The Subprime Mortgage Loan Industry - August 15th, 2007 - 2007 Grant Thornton LLP. All rights reserved.

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The Subprime Mortgage Loan Industry
      August 15th, 2007

©2007 Grant Thornton LLP. All rights reserved.   1
©2007                                               2
 ©2007Grant
      Grant Thornton  LLP.AllAll
            Thornton LLP.        rights
                              rights    reserved.
                                     reserved.
Some Recent Quotes From the Market…

 "We expect difficult housing and mortgage market conditions to persist"…"Softening
 home prices continued to affect many areas of the country and delinquencies and
 defaults continued to rise across all mortgage product categories.".. Countrywide
 Financial Corp. Chief Executive Angelo Mozilo

 "We are concerned that we cannot meet any significant redemption requests without
 selling securities at deep discounts to their fair value and therefore causing
 unnecessary losses to our clients,"…"We contacted the CFTC today and asked for
 their permission to halt redemptions until we can honor them in an orderly
 fashion."…Sentinel Management Group Inc.

©2007 Grant Thornton LLP. All rights reserved.   3
Discussion Topics for Today

                                                      V. Operational Due Diligence
I. Subprime Lending - Primer
                                                      Items

II. Stakeholders in the Subprime                      VI. Comparable Companies
Market                                                Analysis

                                                      VII. Future Outlook – Some
III. Looking for Pockets of Value
                                                      Thoughts

IV. Financial Due Diligence                           VIII. Grant Thornton LLP Recovery
Items                                                 & Reorganization Service
 ©2007 Grant Thornton LLP. All rights reserved.   4
Recent News Items In The Subprime Market

                             cial                                 AHM Files for Bankruptcy
                      in a n
          e n tu ry F        u ptcy
         C               k r
     New nters Ban                                      United Ca
                                                                    pital Asse
          E
     Corp                 e Home
                                                        Managem
                                                                    ent LLC
                                                                               t
                         hoic
                 People C     Bankruptcy                Stops its
                                                                   Investors
                         ters                                                 From
                 Loan En                                Withdraw
                                                                  ing Fund
                                                                            s
                    Mortgage Le
                                 nders                          UBS Closes Down Its
                    Network US
                               A Inc.                           Hedge Fund
                    Enters Bank
                                ruptcy                          Group Dillon Read
                                                           Bear Ste
                                                                    ar
                                                           Near Clo ns Faces
                                ptcy
      HomeBanc Files for Bankru
                                                                    sure of
                                                          Its Hedg          2 of
                                                                   e Funds
                   Ownit Mortgage Solutions
                                                               Bradrock Financial Corp
                   Enters Bankruptcy
                                                               Closes its $300MM
   ©2007 Grant Thornton LLP. All rights reserved.
©2007 Grant Thornton LLP. All rights reserved.
                                                    5          Galena Street Fund
I.   Subprime Lending - Primer

©2007 Grant Thornton LLP. All rights reserved.        6
How is a Subprime Mortgage Loan Originated?

                                                                                                      Residential                       Mortgage
                                                                                                       Borrower                       Broker/Banker

                                                 (1) Subprime mortgage lender borrows from bank
                                                     to fund mortgage originations

                                                 (2) Investment bank funds mortgage originations
                                                                                                      Subprime Mortgage
           Warehouse Lender                                                                                 Lender
           (Investment Bank)                                                                             (originate, finance, sell,          (3) Funds
                                                 (4) Investment bank retains mortgage as collateral       securitize and service)            mortgage

                                                         CASH FLOW
                                                                                                                 (5) Subprime
                                                                                                                 mortgage
        (6) Proceeds repay
                                                                                                                 lender packages loans
        warehouse line                                                Trust                                      and sells them to
                                                              (usually investment bank)                          Trustee

©2007 Grant Thornton LLP. All rights reserved.                                   7
More Borrowers Have Become Seriously Delinquent
    on 2006 Subprime Loans than Borrowers on Loans
    Originated between 2002 -2005

Source: Moody's Investor Services; "U.S. Subprime Mortgage Market"; March 7, 2007
     ©2007 Grant Thornton LLP. All rights reserved.                                 8
Capacity in the Industry Has Not Adjusted to the
     Volume Reduction

                                   Mortgage Industry Volume Staffing Trend

                                    Mortage Volume in Trillions
               5.00

                                    Reported Avg. Staff Level
                                    in Hundred Thousands
                4.00

                3.00

                2.00

                 1.00

                 0.00
                         93

                               94

                                     95
                        19

                                           96
                              19

                                                 97
                                    19

                                                       98
                                          19

                                                             99
                                                19

                                                      19

                                                                   00
                                                            19

                                                                         01

                                                                               02
                                                                  20

                                                                                     03
                                                                        20

                                                                              20

                                                                                              04
                                                                                    20

                                                                                                    05
                                                                                          20

                                                                                                          06
                                                                                                   20

                                                                                                                07
                                                                                                         20

                                                                                                               20

Source: Mortgage Bankers Association and National Mortgage News, May, 2007

     ©2007 Grant Thornton LLP. All rights reserved.                                       9
Even the AAA Tranches of ABX Index Have Seen
      a Steep Drop

                                                                                   ABX-HE-AAA 07-1 Performance

                 100

                   95

                   90                                                                                                                                                                                                                                                                                                                             Ø ABX-HE-AAA-07-1
                                                                                                                                                                                                                                                                                                                                                   has lost 10% since
                   85
                                                                                                                                                                                                                                                                                                                                                   June 2007
                        6/1/07
                                 6/4/07
                                           6/7/07
                                                     6/10/07
                                                                 6/13/07
                                                                             6/16/07
                                                                                          6/19/07
                                                                                                       6/22/07
                                                                                                                    6/25/07
                                                                                                                                  6/28/07
                                                                                                                                                7/1/07
                                                                                                                                                             7/4/07
                                                                                                                                                                          7/7/07
                                                                                                                                                                                       7/10/07
                                                                                                                                                                                                       7/13/07
                                                                                                                                                                                                                   7/16/07
                                                                                                                                                                                                                               7/19/07
                                                                                                                                                                                                                                              7/22/07
                                                                                                                                                                                                                                                             7/25/07
                                                                                                                                                                                                                                                                            7/28/07
                                                                                                                                                                                                                                                                                          7/31/07
                                                                                                                                                                                                                                                                                                        8/3/07
                                                                                                                                                                                                                                                                                                                    8/6/07
                                                                                                                                                                                                                                                                                                                                8/9/07
                                                                                   ABX-HE-BBB- 07-1 Performance
                                                                                                                                                                                                                                                                                                                                                  Ø ABX-HE-BBB-07-1
                   70                                                                                                                                                                                                                                                                                                                              has lost 44% since
                   63                                                                                                                                                                                                                                                                                                                              June 2007
                   56
                   49
                   42

                   35
                        6/1/07
                                  6/4/07
                                            6/7/07
                                                       6/10/07
                                                                   6/13/07
                                                                                6/16/07
                                                                                             6/19/07
                                                                                                          6/22/07
                                                                                                                        6/25/07
                                                                                                                                      6/28/07
                                                                                                                                                    7/1/07
                                                                                                                                                                 7/4/07
                                                                                                                                                                              7/7/07
                                                                                                                                                                                             7/10/07
                                                                                                                                                                                                             7/13/07
                                                                                                                                                                                                                         7/16/07
                                                                                                                                                                                                                                         7/19/07
                                                                                                                                                                                                                                                        7/22/07
                                                                                                                                                                                                                                                                       7/25/07
                                                                                                                                                                                                                                                                                      7/28/07
                                                                                                                                                                                                                                                                                                    7/31/07
                                                                                                                                                                                                                                                                                                                 8/3/07
                                                                                                                                                                                                                                                                                                                             8/6/07
                                                                                                                                                                                                                                                                                                                                         8/9/07

Note: Data as of August 9th ' 2007
Source: Markit Group
      ©2007 Grant Thornton LLP. All rights reserved.                                                                                                                                                                                       10
The Subprime Crisis Does Not Appear to be
      Contained in the US Alone

                                                                                      • Cambridge Place   • Nomura
                                     • BSAM                                           • IKB Deutsche      Holdings
                                     • New                                            • BNP Paribas       • Taiwan
                                     Century                                                              Life Insurance
                                     • Sowood
                                     • AHM….

                                                                                                                 • Basis Capital
                                                                                                                 • Absolut Capital

                                                                                                                     • Macquire Fortress
                                                                                                                     Investment Ltd.

Note: This chart only highlights trouble from the subprime loans market and it
does not include the problems created by the CDOs or the credit market
Source: News Articles
      ©2007 Grant Thornton LLP. All rights reserved.                             11
The Beginning of a Recession – Mid-Cycle Growth
Slowdown?

©2007 Grant Thornton LLP. All rights reserved.   12
(in '000s)

                                                                                                                                                                                            Ju
                                                                                                                                                                                               ly'

                                                                                                                                                                                                                 800
                                                                                                                                                                                                                        900
                                                                                                                                                                                                                                           1000
                                                                                                                                                                                                                                                  1100
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                                                                                                                                                                             D                r' 0
                                                                                                                                                                                                  6
                                                                                                                                                                                 ec
                                                                                                                                                                                    e
                                                                                                                                                                                    m

                                                 Source: National Association of Realtors
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                                                                                                                                                                                                                                                            New Home Sales (SAR)

                                                                                                                                                                                          ry
                                                                                                                                                                                              '0
                                                                                                                                                                                                 7
                                                                                                                                                                                    M

©2007 Grant Thornton LLP. All rights reserved.
                                                                                                                                                                                       ar

                                                                                                             90.0
                                                                                                                    100.0
                                                                                                                            110.0
                                                                                                                                    120.0
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                                                                                             M                                                                                                                                (in '000s)
                                                                                                                                            Pending Home Sales Index (SAR)

                                                                                              ar
                                                                                                '0
                                                                                                   7
                                                                                                                                                                                                          5500
                                                                                                                                                                                                                       6000
                                                                                                                                                                                                                                           6500
                                                                                                                                                                                                                                                     7000

                                                                                             Ap                                                                                    Ju
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                                                                                                      r'0
                                                                                                         7                                                                                 6
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                                                                                                                                                                                  De
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                                                                                                                                                                                                                                                                                                        Housing Has Added to the Subprime Problem

                                                                                                                                                                                            '0
                                                                                                                                                                                               6
                                                                                                                                                                                   Ja
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                                                                                                                                                                                            '07
                                                                                                                                                                                  Fe
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                                                                                                                                                                                            7
                                                                                                                                                                                                                                                                            Existing Home Sales (SAR)

                                                                                                                                                                                  M
                                                                                                                                                                                    ar
                                                                                                                                                                                       '0
                                                                                                                                                                                         7
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                                                                                                                                                                                       '07
                                                                                                                                                                                 Ju
                                                                                                                                                                                   n
                                                                                                                                                                                     p'0
                                                                                                                                                                                         7
Housing Affordability, Consumer Confidence and
       Retail Sales Have Taken a Beating in the Past Few
       Months
                                          Housing Affordability Inde x                                                                                                             Consumer Confidence in 2007

 120
                                                                                                                                                            112

 110
                                                                                                                                                            108

 100
                                                                                                                                                            104

  90
                                                                                                                                                            100
                                                                                                                                   7
          6

                                                      6

                                                                                                                                  7
                                                               6

                                                                                                                   7
                                    6

                                              6
                           6

                                                                                                         7
                  6

                                                                                    7
                                                                       06

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       '0

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                                                   '0

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                                                                                                                '0
                                                            '0
                                           '0
                       l '0

                                 '0
               '0

                                                                                                      '0
                                                                                 '0

                                                                                                                             07
                                                                                                                                                                  January   February        March       April    May   June
   ay

                                                                                                                           ay
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                                                   ct

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                                                        N

                                                                                                                                     Retail Sales in 2007

                                                                                                      380,000

                                                                                                      375,000
                                                                                   (figures in $mm)

                                                                                                      370,000

                                                                                                      365,000

                                                                                                      360,000
                                                                                                                       January   February    March      April      May      June
Source: National Association of Realtors
       ©2007 Grant Thornton LLP. All rights reserved.                                                                                          14
Mortgage Insurers and Home Building Products
      Stocks Have Been Impacted in the Recent Past

                                                                                Relative Perform ance - Building Prodcuts Suppliers

                                     120.0

                                     100.0

                                      80.0

                                      60.0
                                       7/10/2007    7/13/2007    7/16/2007      7/19/2007     7/22/2007     7/25/2007   7/28/2007    7/31/2007     8/3/2007    8/6/2007   8/9/2007

                                         American Standard Companies, Inc. (NYSE:ASD) - Common Stock                  Armstrong World Industries, Inc. (NYSE:AWI)
                                         Lennox International Inc. (NYSE:LII)                                         Owens Corning Sales, Inc. (NYSE:OC)
                                         USG Corp. (NYSE:USG)

                                                                                            Relative Performance - Mortgage Insurers

                                     110.0

                                      90.0

                                      70.0

                                      50.0

                                      30.0
                                       7/10/2007     7/13/2007    7/16/2007       7/19/2007     7/22/2007      7/25/2007      7/28/2007    7/31/2007      8/3/2007    8/6/2007       8/9/2007

                                                            ACA Capi tal Holdings, Inc. (NYSE:ACA) - Common Stock          Assured Guaranty Ltd. (NYSE:AGO)
                                                            MGIC Investment Corp. (NYSE:MTG)                               Radian Group Inc. (NYSE:RDN)
                                                            Security Capital Assurance Ltd. (NYSE:SCA)
Note: Data as of August 9th ' 2007
Source: CapitalIQ
      ©2007 Grant Thornton LLP. All rights reserved.                                                             15
II.   Stakeholders in the Subprime
                                                       Market

©2007 Grant Thornton LLP. All rights reserved.         16
The Top 5 Subprime Originators for the
      Year 2006 are Having Difficult Times in 2007

                                                                     Top 5 Subprime Originators in 2006

                                    80,000

                                    60,000
                         (in $mm)

                                    40,000

                                    20,000

                                        0
                                              Wells Fargo        HSBC Finance         New Century         Countrywide      WMC Mortgage
                                             Home Mortgage                             Financial                              Corp

          Well Fargo shuts its Brokered Subprime Mortgage Loan                            HSBC Finance's loan impairment charges as a % of op.
          Unit                                                                            income in Q2'07 was 15% as compared to 11.3% in Q2'06

                                                                                          Countrywide's 2007 second quarter earnings dropped by
          New Century Financial Corp. Filed for Bankruptcy
                                                                                          Approximately 30%

                                                      GE plans to sell the WMC mortgage business

Source: CapitaIQ, Company Press Release and Filings
      ©2007 Grant Thornton LLP. All rights reserved.                                 17
Subprime Originators Have Reduced the
     Origination Amounts

                                                              Subprim e Originations Over Last 5 Quarters

                        30,000

                        20,000
             (in $mm)

                        10,000

                            0
                                       Q1-2006              Q2-2006                    Q3-2006              Q4-2006            Q1-2007

                        Wells Fargo Home Mortgage     HSBC Finance      Countrywide        Option One Mortgage    Fremont   WMC Mortgage Corp

Source: National Mortgage News
     ©2007 Grant Thornton LLP. All rights reserved.                               18
Most of the Major Financial Institutions Have Been
Impacted by the Subprime Crisis

                 Originators                     Warehouse Lenders   Investors

©2007 Grant Thornton LLP. All rights reserved.          19
Recent Bankruptcies

                                                      Ø Filed for Chapter 11 on August 6th

                                                      Ø REIT; primarily origination and sale of securitized ARMs ,
                                                        also services mortgage loans; 7,409 employees last year
                                                      Ø Assets amounting to $20.53 Billion
                                                      Ø Liabilities amounting to $19.33 Billion

                                                      Ø DIP by WL Ross & Co, LLC's WLR Recovery Fund III LP

                                                      Ø Filed for Chapter 11 on August 9th

                                                      Ø REIT; Mortgage Banking Operations in Southeast U.S.;
                                                        1,300 employees pre-bankruptcy
                                                      Ø Assets amounting to $5.1Billion
                                                      Ø Liabilities amounting to $4.9Billion
                                                      Ø Countrywide Financial Corp agreed to acquire certain
                                                        assets related to 5 of its branches
Source: Company filings, News Releases
     ©2007 Grant Thornton LLP. All rights reserved.               20
Auto Finance Companies Are Also Providing for
     More Credit Losses

                                               Provision of Credit Loss As % of Finance Receivables

                                 2.00%

                                 1.50%

                                 1.00%

                                 0.50%

                                 0.00%
                                             Consumer       Americredit   First Investors   Credit     Carmax Inc
                                              Portfolio                      Financial    Acceptance
                                            Services Inc.                    Services       Corp.

                                                      Latest Quarter -2007    Corresponding Quarter - 2006

Source: SEC Filings
     ©2007 Grant Thornton LLP. All rights reserved.                          21
III. Looking For Pockets of Value

©2007 Grant Thornton LLP. All rights reserved.         22
Portfolios with Subprime FRM Loans are Less
     Risky Than Portfolios with Subprime ARM
     Loans

                                   % Increase in Subprime Delinquencies & Foreclosures in April 2007

                     160%

                     120%

                       80%

                       40%

                         0%
                                        ARM               ARM               FRM              FRM
                                   Delinquencies      Foreclosures     Delinquencies     Foreclosures

                                                          % Inc. MoM        % Inc. YoY

Source: Bloomberg, May 2007 Data

     ©2007 Grant Thornton LLP. All rights reserved.                    23
Decline in Manufacturing Employment in
     Indiana, Michigan & Ohio has Resulted in Very
     High % of Foreclosures in the 3 States

                                % of Mortgage Loans                                   % of Loans in Foreclosures

                   91%
                                                                                85%

                                                        9%
                                                                                                                   15%

                                                      Indiana, Michigan, Ohio    Rest of the Country

        Recently California, Florida, Nevada and Arizona Experienced High Foreclosure Starts

Source: MBA National Delinquency Survey
     ©2007 Grant Thornton LLP. All rights reserved.                    24
While Looking for Value, Conduct Company Specific
Intense Due Diligence

                         Financial                     Operational
                        Due Diligence                 Due Diligence

©2007 Grant Thornton LLP. All rights reserved.   25
IV. Financial Due Diligence Items

©2007 Grant Thornton LLP. All rights reserved.         26
Financial Due Diligence Should Cover All the Key
     Aspects of the Financial Statements

                                                       Earnings
                                                       Analysis

                                       Asset          Financial Due   Liquidity
                                      Analysis          Diligence     Analysis

                                                        Liability
                                                        Analysis

Source: Grant Thornton LLP Analysis
     ©2007 Grant Thornton LLP. All rights reserved.           27
Earnings Analysis: Growth of Spread Will Be the Key
     to Improving Earnings

                                                                                                  Earnings
                                                                                                  Analysis

                                                      ØCompare growth over the last             Financial Due
                                                                                                  Diligence
  Revenue Growth                                      quarters
                                                      ØCompare growth with industry growth

                                                      ØEvaluate spread between interest
  Spread
                                                      income and interest expense/coupon

                                                      ØAdequate provision for loan losses
  Operating Margin &                                  ØCompare growth over the last
  Net Income Growth                                   quarters
                                                      ØCompare growth with industry growth

                                                      ØComprehensive Income should be
  Comprehensive Income
                                                      analyzed to capture fluctuations in the
  Analysis
                                                      hedge instruments
Source: Grant Thornton LLP Analysis
     ©2007 Grant Thornton LLP. All rights reserved.                    28
Asset Analysis: Evaluate the Assumptions
     Underlying Asset Valuation

                                                      ØIdentify accounting policies for             Asset     Financial Due
                                                      different assets – held for sale, held for   Analysis     Diligence
  Accounting for Assets
                                                      investment, mortgage servicing rights,
                                                      derivatives etc.

                                                      ØIdentify valuation methodology for the
  Valuation of Assets                                 assets and make necessary
                                                      adjustments

  Performance of Assets                               ØEvaluate delinquencies and
                                                      foreclosures of the asset portfolio

Source: Grant Thornton LLP Analysis
     ©2007 Grant Thornton LLP. All rights reserved.                    29
Liability Analysis: Maintaining Credit Line With the
     Warehouse is Essential for Survival of the Firm

                                                      Ø Calculate the Debt/Equity Ratio and   Financial Due
          Debt/Equity Ratio                                                                     Diligence
                                                      compare it with Industry
                                                                                                Liability
                                                                                                Analysis

                                                      Ø Evaluate debt covenants and the
            Debt Covenants
                                                      firm's compliance to those covenants

                                                      ØLook for early payment defaults
    Early Payment Defaults                            which can trigger buy back of
                                                      originated mortgages
                                                      ØAny signs of disruption of
     Warehouse Credit Line                            warehouse credit line should be taken
                                                      seriously

Source: Grant Thornton LLP Analysis
     ©2007 Grant Thornton LLP. All rights reserved.                   30
Liquidity Analysis: Evaluate Liquidity in Current
     Market Scenarios and Test it for Future Expected
     Economic Conditions

                                                                                                Financial Due   Liquidity
                                                      ØEvaluate interest coverage, quick          Diligence     Analysis
  Ratio Analysis
                                                      ratio and current ratio

                                                      ØExclude restricted cash into account
  Restricted Cash
                                                      while analyzing short term liquidity

                                                      ØLiquidity should be tested by
                                                      performing sensitivity analysis under
  Sensitivity Analysis
                                                      scenarios of increase in interest rates
                                                      and default rates

                                                      ØIncrease in margin calls with
  Margin Calls                                        concurrent decrease in availability of
                                                      finance could be trouble

Source: Grant Thornton LLP Analysis
     ©2007 Grant Thornton LLP. All rights reserved.                    31
V.   Operational Due Diligence Items

©2007 Grant Thornton LLP. All rights reserved.          32
Operational Due Diligence Should be Performed
     Across the Value Chain of the Firm

                     Management Quality: Important Across All Functions

                                                                   Income
                          Investments                 Borrowings
                                                                   Realization

Source: Grant Thornton LLP Analysis

     ©2007 Grant Thornton LLP. All rights reserved.          33
Investments: Identify the Processes Used in
     Origination of Loans

                                        ØInvestments in real estate: commercial,
                                                                                          Management Quality
                                        home, hotels
    Type of Loans                       ØInvestments in other ABS
                                        ØAmount of loans held for sale or          Investments

                                        investments

                                        ØAverage FICO score
                                        ØWeighted average life of the loans
   Characteristics                      ØLoan to value
     Of Loans                           ØGeographic spread of the loans
                                        ØAvailable documentation
                                        ØPercentage of ARMs
                                        ØPrepayment rates
     Performance
                                        ØHistorical foreclosures and
       of Loans
                                        delinquencies
                                        ØLoans originated inhouse or outsourced
          Loan
                                        ØNetwork of brokers
       Origination
                                        ØEffective use of technology
Source: Grant Thornton LLP Analysis
     ©2007 Grant Thornton LLP. All rights reserved.              34
Borrowings: Evaluate the Cost of Borrowings and
     the Possibilities of Illiquidity

                                        ØShort term – warehouse lending,
                                                                                  Management Quality
                                        repurchase agreements, commercial
       Type of
                                        paper, margin lending
      Borrowings
                                        ØLong term – notes, securitization               Borrowings

                                        structured as finance

                                        ØFind the optimal mix of borrowings for
                                        lower interest expense
        Mix of
                                        ØNumber of funding resources
      Borrowings
                                        dependent on
                                        ØCovenants imposed

                                        ØNon-recourse funding vs. recourse
        Ability to                      funding
         Handle                         ØRelationship with lenders
        Downturn                        ØLiquidity reserves created in order to
                                        withstand volatility
Source: Grant Thornton LLP Analysis
     ©2007 Grant Thornton LLP. All rights reserved.              35
Income Realization: Identify the Inefficient Income
     Streams

                                        ØIdentify the assumptions used in         Management Quality
        Net                             accounting for the interest income
  Interest Income                       ØEffectiveness of hedges used – credit
                                                                                                       Income
                                        risk and interest rate risk hedges                             Realization

                                        ØInhouse vs. outsource – is it a core
   Loan Servicing                       competence
                                        ØPerformance of loan servicing division

                                        ØSale of Loans/Securities
                                            ØImpact in the current scenario and
                                            expected impact in the future
      Non Interest                      ØSecuritization
        Income                              ØType of special purpose entity
                                            used for securitization
                                            Ø Credit enhancements used
                                            ØCounterparties involved

Source: Grant Thornton LLP Analysis
     ©2007 Grant Thornton LLP. All rights reserved.             36
VI. Comparable Companies Analysis

©2007 Grant Thornton LLP. All rights reserved.         37
Mortgage REITS Have Been Hit Hard by Subprime;
      Very Low Price to Book Ratios Imply Overvaluation
      of Assets on the Books
   Subprime Issuers
                                                                  Market                           Operating     Profit
                                                          1
   Issuer                               Stock Price            Capitalization 1   Revenue 2        Margin 2     Margin 2     ROE        P/E            P/B
                                             ($)                            ($mm)                                (%)                            (x)
   Wells Fargo & Co                         34.16                 114,245         50,718           25.95%       17.54%     20.03%      13.10x         2.43x
   Washington Mutual                        36.76                 31,298          26,532           18.69%       12.89%     12.88%      10.21x         1.33x
   Countrywide Financial Corp               28.66                 15,696          21,561           15.71%       10.15%     12.88%       7.63x         1.09x
   IndyMac Bancorp Inc                      20.58                  1,462           2,801           14.63%       9.12%      8.92%        5.73x         0.71x

  High                                      36.76                 114,245          50,718          25.95%       17.54%      20.03%     13.10x         2.43x
  Low                                       20.58                  1,462           2,801           14.63%       9.12%       8.92%      5.73x          0.71x
  Median                                    31.41                  23,497          24,046          17.20%       11.52%      12.88%     8.92x          1.21x
  Mean                                      30.04                  40,675          25,403          18.75%       12.43%      13.68%     9.17x          1.39x
  Mortgage REITS
                                                                 Market                       Operating         Profit
                                                      1
  Issuer                                Stock Price           Capitalization 1 Revenue 2      Margin 2         Margin 2      ROE         P/E           P/B
                                             ($)                          ($mm)                                 (%)                             (x)
  Impac Mortgage Holdings Inc      1.78                            135           1,247         (5.40%)          (5.33%)    (39.73 %)      NA          0.19x
  Luminent Mortgage Capital Inc    0.85                            48             525          15.45%           12.69%      12.73 %     0.73x         0.10x
  Novastar Financial               5.53                            62             498          12.51%           13.32%       3.02 %       NA          0.13x
  Anworth Mortgage Asset Corp      5.61                            195            334          (4.65%)          (4.71%)      2.63 %       NA          0.46x
  Hanover Capital Mortgage Holdings2.02                            17              35          75.09%          (10.77%)        NA         NA          0.35x
  RAIT Investment Trust            5.61                            195            334          (4.65%)          (4.71%)      2.63 %       NA          0.46x

  High                                      5.61                   195           1,247         75.09%           13.32%      12.73 %     0.73x         0.46x
  Low                                       0.85                   17             35           (5.40%)         (10.77%)    (39.73 %)    0.73x         0.10x
  Median                                    3.78                   99             416          3.93%            (4.71%)     2.63 %      0.73x         0.27x
  Mean                                      3.57                   109            496          14.73%           0.08%       (3.74 %)    0.73x         0.28x
Note 1: Price as of August 9th ' 2007
Note 2: Trailing 12Months Value
Source: Bloomberg
      ©2007 Grant Thornton LLP. All rights reserved.                                          38
The Subprime Sector has Seen a Lot of M&A Activity
 in the Recent Past

      Target Name                      Buyers             Comments              Target Description                          Buyer Description
                                                                                ♦Originates, finances, securitizes,
                                                                                                                            ♦Private Equity player with $13.3billion in
                                                                                services and sells non-prime mortgage
                                                                                                                            assets under management
                                                                                loans

                                                          Lone Star agreed to                                               ♦Acquired Accredited Home Lenders is
      Accredited Home Lenders                             acquire Accredited    ♦Revenues primarily from whole loan         being bought through Lone Star Fund V,
                                       Lone Star Funds                          sales as compared to securitized sales      which focuses on investments in financial
      Holding Co. (NasdaqNM:LEND)                         Home in June; The
                                                          deal is pending                                                   and real estate assets on a global basis

                                                                                                                            ♦Has investments in financial services
                                                                                ♦Has a REIT subsidiary                      companies in Germany, Japan, Korea
                                                                                                                            and the U.S.
                                                                                                                            ♦Hedge fund manager which invests in
                                                                                                                            mortgage backed securities, convertible
                                                                                ♦Operates as a REIT
                                                                                                                            bonds, MBS derivatives and asset
                                                          Ellington purchased                                               backed securities
                                                          $180mm worth of                                                   ♦For the last 13 years, its primary focus
      New Century Financial Corp -     Ellington
                                                          loan portfolio for                                                area has been investments in mortgage
      LNFA Mortgage Loan Portfolio     Management                               ♦Currently in Chapter 11
                                                          $58mm on servicing                                                backed securities and it is present in all
                                                          released basis                                                    sectors of the MBS market

                                                                                ♦Incomes from loans held in REIT trusts     ♦Has partnership with an entity that
                                                                                and from whole loan sales                   services distressed mortgage loans
                                                                                                                            ♦One of the world's leading private
                                                                                ♦Originates, acquires, services and sells   investment firms, with portfolio
                                                          Block Financial
                                                                                nonprime mortgage loans                     companies generating more than
                                                          Group (parent of
                                                                                                                            $60Billion in revenue per year
                                       Cerberus Capital   Option One
      Option One Mortgage Corp                                                                                              ♦Has global investments in banks and
                                       Management         Mortgage Corp) may    ♦Subsidiary of H&R Block
                                                          receive future                                                    real estate financing firms
                                                          earnout payments                                                  ♦Related investments in Germany, Israel
                                                                                ♦One of the leading service providers
                                                                                                                            and the U.S.

Source: Company Website, CapitalIQ, PACER
     ©2007 Grant Thornton LLP. All rights reserved.                             39
Firms With Existing Investments in Real Estate and
 Mortgage Loans Have Pursued Acquisitions

  Target Name                        Buyers                 Comments               Target Description                            Buyer Description
                                                                                   ♦Provides mortgage production                 ♦GE Capital Solutions provides financing
                                                                                   (origination, purchase and sale),             products and services, including
                                                                                   mortgage servicing and fleet                  equipment loans and leasing, inventory
                                                                                   management services                           and trade finance, and trade payables
                                     GE Capital Solutions   GE to sell the
                                                                                   ♦Also provides appraisal services, credit
  PHH Corp. (NYSE:PHH)               The Blackstone         mortgage business to                                                 ♦GE Capital Solutions is primarily buying
                                                                                   research, flood certification, and tax
                                     Group                  Blackstone Group                                                     PHH for fleet management services
                                                                                   services
                                                                                   ♦Loan servicing revenue is the majority       ♦The Blackstone Group has investments
                                                                                   revenue contributor in the mortgage           in Real Estate and Financial Services
                                                                                   production segment                            sectors
                                                                                                                                 ♦Privately owned hedge fund sponsor,
                                                                                   ♦Originates, provides interim servicing of
                                                                                                                                 invests in US & European converts, and
                                                            The purchase           and resells subprime mortgage loans
                                                                                                                                 event driven investments
                                                            included $160mm
                                                            loan portfolio (paid                                                 ♦Principal Strategies group at Citadel
                                     Citadel Investment                            ♦Either sells or securitizes all the loans
  ResMae Financial Corp                                     98.5 cents to a                                                      focuses on companies going through
                                     Group                                         on a servicing released basis
                                                            dollar) and Resmae                                                   transformational change
                                                            Mortgage Corp.(paid
                                                            $22.4mm)               ♦Primarily utilizes network of independent
                                                                                   brokers for loan originations
                                                                                                                                 ♦A subsidiary of Citigroup, invests in
                                                                                   ♦Operates as a REIT
                                                                                                                                 mortgage companies

                                                            Citigroup Global       ♦Invests primarily in residential mortgage-   ♦It also has investments in First Equity
                                     Citigroup Global                              related securities issued by FNMA,            Card Corp. which provides credit cards
  Opteum Inc.                                               Markets Realty
                                     Markets Realty Corp.                          FHLMC and GNMA                                for small businesses
                                                            bought 7.5% stake
                                                                                   ♦Also originates and purchases prime, Alt
                                                                                   A and sub prime mortgages

Source: Company Website, CapitalIQ, PACER
     ©2007 Grant Thornton LLP. All rights reserved.                                40
Even With Acquisitions in the Subprime Space,
 Deutsche Bank Came Up With Strong Second
 Quarter Earnings in 2007

 Target Name                         Buyers           Comments               Target Description                            Buyer Description
                                                                             ♦A subsidiary of MortgageIT Inc.,
                                                                                                                           ♦Worldwide banking and services
                                                                             operates as a mortgage banking
                                                                                                                           organization
                                                                             company
                                                      MortgageIT Holdings
                                                      became a part of                                                     ♦Deutsche Bank has been investing in
                                                                             ♦Operates as a REIT
                                                      Deutsche Bank's                                                      the U.S. mortgage market
 MortgageIT Holdings Inc.            Deutsche Bank
                                                      Residential Mortgage   ♦Loans originated are either transferred
                                                      Backed Securities                                                    ♦In recent past it acquired Chapel
                                                                             to investment loan portfolio, sold to thrid
                                                      Business                                                             Funding (mortgage originator) and signed
                                                                             party investors (strategy going forward),
                                                                                                                           a JV with Hispanic National Mortgage
                                                                             or used in REMIC transactions to
                                                                                                                           Association
                                                                             collateralize MBS

Source: Company Website, CapitalIQ, PACER
     ©2007 Grant Thornton LLP. All rights reserved.                          41
Recent M&As in the Subprime Sector Have Valued the Assets at
63% of the Book Value: Valuation Range Today Could be Very
Different from the Valuation Ranges in the Recent Past

                                                                                                                                           Implied        1 Day Prior -
                                                             Transaction   Announcement                            Price to   Implied EV   TEV/Interest   Stock
  Target Name                             Buyers             Value ($mm)   Date             Status      Type       Book Value /LTM NI      Income         Premium

  Accredited Home Lenders Holding
  Co. (NasdaqNM:LEND)             Lone Star Funds            379           6/4/2007         Pending     Cash       0.52x      6.69x        13.14x         9.7%
                                                                                                        Cash -
  New Century Financial Corp -            Ellington                                                     Asset
  LNFA Mortgage Loan Portfolio            Management         58            5/2/2007         Completed   Purchase   0.32x      nm           nm             nm

                                          Cerberus Capital
  Option One Mortgage Corp                Management         800           4/17/2007        Pending     Cash       0.63x      nm           nm             nm

                                          GE Capital
  PHH Corp. (NYSE:PHH)                    Solutions          1775          3/14/2007        Pending     Cash       1.11x      nm           nm             11.9%
                                                                                                        Cash -
                                   Citadel Investment                                                   Asset
  ResMae Financial Corp            Group              179                  3/8/2007         Completed   Purchase   0.89x      nm           nm             nm
                                   Citigroup Global
                                   Markets Realty
  Opteum Inc. - Sale of 7.5% Stake Corp.              4                    12/21/2006       Completed   Cash       0.29x      nm           14.79x         nm

  MortgageIT Holdings Inc.                Deutsche Bank      430           7/12/2006        Completed   Cash       1.20x      8.89x        25.26x         20.5%

  High                                                       1775                                                  1.20x      8.89x        25.26x         20.5%
  Low                                                        4                                                     0.29x      6.69x        13.14x         9.7%
  Mean                                                       518                                                   0.71x      7.79x        17.73x         14.0%
  Median                                                     379                                                   0.63x      7.79x        14.79x         11.9%

Source: Bloomberg, CapitalIQ, Wall Street Journal

     ©2007 Grant Thornton LLP. All rights reserved.                                    42
VII. Future Outlook – Some Thoughts

©2007 Grant Thornton LLP. All rights reserved.         43
What Caused the Subprime Crisis?

              Decline in Housing Market                                    Increase in Interest Rates

                                                        Subprime

                                                 Foreclosures / Delinquencies

                       Originators                   Warehouse Lenders              Investors

                                       Subprime Crisis Could Have Broader Effects

©2007 Grant Thornton LLP. All rights reserved.                    44
High Yield Debt Could be Re-Priced For Risk

                             Risk                         Re-pricing of Risk Premium – Junk Bonds Sell at Discount With
                            Aversion                      Less of Covenant Lite Terms

                                            Deterioration of Health of U.S Leverage Loan Market

                   102.00
                   100.00
                       98.00
                       96.00
                       94.00
                       92.00
                       90.00

                                                                                                               7
                                                                                       7

                                                                                                   7

                                                                                                                           7
                                                           7

                                                                    7
                                                 7

                                                                             7
                                       07
                             07

                                                                                                                                                  7
                                                                                                                                      7
                                                                                     l0

                                                                                                            l- 0
                                                                                                l-0

                                                                                                                        l -0
                                                        n0

                                                                  n0
                                               n0

                                                                           n0

                                                                                                                                                   0
                                                                                                                                       0
                         ay

                                    ay

                                                                                                                                    g-

                                                                                                                                                g-
                                                                                   Ju
                                                      Ju

                                                                Ju
                                             Ju

                                                                         Ju

                                                                                               u

                                                                                                           u

                                                                                                                       u

                                                                                                                               Au

                                                                                                                                           Au
                        M

                                   M

                                                                                            -J

                                                                                                        -J

                                                                                                                    -J
                                                                                  05
                                                     13
                                            06

                                                               20

                                                                        27
                       22

                                  30

                                                                                           12

                                                                                                       19

                                                                                                                   26

                                                                                                                               2-

                                                                                                                                           9-
                                                                                LCDX Price Index

Source: Markit Group
     ©2007 Grant Thornton LLP. All rights reserved.                                45
Stronger Employment Statistics Will Not Help In
      Immediate Reduction of Interest Rates

                               With Strong
                                                       Ø No Cut in Interest Rates – Continued Foreclosures/
                               Employment
                                                         Delinquencies
                                  Data

                                                 Increase in Non Farm Employment

                               138,200

                               137,800
                  (in '000s)

                               137,400

                               137,000
                                          Jan            Feb      March        April    May       June

Source: Bureau of Labor Statistics

      ©2007 Grant Thornton LLP. All rights reserved.                      46
Subprime Crisis Could Impact the Rating Agencies
     and Could Result in Additional Regulations

                    Credit                             Ø Moody's, S&P and Fitch could become more cautious
                    Rating                             Ø S&P/ Moody's recently downgraded approx. $17Billion
                    Agency                               Subprime MBS

                     Regulatory                        Ø Bills have been introduced to protect the homeowners
                     Body

                    Spillover
                    To CDO                             Ø Lending has been tight in the corporate sector
                    Market

                    Continuing                         Ø The trouble in housing market to continue and could affect
                    Housing                              the building material suppliers
                    Trouble

Source: Wall Street Journal

      ©2007 Grant Thornton LLP. All rights reserved.                     47
Politicians Have Responded to the Subprime Crisis
by Proposing New Bills; Fed Provided Additional
Liquidity

                                                      Political Support

                                                 POLITICAL SPEAK
                                                 Ø Hillary Clinton – Proposing a $1Billion Fund to protect
                                                 homeowners…..Speaking to CNBC, August 7th 2007
                                                 Ø Senator Dodd – Laid out Statement of Principles to
                                                 Protect homeowners
     Regulatory Support
                                                      Monetary Policy
                                                    Support from the Fed

                                                 FED SPEAK
                                                 Ø Downside risk to economy has increased;
                                                 Inflation is still the worry…August 7th 2007
                                                 Ø Fed provided liquidity "to facilitate the orderly working of
                                                 financial markets"…August 10th 2007

©2007 Grant Thornton LLP. All rights reserved.               48
Bills Proposed Across the Country are Striving to
Protect the Homeowners

                                                 U.S. Senator Charles Schumer, Chairman of JEC and
                                                 Housing Subcommittee: Borrower's Protection Act of 2007
                                                      Ø$300mm in federal funds
                                                      ØLegislation to upgrade standards for mortgage
                                                      brokers and other non bank mortgage originators,
                                                      with regards to making new loans to borrowers
                                                      ØHolds lenders responsible

       Bills Introduced                          Congressman Spencer Bachus, ranking member of
                                                 House Financial Services Committee introduced Fair
                                                 Mortgage Practices Act
                                                     ØMortgage lenders to weigh borrowers ability
                                                     Ø$100mm in federal funds

                                                 States are working towards amending predatory lending
                                                 acts

©2007 Grant Thornton LLP. All rights reserved.               49
VIII. Grant Thornton LLP - Recovery &
                                                 Reorganization Practice

©2007 Grant Thornton LLP. All rights reserved.         50
Grant Thornton’s Recovery & Reorganization Services launched its
U.S. practice a year ago and has grown to include more than 75
professionals in eight offices, serving more than three dozen
clients…

                                   New York…Houston…Detroit…Chicago…
                                California…Atlanta…Boston…Dallas…Cleveland

 In addition, through the firm’s membership of
 Grant Thornton International, it has access to
 the restructuring capabilities of member firms
 in 51 countries worldwide, with dedicated
 professionals in international hubs such as the
 United Kingdom, France, Germany, the
 Caribbean, India, Hong Kong, China,
 Japan, Australia and Canada – an
 international reach that is of great benefit to
 clients of all sizes.

  ©2007 Grant Thornton LLP. All rights reserved.    51
Grant Thornton's global Recovery and
Reorganization services leverage world-wide
co-ordination…

 Worldwide                                        EMEA                         Asia Pacific            Americas
 50 territories                                   26 countries                 15 territories          9 countries
 115 partners                                     92 partners/directors        35 partners/directors   26 partners/directors
 R&R is 8% of total

 ©2007 Grant Thornton LLP. All rights reserved.                           52
Sectors in which Grant Thornton LLP leads…

               Consumer
Sectors

                                                          Construction,
                   &                   Financial                           Global Public
                                                          Real estate &                    Not-for-Profit    Technology      Health Care
               industrial              Services                               Sector
                                                           Hospitality
               products

             Industrial and         Banks & thrifts       Developers,      Government      Higher           Technology      Hospitals
             consumer                                     owners,          contractors     education        services
             products               Broker-dealers        managers                                                          Health care
             manufacturing                                                 International   Membership       Hardware        systems
                                    Hedge funds           Equity REITs     development     organizations
             Distribution                                                  organizations                    Internet        Nursing homes
Industries

             (truck, rail, ship     Specialty             Hotel, resorts                   Religious
             and air)               finance               & restaurants    The U.S.        organizations    Software         Assisted living
                                                                           government                                       facilities and
             Warehousing            Mortgage              Franchises       marketplace –   Social service   Telecomm        retirement
                                    banks                                  civilian,       organizations                    centers
             Retail                                       Contractors &    defense &                        Life sciences
                                    Mortgage              related          intelligence    Foundations                      Physicians
             Energy &               REITs                 services                                                          groups
             utilities                                                                     Cultural
                                    Mutual funds          Sports teams &                   organizations                    Other medical
                                                          entertainment                                                     and healthcare-
                                                          facilities                                                        related entities

         ©2007 Grant Thornton LLP. All rights reserved.                        53
Recovery & Reorganization Services:
A Comprehensive Solution

                  Integrated
                   IntegratedSolutions
                              SolutionsThat
                                        ThatPreserve
                                             Preserveand
                                                      andEnhance
                                                          EnhanceEnterprise
                                                                  EnterpriseValue
                                                                             Value

                 Financial
                  Financial                          Operational
                                                     Operational                Strategic
                                                                                 Strategic

          •      Business Plan Review            •   Interim Management     •   Assess Strategic
                 and Assessment                                                 Alternatives
                                                 •   Operational
          •      Refinancing                         Turnarounds            •   Strategic Performance
                 Alternatives                                                   Reviews
                                                 •   Detailed Operational
          •      Accelerated M&A                     Review                 •   Strategic Planning
          •      Cash Flow and                   •   Profit Improvement
                 Capital Structure                   and Cost Reduction
                 Assessment                          Strategies
          •      Financial Modeling              •   Supply Chain
                                                     Management
          •      Business Valuation
                                                 •   Project Management
                                                     and Implementation
©2007 Grant Thornton LLP. All rights reserved.               54
Global Recovery and Reorganization services from
Grant Thornton member firms…

Global Recovery
       recovery and
                 & Reorganization
                    reorganizationcapabilities
                                   capabilities
Financial restructuring and refinancing
Operational restructuring and turnaround
Creditor advisory
Strategic reviews
Exit strategy
Accelerated M&A
Formal insolvency – advisory and executory
Asset tracing and recovery

©2007 Grant Thornton LLP. All rights reserved.   55
Grant Thornton Recovery and Reorganization
     services have been of benefit in the following
     industries…

                                                       Global Recovery & Reorganization industry utilization

                                                       Automotive                   Haulage and logistics
                                                       Aviation/airlines            Healthcare
                                                       Construction and property    Hospitality and leisure
                                                       Energy                       Natural resources
                                                       Engineering and components   Retail
                                                       Financial markets            Telecoms
                                                       Food and agriculture         Technology

    ©2007                                                                  56
©2007 GrantGrant Thornton
            Thornton  LLP.LLP.
                            All All rights
                                rights     reserved.
                                         reserved.
Whether assisting debtors, creditors or trustees,
Grant Thornton’s professionals bring years of
experience assisting clients in all phases of
bankruptcy…

                                                  •   Evaluating the viability of the business and identifying restructuring
                                                      alternatives
                                                  •   Assessing the feasibility of a company’s financial projections and
                                                      overall business plan
                                                  •   Analyzing cash flow and developing recommendations for
                                                      enhancing liquidity
                                                  •   Evaluating operations and recommending changes to improve
                                                      operating performance
                                                  •   Advising constituents regarding various financing alternatives
                                                  •   Advising parties in interest with regard to cash collateral
                                                      arrangements
                                                  •   Identifying and evaluating potential exit strategies for the business
                                                      and its stakeholders
                                                  •   Developing and evaluating proposed plans of reorganization or
                                                      liquidation
                                                  •   Performing liquidation analyses and evaluating potential
                                                      recoverability of claims for various constituents
                                                  •   Bankruptcy planning and compliance
                                                  •   Bankruptcy litigation, preferences and fraudulent conveyance
                                                      analysis

 ©2007 Grant Thornton LLP. All rights reserved.         57
Meet a few of our Midwest Region Recovery &
Reorganization leaders…

Ken Malek                               Timothy G. Skillman           Kimberly D Rodriguez   Philip J. Robinson
312-602-8150                            248-233-6980                  248-233-6947           312-602-8130

  Stuart Kaufman                          Velencia L. Thompson             Robert Lack        Benjamin H. Mann
  312-602-8252                            312-602-8791                     312-602-8256       312-602-8258

©2007 Grant Thornton LLP. All rights reserved.                   58
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