8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

January 29, 2007

Date of report (Date of earliest event reported)

FIELDSTONE INVESTMENT CORPORATION

(Exact Name of Registrant as Specified in Its Charter)

Maryland	000-50938	74-2874689
(State or other jurisdiction	(Commission File Number)	(IRS Employer
of incorporation)		Identification No.)

11000 Broken Land Parkway

Columbia, Maryland 21044

(Address of Principal Executive Offices)

(410) 772-7200

(Registrant’s Telephone Number, Including Area Code)

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

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

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

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

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

Section 7– Regulation FD

Item 7.01. Regulation FD Disclosure

Fieldstone Investment Corporation (the “Company”) is furnishing the text of presentation materials, included as Exhibit 99.1 to this report, pursuant to the Securities and Exchange Commission’s Regulation FD. The presentation materials were prepared to be used by Company management on January 29^th and 30^th in meetings with institutional investors during the American Securitization Forum’s Conference at The Venetian Hotel in Las Vegas, Nevada.

This information is furnished pursuant to Item 7.01 of Form 8-K and shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability under that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing. By filing this report on Form 8-K and furnishing this information, the Company makes no admission as to the materiality of any information in this report that is required to be disclosed solely by reason of Regulation FD.

The information contained in the presentation materials is summary information that is intended to be considered in the context of the Company’s SEC filings and other public announcements that the Company may make, by press release or otherwise, from time to time. The Company undertakes no duty or obligation to publicly update or revise the information contained in this report, although it may do so from time to time as management believes is warranted. Any such updating may be made through the filing of other reports or documents with the SEC, through press releases or through other public disclosure.

Section 9 – Financial Statements and Exhibits

Item 9.01. Financial Statements and Exhibits

(d) Exhibits

Exhibit No.	Description
99.1	Text of presentation materials

SIGNATURES

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

	FIELDSTONE INVESTMENT CORPORATION
Date: January 29, 2007	By:	/s/ Nayan V. Kisnadwala
		Nayan V. Kisnadwala Executive Vice President and Chief Financial Officer

EX-99.1

Securitization Program Update

January 2007

www.FieldstoneInvestment.com

Exhibit 99.1

2

FORWARD-LOOKING STATEMENTS

This presentation may contain “forward-looking statements”

within the meaning of the federal securities laws including, but not limited to (i) statements regarding the expected

building of Fieldstone’s portfolio and origination business in 2007; (ii) the expected achievement of targeted leveraged returns on new loans; (iii) expectations regarding its

funding levels, cost to originate, and initiatives on origination growth and cost management; (iv) initiatives designed to mitigate portfolio delinquencies and losses and the results

of those initiatives, (v) expectations regarding its competitive

position, (vi) opinions with respect to maintenance of its liquidity position, and (vii) statements regarding market

condition and opportunity. These statements are being made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Actual results and the

timing of certain events may differ materially from those indicated by such forward-looking statements due to a variety of risks and uncertainties, many of which are beyond

Fieldstone’s ability to control or predict, including but not limited to (i) Fieldstone’s ability to successfully implement or change aspects of its portfolio strategy; (ii) interest rate

volatility and the level of interest rates generally; (iii) the sustainability of loan origination volumes and levels of origination costs; (iv) continued availability of credit facilities

for the liquidity Fieldstone needs to support its origination of

mortgage loans; (v) the ability to sell or securitize mortgage loans on favorable economic terms; (vi) deterioration

in the credit quality of Fieldstone’s loan portfolio; (vii) the nature and amount of competition; (viii) the impact of changes to the fair value of Fieldstone’s interest rate swaps on

its net income, which will vary based upon changes in interest rates and could cause net income to vary significantly from quarter to quarter; and (ix) other risks and

uncertainties outlined in Fieldstone Investment Corporation’s periodic reports filed with the Securities and Exchange Commission. The information contained in the presentation

materials is summary information that is intended to be considered in the context of Fieldstone’s SEC filings and other public announcements that Fieldstone may

make, by

press release or otherwise, from time to time. These statements are made as of the date of this presentation, or as otherwise indicated, and Fieldstone undertakes no obligation to

publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

BASIS OF PRESENTATION

Financial information in this presentation presents the results of Fieldstone’s previous conforming origination business as a discontinued operation, following the sale in the first

quarter of 2006 of the assets related to that business.  Fieldstone’s continuing operations include its Investment Portfolio, Wholesale, Retail, and Corporate segments.  With the

exception of net income, the results of operations discussed in this presentation do not include the results of the discontinued

operations, unless otherwise indicated.

Disclaimer

3

Table of Contents

Page

I.

Fieldstone Summary

4

II.

Portfolio Summary

14

III.

Origination Summary

19

IV.

Underwriting Summary

22

Supplemental Data :

Collateral Performance and Trends

29

Collateral Risk-Adjusted Coupons

33

Management

34

4

Strategic Summary

Fieldstone’s Business Proposition

–

Vertically integrated origination of and investment in residential mortgages

–

Complete dis-intermediation of the sector: pre-tax earnings direct to shareholders

–

Strong focus on loan quality, portfolio management and liquidity

Strategic Imperatives for Fieldstone in 2007

–

Lower cost to originate: in the origination branches and in the home office

–

Increased origination volume of non-prime, alt-A and full value loans

–

Improved delinquency and loss management of loans held for investment

Current Market Conditions

–

Intense competition for loans in a contracting mortgage market

–

Low sale margins will continue, and only low-cost originators can profit on sale of loans

–

Slower Home Price Appreciation will:

–

increase

delinquencies

of

borrowers

that

needed

appreciation

to

afford

their

homes

–

increase

opportunities

for

purchasers

to

afford

to

buy

homes

–

Consolidation of mortgage origination capacity by largest financial service institutions

Market Opportunity

–

Strong economy, job growth and aging and growing population remain positive for home prices

–

Attractive, risk-adjusted returns continue to be available on leveraged investments in non-prime loans

–

Non-prime

and

alt-A

market

share

will

increase

due

to

continued

growth

of

consumer

debt

–

Difficult market conditions will eliminate competition from poorly capitalized participants

–

The most sophisticated participants in the residential market are buying origination capacity

5

Fieldstone Summary Information

Publicly traded on NASDAQ: FICC

Fieldstone’s businesses include:

Originating residential mortgage loans, in its Taxable REIT Subsidiary (TRS)

Investing in a mortgage portfolio in the REIT for net interest income over time

Issuing mortgage-backed securities to finance loans in the portfolio

Selling non-portfolio loans from the TRS for current period gains

REIT Portfolio:

Total at 3Q ‘06: $5.9 Billion

Primarily 2/28 ARM first liens

Match fund with:

MBS securities for life of loan

Swaps during fixed rate period

Origination business:

Began operations in 1995

Licensed in 50 states

Wholesale and Retail, non-prime and alt-A products

1,100 employees, including 375 AEs/Los at 3Q ‘06

Headquartered in Columbia, Maryland

6

Current Market Conditions

Mortgage originators under significant pressure

Intense competition for loans in a contracting mortgage market

Increased levels of early payment defaults and repurchase requests  

Continued imperative to lower costs requires significant investments in systems

Volatile interest markets make hedging more difficult

Seasonal

slowing

is

compounded

by

firms

“for-sale”

driving

volume

with

low

rates

Increased delinquencies for recent non-conforming credit borrowers generally

Slower home price appreciation reduces the ability of borrowers to refinance

Lack of equity appreciation in recent vintage loans means more will roll to REO

Speculative buying in 2003 to 2006 will result in higher delinquencies and losses

Delinquencies and losses on 2005 and 2006 loans higher than for 2002 thru 2004 loans,

up to historic levels experienced on loans originated prior to 2002

Home Price Appreciation is expected to continue to be slow nationally

Risk

highest

for

investor

loans

and

for

largest

loans

with

least

demand

Incentives for speculative buying have been wrung out of the market

Markets that never over-heated should continue steady price increases

Median and lower priced primary residences will hold value for the homeowner

7

Market Opportunity

Origination growth positive over the long term

Rising consumer debt will drive demand for non-prime and Alt-A products

Aging and growing population will support home price appreciation

Challenging market will eliminate poorly capitalized originators

Sophisticated buyers continue to purchase origination capacity in residential markets

Positive total return opportunity in REIT investment portfolio

Life-of-Pool risk-adjusted returns on new loans still attractive

Forward rates, losses, prepayments and expenses modeled

Increased risk premiums for the sector will lower sale margins but  improve risk-

adjusted portfolio returns

Forward yield curve anticipates lower interest rates in the future

Positive

longer

term

for

housing,

mortgage

industry

and

borrower

credit

Little

impact

on

existing

net

interest

spreads

on

loans

held

for

investment

due

to

swaps

Non-cash charge to income to reduce the carrying value of the swaps as rates fall

8

Fieldstone’s Strategic Initiatives for 2007

Reduce Cost to Originate

Improve Servicing of Loan Portfolio

Increase Market Share and Fundings

9

Fieldstone’s Strategic Initiatives for 2007

Reduce Cost to Originate

Reduce number of operations centers

Lower premiums paid for wholesale loans

Achieve efficiencies from use of new Loan Origination System

Train customers on self-serve use of on-line technology

Commission plan focused on net

revenue, after expenses

10

Fieldstone’s Strategic Initiatives for 2007

Improve Servicing of Loan Portfolio

Accelerated manual intervention on delinquent loans

Set-up loans initially with the permanent servicer

Engaged delinquency and loss mitigation over-seer for 2006 loans

Retain only selected products for portfolio:

Already have eliminated weaker products

Historically have excluded investor properties and high dollar

value properties

11

Fieldstone’s Strategic Initiatives for 2007

Increase Market Share and Fundings

Simplified, discounted rate sheet on-line

Focus customers on self-serve use of on-line technology

Add sales force in strategic markets

Add higher credit products with appropriate revenue opportunities

Innovate on non-conforming cash flow features, not credit

Real-time automation delivered on hand-held devices

12

Fieldstone Remains Focused on Loan Quality

Appraisal Reviews

AVM or review appraisal on all loans

Lower tolerances for AVM values in current real estate market

Focus on recent sale and listing information for current valuations

Borrower Credit

FICO-driven underwriting guidelines

Focus on debt ratio, disposable income and well-established credit history

Eliminate lowest FICO, high CLTV programs

Fraud Avoidance

“Hawk Alert”

and SSN validations on all loans

Validate full doc. income using IRS form 4506T

Validate reasonableness of stated income

Proof of identification required at closing

Chain of Title review on all purchase transactions

Borrower benefit documented in writing on non-prime refinances

Terminate business with brokers with poorly performing loans

13

Capital Structure and Liquidity

Fieldstone maintains:

Adequate capital and liquidity

$2.25 billion of lines of credit

An increase of $500 million over September 30th

Long-term, multifaceted relationships with our lenders

In compliance with all covenants at September 30th

Obtained amendments in December to insure compliance with covenants

at year-end 2006

14

Fieldstone’s Investment Portfolio: Strategic Proposition

Originate high quality non-conforming loans for REIT portfolio

2/28 hybrid ARMs primarily

648 average credit score as of September 30, 2006

Focus on median and lower priced, owner occupied homes

Interest Only hybrid ARM

’

s begin amortizing after five years

Finance portfolio with long-term securitization debt

On-balance sheet financing

No

“

gain on sale

”

non-cash gains on securitization

Committed financing with strong asset-liability management

Retain Fieldstone loans to assure quality

Lock in spreads and return gains to shareholders

Protection of current spreads with interest rate swaps

Pre-tax REIT taxable income distributed as dividends to shareholders

15

Credit Score Distribution

Fieldstone Portfolio as of September 30, 2006

Investment Portfolio Balance ($ millions)

Collateral Characteristics

$4,752

$5,526

$5,487

$5,688

$5,855

$4,129

$5,106

$4,836

$5,273

$-

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

Sep-04

Dec-04

Mar-05

Jun-05

Sep-05

Dec-05

Mar-06

Jun-06

Sep-06

4%

15%

30%

34%

17%

0%

5%

10%

15%

20%

25%

30%

35%

40%

500-549

550-599

600-649

650-699

>700

Average Credit Score

648

First Lien Hybrid ARMs

89.1%

-

Average Current Coupon

7.9%

-

Average Gross Margin

5.2%

Fixed Rate Second Liens

4.2%

Prepayment Fee Coverage

85.0%

Full Income Documentation

43.5%

Interest Only Loans

53.3%

Purchase Transactions

61.8%

Primary Residences

96.6%

Weighted Average LTV

82.4%

-

LTV>90%

6.3%

-

Weighted Average CLTV

93.3%

State Concentration-California

39.0%

Average Loan Size                               $175,109

-Average Property Value                 $257,679

-Average Property Value-CA          $441,067

_

16

FMIC 2003-1

Size:

$488,923,000

Priced:

10/3/03

AAA:

LIBOR + 35bps

BBB:

LIBOR + 325bps

FMIC 2004-1

Size:

$663,157,000

Priced:

2/6/04

AAA:

LIBOR + 31bps

BBB:

LIBOR + 180bps

FMIC 2004-2

Size:

$857,120,000

Priced:

4/16/04

AAA:

LIBOR +25bps

BBB:

LIBOR +215bps

FMIC 2004-3

Size:

$986,500,000

Priced:

6/23/04

AAA:

LIBOR + 30bps

BBB:

LIBOR + 215bps

FMIC 2004-4

Size:

$874,308,000

Priced:

9/27/04

AAA:

LIBOR + 33bps

BBB:

LIBOR + 170bps

FMIC 2004-5

Size:

$892,350,000

Priced:

11/10/04

AAA:

LIBOR + 34bps

BBB:

LIBOR + 185bps

All of the figures are at deal inception.

REIT Portfolio Strategy

FMIC 2003-1 Caps at Forward LIBOR

FMIC 2004-1 Swap at 1.94%

FMIC 2004-2 Swap at 2.08%

FMIC 2004-3 Swap at 3.29%

FMIC 2004-4 Utilized Cap Corridor

FMIC 2004-5 Swap at 2.89%

FMIC 2005-1 Swap at 3.53%

FMIC 2005-2 Swap at 3.95%

FMIC 2005-3 Swap at 4.36%

FMIC 2006-1 Swap at 4.79%

FMIC 2006-2 Swap at 5.19%

FMIC 2006-3 Swap at 5.19%

Consistent Net Interest Income

Consistent Issuance of MBS Debt

Focused Strategy to Create Stable and High Yielding Cash Flows

FMIC 2005-1

Size:

$743,625,000

Priced:

2/14/05

AAA:

LIBOR + 23bps

BBB:

LIBOR + 135bps

FMIC 2005-2

Size:

$958,447,000

Priced:

7/15/05

AAA:

LIBOR + 25bps

BBB:

LIBOR + 135bps

FMIC 2005-3

Size:

$1,156,009,000

Priced:

10/28/05

AAA:

LIBOR +24bps

BBB:

LIBOR + 200bps

FMIC 2006-1

Size:

$926,936,000

Priced:

3/14/06

AAA:

LIBOR +17bps

BBB:

LIBOR + 230bps

FMIC 2006-2

Size:

$779,200,000

Priced:

6/29/06

AAA:

LIBOR +15bps

BBB:

LIBOR +190 bps

FMIC 2006-3

Size

$832,855,000

Priced

10/20/06

AAA:

LIBOR +14bps

BBB:

LIBOR +210 bps

17

FMIC Program Distinguishing Characteristics

Strong servicer –

JPMorgan Chase Bank, N.A. maintains the highest servicer ratings

from the rating agencies

Strong Master Servicer / Servicing Oversight –

Wells Fargo Bank, N.A.

Reduced Basis Risk

Primarily hybrid ARM collateral with limited fixed rate and 2

nd

liens

Interest rate swaps or other hedge instruments pledged to the trust during hybrid period

Fieldstone aligns its interests with those of ABS investors

Retains BBB-rated notes

Retains full residual / “equity”

in pool

Funds OC up-front even though not selling NIM

Treats securitization as a financing on balance sheet

18

Non-Conforming Hybrid ARM Mortgage -

Initial Gross Interest Margin (prior to ARM re-set)

Source: Bloomberg

•

Initial Coupon on 2 year hybrid ARM mortgages will re-set after 24 months.

•

Interest rate will reset at a margin of  5% to 6% over 6 month LIBOR.

•

Periodic cap of 3% on the initial rate reset, 1% each reset every six months and 6% life cap. Total increase capped at 6%.

2 Year Hybrid Gross Int. Margin

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5

8.0

8.5

9.0

2/28 Hybrids HFI

2/28 Hybrids HFS

2YR SWAP

HFI v. Swap

19

Fieldstone’s Origination Strategy

Established

loan

origination

channels

since

1995

:

Focus on loan quality, customer service and operating efficiency

Opportunistic product development

Net-Revenue based commissions

Quality-based management incentives

Mortgage

loan

operations

driven

by

technology

:

On-Line loan pre-qualifications and submissions

Electronic document delivery, funding and imaging

Implementing new origination system to increase loans per person, lower origination cost

Deliver products and pricing using hand-held technology real-time direct to PDAs

Stable

business-to-business

sourcing

:

Wholesale originations from professional brokers

Retail originations from small financial service companies

Compete on service and product design, not rate or credit

Cultivate a learning organization to enhance:

Products

Customer service

Operating efficiencies

20

National Origination Franchise

Corp. HQ

Retail Office

Everett

Boston

Corporate

Headquarters,

Columbia,

Maryland

Ft. Lauderdale

Sacramento

Seattle

Portland

Concord

Carson

Irvine

Encinitas

Denver

Las Vegas

Phoenix

Houston

Bloomington

Omaha

Frisco

Boca Raton

Chicago

Indianapolis

Hanover

Tampa

Overland Park

Memphis

•

41 offices in 21 states

Wichita

Albuquerque

Wholesale Office

Arlington

Plano

Atlanta

Tempe

Springfield

Independence

Des Moines

Cedar Rapids

Davenport

$1,261

$1,207

$165

$151

$196

$188

$1,643

$1,264

$861

$236

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

$1,800

3Q 2005

4Q 2005

1Q 2006

2Q 2006

3Q 2006

Non-Conforming Wholesale Division

Retail Division

Quarterly Loan Originations

21

22

Underwriting Summary

Fieldstone’s Investigative Underwriting Process is designed to deter fraud

and limit default frequency and loss severity.

Full credit underwriting completed on all loans prior to funding

Default Frequency control

Full doc loans require execution of 4506 T

Stated loans

»

require authentication of self-employment documents (licenses, CPA letters)

»

credit history and assets appropriate for income stated

Purchase loans require 24 month chain of title to detect flip transactions

Refinance

transactions

require

written

borrower

benefit

analysis

to

deter

predatory

lending

Loans processed through Fieldscore (Fieldstone’s automated pre-qualification engine)

to insure borrower is placed in an appropriate product and to reduce errors

All credit reports are generated by Fieldstone.  Credit reports are tri-merged credit

reports containing Safescan or HAWK fraud alert, OFAC, previous employment and

residence information.

23

Underwriting Summary -

continued

Loss Severity control:  Fieldstone’s Appraisal Policy

Appraisal checklist completed by underwriters

Appraisal validated through AVM or other review products unless completed by

approved National Appraisal firm or new construction by approved

national

builder

All desk reviews are enhanced desk reviews, with new comparable sales evaluated

Field reviews required when transaction involves –

»

non-arm’s length transactions (related-party seller)

»

rural properties

Second appraisal required when loan amounts exceed $1,000,000

Appraisers checked against internal and external watch list

24

Controls

Underwriting completed in regional offices

Provides strong knowledge of local statutes

Better knowledge of local real estate values

Credit approval authorities are assigned to each underwriter by the Chief Credit

Officer

Underwriter

performance

tracked

monthly

via

Underwriters’

Report

Card

Post closing QC completed by internal staff and third party due diligence re-

verifies process

Responses including corrective actions are due monthly

Monthly audit findings reported to senior management

6 month trending reporting to executive management

Loan Origination System contains edits for internal and regulatory compliance

Fieldstone

does

not

fund

Section

32

,

high

cost

or

covered

loans

in

any

jurisdictions

All loans processed through Clayton’s compliance software

Edits

created

by

IS,

checked

by

internal

compliance

and

3

rd

party,

and

imbedded

in

LOS

Exceptions rarely

made for LTV/CLTV or Credit Score

Common

exceptions

include

bankruptcy/foreclosure

seasoning,

cash

out

amount

and seasoning and loan amount

25

Income Documentation Requirements

Fieldstone Offers Five Documentation Levels.  Verbal Verification of

Employment Is Always Obtained by FMC Within Five Days of Closing

Full Documentation

Current pay stubs and most recent year’s W-2s for wage earners; two-years

tax returns (business and personal) for self-employed borrowers

Hourly and self-employment income is averaged, declining income is not allowed

All borrowers receiving fixed income must verify all income used

for qualifying

24-Months’

Bank Statements (all employment types allowed)

24-months’

personal bank statements, allow for 100% of average deposits toward

qualifying.  If using business bank statements, 75% of average deposits is used for

qualifying

12-Months’

Bank Statements (self-employed borrowers only)

Same credit for deposits as 24-months program

26

Income Documentation Requirements -

continued

Limited Documentation

Wage Earners:

Most recent YTD pay stub required; average YTD income used

to qualify; must verify two years in the same profession

1099 Employees:

Most recent year’s 1099 and YTD statement of earnings

required.  75% of average income used to qualify

Self-Employed:

Six months of personal bank statements using 100% average

deposits to qualify or six months of business bank statements using 75% of

average deposits.  Borrowers must provide evidence they owned and operated

the business at least two years

Stated Documentation

Wage Earners:

Income is stated on the 1003 and file must include a written

Verification of Employment from current employer that does not provide income

information, but does show dates of employment, position, if employment is

likely to continue and average hours worked per week.  Borrower must

document two years in the same profession.  Income must be reasonable for

borrower’s profession

Self-Employed:

Income is stated on the 1003 and file must include evidence

that borrower has owned and operated the business for at least two years

27

Selected Recent Guideline Changes

•

Eliminated seller held second liens

•

Revised requirements for review appraisals: 8% tolerance (from 12%)

•

Increased minimum FICO requirements for Wall Street 100% combo loans to

620 for Full Doc and 660 for Stated Income

•

Eliminated seller concessions below 600 FICO for High Street

•

Added reserve requirements for First Time Home Buyers

•

Reduced max LTV for stated wage earners to 95%

•

Eliminated second liens for stated wage earners

•

Increased minimum FICO requirement for 12 month bank statements to 640

•

Now requiring 3 trade lines for all programs

•

Eliminated numerous low FICO high LTV / CLTV products

www.FieldstoneInvestment.com

Supplemental Data

January 2007

29

FMIC Static Pool Prepayment Analysis

Constant prepay rates generally track the market, with spikes around the reset dates as

the average life of Fieldstone’s loans is 22 months.

FMIC Static Pool Prepayment Analysis

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1

3

5

7

9

11

13

15

17

19

21

23

25

27

29

31

33

35

37

Deal Seasoning (months)

2003 Non-Prime ARM Data from LP/CS

Weighted Average of FMIC 2003 Vintage

2004 Non-Prime ARM Data from LP/CS

Weighted Average of FMIC 2004 Vintage

2005 Non-Prime ARM Data from LP/CS

Weighted Average of FMIC 2005 Vintage

2006 Non-Prime ARM Data from LP/CS

Weighted Average of FMIC 2006 Vintage

Source: Industry Averages from Loan Performance/CS as of 12/25/06

30

Source: Industry Averages from Loan Performance/CS as of 12/25/06

Loan Performance -

Delinquencies

As delinquencies and losses have increased on recent originations as well as due to the

overall aging of the portfolio, Fieldstone will focus on loss mitigation initiatives to

improve loan performance.

FMIC Static Pool Delinquency Analysis

60+ Days Delinquent (OTS Method)

0%

5%

10%

15%

20%

25%

1

3

5

7

9

11

13

15

17

19

21

23

25

27

29

31

33

35

37

Deal Seasoning (months)

2003 Non-Prime ARM Data from LP/CS

Weighted Average of FMIC 2003 Vintage

2004 Non-Prime ARM Data from LP/CS

Weighted Average of FMIC 2004 Vintage

2005 Non-Prime ARM Data from LP/CS

Weighted Average of FMIC 2005 Vintage

2006 Non-Prime ARM Data from LP/CS

Weighted Average of FMIC 2006 Vintage

31

FMIC Static Pool Cumulative Loss Analysis

FMIC Static Pool Cumulative Loss Analysis

0.00%

0.10%

0.20%

0.30%

0.40%

0.50%

0.60%

0.70%

0.80%

0.90%

1.00%

1

3

5

7

9

11

13

15

17

19

21

23

25

27

29

31

33

35

37

Deal Seasoning (months)

2003 Non-Prime ARM Data from LP/CS

Weighted Average of FMIC 2003 Vintage

2004 Non-Prime ARM Data from LP/CS

Weighted Average of FMIC 2004 Vintage

2005 Non-Prime ARM Data from LP/CS

Weighted Average of FMIC 2005 Vintage

2006 Non-Prime ARM Data from LP/CS

Weighted Average of FMIC 2006 Vintage

Source: Industry Averages from Loan Performance/CS as of 12/25/06

Credit Risk Management

Credit Score by Income Documentation Level

Q3 2006 Non-Conforming Originations

622

645

675

674

679

648

600

620

640

660

680

700

720

740

Full or Alternative

Documentation

24 Month Bank

Statements

12 Month Bank

Statements

Limited

Documentation

Stated Income

Self Employed

Stated Income

Wage Earner

Weighted Average Credit Score: 652

32

Credit Risk Management-Risk-Based Pricing

8.3%

7.9%

7.8%

7.7%

9.4%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

500-549

550-599

600-649

650-699

>700

Weighted Average Coupon: 7.9%

Credit Score

_

Portfolio Composition -

Risk-Based Pricing                     

(as of September 30, 2006)

33

34

Management Experience

Michael Sonnenfeld, President and Chief Executive Officer since 1995

18+ years of experience in mortgage banking and mortgage securities

Former

Director

of

the

Subprime

Residential

Mortgage

Conduit

for

Nomura

Securities

International,

Inc.

Former President for Saxon Mortgage Funding Corp. and Saxon Mortgage Capital Corp.

Nayan Kisnadwala, EVP and Chief Financial Officer since 2006

20+ years of experience in consumer and mortgage finance

Former MBNA Senior Executive Vice President and CFO of the Consumer Finance and Business Lending

Division, which included the mortgage business

Former CFO at American Express in its Global Operations

Former positions in Risk Management and Finance at Citicorp, Card Establishment Services and First Data

Walter Buczynski, EVP Secondary since 2000

20+ years of experience in mortgage banking

Former SVP at GE Capital Mortgage Services, Inc. directing the capital market activities

Former EVP of Secondary for Margaretten & Co., now known as Chase Manhattan Mortgage Corp.

John Kendall, EVP Investment Portfolio since 2004

15+ years of experience in mortgage capital markets

Former Director Public Fixed Income, MBS/ABS Portfolio; Northwestern Mutual Life Insurance Co.

Former

First

Vice

President,

Asset

Finance

Group;

Kidder

Peabody

&

Co.

/

Paine

Webber,

Inc.

Former Vice President, Capital Markets Group; Greenwich Capital Markets

Gary Uchino, SVP and Chief Credit Officer since 1995

20+ years of experience in subprime lending

Former Vice President of Credit Administration for Security Pacific Corp.

Former Director for Associates Financial Services Co. of Japan, KK

Jim Hagan, EVP Production of FMC since 1996

20+ years of experience in mortgage banking

Former RVP of the Subprime Division for American Residential Mortgage Corp.

Former Senior Vice President for Long Beach Mortgage Corp.

Securitization Program Update

January 2007

www.FieldstoneInvestment.com