1003201--6/22/2006--MUNICIPAL_MORTGAGE_&_EQUITY

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General Risks Related to Our Business Economic conditions adversely affecting the real estate market could have a material adverse effect on our financial condition and results of operations. Changing interest rates may have an adverse effect on our financial condition and results of operations. Our operations are expected to result in higher income for us in the second and fourth fiscal quarters than in the first and third fiscal quarters. The federal government has historically supported investment in affordable multifamily housing through regulatory incentives, and changes or modifications to the regulatory environment could adversely affect our results of operations. Events adversely impacting the GSEs that provide liquidity to the market for investments in affordable housing could materially adversely affect our business. We are exposed to construction completion and rehabilitation risks as well as the risk that completed developments in a lease-up phase do not become stabilized. The properties directly or indirectly securing our investments or included in our tax credit equity funds may not generate sufficient income to make the payments due to us, and the borrowers under our investments may default on their obligations under these investments. Risks Related to Our Tax Credit Equity Segment As a sponsor of tax credit equity funds, we have exposure to risks of loss in the event that we are unable to place project partnerships into tax credit funds or we are unable to recover our advances to certain project partnerships. We provide guarantees with respect to certain of the tax credit equity funds that we sponsor, and if we were to become obligated to perform on such guarantees our financial condition and results of operations could suffer. The tax credit equity funds sponsored by us may not generate sufficient cash to pay fees due to us, which could negatively impact our cash flows. There is a risk of elimination of, or changes to, governmental programs that could limit the product offerings of our tax credit equity business. The tax credit equity syndication market is a maturing market, and we are increasingly competing with more syndicators, which may result in lower profit margins in the future. Risks Related to Our Debt and Structured Finance Segments Substantially all of our investments are illiquid, which could prevent us from consummating sales on favorable terms and makes it difficult for us to accurately value our investment portfolio. A significant portion of our assets are involved with securitization programs and, in the event of certain defaults, such assets could be liquidated to meet senior obligations. In addition, if the value of our assets is impaired, we could be required to post additional collateral or terminate the facilities. A portion of our investments are subordinated securities or interests in bonds that are junior in right of payment to other bonds, notes or instruments, and, in the event that the borrowers are unable to make all required payments, we may not receive all payments on such investments to which we are entitled. As a delegated underwriter and servicer in the Fannie Mae DUS program, we have agreed to share losses (up to certain specified levels) on loans that we underwrite and sell to Fannie Mae. The growth of our business is dependent on maintaining our relationships with the GSEs that participate in the multifamily affordable housing market. As the GSEs admit more financial services firms into their programs, our competitive advantage decreases and our financial condition and results of operations may suffer. Risks Related to Our Fund Management Segment If our registration as an SEC registered investment adviser were revoked or otherwise terminated, we could lose investment advisory clients. Risks Related to the Application of Tax Laws Our classification as a publicly traded partnership not taxable as a corporation is not free from doubt and could be challenged. The characterization of certain of our income as exempt for federal income tax purposes depends upon compliance with numerous sections of the Code. Validity of certain Section 761 elections and related IRS guidance Risks Related to Our Company Inability to access the capital markets could delay or adversely affect execution of our business plan . Material weakness may still exist in our internal controls. Because MuniMae is a holding company and substantially all of our investments and assets are held through our subsidiaries, our shareholders are effectively subordinated to the liabilities and preferred equity interests of our subsidiaries. We have indebtedness and other liabilities that could adversely affect our business and growth prospects. Most of our assets are pledged as collateral. We recently acquired two businesses and reorganized our corporate structure, and the long-term effects of these events will not be measurable for some period of time. We are not required to be registered under the Investment Company Act of 1940 and would not be able to conduct our business as we currently conduct it if we were required to be registered. Certain of our officers and directors may have real or potential conflicts of interest with us. We depend on the expertise and service of key members of management and, given the nature of our business, the loss of their services could have a material adverse effect on our business. Certain provisions of our operating documents may prohibit a change of control.

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1003201--6/22/2006--MUNICIPAL_MORTGAGE_&_EQUITY_LLC