Commitments and Contingencies

12 Months Ended

Dec. 31, 2011

Commitments And Contingencies Disclosure [Abstract]

Commitments And Contingencies Disclosure [Text Block]

NOTE 12. COMMITMENTS AND CONTINGENCIES

Outstanding Litigation

The Company is involved in various lawsuits and claims, both actual and potential, including some that it has asserted against others, in which monetary and other damages are sought. These lawsuits and claims relate primarily to contractual disputes arising out of the ordinary course of the Company's business. The outcome of such lawsuits and claims is inherently unpredictable. However, management believes that, in the aggregate, the outcome of all lawsuits and claims involving the Company will not have a material effect on the Company's consolidated financial position or liquidity; however, any such outcome may be material to the results of operations of any particular period in which costs, if any, are recognized.

A complaint by a note-holder in Preferred Term Securities XX (“PreTSL XX”) was filed on July 16, 2010 in the Supreme Court of the State of New York, New York County, against Bimini Capital Management, Inc. (“Bimini”), the Bank of New York Mellon (“BNYM”), PreTSL XX, Ltd. and Hexagon Securities, LLC (“Hexagon”). The complaint, filed by Hildene Capital Management, LLC and Hildene Opportunities Fund, Ltd. (“Hildene”), alleges that Hildene suffered losses as a result of Bimini's repurchase of all outstanding fixed/floating rate capital securities of Bimini Capital Trust II for less than par value from PreTSL XX in October 2009. Hildene has alleged claims against BNYM for breach of the Indenture, breach of fiduciary duties and breach of covenant of good faith and fair dealing, and claims against Bimini for tortious interference with contract, aiding and abetting breach of fiduciary duty, unjust enrichment and “rescission/illegality”. Plaintiff also alleges derivative claims brought in the name of Nominal Defendant BNYM. (On May 2, 2011, Hexagon and Nominal Defendant PreTSL XX were voluntarily dismissed without prejudice by Hildene.) On May 23, 2011, Bimini and BNYM moved to dismiss Hildene's derivative claims, and Bimini also moved to dismiss Hildene's claim for “rescission/illegality.” On October 19, 2011, PreTSL XX moved to intervene as an additional plaintiff in the action, and Bimini and BNYM have opposed that motion. Bimini denies that the repurchase was improper and intends to defend the suit vigorously.

On June 14, 2007, a complaint was filed in the Circuit Court of the Twelfth Judicial District in and for Manatee County, Florida by Coast Bank of Florida against MortCo seeking monetary damages and specific performance and alleging breach of an alleged oral contract for allegedly failing to convert approximately fifty construction loans to permanent financing. A non-jury trial was scheduled to begin on January 17, 2012. However, on January 16, 2012 the parties entered into a settlement agreement. Pursuant to the settlement agreement, MortCo, without admitting any allegations, paid Coast $800,000 and the litigation and all related claims were dismissed with prejudice. Each party is responsible for the payment of its own legal fees and expenses. At December 31, 2011 the Company recorded an accrual for the $800,000 settlement in the caption “accounts payable, accrued expenses and other” in the accompanying consolidated balance sheet.”

On March 2, 2011, MortCoand Opteum Mortgage Acceptance Corporation (“Opteum Acceptance”) (referred to together herein as “MortCo”) received a cover letter dated March 1, 2011 from Massachusetts Mutual Life Insurance Company (“Mass Mutual”) enclosing a draft complaint against MortCo. In summary, Mass Mutual alleges that it purchased residential mortgage-backed securities offered by MortCo in August 2005 and the first quarter of 2006 and that MortCo made false representations and warranties in connection with the sale of the securities in violation of Mass Gen. Laws Ch. 110A § 410(a)(2) (the “Massachusetts Blue Sky Law”). In its cover letter, Mass Mutual claims it is entitled to damages in excess of $25 million. However, no monetary demand is contained within the enclosed draft complaint and the actual damages Mass Mutual claims to have incurred is uncertain.

Mass Mutual has not filed the complaint or initiated litigation. Pursuant to its request, on March 14, 2011 Mass Mutual and MortCo entered into a Tolling Agreement through June 1, 2011 so that Mass Mutual could address its allegations against MortCo without incurring litigation costs. Mass Mutual has not yet contacted MortCo to schedule such discussions. On August 22, 2011, the parties extended the Tolling Agreement through June 1, 2013.

MortCo denies it made false representations and warranties in connection with the sale of securities to Mass Mutual. Mass Mutual has taken no action to prosecute its claim against MortCo, and the range of loss or potential loss, if any, cannot reasonably be estimated. Should Mass Mutual initiate litigation, MortCo will defend such litigation vigorously.

Loans Sold to Investors.

Generally, MortCo was not exposed to significant credit risk on its loans sold to investors. In the normal course of business, MortCo provided certain representations and warranties during the sale of mortgage loans which obligated it to repurchase loans which are subsequently unable to be sold through the normal investor channels. The repurchased loans were secured by the related real estate properties, and can usually be sold directly to other permanent investors. There can be no assurance, however, that MortCo will be able to recover the repurchased loan value either through other investor channels or through the assumption of the secured real estate.

MortCo recognized a liability, which is included in “accounts payable, accrued expenses and other” in the accompanying consolidated balance sheet, for the estimated fair value of this obligation at the inception of each mortgage loan sale based on the anticipated repurchase levels and historical experience. Changes in this liability for the yearsended December 31, 2011 and 2010 are presented below:

(in thousands)
	Years Ended December 31,
		2011		2010
Balance - Beginning of year	$	5,087	$	5,149
Provision		-		48
Settlements		-		(110)
Balance - End of year	$	5,087	$	5,087

Consulting Agreement

During 2011, the Company, through Bimini Advisors, entered into an agreement with a consultant pursuant to which the consultant will continue to advise the Company with respect to financing alternatives, banking relationships and external asset management arrangements in connection with the formation, capitalization and operation of Orchid. Bimini Advisors paid the consultant a $60,000 retainer in 2011. In addition, if Orchidraises at least $50 million in equity investments by June 30, 2012, Bimini Advisors will pay the consultant 50% of any asset management fees that Bimini Advisors receives from Orchid during the twelve months following the date on which Orchid has received the equity investments. If Orchid raises at least $50 million in equity investments by June 30, 2012, then the minimum amount to be paid to the consultant under management fee sharing arrangement will be $487,500 and the maximum will be $1.2 million.

On February 6, 2012, the consulting agreement was amended. Under the terms of the amended agreement, Bimini Advisors will pay the consultant an additional $60,000 retainer fee, retroactive to January 2012. The additional fee is payable in six equal installments of $10,000 through June of 2012. Further, under the amended terms, if equity capital is raised before June 30, 2012, the retainer paid to the consultant will only be paid up to and including the month the new equity capital is raised, and will be gradually phased out to the extent new equity raised exceeds certain thresholds starting at $125 million.The amended agreement also provides that the obligation to pay the consultant 50% of any asset management fees that Bimini Advisors receives from Orchid following the date on which Orchid has received equity investments of at least $50 million has been extended from June 30, 2012 to December 31, 2012. There is no longer an explicit minimum amount payable under the management fee sharing arrangement, but the maximum of $1.2 million was retained.