1262279--8/28/2007--FIRST_MARBLEHEAD

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We derive a significant portion of our revenue and substantially all of our income from structuring securitization transactions; our financial results and future growth would be adversely affected if we are unable to structure securitizations. A number of factors, some of which are beyond our control, may adversely affect our securitization activities and thereby adversely affect our results of operations. In connection with our recognition of revenue from securitization transactions, if the estimates we make, or the assumptions on which we rely, in preparing our financial statements prove inaccurate, our actual results may vary materially from those reflected in our financial statements. The timing of our securitization activities and size and structure of our securitization transactions will greatly affect our quarterly financial results. Our financial results could be adversely affected if we were required to consolidate the financial results of the entities that we use for securitizations that we facilitate. If our relationships with key clients terminate, our revenue and results of operations would be adversely affected. The outsourcing services market for education lending is highly competitive and if we are not able to compete effectively, our revenue and results of operations may be adversely affected. If our clients do not successfully market and originate student loans, our business will be adversely affected. In structuring and facilitating securitizations of our clients loans and as holders of rights to receive residual cash flows in those trusts, we may incur liabilities to investors in the asset-backed securities those trusts issue. If our relationship with TERI terminates, our business could be adversely affected. Our business could be adversely affected if TERI s ratings are downgraded. Our business could be adversely affected if PHEAA fails to provide adequate or timely services or if our relationship with PHEAA terminates. The growth of our business could be adversely affected by changes in federal student loan programs or expansions in the population of students eligible for loans under federal student loan programs. Access to alternative means of financing the costs of education may reduce demand for private student loans. If competitors acquire or develop a student loan database or advanced loan information processing systems, our business could be adversely affected. Changes in interest rates could affect the value of our additional structural advisory fees and residuals receivable, as well as demand for private student loans and our services. If we are unable to protect the confidentiality of our proprietary database and information systems and processes, the value of our services and technology will be adversely affected. An interruption in or breach of our information systems may result in lost business. The loan origination process is becoming increasingly dependent upon technological advancement, and we could lose clients and market share if we are not able to keep pace with rapid changes in technology. We have expanded our operations rapidly in recent years, and if we fail to manage effectively our growth, our financial results could be adversely affected. We may be subject to state registration or licensing requirements in jurisdictions where we are not currently registered or licensed. If we determine that we are subject to the registration or licensing requirements of any jurisdiction, our compliance costs could increase significantly and other adverse consequences may result. If the regulatory exemptions or rulings that allow us to conduct our business without registration or licensing are modified or revoked, or the statutory and regulatory requirements change in the future, our compliance costs could increase substantially. We may be exposed to liability for failures of third parties with which we do business to comply with the registration, licensing and other requirements that apply to them. We could also become subject to registration or licensing and other regulatory requirements in Massachusetts and other states by expanding the scope or extent of our services. Failure to comply with consumer protection laws could subject us to civil and criminal penalties and have a material adverse effect on our business. Recent litigation has sought to re-characterize certain loan marketers and other originators as lenders; if litigation on similar theories were successful against us or any third-party marketer, the loans that we securitize would be subject to individual state consumer protection laws. The price of our common stock may be volatile. If a substantial number of shares become available for sale and are sold in a short period of time, the market price of our common stock could decline. Insiders have substantial control over us and could limit your ability to influence the outcome of key transactions, including a change of control. We are subject to regulation as a savings and loan holding company, and Union Federal Savings Bank is regulated extensively. Some provisions in our restated certificate of incorporation and amended and restated by-laws may deter third-parties from acquiring us. Section 203 of the Delaware General Corporation Law may delay, defer or prevent a change in control that our stockholders might consider to be in their best interests.

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1262279--8/28/2007--FIRST_MARBLEHEAD_CORP