Franklin Credit Announces Additional Reductions in Borrowing Costs

Franklin Credit Management Corporation, a specialty consumer finance company primarily engaged in the acquisition, origination, servicing and resolution of performing, reperforming and nonperforming residential mortgage loans, today announced several modifications to its borrowing agreements.

"We are very pleased to announce the elimination of all existing and potential success fee liabilities," stated Paul Colasono, Chief Financial Officer of Franklin Credit Management Corporation. The Company reported that its success fee liability currently existing, which would have subsequently increased, has been terminated and eliminated effective December 1, 2006, in consideration for $4.5 million paid to its lead bank.

The Company’s current liability of $6.7 million at September 30, 2006 was eliminated, and the corresponding debt discount of $2.9 million was reduced to approximately $725,000 and will be amortized to expense over the remaining terms of the applicable debt. Mr. Colasono continued, "while the accounting for these success fees is somewhat complex, essentially the current amortization of the debt discount will be reduced from approximately $400,000 per quarter to approximately $50,000 per quarter. This agreement eliminates a potential increasing future liability, which under certain circumstances could have risen as high as approximately $14 million over time and would have substantially increased our quarterly expense amortization in future periods."

In addition, the Company reported that its lead lending bank has agreed to reduce the interest rate margin on new term debt incurred after November 14, 2006 to fund the acquisition, or purchase, of 1-4 family residential loans secured by second mortgages from the current margin of 250 basis points to 235 basis points. Also commencing November 15, 2006, the interest rate margin on new term debt to fund the acquisition, or purchase, of 1-4 family residential loans secured by first liens was reduced from the current margin of 250 basis points to 200 basis points.

"These reductions in margins will not only lower our future borrowing costs, but they will enable us to be more competitive in bidding for pools of loans, particularly those secured by first liens," noted Gordon Jardin, the Company’s Chief Executive Officer.

Additional information regarding these borrowing revisions is available in a Form 8-K filing that was submitted to the SEC today.

The Company previously reported in August of this year that all new borrowings under its term loan agreement after June 25, 2006 would not be subject to a 50 basis point success fee upon payoff off of such new debt, and that the 75 basis point origination fee had been reduced to 50 basis points on all new term debt incurred to fund acquisitions of loan pools after June 25, 2006. In addition, the Company also reported in August that its lead lending bank agreed to reduce the interest rate margin on almost $500 million of existing term debt by 25 basis points effective October 1, 2006 and by an additional 25 basis points effective January 1, 2007.

"I am pleased with the support we have received from our lead lending bank and the progress we have made thus far as we pursue our strategic goal to reduce overall borrowing costs over time," commented Tom Axon, Chairman of Franklin Credit Management Corporation.