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| x                                                 |       | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES  |
|---------------------------------------------------|--------------------------------|---------------------------------------------------------------------|
|                                              |                           | EXCHANGE ACT OF 1934                                                |
|                                              |                           |                                                                |
| For the Quarterly Period Ended September 30, 2010 |
|                                              |                           |                                                                |
| o                                                 |                           | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES |
|                                              |                           | EXCHANGE ACT OF 1934                                                |

| Maryland                                         | 74-2830661                           |
|--------------------------------------------------|--------------------------------------|
| (State or Other Jurisdiction of Incorporation or | (I.R.S. Employer Identification No.) |
| Organization)                                    |                                 |

| 2114 Central Street, Suite 600, Kansas City, MO | 64108      |
|-------------------------------------------------|------------|
| (Address of Principal Executive Office)         | (Zip Code) |

| Large accelerated filero | Accelerated filero | Non-accelerated filero | Smaller reporting companyx |
|--------------------------|--------------------|------------------------|----------------------------|

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| NOVASTAR FINANCIAL, INC.                          |
|---------------------------------------------------|
| FORM 10-Q                                         |
| For the Quarterly Period Ended September 30, 2010 |
|                                              |

| Part I   |       | Financial Information                                                                       |   |
|----------|--------------------------------|---------------------------------------------------------------------------------------------|--------|
|     |                           |                                                                                        |   |
| Item 1.  |                           | Financial Statements (Unaudited)                                                            | 1      |
|     |                           | Condensed Consolidated Balance Sheets                                                       | 1      |
|     |                           | Condensed Consolidated Statements of Operations                                             | 2      |
|     |                           | Condensed Consolidated Statement of Shareholders’ Deficit                             | 3      |
|     |                           | Condensed Consolidated Statements of Cash Flows                                             | 4      |
|     |                           | Notes to Condensed Consolidated Financial Statements                                        | 6      |
|     |                           |                                                                                        |   |
| Item 2.  |                           | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 28     |
|     |                           |                                                                                        |   |
| Item 3.  |                           | Quantitative and Qualitative Disclosures About Market Risk                                  | 37     |
|     |                           |                                                                                        |   |
| Item 4.  |                           | Controls and Procedures                                                                     | 37     |
|     |                           |                                                                                        |   |
| Part II  |                           | Other Information                                                                           | 38     |
|     |                           |                                                                                        |   |
| Item 1.  |                           | Legal Proceedings                                                                           | 38     |
|     |                           |                                                                                        |   |
| Item 1A. |                           | Risk Factors                                                                                | 39     |
|     |                           |                                                                                        |   |
| Item 2.  |                           | Unregistered Sales of Equity Securities and Use of Proceeds                                 | 39     |
|     |                           |                                                                                        |   |
| Item 3.  |                           | Defaults Upon Senior Securities                                                             | 40     |
|     |                           |                                                                                        |   |
| Item 4.  |                           | Removed and Reserved                                                                        | 40     |
|     |                           |                                                                                        |   |
| Item 5.  |                           | Other Information                                                                           | 40     |
|     |                           |                                                                                        |   |
| Item 6.  |                           | Exhibits                                                                                    | 40     |
|     |                           |                                                                                        |   |
|     |                           | Signatures                                                                                  | 41     |

----

| PART I. FINANCIAL INFORMATION                                                                                                                                                                                        |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                 |
| Item 1. Financial Statements                                                                                                                                                                                         |
|                                                                                                                                                                                                                 |
| NOVASTAR FINANCIAL, INC.                                                                                                                                                                                             |
| CONDENSED CONSOLIDATED BALANCE SHEETS                                                                                                                                                                                |
| (unaudited; dollars in thousands, except share and per share amounts)                                                                                                                                                |
|                                                                                                                                                                                                                 | September 30, |   | December 31, |
|                                                                                                                                                                                                                 | 2010 |       | 2009 |
| Assets                                                                                                                                                                                                               |   |   |   |   |   |   |   |
|        Current Assets                                                                                                                                                                  |   |   |   |   |   |   |   |
|               Cash and cash equivalents                                                                                                             | $        | 16,784 |   |   | $      | 7,104 |   |
|               Mortgage securities (includes CDO securities of $1,230 and $959, respectively)                                                        |   | 7,214 |   |   |   | 7,990 |   |
|               Notes receivable, net of allowance of $742 and $300, respectively                                                                     |   | 4,317 |   |   |   | 4,920 |   |
|               Other current assets (includes CDO other assets of $348 and $428, respectively)                                                       |   | 5,885 |   |   |   | 7,501 |   |
|        Total current assets                                                                                                                                                            |   | 34,200 |   |   |   | 27,515 |   |
|        Securitization Trust Assets                                                                                                                                                     |   |   |   |   |   |   |   |
|               Mortgage loans – held-in-portfolio, net of allowance of $0 and $712,614, respectively                                           |   | - |   |   |   | 1,289,474 |   |
|               Accrued interest receivable                                                                                                           |   | - |   |   |   | 74,025 |   |
|               Real estate owned                                                                                                                     |   | - |   |   |   | 64,179 |   |
|        Total securitization trust assets                                                                                                                                               |   | - |   |   |   | 1,427,678 |   |
|        Non-Current Assets                                                                                                                                                              |   |   |   |   |   |   |   |
|               Fixed assets, net of depreciation                                                                                                     |   | 1,439 |   |   |   | 1,803 |   |
|               Goodwill                                                                                                                              |   | 3,170 |   |   |   | - |   |
|               Other assets                                                                                                                          |   | 2,329 |   |   |   | 2,495 |   |
|        Total non-current assets                                                                                                                                                        |   | 6,938 |   |   |   | 4,298 |   |
|                             Total assets                                      | $ | 41,138 |   |   | $ | 1,459,491 |   |
|                                                                                                                                                                                                                 |   |   |   |   |   |   |   |
| Liabilities and Shareholders’ Deficit                                                                                                                                                                          |   |   |   |   |   |   |   |
|        Liabilities:                                                                                                                                                                    |   |   |   |   |   |   |   |
|               Current Liabilities                                                                                                                   |   |   |   |   |   |   |   |
|                      Accounts payable                                                                            | $ | 5,360 |   |   | $ | 1,949 |   |
|                      Accrued expenses                                                                            |   | 8,172 |   |   |   | 6,801 |   |
|                      Dividends payable                                                                           |   | 46,636 |   |   |   | 34,402 |   |
|                      Other current liabilities (includes CDO debt and other liabilities of $1,578 and            |   |   |   |   |   |   |   |
|                             $1,396, respectively)                             |   | 3,305 |   |   |   | 2,962 |   |
|               Total current liabilities                                                                                                             |   | 63,473 |   |   |   | 46,114 |   |
|               Securitization Trust Liabilities                                                                                                      |   |   |   |   |   |   |   |
|                      Due to servicer                                                                             |   | - |   |   |   | 136,855 |   |
|                      Other securitization trust liabilities                                                      |   | - |   |   |   | 3,729 |   |
|                      Asset-backed bonds secured by mortgage loans                                                |   | - |   |   |   | 2,270,602 |   |
|               Total securitization trust liabilities                                                                                                |   | - |   |   |   | 2,411,186 |   |
|               Non-Current Liabilities                                                                                                               |   |   |   |   |   |   |   |
|                      Junior subordinated debentures                                                              |   | 78,027 |   |   |   | 77,815 |   |
|                      Other liabilities                                                                           |   | 2,283 |   |   |   | 928 |   |
|               Total non-current liabilities                                                                                                         |   | 80,310 |   |   |   | 78,743 |   |
|                             Total liabilities                                 |   | 143,783 |   |   |   | 2,536,043 |   |
|        Commitments and contingencies (Note 7)                                                                                                                                          |   |   |   |   |   |   |   |
|        Shareholders’ deficit:                                                                                                                                                    |   |   |   |   |   |   |   |
|               Capital stock, $0.01 par value, 50,000,000 shares authorized:                                                                         |   |   |   |   |   |   |   |
|               Redeemable preferred stock, $25 liquidating preference per share; 2,990,000 shares,                                                   |   |   |   |   |   |   |   |
|                      issued and outstanding                                                                      |   | 30 |   |   |   | 30 |   |
|               Convertible participating preferred stock, $25 liquidating preference per share; 2,100,000                                            |   |   |   |   |   |   |   |
|                      shares, issued and outstanding                                                              |   | 21 |   |   |   | 21 |   |
|               Common stock, 9,368,053, issued and outstanding                                                                                       |   | 94 |   |   |   | 94 |   |
|               Additional paid-in capital                                                                                                            |   | 787,281 |   |   |   | 786,989 |   |
|               Accumulated deficit                                                                                                                   |   | (894,510 | ) |   |   | (1,868,398 | ) |
|               Accumulated other comprehensive income                                                                                                |   | 5,677 |   |   |   | 5,111 |   |
|               Other                                                                                                                                 |   | (17 | ) |   |   | (70 | ) |
|                      Total NovaStar Financial, Inc. (“NFI”) shareholders’ deficit              |   | (101,424 | ) |   |   | (1,076,223 | ) |
|               Noncontrolling interests                                                                                                              |   | (1,221 | ) |   |   | (329 | ) |
|                      Total shareholders’ deficit                                                           |   | (102,645 | ) |   |   | (1,076,552 | ) |
|                             Total liabilities and shareholders’ deficit | $ | 41,138 |   |   | $ | 1,459,491 |   |
|                                                                                                                                                                                                                 |   |   |   |   |   |   |   |

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| NOVASTAR FINANCIAL, INC.                                                                     |
|----------------------------------------------------------------------------------------------|
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS                                              |
| (unaudited; dollars in thousands, except per share amounts)                                  |
|                                                                                         | For the Nine Months |   | For the Three Months |
|                                                                                         | Ended September 30, |   | Ended September 30, |
|                                                                                         | 2010 |       | 2009 |       | 2010 |       | 2009 |
| Income and Revenues:                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        Service fee income                                      | $     | 50,237 |   |   | $     | 22,018 |   |   | $     | 22,784 |   |   | $     | 9,945 |   |
|        Interest income – mortgage loans                  |   | 10,848 |   |   |   | 93,933 |   |   |   | - |   |   |   | 34,793 |   |
|        Interest income – mortgage securities             |   | 7,302 |   |   |   | 19,553 |   |   |   | 2,804 |   |   |   | 4,115 |   |
| Total                                                                                        |   | 68,387 |   |   |   | 135,504 |   |   |   | 25,588 |   |   |   | 48,853 |   |
|                                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Costs and Expenses:                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        Cost of services                                        |   | 44,371 |   |   |   | 22,991 |   |   |   | 19,692 |   |   |   | 10,013 |   |
|        Interest expense – asset-backed bonds             |   | 1,416 |   |   |   | 16,448 |   |   |   | - |   |   |   | 5,246 |   |
|        Provision for credit losses                             |   | 17,433 |   |   |   | 211,050 |   |   |   | - |   |   |   | 42,062 |   |
|        Servicing fees                                          |   | 731 |   |   |   | 8,343 |   |   |   | - |   |   |   | 2,482 |   |
|        Premiums for mortgage loan insurance                    |   | 308 |   |   |   | 4,908 |   |   |   | - |   |   |   | (944 | ) |
|        Selling, general and administrative expense             |   | 14,083 |   |   |   | 15,991 |   |   |   | 4,588 |   |   |   | 5,208 |   |
|        Gain on derecognition of securitization trusts          |   | (993,131 | ) |   |   | - |   |   |   | - |   |   |   | - |   |
|        Other (income) expense                                  |   | (704 | ) |   |   | 13,736 |   |   |   | (401 | ) |   |   | 1,926 |   |
| Total                                                                                        |   | (915,493 | ) |   |   | 293,467 |   |   |   | 23,879 |   |   |   | 65,993 |   |
|                                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        Other income (expense)                                  |   | 968 |   |   |   | 966 |   |   |   | (43 | ) |   |   | (444 | ) |
|        Interest expense on trust preferred securities          |   | (823 | ) |   |   | (980 | ) |   |   | (251 | ) |   |   | (315 | ) |
|                                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        Income (loss) before income tax expense                 |   | 984,025 |   |   |   | (157,977 | ) |   |   | 1,415 |   |   |   | (17,899 | ) |
|        Income tax (benefit) expense                            |   | (1,293 | ) |   |   | 245 |   |   |   | (1,921 | ) |   |   | 116 |   |
|        Net income (loss)                                       |   | 985,318 |   |   |   | (158,222 | ) |   |   | 3,336 |   |   |   | (18,015 | ) |
|        Less: Net loss attributable to noncontrolling interests |   | (804 | ) |   |   | (1,174 | ) |   |   | (105 | ) |   |   | (395 | ) |
|        Net income (loss) attributable to NFI                   | $ | 986,122 |   |   | $ | (157,048 | ) |   | $ | 3,441 |   |   | $ | (17,620 | ) |
| Earnings (Loss) Per Share attributable to NFI:                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        Basic                                                   | $ | 86.86 |   |   | $ | (17.98 | ) |   | $ | (0.08 | ) |   | $ | (2.29 | ) |
|        Diluted                                                 | $ | 86.86 |   |   | $ | (17.98 | ) |   | $ | (0.08 | ) |   | $ | (2.29 | ) |
| Weighted average basic shares outstanding                                                    |   | 9,337,207 |   |   |   | 9,368,053 |   |   |   | 9,337,207 |   |   |   | 9,368,053 |   |
| Weighted average diluted shares outstanding                                                  |   | 9,337,207 |   |   |   | 9,368,053 |   |   |   | 9,337,207 |   |   |   | 9,368,053 |   |
|                                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

| NOVASTAR FINANCIAL, INC.                                        |
|-----------------------------------------------------------------|
| CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ DEFICIT |
| (unaudited; dollars in thousands)                               |
|                                                            |
|                                                            |   | Total NFI Shareholders’ Deficit |   |   |   |   |   |   |   |   |
|                                                            |   |   |   |   | Convertible |   |   |   |   |   |   |   |   |   |   |   | Accumulated |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                            |   | Redeemable |   | Participating |   |   |   |   | Additional |   |   |   |   |   | Other |   |   |   |   |   |   |   |   |   | Total |
|                                                            |   | Preferred |   | Preferred |   | Common |   | Paid-in |   | Accumulated |   | Comprehensive |   |   |   |   |   | Noncontrolling |   | Shareholders’ |
|                                                            |    | Stock |    | Stock |    | Stock |    | Capital |    | Deficit |    | Income |    | Other |    | Interests |    | Deficit |
| Balance, January 1,                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| 2010                                                            |   | $       | 30 |   | $       | 21 |   | $       | 94 |   | $       | 786,989 |   | $       | (1,868,398 | ) |   | $       | 5,111 |   | $       | (70 | ) |   | $       | (329 | ) |   | $       | (1,076,552 | ) |
| Forgiveness of                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| founder’s notes                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| receivable                                                      |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |   |   | - |   |   | 53 |   |   |   | - |   |   |   | 53 |   |
| Compensation                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| recognized under                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| stock compensation                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| plans                                                           |   |   | - |   |   | - |   |   | - |   |   | 292 |   |   | - |   |   |   | - |   |   | - |   |   |   | - |   |   |   | 292 |   |
| Accumulating                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| dividends on                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| preferred stock                                                 |   |   | - |   |   | - |   |   | - |   |   | - |   |   | (12,234 | ) |   |   | - |   |   | - |   |   |   | - |   |   |   | (12,234 | ) |
| Distributions to                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| noncontrolling                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| interests                                                       |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |   |   | - |   |   | - |   |   |   | (88 | ) |   |   | (88 | ) |
| Comprehensive                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| income:                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        Net income (loss)          |   |   | - |   |   | - |   |   | - |   |   | - |   |   | 986,122 |   |   |   | - |   |   | - |   |   |   | (804 | ) |   |   | 985,318 |   |
|        Other                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        comprehensive              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        income                     |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |   |   | 566 |   |   | - |   |   |   | - |   |   |   | 566 |   |
|        Total                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        comprehensive         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        income                |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |   |   | - |   |   | - |   |   |   | - |   |   |   | 985,884 |   |
| Balance,                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| September 30, 2010                                              |   | $ | 30 |   | $ | 21 |   | $ | 94 |   | $ | 787,281 |   | $ | (894,510 | ) |   | $ | 5,677 |   | $ | (17 | ) |   | $ | (1,221 | ) |   | $ | (102,645 | ) |
|                                                            |

----

| NOVASTAR FINANCIAL, INC.                                                                                                                                           |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS                                                                                                                    |
| (unaudited; dollars in thousands)                                                                                                                                  |
|                                                                                                                                                               | For the Nine Months Ended |
|                                                                                                                                                               | September 30, |
|                                                                                                                                                               | 2010 |       | 2009 |
| Cash flows from operating activities:                                                                                                                              |   |   |   |   |   |   |   |
| Net income (loss)                                                                                                                                                  | $       | 985,318 |   |   | $       | (158,222 | ) |
| Adjustments to reconcile net income (loss) to net cash used in operating                                                                                           |   |   |   |   |   |   |   |
|               activities:                                                                         |   |   |   |   |   |   |   |
|        Accretion of available-for-sale and trading securities                                                                        |   | (2,635 | ) |   |   | (21,414 | ) |
|        Impairments on notes receivable                                                                                               |   | 442 |   |   |   | - |   |
|        Interest capitalized on loans held-in-portfolio                                                                               |   | - |   |   |   | (1,550 | ) |
|        Amortization of premiums on mortgage loans                                                                                    |   | 430 |   |   |   | 2,774 |   |
|        Amortization of deferred debt issuance costs                                                                                  |   | 538 |   |   |   | 1,026 |   |
|        Provision for credit losses                                                                                                   |   | 17,433 |   |   |   | 211,050 |   |
|        Impairments on mortgage securities – available-for-sale                                                                 |   | - |   |   |   | 1,155 |   |
|        Fair value adjustments                                                                                                        |   | (775 | ) |   |   | 6,597 |   |
|        Gain on derecognition of securitization trusts                                                                                |   | (993,131 | ) |   |   | - |   |
|        (Gains) losses on derivative instruments                                                                                      |   | (26 | ) |   |   | 4,817 |   |
|        Other                                                                                                                         |   | 6 |   |   |   | - |   |
|        Forgiveness of founders’ notes receivable                                                                               |   | 53 |   |   |   | 52 |   |
|        Compensation recognized under stock compensation plans                                                                        |   | 292 |   |   |   | 532 |   |
|        Depreciation expense                                                                                                          |   | 546 |   |   |   | 677 |   |
|        Changes in:                                                                                                                   |   |   |   |   |   |   |   |
|               Accrued interest receivable                                                         |   | 1,300 |   |   |   | 2,450 |   |
|               Other assets and other liabilities                                                  |   | 734 |   |   |   | (401 | ) |
|               Due to servicer                                                                     |   | (5,080 | ) |   |   | 23,458 |   |
|               Accounts payable and other liabilities                                              |   | 2,630 |   |   |   | (21,558 | ) |
|                      Net cash provided by operating activities |   | 8,075 |   |   |   | 51,413 |   |
|                                                                                                                                                               |   |   |   |   |   |   |   |
| Cash flows from investing activities:                                                                                                                              |   |   |   |   |   |   |   |
| Proceeds from paydowns of mortgage securities - available-for-sale                                                                                                 |   | 3,359 |   |   |   | 12,030 |   |
| Proceeds from paydowns of mortgage securities - trading                                                                                                            |   | 588 |   |   |   | 4,397 |   |
| Proceeds from repayments of mortgage loans held-in-portfolio                                                                                                       |   | 15,040 |   |   |   | 74,426 |   |
| Proceeds from sales of assets acquired through foreclosure                                                                                                         |   | 15,154 |   |   |   | 86,425 |   |
| Restricted cash, net                                                                                                                                               |   | 3,940 |   |   |   | 1,752 |   |
| Proceeds from notes receivable                                                                                                                                     |   | 452 |   |   |   | - |   |
| Issuance of notes receivable                                                                                                                                       |   | (657 | ) |   |   | - |   |
| Purchases of property and equipment                                                                                                                                |   | (188 | ) |   |   | (1,026 | ) |
| Proceeds from disposal of property and equipment                                                                                                                   |   | - |   |   |   | 2 |   |
| Acquisition of business, net of cash acquired                                                                                                                      |   | (609 | ) |   |   | 2 |   |
|                      Net cash provided by investing activities |   | 37,079 |   |   |   | 178,008 |   |
| Continued                                                                                                                                                          |   |

----

|                                                                                                                 | For the Nine Months Ended  |
|----------------------------------------------------------------------------------------------------------------------|----------------------------|
|                                                                                                                 | September 30,              |
| Cash flows from financing activities:                                                                                | 2010                       |       | 2009 |
| Payments on asset-backed bonds                                                                                       |                       | (35,341 | ) |   |   | (239,543 | ) |
| (Distributions to) contributions from noncontrolling interests                                                       |                       | (88 | ) |   |   | 150 |   |
| Other                                                                                                                |                       | (45 | ) |   |   | - |   |
|               Net cash used in financing activities |                       | (35,474 | ) |   |   | (239,393 | ) |
| Net increase (decrease) in cash and cash equivalents                                                                 |                       | 9,680 |   |   |   | (9,972 | ) |
| Cash and cash equivalents, beginning of period                                                                       |                       | 7,104 |   |   |   | 24,790 |   |
| Cash and cash equivalents, end of period                                                                             | $      | 16,784 |   |   | $      | 14,818 |   |
|                                                                                                                 |                       |   |   |   |   |   |   |
|                                                                                                                 |                       |   |   |   |   |   |   |

| Supplemental Disclosure of Cash Flow Information                                                                                          |
|-------------------------------------------------------------------------------------------------------------------------------------------|
| (unaudited; dollars in thousands)                                                                                                         |
|                                                                                                                                      | For the Nine Months Ended |
|                                                                                                                                      | September 30, |
|                                                                                                                                      | 2010 |       | 2009 |
| Cash paid for interest                                                                                                                    | $      | 4,183 |   | $      | 27,846 |
| Cash paid for income taxes                                                                                                                |   | 224 |   |   | 347 |
| Cash received on mortgage securities – available-for-sale with no cost basis                                                        |   | 4,667 |   |   | 1,861 |
| Non-cash investing and financing activities:                                                                                              |   |   |   |   |   |
|        Assets acquired through foreclosure                                                                  |   | 6,283 |   |   | 99,193 |
|        Exchange of noncontrolling interests’ notes receivable for contingent earnings                 |   |   |   |   |   |
|               payout                                                     |   | 366 |   |   | - |
|        Preferred stock dividends accrued, not yet paid                                                      |   | 12,234 |   |   | 11,361 |
|        Acquisition contingent earnings payout accrued, not yet paid                                         |   | 2,195 |   |   | - |
|        Transfer of assets and liabilities upon derecognition of securitization trusts:                      |   |   |   |   |   |
|               Mortgage loans – held-in-portfolio, net of allowance |   | 1,250,287 |   |   | - |
|               Accrued interest receivable                                |   | 72,725 |   |   | - |
|               Real estate owned                                          |   | 55,309 |   |   | - |
|               Asset-backed bonds secured by mortgage loans               |   | 2,235,633 |   |   | - |
|               Due to servicer                                            |   | 131,772 |   |   | - |
|               Other liabilities                                          |   | 4,047 |   |   | - |
|                                                                                                                                      |   |   |   |   |   |
| See notes to condensed consolidated financial statements.                                                                                 | Concluded |

----

| NOVASTAR FINANCIAL, INC.                                      |
|---------------------------------------------------------------|
| NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS          |
| As of and for the period ended September 30, 2010 (Unaudited) |

----

----

|                                                                                |       | Total                      |
|-------------------------------------------------------------------------------------|--------------------------------|----------------------------|
| Assets:                                                                             |                           |                       |   |   |
|        Mortgage loans – held-in-portfolio       |                           | $      | 1,953,188 |   |
|        Allowance for loan losses                      |                           |                       | (702,901 | ) |
|        Accrued interest receivable                    |                           |                       | 72,725 |   |
|        Real estate owned                              |                           |                       | 55,309 |   |
|                                                                                |                           |                       |   |   |
| Total assets                                                                        |                           |                       | 1,378,321 |   |
|                                                                                |                           |                       |   |   |
| Liabilities:                                                                        |                           |                       |   |   |
|        Asset-backed bonds secured by mortgage loans   |                           |                       | 2,235,633 |   |
|        Due to servicer                                |                           |                       | 131,772 |   |
|        Other liabilities                              |                           |                       | 4,047 |   |
|                                                                                |                           |                       |   |   |
| Total liabilities                                                                   |                           |                       | 2,371,452 |   |
|                                                                                |                           |                       |   |   |
|        Gain on derecognition of securitization trusts |                           | $                          | 993,131 |   |
|                                                                                |                           |                       |   |   |

----

|                                                                            |                           | December 31,                           |
|---------------------------------------------------------------------------------|--------------------------------|----------------------------------------|
|                                                                            |       | 2009                                   |
| Mortgage loans – held-in-portfolio (A):                                   |                           |                                   |   |   |
|        Outstanding principal                      |                           | $        | 1,985,483 |   |
|        Net unamortized deferred origination costs |                           |                                   | 16,605 |   |
|        Amortized cost                             |                           |                                   | 2,002,088 |   |
|        Allowance for credit losses                |                           |                                   | (712,614 | ) |
|        Mortgage loans – held-in-portfolio   |                           | $                                      | 1,289,474 |   |
|        Weighted average coupon                    |                           |                                   | 6.94% |   |
|                                                                            |                           |                                   |   |   |

| (A) |       | The Company did not hold any mortgage loans-held-in-portfolio as of September 30, 2010 due to the derecognition of the securitization trusts, see Note 3 to the condensed consolidated financial statements for further details. |
|-----|--------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                       |                           | For the Nine Months Ended  |                           | For the Three Months Ended |
|--------------------------------------------|--------------------------------|----------------------------|--------------------------------|----------------------------|
|                                       |                           | September 30,              |                           | September 30,              |
|                                       |       | 2010                       |       | 2009                       |       | 2010 |       | 2009 |
| Balance, beginning of period               |                           | $      | 712,614                        |                       |   | $      | 776,001 |   |   | $                    | - |   | $      | 810,274 |   |
| Provision for credit losses                |                           |                       | 17,433                         |                       |   |   | 211,050 |   |   |   | - |   |   | 42,062 |   |
| Charge-offs, net of recoveries             |                           |                       | (27,146                        | )                          |   |   | (240,349 | ) |   |   | - |   |   | (105,634 | ) |
| Derecognition of the securitization trusts |                           |                       | (702,901                       | )                          |   |   | - |   |   |   | - |   |   | - |   |
| Balance, end of period                     |                           | $                          | -                              |                       |   | $ | 746,702 |   |   | $ | - |   | $ | 746,702 |   |
|                                       |                           |                       |                           |                       |   |   |   |   |   |   |   |   |   |   |   |

----

----

|                  |                           |                       |                           |         | Assets After Intercompany      |   |                           |                       |                           |        |
|-----------------------|--------------------------------|----------------------------|--------------------------------|--------------|--------------------------------|--------|--------------------------------|----------------------------|--------------------------------|-------------|
|                  |                           |                       |                           |         | Eliminations                   |   | Liabilities After              |                       |                           |        |
|                  |                           | Total                      |                           |         |                           |   | Restricted                     |                       | Intercompany                   |        | Recourse to the |
| Consolidated VIEs     |       | Assets                     |       | Unrestricted |       | (A)    |       | Eliminations               |       | Company (B) |
| September 30, 2010    |                           |                       |                           |         |                           |   |                           |                       |                           |        |   |   |   |   |   |
| CDO(C)                |                           | $                          | 1,230                          |         | $                              | -      |                           | $                          | 1,230                          |        | $ | 1,230 |   | $ | - |
| December 31, 2009     |                           |                       |                           |         |                           |   |                           |                       |                           |        |   |   |   |   |   |
| Mortgage Loan VIEs(D) |                           | $      | 1,435,671                      |         | $                              | -      |                           | $      | 1,427,501                      |        | $ | 2,453,181 |   | $ | - |
| CDO(C)                |                           |                       | 1,389                          |         |                           | -      |                           |                       | 1,387                          |        |   | 1,387 |   |   | - |
|                  |                           |                       |                           |         |                           |   |                           |                       |                           |        |   |   |   |   |   |

| (A) |       | Assets are considered restricted when they cannot be freely pledged or sold by the Company.                                                                                                                         |
|-----|--------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (B) |                           | This column reflects the extent, if any, to which investors have recourse to the Company beyond the assets held by the VIE and assumes a total loss of the assets held by the VIE.                                  |
| (C) |                           | For the CDO, assets are primarily recorded in “Mortgage securities” and liabilities are recorded in “Other current liabilities.”                                                            |
| (D) |                           | For Mortgage Loan VIEs, assets are primarily recorded in “Mortgage loans – held-in-portfolio.” Liabilities are primarily recorded in “Asset-backed bonds secured by mortgage assets.” |

|               |                           | Size/Principal |      |                           | Assets on |                           | Liabilities |                           | Maximum     |                           | Year to   |                           | Year to   |   |
|--------------------|--------------------------------|----------------|-----------|--------------------------------|-----------|--------------------------------|-------------|--------------------------------|-------------|--------------------------------|-----------|--------------------------------|-----------|--------|
|               |                           | Outstanding    |      |                           | Balance   |                           | on Balance  |                           | Exposure to |                           | Date Loss |                           | Date Cash |   |
|               |       | (A)            |      |       | Sheet (B) |       | Sheet       |       | Loss(C)     |       | on Sale   |       | Flows     |   |
|               |                           |           |      |                           |      |                           |        |                           |        |                           |      |                           |      |   |   |   |   |   |   |   |
| September 30, 2010 |                           | $              | 7,434,265 | (D)                            |      | $                              | 5,984       |                           | $           | -                              |      | $                              | 5,984     |   | $ | - |   | $     | 7,683 |   |
| December 31, 2009  |                           |           | 6,570,308 |                           |      |                           | 7,031       |                           | $           | -                              |      |                           | 7,031     |   | $ | - |   |   | 13,401 | (E) |
|               |                           |           |      |                           |      |                           |        |                           |        |                           |      |                           |      |   |   |   |   |   |   |   |

| (A) |       | Size/Principal Outstanding reflects the estimated principal of the underlying assets held by the VIE.                                                                                                    |
|-----|--------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (B) |                           | Assets on balance sheet are securities issued by the entity which are recorded in “Mortgage securities.”                                                                                     |
| (C) |                           | The maximum exposure to loss assumes a total loss on the retained interests held by the Company.                                                                                                         |
| (D) |                           | Due to derecognition of securitization trusts during the nine months ended September 30, 2010, size/principal outstanding includes NHEL 2006-1, NHEL 2006-MTA1 and NHEL 2007-1 as of September 30, 2010. |
| (E) |                           | For the nine months ended September 30, 2009.                                                                                                                                                            |

----

|                                                                                               |       |                       |   |
|----------------------------------------------------------------------------------------------------|--------------------------------|----------------------------|--------|
| Carrying amount/fair value of residual interests                                                   |                           | $      | 5,984  |
| Weighted average life (in years)                                                                   |                           |                       | 3.14   |
| Weighted average prepayment speed assumption (CPR) (percent)                                       |                           |                       | 17.2   |
|        Fair value after a 10% increase in prepayment speed           |                           | $                          | 5,353  |
|        Fair value after a 25% increase in prepayment speed           |                           | $                          | 4,579  |
| Weighted average expected annual credit losses (percent of current collateral balance)             |                           |                       | 25.8   |
|        Fair value after a 10% increase in annual credit losses       |                           | $                          | 5,124  |
|        Fair value after a 25% increase in annual credit losses       |                           | $                          | 4,669  |
| Weighted average residual cash flows discount rate (percent)                                       |                           |                       | 25.0%  |
|        Fair value after a 500 basis point increase in discount rate  |                           | $                          | 5,796  |
|        Fair value after a 1000 basis point increase in discount rate |                           | $                          | 5,618  |
| Market interest rates:                                                                             |                           |                       |   |
|        Fair value after a 100 basis point increase in market rates   |                           | $                          | 4,021  |
|        Fair value after a 200 basis point increase in market rates   |                           | $                          | 2,519  |
|                                                                                               |                           |                       |   |

|                                           |                           | September |                           | December |
|------------------------------------------------|--------------------------------|-----------|--------------------------------|----------|
|                                           |       | 30, 2010  |       | 31, 2009 |
| Mortgage securities – available-for-sale |                           | $         | 5,984                          |     | $ | 6,903 |
| Mortgage securities – trading            |                           |      | 1,230                          |     |   | 1,087 |
| Total mortgage securities                      |                           | $         | 7,214                          |     | $ | 7,990 |
|                                           |                           |      |                           |     |   |   |

|                     |                           |       |                           |   | Unrealized                     |       | Estimated                      |      | Average |
|--------------------------|--------------------------------|------------|--------------------------------|--------|--------------------------------|------------|--------------------------------|-----------|---------|
|                     |       | Cost Basis |       | Gain   |       | Fair Value |       | Yield (A) |
| As of September 30, 2010 |                           | $          | 307                            |   | $                              | 5,677      |                           | $         | 5,984   |   |      407.9% |
| As of December 31, 2009  |                           |       | 1,792                          |   |                           | 5,111      |                           |      | 6,903   |   | 132.9 |
|                     |                           |       |                           |   |                           |       |                           |      |    |   |   |

| (A) |       | The average yield is calculated from the cost basis of the mortgage securities and does not give effect to changes in fair value that are reflected as a component of shareholders’ deficit. |
|-----|--------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                   |                           |          |                           |   | Amortized Cost                 |       |                           |      |   | Average |
|----------------------------------------|--------------------------------|---------------|--------------------------------|--------|--------------------------------|------------|--------------------------------|-----------|--------|---------|
|                                   |       | Original Face |       | Basis  |       | Fair Value |       | Yield (A) |
| As of September 30, 2010               |                           |          |                           |   |                           |       |                           |      |   |    |   |
| Subordinated securities pledged to CDO |                           | $             | 369,507                        |   | $                              | 80,742     |                           | $         | 1,230  |    |   |
| Other subordinated securities          |                           |          | 215,280                        |   |                           | -          |                           |      | -      |    |   |
| Total                                  |                           | $             | 584,787                        |   | $                              | 80,742     |                           | $         | 1,230  |    | 2.05% |
|                                   |                           |          |                           |   |                           |       |                           |      |   |    |   |
| As of December 31, 2009                |                           | $             | 435,114                        |   | $                              | 104,012    |                           | $         | 1,087  |    |      4.79% |
|                                   |                           |          |                           |   |                           |       |                           |      |   |    |   |

| (A) |       | Calculated from the ending fair value of the securities. |
|-----|--------------------------------|----------------------------------------------------------|

----

----

|                                                                 |                           | For the Nine Months                    |                           | For the Three Months |
|----------------------------------------------------------------------|--------------------------------|----------------------------------------|--------------------------------|----------------------|
|                                                                 |                           | Ended September 30,                    |                           | Ended September 30,  |
|                                                                 |       | 2010                                   |       | 2009                 |       | 2010 |       | 2009 |
| Net income (loss)                                                    |                           | $        | 985,318                        |                 | $      | (158,222 | ) |   | $           | 3,336 |   | $      | (18,015 | ) |
| Other comprehensive income (loss):                                   |                           |                                   |                           |                 |   |   |   |   |   |   |   |   |   |   |
| Change in unrealized gain on mortgage securities – available-  |                           |                                   |                           |                 |   |   |   |   |   |   |   |   |   |   |
|        for-sale                        |                           |                                   | 566                            |                 |   | (5,511 | ) |   |   | 291 |   |   | (3,446 | ) |
| Change in unrealized gain on derivative instruments used in          |                           |                                   |                           |                 |   |   |   |   |   |   |   |   |   |   |
|        cash flow hedges                |                           |                                   | -                              |                 |   | 8 |   |   |   | - |   |   | - |   |
| Impairment on mortgage securities - available-for-sale               |                           |                                   |                           |                 |   |   |   |   |   |   |   |   |   |   |
|        reclassified to earnings        |                           |                                   | -                              |                 |   | 1,155 |   |   |   | - |   |   | 702 |   |
| Net settlements of derivative instruments used in cash flow          |                           |                                   |                           |                 |   |   |   |   |   |   |   |   |   |   |
|        hedges reclassified to earnings |                           |                                   | -                              |                 |   | 84 |   |   |   | - |   |   | - |   |
| Other comprehensive income (loss)                                    |                           |                                   | 566                            |                 |   | (4,264 | ) |   |   | 291 |   |   | (2,744 | ) |
| Total comprehensive income (loss)                                    |                           |                                   | 985,884                        |                 |   | (162,486 | ) |   |   | 3,627 |   |   | (20,759 | ) |
| Comprehensive loss attributable to noncontrolling interests          |                           |                                   | 804                            |                 |   | 1,174 |   |   |   | 105 |   |   | 395 |   |
| Total comprehensive income (loss) attributable to NFI                |                           | $                                      | 986,688                        |                 | $ | (161,312 | ) |   | $ | 3,732 |   | $ | (20,364 | ) |
|                                                                 |                           |                                   |                           |                 |   |   |   |   |   |   |   |   |   |   |

| (A) |       | Due to the valuation allowance the Company has recorded on deferred income taxes, there is no net income tax expense recorded against other comprehensive income (loss). |
|-----|--------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

- Level 1—Quoted prices for identical instruments in active markets. 
- Level 2—Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable. 
- Level 3—Instruments whose significant value drivers are unobservable. 

----

|                                           |                           |                            |                           |      | Fair Value Measurements at Reporting Date Using |
|------------------------------------------------|--------------------------------|---------------------------------|--------------------------------|-----------|-------------------------------------------------|
|                                           |                           |                            |                           |      | Quoted Prices                                   |   |   |   |   |   |   |
|                                           |                           |                            |                           |      | in Active                                       |   | Significant |   |   |   |
|                                           |                           |                            |                           |      | Markets for                                     |   | Other |   |   |   |
|                                           |                           | Fair Value at                   |                           | Identical |                                            | Observable |   | Significant |
|                                           |                           | September                       |                           | Assets    |                                            | Inputs |   | Unobservable |
| Description                                    |       | 30, 2010                        |       | (Level 1) |                        | (Level 2) |       | Inputs (Level 3) |
| Assets:                                        |                           |                            |                           |      |                                            |   |   |   |   |   |   |   |
| Mortgage securities – trading            |                           | $      | 1,230                          |      | $                      | - |   | $      | - |   | $      | 1,230 |
| Mortgage securities – available-for-sale |                           |                            | 5,984                          |      |                                            | - |   |   | - |   |   | 5,984 |
| Total assets                                   |                           | $                               | 7,214                          |      | $                                               | - |   | $ | - |   | $ | 7,214 |
|                                           |                           |                            |                           |      |                                            |   |   |   |   |   |   |   |
| Liabilities:                                   |                           |                            |                           |      |                                            |   |   |   |   |   |   |   |
| Asset-backed bonds secured by                  |                           |                            |                           |      |                                            |   |   |   |   |   |   |   |
| mortgage securities                            |                           | $                               | 1,230                          |      | $                                               | - |   | $ | - |   | $ | 1,230 |
| Total liabilities                              |                           | $                               | 1,230                          |      | $                                               | - |   | $ | - |   | $ | 1,230 |
|                                           |                           |                            |                           |      |                                            |   |   |   |   |   |   |   |
|                                           |                           |                            |                           |      |                                            |   |
|                                           |                           |                            |                           |      | Fair Value Measurements at Reporting Date Using |
|                                           |                           |                            |                           |      | Quoted Prices                                   |   |   |   |   |   |   |
|                                           |                           |                            |                           |      | in Active                                       |   | Significant |   |   |   |
|                                           |                           |                            |                           |      | Markets for                                     |   | Other |   | Significant |
|                                           |                           | Fair Value at                   |                           | Identical |                                            | Observable |   | Unobservable |
|                                           |                           | December                        |                           | Assets    |                                            | Inputs |   | Inputs |
| Description                                    |                           | 31, 2009                        |                           | (Level 1) |                                            | (Level 2) |   | (Level 3) |
| Assets:                                        |                           |                            |                           |      |                                            |   |   |   |   |   |   |   |
| Mortgage securities – trading            |                           | $                               | 1,087                          |      | $                                               | - |   | $ | - |   | $ | 1,087 |
| Mortgage securities – available-for-sale |                           |                            | 6,903                          |      |                                            | - |   |   | - |   |   | 6,903 |
| Total assets                                   |                           | $                               | 7,990                          |      | $                                               | - |   | $ | - |   | $ | 7,990 |
|                                           |                           |                            |                           |      |                                            |   |   |   |   |   |   |   |
| Liabilities:                                   |                           |                            |                           |      |                                            |   |   |   |   |   |   |   |
| Asset-backed bonds secured by                  |                           |                            |                           |      |                                            |   |   |   |   |   |   |   |
| mortgage securities                            |                           | $                               | 968                            |      | $                                               | - |   | $ | - |   | $ | 968 |
| Derivative instruments, net                    |                           |                            | 157                            |      |                                            | - |   |   | 157 |   |   | - |
| Total liabilities                              |                           | $                               | 1,125                          |      | $                                               | - |   | $ | 157 |   | $ | 968 |
|                                           |                           |                            |                           |      |                                            |   |   |   |   |   |   |   |

|                                                                                      |                           |                            |                           |            |                           |                                                       |     |   |   | Estimated Fair                                                         |
|-------------------------------------------------------------------------------------------|--------------------------------|---------------------------------|--------------------------------|-----------------|--------------------------------|------------------------------------------------------------|----------|--------|--------|------------------------------------------------------------------------|
|                                                                                      |                           |                            |                           |            |                           |                                                       |     |   |   | Value of                                                               |
|                                                                                      |                           |                            |                           |            |                           |                                                       |     |   |   | Mortgage                                                               |
|                                                                                      |       | Cost Basis                      |       | Unrealized Loss |       | Securities                                                 |
| As of December 31, 2009                                                                   |                           | $      | 104,013                        |            |                           | $             | (102,926 | )      |   | $               | 1,087 |   |
|        Increases (decreases) to mortgage securities – |                           |                            |                           |            |                           |                                                       |     |   |   |                                                                   |   |   |
|        trading                                              |                           |                            |                           |            |                           |                                                       |     |   |   |                                                                   |   |   |
|        Accretion of income                                  |                           |                            | 761                            |            |                           |                                                       | -        |   |   |                                                                   | 761 |   |
|        Proceeds from paydowns of securities                 |                           |                            | (588                           | )               |                           |                                                       | -        |   |   |                                                                   | (588 | ) |
|        Other than temporary impairments                     |                           |                            | (23,444                        | )               |                           |                                                       | 23,444   |   |   |                                                                   | - |   |
|        Mark-to-market value adjustment                      |                           |                            | -                              |            |                           |                                                       | (30      | )      |   |                                                                   | (30 | ) |
|        Net (decrease) increase to mortgage securities       |                           |                            |                           |            |                           |                                                       |     |   |   |                                                                   |   |   |
|        – trading                                      |                           |                            | (23,271                        | )               |                           |                                                       | 23,414   |   |   |                                                                   | 143 |   |
| As of September 30, 2010                                                                  |                           | $                               | 80,742                         |            |                           | $                                                          | (79,512  | )      |   | $                                                                      | 1,230 |   |
|                                                                                      |                           |                            |                           |            |                           |                                                       |     |   |   |                                                                   |   |   |

----

|                                                                                      |                                 |                                  |                                 |            |                                 |                                  |     |   |   | Estimated Fair                        |
|-------------------------------------------------------------------------------------------|--------------------------------------|---------------------------------------|--------------------------------------|-----------------|--------------------------------------|---------------------------------------|----------|--------|--------|---------------------------------------|
|                                                                                      |                                 |                                  |                                 |            |                                 |                                  |     |   |   | Value of                              |
|                                                                                      |                                 |                                  |                                 |            |                                 |                                  |     |   |   | Mortgage                              |
|                                                                                      |        | Cost Basis                            |        | Unrealized Loss |        | Securities                            |
| As of December 31, 2008                                                                   |                                 | $       | 433,968                              |            |                                 | $       | (426,883 | )      |   | $       | 7,085 |   |
|        Increases (decreases) to mortgage securities – |                                 |                                  |                                 |            |                                 |                                  |     |   |   |                                  |   |   |
|        trading                                              |                                 |                                  |                                 |            |                                 |                                  |     |   |   |                                  |   |   |
|        Accretion of income                                  |                                 |                                  | 9,992                                |            |                                 |                                  | -        |   |   |                                  | 9,992 |   |
|        Proceeds from paydowns of securities                 |                                 |                                  | (4,397                               | )               |                                 |                                  | -        |   |   |                                  | (4,397 | ) |
|        Other than temporary impairments                     |                                 |                                  | (265,711                             | )               |                                 |                                  | 265,711  |   |   |                                  | - |   |
|        Mark-to-market value adjustment                      |                                 |                                  | -                                    |            |                                 |                                  | (11,255  | )      |   |                                  | (11,255 | ) |
|        Net (decrease) increase to mortgage securities       |                                 |                                  |                                 |            |                                 |                                  |     |   |   |                                  |   |   |
|        – trading                                      |                                 |                                  | (260,116                             | )               |                                 |                                  | 254,456  |   |   |                                  | (5,660 | ) |
| As of September 30, 2009                                                                  |                                 | $                                     | 173,852                              |            |                                 | $                                     | (172,427 | )      |   | $                                     | 1,425 |   |
|                                                                                      |                                 |                                  |                                 |            |                                 |                                  |     |   |   |                                  |   |   |

|                                                                                      |                                 |                                  |                                 |            |                                 |                                  |    |   |   | Estimated Fair                        |
|-------------------------------------------------------------------------------------------|--------------------------------------|---------------------------------------|--------------------------------------|-----------------|--------------------------------------|---------------------------------------|---------|--------|--------|---------------------------------------|
|                                                                                      |                                 |                                  |                                 |            |                                 |                                  |    |   |   | Value of                              |
|                                                                                      |                                 |                                  |                                 |            |                                 |                                  |    |   |   | Mortgage                              |
|                                                                                      |        | Cost Basis                            |        | Unrealized Loss |        | Securities                            |
| As of June 30, 2010                                                                       |                                 | $       | 80,677                               |            |                                 | $       | (79,598 | )      |   | $       | 1,079 |   |
|        Increases (decreases) to mortgage securities – |                                 |                                  |                                 |            |                                 |                                  |    |   |   |                                  |   |   |
|        trading                                              |                                 |                                  |                                 |            |                                 |                                  |    |   |   |                                  |   |   |
|        Accretion of income                                  |                                 |                                  | 257                                  |            |                                 |                                  | -       |   |   |                                  | 257 |   |
|        Proceeds from paydowns of securities                 |                                 |                                  | (165                                 | )               |                                 |                                  | -       |   |   |                                  | (165 | ) |
|        Other than temporary impairments                     |                                 |                                  | (27                                  | )               |                                 |                                  | 27      |   |   |                                  | - |   |
|        Mark-to-market value adjustment                      |                                 |                                  | -                                    |            |                                 |                                  | 59      |   |   |                                  | 59 |   |
|        Net increase to mortgage securities – trading  |                                 |                                  | 65                                   |            |                                 |                                  | 86      |   |   |                                  | 151 |   |
| As of September 30, 2010                                                                  |                                 | $                                     | 80,742                               |            |                                 | $                                     | (79,512 | )      |   | $                                     | 1,230 |   |
|                                                                                      |                                 |                                  |                                 |            |                                 |                                  |    |   |   |                                  |   |   |

|                                                                                      |                                 |                                  |                                 |            |                                 |                                  |     |   |   | Estimated Fair                        |
|-------------------------------------------------------------------------------------------|--------------------------------------|---------------------------------------|--------------------------------------|-----------------|--------------------------------------|---------------------------------------|----------|--------|--------|---------------------------------------|
|                                                                                      |                                 |                                  |                                 |            |                                 |                                  |     |   |   | Value of                              |
|                                                                                      |                                 |                                  |                                 |            |                                 |                                  |     |   |   | Mortgage                              |
|                                                                                      |        | Cost Basis                            |        | Unrealized Loss |        | Securities                            |
| As of June 30, 2009                                                                       |                                 | $       | 402,192                              |            |                                 | $       | (399,747 | )      |   | $       | 2,445 |   |
|        Increases (decreases) to mortgage securities – |                                 |                                  |                                 |            |                                 |                                  |     |   |   |                                  |   |   |
|        trading                                              |                                 |                                  |                                 |            |                                 |                                  |     |   |   |                                  |   |   |
|        Accretion of income                                  |                                 |                                  | 1,292                                |            |                                 |                                  | -        |   |   |                                  | 1,292 |   |
|        Proceeds from paydowns of securities                 |                                 |                                  | (762                                 | )               |                                 |                                  | -        |   |   |                                  | (762 | ) |
|        Other than temporary impairments                     |                                 |                                  | (228,870                             | )               |                                 |                                  | 228,870  |   |   |                                  | - |   |
|        Mark-to-market value adjustment                      |                                 |                                  | -                                    |            |                                 |                                  | (1,550   | )      |   |                                  | (1,550 | ) |
|        Net (decrease) increase to mortgage securities       |                                 |                                  |                                 |            |                                 |                                  |     |   |   |                                  |   |   |
|        – trading                                      |                                 |                                  | (228,340                             | )               |                                 |                                  | 227,320  |   |   |                                  | (1,020 | ) |
| As of September 30, 2009                                                                  |                                 | $                                     | 173,852                              |            |                                 | $                                     | (172,427 | )      |   | $                                     | 1,425 |   |
|                                                                                      |                                 |                                  |                                 |            |                                 |                                  |     |   |   |                                  |   |   |

----

|                                                                                      |                                 |                                  |                                 |            |                                 |                                  |   |   |   | Estimated Fair                        |
|-------------------------------------------------------------------------------------------|--------------------------------------|---------------------------------------|--------------------------------------|-----------------|--------------------------------------|---------------------------------------|--------|--------|--------|---------------------------------------|
|                                                                                      |                                 |                                  |                                 |            |                                 |                                  |   |   |   | Value of                              |
|                                                                                      |                                 |                                  |                                 |            |                                 |                                  |   |   |   | Mortgage                              |
|                                                                                      |        | Cost Basis                            |        | Unrealized Gain |        | Securities                            |
| As of December 31, 2009                                                                   |                                 | $       | 1,794                                |            |                                 | $       | 5,109  |   |   | $       | 6,903 |   |
|        Increases (decreases) to mortgage securities – |                                 |                                  |                                 |            |                                 |                                  |   |   |   |                                  |   |   |
|        available-for-sale                                   |                                 |                                  |                                 |            |                                 |                                  |   |   |   |                                  |   |   |
|        Accretion of income (A)                              |                                 |                                  | 1,874                                |            |                                 |                                  | -      |   |   |                                  | 1,874 |   |
|        Proceeds from paydowns of securities (A) (B)         |                                 |                                  | (3,359                               | )               |                                 |                                  | -      |   |   |                                  | (3,359 | ) |
|        Mark-to-market value adjustment                      |                                 |                                  | -                                    |            |                                 |                                  | 566    |   |   |                                  | 566 |   |
|        Net (decrease) increase to mortgage securities       |                                 |                                  |                                 |            |                                 |                                  |   |   |   |                                  |   |   |
|        – available-for-sale                           |                                 |                                  | (1,485                               | )               |                                 |                                  | 566    |   |   |                                  | (919 | ) |
| As of September 30, 2010                                                                  |                                 | $                                     | 309                                  |            |                                 | $                                     | 5,675  |   |   | $                                     | 5,984 |   |
|                                                                                      |                                 |                                  |                                 |            |                                 |                                  |   |   |   |                                  |   |   |

| (A) |        | Cash received on mortgage securities with no cost basis was $4.7 million for the nine months ended September 30, 2010.                                                                                                                                                                                                                                              |
|-----|--------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (B) |                                 | For mortgage securities with a remaining cost basis, the Company reduces the cost basis by the amount of cash that is received from the securitization trusts. In contrast, for mortgage securities in which the cost basis has previously reached zero, the Company records the amount of cash that is received from the securitization trusts in interest income. |

|                                                                                      |                                 |                                  |                                 |            |                                 |                                  |   |   |   | Estimated Fair                        |
|-------------------------------------------------------------------------------------------|--------------------------------------|---------------------------------------|--------------------------------------|-----------------|--------------------------------------|---------------------------------------|--------|--------|--------|---------------------------------------|
|                                                                                      |                                 |                                  |                                 |            |                                 |                                  |   |   |   | Value of                              |
|                                                                                      |                                 |                                  |                                 |            |                                 |                                  |   |   |   | Mortgage                              |
|                                                                                      |        | Cost Basis                            |        | Unrealized Gain |        | Securities                            |
| As of December 31, 2008                                                                   |                                 | $       | 3,771                                |            |                                 | $       | 9,017  |   |   | $       | 12,788 |   |
|        Increases (decreases) to mortgage securities – |                                 |                                  |                                 |            |                                 |                                  |   |   |   |                                  |   |   |
|        available-for-sale                                   |                                 |                                  |                                 |            |                                 |                                  |   |   |   |                                  |   |   |
|        Accretion of income (A)                              |                                 |                                  | 11,421                               |            |                                 |                                  | -      |   |   |                                  | 11,421 |   |
|        Proceeds from paydowns of securities (A) (B)         |                                 |                                  | (12,030                              | )               |                                 |                                  | -      |   |   |                                  | (12,030 | ) |
|        Impairment on mortgage securities – available- |                                 |                                  |                                 |            |                                 |                                  |   |   |   |                                  |   |   |
|        for-sale                                             |                                 |                                  | (1,155                               | )               |                                 |                                  |   |   |   |                                  | (1,155 | ) |
|        Mark-to-market value adjustment                      |                                 |                                  | -                                    |            |                                 |                                  | (4,355 | )      |   |                                  | (4,355 | ) |
|        Net (decrease) increase to mortgage securities       |                                 |                                  |                                 |            |                                 |                                  |   |   |   |                                  |   |   |
|        – available-for-sale                           |                                 |                                  | (1,764                               | )               |                                 |                                  | (4,355 | )      |   |                                  | (6,119 | ) |
| As of September 30, 2009                                                                  |                                 | $                                     | 2,007                                |            |                                 | $                                     | 4,662  |   |   | $                                     | 6,669 |   |
|                                                                                      |                                 |                                  |                                 |            |                                 |                                  |   |   |   |                                  |   |   |

| (A) |         | Cash received on mortgage securities with no cost basis was $1.9 million for the nine months ended September 30, 2009.                                                                                                                                                                                                                                              |
|-----|--------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (B) |                                       | For mortgage securities with a remaining cost basis, the Company reduces the cost basis by the amount of cash that is received from the securitization trusts. In contrast, for mortgage securities in which the cost basis has previously reached zero, the Company records the amount of cash that is received from the securitization trusts in interest income. |

|                                                                                      |                                 |                                  |                                 |            |                                 |                                  |   |   | Estimated Fair                        |
|-------------------------------------------------------------------------------------------|--------------------------------------|---------------------------------------|--------------------------------------|-----------------|--------------------------------------|---------------------------------------|--------|--------|---------------------------------------|
|                                                                                      |                                 |                                  |                                 |            |                                 |                                  |   |   | Value of                              |
|                                                                                      |                                 |                                  |                                 |            |                                 |                                  |   |   | Mortgage                              |
|                                                                                      |        | Cost Basis                            |        | Unrealized Gain |        | Securities                            |
| As of June 30, 2010                                                                       |                                 | $       | 469                                  |            |                                 | $       | 5,384  |   | $       | 5,853 |   |
|        Increases (decreases) to mortgage securities – |                                 |                                  |                                 |            |                                 |                                  |   |   |                                  |   |   |
|        available-for-sale                                   |                                 |                                  |                                 |            |                                 |                                  |   |   |                                  |   |   |
|        Accretion of income (A)                              |                                 |                                  | 475                                  |            |                                 |                                  | -      |   |                                  | 475 |   |
|        Proceeds from paydowns of securities (A) (B)         |                                 |                                  | (635                                 | )               |                                 |                                  | -      |   |                                  | (635 | ) |
|        Mark-to-market value adjustment                      |                                 |                                  | -                                    |            |                                 |                                  | 291    |   |                                  | 291 |   |
|        Net (decrease) increase to mortgage securities       |                                 |                                  |                                 |            |                                 |                                  |   |   |                                  |   |   |
|        – available-for-sale                           |                                 |                                  | (160                                 | )               |                                 |                                  | 291    |   |                                  | 131 |   |
| As of September 30, 2010                                                                  |                                 | $                                     | 309                                  |            |                                 | $                                     | 5,675  |   | $                                     | 5,984 |   |
|                                                                                      |                                 |                                  |                                 |            |                                 |                                  |   |   |                                  |   |   |

| (A) |        | Cash received on mortgage securities with no cost basis was $2.1 million for the three months ended September 30, 2010.                                                                                                                                                                                                                                             |
|-----|--------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (B) |                                 | For mortgage securities with a remaining cost basis, the Company reduces the cost basis by the amount of cash that is received from the securitization trusts. In contrast, for mortgage securities in which the cost basis has previously reached zero, the Company records in interest income the amount of cash that is received from the securitization trusts. |

----

|                                                                                      |                                 |                                  |                                 |            |                                 |                                  |   |   |   | Estimated Fair                        |
|-------------------------------------------------------------------------------------------|--------------------------------------|---------------------------------------|--------------------------------------|-----------------|--------------------------------------|---------------------------------------|--------|--------|--------|---------------------------------------|
|                                                                                      |                                 |                                  |                                 |            |                                 |                                  |   |   |   | Value of                              |
|                                                                                      |                                 |                                  |                                 |            |                                 |                                  |   |   |   | Mortgage                              |
|                                                                                      |        | Cost Basis                            |        | Unrealized Gain |        | Securities                            |
| As of June 30, 2009                                                                       |                                 | $       | 2,314                                |            |                                 | $       | 7,405  |   |   | $       | 9,719 |   |
|        Increases (decreases) to mortgage securities – |                                 |                                  |                                 |            |                                 |                                  |   |   |   |                                  |   |   |
|        available-for-sale                                   |                                 |                                  |                                 |            |                                 |                                  |   |   |   |                                  |   |   |
|        Accretion of income (A)                              |                                 |                                  | 3,445                                |            |                                 |                                  | -      |   |   |                                  | 3,445 |   |
|        Proceeds from paydowns of securities (A) (B)         |                                 |                                  | (3,049                               | )               |                                 |                                  | -      |   |   |                                  | (3,049 | ) |
|        Impairment on mortgage securities – available- |                                 |                                  |                                 |            |                                 |                                  |   |   |   |                                  |   |   |
|        for-sale                                             |                                 |                                  | (703                                 | )               |                                 |                                  |   |   |   |                                  | (703 | ) |
|        Mark-to-market value adjustment                      |                                 |                                  | -                                    |            |                                 |                                  | (2,743 | )      |   |                                  | (2,743 | ) |
|        Net (decrease) increase to mortgage securities       |                                 |                                  |                                 |            |                                 |                                  |   |   |   |                                  |   |   |
|        – available-for-sale                           |                                 |                                  | (307                                 | )               |                                 |                                  | (2,743 | )      |   |                                  | (3,050 | ) |
| As of September 30, 2009                                                                  |                                 | $                                     | 2,007                                |            |                                 | $                                     | 4,662  |   |   | $                                     | 6,669 |   |
|                                                                                      |                                 |                                  |                                 |            |                                 |                                  |   |   |   |                                  |   |   |

| (A) |        | Cash received on mortgage securities with no cost basis was $0.7 million for the three months ended September 30, 2009.                                                                                                                                                                                                                                             |
|-----|--------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (B) |                                 | For mortgage securities with a remaining cost basis, the Company reduces the cost basis by the amount of cash that is received from the securitization trusts. In contrast, for mortgage securities in which the cost basis has previously reached zero, the Company records in interest income the amount of cash that is received from the securitization trusts. |

|              |                                 |                                  |                                 |             |                                            |
|-------------------|--------------------------------------|---------------------------------------|--------------------------------------|------------------|-------------------------------------------------|
|              |                                 |                                  |                                 |             | Fair Value Measurements at Reporting Date Using |
|              |                                 |                                  |                                 |             | Quoted Prices in                                |   | Significant |   |   |   |
|              |                                 |                                  |                                 |             | Active Markets for                              |   | Other |   | Significant |
|              |                                 | Real Estate                           |                                 | Identical Assets |                                            | Observable |   | Unobservable |
| Fair Value at     |        | Owned (A)                             |        | (Level 1)        |                   | Inputs (Level 2) |        | Inputs (Level 3) |
| December 31, 2009 |                                 | $       | 64,179                               |             | $                 | - |   | $       | - |   | $       | 64,179 |
|              |                                 |                                  |                                 |             |                                            |   |   |   |   |   |   |   |

| (A) |        | The Company did not hold any Real Estate Owned as of September 30, 2010. |
|-----|--------------------------------------|--------------------------------------------------------------------------|

|                                                     |                                 |         |                                 | Fair Value                            |                                 | Fair Value                           |                                 |                                  |
|----------------------------------------------------------|--------------------------------------|--------------|--------------------------------------|---------------------------------------|--------------------------------------|--------------------------------------|--------------------------------------|---------------------------------------|
|                                                     |                                 |         |                                 | Adjustments For                       |                                 | Adjustments For                      |                                 |                                  |
|                                                     |                                 |         |                                 | the Nine Months                       |                                 | the Three Months                     |                                 |                                  |
|                                                     |                                 |         |                                 | Ended September                       |                                 | Ended September                      |                                 |                                  |
|                                                     |        |         |        | 30,                                   |        | 30,                                  |        |                                  |
|                                                     |                                 | Fair Value   |                                 |                                  |                                 |                                 |                                 |                                  |   |   |   |   |   |   |   |   |   |   |   |
| Asset or Liability                                       |                                 | Measurement  |                                 |                                  |                                 |                                 |                                 |                                  |   |   |   |   |   |   |   |   |   |   | Statement of Operations |
| Measured at Fair Value                                   |                                 | Frequency    |                                 | 2010                                  |                                 |        | 2009                                 |                                  | 2010 |        | 2009 |        | Line Item Impacted |
| Mortgage securities -                                    |                                 |         |                                 |                                  |                                 |                                 |                                 |                                  |   |   |   |   |   |   |   |   |   |   |   |
|        trading             |                                 | Recurring    |                                 | $       | (30                                  | )                                    |                                 | $       | (11,255 | ) |   | $       | 59 |   | $       | (1,550 | ) |   | Other income (expense) |
| Mortgage securities –                              |                                 |         |                                 |                                  |                                 |                                 |                                 |                                  |   |   |   |   |   |   |   |   |   |   |   |
|        available-for-sale  |                                 | Recurring    |                                 |                                  | -                                    |                                 |                                 |                                  | (1,155 | ) |   |   | - |   |   | (703 | ) |   | Other income (expense) |
| Real estate owned                                        |                                 | Nonrecurring |                                 |                                  | (178                                 | )                                    |                                 |                                  | (9,164 | ) |   |   | - |   |   | - |   |   | Other income (expense) |
| Derivative instruments,                                  |                                 |         |                                 |                                  |                                 |                                 |                                 |                                  |   |   |   |   |   |   |   |   |   |   |   |
|        net                 |                                 | Recurring    |                                 |                                  | 157                                  |                                 |                                 |                                  | 5,124 |   |   |   | - |   |   | 2,345 |   |   | Other income (expense) |
| Asset-backed bonds                                       |                                 |         |                                 |                                  |                                 |                                 |                                 |                                  |   |   |   |   |   |   |   |   |   |   |   |
|        secured by mortgage |                                 |         |                                 |                                  |                                 |                                 |                                 |                                  |   |   |   |   |   |   |   |   |   |   |   |
|        securities          |                                 | Recurring    |                                 |                                  | 805                                  |                                 |                                 |                                  | 4,658 |   |   |   | 239 |   |   | 1,153 |   |   | Other income (expense) |
| Total fair value losses                                  |                                 |         |                                 | $                                     | 754                                  |                                 |                                 | $                                     | (11,792 | ) |   | $ | 298 |   | $ | 1,245 |   |   |   |
|                                                     |                                 |         |                                 |                                  |                                 |                                 |                                 |                                  |   |   |   |   |   |   |   |   |   |   |   |

----

----

|                           |                                 | Unpaid Principal                      |                                 | Year to Date Gain |                                  |       |      |
|--------------------------------|--------------------------------------|---------------------------------------|--------------------------------------|-------------------|---------------------------------------|------------|-----------|
| Unpaid Principal Balance as of |        | Balance                               |        | Recognized        |         | Fair Value |
| September 30, 2010             |                                 | $       | 324,478                              |              | $       | 805        |      |   | $       | 1,230 |
| December 31, 2009              |                                 |                                  | 323,999                              |              |                                  | 4,658      |  (A) |   |   | 968 |
|                           |                                 |                                  |                                 |              |                                  |       |      |   |   |   |

| (A) |        | For the nine months ended September 30, 2009. |
|-----|--------------------------------------|-----------------------------------------------|

|                                | For the Nine Months Ended             |   |                                 | For the Three Months Ended |                                  |
|-------------------------------------|---------------------------------------|--------|--------------------------------------|----------------------------|---------------------------------------|
|                                | September 30,                         |   |                                 | September 30,              |                                  |
|                                | 2010                                  |   |        | 2009                       |                                  |        | 2010 |   |        | 2009 |   |
| Balance, beginning of period        | $       | -      |                                 |                       | $       | - |   |   | $       | 975 |   |   | $       | 1,190 |   |
| Advent acquisition                  |                                  | -      |                                 |                       |                                  | 1,190 |   |   |   | - |   |   |   | - |   |
| StreetLinks earnings target payment |                                  | 3,170  | (A)                                  |                       |                                  | - |   |   |   | 2,195 | (A) |   |   | - |   |
| Balance, end of period              | $                                     | 3,170  |                                 |                       | $                                     | 1,190 | (B) |   | $ | 3,170 |   |   | $ | 1,190 | (B) |
|                           |                                  |   |                                 |                       |                                  |   |   |   |   |   |   |   |   |   |   |

| (A) |        | The $2.2 million earnings target payment was achieved as of September 30, 2010, but will not be paid until the fourth quarter of 2010. This amount is included in the “Other Current Liabilities” line item of the Condensed Consolidated Balance Sheets. |
|-----|--------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (B) |                                 | The Advent acquisition goodwill was impaired during the fourth quarter of 2009.                                                                                                                                                                                       |

----

| For the Nine Months Ended September 30, 2010                                                          |
|-------------------------------------------------------------------------------------------------------|
|                                                                                                  |   |   |   |   |   |   |   |   |   | Appraisal |   |   |   |   |   |   |   |   |   |
|                                                                                                  |   |   |   |   |   |   |   |   |   | and Real |   |   |   |   |   |   |   |   |   |
|                                                                                                  |   |   |   |   |   |   |   |   |   | Estate |   |   |   |   |   |   |   |   |   |
|                                                                                                  |   | Securitization |   |   |   |   |   | Valuation |   |   |   |   |   |   |   |   |   |
|                                                                                                  |        | Trusts |        | Corporate |        | Management |   |        | Eliminations |        | Total |
| Income and Revenues:                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        Service fee income                                               |   | $       | - |   |   | $       | - |   |   | $       | 50,237 |   |   | $       | - |   |   | $       | 50,237 |   |
|        Interest income – mortgage                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|               loans                  |   |   | 10,681 |   |   |   | - |   |   |   | - |   |   |   | 167 |   |   |   | 10,848 |   |
|        Interest income – mortgage                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|               securities             |   |   | 683 |   |   |   | 6,619 |   |   |   | - |   |   |   | - |   |   |   | 7,302 |   |
| Total                                                                                                 |   |   | 11,364 |   |   |   | 6,619 |   |   |   | 50,237 |   |   |   | 167 |   |   |   | 68,387 |   |
|                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Costs and Expenses:                                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        Cost of services                                                 |   |   | - |   |   |   | - |   |   |   | 44,371 |   |   |   | - |   |   |   | 44,371 |   |
|        Interest expense – asset-                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|               backed bonds           |   |   | 1,416 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 1,416 |   |
|        Provision for credit losses                                      |   |   | 17,433 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 17,433 |   |
|        Servicing fees                                                   |   |   | 731 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 731 |   |
|        Premiums for mortgage loan                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|               insurance              |   |   | 308 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 308 |   |
|        Selling, general and                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|               administrative expense |   |   | 14 |   |   |   | 10,877 |   |   |   | 3,192 |   |   |   | - |   |   |   | 14,083 |   |
|        Gain on derecognition of                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|               securitization trusts  |   |   | (993,131 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (993,131 | ) |
|        Other expenses (income)                                          |   |   | 1,913 |   |   |   | (2,972 | ) |   |   | 77 |   |   |   | 278 |   |   |   | (704 | ) |
| Total                                                                                                 |   |   | (971,316 | ) |   |   | 7,905 |   |   |   | 47,640 |   |   |   | 278 |   |   |   | (915,493 | ) |
|                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        Other income                                                     |   |   | - |   |   |   | 965 |   |   |   | 3 |   |   |   | - |   |   |   | 968 |   |
|        Interest expense on trust                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|               preferred securities   |   |   | - |   |   |   | (823 | ) |   |   | - |   |   |   | - |   |   |   | (823 | ) |
| Income (loss) before income tax                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        benefit                                                          |   |   | 982,680 |   |   |   | (1,144 | ) |   |   | 2,600 |   |   |   | (111 | ) |   |   | 984,025 |   |
| Income tax benefit                                                                                    |   |   | - |   |   |   | (1,293 | ) |   |   | - |   |   |   | - |   |   |   | (1,293 | ) |
| Net income                                                                                            |   |   | 982,680 |   |   |   | 149 |   |   |   | 2,600 |   |   |   | (111 | ) |   |   | 985,318 |   |
| Less: Net (loss) income                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        attributable to noncontrolling                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        interests                                                        |   |   | - |   |   |   | (1,121 | ) |   |   | 317 |   |   |   | - |   |   |   | (804 | ) |
| Net income attributable to NFI                                                                        |   | $ | 982,680 |   |   | $ | 1,270 |   |   | $ | 2,283 |   |   | $ | (111 | ) |   | $ | 986,122 |   |
|                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| September 30, 2010:                                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total assets                                                                                          |   | $ | 1,578 |   |   | $ | 27,972 |   |   | $ | 14,965 | (A) |   | $ | (3,377 | ) |   | $ | 41,138 |   |
|                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

| (A) |        | Includes goodwill of $3.2 million. |
|-----|--------------------------------------|------------------------------------|

----

| For the Nine Months Ended September 30, 2009                                                          |
|-------------------------------------------------------------------------------------------------------|
|                                                                                                  |   |   |   |   |   |   |   |   |   | Appraisal |   |   |   |   |   |   |   |   |
|                                                                                                  |   |   |   |   |   |   |   |   |   | and Real |   |   |   |   |   |   |   |   |
|                                                                                                  |   |   |   |   |   |   |   |   |   | Estate |   |   |   |   |   |   |   |   |
|                                                                                                  |   | Securitization |   |   |   |   |   |   | Valuation |   |   |   |   |   |   |   |   |
|                                                                                                  |        | Trusts |   |        | Corporate |        | Management |        | Eliminations |        | Total |
| Income and Revenues:                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        Service fee income                                               |   | $       | - |   |   | $       | - |   |   | $       | 22,018 |   |   | $       | - |   |   | $       | 22,018 |   |
|        Interest income – mortgage                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|               loans                  |   |   | 92,796 |   |   |   | - |   |   |   | - |   |   |   | 1,137 |   |   |   | 93,933 |   |
|        Interest income – mortgage                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|               securities             |   |   | 6,807 |   |   |   | 15,265 |   |   |   | - |   |   |   | (2,519 | ) |   |   | 19,553 |   |
| Total                                                                                                 |   |   | 99,603 |   |   |   | 15,265 |   |   |   | 22,018 |   |   |   | (1,382 | ) |   |   | 135,504 |   |
|                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Costs and Expenses:                                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        Cost of services                                                 |   |   | - |   |   |   | - |   |   |   | 22,991 |   |   |   | - |   |   |   | 22,991 |   |
|        Interest expense – asset-                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|               backed bonds           |   |   | 16,448 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 16,448 |   |
|        Provision for credit losses                                      |   |   | 211,050 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 211,050 |   |
|        Servicing fees                                                   |   |   | 8,343 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 8,343 |   |
|        Premiums for mortgage loan                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|               insurance              |   |   | 4,791 |   |   |   | 117 |   |   |   | - |   |   |   | - |   |   |   | 4,908 |   |
|        Selling, general and                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|               administrative expense |   |   | 214 |   |   |   | 14,123 |   |   |   | 1,728 |   |   |   | (74 | ) |   |   | 15,991 |   |
|        Other expenses                                                   |   |   | 1,187 |   |   |   | 12,502 |   |   |   | 47 |   |   |   | - |   |   |   | 13,736 |   |
| Total                                                                                                 |   |   | 242,033 |   |   |   | 26,742 |   |   |   | 24,766 |   |   |   | (74 | ) |   |   | 293,467 |   |
|                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        Other income                                                     |   |   | 116 |   |   |   | 850 |   |   |   | - |   |   |   | - |   |   |   | 966 |   |
|        Interest expense on trust                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|               preferred securities   |   |   | - |   |   |   | (980 | ) |   |   | - |   |   |   | - |   |   |   | (980 | ) |
|                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loss before income tax expense                                                                        |   |   | (142,314 | ) |   |   | (11,607 | ) |   |   | (2,748 | ) |   |   | (1,308 | ) |   |   | (157,977 | ) |
| Income tax expense                                                                                    |   |   | - |   |   |   | 245 |   |   |   | - |   |   |   | - |   |   |   | 245 |   |
| Net loss                                                                                              |   |   | (142,314 | ) |   |   | (11,852 | ) |   |   | (2,748 | ) |   |   | (1,308 | ) |   |   | (158,222 | ) |
| Less: Net loss attributable to                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        noncontrolling interests                                         |   |   | - |   |   |   | (350 | ) |   |   | (824 | ) |   |   | - |   |   |   | (1,174 | ) |
| Net loss attributable to NFI                                                                          |   | $ | (142,314 | ) |   | $ | (11,502 | ) |   | $ | (1,924 | ) |   | $ | (1,308 | ) |   | $ | (157,048 | ) |
|                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| December 31, 2009:                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total assets                                                                                          |   | $ | 1,437,059 |   |   | $ | 26,706 |   |   | $ | 4,164 |   |   | $ | (8,438 | ) |   | $ | 1,459,491 |   |
|                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

| For the Three Months Ended September 30, 2010                                                         |                                  |                                 |      |                                 |                                  |                                 |         |                                 |                                  |   |   |                                  |
|-------------------------------------------------------------------------------------------------------|---------------------------------------|--------------------------------------|-----------|--------------------------------------|---------------------------------------|--------------------------------------|--------------|--------------------------------------|---------------------------------------|--------|--------|---------------------------------------|
|                                                                                                  |                                  |                                 |      |                                 |                                  |                                 |         |                                 |                                  |   |   |                                  |   |   |   |   |   |
|                                                                                                  |                                  |                                 |      |                                 |                                  |                                 |         |                                 | Appraisal                             |   |   |                                  |   |   |   |   |   |
|                                                                                                  |                                  |                                 |      |                                 |                                  |                                 |         |                                 | and Real                              |   |   |                                  |   |   |   |   |   |
|                                                                                                  |                                  |                                 |      |                                 |                                  |                                 |         |                                 | Estate                                |   |   |                                  |   |   |   |   |   |
|                                                                                                  | Securitization                        |                                 |      |                                 |                                  |                                 | Valuation    |                                 |                                  |   |   |                                  |   |
|                                                                                                  | Trusts                                |        | Corporate |        | Management                            |        | Eliminations |        | Total                                 |
| Income and Revenues:                                                                                  |                                  |                                 |      |                                 |                                  |                                 |         |                                 |                                  |   |   |                                  |   |   |   |   |   |   |
|        Service fee income                                               | $       | -                                    |      |                                 | $       | -                                    |         |                                 | $       | 22,784 |   | $       | - |   |   | $       | 22,784 |   |
|        Interest income – mortgage                                 |                                  |                                 |      |                                 |                                  |                                 |         |                                 |                                  |   |   |                                  |   |   |   |   |   |   |
|               securities             |                                  | 233                                  |      |                                 |                                  | 2,571                                |         |                                 |                                  | -      |   |                                  | - |   |   |   | 2,804 |   |
| Total                                                                                                 |                                  | 233                                  |      |                                 |                                  | 2,571                                |         |                                 |                                  | 22,784 |   |                                  | - |   |   |   | 25,588 |   |
|                                                                                                  |                                  |                                 |      |                                 |                                  |                                 |         |                                 |                                  |   |   |                                  |   |   |   |   |   |   |
| Costs and Expenses:                                                                                   |                                  |                                 |      |                                 |                                  |                                 |         |                                 |                                  |   |   |                                  |   |   |   |   |   |   |
|        Cost of services                                                 |                                  | -                                    |      |                                 |                                  | -                                    |         |                                 |                                  | 19,692 |   |                                  | - |   |   |   | 19,692 |   |
|        Selling, general and                                             |                                  |                                 |      |                                 |                                  |                                 |         |                                 |                                  |   |   |                                  |   |   |   |   |   |   |
|               administrative expense |                                  | -                                    |      |                                 |                                  | 3,320                                |         |                                 |                                  | 1,268  |   |                                  | - |   |   |   | 4,588 |   |
|        Other expenses (income)                                          |                                  | 658                                  |      |                                 |                                  | (1,211                               | )            |                                 |                                  | 36     |   |                                  | 116 |   |   |   | (401 | ) |
| Total                                                                                                 |                                  | 658                                  |      |                                 |                                  | 2,109                                |         |                                 |                                  | 20,996 |   |                                  | 116 |   |   |   | 23,879 |   |
|                                                                                                  |                                  |                                 |      |                                 |                                  |                                 |         |                                 |                                  |   |   |                                  |   |   |   |   |   |   |
|        Other (expenses) income                                          |                                  | -                                    |      |                                 |                                  | (45                                  | )            |                                 |                                  | 2      |   |                                  | - |   |   |   | (43 | ) |
|        Interest expense on trust                                        |                                  |                                 |      |                                 |                                  |                                 |         |                                 |                                  |   |   |                                  |   |   |   |   |   |   |
|               preferred securities   |                                  | -                                    |      |                                 |                                  | (251                                 | )            |                                 |                                  | -      |   |                                  | - |   |   |   | (251 | ) |
|                                                                                             |                                  |                                 |      |                                 |                                  |                                 |         |                                 |                                  |   |   |                                  |   |   |   |   |   |   |
| (Loss) income before income tax                                                                       |                                  |                                 |      |                                 |                                  |                                 |         |                                 |                                  |   |   |                                  |   |   |   |   |   |   |
| benefit                                                                                               |                                  | (425                                 | )         |                                 |                                  | 166                                  |         |                                 |                                  | 1,790  |   |                                  | (116 | ) |   |   | 1,415 |   |
| Income tax benefit                                                                                    |                                  | -                                    |      |                                 |                                  | (1,921                               | )            |                                 |                                  | -      |   |                                  | - |   |   |   | (1,921 | ) |
| Net (loss) income                                                                                     |                                  | (425                                 | )         |                                 |                                  | 2,087                                |         |                                 |                                  | 1,790  |   |                                  | (116 | ) |   |   | 3,336 |   |
| Less: Net (loss) income                                                                               |                                  |                                 |      |                                 |                                  |                                 |         |                                 |                                  |   |   |                                  |   |   |   |   |   |   |
|        attributable to noncontrolling                                   |                                  |                                 |      |                                 |                                  |                                 |         |                                 |                                  |   |   |                                  |   |   |   |   |   |   |
|        interests                                                        |                                  | -                                    |      |                                 |                                  | (323                                 | )            |                                 |                                  | 218    |   |                                  | - |   |   |   | (105 | ) |
| Net (loss) income attributable to                                                                     |                                  |                                 |      |                                 |                                  |                                 |         |                                 |                                  |   |   |                                  |   |   |   |   |   |   |
|        NFI                                                              | $                                     | (425                                 | )         |                                 | $                                     | 2,410                                |         |                                 | $                                     | 1,572  |   | $                                     | (116 | ) |   | $ | 3,441 |   |
|                                                                                                  |                                  |                                 |      |                                 |                                  |                                 |         |                                 |                                  |   |   |                                  |   |   |   |   |   |   |

----

| For the Three Months Ended September 30, 2009                                                         |                                  |                                 |      |   |                                  |                                 |         |                                 |                                  |                                 |   |   |                                  |
|-------------------------------------------------------------------------------------------------------|---------------------------------------|--------------------------------------|-----------|--------|---------------------------------------|--------------------------------------|--------------|--------------------------------------|---------------------------------------|--------------------------------------|--------|--------|---------------------------------------|
|                                                                                                  |                                  |                                 |      |   |                                  |                                 |         |                                 |                                  |                                 |   |   |                                  |   |   |   |   |
|                                                                                                  |                                  |                                 |      |   |                                  |                                 |         |                                 | Appraisal                             |                                 |   |   |                                  |   |   |   |   |
|                                                                                                  |                                  |                                 |      |   |                                  |                                 |         |                                 | and Real                              |                                 |   |   |                                  |   |   |   |   |
|                                                                                                  |                                  |                                 |      |   |                                  |                                 |         |                                 | Estate                                |                                 |   |   |                                  |   |   |   |   |
|                                                                                                  |  Securitization                  |        |      |   |                                  |        | Valuation    |        |                                  |        |   |   |                                  |
|                                                                                                  | Trusts                                |                                 | Corporate |   | Management                            |                                 | Eliminations |                                 | Total                                 |
| Income and Revenues:                                                                                  |                                  |                                 |      |   |                                  |                                 |         |                                 |                                  |                                 |   |   |                                  |   |   |   |   |
|        Service fee income                                               | $       | -                                    |      |   | $       | -                                    |         |                                 | $       | 9,945                                |   |   | $       | - |   |   | $       | 9,945 |   |
|        Interest income – mortgage                                 |                                  |                                 |      |   |                                  |                                 |         |                                 |                                  |                                 |   |   |                                  |   |   |   |   |   |   |
|               loans                  |                                  | 34,014                               |      |   |                                  | -                                    |         |                                 |                                  | -                                    |   |   |                                  | 779 |   |   |   | 34,793 |   |
|        Interest income – mortgage                                 |                                  |                                 |      |   |                                  |                                 |         |                                 |                                  |                                 |   |   |                                  |   |   |   |   |   |   |
|               securities             |                                  | 661                                  |      |   |                                  | 3,633                                |         |                                 |                                  | -                                    |   |   |                                  | (179 | ) |   |   | 4,115 |   |
| Total                                                                                                 |                                  | 34,675                               |      |   |                                  | 3,633                                |         |                                 |                                  | 9,945                                |   |   |                                  | 600 |   |   |   | 48,853 |   |
|                                                                                                  |                                  |                                 |      |   |                                  |                                 |         |                                 |                                  |                                 |   |   |                                  |   |   |   |   |   |   |
| Costs and Expenses:                                                                                   |                                  |                                 |      |   |                                  |                                 |         |                                 |                                  |                                 |   |   |                                  |   |   |   |   |   |   |
|        Cost of services                                                 |                                  | -                                    |      |   |                                  | -                                    |         |                                 |                                  | 10,013                               |   |   |                                  | - |   |   |   | 10,013 |   |
|        Interest expense – asset-                                  |                                  |                                 |      |   |                                  |                                 |         |                                 |                                  |                                 |   |   |                                  |   |   |   |   |   |   |
|               backed bonds           |                                  | 5,246                                |      |   |                                  | -                                    |         |                                 |                                  | -                                    |   |   |                                  | - |   |   |   | 5,246 |   |
|        Provision for credit losses                                      |                                  | 42,062                               |      |   |                                  | -                                    |         |                                 |                                  | -                                    |   |   |                                  | - |   |   |   | 42,062 |   |
|        Servicing fees                                                   |                                  | 2,482                                |      |   |                                  | -                                    |         |                                 |                                  | -                                    |   |   |                                  | - |   |   |   | 2,482 |   |
|        Premiums for mortgage loan                                       |                                  |                                 |      |   |                                  |                                 |         |                                 |                                  |                                 |   |   |                                  |   |   |   |   |   |   |
|               insurance              |                                  | (1,042                               | )         |   |                                  | 98                                   |         |                                 |                                  | -                                    |   |   |                                  | - |   |   |   | (944 | ) |
|        Selling, general and                                             |                                  |                                 |      |   |                                  |                                 |         |                                 |                                  |                                 |   |   |                                  |   |   |   |   |   |   |
|               administrative expense |                                  | 54                                   |      |   |                                  | 4,807                                |         |                                 |                                  | 346                                  |   |   |                                  | 1 |   |   |   | 5,208 |   |
|        Other (income) expenses                                          |                                  | (4,333                               | )         |   |                                  | 6,254                                |         |                                 |                                  | 5                                    |   |   |                                  | - |   |   |   | 1,926 |   |
| Total                                                                                                 |                                  | 44,469                               |      |   |                                  | 11,159                               |         |                                 |                                  | 10,364                               |   |   |                                  | 1 |   |   |   | 65,993 |   |
|                                                                                                  |                                  |                                 |      |   |                                  |                                 |         |                                 |                                  |                                 |   |   |                                  |   |   |   |   |   |   |
|        Other income (expenses)                                          |                                  | 15                                   |      |   |                                  | (459                                 | )            |                                 |                                  | -                                    |   |   |                                  | - |   |   |   | (444 | ) |
|        Interest expense on trust                                        |                                  |                                 |      |   |                                  |                                 |         |                                 |                                  |                                 |   |   |                                  |   |   |   |   |   |   |
|               preferred securities   |                                  | -                                    |      |   |                                  | (315                                 | )            |                                 |                                  | -                                    |   |   |                                  | - |   |   |   | (315 | ) |
|                                                                                                  |                                  |                                 |      |   |                                  |                                 |         |                                 |                                  |                                 |   |   |                                  |   |   |   |   |   |   |
| Loss before income tax expense                                                                        |                                  | (9,779                               | )         |   |                                  | (8,300                               | )            |                                 |                                  | (419                                 | )      |   |                                  | 599 |   |   |   | (17,899 | ) |
| Income tax expense                                                                                    |                                  | -                                    |      |   |                                  | 116                                  |         |                                 |                                  | -                                    |   |   |                                  | - |   |   |   | 116 |   |
| Net loss                                                                                              |                                  | (9,779                               | )         |   |                                  | (8,416                               | )            |                                 |                                  | (419                                 | )      |   |                                  | 599 |   |   |   | (18,015 | ) |
| Less: Net loss attributable to                                                                        |                                  |                                 |      |   |                                  |                                 |         |                                 |                                  |                                 |   |   |                                  |   |   |   |   |   |   |
|        noncontrolling interests                                         |                                  | -                                    |      |   |                                  | (269                                 | )            |                                 |                                  | (126                                 | )      |   |                                  | - |   |   |   | (395 | ) |
| Net loss attributable to NFI                                                                          | $                                     | (9,779                               | )         |   | $                                     | (8,147                               | )            |                                 | $                                     | (293                                 | )      |   | $                                     | 599 |   |   | $ | (17,620 | ) |
|                                                                                                  |                                  |                                 |      |   |                                  |                                 |         |                                 |                                  |                                 |   |   |                                  |   |   |   |   |   |   |

----

|                                                                                                              |                           | For the Nine Months             |                           | For the Three Months |
|-------------------------------------------------------------------------------------------------------------------|--------------------------------|---------------------------------|--------------------------------|----------------------|
|                                                                                                              |                           | Ended September 30,             |                           | Ended September 30,  |
|                                                                                                              |                           | 2010                            |       | 2009                 |       | 2010 |       | 2009 |
| Numerator:                                                                                                        |       |                            |                           |                 |   |   |   |   |   |   |   |   |   |   |   |   |
|        Net income (loss)                                                       |                           | $      | 985,318                        |                 |   | $      | (158,222 | ) |   | $      | 3,336 |   |   | $      | (18,015 | ) |
|        Less loss attributable to noncontrolling interests                      |                           |                            | (804                           | )                    |   |   | (1,174 | ) |   |   | (105 | ) |   |   | (395 | ) |
|        Dividends on preferred shares                                           |                           |                            | (12,234                        | )                    |   |   | (11,361 | ) |   |   | (4,183 | ) |   |   | (3,880 | ) |
|        Allocation of undistributed income to convertible                       |                           |                            |                           |                 |   |   |   |   |   |   |   |   |   |   |   |   |
|               participating preferred stock |                           |                            | (162,862                       | )                    |   |   | - |   |   |   | - |   |   |   | - |   |
|        Income (loss) available to common shareholders                          |                           | $                               | 811,026                        |                 |   | $ | (168,409 | ) |   | $ | (742 | ) |   | $ | (21,500 | ) |
|                                                                                                              |                           |                            |                           |                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Denominator:                                                                                                      |                           |                            |                           |                 |   |   |   |   |   |   |   |   |   |   |   |   |
|        Weighted average common shares outstanding – basic                |                           |                            | 9,337,207                      |                 |   |   | 9,368,053 |   |   |   | 9,337,207 |   |   |   | 9,368,053 |   |
|                                                                                                              |                           |                            |                           |                 |   |   |   |   |   |   |   |   |   |   |   |   |
|        Weighted average common shares outstanding – basic                |                           |                            | 9,337,207                      |                 |   |   | 9,368,053 |   |   |   | 9,337,207 |   |   |   | 9,368,053 |   |
|               Stock options                 |                           |                            | -                              |                 |   |   | - |   |   |   | - |   |   |   | - |   |
|        Weighted average common shares outstanding – dilutive             |                           |                            | 9,337,207                      |                 |   |   | 9,368,053 |   |   |   | 9,337,207 |   |   |   | 9,368,053 |   |
|                                                                                                              |                           |                            |                           |                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic earnings per share:                                                                                         |                           |                            |                           |                 |   |   |   |   |   |   |   |   |   |   |   |   |
|        Net income (loss)                                                       |                           | $                               | 105.53                         |                 |   | $ | (16.89 | ) |   | $ | 0.36 |   |   | $ | (1.92 | ) |
|        Less loss attributable to noncontrolling interests                      |                           |                            | (0.08                          | )                    |   |   | (0.12 | ) |   |   | (0.01 | ) |   |   | (0.04 | ) |
|        Dividends on preferred shares                                           |                           |                            | (1.31                          | )                    |   |   | (1.21 | ) |   |   | (0.45 | ) |   |   | (0.41 | ) |
|        Allocation of undistributed income to convertible                       |                           |                            |                           |                 |   |   |   |   |   |   |   |   |   |   |   |   |
|               participating preferred stock |                           |                            | (17.44                         | )                    |   |   | - |   |   |   | - |   |   |   | - |   |
|        Net income (loss) available to common shareholders                      |                           | $                               | 86.86                          |                 |   | $ | (17.98 | ) |   | $ | (0.08 | ) |   | $ | (2.29 | ) |
|                                                                                                              |                           |                            |                           |                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Diluted earnings per share:                                                                                       |                           |                            |                           |                 |   |   |   |   |   |   |   |   |   |   |   |   |
|        Net income (loss)                                                       |                           | $                               | 105.53                         |                 |   | $ | (16.89 | ) |   | $ | 0.36 |   |   | $ | (1.92 | ) |
|        Less loss attributable to noncontrolling interests                      |                           |                            | (0.08                          | )                    |   |   | (0.12 | ) |   |   | (0.01 | ) |   |   | (0.04 | ) |
|        Dividends on preferred shares                                           |                           |                            | (1.31                          | )                    |   |   | (1.21 | ) |   |   | (0.45 | ) |   |   | (0.41 | ) |
|        Allocation of undistributed income to convertible                       |                           |                            |                           |                 |   |   |   |   |   |   |   |   |   |   |   |   |
|               participating preferred stock |                           |                            | (17.44                         | )                    |   |   | - |   |   |   | - |   |   |   | - |   |
|        Net income (loss) available to common shareholders                      |                           | $                               | 86.86                          |                 |   | $ | (17.98 | ) |   | $ | (0.08 | ) |   | $ | (2.29 | ) |
|                                                                                                              |                           |                            |                           |                 |   |   |   |   |   |   |   |   |   |   |   |   |

|                                             |                           | For the Nine Months Ended       |                           | For the Three Months |
|--------------------------------------------------|--------------------------------|---------------------------------|--------------------------------|----------------------|
|                                             |                           | September 30,                   |                           | Ended September 30,  |
|                                             |                           | 2010                            |       | 2009                 |       | 2010 |       | 2009 |
| Number of stock options                          |                           |                            | 280                            |                 |   | 114 |   |   | 285 |   |   | 114 |
| Weighted average exercise price of stock options |       | $      | 22.00                          |                 | $      | 52.98 |   | $      | 21.66 |   | $      | 52.98 |
|                                             |

----

|                                                                                                                                     |                           | As of September 30, 2010        |                           | As of December 31, 2009 |
|------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------|---------------------------------|--------------------------------|-------------------------|
|                                                                                                                                     |       | Carrying Value                  |       | Fair Value              |       | Carrying Value |       | Fair Value |
| Financial assets:                                                                                                                        |                           |                            |                           |                    |   |   |   |   |   |   |   |   |   |   |
|        Cash and cash equivalents                                                                      |                           | $      | 16,784                         |                    | $      | 16,784 |   | $      | 7,104 |   |   | $      | 7,104 |   |
|        Restricted cash                                                                                |                           |                            | 1,402                          |                    |   | 1,334 |   |   | 5,342 |   |   |   | 5,206 |   |
|        Mortgage loans – held-in-portfolio                                                       |                           |                            | -                              |                    |   | - |   |   | 1,289,474 |   |   |   | 1,160,527 |   |
|        Mortgage securities – trading                                                            |                           |                            | 1,230                          |                    |   | 1,230 |   |   | 1,087 |   |   |   | 1,087 |   |
|        Mortgage securities – available-for-sale                                                 |                           |                            | 5,984                          |                    |   | 5,984 |   |   | 6,903 |   |   |   | 6,903 |   |
|        Accrued interest receivable                                                                    |                           |                            | -                              |                    |   | - |   |   | 74,025 |   |   |   | 74,025 |   |
|        Notes receivable                                                                               |                           |                            | 4,317                          |                    |   | 4,317 |   |   | 4,920 |   |   |   | 4,920 |   |
| Financial liabilities:                                                                                                                   |                           |                            |                           |                    |   |   |   |   |   |   |   |   |   |   |
|        Borrowings:                                                                                    |                           |                            |                           |                    |   |   |   |   |   |   |   |   |   |   |
|               Asset-backed bonds secured by mortgage               |                           |                            |                           |                    |   |   |   |   |   |   |   |   |   |   |
|                      loans      |                           |                            | -                              |                    |   | - |   |   | 2,270,602 |   |   |   | 1,297,980 |   |
|               Asset-backed bonds secured by mortgage               |                           |                            |                           |                    |   |   |   |   |   |   |   |   |   |   |
|                      securities |                           |                            | 1,230                          |                    |   | 1,230 |   |   | 968 |   |   |   | 968 |   |
|               Junior subordinated debentures                       |                           |                            | 78,027                         |                    |   | 17,114 |   |   | 77,815 |   |   |   | 6,225 |   |
|        Accrued interest payable                                                                       |                           |                            | 392                            |                    |   | 392 |   |   | 751 |   |   |   | 751 |   |
| Derivative instruments:                                                                                                                  |                           |                            | -                              |                    |   | - |   |   | (157 | ) |   |   | (157 | ) |
|                                                                                                                                     |                           |                            |                           |                    |   |   |   |   |   |   |   |   |   |   |

----

----

- appraisers must be paid “reasonable and customary fees,”  
- require regulatory agencies to implement uniform appraisal standards for all federal appraisals,  
- require appraisal management companies to register with state agencies, and  
- govern automated valuation models. 

- maintaining and/or generating adequate liquidity to sustain us and allow us to take advantage of investment opportunities, and 
- generating income for our shareholders. 

| Table 1 — Summary of Financial Highlights and Key Performance Metrics(dollars in thousands; except per share amounts) |                           |                            |   |                           |                            |   |
|-----------------------------------------------------------------------------------------------------------------------------|--------------------------------|---------------------------------|--------|--------------------------------|---------------------------------|--------|
|                                                                                                                        |                           | September                       |   | December                       |
|                                                                                                                        |                           | 30, 2010                        |   | 31, 2009                       |
| Cash and cash equivalents                                                                                                   |                           | $                               | 16,784 |                           | $                               | 7,104  |   |
|                                                                                                                        |                           |                            |   |                           |                            |   |   |
|                                                                                                                        |                           | For the Nine Months             |
|                                                                                                                        |                           | Ended September 30,             |
|                                                                                                                        |                           |   2010                     |   |   2009                    |
| Net income (loss) available to common shareholders per diluted share                                                        |       | $      | 86.86  |       | $      | (17.98 | ) |
|                                                                                                                        |                           |                            |   |                           |                            |   |   |

----

| Table 2 — Assets and Liabilities of Loan Trusts and Gain Recognized upon Derecognition(dollars in thousands) |
|--------------------------------------------------------------------------------------------------------------------|
|                                                                                                          |
|                                                                                                               |   | NHEL 2006-MTA1 |       | NHEL 2006-1 |       | NHEL 2007-1 |       | Eliminations (A) |       | Total |
| Assets:                                                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        Mortgage loans – held-in-                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|               portfolio                      |       | $ | 528,388 |   |   | $ | 399,507 |   |   | $      | 1,033,296 |   |   | $      | (8,003 | ) |   | $      | 1,953,188 |   |
|        Allowance for loan losses                                                |   |   | (147,147 | ) |   |   | (115,191 | ) |   |   | (440,563 | ) |   |   | - |   |   |   | (702,901 | ) |
|        Accrued interest receivable                                              |   |   | 6,176 |   |   |   | 20,521 |   |   |   | 46,028 |   |   |   | - |   |   |   | 72,725 |   |
|        Real estate owned                                                        |   |   | 11,842 |   |   |   | 17,919 |   |   |   | 25,548 |   |   |   | - |   |   |   | 55,309 |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total assets                                                                                                       |   |   | 399,259 |   |   |   | 322,756 |   |   |   | 664,309 |   |   |   | (8,003 | ) |   |   | 1,378,321 |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities:                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        Asset-backed bonds                                                       |   |   | 588,434 |   |   |   | 465,164 |   |   |   | 1,175,608 |   |   |   | 6,427 |   |   |   | 2,235,633 |   |
|        Due to servicer                                                          |   |   | 17,298 |   |   |   | 32,835 |   |   |   | 81,639 |   |   |   | - |   |   |   | 131,772 |   |
|        Other liabilities                                                        |   |   | 9,432 |   |   |   | 12,368 |   |   |   | 24,017 |   |   |   | (41,770 | ) |   |   | 4,047 |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total liabilities                                                                                                  |   |   | 615,164 |   |   |   | 510,367 |   |   |   | 1,281,264 |   |   |   | (35,343 | ) |   |   | 2,371,452 |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        Gain on derecognition of                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|               securitization trusts          |   | $ | 215,905 |   |   | $ | 187,611 |   |   | $ | 616,955 |   |   | $ | (27,340 | ) |   | $ | 993,131 |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

| (A) |         | Eliminations relate to intercompany accounts at the consolidated financial statement level, there are no intercompany balances between the securitization trusts. |
|-----|---------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

- Mortgage Loans  –  Held-in-Portfolio 
- Allowance for Loan Losses 
- Accrued Interest Receivable 
- Real Estate Owned 
- Due to Servicer 
- Asset-backed Bonds Secured by Mortgage Assets 
- Other securitization trust liabilities 

| Table 3 — Values of Individual Mortgage Securities – Available-for-Sale (dollars in thousands) |
|------------------------------------------------------------------------------------------------------------|
|                                                                                                       |   | September 30, 2010 |   | December 31, 2009 |
|                                                                                                       |   |   |   |   |   |   |   |   | Constant |   | Expected |   |   |   |   |   |   |   |   | Constant |   | Expected |
| Securitization                                                                                             |   | Estimated |   | Discount |   | Pre-payment |   | Credit |   | Estimated |       | Discount |   | Pre-payment |       | Credit |
| Trust (A)                                                                                                  |       | Fair Value |   | Rate |       | Rate |       | Losses |   | Fair Value |   | Rate |   | Rate |   | Losses |
| 2002-3                                                                                                     |   | $      | 1,507 |       | 25 | % |   |   | 18 | % |   |   | 1.0 | % |   |       | $      | 1,997 |   | 25 | % |   |       | 15 | % |   |   | 1.0 | % |   |
| 2003-1                                                                                                     |   |   | 2,642 |   | 25 |   |   |   | 19 |   |   |   | 2.1 |   |   |   |   | 3,469 |   | 25 |   |   |   | 13 |   |   |   | 2.1 |   |   |
| 2003-3                                                                                                     |   |   | 915 |   | 25 |   |   |   | 14 |   |   |   | 2.4 |   |   |   |   | 1,437 |   | 25 |   |   |   | 10 |   |   |   | 2.7 |   |   |
| 2003-4                                                                                                     |   |   | 920 |   | 25 |   |   |   | 18 |   |   |   | 2.5 |   |   |   |   | - |   | 25 |   |   |   | 12 |   |   |   | 2.7 |   |   |
| Total                                                                                                      |   | $ | 5,984 |   |   |   |   |   |   |   |   |   |   |   |   |   | $  | 6,903 |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

| Table 4 — Income (Expense) of Consolidated Loan Securitization; Gain onDisposition of Mortgage Assets(dollars in thousands) |
|-----------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                              |   | For the Nine Months |
|                                                                                                                              |   | Ended September 30, |
|                                                                                                                              |       | 2010 |       | 2009 |
| Gain on derecognition of securitization trusts                                                                                    |   | $      | 993,131 |   |   | $      | – |   |
| Interest income – mortgage loans                                                                                            |   |   | 10,681 |   |   |   | 93,933 |   |
| Interest expense – asset-backed bonds                                                                                       |   |   | (1,416 | ) |   |   | (16,448 | ) |
| Provision for credit losses                                                                                                       |   |   | (17,433 | ) |   |   | (211,050 | ) |
| Servicing fees                                                                                                                    |   |   | (731 | ) |   |   | (8,343 | ) |
| Premiums for mortgage loan insurance                                                                                              |   |   | (308 | ) |   |   | (4,791 | ) |
| Other expense                                                                                                                     |   |   | (560 | ) |   |   | (1,187 | ) |
|                                                                                                                         |   |   |   |   |   |   |   |   |

----

| Table 5 — Appraisal and Real Estate Valuation Management Services Operations (dollars in thousands, except unit amounts) |
|--------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                           |   | For the Nine Months Ended |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                           |   | September 30, |   | For the Three Months Ended September 30, |
|                                                                                                                           |   | 2010 |   | 2009 |   | 2010 |   | 2009 |
|                                                                                                                           |   | Total |   | Per Unit |   |   Total |   | Per Unit |   | Total |   | Per Unit |   | Total |   | Per Unit |
| Completed orders (units)                                                                                                       |   |   | 135,891 |   |   |   |   |   | 59,209 |   |   |   |   |   |   |   | 62,025 |   |   |   |   |   | 26,960 |   |     |   |   |   |
|                                                                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Service fee income                                                                                                             |     | $      | 50,237 |     | $      | 370 |     | $      | 22,018 |   |   | $ | 372 |   |   | $      | 22,784 |   | $      | 367 |     | $      | 9,945 |   |   | $      | 369 |   |
| Cost of services                                                                                                               |   |   | 44,371 |   |   | 327 |   |   | 22,991 |   |   |   | 388 |   |   |   | 19,692 |   |   | 317 |   |   | 10,013 |   |   |   | 372 |   |
| Selling, general and                                                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        administrative expense                                                               |   |   | 3,192 |   |   | 23 |   |   | 1,728 |   |   |   | 29 |   |   |   | 1,268 |     |   | 20 |   |   | 346 |   |   |   | 13 |   |
| Other expense                                                                                                                  |   |   | 77 |   |   | 1 |   |   | 47 |   |   |   | 1 |   |   |   | 36 |   |   | 1 |   |   | 5 |   |   |   | - |   |
|                                                                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other income                                                                                                                   |   |   | 3 |   |   | - |   |   | - |   |   |   | - |   |   |   | 2 |   |   | - |   |   | - |   |   |   | - |   |
|                                                                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net income (loss)                                                                                                              |   |   | 2,600 |   |   | 19 |   |   | (2,748 | ) |   |   | (46 | ) |     |   | 1,790 |   |   | 29 |   |   | (419 | ) |   |   | (16 | ) |
| Less: Net income (loss)                                                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        attributable to                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        noncontrolling interests                                                             |   |   | 317 |   |   | 2 |   |   | (824 | ) |   |   | (14 | ) |   |   | 218 |   |   | 4 |   |   | (126 | ) |   |   | (5 | ) |
| Net income (loss)                                                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        attributable to NFI                                                                  |   | $ | 2,283 |   | $ | 17 |   | $ | (1,924 | ) |     | $      | (32 | ) |   | $ | 1,572 |   | $ | 25 |   | $ | (293 | ) |   | $ | (11 | ) |
|                                                                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

| Table 6 — Contractual Obligations (dollars in thousands) |
|----------------------------------------------------------------|
| As of September 30, 2010                                       |
|                                                           |   |   |   |   | Less than 1 |   |   |   |   |   |   |   |   | After 5 |
| Contractual Obligations                                        |   | Total |   | Year |   |       | 1-3 Years |       | 3-5 Years |       | Years |
| Junior subordinated debentures                                 |       | $      | 97,608 |       | $      | 781 |   |   |   | 1,563 |   | $      | 1,563 |   | $      | 93,701 |
| Operating leases                                               |   |   | 3,210 |   |   | 1,350 |   |   |   | 998 |   |   | 662 |   |   | 200 |
| StreetLinks earnings target                                    |   |   | 2,195 |   |   | 2,195 | (A) |   |   | - |   |   | - |   |   | - |
| Total obligations                                              |   | $ | 103,013 |   | $ | 4,326 |   |   | $      | 2,561 |   | $ | 2,225 |   | $ | 93,901 |
|                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

| Table 7 — Primary Sources of Cash Receipts and Disbursements (dollars in thousands)    |
|---------------------------------------------------------------------------------------------------|
|                                                                                              | For the Nine Months |
|                                                                                              | Ended September 30, |
|                                                                                              | 2010 |       | 2009 |
| Primary sources:                                                                                  |   |   |   |   |   |
| Fees received for appraisal and real estate valuation                                             |   |   |   |   |   |
|        management services                                     | $      | 50,944 |   | $      | 20,770 |
| Cash flows received from mortgage securities                                                      |   | 7,683 |   |   | 13,908 |
|                                                                                              |   |   |   |   |   |
| Primary uses:                                                                                     |   |   |   |   |   |
| Payments for appraisals and real estate valuation                                                 |   |   |   |   |   |
|        management services and related administrative expenses |   | 41,547 |   |   | 20,801 |
| Payments of corporate, general and administrative expenses                                        |   | 6,427 |   |   | 22,950 |
|                                                                                              |   |   |   |   |   |

| Table 8 — Summary of Operating, Investing and Financing Cash Flows (dollars in thousands) |
|-------------------------------------------------------------------------------------------------|
|                                                                                            | For the Nine Months Ended |
|                                                                                            | September 30, |
|                                                                                            | 2010 |       | 2009 |
| Consolidated Statements of Cash Flows:                                                          |   |   |   |   |   |   |   |
| Cash provided by operating activities                                                           | $      | 8,075 |   |   | $      | 51,413 |   |
| Cash flows provided by investing activities                                                     |   | 37,079 |   |   |   | 178,008 |   |
| Cash flows used in financing activities                                                         |   | (35,474 | ) |   |   | (239,393 | ) |
|                                                                                            |   |   |   |   |   |   |   |

----

- As short-term interest rates declined and continue to remain low, the net spread to us has increased and remains high,  
- Higher credit losses have decreased cash available to distribute with respect to our securities,  
- We have lower average balances of our mortgage securities  –  available-for-sale portfolio as the securities have paid down and we have not acquired new bonds. 

----

----

| Item 2. Unregistered Sales of Equity Securities and Use of Proceeds (dollars in thousands) |
|--------------------------------------------------------------------------------------------|
| Issuer Purchases of Equity Securities                                                      |
|                                                                                       |   |   |   |   | Total Number of |   |   |   |
|                                                                                       |   |   |   |   | Shares |   | Approximate Dollar |
|                                                                                       |   |   |   |   | Purchased as |   | Value of Shares |
|                                                                                       |   |   |   |   | Part of Publicly |   | That May Yet Be |
|                                                                                       | Total Number |   | Average |   | Announced |   | Purchased Under |
|                                                                                       | of Shares |   | Price Paid |   | Plans or |   | the Plans or |
|                                                                                       | Purchased |       | per Share |       | Programs |       | Programs (A) |
| July 1 – July 31, 2010                                                               | - |   | - |   | - |   | $ | 1,020 |
| August 1 – August 31, 2010                                                           | - |   | - |   | - |   | $ | 1,020 |
| September 1 – September 30, 2010                                                     | - |   | - |   | - |   | $ | 1,020 |
|                                                                                       |   |   |   |   |   |   |   |   |

| (A)        | A current report on Form 8-K was filed on October 2, 2000 announcing that the Board of Directors authorized the Company to repurchase its common shares, bringing the total authorization to $9 million. |
|-----------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| Exhibit No. |       | Description of Document                                                                                       |
|-------------|--------------------------------|---------------------------------------------------------------------------------------------------------------|
| 11.1(1)     |                           | Statement Regarding Computation of Per Share Earnings                                                         |
|        |                           |                                                                                                          |
| 31.1        |                           | Chief Executive Officer Certification filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002         |
|        |                           |                                                                                                          |
| 31.2        |                           | Principal Financial Officer Certification filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002     |
|        |                           |                                                                                                          |
| 32.1        |                           | Chief Executive Officer Certification furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002     |
|        |                           |                                                                                                          |
| 32.2        |                           | Principal Financial Officer Certification furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |

| (1)        | See Note 14 to the condensed consolidated financial statements. |
|-----------------------------------------------|-----------------------------------------------------------------|

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| DATE: November 10, 2010 | /s/ W. Lance Anderson              |   |
|-------------------------|------------------------------------|--------|
|                    | W. Lance Anderson, Chairman of the |
|                    | Board of Directors and Chief       |
|                    | Executive Officer                  |
|                    | (Principal Executive Officer)      |
|                    |
| DATE: November 10, 2010 | /s/ Rodney E. Schwatken            |   |
|                    | Rodney E. Schwatken, Chief         |
|                    | Financial Officer                  |
|                    | (Principal Financial Officer)      |

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