanding, interest
      expense, average cost of funds, net interest income and net interest spread
      for
      the quarter ended March 31, 2007, and the eight previous quarters for
      Opteum’s portfolio of MBS securities only.  The data in the table below
      does not include information pertaining to OFS’s results of operations.
      Indicated in the table below, net interest spread expanded during the first
      quarter of 2007 to 0.36% from (0.86%) in the fourth quarter of 2006. Excluding
      the quarterly retrospective adjustment, the net interest margin expanded from
      (0.31%) in the fourth quarter of 2006 to 0.11% in the first quarter of 2007.
      Excluding the quarterly retrospective adjustment, the net interest margin
      decreased from 0.14% in the first quarter of 2006 to 0.11% in the first quarter
      of 2007 .





RATIOS
      FOR THE QUARTERS HAVE BEEN ANNUALIZED


(in
      thousands)





**Quarter
                Ended**
            
            **Average**
              **Investment**
              **Securities
                Held**
            
            **Total
                Interest Income**
            **Yield
                on**
              **Average
                Interest**
              **Earning
                Assets**
            
            **Average**
              **Balance
                of**
              **Repurchase**
              **Obligations**
              **Outstanding**
            
            **Interest**
              **Expense**
            **Average**
              **Cost
                of**
              **Funds**
            
            **Net**
              **Interest**
              **Income**
            **Net**
              **Interest**
              **Spread**March
                31, 2007
            $
            2,870,265
            $
            41,856
            5.83%
            $
            2,801,901
            $
            38,357
            5.48%
            $
            3,499
            0.36%December
                31, 2006
            
            2,944,397
            
            35,162
            4.78%
            
            2,869,210
            
            40,400
            5.63%
            
            (5,238)
            (0.86%)September
                30, 2006
            
            3,243,674
            
            45,850
            5.65%
            
            3,151,813
            
            42,710
            5.42%
            
            3,140
            0.23%June
                30, 2006
            
            3,472,921
            
            57,027
            6.57%
            
            3,360,421
            
            42,829
            5.10%
            
            14,198
            1.47%March
                31, 2006
            
            3,516,292
            
            42,345
            4.82%
            
            3,375,777
            
            37,661
            4.46%
            
            4,684
            0.35%December
                31, 2005
            
            3,676,175
            
            43,140
            4.69
                %
            
            3,533,486
            
            35,913
            4.07
                %
            
            7,227
            0.63
                %September
                30, 2005
            
            3,867,263
            
            43,574
            4.51
                %
            
            3,723,603
            
            33,102
            3.56
                %
            
            10,472
            0.95
                %June 30,
                2005
            
            3,587,629
            
            36,749
            4.10
                %
            
            3,449,744
            
            26,703
            3.10
                %
            
            10,045
            1.00
                %March 31,
                2005
            
            3,136,142
            
            31,070
            3.96
                %
            
            2,976,409
            
            19,842
            2.67
                %
            
            11,228
            1.30
                %





For
      the
      three months ended March 31, 2007, $1.8 million of the $41.8 million of interest
      income was derived from the quarterly retrospective adjustment. The adjustment
      represented 25.0 basis points of the 583.3 basis points of the yield on average
      interest earning assets. For the three months ended March 31, 2006, $1.9 million
      of the $42.3 million of interest income was derived from the quarterly
      retrospective adjustment. The adjustment represented 21.8 basis points of the
      481.7 basis points of the yield on average interest earning assets.





*PERFORMANCE
      OF OFS*





The
      principal business activities of OFS are the origination and sale of mortgage
      loans. In addition, as part of the securitization of loans sold, OFS retains
      an
      interest in the resulting residual interest cash flows more fully described
      below. Finally, OFS services the loans securitized as well as some loans sold
      on
      a whole loan basis.





At
      March
      31, 2007, OFS owned $416.6 million of mortgage loans which were classified
      as
      mortgage loans held for sale. Gains/ (losses) realized on the mortgage banking
      activities for the three months ended March 31, 2007 and 2006, were ($18.0)
      million and $3.0 million, respectively. These gains/(losses) reflect the effects
      of the mark to market of IRLCs and loans held for sale prior to the sale date
      of
      ($14.1) million and ($4.1) million, respectively. The
      sharp
      deterioration in the gains/(losses) from mortgage banking activities was the
      result of disruptions in the secondary market for the loans OFS originates
      and
      sells. Owing to fears related to the credit performance of certain types of
      loans OFS originated, namely high combined loan to value (“CLTV”) and second
      lien mortgages, prices obtained upon sale were depressed and OFS also
      experienced elevated levels of early payment defaults (EPD’s), resulting in OFS
      recording high loan loss reserves.




Gains/
      (losses) from mortgage banking activities include changes in the fair value
      of
      retained interests in securitizations and the associated hedge gains or losses.
      Excluding changes in fair value of retained interests in securitizations net
      of
      hedge gains and losses, OFS had gains (losses) from sales of mortgages held
      for
      sale of ($12.0) million and $3.8 million for the three months ended March 31,
      2007 and 2006, respectively.





The
      retained interests in securitizations represent residual interests in loans
      originated or purchased by OFS prior to securitization. These retained interests
      are classified on the accompanying consolidated balance sheet as Retained
      Interest, Trading. The total fair market value of these retained interests
      was
      approximately $102.0 million as of March 31, 2007. Fluctuations in value of
      retained interests are primarily driven by projections of future interest rates
      (the forward LIBOR curve), the discount rate used to determine the present
      value
      of the residual cash flows and prepayment and loss estimates on the underlying
      mortgage loans. Due to slightly higher projected prepayment rates on the
      underlying mortgage loans, the market value of the retained interests decreased
      by $(2.2) million and increased $7.2 million (net of $12.4 million of
      additions), respectively, for the three months ended March 31, 2007 and
      2006.


It
      is the
      Company’s intention to hedge these retained interests so as to protect earnings
      from an unexpected change due to a decline in value of the retained interests.
      However, movements in the variables that affect the value of the retained
      interests, in particular forward LIBOR rates and prepayment estimates, also
      affect retrospective adjustments to the effective interest computation of the
      Opteum MBS portfolio and the value of the Company’s mortgage servicing rights (“MSRs”) .
      Movements in these two variables have the opposite effect on the value of the
      retained interests and the retrospective adjustment to the effective interest
      computation of the Opteum MBS portfolio and the MSRs. Since movements in these
      two variables affect reported earnings in an offsetting fashion, they tend
      to
      naturally hedge the Company’s earnings when taken as a whole. Accordingly, the
      Company takes this fact into consideration when constructing and implementing
      its hedging strategy.





The
      table
      below provides details of OFS’s gain/ (loss) on mortgage banking activities for
      the three months ended March 31, 2007 and 2006. OFS recognizes a gain on sale
      of
      mortgages held for sale only when the loans are actually sold.





(LOSSES)
      GAINS ON MORTGAGE BANKING ACTIVITIES





(in
      thousands)





Three
                Months EndedMarch
                31, 2007
            
            March
                31, 2006Fair
                value adjustment of retained interests, trading
            $
            (1,324)
            $
            (4,226)Gain
                on sales of mortgage loans
            
            14,513
            
            20,829Fees
                on brokered loans
            
            857
            
            1,549Gain/(loss)
                on derivatives
            
            (4,636)
            
            3,402Direct
                loan origination expenses, deferred
            
            (1,492)
            
            1,238Fees
                earned, brokering
            
            435
            
            771Write
                off purchased pipeline (Purchase Accounting Adjustment)
            
            -
            
            (534)Direct
                loan origination expenses, reclassified
            (12,239)
            
            (15,952)Net
                gain/(loss) on sale of mortgage loans
            $
            (3,886)
            $
            7,077Change
                in market value of IRLCs
            
            204
            
            (3,744)Change
                in market value of mortgage loans held for sale
            
            (14,278)
            
            (336)Gain/(loss)
                on mortgage banking activities
            $
            (17,960)
            $
            2,997





For
      the
      three months ended March 31, 2007 and 2006, OFS originated mortgage loans of
      $1.1 billion and $1.3 billion, respectively. For the same periods, OFS sold
      $1.3
      billion and $1.4 billion of originated mortgage loans. Of the originated
      mortgage loans sold during the three months ended March 31, 2007 and 2006,
      $0.6
      billion of the $1.3 billion and $1.1 billion of the $1.4 billion, respectively,
      were sold on a servicing retained basis.





For
      the
      three months ended March 31, 2007 and 2006, OFS had net servicing (loss) of
      ($4.6) million and ($1.8) million, respectively. The results for the three
      month
      periods were driven primarily by negative fair value **** adjustments
      to the MSRs (inclusive of run-off of the servicing portfolio) for the three
      months ended March 31, 2007 and the Company’s early adoption of SFAS 156 on
      January 1, 2006 (for the three months ended March 31, 2006). ****





As
      of
      March 31, 2007, OFS held originated MSRs on approximately $9.4 billion in
      mortgages with a fair market value of approximately $91.9 million. For the
      three
      months ended March 31, 2007 and 2006, additions to the MSRs were $5.3 million
      and $11.0 million, respectively. In turn, the net fair value adjustments for
      the
      three months ended March 31, 2007 and 2006, reflect declines in fair value
      due
      to run-off of $(4.7) million and $(5.1) million and adjustments due to decreases
      in fair value of ($7.6) million and ($1.4) million, respectively. Changes in
      valuation assumptions in the case of the three months ended March 31, 2007,
      and
      early adoption of SFAS 156 for the three month period and March 31, 2006,
      reduced the fair market value by $2.6 million and $1.1 million, respectively.





OFS
      had
      interest rate lock commitments (“IRLCs”), along with other instruments that are
      hedges for both these IRLCs and retained interests, securitizations, and both
      are considered derivatives. The changes to the fair value of these derivatives
      from inception to the period end are recorded at their fair value with the
      resulting gain or loss reflected in current period earnings. The result of
      the
      changes in the fair value of these derivatives was a loss of approximately
      $4.4
      million as of March 31, 2007.





**Liquidity
      and Capital Resources**





The
      Company presently believes that its equity and junior subordinated debt capital,
      combined with the cash flow from operations and the utilization of borrowings,
      will be sufficient to enable the Company to meet its anticipated liquidity
      requirements. Various changes in market conditions could, however, adversely
      affect the Company’s liquidity, including increases in interest rates, increases
      in prepayment rates substantially above expectations or the reduction of fee
      income generated through mortgage originations at OFS. If cash resources are,
      at
      any time, insufficient to satisfy the Company’s liquidity requirements, such as
      when cash flow from operations were materially negative, the Company may be
      required to pledge additional assets to meet margin calls, liquidate assets,
      sell additional debt or equity securities or pursue other financing
      alternatives. Any sale of mortgage-related securities or originated mortgage
      loans held for sale by OFS at prices lower than the carrying value of such
      assets would reduce the Company’s income.





The
      Company may, in the future, increase capital resources by making additional
      offerings of equity and debt securities, including classes of preferred stock,
      common stock, commercial paper, medium-term notes, collateralized mortgage
      obligations and senior or subordinated notes. All debt securities, other
      borrowings and classes of preferred stock will be senior to the Class A
      Common Stock in a liquidation of the company. Additional equity offerings may
      be
      dilutive to stockholders' equity or reduce the market price of the Class A
      Common Stock or both. The Company is unable to estimate the amount, timing
      or
      nature of any additional offerings as they will depend upon market conditions
      and other factors.





In
      addition to its equity and junior subordinated debt capital and cash flow from
      operations, which consists primarily of monthly principal and interest payments
      received on Opteum’s mortgage-related securities and cash generated by OFS from
      sales of mortgage loans, retained interests in mortgage securitizations,
      originated MSRs and originated loan fees, the Company presently relies upon
      repurchase agreements and credit facilities to finance its operations.





Repurchase
      agreements are used primarily in connection with the financing of Opteum’s MBS
      portfolio and, although structured as repurchase agreements, are treated as
      secured loans for U.S. federal income tax purposes. Credit facilities are used
      primarily in connection with OFS’s mortgage loan origination
      activities.





*OPTEUM’S
      LIQUIDITY AND CAPITAL RESOURCES*





At
      March 31, 2007, Opteum had master repurchase agreements in place with
      19 **** counterparties
      and had outstanding balances under 11 of these agreements. None of the
      counterparties to these agreements are affiliates of Opteum. These agreements
      are secured by Opteum’s MBS and bear interest rates that are based on a spread
      to LIBOR.





As
      of
      March 31, 2007, Opteum had obligations outstanding under its repurchase
      agreements totaling $2.9 billion with a net weighted average borrowing cost
      of
      5.24%. All of Opteum’s outstanding repurchase agreement obligations are due in
      less than 18 months with $0.4 billion maturing between two and
      30 days, $1.6 billion maturing between 31 and 90 days and
      $0.9 billion maturing in more than 90 days. Securing these repurchase
      agreement obligations as of March 31, 2007, were MBS with an estimated fair
      value of $2.9 billion and a weighted average maturity of 313 months.




As
      of
      March 31, 2007, Opteum’s repurchase agreements had the following
      counterparties, amounts outstanding, amounts-at-risk and weighted average
      remaining maturities:





(in
      thousands)





**Repurchase
                Agreement Counterparties**
            
            **Amount**
              **Outstanding**
            
            **Amount**
              **at
                Risk(1)**
            **Weighted
                Average**
              **Maturity
                of**
              **Repurchase**
              **Agreements**
              **in
                Days**
            **Percent**
              **of
                Total**
              **Amount**
              **Outstanding**Deutsche
                Bank Securities, Inc.
            $
            873,149
            $
            16,329
            168
            30.52
            %ING
                Financial Markets LLC
            
            699,520
            
            14,148
            91
            24.44JP
                Morgan Securities
            
            565,111
            
            14,065
            255
            19.74Nomura
                Securities International, Inc.
            
            328,640
            
            8,407
            48
            11.48Countrywide
                Securities Corp
            
            127,167
            
            4,708
            45
            4.44RBS
                Greenwich Capital
            
            98,613
            
            1,315
            38
            3.45Bank
                of America Securities, LLC
            
            54,120
            
            1,929
            52
            1.89Morgan
                Stanley
            
            33,650
            
            1,042
            10
            1.18HSBC
                Securities (USA) Inc
            
            31,537
            
            615
            6
            1.10Lehman
                Brothers
            
            27,045
            
            598
            60
            0.94Goldman
                Sachs
            
            23,570
            
            706
            151
            0.82Total
            $
            2,862,122
            $
            63,862
            
            100.00
            %





(1)  Equal
      to
      the fair value of securities sold, plus accrued interest income, minus the
      sum
      of repurchase agreement liabilities, plus accrued interest expense.





Opteum’s
      master repurchase agreements have no stated expiration, but can be terminated
      at
      any time at Opteum’s option or at the option of the counterparty. However, once
      a definitive repurchase agreement under a master repurchase agreement has been
      entered into, it generally may not be terminated by either party. A negotiated
      termination can occur, but may involve a fee to be paid by the party seeking
      to
      terminate the repurchase agreement transaction.





Opteum
      has entered into contracts and paid commitment fees to three counterparties
      providing for an aggregate of $1.7 billion in committed repurchase agreement
      facilities at pre-determined borrowing rates and haircuts for a 364 day period
      following the commencement date of each contract. Opteum has no obligation
      to
      utilize these repurchase agreement facilities. All of these facilities have
      been
      renewed for an additional 364 day period.





In
      addition, two of the agreements described above are available to provide
      financing for up to $150 million to cover margin requirements associated with
      monthly principal payments on the MBS portfolio.





It
      is the
      Company’s present intention to seek to renew its various committed and
      uncommitted repurchase agreements as they become due or expire. However, market
      conditions could change making the renewal of these contractual arrangements
      more expensive or unattainable. Further, as discussed above, increases in
      short-term interest rates could negatively impact the valuation of Opteum’s MBS
      portfolio. Should this occur, Opteum’s ability to enter into new repurchase
      agreements or extend its existing repurchase agreements could be limited and
      may
      cause Opteum’s repurchase agreement counterparties to initiate margin calls.
      Under this scenario, Opteum would likely seek alternative sources of financing
      which could include additional debt or equity financing or sales of
      assets.





In
      May 2005, Opteum completed a private offering of $51.6 million of trust
      preferred securities of Bimini Capital Trust I (“BCTI”) resulting in the
      issuance by Opteum of $51.6 million of junior subordinated notes. The interest
      rate payable by Opteum on the BCTI junior subordinated notes is fixed for the
      first five years at 7.61% and then floats at a spread of 3.30% over three-month
      LIBOR for the remaining 25 years. However, the BCTI junior subordinated notes
      and the corresponding BCTI trust preferred securities are redeemable at Opteum’s
      option at the end of the first five year period and at any subsequent date
      that
      Opteum chooses.





In
      addition, in October 2005, Opteum completed a private offering of an additional
      $51.5 million of trust preferred securities of Bimini Capital Trust II (“BCTII”)
      resulting in the issuance by Opteum of an additional $51.5 million of junior
      subordinated notes. The interest rate on the BCTII junior subordinated notes
      and
      the corresponding BCTII trust preferred securities is fixed for the first five
      years at 7.8575% and then floats at a spread of 3.50% over three-month LIBOR
      for
      the remaining 25 years. However, the BCTII junior subordinated notes and the
      corresponding BCTII trust preferred securities are redeemable at Opteum’s option
      at the end of the first five year period and at any subsequent date that Opteum
      chooses.





Opteum
      attempts to ensure that the income generated from available investment
      opportunities, when the use of leverage is employed for the purchase of assets,
      exceeds the cost of its borrowings. However, the issuance of debt at a fixed
      rate for any long-term period, considering the use of leverage, could create
      an
      interest rate mismatch if Opteum is not able to invest at yields that exceed
      the
      interest rates of the Company’s junior subordinated notes and other
      borrowings.





*OFS’S
      LIQUIDITY AND CAPITAL RESOURCES*





In
      order
      to facilitate the origination of mortgage loans, OFS has various warehouse
      and
      aggregation lines of credit available, some of which are committed facilities
      while others are uncommitted. With respect to the committed lines, the
      commitments are for 364 day periods. At March 31, 2007 OFS had committed
      warehouse lines of $0.9 billion, uncommitted warehouse lines of $0.7 billion
      and
      a committed aggregation line of $1.5 billion. In addition, OFS had $0.2 billion
      of various committed lines of credit secured by OFS’s retained interests in
      securitizations and originated mortgage servicing rights. One billion of the
      committed warehouse and credit line with one lender matures May 31, 2007 and
      will be reduced as a consequence of the decision to close the wholesale and
      conduit mortgage loan origination channels.





The
      committed and uncommitted warehouse and aggregation facilities are secured
      by
      mortgage loans and other assets of OFS. The facilities generally contain various
      covenants pertaining to tangible net worth, net income, available cash and
      liquidity, leverage ratio, current ratio and servicing delinquency. As of March
      31, 2007, OFS was not in compliance with respect to two covenants pertaining
      to
      tangible net worth with two lenders. OFS has obtained waivers from each lender
      for the covenant violations. However, OFS may violate such covenants again
      in
      the future. In the event the violations occur, OFS may be unable to obtain
      waivers. In the event waivers are not obtained, OFS would be in default under
      the terms of the agreements. In the event OFS defaulted under the terms of
      the
      agreement, the lenders could force OFS to liquidate the mortgage loans
      collateralizing the loan, seek payment from the Company as guarantor, or force
      OFS into an involuntary bankruptcy. In the event the Company where required
      to
      perform under its duties as guarantor, the Company’s liquidity would be
      constrained or it may not be able to satisfy such obligations. In such event,
      this would also constitute an event of default under the terms of the agreement
      and the lenders would have the same remedies available to them as
      above.




As
      of
      March 31, 2007, OFS had outstanding balances of approximately $405.2 million
      under their various warehouse and aggregation lines and approximately $124.3
      million outstanding on other lines of credit with various lenders. The rates
      on
      these borrowings generally are based on a spread to LIBOR.





The
      committed and uncommitted warehouse an aggregation lines are sufficient to
      support OFS’s production. However, in the event OFS were not able to renew the
      $1.0 billion committed warehouse/credit line maturing May 31, 2007, even at
      a
      reduced commitment level, OFS would have to seek a waiver from other committed
      lenders who require OFS to have additional committed borrowing available of
      $500
      million. Should OFS not obtain such waiver, OFS could lose all their committed
      lines. In such instance, OFS would have to seek to obtain additional financing
      that might only be available at less favorable terms or not available at all.
      In
      such instance, OFS might have to curtail production further or pledge additional
      assets to obtain financing.





OFS
      has
      commitments to borrowers to fund residential mortgage loans as well as
      commitments to purchase and sell mortgage loans to third parties. As of March
      31, 2007, OFS had outstanding commitments to originate loans of approximately
      $142.3 million. As of March 31, 2007, OFS had outstanding commitments to sell
      loans of approximately $201.2 million. The commitments to originate and purchase
      loans do not necessarily represent future cash requirements, as some portion
      of
      the commitments are likely to expire without being drawn upon or may be
      subsequently declined for credit or other reasons.





The
      Company’s TRS, OFS has been in violation of certain covenants with respect to
      their warehouse lines of credit related to their loan origination operations
      for
      five consecutive quarters. While the violations to the covenants have been
      waived by the lender, should conditions in the mortgage origination industry
      continue to deteriorate or fail to recover in sufficient time, it is possible
      OFS may not be able to obtain such waivers in the future. Under such
      circumstances, OFS might be precluded from accessing its warehouse lending
      agreements to the extent it does now and may have to curtail its originations
      accordingly. As of March 31, 2007, OFS was not in compliance with respect to
      a
      covenant with two lenders.  The covenant violations as of March 31, 2007
      pertained to tangible net worth.  OFS has obtained a waiver from lenders
      with respect to the covenant violations as of March 31, 2007. ****





**Outlook**





As
      discussed above, the Company's results of operations for the three months ended
      March 31, 2007 continue to be impacted by the prior monetary policy actions
      of
      the Federal Reserve whereby their target for the federal funds rate was raised
      by 425 basis points over a two year period. The Company repositioned its
      portfolio of MBS securities in response to the initial steps taken by the
      Federal Reserve by significantly increasing the allocation to short resetting
      ARMs. However, while this protected the portfolio from rising funding costs
      to
      some extent, such ARM securities reset upward in coupon less frequently than
      funding costs and the NIM of the portfolio became negative in late 2006. The
      NIM
      of the portfolio was negative for the three month period ended March 31, 2007
      as
      well.





The
      funding costs of the MBS portfolio have stabilized and the yield on the MBS
      assets continues to rise, albeit slowly, through a combination of ARM resetting
      and reinvestment of monthly pay-downs at higher relative yields. The need to
      fund negative cash flow operations at OFS precluded the Company from reinvesting
      monthly pay-downs throughout much of 2006 and thus exacerbated the erosion
      of
      the NIM. The Company did reinvest pay-downs throughout the three month period
      ended March 31, 2007. The Company’s recent decision to significantly terminate
      mortgage loan origination operations at OFS was done in part to alleviate the
      negative effect the operations at OFS had on the MBS portfolio.





Going
      forward, the combination of the ability to reinvest pay-downs on a regular
      basis, the continued appreciation in yield resulting from ARM resets and the
      absence of cash flow needs for OFS should slowly restore the NIM of the MBS
      portfolio to a positive value. However, the reduced size of the portfolio and
      the current market conditions in terms of the positive NIM available, will
      constrain the earnings potential of the Company in the near term.





In
      the
      event short-term rates remain stable, the effect on the Company's consolidated
      results of operations would depend on the rate at which the portfolio of
      adjustable MBS securities reset upward in relation to the funding costs, yields
      available on securities purchased with reinvested pay-downs and future
      retrospective adjustments. However, if short-term rates decline, the Company's
      consolidated results of operations and liquidity will likely be positively
      impacted. In this event, the Company may seek to raise additional equity or
      debt
      financing or reposition its assets to maximize its earnings and dividend
      potential.





Recent
      developments in the secondary market for Alt-A and, specifically, loans with
      additional second lien mortgages, have had a material negative impact on the
      results of operations of OFS. Owing primarily to poor credit performance of
      such
      high CLTV residential mortgage loans, especially those originated in late 2006
      and early 2007, the secondary market for such loans has deteriorated. The poor
      credit performance of such loans has manifested itself in elevated levels of
      EPD's and depressed prices in the secondary market. As a result, OFS recorded
      reserves for loan losses in excess of amounts recorded in earlier periods and
      has had to repurchase EPD loans from the buyers that acquired the loans from
      OFS. Once repurchased, such loans are typically re-sold at a loss by OFS. OFS
      made changes to its underwriting standards designed to increase the
      creditworthiness of the loans it originates. Such actions should reduce the
      level of EPD's incurred and increase the prices at which OFS sells such loans.





On
      April
      20, 2007, OFS announced the closure of its warehouse and conduit loan
      origination channels. On May 7, 2007, OFS signed a binding agreement to sell
      its
      retail loan origination channel to a third party. Accordingly, upon closing
      of
      the sale of the retail origination channel and the closure of OFS conduit and
      wholesale origination channel, OFS will no longer operate a mortgage loan
      origination business.





During
      the wind down of the mortgage loan origination operations, OFS will still need
      access to sufficient capacity of warehouse lines of credit to fund the remaining
      unsold loans in its inventory. In the event such borrowing capacity is reduced
      or withdrawn before the inventory can be fully liquidated, OFS may need to
      seek
      alternative sources of funding or hold such loans until sold.





**Critical
      Accounting Policies**





The
      Company’s financial statements are prepared in accordance with U.S. generally
      accepted accounting principles (“GAAP”). The Company’s significant accounting
      policies are described in Note 1 to the Company’s accompanying Consolidated
      Financial Statements.





GAAP
      requires the Company’s management to make some complex and subjective decisions
      and assessments. The Company’s most critical accounting policies involve
      decisions and assessments which could significantly affect reported assets
      and
      liabilities, as well as reported revenues and expenses. The Company believes
      that all of the decisions and assessments upon which its financial statements
      are based were reasonable at the time made based upon information available
      to
      it at that time. Management has identified its most critical accounting policies
      to be the following:





*LONG-LIVED
      ASSETS*





Long-lived
      assets, including property, plant and equipment and goodwill comprise a
      significant amount of the Company’s total assets. The Company makes judgments
      and estimates about the carrying value of these assets, including amounts to
      be
      capitalized, depreciation methods and useful lives. The Company also reviews
      these assets for impairment on a periodic basis or whenever events or changes
      in
      circumstances indicate that the carrying amounts may not be recoverable. The
      impairment test consists of a comparison of an asset’s fair value with its
      carrying value; if the carrying value of the asset exceeds its fair value,
      an
      impairment loss is recognized in the Consolidated Statement of Operations in
      an
      amount equal to that excess. When an asset’s fair value is not readily apparent
      from other sources, management’s determination of an asset’s fair value requires
      it to make long-term forecasts of future net cash flows related to the asset.
      These forecasts require assumptions about future demand, future market
      conditions and regulatory developments. Significant and unanticipated changes
      to
      these assumptions could require a provision for impairment in a future period.


In
        accordance with SFAS No. 144, *Accounting
        for the Impairment or Disposal of Long Lived Assets* (“SFAS
        144”), the closure and/or sale of mortgage loan origination channels (discussed
        in Note 19) required management to test the associated long lived assets
        for
        recoverability. In connection with the testing of recoverability of the long
        lived assets, OFS recorded an impairment charge of $6.0 million for the three
        months ended March 31, 2007. Further, in accordance with SFAS 144, such long
        lived assets were reported by OFS as held for use as of March 31, 2007, but
        these assets will be included in discontinued operations for the remainder
        of
        2007.





*GOODWILL
      AND OTHER INTANGIBLE ASSETS*





In
      accordance with SFAS No. 142, *Goodwill
      and Other Intangible Assets,* goodwill
      of a reporting unit (OFS) and other intangible assets (the *“Opteum* ”
trade
      name) not subject to amortization shall be tested for impairment on an annual
      basis and between annual tests if an event occurs or circumstances change that
      indicate the intangible asset might be impaired, which, in the case of goodwill
      of a reporting unit, is when such event or circumstances would more likely
      than
      not reduce the fair value of that reporting unit below its carrying amount.
      The
      closure and or sale of the mortgage loan origination channels constituted such
      an event that would require impairment analyses on the goodwill and other
      intangibles not subject to amortization. Accordingly, OFS recorded impairment
      charges of both goodwill and other intangible assets not subject to amortization
      of approximately $2.8 million at March 31, 2007.





*MORTGAGE
      BACKED SECURITIES*





The
      Company’s investments in MBS are classified as available-for-sale securities. As
      a result, changes in fair value are recorded as a balance sheet adjustment
      to
      accumulated other comprehensive income (loss), which is a component of
      stockholders' equity, rather than through the statement of operations. The
      Company’s MBS have fair values determined by management based on the average of
      third-party broker quotes received and/or by independent pricing sources when
      available. Because the price estimates may vary to some degree between sources,
      management must make certain judgments and assumptions about the appropriate
      price to use to calculate the fair values for financial reporting purposes.
      Alternatively, management could opt to have the value of all of its positions
      in
      MBS determined by either an independent third-party pricing source or do so
      internally based on managements own estimates. Management believes pricing
      on
      the basis of third-party broker quotes is the most consistent with the
      definition of fair value described in SFAS No. 107, *Disclosures
      about the Fair Value of Financial Instruments.*





*RETAINED
      INTEREST, TRADING*





Retained
      interest, trading is the subordinated interests retained by the Company from
      the
      Company’s various securitizations and includes the over-collateralization and
      residual net interest spread remaining after payments to the Public Certificates
      and NIM Notes. (See Notes 1 and 4 in the accompanying consolidated financial
      statements.) Retained interest, trading represents the present value of
      estimated cash flows to be received from these subordinated interests in the
      future. The subordinated interests retained are classified as “trading
      securities” and are reported at fair value with unrealized gains or losses
      reported in earnings. In order to value these unrated and unquoted retained
      interests, the Company utilizes either pricing available directly from dealers
      or calculates their present value by projecting their future cash flows on
      a
      publicly-available analytical system. When a publicly-available analytical
      system is employed, the Company uses the following variable factors in
      estimating the fair value of these assets:




*Interest
      Rate Forecast* .
      The
      forward London Interbank Offered Rate (“LIBOR”) interest rate curve.




*Discount
      Rate* .
      The
      present value of all future cash flows utilizing a discount rate assumption
      established at the discretion of the Company to represent market conditions
      and
      value.




*Prepayment
      Forecast* .
      The
      prepayment forecast may be expressed by the Company in accordance with one
      of
      the following standard market conventions: Constant Prepayment Rate (“CPR”) or
      Percentage of a Prepayment Vector. Prepayment forecasts are made utilizing
      Citigroup Global Markets Yield Book and/or management estimates based on
      historical experience. Conversely, prepayment speed forecasts could have been
      based on other market conventions or third-party analytical systems. Prepayment
      forecasts may be changed as OFS observes trends in the underlying collateral
      as
      delineated in the Statement to Certificate Holders generated by the
      securitization trust’s Trustee for each underlying security.




*Credit
      Performance Forecast* .
      A
      forecast of future credit performance of the underlying collateral pool will
      include an assumption of default frequency, loss severity and a recovery lag.
      In
      general, the Company will utilize the combination of default frequency and
      loss
      severity in conjunction with a collateral prepayment assumption to arrive at
      a
      target cumulative loss to the collateral pool over the life of the pool based
      on
      historical performance of similar collateral by the originator. The target
      cumulative loss forecast will be developed and noted at the pricing date of
      the
      individual security but may be updated by the Company consistent with
      observations of the actual collateral pool performance.




As
      of
      March 31, 2007, and December 31, 2006, key economic assumptions and the
      sensitivity of the current fair value of retained interests to the immediate
      10%
      and 20% adverse change in those assumptions are as follows:





(in
      thousands)





**March
                31, 2007**
            
            **December
                31, 2006**Balance
                Sheet Carrying value of retained interests - fair value
            $
            101,974
            $
            104,199Weighted
                average life (in years)
            
            4.00
            
            4.26Prepayment
                assumption (annual rate)
            
            38.94%
            
            37.88%Impact
                on fair value of 10% adverse change
            $
            (6,748)
            $
            (8,235)Impact
                on fair value of 20% adverse change
            $
            (12,334)
            $
            (14,939)Expected
                Credit losses (annual rate)
            
            0.51%
            
            0.56%Impact
                on fair value of 10% adverse change
            $
            (2,602)
            $
            (3,052)Impact
                on fair value of 20% adverse change
            $
            (5,285)
            $
            (6,098)Residual
                Cash-Flow Discount Rate
            
            17.35%
            
            16.03%Impact
                on fair value of 10% adverse change
            $
            (4,407)
            $
            (4,575)Impact
                on fair value of 20% adverse change
            $
            (8,452)
            $
            (8,771)Interest
                rates on variable and adjustable loans and bonds
            
            Forward
                LIBOR Yield Curve
            
            Forward
                LIBOR Yield CurveImpact
                on fair value of 10% adverse change
            $
            (17,611)
            $
            (18,554)Impact
                on fair value of 20% adverse change
            $
            (33,568)
            $
            (39,292)








These
      sensitivities are entirely hypothetical and should be used with caution. As
      the
      figures indicate, changes in fair value based upon 10% and 20% variations in
      assumptions generally cannot be extrapolated to greater or lesser percentage
      variations because the relationship of the change in assumption to the change
      in
      fair value may not be linear. Also, in this table, the effect of the variation
      in a particular assumption on the fair value of the subordinated interest is
      calculated without changing any other assumption. In reality, changes in one
      factor may result in changes in another that may magnify or counteract the
      sensitivities. To estimate the impact of a 10% and 20% adverse change of the
      forward LIBOR curve, a parallel shift in the forward LIBOR curve was assumed
      based on the forward LIBOR curve as of March 31, 2007 and December 31,
      2006.





*MORTGAGE
      SERVICING RIGHTS*





The
      Company recognizes mortgage servicing rights (“MSRs”) as assets when separated
      from the underlying mortgage loans in connection with the sale of such loans.
      Upon sale of a loan, the Company measures the retained MSRs by allocating the
      total cost of originating a mortgage loan between the loan and the servicing
      right based on their relative fair values. Gains or losses on the sale of MSRs
      are recognized when title and all risks and rewards have irrevocably passed
      to
      the purchaser of such MSRs and there are no significant unresolved
      contingencies.




In
      March
      2006, the FASB issued SFAS No. 156, *Accounting
      for Servicing of Financial Assets* .
      The
      Company elected to early adopt SFAS 156 as of January 1, 2006, and to measure
      all mortgage servicing assets at fair value (and as one class). (See Notes
      1 and
      5 in the accompanying consolidated financial statements.)




To
      facilitate hedging of the MSRs, management has elected to utilize an internal
      model for valuation purposes. Accordingly, fair value is estimated based on
      internally generated expected cash flows considering market prepayment
      estimates, historical prepayment rates, portfolio characteristics, interest
      rates and other economic factors.




As
      of
      March 31, 2007, and December 31, 2006, key economic assumptions and the
      sensitivity of the current fair value of MSR cash flows to the immediate 10%
      and
      20% adverse change in those assumptions are as follows:




(in
      thousands)





**March
                31, 2007**
            
            **December
                31, 2006**Prepayment
                assumption (annual rate) (PSA)
            
            406.8
            
            424.6Impact
                on fair value of 10% adverse change
            $
            (3,986)
            $
            (3,923)Impact
                on fair value of 20% adverse change
            $
            (7,535)
            $
            (7,557)MSR
                Cash-Flow Discount Rate
            
            14.39%
            
            14.50%Impact
                on fair value of 10% adverse change
            $
            (3,378)
            $
            (3,505)Impact
                on fair value of 20% adverse change
            $
            (6,480)
            $
            (6,727)








These
      sensitivities are entirely hypothetical and should be used with caution. As
      the
      figures indicate, changes in fair value based upon 10% and 20% variations in
      assumptions generally cannot be extrapolated to greater or lesser percentage
      variations because the relationship of the change in assumption to the change
      in
      fair value may not be linear. Also, in this table, the effect of the variation
      in a particular assumption on the fair value of the MSRs is calculated without
      changing any other assumption. In reality, changes in one factor may result
      in
      changes in another which may magnify or counteract the sensitivities.





*INCOME
      RECOGNITION*





Interest
      income on MBS is accrued based on the actual coupon rate and the outstanding
      principal amount of the underlying mortgages. Premiums and discounts are
      amortized or accreted into interest income over the estimated lives of the
      MBS
      using the effective yield method adjusted for the effects of estimated
      prepayments based on SFAS No. 91, *Accounting
      for Nonrefundable Fees and Costs Associated with Originating or Acquiring Loans
      and Initial Direct Costs of Leases;* an
      amendment of FASB Statements No. 13, 60 and 65 and a rescission of FASB
      Statement No. 17. Adjustments are made using the retrospective method to
      the effective interest computation each reporting period based on the actual
      prepayment experiences to date and the present expectation of future prepayments
      of the underlying mortgages. To make assumptions as to future estimated rates
      of
      prepayments, the Company currently uses actual market prepayment history for
      the
      securities it owns and for similar securities that the Company does not own
      and
      current market conditions. If the estimate of prepayments is incorrect, the
      Company is required to make an adjustment to the amortization or accretion
      of
      premiums and discounts that would have an impact on future income.





With
      respect to mortgage loans held for sale, interest income and interest expense
      are recognized as earned or incurred. Loans are placed on a non-accrual status
      when concern exists as to the ultimate collectability of principal or interest.
      Loans return to accrual status when principal and interest become current and
      are anticipated to be fully collectible. The Company recognizes gain (or loss)
      on the sale of these loans.  Gains or losses on such sales are recognized
      at the time legal title transfers to the purchaser of such loans based upon
      the
      difference between the sales proceeds from the purchaser and the allocated
      basis
      of the loan sold, adjusted for net deferred loan fees and certain direct costs
      and selling costs. The Company defers net loan origination costs and fees as
      a
      component of the loan balance on the balance sheet. Such costs are not amortized
      and are recognized into income as a component of the gain or loss upon sale.
      Accordingly, salaries, commissions, benefits and other operating expenses of
      $12.2 million during the three months ended March 31, 2007 were capitalized
      as
      direct loan origination costs.





Servicing
      fee income is generally a fee based on a percentage of the outstanding principal
      balances of the mortgage loans serviced by the Company (or by a sub-servicer
      where the Company is the master servicer) and is recorded as income as the
      installment payments on the mortgages are received by the Company or the
      sub-servicer.





*INCOME
      TAXES*





Opteum
      has elected to be taxed as a REIT under the Code. As further described below,
      Opteum's TRS, OFS, is a taxpaying entity for income tax purposes and is taxed
      separately from Opteum. Opteum will generally not be subject to federal income
      tax on its REIT taxable income to the extent that Opteum distributes its REIT
      taxable income to its stockholders and satisfies the ongoing REIT requirements,
      including meeting certain asset, income and stock ownership tests. A REIT must
      generally distribute at least 90% of its REIT taxable income to its
      stockholders, of which 85% generally must be distributed within the taxable
      year, in order to avoid the imposition of an excise tax. The remaining balance
      may be distributed up to the end of the following taxable year, provided the
      REIT elects to treat such amount as a prior year distribution and meets certain
      other requirements.





OFS
      and
      its activities are subject to corporate income taxes and the applicable
      provisions of SFAS No. 109, *Accounting for Income Taxes* . 
      Deferred tax assets and liabilities are recognized for the future tax
      consequences attributable to differences between the financial statement
      carrying amounts of existing assets and liabilities and their respective tax
      basis. Deferred tax assets and liabilities are measured using enacted tax rates
      expected to apply to taxable income in the years in which those temporary
      differences are expected to be recovered or settled. The effect on deferred
      tax
      assets and liabilities of a change in tax rates is recognized in income in
      the
      period that includes the enactment date.





In
      assessing the realizability of deferred tax assets, management considers whether
      it is more likely than not that some portion or all of the deferred tax assets
      will not be realized. The ultimate realization of deferred tax assets is
      dependant upon the generation of future taxable income during the periods in
      which those temporary differences become deductible. Management considers the
      scheduled reversal of deferred tax liabilities, projected future taxable
      income, and tax planning strategies in making this assessment, including the
      impacts of the Company’s current plans to close
      the OFS wholesale and conduit mortgage loan origination channels in the second
      quarter of 2007, and to sell the OFS retail mortgage loan origination channel
      to
      a third party.  At this time, management
      believes it is more likely than not that the Company will not realize the full
      benefits of the federal tax loss carryforwards, and that the Company will not
      realize any benefit of the state tax loss carryforwards and the other deferred
      tax assets.  Therefore, the Company has recorded a valuation allowance of
      $37.4 million against certain deferred tax assets as of March 31, 2007. 
The Company believes deferred tax assets of $23.4 million for which there are
      future reversals of existing taxable temporary differences expected to result
      in
      tax gains are more likely than not realizable as of March 31, 2007. The amount
      of the deferred tax assets that the Company considers realizable could be
      increased in the future depending on the actual tax results from the OFS closing
      and sales activities described above.





**Off-Balance
      Sheet Arrangements**





As
      previously discussed OFS
      pools loans originated or purchased and then sells them or securitizes them
      to
      obtain long-term financing for its assets. Securitized loans are transferred
      to
      a trust where they serve as collateral for asset-backed bonds, which the trust
      primarily issues to the public. During the first quarter of 2007, OFS did not
      execute a securitization, and is not expected to do so in the future. However,
      OFS held approximately $102.0 million of retained interests from securitizations
      as of March 31, 2007.





The
      cash
      flows associated with OFS’s securitization activities over the three months
      ended March 31, 2007, were as follows:





(in
      thousands)





**For
                the Three Months Ended March 31, 2007**Proceeds
                from securitizations
            $
            -Servicing
                fees received
            
            5,310Servicing
                advances net of repayments
            
            605Cash
                flows received on retained interests
            
            901





**ITEM
      3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.**





There
      have been no material changes to the Company’s exposure to market risk since
      December 31, 2006. The information set forth under Item 7A - Quantitative and
      Qualitative Disclosures About Market Risk in the Company’s Annual Report on Form
      10-K for the period ended December 31, 2006, is incorporated herein by
      reference.





**ITEM
      4.**  **CONTROLS
      AND PROCEDURES.**





**Evaluation
      of Disclosure Controls and Procedures**





The
      Company maintains disclosure controls and procedures that are designed to ensure
      that information required to be disclosed in the Company’s Exchange Act reports
      is recorded, processed, summarized and reported within the time periods
      specified in the SEC’s rules and forms and that such information is
      accumulated and communicated to the Company’s management, including its Chief
      Executive Officer and Chief Financial Officer, as appropriate, to allow timely
      decisions regarding required disclosure based closely on the definition of
      “disclosure controls and procedures” in Rule 13a-15(e). In designing and
      evaluating the disclosure controls and procedures, management recognized that
      any controls and procedures, no matter how well designed and operated, can
      provide only reasonable assurance of achieving the desired control objectives
      and management necessarily was required to apply its judgment in evaluating
      the
      cost-benefit relationship of possible controls and procedures.





As
      of the
      end of the period covered by this report, the Company carried out an evaluation,
      under the supervision and with the participation of the Company’s management,
      including the Company’s Chief Executive Officer and the Company’s Chief
      Financial Officer, of the effectiveness of the design and operation of the
      Company’s disclosure controls and procedures. Based on the foregoing, the
      Company’s Chief Executive Officer and Chief Financial Officer concluded that the
      Company’s disclosure controls and procedures were effective.





**Changes
      in Internal Controls over Financial Reporting**





There
      were no significant changes in the Company’s internal control over financial
      reporting that occurred during the Company’s most recent fiscal quarter that
      have materially affected or are reasonably likely to materially affect, the
      Company’s internal control over financial reporting.





**PART
      II. OTHER INFORMATION.**





**ITEM
      1. LEGAL PROCEEDINGS.**





The
      Company is involved in various lawsuits and claims, both actual and potential,
      including some that it has asserted against others, in which monetary and other
      damages are sought. These lawsuits and claims relate primarily to contractual
      disputes arising out of the ordinary course of the Company’s business. The
      outcome of such lawsuits and claims is inherently unpredictable. However,
      management believes that, in the aggregate, the outcome of all lawsuits and
      claims involving the Company will not have a material effect on the Company’s
      consolidated financial position or liquidity; however, any such outcome may
      be
      material to the results of operations of any particular period in which costs,
      if any, are recognized.




**ITEM
      1A. RISK FACTORS.**





During
      the period covered by this report, there were no material changes from the
      risk
      factors previously disclosed under Item 1A - Risk Factors in the Company’s
      Annual Report on Form 10-K for the period December 31, 2006 as filed on March
      14, 2007. The information set forth under Item 1A - Risk Factors in the
      Company’s Annual Report on Form 10-K for the period ended December 31, 2006, is
      incorporated herein by reference.




**ITEM
      6.**  **EXHIBITS.**





Exhibit
      No.





2.1
            Agreement
                and Plan of Merger,incorporated
                by reference to Exhibit 2.1 to the Company’s Form 8-K, dated September 29,
                2005, filed with the SEC on September 30, 20053.1
            Articles
                of Amendment and Restatement, incorporated by reference toExhibit
                3.1 tothe
                Company’s Form S-11/A, filed with the SEC on April 29,
                20043.2
            Articles
                Supplementary, incorporated by reference toExhibit
                3.1 tothe
                Company’s Form 8-K, dated November 3, 2005, filed with the SEC on November
                8, 20053.3
            Articles
                of Amendment, incorporated by reference toExhibit
                3.1 tothe
                Company’s Form 8-K, dated February 10, 2006, filed with the SEC on
                February 15, 20063.4
            Amended
                and Restated Bylaws, incorporated by reference toExhibit
                3.1 tothe
                Company’s Form 8-K, filed with the SEC on September 26,
                20064.1
            Specimen
                Common Stock Certificate incorporated by reference to Exhibit 4.1
                to the
                Company’s Form 10-Q for the period ended March 31, 2006, filed with the
                SEC on May 8, 2006†10.1
            Opteum
                Inc. 2003 Long Term Incentive Compensation Plan, incorporated by
                reference
                to Exhibit 10.1 to the Company’s Form 10-Q for the period ended September
                30, 2006, filed with the SEC on December 20, 2006†10.2
            Employment
                Agreement between Bimini Mortgage Management, Inc. and Jeffrey J.
                Zimmer, incorporated by reference toExhibit
                10.3 tothe
                Company’s Form S-11/A, dated April 12, 2004, filed with the SEC on April
                29, 2004†10.3
            Employment
                Agreement between Bimini Mortgage Management, Inc. and Robert E.
                Cauley, incorporated by reference toExhibit
                10.4 tothe
                Company’s Form S-11/A, dated April 12, 2004, filed with the SEC on April
                29, 2004†10.4
            Employment
                Agreement between Opteum Financial Services, LLC and Peter R.
                Norden,
                incorporated by reference toExhibit
                10.5 tothe
                Company’s Form 10-K, dated September 29, 2005, filed with the SEC on March
                10, 2006†10.5
            Opteum
                Inc. 2004 Performance Bonus Plan, incorporated by reference to Exhibit
                10.7 to the Company’s Form 10-Q for the period ended September 30, 2006,
                filed with the SEC on December 20, 2006†10.6
            Phantom
                Share Award Agreement between Bimini Mortgage Management, Inc. and
                Jeffrey J. Zimmer, incorporated by reference toExhibit
                10.8 tothe
                Company’s Form S-11/A, dated August 13, 2004, filed with the SEC on August
                25, 2004†10.7
            Phantom
                Share Award Agreement between Bimini Mortgage Management, Inc. and
                Robert E. Cauley, incorporated by reference toExhibit
                10.9 tothe
                Company’s Form S-11/A, dated August 13, 2004, filed with the SEC on August
                25, 200410.8
            Voting
                Agreement, among certain stockholders of Bimini Mortgage Management,
                Inc.,
                Jeffrey J. Zimmer, Robert E. Cauley, Amber K. Luedke, George H. Haas,
                IV,
                Kevin L. Bespolka, Maureen A. Hendricks, W. Christopher Mortenson,
                Buford
                H. Ortale, Peter Norden, certain of Mr. Norden’s affiliates, Jason Kaplan,
                certain of Mr. Kaplan’s affiliates and other former owners of Opteum
                Financial Services, LLC, incorporated by reference to Exhibit 99(D)
                to the
                Company’s Schedule 13D, dated November 3, 2005, filed with the SEC on
                November 14, 2005†10.9
            Form
                of Phantom Share Award Agreement,
                incorporated by reference to Exhibit 10.11 to the Company’s Form 10-Q for
                the period ended September 30, 2006, filed with the SEC on December
                20,
                2006†10.10
            Form
                of Restricted Stock Award Agreement,
                incorporated by reference to Exhibit 10.12 to the Company’s Form 10-Q for
                the period ended September 30, 2006, filed with the SEC on December
                20,
                200610.11
            Membership
                Interest Purchase, Option and Investor Rights Agreement among Opteum
                Inc.,
                Opteum Financial Services, LLC and Citigroup Global Markets Realty
                Corp.
                dated as of December 21, 2006, incorporated by reference to Exhibit
                10.1
                to the Company’s Form 8-K, dated December 21, 2006, filed with the SEC on
                December 21, 200610.12
            Sixth
                Amended and Restated Limited Liability Company Agreement of Opteum
                Financial Services, LLC, dated as of December 21, 2006, made and
                entered
                into by Opteum Inc. and Citigroup Global Markets Realty Corp.,
                incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K, dated
                December 21, 2006, filed with the SEC on December 21,
                200610.13
            Asset
                Purchase Agreement, dated May 7, 2007, by and among Opteum Financial
                Services, LLC, Opteum Inc. and Prospect Mortgage Company, LLC,
                incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K, dated
                May 7, 2007, filed with the SEC on May 7, 2007*31.1
            Certification
                of the Principal Executive Officer, pursuant to Rule 13a-14(a) or
                15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant
                to
                Section 302 of the Sarbanes-Oxley Act of 2002*31.2
            Certification
                of the Principal Financial Officer, pursuant to Rule 13a-14(a) or
                15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant
                to
                Section 302 of the Sarbanes-Oxley Act of 2002*32.1
            Certification
                of the Chief Executive Officer, pursuant to 18 U.S.C. Section 1350,
                as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
                2002*32.2
            Certification
                of the Chief Financial Officer, pursuant to 18 U.S.C. Section 1350,
                as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
                2002













**Signatures**





Pursuant
      to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
      1934, as amended, the registrant has duly caused this report to be signed on
      its
      behalf by the undersigned, thereunto duly authorized.





OPTEUM
      INC.





Date:
      May
      10, 2007     By:  /s/
      Robert E. Cauley


Robert
      E.
      Cauley


Vice
      Chairman, Senior Executive Vice President,


Chief
      Financial Officer and Chief Investment Officer





EXHIBIT
      INDEX





Exhibit
      No.





2.1
            Agreement
                and Plan of Merger,incorporated
                by reference to Exhibit 2.1 to the Company’s Form 8-K, dated September 29,
                2005, filed with the SEC on September 30, 20053.1
            Articles
                of Amendment and Restatement, incorporated by reference toExhibit
                3.1 tothe
                Company’s Form S-11/A, filed with the SEC on April 29,
                20043.2
            Articles
                Supplementary, incorporated by reference toExhibit
                3.1 tothe
                Company’s Form 8-K, dated November 3, 2005, filed with the SEC on November
                8, 20053.3
            Articles
                of Amendment, incorporated by reference toExhibit
                3.1 tothe
                Company’s Form 8-K, dated February 10, 2006, filed with the SEC on
                February 15, 20063.4
            Amended
                and Restated Bylaws, incorporated by reference toExhibit
                3.1 tothe
                Company’s Form 8-K, filed with the SEC on September 26,
                20064.1
            Specimen
                Common Stock Certificate incorporated by reference to Exhibit 4.1
                to the
                Company’s Form 10-Q for the period ended March 31, 2006, filed with the
                SEC on May 8, 2006†10.1
            Opteum
                Inc. 2003 Long Term Incentive Compensation Plan, incorporated by
                reference
                to Exhibit 10.1 to the Company’s Form 10-Q for the period ended September
                30, 2006, filed with the SEC on December 20, 2006†10.2
            Employment
                Agreement between Bimini Mortgage Management, Inc. and Jeffrey J.
                Zimmer, incorporated by reference toExhibit
                10.3 tothe
                Company’s Form S-11/A, dated April 12, 2004, filed with the SEC on April
                29, 2004†10.3
            Employment
                Agreement between Bimini Mortgage Management, Inc. and Robert E.
                Cauley, incorporated by reference toExhibit
                10.4 tothe
                Company’s Form S-11/A, dated April 12, 2004, filed with the SEC on April
                29, 2004†10.4
            Employment
                Agreement between Opteum Financial Services, LLC and Peter R.
                Norden,
                incorporated by reference toExhibit
                10.5 tothe
                Company’s Form 10-K, dated September 29, 2005, filed with the SEC on March
                10, 2006†10.5
            Opteum
                Inc. 2004 Performance Bonus Plan, incorporated by reference to Exhibit
                10.7 to the Company’s Form 10-Q for the period ended September 30, 2006,
                filed with the SEC on December 20, 2006†10.6
            Phantom
                Share Award Agreement between Bimini Mortgage Management, Inc. and
                Jeffrey J. Zimmer, incorporated by reference toExhibit
                10.8 tothe
                Company’s Form S-11/A, dated August 13, 2004, filed with the SEC on August
                25, 2004†10.7
            Phantom
                Share Award Agreement between Bimini Mortgage Management, Inc. and
                Robert E. Cauley, incorporated by reference toExhibit
                10.9 tothe
                Company’s Form S-11/A, dated August 13, 2004, filed with the SEC on August
                25, 200410.8
            Voting
                Agreement, among certain stockholders of Bimini Mortgage Management,
                Inc.,
                Jeffrey J. Zimmer, Robert E. Cauley, Amber K. Luedke, George H. Haas,
                IV,
                Kevin L. Bespolka, Maureen A. Hendricks, W. Christopher Mortenson,
                Buford
                H. Ortale, Peter Norden, certain of Mr. Norden’s affiliates, Jason Kaplan,
                certain of Mr. Kaplan’s affiliates and other former owners of Opteum
                Financial Services, LLC, incorporated by reference to Exhibit 99(D)
                to the
                Company’s Schedule 13D, dated November 3, 2005, filed with the SEC on
                November 14, 2005†10.9
            Form
                of Phantom Share Award Agreement,
                incorporated by reference to Exhibit 10.11 to the Company’s Form 10-Q for
                the period ended September 30, 2006, filed with the SEC on December
                20,
                2006†10.10
            Form
                of Restricted Stock Award Agreement,
                incorporated by reference to Exhibit 10.12 to the Company’s Form 10-Q for
                the period ended September 30, 2006, filed with the SEC on December
                20,
                200610.11
            Membership
                Interest Purchase, Option and Investor Rights Agreement among Opteum
                Inc.,
                Opteum Financial Services, LLC and Citigroup Global Markets Realty
                Corp.
                dated as of December 21, 2006, incorporated by reference to Exhibit
                10.1
                to the Company’s Form 8-K, dated December 21, 2006, filed with the SEC on
                December 21, 200610.12
            Sixth
                Amended and Restated Limited Liability Company Agreement of Opteum
                Financial Services, LLC, dated as of December 21, 2006, made and
                entered
                into by Opteum Inc. and Citigroup Global Markets Realty Corp.,
                incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K, dated
                December 21, 2006, filed with the SEC on December 21,
                200610.13
            Asset
                Purchase Agreement, dated May 7, 2007, by and among Opteum Financial
                Services, LLC, Opteum Inc. and Prospect Mortgage Company, LLC,
                incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K, dated
                May 7, 2007, filed with the SEC on May 7, 2007*31.1
            Certification
                of the Principal Executive Officer, pursuant to Rule 13a-14(a) or
                15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant
                to
                Section 302 of the Sarbanes-Oxley Act of 2002*31.2
            Certification
                of the Principal Financial Officer, pursuant to Rule 13a-14(a) or
                15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant
                to
                Section 302 of the Sarbanes-Oxley Act of 2002*32.1
            Certification
                of the Chief Executive Officer, pursuant to 18 U.S.C. Section 1350,
                as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
                2002*32.2
            Certification
                of the Chief Financial Officer, pursuant to 18 U.S.C. Section 1350,
                as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
                2002*
                Filed herewith.
              †Management compensatory plan or arrangement required to be filed
                by Item
                601 of Regulation S-K.