SCHEDULE 14A
                                 (RULE 14A-101)

                     INFORMATION REQUIRED IN PROXY STATEMENT

                            SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
                                (AMENDMENT NO. )

Filed by the Registrant /_/

Filed by a Party other than the Registrant /X/

Check the appropriate box:

     /X/    Preliminary Proxy Statement

     /_/    Confidential,  for Use of the Commission  Only (as permitted by Rule
            14a-6(e)(2))

     /_/    Definitive Proxy Statement

     /_/    Definitive Additional Materials

     /_/    Soliciting Material Under Rule 14a-12

                        SUNSET FINANCIAL RESOURCES, INC.
--------------------------------------------------------------------------------
                (Name of Registrant as Specified in Its Charter)

                            WESTERN INVESTMENT L L C
--------------------------------------------------------------------------------
                      WESTERN INVESTMENT HEDGED PARTNERS LP
                 WESTERN INVESTMENT INSTITUTIONAL PARTNERS L L C
                   WESTERN INVESTMENT ACTIVISM PARTNERS L L C
                                ARTHUR D. LIPSON
--------------------------------------------------------------------------------
    (Name of Persons(s) Filing Proxy Statement, if Other Than the Registrant)

Payment of Filing Fee (Check the appropriate box):

     /X/    No fee required.

     /_/    Fee computed on table below per Exchange Act Rules  14a-6(i)(1)  and
            0-11.

     (1)    Title of each class of securities to which transaction applies:

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     (2)    Aggregate number of securities to which transaction applies:

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     (3)    Per unit price or other  underlying  value of  transaction  computed
            pursuant  to  Exchange  Act Rule 0-11 (set forth the amount on which
            the filing fee is calculated and state how it was determined):

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     (4)    Proposed maximum aggregate value of transaction:

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     (5)    Total fee paid:

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     /_/    Fee paid previously with preliminary materials:


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     /_/    Check box if any part of the fee is offset as  provided  by Exchange
Act Rule  0-11(a)(2)  and identify the filing for which the  offsetting  fee was
paid previously.  Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.

     (1)    Amount previously paid:

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     (2)    Form, Schedule or Registration Statement No.:

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     (3)    Filing Party:

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     (4)    Date Filed


                                       2





                       SUNSET FINANCIAL RESOURCES, INC.
--------------------------------------------------------------------------------

                         CONSENT SOLICITATION STATEMENT
                    TO CALL A SPECIAL MEETING OF STOCKHOLDERS
                                       BY
                            WESTERN INVESTMENT L L C,
                WESTERN INVESTMENT INSTITUTIONAL PARTNERS L L C,
                     WESTERN INVESTMENT HEDGED PARTNERS LP,
                 WESTERN INVESTMENT ACTIVISM PARTNERS L L C, AND
                                ARTHUR D. LIPSON
--------------------------------------------------------------------------------

WHY YOU WERE SENT THIS CONSENT SOLICITATION STATEMENT

Western Investment L L C ("WILLC"),  Western Investment Institutional Partners L
L C ("WIIP"), Western Investment Hedged Partners LP ("WIHP"), Western Investment
Activism  Partners  L L C  ("WIAP")  and  Arthur D.  Lipson  (collectively,  the
"Western  Committee") are hereby asking you to help the Western Committee call a
special  meeting  of  stockholders  of Sunset  Financial  Resources,  Inc.  (the
"Company").  This consent  solicitation  statement  and the  accompanying  WHITE
consent card are being furnished to holders of the Company's common stock, $.001
par value (the "Common  Stock") in connection  with the  solicitation of written
consents  to call a  special  meeting  by the  Western  Committee.  The  Western
Committee seeks to call a special meeting of the Company's  stockholders for the
following purposes:  (i) to remove each of the members of the Board of Directors
(the  "Board of  Directors")  of the  Company,  (ii) to amend the  bylaws of the
Company to require  Article II,  Section 2.6 thereof,  which provides that board
vacancies  created by the removal of directors shall be filled by  stockholders,
to only be  amended by a vote of a  majority  of the voting  power of the Common
Stock of the Company and to read as follows: "Any vacancy occurring on the Board
of  Directors,  including  any  vacancy  created by reason of an increase in the
number of  directors,  may be  filled in the  manner  provided  in the  Charter.
Notwithstanding the foregoing, any vacancy created as a result of the removal of
a director by a vote of the  stockholders  shall only be filled by a vote of the
stockholders.  This Section 2.6 shall only be amended by a vote of a majority of
the  voting  power of the  Common  Stock  of the  Company,"  (iii) to amend  the
Company's bylaws to fix the number of members of the Board of Directors at five,
and (iv) to elect  directors  to fill the  vacancies  created by the  removal of
directors as proposed above (items (i) through (iv) above collectively  referred
to as the "Proposals").

Under the Company's bylaws, as amended on August 31, 2005, for a special meeting
to be held,  written  consents to call a special meeting must be executed by the
holders of not less than 50% of all of the shares of Common  Stock  entitled  to
vote at such meeting.  Prior to the Company's  amendment of its bylaws,  special
meetings could be called by the written  request by the holders of not less than
25% of all of the shares of Common Stock entitled to vote at such meeting. As of
October __, 2005, the Western  Committee is the beneficial owner of, and has the
right to vote,  1,021,300  shares of the Company's  Common  Stock,  representing
approximately 9.7% of the outstanding Common Stock of the Company.

This consent solicitation  statement and the accompanying WHITE consent card are
first being mailed to  stockholders  on or about  October  ____,  2005.  Written
consents to call a special  meeting should be delivered as promptly as possible,
by fax or by mail (using the  enclosed  envelope),  to the  Western  Committee's
Solicitation Agent, The Altman Group, Inc. as set forth below.

This consent  solicitation  is being made by the Western  Committee,  and not on
behalf of the Board of  Directors.  At this time,  the Western  Committee is not

                                       1






currently  seeking your proxy,  consent,  authorization  or written  consent for
approval of the proposals. THE WESTERN COMMITTEE IS ONLY SOLICITING YOUR WRITTEN
CONSENT TO CALL THE SPECIAL MEETING.  AFTER THE SPECIAL MEETING HAS BEEN CALLED,
THE WESTERN  COMMITTEE WILL SEND YOU PROXY MATERIALS URGING YOU TO VOTE IN FAVOR
OF THE PROPOSALS.  YOUR WRITTEN CONSENT IS IMPORTANT,  NO MATTER HOW MANY OR HOW
FEW SHARES YOU OWN. THE WESTERN COMMITTEE URGES YOU TO SIGN, DATE AND RETURN THE
ENCLOSED WHITE WRITTEN CONSENT TO CALL A SPECIAL MEETING.

IMPORTANT


IF YOUR SHARES OF COMMON  STOCK ARE  REGISTERED  IN YOUR OWN NAME,  PLEASE SIGN,
DATE AND MAIL THE ENCLOSED  WHITE CONSENT CARD TO THE ALTMAN GROUP,  INC. IN THE
POSTAGE-PAID ENVELOPE PROVIDED.

IF YOUR SHARES OF COMMON  STOCK ARE HELD IN THE NAME OF A BROKERAGE  FIRM,  BANK
NOMINEE OR OTHER INSTITUTION, ONLY IT CAN SIGN A WHITE CONSENT CARD WITH RESPECT
TO YOUR  SHARES  AND ONLY  UPON  RECEIPT  OF  SPECIFIC  INSTRUCTIONS  FROM  YOU.
ACCORDINGLY, YOU SHOULD CONTACT THE PERSON RESPONSIBLE FOR YOUR ACCOUNT AND GIVE
INSTRUCTIONS FOR A WHITE CONSENT CARD TO BE SIGNED  REPRESENTING  YOUR SHARES OF
COMMON  STOCK.  THE  WESTERN  COMMITTEE  URGES YOU TO CONFIRM  IN  WRITING  YOUR
INSTRUCTIONS TO THE PERSON RESPONSIBLE FOR YOUR ACCOUNT AND TO PROVIDE A COPY OF
SUCH  INSTRUCTIONS TO THE WESTERN COMMITTEE IN CARE OF THE ALTMAN GROUP, INC. TO
THE  ADDRESS  BELOW,  SO  THAT  THE  WESTERN  COMMITTEE  WILL  BE  AWARE  OF ALL
INSTRUCTIONS  GIVEN  AND CAN  ATTEMPT  TO  ENSURE  THAT  SUCH  INSTRUCTIONS  ARE
FOLLOWED.

IF YOU HAVE ANY QUESTIONS  ABOUT EXECUTING OR DELIVERING YOUR WHITE CONSENT CARD
OR REQUIRE ASSISTANCE, PLEASE CONTACT:

The Altman Group, Inc.
1200 Wall Street West, 3rd Floor
Lyndhurst, New Jersey 07071
CALL TOLL-FREE: (866) 416-0553
FAX: (201) 460-0050


WE ARE DISSATISFIED WITH THE CURRENT BOARD OF DIRECTORS

We are  dissatisfied  with the  Board of  Directors.  Since the  members  of the
Western Committee comprise one of the largest  stockholdings in the Company,  we
have  a very  strong  incentive  to  increase  stockholder  value.  The  Western
Committee  believes  that calling a special  meeting will provide the  Company's
stockholders  an opportunity to express their  dissatisfaction  with the current
affairs of the  Company  and  performance  of the  current  Board of  Directors.
Holding a special  meeting  shall also  provide the  Company's  stockholders  an
opportunity  to be  proactive  in the  future of the  Company  by  changing  the
composition of the Board and removing each of the current directors.

PAST CONTACTS

On August 27, 2005, WILLC sent a letter to the Board of Directors expressing its
concerns about recent  developments with the Company,  including the resignation
of Ernst & Young LLP as the Company's independent auditors for the period ending
December  31, 2005.  WILLC stated that it believes  that it would be in the best
interests  of the Company and its  stockholders  if the Board of  Directors  was
reconstituted and a majority of new directors were elected. WILLC suggested that
the Company hold a special meeting to vote on the Proposals.  After  discussions
with Mr. Lipson,  WILLC's managing member, the Board of Directors decided not to

                                       2





call a special meeting.  In fact, the Board of Directors even made it harder for
stockholders  to express any  dissatisfaction  they may have with respect to the
management of the Company by increasing the percentage of the outstanding shares
of Common Stock  necessary  to call a special  meeting from 25% to 50% on August
31, 2005. On September 22, 2005, WILLC sent a letter to the members of the Board
of Directors  requesting that the Board of Directors  consult with the principal
stockholders  of the Company with respect to one remaining  vacancy on the Board
of   Directors   and  that  the  Board  of  Directors   appoint  a   stockholder
representative to fill the vacancy. On September 28, 2005, the Company announced
the appointment of Charles Wolcott to the Board of Directors of the Company.  To
show its  commitment and  determination  to express its concerns with respect to
the recent developments in the Company and in an effort to increase  shareholder
value,  the Western  Committee has decided to solicit written consents to call a
special meeting from the stockholders of the Company.

THE SPECIAL MEETING

The  Western  Committee  is  soliciting  written  consents  to call the  special
meeting. The Western Committee is furnishing this Consent Solicitation Statement
and the WHITE Consent Card to enable you and the Company's other stockholders to
call the special meeting.  For the special meeting to be held in accordance with
the  amendment  to the bylaws  adopted by the Board of  Directors  on August 31,
2005,  written  consents  in favor of the call of the  special  meeting  must be
executed by the holders of not less than 50% of all votes entitled to be cast at
such meeting.  After the special meeting is called,  the Western  Committee will
solicit  proxies from you in support of the Proposals by sending you a notice of
the  special  meeting,  a proxy  statement  and a proxy card for use  therewith.
According to the Company's Form 10-Q for the fiscal quarter ended June 30, 2005,
as of August 10, 2005,  there were  10,475,000  shares of the  Company's  common
stock outstanding. Based on such number, and the fact that the Western Committee
already owns 1,021,300  shares of Common Stock,  additional  written consents to
hold a special meeting from holders of an aggregate of at least 4,216,200 shares
of Common Stock will be required to call the special  meeting.  PLEASE COMPLETE,
SIGN AND RETURN THE ENCLOSED  WHITE  CONSENT CARD BEFORE  OCTOBER __, 2005.  THE
FAILURE TO SIGN AND RETURN THE WHITE  CONSENT  CARD WILL HAVE THE SAME EFFECT AS
OPPOSING THE CALL OF A SPECIAL MEETING.

If the Western  Committee is successful in its solicitation of written consents,
the Company  will be required  to call and hold the special  meeting.  After the
special meeting is called, the Western Committee intends to solicit proxies from
you in support of the Proposals by sending you a notice of the special  meeting,
a proxy  statement and a proxy card for use therewith.  At the special  meeting,
the stockholders will be asked to vote "For" the Proposals.

The Western  Committee  expects to  request,  in any future  proxy  solicitation
relating  to the  special  meeting,  authority  (i) to  initiate  and  vote  for
proposals  to recess or adjourn the  special  meeting for any reason and (ii) to
oppose and vote against any  proposal to recess or adjourn the special  meeting.
The Western Committee does not currently anticipate  additional proposals on any
substantive matters.  Nevertheless,  the Western Committee reserves the right to
either  modify the Proposals or cause  additional  proposals to be identified in
the notice of, and in, the proxy materials for, the special meeting. The Western
Committee is not aware of any other  proposals to be brought  before the special
meeting.  However, should other proposals be brought before the special meeting,
the Western Committee will vote its proxies on such matters in its discretion.

WRITTEN CONSENT PROCEDURES

Pursuant  to this  Consent  Solicitation  Statement,  the Western  Committee  is
soliciting  written consents from holders of outstanding  shares of Common Stock
to call the special meeting.  By executing a written  consent,  a stockholder is

                                       3





requesting  the Company to call the  special  meeting  and  designate  specified
persons as the stockholder's agents and is authorizing the designated agents (i)
to call the special meeting, (ii) to set the place, date and time of the special
meeting, if held to be permissible, and (iii) exercise all rights of the holders
of shares of Common  Stock  incidental  to calling  and  convening  the  special
meeting and causing the purposes of the authority  expressly granted pursuant to
the written  consents to the designated  agents to be carried into.  PLEASE NOTE
THAT WRITTEN  CONSENTS TO CALL THE SPECIAL  MEETING DO NOT GRANT THE  DESIGNATED
AGENT(S)  THE POWER TO VOTE YOUR SHARES OF COMMON  STOCK AT THE SPECIAL  MEETING
AND DO  COMMIT  YOU TO CAST  ANY VOTE IN FAVOR OR  AGAINST  ANY  PROPOSAL  TO BE
BROUGHT BEFORE THE SPECIAL MEETING.  To vote on the matters to be brought before
the special meeting you must vote by proxy or in person at the special meeting.

You may revoke  your  written  consent to call a special  meeting at any time by
delivering a written  revocation to the Western  Committee in care of The Altman
Group,  Inc.  at the  address  or fax number set forth on the back cover of this
Consent Solicitation  Statement.  Such a revocation must clearly state that your
written consent to call a special meeting is no longer effective. Any revocation
of a written  consent to call a special meeting will not affect any action taken
by  the  designated  agent  pursuant  to  the  written  consent  prior  to  such
revocation.

If your shares of Common  Stock are held in the name of a brokerage  firm,  bank
nominee or other  institution,  only it can sign a written consent or revoke any
consent  previously  given with  respect to your shares and only upon receipt of
your specific instructions.  Accordingly,  please contact the person responsible
for your account and give  instructions  for a WHITE  Consent Card  representing
your shares to be signed.  The Western Committee urges you to confirm in writing
your  instructions  to the person  responsible for your account and to provide a
copy of such  instructions to the Western Committee in care of The Altman Group,
Inc.  at the  address or fax number set forth on the back cover of this  Consent
Solicitation  Statement  so that  the  Western  Committee  will be  aware of all
instructions  given  and can  attempt  to  ensure  that  such  instructions  are
followed.

SOLICITATION OF WRITTEN CONSENTS; EXPENSES.

The entire expense of preparing and mailing this Consent Solicitation  Statement
and any other  soliciting  material and the total  expenditures  relating to the
solicitation of written consents to call the special meeting (including, without
limitation, costs, if any, related to advertising,  printing, fees of attorneys,
financial advisors, solicitors,  accountants,  public relations,  transportation
and litigation) will be borne by the Western  Committee.  In addition to the use
of the mails,  written  consents  to call a special  meeting  and proxies may be
solicited  by  the  Western  Committee  by  telephone,  telegram,  and  personal
solicitation.  Banks,  brokerage  houses,  and other custodians,  nominees,  and
fiduciaries will be requested to forward solicitation material to the beneficial
owners  of the  Common  Stock  that  such  institutions  hold,  and the  Western
Committee will reimburse such  institutions for their  reasonable  out-of-pocket
expenses.

The Western Committee has retained The Altman Group,  Inc., a proxy solicitation
firm,  to  assist  in  the  solicitation  of  written  consents  and  the  proxy
solicitation  in connection  with the special meeting and at a fee estimated not
to exceed  $[______] plus  reimbursement of reasonable  out-of-pocket  expenses.
That firm will utilize approximately [__] persons in its solicitation efforts.

The Western Committee  estimates that their total  expenditures  relating to the
solicitation of written  consents to call a special meeting and the solicitation
of  proxies  for  approval  of the  Proposals  at the  special  meeting  will be
approximately $[_______] (including,  without limitation, costs, if any, related
to advertising,  printing,  fees of attorneys,  financial advisors,  solicitors,
accountants,  public  relations,  transportation,  and  litigation).  Total cash
expenditures  to date relating to these  solicitations  have been  approximately
$[____].

                                       4





The Western  Committee  intends to seek  reimbursement  from the Company for the
Western   Committee's   actual   expenses   incurred  in  connection  with  this
solicitation and the solicitation of proxies approving the Proposals.  Following
the  special  meeting,  the Western  Committee  will  request  that the Board of
Directors  approve a reimbursement of such expenses.  If the matter is submitted
to a vote of the Company's  stockholders,  the Western  Committee  will vote its
shares  in favor of such  reimbursement  and will  accept  the  results  of such
stockholder vote.

CERTAIN INFORMATION REGARDING THE PARTICIPANTS.

Each member of the Western  Committee may be deemed to be a "participant" in the
solicitation  conducted  with this  Consent  Solicitation  Statement.  Arthur D.
Lipson is the sole  managing  member  of WILLC,  a  Delaware  limited  liability
company,  which in turn is (a) the general  partner of WIHP, a Delaware  limited
partnership,  (b) the  managing  member of WIIP,  a Delaware  limited  liability
company,  and (c) the  managing  member of WIAP,  a Delaware  limited  liability
company. The principal occupation of Mr. Lipson is acting as the managing member
of WILLC.  The principal  business of WILLC is acting as the general  partner of
WIHP and the managing member of each of WIIP and WIAP. The principal business of
WIHP,  WIIP and WIAP is the  business of  acquiring,  holding and  disposing  of
investments in various companies.  The principal business address of Mr. Lipson,
WILLC, WIHP, WIIP and WIAP is 2855 East Cottonwood Parkway, Suite 110, Salt Lake
City, Utah 84121. As of the date hereof,  WIHP, WIIP and WIAP beneficially owned
305,300,  633,300,  and  77,700  shares of Common  Stock,  respectively.  As the
general partner or managing member,  as the case may be, of WIHP, WIIP and WIAP,
WILLC may be deemed to  beneficially  own the  1,016,300  shares of Common Stock
beneficially  owned in the  aggregate  by WIHP,  WIIP and WIAP.  As the managing
member of WILLC,  Mr.  Lipson may be deemed to  beneficially  own the  1,016,300
shares of Common  Stock  beneficially  owned by WILLC,  in addition to the 5,000
shares of Common Stock that Mr. Lipson owns directly.

Exhibit A lists certain  information  regarding ownership of the Common Stock by
the Western  Committee and  transactions in the Common Stock made by the Western
Committee during the last two years.  The Western  Committee  beneficially  owns
1,021,300 shares,  approximately 9.7% of the outstanding shares of the Company's
Common Stock. The Western Committee may, however, change or alter its investment
strategy at any time to increase or decrease its holdings in the Company.

Except as set forth herein, none of the members of the Western Committee is now,
nor has been  within  the past year,  a party to any  contract,  arrangement  or
understanding  with any person  with  respect to any  securities  of the Company
(including,  but not limited to, joint  ventures,  loan or option  arrangements,
puts or calls,  guarantees  against loss or  guarantees  of profit,  division of
losses or profits, or the giving or withholding of proxies).

There are no material  proceedings to which any member of the Western  Committee
or any  associate of any member of the Western  Committee is a party  adverse to
the Company or any of its subsidiaries or has a material interest adverse to the
Company or any of its  subsidiaries.  Except as  described  herein,  neither the
members of the Western  Committee  nor any associate of any of the member of the
Western  Committee  has any  interest  in the  matters  to be voted  upon at the
special  meeting,  other  than an  interest,  if any,  as a  stockholder  of the
Company.

Except as described herein or in the schedules  hereto, to the best knowledge of
the Western  Committee,  neither the  members of the Western  Committee  nor any
associate  of any member of the  Western  Committee  (1) has engaged in or has a
direct or indirect  interest in any transaction or series of transactions  since
the  beginning of the Company's  last fiscal year, or in any currently  proposed
transaction,  to which the Company or any of its  subsidiaries  is a party where
the amount  involved  was in excess of  $60,000;  (2) has been  indebted  to the

                                       5





Company or any of its  subsidiaries;  (3) has borrowed any funds for the purpose
of acquiring or holding any securities of the Company,  or is presently,  or has
been within the past year, a party to any contract, arrangement or understanding
with any person with respect to either any securities of the Company, any future
employment by the Company or its affiliates,  or any future transaction to which
the  Company  or any of its  affiliates  will or may be a  party;  or (4) is the
beneficial  or record  owner of any  securities  of the Company or any parent or
subsidiary thereof.

OTHER MATTERS

The principal  executive  offices of the Company are located at 10245  Centurion
Parkway North, Suite 305, Jacksonville, Florida 32256. Except as otherwise noted
herein,  the information  concerning the Company has been taken from or is based
upon  documents  and records on file with the SEC and other  publicly  available
information.  Although the Western  Committee  does not have any knowledge  that
would indicate that any statement contained herein based upon such documents and
records is  untrue,  it does not take any  responsibility  for the  accuracy  or
completeness of the information  contained in such documents and records, or for
any failure by the Company to disclose  events that may affect the  significance
or accuracy of such information.

For information  regarding the security  ownership of certain  beneficial owners
and the management of the Company, see Schedule II.

YOUR SUPPORT IS IMPORTANT

NO MATTER HOW MANY OR HOW FEW SHARES YOU OWN WE ARE SEEKING YOUR SUPPORT. PLEASE
SIGN,  DATE,  AND MAIL IN THE ENCLOSED  POSTAGE-PAID  ENVELOPE WITH THE ENCLOSED
WHITE CONSENT CARD AS SOON AS POSSIBLE.

IF YOUR SHARES OF COMMON STOCK ARE HELD IN THE NAME OF A BROKERAGE  FIRM,  BANK,
BANK  NOMINEE  OR OTHER  INSTITUTION,  ONLY IT CAN SIGN A WRITTEN  CONSENT  WITH
RESPECT TO YOUR COMMON STOCK. ACCORDINGLY, PLEASE CONTACT THE PERSON RESPONSIBLE
FOR YOUR  ACCOUNT  AND GIVE  INSTRUCTIONS  FOR A  WRITTEN  CONSENT  TO BE SIGNED
REPRESENTING YOUR SHARES OF COMMON STOCK.

WHOM YOU CAN CALL IF YOU HAVE QUESTIONS

If you have any questions or require any  assistance,  please contact The Altman
Group,  Inc.,  proxy  solicitors  for the Western  Committee,  at the  following
address and toll free telephone number:

                        The Altman Group, Inc.
                        1200 Wall Street West, 3rd Floor
                        Lyndhurst, New Jersey 07071
                        CALL TOLL-FREE: (866) 416-0553
                        FAX: (201) 460-0050

IT IS  IMPORTANT  THAT YOU SIGN AND DATE YOUR WHITE  CONSENT  CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED  ENVELOPE TO AVOID  UNNECESSARY  EXPENSE AND DELAY.  NO
POSTAGE IS NECESSARY.

                                                     THE WESTERN COMMITTEE

                                                     October __, 2005

                                       6





                                   SCHEDULE I

         TRANSACTIONS IN SECURITIES OF SUNSET FINANCIAL RESOURCES, INC.
                            DURING THE PAST TWO YEARS


    CLASS               QUANTITY         PRICE PER               DATE OF
OF SECURITY          PURCHASED/(SOLD)    SHARE ($)*          PURCHASE / (SALE)
--------------------------------------------------------------------------------

                      WESTERN INVESTMENT HEDGED PARTNERS LP
--------------------------------------------------------------------------------
 Common Stock             18,000         12.7706                 3/17/04
 Common Stock             18,000         12.7555                 3/17/04
 Common Stock             20,000         13.0005                 3/17/04
 Common Stock             18,000         13.0005                 3/17/04
 Common Stock            (18,000)        12.7439                (3/17/04)
 Common Stock             20,000          9.8075                 7/13/04
 Common Stock             15,000          9.6100                 8/12/04
 Common Stock            (91,000)        10.3798               (11/30/04)
 Common Stock             62,500          9.6701                 3/04/05
 Common Stock            100,000          9.6701                 3/07/05
 Common Stock            125,000          9.4200                 3/24/05
 Common Stock              8,400          8.2695                 8/16/05
 Common Stock              9,400          8.2822                 8/17/05

* Per share prices includes all commission costs.

                 WESTERN INVESTMENT INSTITUTIONAL PARTNERS L L C
--------------------------------------------------------------------------------
 Common Stock             30,000          12.7500                 3/17/04
 Common Stock             25,000          13.0004                 3/17/04
 Common Stock             32,000          12.7553                 3/17/04
 Common Stock             50,000          13.0002                 3/17/04
 Common Stock            (32,000)         12.7442                (3/17/04)
 Common Stock             10,000          12.7910                 3/22/04
 Common Stock              4,300          11.4623                 4/08/04
 Common Stock             26,100          11.4604                 4/12/04
 Common Stock             11,700          11.0178                 4/30/04
 Common Stock              5,000          11.0150                 5/03/04
 Common Stock             22,000          10.3800                11/30/04

                                       7





    CLASS               QUANTITY         PRICE PER               DATE OF
OF SECURITY          PURCHASED/(SOLD)    SHARE ($)*          PURCHASE / (SALE)
--------------------------------------------------------------------------------

 Common Stock             91,000          10.3800                11/30/04
 Common Stock              1,000           9.77785                2/22/05
 Common Stock              5,000           9.7085                 2/23/05
 Common Stock             10,000           9.5255                 2/24/05
 Common Stock              1,000           9.4785                 2/25/05
 Common Stock             62,500           9.6701                 3/04/05
 Common Stock            100,000           9.4200                 3/24/05
 Common Stock            (29,700)          9.4711                (3/24/05)
 Common Stock            186,100           9.5200                 3/28/05
 Common Stock             (1,100)          9.4996                (3/28/05)
 Common Stock                100           9.2200                 5/04/05
 Common Stock              8,300           9.1867                 5/13/05
 Common Stock             10,000           9.1898                 5/16/05
 Common Stock              5,000           9.1680                 5/17/05

* Per share prices includes all commission costs.

                   WESTERN INVESTMENT ACTIVISM PARTNERS L L C
--------------------------------------------------------------------------------
 Common Stock              10,000          9.6395                 3/04/05
 Common Stock              20,600          9.6015                 3/04/05
 Common Stock              15,100          9.4999                 3/16/05
 Common Stock              25,000          9.4202                 3/24/05
 Common Stock               2,800          9.2100                 5/27/05
 Common Stock                 800          9.2100                 8/02/05
 Common Stock               4,500          9.2100                 8/03/05
 Common Stock              (1,100)         9.2996                (8/08/05)

* Per share prices includes all commission costs.

                                ARTHUR D. LIPSON
--------------------------------------------------------------------------------
 Common Stock               5,000          9.5000                  3/28/05

                            WESTERN INVESTMENT L L C
--------------------------------------------------------------------------------
                                      NONE

                                       8






                                   SCHEDULE II

      THE FOLLOWING TABLE IS REPRINTED FROM THE DEFINITIVE PROXY STATEMENT
          FILE BY SUNSET FINANCIAL RESOURCES, INC. WITH THE SECURITIES
                   AND EXCHANGE COMMISSION ON APRIL 6, 2005.

                  SHARE OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

The following  table sets forth  certain  information  regarding the  beneficial
ownership  of our common  stock as of March 30, 2005 by (1) each person known by
us to own  beneficially  more than 5% of our outstanding  common stock, (2) each
current  director,  (3)  each  named  executive  officer,  and (4)  all  current
directors and executive  officers as a group.  The number of stock  beneficially
owned by each entity, person,  director or executive officer is determined under
the rules of the SEC,  and the  information  is not  necessarily  indicative  of
beneficial  ownership  for any  other  purpose.  Under  such  rules,  beneficial
ownership  includes any stock as to which the  individual has the sole or shared
voting power or investment  power and also any stock that the  individual  has a
right to acquire as of May 30, 2005 (60 days after March 30,  2005)  through the
exercise of any share option or other right.  Unless otherwise  indicated,  each
person has sole  voting and  investment  power (or shares  such  powers with his
spouse) with respect to the stock set forth in the following table.

                                                     Amount and Nature of           Percent of
Name and Address of Beneficial Owner                 Beneficial Ownership            Class (1)
-----------------------------------------------      --------------------           ----------
Hunter Global Associates, L.L.C.                          1,500,000 (2)              14.3%
    485 Madison Avenue
    22nd Floor
    New York, New York 10022

North Sound Capital LLC                                   1,000,000 (3)               9.6%
    53 Forest Avenue
    Suite 202
    Old Greenwich, CT 06870

Delaware Management Holdings                                899,100 (4)               8.6%
    2005 Market Street
    Philadelphia, PA 19103

NWQ Investment Management Company, LLC                      897,549 (5)               8.6%
    2049 Century Park East, 4th Floor
    Los Angeles, CA 90067

Teachers Insurance and Annuity Association of America       788,320 (6)               7.5%
    730 Third Avenue
    New York, NY 10017

                                       9





Thomas Bruce Akin                                           659,700 (7)               6.3%
     c/o Talkot Crossover Fund, L.P.
     2400 Bridgeway
     Suite 300
     Sausalito, CA 94965

Western Investment LLC                                      562,800 (8)               5.4%
    2855 East Cottonwood Parkway
    Suite 110
    Salt Lake City, UT 84121

J. Bert Watson                                              189,000 (9)               1.8%

Byron L. Boston                                              36,666 (10)               *

Jeffrey S. Betros                                             8,833 (11)               *

Michael L. Pannell                                           14,333 (12)               *

Rodney E. Bennett                                             5,000 (13)               *

Hugh H. Jones, Jr.                                            7,000 (14)               *

George A. Murray                                              8,000 (15)               *

Joseph P. Stingone                                            6,000 (16)               *

G. Steven Dawson                                              5,000 (17)               *

George O. Deehan                                              5,000 (18)               *

Thomas Manuel                                                   -- (19)                *

All directors and executive officers as a group             289,832 (3)               2.7%
(11 persons)


* Beneficial ownership of less than 1% of the class is omitted.

                                       10






(1)    The  percentages  of  shares  owned  provided  in the  table  is based on
       10,475,000  shares  outstanding  as of  March  21,  2005.  Percentage  of
       beneficial ownership by a person as of a particular date is calculated by
       dividing  the number of shares  beneficially  owned by such  person as of
       March  30,  2005 by the sum of the  number  of  shares  of  common  stock
       outstanding as of such date and the number of unissued shares as to which
       such  person  has the right to acquire  voting  and/or  investment  power
       within 60 days and restricted stock not yet vested.

(2)    Includes  shares  beneficially  owned  by Duke  Buchan  III  and  various
       affiliated  entities,  including Hunter Global Associates L.L.C.,  Hunter
       Global  Investors  L.P.,  Hunter Global  Investors Fund I L.P. and Hunter
       Global Investors Fund II L.P. Hunter Global  Associates  L.L.C.  reported
       shared voting power and shared  dispositive power with respect to 475,500
       shares.  Hunter Global  Investors  L.P. and Duke Buchan III each reported
       shared  voting  power  and  shared  dispositive  power  with  respect  to
       1,500,000  shares.  Hunter Global  Investors Fund I L.P.  reported shared
       voting power and shared dispositive power with respect to 448,500 shares.
       Hunter Global  Investors  Fund II L.P.  reported  shared voting power and
       shared  dispositive power with respect to 27,000 shares.  Based solely on
       Schedule 13G dated March 17, 2004.

(3)    North Sound Capital LLC reported shared voting and dispositive power over
       1,000,000 shares of common stock.  The ultimate  managing member of North
       Sound  Capital  LLC is Thomas  McAuley.  North  Sound  Capital LLC may be
       deemed the beneficial owner of the shares in its capacity as the managing
       member of North Sound Legacy Fund LLC,  North Sound Legacy  Institutional
       Fund LLC and North Sound Legacy International Ltd. (the "Funds"), who are
       the holders of such shares.  As the managing  member of the Funds,  North
       Sound Capital LLC has voting and  investment  control with respect to the
       shares of common  stock held by the Funds.  Based  solely on Schedule 13G
       dated March 17, 2004.

(4)    Consists of shares  beneficially  owned by Delaware  Management  Holdings
       which is wholly-owned  by Delaware  Management  Business  Trust.  Lincoln
       National  Corp. is the ultimate  parent of Delaware  Management  Business
       Trust and may be deemed to share  beneficial  ownership  with the various
       Delaware  Investments Family of Funds. Of the shares  beneficially owned,
       Delaware  Management Holdings and Delaware Management Business Trust have
       sole voting and dispositive  power with respect to 899,100 shares.  Based
       solely on Schedule 13G dated December 31, 2004.

(5)   Shares are  beneficially  owned by clients  of NWQ  Investment  Management
      ("NWQ"),  an  investment  advisor,  which  clients may include  investment
      companies  registered  under the  Investment  Company Act and/or  employee
      benefit  plans,  pension  funds,  endowment  funds or other  institutional
      clients. NWQ has the sole power to dispose of or to direct the disposition
      of  897,549  shares,  and the  sole  power to vote or  direct  the vote of
      786,418 shares. Based solely on Schedule 13G dated December 31, 2004.

(6)   Teachers  Insurance  and Annuity  Association  of America  ("TIAA")  holds
      303,820  shares of our common  stock for the  benefit of TIAA Real  Estate
      Account,  a separate account of TIAA. In addition,  TIAA, as the parent of
      two registered investment advisers,  may be deemed to have indirect voting
      or investment  discretion over 484,500 shares of our common stock that are
      beneficially  owned by three  registered  investment  companies  - College
      Retirement Equities Fund ("CREF"),  TIAA-CREF  Institutional  Mutual Funds
      ("Institutional  Funds"), and TIAA-CREF Life Funds ("Life Funds"), as well
      as the TIAA-CREF Asset Management  Commingled Funds Trust I ("TCAM Funds")

                                       11





      - whose investment advisers are TIAA-CREF Investment  Management,  LLC (in
      the  case  of  CREF)  and  Teachers   Advisors,   Inc.  (in  the  case  of
      Institutional  Funds, Life Funds and TCAM Funds), both of which are wholly
      owned  subsidiaries  of TIAA.  Based solely on Schedule 13G dated December
      31, 2004.

(7)    Thomas Akin is the direct  beneficial  owner of 446,800  shares of common
       stock.  Thomas  Akin  is the  managing  general  partner  of  the  Talkot
       Crossover Fund, L.P. Talkot Crossover Fund, L.P. is the direct beneficial
       owner of 212,900  shares of common stock.  By virtue of the  relationship
       between Mr. Akin and the fund, Mr. Akin may be deemed to possess indirect
       beneficial  ownership of the shares of common stock beneficially owned by
       the fund. Based solely on Schedule 13D dated March 15, 2005.

(8)    Western Investment LLC, ("WILLC"),  Arthur D. Lipson,  Western Investment
       Hedged Partners LP, ("WIHP"),  Western Investment  Institutional Partners
       LLC,  a  Delaware  limited  liability   company  ("WIIP"),   and  Western
       Investment  Activism Partners LLC ("WIAP"),  jointly reported their stock
       ownership.  WILLC has sole  voting  and  investment  power  over  WIHP's,
       WIIP's,  and WIAP's security  holdings and Mr. Lipson, in his role as the
       managing  member  of  WILLC,   controls  WILLC's  voting  and  investment
       decisions.  As of the close of business on March 16, 2005, WIHP, WIIP and
       WIAP beneficially owned 162,500,  354,600 and 45,700 shares respectively.
       WILLC  beneficially  owned 562,800  shares.  Based solely on Schedule 13D
       filed March 7, 2005.

(9)    Includes options to purchase 39,000 shares of common stock.

(10)   Includes  options to purchase  16,666 shares of common  stock,  and 5,000
       restricted shares.

(11)   Includes options to purchase 8,333 shares of common stock.

(12)   Includes options to purchase 8,333 shares of common stock.

(13)   Includes options to purchase 5,000 shares of common stock.

(14)   Includes options to purchase 5,000 shares of common stock.

(15)   Includes options to purchase 5,000 shares of common stock. Includes 3,000
       shares held in a family trust, of which Mr. Murray is the trustee.

(16)   Includes options to purchase 5,000 shares of common stock.

(17)   Includes options to purchase 5,000 shares of common stock.

(18)   Includes options to purchase 5,000 shares of common stock.

(19)   Based solely on Form 4 filed January 27, 2005.

                                       12





                                 WRITTEN CONSENT
               OF STOCKHOLDERS OF SUNSET FINANCIAL RESOURCES, INC.


       SOLICITED BY WESTERN INVESTMENT L L C ("WILLC"), WESTERN INVESTMENT
    INSTITUTIONAL PARTNERS L L C ("WIIP"), WESTERN INVESTMENT HEDGED PARTNERS
        LP ("WIHP"), WESTERN INVESTMENT ACTIVISM PARTNERS L L C ("WIAP")
          AND ARTHUR D. LIPSON (COLLECTIVELY, THE "WESTERN COMMITTEE")
                TO CALL A SPECIAL MEETING OF THE STOCKHOLDERS OF
                        SUNSET FINANCIAL RESOURCES, INC.


The undersigned is a stockholder of common stock of Sunset Financial  Resources,
Inc. (the  "Company") and hereby submits this request to call a special  meeting
of the  Company's  stockholders  for the purposes of  considering  the proposals
described  in  the  Consent  Solicitation   Statement  previously  sent  to  the
stockholders of the Company, and incorporated by reference herein, and designate
specified  persons as the  stockholder's  agents and  authorizing the designated
agents to set the place,  date and time of the  special  meeting,  if held to be
permissible,  and  exercise  all  rights  of the  stockholders  of  the  Company
incidental to calling and convening the special  meeting.  NOTHING  CONTAINED IN
THIS  INSTRUMENT  SHALL BE CONSTRUED TO GRANT THE WESTERN  COMMITTEE  THE RIGHT,
POWER OR AUTHORITY TO VOTE ANY SHARES  OWNED BY THE  UNDERSIGNED  AT THE SPECIAL
MEETING.

The undersigned  hereby  authorizes and designates the Western  Committee or any
agent thereof to collect and deliver this request to the Company, and to deliver
any other information required in connection therewith.

This request  supercedes,  and the undersigned  hereby revoke, any earlier dated
revocation  which the undersigned  may have submitted to the Western  Committee,
the Company or any designees of either.

Print Name:_______________________________________________________________

Signature:________________________________________________________________

Signature (if held jointly):______________________________________________

Title (only if shares are held by an entity):_____________________________

Number of shares beneficially owned (and as to which you have the right to
vote):_____________________________


Dated:______________________________________________________


Please sign exactly as your shares are registered. When shares are held by joint
tenants, both should sign. When signing as an attorney, executor, administrator,
trustee, or guardian,  please give full title as such. If a corporation,  please
sign in full corporation name by the President or other duly authorized officer.
If a partnership,  please sign in partnership  name by authorized  person.  This
demand will represent all shares held in all capacities.

                 PLEASE COMPLETE, SIGN, DATE, AND MAIL PROMPTLY
               IN THE ENCLOSED ENVELOPE BEFORE ____________, 2005

                                       13