##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
 For the quarterly period ended March 31, 2009
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
 For the transition period from  to
 Commission file number 0-17771
 FRANKLIN CREDIT HOLDING CORPORATION
  Delaware
(State or other jurisdiction of 
incorporation or organization)
    
    26-3104776
(IRS Employer
Identification No.)101 Hudson StreetJersey City, New Jersey
(Address of Principal 
Executive Offices)
    
    07302
(Zip code)
 (201) 604-1800
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ(Do not check if a smaller reporting company)
 o þ




---



##### 



PagePART I. FINANCIAL INFORMATIONItem 1. Financial Statements (Unaudited)Consolidated Balance Sheets at March 31, 2009 and December 31, 2008
    
    
    3Consolidated Statements of Operations for the three months ended
March 31, 2009 and March 31, 2008
    
    
    4Consolidated Statement of Changes in Stockholders (Deficit)
for the three months ended March 31, 2009
    
    
    5Consolidated Statements of Cash Flows for the three months ended
March 31, 2009 and March 31, 2008
    
    
    6Notes to Consolidated Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    22Application of Critical Accounting Policies and Estimates
    
    
    22Portfolio Characteristics
    
    
    23Results of Operations
    
    
    28Liquidity and Capital Resources
    
    
    32Borrowings
    
    
    34Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    45Item 4T. Controls and Procedures
    
    
    46PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    47Item 1A. Risk Factors
    
    
    47Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    47Item 3. Defaults Upon Senior Securities
    
    
    47Item 4. Submission of Matters to a Vote of Security Holders
    
    
    48Item 5. Other Information
    
    
    48Item 6. Exhibits
    
    
    49SIGNATURES
    
    
    51EX-31.1EX-31.2EX-32.1EX-32.2




---



##### Table of Contents



FRANKLIN CREDIT HOLDING CORPORATION AND SUBSIDIARIES
 
  March 31, 2009(Unaudited)
    
    
    December 31, 2008ASSETSCash and cash equivalents
    
    $
    23,966,491
    
    
    $
    21,426,777Restricted cash
    
    
    21,250,154
    
    
    
    27,890,706Investment in REIT securities at fair value
    
    
    477,316,409
    
    
    
    Investment in trust certificates at fair value
    
    
    95,832,753
    
    
    
    Mortgage
loans and real estate held for sale
    
    
    477,316,409
    
    
    
    Notes Receivable:Principal
    
    
    
    
    
    
    1,021,648,291Purchase discount
    
    
    
    
    
    
    (9,777,475
    )Allowance for loan losses
    
    
    
    
    
    
    (471,093,159
    )Net notes receivable
    
    
    
    
    
    
    540,777,657Notes receivable held for sale, net
    
    
    4,295,571
    
    
    
    Originated loans held for investment:Principal, net of deferred fees and costs
    
    
    
    
    
    
    391,704,319Allowance for loan losses
    
    
    
    
    
    
    (49,876,092
    )Originated loans held for investment, net
    
    
    
    
    
    
    341,828,227Accrued interest receivable
    
    
    
    
    
    
    10,055,241Other real estate owned
    
    
    
    
    
    
    60,748,390Deferred financing costs, net
    
    
    7,657,664
    
    
    
    7,824,432Other receivables
    
    
    1,410,521
    
    
    
    7,028,334Building, furniture and equipment, net
    
    
    2,016,348
    
    
    
    2,042,436Income tax receivable
    
    
    2,259,539
    
    
    
    2,126,590Other assets
    
    
    507,085
    
    
    
    634,652Total assets
    
    $
    1,113,828,944
    
    
    $
    1,022,383,442LIABILITIES AND STOCKHOLDERS (DEFICIT)Liabilities:Notes payable, net of debt discount of $201,451 at March 31, 2009
and $205,976 at December 31, 2008
    
    $
    1,410,875,630
    
    
    $
    1,442,126,964Financing agreements
    
    
    2,933,679
    
    
    
    1,958,011Nonrecourse
liability
    
    
    477,316,409
    
    
    
    Accounts payable and accrued expenses
    
    
    18,855,151
    
    
    
    15,056,870Terminated derivative liability
    
    
    8,200,000
    
    
    
    Derivative liabilities, at fair value
    
    
    18,572,476
    
    
    
    27,753,436Total liabilities
    
    
    1,936,753,345
    
    
    
    1,486,895,281Commitments and ContingenciesStockholders (Deficit):Preferred stock, $0.01 par value; authorized 3,000,000;
issued and outstanding: none
    
    
    
    
    
    
    Common stock and additional paid-in capital, $0.01 par value,
22,000,000 authorized shares; issued and outstanding: 8,025,295
at March 31, 2009 and 8,025,295 at December 31, 2008
    
    
    21,736,965
    
    
    
    23,383,120Noncontrolling interest in subsidiary
    
    
    1,710,490
    
    
    
    Accumulated other comprehensive (loss)
    
    
    (23,846,047
    )
    
    
    (27,753,436
    )Retained (deficit)
    
    
    (822,525,809
    )
    
    
    (460,141,523
    )Total stockholders (deficit)
    
    
    (822,924,401
    )
    
    
    (464,511,839
    )Total liabilities and stockholders (deficit)
    
    $
    1,113,828,944
    
    
    $
    1,022,383,442
  3




---



##### Table of Contents



FRANKLIN CREDIT HOLDING CORPORATION AND SUBSIDIARIES
 
 
 Three Months Ended March 31,2009
    
    
    2008Revenues:Interest income
    
    $
    16,454,325
    
    
    $
    32,320,130Purchase discount earned
    
    
    392,127
    
    
    
    781,341(Loss) on
mortgage loans and real estate held for sale
    
    
    (282,593,653
    )
    
    
    (Loss) on valuation of investment in trust certificates
and notes receivable held for sale
    
    
    (62,651,940
    )
    
    
    Gain on sale of other real estate owned
    
    
    374,344
    
    
    
    90,816Servicing fees and other income
    
    
    2,509,557
    
    
    
    2,022,723Total (losses)/revenues
    
    
    (325,515,240
    )
    
    
    35,215,010Operating Expenses:Interest expense
    
    
    17,683,156
    
    
    
    22,882,009Collection, general and administrative
    
    
    18,692,995
    
    
    
    9,623,169Provision for loan losses
    
    
    169,479
    
    
    
    8,655,825Amortization of deferred financing costs
    
    
    166,768
    
    
    
    255,839Depreciation
    
    
    156,648
    
    
    
    316,626Total expenses
    
    
    36,869,046
    
    
    
    41,733,468(Loss) before provision for income taxes
    
    
    (362,384,286
    )
    
    
    (6,518,458
    )Income tax (benefit)
    
    
    
    
    
    
    Net (loss)
    
    $
    (362,384,286
    )
    
    $
    (6,518,458
    )Net (loss) per common share:Basic
    
    $
    (45.33
    )
    
    $
    (0.82
    )Diluted
    
    $
    (45.33
    )
    
    $
    (0.82
    )Weighted average number of shares outstanding:Basic
    
    
    7,994,045
    
    
    
    7,970,295Diluted
    
    
    7,994,045
    
    
    
    7,970,295
  4




---



##### Table of Contents



FRANKLIN CREDIT MANAGEMENT HOLDING AND SUBSIDIARIES
 
 
 Common Stock andAdditional Paid-in CapitalAccumulatedOther
    
    
    NoncontrollingComprehensive
    
    
    Interest
    
    
    RetainedShares
    
    
    Amount
    
    
    Loss
    
    
    in Subsidiary
    
    
    (Deficit)
    
    
    TotalBALANCE, JANUARY 1, 2009
    
    
    8,025,295
    
    
    $
    23,383,120
    
    
    $
    (27,753,436
    )
    
    $
    
    
    
    $
    (460,141,523
    )
    
    $
    (464,511,839
    )Stock-based compensation
    
    
    
    
    
    
    64,335
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    64,335Noncontrolling interest
in subsidiary
    
    
    
    
    
    
    (1,710,490
    )
    
    
    
    
    
    
    1,710,490
    
    
    
    
    
    
    
    Amortization 
unrealized loss on
derivatives
    
    
    
    
    
    
    
    
    
    
    3,907,389
    
    
    
    
    
    
    
    
    
    
    
    3,907,389Net (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (362,384,286
    )
    
    
    (362,384,286
    )BALANCE, MARCH 31, 2009
    
    
    8,025,295
    
    
    $
    21,736,965
    
    
    $
    (23,846,047
    )
    
    $
    1,710,490
    
    
    $
    (822,525,809
    )
    
    $
    (822,924,401
    )
   5




---



##### Table of Contents



FRANKLIN CREDIT HOLDING CORPORATION AND SUBSIDIARIES
 
 
 Three Months Ended March 31,2009
    
    
    2008CASH FLOWS FROM OPERATING ACTIVITIES:Net (loss)
    
    $
    (362,384,286
    )
    
    $
    (6,518,458
    )Adjustments to reconcile income to net cash provided by/(used in) operating activities:Gain on sale of other real estate owned
    
    
    (374,344
    )
    
    
    (90,816
    )Depreciation
    
    
    156,648
    
    
    
    316,626Amortization of deferred costs and fees on originated loans
    
    
    48,215
    
    
    
    (136,351
    )Loss on mortgage loans and real estate held for sale
    
    
    282,593,653
    
    
    
    Market valuation on investment in trust certificates and notes receivable held for sale
    
    
    62,651,940
    
    
    
    Amortization of deferred financing costs
    
    
    166,768
    
    
    
    255,839Amortization of debt discount and success fees
    
    
    4,525
    
    
    
    6,839Non-cash compensation
    
    
    64,335
    
    
    
    65,146Purchase discount earned
    
    
    (392,127
    )
    
    
    (781,341
    )Provision for loan losses
    
    
    169,479
    
    
    
    8,655,825Changes in operating assets and liabilities:Accrued interest receivable
    
    
    1,322,687
    
    
    
    1,426,704Other receivables
    
    
    1,992,609
    
    
    
    (90,556
    )Income tax receivable
    
    
    (132,949
    )
    
    
    444,332Other assets
    
    
    (7,281,784
    )
    
    
    21,705Transfer to fixed assets
    
    
    (127,190
    )
    
    
    Accounts payable and accrued expenses
    
    
    3,798,281
    
    
    
    (7,509,374
    )Terminated derivative liability
    
    
    8,200,000
    
    
    
    Net cash (used in) operating activities
    
    
    (9,523,540
    )
    
    
    (3,933,880
    )CASH FLOWS FROM INVESTING ACTIVITIES:(Increase)/decrease in restricted cash
    
    
    6,640,552
    
    
    
    (1,029,310
    )Principal collections on notes receivable
    
    
    10,622,170
    
    
    
    26,132,881Principal collections on loans held for investment
    
    
    5,857,079
    
    
    
    19,752,241Investment in short-term securities
    
    
    
    
    
    
    (48,910
    )Putback of acquired notes receivable
    
    
    
    
    
    
    123,591Proceeds from sale of other real estate owned
    
    
    19,227,015
    
    
    
    7,359,816Purchase of building, furniture and equipment
    
    
    (3,370
    )
    
    
    Net cash provided by investing activities
    
    
    42,343,446
    
    
    
    52,290,309CASH FLOWS FROM FINANCING ACTIVITIES:Principal payments of notes payable
    
    
    (31,255,859
    )
    
    
    (49,520,489
    )Proceeds from financing agreements
    
    
    975,667
    
    
    
    87,822Principal payments of financing agreements
    
    
    
    
    
    
    (387,529
    )Net cash (used in) financing activities
    
    
    (30,280,192
    )
    
    
    (49,820,196
    )NET CHANGE IN CASH AND CASH EQUIVALENTS
    
    
    2,539,714
    
    
    
    (1,463,767
    )CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
    
    
    21,426,777
    
    
    
    18,266,066CASH AND CASH EQUIVALENTS, END OF PERIOD
    
    $
    23,966,491
    
    
    $
    16,802,299SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:Cash payments for interest
    
    $
    11,954,108
    
    
    $
    26,041,731Cash payments for taxes
    
    $
    201,408
    
    
    $
    131,665NON-CASH INVESTING AND FINANCING ACTIVITY:Transfer from notes receivable and loans held for investment to OREO
    
    $
    20,566,413
    
    
    $
    21,290,396
 6




---



##### Table of Contents



FRANKLIN CREDIT HOLDING CORPORATION AND SUBSIDIARIES
 
  1. BUSINESS
 Overview
 March 2009 Restructuring
    
    
    entry into a market-rate servicing agreement with the Bank (with an initial term of
three years, which can be terminated by the Bank for any reason and at any time) as
certificate trustee and administrator of a trust, Franklin Mortgage Asset Trust 2009-A
(the Trust), in which its wholly-owned subsidiary real estate investment trust,
Huntington Capital Financing, LLC (the REIT), holds approximately 83% of the Trusts
certificates, that will enable FCMC, which houses the Companys servicing business, to
generate fee income from servicing approximately 83% of the Companys portfolio of
subprime mortgage loans and owned real estate which was effectively transferred to the
balance sheet of Huntington in the form of certificates issued by the Trust and
replaced by common shares and approximately $475 million in preferred shares in the
Banks REIT (together, the REIT Securities), the preferred shares having an annual
cumulative dividend rate of 9%, and, the remaining approximately 17% of the subprime
mortgage loans retained and beneficially owned by the Company (collectively, the
Portfolio);
    
    release of 30% of the equity in FCMC from the Companys pledges to the Bank (of
which 10% of the equity in FCMC has been transferred to Thomas J. Axon, Chairman and
President, and principal stockholder of the Company), with the possibility of release
of up to an additional 50% based on cash collections from servicing of the Portfolio
over the next five
 7




---



##### Table of Contents



years (subject to a further transfer of up to an additional 10% of the equity in FCMC to
Mr. Axon);
    
    principal and interest payments on approximately $1.4 billion of the legacy debt
owed to the Bank and its participant banks are only due and payable principally to the
extent of (a) dividends declared and paid on the preferred REIT shares and 70%, or
potentially less with a maximum reduction to 20%, of the amounts distributed by FCMC to
Franklin Holding and (b) distributions made by the Trust on approximately 17% of the
trust certificates held by the Company;
    
    the Banks recourse against FCMC and Franklin Holding under the Legacy Credit
Agreement is limited to 20% to 70% of FCMCs common equity, which range is based upon
the net amounts collected, including net proceeds from the sale of any portion of the
Portfolio, during specified time periods through FCMCs servicing of the Portfolio, a
first lien on an office condominium unit, and a second priority lien on cash collateral
held as security for revolving credit and letters of credit under a new separate joint
credit facility with the Bank for FCMC and Franklin Holding. The Bank also will be
entitled to receive 70% of the income distributions and dividends from FCMC, which may
also be reduced to 20% based upon net amounts having been collected on the Portfolio
over certain time periods, which will be used to make interest and/or principal
payments on the debt owed to the Bank;
    
    entry into an amended $13.5 million credit facility with the Bank (the Licensing
Credit Agreement); including a $5 million draw facility; a $2 million revolving
facility; and, a $6.5 million letter of credit facility to support various servicer
licenses; and,
    
    enabling of FCMC to seek additional third-party sub-servicing contracts in order to
capitalize on its servicing and collection expertise and build its servicing revenue
stream.
    8




---



##### Table of Contents



Going Concern Uncertainty  Franklin Holding
  9




---



##### Table of Contents



Operating Losses and Stockholders Deficit
  Licenses to Service Loans and December 2008 Corporate Reorganization
  10




---



##### Table of Contents



11




---



##### Table of Contents



Delisting  The Nasdaq Capital Market
  Franklins Business
  12




---



##### Table of Contents



Loan Servicing
  13




---



##### Table of Contents



Due Diligence Services
  Financing
    Corporate History
  14




---



##### Table of Contents



December 2008 Corporate Reorganization
   (i)
    
    adopted a holding company form of organizational structure, with Franklin
Holding serving as the new public-company parent;(ii)
    
    transferred all of the equity and membership interests in FCMCs direct
subsidiaries to other entities in the reorganized corporate structure of the Company;(iii)
    
    assigned legal record ownership of any loans in the Companys portfolios held
directly by FCMC and Tribeca Lending Corporation, a direct, wholly-owned subsidiary of
FCMC (Tribeca), to other entities in the reorganized corporate structure of the
Company; and,(iv)
    
    amended its loan agreements with The Huntington National Bank, its lead lending
bank.
  Holding Company Structure
   15




---



##### Table of Contents



(i)
    
    each share of common stock of the Predecessor (the Predecessor Common Stock)
issued and outstanding immediately prior to the Merger was converted into a share of
common stock of Franklin Holding (Franklin Holding Common Stock) having the same
designations, rights, powers and preferences, and qualifications, limitations and
restrictions thereof, as the share of Predecessor Common Stock so converted; and,(ii)
    
    each share of capital stock of Merger Sub issued and outstanding immediately
prior to the Merger was converted into a share of common stock of the Predecessor.
    2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Basis of Presentation
  16




---



##### Table of Contents



Investment
in REIT Securities
 Investment in Trust Certificates
 Mortgage
Loans and Real Estate Held for Sale 
 Nonrecourse
Liability 
 Notes Receivable Held for Sale 
 Notes Receivable and Income Recognition
  17




---



##### Table of Contents



Originated Loans Held for Investment
  Allowance for Loan Losses
  Three Months Ended March 31,2009
    
    
    2008Allowance for loan losses, beginning of period
    
    $
    520,969,251
    
    
    $
    254,661,653Provision for loan losses
    
    
    (1,530,521
    )
    
    
    5,166,376Loans transferred to OREO
    
    
    (6,517,919
    )
    
    
    (2,439,870
    )Loans charged off
    
    
    (14,029,345
    )
    
    
    (5,684,862
    )Loans
transferred to Huntington
and loans exchanged for trust certificates and retained
    
    
    (481,453,374
    )
    
    
    Loans transferred to loans held for sale
    
    
    (17,435,075
    )
    
    
    Other, net
    
    
    (3,017
    )
    
    
    (76,310
    )Allowance for loan losses, end of period
    
    $
    
    
    
    $
    251,626,987
 18




---



##### Table of Contents



Derivatives Accounting for Derivative
Instruments and Hedging Activities
       19




---



##### Table of Contents



Fair Value Measurements
 Fair Value Measurements
 
    
    Level 1 Inputs to the valuation methodology are quoted prices (unadjusted) for
identical assets or liabilities in active markets.
    
    Level 2 Inputs to the valuation methodology include quoted prices for similar
assets and liabilities in active markets and inputs that are observable for the asset
of liability, either directly or indirectly, for substantially the full term of the
financial instrument. Fair values for these instruments are estimated using pricing
models, quoted prices of securities with similar characteristics, or discounted cash
flows.
    
    Level 3 Inputs to the valuation methodology are unobservable and significant to
the fair value measurement. Fair values are initially valued based upon transaction
price and are adjusted to reflect exit values as evidenced by financing and sale
transactions with third parties.
   20




---



##### Table of Contents



Level 1
    
    
    Level 2
    
    
    Level 3Interest rate swaps
    
    $
    
    
    
    $
    (18,572,476
    )
    
    $
    Investment in REIT securities
    
    
    
    
    
    
    
    
    
    
    472,413,331Investment in trust certificates
    
    
    
    
    
    
    
    
    
    
    95,832,753Total
    
    $
    
    
    
    $
    (18,572,476
    )
    
    $
    568,246,084
  Balance, January 1, 2009
    
    $
    Additions
    
    
    623,602,529Total recognized unrealized losses
    
    
    (55,356,445
    )Transfer in/(out)
    
    
    Balance, March 31, 2009
    
    $
    568,246,084
   Level 1
    
    
    Level 2
    
    
    Level 3Mortgage
loans and real estate held for sale
    
    $
    
    
    
    $
    
    
    
    $
    477,316,409
 Recent Development
  21




---



##### Table of Contents



ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 General
 Safe Harbor Statements.
 
 Application of Critical Accounting Policies and Estimate
  22




---



##### Table of Contents



Portfolio Characteristics
 Overall Portfolio
   Unpaid
    
    
    Percentage of TotalProperty Types
    
    Principal Balance
    
    
    Principal BalanceResidential 1-4 family
    
    $
    1,268,478,890
    
    
    
    82.41
    %Condos, co-ops, PUD dwellings
    
    
    193,149,884
    
    
    
    12.55
    %Manufactured and mobile homes
    
    
    15,135,861
    
    
    
    0.98
    %Multi-family
    
    
    443,023
    
    
    
    0.03
    %Secured, property type unknown(1)
    
    
    18,464,780
    
    
    
    1.20
    %Commercial
    
    
    1,920,922
    
    
    
    0.12
    %Unsecured loans(2)
    
    
    41,678,994
    
    
    
    2.71
    %Total
    
    $
    1,539,272,354
    
    
    
    100.00
    %
 
 (1)
    
    The loans included in this category are principally small balance (less than $10,000)
second-lien loans acquired, and are collateralized by residential real estate.(2)
    
    The loans included in this category are principally second-lien loans where the Company
is aware that residential real estate collateral has been foreclosed by the first-lien
holder. 23




---



##### Table of Contents



Geographic Dispersion.
 Unpaid
    
    
    Percentage of TotalLocation
    
    Principal Balance
    
    
    Principal BalanceCalifornia
    
    $
    226,583,453
    
    
    
    14.72
    %New York
    
    
    172,713,267
    
    
    
    11.22
    %New Jersey
    
    
    145,363,612
    
    
    
    9.44
    %Florida
    
    
    136,181,054
    
    
    
    8.85
    %Pennsylvania
    
    
    69,705,413
    
    
    
    4.53
    %Texas
    
    
    69,656,734
    
    
    
    4.53
    %Maryland
    
    
    50,994,311
    
    
    
    3.31
    %Ohio
    
    
    50,792,987
    
    
    
    3.30
    %Illinois
    
    
    49,072,979
    
    
    
    3.19
    %Michigan
    
    
    43,731,150
    
    
    
    2.84
    %All Others
    
    
    524,477,394
    
    
    
    34.07
    %Total
    
    $
    1,539,272,354
    
    
    
    100.00
    %
 Asset Quality
 Delinquency .
  24




---



##### Table of Contents



December 31, 2008Contractual Delinquency
    
    
    Recency DelinquencyDays Past Due
    
    Amount
    
    
    %
    
    
    Amount
    
    
    %Performing  Current
    
    0   30 days
    
    $
    373,712,487
    
    
    
    24.28
    %
    
    $
    419,653,369
    
    
    
    27.26
    %Delinquent
    
    31   60 days
    
    
    30,511,251
    
    
    
    1.98
    %
    
    
    25,910,879
    
    
    
    1.69
    %61   90 days
    
    
    4,302,736
    
    
    
    0.28
    %
    
    
    21,390,383
    
    
    
    1.39
    %90+ days
    
    
    128,904,056
    
    
    
    8.38
    %
    
    
    70,475,899
    
    
    
    4.58
    %Modified Loans
    
    0   30 days
    
    
    262,156,611
    
    
    
    17.03
    %
    
    
    299,215,550
    
    
    
    19.44
    %Delinquent
    
    31   60 days
    
    
    46,097,510
    
    
    
    2.99
    %
    
    
    32,572,746
    
    
    
    2.12
    %61   90 days
    
    
    1,195,906
    
    
    
    0.08
    %
    
    
    15,542,772
    
    
    
    1.01
    %90+ days
    
    
    78,911,624
    
    
    
    5.13
    %
    
    
    41,030,583
    
    
    
    2.66
    %Bankruptcy
    
    0   30 days
    
    
    26,527,458
    
    
    
    1.72
    %
    
    
    62,020,559
    
    
    
    4.03
    %Delinquent
    
    31   60 days
    
    
    5,929,387
    
    
    
    0.38
    %
    
    
    10,264,968
    
    
    
    0.67
    %61   90 days
    
    
    1,644,545
    
    
    
    0.11
    %
    
    
    4,623,655
    
    
    
    0.30
    %90+ days
    
    
    90,762,522
    
    
    
    5.90
    %
    
    
    47,954,730
    
    
    
    3.11
    %Foreclosure
    
    0   30 days
    
    
    2,575,557
    
    
    
    0.16
    %
    
    
    19,594,271
    
    
    
    1.27
    %Delinquent
    
    31   60 days
    
    
    743,187
    
    
    
    0.05
    %
    
    
    7,639,599
    
    
    
    0.50
    %61   90 days
    
    
    123,808
    
    
    
    0.01
    %
    
    
    7,248,534
    
    
    
    0.47
    %90+ days
    
    
    485,173,709
    
    
    
    31.52
    %
    
    
    454,133,857
    
    
    
    29.50
    %Total
    
    $
    1,539,272,354
    
    
    
    100.00
    %
    
    $
    1,539,272,354
    
    
    
    100.00
    %All current loans
    
    0   30 days
    
    $
    664,972,113
    
    
    
    43.20
    %
    
    $
    800,483,749
    
    
    
    52.00
    %
   25




---



##### Table of Contents



Notes Receivable Portfolio
   December 31, 2008Performing loans
    
    $
    528,953,209Allowance for loan losses
    
    
    130,724,698Nonaccretable discount*
    
    
    25,277,808Total performing loans, net
allowance for loan losses and nonaccretable discount
    
    
    372,950,703Impaired loans
    
    
    615,159,200Allowance for loan losses
    
    
    340,368,461Nonaccretable discount*
    
    
    72,325,558Total impaired loans, net
allowance for loan losses and nonaccretable discount
    
    
    202,465,181Total notes receivable, net
allowance for loan losses and nonaccretable discount
    
    
    575,415,884Accretable discount*
    
    
    24,860,752Total notes receivable, net
allowance for loan losses and accretable/nonaccretable
discount
    
    $
    550,555,132
 
 *
    
    Represents purchase discount not reflected on the face of the balance sheet in
accordance with SOP 03-3 for loans acquired after December 31, 2004. Accretable Discount
is the excess of the loans estimated cash flows over the purchase prices, which is
accreted into income over the life of the loan. Nonaccretable Discount is the excess of
the undiscounted contractual cash flows over the undiscounted cash flows estimated at the
time of acquisition.  26




---



##### Table of Contents



December 31, 2008Performing Loans:Fixed rate
    
    $
    325,799,144Adjustable rate
    
    
    72,429,367Total Performing Loans
    
    $
    398,228,511Impaired Loans:Fixed rate
    
    $
    162,504,488Adjustable rate
    
    
    112,286,251Total Impaired Loans
    
    $
    274,790,739Total Notes
    
    $
    673,019,250Accretable discount
    
    $
    24,860,752Nonaccretable discount
    
    $
    97,603,366Total Notes Receivable,
net of allowance for loan losses
    
    $
    550,555,132
  Lien Position.
 December 31, 2008Percentage of TotalLien Position
    
    Principal Balance
    
    
    Principal Balance1st Liens
    
    $
    390,020,158
    
    
    
    34.09
    %2nd Liens
    
    
    754,092,251
    
    
    
    65.91
    %Total
    
    $
    1,144,112,409
    
    
    
    100.00
    %
 27




---



##### Table of Contents



Other Real Estate Owned
  Three Months Ended March 31,2009
    
    
    2008Other real estate owned
    
    $
    
    
    
    $
    68,699,919OREO as a percentage of total assets
    
    
    
    
    
    
    4.22
    %OREO sold (prior to the Restructuring)
    
    $
    18,852,671
    
    
    $
    7,268,999Gain on sale
    
    $
    374,344
    
    
    $
    90,816
  
 Results of Operations
 Three Months Ended March 31, 2009 Compared to Three Months Ended March 31, 2008
 Overview.
 28




---



##### Table of Contents



Revenues.
       29




---



##### Table of Contents



Operating Expenses.
   30




---



##### Table of Contents



Franklin Credit Management Corporation (FCMC)
  31




---



##### Table of Contents



Liquidity and Capital Resources
 General
    Short-term Investments.
 32




---



##### Table of Contents



Cost of Funds.
 Under the terms of theForbearance Agreementsand credit agreementIn accordance with the
    
    
    excludedterms of the Restructuring
    
    
    from the RestructuringAgreements
    
    
    AgreementsFHLB 30-day LIBOR advance rate plus 2.60%
    
    $
    
    
    
    $
    16,447,483FHLB 30-day LIBOR advance rate plus 2.75%
    
    
    
    
    
    
    24,208,744LIBOR plus 2.25%
    
    
    837,932,436
    
    
    
    LIBOR plus 2.75%
    
    
    407,488,418
    
    
    
    15.00%
    
    
    125,000,000
    
    
    
    $
    1,370,420,854
    
    
    $
    40,656,227
  Cash Flow from Operating, Investing and Financing Activities
    33




---



##### Table of Contents



Borrowings
  Restructuring Agreements with Lead Lending Bank
  March 2009 Restructuring
   34




---



##### Table of Contents



Background.
 
    
    a substantial and growing shortfall in cash collections from the Portfolio relative
to the Companys debt service obligations owed to the Bank;
    
    a substantial and growing shortfall in the value of the Companys assets, relative
to the amounts owed to the Bank under the facility agreements for the Companys
outstanding debt with the Bank;
    
    concern by potential servicing customers and other constituencies over the continued
viability of the Company in its current form, including the viability of FCMC, the
Companys servicing platform;
 35




---



##### Table of Contents




    
    concern that the Bank was increasingly likely to:
 o
    
    cease granting necessary waivers and forbearances with respect to
Company defaults under the Companys various credit facilities; ando
    
    declare a default with respect to the credit facilities and foreclose
on the assets of the Company, substantially all of which were pledged to the Bank,
especially in light of communications from the Bank indicating that it was seeking
greater and more direct control over the collection guidelines related to the
assets in the Portfolio and may have needed to foreclose on the Portfolio if it
were not able to consummate a transaction like the Restructuring in which it was
able to gain control over the Portfolio while keeping the credit facilities
outstanding. Such a foreclosure would have left no value for the Companys
stockholders.
  Summary.
 
    
    in exchange for the transfer of that part of the Portfolio underlying the Bank Trust
Certificates (as defined below), the Company received common membership interests and
Class C preferred membership interests in the REIT having in the aggregate a value
intended to approximate the fair market value of that portion of the Portfolio
transferred to the Bank, which as of March 31, 2009 was approximately $477.3 million
(the REIT Securities). The preferred membership interests have a liquidation value
of $100,000 per unit and an annual cumulative dividend rate of 9% of such liquidation
value. Any dividends on the preferred shares shall be payable only out of funds
legally available for the payment thereof;
    
    principal and interest payments in respect of the Legacy Credit Agreement are only
due and payable to the extent of cash flow of the Company, which cash flow would
include dividends declared and paid in respect of the REIT Securities, 70% of the
amounts distributed by FCMC to the Company or any other assets of the Company, other
than the retained interest in FCMC (as discussed below); and
    
    the Banks recourse in respect of the Legacy Credit Agreement is limited to the
assets and stock of Franklin Holdings subsidiaries, excluding the assets of FCMC
(except for a first lien of the Bank on an office condominium unit and a second
priority lien of the Bank on cash collateral held as security under the Licensing
Credit Agreement) and a portion of FCMCs stock, representing not less than twenty
percent and not more than seventy percent of FCMCs common equity, based on the amounts
received by the Bank from the cash collections from FCMCs servicing of the Portfolio
as discussed in more detail below. The Bank, in regard to the payment of principal and
interest on its loan, also is entitled to receive seventy percent of the distributions
and dividends from FCMC, which percentage share may be reduced to twenty percent based
upon the Banks receipt of the agreed amounts of net remittances from the Portfolio
summarized below.
 36




---



##### Table of Contents




    
    release of thirty percent of the equity in FCMC, 10 percent of which has been
transferred to the Companys principal stockholder, Thomas J. Axon, from the Companys
pledges to the Bank in respect of its Legacy Credit Agreement, with the possibility of
release of up to an additional fifty percent (of which a maximum of ten percent would
go to Thomas J. Axon), based upon the Banks receipt of the agreed amounts of net
remittances from the Portfolio, summarized below (the Net Remittances), from March
31, 2009, the effective date of the Legacy Credit Agreement (the Legacy Effective
Date), through the term of the Legacy Credit Agreement;the Bank shall reduce its
interest in the equity in FCMC, as collateral, in accordance with the following
collection levels:
 Minimum Amountof Net RemittancesLevel
    
    (Minimum Level Amount)
    
    Time Period
    
    Release of Equity InterestsLevel 1
    
    $225 million
    
    1 year from the Legacy Effective Date
    
    10% (70% reduces to 60%)Level 2
    
    $475 million
    
    3 years from the Legacy Effective Date
    
    10% (60% reduces to 50%)Level 3
    
    $575 million
    
    No time period specified
    
    10% (50% reduces to 40%)Level 4
    
    $650 million
    
    No time period specified
    
    10% (40% reduces to 30%)Level 5
    
    $750 million
    
    No time period specified
    
    10% (30% reduces to 20%)
  
    
    entry into a servicing agreement enabling the Company to receive fee income in
respect of its continued servicing of the transferred Portfolio; and
 
    
    entry into amended credit facilities in the aggregate principal amount of $13.5
million, including a $5 million facility for working capital and to support various
servicer licenses, a $2 million revolving facility and a $6.5 million letter of credit
facility to support various servicer licenses.
  
    
    the possible transfer of ownership of a portion of FCMC, including a minimum of
twenty percent and a maximum of seventy percent, to the Bank at maturity of the
Companys Legacy Credit Agreement with the Bank, unless further extended if the Company
is not otherwise able to satisfy or refinance the Legacy Credit Agreement prior to
maturity;
 37




---



##### Table of Contents




    
    the transfer of ten percent of ownership of FCMC to Franklin Holdings principal
stockholder, Thomas J. Axon, as the cost of obtaining certain guarantees and pledges
required by the Bank as a condition of the restructuring, subject to increase to an
additional ten percent should the pledge of common shares of FCMC by Franklin Holding
to the Bank be reduced upon the attainment by FCMC of certain net collection targets
set by the Bank with respect to the Portfolio;
    
    entry into a service agreement with respect to FCMCs continued servicing of the
Portfolio that allows the Bank to terminate such servicing and, concomitantly, FCMCs
fee income from servicing the Portfolio; and
    
    in part as a result of a tax basis transfer, the Company may incur significant
income tax liabilities at termination of the Legacy Credit Agreement, liquidation of
the Company or any of its direct or indirect subsidiary companies, or certain other
Company events such as a de facto liquidation. The amount of any tax liability that
the Company may incur is not certain since any such calculations need to be performed
on a company by company basis and are influenced by a number of factors including, but
not limited to, the ability to use prior year losses and future results of operations.
 Restructuring Agreements.
 Transferred substantially all of the Portfolio in exchange for the REIT Securities
  (a)
    
    an undivided 100% interest of the Banks portion of consumer mortgage
loans (the Bank Consumer Loan Certificate);(b)
    
    an undivided 100% interest in the Banks portion of consumer REO assets
(the Bank Consumer REO Certificate, and together with the Bank Consumer Loan
Certificate, the Bank Trust Certificates);(c)
    
    an undivided 100% interest in the portion of consumer mortgage loan
assets allocated to the M&I Marshall & Ilsley Bank (M&I) and BOS (USA) Inc.
(BOS) (M&I and BOS collectively, the Participants) represented by two
certificates (the Participants Consumer Loan Certificates); and(d)
    
    an undivided 100% interest in Participants portion of the consumer REO
assets represented by two certificates (the Participants Consumer REO
Certificates, and together with the Participants Consumer Loan Certificate, the
Participants Trust Certificates).
  38




---



##### Table of Contents



Amended and restated substantially all of its outstanding debt.
  39




---



##### Table of Contents



Terms of the Restructured Indebtedness Under the Legacy Credit Agreement.
 Outstanding
    
    Applicable Interest
    
    Required MonthlyPrincipal Amount -
    
    Margin Over LIBOR
    
    PrincipalFranklin Asset/Tribeca
    
    (basis points)
    
    AmortizationTranche A
    
    $
    838,000,000
    
    
    
    225
    
    
    NoneTranche B
    
    $
    407,000,000
    
    
    
    275
    
    
    NoneTranche C
    
    $
    125,000,000
    
    
    
    N/A
    (1)
    
    NoneUnrestructured Debt
    
    $
    41,000,000
    
    
    
    (2)
    
    
    None
 
 (1)
    
    The applicable interest rate is fixed at 15% per annum. Interest will be paid in kind
during the term of the Restructuring.(2)
    
    Interest margin over FHLB 30-day LIBOR advance rate plus 2.60-2.75%.   40




---



##### Table of Contents



41




---



##### Table of Contents



Entered into an amended and restated credit agreement to fund FCMCs licensing obligations and
working capital.
      42




---



##### Table of Contents



Entered into a servicing agreement with the New Trust
      Interest Rate Caps
  43




---



##### Table of Contents



Interest Rate Swaps
      44




---



##### Table of Contents



Notional Amount
    
    
    Term
    
    Maturity Date
    
    
    Fixed Rate
    
    
    Estimated Fair Value*$
    275,000,000
    
    
    3 years
    
    March 5, 2011
    
    
    3.47%
    
    
    $
    (13,294,472
    )70,000,000
    
    
    3 years
    
    March 5, 2011
    
    
    3.11%
    
    
    
    (2,735,064
    )45,000,000
    
    
    4 years
    
    March 5, 2012
    
    
    3.43%
    
    
    
    (2,542,940
    )$
    390,000,000
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (18,572,476
    )
 
 *
    
    Determined in accordance with SFAS 157 based upon a Level 2 valuation methodology. 
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  Impact of Inflation
  Interest Rate Risk
    45




---



##### Table of Contents



ITEM 4T. CONTROLS AND PROCEDURES
 Disclosure Controls and Procedures
  Changes in Internal Controls over Financial Reporting
  46




---



##### Table of Contents



PART II
OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  Franklin Credit Management Corporation v. WMC Mortgage LLC
 Franklin Credit Management Corporation v. WMC Mortgage LLC,
successor to WMC Mortgage Corp
 Franklin Credit Management Corporation v. WMC Mortgage LLC,
successor to WMC Mortgage Corp
  
 ITEM 1A. RISK FACTORS
  
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  47




---



##### Table of Contents



ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 ITEM 5. OTHER INFORMATION
 Market Information
  48




---



##### Table of Contents



ITEM 6. EXHIBITS
 ExhibitNumber3.1
    
    Fifth Amended and Restated Certificate of Incorporation.
Incorporated by reference to Appendix A to the Registrants
Definitive Information Statement on Schedule 14C, filed
with the Securities and Exchange Commission (the
Commission) on January 20, 2005.3.2
    
    Amended and Restated By-laws. Incorporated by reference to
Appendix B to the Registrants Definitive Information
Statement on Schedule 14C, filed with the Commission on
January 20, 2005.10.89
    
    First Amendment to Loan Servicing Agreement, dated as of
February 27, 2009, by and between Franklin Credit
Management Corporation and Bosco Credit, LLC. Incorporated
by reference to Exhibit 10.89 to the Registrants Annual
Report on Form 10-K for the fiscal year period ended
December 31, 2008, filed with the Commission on April 10,
2009.10.90
    
    Trust Agreement by and among Franklin Credit Asset
Corporation, Franklin Credit Management Corporation,
Tribeca Lending Corp. and each of their respective
subsidiaries, as Depositors, and The Huntington National
Bank, as Certificate Trustee, and Wilmington Trust Company,
as Owner Trustee, dated March 31, 2009. Incorporated by
reference to Exhibit 10.1 to the Registrants Current
Report on Form 8-K, dated as of April 6, 2009.10.91
    
    Transfer and Assignment Agreement by and among Franklin
Mortgage Asset Trust 2009-A, Franklin Credit Asset
Corporation, Franklin Credit Management Corporation,
Tribeca Lending Corp. and each of their respective
subsidiaries dated March 31, 2009. Incorporated by
reference to Exhibit 10.2 to the Registrants Current
Report on Form 8-K, dated as of April 6, 2009.10.92
    
    Contribution Agreement by and among Franklin Asset, LLC and
Franklin Asset Merger Sub, LLC dated March 31, 2009.
Incorporated by reference to Exhibit 10.3 to the
Registrants Current Report on Form 8-K, dated as of April
6, 2009.10.93
    
    Agreement and Plan of Merger by and among Huntington
Capital Financing, LLC, HCFFL, LLC, Franklin Asset, LLC,
Franklin Credit Holding Corporation, Franklin Credit Asset
Corporation, Tribeca Lending Corp. and each of their
respective subsidiaries dated March 31, 2009. Incorporated
by reference to Exhibit 10.4 to the Registrants Current
Report on Form 8-K, dated as of April 6, 2009.10.94
    
    Amended and Restated Credit Agreement (Legacy) by and among
Franklin Credit Asset Corporation, Tribeca Lending Corp.
and the Other Borrowers Party hereto as Borrowers, the
Financial Institutions Party hereto as Lenders, and the
Huntington National Bank, as Administrative Agent, dated
March 31, 2009. Incorporated by reference to Exhibit 10.5
to the Registrants Current Report on Form 8-K, dated as of
April 6, 2009.10.95
    
    The Limited Recourse Guarantee, dated as of March 3, 2009,
made by Franklin Credit Holding Corporation in favor of The
Huntington National Bank. Incorporated by reference to
Exhibit 10.6 to the Registrants Current Report on Form
8-K, dated as of April 6, 2009.10.96
    
    The Limited Recourse Guarantee, dated as of March 31, 2009,
made by Franklin Credit Management Corporation in favor of
The Huntington National Bank. Incorporated by reference to
Exhibit 10.7 to the Registrants Current Report on Form
8-K, dated as of April 6, 2009.
 49




---



##### Table of Contents



ExhibitNumber10.97
    
    The Amended and Restated Security Agreement, dated as of
March 31, 2009, by and among the Borrowers and The
Huntington National Bank. Incorporated by reference to
Exhibit 10.8 to the Registrants Current Report on Form
8-K, dated as of April 6, 2009.10.98
    
    The Amended and Restated Pledge Agreement, dated as of
March 31, 2009, by and between Franklin Credit Holding
Corporation and The Huntington National Bank. Incorporated
by reference to Exhibit 10.9 to the Registrants Current
Report on Form 8-K, dated as of April 6, 2009.10.99
    
    Amendment No. 1 to First Amended and Restated Forbearance
Agreement and Amendment to Credit Agreements, dated as of
April 20, 2009, by and among Franklin Credit Holding
Corporation, Franklin Credit Management Corporation,
Franklin Credit Asset Corporation, Flow 2006 F Corp., FCMC
2006 M Corp., FCMC 2006 K Corp. and The Huntington National
Bank. Incorporated by reference to Exhibit 10.1 to the
Registrants Current Report on Form 8-K, dated as of April
22, 2009.31.1*
    
    Rule 13a-14(a) Certification of Chief Executive Officer of
the Registrant in accordance with Section 302 of the
Sarbanes-Oxley Act of 2002.31.2*
    
    Rule 13a-14(a) Certification of Chief Financial Officer of
the Registrant in accordance with Section 302 of the
Sarbanes-Oxley Act of 2002.32.1*
    
    Section 1350 Certification of Chief Executive Officer of
the Registrant in accordance with Section 906 of the
Sarbanes-Oxley Act of 2002.32.2*
    
    Section 1350 Certification of Chief Financial Officer of
the Registrant in accordance with Section 906 of the
Sarbanes-Oxley Act of 2002.
 
 *
    
    Filed herewith. 50




---



##### Table of Contents



SIGNATURES
  FRANKLIN CREDIT HOLDING CORPORATIONJune 19, 2009
    By:
    /s/ ALEXANDER GORDON JARDINAlexander Gordon JardinChief Executive Officer
(Principal Executive Officer)June 19, 2009
    By:
    /s/ PAUL D. COLASONOPaul D. ColasonoExecutive Vice President and Chief Financial Officer
(Principal Financial Officer) 51