UNITED STATES
                             SECURITIES AND EXCHANGE COMMISSION
                                   WASHINGTON, D.C. 20549



                                          FORM 10-K/A
                                        Amendment No. 3

The Issuing Entity is filing this Form 10-K/A to replace Exhibits 31, 33(a)
and 34(a) to the orignal Form 10-K filed on April 17, 2007, the first Form
10-K/A filed on May 18, 2007 and the second Form 10-K/A filed on May 29, 2007.
American Security Insurance Company, Standard Guaranty Insurance Company and
TrackSure Insurance Agency, Inc. (formerly, "Safeco Financial Institution
Solutions, Inc.") ("Assurant Inc.") recently provided the Issuing Entity with a
revised report on assessment of compliance with servicing criteria for
asset-backed securities and a related attestation. In the original assessment
previously provided to the Issuing Entity, Assurant Inc. excluded Item 1122(d)
(4)(xii) from the scope of its assessment. Assurant Inc. recently provided the
Issuing Entity with a revised assessment of compliance that assesses Assurant
Inc.'s compliance with Item 1122(d)(4)(xii) and identifies material instance of
non compliance with this criterion. This material instance of non compliance is
noted in this Form 10-K/A under "Additional Disclosure Items Pursuant to
General Instruction J." The Issuing Entity has included this revised assessment
of compliance under Exhibit 33(a), the related attestation under Exhibit 34(a)
and a revised Rule 13a-14(d)/15d-14(d) Certification under Exhibit 31. This
Form 10-K/A does not otherwise amend the orignal Form 10-K filed on April 17,
2007, the first Form 10-K/A filed on May 18, 2007 and the second Form 10-K/A
filed on May 29, 2007.

  (Mark one)

  /X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934
      For the fiscal year ended December 31, 2006

      OR



  / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934


       Commission file number:  333-123741-17

       ACE Securities Corp. Home Equity Loan Trust, Series 2006-HE1
       (exact name of issuing entity as specified in its charter)

       ACE Securities Corp.
       (exact name of the depositor (as registrant on behalf of the issuing
       entity) as specified in its charter)

       DB Structured Products, Inc.
       (exact name of the sponsor as specified in its charter)


  Delaware                                          06-1442101
  (State or other jurisdiction of                   Depositor
  incorporation or organization)                    (I.R.S. Employer
                                                    Identification No.)


   ACE Securities Corp.
   6525 Morrison Boulevard Suite 318
   Charlotte, NC                                 28211
  (Address of principal executive offices)    (Zip Code)


  Registrant's telephone number, including area code: (704) 365-0569


  Securities registered pursuant to Section 12(b) of the Act:

        NONE.


  Securities registered pursuant to Section 12(g) of the Act:

        NONE.

  This report omits to disclose the Attestation Report of Fremont Investment &
  Loan required by Rule 15d-18 of the Securities Exchange Act of 1934, as
  amended.

  Indicate by check mark if the registrant is a well-known seasoned issuer,
  as defined in Rule 405 of the Securities Act.

        Yes  ___     No  X


  Indicate by check mark if the registrant is not required to file reports
  pursuant to Section 13 or Section 15(d) of the Act.

        Yes  ___     No  X


  Indicate by check mark whether the registrant (1) has filed all reports
  required to be filed by Section 13 or 15(d) of the Securities Exchange
  Act of 1934 during the preceding 12 months (or for such shorter period
  that the registrant was required to file such reports), and (2) has been
  subject to such filing requirements for the past 90 days.

        Yes  X       No  ___


  Indicate by check mark if disclosure of delinquent filers pursuant to
  Item 405 of Regulation S-K ( 229.405 of this chapter) is not contained
  herein, and will not be contained, to the best of registrant's knowledge,
  in definitive proxy or information statements incorporated by reference
  in Part III of this Form 10-K or any amendment to this Form 10-K.

        Not applicable.


  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. (Check one):


  Large accelerated filer ___  Accelerated filer ___  Non-accelerated filer X


  Indicate by check mark whether the registrant is a shell company (as
  defined in Rule 12b-2 of the Act).

        Yes  ___     No  X


  State the aggregate market value of the voting and non-voting common
  equity held by non-affiliates computed by reference to the price at which
  the common equity was last sold, or the average bid and asked price of
  such common equity, as of the last business day of the registrant's most
  recently completed second fiscal quarter.

        Not applicable.


     Documents Incorporated by Reference

  List hereunder the following documents if incorporated by reference and
  the Part of the Form 10-K (e.g., Part I, Part II, etc.) into which the
  document is incorporated: (1)Any annual report to security holders; (2)
  Any proxy or information statement; and (3)Any prospectus filed pursuant
  to Rule 424(b) or (c) under the Securities Act of 1933. The listed
  documents should be clearly described for identification purposes (e.g.,
  annual report to security holders for fiscal year ended December 24, 1980).

        Not applicable.


                                   PART I
  Item 1.  Business.

            Omitted.


  Item 1A.  Risk Factors.

            Omitted.


  Item 1B.  Unresolved Staff Comments.

            None.


  Item 2.  Properties.

            Omitted.


  Item 3.  Legal Proceedings.

            Omitted.


  Item 4.  Submission of Matters to a Vote of Security Holders.

            Omitted.


                                PART II

  Item 5. Market for Registrant's Common Equity, Related Stockholder
         Matters and Issuer Purchases of Equity Securities.

            Omitted.


  Item 6.  Selected Financial Data.

            Omitted.


  Item 7.  Management's Discussion and Analysis of Financial Condition and
           Results of Operations.

            Omitted.


  Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

            Omitted.


  Item 8.  Financial Statements and Supplementary Data.

            Omitted.


  Item 9.  Changes in and Disagreements With Accountants on Accounting and
           Financial Disclosure.

            Omitted.


  Item 9A. Controls and Procedures.

            Omitted.


  Item 9A(T). Controls and Procedures.

            Omitted.


  Item 9B. Other Information.

            None.


                                PART III

  Item 10. Directors, Executive Officers and Corporate Governance.

            Omitted.


  Item 11. Executive Compensation.

            Omitted.

  Item 12. Security Ownership of Certain Beneficial Owners and
           Management and Related Stockholder Matters.

            Omitted.


  Item 13. Certain Relationships and Related Transactions, and Director
           Independence.

            Omitted.


  Item 14. Principal Accounting Fees and Services.

            Omitted.



            ADDITIONAL DISCLOSURE ITEMS PURSUANT TO GENERAL INSTRUCTION J

  Item 1112(b) of Regulation AB, Significant Obligor Financial Information.

            None.

  Item 1114(b)(2) of Regulation AB, Credit Enhancement and Other Support,
            except for certain Derivative Instruments (Information regarding
            Significant Enhancement Providers Financial Information).

CIFG Assurance North America, Inc., insurer of the Class A-1B2 Certificates.

Financial Statements

December 31, 2006, 2005 and 2004


(page)


CIFG Assurance North America, Inc.
Table of Contents



Report of Independent Auditors                                          2

Balance Sheets as of December 31, 2006 and 2005                         3

Statements of Operations for the years ended December 31, 2006,         4
         2005 and 2004

Statements of Changes in Shareholders Equity and Comprehensive
(Loss) Income for the years ended December 31, 2006, 2005 and 2004      5

Statements of Cash Flows for the years ended December 31, 2006,         6
         2005 and 2004

Notes to Financial Statements                                           7-26


(page)


(logo) PRICEWATERHOUSECOOPERS

PricewaterhouseCoopers LLP
PricewaterhouseCoopers Center
300 Madison Avenue
New York NY 10017
Telephone (646) 471 3000
Facsimile (813) 286 6000


Report of Independent Auditors

To Board of Directors and Shareholder of
CIFG Assurance North America, Inc:

In our opinion, the accompanying balance sheets and the related statements of
operations, changes in shareholder's equity and comprehensive income (loss), and
cash flows present fairly, in all material respects, the financial position of
CIFG Assurance North America, Inc. (the "Company") at December 31, 2006 and
2005, and the results of its operations and its cash flows for each of the three
years then ended in conformity with accounting principles generally accepted in
the United States of America. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally accepted in the
United States of America. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

New York, New York
March 27, 2007


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CIFG Assurance North America, Inc.
Balance Sheets
($ In '000s, except per share amount)

<TABLE>
<CAPTION>
<S>     <C>


                                                                        As of December 31,
                                                                        2006            2005

Assets
Investments
Fixed income securities available-for-sale, at fair value
   (amortized cost of $135,985 and $134,387)                        $   134,403      $  132,924
Short-term investments, at cost                                          39,588          24,652
Total Investments                                                       173,991         157,576

Cash                                                                      1,068           3,388
Premiums receivable                                                      11,436           7,515
Receivable for securities sold                                              ---           4,000
Investment income due and accrued                                         1,748           1,497
Prepaid reinsurance premiums                                            183,761         141,827
Reinsurance recoverable on unpaid loss and loss
 adjustment expense reserves                                              4,670           2,777
Derivative assets                                                            10               4
Intangible asset - licenses acquired in acquisition                       8,331           8,331
Current income taxes recoverable                                             42             ---
Total assets                                                        $   385,057     $   326,915

Liabilities and Shareholder's Equity
Liabilities
Deferred premium revenues                                           $   218,714     $   165,846
Loss and loss adjustment expense reserves                                 5,530           3,306
Deferred ceding commissions, net                                         18,373          13,267
Ceded reinsurance balances payable                                        6,463          12,949
Deferred fee income                                                       1,233             413
Ceding commission payable                                                   141             138
Current income taxes payable                                                ---              88
Derivative liabilities                                                       49              57
Balances due to affiliates                                               10,606           6,798
Other liabilities                                                         2,051           1,961
Total liabilities                                                       263,160         204,823

Shareholder's Equity
Common stock (par value $4,191.49 per share authorized, issued
 and outstanding shares 4,700)                                           19,700          19,700
Additional paid-in-capital                                              122,850         122,850
Accumulated deficit                                                     (19,072)        (18,995)
Accumulated other comprehensive loss (net of deferred
 income (benefit) taxes of $0, in 2006 and 2005)                         (1,581)         (1,463)
Total shareholder's equity                                              121,897         122,092
Total liabilities and shareholder's equity                          $   385,057     $   326,915

</TABLE>

The accompanying notes are an integral part of these financial statements.

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(page)


CIFG Assurance North America, Inc.
Statements of Operations
($ In '000s)

<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>

                                                           Years Ended December 31,
                                                        2006            2005            2004

Revenues
Gross premiums written                           $   101,665        $    94,256     $    55,146
Ceded premiums written                               (84,163)           (83,958)        (48,747)
Net premiums written                                  17,502             10,298           6,399
Change in net deferred premium
 revenue                                             (10,925)            (5,546)         (2,588)
Net premiums earned (net of ceded
 earned premiums of $42,322 in 2006,
 $27,267 in 2005 and $18,529 in 2004)                  6,577              4,752           3,811
Net investment income                                  6,677              4,098           2,273
Net realized investment (losses) gains                    (5)                (4)             10
Net realized and unrealized
 gains (losses) on credit derivatives                     14                (32)             (5)
Other income                                             217                 47              53
Total revenues                                        13,480              8,861           6,142

Expenses
Losses and loss adjustment
 expenses, net                                           331                236             199
Amortization of deferred ceding
 commissions                                          (8,794)            (3,158)         (2,042)
Amortization of deferred acquisition
 costs                                                 6,744              3,641           2,635
Operating expenses                                    14,892             11,826          10,822
Total expenses                                        13,173             12,545          11,614

Income (loss) before income taxes                        307             (3,684)         (5,472)
Provision for income taxes                               384                148             ---
Net Loss                                        $        (77)       $    (3,832)    $    (5,472)

</TABLE>


The accompanying notes are an integral part of these financial statements.


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(page)


CIFG Assurance North America, Inc.
Statements of Changes in Shareholder's Equity and Comprehensive (Loss) Income
($ In '000s, except per share amounts)

<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>

                                                           Years Ended December 31,
                                                        2006                  2005                      2004

Common Shares
Shares at beginning of period                          4,700                    4,700                   4,700
Shares as of December 31                               4,700                    4,700                   4,700

Common Stock
Balance at beginning of period                      $ 19,700                 $ 19,700                $ 19,700
Balance as of December 31                             19,700                   19,700                  19,700

Additional paid-in capital
Balance at beginning of period                       122,850                  122,850                 112,850
Capital contribution                                     ---                      ---                  10,000
Balance as of December 31                            122,850                  122,850                 122,850

Accumulated deficit
Balance at beginning of period                       (18,995)                 (15,163)                 (9,691)
Net loss                                                 (77)  $ (77)          (3,832)  $ (3,832)      (5,472)  $ (5,472)
Balance as of December 31                            (19,072)                 (18,995)                (15,163)

Accumulated other comprehensive (loss) income
Balance at beginning of period                        (1,463)                     (53)                    530
Net change in unrealized (depreciation) of AFS
 securities, net of deferred tax expense (benefit)
 expense of $0 in 2006, $28 in 2005, $(313) in 2004             (118)                     (1,410)                   (583)
Other comprehensive loss                                (118)   (118)          (1,410)    (1,410)        (583)      (583)
Total comprehensive loss                                      $ (195)                   $ (5,242)               $ (6,055)

 Balance as of December 31                            (1,581)                  (1,463)                    (53)
Total Shareholder's Equity                         $ 121,897                $ 122,092              $  127,334

                                                        2006                  2005                      2004
Disclosure of reclassification amounts
Unrealized (depreciation) arising during the period,
 net of taxes                                         $ (114)                $ (1,407)                 $ (590)
Less: reclassification adjustment for net (losses) and
 gains included in net income, net of taxes               (4)                      (3)                      7
Net unrealized (depreciation) of securities,          $ (118)                $ (1,410)                 $ (583)
 net of taxes

</TABLE>

The accompanying notes are an integral part of these financial statements.

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(page)


CIFG Assurance North America, Inc.
Statements of Cash Flows
($ In '000s)

<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>


                                                                                     Years ended December 31,
                                                                             2006             2005              2004

Cash flows from operating activities
Net Loss                                                                     $ (77)                 $ (3,832)        $  (5,472)

Adjustments to reconcile net loss to net cash
 provided (used) by operating activities:
Amortization of bond premium, net                                              283                        (5)              700
Net realized losses  (gains) on sale of investments                              5                         4               (10)
Increase in loss and loss adjustment reserves, net of
 reinsurance                                                                   331                       236               199
Increase in deferred premium revenues                                       52,868                    62,273            31,425
Increase in prepaid reinsurance premiums                                   (41,934)                  (56,722)          (28,975)
Decrease in deferred acquisition costs, net                                    ---                       ---             1,184
(Increase) in premiums receivable                                           (3,767)                   (2,484)             (947)
(Decrease) increase in ceded reinsurance balances payable                   (6,515)                    6,966           (12,766)
Increase (decrease) in ceding commissions payable                                3                      (107)             (372)
Increase  in investment income due and accrued                                (251)                     (878)              (37)
Increase in balances due to affiliates                                       3,808                     1,115               344
(Decrease) Increase in current income taxes payable                           (130)                       88               ---
Net realized and unrealized (gains) losses on credit                           (14)                       32                 5
 derivatives, net
Increase in deferred ceding commissions, net                                 5,106                    11,216             2,051
Other, net                                                                     645                     1,689               844
Total adjustments to net loss                                               10,438                    23,423            (6,355)
Net cash provided (used) by operating activities                            10,361                    19,591           (11,827)

Cash flows from investing activities
(Purchase) of fixed income securities                                      (38,299)                  (92,022)          (49,454)
(Purchase) sale of short-term investments, net                             (14,936)                   43,236            21,902
Proceeds from the sale of fixed income securities                               55                       180             3,760
Proceeds from the maturity of fixed income securities                       40,417                    26,098            31,819
       Net cash (used) provided by investing activities                    (12,763)                  (22,508)            8,027

Cash flows from financing activities
Capital contributions                                                          ---                       ---            10,000
Net cash provided by financing activities                                      ---                       ---            10,000

Effect of exchange rates on cash                                                82                      (263)             (155)

(Decrease) increase in cash                                                 (2,320)                   (3,180)            6,045
Cash at beginning of the year                                                3,388                     6,568               523
Cash at the end of the year                                                $ 1,068                   $ 3,388           $ 6,568

Supplemental disclosures of cash flow information
Federal Income Taxes paid                                                  $   294                   $    60           $   ---

</TABLE>

The accompanying notes are an integral part of these financial statements.

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(page)


CIFG Assurance North America, Inc.
Notes to Financial Statements
December 31, 2006, 2005 and 2004
(Dollar Amounts in Thousands)

1. Business and Organization

CIFG Assurance North America, Inc., ("CIFG NA" or the "Company") was
incorporated on April 11, 2002 in the State of New York. On May 24, 2002 the New
York State Insurance Department (NYSID) granted the Company a license to conduct
surety, credit, residual value and financial guaranty insurance. As of December
31, 2006, CIFG NA was licensed to transact financial guaranty insurance in 45
states and the U.S. Virgin Islands, District of Columbia and the Commonwealth of
Puerto Rico.

In prior years, the shares of CIFG NA were transferred by CIFG NA's direct
parent, CIFG Services, Inc. ("CIFG Services") to a voting trust to comply with
certain U.S. state restrictions regarding the ownership or control of U.S.
insurance companies by a foreign government or any agency or instrumentality
thereof. Under the terms of the Voting Trust Agreement, 80% of the trustees must
be directors or officers of CIFG Services, or Caisse Nationale des Caisses
d'Epargne ("CNCE"), an indirect parent of CIFG Holding. Although the shares are
legally owned by the voting trustees in accordance with the Voting Trust
Agreement, CIFG Services retains the economic benefits of the shares of CIFG NA.

CIFG Services is a management company that was incorporated in the state of
Delaware during 2001. CIFG Services is a wholly-owned subsidiary of CIFG
Guaranty, a reinsurance company that was registered in France by Registre du
Commerce et des Societes on March 30, 2001. CIFG Guaranty is a wholly-owned
subsidiary of CIFG Holding, a French corporation that acts as a holding company
for the CIFG group of companies. CIFG Guaranty owns 100% of the outstanding
shares of CIFG Services and CIFG Europe. CIFG Europe is a French licensed
insurance company authorized to write financial guaranty business throughout 20
member states of the European Union.

On November 17, 2006, Banque Federale des Banques Populaires ("BFBP") and CNCE
combined certain of their operations, through Natexis Banques Populaires
("Natexis). CNCE contributed CIFG Holding and its subsidiaries, as well as other
assets, to Natexis, which was simultaneously renamed "Natixis". As of December
31, 2006, CNCE and BFBP each owned 34.44% of Natixis, with 8.76% owned by Caisse
des Depots et Consignations ("CDC") (via CDC Finance Holding) and 22.36 % was
owned by public float and institutional shareholders. Until November 17, 2006,
CIFG Holding was wholly-owned by CNCE.

In the ordinary course of business, the Company issues financial guaranty
contracts in respect of certain obligations of certain variable interest
entities (VIEs). Specifically, CIFG NA has issued contracts in respect of
certain obligations of multiple distinct New York State business trusts,
collectively known as the New Generation Funding Trusts. The financial guaranty
contracts generally provide credit protection to investors who have entered into
credit derivative transactions with the respective VIEs. Other than the
transactions described above, the VIEs own no assets and have no outstanding
debt and, by virtue of the credit support provided by the financial guaranty
contracts, CIFG NA is considered to be the primary beneficiary of these VIEs.
Accordingly, these VIEs are consolidated.

Each of CIFG Guaranty, CIFG Europe and CIFG NA has received an insurer financial
strength rating of "AAA" from Fitch Ratings, an insurer financial strength
rating of "Aaa" from Moodys Investors Services Inc., and an insurer financial
strength and financial enhancement ratings of


-7-


(page)


"AAA" from Standard and Poor's Rating Services ("S&P"), the highest rating
assigned by each rating agency.

2. Significant Accounting Policies

The financial statements have been prepared in accordance with accounting
principles generally accepted in the United States of America (U.S. GAAP), which
for insurance and reinsurance companies differ in certain respects from the
accounting practices prescribed or permitted by NYSID. The preparation of
financial statements in conformity with U.S. GAAP requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements, and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

Significant accounting policies are as follows:

Investments
The Company's investment portfolio is accounted for on a trade-date basis.
Investments in fixed income securities that are considered available-for-sale
("AFS") are carried at fair value, with unrealized gains and losses, net of
deferred taxes, reflected in Other Comprehensive Income ("OCI"). Short-term
investments are stated at amortized cost, which approximates fair value.
Unrealized gains and losses are calculated using amortized cost as the basis.
AFS investments denominated in currencies other than the U.S. dollar are
accounted for at their U.S. dollar equivalent using exchange rates in effect at
the balance sheet date. Changes in values due to currency fluctuations are
recorded as unrealized gains or losses on AFS securities, net of deferred taxes,
in OCI.

For purposes of computing amortized cost, premiums and discounts are accounted
for using the effective yield method over the remaining terms of securities
acquired. For premium on bonds that do not have call features, such premiums are
amortized over the remaining terms of the securities.

The Company's process for identifying declines in the fair value of investments
that are other than temporary involves consideration of multiple factors. These
factors include current economic conditions, market prices, issuer-specific
developments, the time period during which there has been a significant decline
in value and the Company's intent and ability to hold the investment for a
sufficient period of time for the value to recover. If the Company's analysis of
these factors results in the determination that the decline is other-than
temporary, CIFG NA writes down the carrying value of the investment to fair
value and records a realized loss. As of December 31, 2006 and 2005, there were
no declines in fair value deemed to be other than temporary.

Realized gains and losses on the sale of investments are determined on the basis
of first in, first out ("FIFO"). Investment income is recorded when earned.

Deferred Acquisition Costs (DAC) and Deferred Ceding Commissions
Certain costs incurred, primarily related to and varying with the production of
new financial guaranty business, excluding financial guaranty contracts
accounted for as derivatives, have


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(page)


been deferred (DAC). These costs include direct and indirect expenses related to
underwriting and contract origination expenses, rating agency fees and premium
taxes.

The Company receives ceding commissions under its ceded reinsurance contracts as
compensation for acquisition costs incurred. Ceding commissions are deferred.

The Company considers deferred premium revenue and the present value of future
premiums due to the Company under installment contracts when determining the
recoverability of DAC. DAC and deferred ceding commissions are amortized into
the income statement over the periods in proportion to the earnings of the
related premiums. Deferred ceding commissions are presented in the balance sheet
net of DAC.

Premium Revenue Recognition
Premiums received at the inception of the policy, or otherwise "up-front"
premiums, are earned pro-rata over the period of the underlying risk in
proportion to the amount of risk outstanding over the expected period of
coverage. The amount of risk outstanding is equal to the sum of the par amount
of the debt insured. Installment premiums written are recognized ratably over
each installment period. If a guaranteed issue is retired early, the remaining
deferred premium will be earned, and any related unamortized DAC and deferred
ceding commissions will be recognized immediately. Deferred premium revenue and
prepaid reinsurance premiums represent the portion of gross and ceded premium
written, respectively, which has been allocated to the unexpired underlying
risk.

Losses and Loss Adjustment Expense Reserves
Loss and loss adjustment reserves are established for financial guaranty
contracts subject to SFAS 60 - "Accounting and Reporting by Insurance
Enterprises" ("FAS 60"). The reserve for losses and loss adjustment expenses
consists of active credit reserves and case basis loss and loss adjustment
expense reserves. The development of active credit reserves is based upon
estimates of the expected levels of debt service payment defaults on currently
guaranteed issues that are not presently or imminently in default, and by
reference to financial guaranty industry historical loss experience. The
determination of the reserve is primarily based on an analysis of expected
losses as a percentage of expected premium on the outstanding insured portfolio,
pursuant to which, active credit reserves are provided on a periodic basis as a
function of regular financial guaranty premiums earned to date.

The Company monitors active credit reserves on an ongoing basis and adjusts
these reserves based on actual loss experience, considering the changes in the
mix of business and economic conditions. Case basis loss reserves will be
recorded when it is probable that a loss has been incurred and the amount of
such loss can be reasonably estimated. When losses occur, case basis loss
reserves will be established in an amount that is sufficient to cover the
present value of the anticipated defaulted debt service payments over the
expected period of default and estimated expenses associated with settling the
claims, less estimated recoveries under salvage or subrogation rights. The
active credit reserve is available to be applied against future case basis loss
reserves and any related adjustments. As of December 31, 2006 and 2005, there
were no case basis loss reserves recorded.

The Company's loss reserving policy, described above, is based on guidance
provided in FAS 60, SFAS 5 - "Accounting for Contingencies", and analogies to
Emerging Issues Task Force


-9-


(page)


(EITF) 85-20, "Recognition of Fees for Guaranteeing a Loan." FAS 60 requires
that, for short-duration contracts, a liability for unpaid claim costs relating
to insurance contracts, including estimates of costs relating to incurred but
not reported claims, be accrued when insured events occur. Additionally, SFAS 5
requires that a loss be recognized where it is probable that one or more future
events will occur confirming that a liability has been incurred at the date of
the financial statements and the amount of loss can be reasonably estimated.

Management believes that the Company's reserves are adequate to cover the
ultimate net cost of claims. However, because the reserves are based on
management's judgment and estimates, there can be no assurance that the ultimate
liability will not exceed such estimates.

Income Taxes
The Company is included in the consolidated U.S. tax return of CIFG Services.
The tax provision for CIFG NA is determined on a stand-alone-basis.

Deferred income taxes are provided with respect to the temporary differences
between the tax bases of assets and liabilities and the reported amounts in the
financial statements that will result in deductible or taxable amounts in future
years when the reported amount of the asset or liability is recovered or
settled. Such temporary differences relate principally to premium revenue
recognition, deferred acquisition costs, deferred ceding commissions, net
operating losses, and unrealized appreciation or depreciation of investments. A
valuation allowance is established when it is more likely than not (a likelihood
of more than 50 percent) that some portion or the entire deferred tax asset will
not be realized.

Reinsurance
In the normal course of business, the Company seeks to reduce its financial
guaranty exposure by reinsuring certain levels of risk with other insurance
enterprises or reinsurers. Reinsurance premiums ceded and related commissions
recorded are deferred and recognized in earnings on a pro-rata basis over the
period the related financial guaranty coverage is provided.

Intangible Assets
In prior years, the Company's acquisition of Western Continental Insurance
Company ("WCIC") resulted in an intangible asset for the fair value of the
insurance licenses acquired, which is carried in the balance sheet. The Company
has determined that the licenses have an indefinite life and, therefore, are not
being amortized. The recoverability of the carrying value of the intangible
asset is evaluated annually based on a review of forecasted discounted cash
flows and by referencing other available information. As of December 31, 2006
and 2005, there were no adjustments to the carrying value of the intangible
asset.

Derivative Contracts
The Company has issued insurance policies that do not qualify for the financial
guaranty scope exception under FAS 133 and 149. These contracts are recorded at
fair value which is determined using models developed by the Company. The models
include various assumptions such as an expected loss projection. The valuation
results from these models could differ materially from amounts that might
actually be realized in the market.

The Company believes that the most meaningful income statement presentation of
derivative revenues is to reflect them as premiums written when installments are
received, as premium earned over the installment period, with changes in fair
value recorded as "net realized and


-10-


(page)


unrealized gains (losses) on credit derivatives." Derivative assets and
liabilities are presented on a gross basis in the balance sheet.

Variable Interest Entities (VIEs)
From time to time, the Company guarantees payment obligations of counterparties,
including VIEs that may enter into credit default swaps ("CDS") with third
parties. The Company provides financial guarantees covering certain obligations
of these entities at market rates and consolidates those VIEs where the Company
is determined to be the primary beneficiary.

Foreign currency translation
Functional currencies are generally the currencies of the local operating
environment. CIFG NA's functional currency is the U.S. dollar. CIFG NA's
financial statements include balances denominated in currencies other than the
U.S. dollar which are converted to the U.S. dollar at exchange rates in effect
at the balance sheet dates with income statement accounts converted using daily
exchange rates which are averaged on a year-to-date basis.

Foreign currency transaction gains and losses, as well as gains and losses
arising from the re-valuation of assets (excluding AFS investments) and
liabilities denominated in non-functional currencies are reflected in net
income.

Recent Accounting Developments
In February 2006, the Financial Accounting Standards Board (the "FASB") issued
SFAS No. 155, "Accounting for Certain Hybrid Financial Instruments" ("FAS 155"),
which amends SFAS No. 133, "Accounting for Derivative Instruments and Hedging"
("FAS 133") and SFAS No. 140, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishment of Liabilities." FAS 155 permits an election
for hybrid instruments that contain an embedded derivative that otherwise would
require bifurcation to irrevocably be accounted for at fair value, with changes
in fair value recognized in the statement of operations and comprehensive
income. The fair value election may be applied on an instrument-by-instrument
basis. FAS 155 also eliminates a restriction on qualifying special purpose
entities from holding passive derivative instruments. FAS 155 is effective for
all financial instruments acquired or issued after December 15, 2006.

The FASB's Derivative Implementation Group ("DIG") issued DIG Issue B40 -
"Embedded Derivatives: Application of Paragraph 13(b) to Securitized Interests
in Prepayable Financial Assets" ("DIG B40") in December of 2006. DIG B40
provides a scope exception on performing embedded derivative tests required
under FAS 133 related to rate of returns for certain securitized interests. DIG
B40 is required to be applied upon adoption of FAS 155. The Company is in the
process of evaluating the impact of FAS 155 and DIG B40 on its financial
statements.

In June 2006, the FASB issued FASB Interpretation ("FIN") No. 48, "Accounting
for Uncertainty in Income Taxes", an interpretation of SFAS No. 109, "Accounting
for Income Taxes" ("FAS 109"). FIN 48 requires that the Company determine
whether a tax position is more likely than not to be sustained under
examination, including resolution of any related appeals or litigation
processes, based on the technical merits of the position. If a tax position does
not meet the more likely than not threshold, the benefit is not recognized in
the financial statements. If the Company determines that a position meets the
recognition threshold, the position is measured to determine the amount of the
benefit that may be recognized in the financial statements based on criteria set
forth in the pronouncement. FIN 48 also provides guidance on derecognition,
classification of

-11-


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interest and penalties, accounting in interim periods and disclosure. FIN 48 is
applicable for fiscal years beginning after December 15, 2006. The Company is in
the process of evaluating the impact of FIN 48 on its financial statements.

The FASB issued FAS No. 157, "Fair Value Measurement" ("FAS 157") in September
2006. This pronouncement defines fair value, establishes a framework for
measuring fair value and enhances the footnote disclosures pertaining to fair
value. Fair values are evaluated using a hierarchy (Levels 1, 2, & 3), which is
based on the level of inputs used for the valuation. The input levels range from
quotable market prices to unobservable inputs such as an entity's own internal
data. The disclosure requirements vary amongst the fair value hierarchy levels.
FAS 157 is applicable to financial statements issued for fiscal years beginning
after November 15, 2007 and for interim periods within those fiscal years. The
Company is in the process of evaluating the impact of FAS 157 on its financial
statements.

On February 15, 2007 the FASB issued SFAS No. 159 - "The Fair Value Option for
Financial Assets and Financial Liabilities including an amendment of FASB No.
115" ("FAS 159"), which provides companies with an option to report selected
financial assets and liabilities at fair value. The objective of this
pronouncement is to reduce both complexity in accounting for financial
instruments and the volatility in earnings caused by measuring related assets
and liabilities differently. FAS 159 also establishes presentation and
disclosure requirements designed to facilitate comparisons between companies
that choose different measurement attributes for similar types of assets and
liabilities. FAS 159 is applicable for fiscal years beginning after November 15,
2007. The Company is in the process of evaluating the impact of FAS 159 on its
financial statements.

Due to the diversity of accounting practices in the financial guaranty industry,
the FASB undertook a project in 2005 to consider the accounting model for
financial guaranty insurers. An exposure draft is expected in 2007. The current
accounting model used by the Company may change significantly. Until the FASB
issues specific guidance, the Company intends to continue to apply its existing
accounting policies. It is not possible to predict the impact that the FASBs
project may have on the Company's accounting practices.

3. Related Parties

Administrative Services and Property Agreement
The Company participates in a Management Services Agreement with CIFG Services,
which has been approved by the NYSID. Under this agreement CIFG Services
provides the Company with management services, including office space and
furniture and equipment used by the Company. Under the terms of this agreement,
operating expenses are allocated based on the requirements of Regulation 30 of
the NYSID. In 2006, 2005 and 2004, expenses charged by CIFG Services to the
Company under this agreement were $33.5, $23.5, and $21.3 million, respectively.

Facultative Reinsurance Agreements
CIFG Guaranty participates in a Master Facultative Reinsurance Agreement
("Agreement") with CIFG NA. Under the terms of this Agreement, CIFG Guaranty has
the option to reinsure up to 90% of CIFG NAs acceptable risks. CIFG Guaranty
pays a ceding commission on premiums ceded under the terms of this Agreement.
Premiums ceded by CIFG NA and assumed by CIFG

-12-


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Guaranty under this facultative reinsurance agreement were $84.2, $84.0, and
$48.7 million for 2006, 2005 and 2004, respectively.

As of December 31, 2006 and 2005, CIFG Guaranty pledged to CIFG NA U.S. dollar
denominated investments with a fair value of $273.0 and $168.2 million
respectively, to support its reinsurance coverage in accordance with New York
State insurance regulatory requirements. The assets pledged are maintained in a
secured trust on behalf of CIFG NA, for its sole use and benefit in accordance
with New York State insurance regulation 11NYCRR 126.

Financial Guarantees
In the normal course of business, CIFG NA enters into certain financial guaranty
contracts with affiliates on terms that management believes are on an
arms-length basis. The affiliates involved are Credit Foncier ("Foncier") and
IXIS Corporate & Investment Bank ("IXIS CIB"). Gross premiums written on
policies closed with IXIS CIB during 2006, 2005 and 2004 were $2.8 million, $608
thousand and $207 thousand, respectively. Gross premiums written on policies
with Foncier during 2006, 2005 and 2004 were nil, $8.9 million and $4.5 million,
respectively.

Capital Maintenance Agreement
The Company has entered into an irrevocable keep-well capital maintenance
agreement with CIFG Guaranty. The agreement requires CIFG Guaranty to contribute
capital to the Company if at any time the capital of the Company falls below $80
million, so as to maintain minimum capital at that level.

Tax Sharing Agreement
The Company files a consolidated Federal income tax return with CIFG Services,
and files separate-company state and local income tax returns. The method of
allocation between the companies in the consolidated Federal income tax return
is subject to a tax allocation agreement approved by the Board of Directors of
CIFG NA and the NYSID. Pursuant to this tax allocation agreement between the
companies, total Federal income tax expense is determined on a separate company
basis. Members with losses record tax benefits to the extent such losses are
recognizable on a separate company basis. Inter-company tax balances are settled
on a periodic basis, no less than annually.

4. Deferred Acquisition Costs and (Deferred Ceding Commissions)
Acquisition costs and ceding commissions are deferred and amortized in
proportion to the related premium revenue to be recognized in future periods.
The commission income and acquisition costs deferred and related amortization
are as follows:

<TABLE>
<CAPTION>
<S>     <C>    <C>

                                                                        As of December 31,
                                                                        2006            2005

Deferred ceding commissions, net,
 beginning of period                                                $   (13,267)     $   (2,051)
Current year costs:
Deferred acquisition costs                                               16,419          12,715
Deferred ceding commissions                                             (23,575)        (23,448)
 Net                                                                     (7,156)        (10,733)
Net amortization during the period                                        2,050            (483)
Deferred ceding commissions, net, end of
 period                                                             $   (18,373)    $   (13,267)

</TABLE>

-13-


(page)


During the fourth quarter of 2006 the Company conducted its annual DAC study,
which encompassed both a review of deferrable costs and the amortization pattern
of DAC and deferred ceding commissions. In addition, the Company enhanced its
policy systems in 2006, allowing it to update its exposure with more current
policy information received from external parties. These modifications have
resulted in a change in accounting estimate for DAC, the effect of which has
been reflected on a prospective basis in these financial statements in
accordance with SFAS No. 154 - "Accounting Changes and Error Corrections, a
replacement of APB No. 20 and FASB Statement No. 3". Approximately $1.5 million
is included in the "amortization of deferred acquisition costs" as a charge to
the income statement.

5. Investments

The Company's investment objective is to optimize after-tax returns while
emphasizing the preservation of capital through the maintenance of high-quality
investments with adequate liquidity. The weighted-average credit quality of the
fixed income portfolio, which excludes short-term investments, was AAA with no
investment rated below BBB as rated by S&P.

Short-term investments consist of United States government obligations (61%) and
money market instruments (39%).

The following tables set forth the amortized cost and fair value of the fixed
income securities and short-term investments included in the investment
portfolio of CIFG NA:

<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>    <C>

                                                              December 31, 2006

                                                        Gross           Gross
                                        Amortized     Unrealized      Unrealized     Fair
                                        Cost            Gains           Losses       Value

United States government obligations    $  68,453      $       8       $    (897)   $   67,564
State and municipal obligations            16,642            ---            (452)       16,190
US Agencies                                43,027              3            (347)       42,683
Corporate obligations                       4,118            ---             (26)        4,092
Non- US *                                   3,744            130             ---         3,874
Short term                                 39,588            ---             ---        39,588
Total                                   $ 175,572      $     141       $  (1,722)   $  173,991


                                                              December 31, 2005
                                                        Gross           Gross
                                        Amortized     Unrealized      Unrealized     Fair
                                        Cost            Gains           Losses       Value

United States government obligations    $  99,307      $      27       $  (1,050)  $    98,284
State and municipal obligations            15,682             21            (246)       15,457
US Agencies                                14,070             46            (241)       13,875
Corporate obligations                       4,144              4             ---         4,148
Non- US *                                   1,184            ---             (24)        1,160
Short term                                 24,652            ---             ---        24,652
Total                                   $ 159,039      $      98       $  (1,561)  $   157,576

<FN>
* Principally euro-denominated debt securities issued by European governments and European municipalities.
</FN>

</TABLE>

Fixed income investments carried at fair value of approximately of $9.1 and $9.2
million as of December 31, 2006 and 2005, respectively, were on deposit with
various regulatory authorities to comply with insurance laws.

-14-


(page)


The Company maintains a portion of its cash and investments under a custody
agreement with one financial institution that the Company considers of high
quality.

The following table sets forth the distribution by contractual maturity of
investments at amortized cost and fair value at December 31, 2006 and 2005.
Actual maturities may differ from contractual maturities because borrowers may
have the right to call or prepay obligations.

<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>    <C>

                                                                  December 31,
                                                   2006                          2005
                                        Amortized     Fair Value      Amortized     Fair Value
                                            Cost                          Cost
Due in one year or less                 $  73,829      $  73,730      $  61,110      $  60,986
Due after one year through five years      76,219         75,086         75,725         74,594
Due after five years through ten years     22,484         22,337         19,164         19,072
Due over ten years                          3,040          2,838          3,040          2,924
Total                                   $ 175,572      $ 173,991      $ 159,039      $ 157,576

</TABLE>

As of December 31, 2006 and 2005 no single issuer, excluding U.S. government
obligations, exceeds 10% of shareholder's equity.

The following investment table presents the Company's gross unrealized losses
and fair value, aggregated by investment category and length of time that
individual securities have been in a continuous unrealized loss position at
December 31, 2006 and 2005:

<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>    <C>    <C>    <C>

                                       Greater than 12 months      Less than 12 months        Total

                                        Fair       Unrealized      Fair     Unrealized      Fair        Unrealized
        2006                            Value        Losses        Value      Losses        Value         Losses

United States government
obligations                           $  58,263     $    (879)    $   8,578   $    (18)    $  66,841      $   (897)
State and municipal
obligations                              15,166          (442)        1,023        (10)       16,189          (452)
US Agencies                              10,250          (237)       28,974       (110)       39,224          (347)
Corporate obligations                       ---           ---         4,093        (26)        4,093           (26)
Non-US *                                    ---           ---           ---        ---           ---           ---
Total temporarily impaired
fixed income securities               $  83,679     $  (1,558)    $  42,668   $   (164)    $ 126,347      $ (1,722)

                                       Greater than 12 months      Less than 12 months        Total

                                        Fair       Unrealized      Fair     Unrealized      Fair        Unrealized
        2005                            Value        Losses        Value      Losses        Value         Losses

United States government
obligations                           $  46,792     $    (559)    $  42,714   $   (491)    $  89,506      $ (1,050)
State and municipal
obligations                                 ---           ---         9,197       (246)        9,197          (246)
US Agencies                                 ---           ---        10,377       (241)       10,377          (241)
Corporate obligations                       ---           ---           ---        ---           ---           ---
Non-US *                                    ---           ---         1,160        (24)        1,160           (24)
Total temporarily impaired
fixed income securities               $  46,792     $    (559)    $  63,448   $ (1,002)    $ 110,240      $ (1,561)

<FN>
* Principally euro-denominated debt securities issued by European governments and European municipalities.
</FN>

</TABLE>

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(page)


The unrealized losses in the Company's investment portfolio were caused by
increases in interest rates. The Company evaluated the credit rating of these
securities and noted no significant credit deterioration. Since the decline in
market value is related to changes in interest rates and not credit quality, and
the Company has the intent and ability to hold the investments until the value
recovers, the Company does not consider these investments to be other than
temporarily impaired as of December 31, 2006 and 2005.

Net investment income was comprised of the following:

<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>

                                                                   December 31,
                                                    2006             2005             2004
Fixed income securities                             $  4,815          $   3,511      $    1,086
Short-term investments                                 2,064                729           1,326
Total Investment income                                6,879              4,240           2,412
Investment expenses                                     (202)              (142)           (139)
Net investment income                               $  6,677          $   4,098      $    2,273

</TABLE>

Net realized (losses) gains from fixed income securities were comprised of the
following:

<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>

                                                                   December 31,
                                                    2006             2005             2004
Gross gains                                         $    ---          $     ---      $       10
Gross losses                                              (5)                (4)            ---
 Net realized capital (loss)
 gains                                              $     (5)         $      (4)     $       10

</TABLE>

Proceeds from the sale of fixed income securities were $55 thousand, $180
thousand, and $3.8 million for the periods ended December 31, 2006, 2005 and
2004, respectively.

6. Reinsurance

The Company participates in a Facultative Reinsurance Agreement with CIFG
Guaranty. The Company utilizes reinsurance principally to increase capacity and
to reduce the risk of loss on financial guaranty business underwritten. The
Company is liable with respect to reinsurance ceded to the extent that CIFG
Guaranty fails to meet its obligation to the Company. CIFG NA regularly monitors
the financial condition of CIFG Guaranty and believes there is no material
unrecoverable reinsurance.

-16-


(page)


The effect of reinsurance on premiums written was as follows:

<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>

                                                                   December 31,
                                                    2006             2005             2004
Direct premium written                              $ 98,808          $  84,408      $   45,058
Assumed premium written                                2,857              9,848          10,088
Ceded premium written                                (84,163)           (83,958)        (48,747)
Net premiums written                                  17,502             10,298           6,399

Change in direct deferred premium revenue            (56,116)           (60,054)        (29,625)
Change in assumed deferred premium
 revenue                                               3,350             (2,184)         (3,181)
Change in ceded deferred premiums revenue             41,841             56,692          30,218
Net premiums earned                                 $  6,577          $   4,752      $    3,811

</TABLE>

Net earned premium in 2006, 2005 and 2004 does not include any refunded earned
amounts.

Ceding commissions on reinsurance ceded to CIFG Guaranty was $25.2, $25.2, and
$14.6 million during 2006, 2005 and 2004, respectively.

7. Income Taxes

The current provision for federal income taxes was $82 thousand, $148 thousand,
and nil for the years ended December 31, 2006, 2005 and 2004. During 2006, an
estimated tax payment of $294 thousand was made for alternative minimum taxes
("AMT").

AMT paid in current and prior years of $354 thousand are available as AMT
credits to be carried-forward and utilized in the event that regular tax exceeds
AMT tax in the future.

The Company's total tax provision differs from the amount that would be obtained
by applying the tax rate to pre-tax book income due to the impact of disallowed
expenses, tax exempt interest and the establishment of a valuation allowance.

-17-


(page)


The tax effects of temporary differences that give rise to deferred tax assets
and liabilities as of December 31, 2006 and 2005 are presented below:

<TABLE>
<CAPTION>
<S>     <C>    <C>

                                                                        As of December 31,
                                                                        2006            2005

Deferred tax assets:
Net operating loss carry-forward                                      $     599      $    2,002
Deferred premium revenue                                                    141             203
Deferred ceding commission, net                                           6,431           4,644
Unrealized loss on investments                                              687             512
Other                                                                       669             529
Less: valuation allowance                                                (7,604)         (7,220)
Total deferred tax assets                                                   923             670

Deferred tax liabilities:
Accretion of discount                                                       169             119
License amortization                                                        745             551
Other                                                                         9             ---
Total deferred tax liabilities                                              923             670
Net deferred tax assets                                               $     ---      $      ---

</TABLE>

In 2006, the Company used approximately $4.1 million in net operating loss
carry-forwards generated in prior years to offset taxable income in the current
year. At December 31, 2006, the Company had net operating loss carry-forwards
available to offset future taxable income of $1.7 million which will expire in
2024.

The Company recognizes deferred tax assets and liabilities for the expected
future tax consequences of events that have been included in the financial
statements or tax returns. Deferred tax assets and liabilities are determined
based on the difference between the financial statement and tax bases of assets
and liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse. The effect on tax assets and liabilities
for a change in tax rates is recognized in income in the period that includes
the enactment date.

The Company has yet to establish an earnings history. As a result, management
has established a valuation allowance to offset net deferred tax assets.

8. Dividend Restrictions

Under New York State insurance law, CIFG NA may pay a dividend only from earned
surplus subject to the maintenance of a minimum capital requirement. Any
dividends declared or paid may not exceed, together with all other dividends
declared or distributed by CIFG NA during the next preceding twelve months, the
lesser of (i) 10% of its shareholders surplus shown on its last filed statement,
or (ii) one hundred percent of adjusted net investment income (as defined under
New York Insurance Law), for such 12-month period without prior approval of the
Superintendent of the NYSID. The Company has not declared or paid any dividends
since its inception given that it has no earned surplus and is therefore
ineligible to pay a dividend.

-18-


(page)


9. Statutory Accounting Practices

U.S. GAAP differs in certain significant respects from accounting practices
prescribed or permitted by the NYSID. In 2006, the NYSID performed a routine
triennial examination of the Company; an examination report has not been issued
yet. The Company does not anticipate any material adjustments to its statutory
capital and surplus as a result of this examination.

The following summarizes the significant differences between the statutory
annual statement as filed and U.S. GAAP.

<TABLE>
<CAPTION>
<S>     <C>    <C>

                                                                        As of December 31,
                                                                        2006            2005
U.S. GAAP Shareholders Equity                                         $ 121,897      $  122,092
Statutory Adjustments:
Premium revenue recognition                                              (3,991)         (2,521)
Intangible asset                                                         (8,331)         (8,373)
Loss and loss adjustment expense reserves, net                              860             529
Contingency reserves, net                                               (10,597)         (6,316)
Deferred income taxes                                                    14,123          11,824
Unrealized losses, net                                                    1,838           1,463
Fair value of derivatives, net                                               39              53
Deferred Ceding commission income                                           891           1,712
Other liabilities                                                            59              22
Non admitted assets                                                     (12,968)        (11,910)
Statutory capital and surplus                                         $ 103,820      $  108,575

</TABLE>

The principal differences result from the following statutory accounting
practices:

     *    Upfront premiums are recognized as earned when related principal and
          interest have expired while under GAAP, premiums are recognized as
          earned over the expected coverage period;

     *    Liabilities for deferred premium revenues are shown net of amounts
          ceded under reinsurance contracts while under GAAP, they are recorded
          at their gross amounts;

     *    Acquisition costs are charged to operations as incurred. Under GAAP,
          certain costs are deferred and amortized as the related premiums are
          earned;

     *    Intangible assets were charged directly to surplus as a result of the
          statutory mergers while under GAAP the Company established an
          intangible asset representing the value of state licenses, which is
          subject to impairment tests;

     *    A contingency reserve is computed on the basis of statutory
          requirements, and reserves for case basis losses and LAE are
          established, at present value, for specific insured issues that are
          identified as currently or likely to be in default. Under GAAP, case
          basis loss reserves are established at present value based on CIFG NAs
          reasonable estimate of the identified losses and LAE, plus estimates
          for reserves for the portfolio of active credits on the insured
          obligations written;

-19-


(page)


     *    If applicable, a provision is made for ceded unearned premiums and
          losses recoverable in excess of funds held plus other qualifying
          collateral, on business reinsured with companies not qualified or
          licensed in the State of New York through a direct charge to surplus,
          while under GAAP there is no such provision;

     *    Fixed income securities are carried at amortized cost; under GAAP
          these securities are designated as available-for-sale and carried at
          fair value, with the related unrealized gains or losses recognized as
          a separate component of shareholders equity net of applicable deferred
          federal income tax;

     *    Deferred tax assets in excess of certain defined limitations are
          excluded from the balance sheet and charged to surplus as a
          non-admitted asset. Under GAAP, deferred federal income taxes reflect
          the net tax effect of temporary differences between the carrying
          amount of GAAP basis assets and liabilities and the amounts used for
          federal income tax purposes. The change in net deferred taxes,
          excluding the amount related to unrealized gains and losses, is a
          component of net income;

     *    Financial guarantees are accounted for as insurance contracts, while
          under GAAP, certain financial guarantees that do not qualify as
          insurance contracts under FAS 133 are recorded at fair value;

     *    Ceding commission income is recognized in income when earned and can
          offset acquisition costs, but a liability is established for any
          amount of ceding commissions in excess of acquisition expenses. Under
          GAAP, ceding commission income is deferred and amortized as the
          related ceded premiums are expensed.

     *    Certain assets classified as non-admitted are charged directly to
          surplus but are reflected as assets under GAAP.

The NYSID has recently undertaken a review of the industry practice to record
contingency reserves on a net basis specifically in the case where an
unauthorized reinsurer has provided appropriate collateral to secure the ceded
contingency reserve. Currently, the NYSID has not concluded their review nor
have they issued any new statutory guidance on this subject. As a result, the
Company will maintain its current treatment of the ceded contingency reserve
until the NYSID has concluded their review and issued final statutory guidance,
which is expected to be applied prospectively, if different than the Company's
current statutory accounting treatment. As of December 31, 2006 the Company has
recorded a gross contingency reserve of $76.3 million which is offset by a ceded
contingency reserve of $65.7 million in its statutory financial statements.

CIFG NA's statutory financial statements are prepared in conformity with
accounting practices prescribed or permitted by the NYSID. Prescribed statutory
accounting principles include state laws, regulations and general administrative
rules, as well as a variety of the National Association of Insurance
Commissioners (NAIC) publications. The NAIC Statements of Statutory Accounting
Principles (SSAP) have been adopted as a component of prescribed or permitted
practices by the State of New York. The State of New York has adopted certain
prescribed practices which vary from those found in SSAP. These differences have
no impact on the net income and the determination of statutory surplus.
Statutory capital and surplus was $103.8

-20-


(page)


million and $108.6 million at December 31, 2006 and 2005, respectively, which
meets New York State minimum capital requirements. Qualified statutory capital
(statutory capital and surplus plus contingency reserve) was $114.4 and $114.9
million at December 31, 2006 and 2005, respectively. Statutory net loss for CIFG
NA was $(2.1), $(2.5) and $(5.2) million for the periods ending December 31,
2006, 2005 and 2004, respectively.

10. Net Insurance in Force

The financial guaranty contracts issued by CIFG NA guaranty the scheduled
payments of principal and interest on municipal and structured obligations. The
net exposure retained on any risk is subject to formalized underwriting
guidelines.

As of December 31, 2006, insurance in force, net of cessions, had a range of
legal maturities of 1-74 years. However, the expected life of these transactions
may vary substantially from the legal final maturities, and are influenced by
actual performance, market conditions and business objectives of the issuers.
The expected maturities of these policies are between 1-46 years which are
diversified among 1,430 outstanding policies. The weighted-average (based on
par) expected life of the guaranteed portfolio is 10.57 years.

-21-


(page)


The distribution of gross and net par in force by bond type is presented in the
following table:

<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>    <C>    <C>    <C>

Insurance Inforce                                      2006                                2005
                                         Gross                 Net              Gross                   Net

Global Public Finance and
Infrastructure
State GO And Appropriation              $ 5,606,167            $ 760,469       $ 3,716,422               $ 572,445
City And County GO                        3,977,717              541,329         1,186,237                 168,286
Utility Systems                           1,123,985              274,201           680,533                  83,185
Airports                                  1,471,021              253,390         1,406,341                 188,661
Health Care                               1,491,191              246,967           880,507                 130,631
State Tax Backed                          1,518,447              216,326         1,183,155                 155,092
Higher Education                          1,309,316              194,245           553,572                  80,973
Sovereign/Sub Sovereign                   1,374,633              182,494         1,232,554                 183,187
Public Power                                739,047              171,468           348,752                  62,857
Special Revenue                             725,562              140,056           244,910                  48,860
Toll Roads                                  849,642              106,306           822,846                  88,051
Local Tax Backed                            387,624               78,745           228,134                  24,491
Municipal Housing                           748,649               74,865           177,794                  17,779
Transportation                              527,218               52,722           489,794                  76,495
Investor-Owned Utilities                    230,654               23,065           314,947                  48,979
Project Finance                              87,244                8,724            77,852                   7,785
Total                                    22,168,117            3,325,372        13,544,350               1,937,757

Global Structured Finance
CDO High Yield                           10,900,485            1,096,113         4,579,475                 596,952
CDO Asset Backed                          7,373,885              863,411         4,373,598                 472,023
CDO Investment Grade                      4,746,055              616,197         3,304,315                 471,898
Home Equity                               2,882,048              288,205         2,510,373                 251,037
Commercial Mortgage Backed                2,426,124              242,612         1,061,265                 106,126
Student Loans                             1,672,960              167,296           631,674                  63,167
Lease Assets                                804,747              124,039         1,061,992                 190,425
Commercial Asset Backed                     656,164               65,616           466,517                  46,652
Residential Mortgage Backed                 570,573               57,057           778,698                  77,870
Other                                       179,407               17,941           288,658                  44,649
Credit Cards                                101,000               10,100           101,000                  10,100
Auto Loans                                   71,822                7,182           307,822                  37,500
Total                                    32,385,270            3,555,769        19,465,387               2,368,399
Grand Total                            $ 54,553,387          $ 6,881,141      $ 33,009,737             $ 4,306,156

</TABLE>

The Company limits its exposure to losses under its financial guarantees through
a formal credit approval process and by maintaining a surveillance function
which monitors insured transactions. Additionally, the Company mitigates credit
risk by underwriting investment grade transactions and maintaining collateral
quality requirements on asset-backed obligations, as well as through
reinsurance. As of December 31, 2006, there were no guaranteed transactions
rated below investment grade.

Included in the table above is $0.2 billion of direct net par exposure related
to securitization transactions supported by sub-prime mortgage assets. As of
December 31, 2006, all of this exposure has underlying ratings of triple-A by at
least two rating agencies prior to the benefit of financial guaranty provided by
the Company, except for $5.9 million which was issued in 2004 and is rated in
the A-minus rating category.

In addition, CIFG NA has indirect net exposure to sub-prime mortgage assets as a
result of guarantees of $0.8 billion of senior tranches of multi-sector
collateralized debt obligations that

-22-


(page)


include varying proportions of sub-prime mortgage assets in their collateral
pools. As of December 31, 2006, all of this exposure has underlying ratings of
triple-A by at least two rating agencies prior to the benefit of the financial
guaranty provided by the Company.

Gross par written includes $250 million, $505 million and $2.3 billion of
assumed premium business for each of the three years ended December 31, 2006,
2005 and 2004, respectively.

Gross par outstanding includes $3.9 billion and $5.0 billion of assumed
business, at December 31, 2006 and December 31, 2005, respectively.

Gross and net par outstanding includes financial guaranty contracts treated as
derivatives under FAS 133.

The distribution of gross and net par in force by geographical location is
presented in the following table:

<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>    <C>    <C>    <C>


                                           2006              % of                        2005                  % of
                                Gross                   Net        Net           Gross                   Net          Net
United States:
Florida                      $   1,538,190          $    683,957     9.9%     $      681,672         $      68,167       1.6%
New York                         3,870,534               613,447     8.9%          3,264,855               556,215      12.9%
Puerto Rico                      1,368,371               236,955     3.4%          1,168,357               217,496       5.1%
Illinois                         1,795,392               179,539     2.6%          1,325,550               132,555       3.1%
California                       1,054,063               165,509     2.4%            901,917               151,317       3.5%
New Jersey                       1,249,406               152,441     2.2%            835,701               111,070       2.6%
Texas                              880,098               136,037     2.0%            544,034               102,431       2.4%
Pennsylvania                     1,020,536               102,054     1.5%            165,159                16,516       0.4%
Louisiana                          961,475                96,148     1.4%              4,800                   480       0.0%
Massachusetts                      297,565                78,507     1.1%            100,587                58,809       1.4%
Other states                     5,940,820               616,582     9.0%          2,599,691               282,468       6.5%
US diversified*                 25,316,946             2,822,686    41.0%         13,950,086             1,790,619      41.5%
Total United States             45,293,396             5,883,862    85.4%         25,542,409             3,488,143      81.0%

Non United States:
Italy                            1,155,563               115,556     1.7%          1,014,215               101,422       2.4%
Canada                             228,594                67,890     1.0%            221,813                67,212       1.6%
United Kingdom                     424,617                42,462     0.6%            427,407                42,741       1.0%
Greece                             328,588                32,859     0.5%            295,988                29,599       0.7%
Brazil                             316,860                31,686     0.5%            316,860                31,686       0.7%
France                             263,006                26,301     0.4%            241,307                24,131       0.6%
Germany                            187,763                18,776     0.3%            176,911                17,691       0.4%
Turkey                             150,000                15,000     0.2%            150,000                15,000       0.3%
Switzerland                         81,823                 8,182     0.1%             55,131                 5,513       0.1%
Australia                           21,549                 2,155     0.0%             19,814                 1,981       0.0%
Spain                                3,470                   347     0.0%              3,126                   313       0.0%
Europe diversified**             2,195,950               219,595     3.2%          1,555,414               155,541       3.6%
Global                           3,902,208               416,470     6.1%          2,989,342               325,183       7.6%
Total Non United States          9,259,991               997,279    14.6%          7,467,328               818,013      19.0%

Grand Total                   $ 54,553,387           $ 6,881,141   100.0%       $ 33,009,737           $ 4,306,156       100%

<FN>
* Includes financial guaranties with obligations in multiple states.

** Includes financial guaranties with obligations in multiple countries.
</FN>
</TABLE>

-23-


(page)


11. Loss and Loss Adjustment Reserves

The Company's reserve for losses and loss adjustment expenses consists of active
credit reserves only. There were no case basis reserves recorded during 2006 and
2005. Activity in the losses and loss adjustment reserves, gross of reinsurance,
are summarized as follows:

<TABLE>
<CAPTION>
<S>     <C>    <C>

                                                                  2006                  2005
Gross active credit reserves:
Balance, beginning of period                                         $  3,306              $  1,677
Incurred losses and loss adjustment expense reserves                    2,224                 1,629
Balance, end of period                                               $  5,530              $  3,306

</TABLE>

Gross incurred loss and loss adjustment expenses are presented in the income
statement net of ceded amounts of $1,893, $1,393, and $1,044 for the years ended
December 31, 2006, 2005 and 2004, respectively.

12. Fair Value of Financial Instruments

The following fair value amounts were determined by using independent market
information when available, and internal valuation methodologies when market
quotes were not available. In cases where specific market quotes were
unavailable, interpreting market data and estimating market values requires
considerable judgment by management. Accordingly, the estimates presented are
not necessarily indicative of the amount CIFG NA could realize in a current
market exchange. The use of different market assumptions and/or estimation
methodologies may have a material effect on the estimated fair value amounts.

The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate that
value:

Fixed income securities: The fair values of fixed income securities are based
primarily on quoted market prices.

Short-Term Investments and Cash: The carrying value of these items approximate
fair value.

Investment Income Due and Accrued: The fair value of investment income due and
accrued is assumed to approximate carrying value.

Deferred Premium Revenue: The fair value of the deferred premium revenue is
based upon the estimated cost to reinsure those exposures at current market
rates, which amount consists of the current deferred premium revenue, less an
estimated ceding commission thereon.

Certain other financial guaranty insurance contracts have been written on an
installment premium basis, where the future premiums to be received by the
Company are determined based on the outstanding exposure at the time these
premiums are due. The fair value of the Company's future premium revenue under
its installment contracts is measured using the present value of estimated
future installment premiums, less an estimated ceding commission thereon,
discounted at 7%. The estimate of the amounts and timing of the future
installment premiums is based on contractual premium rates, debt service
schedules and expected run-off

-24-


(page)


scenarios. This measure is used as an estimate of the cost to reinsure the
Company's exposures under these policies.

The carrying amount and estimated fair value of financial instruments are
presented below:

<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>    <C>

                                                                    December 31,
                                                    2006                                  2005
                                        Carrying         Estimated fair    Carrying Amount       Estimated fair
                                         Amount               value                                   value

Financial Assets:
Fixed income securities                   $ 134,403            $ 134,403         $ 132,924              $132,924
Short-term investments                       39,588               39,588            24,652                24,652
Cash                                          1,068                1,068             3,388                 3,388
Investment income due and accrued             1,748                1,748             1,497                 1,497
Derivative assets                                10                   10                 4                     4

Financial Liabilities:

Deferred premium revenue:
  Gross                                     218,714              153,100           165,846               116,092
  Net of reinsurance                         34,953               24,467            24,019                16,812

Derivative liabilities                           49                   49                57                    57

Off-balance sheet instruments:

Installment premium receivable
  Gross                                         ---              124,159               ---                82,973
  Net of reinsurance                            ---               13,063               ---                 9,581

</TABLE>

13. Credit Derivatives

Certain financial guaranty contracts meet the definition of a derivative under
FAS 133 as amended by FAS 149. All of these direct contracts provide credit
protection to investors who have entered into credit derivative transactions
with New Generation Funding Trusts. The Company records these contracts at
Managements estimate of fair value based on valuation models. The models contain
an expected loss assumption. These contracts are considered by the Company to
be, in substance, financial guaranty contracts and the Company generally intends
to hold them to maturity. The level of fair value adjustments is dependent upon
a number of factors including changes in credit spreads and other market
factors.

As of December 31, 2006 and 2005, the distribution of par exposure by form of
credit enhancement is set forth in the following table on a gross (direct and
assumed) basis and net of reinsurance:

<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>    <C>

                                                 December 31,
                                             2006                                     2005
                                 Gross                   Net               Gross                    Net
Financial guarantees           $  27,200,799           $ 3,879,324        $ 17,605,496               $ 2,424,333
Credit Derivatives                27,352,588             3,001,817          15,404,241                 1,881,823
Total                          $  54,553,387           $ 6,881,141        $ 33,009,737               $ 4,306,156

</TABLE>

-25-


(page)


14. Variable Interest Entities

The Companys financial statements include the consolidation of New Generation
Funding Trusts (VIEs) as disclosed in Note 1. For each of the three years ended
December 31, 2006, 2005 and 2004 gross direct premium written by these VIEs was
approximately $27.1, $20.8, $10.5 million, respectively, and gross par
outstanding at December 31, 2006 and 2005 includes $27.1 and $15.2 billion,
respectively, underwritten through these VIEs.


-26-


  Item 1115(b) of Regulation AB, Certain Derivative Instruments.

            The significance percentage related to each entity or group of
            affiliated entities providing derivative instruments described in
            Item 1115 of Regulation AB is less than 10%.

  Item 1117 of Regulation AB, Legal Proceedings.

            Recent Events Relating to Fremont Investment & Loan

            Pursuant to a Form 12b-25 filed on March 2, 2007, Fremont General
            Corporation ("Fremont General"), the parent of Fremont Investment
            & Loan ("Fremont"), announced that it was delaying the filing of
            its Annual Report on Form 10-K for the fiscal year ended December
            31, 2006. Pursuant to a Form 8-K filed on March 16, 2007, Fremont
            General announced that it would not file its Annual Report on Form
            10-K for the fiscal year ended December 31, 2006 before its
            extended deadline of April 17, 2007.

            Fremont General also announced that, in light of the current
            operating environment for subprime mortgage lenders and recent
            legislative and regulatory events, Fremont intends to exit its
            subprime residential real estate lending business. Fremont General
            is engaged in discussions with various parties regarding the sale
            or other disposition of the residential loan origination platform
            and has engaged Credit Suisse Securities LLC in connection
            therewith; however, there can be no assurance that Fremont General
            or its affiliates will be able to enter into any transaction
            involving its residential loan origination platform.

            Additionally, on March 7, 2006, Fremont Investment & Loan, its
            parent, Fremont General Corporation and the company's wholly owned
            subsidiary, Fremont General Credit Corporation consented to the
            terms of a cease and desist order issued by the Federal Deposit
            Insurance Corporation without admitting to the allegations
            contained therein. The cease and desist order requires, among other
            things, Fremont to cease and desist from the following:

            (1) Operating with management whose policies and practices are
            detrimental to Fremont; (2) operating Fremont without effective
            risk management policies and procedures in place in relation to
            Fremont's brokered subprime mortgage lending and commercial real
            estate construction lending businesses; (3) operating with
            inadequate underwriting criteria and excessive risk in relation to
            the kind and quality of assets held by Fremont; (4) operating
            without an accurate, rigorous and properly documented methodology
            concerning its allowance for loan and lease losses; (5) operating
            with a large volume of poor quality loans; (6) engaging in
            unsatisfactory lending practices; (7) operating without an adequate
            strategic plan in relation to the volatility of Fremont's business
            lines and the kind and quality of assets held by Fremont; (8)
            operating with inadequate capital in relation to the kind and
            quality of assets held by Fremont; (9) operating in such a manner
            as to produce low and unsustainable earnings; (10) operating with
            inadequate provisions for liquidity in relation to the volatility
            of Fremont's business lines and the kind and quality of assets held
            by Fremont; (11) marketing and extending adjustable-rate mortgage
            products to subprime borrowers in an unsafe and unsound manner that
            greatly increases the risk that borrowers will default on the loans
            or otherwise cause losses to Fremont, including (a) adjustable-rate
            mortgage products that qualify borrowers for loans with low initial
            payments based on an introductory rate that will expire after an
            initial period, without adequate analysis of the borrower's ability
            to repay at the fully indexed rate, (b) adjustable-rate mortgage
            products containing features likely to require frequent refinancing
            to maintain affordable monthly payment or to avoid foreclosure, and
            (c)loans or loan arrangements with loan-to-value ratios approaching
            or exceeding 100 percent of the value of the collateral; (12)making
            mortgage loans without adequately considering the borrower's
            ability to repay the mortgage according to its terms; (13)operating
            in violation of Section 23B of the Federal Reserve Act, in that
            Fremont engaged in transactions with its affiliates on terms and
            under circumstances that in good faith would not be offered to, or
            would not apply to, nonaffiliated companies; and (14) operating
            inconsistently with the Federal Deposit Insurance Corporation's
            Interagency Advisory on Mortgage Banking and Interagency Expanded
            Guidance for Subprime Lending Programs. The cease and desist order
            also requires Fremont to take a number of steps, including (1)
            having and retaining qualified management; (2) limiting Fremont
            General's and Fremont General Credit Corporation's representation
            on Fremont's board of directors and requiring that independent
            directors comprise a majority of Fremont's board of directors; (3)
            revising and implementing written lending policies to provide
            effective guidance and control over Fremont's residential lending
            function; (4)revising and implementing policies governing
            communications with consumers to ensure that borrowers are provided
            with sufficient information; (5) implementing control systems to
            monitor whether Fremont's actual practices are consistent with its
            policies and procedures; (6) implementing a third-party mortgage
            broker monitoring program and plan; (7) developing a five-year
            strategic plan, including policies and procedures for diversifying
            Fremont's loan portfolio; (8) implementing a policy covering
            Fremont's capital analysis on subprime residential loans; (9)
            performing quarterly valuations and cash flow analyses on Fremont's
            residual interests and mortgage servicing rights from its
            residential lending operation, and obtaining annual independent
            valuations of such interests and rights; (10) limiting extensions
            of credit to certain commercial real estate borrowers; (11)
            implementing a written lending and collection policy to provide
            effective guidance and control over Fremont's commercial real
            estate lending function, including a planned material reduction in
            the volume of funded and unfunded nonrecourse lending and loans for
            condominium conversion and construction as a percentage of Tier I
            capital; (12) submitting a capital plan that will include a Tier I
            capital ratio of not less than 14% of Fremont's total assets; (13)
            implementing a written profit plan; (14) limiting the payment of
            cash dividends by Fremont without the prior written consent of the
            Federal Deposit Insurance Corporation and the Commissioner of the
            California Department of Financial Institutions; (15) implementing
            a written liquidity and funds management policy to provide
            effective guidance and control over Fremont's liquidity position
            and needs; (16) prohibiting the receipt, renewal or rollover of
            brokered deposit accounts without obtaining a Brokered Deposit
            Waiver approved by the Federal Deposit Insurance Corporation; (17)
            reducing adversely classified assets; and (18) implementing a
            comprehensive plan for the methodology for determining the adequacy
            of the allowance for loan and lease losses.

            Further, Fremont General is analyzing, in connection with the
            preparation of Fremont General's consolidated financial statements
            as of and for the period ended December 31, 2006, the Federal
            Deposit Insurance Corporation's criticism with respect to Fremont
            General's methodology for determining the carrying value of Fremont
            General's residential real estate loans held for sale.

            In addition, on March 5, 2007, Moody's Investors Service, Inc.
            downgraded Fremont's residential primary servicer rating for
            subprime mortgage loans to "SQ4+" from "SQ3+" and placed such
            rating on review for possible further downgrade and on March 6,
            2007, Fitch Ratings,  Inc. downgraded Fremont's residential
            primary servicer rating for subprime mortgage loans to "RPS4" from
            "RPS3+" and placed such rating on "Watch Negative", indicating that
            further downgrades of such rating are possible.

            Ownit Mortgage Solutions, Inc.

            Ownit Mortgage Solutions, Inc. ("Ownit") is a debtor and
            debtor-in-possession under Chapter 11 of the Bankruptcy Code in
            Case No. 06-12579. Ownit's Schedules of Assets and Liabilities and
            Statement of Financial Affairs, which are on file with the
            Bankruptcy Court, contain lists of certain known claims and
            potential claims against Ownit as of December 28, 20006, the date
            that Ownit commenced its Chapter 11 case.


  Item 1119 of Regulation AB, Affiliations and Certain Relationships and
             Related Transactions.

            No applicable updates.


  Item 1122 of Regulation AB, Compliance with Applicable Servicing Criteria.

            Assurant, Inc. previously excluded the applicable servicing
            criteria set forth in Item 1122 (d)(4)(xii) from the scope of its
            assessment of compliance. Assurant, Inc. has now assessed its
            compliance with the Applicable Servicing Criteria for the Reporting
            Period of January 1, 2006 through December 31, 2006 and has
            identified a material instance of noncompliance with that servicing
            criterion. Specifically, Assurant, Inc. did not have, during the
            Reporting Period, sufficient policies and procedures to capture the
            information with respect to the Platform Transactions necessary to
            determine compliance with Item 1122(d)(4)(xii). Accordingly,
            Assurant, Inc. has restated its previous assessment for the
            Reporting Period, which excluded evaluation of the criterion,
            to include the criterion and reflect the material noncompliance as
            a result of its assessment.

            The 1122 statements for First American Real Estate Solutions of
            Texas, L.P. (as Sub-Contractor for Ocwen Loan Servicing, LLC) has
            disclosed the following material instance of noncompliance with
            the servicing criteria set forth in Item 1122(d)(2)(vii)(B) of
            Regulation AB applicable to the Company during year ended
            December 31, 2006. Account reconciliations for all asset-backed
            securities related bank accounts were not prepared within 30
            calendar days after the bank statement cutoff date, or such other
            number of days specified in the transaction agreements as required
            by Item 1122(d)(2)(vii)(B) of Regulation AB.

            The 1122 statements for Wells Fargo Bank, National Association
            (Corporate Trust Services) has disclosed material noncompliance with
            criterion 1122(d)(3)(i), as applicable to the Company during the
            twelve months ended December 31, 2006. Certain monthly investor or
            remittance reports included errors in the calculation and/or the
            reporting of delinquencies for the pool assets.

            The 1122 statements for Wells Fargo Bank, N.A. (servicer) has
            disclosed the following instances of material noncompliance with
            certain servicing criteria applicable to the Company during the year
            ended December 31, 2006:

            1. 1122(d)(3)(i) - Delinquency Reporting - The Company provided
               incomplete data to some third parties who use such data to
               calculate delinquency ratios and determine the status of loans
               with respect to bankruptcy, foreclosure or real estate owned.
               Instead of the actual due date being provided for use in
               calculating delinquencies, the date of the first payment due to
               the security was provided.

            2. 1122(d)(4)(vii) - Notification of Intent to Foreclose - The
               Company, as required by certain servicing agreements, did not
               provide investors with prior notification of intent to foreclose.

            See Item 15.

  Item 1123 of Regulation AB, Servicer Compliance Statement.

            See Item 15.




                                PART IV



  Item 15. Exhibits, Financial Statement Schedules.

   (a) Exhibits

    (4)  Pooling and Servicing  Agreement, dated as of February 1, 2006, among
         ACE Securities  Corp., as depositor, Ocwen Loan Servicing, LLC, as a
         servicer, Wells Fargo Bank, N.A., as a servicer, Wells Fargo Bank,
         N.A., master servicer and securities administrator and HSBC Bank USA,
         National  Association,  as trustee (incorporated herein by reference
         from Exhibit 4.1 of the Current Report on Form 8-K of the registrant,
         as filed with the Commission).

    (31) Rule 13a-14(d)/15d-14(d) Certifications.

    (33) Reports on assessment of compliance with servicing criteria for
         asset-backed securities.



      <TABLE>

      
         <c>

      a) Assurant Inc. as Sub-Contractor for Ocwen Loan Servicing, LLC, as Sub-Contractor <F1>
      b) Deutsche Bank National Trust Company, as Custodian <F1>
      c) First American Real Estate Solutions of Texas, L.P. as Sub-Contractor for Ocwen Loan Servicing, LLC, as Sub-Contractor <F1>
      d) Fremont Investment & Loan, as Servicer <F1>
      e) LandAmerica Tax and Flood Services as Sub-Contractor for Fremont Investment & Loan, as Sub-Contractor <F1>
      f) Ocwen Loan Servicing, LLC, as Servicer <F1>
      g) Regulus Group LLC as Sub-Contractor for Ocwen Loan Servicing, LLC, as Sub-Contractor <F1>
      h) Regulus Group LLC as Sub-Contractor for Wells Fargo Bank, N.A., as Sub-Contractor <F1>
      i) Wells Fargo Bank, N.A., as Servicer <F1>
      j) Wells Fargo Bank, N.A., as Master Servicer <F1>
      k) Wells Fargo Bank, N.A., as Securities Administrator <F1>
      l) Wells Fargo Bank, N.A., as Paying Agent <F1>
      m) Wells Fargo Bank, N.A., as Custodian <F1>
      n) ZC Sterling Insurance Agency, Inc. as Sub-Contractor for Wells Fargo Bank, N.A., as Sub-Contractor <F1>

      </TABLE>

     (34) Attestation reports on assessment of compliance with servicing
          criteria for asset-backed securities.

      <TABLE>

      
        <c>

      a) Assurant Inc. as Sub-Contractor for Ocwen Loan Servicing, LLC, as Sub-Contractor <F1>
      b) Deutsche Bank National Trust Company, as Custodian <F1>
      c) First American Real Estate Solutions of Texas, L.P. as Sub-Contractor for Ocwen Loan Servicing, LLC, as Sub-Contractor <F1>
      d) Fremont Investment & Loan, as Servicer <F1>
      e) LandAmerica Tax and Flood Services as Sub-Contractor for Fremont Investment & Loan, as Sub-Contractor <F1>
      f) Ocwen Loan Servicing, LLC, as Servicer <F1>
      g) Regulus Group LLC as Sub-Contractor for Ocwen Loan Servicing, LLC, as Sub-Contractor <F1>
      h) Regulus Group LLC as Sub-Contractor for Wells Fargo Bank, N.A., as Sub-Contractor <F1>
      i) Wells Fargo Bank, N.A., as Servicer <F1>
      j) Wells Fargo Bank, N.A., as Master Servicer <F1>
      k) Wells Fargo Bank, N.A., as Securities Administrator <F1>
      l) Wells Fargo Bank, N.A., as Paying Agent <F1>
      m) Wells Fargo Bank, N.A., as Custodian <F1>
      n) ZC Sterling Insurance Agency, Inc. as Sub-Contractor for Wells Fargo Bank, N.A., as Sub-Contractor <F1>

      </TABLE>

     (35) Servicer compliance statement.

      <TABLE>

      
         <c>

      a) Fremont Investment & Loan, as Servicer <F1>
      b) Ocwen Loan Servicing, LLC, as Servicer <F1>
      c) Wells Fargo Bank, N.A., as Servicer <F1>
      d) Wells Fargo Bank, N.A., as Master Servicer <F1>
      e) Wells Fargo Bank, N.A., as Securities Administrator <F1>

      </TABLE>

   (b) Not applicable.

   (c) Omitted.


  <F1> Filed herewith.




                                SIGNATURES

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



   Ace Securities Corp.
   (Depositor)


    /s/ Doris J. Hearn
    Doris J. Hearn, Vice President
   (senior officer in charge of securitization of the depositor)


    Date: July 18, 2008


  Exhibit Index

  Exhibit No.

    (31) Rule 13a-14(d)/15d-14(d) Certifications.

    (33) Reports on assessment of compliance with servicing criteria for
         asset-backed securities.



      <TABLE>

      
         <c>
      a) Assurant Inc. as Sub-Contractor for Ocwen Loan Servicing, LLC, as Sub-Contractor
      b) Deutsche Bank National Trust Company, as Custodian
      c) First American Real Estate Solutions of Texas, L.P. as Sub-Contractor for Ocwen Loan Servicing, LLC, as Sub-Contractor
      d) Fremont Investment & Loan, as Servicer
      e) LandAmerica Tax and Flood Services as Sub-Contractor for Fremont Investment & Loan, as Sub-Contractor
      f) Ocwen Loan Servicing, LLC, as Servicer
      g) Regulus Group LLC as Sub-Contractor for Ocwen Loan Servicing, LLC, as Sub-Contractor
      h) Regulus Group LLC as Sub-Contractor for Wells Fargo Bank, N.A., as Sub-Contractor
      i) Wells Fargo Bank, N.A., as Servicer
      j) Wells Fargo Bank, N.A., as Master Servicer
      k) Wells Fargo Bank, N.A., as Securities Administrator
      l) Wells Fargo Bank, N.A., as Paying Agent
      m) Wells Fargo Bank, N.A., as Custodian
      n) ZC Sterling Insurance Agency, Inc. as Sub-Contractor for Wells Fargo Bank, N.A., as Sub-Contractor

      </TABLE>

     (34) Attestation reports on assessment of compliance with servicing
          criteria for asset-backed securities.

      <TABLE>

      
        <c>
      a) Assurant Inc. as Sub-Contractor for Ocwen Loan Servicing, LLC, as Sub-Contractor
      b) Deutsche Bank National Trust Company, as Custodian
      c) First American Real Estate Solutions of Texas, L.P. as Sub-Contractor for Ocwen Loan Servicing, LLC, as Sub-Contractor
      d) Fremont Investment & Loan, as Servicer
      e) LandAmerica Tax and Flood Services as Sub-Contractor for Fremont Investment & Loan, as Sub-Contractor
      f) Ocwen Loan Servicing, LLC, as Servicer
      g) Regulus Group LLC as Sub-Contractor for Ocwen Loan Servicing, LLC, as Sub-Contractor
      h) Regulus Group LLC as Sub-Contractor for Wells Fargo Bank, N.A., as Sub-Contractor
      i) Wells Fargo Bank, N.A., as Servicer
      j) Wells Fargo Bank, N.A., as Master Servicer
      k) Wells Fargo Bank, N.A., as Securities Administrator
      l) Wells Fargo Bank, N.A., as Paying Agent
      m) Wells Fargo Bank, N.A., as Custodian
      n) ZC Sterling Insurance Agency, Inc. as Sub-Contractor for Wells Fargo Bank, N.A., as Sub-Contractor

      </TABLE>

     (35) Servicer compliance statement.

      <TABLE>

      
         <c>

      a) Fremont Investment & Loan, as Servicer
      b) Ocwen Loan Servicing, LLC, as Servicer
      c) Wells Fargo Bank, N.A., as Servicer
      d) Wells Fargo Bank, N.A., as Master Servicer
      e) Wells Fargo Bank, N.A., as Securities Administrator

      </TABLE>