**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 June 30, 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
                  filer þ
              
              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
        August 13, 2007, the number of shares outstanding of the registrant’s Class A
        Common Stock, $0.001 par value, was 24,665,993; 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
              **3**ITEM
                  1. FINANCIAL STATEMENTS.
              **3**Consolidated
                  Balance Sheets as
                  of June 30, 2007 (unaudited) and December 31, 2006
              **3**Consolidated
                  Statements of
                  Operations for the six and three months ended June 30, 2007 and
                  2006(unaudited)
              **4**Consolidated
                  Statement of
                  Stockholders’ Equity for the six months ended June 30, 2007
                  (unaudited)
              **6**Consolidated
                  Statements of Cash
                  Flows for the six months ended June 30, 2007 and 2006
                  (unaudited)
              **7**Notes
                  to Consolidated Financial
                  Statements
                  (unaudited)
              **9**ITEM
                  2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONAND
                  RESULTS OF
                  OPERATIONS.
              **37**ITEM
                  3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
                  RISK.
              **54**ITEM
                  4. CONTROLS AND PROCEDURES.
              **54**PART
                  II. OTHER INFORMATIONITEM
                  1. LEGAL PROCEEDINGS.
              **55**ITEM
                  1A. RISK FACTORS.
              **55**ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
                  HOLDERS
              **55**ITEM 6. EXHIBITS.
              **57**
 
 
 
  
  **PART
        I. FINANCIAL INFORMATION**
 **ITEM
        1. FINANCIAL STATEMENTS.**
 **OPTEUM
                  INC.****CONSOLIDATED
                  BALANCE SHEETS****(Unaudited)**ASSETS
              
              **June
                  30, 2007**
              
              **December
                  31, 2006**MORTGAGE-BACKED
                  SECURITIES:Pledged
                  to counterparties, at fair value
              $
              1,818,234,441
              $
              2,803,019,180Unpledged,
                  at fair value
              
              401,568
              
              5,714,860TOTAL
                  MORTGAGE BACKED SECURITIES
              
              1,818,636,009
              
              2,808,734,040Cash
                  and cash equivalents
              
              41,902,854
              
              82,751,795Principal
                  payments receivable
              
              10,016,176
              
              12,209,825Accrued
                  interest receivable
              
              9,835,614
              
              14,072,078Property
                  and equipment, net
              
              4,253,272
              
              4,372,997Prepaids
                  and other assets
              
              5,696,687
              
              6,168,736Assets
                  held for sale
              
              218,317,915
              
              1,009,324,465TOTAL
                  ASSETS
              $
              2,108,658,527
              $
              3,937,633,936LIABILITIES
                  AND STOCKHOLDERS' EQUITYLIABILITIES:Repurchase
                  agreements
              $
              1,783,331,466
              $
              2,741,679,650Junior
                  subordinated notes due to Bimini Capital Trust I & II
              
              103,097,000
              
              103,097,000Accrued
                  interest payable
              
              10,303,971
              
              17,776,464Dividends
                  payable
              
              -
              
              1,266,937Accounts
                  payable, accrued expenses and other
              
              2,239,480
              
              692,469Minority
                  interest in consolidated subsidiary
              
              -
              
              770,563Liabilities
                  related to assets held for sale
              
              180,917,866
              
              879,916,024TOTAL
                  LIABILITIES
              
              2,079,889,783
              
              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 June 30, 2007 and December
                  31,
                  2006
              
              -
              
              -Class
                  A Common Stock, $0.001 par value; 98,000,000 shares designated:
                  24,603,560
                  shares issued and outstanding as of June 30, 2007 and 24,515,717
                  shares
                  issued and outstanding as of December 31, 2006
              
              24,603
              
              24,516Class
                  B Common Stock, $0.001 par value; 1,000,000 shares designated,
                  319,388
                  shares issued and outstanding as of June 30, 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 June 30, 2007 and December
                  31,
                  2006
              
              319
              
              319Additional
                  paid-in capital
              
              337,011,764
              
              335,646,460Accumulated
                  other comprehensive loss
              
              -
              
              (76,773,610)Accumulated
                  deficit
              
              (308,268,261)
              
              (66,463,175)TOTAL
                  STOCKHOLDERS' EQUITY
              
              28,768,744
              
              192,434,829TOTAL
                  LIABILITIES AND STOCKHOLDERS’ EQUITY
              $
              2,108,658,527
              $
              3,937,633,936See
                  notes to consolidated financial
                  statements.
 
  
 
  
 **OPTEUM
                  INC.****CONSOLIDATED
                  STATEMENTS OF OPERATIONS****(Unaudited)****Six
                  Months Ended**
              
              **Three
                  Months Ended****June
                  30, 2007**
              
              **June
                  30, 2006**
              
              **June
                  30, 2007**
              
              **June
                  30, 2006**Interest
                  income, net of amortization of premium and discount
              $
              71,419,602
              $
              98,869,734
              $
              29,563,192
              $
              57,041,544Interest
                  expense
              
              (75,323,440)
              
              (82,702,101)
              
              (35,680,803)
              
              (43,822,078)NET
                  INTEREST INCOME (EXPENSE)
              
              (3,903,838)
              
              16,167,633
              
              (6,117,611)
              
              13,219,466REALIZED
                  LOSS ON SALE OF MORTGAGE-BACKED SECURITIES
              
              (19,388,377)
              
              -
              
              (18,568,106)
              
              -OTHER
                  INCOME
              
              -
              
              70,566
              
              -
              
              70,566OTHER-THAN-TEMPORARY
                  LOSS ON MORTGAGE-BACKED SECURITIES
              
              (55,250,278)
              
              -
              
              (55,250,278)
              
              -TOTAL
                  NET REVENUES (DEFICIENCY OF REVENUES)
              
              (78,542,493)
              
              16,238,199
              
              (79,935,995)
              
              13,290,032DIRECT
                  REIT OPERATING EXPENSES
              
              451,702
              
              545,823
              
              223,455
              
              226,573GENERAL
                  AND ADMINISTRATIVE EXPENSES:Compensation
                  and related benefits
              
              2,343,830
              
              3,570,516
              
              1,151,445
              
              2,159,429Directors’
                  fees and liability insurance
              
              388,536
              
              420,034
              
              188,573
              
              210,140Audit,
                  legal and other professional fees
              
              681,226
              
              676,301
              
              338,830
              
              391,720Other
                  administrative expenses
              
              328,614
              
              490,503
              
              183,310
              
              266,355TOTAL
                  GENERAL AND ADMINISTRATIVE EXPENSES
              
              3,742,206
              
              5,157,354
              
              1,862,158
              
              3,027,644TOTAL
                  EXPENSES
              
              4,193,908
              
              5,703,177
              
              2,085,613
              
              3,254,217INCOME
                  (LOSS) FROM CONTINUING OPERATIONS BEFORE MINORITY INTEREST
              
              (82,736,401)
              
              10,535,022
              
              (82,021,608)
              
              10,035,815MINORITY
                  INTEREST IN CONSOLIDATED SUBSIDIARY
              
              770,563
              
              -
              
              -
              
              -INCOME
                  (LOSS) FROM CONTINUING OPERATIONS
              
              (81,965,838)
              
              10,535,022
              
              (82,021,608)
              
              10,035,815DISCONTINUED
                  OPERATIONS (see Note 12):Loss
                  from discontinued operations, net of tax
              
              (148,102,400)
              
              (19,902,189)
              
              (69,976,611)
              
              (11,431,171)Loss
                  on sale and disposal of assets of discontinued operations, net
                  of
                  tax
              
              (10,469,203)
              
              -
              
              (10,469,203)
              
              -TOTAL
                  LOSS FROM DISCONTINUTED OPERATIONS, NET OF TAX
              
              (158,571,603)
              
              (19,902,189)
              
              (80,445,814)
              
              11,431,171NET
                  LOSS
              $
              (240,537,441)
              $
              (9,367,167)
              $
              (162,467,422)
              $
              (1,395,356)
 
  
 
 
  
 **OPTEUM
                  INC.**
                **CONSOLIDATED
                  STATEMENT OF OPERATIONS (con’t)**
                **(Unaudited)****Six
                  Months Ended**
              
              **Three
                  Months Ended****June
                  30, 2007**
              
              **June
                  30, 2006**
              
              **June
                  30, 2007**
              
              **June
                  30, 2006**BASIC
                  AND DILUTED NET INCOME (LOSS) PER SHARE OF:CLASS
                  A COMMON STOCKContinuing
                  operations
              $
              (3.30)
              $
              0.43
              $
              (3.29)
              $
              0.40Discontinued
                  operations
              
              (6.37)
              
              (0.81)
              
              (3.24)
              
              (0.46)Total
                  basic and diluted net (loss) per Class A share
              $
              (9.67)
              $
              (0.38)
              $
              (6.53)
              $
              (0.06)CLASS
                  B COMMON STOCKContinuing
                  operations
              $
              (3.29)
              $
              0.42
              $
              (3.29)
              $
              0.40Discontinued
                  operations
              
              (6.36)
              
              (0.79)
              
              (3.23)
              
              (0.45)Total
                  basic and diluted net (loss) per Class B share
              $
              (9.65)
              $
              (0.37)
              $
              (6.52)
              $
              (0.05)WEIGHTED
                  AVERAGE SHARES OUTSTANDING USED IN COMPUTING BASIC AND DILUTED
                  PER SHARE
                  AMOUNTS:Class
                  A Common Stock
              
              24,555,916
              
              24,398,310
              
              24,577,222
              
              24,664,197Class
                  B Common Stock
              
              319,388
              
              319,388
              
              319,388
              
              319,388CASH
                  DIVIDENDS DECLARED PER SHARE OF:CLASS
                  A COMMON STOCK
              $
              0.05
              $
              0.36
              $
              -
              $
              0.25CLASS
                  B COMMON STOCK
              $
              0.05
              $
              0.36
              $
              -
              $
              0.25See
                  notes to consolidated financial
                  statements.
  
  
 
 **OPTEUM
                  INC.**
                **CONSOLIDATED
                  STATEMENT OF STOCKHOLDERS’ EQUITY (Unaudited)**
                **Six
                  Months Ended**
                **June
                  30, 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
              87
              -
              -
              67,997
              -
              -
              68,084Cash
                  dividends declared, March 2007
              -
              -
              -
              -
              -
              (1,267,645)
              (1,267,645)Amortization
                  of equity plan compensation
              -
              -
              -
              1,479,217
              -
              -
              1,479,217Equity
                  plan shares withheld for statutory minimum withholding
                  taxes
              -
              -
              -
              (181,910)
              -
              -
              (181,910)Reclassify
                  net realized loss on mortgage-backed security sales
              -
              -
              -
              -
              19,388,377
              -
              19,388,377Net  loss
              -
              -
              -
              -
              -
              (240,537,441)
              (240,537,441)Unrealized
                  gain on available-for-sale securities, net
              -
              -
              -
              -
              2,134,955
              -
              2,134,955Reclassify
                  other-than-temporary loss on mortgage-backed securities
              -
              -
              -
              -
              55,250,278
              -
              55,250,278Comprehensive
                  loss
              -
              -
              -
              -
              -
              -
              (163,763,831)Balances,
                  June 30, 2007
              $
                  24,603
              $   319
              $     319
              $
                  337,011,764
              $                -
              $
                  (308,268,261)
              $
                  28,768,744See
                  notes to consolidated financial
                  statements.
 
  
  
 **OPTEUM
                  INC.****CONSOLIDATED
                  STATEMENTS OF CASH FLOWS****(Unaudited)****Six
                  Months Ended****June
                  30, 2007**
              
              **June
                  30, 2006**CASH
                  FLOWS FROM OPERATING ACTIVITIES:Income
                  (loss) from continuing operations
              $
              (81,965,838)
              $
              10,535,022Adjustments
                  to reconcile income (loss) from continuing operations
                to
                  net cash provided by operating activities:Other-than-temporary
                  loss on mortgage backed securities
              
              55,250,278
              
              -Amortization
                  of premium and discount on mortgage backed securities
              
              10,776,614
              
              (7,409,186)Stock
                  compensation
              
              1,365,391
              
              1,326,032Depreciation
                  and amortization
              
              432,246
              
              188,280Loss
                  on sales of mortgage-backed securities
              
              19,388,377
              
              -Changes
                  in operating assets and liabilities:(Increase)/decrease
                  in accrued interest receivable
              
              4,236,464
              
              (366,980)(Increase)/decrease
                  in prepaids and other assets
              
              (472,050)
              
              267,937(Decrease)
                  in accrued interest payable
              
              (7,472,493)
              
              (4,742,294)Increase
                  in accounts payable, accrued expenses and other
              
              1,547,010
              
              563,333NET
                  CASH PROVIDED BY OPERATING ACTIVITIES
              
              3,085,999
              
              362,144CASH
                  FLOWS FROM INVESTING ACTIVITIES:From
                  available-for-sale securities:Purchases
              
              (834,671,779)
              
              (706,141,129)Sales
              
              1,191,814,282
              
              -Principal
                  repayments
              
              626,507,518
              
              711,094,904Purchases
                  of property and equipment, and other
              
              1,500
              
              (686,875)NET
                  CASH PROVIDED BY INVESTING ACTIVITIES
              
              983,651,521
              
              4,266,900CASH
                  FLOWS FROM FINANCING ACTIVITIES:Decrease
                  in restricted cash
              
              -
              
              1,230,000Proceeds
                  from repurchase agreements
              
              10,106,181,385
              
              11,637,052,539Principal
                  payments on repurchase agreements
              
              (11,064,529,569)
              
              (11,667,763,651)Stock
                  issuance and other costs
              
              -
              
              (128,384)Purchase
                  of treasury stock
              
              -
              
              (4,500,327)Cash
                  dividends paid
              
              (2,534,582)
              
              (2,645,854)NET
                  CASH USED IN FINANCING ACTIVITIES
              
              (960,882,766)
              
              (36,755,677)CASH
                  FLOWS FROM DISCONTINUED OPERATIONS:Net
                  cash provided by operating activities
              
              633,335,325
              
              122,017,551Net
                  cash provided by (used in) investing activities
              
              1,195,582
              
              (2,122,563)Net
                  cash (used in) financing activities
              
              (701,234,602)
              
              (143,678,568)NET
                  CASH FLOWS FROM DISCONTINUED OPERATIONS
              
              (66,703,695)
              
              (23,783,580)NET
                  CHANGE IN CASH AND CASH EQUIVALENTS
              
              (40,848,941)
              
              (55,910,213)CASH
                  AND CASH EQUIVALENTS, Beginning of the period
              
              82,751,795
              
              122,072,166CASH
                  AND CASH EQUIVALENTS, End of the period
              $
              41,902,854
              $
              66,161,953
 
 
 
  
 **OPTEUM
                  INC.****CONSOLIDATED
                  STATEMENTS OF CASH FLOWS (CONT’D)****(Unaudited)****Six
                  Months Ended****June
                  30, 2007**
              
              **June
                  30, 2006**SUPPLEMENTAL
                  DISCLOSURES OF CASH FLOW INFORMATION:Cash
                  paid during the period for interest
              $
              82,795,933
              $
              87,444,395SUPPLEMENTAL
                  SCHEDULE OF NONCASH INVESTING AND
                  FINANCING  ACTIVITIES:Cash
                  dividends declared and payable, not yet paid
              $
              -
              $
              6,318,383See
                  notes to consolidated financial
                  statements.
   
 
  
 **OPTEUM INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**
 **June
        30, 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.  This entity, which was previously referred to as
“OFS,” was renamed Orchid Island TRS, LLC effective July 3, 2007.  
Hereinafter, any historical mention, discussion or references to Opteum
        Financial Services, LLC or to OFS (such as in previously filed documents
        or
        Exhibits) now means Orchid Island TRS, LLC or “OITRS.”  Upon closing
        of the transaction, OITRS became a wholly-owned taxable REIT subsidiary 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 OITRS.
 
 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 OITRS 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 OITRS, representing 7.5% of all of OITRS’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 OITRS representing 92.5% of all of OITRS’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 OITRS representing 7.49% of all
        of
        OITRS’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.  OITRS 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 OITRS 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, 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, discussions related to
        Opteum’s taxable REIT subsidiary or non-REIT eligible assets refer to OITRS and
        its consolidated subsidiaries.  This entity, which was previously
        referred to as “OFS,” was renamed Orchid Island TRS, LLC effective July 3,
        2007.   Hereinafter, any historical mention, discussion or references
        to Opteum Financial Services, LLC or to OFS (such as in previously filed
        documents or Exhibits) now means Orchid Island TRS, LLC or
“OITRS.”  Discussions relating to the “Company” refer to the
        consolidated entity (the combination of Opteum and OITRS). The assets and
        activities that are not REIT eligible, such as mortgage origination, acquisition
        and servicing activities, are conducted by OITRS.
 
 On
        April 18, 2007, the Board of
        Managers of OITRS, at the recommendation of the Board of Directors of Opteum,
        approved the closure of OITRS’ wholesale and conduit mortgage loan origination
        channels in the second quarter of 2007.  Also, during the second
        quarter of 2007, approval was also given to sell substantially all of the
        other
        operating assets of OITRS.   Therefore, OITRS is accounted for as
        a discontinued operation,all OITRS’s assets are considered
        as
        held for sale, and OITRS is reported as a discontinued operation for all
        periods
        presented following applicable accounting standards.  For financial
        statement presentation purposes, as of the quarter ended June 30, 2007, Opteum
        is now operating in a single business segment, as a REIT.
 
 **Liquidity**
 
 The
        Company has obtained committed funding arrangements that provide specified
        advance rates and funding levels and are available to finance our MBS
        portfolio.   Should our financing be withdrawn and our committed
        funding agreements not be sufficient to finance all of our MBS investments,
        we
        may be forced to sell such assets, which may result in losses upon such sales.
         While the financing in place for our retained interests, trading held by
        OITRS is committed through December 20, 2007, the lender on the financing
        facility has and may continue to request additional margin be posted in
        connection with the facility. If we are unable to meet such requests in the
        future, we may be forced to sell the assets or seek alternative financing.
         At present, such alternative financing arrangements for the residual
        interests, trading may not be available or only available at substantially
        higher cost to OITRS.  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 other assets held for sale at prices lower
        than
        the carrying value of such assets would reduce our income.  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. Continued disruptions in market conditions could, however,
        adversely affect the Company’s liquidity, including the lack of available
        financing for our MBS assets beyond the capacity of our committed facilities
        (currently $0.75 billion), increases in interest rates, increases in prepayment
        rates substantially above expectations and decreases in value of assets held
        for
        sale. Therefore, no assurances can be made regarding the Company's ability
        to
        satisfy its liquidity and working capital requirements.
 
 **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 June 30, 2007 are not necessarily
        indicative of results that can be expected for the year ended December 31,
        2007.
        The consolidated balance sheet as of December 31, 2006 was derived from audited
        financial statements included in our 2006 Annual Report on Form 10-K but
        does
        not include all disclosures required by accounting principals generally accepted
        in the United States.  Certain prior year amounts were reclassified to
        conform to the second quarter of 2007 presentation, including the discontinued
        operations 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 recording of certain balances
        related to the discontinued operation, including 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**
 
 The
        accompanying consolidated financial statements include the accounts of Opteum
        and its majority-owned subsidiary, OITRS, as well the wholly-owned and
        majority-owned subsidiaries of OITRS.  OITRS is reported as a
        discontinued operation as of June 30, 2007.  All inter-company
        accounts and transactions have been eliminated from the consolidated financial
        statements.
 
 Opteum
        owned 100% of OITRS until December 21, 2006, when a Class B non-voting interest
        representing 7.5% of OITRS’s then outstanding limited liability company
        membership interest was sold to Citigroup Realty.  Citigroup Realty’s
        proportionate share in the after-tax results of OITRS’s operations, are included
        in the accompanying statements of operation. During the six months ended
        June
        30, 2007, the proportionate share of OITRS’s loss exceeded the net investment
        attributable to Citigroup Realty. Therefore, the portion of the net loss
        of
        OITRS 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 balance on December 31, 2006 was $0.8
        million**.**During the quarter ended March 31, 2007,
        Citigroup Realty’s interest in the net loss of OITRS was limited to their $0.8
        million net investment, and the remainder was charged against the
        Company.  The entire loss for the quarter ended June 30, 2007 is
        charged against the Company. The losses absorbed by the Company which are
        in
        excess of Citigroup Realty’s investment totaled approximately $11.1 million and
        $6.0****million for the six and three months ended June 30,
        2007, respectively.  In future periods, the Company will be credited
        first for these absorbed losses before Citigroup Realty’s investment is
        reinstated.
 
 As
        further described in****Note 6, 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 June 30, 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
        June
        30, 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 generally
        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 and/or to meet
        liquidity needs. The Company classifies all of its securities as
        available-for-sale.
  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 June 30, 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.  Accordingly, due to
        liquidity and working capital needs, the Company no longer had the ability
        to
        hold such assets until their amortized cost could be fully recovered in the
        period ended June 30, 2007, the cost basis of all MBS have been written down
        to
        fair value and the previously unrealized loss was recognized in current period
        earnings. The measurement basis for other-than-temporarily impaired MBS is
        the
        lower of cost or market (LOCOM) method.  An impairment loss is
        recognized in earnings equal to the difference between the MBS’ cost and its
        fair value at the balance sheet date of the reporting period for which the
        assessment is made.  The LOCOM method recognizes the net decrease in
        value but not the net appreciation in the value of those
        securities.  The fair value of impaired MBS would then become the new
        cost basis of the MBS and should not be adjusted for subsequent recoveries
        in
        fair value.
  **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
        12
        years, leasehold improvements with a depreciable life of 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.
 
 Opteum’s
        property and equipment as of June 30, 2007 and December 31, 2006, is net
        of
        accumulated depreciation
        of****$0.3****million and
        $0.2****million, respectively. Depreciation expense for the
        six and three months ended June 30, 2007 was $0.1****million
        and****$0.06 million, respectively, and was
        $0.06****million and $0.03****million for
        the six and three months ended June 30, 2006, respectively.  All
        property and equipment for OITRS is included in assets held for sale on the
        accompanying balance sheets.
 
 **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 June 30, 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.
 
 For
        the
        REIT activities,
        approximately****91.0%****of the interest
        income was derived from MBS issued by U.S. Government agencies.
 
 **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, provided however that such
        securities are not other than temporarily impaired.
 
 Comprehensive
        (loss) is as follows:
 
 (in
        thousands)
 
 **(Unaudited)****Six
                  Months Ended**
              
              **Three
                  Months Ended****June
                  30, 2007**
              
              **June
                  30, 2006**
              
              **June
                  30, 2007**
              
              **June
                  30, 2006**Net
                  (loss)
              $
              (240,537)
              $
              (9,367)
              $
              (162,467)
              $
              (1,395)Reclassify
                  net realized loss on MBS
              
              19,388
              
              -
              
              18,568
              
              -Reclassify
                  other-than-temporary loss on MBS
              
              55,250
              
              -
              
              55,250
              
              -Unrealized
                  gain (loss) on available-for-sale securities, net
              
              2,135
              
              (33,897)
              
              (1,043)
              
              (22,472)Comprehensive
                  (loss)
              $
              (163,764)
              $
              (43,264)
              $
              (89,692)
              $
              (23,867)
 
  **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 $1.5 million and $0.7 million of
        compensation expense for the six and three months ended June 30, 2007,
        respectively, and $1.6 million and $0.8 million of compensation expense for
        the
        six and three months ended June 30, 2006, respectively.
 
 **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 in
        Note
        12, Discontinued Operations, OITRS 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.
 
 **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.  The Company is currently
        evaluating the impact of SFAS 159, if any, on the 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.
 
 **NOTE
        2.   ACQUISITION OF OITRS**
 
 On
        November 3, 2005, Opteum acquired 100% of the equity interests of OITRS
        through a merger with a wholly-owned subsidiary of Opteum. The results of
        operations of OITRS have been included in the Company's consolidated financial
        statements since November 3, 2005.  On December 21, 2006, Opteum sold
        to Citigroup Realty a Class B non-voting limited liability company membership
        interest in OITRS, representing 7.5% of all of OITRS’s outstanding limited
        liability company membership interests, for $4.1 million. As of June 30,
        2007,
        OITRS is accounted for as a discontinued operation (See Note 12).
  **NOTE
          3.   MORTGAGE BACKED SECURITIES**
  As
        of
        June 30, 2007 and December 31, 2006, all of Opteum's MBS were classified
        as
        available-for-sale. The measurement basis for other-than-temporarily impaired
        MBS is the LOCOM method.  An impairment loss is recognized in earnings
        equal to the difference between the MBS’ cost and its fair value at the balance
        sheet date of the reporting period for which the assessment is
        made.  The LOCOM method recognizes the net decrease in value but not
        the net appreciation in the value of those securities.  The fair value
        of impaired MBS would then become the new cost basis of the MBS and should
        not
        be adjusted for subsequent recoveries in 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 June 30,
        2007
        and December 31, 2006:
 
 (in
        thousands)
 
 **June
                  30, 2007**
              
              **December
                  31, 2006**Hybrid
                  Arms
              $
              213,859
              $
              76,488Adjustable
                  Rate Mortgages
              
              1,171,277
              
              2,105,818Fixed
                  Rate Mortgages
              
              433,500
              
              626,428Totals
              $
              1,818,636
              $
              2,808,734
 
 The
        following table presents the components of the carrying value of Opteum's
        MBS
        portfolio as of June 30, 2007 and December 31, 2006:
 
 (in
        thousands)
 
 **June
                  30, 2007**
              
              **December
                  31, 2006**Principal
                  balance
              $
              1,801,492
              $
              2,779,867Unamortized
                  premium
              
              72,647
              
              116,114Unaccreted
                  discount
              
              (253)
              
              (502)Gross
                  unrealized gains
              
              -
              
              422Other-than-temporary
                  losses
              
              (55,250)
              
              (9,971)Gross
                  unrealized losses
              
              -
              
              (77,196)Carrying
                  value/estimated fair value
              $
              1,818,636
              $
              2,808,734
 
 As
        a
        result of the other-than-temporary impairment of MBS as of June 30, 2007,
        Opteum’s MBS investments are carried on a LOCOM basis and therefore there are no
        unrealized losses.
  
 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
        June 30, 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.
 
 As
        stated
        in Note 1, the Company believes that the overall decline in fair value of
        MBS is
        other-than-temporary as of June 30, 2007.  Accordingly, the adjustment to
        reduce MBS to fair value is recorded in earnings. 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.  As of June 30, 2007, the Company no longer had
        the ability and intent to hold such securities until their value could be
        recovered due
        to
        the Company’s liquidity and working capital requirements caused by the turmoil
        in the mortgage market.
 
 As
        of
        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 included in “Loss on sales of mortgage backed
        securities” in the accompanying Statements of Operations.
  **NOTE
          4.   EARNINGS PER SHARE**
 Effective
        November 3, 2005, the Company issued 1.2 million shares of Class A
        Redeemable Preferred Stock, pursuant to the acquisition of OITRS. 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.  Therefore, the EPS
        presentation for these securities is not shown.
 
 The
        Company has dividend eligible stock incentive plan shares that were outstanding
        during the six and three months ended June 30, 2007 and 2006, respectively.
        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 in any period there is
        a loss
        from continuing operations, even though they are participating securities.
        Therefore, the computation of basic and diluted EPS for the Class A Common
        Stock
        for the six and three months ended June 30, 2007 excludes 414,991 incentive
        plan
        shares.
  During
          the six and three months ended June 30, 2006, 612,268 of incentive plan
          shares
          are included in the basic and diluted EPS computations because they are
          participating securities and there is income from continuing operations
          during
          these periods.
 
 The
          table
          below reconciles the numerators and denominators of the EPS.  See the
          consolidated statements of operations for the breakdown between continuing
          operations and discontinued operations.
 
 (in
        thousands, except EPS per share)
 
 **Six
                  Months Ended**
              
              **Three
                  Months Ended****June
                  30, 2007**
              
              **June
                  30, 2006**
              
              **June
                  30, 2007**
              
              **June
                  30, 2006**Basic
                  and diluted EPS per Class A common share:Numerator:
                  net loss allocated to the Class A common shares
              $
              (237,455)
              $
              (9,248)
              $
              (160,385)
              $
              (1,379)Denominator:
                  basic and diluted:Class
                  A common shares outstanding at the balance sheet date
              
              24,603
              
              24,354
              
              24,603
              
              24,354Dividend
                  eligible equity plan shares issued as of the balance sheet
                  date
              
              -
              
              612
              
              -
              
              612Effect
                  of weighting
              
              (47)
              
              (568)
              
              (26)
              
              (302)Weighted
                  average shares-basic and diluted
              
              24,556
              
              24,398
              
              24,577
              
              24,664Basic
                  and diluted EPS per Class A common share
              $
              (9.67)
              $
              (0.38)
              $
              (6.53)
              $
              (0.06)Basic
                  and diluted EPS per Class B common share:Numerator:
                  net loss allocated to Class B common shares
              $
              (3,082)
              $
              (119)
              $
              (2,082)
              $
              (16)Denominator:
                  basic and diluted:Class
                  B common shares outstanding at the balance sheet date
              
              319
              
              319
              
              319
              
              319Effect
                  of weighting
              
              -
              
              -
              
              -
              
              -Weighted
                  average shares-basic and diluted
              
              319
              
              319
              
              319
              
              319Basic
                  and diluted EPS per Class B common share
              $
              (9.65)
              $
              (0.37)
              $
              (6.52)
              $
              (0.05)
  **NOTE
          5.   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 the
        forward London Interbank Offered Rate (“LIBOR”) interest rate curve. As of
        June 30, 2007, Opteum had an outstanding amount of $1.8 billion with a net
        weighted average borrowing rate of 5.24% and these agreements were
        collateralized by MBS with a fair value of
        $1.8****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 June 30, 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
              $
              -
              $
              783,663
              $
              461,018
              $
              561,373
              $
              1,806,054Fair
                  market value of securities sold, including accrued interest
                  receivable
              $
              -
              $
              758,540
              $
              447,892
              $
              547,456
              $
              1,753,888Repurchase
                  agreement liabilities associated with these securities
              $
              -
              $
              750,428
              $
              466,984
              $
              565,919
              $
              1,783,331Net
                  weighted average borrowing rate
              
              -
              
              5.33%
              
              5.32%
              
              5.06%
              
              5.24%
 
 As
        ofDecember 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
        June 30, 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.
              $
              785,347
              $
              10,232
              118
              44.04
              %JP
                  Morgan Securities Inc.
              
              646,699
              
              16,211
              183
              36.26ING
                  Financial Markets,LLC
              
              81,790
              
              969
              93
              4.59HSBC
                  Securities (USA) Inc.
              
              78,232
              
              1,599
              13
              4.39UBS
                  Securities LLC
              
              52,821
              
              1,452
              26
              2.96Lehman
                  Brothers Inc
              
              44,564
              
              1,279
              256
              2.50Nomura
                  Securities International, Inc.
              
              40,857
              
              1,531
              10
              2.29Citigroup
                  Global Markets Inc
              
              24,814
              
              502
              6
              1.39Goldman
                  Sachs & Co.
              
              23,570
              
              456
              60
              1.32Bear,
                  Stearns & Co. Inc.
              
              4,637
              
              154
              6
              0.26Total
              $
              1,783,331
              $
              34,385
              
              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 Inc.
              
              652,936
              
              13,195
              98
              23.82Nomura
                  Securities International, Inc.
              
              463,410
              
              13,405
              94
              16.90WAMU
                  Capital Corp.
              
              333,587
              
              12,476
              24
              12.17Countrywide
                  Securities Corporation
              
              206,220
              
              4,401
              79
              7.52BNP
                  Paribas Securities Corp.
              
              92,155
              
              2,666
              18
              3.36Goldman
                  Sachs & Co.
              
              70,068
              
              1,278
              122
              2.56Bank
                  of America Securities, LLC
              
              54,120
              
              1,742
              136
              1.97UBS
                  Securities LLC
              
              21,515
              
              231
              17
              0.78Greenwich
                  Capital Markets, Inc.
              
              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
          6.  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
          7.  CAPITAL STOCK**
 **Issuances
        of Class A Common Stock**
 
 During
        the six and three months ended June 30, 2007, the Company issued a total
        of
        11,042****and 5,068 shares, respectively, of Class A Common
        Stock to its independent directors for the payment of director fees for services
        rendered.
 
 During
        the six and three months ended June 30, 2007, the Company issued
        76,801****and****42,273 shares,
        respectively, of its Class A Common Stock to employees pursuant to the terms
        of
        the stock incentive plan phantom share grants (see Note 8).
 
 **Dividends
        Declared and Paid in 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 six and three months ended June 30, 2007.
 **NOTE
        8.    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 six months ended June 30, 2007, Opteum granted
        25,607****phantom shares to employees with an aggregate fair
        value of $0.2 million.  For the three months ended June 30, 2007,
        Opteum granted no phantom shares to employees. 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
        June 30, 2007, a total of 759,457 phantom share awards have been granted
        since
        the inception of the 2003 Plan, however 6,446 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 $68,065.  Of the
        phantom shares not forfeited, 502,302 phantom shares have fully vested since
        inception of the 2003 Plan and 250,709 phantom shares remain unvested as
        of June
        30, 2007.  Of the 502,302 phantom shares that have fully vested, 337,520
        phantom shares have been settled as of June 30, 2007 and an equivalent number
        of
        shares of the Company’s Class A Common Stock have been issued to grantees or
        surrendered by grantees to pay income taxes.  As of June 30, 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
        six and three months ended June 30,
        2007,****113,685****and****61,724****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 six and three months ended June 30, 2006,
        53,157****and****103,407 phantom shares,
        respectively, 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 June 30, 2007, there were
        415,491****phantom shares outstanding that had not been
        settled as of such date,****250,709 of which were unvested
        and 164,782 of which were vested.  Total compensation cost recognized for
        the six and three months ended June 30, 2007 was $1.4 million and
        $0.7****million, respectively. Total compensation cost
        recognized for the six and three months ended June 30, 2006 was $1.4 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
          9.  COMMITMENTS AND CONTINGENCIES**
 
 **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 OITRS 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 OITRS 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, OITRS was the
        plaintiff and was seeking money damages from third parties.  In the
        other two matters, OITRS was a defendant and was defending itself against
        claims
        for money damages.
 
 Pursuant
        to the terms of the Merger Agreement, the former owners of OITRS must indemnify
        the Company for any liabilities arising from the two matters in which OITRS
        was
        a defendant.  In addition, the former owners of OITRS are entitled to
        receive any amounts paid to the Company upon the settlement or final resolution
        of the two matters in which OITRS was the plaintiff.
 
 **Guarantees**.  Opteum
        has guaranteed the obligations of OITRS and OITRS’s wholly-owned subsidiary, HS
        Special Purpose, LLC, under their respective financing facilities with JPMorgan
        Chase and Citigroup described in Note 12. 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
          10.  INCOME TAXES**
 
 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
        June
        30, 2007, Opteum's REIT taxable income is approximately
        $91.0****million greater than Opteum's financial statement
        net income as reported in its financial statements.
 
 For
        the
        six months ended June 30, 2007, Opteum's REIT taxable loss was approximately
        $76.1 million less than Opteum's financial statement net loss from REIT
        activities. During 2007, Opteum's most significant items and transactions
        being
        accounted for differently include the $55.3 million other-than-temporary
        loss on
        MBS recorded at June 30, 2007, interest on inter-company loans with OITRS,
        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. The $55.3
        million other-than-temporary loss on MBS recorded during the three months
        ended
        June 30, 2007 is not recognized for tax purposes, as it does not represent
        an
        actual sale of any MBS securities by Opteum.  For tax purposes, the
        gain or loss on MBS sales are recognized only when the actual sale transaction
        is completed.
 
 During
        the six months ended June 30, 2007, tax capital losses of approximately $29.4
        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
          11.  SUBSEQUENT EVENTS**
 
 On
        July
        25, 2007, OITRS entered into a binding agreement to sell a majority of its
        remaining private-label and agency mortgage servicing portfolio, which had
        an
        aggregate unpaid principal balance of approximately $3.0 billion as of June
        30,
        2007. The aggregate sales proceeds will be used to repay debt that is currently
        secured by OITRS's mortgage servicing portfolio. The transaction, which is
        subject to various closing conditions, is expected to be completed by September
        4, 2007. The transaction is not expected to result in a material gain or
        loss.
 
 Opteum,
        then known as Bimini, acquired Opteum Financial Services, LLC on November
        3,
        2005.  This entity, which was previously referred to as “OFS,” was
        renamed Orchid Island TRS, LLC effective July 3, 2007.
 ****
 **NOTE
          12.   DISCONTINUED OPERATIONS-OITRS**
 
 **(a)
        - Background and activities as of March 31, 2007**
 
 Beginning
        in April 2007, the Board of Managers of OITRS, at the recommendation of and
        with
        the approval of the Board of Directors of Opteum, began a process that would
        eventually result in the sale or closure of all business operations within
        OITRS.  The decision to sell and/or close OITRS was made after
        evaluation of, among other things, short and long-term business prospects
        for
        OITRS, and its ability to recover from recent large operating losses. Due
        to
        this decision, all OITRS assets are considered as held for sale in the second
        quarter of 2007, and have been accounted for as discontinued operations under
        applicable accounting standards for all periods presented.
 
 The
        impact of these decisions on the March 31, 2007 financial statements included
        OITRS recording impairment charges on goodwill and other intangible assets
        and
        on certain fixed assets.  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, OITRS recorded an impairment
        charge of $6.0 million during the three months ended March 31, 2007. Further,
        in
        accordance with SFAS 144, such long lived assets were reported by OITRS as
        held
        for use as of March 31, 2007.  As of June 30, 2007, these assets are
        now included in discontinued operations.
 
 In
        accordance with SFAS No. 142,  the goodwill assigned to OITRS and the
*“Opteum*” trade name intangible asset were not subject to amortization,
        but were tested for impairment at March 31, 2007 based on a change in
        circumstances.  The closure and/or sale of the wholesale and conduit
        mortgage loan origination channels constituted such an event that required
        impairment analyses on the goodwill and other intangibles not subject to
        amortization. Accordingly, OITRS recorded impairment charges for both goodwill
        and other intangible assets not subject to amortization of approximately
        $2.8
        million as of March 31, 2007.
 
 **(b)
        - Activities during the three months ended June 30, 2007**
  On
        April
        18, 2007, the Board of Managers of OITRS approved the closure of OITRS’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.
 
 On
        April
        26, 2007, OITRS 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 were used to repay debt that was secured by OITRS’s
        mortgage servicing portfolio. All servicing was transferred to the buyer
        on or
        before July 2, 2007. The transaction resulted in a loss of $2.8
        million.
 
 On
        May 7,
        2007, OITRS signed a binding agreement to sell its retail mortgage loan
        origination channel to a third party.  On June 30, 2007, OITRS entered
        into an amendment to this agreement. The sales price was $1.5 million plus
        the
        assumption of certain liabilities, including the assumption of certain future
        operating lease obligations of OITRS.
 
 The
        closure of the wholesale and conduit mortgage loan origination channels,
        coupled
        with sale of the retail channel, resulted in charges associated with severance
        payments to employees and operating lease termination costs, among other
        less
        significant costs.  Approximately $0.7 million of such costs were paid
        in the three months ended June 30, 2007, and approximately $6.9 million of
        such
        costs remain accrued and unpaid at June 30, 2007.  The costs
        associated with the closure of the wholesale and conduit origination sale,
        coupled with the sale of the retail channel, resulted in a loss on disposal
        of
        $10.5 million.  No income tax benefit or provision was recorded as a
        result of this loss.
  
 The
        following table summarizes the OITRS assets held for sale and liabilities
        related to the assets held for sale, as of June 30, 2007 and December 31,
        2006:
 
 (in
        thousands)
 
 **June
                  30, 2007**
              
              **December
                  31, 2006**Cash
                  and cash equivalents
              $
              706
              $
              9,754Mortgage
                  loans held for sale
              
              93,544
              
              749,834Retained
                  interests, trading
              
              73,798
              
              104,199Securities
                  held for sale
              
              505
              
              858Originated
                  mortgage servicing rights
              
              32,145
              
              98,859Receivables
              
              5,611
              
              5,958Property
                  and equipment, net
              
              343
              
              11,415Prepaids
                  and other assets
              
              11,666
              
              28,447Assets
                  held for sale
              $
              218,318
              $
              1,009,324Warehouse
                  lines of credit and drafts payable
              $
              89,259
              $
              734,879Other
                  secured borrowings
              
              59,820
              
              121,977Accounts
                  payable, accrued expenses and other
              
              31,839
              
              23,060Liabilities
                  related to assets held for sale
              $
              180,918
              $
              879,916
 
 The
        following table summarizes the results of operations of OITRS for the six
        month
        periods ended June 30, 2007 and 2006:
 
 (in
        thousands)
 
 **Six
                  Months Ended****June
                  30, 2007**
              
              **June
                  30, 2006**Interest
                  income, net
              $
              16,407
              $
              37,000Interest
                  expense
              
              (17,050)
              
              (34,005)Net
                  interest income (deficiency)
              
              (643)
              
              2,995Loss
                  on mortgage banking activities
              
              (61,815)
              
              (2,881)Other
                  income and expenses, net
              
              (9,652)
              
              -Net
                  servicing income (loss)
              
              (10,618)
              
              1,844Other
                  non-interest income
              
              2,254
              
              3,207Total
                  net revenues (deficiency of revenues)
              
              (80,474)
              
              5,165General
                  and administrative expenses
              
              (66,635)
              
              (37,717)Loss
                  before benefit (provision) for income taxes
              
              (147,109)
              
              (32,552)Benefit
                  (provision) for income taxes
              
              (11,463)
              
              12,650Net
                  loss from discontinued operations
              $
              (158,572)
              $
              (19,902)
 
  The
        following table summarizes the results of operations of OITRS for the three
        month periods ended June 30, 2007 and 2006:
 
 (in
        thousands)
 
 **Three
                  Months Ended****June
                  30, 2007**
              
              **June
                  30, 2006**Interest
                  income, net
              $
              4,746
              $
              18,548Interest
                  expense
              
              (4,720)
              
              (16,696)Net
                  interest income
              
              26
              
              1,852Loss
                  on mortgage banking activities
              
              (43,855)
              
              (5,878)Other
                  income and expenses, net
              
              (9,652)
              
              -Net
                  servicing income (loss)
              
              (5,975)
              
              3,607Other
                  non-interest income
              
              886
              
              1,459Total
                  net revenues (deficiency of revenues)
              
              (58,570)
              
              1,040General
                  and administrative expenses
              
              (21,876)
              
              (19,741)Loss
                  before benefit for income taxes
              
              (80,446)
              
              (18,701)Benefit
                  for income taxes
              
              -
              
              7,270Net
                  loss from discontinued operations
              $
              (80,446)
              $
              (11,431)
 
 **(c)
        - Significant accounting policies of OITRS**
 
 The
        following accounting policies were applicable prior to the discontinuation
        of
        the residential mortgage origination operations.  Going forward such
        policies generally will not be applicable to OITRS as it no longer originates
        residential mortgage loans. OITRS will continue to own originated mortgage
        servicing rights and retained interests in securitizations, but will not
        generate any such assets in the future.
 
 **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, OITRS 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 retained interests, trading which are included
        in
        discontinued operations on the accompanying consolidated balance
        sheet.
 
 **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 OITRS.  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 participant’s 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. OITRS 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, OITRS
        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.**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 required
        management to test the associated long lived assets for
        recoverability.  In connection with the testing of recoverability of
        the long lived assets, OITRS recorded an impairment charge of $6.0 million
        for
        the three months ended March 31, 2007.  OITRS sold or wrote-off all
        depreciable or amortizable property and equipment by June 30, 2007 applicable
        to
        the residential mortgage origination business.
 
 **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 $22.2 million and
        $9.9****million, for the six and three months ended June 30,
        2007 and****$30.2 million and
        $14.3****million, respectively, for the six and three months
        ended June 30, 2006 were capitalized as direct loan origination costs and
        reflected in the basis of loans sold for gain on sale recognition
        purposes.  The net (loss) on mortgage banking activities for the six
        and three months ended June 30, 2007 was ($61.8) million and
        ($43.9)****million and for the six and three months ended
        June 30, 2006 was****($2.9) million and ($5.9) million,
        respectively.
  **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.
 
 **Income
        taxes.**OITRS 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.  To the extent management believes deferred tax
        assets will not be fully realized in future periods, a provision is recorded
        so
        as to reflect the net portion, if any, of the deferred tax asset management
        expects to realize.
 
 **(d)
        - Mortgage Loans Held for Sale**
 
 Prior
        to
        ceasing operations, upon the closing of a residential mortgage loan or shortly
        thereafter, OITRS would sell or securitize the majority of its mortgage loan
        originations. OITRS also sold 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 OITRS, except where
        limited by the Federal Housing Administration and Veterans Administration
        and
        their respective loan programs. As of June 30, 2007, OITRS serviced
        approximately****$3.6****billion of
        mortgage loans sold into the secondary market.  Mortgage loans held
        for sale consist of the following as of June 30, 2007 and December 31,
        2006:
  (in
        thousands)
  **June
                  30, 2007**
              
              **December
                  31, 2006**Mortgage
                  loans held for sale, and other, net
              $
              104,573
              $
              741,545Deferred
                  loan origination costs and other-net
              
              1,155
              
              9,188Lower
                  of cost or market and  valuation allowance
              
              (12,184)
              
              (899)$
              93,544
              $
              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 discontinued
        operations.
 
 **(e)
        -   Retained Interest, Trading**
 
 Retained
        interest, trading is the subordinated interests retained by OITRS 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
        OITRS’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 OITRS surrenders control over the mortgage loans
        upon
        their transfer to the REMIC trust.
  **Valuation
        of Investments.**OITRS 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, OITRS 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, OITRS will input the following
        variable factors which will have an impact on determining the market
        value:
  *Interest
        Rate Forecast*. LIBOR interest rate curve.
  *Discount
        Rate*. The present value of all future cash flows utilizing a discount rate
        assumption established at the discretion of OITRS 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 OITRS 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 OITRS 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, OITRS 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 OITRS
        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 OITRS 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 OITRS 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 OITRS 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 OITRS will generally adjust the Prepayment and Credit
        Performance Forecasts to replicate actual performance trends without balancing
        adverse and positive effects.
  The
        following table summarizes OITRS’s residual interests in securitizations as of
        June 30, 2007 and December 31, 2006:
  (in
        thousands)
 
 **Series**
              
              **Issue
                  Date**
              
              **June
                  30, 2007**
              
              **December
                  31, 2006**HMAC
                  2004-1
              
              March
                  4, 2004
              $
              1,946
              $
              2,948HMAC
                  2004-2
              
              May
                  10, 2004
              
              749
              
              1,939HMAC
                  2004-3
              
              June
                  30, 2004
              
              90
              
              362HMAC
                  2004-4
              
              August
                  16, 2004
              
              952
              
              1,544HMAC
                  2004-5
              
              September
                  28, 2004
              
              3,147
              
              4,545HMAC
                  2004-6
              
              November
                  17, 2004
              
              6,428
              
              9,723OMAC
                  2005-1
              
              January
                  31, 2005
              
              7,538
              
              13,331OMAC
                  2005-2
              
              April
                  5, 2005
              
              9,841
              
              14,259OMAC
                  2005-3
              
              June
                  17, 2005
              
              11,871
              
              16,091OMAC
                  2005-4
              
              August
                  25, 2005
              
              10,079
              
              12,491OMAC
                  2005-5
              
              November
                  23, 2005
              
              7,566
              
              8,916OMAC
                  2006-1
              
              March
                  23, 2006
              
              9,735
              
              13,219OMAC
                  2006-2
              
              June
                  26, 2006
              
              3,856
              
              4,831Total
              
              
              $
              73,798
              $
              104,199
 
 Key
        economic assumptions used in measuring the fair value of retained interests
        at
        the date of securitization resulting from securitizations completed in 2006
        were
        as follows:
 
 **December
                  31, 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
        June 30, 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)
 
 **June
                  30, 2007**
              
              **December
                  31, 2006**Carrying
                  value of retained interests – fair value
              $
              73,798
              $
              104,199Weighted
                  average life (in years)
              
              4.65
              
              4.26Prepayment
                  assumption (annual rate)
              
              33.78%
              
              37.88%Impact
                  on fair value of 10% adverse change
              $
              (4,821)
              $
              (8,235)Impact
                  on fair value of 20% adverse change
              $
              (8,873)
              $
              (14,939)Expected
                  credit losses (% of original unpaid principal balance)
              
              0.55%
              
              0.56%Impact
                  on fair value of 10% adverse change
              $
              (2,642)
              $
              (3,052)Impact
                  on fair value of 20% adverse change
              $
              (5,365)
              $
              (6,098)Residual
                  cash-flow discount rate
              
              17.35%
              
              16.03%Impact
                  on fair value of 10% adverse change
              $
              (3,542)
              $
              (4,575)Impact
                  on fair value of 20% adverse change
              $
              (6,767)
              $
              (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
              $
              (24,550)
              $
              (18,554)Impact
                  on fair value of 20% adverse change
              $
              (43,031)
              $
              (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 June 30, 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 OITRS securitizations that
        have
        been completed to date:
 
 (in
        thousands)
 
 **Series**
              **Issue
                  Date**
              **Original
                  Unpaid Principal Balance**
              **Actual
                  Losses Through June 30, 2007**
              **Projected
                  Future Credit Losses as of June 30, 2007**
              **Projected
                  Total Credit Losses as of June 30, 2007**HMAC
                  2004-1
              March
                  4, 2004
              $
                  309,710
              0.20%
              0.14%
              0.34%HMAC
                  2004-2
              May
                  10, 2004
              388,737
              0.42%
              0.12%
              0.54%HMAC
                  2004-3
              June
                  30, 2004
              417,055
              0.18%
              0.15%
              0.33%HMAC
                  2004-4
              August
                  16, 2004
              410,123
              0.17%
              0.14%
              0.31%HMAC
                  2004-5
              September
                  28, 2004
              413,875
              0.15%
              0.27%
              0.42%HMAC
                  2004-6
              November
                  17, 2004
              761,027
              0.31%
              0.32%
              0.63%OMAC
                  2005-1
              January
                  31, 2005
              802,625
              0.15%
              0.28%
              0.43%OMAC
                  2005-2
              April
                  5, 2005
              883,987
              0.12%
              0.34%
              0.46%OMAC
                  2005-3
              June
                  17, 2005
              937,117
              0.08%
              0.33%
              0.41%OMAC
                  2005-4
              August
                  25, 2005
              1,321,739
              0.04%
              0.54%
              0.58%OMAC
                  2005-5
              November
                  23, 2005
              986,277
              0.04%
              0.59%
              0.63%OMAC
                  2006-1
              March
                  23, 2006
              934,441
              0.01%
              0.66%
              0.67%OMAC
                  2006-2
              June
                  26, 2006
              491,572
              0.00%
              1.25%
              1.25%Total
              
              $
                  9,058,285
 
 The
        table
        below summarizes certain cash flows received from and paid to securitization
        trusts:
 
 (in
        thousands)
 
 **Six
                  Months Ended****June
                  30, 2007**
              
              **June
                  30, 2006**Proceeds
                  from securitizations
              $
              -
              $
              1,436,838Servicing
                  fees received
              
              9,691
              
              9,252Servicing
                  advances
              
              1,433
              
              1,550Cash
                  flows received on retained interests
              
              2,909
              
              2,009
 
 The
        following information presents quantitative information about delinquencies
        and
        credit losses on securitized financial assets as of June 30, 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**June
                  30, 2007
              $
              5,041,845
              $
              260,012
              $
              10,657December
                  31, 2006
              
              5,849,013
              
              138,205
              
              5,210
 
 **(f)
                  – 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.
  Activities
        for MSRs are summarized as follows for the six months ended June 30, 2007
        and
        for the year ended December 31, 2006:
 
 (in
        thousands)
  **June
                  30, 2007**
              
              **December
                  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
              
              7,693
              
              43,175Changes
                  in fair value:Changes
                  in fair value due to changes in market conditions and
                  run-off
              
              (12,330)
              
              (33,551)Changes
                  in fair value due to change in valuation assumptions
              
              (4,630)
              
              (1,145)Less
                  servicing sold
              
              (56,440)
              
              -Fair
                  value at end of period
              
              33,152
              
              98,859Less
                  cost to sell
              
              (1,007)
              
              -Balance
                  at end of period
              $
              32,145
              $
              98,859
 
  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 OITRS 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 based on
        market assumptions. 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 six and three months ended June 30, 2007 and
        2006, such changes to the underlying assumptions resulted in changes in fair
        value of ($4.6) million and ($2.1) million and ($1.1) million and ($1.1)
        million, respectively.  During the six and three months ended June 30,
        2007 and 2006, the MSR value increased/(decreased) by ($66.7) million and
        ($59.8) million and $10.6 million and $3.3 million, respectively. The
        decreases for the six and three months ended June 30, 2007 include the sale
        of
        $56.4 million of MSR. Excluding the MSR sale, the decreases for the six and
        three months ended June 30, 2007, were ($9.3) million plus the cost to sell
        of
        ($1.0) million and ($2.4) million plus the cost to sell for ($1.0) million,
        respectively.  Additions to the servicing portfolio, net of run-off,
        for the six and three months ended June 30, 2007 and 2006, were $1.6 million
        and
        $1.0 million and $6.6 million and $1.1 million, respectively. The balance of the
        changes in fair value for the six and three months ended June 30, 2007 and
        2006,
        were the result of changes market conditions. 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
        June 30, 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)
 
 **June
                  30, 2007**
              
              **December
                  31, 2006**Prepayment
                  assumption (annual rate) (PSA)
              
              387.9
              
              424.6Impact
                  on fair value of 10% adverse change
              $
              (1,311)
              $
              (3,923)Impact
                  on fair value of 20% adverse change
              $
              (2,494)
              $
              (7,557)MSR
                  Cash-Flow Discount Rate
              
              14.50%
              
              14.50%Impact
                  on fair value of 10% adverse change
              $
              (1,194)
              $
              (3,505)Impact
                  on fair value of 20% adverse change
              $
              (2,296)
              $
              (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.
 
 **(g)
        - Warehouse lines of credit and drafts payable**
 
 OITRS
        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 June 30, 2007 and December 31, 2006:
  (in
        thousands)
  **Warehouse
                  and aggregation lines of credit:**
              
              **June
                  30, 2007**
              
              **December
                  31, 2006**A
                  committed warehouse line of credit for $100.0 million between OITRS
                  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.
              $
              -
              $
              6,172A
                  syndicated committed warehouse line of credit for $850.0 million
                  as of
                  December 31, 2006, between OITRS and JP Morgan Chase (“JPM”). The
                  agreement was scheduled to expire on May 30, 2007.  The
                  agreement was extended until July 31, 2007 and the limit reduced
                  in
                  stages, initially to $155 million through June 30, 2007 and $50.0
                  million
                  through July 31, 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.  During the extension
                  period the applicable margin was increased to 1.5% on all
                  borrowings.
              
              22,272
              
              409,609An
                  aggregation facility for $1.5 billion as of December 31, 2006 for
                  the
                  whole loan and servicing rights facility, collectively, (of which
                  no more
                  than $100.0 million as of December 31, 2006 may be allocated to
                  the
                  servicing rights facility) between HS Special Purpose, LLC, a wholly-owned
                  subsidiary of OITRS, and Citigroup Global Markets Realty Corp.
                  (“Citigroup”) to aggregate loans pending securitization. The agreement was
                  scheduled to expire on December 20, 2007. The agreement provides
                  for
                  interest rates based upon one month LIBOR plus a margin of
                  0.30%.  The facility was amended on May 25, 2007 and the limit
                  was reduced to $300 million and is now scheduled to expire September
                  30,
                  2007.  On August 9, 2007, the facility was further amended and
                  the limit was reduced to $40 million.
              
              37,233
              
              5,358A
                  $750.0 million purchase and security agreement between OITRS and
                  UBS
                  Warburg Real Estate Securities, Inc. (“UBS Warburg”).  The
                  agreement expired on February 28, 2007 and was not
                  renewed.
              
              -
              
              3,283Drafts
                  payable
              
              -
              
              6,542Loan
                  sale agreements accounted for as financings:An
                  uncommitted $700.0 million purchase agreement between OITRS and
                  Colonial
                  Bank.  The facility is due upon demand and can be cancelled by
                  either party upon notification to the counterparty.  OITRS
                  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.  The borrowing capacity of the facilities was reduced
                  to $30 million effective July 1, 2007 and both parties agreed to
                  cancel
                  the facility effective July 31, 2007.
              
              29,754
              
              303,915Total
                  warehouse lines and drafts payable
              $
              89,259
              $
              734,879
 
  In
        addition to the JPM, Citigroup, and Colonial Bank facilities, OITRS has purchase
        and sale agreements with Fannie Mae. These additional agreements allow OITRS
        to
        accelerate the sale of its mortgage loan inventory, resulting in a more
        effective use of its warehouse facilities. OITRS has a combined capacity
        of
        $100.0 million under these purchase and sale agreements. There
        were****$16.2****million sold and being
        held under these agreements as of June 30, 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
        OITRS.  The facilities generally contain various covenants pertaining
        to tangible net worth, net income, available cash and liquidity, leverage
        ratio,
        and servicing delinquency.  As of June 30, 2007, OITRS was not in
        compliance with respect to four covenants pertaining to tangible net worth,
        available cash and liquidity, debt to tangible net worth and profitability
        with
        one lender and the Company was not in compliance pertaining to tangible net
        worth with the same lender and one other lender.  OITRS and the
        Company have obtained waivers from each lender for the covenant
        violations.  However, OITRS may violate such covenants again in the
        future.  In the event the violations occur, OITRS may be unable to
        obtain waivers.  In the event waivers are not obtained, OITRS would be
        in default under the terms of the agreements.   In the event
        OITRS defaulted under the terms of the agreement, the lenders could force
        OITRS
        to liquidate the mortgage loans collateralizing the loan, seek payment from
        the
        Company as guarantor, or force OITRS into an involuntary
        bankruptcy.
 
 As
        of
        July 31, 2007 the outstanding balance on the JP Morgan committed warehouse
        line
        and the uncommitted purchase agreement with Colonial Bank have matured and
        their
        outstanding balances are paid in full.
 
 **(h)
        – Other Secured Borrowings**
 
 Other
                  secured borrowings consisted of the following as of June 30, 2007
                  and
                  December 31, 2006:
  (in
                  thousands)
  **June
                  30, 2007**
              
              **December
                  31, 2006**A
                  committed warehouse line of credit between OITRS and JP Morgan
                  Chase, that
                  allows for a sublimit for Originated Mortgage Servicing Rights. The
                  agreement was extended until July 31, 2007 and the limit reduced
                  in
                  stages, initially to $75.0 million through June 30, 2007 and $20.0
                  million
                  through July 31, 2007.  The agreement was further extended until
                  September 28, 2007. The agreement provides for interest rate based
                  on
                  LIBOR plus 1.50% to 1.85% depending on collateral type.
              $
              20,048
              $
              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%.
              
              39,772
              
              50,320$
              59,820
              $
              121,977
 
 **(i)  -
        Income taxes**
 
 As
        previously described, Opteum acquired OITRS on November 3, 2005, and OITRS
        is a
        taxpaying entity for income tax purposes and is taxed separately from
        Opteum.  Therefore, OITRS separately reports an income tax provision
        or benefit based on its own taxable activities.
 
 The
        income tax provision for the six and three months ended June 30, 2007 differs
        from the amount determined by applying the statutory Federal rate of 35%
        to the
        pre-tax loss due primarily to the recording of deferred tax asset valuation
        allowances.  OITRS recorded a deferred tax asset valuation allowance
        of approximately $37.4 million during the three month period ended March
        31,
        2007; there was no allowance recorded previously.  At December 31,
        2006, OITRS had recorded net deferred tax assets of approximately $7.1
        million.  The recording of the valuation allowance (among other items)
        during the three months ended March 31, 2007 resulted in OITRS recording
        an
        income tax provision of $11.5 million, and reduced the December 31, 2006
        net
        deferred tax asset to a net deferred tax liability at March 31, 2007 of
        approximately $4.3 million.  The net deferred tax assets generated
        during the three months ended June 30, 2007, primarily created by the net
        operating loss during the period, are offset in their entirety by a deferred
        tax
        asset valuation allowance; therefore, there is no provision or benefit for
        income taxes during this period, and there is no change in the net deferred
        tax
        liability at June 30, 2007.  The amount of the gross tax benefit and
        the corresponding offsetting valuation allowance is
        $31.3****million for the three months ended June 30,
        2007.
 
 The
        ultimate realization of deferred tax assets is dependent upon the generation
        of
        future taxable income within OITRS.  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 closing of the OITRS wholesale and conduit mortgage loan
        origination channels, the sale of the retail mortgage loan origination channel,
        and other actions related to the operations of OITRS.  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 against certain deferred tax assets during 2007.  As of June
        30, 2007, OITRS has an estimated federal tax net operating loss carryforward
        of
        approximately $200.0 million, which begins to expire in 2025, and is fully
        available to offset future taxable income.
 
 The
        effective income tax benefit for the six and three months ended June 30,
        2006
        differs from the amount determined by applying the statutory Federal rate
        of 35%
        to the pre-tax loss due primarily to permanent differences, the state tax
        benefit (net of the Federal tax effect) and valuation allowance.
 
 **(j)**
              **-
                  Transactions With a Related
                  Party**
 
 During
        the six and three months ended June 30, 2007, OITRS received aggregate payments
        of $0.4****million and $0.0 million, respectively, 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 former officers of OITRS, one of whom is also a
        former director of Opteum, own membership interests in Southstar
        Partners.  In addition, a former officer of OITRS as well as a former
        director of Opteum serves on the Board of Managers of Southstar
        Funding.  As of June 30, 2007, there were no amounts due from or owed
        to Southstar Partners 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.
 
 **(k) - Loans
        Sold to Investors**. Generally, OITRS is not exposed to significant
        credit risk on its loans sold to investors. In the normal course of business,
        OITRS 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
        OITRS will be able to recover the repurchased loan value either through other
        investor channels or through the assumption of the secured real
        estate.
  OITRS
        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 six months ended June 30, 2007 and
        2006:
  (in
        thousands)
  **Six
                  Months Ended****June
                  30, 2007**
              
              **June
                  30, 2006****Balance—Beginning
                  of period**
              $
              7,136
              $
              2,038**Provision**
              
              16,010
              
              1,567**Charge-Offs**
              
              (10,492)
              
              (896)**Balance—End
                  of period**
              $
              12,654
              $
              2,709
 
  **(l) - Net
        Worth Requirements**. OITRS 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 June 30, 2007, the highest minimum net worth
        requirement applicable to OITRS was approximately $0.3 million. OITRS had
        negative net worth of approximately ($60.3) million as of June 30,
        2007.   Subject to the approval of Opteum’s Board of Directors,
        Opteum may forgive inter-company debt in order to restore the net worth of
        OITRS
        to an amount in excess of the required
        minimum.  ****
  **(m)
        -****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.
  
  
 
 **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, discussions related to Opteum’s taxable REIT
        subsidiary or non-REIT eligible assets refer to Opteum Financial Services,
        LLC
        and its consolidated subsidiaries. This entity, which was previously referred
        to
        as “OFS,” was renamed Orchid Island TRS, LLC effective July 3, 2007.  
Hereinafter, any historical mention, discussion or references to Opteum
        Financial Services, LLC or to OFS (such as in previously filed documents
        or
        Exhibits) now means Orchid Island TRS, LLC or “OITRS.”  Discussions
        relating to the “Company” refer to the consolidated entity (the combination of
        Opteum and OITRS). The assets and activities that are not REIT eligible,
        such as
        mortgage origination, acquisition and servicing activities, are conducted
        by
        OITRS.
 
 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
        July 25, 2007, OITRS entered into a
        binding agreement to sell a majority of its remaining private-label and agency
        mortgage servicing portfolio, which had an aggregate unpaid principal balance
        of
        approximately $3.0****billion as of June 30,
        2007.  The aggregate sales proceeds will be used to repay debt that is
        currently secured by OITRS’s mortgage servicing portfolio. The transaction,
        which is subject to various closing conditions, is expected to be completed
        by
        September 4, 2007.  The transaction is not expected to result in a
        material gain or loss.
 
 On
        April 18, 2007, the Board of
        Managers of OITRS, 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, OITRS signed a
        binding agreement to sell its retail mortgage loan origination channel to
        a
        third party as well.  On June 30, 2007, OITRS entered into an
        amendment to this agreement.  The proceeds of the transactions were
        approximately****$1.5****million plus the
        assumption of certain liabilities of OITRS.  The transaction, coupled
        with the disposal of the conduit and wholesale origination channels, resulted
        in
        a loss of approximately $10.5 million.  Going forward, OITRS will not
        operate a mortgage loan origination business and the results of the mortgage
        origination business are reported as discontinued operations for the three
        and
        six months ended June 30, 2007.
 
 OITRS
        was
        acquired by the Company in November 2005. As a result of the merger, OITRS
        became a wholly-owned taxable REIT subsidiary of Opteum.  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
        OITRS, representing 7.5% of all of OITRS’s outstanding limited liability company
        membership interests, for $4.1 million.  OITRS is subject to corporate
        income taxes and files separate federal and state income tax
        returns.
 
 **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 six and three months ended June 30, 2007, as
        compared to the Company’s results of operations for the six and three months
        ended June 30, 2006.   During the three month period ended June
        30, 2007, the Company ceased all mortgage origination business at
        OITRS.  As stated above, result of those operations are reported in
        the financial statements as discontinued operations.  As a result of
        these actions, the Company’s financial statements are not comparable to prior
        reports filed since the acquisition of OITRS.
 
 Consolidated
        net loss for the six and
        three months ended June 30, 2007, was $240.5 million
        and****$162.5****million,
        respectively,****compared to a consolidated net loss of $9.4
        million and $1.4****million, respectively, for the six and
        three months ended June 30, 2006. Consolidated net loss per basic and diluted
        share of Class A Common Stock was $9.67 and $6.53, respectively, for the
        six and three months ended June 30, 2007, compared to a consolidated net
        loss
        per basic and diluted share of Class A Common Stock of $0.38 and $0.06,
        respectively, for the comparable prior period.  The decline in
        consolidated net loss was driven primarily by a permanent impairment taken
        on
        MBS securities in the Company’s MBS portfolio, continued poor operating results
        of OITRS and declines in the value of the retained interest in securitization,
        also at OITRS.
 
 For
        the three months ended June 30,
        2007, the Company no longer has the ability and intent to hold until recovery
        MBS securities whose values are impaired as of June 30,
        2007.  Accordingly, due to liquidity and working capital needs brought
        about by the turmoil in the mortgage market, the Company no longer had the
        ability to hold such assets until their amortized cost could be fully
        recovered.  During the three months ended June 30, 2007, the Company
        sold securities with a market value at the time of sale of approximately
        $782.0****million that were impaired at the time of sale,
        realizing losses on sale of $18.6 million.  The Company recorded $55.3
        million of permanent impairments on the remaining $1.8 billion of MBS securities
        held as available-for-sale at June 30, 2007.  As a result of these
        actions the Company’s net interest margin (or NIM) on it’s portfolio of MBS
        securities increased to 86 basis points as of June 30, 2007. The NIM measures
        the spread, in basis points, between the weighted average yield on the MBS
        portfolio and the weighted average borrowing costs on the repo
        liabilities.  This figure does not incorporate the effect of other
        sources of interest income or expense nor overhead expenses.
 
 For
        the six and three months ended June
        30, 2007, comprehensive (loss) was****($163.8) million and
        ($89.7) million, respectively, including the net unrealized gain/(loss) on
        available-for-sale securities of $2.1 million and****($1.0)
        million and the reclassification at June 30, 2007 of the other-than-temporary
        loss on MBS of $55.3 million. For the six and three months ended June 30,
        2007,
        reclassification of realized loss on mortgage-backed securities sales of
        $19.4
        million and $18.6 million  were made to reflect the realized loss on
        sales of assets previously reflected in comprehensive loss as unrealized
        losses
        on available for sale securities.  For the six and three months ended
        June 30, 2006, comprehensive (loss) was ($43.3) million and ($23.9) million,
        respectively, including the net unrealized loss on available-for-sale securities
        of ($33.9) million and ($22.5)****million, respectively. The
        factors resulting in the unrealized loss on available-for-sale securities
        are
        described below.
 
 Comprehensive
        (loss) is as follows:
 
 (in
        thousands)
 
 **Six
                  Month Ended**
              
              **Three
                  Months Ended****June
                  30, 2007**
              
              **June
                  30, 2006**
              
              **June
                  30, 2007**
              
              **June
                  30, 2006**Net
                  (loss)
              $
              (240,537)
              $
              (9,367)
              $
              (162,467)
              $
              (1,395)Reclassify
                  net realized loss on MBS
              
              19,388
              
              -
              
              18,568
              
              -Reclassify
                  other-than-temporary loss on MBS
              
              55,250
              
              -
              
              55,250
              
              -Unrealized
                  gain (loss) on available-for-sale securities, net
              
              2,135
              
              (33,897)
              
              (1,043)
              
              (22,472)Comprehensive
                  (loss)
              $
              (163,764)
              $
              (43,264)
              $
              (89,692)
              $
              (23,867)
 
 Unrealized
        gains/(losses) on available-for-sale securities is a component of accumulated
        other comprehensive loss, which is included in 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 six months ended June 30, 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 June 30, 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
        six months ended June 30, 2007, Opteum's REIT taxable loss was approximately
        $76.1 million less than Opteum's net loss from REIT activities computed in
        accordance with GAAP. The most significant difference was the impairment
        taken
        on available-for-sale securities which is reflected in GAAP earnings but
        not for
        REIT tax purposes.   If such securities are eventually sold and
        realized loses incurred, a substantial portion of this difference would be
        eliminated.  Another contributor is attributable to interest on
        inter-company loans with OITRS 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 the forgiveness
        of
        up to $108.3 million of inter-company debt with OITRS.  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 June 30, 2007, Opteum's taxable income is
        approximately****$91.0 million greater than Opteum's
        financial statement net income as computed in accordance with
        GAAP.  For the six months ended June 30, 2007, tax capital losses of
        approximately $29.4 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.
 
 *PERFORMANCE
        OF OPTEUM’S MBS PORTFOLIO*
 
 For
        the six and three months ended June
        30, 2007, the REIT generated ($9.5) million and ($8.2) million of net interest
        income (loss).  Included in these results
        were****$65.8 million and $27.5 million of interest income,
        offset by $75.3 million and $35.7 million of interest
        expense.  Inclusive in these results is the quarterly retrospective
        adjustment of****($4.4) million and ($6.2) million for the
        six and three month period ended June 30, 2007. The retrospective adjustment
        is
        described below under Critical Accounting Policies/Income
        Recognition.  Net interest income is down
        approximately****$21.6****million
        and****$19.2****million, respectively,
        compared to the six and three months ended June 30, 2006.  The decline
        is mostly the result of the approximately 46.6% reduction in the MBS investment
        portfolio.
 
 For
        the six and three months ended
        June 30, 2007, the REIT’s general and administrative costs
        were****$3.7 million and $1.9 million, respectively. For the
        six and three months ended June 30, 2006, the REIT’s general and administrative
        costs were $5.2 million and $3.0 million, respectively. The decrease in general
        and administrative expenses was primarily the result of a reduction in employee
        bonus accruals.  Operating expenses, which incorporate trading costs,
        fees and other direct costs, were****$0.5 million
        and****$0.2****million, for the six and
        three months ended June 30, 2007 and****$0.5 million and
        $0.2****million for the six and three months ended June 30,
        2006, respectively.
 
 As
        stated above, the REIT recorded
        permanent impairment charges to various MBS securities at June 30,
        2007.  In addition, certain securities were sold that were impaired at
        the time of sale.  As a result, the REIT had $19.4 million and $18.6
        million, respectively, in losses from the sale of securities in the MBS
        portfolio during the six and three months ended June 30, 2007.  For
        the six and three months ended June 30, 2006, Opteum reported no gains/loss
        from
        the sale of MBS.
 
 As
        of June 30, 2007, Opteum’s MBS
        portfolio consisted of $1.8****billion of agency or
        government MBS at fair value and had a weighted average yield on assets
        of****6.10% and a net weighted average borrowing cost of
        5.24%.  The following tables summarize Opteum’s agency and government
        mortgage related securities as of June 30, 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
              $
              1,171,277
              
              64.40%
              
              5.42%
              318
              1-Apr-44
              4.95
              9.85%
              1.74%Fixed-Rate
                  MBS
              $
              433,500
              
              23.84%
              
              6.64%
              241
              1-Jan-37
              n/a
              n/a
              n/aHybrid
                  Adjustable-Rate MBS
              $
              213,859
              
              11.76%
              
              4.40%
              336
              1-May-36
              13.87
              9.91%
              2.04%Total
                  Portfolio
              $
              1,818,636
              
              100.00%
              
              5.59%
              302
              1-Apr-44
              6.32
              9.86%
              1.79%
 
 **Agency**
              
              **Market
                  Value**
                **(in
                  thousands)**
              
              **Percentage
                  of**
                **Entire
                  Portfolio**Fannie
                  Mae
              $
              1,413,319
              
              77.71%Freddie
                  Mac
              
              107,250
              
              5.90%Ginnie
                  Mae
              
              298,067
              
              16.39%**Total
                  Portfolio**
              $
              1,818,636
              
              100.00%
 
 **Entire
                  Portfolio**Effective
                  Duration (1)
              
              1.36Weighted
                  Average Purchase Price
              $
              102.31Weighted
                  Average Current Price
              $
              100.95
 
 (1)
              Effective
                  duration of 1.36****indicates that an interest rate
                  increase of 1% would be expected to cause a
                  1.36%****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 June 30, 2007, approximately
        64.4% of the REIT portfolio is comprised of short duration ARM
        securities.   The REIT favors such securities since they offer
        attractive yields relative to alternative securities in an inverted yield
        curve
        environment such as the one the Company has been operating in
        recently.  Going forward, to the extent the shape of the yield curve
        is less or not inverted, the composition of the portfolio may be changed
        to
        better take advantage of opportunities in the market at that time.
 
 The
        value of the REIT’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 June 30, 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 $1,171,277)Change
                  in fair value
              $
              8,610
              $
              (8,610)
              $
              (17,220)Change
                  as a percent of fair value
              
              0.74%
              
              (0.74%)
              
              (1.47%)**Fixed-Rate
                  MBS**(Fair
                  Value $433,500)Change
                  in fair value
              $
              12,721
              $
              (12,721)
              $
              (25,442)Change
                  as a percent of fair value
              
              2.93%
              
              (2.93%)
              
              (5.87%)**Hybrid
                  Adjustable-Rate MBS**(Fair
                  Value $213,859)Change
                  in fair value
              $
              3,386
              $
              (3,386)
              $
              (6,772)Change
                  as a percent of fair value
              
              1.58%
              
              (1.58)
              
              (3.17%)**Cash**(Fair
                  Value $ 41,903)**Portfolio
                  Total**(Fair
                  Value $1,818,636)Change
                  in fair value
              $
              24,717
              $
              (24,717)
              $
              (49,434)Change
                  as a percent of fair value
              
              1.36%
              
              (1.36%)
              
              (2.72%)
 
 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 $1,171,277)Change
                  in fair value
              $
              4,929
              $
              (12,238)
              $
              (32,091)Change
                  as a percent of fair value
              
              0.42%
              
              (1.04%)
              
              (2.74%)**Fixed-Rate
                  MBS**(Fair
                  Value $433,500)Change
                  in fair value
              $
              9,782
              $
              (14,854)
              $
              (31,881)Change
                  as a percent of fair value
              
              2.26%
              
              (3.43%)
              
              (7.35%)**Hybrid
                  Adjustable-Rate MBS**(Fair
                  Value $213,859)Change
                  in fair value
              $
              2,552
              $
              (4,092)
              $
              (9,413)Change
                  as a percent of fair value
              
              1.19%
              
              (1.91%)
              
              (4.40%)**Cash**(Fair
                  Value $41,903)**Portfolio
                  Total**(Fair
                  Value $1,818,636)Change
                  in fair value
              $
              17,263
              $
              (31,184)
              $
              (73,385)Change
                  as a percent of fair value
              
              0.95%
              
              (1.71%)
              
              (4.04%)
 
 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 nine quarters for the portfolio of MBS securities only.  The data
        in the table below does not include information pertaining to discontinued
        operations at OITRS.
 
 (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
                  June 30, 2007
              $
              1,801,492
              $
              17,144
              $
              1,818,636
              100.95
              $
              1,818,636
              100.95At
                  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 June 30, 2007, and the nine previous quarters for
        Opteum’s portfolio of MBS securities only. The data in the table below does not
        include information pertaining to discontinued operations at
        OITRS.  Indicated in the table below, net interest spread declined
        during the second quarter of 2007 to****(1.04%) from
        0.36%****in the first quarter of 2007. Excluding the
        quarterly retrospective adjustment, the net interest margin declined from
        0.11%
        in the first quarter of 2007 to****0.00% in the second
        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**June
                  30, 2007
              $
              2,375,216
              $
              29,009
              4.89%
              $
              2,322,727
              $
              34,396
              5.92%
              $
              (5,387)
              (1.04%)March
                  31, 2007
              
              2,870,265
              
              41,856
              5.83%
              
              2,801,901
              
              38,357
              5.48%
              
              3,500
              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 June 30, 2007, ($6.2) million of the $29.0 million of
        interest income was attributable to the quarterly retrospective
        adjustment.  As a result of the retrospective adjustment, the yield on
        average interest earning assets for the period was reduced by 104.1 basis
        points
        to 488.5 basis points.  For the three months ended June 30, 2006,
        $13.4****million of the $57.0 million of interest income was
        derived from the quarterly retrospective adjustment.  The adjustment
        represented****154.3****basis points of
        the****656.8 basis points of the yield on average interest
        earning assets.
 
 
 *PERFORMANCE
        OF DISCONTINUED OPERATIONS OF OITRS*
 
 As
        stated above, the Company has
        sold or discontinued all residential mortgage origination activities at
        OITRS.  Going forward, all reported financial results will reflect
        this decision.  The principal business activities of OITRS were the
        origination and sale of mortgage loans.  In addition, as part of the
        securitization of loans sold, OITRS retained an interest in the resulting
        residual interest cash flows more fully described below.  Finally,
        OITRS serviced the loans securitized as well as some loans sold on a whole
        loan
        basis.
 
 As
        of June 30, 2007, OITRS owned
        $93.5****million of mortgage loans net of deferred
        origination costs, mark to market and other adjustments which were classified
        as
        mortgage loans held for sale.  Gains/(losses) realized on the mortgage
        banking activities for the six and three months ended June 30, 2007, were
        ($61.8) million and ($43.9)****million, respectively, and for
        the six and three months ended June 30, 2006, were ($2.9) million and ($5.9)
        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
        ($9.3) million and**$**4.8 million,
        respectively,  for the six and three months ended June 30, 2007, and
        were ($4.9) million and ($0.8) million, respectively,  for the six and
        three months ended June 30,
        2006.  OITRS’s****gains/(losses) from mortgage
        banking activities were the result of a sharp deterioration in the secondary
        market for the loans OITRS originates and sells.  Owing to fears
        related to the credit performance of certain types of loans OITRS originated,
        namely high combined loan to value (“CLTV”) and second lien mortgages, prices
        obtained upon sale were depressed and OITRS also experienced elevated levels
        of
        early payment defaults (EPDs), resulting in OITRS 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, OITRS had gains/(losses) from sales of mortgages held for
        sale
        of****($29.6) million and ($17.6) million, respectively, for
        the six and three months ended June 30, 2007, and****$19.1
        million and $15.2 million, respectively, for the six and three months ended
        June
        30, 2006.
  The
        retained interests in
        securitizations represent residual interests in loans originated or purchased
        by
        OITRS prior to securitization.  The total fair market value of these
        retained interests was approximately $73.8****million as of
        June 30, 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 higher forward LIBOR rates, the
        market
        value of the retained interests decreased by $27.5 million and $26.2
        million,****respectively, for the six and three months ended
        June 30, 2007 and decreased by $24.5 million and
        $20.2****million,****respectively, for the
        six and three months ended June 30, 2006.
  The
        table below provides details of
        OITRS’s (loss) on mortgage banking activities for the six and three months ended
        June 30, 2007 and 2006.  OITRS recognizes a gain or loss on sale of
        mortgages held for sale only when the loans are actually sold.
 
 (LOSSES)
        ON MORTGAGE BANKING ACTIVITIES
 
 (in
        thousands)
 
 **Six  Months
                  Ended**
              
              **Three
                  Months Ended****June
                  30, 2007**
              
              **June
                  30,  2006**
              
              **June
                  30,  2007**
              
              **June
                  30,  2006**Fair
                  Value adjustment of retained interests, trading
              $
              (27,492)
              $
              (24,472)
              $
              (26,168)
              $
              (20,246)Gain/
                  (loss) on sales of mortgage loans
              
              4,942
              
              49,567
              
              (9,571)
              
              28,738Fees
                  on brokered loans
              
              1,749
              
              3,135
              
              892
              
              1,586Gain/(loss)
                  on derivatives
              
              (4,719)
              
              2,521
              
              (83)
              
              (881)Direct
                  loan origination expenses, deferred
              
              (5,495)
              
              689
              
              (4,003)
              
              (549)Fees
                  earned, brokering
              
              705
              
              1,306
              
              270
              
              535Write
                  off purchased pipeline (Purchase Accounting Adjustment)
              
              -
              
              (534)
              
              -
              
              -$
              (30,310)
              $
              32,212
              $
              (38,663)
              $
              9,183Direct
                  loan origination expenses, reclassified
              
              (22,181)
              
              (30,204)
              
              (9,942)
              
              (14,252)Net  gain/(loss)
                  on sale of mortgage loans
              $
              (52,491)
              $
              2,008
              $
              (48,605)
              $
              (5,069)Change
                  in market value of IRLCs
              $
              14
              $
              (809)
              $
              (190)
              $
              2,935Change
                  in market value mortgage loans for held for sale
              $
              (9,338)
              $
              (4,080)
              $
              4,940
              $
              (3,744)(Loss)
                  on mortgage banking activities
              $
              (61,815)
              $
              (2,881)
              $
              (43,855)
              $
              (5,878)
 
 For
        the six and three months ended
        June 30, 2007 and 2006, OITRS originated mortgage loans of $1.5 billion and
        $0.4****billion, and $2.8****billion
        and****$1.5 billion, respectively.  For the six and
        three months ended June 30, 2007, OITRS sold $2.0 billion
        and****$0.7****billion of originated
        mortgage loans. For the six and three months ended June 30, 2006, OITRS sold
        $2.7 billion and****$1.3****billion of
        originated mortgage loans. Of the originated mortgage loans sold during the
        six
        and three months ended June 30, 2007, $0.8 billion of the $2.0 billion and
        $0.3****billion of
        the****$0.7****billion, respectively, were
        sold on a servicing retained basis. Of the originated mortgage loans sold
        during
        the six and three months ended June 30, 2006, $1.7 billion of the
        $2.7****billion and****$0.6 billion of the
        $1.3****billion, respectively, were sold on a servicing
        retained basis.
 
 For
        the six and three months ended
        June 30, 2007 and 2006, OITRS had net servicing income/ (loss) of ($10.6)
        million and ($6.0)****million, and $1.8 million and
        $3.6****million, respectively.  The results for the
        six and three month periods were driven primarily by negative fair
        value****adjustments to the MSRs (inclusive of run-off of the
        servicing portfolio) for the six and three months ended June 30, 2007 and
        the
        Company’s early adoption of SFAS 156 on January 1, 2006 (for the six and three
        months ended June 30, 2006).
 
 As
        of June 30, 2007, OITRS held
        originated MSRs on approximately $3.6****billion in mortgages
        with a fair market value of approximately $32.1 million.  For the six
        and three months ended June 30, 2007 and 2006, additions to the MSRs were
        $7.7
        million and $2.4****million, and
        $17.1****million
        and****$6.1****million,
        respectively.  In turn, the net fair value adjustments for the six and
        three months ended June 30, 2007, reflect declines in fair value due to run-off
        of ($6.0)****million and****($1.4) million
        and adjustments due to (decreases)/increases in fair value of ($6.3) million
        and
        ($1.3) million, respectively.  The net fair value adjustments for the
        six and three months ended June 30, 2006, reflect declines in fair value
        due to
        run-off of ($10.4)****million
        and****($4.9) million and adjustments due to
        (decreases)/increases in fair value of ($0.4) million and $2.1 million,
        respectively. Changes in valuation assumptions for the six and three months
        ended June 30, 2007, reduced the fair market value by $4.6 million and $2.1
        million, respectively.  Changes in valuation assumptions and early adoption
        of SFAS 156 in January of 2006 increased fair market value for the six months
        ended June 30, 2006, by $3.2 million.  There were no such changes for the
        three months ended June 30, 2006.
  **Liquidity
        and Capital Resources**
  As
        of June 30, 2007, Opteum had
        master repurchase agreements in place with 19 counterparties and had outstanding
        balances under 10 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 June 30, 2007, Opteum had
        obligations outstanding under its repurchase agreements totaling
        $1.8****billion with a net weighted average borrowing cost of
        5.24%.  All of Opteum’s outstanding repurchase agreement obligations
        are due in less than 15****months with
        $0.8****billion maturing between two and
        30 days,****$0.5 billion maturing between 31 and
        90 days and $0.5****billion maturing in more than
        90 days.  Securing these repurchase agreement obligations as of
        June 30, 2007, were MBS with an estimated fair value of
        $1.8****billion and a weighted average maturity of
        302 months.
  As
        of June 30, 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.
              $
              785,347
              $
              10,232
              118
              44.04
              %JP
                  Morgan Securities Inc.
              
              646,699
              
              16,211
              183
              36.26ING
                  Financial Markets, LLC
              
              81,790
              
              969
              93
              4.59HSBC
                  Securities (USA) Inc.
              
              78,232
              
              1,599
              13
              4.39UBS
                  Securities LLC
              
              52,821
              
              1,452
              26
              2.96Lehman
                  Brothers Inc.
              
              44,564
              
              1,279
              256
              2.50Nomura
                  Securities International, Inc.
              
              40,857
              
              1,531
              10
              2.29Citigroup
                  Goldman Sachs & Co.
              
              24,814
              
              502
              6
              1.39Goldman
                  Sachs
              
              23,570
              
              456
              60
              1.32Bear,
                  Stearns & Co. Inc.
              
              4,637
              
              154
              6
              0.26Total
              $
              1,783,331
              $
              34,385
              
              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
        $0.75****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.  The facilities capacity and
        expiration dates are as follows:  $450.0 million on October 17, 2007
        and $300 million on April 23, 2008.  Opteum has no obligation to
        utilize these repurchase agreement facilities.
 
 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.
 
 Given
        the
        current turmoil in the mortgage market, such alternative sources of financing
        are not readily available to the Company.  Further, as a result of the
        turmoil in the mortgage market, cash needs of OITRS were
        increased.  The increased needs stemmed from margin calls on the
        various warehouse lines and depressed levels on loan sales.  The
        Company, as guarantor, is potentially exposed to cash needs connected to
        OITRS’s
        warehouse lines to the extent OITRS has insufficient funds to meet margin
        calls
        or repay borrowings. Accordingly, during the three month period ended June
        30,
        2007, the Company undertook a series of assets sales intended to raise funds
        necessary to support the operations of OITRS and maintain adequate liquidity
        during the disruptions in the mortgage market that occurred and are
        continuing.
 
 The
        Company has obtained committed funding arrangements that provide specified
        advance rates and funding levels and are available to finance our MBS
        portfolio.   Should our financing be withdrawn and our committed
        funding agreements not be sufficient to finance all of our MBS investments,
        we
        may be forced to sell such assets, which may result in losses upon such sales.
         While the financing in place for our retained interests, trading held by
        OITRS is committed through December 20, 2007, the lender on the financing
        facility has and may continue to request additional margin be posted in
        connection with the facility. If we are unable to meet such requests in the
        future, we may be forced to sell the assets or seek alternative financing.
         At present, such alternative financing arrangements for the residual
        interests, trading may not be available or only available at substantially
        higher cost to OITRS.  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 other assets held for sale at prices lower
        than
        the carrying value of such assets would reduce our income.  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. Continued disruptions in market conditions could, however,
        adversely affect the Company’s liquidity, including the lack of available
        financing for our MBS assets beyond the capacity of our committed facilities
        (currently $0.75 billion), increases in interest rates, increases in prepayment
        rates substantially above expectations and decreases in value of assets held
        for
        sale. Therefore, no assurances can be made regarding the Company's ability
        to
        satisfy its liquidity and working capital requirements.
 
 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.
 
 *LIQUIDITY
        AND CAPITAL RESOURCES OF THE DISCONTINUED OPERATIONS OF
        OITRS*
 
 In
        order to facilitate the sale of the
        remaining residential mortgage loans held for sale at June 30, 2007, OITRS
        has
        various warehouse and aggregation lines of credit available, some of which
        are
        committed facilities while others are uncommitted.   As of July
        1, 2007 OITRS had an aggregation line of $300 million, an uncommitted warehouse
        line of $30 million and a committed warehouse line of $50 million. In addition,
        OITRS had a $80 million committed line of credit secured by OITRS’s retained
        interests in securitizations and the ability to utilize $20 million of the
        committed warehouse line mentioned above to finance originated mortgage
        servicing rights. The ability to utilize the committed warehouse line to
        finance
        originated mortgage servicing rights matures September 28, 2007.  The
        balance of the $50 million committed warehouse line and the $30 million
        uncommitted warehouse line matured July 31, 2007.  On August 9, 2007,
        the $300 million aggregation line was further amended and the limit
        was reduced to $40 million.  At the time the capacity of the facility
        was reduced, the outstanding balance was $12.6 million.
 
 The
        committed and uncommitted warehouse
        and aggregation facilities are secured by mortgage loans and other assets
        of
        OITRS.  The facilities generally contain various covenants pertaining
        to tangible net worth, available cash and liquidity, leverage ratio, and
        servicing delinquency.  As of June 30, 2007, OITRS was not in
        compliance with respect to four covenants pertaining to tangible net worth,
        available cash and liquidity, debt to tangible net worth and profitability
        with
        one lender and the Company was not in compliance pertaining to tangible net
        worth with the same lender and one other lender.  OITRS has obtained
        waivers from each lender for the covenant violations.  In the event
        waivers are not obtained, OITRS would be in default under the terms of the
        agreements.   In the event OITRS defaulted under the terms of the
        agreement, the lenders could force OITRS to liquidate the mortgage loans
        collateralizing the loan, seek payment from the Company as guarantor, or
        force
        OITRS into an involuntary bankruptcy.  In the event the Company were
        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 June 30, 2007, OITRS had
        outstanding balances of approximately****$89.3 million under
        their various warehouse and aggregation lines and approximately $59.8 million
        outstanding on other lines of credit with various lenders. The rates on these
        borrowings generally are based on a spread to LIBOR.
 
 The
        Company believes that its committed and uncommitted warehouse and aggregation
        lines are sufficient to support the liquidation of OITRS’s remaining residential
        mortgage loans held for sale.
 
 OITRS
        has
        commitments to sell mortgage loans to third parties. As of June 30, 2007,
        OITRS
        had outstanding commitments to sell loans of approximately $50.8
        million.
 
 **Outlook**
 
 As
        discussed above, the Company's
        results of operations for the six and three months ended June 30, 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.  Initially, the Company repositioned its portfolio of MBS
        securities in response to the 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 June 30, 2007 as well.  As a consequence of the
        impairment charges taken on available-for-sale securities during the period
        ended June 30, 2007, the NIM on the Company’s portfolio is now positive on a
        GAAP basis.  To the extent the Federal Reserve resumed their
        tightening policy in the future, there can be no assurance the Company would
        be
        able to maintain its positive NIM.  In the event the NIM on the
        Company’s portfolio of MBS securities were no longer positive, the results of
        operations would be negatively impacted.
 
 The
        funding costs of the MBS portfolio have stabilized and the yield on the MBS
        assets now exceeds the funding costs through a combination of ARM resetting
        and
        as a result of the impairment charge taken. The need to fund negative cash
        flow
        operations at OITRS precluded the Company from reinvesting monthly pay-downs
        throughout much of 2006 and 2007 and thus exacerbated the erosion of the
        NIM.  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 OITRS should allow the
        NIM of
        the MBS portfolio to remain positive.  However, the reduced size of
        the portfolio in relation to our operating expenses will constrain the earnings
        potential of the Company in the near term.
 
 Developments
        in the secondary market for Alt-A and, specifically, loans with additional
        second lien mortgages, had a material negative impact on the results of
        operations of OITRS. 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 deteriorated. The poor credit
        performance of such loans manifested itself in elevated levels of EPDs and
        significantly depressed prices in the secondary market. As a result, OITRS
        recorded reserves for loan losses in excess of amounts recorded in earlier
        periods related to EPDs.
 
 On
        April
        18, 2007, the Board of Managers of OITRS approved the closure of its warehouse
        and conduit loan origination channels. ****On June 30, 2007,
        OITRS sold its retail loan origination channel to a third
        party.  Accordingly, as a result of the closing of the sale of the
        retail origination channel and the closure of OITRS conduit and wholesale
        origination channel, OITRS no longer operates a mortgage loan origination
        business.
 
 During
        the wind down of the mortgage loan origination operations, OITRS will still
        need
        access to a 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,
        OITRS may need to seek alternative sources of funding or hold such loans
        until
        sold.  Further, OITRS has exposure to early payment default claims
        that have been received from buyers of mortgage loans sold in the
        past.  The settlement of such claims will also need to be
        funded.  The Company believes that adequate reserves have been
        recorded for such exposure.
 
 **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 12) required management to test the
        associated long lived assets for recoverability.  In connection with
        the testing of recoverability of the long lived assets, OITRS recorded an
        impairment charge of $8.9 million and $3.0****million,
        respectively, for the six and three months ended June 30,
        2007.  Further, in accordance with SFAS 144, such long lived assets
        were reported by OITRS as held for use as of March 31, 2007, but these assets
        are now 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 (OITRS) 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, OITRS recorded impairment charges of both
        goodwill and other intangible assets not subject to amortization of
        approximately $3.4 million and $0.6****million, respectively,
        for the six and three months ended June 30, 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.*
 
 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 June 30, 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.  Such an event occurred
        in the period ended June 30, 2007 and as a consequence the cost basis of
        all MBS
        securities have been written down to fair value and the previously unrealized
        loss recognized in current period earnings.
 
 *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 Note 12).  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*. 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 OITRS 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
        June 30, 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)
 
 **June
                  30, 2007**
              
              **December
                  31, 2006**Carrying
                  value of retained interests – fair value
              $
              73,798
              $
              104,199Weighted
                  average life (in years)
              
              4.65
              
              4.26Prepayment
                  assumption (annual rate)
              
              33.78%
              
              37.88%Impact
                  on fair value of 10% adverse change
              $
              (4,821)
              $
              (8,235)Impact
                  on fair value of 20% adverse change
              $
              (8,873)
              $
              (14,939)Expected
                  Credit losses (annual rate)
              
              0.55%
              
              0.56%Impact
                  on fair value of 10% adverse change
              $
              (2,642)
              $
              (3,052)Impact
                  on fair value of 20% adverse change
              $
              (5,365)
              $
              (6,098)Residual
                  Cash-Flow Discount Rate
              
              17.35%
              
              16.03%Impact
                  on fair value of 10% adverse change
              $
              (3,542)
              $
              (4,575)Impact
                  on fair value of 20% adverse change
              $
              (6,767)
              $
              (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
              $
              (24,550)
              $
              (18,554)Impact
                  on fair value of 20% adverse change
              $
              (43,031)
              $
              (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 June 30, 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).
  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
        June 30, 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)
 
 **June
                  30, 2007**
              
              **December
                  31, 2006**Prepayment
                  assumption (annual rate) (PSA)
              
              387.9
              
              424.6Impact
                  on fair value of 10% adverse change
              $
              (1,311)
              $
              (3,923)Impact
                  on fair value of 20% adverse change
              $
              (2,494)
              $
              (7,557)MSR
                  Cash-Flow Discount Rate
              
              14.50%
              
              14.50%Impact
                  on fair value of 10% adverse change
              $
              (1,194)
              $
              (3,505)Impact
                  on fair value of 20% adverse change
              $
              (2,296)
              $
              (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
        $22.2****million and****$9.9 million,
        respectively, during the six and three months ended June 30, 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 subsidiary, OITRS 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.
 
 OITRS
        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.  To the extent
        management believes deferred tax assets will not be fully realized in future
        periods, a provision is recorded so as to reflect the net portion, if any,
        of
        the deferred tax asset management expects to realize.
 
 **Off-Balance
        Sheet Arrangements**
 
 As
        previously discussed OITRS 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
        second quarter of 2007, OITRS did not execute a securitization, and is not
        expected to do so in the future. However, OITRS held approximately $73.8
        million
        of retained interests from securitizations as of June 30, 2007.
 
 The
        cash flows associated with OITRS’s
        securitization activities over the six months ended June 30, 2007, were as
        follows:
 
 (in
        thousands)
 
 **Six
                  Months Ended June 30, 2007**
              
              **Six
                  Months Ended June 30, 2006**Proceeds
                  from securitizations
              $
              -
              $
              1,436,838Servicing
                  fees received
              
              9,691
              
              9,252Servicing
                  advances net of repayments
              
              1,433
              
              1,550Cash
                  flows received on retained interests
              
              2,909
              
              2,009
 
 **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 reports under the
        Securities Exchange Act of 1934, as amended, is recorded, processed, summarized
        and reported within the time periods specified in the Securities and Exchange
        Commission’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.  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’s management carried out
        an evaluation, under the supervision and with the participation of the Company’s
        Chief Executive Officer and Chief Financial Officer, of the effectiveness
        of the
        design and operation of the Company’s disclosure controls and procedures. 
Based on such evaluation, the Company’s Chief Executive Officer and Chief
        Financial Officer concluded that the Company’s disclosure controls and
        procedures were ineffective to accomplish their intended objectives as of
        June
        30, 2007, for the following reasons:
  On
        June
        30, 2007, the Company’s majority-owned subsidiary, Orchid Island TRS, LLC (then
        known as Opteum Financial Services, LLC) (“OITRS”), completed the sale of
        substantially all of the assets related to OITRS’s retail mortgage loan
        origination business (the “Business”), and certain other assets associated with
        OITRS’s corporate staff functions.  In connection with the
        consummation of this transaction, the employment by OITRS of substantially
        all
        of OITRS’s employees was terminated and a majority of these employees were hired
        by the purchaser of the Business.  Owing to a substantial reduction in
        OITRS’s personnel in connection with the sale of the Business, the preparation
        of estimates necessary for the completion of the Company’s Quarterly Report on
        Form 10-Q for the period ended June 30, 2007, delayed the completion and
        timely
        filing of such report, which delay could not have been avoided without
        unreasonable effort or expense.
 
 
 **Changes
        in Internal Controls over Financial Reporting**
 
 The
        substantial reduction in OITRS’s personnel in connection with the sale of the
        Business as described above has necessitated the re-allocation of responsibility
        for certain controls and procedures to the remaining staff of OITRS and the
        staff of Opteum.  As a result, the extent of segregation of duties has been
        reduced.  Except for the foregoing, there was no change in the Company’s
        internal control over financial reporting that occurred during the Company’s
        most recent fiscal quarter that has materially affected, or is 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.   See also Notes 9 and 12 to the Company’s
        accompanying consolidated financial statements.
 **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
        4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.**
 
 The
        Annual Meeting of Stockholders of the Company was held on April 30,
        2007.
 
 1.
        *Election of Directors.*  At the meeting, Kevin L. Bespolka and W.
        Christopher Mortenson were each re-elected as Class I directors to serve
        until
        the 2010 Annual Meeting of Stockholders.  For each nominee, the number
        of votes cast for and withheld were as follows:
 
 **NOMINEE**
              
              **FOR**
              
              **WITHHELD**Kevin
                  L Bespolka
              
              20,517,313
              
              464,990W.
                  Christopher Mortenson
              
              20,518,020
              
              464,283
 
 The
        following directors continued in office after the meeting:
  Jeffrey
        J. Zimmer, Robert E. Cauley, Peter R. Norden, Maureen A. Hendricks and Buford
        H.
        Ortale.
 
 On
        June
        12, 2007, Robert J. Dwyer was appointed as a member of the Board of Directors
        and as Chair of the Audit Committee of the Board of Directors following the
        resignation from the Board of Directors of Maureen A. Hendricks.  On
        June 29, 2007, in conjunction with the sale by the Company of its Retail
        mortgage origination business, Peter R. Norden resigned his positions with
        the
        Company and as a member of the Board of Directors.
  2.*Ratification of Appointment of Independent Registered Public Accounting
        Firm*.  At the meeting, the appointment of Ernst & Young LLP as the
        Company’s independent registered public accounting firm for the year ending
        December 31, 2007 was ratified by the Company’s stockholders.  The number
        of votes cast for and against the ratification of Ernst & Young LLP and the
        number of abstentions and broker non-votes were as follows:
 
 **FOR**
              
              **AGAINST**
              
              **ABSTAIN**
              
              **BROKER**
                **NON-VOTES**20,642,123
              
              276,668
              
              63,511
              
              0
  **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 to Exhibit
                  3.1 to
                  the Company’s Form S-11/A, filed with the SEC on April 29,
                  20043.2
              Articles
                  Supplementary, incorporated by reference to Exhibit 3.1 to the
                  Company’s
                  Form 8-K, dated November 3, 2005, filed with the SEC on November
                  8,
                  20053.3
              Articles
                  of Amendment, incorporated by reference to Exhibit 3.1 to the 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 to Exhibit 3.1 to
                  the
                  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 to Exhibit 10.3 to the 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 to Exhibit 10.4 to the 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 to Exhibit 10.5 to the 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 to Exhibit 10.8 to
                  the
                  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 to Exhibit 10.9 to
                  the
                  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, 2006*10.12
              Seventh
                  Amended and Restated Limited Liability Company Agreement of Orchid
                  Island
                  TRS, LLC, dated as of July 20, 2007, made and entered into by Opteum
                  Inc.
                  and Citigroup Global Markets Realty Corp.10.13
              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, 200710.14
              First
                  Amendment to Purchase Agreement, dated June 30, 2007, by and among
                  Metrocities Mortgage, LLC – Opteum Division, Opteum Financial Services,
                  LLC and Opteum Inc., incorporated by reference to Exhibit 10.1
                  to the
                  Company’s Current Report on Form 8-K, dated June 30, 2007, filed with the
                  SEC on July 5, 200710.15
              Separation
                  Agreement and General Release, dated as of June 29, 2007, by and
                  among
                  Opteum Inc., Opteum Financial Services, LLC and Peter R. Norden,
                  incorporated by reference to Exhibit 10.2 to the Company’s Current Report
                  on Form 8-K, dated June 30, 2007, filed with the SEC on July 5,
                  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.
 
 
 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:  August
        14,
        2007                                                                                     By:           /s/
        Robert E. Cauley
 Robert
        E. Cauley
 Vice
        Chairman, Senior Executive Vice
        President,
 Chief
        Financial Officer, Chief
        Investment Officer and
 Treasurer
  
  **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 to Exhibit
                  3.1 to
                  the Company’s Form S-11/A, filed with the SEC on April 29,
                  20043.2
              Articles
                  Supplementary, incorporated by reference to Exhibit 3.1 to the
                  Company’s
                  Form 8-K, dated November 3, 2005, filed with the SEC on November
                  8,
                  20053.3
              Articles
                  of Amendment, incorporated by reference to Exhibit 3.1 to the 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 to Exhibit 3.1 to
                  the
                  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 to Exhibit 10.3 to the 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 to Exhibit 10.4 to the 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 to Exhibit 10.5 to the 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 to Exhibit 10.8 to
                  the
                  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 to Exhibit 10.9 to
                  the
                  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, 2006*10.12
              Seventh
                  Amended and Restated Limited Liability Company Agreement of Orchid
                  Island
                  TRS, LLC, dated as of July 20, 2007, made and entered into by Opteum
                  Inc.
                  and Citigroup Global Markets Realty Corp.10.13
              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, 200710.14
              First
                  Amendment to Purchase Agreement, dated June 30, 2007, by and among
                  Metrocities Mortgage, LLC – Opteum Division, Opteum Financial Services,
                  LLC and Opteum Inc., incorporated by reference to Exhibit 10.1
                  to the
                  Company’s Current Report on Form 8-K, dated June 30, 2007, filed with the
                  SEC on July 5, 200710.15
              Separation
                  Agreement and General Release, dated as of June 29, 2007, by and
                  among
                  Opteum Inc., Opteum Financial Services, LLC and Peter R. Norden,
                  incorporated by reference to Exhibit 10.2 to the Company’s Current Report
                  on Form 8-K, dated June 30, 2007, filed with the SEC on July 5,
                  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.