UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 10-Q

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 001-13417

Walter Investment Management Corp.

Maryland (State or other Jurisdiction of Incorporation or Organization)		13-3950486 (I.R.S. Employer Identification No.)

3000 Bayport Drive, Suite 1100
Tampa, FL 33607
(Address of principal executive offices) (Zip Code)

(813) 421-7600
(Registrant’s telephone number, including area code)

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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o   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 (Do not check if a smaller reporting company)		Smaller reporting company o

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

The registrant had 25,703,880 shares of common stock outstanding as of May 3, 2010.

 

 

WALTER INVESTMENT MANAGEMENT CORP.

FORM 10-Q

INDEX

		Page No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements		3
Consolidated Balance Sheets as of March 31, 2010 (unaudited) and December 31, 2009		3
Consolidated Statements of Income for the Three Months Ended March 31, 2010 and 2009 (unaudited)		4
Consolidated Statement of Stockholders’ Equity and Comprehensive Income for the Three Months Ended March 31, 2010 (unaudited)		5
Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2010 and 2009 (unaudited)		6
Notes to Consolidated Financial Statements (unaudited)		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		33
PART II. OTHER INFORMATION
Item 1. Legal Proceedings		35
Item 1A. Risk Factors		35
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		35
Item 3. Defaults Upon Senior Securities		35
Item 4. (Removed and Reserved)		35
Item 5. Other Information		35
Item 6. Exhibits		35
Signatures		36
EX-10.4
EX-10.5
EX-10.6
EX-10.9
EX-10.10
EX-10.11
EX-10.12
EX-31.1
EX-31.2
EX-32

PART 1. FINANCIAL INFORMATION

Item 1. Financial Statements

WALTER INVESTMENT MANAGEMENT CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)

		March 31,				December 31,
		2010				2009
		(Unaudited)
ASSETS
Cash and cash equivalents		$	96,302			$	99,286
Restricted cash			8,901				8,963
Restricted cash of securitization trusts			41,324				42,691
Receivables, net			3,542				3,052
Residential loans, net of allowance for loan losses of $3,384 and $3,460, respectively			327,775				333,636
Residential loans of securitization trusts, net of allowance for loan losses of $13,940 and $14,201, respectively			1,292,561				1,310,710
Subordinate security			1,837				1,801
Real estate owned			25,284				21,981
Real estate owned of securitization trusts			36,667				41,143
Deferred debt issuance costs of securitization trusts			18,137				18,450
Other assets			5,073				5,961
Total assets		$	1,857,403			$	1,887,674
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable		$	477			$	13,489
Accounts payable of securitization trusts			555				556
Accrued expenses			25,438				28,296
Deferred income taxes, net			161				173
Mortgage-backed debt of securitization trusts			1,244,379				1,267,454
Accrued interest of securitization trusts			8,555				8,755
Other liabilities			776				767
Total liabilities			1,280,341				1,319,490
Commitments and contingencies (Note 17)
Stockholders’ equity:
Preferred stock, $0.01 par value per share:
Authorized — 10,000,000 shares
Issued and outstanding — 0 shares at March 31, 2010 and December 31, 2009			—				—
Common stock, $0.01 par value per share:
Authorized — 90,000,000 shares
Issued and outstanding — 25,694,073 and 25,642,889 shares at March 31, 2010 and December 31, 2009, respectively			257				256
Additional paid-in capital			123,471				122,552
Retained earnings			451,545				443,433
Accumulated other comprehensive income			1,789				1,943
Total stockholders’ equity			577,062				568,184
Total liabilities and stockholders’ equity		$	1,857,403			$	1,887,674

The accompanying notes are an integral part of the consolidated financial statements.

WALTER INVESTMENT MANAGEMENT CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(in thousands, except share and per share data)

		For the Three Months
		Ended March 31,
		2010				2009
Net interest income:
Interest income		$	41,628			$	45,829
Less: Interest expense			21,274				23,089
Total net interest income			20,354				22,740
Less: Provision for loan losses			3,190				4,376
Total net interest income after provision for loan losses			17,164				18,364
Non-interest income:
Premium revenue			2,691				3,065
Other income, net			760				160
Total non-interest income			3,451				3,225
Non-interest expenses:
Claims expense			912				1,289
Salaries and benefits			6,981				4,285
Legal and professional			899				704
Occupancy			345				335
Technology and communication			728				818
Depreciation and amortization			91				78
General and administrative			2,365				1,533
Other expense			51				337
Related party — allocated corporate charges			—				853
Total non-interest expenses			12,372				10,232
Income before income taxes			8,243				11,357
Income tax expense			131				4,155
Net income		$	8,112			$	7,202
Basic earnings per common and common equivalent share		$	0.30			$	0.36
Diluted earnings per common and common equivalent share		$	0.30			$	0.36
Weighted average common and common equivalent shares outstanding — basic			26,343,279				19,871,205
Weighted average common and common equivalent shares outstanding — diluted			26,403,281				19,871,205

The accompanying notes are an integral part of the consolidated financial statements.

WALTER INVESTMENT MANAGEMENT CORP. AND SUBSIDIARIES

(in thousands, except share data)

																										Accumulated
														Additional												Other
						Common Stock								Paid-In				Comprehensive				Retained				Comprehensive
		Total				Shares				Amount				Capital				Income				Earnings				Income
Balance at December 31, 2009		$	568,184				25,642,889			$	256			$	122,552							$	443,433			$	1,943
Comprehensive income:
Net income			8,112															$	8,112				8,112
Other comprehensive income (loss), net of tax:
Change in postretirement benefit plans, net of $7 tax effect			(126	)															(126	)							(126	)
Net unrealized gain on subordinate security, net of $0 tax effect			36																36								36
Net amortization of realized gain on closed hedges, net of $0 tax effect			(64	)															(64	)							(64	)
Comprehensive income																		$	7,958
Share-based compensation			1,172												1,172
Shares issued upon exercise of stock options and vesting of RSUs			12				70,180				1				11
Repurchase and cancellation of common stock			(264	)			(18,996	)							(264	)
Balance at March 31, 2010		$	577,062				25,694,073			$	257			$	123,471							$	451,545			$	1,789

The accompanying notes are an integral part of the consolidated financial statements.

WALTER INVESTMENT MANAGEMENT CORP. AND SUBSIDIARIES

(in thousands)

		For the Three Months
		Ended March 31,
		2010				2009
Operating activities:
Net income		$	8,112			$	7,202
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Provision for loan losses			3,190				4,376
Amortization of residential loan discount to interest income			(3,235	)			(4,143	)
Depreciation and amortization			91				78
Benefit from deferred income taxes			(5	)			(183	)
Amortization of deferred debt issuance costs to interest expense			259				260
Share-based compensation			1,172				67
Other			(124	)			(121	)
(Increase) decrease in assets:
Receivables			1,108				281
Other			805				(88	)
Increase (decrease) in liabilities:
Accounts payable			235				(188	)
Accrued expenses			(2,858	)			3,906
Accrued interest			(200	)			(253	)
Cash flows provided by operating activities			8,550				11,194
Investing activities:
Principal payments received on residential loans			24,736				30,813
Additions to real estate owned			(3,327	)			(2,071	)
Cash proceeds from sales of real estate owned			2,221				2,452
Additions to property and equipment, net			(8	)			(1,881	)
Decrease in restricted cash			1,429				7
Cash flows provided by investing activities			25,051				29,320
Financing activities:
Payments on mortgage-backed debt			(23,085	)			(27,673	)
Net activity with Walter Energy			—				(8,680	)
Dividends and dividend equivalents declared			(13,248	)			—
Shares issued upon exercise of stock options and vesting of RSUs			12				—
Repurchase and cancellation of common stock			(264	)			—
Cash flows used in financing activities			(36,585	)			(36,353	)
Net increase (decrease) in cash and cash equivalents			(2,984	)			4,161
Cash and cash equivalents at the beginning of the period			99,286				1,319
Cash and cash equivalents at the end of the period		$	96,302			$	5,480
Supplemental Disclosure of Non-Cash Investing and Financing Activities:
Real estate owned acquired through foreclosure		$	21,104			$	20,863
Residential loans originated to finance the sale of real estate owned		$	20,476			$	13,473
Residential loans acquired with warehouse proceeds and/or advances from Walter Energy		$	—			$	1,390
Dividends to Walter Energy		$	—			$	3,356

The accompanying notes are an integral part of the consolidated financial statements.

WALTER INVESTMENT MANAGEMENT CORP. AND SUBSIDARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1. Business

     The Company is a mortgage servicer and mortgage portfolio owner specializing in subprime, non-conforming and other credit-challenged residential loans primarily in the southeastern United States, or U.S. The Company also operates mortgage advisory and insurance ancillary businesses. At March 31, 2010, the Company had four wholly owned, primary subsidiaries: Hanover Capital Partners 2, Ltd., doing business as Hanover Capital, Walter Mortgage Company, LLC, or WMC, Best Insurors, Inc., or Best, and Walter Investment Reinsurance Company, Ltd., or WIRC.

     The Company’s business, headquartered in Tampa, Florida, was established in 1958 as the financing segment of Walter Energy, Inc., formerly known as Walter Industries, Inc., or Walter Energy. Throughout the Company’s history, it purchased residential loans originated by Walter Energy’s homebuilding affiliate, Jim Walter Homes, Inc., or JWH, originated and purchased residential loans on its own behalf, and serviced these residential loans to maturity. Over the past 50 years, the Company has developed significant expertise in servicing credit-challenged accounts through its differentiated high-touch approach which involves significant face-to-face borrower contact by trained servicing personnel strategically located in the markets where its borrowers reside. As of March 31, 2010, the Company serviced approximately 34,000 individual residential loans.

The Spin-off

     On September 30, 2008, Walter Energy outlined its plans to separate its Financing business from its core Natural Resources business through a spin-off to stockholders. Immediately prior to the spin-off, substantially all of the assets and liabilities related to the Financing business were contributed, through a series of transactions, to Walter Investment Management LLC, or WIM, in return for all of WIM’s membership units. See Note 3 for further information.

     The combined financial statements of WMC, Best and WIRC (collectively representing substantially all of Walter Energy’s Financing business prior to the spin-off) are considered the predecessor to WIM for accounting purposes. Under Walter Energy’s ownership, the Financing business operated through separate subsidiaries. A direct ownership relationship did not exist among the legal entities prior to the contribution to WIM.

The Merger

     On September 30, 2008, Walter Energy and WIM entered into a definitive agreement to merge with Hanover Capital Mortgage Holdings, Inc., or Hanover, which agreement was amended and restated on February 17, 2009. On April 17, 2009, Hanover completed the transactions, or the Merger, contemplated by the Second Amended and Restated Agreement and Plan of Merger (as amended on April 17, 2009, or the Merger Agreement) by and among Hanover, Walter Energy, WIM, and JWH Holding Company, LLC, or JWHHC. The merged business, together with its consolidated subsidiaries, was renamed Walter Investment Management Corp. on April 17, 2009 and is referred to herein as “Walter Investment” or the “Company”. See Note 3 for further information.

2. Basis of Presentation

Interim Financial Reporting

     The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States, or GAAP, for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments, consisting of normal recurring accruals, considered necessary for a fair presentation have been included. Operating results for the three month period ended March 31, 2010 are not necessarily indicative of the results that may be expected for the year ended December 31, 2010. These unaudited interim financial statements should be read in conjunction with our audited consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009.

     Although Hanover was the surviving legal and tax entity in the Merger, for accounting purposes the Merger was treated as a reverse acquisition of the operations of Hanover and has been accounted for pursuant to the guidance concerning business combinations, with WIM as the accounting acquirer. As such, the pre-acquisition financial statements of WIM are treated as the historical financial statements of Walter Investment. The Hanover assets acquired and the liabilities assumed were recorded at the date of acquisition, April 17, 2009, at their respective fair values. The results of operations of Hanover were included in the consolidated statements of income for periods subsequent to the Merger.

     The consolidated financial statements have been prepared in accordance with GAAP, which requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements. Actual results could differ from those estimates. All significant intercompany balances have been eliminated in the consolidated financial statements.

     Although the Company did not operate as an independent, stand-alone entity prior to April 17, 2009, management believes the assumptions underlying the consolidated financial statements for the period through April 17, 2009 are reasonable. However, the consolidated financial statements included herein do not include all of the expenses that would have been incurred had the Company been a separate, stand-alone entity, although, the consolidated financial statements do include certain costs and expenses that have been allocated to the Company from Walter Energy for the three months ended March 31, 2009. As such, the financial information does not necessarily reflect what would have been reflected had the Company been a separate, stand-alone entity during the period through April 17, 2009.

Recent Accounting Guidance

Transfers and Servicing

     In June 2009, the FASB issued new accounting guidance concerning the accounting for transfers of financial assets which amends the existing derecognition accounting and disclosure guidance. The guidance eliminates the exemption from consolidation for QSPEs, it also requires a transferor to evaluate all existing QSPEs to determine whether it must be consolidated in accordance with the accounting guidance concerning variable interest entities. The guidance was effective for financial asset transfers occurring after the beginning of an entity’s first fiscal year that begins after November 15, 2009. The adoption of this guidance on January 1, 2010 did not have a significant impact on the Company’s consolidated financial statements.

Fair Value Measurements and Disclosures

     In January 2010, the FASB updated the accounting standards to require new disclosures for fair value measurements and to provide clarification for existing disclosure requirements. More specifically, this update will require (a) an entity to disclose separately the amounts of significant transfers in and out of levels 1 and 2 fair value measurements and to describe the reasons for the transfers and (b) information about purchases, sales, issuances, and settlements to be presented separately (i.e., present the activity on a gross basis rather than net) in the roll forward of fair value measurements using significant unobservable inputs (Level 3 inputs). This update clarifies existing disclosure requirements for the level of disaggregation used for classes of assets and liabilities measured at fair value and requires disclosures about the valuation techniques and inputs used to measure for fair value for both recurring and nonrecurring fair value measurements using Level 2 and Level 3 inputs. The standard was effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December 12, 2010, and for interim periods within those fiscal years. The adoption of this guidance on January 1, 2010 did not have a significant impact on the Company’s consolidated financial statements or disclosures. See Note 5 for the additional required disclosures.

Subsequent Events

     In May 2009, the FASB issued guidelines on subsequent event accounting to establish general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued. This guidance was subsequently amended in February 2010 to no longer require disclosure of the date through which an entity has evaluated subsequent events. The adoption of this guidance did not have a significant impact on the Company’s consolidated financial statements.

Receivables

     In April 2010, the FASB updated the accounting standards to clarify that modifications of acquired loans that are accounted for within a pool would not result in the removal of those loans from the pool even if the modification would otherwise be considered a troubled debt restructuring. The guidance will be effective for modifications of acquired loans accounted for within pools occurring in the first interim or annual period ending on or after July 15, 2010. The Company is continuing to evaluate the impact that the guidance will have on the Company’s consolidated financial statements.

Reclassifications

     In order to provide comparability between periods presented, certain amounts have been reclassified from the previously reported consolidated financial statements to conform to the consolidated financial statement presentation of the current period.

3. Business Separation and Merger

     On September 30, 2008, Walter Energy outlined its plans to separate its Financing business from its core Natural Resources businesses through a spin-off to stockholders and subsequent Merger with Hanover. In furtherance of these plans, on September 30, 2008, Walter Energy and WIM entered into a definitive agreement to merge with Hanover, which agreement was amended and restated on February 17, 2009. To effect the separation, WIM was formed on February 3, 2009, as a wholly-owned subsidiary of Walter Energy, having no independent assets or operations. Immediately prior to the spin-off, substantially all of the assets and

liabilities related to the Financing business were contributed, through a series of transactions, to WIM in return for WIM’s membership unit.

     On April 17, 2009, the Company completed its separation from Walter Energy. In connection with the separation, WIM and Walter Energy executed the following transactions or agreements which involved no cash:

	•		Walter Energy distributed 100% of its interest in WIM to holders of Walter Energy’s common stock;
	•		All intercompany balances between WIM and Walter Energy were settled with the net balance recorded as a dividend to Walter Energy;
	•		In accordance with the Tax Separation Agreement, Walter Energy will, in general, be responsible for any and all taxes reported on any joint return through the date of the separation, which may also include WIM for periods prior to the separation. WIM will be responsible for any and all taxes reported on any WIM separate tax return and on any consolidated returns for Walter Investment subsequent to the separation;
	•		Walter Energy’s share-based awards held by WIM employees were converted to equivalent share-based awards of Walter Investment, with the number of shares and the exercise price being equitably adjusted to preserve the intrinsic value. The conversion was accounted for as a modification pursuant to the guidance concerning stock compensation.

     The assets and liabilities transferred to WIM from Walter Energy also included $26.6 million in cash, which was contributed to WIM by Walter Energy on April 17, 2009. Following the spin-off, WIM paid a taxable dividend consisting of cash of $16.0 million and additional equity interests to its members.

     The Merger occurred immediately following the spin-off and taxable dividend on April 17, 2009. The surviving company, Walter Investment, continues to operate as a publicly traded REIT subsequent to the Merger. After the spin-off and Merger, Walter Energy’s stockholders that became members of WIM as a result of the spin-off, and certain holders of options to acquire limited liability company interests of WIM, collectively owned 98.5% and stockholders of Hanover owned 1.5% of the shares of common stock of Walter Investment outstanding or reserved for issuance in settlement of restricted stock units of Walter Investment. As a result, the business combination has been accounted for as a reverse acquisition, with WIM considered the accounting acquirer. Walter Investment applied for, and was granted approval, to list its shares on the NYSE Amex. On April 20, 2009, the Company’s common stock began trading on the NYSE Amex under the symbol “WAC”.

     The purchase price for the acquisition was $2.2 million based on the fair value of Hanover (308,302 Hanover shares, which represented 1.5% of the shares of common stock at the time of the transaction, at $7.09, the closing stock price of Walter Investment) on April 17, 2009.

     The above purchase price has been allocated to the tangible assets acquired and liabilities assumed based on management’s estimates of their current fair values. Acquisition-related transaction costs, including legal and accounting fees and other external costs directly related to the Merger, were expensed as incurred.

     Prior to the acquisition, the Company loaned Hanover funds under a revolving line of credit, as well as a loan and security agreement which were automatically terminated by operation of law upon consummation of the Merger.

4. Restricted Cash

Restricted Cash

     Restricted cash totaled $8.9 million and $9.0 million at March 31, 2010 and December 31, 2009, respectively. Restricted cash includes approximately $5.9 million at March 31, 2010 and December 31, 2009 held in an insurance trust account which secures payments under the Company’s reinsurance agreements. The funds in the insurance trust account include investments in money market funds. The remaining restricted cash at March 31, 2010 and December 31, 2009 consists primarily of compensating balance requirements.

Restricted Cash of Securitization Trusts

     Restricted cash of securitization trusts relate primarily to funds collected on residential loans owned by the Company’s various securitization trusts (see Note 9), which are available only to pay expenses of the securitization trusts and principal and interest on indebtedness of the securitization trusts ($41.3 million and $42.7 million, at March 31, 2010 and December 31, 2009, respectively). Restricted cash also includes amounts to provide overcollateralization within the Company’s mortgage-backed debt arrangements. Restricted cash at March 31, 2010 and December 31, 2009 include short-term deposits in FDIC-insured accounts.

5. Fair Value

     Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. A three-tier fair value hierarchy is used to prioritize the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted market prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. The three levels of the fair value hierarchy are as follows:

Basis or Measurement

     Level 1 Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

     Level 2 Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly.

     Level 3 Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.

     The accounting guidance concerning fair value allows the Company to elect to measure certain items at fair value and report the changes in fair value through the statements of income. This election can only be made at certain specified dates and is irrevocable once made. The Company does not have a policy regarding specific assets or liabilities to elect to measure at fair value, but rather makes the election on an instrument by instrument basis as they are acquired or incurred. The Company has not made the fair value election for any financial assets or liabilities as of March 31, 2010.

     The Company determines fair value based upon quoted broker prices when available or through the use of alternative approaches, such as discounting the expected cash flows using market rates commensurate with the credit quality and duration of the investment.

Items Measured at Fair Value on a Recurring Basis

     The subordinate security is measured in the consolidated financial statements at fair value on a recurring basis in accordance with the accounting guidance concerning debt and equity securities and is categorized in the table below based upon the lowest level of significant input to the valuation (in thousands):

		March 31, 2010
		Quoted Prices in
		Active Markets								Significant
		for Identical				Significant Other				Unobservable
		Assets				Observable Inputs				Inputs
		(Level 1)				(Level 2)				(Level 3)				Total
Subordinate security		$	—			$	—			$	1,837			$	1,837
Total		$	—			$	—			$	1,837			$	1,837

     The subordinate security, acquired as part of the Merger, consists of a single, fixed-rate security backed by notes that are collateralized by manufactured housing. Approximately one-third of the notes include attached real estate on which the manufactured housing is located as additional collateral. The subordinate security has a coupon of 8.0% and a contractual maturity of 2038. The underlying notes were originated primarily in 2004 and 2005, have a weighted-average coupon rate of 9.6% and a weighted-average maturity of 19.3 years. The subordinate security has an overcollateralization level of 8.6% with a 1.1% annual loss rate.

     To estimate the fair value, the Company used a discounted cash flow approach. The significant inputs for the valuation model include the following:

	•		Yield: 18.5%
	•		Probability of default: 2.3%
	•		Loss severity: 55.0%
	•		Prepayment: 3.5%

     The following table provides a reconciliation of the beginning and ending balances of the Company’s subordinate security which is measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three months ended March 31, 2010 (in thousands):

		As of and for the
		Three Months Ended
		March 31, 2010
Beginning balance		$	1,801
Principal reductions			—
Total gains (losses):
Included in net income			—
Included in other comprehensive income			36
Purchases, sales, issuances and settlements, net			—
Transfer into or out of Level 3 category			—
		$	1,837
Total gains (losses) for the period included in earnings attributable to the change in unrealized gains or losses relating to assets still held at the reporting date		$	—

Items Measured at Fair Value on a Non-Recurring Basis

     At the time a residential loan becomes real estate owned, or REO, the Company records the property at the lower of its carrying amount or estimated fair value less estimated costs to sell. Upon foreclosure and through liquidation, the Company evaluates the property’s fair value as compared to its carrying amount and records a valuation adjustment when the carrying amount exceeds fair value. Any valuation adjustment at the time the loan becomes real estate owned is charged to the allowance for loan losses.

     Carrying values, and the corresponding fair value adjustments, for Level 3 assets and liabilities measured in the consolidated financial statements at fair value on a non-recurring basis are as follows (in thousands):

		Fair Value Measurements at Reporting Date Using
						Quoted Prices in
		Real				Active Markets for				Significant Other				Significant
		Estate				Identical Assets				Observable Inputs				Unobservable Inputs				Fair Value
Fair Value at		Owned				(Level 1)				(Level 2)				(Level 3)				Adjustment
Real estate owned:
March 31, 2010		$	25,284			$	—			$	—			$	25,284			$	(5,167	)
December 31, 2009		$	21,981			$	—			$	—			$	21,981			$	(4,430	)
Real estate owned of securitization trusts:
March 31, 2010		$	36,667			$	—			$	—			$	36,667			$	(9,617	)
December 31, 2009		$	41,143			$	—			$	—			$	41,143			$	(10,615	)

     As of March 31, 2010, the fair value of the Company’s Level 3 REO was $62.0 million. These REO properties are generally located in rural areas and are primarily concentrated in Texas, Mississippi, Alabama, Florida, South Carolina and Georgia. The REO properties have a weighted-average holding period of 10 months. To estimate the fair value, the Company utilized historical loss severity rates experienced on similar REO properties previously sold by the Company. The blended loss severity utilized at March 31, 2010 was 19.2%.

Fair Value of Financial Instruments

     The following table presents the carrying values and estimated fair values of financial assets and liabilities that are required to be recorded or disclosed at fair value as of March 31, 2010 and December 31, 2009, respectively (in thousands):

		March 31, 2010								December 31, 2009
		Carrying Amount				Estimated Fair Value				Carrying Amount				Estimated Fair Value
Financial assets:
Cash and cash equivalents		$	96,302			$	96,302			$	99,286			$	99,286
Cash and short-term investments			8,901				8,901				8,963				8,963
Restricted cash of securitization trusts			41,324				41,324				42,691				42,691
Receivables, net			3,542				3,542				3,052				3,052
Residential loans, net			327,775				295,600				333,636				295,000

		March 31, 2010								December 31, 2009
		Carrying Amount				Estimated Fair Value				Carrying Amount				Estimated Fair Value
Residential loans of securitization trusts, net			1,292,561				1,243,047				1,310,710				1,238,267
Subordinate security			1,837				1,837				1,801				1,801
Financial liabilities:
Accounts payable			477				477				13,489				13,489
Accounts payable of securitization trusts			555				555				556				556
Accrued expenses			25,438				25,438				28,296				28,296
Mortgage-backed debt, net of deferred debt issuance costs, of securitization trusts			1,226,242				1,147,056				1,249,004				1,147,142
Accrued interest of securitization trusts			8,555				8,555				8,755				8,755

     For assets and liabilities measured in the consolidated financial statements on a historical cost basis, the estimated fair value shown in the above table is for disclosure purposes only. The following methods and assumptions were used to estimate fair value:

     Cash, restricted cash and short-term investments, receivables, accounts payable, accrued expenses, and accrued interest — The estimated fair value of these financial instruments approximates their carrying value due to their high liquidity or short-term nature.

     Residential loans — The fair value of residential loans is estimated by discounting the net cash flows estimated to be generated from the asset. The discounted cash flows were determined using assumptions such as, but not limited to, interest rates, prepayment speeds, default rates, loss severities, and a risk-adjusted market discount rate. The value of these assets is very sensitive to changes in interest rates.

     Subordinate security — The fair value of the subordinate security is measured in the consolidated financial statements at fair value on a recurring basis by discounting the net cash flows estimated to be generated from the asset. Unrealized gains and losses are reported in accumulated other comprehensive income. To the extent that the cost basis exceeds the fair value and the unrealized loss is considered to be other-than-temporary, an impairment charge is recognized and the amount recorded in accumulated other comprehensive income or loss is reclassified to earnings as a realized loss.

     Mortgage-backed debt, net of deferred debt issuance costs, of securitization trusts — The fair value of mortgage-backed debt of securitization trusts is determined by discounting the net cash outflows estimated to be used to repay the debt. These obligations are to be satisfied using the proceeds from the residential loans that secure these obligations and are non-recourse to the Company. The value of mortgage-backed debt is very sensitive to changes in interest rates.

6. Residential Loans

     Residential loans, net are held for investment and consist of unencumbered residential mortgage loans and residential retail instalment agreements, summarized in the table below (in thousands):

		March 31, 2010				December 31, 2009
Residential loans, principal balance		$	360,543			$	365,797
Less: Yield adjustment, net (1)			(29,384	)			(28,701	)
Less: Allowance for loan losses			(3,384	)			(3,460	)
Residential loans, net (2)		$	327,775			$	333,636

     The following table summarizes the activity in the allowance for loan losses on residential loans, net (in thousands):

		Three Months Ended
		March 31,
		2010				2009
Balance, December 31		$	3,460			$	3,418
Provision charged to income			1,399				1,269
Less: Charge-offs, net of recoveries			(1,475	)			(1,314	)
Balance, March 31		$	3,384			$	3,373

     The amount of residential loans, net that had been put on nonaccrual status due to delinquent payments of 90 days past due or greater was $18.8 million and $21.4 million at March 31, 2010 and December 31, 2009, respectively. Residential loans are placed on non-accrual status when any portion of the principal or interest is 90 days past due. When placed on non-accrual status, the related interest receivable is reversed against interest income of the current period. Residential loans are removed from non-accrual status when the amount financed and the associated interest are no longer over 90 days past due.

     The following table presents delinquencies as a percent of amounts outstanding on the principal balance of residential loans, net:

		March 31, 2010				December 31, 2009
31-60 days			1.62	%			1.98	%
61-90 days			0.83	%			1.53	%
91 days or more			5.21	%			5.84	%
			7.66	%			9.35	%

7. Residential Loans of Securitization Trusts

     Residential loans of securitization trusts, net consist of residential mortgage loans and residential retail instalment agreements that the Company has securitized in structures that are accounted for as financings. These securitizations are structured legally as sales, but for accounting purposes are treated as financings under the accounting guidance concerning transfers of financial assets, as amended. Accordingly, the loans in these securitizations remain on the balance sheet as residential loans. Given this treatment, retained interests are not created, and securitization mortgage-backed debt is reflected on the balance sheet as a liability. The assets of the securitization trusts are not available to satisfy claims of general creditors of the Company and the mortgage-backed debt issued by the securitization trusts is to be satisfied solely from the proceeds of the residential loans of securitization trusts and are non-recourse to the Company. The Company records interest income on residential loans of securitization trusts and interest expense on mortgage-backed debt issued in the securitizations over the life of the securitizations. Deferred debt issuance costs and discounts related to the mortgage-backed debt are amortized on a level yield basis over the estimated life of the mortgage-backed debt.

     Residential loans of securitization trusts, net are summarized as follows (in thousands):

		March 31, 2010				December 31, 2009
Residential loans of securitization trusts, principal balance		$	1,432,403			$	1,454,062
Less: Yield adjustment, net (1)			(125,902	)			(129,151	)
Less: Allowance for loan losses			(13,940	)			(14,201	)
Residential loans of securitization trusts, net (2)		$	1,292,561			$	1,310,710

     The following table summarizes the activity in the allowance for loan losses on residential loans of securitization trusts, net (in thousands):

		Three Months Ended
		March 31,
		2010				2009
Balance, December 31		$	14,201			$	15,551
Provision charged to income			1,791				3,107
Less: Charge-offs, net of recoveries			(2,052	)			(3,549	)
Balance, March 31		$	13,940			$	15,109

     The amount of residential loans of securitization trusts, net that had been put on nonaccrual status due to delinquent payments of 90 days past due or greater was $32.9 million and $39.8 million at March 31, 2010 and December 31, 2009, respectively. Residential loans are placed on non-accrual status when any portion of the principal or interest is 90 days past due. When placed on non-accrual status, the related interest receivable is reversed against interest income of the current period. Residential loans are removed from non-accrual status when the amount financed and the associated interest are no longer over 90 days past due.

     All of the Company’s residential loans of securitization trusts, net are pledged as collateral for the mortgage-backed debt (see Note 9). The Company’s only continued involvement with the residential loans of securitization trusts, net is retaining all of the beneficial interests in the securitization trusts and servicing the residential loans collateralizing the mortgage-backed debt.

     The following table presents delinquencies as a percent of amounts outstanding on the principal balance of residential loans of securitization trusts:

		March 31, 2010				December 31, 2009
31-60 days			0.73	%			1.17	%
61-90 days			0.31	%			0.54	%
91 days or more			2.30	%			2.74	%
			3.34	%			4.45	%

8. Subordinate Security

     The Company’s subordinate security totaled $1.8 million at March 31, 2010 and December 31, 2009. The subordinate security was acquired as part of the Merger with Hanover. Subordinate security is summarized as follows (in thousands):

		March 31, 2010				December 31, 2009
Principal balance		$	3,812			$	3,812
Purchase price and other adjustments			(2,200	)			(2,200	)
Amortized cost		$	1,612			$	1,612
Unrealized gain			225				189
Carrying value (fair value)		$	1,837			$	1,801

     Actual maturities on mortgage-backed securities are generally shorter than the stated contractual maturities because the actual maturities are affected by the contractual lives of the underlying notes, periodic payments of principal, and prepayments of principal. The contractual maturity of the subordinate security is 2038.

9. Mortgage-Backed Debt and Related Collateral of Securitization Trusts

Mortgage-Backed Debt

     Mortgage-backed debt consists of mortgage-backed/asset-backed notes and collateralized mortgage obligations issued by the Company to fund its residential loans via the securitization market. The securitization trusts beneficially owned by WIMC and its wholly owned subsidiary, Mid-State Capital, LLC, or Mid-State Capital, are the depositors under the Company’s outstanding mortgage-backed and asset-backed notes (the “Trust Notes”), which consist of eight separate series of public debt offerings and one private offering. Hanover Capital Grantor Trust, acquired from Hanover as part of the Merger, is a public debt offering. These ten trusts have an aggregate of $1.2 billion of outstanding debt, collateralized by $1.5 billion of assets, including residential loans, REO and restricted cash. All of the Company’s mortgage-backed debt is non-recourse and not cross-collateralized and, therefore, must be satisfied exclusively from the proceeds of the residential loans and REO held in each securitization trust. The Company services the collateral underlying the nine securitization trusts owned by WIMC and Mid-State Capital.

     The securitization trusts contain provisions that require the cash payments received from the underlying residential loans be applied to reduce the principal balance of the Trust Notes unless certain overcollateralization or other similar targets are satisfied. The securitization trusts also contain delinquency and loss triggers, that, if exceeded, require that any excess overcollateralization be paid to reduce the outstanding principal balance of the Trust Notes for that particular securitization at an accelerated pace. Assuming no servicer trigger events have occurred and the overcollateralization targets have been met, any excess cash is released to the Company either monthly or quarterly, in accordance with the terms of the respective underlying trust agreements. As of March 31, 2010, two of the Company’s securitization trusts exceeded certain triggers and did not provide any significant levels of excess cash flow to the Company during the three months ended March 31, 2010.

     Borrower remittances received on the residential loan collateral are used to make payments on the mortgage-backed debt. The maturity of the mortgage-backed debt is directly affected by principal prepayments on the related residential loan collateral. As a result, the actual maturity of the mortgage-backed debt is likely to occur earlier than the stated maturity. Certain of the Company’s

mortgage-backed debt is also subject to redemption at the option of the Company according to specific terms of the respective indenture agreements.

Collateral for Mortgage-Backed Debt

     The following table summarizes the carrying value of the collateral for the mortgage-backed debt as of March 31, 2010 and December 31, 2009, respectively (in thousands):

		March 31, 2010				December 31, 2009
Residential loans of securitization trusts, principal balance		$	1,432,403			$	1,454,062
Restricted cash of securitization trusts			41,324				42,691
Real estate owned of securitization trusts			36,667				41,143
Total mortgage-backed debt collateral of securitization trusts		$	1,510,394			$	1,537,896

10. Share-Based Compensation Plans

     The Company’s share-based expense has been reflected in the consolidated statements of income in salaries and benefits expense.

Option Activity

     On January 4, 2010, certain executive officers of the Company were awarded a total of 118,651 nonqualified options, or the Executive Options, to acquire common stock of the Company pursuant to the 2009 LTIP. The Executive Options granted to each executive officer of the Company will vest and become exercisable in equal installments on the first, second and third anniversary of the date of grant. The exercise price of $14.39 for each of the Executive Options was determined based on the mean of the high and low sales prices for a share of common stock of the Company as reported by the NYSE Amex on the date of grant.

     On January 22, 2010, an executive, in connection with his employment with the Company, was awarded a total of 90,000 nonqualified options to acquire common stock of the Company pursuant to the 2009 LTIP. The options granted will vest and become exercisable on the fourth anniversary of the award. The exercise price of $14.29 for each option was determined based on the mean of the high and low sales prices for a share of common stock of the Company as reported by the NYSE Amex on the date of grant.

     On March 3, 2010, the Company granted stock options to its new non-employee director who was awarded a total of 5,195 nonqualified options to acquire common stock of the Company pursuant to the 2009 LTIP. The options granted will vest and become exercisable in equal installments on the first, second and third anniversary of the date of grant. The exercise price of $14.79 for each option was determined based on the mean of the high and low sales prices for a share of common stock of the Company as reported by the NYSE Amex on the date of grant.

     The grant date fair value of the stock options granted during the three months ended March 31, 2010 approximated $0.6 million.

Non-Vested Share Activity

     The Company’s non-vested share-based awards consist of restricted stock and restricted stock units.

     On January 4, 2010, certain executive officers of the Company were awarded a total of 100,548 restricted stock units, or the Executive RSUs, of the Company pursuant to the 2009 LTIP. The Executive RSUs granted to each executive officer of the Company will vest in equal installments on the first, second and third anniversary of the date of grant, and each such Executive RSU vested on such date will be paid out with a single share of common stock of the Company. Each executive receiving Executive RSUs will be entitled to receive cash payments equivalent to any dividend paid to the holders of common stock of the Company, but they will not be entitled to any voting rights otherwise associated with the common stock.

     On January 22, 2010, an executive, in connection with his employment with the Company, was awarded a total of 135,556 restricted stock units, or RSUs, of the Company under the 2009 LTIP. Of the RSUs granted, 110,000 will vest in equal installments on the first, second and third anniversary of the date of grant. The settlement date for these RSUs is January 22, 2013, and each such RSU vested on such date will be paid out with a single share of common stock of the Company. The remaining 25,556 RSUs granted will vest on the first anniversary of the date of grant. The settlement date for these RSUs is March 14, 2011, and each such RSU vested on such date will be paid out with a single share of common stock of the Company. The executive receiving the RSUs will be entitled to receive cash payments equivalent to any dividend paid to the holders of common stock of the Company, but they will not be entitled to any voting rights otherwise associated with the common stock.

     The grant date fair value of RSUs granted during the three months ended March 31, 2010 approximated $3.4 million.

11. Credit Agreements

     On April 20, 2009, the Company entered into a syndicated credit agreement, a revolving credit agreement and security agreement, and a support letter of credit agreement. All three of these agreements mature on April 20, 2011. As of March 31, 2010, no funds have been drawn under any of the credit agreements and the Company is in compliance with all covenants.

12. Transactions with Walter Energy

     Following the spin-off, Walter Investment and Walter Energy have operated independently, and neither has any ownership interest in the other. In order to govern certain of the ongoing relationships between the Company and Walter Energy after the spin-off and to provide mechanisms for an orderly transition, the Company and Walter Energy entered into certain agreements, pursuant to which (a) the Company and Walter Energy provide certain services to each other, (b) the Company and Walter Energy will abide by certain non-compete and non-solicitation arrangements, and (c) the Company and Walter Energy will indemnify each other against certain liabilities arising from their respective businesses. The specified services that the Company and Walter Energy may provide each other, as requested, include tax and accounting services, certain human resources services, communications systems and support, and insurance/risk management. Each party will be compensated for services rendered, as set forth in the Transition Services Agreement. The Transition Services Agreement provides for terms not to exceed 24 months for the various services, with some of the terms capable of extension. See Note 3 for further information regarding the spin-off transaction.

13. Comprehensive Income and Accumulated Other Comprehensive Income

     The components of comprehensive income are as follows (in thousands):

		Three Months Ended
		March 31,
		2010				2009
Net income		$	8,112			$	7,202
Other comprehensive income (loss):
Change in postretirement benefit plans, net of $7 tax effect			(126	)			—
Net unrealized gain on subordinate security, net of $0 tax effect			36				—
Net amortization of realized gain on closed hedges, net of $0 and $30 tax effect, respectively			(64	)			(51	)
Comprehensive income		$	7,958			$	7,151

     The components of accumulated other comprehensive income are as follows (in thousands):

		Excess of
		Additional
		Postretirement				Net Unrealized Gain				Net Amortization of
		Employee Benefits				on Subordinate				Realized Gain on
		Liability				Security				Closed Hedges				Total
Balance at December 31, 2009		$	1,117			$	189			$	637			$	1,943
Pre-tax amount			(133	)			36				(64	)			(161	)
Tax benefit			7				—				—				7
Balance at March 31, 2010		$	991			$	225			$	573			$	1,789

14. Common Stock and Earnings Per Share

     In accordance with the accounting guidance concerning earnings per share, or EPS, unvested share-based payment awards that include non-forfeitable rights to dividends or dividend equivalents, whether paid or unpaid, are considered participating securities. As a result, the awards are required to be included in the calculation of basic earnings per common share pursuant to the “two-class” method. For the Company, participating securities are comprised of certain unvested restricted stock and restricted stock units.

     Under the two-class method, net income is reduced by the amount of dividends declared in the period for common stock and participating securities. The remaining undistributed earnings are then allocated to common stock and participating securities as if all of the net income for the period had been distributed. Basic earnings per share excludes dilution and is calculated by dividing net income allocable to common shares by the weighted-average number of common shares outstanding for the period. Diluted earnings per share is calculated by dividing net income allocable to common shares by the weighted-average number of common shares for the period, as adjusted for the potential dilutive effect of non-participating share-based awards.

     The following is a reconciliation of the numerators and denominators of the basic and diluted EPS computations shown on the face of the accompanying consolidated statements of income (in thousands, except per share data):

		Three Months Ended March 31,
		2010				2009
Basic earnings per share:
Net income		$	8,112			$	7,202
Less: net income allocated to unvested restricted stock units			(113	)			—
Net income available to common stockholders (numerator)		$	7,999			$	7,202
Weighted-average common shares outstanding			25,657				19,871
Add: vested restricted stock units			686				—
Total weighted-average common shares outstanding (denominator)			26,343				19,871
Basic earnings per share		$	0.30			$	0.36
Diluted earnings per share:
Net income		$	8,112			$	7,202
Less: net income allocated to unvested restricted stock units			(113	)			—
Net income available to common stockholders (numerator)		$	7,999			$	7,202
Weighted-average common shares outstanding			25,657				19,871
Add: Potentially dilutive stock options and restricted stock units			746				—
Diluted weighted-average common shares outstanding (denominator)			26,403				19,871
Diluted earnings per share		$	0.30			$	0.36

     The calculation of diluted earnings per share for the three months ended March 31, 2010 does not include 0.2 million shares because their effect would have been anti-dilutive. There were no anti-dilutive shares for the three months ended March 31, 2009.

15. REIT Qualification

     The Company has elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended. The Company’s continuing qualification as a REIT depends on its ability to meet the various requirements imposed by the Code, which relate to organizational structure, distribution levels, diversity of stock ownership and certain restrictions with regard to owned assets and categories of income. As a REIT, the Company will generally not be subject to United States, or U.S., federal corporate income tax on its taxable income that is currently distributed to stockholders.

     Even as a REIT, the Company may be subject to U.S. federal income and excise taxes in various situations, such as on the Company’s undistributed income.

     Certain of the Company’s operations or portions thereof, including mortgage advisory and insurance ancillary businesses, are conducted through taxable REIT subsidiaries, or TRSs. A TRS is a C-corporation that has not elected REIT status and, as such, is subject to U.S. federal corporate income tax. The Company’s TRSs facilitate its ability to offer certain services and conduct activities that generally cannot be offered directly by the REIT. The Company also will be required to pay a 100% tax on any net income on non-arm’s length transactions between the REIT and any of its TRSs.

16. Income Taxes

     The Company recorded income tax expense of $0.1 million for the three months ended March 31, 2010. During the three months ended March 31, 2010 and 2009, an estimated tax rate of 1.6% and 36.6%, respectively, was used to derive income tax expense of $0.1 million and $4.2 million, respectively, calculated on our income from operations, before taxes, of $8.2 million and $11.4 million, respectively. The decrease in income tax expense was due to the Company’s REIT qualification in conjunction with the spin-off from Walter Energy and Merger with Hanover which resulted in only the Company’s TRSs being taxable entities.

     The Company recognizes tax benefits in accordance with the FASB guidance concerning uncertainty in income taxes. This guidance establishes a “more-likely-than-not” recognition threshold that must be met before a tax benefit can be recognized in the financial statements. As of March 31, 2010 and December 31, 2009, the total gross amount of unrecognized tax benefits was $7.7 million.

17. Commitments and Contingencies

Securities Sold with Recourse

     In October 1998, Hanover sold 15 adjustable-rate FNMA certificates and 19 fixed-rate FNMA certificates that the Company received in a swap for certain adjustable-rate and fixed-rate mortgage loans. These securities were sold with recourse. Accordingly, the Company retains credit risk with respect to the principal amount of these mortgage securities. As of March 31, 2010, the unpaid principal balance of the 15 remaining mortgage securities was approximately $1.7 million.

Employment Agreements

     At March 31, 2010, the Company had employment agreements with its senior officers, with varying terms that provide for, among other things, base salary, bonus, and change-in-control provisions that are subject to the occurrence of certain triggering events.

Bayport Plaza Lease

     On May 1, 2009, the Company entered into a sublease with Municipal Mortgage & Equity, LLC to secure the Company’s corporate headquarters located at 3000 Bayport Drive, Suite 1100, Tampa, Florida 33607. The lease commenced on May 15, 2009 and expires on April 29, 2016. The base rent over the lease term is $4.0 million.

Income Tax Exposure

     A dispute exists with regard to federal income taxes owed by the Walter Energy consolidated group. The Company was part of the Walter Energy consolidated group prior to the spin-off and Merger. As such, the Company is jointly and severally liable with Walter Energy for any final taxes, interest and/or penalties owed by the Walter Energy consolidated group during the time that the Company was a part of the Walter Energy consolidated group. According to Walter Energy’s most recent public filing, they state that a controversy exists with regard to federal income taxes allegedly owed by Walter Energy for fiscal years ended August 31, 1983 through May 31, 1994, and the amount of tax claimed by the IRS in an adversary proceeding in bankruptcy court, including interest and penalties, is substantial. The public filing goes on to disclose that Walter Energy believes, should the IRS prevail on any such issues, Walter Energy’s financial exposure is limited to interest and possible penalties. Walter Energy discloses further that it believes that all of its current and prior tax filing positions have substantial merit and it intends to defend vigorously any tax claims asserted. Under the terms of the Tax Separation Agreement between the Company and Walter Energy dated April 17, 2009, Walter Energy is responsible for the payment of all federal income taxes (including any interest or penalties applicable thereto) of the consolidated group, which includes the aforementioned claims of the IRS. However, to the extent that Walter Energy is unable to pay any amounts owed, the Company could be responsible for any unpaid amounts.

     The Tax Separation Agreement also provides that Walter Energy is responsible for the preparation and filing of any tax returns for the consolidated group for the periods when the Company was part of the Walter Energy consolidated group. This arrangement may result in conflicts between Walter Energy and the Company. In addition, the spin-off of WIM from Walter Energy was intended to qualify as a tax-free spin-off under Section 355 of the Code. The Tax Separation Agreement provides generally that if the spin-off is determined not to be tax-free pursuant to Section 355 of the Code, any taxes imposed on Walter Energy or a Walter Energy shareholder as a result of such determination (“Distribution Taxes”) which are the result of the acts or omissions of Walter Energy or its affiliates, will be the responsibility of Walter Energy. However, should Distribution Taxes result from the acts or omissions of the Company or its affiliates, such Distribution Taxes will be the responsibility of the Company. The Tax Separation Agreement goes on to provide that Walter Energy and the Company shall be jointly liable, pursuant to a designated allocation formula, for any Distribution Taxes that are not specifically allocated to Walter Energy or the Company. To the extent that Walter Energy is unable or unwilling to pay any Distribution Taxes for which it is responsible under the Tax Separation Agreement, the Company could be liable for those taxes as a result of being a member of the Walter Energy consolidated group for the year in which the spin-off occurred. The Tax Separation Agreement also provides for payments from Walter Energy in the event that an additional taxable dividend is required to cure a REIT disqualification from the determination of a shortfall in the distribution of non-REIT earnings and profits made immediately following the spin-off. As with Distribution Taxes, the Company will be responsible for this dividend if Walter Energy is unable or unwilling to pay.

Miscellaneous Litigation

     The Company is a party to a number of lawsuits arising in the ordinary course of its business. While the results of such litigation cannot be predicted with certainty, the Company believes that the final outcome of such litigation will not have a materially adverse effect on the Company’s financial condition, results of operations or cash flows.

18. Subsequent Events

Purchase of a Pool of Loans

     On April 14, 2010, the Company entered into a definitive agreement to purchase a pool of 100% performing, fixed-rate residential loans on single-family, owner occupied residences located within the Company’s existing southeastern United States geographic footprint. The purchase closed on April 19, 2010, utilizing $11.1 million of the proceeds from the Company’s secondary offering that closed on October 21, 2009. The Company is in the process of evaluating the loans acquired for evidence of credit quality deterioration since origination and for which it is probable at the purchase date that the Company will be unable to collect all contractually required payments.

Dividend Declaration

     On April 30, 2010, the Company declared a dividend of $0.50 per share on its common stock to stockholders of record on May 14, 2010 which will be paid on May 28, 2010.

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

     The following discussion should be read in conjunction with the consolidated financial statements and notes thereto appearing elsewhere in this Form 10-Q and in our results for the year ended December 31, 2009, filed in our Annual Report on Form 10-K on March 2, 2010. Historical results and trends which might appear should not be taken as indicative of future operations. Our results of operations and financial condition, as reflected in the accompanying statements and related footnotes, are subject to management’s evaluation and interpretation of business conditions, changing capital market conditions, and other factors.

     Our website can be found at www.walterinvestment.com. We make available, free of charge through the investor relations section of our website, access to our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, current reports on Form 8-K, other documents and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as well as proxy statements, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. We also make available, free of charge, access to our Corporate Governance Standards, charters for our Audit Committee, Compensation and Human Resources Committee, and Nominating and Corporate Governance Committee, and our Code of Conduct governing our directors, officers, and employees. Within the time period required by the SEC and the New York Stock Exchange, we will post on our website any amendment to the Code of Conduct and any waiver applicable to any executive officer, director, or senior officer (as defined in the Code of Conduct). In addition, our website includes information concerning purchases and sales of our equity securities by our executive officers and directors, as well as disclosure relating to certain non-GAAP and financial measures (as defined by SEC Regulation G) that we may make public orally, telephonically, by webcast, by broadcast, or by similar means from time to time. The information on our website is not part of this Quarterly Report on Form 10-Q.

     Our Investor Relations Department can be contacted at 3000 Bayport Drive, Suite 1100, Tampa, FL 33607, Attn: Investor Relations, telephone (813) 421-7694.

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995

     Certain statements in this report, including, without limitation, matters discussed under Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” should be read in conjunction with the financial statements, related notes, and other detailed information included elsewhere in this Quarterly Report on Form 10-Q. We are including this cautionary statement to make applicable and take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Statements that are not historical fact are forward-looking statements. Certain of these forward-looking statements can be identified by the use of words such as “believes,” “anticipates,” “expects,” “intends,” “plans,” “projects,” “estimates,” “assumes,” “may,” “should,” “will,” or other similar expressions. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors, which could cause actual results, performance or achievements to differ materially from future results, performance or achievements. These forward-looking statements are based on our current beliefs, intentions and expectations. These statements are not guarantees or indicative of future performance. Important assumptions and other important factors that could cause actual results to differ materially from those forward-looking statements include, but are not limited to, those factors, risks and uncertainties described in our Annual Report on Form 10-K filed on March 2, 2010 under the caption “Risk Factors” and in our other securities filings with the SEC.

     In particular (but not by way of limitation), the following important factors and assumptions could affect our future results and could cause actual results to differ materially from those expressed in the forward-looking statements: local, regional, national and global economic trends and developments in general, and local, regional and national real estate and residential mortgage market trends and developments in particular; the availability of suitable qualifying investments for the proceeds of our October 2009 secondary offering and risks associated with any such investments we may pursue; the availability of additional investment capital and suitable qualifying investments, and risks associated with the expansion of our business activities, including risks associated with expanding our business outside of our current geographic footprint and/or expanding the scope of our business to include activities not currently undertaken by our business; limitations imposed on our business due to our real estate investment trust, or REIT, status and our continued qualification as a REIT for federal income tax purposes; financing sources and availability, and future interest expense; fluctuations in interest rates and levels of mortgage prepayments; increases in costs and other general competitive factors; natural disasters and adverse weather conditions, especially to the extent they result in material payouts under insurance policies placed with our captive insurance subsidiary; changes in federal, state and local policies, laws and regulations affecting our business, including, without limitation, mortgage financing or servicing, changes to licensing requirements, and/or the rights and obligations of property owners, mortgagees and tenants; the effectiveness of risk management strategies; unexpected losses resulting from pending, threatened or unforeseen litigation or other third party claims against us; the ability or willingness of Walter Energy, Inc. and other counterparties to satisfy material obligations under agreements with us; our continued listing on the NYSE Amex; uninsured losses or losses in excess of insurance limits and the availability of adequate insurance coverage at reasonable costs; the integration of the former Hanover Capital Mortgage Holdings, Inc., or Hanover, business into that of Walter Investment Management, LLC and its affiliates as a result of the merger of the two companies, and the realization of anticipated synergies, cost savings and growth opportunities from the Merger; future performance generally; and other presently unidentified factors.

     All forward looking statements set forth herein are qualified by these cautionary statements and are made only as of the date hereof. We undertake no obligation to update or revise the information contained herein, including without limitation any forward-looking statements whether as a result of new information, subsequent events or circumstances, or otherwise, unless otherwise required by law.

The Company

     We are a mortgage servicer and mortgage portfolio owner specializing in subprime, non-conforming and other credit-challenged residential loans primarily in the southeastern United States, or U.S. We also operate mortgage advisory and insurance ancillary businesses. At March 31, 2010, we had four wholly owned, primary subsidiaries: Hanover Capital Partners 2, Ltd., doing business as Hanover Capital, Walter Mortgage Company, or WMC, Best Insurors, Inc., or Best, Walter Investment Reinsurance Co., Ltd., or WIRC. We operate as an internally managed, publicly traded real estate investment trust, or REIT.

Basis of Presentation

     The consolidated financial statements reflect the historical operations of the Financing business which was operated as part of Walter Energy prior to the spin-off. Under Walter Energy’s ownership, the Financing business operated through separate subsidiaries. A direct ownership relationship did not exist among the legal entities prior to the contribution to Walter Investment Management LLC, or WIM. The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States, or GAAP, which requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements. Actual results could differ from those estimates. All significant intercompany balances have been eliminated in the consolidated financial statements.

     Although we have operated as an independent, stand-alone entity only since April 17, 2009, management believes the assumptions underlying the consolidated financial statements as of March 31, 2009 are reasonable. However, the consolidated financial statements included herein do not include all of the expenses that would have been incurred had we been a separate, stand-alone entity, although, the consolidated financial statements do include certain costs and expenses that have been allocated to us from Walter Energy. As such, the financial information does not necessarily reflect or is not necessarily indicative of our consolidated financial position, results of operations and cash flows in the future, or what would have been reflected had we been a separate, stand-alone entity during the period presented prior to the Merger.

     Results of operations for the three months ended March 31, 2010 and 2009 include the results of operations of legacy WIM. The results of operations of legacy Hanover are included for the three months ended March 31, 2010. Since the Merger constitutes a reverse acquisition for accounting purposes, the pre-acquisition consolidated financial statements of WIM are treated as the historical financial statements of Walter Investment. The combined financial statements of WMC, Best and WIRC (collectively representing substantially all of Walter Energy’s Financing business prior to the Merger) are considered the predecessor to WIM for accounting purposes. The combined financial statements of WMC, Best and WIRC have become WIM’s historical financial statements for periods prior to the Merger.

Business Separation and Merger

     On September 30, 2008, Walter Energy outlined its plans to separate its Financing business from its core Natural Resources business through a spin-off to stockholders and subsequent Merger with Hanover. In furtherance of these plans, on September 30, 2008, Walter Energy and WIM entered into a definitive agreement to merge with Hanover which agreement was amended and restated on February 17, 2009. Immediately prior to the spin-off, substantially all of the assets and liabilities related to the Financing business were contributed, through a series of transactions, to WIM in return for all of WIM’s membership units. On April 17, 2009, immediately following the spin-off from Walter Energy, WIM was merged with and into Hanover with Hanover continuing as the surviving corporation in the Merger. Following the Merger, Hanover was renamed Walter Investment Management Corp. After the spin-off and Merger, Walter Energy’s stockholders that became members of WIM as a result of the spin-off, and certain holders of options to acquire limited liability company interests of WIM, collectively owned 98.5% of the shares of common stock of the surviving corporation in the Merger, while stockholders of Hanover owned 1.5% of the shares of common stock of such corporation. As a result, the business combination has been accounted for as a reverse acquisition, with WIM considered the accounting acquirer. On April 20, 2009, our common stock began trading on the NYSE Amex under the symbol “WAC”.

     Although Hanover was the legal and tax surviving entity in the Merger, for accounting purposes the Merger was treated as a reverse acquisition of the operations of Hanover and has been accounted for pursuant to the guidance concerning business combinations, with WIM as the accounting acquirer. As such, the pre-acquisition financial statements of WIM are treated as the historical financial statements of Walter Investment. The Hanover assets acquired and the liabilities assumed were recorded at the date of acquisition, April 17, 2009, at their respective fair values. The results of operations of Hanover were included in the consolidated statements of income for periods subsequent to the Merger.

     On April 17, 2009, we completed our separation from Walter Energy. In connection with the separation, WIM and Walter Energy executed the following transactions or agreements which involved no cash:

	•		Walter Energy distributed 100% of its interest in WIM to holders of Walter Energy’s common stock;
	•		All intercompany balances between WIM and Walter Energy were settled with the net balance recorded as a dividend to Walter Energy;
	•		In accordance with the Tax Separation Agreement, Walter Energy will, in general, be responsible for any and all taxes reported on any joint return through the date of the separation, which may also include WIM for periods prior to the separation. WIM will be responsible for any and all taxes reported on any WIM separate tax return and on any consolidated returns for Walter Investment subsequent to the separation;
	•		Walter Energy’s share-based awards held by WIM employees were converted to equivalent share-based awards of Walter Investment, with the number of shares and the exercise price being equitably adjusted to preserve the intrinsic value. The conversion was accounted for as a modification under the provisions of the guidance concerning stock compensation.

     The assets and liabilities transferred to WIM from Walter Energy also included $26.6 million in cash, which was contributed to WIM by Walter Energy on April 17, 2009. Following the spin-off, WIM paid a taxable dividend consisting of cash of $16.0 million and additional equity interests to its members. The Merger occurred immediately following the spin-off and taxable dividend on April 17, 2009. The surviving company continues to operate as a publicly traded REIT subsequent to the Merger.

Critical Accounting Policies

     The significant accounting policies used in preparation of our consolidated financial statements are described in Note 2 of “Notes to Consolidated Financial Statements” for the year ended December 31, 2009 included in our Annual Report on Form 10-K filed with the SEC on March 2, 2010. There have been no material changes to our critical accounting policies or the methodologies or assumptions we apply under them.

Results of Operations

Revenue by Portfolio Type

     For the three months ended March 31, 2010 and 2009, we reported net income of $8.1 million and $7.2 million, respectively. The main components of the change in net income for the three months ended March 31, 2010 and 2009 are detailed in the following table (in thousands):

		Three Months Ended
		March 31,								Increase/
		2010				2009				(Decrease)
Residential loans
Interest income		$	7,714			$	8,928			$	(1,214	)
Less: Interest expense			—				—				—
Net interest income			7,714				8,928				(1,214	)
Less: Provision for loan losses (1)			1,399				1,269				130
Net interest income after provision for loan losses			6,315				7,659				(1,344	)
Residential loans of securitization trusts
Interest income			33,914				36,901				(2,987	)
Interest expense			21,274				23,089				(1,815	)
Net interest income			12,640				13,812				(1,172	)
Less: Provision for loan losses (1)			1,791				3,107				(1,316	)

		Three Months Ended
		March 31,								Increase/
		2010				2009				(Decrease)
Net interest income after provision for loan losses			10,849				10,705				144
Non-interest income
Premium revenue			2,691				3,065				(374	)
Other income, net			760				160				600
Total			3,451				3,225				226
Total revenues, net			20,615				21,589				(974	)
Total non-interest expenses			12,372				10,232				2,140
Income before income taxes			8,243				11,357				(3,114	)
Income tax expense			131				4,155				(4,024	)
Net income		$	8,112			$	7,202			$	910

Net Interest Income

     The decrease in unencumbered residential loan net interest income for the three months ended March 31, 2010, as compared to the same period in 2009 was due primarily to the declining portfolio balance as a result of principal repayments and foreclosures and a decrease in the volume of voluntary prepayments. The average prepayment rate for the unencumbered portfolio was 3.0% for the three months ended March 31, 2010, as compared to 4.5% in the same period of 2009.

     The decrease in the securitized residential loan net interest income for the three months ended March 31, 2010, as compared to the same period in 2009 was due primarily to the declining balance as a result of principal repayments and foreclosures, a decrease in voluntary prepayments and a decrease in interest expense due to lower average outstanding borrowings. The average prepayment rate for the securitized portfolio was 2.6% for the three months ended March 31, 2010, as compared to 3.3% in the same period of 2009. The reduction in average borrowings was due to principal payments on the mortgage-backed debt issued with no new issuances over the past year.

Provision for Loan Losses

     The unencumbered residential loan provision for loan losses was relatively unchanged for the three months ended March 31, 2010, as compared to the same period in 2009 due to an improvement in the performance experienced by this portfolio.

     The decrease in the securitized residential loan provision for loan losses for the three months ended March 31, 2010, as compared to the same period in 2009 was primarily due to a decline in seriously delinquent accounts and foreclosures in process as well as an improvement in the net charge-off ratio experienced by this portfolio.

Non-Interest Income

     The increase in non-interest income for the three months ended March 31, 2010, as compared to the same period in 2009 was primarily due to the addition of mortgage advisory services revenue as a result of our Merger with Hanover in April 2009 as well as an improvement in taxes, insurance and other advances as a result of lower insurance advances and a slight increase in collections, partially offset by lower earned premiums from our insurance business.

Non-Interest Expenses

     The increase in non-interest expenses for the three months ended March 31, 2010, as compared to the same period in 2009 was primarily due to the additional expenses incurred in order to support the stand-alone corporate functions required subsequent to the spin-off from Walter Energy and Merger with Hanover, as well as the timing of compensation expense associated with share-based awards. Share-based awards were granted during the first quarter in 2010 versus the second quarter in 2009. Share-based award compensation expense is recognized over the vesting term, which is generally three years, using the graded method.

Income Taxes

     The decrease in income tax expense for the three months ended March 31, 2010, as compared to the same period in 2009 was due to our REIT qualification in conjunction with the spin-off from Walter Energy and Merger with Hanover which generally limits our income tax expense to our TRSs.

Residential Loan Portfolio and Related Liabilities

     Our results of operations for our portfolio during a given period typically reflect the net interest spread earned on our residential loan portfolio. The net interest spread is impacted by factors such as the interest rate our residential loans are earning and our cost of funds. Furthermore, the amount of discount on the residential loans will impact the net interest spread as such amounts will be amortized over the expected term of the residential loans and the amortization will be accelerated due to voluntary prepayments. Loan losses due to defaults will also negatively impact our earnings.

Residential Loan Portfolio

     The following table reflects the average balances of our unencumbered residential loan portfolio, net with corresponding rates of interest and effective yields (in thousands):

		Three Months Ended March 31,
		2010				2009
Average residential loan balance (1)		$	334,128			$	363,211
Interest income		$	7,714			$	8,928
Effective interest income yield on the residential loan portfolio (2)			9.23	%			9.83	%

Interest Income

     Net interest income decreased for the three months ended March 31, 2010, as compared to the same period in 2009, primarily due to the declining portfolio balance as a result of principal repayments and foreclosures and a decrease in the volume of voluntary prepayments.

Effective Interest Income Yield

     Effective interest income yield decreased for the three months ended March 31, 2010, compared to the same period in 2009. This decrease is primarily due to a decrease in voluntary prepayment speeds which resulted in a decrease in the recognition of purchase discounts into interest income.

Securitized Residential Loan Portfolio

     The following table reflects the average balances of our securitized residential loan portfolio, net, as well as associated liabilities, with corresponding rates of interest and effective yields (in thousands):

		Three Months Ended March 31,
		2010				2009
Average securitized residential loan balance (1)		$	1,315,706			$	1,409,975
Average mortgage-backed debt balance			1,255,917				1,358,991
Net investment		$	59,789			$	50,984
Interest income		$	33,914			$	36,901
Less: Interest expense			21,274				23,089
Net interest income		$	12,640			$	13,812

		Three Months Ended March 31,
		2010				2009
Effective interest income yield on the securitized residential loan portfolio (2)			10.31	%			10.47	%
Effective interest expense rate on the mortgage-backed debt (2)			6.78	%			6.80	%
Net interest spread (2)			3.53	%			3.67	%
Average equity balance			572,623				411,441
Average leverage ratio (3)			2.19				3.30
Net interest margin (2)(4)			3.84	%			3.92	%
Net yield on net investment (2)(5)			84.56	%			108.37	%

Average Net Investment

     Average net investment increased for the three months ended March 31, 2010, as compared to the same period in 2009, primarily due to the acceleration of debt repayments due to exceeding loss triggers on certain securitization trusts.

Net Interest Income

     Net interest income decreased for the three months ended March 31, 2010, as compared to the same period in 2009, primarily due to the declining portfolio balance as a result of principal repayments and foreclosures coupled with a decrease in the volume of voluntary prepayments.

Net Interest Spread

     Net interest spread decreased for the three months ended March 31, 2010, compared to the same period in 2009. This decrease is primarily due to a reduction in the effective interest yield on the securitized residential loan portfolio due to a decrease in voluntary prepayment speeds which resulted in a decrease in the recognition of purchase discounts into interest income, as well as an increase in borrower delinquencies.

Average Leverage Ratio

     The average leverage ratio decreased for the three months ended March 31, 2010, compared to the same period in 2009. The decrease is primarily related to a decrease in the average mortgage-backed debt balance due to repayments as well as an increase in average equity primarily resulting from the settlement of the net activity with Walter Energy in conjunction with the spin-off and Merger, net income generated, as well as our secondary offering in October 2009, partially offset by dividends paid.

Net Yield on Net Investment

     Net yield on net investment decreased for the three months ended March 31, 2010, as compared to the same period in 2009. The decrease is primarily the result of the increase in our average net investment resulting from accelerated mortgage-backed debt repayments coupled with a slight decrease in net interest income due to the run-off of the portfolio and lower voluntary prepayments.

Additional Analysis of Residential Loan Portfolio

Allowance for Loan Losses

     The allowance for loan losses represents management’s estimate of probable incurred credit losses inherent in our residential loan portfolio as of the balance sheet date. The determination of the level of the allowance for loan losses and, correspondingly, the provision for loan losses, is based on delinquency levels and trends, prior loan loss severity experience, and management’s judgment and assumptions regarding various matters, including the composition of the residential loan portfolio, the estimated value of the underlying real estate collateral, the level of the allowance in relation to total loans and to historical loss levels, national and local economic conditions, changes in unemployment levels and the impact that changes in interest rates have on a borrower’s ability to

refinance their loan and to meet their repayment obligations. Management continuously evaluates these assumptions and various other relevant factors impacting credit quality and inherent losses when quantifying our exposure to credit losses and assessing the adequacy of our allowance for such losses as of each reporting date. The level of the allowance is adjusted based on the results of management’s analysis.

     Given continuing pressure on residential property values, especially in our southeastern U.S. market, continued high unemployment and a generally uncertain economic backdrop, we expect the allowance for loan losses to continue to remain elevated until such time as we experience a sustained improvement in the credit quality of the residential loan portfolio. The future growth of the allowance is highly correlated to unemployment levels and changes in home prices within our markets.

     While we consider the allowance for loan losses to be adequate based on information currently available, future adjustments to the allowance may be necessary due to changes in economic conditions, delinquency levels, foreclosure rates, loss severity rates, and further declines in real estate values.

     The following table shows information about the allowance for losses by portfolio for the periods presented.

										Net Losses and				Net Losses and
										Charge-offs				Charge-offs as a %
		Allowance				Allowance as a % of				Deducted from the				of Average
		for Loan Losses				Residential Loans (1)				Allowance				Residential Loans (2)
		(in thousands)
Residential loans:
March 31, 2010		$	3,384				1.02	%		$	5,900	(3)			1.77%	(3)(4)
December 31, 2009		$	3,460				1.03	%		$	4,317				1.23	%
Residential loans of securitization trusts:
March 31, 2010		$	13,940				1.07	%		$	8,208	(3)			0.62%	(3)(4)
December 31, 2009		$	14,201				1.07	%		$	12,173				0.89	%

     The following table summarizes activity in the allowance for loan losses in our residential loan portfolios, net for the three months ended March 31, 2010 and 2009 (in thousands):

		Residential Loans								Residential Loans of Securitization Trusts
		Three Months Ended March 31,								Three Months Ended March 31,
		2010				2009				2010				2009
Balance, December 31		$	3,460			$	3,418			$	14,201			$	15,551
Provision charged to income			1,399				1,269				1,791				3,107
Less: Charge-offs, net of recoveries			(1,475	)			(1,314	)			(2,052	)			(3,549	)
Balance, March 31		$	3,384			$	3,373			$	13,940			$	15,109

Delinquency Information

     The following table presents information about delinquencies as a percent of amounts outstanding in our residential loan portfolios:

										Residential Loans
		Residential Loans								of Securitization Trusts
		March 31,				December 31,				March 31,				December 31,
		2010				2009				2010				2009
Principal balance outstanding (in thousands)		$	360,543			$	365,797			$	1,432,403			$	1,454,062
31-60 days			1.62	%			1.98	%			0.73	%			1.17	%
61-90 days			0.83	%			1.53	%			0.31	%			0.54	%
91 days or more			5.21	%			5.84	%			2.30	%			2.74	%
			7.66	%			9.35	%			3.34	%			4.45	%

     The following table presents information about delinquencies as a percent of the total number of loans outstanding in our residential loan portfolios:

										Residential Loans
		Residential Loans								of Securitization Trusts
		March 31,				December 31,				March 31,				December 31,
		2010				2009				2010				2009
Total number of residential loans			3,676				3,703				30,054				30,502
31-60 days			1.61	%			1.84	%			0.63	%			1.07	%
61-90 days			0.82	%			1.51	%			0.26	%			0.47	%
91 days or more			4.79	%			5.51	%			1.83	%			2.15	%
			7.22	%			8.86	%			2.72	%			3.69	%

     The past due or delinquency status is generally determined based on the contractual payment terms. The calculation of delinquencies excludes from delinquent amounts those accounts that are in bankruptcy proceedings that are paying their mortgage payments in contractual compliance with the bankruptcy court approved mortgage payment obligations.

     The following table summarizes our residential loans placed in non-accrual status due to delinquent payments of 90 days past due or greater:

		March 31,				December 31,
		2010				2009
Residential loans
Number of loans			176				204
Balance (in millions)		$	18.8			$	21.4
Residential loans of securitization trusts
Number of loans			551				656
Balance (in millions)		$	32.9			$	39.8
Total
Number of loans			727				860
Balance (in millions)		$	51.7			$	61.2

Portfolio Characteristics

     The weighted average original loan-to-value, or LTV, dispersion of our portfolios is as follows:

										Residential Loans
		Residential Loans								of Securitization Trusts
		March 31,				December 31,				March 31,				December 31,
		2010				2009				2010				2009
Weighted Average LTV			88.00	%			88.00	%			89.00	%			89.00	%
0.00 - 70.00			3.84	%			3.91	%			0.96	%			0.95	%
70.01 - 80.00			6.63	%			6.88	%			1.91	%			1.93	%
80.01 - 90.00(1)			44.84	%			43.56	%			77.35	%			76.90	%
90.01 - 100.00			44.69	%			45.65	%			19.78	%			20.22	%
Total			100.00	%			100.00	%			100.00	%			100.00	%

     Original LTVs do not include additional value contributed by the borrower to complete the home. This additional value typically

was created by the installation and completion of wall and floor coverings, landscaping, driveways and utility connections in more recent periods.

     Current LTVs are not readily determinable given the rural geographic distribution of our portfolio which precludes us from obtaining reliable comparable sales information to utilize in valuing the collateral.

     The weighted average FICO score dispersion of the loans in our residential loan portfolios, refreshed as of December 31, 2009, is as follows:

										Residential Loans
		Residential Loans								of Securitization Trusts
		March 31,				December 31,				March 31,				December 31,
		2010				2009				2010				2009
Weighted Average FICO			566				566				584				583
<=600			62.97	%			62.77	%			55.06	%			54.90	%
601 - 640			11.19	%			11.07	%			14.01	%			13.97	%
641 - 680			6.85	%			6.84	%			8.82	%			8.85	%
681 - 720			4.58	%			4.55	%			4.93	%			4.99	%
721 - 760			2.36	%			2.42	%			2.95	%			2.94	%
761-800			1.99	%			2.01	%			2.44	%			2.46	%
>=801			0.82	%			0.84	%			0.98	%			0.99	%
Unknown or unavailable			9.24	%			9.50	%			10.81	%			10.90	%
Total			100.00	%			100.00	%			100.00	%			100.00	%