Edgar Filing: ORIGEN FINANCIAL INC

e424b3

Filed Pursuant to Rule 424(b)(3)
Registration No. 333-112520

Prospectus Supplement No. 7
(to Prospectus dated May 26, 2005)

This Prospectus Supplement No. 7 supplements and amends the Prospectus dated May 26, 2005 (the “Prospectus”) relating to the sale from time to time of up to 10,575,000 shares of our common stock by certain selling stockholders.

We filed the attached Quarterly Report on Form 10-Q and the attached Current Report on Form 8-K with the Securities and Exchange Commission on November 3, 2006 and November 6, 2006, respectively. The attached information supplements and supersedes, in part, the information contained in the Prospectus.

This Prospectus Supplement No. 7 should be read in conjunction with, and delivered with, the Prospectus and is qualified by reference to the Prospectus except to the extent that the information in this Prospectus Supplement No. 7 supersedes the information contained in the Prospectus.

Our common stock is listed on the Nasdaq National Market under the symbol “ORGN.”

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if the Prospectus or this Prospectus Supplement No. 7 is truthful or complete. Any representation to the contrary is a criminal offense.

The date of this Prospectus Supplement No. 7 is November 7, 2006.

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.

FORM 10-Q


þ		Quarterly report pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934

FOR THE QUARTERLY PERIOD ENDED September 30, 2006.


o		Transition report pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934

For the Transition Period From to

COMMISSION FILE NUMBER 000-50721

Origen Financial, Inc.

(Exact Name of Registrant as Specified in its Charter)


Delaware		20-0145649
(State of Incorporation)		(I.R.S. Employer Identification No.)

27777 Franklin Rd.
Suite 1700
Southfield, MI		48034
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s telephone number, including area code: (248) 746-7000

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o Accelerated filer þ Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No þ

Number of shares of Common Stock, $.01 par value, outstanding as of October 30, 2006: 25,785,901

Origen Financial, Inc.

Index


	Page
Part I Financial Information

Item 1. Financial Statements (Unaudited)

Consolidated Balance Sheets as of September 30, 2006 and December 31, 2005		3

Consolidated Statements of Operations for the periods ended September 30, 2006 and 2005		4

Consolidated Statements of Comprehensive Income (Loss) for the periods ended September 30, 2006 and 2005		5

Consolidated Statements of Cash Flows for the nine months ended September 30, 2006 and 2005		6

Notes to Consolidated Financial Statements		7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		20

Item 3. Quantitative and Qualitative Disclosures about Market Risk		32

Item 4. Controls and Procedures		34

Part II Other Information

Item 6. Exhibits and Reports on Form 8-K		34

Signatures		35

Part I. Financial Information

Item 1. Financial Statements

Origen Financial, Inc.

Consolidated Balance Sheets

(In thousands, except share data)

September 30, 2006 and December 31, 2005


	September 30,			December 31,
	2006			2005
	(Unaudited)
ASSETS
Assets
Cash and cash equivalents	$	3,343		$	8,307
Restricted cash		13,867			13,635
Investments held to maturity		41,540			41,914
Loans receivable, net of allowance for losses of $8,412 and $10,017, respectively		904,865			768,410
Furniture, fixtures and equipment, net		3,300			3,558
Goodwill		32,277			32,277
Other assets		24,954			24,902

Total assets	$	1,024,146		$	893,003

LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities
Warehouse financing	$	61,018		$	65,411
Securitization financing		710,011			578,503
Repurchase agreements		23,582			23,582
Notes payable — servicing advances		1,458			2,212
Other liabilities		25,607			23,344

Total liabilities		821,676			693,052

Stockholders’ Equity
Preferred stock, $.01 par value, 10,000,000 shares authorized; 125 shares issued and outstanding at September 30, 2006 and December 31, 2005		125			125
Common stock, $.01 par value, 125,000,000 shares authorized; 25,785,901 and 25,450,726 shares issued and outstanding at September 30, 2006 and December 31, 2005, respectively		258			255
Additional paid-in-capital		219,437			218,366
Accumulated other comprehensive income (loss)		(1,044	)		907
Distributions in excess of earnings		(16,306	)		(19,702	)

Total stockholders’ equity		202,470			199,951

Total liabilities and stockholders’ equity	$	1,024,146		$	893,003

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

Origen Financial, Inc.

Consolidated Statements of Operations (Unaudited)

(In thousands, except share data)

For the periods ended September 30, 2006 and 2005


	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2006		2005			2006		2005
Interest Income
Total interest income	$	18,807	$	15,408		$	54,072	$	43,196
Total interest expense		11,451		7,714			31,328		19,805

Net interest income before loan losses		7,356		7,694			22,744		23,391
Provision for loan losses		1,598		6,697			4,924		10,372
Impairment of purchased loan pool		—		428			—		428

Net interest income after loan losses and impairment		5,758		569			17,820		12,591
Non-interest Income		4,362		3,874			12,750		10,550
Non-interest Expenses
Personnel		5,719		5,887			17,986		17,065
Loan origination and servicing		402		371			1,114		1,165
Write-down of residual interest		—		724			—		724
Loss on recourse buyout		—		869			—		869
State business taxes		76		74			251		264
Other operating		2,169		2,600			6,327		6,616

Total non-interest expense		8,366		10,525			25,678		26,703

Net income before cumulative effect of change in accounting principle	$	1,754	$	(6,082	)	$	4,892	$	(3,562	)

Cumulative effect of change in accounting principle		—		—			46		—

NET INCOME (LOSS)	$	1,754	$	(6,082	)	$	4,938	$	(3,562	)

Weighted average common shares outstanding, basic		25,203,558		24,980,889			25,099,157		24,845,216

Weighted average common shares outstanding, diluted		25,247,421		24,980,889			25,174,272		24,845,216

Earnings (loss) per common share before cumulative effect of change in accounting principle:
Basic	$	0.07	$	(0.24	)	$	0.19	$	(0.14	)

Diluted	$	0.07	$	(0.24	)	$	0.19	$	(0.14	)

Earnings (loss) per common share:
Basic	$	0.07	$	(0.24	)	$	0.20	$	(0.14	)

Diluted	$	0.07	$	(0.24	)	$	0.20	$	(0.14	)

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

Origen Financial, Inc.

Consolidated Statements of Comprehensive Income (Loss) (Unaudited)

(In thousands)

For the periods ended September 30, 2006 and 2005


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2006			2005			2006			2005
Net income (loss)	$	1,754		$	(6,082	)	$	4,938		$	(3,562	)

Other comprehensive income (loss):
Net unrealized gain (loss) on interest rate swaps designated as cash flow hedges		(4,790	)		2,154			(1,942	)		1,056
Reclassification adjustment for net realized (gains) losses included in net income		(2	)		114			(9	)		273

Total other comprehensive income (loss)		(4,792	)		2,268			(1,951	)		1,329


Comprehensive income (loss)	$	(3,038	)	$	(3,814	)	$	2,987		$	(2,233	)

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

Origen Financial, Inc.

Consolidated Statements of Cash Flows (Unaudited)

(In thousands)

For the nine months ended September 30, 2006 and 2005


	Nine Months Ended
	September 30,
	2006			2005
Cash Flows From Operating Activities
Net income (loss)	$	4,938		$	(3,562	)
Adjustments to reconcile net income to cash provided by operating activities:
Provision for loan losses		4,924			10,372
Investment impairment		114			—
Impairment of purchased loan pool		—			428
Impairment of residual interest		—			724
Depreciation and amortization		4,502			4,086
Compensation expense recognized under share-based compensation plans		1,409			1,903
Cumulative effect of change in accounting principle		(46	)		—
Increase in other assets		(1,957	)		(1,054	)
(Decrease) Increase in accounts payable and other liabilities		(606	)		703

Net cash provided by operating activities		13,278			13,600
Cash Flows From Investing Activities
Increase in restricted cash		(232	)		(4,310	)
Purchase of investment securities		—			(4,106	)
Origination and purchase of loans		(214,548	)		(216,613	)
Principal collections on loans		63,990			41,313
Proceeds from sale of repossessed houses		8,661			8,697
Capital expenditures		(506	)		(1,650	)

Net cash used in investing activities		(142,635	)		(176,669	)
Cash Flows From Financing Activities
Dividends paid		(1,542	)		(4,072	)
Repurchase and retirement of common stock		(288	)		(449	)
Proceeds from securitization financing		200,646			165,274
Repayment of securitization financing		(69,276	)		(50,599	)
Proceeds from advances under repurchase agreements		—			5,243
Repayment of advances under repurchase agreements		—			(360	)
Proceeds from warehouse financing		201,868			207,848
Repayment of warehouse financing		(206,261	)		(168,307	)
Change in servicing advances, net		(754	)		1,539

Net cash provided by financing activities		124,393			156,117

NET DECREASE IN CASH AND CASH EQUIVALENTS		(4,964	)		(6,952	)
Cash and cash equivalents, beginning of period		8,307			9,293

Cash and cash equivalents, end of period	$	3,343		$	2,341

Supplemental disclosures of cash flow information:
Interest paid	$	30,849		$	19,011
Supplemental non cash financing activities:
Non-vested common stock issued as unearned compensation	$	2,400		$	2,156
Loans transferred to repossessed assets and held for sale	$	13,874		$	15,437

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

Origen Financial, Inc.

Notes to Consolidated Financial Statements (Unaudited)

Note 1 — Basis of Presentation

The unaudited consolidated financial statements of Origen Financial, Inc. (the “Company”), have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) for interim financial reporting and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X of the Rules and Regulations of the Securities and Exchange Commission (“SEC”). However, they do not include all of the disclosures necessary for annual financial statements in conformity with US GAAP. The results of operations for the periods ended September 30, 2006 are not necessarily indicative of the operating results anticipated for the full year. Accordingly, these unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2005. The preparation of financial statements in conformity with US GAAP also requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expense during the reporting period. Actual results could differ from those estimates.

The accompanying consolidated financial statements reflect, in the opinion of management, all adjustments necessary for a fair presentation of the interim financial statements. All such adjustments are of a normal and recurring nature.

Certain prior period amounts have been reclassified to conform to current financial statement presentation.

Note 2 – Recent Accounting Pronouncements

Accounting for Share-Based Payments

In December 2004, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 123(R), “Share-Based Payment,” that addresses the accounting for share-based payment transactions in which an enterprise receives employee services in exchange for (a) equity instruments of the enterprise, or (b) liabilities that are based on the fair value of the enterprise’s equity instruments or that may be settled by the issuance of such equity instruments. Under the FASB’s statement, all forms of share-based payments to employees, including employee stock options, must be treated the same as other forms of compensation by recognizing the related cost in the income statement. The expense of the award would generally be measured at fair value at the grant date. Previous accounting guidance required that the expense relating to employee stock options only be disclosed in the footnotes to the financial statements. The statement eliminates the ability to account for share-based compensation transactions using Accounting Principles Board Opinion (“APB”) No. 25, “Accounting for Stock Issued to Employees” for options granted after June 15, 2005. On April 14, 2005, the SEC announced it would permit companies to implement SFAS No. 123(R) at the beginning of their next fiscal year. The Company adopted the new rules reflected in SFAS No. 123(R) using the modified-prospective method on January 1, 2006. The effects of the adoption of SFAS No. 123(R) are discussed further in Note 8.

Origen Financial, Inc.
Notes to Consolidated Financial Statements (Unaudited)

Note 2 – Recent Accounting Pronouncements (Continued)

Accounting Changes and Error Corrections

In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections—a replacement of APB Opinion No. 20 and FASB Statement No. 3”. This statement replaces APB No. 20, “Accounting Changes”, and SFAS No. 3, “Reporting Accounting Changes in Interim Financial Statements,” and changes the requirements for the accounting for and reporting of a change in accounting principle. The statement applies to all voluntary changes in accounting principles. It also applies to changes required by an accounting pronouncement in the unusual instance that the pronouncement does not include specific transition provisions. The statement is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. The adoption of SFAS No. 154 on January 1, 2006 did not have a material effect on the Company’s financial position or results of operations.

Accounting for Certain Hybrid Instruments

In February 2006, the FASB issued SFAS No. 155, “Accounting for Certain Hybrid Instruments,” which allows financial instruments that have embedded derivatives to be accounted for as a whole (eliminating the need to bifurcate the derivative from its host) if the holder elects to account for the whole instrument on a fair value basis. SFAS No. 155 is effective for all financial instruments acquired or issued after the beginning of an entity’s first fiscal year that begins after September 15, 2006. At this time, the Company does not expect the adoption of SFAS No. 155 to have a material impact on its financial position or results of operations.

Accounting for Servicing of Financial Assets

In March 2006, the FASB issued SFAS No. 156, “Accounting for Servicing of Financial Assets - An Amendment of FASB Statement No. 140.” This statement amends the guidance in FASB Statement No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.” Among other requirements, SFAS No. 156 requires an entity to recognize a servicing asset or servicing liability each time it undertakes an obligation to service a financial asset by entering into a servicing contract in any of the following situations: a transfer of the servicer’s financial assets that meets the requirements for sale accounting; a transfer of the servicer’s financial assets to a qualifying special-purpose entity in a guaranteed mortgage securitization in which the transferor retains all of the resulting securities and classifies them as either available-for-sale securities or trading securities; or an acquisition or assumption of an obligation to service a financial asset that does not relate to financial assets of the servicer or its consolidated affiliates. SFAS No. 156 is effective as of the beginning of an entity’s first fiscal year that begins after September 15, 2006. At this time, the Company does not expect the adoption of SFAS No. 156 to have a material impact on its financial position or results of operations.

Accounting for Uncertainty in Income Taxes

In June 2006, the FASB issued FASB Interpretation (“FIN”) No. 48, “Accounting for Uncertainty in Income Taxes – An Interpretation of FASB Statement No. 109.” FIN No. 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN No. 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. FIN No. 48 is effective for fiscal years beginning after December 15, 2006. At this time, the Company does not expect the adoption of FIN No. 48 to have a material impact on its financial position or results of operations.

Origen Financial, Inc.
Notes to Consolidated Financial Statements (Unaudited)

Note 2 – Recent Accounting Pronouncements (Continued)

Fair Value Measurements

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements.” This statement defines fair value, establishes a framework for measuring fair value in US GAAP, and expands disclosures about fair value measurements. This statement applies under other accounting pronouncements that require or permit fair value measurements, the FASB having previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. Accordingly, this statement does not require any new fair value measurements. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. At this time, the Company does not expect the adoption of SFAS No. 157 to have a material impact on its financial position or results of operations.

Quantifying Misstatements

In September 2006, the SEC staff issued Staff Accounting Bulletin (“SAB”) No. 108, “Considering the Effects of Prior Year Misstatements When Quantifying Misstatements in Current Year Financial Statements,” in order to address the SEC staff’s concerns over registrants’ exclusive reliance on either the “iron curtain” or balance sheet approach or the “rollover” or income statement approach in quantifying financial statement misstatements. SAB No. 108 states that registrants should use both a balance sheet and an income statement approach when quantifying and evaluating the materiality of a misstatement and contains guidance on correcting errors under the dual approach. SAB No. 108 is effective for financial statements issued for fiscal years ending after November 15, 2006. At this time, the Company does not expect the adoption of SAB No. 108 to have a material impact on its financial position or results of operations.

Origen Financial, Inc.
Notes to Consolidated Financial Statements (Unaudited)

Note 3 – Per Share Data

Basic earnings per share (“EPS”) is computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted EPS incorporates the potential dilutive effect of common stock equivalents outstanding on an average basis during the period. Dilutive common shares primarily consist of employee stock options and non-vested common stock. The following table presents a reconciliation of basic and diluted EPS for the three months and nine months ended September 30, 2006 and 2005 (in thousands, except per share data):


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2006			2005			2006			2005
Numerator:
Net income	$	1,754		$	(6,082	)	$	4,938		$	(3,562	)
Preferred stock dividends		(4	)		(4	)		(12	)		(12	)

Income available to common shareholders	$	1,750		$	(6,086	)	$	4,926		$	(3,574	)

Denominator:
Weighted average common shares for basic EPS		25,204			24,981			25,099			24,845
Effect of dilutive securities:
Weighted average non-vested stock awards		43			—			75			—

Weighted average common shares for diluted EPS		25,247			24,981			25,174			28,845

Basic EPS	$	0.07		$	(0.24	)	$	0.20		$	(0.14	)

Diluted EPS	$	0.07		$	(0.24	)	$	0.20		$	(0.14	)

Origen Financial, Inc.
Notes to Consolidated Financial Statements (Unaudited)

Note 4– Investments

The Company follows the provisions of SFAS No. 115, “Accounting For Certain Investments in Debt and Equity Securities,” and the American Institute of Certified Public Accountants (“AICPA”) Statement of Position 03-3 (“SOP 03-3”), “Accounting for Certain Loans or Debt Securities Acquired in a Transfer,” in reporting its investments. The securities are carried on the Company’s balance sheet at an amortized cost of $41.5 million at September 30, 2006, which approximates their fair value.

Investments Accounted for Under the Provisions of SFAS No. 115

The carrying value of investments accounted for under the provisions of SFAS No. 115 was approximately $37.9 million at September 30, 2006 and is included in investments in the consolidated balance sheet. These investments consisted of two asset-backed securities with principal amounts of $32.0 million and $6.8 million, respectively, at September 30, 2006. The securities are collateralized by manufactured housing loans and are classified as held-to-maturity. They have contractual maturity dates of July 28, 2033 and December 28, 2033, respectively. During the three and nine months ended September 30, 2006, the Company did not purchase or sell any securities. As prescribed by the provisions of SFAS No. 115 the Company has both the intent and ability to hold the securities to maturity. The securities will not be sold in response to changing market conditions, changing fund sources or terms, changing availability and yields on alternative investments or other asset liability management reasons. The securities are regularly measured for impairment through the use of a discounted cash flow analysis based on the historical performance of the underlying loans that collateralize the securities. If it is determined that there has been a decline in fair value below amortized cost and the decline is other-than–temporary, the cost basis of the security is written down to fair value as a new cost basis and the amount of the write-down is included in earnings. No impairment was recorded relating to these securities during the three and nine months ended September 30, 2006.

Investments Accounted for Under the Provisions of SOP 03-3

Debt securities acquired with evidence of deterioration of credit quality since origination are accounted for under the provisions of SOP 03-3. The carrying value of debt securities accounted for under the provisions of SOP 03-3 was approximately $3.6 million at September 30, 2006 and is included in investments in the consolidated balance sheet. During the three and nine months ended September 30, 2006, the Company did not purchase or sell any securities. The securities are regularly measured for impairment through the use of a discounted cash flow analysis based on the historical performance of the underlying loans that collateralize the securities. If it is determined that there has been a decline in fair value below amortized cost and the decline is other-than–temporary, the cost basis of the security is written down to fair value as a new cost basis and the amount of the write-down is included in earnings. No impairment was recorded relating to these securities during the three months ended September 30, 2006. An other-than-temporary impairment of $114,000 was recorded during the nine months ended September 30, 2006, as a result of a change in the Company’s estimates of expected future cash flows.

Origen Financial, Inc.
Notes to Consolidated Financial Statements (Unaudited)

Note 5 – Loans Receivable

The carrying amounts of loans receivable consisted of the following (in thousands):


	September 30, 2006			December 31, 2005
Manufactured housing loans — securitized	$	851,499		$	695,701
Manufactured housing loans — unsecuritized		61,097			85,949
Accrued interest receivable		4,660			4,078
Deferred fees		(160	)		(2,100	)
Discount on purchased loans		(3,391	)		(4,773	)
Allowance for purchased loans		(428	)		(428	)
Allowance for loan loss		(8,412	)		(10,017	)

	$	904,865		$	768,410

The Company originates and purchases loans collateralized by manufactured houses with the intent to securitize them. Under the current legal structure of the securitization program, the Company transfers manufactured housing loans it originates and purchases to a trust for cash. The trust then sells asset-backed bonds secured by the loans to investors. These loan securitizations are structured as financing transactions. When securitizations are structured as financings, no gain or loss is recognized, nor is any allocation made to residual interests or servicing rights. Rather, the loans securitized continue to be carried by the Company as assets, and the asset-backed bonds secured by the loans are carried as a liability.

Total unpaid principal balance of loans serviced that the Company has previously securitized and accounted for as a sale was approximately $132.6 million at September 30, 2006. Delinquency statistics (including repossessed inventory) on those loans are as follows at September 30, 2006 (dollars in thousands):


	No. of		Principal		% of
Days delinquent	Loans		Balance		Portfolio
31-60		122	$	4,861		3.7	%
61-90		41		1,640		1.2	%
Greater than 90		99		4,158		3.1	%

Note 6 – Allowance for Loan Losses

The allowance for loan losses and related additions and deductions to the allowance were as follows for the three months and nine months ended September 30 (in thousands):


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2006			2005			2006			2005
Balance at beginning of period	$	8,779		$	5,729		$	10,017		$	5,315
Provision for loan losses¹		1,598			6,697			4,924			10,372
Transfers from recourse liability		—			123			—			2,036
Gross charge-offs		(4,202	)		(5,512	)		(12,825	)		(15,719	)
Recoveries		2,237			2,873			6,296			7,906

Balance at end of period	$	8,412		$	9,910		$	8,412		$	9,910


¹		The provision for loan losses for the three and nine months ended September 31, 2005 includes approximately $3.5 million related to the effects of Hurricane Katrina and Hurricane Rita.

Origen Financial, Inc.
Notes to Consolidated Financial Statements (Unaudited)

Note 7– Debt

Total debt outstanding was as follows (in thousands):


	September 30,		December 31,
	2006		2005
Warehouse financing	$	61,018	$	65,411
Securitization financing		710,011		578,503
Repurchase agreements		23,582		23,582
Notes payable – servicing advances		1,458		2,212

	$	796,069	$	669,708

Warehouse Financing – Citigroup – The Company, through its primary operating subsidiary Origen Financial L.L.C., currently has a short term securitization facility used for warehouse financing with Citigroup Global Markets Realty Corporation (“Citigroup”). Under the terms of the agreement, originally entered into in March 2003 and amended periodically, most recently in July 2006, the Company pledges loans as collateral and in turn is advanced funds. The facility has a maximum advance amount of $200 million at an annual interest rate equal to LIBOR plus a spread. Additionally, the facility includes a $35 million supplemental advance amount that is collateralized by the Company’s residual interests in its securitizations. The facility matures on March 22, 2007. The outstanding balance on the facility was approximately $61.0 million at September 30, 2006. At September 30, 2006 all financial covenants were met.

Securitization Financing – 2004-A Securitization - On February 11, 2004, the Company completed a securitization of approximately $238.0 million in principal balance of manufactured housing loans. The securitization was accounted for as a financing. As part of the securitization the Company, through a special purpose entity, issued $200.0 million in notes payable. The notes are stratified into six different classes and pay interest at a duration-weighted average rate of approximately 5.12%. The notes have a contractual maturity date of October 2013 with respect to the Class A-1 notes; August 2017, with respect to the Class A-2 notes; December 2020, with respect to the Class A-3 notes; and January 2035, with respect to the Class A-4, Class M-1 and Class M-2 notes. The outstanding balance on the 2004-A securitization notes was approximately $119.5 million at September 30, 2006.

Securitization Financing – 2004-B Securitization – On September 29, 2004, the Company completed a securitization of approximately $200.0 million in principal balance of manufactured housing loans. The securitization was accounted for as a financing. As part of the securitization the Company, through a special purpose entity, issued $169.0 million in notes payable. The notes are stratified into seven different classes and pay interest at a duration-weighted average rate of approximately 5.27%. The notes have a contractual maturity date of June 2013 with respect to the Class A-1 notes; December 2017, with respect to the Class A-2 notes; August 2021, with respect to the Class A-3 notes; and November 2035, with respect to the Class A-4, Class M-1, Class M-2 and Class B-1 notes. The outstanding balance on the 2004-B securitization notes was approximately $119.5 million September 30, 2006.

Origen Financial, Inc.
Notes to Consolidated Financial Statements (Unaudited)

Note 7– Debt (Continued)

Securitization Financing – 2005-A Securitization - On May 12, 2005, the Company completed a securitization of approximately $190.0 million in principal balance of manufactured housing loans. The securitization was accounted for as a financing. As part of the securitization the Company, through a special purpose entity, issued $165.3 million in notes payable. The notes are stratified into seven different classes and pay interest at a duration-weighted average rate of approximately 5.30%. The notes have a contractual maturity date of July 2013 with respect to the Class A-1 notes; May 2018, with respect to the Class A-2 notes; October 2021, with respect to the Class A-3 notes; and June 2036, with respect to the Class A-4, Class M-1, Class M-2 and Class B notes. The outstanding balance on the 2005-A securitization notes was approximately $133.5 million at September 30, 2006.

Securitization Financing – 2005-B Securitization – On December 15, 2005, the Company completed a securitization of approximately $175.0 million in principal balance of manufactured housing loans. The securitization was accounted for as a financing. As part of the securitization the Company, through a special purpose entity, issued $156.2 million in notes payable. The notes are stratified into eight different classes and pay interest at a duration-weighted average rate of approximately 6.15%. The notes have a contractual maturity date of February 2014 with respect to the Class A-1 notes; December 2018, with respect to the Class A-2 notes; May 2022, with respect to the Class A-3 notes; and January 2037, with respect to the Class A-4, Class M-1, Class M-2 , Class B-1 and B-2 notes. The outstanding balance on the 2005-B securitization notes was approximately $141.7 million at September 30, 2006.

Securitization Financing – 2006-A Securitization – On August 25, 2006, the Company completed a securitization of approximately $224.2 million in principal balance of manufactured housing loans. The securitization was accounted for as a financing. As part of the securitization the Company, through a special purpose entity, issued $200.6 million in notes payable. The notes are stratified into two different classes. The Class A-1 notes pay interest at one month LIBOR plus 15 basis points and have a contractual maturity date of November 15, 2018. The Class A-2 notes pay interest based on a rate established by the auction agent at each rate determination date and have a contractual maturity date of October 15, 2037. The outstanding balance on the 2006-A securitization notes was approximately $195.8 million at September 30, 2006.

Repurchase Agreements – Citigroup - The Company has entered into four repurchase agreements with Citigroup. Three of the repurchase agreements are for the purpose of financing the purchase of investments in three asset backed securities with principal balances of $32.0 million, $3.1 million and $3.7 million respectively. The fourth repurchase agreement is for the purpose of financing a portion of the Company’s interest in the 2004-B securitization with a principal balance of $4.0 million. Under the terms of the agreements the Company sells its interest in the securities with an agreement to repurchase them at a predetermined future date at the principal amount sold plus an interest component. The securities are financed at an amount equal to 75% of their current market value as determined by Citigroup. Typically the repurchase agreements are rolled over for 30 day periods when they expire. The annual interest rates on the agreements are equal to LIBOR plus a spread. The repurchase agreements had outstanding principal balances of approximately $16.8 million, $1.7 million, $2.1 million and $3.0 million, respectively, at September 30, 2006.

Origen Financial, Inc.
Notes to Consolidated Financial Statements (Unaudited)

Note 7 – Debt (Continued)

Note Payable – Servicing Advances – JPMorgan Chase Bank, N.A. – The Company currently has a revolving credit facility with JPMorgan Chase Bank, N.A. Under the terms of the facility the Company can borrow up to $5.0 million for the purpose of funding required principal and interest advances on manufactured housing loans that are serviced for outside investors. Borrowings under the facility are repaid upon the collection by the Company of monthly payments made by borrowers under such manufactured housing loans. The bank’s prime interest rate is payable on the outstanding balance. To secure the loan, the Company has granted JPMorgan Chase Bank, N.A. a security interest in substantially all its assets excluding securitized assets. The expiration date of the facility is December 31, 2006. The outstanding balance on the facility was approximately $1.5 million at September 30, 2006. At September 30, 2006 all financial covenants were met.

The average balance and average interest rate of outstanding debt was as follows (dollars in thousands):


	September 30, 2006					December 31, 2005
	Average		Average			Average		Average
	Balance		Rate			Balance		Rate
Warehouse financing – Citigroup	$	129,327		6.9	%	$	139,539		5.2	%
Securitization financing – 2004-A securitization		129,728		5.3	%		154,295		4.9	%
Securitization financing – 2004-B securitization		128,656		5.5	%		149,499		5.1	%
Securitization financing – 2005-A securitization		142,572		5.2	%		101,441		5.1	%
Securitization financing – 2005-B securitization		148,205		5.7	%		7,228		5.5	%
Securitization financing – 2006-A securitization		26,889		6.1	%		—		—
Repurchase agreements – Citigroup		23,582		5.8	%		22,793		4.2	%
Note payable – servicing advances – JPMorgan Chase Bank, N.A.		454		9.6	%		710		7.5	%

At September 30, 2006, the total of maturities and amortization of debt during the next five years are approximately as follows: 2006 — $65.2 million; 2007 — $138.1 million; 2008 - $81.5 million; 2009 — $71.9 million; 2010 — $63.4 million and $376.0 million thereafter.

Note 8 – Share-Based Compensation Plan

The Company’s equity incentive plan has approximately 1.8 million shares of common stock reserved for issuance as either stock options or non-vested stock grants. As of September 30, 2006, approximately 350,000 shares of common stock remained available for issuance, as either stock options or non-vested stock grants, under the plan. The compensation cost that has been charged against income for those plans was $317,000 and $1,409,000 for the three and nine months ended September 30, 2006, respectively, and $611,000 and $1,903,000 for the three and nine months ended September 30, 2005, respectively.

The Company adopted SFAS No. 123(R) on January 1, 2006, using the modified-prospective transition method, to account for its equity incentive plan. Prior to January 1, 2006, as permitted under the provisions of SFAS No. 123, “Accounting for Stock-Based Compensation,” as amended, the Company had chosen to recognize compensation expense using the intrinsic value-based method of valuing stock options prescribed in APB No. 25, “Accounting for Stock Issued to Employees” and related interpretations. Under the intrinsic value-based method, compensation cost is measured as the amount by which the quoted market price of the Company’s stock at the date of grant exceeds the stock option exercise price. All options granted by the Company prior to the adoption of SFAS 123(R) were granted at a fixed price not less than the market value of the underlying common stock on the date of grant and, therefore, were not included in compensation expense, prior to the adoption of SFAS No. 123(R). Results for prior periods have not been restated.

Origen Financial, Inc.
Notes to Consolidated Financial Statements (Unaudited)

Note 8 – Share-Based Compensation Plan (Continued)

As a result of adopting SFAS No. 123(R) on January 1, 2006, the Company’s net income after the cumulative effect of a change in accounting principle was $5,000 higher for the three months ended September 30, 2006 and $19,000 higher for the nine months ended September 30, 2006 than if it had continued to account for share-based compensation under APB No. 25. There would have been no change in basic or diluted earnings per share for the three and nine months ended September 30, 2006, if the Company had not adopted SFAS No. 123(R). The effect of this change from applying the original provisions of SFAS No. 123 had no effect on cash flow from operations and financing activities.

Stock Options

Under the plan, the exercise price of the options will not be less than the fair market value of the common stock on the date of grant. The date on which the options are first exercisable is determined by the Compensation Committee of the Board of Directors as the administrator of the Company’s equity incentive plan, and options that have been issued to date generally vest over a two-year period, have 10-year contractual terms and a 5-year expected option term. The Company does not pay dividends or make distributions on unexercised options. As of September 30, 2006 there was $43,000 of total unrecognized compensation cost related to stock options granted under the equity incentive plan. That cost is expected to be recognized over a weighted-average period of 2.2 years.

The following table summarizes the activity relating to the Company’s stock options for the nine months ended September 30, 2006:


						Weighted
				Weighted		Average
				Average		Remaining
	Number of			Exercise		Contractual
	Options			Price		Term
Options outstanding at January 1, 2006		255,500		$	10.00		7.9
Granted		—			—		—
Exercised		—			—		—
Forfeited		(7,000	)	$	10.00		7.8

Options outstanding at September 30, 2006		248,500		$	10.00		7.1

Options exercisable at September 30, 2006		248,500		$	10.00		7.1

The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of SFAS No. 123 to options granted under the Company’s equity incentive plan for the three and nine months ended September 30, 2005. Note that the pro forma disclosures are provided for 2005 because employee stock options were not accounted for using the fair-value method during those periods. Disclosures for 2006 are not presented because share-based payments have been accounted for under SFAS No. 123(R)’s fair-value method. For purposes of this pro forma disclosure, the value of the options is estimated using a binomial option-pricing model.

Origen Financial, Inc.
Notes to Consolidated Financial Statements (Unaudited)

Note 8 – Share-Based Compensation Plan (Continued)


	Three Months			Nine Months
	Ended			Ended
	September 30,			September 30,
	2005			2005
Net income available to common shareholders	$	(6,086	)	$	(3,574	)
Stock option compensation cost	$	(3	)	$	(10	)

Pro forma net income available to common shareholders	$	(6,089	)	$	(3,584	)

Basic income per share as reported	$	(0.24	)	$	(0.14	)

Pro forma basic income per share	$	(0.24	)	$	(0.14	)

Diluted income per share as reported	$	(0.24	)	$	(0.14	)

Pro forma diluted income per share	$	(0.24	)	$	(0.14	)

Non-Vested Stock Awards

The Company grants non-vested stock awards to certain directors, officers and employees under the equity incentive plan. The grantees of the non-vested stock awards are entitled to receive all dividends and other distributions paid with respect to the common shares of the Company underlying such non-vested stock awards at the time such dividends or distributions are paid to holders of common shares.

On July 14, 2006 the Company granted 175,000 non-vested stock awards to an officer of the Company. The stock awards were issued at $6.16 per share and are being expensed over their estimated service period of five years. Compensation expense recognized for these non-vested stock awards was approximately $65,000 for the three months ended September 30, 2006.

The Company recognized compensation expense for outstanding non-vested stock awards over their vesting periods for an amount equal to the fair value of the non-vested stock awards at grant date. As of September 30, 2006 there was $3.3 million of total unrecognized compensation cost related to non-vested stock awards granted under the equity incentive plan. That cost is expected to be recognized over a weighted-average period of 3.4 years

The Company recorded a cumulative effect of a change in accounting principle, as a result of the adoption of SFAS No. 123(R), in the amount of $46,000 as of January 1, 2006 to reflect the change in accounting for forfeitures. Results for prior periods have not been restated.

The following table summarizes the activity relating to the Company’s non-vested stock awards for the nine months ended September 30, 2006:


				Weighted
	Number of			Average
	Non-Vested			Grant Date
	Stock Awards			Fair Value
Non-vested at January 1, 2006		469,837		$	8.02
Granted		390,000			6.15
Vested		(269,493	)		8.63
Forfeited		(8,001	)		7.18

Non-vested at September 30, 2006		582,343		$	6.51

Origen Financial, Inc.
Notes to Consolidated Financial Statements (Unaudited)

Note 9 – Derivative Instruments and Hedging Activities

In connection with the Company’s strategy to mitigate interest rate risk and variability in cash flows on its securitizations and anticipated securitizations the Company uses derivative financial instruments such as interest rate swap contracts. It is not the Company’s policy to use derivatives to speculate on interest rates. These derivative instruments are intended to provide income and cash flow to offset potential increased interest expense and cash flow under certain interest rate environments. In accordance with Statement of Financial Accounting Standards (SFAS) No. 133, “Accounting for Derivative Instruments and Hedging Activities,” the derivative financial instruments are reported on the consolidated balance sheet at their fair value.

The Company documents the relationships between hedging instruments and hedged items, as well as its risk management objectives and strategies for undertaking various hedge transactions at the inception of the hedging transaction. This process includes linking derivatives to specific liabilities on the consolidated balance sheet. The Company also assesses, both at the inception of the hedge and on an ongoing basis, whether the derivatives used in hedging transactions are highly effective in offsetting changes in cash flows of the hedged items. When it is determined that a derivative is not highly effective as a hedge or that it has ceased to be a highly effective hedge, the Company discontinues hedge accounting.

When hedge accounting is discontinued because the Company determines that the derivative no longer qualifies as a hedge, the derivative will continue to be recorded on the consolidated balance sheet at its fair value. Any change in the fair value of a derivative no longer qualifying as a hedge is recognized in current period earnings. For terminated cash flow hedges or cash flow hedges that no longer qualify as highly effective, the effective position previously recorded in accumulated other comprehensive income is recorded in earnings when the hedged item affects earnings.

Cash Flow Hedge Instruments

The Company evaluates the effectiveness of derivative financial instruments designated as cash flow hedge instruments against the interest payments related to securitizations or anticipated securitization in order to ensure that there remains a high correlation in the hedge relationship and that the hedge relationship remains highly effective. To hedge the effect of interest rate changes on cash flows or the overall variability in cash flows, which affect the interest payments related to its securitization financing being hedged, the Company uses derivatives designated as cash flow hedges under SFAS No. 133. Once the hedge relationship is established, for those derivative instruments designated as qualifying cash flow hedges, the effective portion of the gain or loss on the derivative is reported as a component of other comprehensive income during the current period, and reclassified into earnings as part of interest expense in the periods during which the hedged transaction affects earnings pursuant to SFAS No. 133. The ineffective portion of the derivative instrument is recognized in earnings in the current period and is included in interest expense for derivatives hedging future interest payments related to recognized liabilities and non-interest income for derivatives hedging future interest payments related to forecasted liabilities. No component of the derivative instrument’s gain or loss has been excluded from the assessment of hedge effectiveness. During both the three and nine months ended September 30, 2006, the Company recognized a loss of approximately $11,000 in interest expense and $1,000 in other income due to the ineffective portion of these hedges. No ineffectiveness was recognized for the three and nine months ended September 30, 2005.

Origen Financial, Inc.
Notes to Consolidated Financial Statements (Unaudited)

Note 9 – Derivative Instruments and Hedging Activities (Continued)

For the three and nine months ended September 30, 2006, the Company reclassified a net gain of approximately $2,000 and $9,000, respectively, attributable to previously terminated cash flow hedges, which has been recorded as a reduction of interest expense. For the three and nine months ended September 30, 2005, the Company reclassified net losses of approximately $114,000 and $273,000, respectively, attributable to previously terminated cash flow hedges, which were recorded as an increase in interest expense. As of September 30, 2006, net unrealized losses of approximately $1.0 million related to cash flow hedges were included in accumulated other comprehensive income. The Company expects to reclassify net losses of approximately $37,000 from accumulated other comprehensive income into earnings during the next twelve months. The remaining amounts in accumulated other comprehensive income will be reclassified into earnings by March 2020. The fair value of the Company’s derivatives accounted for as cash flow hedges at September 30, 2006 approximated a liability of $3.4 million and is included in other liabilities.

Derivatives Not Designated as Hedge Instruments

As of September 30, 2006, the Company had a certain open interest rate swap contract which is not designated as a hedge. This interest rate swap contract was entered into in connection with another interest rate swap contract which is being accounted for as a cash flow hedge for the purpose of hedging the variability in expected cash flows from the variable-rate debt related to the Company’s 2006-A securitization. The change in the fair value of the interest rate swap contract not designated and documented as a hedge is recorded through earnings each period and is included in non-interest income. During both the three and nine months ended September 30, 2006, the Company recognized net gains of approximately $3,000 related to the change in fair value of this contracts. The fair value of this contracts at September 30, 2006 was approximately $3,000 and is included in other assets. The Company did not have any derivatives not designated as hedge instruments during the three and nine months ended September 30, 2005.

Note 10 – Stockholders’ Equity

On August 7, 2006, the Company declared a dividend of $0.03 per common share payable to holders of record as of August 18, 2006. On August 31, 2006 those dividends were paid and totaled approximately $773,000.

Note 11 – Subsequent Events

On November 2, 2006, the Company declared a dividend of $0.03 per common share payable to holders of record as of November 13, 2006. Payment of the dividend is planned for November 30, 2006.


Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Quarterly Report on Form 10-Q contains various “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and we intend that such forward-looking statements will be subject to the safe harbors created thereby. For this purpose, any statements contained in this Form 10-Q that relate to prospective events or developments are deemed to be forward-looking statements. Words such as “believes,” “forecasts,” “anticipates,” “intends,” “plans,” “expects,” “will” and similar expressions are intended to identify forward-looking statements. These forward-looking statements reflect our current views with respect to future events and financial performance, but involve known and unknown risks and uncertainties, both general and specific to the matters discussed in this Form 10-Q. These risks and uncertainties may cause our actual results to be materially different from any future results expressed or implied by such forward-looking statements. Such risks and uncertainties include:

	•		the performance of our manufactured housing loans;

	•		our ability to borrow at favorable rates and terms;

	•		the supply of manufactured housing loans;

	•		interest rate levels and changes in the yield curve;

	•		our ability to use hedging strategies to mitigate our exposure to changing interest rates;

	•		changes in, and the costs associated with complying with, federal, state and local regulations, including consumer finance and housing regulations;

	•		applicable laws, including federal income tax laws;

	•		general economic conditions in the markets in which we operate;

and those other risk factors discussed under the heading entitled “Risk Factors” and elsewhere in our Annual Report on Form 10-K for the year ended December 31, 2005. All forward-looking statements included in this document are based on information available to us on the date of this Form 10-Q. We do not intend to update or revise any forward-looking statements that we make in this document or other documents, reports, filings or press releases, whether as a result of new information, future events or otherwise.

The following discussion and analysis of our consolidated financial condition and results of operations as of and for the periods ended September 30, 2006 in this quarterly report on Form 10-Q should be read in conjunction with our Consolidated Financial Statements and the “Notes to Consolidated Financial Statements” included in our Annual Report on Form 10-K for the year ended December 31, 2005.


Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

In October 2003, we began operations upon the completion of a private placement of $150 million of our common stock to certain institutional and accredited investors. In February, 2004, we completed another private placement of $10 million of our common stock to one institutional investor. In connection with and as a condition to the October 2003 private placement, we acquired all of the equity interests of Origen Financial L.L.C. We also took steps to qualify Origen Financial, Inc. as a REIT. In the second quarter of 2004, we completed the initial public offering of our common stock. Currently, most of our operations are conducted through Origen Financial L.L.C., our wholly-owned subsidiary. We conduct the rest of our business operations through our other wholly-owned subsidiaries, including taxable REIT subsidiaries, to take advantage of certain business opportunities and ensure that we comply with the federal income tax rules applicable to REITs.

Recent Developments

On August 25, 2006, we completed our 2006-A securitization of approximately $224.2 million in principal balance of manufactured housing loans. The securitization was accounted for as a financing. As part of the securitization we issued approximately $200.6 million in notes payable.

Critical Accounting Policies

The Company’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (US GAAP).

The financial information contained within our statements is, to a significant extent, financial information that is based on approximate measures of the financial effects of transactions and events that have already occurred. A variety of factors could affect the ultimate value that is obtained either when earning income, recognizing an expense, recovering an asset, or relieving a liability. In some instances we use a discount factor to determine the present value of assets and liabilities. A change in the discount factor could increase or decrease the values of those assets and liabilities and such changes would result in either a beneficial or adverse impact to our financial results. We use historical loss factors, adjusted for current conditions, to determine the inherent loss that may be present in our loan portfolio. Other estimates that we use are fair value of derivatives and expected useful lives of our depreciable assets. We value our derivative contracts at fair value using either readily available, market quoted prices or from information that can be extrapolated to approximate a market price. Additionally, as a result of the adoption of Statement of Financial Accounting Standards (“SFAS”) No. 123(R), “Share-Based Payment,” we make estimates related to future forfeitures of unvested stock awards and stock options. Any change in the estimates of future forfeitures of unvested stock awards and stock options could increase or decrease compensation expense. We are subject to US GAAP that may change from one previously acceptable method to another method. Although the economics of our transactions would be the same, the timing of events that would impact our transactions could change.

Understanding our accounting policies is fundamental to understanding our consolidated financial position and consolidated results of operations. Details regarding our critical accounting policies are described fully in Note 1 in the “Notes to Consolidated Financial Statements” in our 2005 Annual Report on Form 10-K filed with the Securities and Exchange Commission.


Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations

Results of Operations

Comparison of the three months ended September 30, 2006 and 2005.

Net Income

Net income increased $7.9 million to $1.8 million for the three months ended September 30, 2006 compared to a net loss of $6.1 million for the same period in 2005. The increase is the result of an increase of $5.2 million in net interest income after loan losses and impairment, an increase of $0.5 million in non-interest income and a decrease in non-interest expenses of $2.2 million as described in more detail below.

Interest Income

Interest income increased 22.1% to approximately $18.8 million compared to approximately $15.4 million. This increase resulted primarily from an increase of $181.8 million or 24.1% in average interest earning assets from $753.3 million to $935.1 million. The increase in interest earning assets includes an increase of approximately $181.0 million in average manufactured housing loans. The weighted average net interest rate on the loan receivable portfolio decreased to 8.0% from 8.2%.

Interest expense increased $3.8 million, or 49.4%, to $11.5 million from $7.7 million. The majority of our interest expense relates to interest on our loan funding facilities. Average debt outstanding on our loan funding facilities increased $181.4 million to $751.7 million compared to $570.3 million, or 31.8%. The average interest rate on total debt outstanding increased from 5.2% to 5.9%. The higher average interest rate for the three months ended September 30, 2006 compared to the three months ended September 30, 2005 was primarily due to increases in the base LIBOR rate.

The following table presents information relative to the average balances and interest rates of our interest earning assets and interest bearing liabilities for the three months ended September 30 (dollars in thousands):


	2006							2005
	Average				Yield/			Average				Yield/
	Balance		Interest		Rate			Balance		Interest		Rate
Interest earning assets:
Manufactured housing loans¹	$	877,190	$	17,637		8.04	%	$	696,151	$	14,329		8.23	%
Investment securities		41,229		937		9.09	%		41,298		973		9.42	%
Other		16,665		233		5.59	%		15,862		106		2.67	%

Total	$	935,084	$	18,807		8.05	%	$	753,311	$	15,408		8.18	%

Interest bearing liabilities²:
Loan funding facilities	$	751,735	$	11,077		5.89	%	$	570,319	$	7,433		5.21	%
Repurchase agreements		23,582		365		6.19	%		24,263		267		4.40	%
Notes payable – servicing advance		367		9		9.81	%		721		14		7.77	%

Total	$	775,684	$	11,451		5.90	%	$	595,303	$	7,714		5.18	%

Net interest income and interest rate spread			$	7,356		2.14	%			$	7,694		3.00	%

Net yield on average interest earning assets³						3.15	%						4.09	%


¹		Net of loan servicing fees.

²		Includes facility fees.

³		Amount is calculated as annualized net interest income divided by total average interest earning assets.


Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following table sets forth the changes in the components of net interest income for the three months ended September 30, 2006 compared to the three months ended September 30, 2005 (in thousands). The changes in net interest income between periods have been reflected as attributable to either volume or rate changes. For the purposes of this table, changes that are not solely due to volume or rate changes are allocated to rate changes.


	Volume			Rate			Total
Interest earning assets:
Manufactured housing loans	$	3,726		$	(418	)	$	3,308
Investment securities		(2	)		(34	)		(36	)
Other		5			122			127

Total interest income	$	3,729		$	(330	)	$	3,399

Interest bearing liabilities:
Loan funding facilities	$	2,364		$	1,280		$	3,644
Repurchase agreements		(7	)		105			98
Notes payable – servicing advances		(7	)		2			(5	)

Total interest expense	$	2,350		$	1,387		$	3,737

Decrease in net interest income							$	(338	)

Non-interest Income

Non-interest income is primarily made up of loan servicing related revenue including loan servicing fees, late charges, commissions on insurance and commitment fees from third-party loan originations. Such revenue increased $0.5 million, or 12.8%, to $4.4 million compared to $3.9 million. This increase was primarily the result of an increase in the average serviced loan portfolio on which servicing fees are collected of approximately $78.7 million, or 5.3%, from $1.49 billion to $1.57 billion.

Provision for Losses

The provision for loan losses decreased 76.1% to $1.6 million from $6.7 million. The provision for the three months ended September 30, 2005 included approximately $3.5 million related to the effects of Hurricane Katrina and Hurricane Rita and approximately $0.8 million of losses related to the charge-off of loans repurchased from Vanderbilt Mortgage and Finance, Inc. (“Vanderbilt”) under a previous repurchase agreement. Net charge-offs against the allowance for loan losses decreased 23.1% to $2.0 million for the three months ended September 30, 2006 compared to $2.6 million for three months ended September 30, 2005. As a percentage of average loans receivable, net charge-offs, on an annualized basis, decreased to 0.9% compared to 1.5%. We expect net charge-offs as a percentage of average outstanding principal balance to continue to decrease in the future due to the fact that the owned portfolio of loans at September 30, 2006 has a larger concentration of loans originated after December 31, 2001 than was the case for the owned portfolio at September 30, 2005. A change to our underwriting practices and credit scoring model in 2002 has resulted in higher credit quality of loans originated since 2002.

No impairments related to previously purchased loan pools were recognized during the third quarter of 2006. An impairment of $0.4 million in the carrying value of a previously purchased loan pool was recognized during the third quarter of 2005.


Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations

Non-interest Expenses

Personnel expenses decreased approximately $0.2 million, or 3.4%, to $5.7 million compared to $5.9 million. The decrease is primarily the result of a $0.3 million decrease in stock compensation expense offset by a $0.1 million increase in salary expense.

Loan origination and servicing expenses increased approximately 8.4% to $402,000 compared to $371,000. The change is primarily a result of an increase in custodial and other servicing fees related to the general growth of our servicing portfolio.

Write-down of residual interest decreased $0.7 million. During the three months ended September 30, 2005 we wrote-off our residual interest in the 2002-A securitization as a result of the effects of Hurricane Katrina and Hurricane Rita.

Loss on recourse buyout decreased $0.9 million. During the three months ended September 30, 2005 we bought out our recourse obligation with Vanderbilt.

Other operating expenses, which consist of occupancy and equipment, professional fees, travel and entertainment and miscellaneous expenses decreased approximately $0.4 million to $2.2 million or 15.4%, compared to $2.6 million. This decrease is primarily the result of a $0.2 million decrease in professional fees, a $0.1 million decrease in travel and entertainment expenses and a $0.1 million decrease in other miscellaneous expenses.

Comparison of the nine months ended September 30, 2006 and 2005.

Net Income

Net income increased $8.5 million to $4.9 million for the nine months ended September 30, 2006 compared to a net loss of $3.6 million for the same period in 2005. The increase is the result of an increase of $5.2 million in net interest income after loan losses and impairment, an increase of $2.2 million in non-interest income and a decrease in non-interest expenses of $1.1 million as described in more detail below.

Interest Income

Interest income increased 25.2% to approximately $54.1 million compared to approximately $43.2 million. This increase resulted primarily from an increase of $186.8 million or 26.7% in average interest earning assets from $699.4 million to $886.2 million. The increase in interest earning assets includes an increase of approximately $185.4 million in average manufactured housing loans. The weighted average net interest rate on the loan receivable portfolio decreased to 8.2% from 8.3%.

Interest expense increased $11.5 million, or 58.1%, to $31.3 million from $19.8 million. The majority of our interest expense relates to interest on our loan funding facilities. Average debt outstanding on our loan funding facilities increased $187.9 million to $705.4 million compared to $517.5 million, or 36.3%. The average interest rate on total debt outstanding increased from 4.9% to 5.7%. The higher average interest rate for the nine months ended September 30, 2006 compared to the nine months ended September 30, 2005 was primarily due to increases in the base LIBOR rate.


Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following table presents information relative to the average balances and interest rates of our interest earning assets and interest bearing liabilities for the nine months ended September 30 (dollars in thousands):


	2006							2005
	Average				Yield/			Average				Yield/
	Balance		Interest		Rate			Balance		Interest		Rate
Interest earning assets:
Manufactured housing loans¹	$	828,294	$	50,665		8.16	%	$	642,902	$	40,097		8.32	%
Investment securities		41,313		2,814		9.08	%		40,143		2,803		9.31	%
Other		16,618		593		4.76	%		16,312		296		2.42	%

Total	$	886,225	$	54,072		8.14	%	$	699,357	$	43,196		8.24	%

Interest bearing liabilities²:
Loan funding facilities	$	705,377	$	30,270		5.72	%	$	517,515	$	19,115		4.92	%
Repurchase agreements		23,582		1,026		5.80	%		22,337		653		3.90	%
Notes payable – servicing advance		454		32		9.40	%		623		37		7.92	%

Total	$	729,413	$	31,328		5.73	%	$	540,475	$	19,805		4.89	%

Net interest income and interest rate spread			$	22,744		2.41	%			$	23,391		3.35	%

Net yield on average interest earning assets³						3.42	%						4.46	%

The following table sets forth the changes in the components of net interest income for the nine months ended September 30, 2006 compared to the nine months ended September 30, 2005 (in thousands). The changes in net interest income between periods have been reflected as attributable to either volume or rate changes. For the purposes of this table, changes that are not solely due to volume or rate changes are allocated to rate changes.


	Volume			Rate			Total
Interest earning assets:
Manufactured housing loans	$	11,563		$	(995	)	$	10,568
Investment securities		82			(71	)		11
Other		6			291			297

Total interest income	$	11,651		$	(775	)	$	10,876

Interest bearing liabilities:
Loan funding facilities	$	6,939		$	4,216		$	11,155
Repurchase agreements		36			337			373
Notes payable – servicing advances		(10	)		5			(5	)

Total interest expense	$	6,965		$	4,558		$	11,523

Decrease in net interest income							$	(647	)

Non-interest Income

Non-interest income is primarily made up of loan servicing related revenue including loan servicing fees, late charges, commissions on insurance and commitment fees from third-party loan originations. Such revenue increased $2.2 million, or 20.8%, to $12.8 million compared to $10.6 million. This increase was primarily the result of an increase in the average serviced loan portfolio on which servicing fees are collected of approximately $82.5 million, or 5.7%, from $1.46 billion to $1.54 billion.


¹		Net of loan servicing fees.

²		Includes facility fees.

³		Amount is calculated as annualized net interest income divided by total average interest earning assets.


Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations

Provision for Losses

The provision for loan losses decreased 52.9% to $4.9 million from $10.4 million. The provision for the nine months ended September 30, 2006 included approximately $3.5 million related to the effects of Hurricane Katrina and Hurricane Rita and approximately $0.8 million of losses related to the charge-off of loans repurchased from Vanderbilt under a previous repurchase agreement. Net charge-offs against the allowance for loan loss decreased 16.7% from $7.8 million, to $6.5 million. As a percentage of average loans receivable, net charge-offs, on an annualized basis, decreased to 1.0% compared to 1.6%. We expect net charge-offs as a percentage of average outstanding principal balance to continue to decrease in the future due to the fact that the owned portfolio of loans at September 30, 2006 has a larger concentration of loans originated after December 31, 2001 than was the case for the owned portfolio at September 30, 2005. A change to our underwriting practices and credit scoring model in 2002 has resulted in higher credit quality of loans originated since 2002.

Non-interest Expenses

Personnel expenses increased approximately $0.9 million, or 5.3%, to $18.0 million compared to $17.1 million. The increase is primarily the result of a $0.7 million increase in annual performance bonuses and a $0.7 million increase in salaries and temporary office staffing expenses, offset by a decrease of $0.5 million in stock compensation expenses.

Write-down of residual interest decreased $0.7 million. During the nine months ended September 30, 2005 we wrote-off our residual interest in the 2002-A securitization as a result of the effects of Hurricane Katrina and Hurricane Rita.

Loss on recourse buyout decreased $0.9 million. During the nine months ended September 30, 2005 we bought out our recourse obligation with Vanderbilt.

Other operating expenses, which consist of occupancy and equipment, professional fees, travel and entertainment and miscellaneous expenses decreased approximately $0.3 million to $6.3 million or 4.5%, compared to $6.6 million. This decrease is primarily the result of a $0.1 million decrease in professional fees, a $0.1 million decrease in telephone and data communication expenses and a $0.1 million decrease in other miscellaneous expenses.


Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations

Receivable Portfolio and Asset Quality

Net loans receivable outstanding increased 17.8% to $904.9 million at September 30, 2006 compared to $768.4 million at December 31, 2005. Loans receivable are comprised of installment contracts and mortgages collateralized by manufactured houses and in some instances real estate.

New loan originations for the three months ended September 30, 2006 decreased 0.7% to $70.9 million compared to $71.4 million for the three months ended September 30, 2005. We additionally processed $15.7 million and $11.1 million in loans originated under third-party origination agreements for the three months ended September 30, 2006 and 2005, respectively. New loan originations for the nine months ended September 30, 2006 increased 6.5% to $210.2 million compared to $197.4 million for the nine months ended September 30, 2005. We additionally processed $35.9 million and $23.1 million in loans originated under third-party origination agreements for the nine months ended September 30, 2006 and 2005, respectively.

During the three and nine months ended September 30, 2006, we purchased $4.2 million in loans from Sun Home Services, Inc., a subsidiary of Sun Communities, Inc. (“Sun Communities”). The purchase price approximated fair value. Sun Communities owns approximately 20% of our outstanding common stock. We did not purchase any loans from Sun Communities or its affiliates during the three and nine months ended September 30, 2005.

The following table sets forth the average loan balance, weighted average loan coupon and weighted average initial term of the loan receivable portfolio (dollars in thousands):


	September 30, 2006			December 31, 2005
Principal balance of loans receivable	$	912,596		$	781,650
Number of loans receivable		19,580			17,277
Average loan balance	$	47		$	45
Weighted average loan coupon¹		9.51	%		9.56	%
Weighted average initial term	20 years			20 years

Delinquency statistics for the manufactured housing loan portfolio are as follows (dollars in thousands):


	September 30, 2006							December 31, 2005
	No. of		Principal		% of			No. of		Principal		% of
Days delinquent	Loans		Balance		Portfolio			Loans		Balance		Portfolio
31-60		240	$	8,701		1.0	%		215	$	8,182		1.0	%
61-90		84		2,991		0.3	%		68		2,561		0.3	%
Greater than 90		147		5,600		0.6	%		192		7,480		1.0	%

We define non-performing loans as those loans that are 90 or more days delinquent in contractual principal payments. For the three and nine months ended September 30, 2006 the average outstanding principal balance of non-performing loans was approximately $5.2 million and $5.8 million, respectively, compared to $7.0 million for both the three and nine months ended September 30, 2005. Non-performing loans as a percentage of average loans receivable decreased to 0.6% and 0.7% for the three and nine months ended September 30, 2006 as compared to 1.0% and 1.1% for the three and nine months ended September 30, 2005, primarily as a result of higher average balances and improved credit quality in the loan portfolio.

At September 30, 2006 we held 124 repossessed houses owned by us compared to 162 houses at December 31, 2005. The book value of these houses, including repossession expenses, based on the lower of cost or market value was approximately $2.6 million at September 30, 2006 compared to $3.5 million at December 31, 2005, a decrease of $0.9 million or 25.7%.


¹		The weighted average loan coupon includes an imbedded servicing fee rate resulting from securitization or sale of the loan but accounted for as a financing.


Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations

The allowance for loan losses decreased $1.6 million to $8.4 million at September 30, 2006 from $10.0 million at December 31, 2005. Despite the 18.7% increase in the gross loans receivable balance, net of loans accounted for under the provisions of the American Institute of Certified Public Accountants (“AICPA”) Statement of Position 03-3 (“SOP 03-3”), “Accounting for Certain Loans or Debt Securities Acquired in a Transfer,” the allowance for loan losses decreased 16.0% due to improvements in delinquency rates and net charge-offs. Loans delinquent over 60 days decreased $1.4 million or 14.0% from $10.0 million at December 31, 2005 to $8.6 million at September 30, 2006. The allowance for loan losses as a percentage of gross loans receivable, net of loans accounted for under SOP 03-3, was approximately 0.95% at September 30, 2006 compared to approximately 1.35% at December 31, 2005. Net charge-offs were $2.0 million and $6.5 million for the three and nine months ended September 30, 2006, respectively, compared to $2.6 million and $7.8 million for the three and nine months ended September 30, 2005.

Our allowance for loan losses includes amounts provided for inherent losses resulting from the damage inflicted by Hurricane Katrina and Hurricane Rita in 2005. Observed trends in the performance of the identified loans through September 30, 2006 and continuing through November 1, 2006, including delinquency rates, losses and recovery percentages, have been more favorable than management’s initial expectations. However, there can be no assurance that these trends will continue. At January 1, 2006 our allowance included approximately $3.4 million of estimated losses related to the effects of Hurricane Katrina and Hurricane Rita. As a result of the more favorable trends, we have reduced a portion of the allowance established for estimated hurricane losses by approximately $0.6 million and $1.6 million during the three and nine months ended September 30, 2006. We will continue to gather and interpret data from the affected areas and compare such information to our estimates. Amounts are refined as deemed appropriate.

Changes to our underwriting practices, processes, credit scoring models, systems and servicing techniques in 2002 have resulted in demonstrably superior performance by loans originated in and subsequent to 2002 as compared to loans originated by our predecessors prior to 2002. The pre-2002 loans, despite representing a diminishing percentage of our owned loan portfolio, have had a disproportionate impact on our financial performance.

The following tables indicate the impact of such legacy loans:

Loan Pool Unpaid Principal Balance (dollars in thousands)¹


				2002 and
	2001 and prior			subsequent
At December 31, 2005
Dollars	$	56,622		$	732,033
Percentage of total		7.2	%		92.8	%

At September 30, 2006
Dollars	$	48,475		$	868,071
Percentage of total		5.3	%		94.7	%

Static Pool Performance (dollars in thousands)¹


				2002 and
	2001 and prior			subsequent
Nine months ended September 30, 2006
Dollars defaulted	$	4,055		$	9,819
Net recovery percentage		37.1	%		48.4	%
Net losses	$	3,495		$	5,507


¹		Includes owned portfolio, repossessed inventory and loans sold with recourse.


Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations

While representing less than 6% of the owned loan portfolio at September 30, 2006, the pre-2002 loans accounted for approximately 29% of the defaults during the nine months ended September 30, 2006. Additionally, recovery rates were substantially lower for the pre-2002 loans leading to higher losses as compared to loans from 2002 and later. Management believes that as these loans become a smaller percentage of the owned loan portfolio, the negative impact on earnings will diminish.

Our asset quality statistics for the quarter ended September 30, 2006 reflect our continued emphasis on the credit quality of our borrowers and the improved underwriting and origination practices we have put into place. Continued improvement in delinquency statistics and recovery rates are expected to result in lower levels of non-performing assets and net charge-offs. Long term, lower levels of non-performing assets and net charge-offs should have a positive effect on earnings through decreases in the provision for loan losses and servicing expenses as well as increases in net interest income.

Liquidity and Capital Resources

We require capital to fund our loan originations, acquire manufactured housing loans originated by third parties and expand our loan servicing operations. At September 30, 2006 we had approximately $3.3 million in available cash and cash equivalents. As a REIT, we are required to distribute at least 90% of our REIT taxable income (as defined in the Internal Revenue Code) to our stockholders on an annual basis. Therefore, as a general matter, it is unlikely we will have any substantial cash balances that could be used to meet our liquidity needs. Instead, these needs must be met from cash provided from operations and external sources of capital. Historically, we have satisfied our liquidity needs through cash generated from operations, sales of our common and preferred stock, borrowings on our credit facilities and securitizations.

Cash provided by operating activities during the nine months ended September 30, 2006, totaled $13.3 million versus $13.6 million for the nine months ended September 30, 2005. Cash used in investing activities was $142.6 million for the nine months ended September 30, 2006 versus $176.7 million for the nine months ended September 30, 2005. Cash used to originate and purchase loans decreased 1.0%, or $2.1 million, to $214.5 million for the nine months ended September 30, 2006 compared to $216.6 million for the nine months ended September 30, 2005. The change is a result of a decrease of approximately $26.6 million in manufactured housing loan purchases offset by an increase in origination volume due to increased market share resulting from our focus on customer service and the use of technology to deliver our products and services. Principal collections on loans totaled $64.0 million for the nine months ended September 30, 2006 as compared to $41.3 million for the nine months ended September 30, 2005, an increase of $22.7 million, or 55.0%. The increase in collections is primarily related to the increase in the average outstanding loan portfolio balance, which was $828.3 million for the nine months ended September 30, 2006 compared to $642.9 million for the nine months ended September 30, 2005, in addition to improved credit quality and decreased delinquency as a percentage of outstanding loan receivable balance.

The primary source of cash during the nine months ended September 30, 2006 was our 2006-A securitized financing transaction completed in August 2006. We securitized approximately $224.2 million in principle balance of manufactured housing loans, which was funded by issuing bonds of approximately $200.6 million. Proceeds from the transaction totaled approximately $200.6 million, of which approximately $199.2 million was used to reduce the aggregate balance of notes outstanding under our Citigroup warehouse financing facility.


Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations

Continued access to the securitization market is very important to our business. The proceeds from successful securitization transactions generally are applied to paying down our short-term credit facilities giving us renewed borrowing capacity to fund new loan originations. Numerous factors affect our ability to complete a successful securitization, including factors beyond our control. These include general market interest rate levels, the shape of the yield curve and spreads between rates on U.S. Treasury obligations and securitized bonds, all of which affect investors’ demand for securitized debt. In the event these factors are unfavorable our ability to successfully complete securitization transactions is impeded and our liquidity and capital resources are affected negatively. There can be no assurance that current favorable conditions will continue or that unfavorable conditions will not return.

We currently have a short term securitization facility used for warehouse financing with Citigroup. Under the terms of the agreement, originally entered into in March 2003 and amended periodically, most recently in July 2006, we pledge loans as collateral and in turn we are advanced funds. The facility has a maximum advance amount of $200 million at an annual interest rate equal to LIBOR plus a spread. Additionally, the facility includes a $35 million supplemental advance amount that is collateralized by our residual interests in our securitizations. The facility matures on March 22, 2007. The outstanding balance on the facility was approximately $61.0 million at September 30, 2006.

Additionally, we have four repurchase agreements with Citigroup. Three of the repurchase agreements are for the purpose of financing the purchase of investments in three asset backed securities with principal balances of $32.0 million, $3.1 million and $3.7 million respectively. The fourth repurchase agreement is for the purpose of financing a portion of our interest in the 2004-B securitization with a principal balance of $4.0 million. Under the terms of the agreements we sell our interest in the securities with an agreement to repurchase them at a predetermined future date at the principal amount sold plus an interest component. The securities are financed at an amount equal to 75% of their current market value as determined by Citigroup. Typically the repurchase agreements are rolled over for 30 day periods when they expire. The annual interest rates on the agreements are equal to LIBOR plus a spread. The repurchase agreements had outstanding principal balances of approximately $16.8 million, $1.7 million, $2.1 million and $3.0 million at September 30, 2006.

Under the terms of our revolving credit facility with JP Morgan Chase Bank, N.A., we can borrow up to $5.0 million to fund required principal and interest advances on manufactured housing loans that we service for outside investors. Borrowings under the facility are repaid when we collect monthly payments made by borrowers under such manufactured housing loans. The bank’s prime interest rate is payable on the outstanding balance. To secure the loan, we have granted JPMorgan Chase Bank, N.A. a security interest in substantially all our assets excluding securitized assets. The expiration date of the facility is December 31, 2006. The outstanding balance on the facility was approximately $1.5 million at September 30, 2006.

In September 2005, the Securities and Exchange Commission declared effective our shelf registration statement on Form S-3 for the proposed offering, from time to time, of up to $200 million of our common stock, preferred stock and debt securities. In addition to such debt securities, preferred stock and other common stock we may sell under the registration statement, we have registered for sale 1,540,000 shares of our common stock pursuant to a sales agreement that we have entered into with Brinson Patrick Securities Corporation. It is anticipated that these shares of common stock will be sold at the price of our common stock prevailing at the time of sale.


Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations

Our long-term liquidity and capital requirements consist primarily of funds necessary to originate and hold manufactured housing loans, acquire and hold manufactured housing loans originated by third parties and expand our loan servicing operations. We expect to meet our long-term liquidity requirements through cash generated from operations, but we will require external sources of capital, including sales of shares of our common stock, preferred stock, debt securities and third-party borrowings. We intend to continue to access the asset-backed securities market for the long-term financing of our loans in order to match the interest rate risk between our loans and the related long-term funding source. Our ability to meet our long-term liquidity needs depends on numerous factors, many of which are outside of our control. These factors include general capital market and economic conditions, general market interest rate levels, the shape of the yield curve and spreads between rates on U.S. Treasury obligations and securitized bonds, all of which affect investors’ demand for equity and debt securities, including securitized debt securities.

Cash generated from operations, borrowings under our Citigroup facility, loan securitizations, borrowings against our securitized loan interests, convertible debt, equity interests or additional debt financing arrangements (either pursuant to our shelf registration statement on Form S-3 or otherwise) will enable us to meet our liquidity needs for at least the next twelve months depending on market conditions which may affect loan origination volume, loan purchase opportunities and the availability of securitizations. If market conditions require, loan purchase opportunities become available, or favorable capital opportunities become available, we may seek additional funds through additional credit facilities or additional sales of our common or preferred stock.

The risks associated with the manufactured housing business become more acute in any economic slowdown or recession. Periods of economic slowdown or recession may be accompanied by decreased demand for consumer credit and declining asset values. In the manufactured housing business, any material decline in collateral values increases the loan-to-value ratios of loans previously made, thereby weakening collateral coverage and increasing the size of losses in the event of default. Delinquencies, repossessions, foreclosures and losses generally increase during economic slowdowns or recessions. For our finance customers, loss of employment, increases in cost-of-living or other adverse economic conditions could impair their ability to meet their payment obligations. Higher industry inventory levels of repossessed manufactured houses may affect recovery rates and result in future impairment charges and provision for losses. In addition, in an economic slowdown or recession, servicing and litigation costs generally increase. Any sustained period of increased delinquencies, repossessions, foreclosures, losses or increased costs would adversely affect our financial condition, results of operations and liquidity.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Market risk is the risk of loss arising from adverse changes in market prices and interest rates. Our market risk arises from interest rate risk inherent in our financial instruments. We are not currently subject to foreign currency exchange rate risk or commodity price risk.

The outstanding balance of our variable rate debt under which we paid interest at various LIBOR rates plus a spread, totaled $281.9 million and $173.5 million at September 2006 and 2005, respectively. If LIBOR increased or decreased by 1.0% during the nine months ended September 30, 2006 and 2005, we believe our interest expense would have increased or decreased by approximately $1.3 million and $1.1 million, respectively, based on the $180.3 million and $146.0 million average balance outstanding under our variable rate debt facilities for the nine months ended September 30, 2006 and 2005, respectively. We had no variable rate interest earning assets outstanding during the nine months ended September 30, 2006 or 2005.

The following table shows the contractual maturity dates of our assets and liabilities at September 30, 2006. For each maturity category in the table the difference between interest-earning assets and interest-bearing liabilities reflects an imbalance between re-pricing opportunities for the two sides of the balance sheet. The consequences of a negative cumulative gap at the end of one year suggests that, if interest rates were to rise, liability costs would increase more quickly than asset yields, placing negative pressure on earnings (dollars in thousands).


	Maturity
	0 to 3			4 to 12			1 to 5			Over 5
	months			months			years			years			Total
*Assets*

Cash and equivalents	$	3,343		$	—		$	—		$	—		$	3,343
Restricted cash		13,867			—			—			—			13,867
Investments		—			—			—			41,540			41,540
Loans receivable, net		31,735			89,613			358,654			424,863			904,865
Furniture, fixtures and equipment, net		206			619			2,475			—			3,300
Goodwill		—			—			—			32,277			32,277
Other assets		11,354			6,374			4,680			2,546			24,954

Total assets	$	60,505		$	96,606		$	365,809		$	501,226		$	1,024,146


*Liabilities and Stockholders’ Equity*

Warehouse financing	$	15,255		$	45,763		$	—		$	—		$	61,018
Securitization financing		24,901			70,316			281,422			333,372			710,011
Repurchase agreements		23,582			—			—			—			23,582
Notes payable – servicing advances		1,458			—			—			—			1,458
Other liabilities		20,579			356			—			4,672			25,607

Total liabilities		85,775			116,435			281,422			338,044			821,676


Preferred stock		—			—			—			125			125
Common stock		—			—			—			258			258
Additional paid-in-capital		—			—			—			219,437			219,437
Accumulated other comprehensive loss		(4	)		(32	)		177			(1,185	)		(1,044	)
Distributions in excess of earnings		—			—			—			(16,306	)		(16,306	)

Total stockholders’ equity		(4	)		(32	)		177			202,329			202,470

Total liabilities and stockholders’ equity	$	85,771		$	116,403		$	281,599		$	540,373		$	1,024,146

Interest sensitivity gap	$	(25,266	)	$	(19,797	)	$	84,210		$	(39,147	)
Cumulative interest sensitivity gap	$	(25,266	)	$	(45,063	)	$	39,147			—
Cumulative interest sensitivity gap to total assets		(2.47	)%		(4.40	)%		3.82	%		—

We believe the negative effect of a rise in interest rates is reduced by the anticipated securitization of our loans receivable, which in conjunction with our hedging strategies, fixes our cost of funds associated with the loans over the lives of such loans.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The following table shows our financial instruments that are sensitive to changes in interest rates and are categorized by contractual maturity at September 30, 2006, (dollars in thousands):


	Contractual Maturity
																There-
	2006			2007			2008			2009			2010			after			Total
Interest sensitive assets
Loans receivable	$	31,735		$	117,678		$	103,867		$	91,615		$	80,775		$	479,195		$	904,865
Average interest rate		9.51	%		9.51	%		9.51	%		9.51	%		9.51	%		9.51	%		9.51	%
Interest bearing deposits		17,669			—			—			—			—			—			17,669
Average interest rate		4.76	%		—			—			—			—			—			4.76	%
Investments		—			—			—			—			—			41,540			41,540
Average interest rate		—			—			—			—			—			9.08	%		9.08	%
Interest rate swap asset		3			—			—			—			—			—			3
Average interest rate		5.33	%		—			—			—			—			—			5.33	%

Total interest sensitive assets	$	49,407		$	117,678		$	103,867		$	91,615		$	80,775		$	520,735		$	964,077

Interest sensitive liabilities
Warehouse financing	$	15,255		$	45,763		$	—		$	—		$	—		$	—		$	61,018
Average interest rate		7.19	%		7.19	%		—			—			—			—			7.19	%
Securitization financing		24,901			92,337			81,500			71,886			63,381			376,006			710,011
Average interest rate		5.89	%		5.89	%		5.89	%		5.89	%		5.89	%		5.89	%		5.89	%
Repurchase agreements		23,582			—			—			—			—			—			23,582
Average interest rate		6.19	%		—			—			—			—			—			6.19	%
Note payable – servicing advance		1,458			—			—			—			—			—			1,458
Average interest rate		9.81	%		—			—			—			—			—			9.81	%
Interest rate swap liability		—			232			—			—			—			3,140			3,372
Average interest rate		—			5.44	%		—			—			—			5.44	%		5.44	%

Total interest sensitive liabilities	$	65,196		$	138,332		$	81,500		$	71,886		$	63,381		$	379,146		$	799,441

Item 4. Controls and Procedures

Our Chief Executive Officer and Chief Financial Officer have concluded that the design and operation of our disclosure controls and procedures are effective as of the end of the period covered by this report. This conclusion is based on an evaluation conducted under the supervision and with the participation of management. Disclosure controls and procedures are those controls and procedures which ensure that information required to be disclosed in our filings is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and regulations, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, in order to allow timely decisions regarding required disclosures.

Our management, including our Chief Executive Officer and Chief Financial Officer, has determined that during the period covered by this report there were no changes in our internal controls over financial reporting that materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

PART II OTHER INFORMATION

ITEM 6. Exhibits and Reports on Form 8-K

(a) Exhibits


Exhibit No.	Description	Method of Filing
10.1	Employment Agreement dated July 14, 2006 among Origen Financial Inc., Origen Financial L.L.C and Ronald A. Klein*		(1	)

31.1	Certification of Chief Executive Officer Required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.		(2	)

31.2	Certification of Chief Financial Officer Required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.		(2	)

32.1	Certification of Chief Executive Officer and Chief Financial Officer Required by Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended.		(2	)

(1) Incorporated by reference to Origen Financial, Inc.’s Current Report on Form 8-K filed July 18, 2006.

(2) Filed herewith.

* Management contract or compensatory plan or arrangement.

(b) Reports on Form 8-K

During the period covered by this report, we filed the following Current Reports on Form 8-K:

	(i)		Form 8-K, filed July 18, 2006, furnished for the purpose of reporting, under Items 1.01 (Entry into a Material Definitive Agreement) and 9.01 (Financial Statements and Exhibits), the entry into an employment agreement between Origen Financial, Inc., and our Chief Executive Officer, Ronald A. Klein.

	(ii)		Form 8-K, filed August 9, 2006, furnished for the purpose of reporting, under Item 2.02 (Results of Operations and Financial Condition), our preliminary unaudited financial results for the quarter ended June 30, 2006.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Dated: November 3, 2006


		ORIGEN FINANCIAL, INC. (Registrant)

		BY:		/s/ W. Anderson Geater, Jr.

				W. Anderson Geater, Jr., Chief
				Financial Officer and Secretary
				(Duly authorized officer and principal financial officer)

ORIGEN FINANCIAL, INC.
EXHIBIT INDEX


Exhibit No.	Description	Method of Filing
10.1	Employment Agreement dated July 14, 2006 among Origen Financial Inc., Origen Financial L.L.C and Ronald A. Klein*		(1	)

31.1	Certification of Chief Executive Officer Required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.		(2	)

31.2	Certification of Chief Financial Officer Required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.		(2	)

32.1	Certification of Chief Executive Officer and Chief Financial Officer Required by Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended.		(2	)

(1) Incorporated by reference to Origen Financial, Inc.’s Current Report on Form 8-K filed July 18, 2006.

(2) Filed herewith.

* Management contract or compensatory plan or arrangement.

Exhibit 10.1

DATED: July 30, 2004

FIRST LEASE MODIFICATION

THE LEASE AGREEMENT dated November 19, 2002, by and between AMERICAN CENTER LLC (“Landlord”), a Michigan Limited Liability Company, and ORIGEN FINANCIAL, LLC (“Tenant”), a Delaware Limited Liability Company for Suite 1700 consisting of 19,909 rentable /18,606 usable square feet (the “Premises” or “demised premises”) in the AMERICAN CENTER (the “Building”), 27777 Franklin Road, Southfield, Michigan 48034 (the “Project”), is hereby modified as follows:

1.		Effective July 1, 2003 and expiring no later than December 31, 2009, Tenant shall lease an additional one (1) Designated Parking Space on month-to-month basis at a monthly rate of One Hundred Twenty Five and 00/100 Dollars ($125.00).

2.		Effective March 9, 2004 and expiring no later than December 31, 2009, Tenant shall lease an additional one (1) Designated Parking Space on month-to-month basis at a monthly rate of One Hundred Twenty Five and 00/100 Dollars ($125.00).

3.		Non-Disclosure - Tenant will not record this First Lease Modification or a memorandum hereof, and will not otherwise disclose the terms of this First Lease Modification to anyone other than its attorneys, accountants or employees who need to know of its contents in order to perform their duties for Tenant. Any other disclosure will be an event of Default under the Lease. Tenant agrees that Landlord shall have the right to publish a “tombstone” or other promotional description of this First Lease Modification.

Except as hereinabove specifically provided to the contrary, all of the remaining terms, covenants, and agreements contained in said Lease, and all modifications thereafter, shall remain in full force and effect and shall be applicable to the Premises as described in said Lease is hereby acknowledged, ratified, and confirmed by the parties hereto.


LANDLORD:		TENANT:
AMERICAN CENTER LLC, a Michigan Limited		ORIGEN FINANCIAL, LLC, a Delaware Limited
Liability Company		Liability Company
By: Southfield Office Holdings, LLC
By: Southfield Office Manager, Inc.

By:	/s/ Paul Stodulski	By:	/s/ J. Peter Scherer

Printed:	Paul Stodulski	Printed:	J. Peter Scherer
Its:	Secretary	Its:	President
Date:	8-5-04	Date:	August 3, 2004

Exhibit 10.2

DATED: July 6, 2006

SECOND LEASE MODIFICATION

THE LEASE AGREEMENT dated November 19, 2002, and modified thereafter, by and between AMERICAN CENTER LLC (“Landlord”), a Michigan Limited Liability Company, and ORIGEN FINANCIAL, LLC (“Tenant”), a Delaware Limited Liability Company for Suite 1700 consisting of 19,909 rentable / 18,606 usable square feet (the “Premises” or “demised premises”) in the AMERICAN CENTER (the “Building”), 27777 Franklin Road, Southfield, Michigan 48034 (the “Project”), is hereby modified as follows:

1.		Suite 1700 of the Building shall also be known as the “Existing Space”.

2.		Effective April 1, 2008, the Term of Lease for the Existing Space shall be extended for three (3) years and five (5) months, expiring August 31, 2011.

3.		Effective September 1, 2006, Tenant shall lease Suite 1640 of the Building (the “Additional Space”), consisting of 5,192 rentable / 4,615 usable square feet, for a Term of five (5) years, expiring August 31,2011.

4.		Effective upon the Additional Space Completion Date, the Existing Space and the Additional Space, for a total of 25,101 rentable / 23,221 usable square feet, shall collectively be known as the Premises.

5.		The monthly base Rent shall be as follows:


	Suites 1640		Designated		Total Monthly		Total Base Rent
Date	&1700		Parking Spaces		Base Rent		for the Period
9/1/06 - 12/31/06	$	43,926.75	$	550.00	$	44,476.75	$	177,907.00
1/1/07 - 12/31/07	$	44,972.63	$	550.00	$	45,522.63	$	546,271.56
1/1/08 - 12/31/08	$	46,018.50	$	550.00	$	46,568.50	$	558,822.00
1/1/09 - 12/31/09	$	47,064.38	$	550.00	$	47,614.38	$	571,372.56
1/1/10 - 12/31/10	$	48,110.25	$	550.00	$	48,660.25	$	583,923.00
1/1/11 - 8/31/11	$	49,156.13	$	550.00	$	49,706.13	$	397,649.04
					Aggregate		$	2,835,945.16

6.		The Proportionate Share for the Existing Space shall remain 4.0758% (19,909 / 488,465 rsf); the Proportionate Share for the Additional Space shall be 1.0629% (5,192 / 488,465 rsf). The Base Year for the Additional Space shall be 2006. The Base Year for the Existing Space shall remain 2003 until March 31, 2008. Effective April 1, 2008, the Base Year for the Existing Space shall be changed to 2006.

7.		Effective the date hereof, Tenant shall be entitled to use one (1) additional Designated Parking Space at no additional charge, for a total of nine (9) Designated Parking Spaces. Tenant will therefore have four (4) Designated Parking Spaces at no additional charge and five (5) Designated Parking Spaces at the additional charge specified in Section 5 of this Second Lease Modification.

8.		ADDITIONAL SPACE TENANT IMPROVEMENTS

		8.01 Landlord shall construct the improvements to the Additional Space (the “Additional Space Tenant improvements”) up to a cost of Two Hundred Forty Five Thousand, Eight Hundred Forty Five and 58/100 Dollars ($245,845.58) (the “Additional Space Tenant Improvement Allowance”) in accordance with the plan dated May 19, 2006, attached hereto as Exhibit A, and priced May 30, 2006. Landlord shall deliver the Additional iSpace “ready for occupancy on September 1, 2006, subject to any Tenant Delay (as defined in Section 2.04 of the Lease). Tenant may utilize, on or before December 31, 2006, up to Thirty Nine Thousand, Eight Hundred Eighteen and 00/100 Dollars ($39,818.00) of the Additional Space Tenant Improvement Allowance for improvements to the Existing Space. In the

		event the cost of completing the Additional Space Tenant Improvements is less than the Additional Space Tenant Improvement Allowance, Landlord shall retain the difference and Tenant shall have no claim for and not be entitled to receive any such sums. In the event the estimated cost of completing the Additional Space Tenant Improvements in accordance with the Space Plan shall at anytime exceed one hundred five percent (105%) of the Additional Space Tenant Improvement Allowance, Tenant shall pay Landlord, within five (5) days of request for such payment (which request will come no more than twice monthly), the difference between the estimated cost of completion and the Additional Space Tenant Improvement Allowance on a percentage of completion basis. If the estimated cost of completion of the Additional Space Tenant Improvements is less than one hundred five percent (105%) of the Additional Space Tenant Improvement Allowance, Tenant shall pay Landlord the difference between the actual cost of completion and the Additional Space Tenant Improvement Allowance when the Additional Space Tenant Improvements are substantially complete.

		8.02 There shall be no allowance to Tenant for diminutions of rental value and no liability on the part of Landlord by reason of inconvenience, interruption, annoyance or injury to Tenant’s business arising from Landlord, its licensees, servants, agents, employees and contractors constructing the Additional Space Tenant Improvements and the same shall not be construed as an actual or constructive eviction of the Premises.

9.		LANDLORD IMPROVEMENTS

		Landlord acknowledges that the stairwell between Floors 16 and 17 will be painted at Landlord’s sole cost and expense.

10.		INSTALLATION BY TENANT

		Landlord acknowledges that Tenant shall have the right to install a security passkey device on the stairway doors between Floors 16 and 17 subject to building and fire codes.

11.		ANTI-TERRORISM LAW

		11.01 Tenant Representations

(a) Neither Tenant nor any of its respective constituents or affiliates nor any of their respective agents acting or benefiting in any capacity in connection with the Lease (individuaily a “Tenant Party” and collectively, the “Tenant Parties”) is in violation of any laws relating to terrorism or money laundering, including but not limited to, Executive Order No. 13224 on Terrorist Financing, effective September 23, 2001 (the “Executive Order”), as amended from time to time, and the U.S. Bank Secrecy Act of 1970, as amended by the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, and as otherwise amended from time to time (collectively, with the Executive Order, “Anti-Terrorism Law”).

(b) No action, proceeding, investigation, charge, claim, report, or notice has been filed, commenced, or threatened against any Tenant Party alleging any violation of any Anti-Terrorism Law.

(c) No Tenant Party has, after due investigation and inquiry, knowledge or notice of any fact, event, circumstance, situation, or condition which could reasonably be expected to result in:

(i) Any action, proceeding, investigation, charge, claim, report, or notice being filed, commenced, or threatened against any of them alleging any violation of, or failure to comply with, any Anti-Terrorism Law; or

(ii) The imposition of any civil or criminal penalty against any of them for any failure to so comply.

(d) No Tenant Party is a “Prohibited Person.” A Prohibited Person means any of the following:

(i) A person or entity that is listed in the Annex to, or is otherwise subject to the provisions of, the Executive Order;

(ii) A person or entity owned or controlled by, or acting for or on behalf of, any person or entity that is listed in the Annex to, or is otherwise subject to the provisions of, the Executive Order;

(iii) A person or entity with whom Landlord is prohibited from dealing or otherwise engaging in any transaction by any Anti-Terrorism Law;

(iv) A person or entity who or that commits, threatens, or conspires to commit or supports “terrorism” as defined in the Executive Order; or

(v) A person or entity that is named as a “specially designated national and blocked person” on the most current list published by the U.S. Treasury Department Office of Foreign Asset Control at its official web site or any replacement website or other replacement official publication of such list.

Tenant has provided Landlord with sufficient information (including names, addresses, and where applicable, jurisdiction of formation or organization) to reasonably permit Landlord to verify the foregoing.

(e) No Tenant Party:

(i) Conducts any business or engages in making or receiving any contribution of funds, goods, or services to or for the benefit of any Prohibited Person; or

(ii) Deals in, or otherwise engages in any transaction relating to, any property or interests in property blocked under the Executive Order; or

(iii) Engages in or conspires to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in any Anti-Terrorism Law.

11.02 Tenant Covenants

(a) Tenant shall not:

(i) Conduct any business or engage in making or receiving any contribution of funds, goods, or services to or for the benefit of any Prohibited Person;

(ii) Deal in, or otherwise engage in any transaction relating to, any property or interests in property blocked pursuant to the Executive Order or any other Anti-Terrorism Law; or

(iii) Engage in or conspire to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in any Anti-Terrorism Law.

(b) Before any changes in direct or indirect ownership of any Tenant Party, Tenant shall give a written notice to Landlord:

(i) Advising Landlord, in reasonable detail as to the proposed ownership change; and

(ii) Reaffirming that the representations and warranties herein contained will remain true and correct.

		(c) Tenant agrees promptly to deliver to Landlord (but in any event within ten (10) days of Landlord’s written request) any certification or other evidence requested from time to time by Landlord in its reasonable discretion, confirming Tenant’s compliance with the foregoing.

12.		Non-Disclosure - Tenant will not record this Second Lease Modification or a memorandum hereof, and will not otherwise disclose the terms of this Second Lease Modification to anyone other than its attorneys, accountants or employees who need to know of its contents in order to perform their duties for Tenant. Any other disclosure will be an event of Default under the Lease. Tenant agrees that Landlord shall have the right to publish a “tombstone” or other promotional description of this Second Lease Modification.


LANDLORD:		TENANT:
AMERICAN CENTER LLC, a Michigan Limited Liability Company		ORIGEN FINANCIAL, LLC, a Delaware Limited Liability Company
By: Southfield Office Holdings, LLC
By: Southfield Office Manager, Inc.

By:	/s/ Paul Stodulski	By:	/s/ J. Peter Scherer

Printed:	Paul Stodulski	Printed:	J. Peter Scherer
Its:	Secretary	Its:	President
Date:	7-12-06	Date:	July 12, 2006

EXHIBIT 31.1

CERTIFICATIONS
(As Adopted Under Section 302 of the Sarbanes-Oxley Act of 2002)

I, Ronald A. Klein, certify that:

1.		I have reviewed this Quarterly Report on Form 10-Q of Origen Financial, Inc.;

2.		Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.		Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.		The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)), and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(g)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


/s/ Ronald A. Klein		Dated: November 3, 2006
Ronald A. Klein,
Chief Executive Officer of Origen Financial, Inc.

EXHIBIT 31.2

CERTIFICATIONS
(As Adopted Under Section 302 of the Sarbanes-Oxley Act of 2002)

I, W. Anderson Geater, Jr., certify that:

1.		I have reviewed this Quarterly Report on Form 10-Q of Origen Financial, Inc.;

2.		Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.		Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.		The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)), and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(g)) for the registrant and have:

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


/s/ W. Anderson Geater, Jr.		Dated: November 3, 2006
W. Anderson Geater, Jr.,
Chief Financial Officer of Origen Financial, Inc.

EXHIBIT 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350
(As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002)

In connection with the Quarterly Report of Origen Financial, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2006 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned officers, Ronald A. Klein and W. Anderson Geater, Jr., hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to their knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.


/s/ Ronald A. Klein		Dated: November 3, 2006
Ronald A. Klein, Chief Executive Officer

/s/ W. Anderson Geater, Jr.		Dated: November 3, 2006
W. Anderson Geater Jr., Chief Financial Officer

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) November 2, 2006

Origen Financial, Inc.

(Exact name of registrant as specified in its charter)


DELAWARE	000-50721	20-0145649

State of Incorporation	(Commission File Number)	(I.R.S. Employer
		Identification No.)


27777 Franklin Road, Suite 1700, Southfield, Michigan		48034

(Address of Principal Executive Offices)		(Zip Code)

Registrant’s telephone number, including area code: (248) 746-7000

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o		Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o		Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o		Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d2(b))

o		Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e4(c))

TABLE OF CONTENTS


ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
SIGNATURES
EXHIBIT INDEX

ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION

On November 2, 2006, Origen Financial, Inc. issued a press release reporting earnings and other financial results for the fiscal quarter ended September 30, 2006. A copy of the press release is attached as Exhibit 99.1.

ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS

(d) Exhibits:


Exhibit No.	Description	Furnished Herewith

99.1	Text of Press Release, dated November 2, 2006	X

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


Dated: November 3, 2006	Origen Financial, Inc.
	By:	/s/ W. Anderson Geater, Jr.
		W. Anderson Geater, Jr., Chief Financial Officer

ORIGEN FINANCIAL, INC.

EXHIBIT INDEX


Exhibit No.	Description	Furnished Herewith

99.2	Text of Press Release, dated November 2, 2006	X

Exhibit 99.1


At Origen Financial:		At Financial Relations Board:
W. Anderson Geater		Leslie Loyet
Chief Financial Officer		(312) 640-6672
866.4 ORIGEN		lloyet@frbir.com

SOUTHFIELD, MI -November 2, 2006 — In the news release, Origen Financial (Nasdaq: ORGN — News) Announces Third Quarter 2006 Results, issued yesterday, Nov. 2, by Origen Financial, Inc. over PR Newswire, we are advised by a representative of the company that the first paragraph, second sentence, should read “Origen’s Board of Directors declared a dividend payment for the third quarter of $0.03 per share...” rather than “...dividend payment for the second quarter ” as originally issued inadvertently. Complete, corrected release follows.

ORIGEN FINANCIAL ANNOUNCES THIRD QUARTER 2006 RESULTS;
DECLARES DIVIDEND OF $0.03 PER SHARE

Origen Financial, Inc. (NASDAQ: ORGN), a real estate investment trust that originates and services manufactured housing loans, today announced net income of $1.8 million, or $0.07 per share, for the quarter ended September 30, 2006, compared with a net loss of $6.1 million, or $0.24 per share, for the quarter ended September 30, 2005. Origen’s Board of Directors declared a dividend payment for the third quarter of $0.03 per share to be paid to holders of Origen’s common stock of record on November 13, 2006. The dividend will be paid on November 30, 2006, and will approximate $0.8 million. The Board of Directors takes into consideration the differences between net income as determined by generally accepted accounting principles and estimated REIT taxable net income in the determination of dividend payments.

Highlights for Quarter

	•		Origen successfully completed its Origen 2006-A securitization, in which it securitized $224.2 million of manufactured housing loans and issued $200.6 million in notes payable.

	•		Total revenue increased 20 percent from the prior year to $23.2 million.

	•		Non-performing loans as a percent of average outstanding loan principal balances improved to 0.6 percent at September 30, 2006, from 1.0 percent a year ago.

	•		Loan origination volume declined 0.7 percent to $70.9 million from year ago levels.

	•		Loans processed for third parties totaled $15.7 million for the quarter, an increase of 41 percent over the third quarter 2005.

Financial Highlights

Interest income was $18.8 million for the third quarter 2006, an increase of 22 percent, primarily due to a 26 percent increase over the same period a year ago in the average owned loan portfolio. Non-interest income increased 13 percent over the prior year’s third quarter to $4.4 million. Interest expense for the third quarter 2006 increased 49 percent to $11.5 million from $7.7 million for last year’s third quarter as a result of increased borrowings on Origen’s loan warehouse and residual facility, as well as continued increases in the LIBOR benchmark rate on Origen’s warehouse line of credit.

The provision for credit losses was $1.6 million for the third quarter 2006 compared with $6.7 million for the same quarter in 2005. The anticipated impact on loan losses resulting from the effects of last year’s hurricanes was initially recorded in the third quarter of 2005. The decrease

in provision reflects this, as well as the continued improvement in the overall quality of the owned loan portfolio and smaller-than-anticipated losses to date resulting from the hurricanes.

Third quarter 2006 non-interest expenses were $8.4 million, a 20 percent decrease compared with $10.5 million for the year ago quarter. Of the $2.1 million decrease, $0.2 million was personnel-related, $0.3 million related to a reduction in other operating expenses, and $1.6 million related to non-recurring charges incurred in the 2005 quarter.

Portfolio Performance

At September 30, 2006, loans 60 or more days delinquent were 0.9 percent of the owned loan portfolio compared to 1.3 percent at both September 30, 2005, and December 31, 2005. Net charge-offs totaled $2.0 million and $2.6 million, respectively, for the third quarters 2006 and 2005.

Ronald A. Klein, Origen’s Chief Executive Officer, stated, “We are generally pleased with our third quarter results. While the industry saw double digit decreases in new home shipments, our originations were basically flat versus last year’s very strong third quarter and our third party businesses continued to grow. Credit performance continues to be excellent. We were very pleased with the execution of our Origen 2006-A securitization. The utilization of an AMBAC wrapped, floating rate structure allowed us to improve our leverage and decrease our cost of funds as compared to our Origen 2005-B transaction.”

Earnings Call and Webcast

A conference call and webcast have been scheduled for November 3, 2006, at 11:00 a.m. EST to discuss third quarter results. The call may be accessed on Origen’s web site at www.origenfinancial.com or by dialing 888-695-0608. A replay will be available through November 10, 2006 by dialing 888-203-1112, passcode 3121914. You may also access the replay on Origen’s website for 90 days after the event.

Forward-Looking Statements

This press release contains various “forward-looking statements” within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934, and Origen intends that such forward-looking statements will be subject to the safe harbors created thereby. The words “will,” “may,” “could,” “expect,” “anticipate,” “believes,” “intends,” “should,” “plans,” “estimates,” “approximate” and similar expressions identify these forward-looking statements. These forward-looking statements reflect Origen’s current views with respect to future events and financial performance, but involve known and unknown risks and uncertainties, both general and specific to the matters discussed in this press release. These risks and uncertainties may cause Origen’s actual results to be materially different from any future results expressed or implied by such forward-looking statements. Such risks and uncertainties include, among others, the foregoing assumptions and those risks referenced under the headings entitled “Factors That May Affect Future Results” or “Risk Factors” contained in Origen’s filings with the Securities and Exchange Commission. The forward-looking statements contained in this press release speak only as of the date hereof and Origen expressly disclaims any obligation to provide public updates, revisions or amendments to any forward- looking statements made herein to reflect changes in Origen’s expectations or future events.

About Origen Financial, Inc.

Origen is an internally managed and internally advised company that has elected to be taxed as a real estate investment trust. Based in Southfield, Michigan, with significant operations in Ft. Worth, Texas, Origen is a national consumer manufactured housing lender and servicer. It offers a complete line of home only products and land home conforming and non-conforming products. Origen also provides servicing for manufactured home only and land home loans.

For more information about Origen, please visit www.origenfinancial.com.

ORIGEN FINANCIAL, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)


	(Unaudited)
	September 30,		December 31,
	2006		2005
ASSETS

Assets
Cash and Equivalents	$	3,343	$	8,307
Restricted Cash		13,867		13,635
Investment Securities		41,540		41,914
Loans Receivable		904,865		768,410
Premises & Equipment		3,300		3,558
Goodwill		32,277		32,277
Other Assets		24,954		24,902

Total Assets	$	1,024,146	$	893,003


LIABILITIES AND STOCKHOLDERS’ EQUITY

Liabilities
Warehouse Financing	$	61,018	$	65,411
Securitization Financing		710,011		578,503
Repurchase Agreements		23,582		23,582
Note Payable		1,458		2,212
Other Liabilities		25,607		23,344

Total Liabilities		821,676		693,052


Equity		202,470		199,951


Total Liabilities and Equity	$	1,024,146	$	893,003

ORIGEN FINANCIAL, INC.
CONSOLIDATED STATEMENT OF EARNINGS
(Dollars in thousands, except for share data)
(Unaudited)


	Three Months Ended					Nine Months Ended
	September, 30					September, 30
	2006		2005			2006		2005
Interest Income
Total Interest Income	$	18,807	$	15,408		$	54,072	$	43,196
Total Interest Expense		11,451		7,714			31,328		19,805

Net Interest Income Before Losses		7,356		7,694			22,744		23,391
Provision for Loan Losses		1,598		6,697			4,924		10,372
Impairment of Purchased Loan Pool		—		428			—		428

Net Interest Income After Loan Losses and Impairment		5,758		569			17,820		12,591
Non-interest Income		4,362		3,874			12,750		10,550
Non-interest Expenses:
Personnel		5,719		5,887			17,986		17,065
Loan Origination & Servicing		402		371			1,114		1,165
Write-down of Residual Interest		—		724			—		724
Loss on Recourse Buy-out		—		869			—		869
State Taxes		76		74			251		264
Other Operating		2,169		2,600			6,327		6,616

Total Non-interest Expenses		8,366		10,525			25,678		26,703

Net Income Before Cumulative Effect of Change in Accounting Principle	$	1,754	$	(6,082	)	$	4,892	$	(3,562	)
Cumulative Effect of Change in Accounting Principle		—		—			46		—

Net Income	$	1,754	$	(6,082	)	$	4,938	$	(3,562	)


Weighted Average Common Shares Outstanding		25,203,558		24,980,889			25,099,157		24,845,216

Weighted Average Common Shares Outstanding, Diluted		25,247,421		24,980,889			25,174,272		24,845,216

Earnings Per Share on Basic Average Shares Outstanding	$	0.07	$	(0.24	)	$	0.19	$	(0.14	)

Earnings Per Share on Diluted Average Shares Outstanding	$	0.07	$	(0.24	)	$	0.20	$	(0.14	)