##### Table of Contents



UNITED STATESSECURITIES 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 September 30, 2007
 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 MANAGEMENT CORPORATION
  Delaware
(State or other jurisdiction of 
incorporation or organization)
    
    75-2243266
(IRS Employer
Identification No.)101 Hudson Street 
Jersey City, New Jersey
(Address of Principal 
Executive Offices)
    
    07302
(Zip code)
 (201) 604-1800
 þ 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




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##### 



PagePART I.
    
    FINANCIAL INFORMATIONItem 1.
    
    Financial Statements (Unaudited)Consolidated Balance Sheets at September 30, 2007 and December 31, 2006
    
    
    3Consolidated Statements of Income for the three and nine months ended September 30, 2007 and September 30, 2006
    
    
    4Consolidated Statement of Changes in Stockholders Equity for the nine months ended September 30, 2007
    
    
    5Consolidated Statements of Cash Flows for the nine months ended September 30, 2007 and September 30, 2006
    
    
    6Notes to Consolidated Financial Statements
    
    
    7Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    24Application of Critical Accounting Policies and Estimates
    
    
    25Portfolio Characteristics
    
    
    26Results of Operations
    
    
    36Liquidity and Capital Resources
    
    
    42Borrowings
    
    
    44Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    53Item 4.
    
    Controls and Procedures
    
    
    55PART II.
    
    OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    56Item 1A.
    
    Risk Factors
    
    
    56Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    72Item 3.
    
    Defaults Upon Senior Securities
    
    
    72Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    72Item 5.
    
    Other Information
    
    
    72Item 6.
    
    Exhibits
    
    
    73SIGNATURES
    
    
    75EX-10.6: CONTINUING AND UNCONDITIONAL GUARANTYEX-31.1: CERTIFICATIONEX-31.2: CERTIFICATIONEX-32.1: CERTIFICATIONEX-32.2: CERTIFICATION




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FRANKLIN CREDIT MANAGEMENT CORPORATION AND SUBSIDIARIES
 September 30, 2007(Unaudited)
    
    
    December 31, 2006ASSETSCash and cash equivalents
    
    $
    7,074,593
    
    
    $
    3,983,104Restricted cash
    
    
    31,520,491
    
    
    
    32,689,154Short-term investments
    
    
    26,705,362
    
    
    
    20,311,193Notes Receivable:Principal
    
    
    1,315,334,060
    
    
    
    1,174,039,567Purchase discount
    
    
    (10,993,575
    )
    
    
    (12,423,746
    )Allowance for loan losses
    
    
    (233,900,137
    )
    
    
    (52,424,375
    )Net notes receivable
    
    
    1,070,440,348
    
    
    
    1,109,191,446Originated loans held for sale
    
    
    843,418
    
    
    
    4,114,284Originated loans held for investment:Principal,
net of deferred fees and costs
    
    
    525,750,965
    
    
    
    423,549,261Allowance for loan losses
    
    
    (24,777,105
    )
    
    
    (866,466
    )Originated loans held for investment, net
    
    
    500,973,860
    
    
    
    422,682,795Accrued interest receivable
    
    
    24,720,130
    
    
    
    22,010,027Other real estate owned
    
    
    41,410,637
    
    
    
    22,977,725Deferred financing costs, net
    
    
    11,684,811
    
    
    
    10,622,961Other receivables
    
    
    5,858,091
    
    
    
    6,614,386Deferred tax asset
    
    
    112,784,004
    
    
    
    Building, furniture and equipment, net
    
    
    3,658,014
    
    
    
    3,715,908Income tax receivable
    
    
    3,124,474
    
    
    
    8,594,119Other assets
    
    
    1,041,565
    
    
    
    850,897Total assets
    
    $
    1,841,839,798
    
    
    $
    1,668,357,999LIABILITIES AND STOCKHOLDERS EQUITYLiabilities:Notes payable, net of debt discount of $399,725 at September 30, 2007
and $515,799 at December 31, 2006
    
    $
    1,874,853,363
    
    
    $
    1,520,217,264Financing agreements
    
    
    63,092,669
    
    
    
    55,962,315Accounts payable and accrued expenses
    
    
    24,486,962
    
    
    
    22,875,527Repurchase obligation
    
    
    
    
    
    
    18,094,061Deferred tax liability
    
    
    
    
    
    
    3,655,483Total liabilities
    
    
    1,962,432,994
    
    
    
    1,620,804,650Commitments and ContingenciesStockholders (Deficit)/Equity:Preferred stock, $0.01 par value; authorized 3,000,000; issued  none
    
    
    
    
    
    
    Common stock and additional paid-in capital, $0.01 par value,
22,000,000 authorized shares; issued and outstanding: 8,025,295 both
at
September 30, 2007 and December 31, 2006
    
    
    23,026,362
    
    
    
    22,715,180(Accumulated deficit)/Retained earnings
    
    
    (143,619,558
    )
    
    
    24,838,169Total stockholders (deficit)/equity
    
    
    (120,593,196
    )
    
    
    47,553,349Total liabilities and stockholders equity
    
    $
    1,841,839,798
    
    
    $
    1,668,357,999
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FRANKLIN CREDIT MANAGEMENT CORPORATION AND SUBSIDIARIES
 Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Revenues:Interest income
    
    $
    38,692,713
    
    
    $
    35,855,704
    
    
    $
    120,990,305
    
    
    $
    104,570,879Purchase discount earned
    
    
    1,109,316
    
    
    
    2,660,711
    
    
    
    3,889,523
    
    
    
    6,863,384Gain on sale of notes receivable
    
    
    
    
    
    
    94,862
    
    
    
    31,118
    
    
    
    163,911(Loss)/gain on sale of originated loans
    
    
    (590,243
    )
    
    
    1,349,724
    
    
    
    (389,510
    )
    
    
    1,686,520Gain on sale of other real estate owned
    
    
    390,653
    
    
    
    70,056
    
    
    
    629,460
    
    
    
    1,312,339Prepayment penalties and other income
    
    
    1,961,107
    
    
    
    2,435,600
    
    
    
    6,085,900
    
    
    
    6,975,920Total revenues
    
    
    41,563,546
    
    
    
    42,466,657
    
    
    
    131,236,796
    
    
    
    121,572,953Operating Expenses:Interest expense
    
    
    39,132,464
    
    
    
    29,494,108
    
    
    
    106,101,071
    
    
    
    81,884,172Collection, general and administrative
    
    
    10,255,570
    
    
    
    10,420,831
    
    
    
    29,918,343
    
    
    
    28,801,503Provision for loan losses
    
    
    262,715,207
    
    
    
    1,709,165
    
    
    
    272,711,893
    
    
    
    6,740,440Amortization of deferred financing costs
    
    
    526,729
    
    
    
    1,550,790
    
    
    
    2,280,227
    
    
    
    3,589,221Depreciation
    
    
    364,484
    
    
    
    286,616
    
    
    
    1,081,839
    
    
    
    849,934Total expenses
    
    
    312,994,454
    
    
    
    43,461,510
    
    
    
    412,093,373
    
    
    
    121,865,270Loss before provision for income taxes
    
    
    (271,430,908
    )
    
    
    (994,853
    )
    
    
    (280,856,577
    )
    
    
    (292,317
    )Income tax benefit
    
    
    108,510,170
    
    
    
    430,898
    
    
    
    112,398,850
    
    
    
    125,698Net loss
    
    $
    (162,920,738
    )
    
    $
    (563,955
    )
    
    $
    (168,457,727
    )
    
    $
    (166,619
    )Net loss per common share:Basic
    
    $
    (20.51
    )
    
    $
    (0.07
    )
    
    $
    (21.22
    )
    
    $
    (0.02
    )Diluted
    
    $
    (20.51
    )
    
    $
    (0.07
    )
    
    $
    (21.22
    )
    
    $
    (0.02
    )Weighted average number of shares outstanding:Basic
    
    
    7,945,295
    
    
    
    7,755,628
    
    
    
    7,937,795
    
    
    
    7,635,989Diluted
    
    
    7,945,295
    
    
    
    7,755,628
    
    
    
    7,937,795
    
    
    
    7,635,989
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FRANKLIN CREDIT MANAGEMENT CORPORATION AND SUBSIDIARIES
 (AccumulatedCommon Stock and
    
    
    Deficit)/Additional Paid-in Capital
    
    
    RetainedShares
    
    
    Amount
    
    
    Earnings
    
    
    TotalBALANCE, JANUARY 1, 2007
    
    
    8,025,295
    
    
    $
    22,715,180
    
    
    $
    24,838,169
    
    
    $
    47,553,349Stock-based compensation
    
    
    
    
    
    
    311,182
    
    
    
    
    
    
    
    311,182Net loss
    
    
    
    
    
    
    
    
    
    
    (168,457,727
    )
    
    
    (168,457,727
    )BALANCE, SEPTEMBER 30, 2007
    
    
    8,025,295
    
    
    $
    23,026,362
    
    
    $
    (143,619,558
    )
    
    $
    (120,593,196
    )
  5




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FRANKLIN CREDIT MANAGEMENT CORPORATION AND SUBSIDIARIES
 Nine Months Ended September 30,2007
    
    
    2006CASH FLOWS FROM OPERATING ACTIVITIES:Net loss
    
    $
    (168,457,727
    )
    
    $
    (166,619
    )Adjustments to reconcile loss to net cash provided by/(used in) operating activities:Gain on sale of notes receivable
    
    
    (31,118
    )
    
    
    (163,911
    )Gain on sale of other real estate owned
    
    
    (629,460
    )
    
    
    (1,312,339
    )Loss/(gain) on sale of originated loans
    
    
    389,510
    
    
    
    (1,686,520
    )Depreciation
    
    
    1,081,839
    
    
    
    849,934Amortization of deferred costs and fees on originated loans
    
    
    1,158,610
    
    
    
    1,036,244Amortization of deferred financing costs
    
    
    2,280,227
    
    
    
    3,589,221Amortization of debt discount
    
    
    116,074
    
    
    
    1,055,753Excess tax benefit
    
    
    
    
    
    
    (539,675
    )Non-cash compensation
    
    
    311,182
    
    
    
    653,263Proceeds from the sale of and principal collections on loans held for sale
    
    
    32,989,956
    
    
    
    26,808,669Deferred tax provision
    
    
    (116,439,487
    )
    
    
    (413,372
    )Purchase discount earned
    
    
    (3,889,523
    )
    
    
    (6,863,384
    )Provision for loan losses
    
    
    272,711,893
    
    
    
    6,740,440Origination of loans held for sale
    
    
    (34,060,310
    )
    
    
    (21,856,300
    )Changes in operating assets and liabilities:Accrued interest receivable
    
    
    (2,710,103
    )
    
    
    (5,689,454
    )Other receivables
    
    
    756,295
    
    
    
    424,726Income tax receivable
    
    
    5,469,645
    
    
    
    Other assets
    
    
    (190,668
    )
    
    
    (3,200,512
    )Accounts payable and accrued expenses
    
    
    1,611,435
    
    
    
    2,626,379Net cash (used in)/provided by operating activities
    
    
    (7,531,730
    )
    
    
    1,892,543CASH FLOWS FROM INVESTING ACTIVITIES:Decrease/(increase) in restricted cash
    
    
    1,168,663
    
    
    
    (9,279,056
    )Purchase of notes receivable
    
    
    (414,826,661
    )
    
    
    (417,334,295
    )Principal collections on notes receivable
    
    
    150,234,712
    
    
    
    207,537,510Principal collections on loans held for investment
    
    
    125,462,999
    
    
    
    177,590,686Origination of loans held for investment
    
    
    (247,786,062
    )
    
    
    (274,236,127
    )Investment in short-term securities
    
    
    (6,394,169
    )
    
    
    150,905Repurchase of loans sold
    
    
    (8,235,468
    )
    
    
    Putback of acquired notes receivable
    
    
    14,796,193
    
    
    
    Proceeds from sale of other real estate owned
    
    
    23,297,621
    
    
    
    23,245,259Proceeds from sale of loans held for investment
    
    
    12,716,251
    
    
    
    60,810,585Proceeds from sale of notes receivable
    
    
    20,998,838
    
    
    
    3,807,050Purchase of building, furniture and equipment
    
    
    (1,023,945
    )
    
    
    (779,974
    )Net cash used in investing activities
    
    
    (329,591,028
    )
    
    
    (228,487,457
    )CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from notes payable
    
    
    693,156,528
    
    
    
    678,872,363Principal payments of notes payable
    
    
    (338,636,504
    )
    
    
    (454,098,499
    )Proceeds from financing agreements
    
    
    375,094,599
    
    
    
    318,708,828Principal payments of financing agreements
    
    
    (367,964,244
    )
    
    
    (312,490,597
    )Repurchase obligation
    
    
    (18,094,061
    )
    
    
    Excess tax benefit
    
    
    
    
    
    
    539,675Payment of deferred financing costs
    
    
    (3,342,071
    )
    
    
    (4,031,328
    )Exercise of options
    
    
    
    
    
    
    335,805Net cash provided by financing activities
    
    
    340,214,247
    
    
    
    227,836,247NET CHANGE IN CASH AND CASH EQUIVALENTS
    
    
    3,091,489
    
    
    
    1,241,333CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
    
    
    3,983,104
    
    
    
    3,886,506CASH AND CASH EQUIVALENTS, END OF PERIOD
    
    $
    7,074,593
    
    
    $
    5,127,839SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:Cash payments for interest
    
    $
    131,582,708
    
    
    $
    78,912,461Cash payments for taxes
    
    $
    7,795,132
    
    
    $
    3,625,115NON-CASH INVESTING AND FINANCING ACTIVITY:Transfer of loans from held for sale to loans held for investment
    
    $
    4,910,730
    
    
    $
    483,604Transfer from notes receivable and loans held for investment to OREO
    
    $
    41,101,073
    
    
    $
    35,353,176
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FRANKLIN CREDIT MANAGEMENT CORPORATION AND SUBSIDIARIES
 1. BUSINESS
 Overview
  Allowance for Loan Losses
  Recent Events
   7




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(1)
    
    On December 28, 2007, Franklin entered into a series of agreements (the
Forbearance Agreements) with The Huntington National Bank, successor by merger in
July 2007 to Sky Bank (Sky Bank, prior to the merger, and Huntington, thereafter, are
referred to as the bank), whereby the bank agreed to restructure approximately $1.93
billion of the Companys indebtedness to it and its participant banks, forgive $300
million of such indebtedness for a restructuring fee of $12 million paid to the bank,
and waive certain existing defaults (the Restructuring). See Managements
Discussion and Analysis  Borrowings.(2)
    
    Franklin ceased to acquire or originate loans in November 2007 and is expressly
prohibited from acquiring or originating loans by the terms of the Forbearance
Agreements. The Company is currently seeking to enter new business activities (for
third parties) that are directly related to our portfolio acquisition and servicing
operations, such as performing due diligence services, servicing subprime loans or
brokering loans, or participating in off-balance sheet joint ventures. These new
business activities are subject to the consent of the bank; and,(3)
    
    Effective February 27, 2008, the Company entered into $725 million (notional
amount) of fixed-rate interest rate swaps in order to effectively stabilize the future
interest payments on a portion of its interest-sensitive borrowings. See Managements
Discussion and Analysis  Borrowings.
 Forbearance Agreements with Lead Lending Bank.
 
    
    $44.5 million of the Companys indebtedness under the Master Credit and Security
Agreement, dated as of October 13, 2004, as amended, by and among Franklin Credit,
certain subsidiaries of Franklin Credit and the bank; and
    
    $44.8 million of Tribecas indebtedness to BOS (USA) Inc., an affiliate of Bank of
Scotland, under the Master Credit and Security Agreement, dated March 24, 2006, by and
among Tribeca, certain subsidiaries and BOS.
    8




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
    
    the Company acknowledged, and the bank waived, certain existing defaults under the
Companys existing credit facilities with the bank;
    
    Franklin Credits indebtedness to the bank was reduced by $300 million and Franklin
Credit paid a restructuring fee of $12 million to the bank;
    
    the remaining approximately $1.54 billion of outstanding indebtedness to the bank,
including approximately $1.05 billion of outstanding indebtedness of Franklin Credit
and approximately $491.1 million of outstanding indebtedness of Tribeca, was
restructured into six term loans with modified terms and a maturity date of May 15,
2009; and,
    
    the Company paid all of the accrued interest on its debt outstanding to the bank
through December 27, 2007 and guaranteed payment and performance of the restructured
indebtedness.
  
    
    the Companys reimbursable expenses in the ordinary course of business during each
of the first two months after the date of the agreement will not exceed $2.5 million,
excluding reimbursement of certain bank expenses after the date of the Restructuring,
and thereafter, an amount provided for in an approved budget;
    
    the Company will not originate or acquire mortgage loans or other assets, perform
due diligence or servicing, broker loans, or participate in off-balance sheet joint
ventures and special purpose vehicles, without the prior consent of the bank;
    
    the Company will use its best efforts to obtain interest rate hedges acceptable to
the bank in respect of the $1 billion of Tranche A indebtedness;
    
    the Company will not make certain restricted payments to its stockholders or certain
other related parties;
    
    the Company will not engage in certain transactions with affiliates;
    
    the Company will not incur additional indebtedness other than trade payables and
subordinated indebtedness;
    
    the Company together will maintain a minimum consolidated net worth of at least $5
million, plus a certain percentage, to be mutually agreed upon, of any equity
investment in the Company after the date of the Restructuring;
    
    the Company will together maintain a minimum liquidity of $5 million;
    
    the Company will maintain prescribed interest coverage ratios based on EBITDA (as
defined) to Interest Expense (as defined);
    
    the Company will not enter into mergers, consolidations or sales of assets (subject
to certain exceptions); and,
    
    the Company will not, without the banks consent, enter into any material change in
its capital structure that the bank or a nationally recognized independent public
accounting firm determine could cause a consolidation of its assets with other persons
under relevant accounting regulations.
 9




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Loan Acquisitions
  
    
    performing loans loans to borrowers who are contractually current, but may have
been delinquent in the past and which may have deficiencies relating to credit history,
loan-to-value ratios, income ratios or documentation;
    
    reperforming loans loans to borrowers who are not contractually current, but have
recently made regular payments and where there is a good possibility the loans will be
repaid in full; and
 10




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
    
    nonperforming loans loans to borrowers who are delinquent, not expected to cure,
and for which a primary avenue of recovery is through the sale of the property securing
the loan.
   Loan Originations
    11




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Loan Servicing
  12




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Financing
     2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Basis of Presentation
  13




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Notes Receivable and Income Recognition
  Discounts on Acquired Loans
 14




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15




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Three Months Ended September 30,2007
    
    
    2006Accretable DiscountBalance, beginning of period
    
    $
    17,248,794
    
    
    $
    14,240,528New acquisitions
    
    
    
    
    
    
    4,000Accretion
    
    
    (742,925
    )
    
    
    (1,010,378
    )Transfers from nonaccretable
    
    
    9,448,913
    
    
    
    695,508Net reductions relating to loans sold
    
    
    
    
    
    
    (93,020
    )Net reductions relating to loans repurchased
    
    
    
    
    
    
    (4,297
    )Other
    
    
    
    
    
    
    32,530Balance, end of period
    
    $
    25,954,782
    
    
    $
    13,864,871Nonaccretable DiscountBalance, beginning of period
    
    $
    117,887,304
    
    
    $
    39,212,462New acquisitions
    
    
    6,504,425
    
    
    
    13,741,125Transfers to accretable
    
    
    (9,448,913
    )
    
    
    (695,508
    )Net reductions relating to loans sold
    
    
    
    
    
    
    (77,996
    )Net reductions relating to loans repurchased
    
    
    (161,099
    )
    
    
    Net reductions relating to loans charged off
    
    
    (17,579,853
    )
    
    
    Other, loans transferred to OREO
    
    
    (1,051,671
    )
    
    
    (3,036,816
    )Balance, end of period
    
    $
    96,150,193
    
    
    $
    49,143,267
 Nine Months Ended September 30,2007
    
    
    2006Accretable DiscountBalance, beginning of period
    
    $
    12,842,755
    
    
    $
    11,360,617New acquisitions
    
    
    29,080
    
    
    
    2,549,873Accretion
    
    
    (2,273,623
    )
    
    
    (2,936,851
    )Transfers from nonaccretable
    
    
    15,915,964
    
    
    
    2,883,125Net reductions relating to loans sold
    
    
    (558,022
    )
    
    
    (93,020
    )Net reductions relating to loans repurchased
    
    
    
    
    
    
    (6,486
    )Other
    
    
    (1,372
    )
    
    
    107,613Balance, end of period
    
    $
    25,954,782
    
    
    $
    13,864,871Nonaccretable DiscountBalance, beginning of period
    
    $
    60,531,503
    
    
    $
    23,981,013New acquisitions
    
    
    78,020,542
    
    
    
    32,430,347Transfers to accretable
    
    
    (15,915,964
    )
    
    
    (2,883,125
    )Net reductions relating to loans sold
    
    
    (227,821
    )
    
    
    (85,881
    )Net reductions relating to loans repurchased
    
    
    (654,713
    )
    
    
    (204,026
    )Net reductions relating to loans charged off
    
    
    (21,570,331
    )
    
    
    Other, loans transferred to OREO
    
    
    (4,033,023
    )
    
    
    (4,095,061
    )Balance, end of period
    
    $
    96,150,193
    
    
    $
    49,143,267
 16




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##### Table of Contents



Allowance for Loan Losses
 Three Months EndedSeptember 30, 2007Allowance for loan losses, July 1, 2007
    
    $
    48,134,560Provision for loan losses
    
    
    257,507,795Charges for loans transferred to OREO
    
    
    (1,747,628
    )Charge-offs
    
    
    (45,240,952
    )Other
    
    
    23,467Allowance for loan losses, September 30, 2007
    
    $
    258,677,242
 Nine Months EndedSeptember 30, 2007Allowance for loan losses, January 1, 2007
    
    $
    53,290,841Provision for loan losses
    
    
    262,216,229Charges for loans transferred to OREO
    
    
    (6,136,443
    )Charge-offs
    
    
    (50,478,842
    )Other
    
    
    (214,543
    )Allowance for loan losses, September 30, 2007
    
    $
    258,677,242
  Originated Loans Held for Sale
 17




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##### Table of Contents



Originated Loans Held for Investment
   Stock-Based Compensation Plans Accounting for Stock Issued to Employees Accounting for Stock-Based Compensation Share-Based Payment
 18




---



##### Table of Contents



 Stock Options
   Nine Months Ended September 30,2007
    
    2006Risk-free interest rate
    
    
    4.96
    %
    
    
    3.85
    %Weighted average volatility
    
    
    95.15
    
    
    
    47.57Expected lives (years)
    
    
    6.0
    
    
    
    6.0
 19




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##### Table of Contents



WeightedAverageWeighted
    
    Remaining
    
    AggregateAverage
    
    Contractual
    
    IntrinsicShares
    
    Exercise
    
    Term
    
    ValueBalance, January 1, 2007
    
    
    355,000
    
    
    $
    3.38
    
    
    5.41 years
    
    $
    1,014,560Granted
    
    
    15,000
    
    
    
    4.98
    
    
    9.69 years
    
    
    Balance, September 30, 2007
    
    
    370,000
    
    
    
    3.44
    
    
    4.87 years
    
    
    1,111,560Options exercisable
at September 30, 2007
    
    
    370,000
    
    
    $
    3.44
    
    
    
    
    
    
    $
    1,111,560
   2006 Stock Incentive Plan
   Restricted Stock
 20




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##### Table of Contents



Weighted AverageGrant DateShares
    
    Fair ValueNon-vested balance, January 1, 2007
    
    
    95,000
    
    
    $
    8.36Vested
    
    
    (20,000
    )
    
    
    9.55Forfeited
    
    
    
    
    
    
    Non-vested balance, September 30, 2007
    
    
    75,000
    
    
    $
    8.15
  Operating Segments Disclosures about Segments of an Enterprise and Related
Information
 21




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##### Table of Contents



Three Months Ended September 30,2007
    
    
    2006CONSOLIDATED REVENUE:Portfolio asset acquisition and resolution
    
    $
    30,841,271
    
    
    $
    28,939,922Mortgage banking
    
    
    10,722,275
    
    
    
    13,526,735Consolidated revenue
    
    $
    41,563,546
    
    
    $
    42,466,657CONSOLIDATED NET INCOME:Portfolio asset acquisition and resolution
    
    $
    (146,281,291
    )
    
    $
    (1,558,423
    )Mortgage banking
    
    
    (16,639,447
    )
    
    
    994,468Consolidated net income
    
    $
    (162,920,738
    )
    
    $
    (563,955
    )
 Nine Months Ended September 30,2007
    
    
    2006CONSOLIDATED REVENUE:Portfolio asset acquisition and resolution
    
    $
    97,967,676
    
    
    $
    84,774,301Mortgage banking
    
    
    33,269,120
    
    
    
    36,798,652Consolidated revenue
    
    $
    131,236,796
    
    
    $
    121,572,953CONSOLIDATED NET INCOME:Portfolio asset acquisition and resolution
    
    $
    (149,913,862
    )
    
    $
    (3,149,719
    )Mortgage banking
    
    
    (18,543,865
    )
    
    
    2,983,100Consolidated net income
    
    $
    (168,457,727
    )
    
    $
    (166,619
    )
 September 30, 2007
    
    
    December 31, 2006CONSOLIDATED ASSETS:Portfolio asset acquisition and resolution
    
    
    $  1,302,051,668
    
    
    
    $  1,207,914,463Mortgage banking
    
    
    539,788,130
    
    
    
    460,443,536Consolidated assets
    
    
    $  1,841,839,798
    
    
    
    $  1,668,357,999
 Recent Accounting Pronouncements The Fair Value Option for Financial Assets and Financial
Liabilities, including an amendment of FASB Statement No. 115
 Fair
Value Measurements
 22




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##### Table of Contents



Accounting for Uncertainty in
Income Taxes Accounting for Uncertainty in Income Taxes Accounting for Income
Taxes
    Loss before provision for income taxes
    
    $
    (271,430,908
    )Income tax benefit
    
    
    108,510,170Net loss
    
    $
    (162,920,738
    )
 23




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##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 General
 Safe Harbor Statements.
 Allowance for Loan Losses
   24




---



##### Table of Contents



Application of Critical Accounting Policies and Estimates
  25




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##### Table of Contents



Portfolio Characteristics
 Overall Portfolio
  Percentage of TotalProperty Types
    
    Principal Balance
    
    
    Principal BalanceResidential 1-4 family
    
    $
    1,643,285,593
    
    
    
    83.48
    %Condos, co-ops, PUD dwellings
    
    
    240,784,011
    
    
    
    12.23
    %Manufactured and mobile homes
    
    
    19,422,565
    
    
    
    0.99
    %Multi-family
    
    
    823,224
    
    
    
    0.04
    %Secured, property type unknown(1)
    
    
    30,204,620
    
    
    
    1.54
    %Commercial
    
    
    3,373,396
    
    
    
    0.17
    %Unsecured loans(2)
    
    
    29,992,102
    
    
    
    1.52
    %Other
    
    
    629,502
    
    
    
    0.03
    %Total
    
    $
    1,968,515,013
    
    
    
    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
residential real estate collateral has been foreclosed by the first-lien holder. Geographic Dispersion.
 Percentage of TotalLocation
    
    Principal Balance
    
    
    Principal BalanceCalifornia
    
    $
    267,254,697
    
    
    
    13.58
    %New York
    
    
    222,002,360
    
    
    
    11.28
    %New Jersey
    
    
    191,711,630
    
    
    
    9.74
    %Florida
    
    
    167,614,339
    
    
    
    8.51
    %Pennsylvania
    
    
    88,207,288
    
    
    
    4.48
    %Texas
    
    
    87,805,068
    
    
    
    4.46
    %Ohio
    
    
    66,618,721
    
    
    
    3.38
    %Maryland
    
    
    64,483,875
    
    
    
    3.28
    %Illinois
    
    
    61,328,712
    
    
    
    3.11
    %Michigan
    
    
    57,657,613
    
    
    
    2.93
    %All Others
    
    
    693,830,710
    
    
    
    35.25
    %Total
    
    $
    1,968,515,013
    
    
    
    100.00
    %
  26




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##### Table of Contents



Asset Quality
 Delinquency .
 September 30, 2007Contractual Delinquency
    
    
    Recency DelinquencyDays Past Due
    
    
    Amount
    
    
    %
    
    
    Amount
    
    
    %Current
    
    0  30 days
    
    $
    1,100,480,328
    
    
    
    55.90
    %
    
    $
    1,260,494,814
    
    
    
    64.03
    %Delinquent
    
    31  60 days
    
    
    124,944,457
    
    
    
    6.35
    %
    
    
    76,065,243
    
    
    
    3.86
    %61  90 days
    
    
    10,438,671
    
    
    
    0.53
    %
    
    
    31,258,982
    
    
    
    1.59
    %90+ days
    
    
    213,771,117
    
    
    
    10.86
    %
    
    
    81,815,534
    
    
    
    4.16
    %Bankruptcy
    
    0  30 days
    
    
    30,749,328
    
    
    
    1.56
    %
    
    
    88,300,973
    
    
    
    4.49
    %Delinquent
    
    31  60 days
    
    
    7,626,350
    
    
    
    0.39
    %
    
    
    9,383,435
    
    
    
    0.48
    %61  90 days
    
    
    2,693,854
    
    
    
    0.14
    %
    
    
    3,595,828
    
    
    
    0.18
    %90+ days
    
    
    106,736,276
    
    
    
    5.42
    %
    
    
    46,525,572
    
    
    
    2.36
    %Foreclosure
    
    0  30 days
    
    
    779,147
    
    
    
    0.04
    %
    
    
    32,380,044
    
    
    
    1.64
    %Delinquent
    
    31  60 days
    
    
    4,619,690
    
    
    
    0.23
    %
    
    
    16,766,930
    
    
    
    0.85
    %61  90 days
    
    
    1,187,643
    
    
    
    0.06
    %
    
    
    18,614,531
    
    
    
    0.95
    %90+ days
    
    
    364,488,152
    
    
    
    18.52
    %
    
    
    303,313,127
    
    
    
    15.41
    %Total
    
    $
    1,968,515,013
    
    
    
    100.00
    %
    
    $
    1,968,515,013
    
    
    
    100.00
    %Total loans
    
    0  30 days
    
    $
    1,132,008,803
    
    
    
    57.51
    %
    
    $
    1,381,175,831
    
    
    
    70.16
    %
 27




---



##### Table of Contents



December 31, 2006Contractual Delinquency
    
    
    Recency DelinquencyDays Past Due
    
    
    Amount
    
    
    %
    
    
    Amount
    
    
    %Current
    
    0  30 days
    
    $
    961,563,124
    
    
    
    57.91
    %
    
    $
    1,096,675,851
    
    
    
    66.04
    %Delinquent
    
    31  60 days
    
    
    89,662,792
    
    
    
    5.40
    %
    
    
    57,397,832
    
    
    
    3.46
    %61  90 days
    
    
    12,558,911
    
    
    
    0.75
    %
    
    
    20,572,952
    
    
    
    1.24
    %90+ days
    
    
    195,922,320
    
    
    
    11.80
    %
    
    
    85,060,512
    
    
    
    5.12
    %Bankruptcy
    
    0  30 days
    
    
    38,276,181
    
    
    
    2.31
    %
    
    
    101,649,384
    
    
    
    6.12
    %Delinquent
    
    31  60 days
    
    
    8,523,006
    
    
    
    0.51
    %
    
    
    6,957,591
    
    
    
    0.42
    %61  90 days
    
    
    3,231,686
    
    
    
    0.19
    %
    
    
    2,920,336
    
    
    
    0.18
    %90+ days
    
    
    104,883,243
    
    
    
    6.32
    %
    
    
    43,386,805
    
    
    
    2.61
    %Foreclosure
    
    0  30 days
    
    
    622,379
    
    
    
    0.04
    %
    
    
    8,371,118
    
    
    
    0.50
    %Delinquent
    
    31  60 days
    
    
    214,085
    
    
    
    0.01
    %
    
    
    1,789,362
    
    
    
    0.11
    %61  90 days
    
    
    244,283
    
    
    
    0.02
    %
    
    
    2,593,268
    
    
    
    0.16
    %90+ days
    
    
    208,091,113
    
    
    
    12.53
    %
    
    
    196,418,112
    
    
    
    11.83
    %Not Boarded(1)
    
    
    
    
    
    
    36,687,620
    
    
    
    2.21
    %
    
    
    36,687,620
    
    
    
    2.21
    %Total(2)
    
    $
    1,660,480,743
    
    
    
    100.00
    %
    
    $
    1,660,480,743
    
    
    
    100.00
    %Total loans
    
    0  30 days
    
    $
    1,000,461,684
    
    
    
    60.25
    %
    
    $
    1,206,696,353
    
    
    
    72.67
    %
 
 (1)
    
    Not boarded represents recently acquired loans serviced by the seller on a temporary
basis. Approximately $93.2 million of these loans were contractually current at the time
of acquisition and included in the appropriate delinquency categories based on information
provided by the seller-servicer. The remaining portion of not boarded loans, for which
information has not been entered into our servicing systems, is shown in the not boarded
category.(2)
    
    Excludes $17.2 million of loans sold to investors, which the Company committed to
repurchase, that are included on the face of the balance sheet at December 31, 2006. 28




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##### Table of Contents



Notes Receivable Portfolio
  September 30, 2007
    
    
    December 31, 2006Performing loans
    
    $
    1,084,937,110
    
    
    $
    866,296,721Allowance for loan losses
    
    
    131,403,754
    
    
    
    7,745,261Nonaccretable discount*
    
    
    52,471,557
    
    
    
    29,536,412Total performing loans, net of allowance for loan losses
and nonaccretable discount
    
    
    901,061,799
    
    
    
    829,015,048Impaired loans
    
    
    352,501,925
    
    
    
    251,210,748Allowance for loan losses
    
    
    102,496,383
    
    
    
    44,679,114Nonaccretable discount*
    
    
    43,678,636
    
    
    
    19,892,190Total impaired loans, net of allowance for loan losses
and nonaccretable discount
    
    
    206,326,906
    
    
    
    186,639,444Not yet boarded onto servicing system
    
    
    
    
    
    
    129,906,356Nonaccretable discount*
    
    
    
    
    
    
    11,102,901Not yet boarded onto servicing system, net of allowance
for loan losses and nonaccretable discount
    
    
    
    
    
    
    118,803,455Total notes receivable, net of allowance for loan losses
and nonaccretable discount
    
    
    1,107,388,705
    
    
    
    1,134,457,947Accretable discount*
    
    
    25,954,782
    
    
    
    12,842,755Total Notes Receivable, net of allowance for loan losses
and accretable/nonaccretable discount
    
    $
    1,081,433,923
    
    
    $
    1,121,615,192
 
 *
    
    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. 29




---



##### Table of Contents



September 30, 2007
    
    
    December 31, 2006Performing Loans:Fixed rate
    
    $
    779,067,120
    
    
    $
    755,334,985Adjustable rate
    
    
    174,466,236
    
    
    
    103,216,474Total Performing Loans
    
    $
    953,533,356
    
    
    $
    858,551,459Impaired Loans:Fixed rate
    
    $
    154,079,383
    
    
    $
    169,586,108Adjustable rate
    
    
    95,926,159
    
    
    
    36,945,527Total Impaired Loans
    
    $
    250,005,542
    
    
    $
    206,531,635Not Boarded Loans
    
    $
    
    
    
    $
    129,906,356Total Notes
    
    $
    1,203,538,898
    
    
    $
    1,194,989,450Accretable discount
    
    $
    25,954,782
    
    
    $
    12,842,755Nonaccretable discount
    
    $
    96,150,193
    
    
    $
    60,531,503Total Notes Receivable, net of allowance for loan losses
    
    $
    1,081,433,923
    
    
    $
    1,121,615,192
 Lien Position.
 September 30, 2007
    
    
    December 31, 2006Percentage of Total
    
    
    
    
    
    
    Percentage of TotalLien Position
    
    Principal Balance
    
    
    Principal Balance
    
    
    Principal Balance
    
    
    Principal Balance1st Liens
    
    $
    483,329,559
    
    
    
    33.62
    %
    
    $
    365,713,586
    
    
    
    29.32
    %2nd Liens
    
    
    954,109,477
    
    
    
    66.38
    %
    
    
    881,700,239
    
    
    
    70.68
    %Total
    
    $
    1,437,439,036
    
    
    
    100.00
    %
    
    $
    1,247,413,825
    
    
    
    100.00
    %
 Loan Acquisitions
  30




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##### Table of Contents



Three Months Ended September 30,
    
    Nine Months Ended September 30,2007
    
    2006
    
    2007
    
    2006Number of loans
    
    
    351
    
    
    
    3,650
    
    
    
    6,341
    
    
    
    9,928Aggregate unpaid principal
balance at acquisition
    
    $
    35,198,391
    
    
    $
    215,021,204
    
    
    $
    492,828,610
    
    
    $
    452,311,109Purchase price
    
    $
    28,693,946
    
    
    $
    201,280,078
    
    
    $
    414,826,661
    
    
    $
    417,334,296Purchase price percentage
    
    
    82
    %
    
    
    94
    %
    
    
    84
    %
    
    
    92
    %Percentage of 1st liens
    
    
    59
    %
    
    
    5
    %
    
    
    46
    %
    
    
    9
    %Percentage of 2nd liens
    
    
    41
    %
    
    
    93
    %
    
    
    54
    %
    
    
    90
    %Percentage of Other
    
    
    
    
    
    
    2
    %*
    
    
    
    
    
    
    1
    %*
 
 *
    
    Represents $5.0 million of OREO that was acquired in the third quarter of 2006. Notes Receivable Dispositions
  Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Sale of Performing LoansAggregate unpaid principal balance
    
    $
    
    
    
    $
    3,784,126
    
    
    $
    22,255,982
    
    
    $
    3,784,126Gain on sale
    
    $
    
    
    
    $
    94,862
    
    
    $
    31,118
    
    
    $
    94,862Sale of Non-Performing LoansAggregate unpaid principal balance
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    161,149Gain on sale
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    69,049Total gain on sale
    
    $
    
    
    
    $
    94,862
    
    
    $
    31,118
    
    
    $
    163,911
 31




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##### Table of Contents



Tribecas Loan Originations
  Three Months Ended September 30,
    
    Nine Months Ended September 30,2007
    
    2006
    
    2007
    
    2006Number of loans originated
    
    
    313
    
    
    
    376
    
    
    
    1,164
    
    
    
    1,320Original principal balance(1)
    
    $
    71,983,001
    
    
    $
    91,679,220
    
    
    $
    281,846,372
    
    
    $
    296,092,427Average loan amount
    
    $
    229,978
    
    
    $
    243,828
    
    
    $
    242,136
    
    
    $
    224,312Originated as fixed
    
    $
    1,839,300
    
    
    $
    11,813,000
    
    
    $
    31,304,840
    
    
    $
    22,292,900Originated as ARM(2)
    
    $
    70,143,701
    
    
    $
    79,866,220
    
    
    $
    250,541,532
    
    
    $
    273,799,527Number of loans sold
    
    
    28
    
    
    
    235
    
    
    
    147
    
    
    
    379Aggregate face value
    
    $
    5,659,452
    
    
    $
    51,510,266
    
    
    $
    36,927,474
    
    
    $
    85,304,214Loss/(gain) on sale
    
    $
    (590,243
    )
    
    $
    1,349,724
    
    
    $
    (389,510
    )
    
    $
    1,686,520Loss/(gain) on sale percentage
    
    
    (10.43)
    %*
    
    
    2.62
    %
    
    
    (1.05)
    %**
    
    
    1.98
    %***
 
 (1)
    
    In the three and nine months ended September 30, 2007, we originated $230,000 and $22.4
million, respectively, of Alt-A loans.(2)
    
    Originated ARM loans are principally fixed-rate for the first two years and six-month
adjustable-rate for the remaining term.*
    
    Included in gain on sale for the three months ended September 30, 2007 are: net gain of
$78,000 on the sale of Liberty and other loans originated for sale; a negative
mark-to-market valuation of $596,000 on Alt-A loans held for sale; a net loss of $58,000
on sales of Alt-A loans; and, a net loss of $14,000 from repurchased loans.**
    
    Included in gain on sale for the nine months ended September 30, 2007 are: net gain of
$469,000 on the sale of Liberty and other loans originated for sale; a negative
mark-to-market valuation of $746,000 on Alt-A loans held for sale; a net loss of $167,000
on sales of Alt-A loans; and, a net recovery of $54,000 for previously established early
payment default reserves for Liberty Loans sold in 2006.***
    
    In the nine months ended September 30, 2006, we sold $7.5 million of originated loans
held for sale to investors at a loss of $269,000; these loans did not meet investor
requirements. Property Types of Originated Loans Held for Investment.
 Loans Held for Investmentat September 30, 2007Percentage of TotalProperty Types
    
    Principal Balance
    
    
    Principal BalanceResidential 1-4 family
    
    $
    495,679,359
    
    
    
    93.50
    %Condos, co-ops, PUD dwellings
    
    
    31,634,286
    
    
    
    5.97
    %Commercial
    
    
    2,609,393
    
    
    
    0.49
    %Other
    
    
    233,346
    
    
    
    0.04
    %Total
    
    $
    530,156,384
    
    
    
    100.00
    %
  32




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##### Table of Contents



Geographic Dispersion of Originated Loans.
 Loans Originated
    
    
    Loans Held for Investmentfor Nine Months Ended September 30, 2007
    
    
    at September 30, 2007Principal
    
    
    Percentage of Total
    
    
    Principal
    
    
    Percentage of TotalLocation
    
    Balance
    
    
    Principal Balance
    
    
    Balance
    
    
    Principal BalanceNew York
    
    $
    81,953,941
    
    
    
    29.08
    %
    
    $
    162,925,268
    
    
    
    30.73
    %New Jersey
    
    
    77,449,664
    
    
    
    27.48
    %
    
    
    152,410,447
    
    
    
    28.75
    %Pennsylvania
    
    
    20,339,239
    
    
    
    7.22
    %
    
    
    46,824,490
    
    
    
    8.83
    %Florida
    
    
    19,988,909
    
    
    
    7.09
    %
    
    
    30,163,053
    
    
    
    5.69
    %Maryland
    
    
    14,542,723
    
    
    
    5.16
    %
    
    
    25,890,276
    
    
    
    4.88
    %Connecticut
    
    
    12,530,906
    
    
    
    4.45
    %
    
    
    19,158,649
    
    
    
    3.61
    %Virginia
    
    
    11,482,711
    
    
    
    4.07
    %
    
    
    18,119,411
    
    
    
    3.42
    %Massachusetts
    
    
    10,115,200
    
    
    
    3.59
    %
    
    
    25,818,500
    
    
    
    4.87
    %California
    
    
    7,284,155
    
    
    
    2.58
    %
    
    
    11,861,274
    
    
    
    2.24
    %North Carolina
    
    
    5,066,800
    
    
    
    1.80
    %
    
    
    6,319,338
    
    
    
    1.19
    %All Others
    
    
    21,092,124
    
    
    
    7.48
    %
    
    
    30,665,678
    
    
    
    5.79
    %Total
    
    $
    281,846,372
    
    
    
    100.00
    %
    
    $
    530,156,384
    *
    
    
    100.00
    %
 
 *
    
    UPB before net deferred fees and allowance for loan losses. 33




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##### Table of Contents



Delinquency .
 September 30, 2007Contractual Delinquency
    
    
    Recency DelinquencyDays Past Due
    
    Amount
    
    
    %
    
    
    Amount
    
    
    %Current
    
    0  30 days
    
    $
    257,629,403
    
    
    
    48.51
    %
    
    $
    304,026,754
    
    
    
    57.25
    %Delinquent
    
    31  60 days
    
    
    44,484,144
    
    
    
    8.38
    %
    
    
    28,547,903
    
    
    
    5.37
    %61  90 days
    
    
    1,202,479
    
    
    
    0.23
    %
    
    
    15,299,979
    
    
    
    2.88
    %90+ days
    
    
    56,822,561
    
    
    
    10.70
    %
    
    
    12,263,951
    
    
    
    2.31
    %Bankruptcy
    
    0  30 days
    
    
    234,805
    
    
    
    0.04
    %
    
    
    5,820,359
    
    
    
    1.10
    %Delinquent
    
    31  60 days
    
    
    55,169
    
    
    
    0.01
    %
    
    
    691,759
    
    
    
    0.13
    %61  90 days
    
    
    
    
    
    
    
    
    
    
    1,414,940
    
    
    
    0.27
    %90+ days
    
    
    26,412,185
    
    
    
    4.97
    %
    
    
    18,775,101
    
    
    
    3.53
    %Foreclosure*
    
    0  30 days
    
    
    415,975
    
    
    
    0.08
    %
    
    
    15,519,903
    
    
    
    2.92
    %Delinquent
    
    31  60 days
    
    
    1,319,025
    
    
    
    0.25
    %
    
    
    5,361,888
    
    
    
    1.01
    %61  90 days
    
    
    696,816
    
    
    
    0.13
    %
    
    
    7,112,284
    
    
    
    1.34
    %90+ days
    
    
    141,803,415
    
    
    
    26.70
    %
    
    
    116,241,156
    
    
    
    21.89
    %Total
    
    $
    531,075,977
    
    
    
    100.00
    %
    
    $
    531,075,977
    
    
    
    100.00
    %Total loans
    
    0  30 days
    
    $
    258,280,183
    
    
    
    48.63
    %
    
    $
    325,367,016
    
    
    
    61.27
    %
 
 *
    
    $144.2 million of loans were in various stages of the foreclosure process; our servicing
practice for this portfolio is to move loans into our foreclosure collection process at an
early stage of delinquency. 34




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##### Table of Contents



December 31, 2006Contractual Delinquency
    
    
    Recency DelinquencyDays Past Due
    
    Amount
    
    
    %
    
    
    Amount
    
    
    %Current
    
    0  30 days
    
    $
    188,855,227
    
    
    
    45.72
    %
    
    $
    239,784,515
    
    
    
    58.05
    %Delinquent
    
    31  60 days
    
    
    31,652,388
    
    
    
    7.66
    %
    
    
    23,558,856
    
    
    
    5.70
    %61  90 days
    
    
    2,561,701
    
    
    
    0.62
    %
    
    
    8,105,861
    
    
    
    1.96
    %90+ days
    
    
    76,292,627
    
    
    
    18.47
    %
    
    
    27,912,711
    
    
    
    6.76
    %Bankruptcy
    
    0  30 days
    
    
    134,904
    
    
    
    0.03
    %
    
    
    2,039,871
    
    
    
    0.49
    %Delinquent
    
    31  60 days
    
    
    55,652
    
    
    
    0.02
    %
    
    
    330,509
    
    
    
    0.08
    %61  90 days
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    90+ days
    
    
    9,885,179
    
    
    
    2.39
    %
    
    
    7,705,355
    
    
    
    1.87
    %Foreclosure(1)
    
    0  30 days
    
    
    
    
    
    
    
    
    
    
    1,894,422
    
    
    
    0.46
    %Delinquent
    
    31  60 days
    
    
    
    
    
    
    
    
    
    
    621,003
    
    
    
    0.15
    %61  90 days
    
    
    
    
    
    
    
    
    
    
    1,258,886
    
    
    
    0.31
    %90+ days
    
    
    103,629,240
    
    
    
    25.09
    %
    
    
    99,854,929
    
    
    
    24.17
    %Total(2)
    
    $
    413,066,918
    
    
    
    100.00
    %
    
    $
    413,066,918
    
    
    
    100.00
    %Total loans
    
    0  30 days
    
    $
    188,990,131
    
    
    
    45.75
    %
    
    $
    243,718,808
    
    
    
    59.00
    %
 
 (1)
    
    $103.6 million of loans were in various stages of the foreclosure process; our
servicing practice for this portfolio is to move loans into our foreclosure collection
process at an early stage of delinquency.(2)
    
    Excludes $17.2 million of loans sold to investors, which the Company committed to
repurchase, that are included on the face of the balance sheet at December 31, 2006.  35




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##### Table of Contents



Other Real Estate Owned
  Three Months Ended September 30,
    
    Nine Months Ended September 30,2007
    
    2006
    
    2007
    
    2006Other real estate owned
    
    $
    41,410,637
    
    
    $
    22,717,436
    
    
    $
    41,410,637
    
    
    $
    22,717,436OREO as a percentage of total assets
    
    
    2.25
    %
    
    
    1.45
    %
    
    
    2.25
    %
    
    
    1.45
    %OREO sold
    
    $
    6,717,392
    
    
    $
    6,096,869
    
    
    $
    22,644,877
    
    
    $
    21,927,070Gain on sale
    
    $
    390,653
    
    
    $
    70,056
    
    
    $
    629,460
    
    
    $
    1,312,339
 
 Results of Operations
 Three Months Ended September 30, 2007 Compared to Three Months Ended September 30, 2006
 Overview.
  36




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##### Table of Contents



Revenues.
       37




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##### Table of Contents



Operating Expenses.
    38




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##### Table of Contents



Nine Months Ended September 30, 2007 Compared to Nine Months Ended September 30, 2006
 Overview.
  39




---



##### Table of Contents



Revenues.
     40




---



##### Table of Contents



Operating Expenses.
   41




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##### Table of Contents



Liquidity and Capital Resources
 General
   42




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##### Table of Contents



Short-term Investments.
 Cost of Funds.
 Prime rate plus a margin of 0.25% to 1.75%
    
    $
    2,195,047FHLB 30-day LIBOR advance rate plus 2.00%
    
    
    172,355,891FHLB 30-day LIBOR advance rate plus 2.17%
    
    
    96,362,103FHLB 30-day LIBOR advance rate plus 2.22%
    
    
    564,832,498FHLB 30-day LIBOR advance rate plus 2.30%
    
    
    44,380,944FHLB 30-day LIBOR advance rate plus 2.35%
    
    
    48,785,018FHLB 30-day LIBOR advance rate plus 2.37%
    
    
    591,644,745FHLB 30-day LIBOR advance rate plus 2.50%
    
    
    353,510,085FHLB 30-day LIBOR advance rate plus 3.245%
    
    
    346,487FHLB 30-day LIBOR advance rate plus 3.745%
    
    
    840,270$
    1,875,253,088
  Cash Flow from Operating, Investing and Financing Activities
  43




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##### Table of Contents



Borrowings
  44




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##### Table of Contents



Forbearance Agreements with Lead Lending Bank
   
    
    $44.5 million of the Companys indebtedness under the Master Credit and Security
Agreement, dated as of October 13, 2004, as amended, by and among Franklin Credit,
certain subsidiaries of Franklin Credit and the bank (the Franklin Master Agreement);
and,
    
    $44.8 million of Tribecas indebtedness to BOS (USA) Inc., an affiliate of Bank of
Scotland, under the Master Credit and Security Agreement, dated March 24, 2006, by and
among Tribeca, certain subsidiaries and BOS.
  Loan Restructuring.
 
    
    the Company acknowledged, and the bank waived, certain existing defaults under the
Companys existing credit facilities with the bank;
    
    Franklin Credits indebtedness to the bank was reduced by $300 million and Franklin
Credit paid a restructuring fee of $12 million to the bank;
    
    the remaining approximately $1.54 billion of outstanding indebtedness to the bank,
including approximately $1.05 billion of outstanding indebtedness of Franklin Credit
and approximately $491.1 million of outstanding indebtedness of Tribeca, was
restructured into six term loans with modified terms and a maturity date of May 15,
2009; and,
    
    the Company paid all of the accrued interest on its debt outstanding to the bank
through December 27, 2007 and guaranteed payment and performance of the restructured
indebtedness.
 45




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##### Table of Contents



Terms of the Restructured Indebtedness.
 ApplicableOutstanding
    
    Interest
    
    Required Monthly
    
    Required MonthlyOutstanding
    
    Principal
    
    Margin Over
    
    Principal
    
    PrincipalPrincipal Amount 
    
    Amount 
    
    LIBOR
    
    Amortization 
    
    Amortization Franklin Credit
    
    Tribeca
    
    (basis points)
    
    Franklin Credit
    
    TribecaTranche A
    
    $
    600,000,000
    
    
    $
    400,000,000
    
    
    
    225
    
    
    $
    5,400,000
    
    
    $
    3,600,000Tranche B
    
    $
    323,255,000
    
    
    $
    91,142,000
    
    
    
    275
    
    
    $
    750,000
    
    
    $
    250,000Tranche C
    
    $
    125,000,000
    
    
    
    N/A
    
    
    
    N/A
    (1)
    
    
    N/A
    (2)
    
    
    N/ATranche D
    
    $
    1,033,000
    (3)
    
    
    N/A
    
    
    
    250
    (4)
    
    
    N/A
    
    
    
    N/AUnrestructured Debt
    
    $
    44,537,000
    
    
    $
    44,835,000
    
    
    
    235-250
    
    
    $
    148,000
    
    
    $
    498,000
 
 (1)
    
    The applicable interest rate is fixed at 10% per annum. Interest will be paid in kind
during the term of the forbearance.(2)
    
    Tranche C requires no principal amortization. All principal is due at maturity.(3)
    
    Tranche D serves as a revolving credit line with a maximum availability of $5 million,
and an additional $5 million which may be used for issuance of letters of credit.(4)
    
    Does not include a letter of credit facing fee of 0.125% per annum on the average daily
undrawn amount of each issued and outstanding letter of credit.   Total OutstandingPrincipal Amount
    
    Weighted Average(Franklin Credit and Tribeca)(1)
    
    Applicable Interest RateImmediately after restructuring
    
    $1.63 billion
    
    
    7.49
    %Immediately prior to restructuring
    
    $1.93 billion
    
    
    7.71
    %
 
 (1)
    
    Includes the Unrestructured Debt.  Cash Flow.
 
    
    to pay interest in respect of Tranche A advances, Tranche B advances and, in the
case of Franklin Credit, Tranche D advances, in that order;
    
    to pay fees related to the Companys letters of credit from the bank;
    
    to pay the minimum required principal payments in respect of Tranche A advances and
Tranche B advances, in that order;
    
    to prepay outstanding Tranche A advances;
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##### Table of Contents




    
    to prepay outstanding Tranche B advances;
    
    to prepay Unrestructured Debt (excluding that owed to BOS);
    
    in the case of Franklin Credit, to repay Tranche D advances, any letter of credit
exposure, and any obligations in respect of any interest rate hedge agreements with the
bank;
    
    in the case of Franklin Credit, 90% of the available cash flow to repay interest and
then principal of the Tranche C advances if Franklin Credit is acting as servicer of
the underlying collateral, or 100% otherwise; and,
    
    in the case of Franklin Credit and Tribeca, to pay any advances then outstanding in
respect of the others indebtedness to the bank, other than for Unrestructured Debt.
 Covenants; Events of Default.
 
    
    the Companys reimbursable expenses in the ordinary course of business during each
of the first two months after the date of the agreement will not exceed $2.5 million,
excluding reimbursement of certain bank expenses after the date of the Restructuring,
and thereafter, an amount provided for in an approved budget;
    
    the Company will not originate or acquire mortgage loans or other assets, perform
due diligence or servicing, broker loans, or participate in off-balance sheet joint
ventures and special purpose vehicles, without the prior consent of the bank;
    
    the Company will use its best efforts to obtain interest rate hedges acceptable to
the bank in respect of the $1 billion of Tranche A indebtedness;
    
    the Company will not make certain restricted payments to its stockholders or certain
other related parties;
    
    the Company will not engage in certain transactions with affiliates;
    
    the Company will not incur additional indebtedness other than trade payables and
subordinated indebtedness;
    
    the Company together will maintain a minimum consolidated net worth of at least $5
million, plus a certain percentage, to be mutually agreed upon, of any equity
investment in the Company after the date of the Restructuring;
    
    the Company will together maintain a minimum liquidity of $5 million;
    
    the Company will maintain prescribed interest coverage ratios, based on EBITDA (as
defined) to Interest Expense (as defined);
    
    the Company will not enter into mergers, consolidations or sales of assets (subject
to certain exceptions); and,
    
    the Company will not, without the banks consent, enter into any material change in
its capital structure that the bank or a nationally recognized independent public
accounting firm determine could cause a consolidation of its assets with other persons
under relevant accounting regulations.
  47




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##### Table of Contents



Servicing.
 Security.
 Gain on Debt Forgiveness.
 Master Credit Facilities  Term Loans
  General.
  48




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##### Table of Contents



Interest Rates and Fees.
 For Loans FundedPrior to July 1, 2005
    
    On or After July 1, 2005If the 30-day advance rate is
    
    the applicable margin is
    
    the applicable margin isLess than 2.26%
    
    350 basis points
    
    300 basis points2.26 to 4.50%
    
    325 basis points
    
    275 basis pointsGreater than 4.50%
    
    300 basis points
    
    250 basis points
 August 2006 Modifications to Huntington National Bank Financing Arrangements
  December 2006 Modifications to Huntington National Bank Financing Arrangements
  If the 30-day advance rate is
    
    the applicable margin isLess than 2.26%
    
    300 basis points2.26 to 4.50%
    
    260 basis pointsGreater than 4.50%
    
    235 basis points
  If the 30-day advance rate is
    
    the applicable margin isLess than 2.26%
    
    300 basis points2.26 to 4.50%
    
    225 basis pointsGreater than 4.50%
    
    200 basis points
 49




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##### Table of Contents



For Loans FundedPrior to November 15, 2006
    
    On or After November 15, 2006Purchase of First
    
    Tribeca Originated Loans/Mortgages
    
    Second Mortgage PurchasesIf the 30-day advance rate is
    
    the applicable margin is
    
    the applicable margin is
    
    the applicable margin isLess than 2.26%
    
    300 basis points
    
    300 basis points
    
    300 basis points2.26 to 4.50%
    
    275 basis points
    
    225 basis points
    
    260 basis pointsGreater than 4.50%
    
    250 basis points
    
    200 basis points
    
    235 basis points
  Principal; Prepayments; Termination of Commitments .
  Covenants; Events of Default.
 Security .
 50




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##### Table of Contents



Bank of Scotland Term Loan
  If the 30-day advance rate is
    
    the applicable margin isLess than 2.26%
    
    300 basis points2.26 to 4.50%
    
    275 basis pointsGreater than 4.50%
    
    250 basis points
    Warehouse Facilities
 Tribeca Warehouse .
  51




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##### Table of Contents



Flow Warehouse .
   Interest Rate Caps
   52




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##### Table of Contents



Interest Rate Caps
    
    Notional Amount
    
    
    Expiration Date
    
    
    Premium Paid
    
    
    Fair ValueCap 1
    
    $
    200,000,000
    
    
    September 30, 2008
    
    $
    102,000
    
    
    $
    10,675Cap 2
    
    
    400,000,000
    
    
    September 30, 2008
    
    
    90,000
    
    
    
    21,098Total
    
    $
    600,000,000
    
    
    
    
    
    
    $
    192,000
    
    
    $
    31,773
 Recent Development
   
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  Impact of Inflation
  53




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##### Table of Contents



Interest Rate Risk
     54




---



##### Table of Contents



Real Estate Risk
    
 ITEM 4. CONTROLS AND PROCEDURES
 Disclosure Controls and Procedures
  Changes in Internal Controls over Financial Reporting
  55




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##### Table of Contents



PART II
OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  
 ITEM 1A. RISK FACTORS
  Risks Related to Our Business
 We may experience higher loan losses than we have reserved for in our financial statements.
  A prolonged economic slowdown or a lengthy or severe recession could harm our operations,
particularly if it results in a decline in the real estate market.
  56




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##### Table of Contents



Our credit facilities require us to observe certain covenants, and our failure to satisfy such
covenants could render us insolvent.
     If our lenders fail to renew our loans for additional terms or provide us with refinancing
opportunities, our indebtedness will become due and payable in 2009.
  If we do not comply with certain minimum servicing standards in the Forbearance Agreements with the
bank, the bank can transfer our rights as servicer to a third party.
  57




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##### Table of Contents



Our ability to fund operating expenses depends on our principal lender continuing to provide an
adequate operating allowance.
  Our business is sensitive to, and can be materially affected by, changes in interest rates.
  
    
    All of our borrowings bear interest at variable rates and we are only partially
hedged through interest rate swaps and caps, while a significant majority of the loans
in our portfolio have fixed rates. As a result, an increase in interest rates is
likely to result in an increase in our interest expense without an offsetting increase
in interest income. Further, our adjustable-rate loans typically provide for less
frequent adjustments in response to rate increases than do our borrowings, and
sometimes also include interest rate caps. To the extent this is the case, an increase
in interest rates would result in a greater increase in our interest expense than in
our interest income, which would adversely affect our profitability.
    
    An increase in interest rates would adversely affect the value that we would receive
upon a sale of loans that bear interest at fixed rates, and our results of operations
could be adversely affected.
    
    An increase in our borrowing costs without an offsetting increase in revenue would
cause our cash flow to decrease, which in turn may have an adverse impact on our
ability to meet our monthly debt service obligations. In the event we are unable to
meet our monthly debt service obligations for this or for any other reason, we would be
in default under the obligations of our credit facilities and our lenders would have
the right to accelerate payments under these facilities.
    
    An increase in interest rates would result in a slowdown of borrower prepayments and
a reduction of revenue as purchase discount accreted into income would decline. An
increase in interest rates may also lead to an increase in our borrower defaults, if
borrowers have difficulties making their adjustable-rate mortgage payments, and a
corresponding increase in nonperforming assets, which could decrease our revenues and
our cash flows, increase our loan servicing costs and our provision for loan losses,
and adversely affect our profitability.
  58




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The bank may prevent our pursuing future business opportunities.
  We use estimates for recognizing revenue on a majority of our portfolio investments and our
earnings would be reduced if actual results are less than our estimates.
  When we acquired S&D loans, the price we paid was based on a number of assumptions. Material
differences between the assumptions we used in determining the value of S&D loans we acquired and
our actual experience could harm our financial position.
  If we do not obtain and maintain the appropriate state licenses, we will not be allowed to broker
or service mortgage loans in some states, which would adversely affect our operations.
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A significant amount of our mortgage loan originations were secured by property in New York and New
Jersey, and our operations could be harmed by economic downturns or other adverse events in these
states.
  We may not be adequately protected against the risks inherent in subprime residential mortgage
loans.
  A number of our second lien loans are subordinated to ARM or interest-only mortgages that may be
subject to monthly payment increases, which may result in delinquencies and increase our risk of
loss on these loans.
  We are subject to losses due to fraudulent and negligent acts on the part of loan applicants,
mortgage brokers, sellers of loans we acquired, vendors and our employees.
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We may not be successful in entering into or implementing our planned business of providing
servicing and other mortgage related services for other entities on a fee-paying basis.
  The success and growth of our servicing business will depend on our ability to adapt to and
implement technological changes, and any failure to do so could result in a material adverse effect
on our business.
  If we do not manage the changes in our businesses effectively, our financial performance could be
harmed.
  The inability to attract and retain qualified employees could significantly harm our business.
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An interruption in or breach of our information systems may result in lost business and increased
expenses.
  We are exposed to the risk of environmental liabilities with respect to properties to which we take
title.
  A loss of our Chairman may adversely affect our operations.
  Risks Related to Our Financial Statements
 We may become subject to liability and incur increased expenditures as a result of the restatement
of our financial statements.
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We may become subject to liability and incur increased expenditures as a result of our reassessment
of our allowance for loan losses.
  Failures in our internal controls and disclosure controls and procedures could lead to material
errors in our financial statements and cause us to fail to meet our reporting obligations.
  Risks Related to the Regulation of Our Industry
 New legislation and regulations directed at curbing predatory lending practices could restrict our
ability to sell or finance non-prime residential mortgage loans, which could adversely impact our
earnings.
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The broad scope of our operations exposes us to risks of noncompliance with an increasing and
inconsistent body of complex laws and regulations at the federal, state and local levels.
   
    
    civil and criminal liability, including potential monetary penalties;
    
    loss of lending licenses or approved status required for continued servicing
operations;
    
    demands for indemnification or loan repurchases from purchasers of our loans;
    
    legal defenses causing delay and expense;
    
    adverse effects on our ability, as servicer, to enforce loans;
    
    the borrower having the right to rescind or cancel the loan transaction;
 
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
    
    adverse publicity;
    
    individual and class action lawsuits;
    
    administrative enforcement actions;
    
    damage to our reputation in the industry;
    
    inability to sell our loans; or
    
    inability to obtain credit to fund our operations.
  If financial institutions face exposure stemming from legal violations committed by the companies
to which they provide financing or underwriting services, this could increase our borrowing costs
and negatively affect the market for whole-loans and mortgage-backed securities.
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We may be subject to fines or other penalties based upon the conduct of our independent brokers.
  We are subject to reputational risks from negative publicity concerning the subprime mortgage
industry.
     We are subject to significant legal and reputational risks and expenses under federal and state
laws concerning privacy, use and security of customer information.
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If many of our borrowers become subject to the Servicemembers Civil Relief Act of 2003, our cash
flows and interest income may be adversely affected.
  Legislative action to provide mortgage relief may negatively impact our business.
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Risks Related to Our Securities
 Thomas J. Axon effectively controls our company, substantially reducing the influence of our other
stockholders.
  
    
    the election of our directors; and
    
    the approval of mergers, sales of assets or other corporate transactions or matters
submitted for stockholder approval.
  Our organizational documents, Delaware law and our credit facilities may make it harder for us to
be acquired without the consent and cooperation of our board of directors, management and lender.
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Our quarterly operating results may fluctuate and cause our stock price to decline.
  
    
    the timing and amount of collections on loans in our portfolio;
    
    the rate of delinquency, default, foreclosure and prepayment on the loans we hold
and service;
    
    changes in interest rates;
    
    deviations in the amount or timing of collections on loans from our expectations
when we purchased or originated such loans;
    
    our inability to purchase and originate new mortgage loans for portfolio or for sale
in the secondary mortgage market;
    
    our inability to successfully enter the new business of servicing loans for third
parties;
    
    further declines in the estimated value of real property securing mortgage loans;
    
    increases in operating expenses associated with the changes in our business;
    
    general economic and market conditions; and
    
    the effects of state and federal tax, monetary and fiscal policies.
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Various factors unrelated to our performance may cause the market price of our common stock to
become volatile, which could harm our ability to access the capital markets in the future.
  Future sales of our common stock may depress our stock price.
  Compliance with the rules of the market in which our common stock trades and proposed and recently
enacted changes in securities laws and regulations are likely to increase our costs.
  We may be delisted from The Nasdaq Stock Market, in which case the price and liquidity of our
common stock and our ability to access the capital markets would be adversely affected.
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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 ITEM 5. OTHER INFORMATION
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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, 2005.10.6*
    
    
    Continuing and Unconditional Guaranty, dated as of August
30, 2007, by the Company, as Guarantor, to and for the
benefit of BOS (USA) Inc.10.7
    
    
    Limited Waiver, dated as of November 15, 2007, between The
Huntington National Bank, successor by merger to Sky Bank
(Huntington), the Company and each subsidiary of the
Company listed on the signature pages thereof.
Incorporated by reference to Exhibit 10.1 to the
Registrants Current Report on Form 8-K, filed with the
Commission on November 15, 2007.10.8
    
    
    Limited Waiver, dated as of November 15, 2007, between
Huntington, Tribeca and each subsidiary of the Company
listed on the signature pages thereof. Incorporated by
reference to Exhibit 10.2 to the Registrants Current
Report on Form 8-K, filed with the Commission on November
15, 2007.10.9
    
    
    Security Agreement, dated as of November 15, 2007, by the
Company and each of the entities listed on the signature
pages thereof in favor of Huntington. Incorporated by
reference to Exhibit 10.3 to the Registrants Current
Report on Form 8-K, filed with the Commission on November
15, 2007.10.10
    
    
    Forbearance Agreement and Amendment to Credit Agreements,
dated December 28, 2007, by and among the borrowers listed
on Schedule 1 thereof, Franklin Credit Management
Corporation and The Huntington National Bank. Incorporated
by reference to Exhibit 10.1 to the Registrants Current
Report on Form 8-K, filed with the Commission on January 4,
2008.10.11
    
    
    Tranche A Note, dated December 28, 2007, by the borrowers
listed on Schedule 1 to the Forbearance Agreement, in favor
of The Huntington National Bank. Incorporated by reference
to Exhibit 10.2 to the Registrants Current Report on Form
8-K, filed with the Commission on January 4, 2008.10.12
    
    
    Form of Tranche B Note, dated December 28, 2007, by the
borrowers listed on Schedule 1 to the Forbearance
Agreement, in favor of The Huntington National Bank.
Incorporated by reference to Exhibit 10.3 to the
Registrants Current Report on Form 8-K, filed with the
Commission on January 4, 2008.10.13
    
    
    Tranche C Note, dated December 28, 2007, by the borrowers
listed on Schedule 1 to the Forbearance Agreement, in favor
of The Huntington National Bank. Incorporated by reference
to Exhibit 10.4 to the Registrants Current Report on Form
8-K, filed with the Commission on January 4, 2008.
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ExhibitNumber10.14
    
    
    Tranche D Note, dated December 28, 2007, by the borrowers
listed on Schedule 1 to the Forbearance Agreement, in favor
of The Huntington National Bank. Incorporated by reference
to Exhibit 10.5 to the Registrants Current Report on Form
8-K, filed with the Commission on January 4, 2008.10.15
    
    
    Letter Agreement, dated January 3, 2008, by and among the
borrowers listed on Schedule 1 to the Forbearance
Agreement, Franklin Credit Management Corporation and The
Huntington National Bank. Incorporated by reference to
Exhibit 10.6 to the Registrants Current Report on Form
8-K, filed with the Commission on January 4, 2008.10.16
    
    
    Tribeca Forbearance Agreement and Amendment to Credit
Agreements, dated December 28, 2007, by and among the
borrowers listed on Schedule 1 thereof, including without
limitation Tribeca Lending Corp. and Franklin Credit
Management Corporation, and The Huntington National Bank.
Incorporated by reference to Exhibit 10.7 to the
Registrants Current Report on Form 8-K, filed with the
Commission on January 4, 2008.10.17
    
    
    Tranche A Note, dated December 28, 2007, by the borrowers
listed on Schedule 1 to the Tribeca Forbearance Agreement,
in favor of The Huntington National Bank. Incorporated by
reference to Exhibit 10.8 to the Registrants Current
Report on Form 8-K, filed with the Commission on January 4,
2008.10.18
    
    
    Form of Tranche B Note, dated December 28, 2007, by the
borrowers listed on Schedule 1 to the Tribeca Forbearance
Agreement, in favor of The Huntington National Bank.
Incorporated by reference to Exhibit 10.9 to the
Registrants Current Report on Form 8-K, filed with the
Commission on January 4, 2008.10.19
    
    
    Guaranty, dated as of December 28, 2007, by Franklin Credit
Management Corporation in favor of The Huntington National
Bank. Incorporated by reference to Exhibit 10.10 to the
Registrants Current Report on Form 8-K, filed with the
Commission on January 4, 2008.10.20
    
    
    Guaranty, dated as of December 28, 2007, by Franklin Credit
Management Corporation in favor of The Huntington National
Bank. Incorporated by reference to Exhibit 10.11 to the
Registrants Current Report on Form 8-K, filed with the
Commission on January 4, 2008.10.21
    
    
    Security Agreement, dated as of December 28, 2007, by
Tribeca Lending Corp. and each of the entities listed on
the signature pages thereof, in favor of The Huntington
National Bank. Incorporated by reference to Exhibit 10.12
to the Registrants Current Report on Form 8-K, filed with
the Commission on January 4, 2008.31.1*
    
    
    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. 74




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SIGNATURES
   FRANKLIN CREDIT MANAGEMENT CORPORATIONBy:
    /s/ ALEXANDER GORDON JARDINAlexander Gordon JardinChief Executive Officer  Signature
    
    Title
    
    Date/s/ ALEXANDER GORDON JARDIN

Alexander Gordon Jardin
(Principal Executive Officer)
    
    Chief Executive Officer
    
    March 31, 2008/s/ PAUL D. COLASONO

Paul D. Colasono
(Principal Financial Officer)
    
    Executive Vice President
and Chief Financial Officer
    
    March 31, 2008
 75