10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended November 30, 2005

Commission file number 1-11749

Lennar Corporation

(Exact name of registrant as specified in its charter)

Delaware	95-4337490
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

700 Northwest 107th Avenue, Miami, Florida 33172

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code (305) 559-4000

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Class A Common Stock, par value 10¢	New York Stock Exchange
Class B Common Stock, par value 10¢	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:

NONE

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  YES  þ  NO  ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  YES  ¨  NO  þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  YES  þ  NO  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  þ

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer   þ Accelerated filer  ¨ Non-accelerated filer  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    YES  ¨   NO  þ

The aggregate market value of the registrant’s Class A and Class B common stock held by non-affiliates of the registrant (118,606,859 Class A shares and 11,248,552 Class B shares) as of May 31, 2005, based on the closing sale price per share as reported by the New York Stock Exchange on such date, was $7,484,881,075.

As of January 31, 2006, the registrant had outstanding 125,989,769 shares of Class A common stock and 32,823,187 shares of Class B common stock.

DOCUMENTS INCORPORATED BY REFERENCE:

Related Section	Documents
III	Definitive Proxy Statement to be filed pursuant to Regulation 14A on or before March 30, 2006.

PART I

Item 1.    Business.

Overview of Lennar Corporation

We are one of the nation’s largest homebuilders and a provider of financial services. Our homebuilding operations include the sale and construction of single-family attached and detached homes, as well as the purchase, development and sale of residential land directly and through unconsolidated entities in which we have investments. Our financial services operations provide mortgage financing, title insurance, closing services and insurance agency services for both buyers of our homes and others. We sell substantially all of the loans that we originate in the secondary mortgage market. Through our financial services operations, we also provide high-speed Internet and cable television services to residents of communities we develop and to others. For financial information about both our homebuilding and financial services operating segments, you should review our consolidated financial statements and the notes to our consolidated financial statements, which are included in Item 8 of this document.

A Brief History of Our Growth

1954:	We were founded as a local Miami homebuilder.
1969:	We began developing, owning and managing commercial and multi-family residential real estate.
1971:	We completed our initial public offering.
1972:	Our common stock was listed on the New York Stock Exchange. We also entered the Arizona homebuilding market.
1986:	We acquired Development Corporation of America in Florida.
1991:	We entered the Texas homebuilding market.
1992:	We expanded our commercial operations by acquiring, through a joint venture, a portfolio of loans, mortgages and properties from the Resolution Trust Corporation.
1995:	We entered the California homebuilding market through the acquisition of Bramalea California, Inc.
1996:	We expanded in California through the acquisition of Renaissance Homes, and significantly expanded operations in Texas with the acquisitions of the assets and operations of both Houston-based Village Builders and Friendswood Development Company, and acquired Regency Title.
1997:	We completed the spin-off of our commercial real estate investment business to LNR Property Corporation. We continued our expansion in California through homesite acquisitions and investments in unconsolidated entities. We also acquired Pacific Greystone Corporation, which further expanded our operations in California and Arizona and brought us into the Nevada homebuilding market.
1998:	We acquired the properties of two California homebuilders, ColRich Communities and Polygon Communities, acquired a Northern California homebuilder, Winncrest Homes, and acquired North American Title with operations in Arizona, California and Colorado.
1999:	We acquired Eagle Home Mortgage with operations in Nevada, Oregon and Washington and Southwest Land Title in Texas.
2000:	We acquired U.S. Home Corporation, which expanded our operations into New Jersey, Maryland, Virginia, Minnesota, Ohio and Colorado and strengthened our position in other states. We expanded our title operations in Texas through the acquisition of Texas Professional Title.
2002:	We acquired Patriot Homes, Sunstar Communities, Don Galloway Homes, Genesee Company, Barry Andrews Homes, Cambridge Homes, Pacific Century Homes, Concord Homes and Summit Homes, which expanded our operations into the Carolinas and the Chicago, Baltimore and Central Valley, California homebuilding markets and strengthened our position in several existing markets. We also acquired Sentinel Title with operations in Maryland and Washington, D.C.
2003:	We acquired Seppala Homes and Coleman Homes, which expanded our operations in South Carolina and California. We also acquired Mid America Title in Illinois.

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2004:

We acquired The Newhall Land and Farming Company through an unconsolidated entity of which we and LNR Property Corporation each own 50%. We expanded into the San Antonio, Texas homebuilding market by acquiring the operations of Connell-Barron Homes and entered the Jacksonville, Florida homebuilding market by acquiring the operations of Classic American Homes. Through acquisitions, we also expanded our mortgage operations in Oregon and Washington. We expanded our title and closing operations into Minnesota through the acquisition of Title Protection, Inc.

2005:

We entered the metropolitan New York City and Boston markets by acquiring, directly and through a joint venture, rights to develop a portfolio of properties in New Jersey facing mid-town Manhattan and waterfront properties near Boston. We also entered the Reno, Nevada market and then expanded in Reno through the acquisition of Barker Coleman. We expanded our presence in Jacksonville through the acquisition of Admiral Homes.

Homebuilding Operations

Overview

We primarily sell single-family attached and detached homes, and to a lesser extent, condominiums, in communities targeted to first-time, move-up and active adult homebuyers. The average sales price of a Lennar home was $311,000 in fiscal 2005. We operate primarily under the Lennar and U.S. Home brand names, which incorporate our Everything’s Included^® and Design Studio^SM programs.

Through our own efforts and unconsolidated entities in which we have investments, we are involved in all phases of planning and building in our residential communities including land acquisition, site planning, preparation and improvement of land and design, construction and marketing of homes. We view unconsolidated entities as a means to both expand our market opportunities and manage our risks. For additional information about our unconsolidated entities, see Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7.

Management and Operating Structure

We balance a local operating structure with centralized corporate level management. Our local managers, who generally have significant experience in the homebuilding industry and, in most instances, in their particular markets, are responsible for operating decisions regarding land identification, joint ventures, community development, home design, construction and marketing. Decisions related to our overall strategy, acquisitions of land and businesses, risk management, financing, cash management and information systems are centralized at the corporate level.

Diversified Program of Property Acquisition

In our homebuilding operations, we generally acquire land for development and for the construction of homes that we sell to homebuyers. Land is subject to strict underwriting criteria and is acquired through our diversified program of property acquisition consisting of the following:

• Acquiring land directly from individual land sellers or homebuilders,

• Acquiring local or regional homebuilders that own, or have options on, land in strategic markets,

• Acquiring large parcels of land through joint ventures, where we reduce and share our risk (using primarily non-recourse debt) by limiting the amount of our capital invested in land, while increasing our access to potential future homesites, and

• Acquiring land through option contracts, which generally enables us to defer acquiring portions of properties owned by third parties (including land funds) and unconsolidated entities until we are ready to build homes on them.

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The table below indicates the number of homesites owned and homesites to which we had access through option contracts with third parties (“optioned”) or unconsolidated joint ventures in which we have investments (“JVs”) (i.e., controlled homesites) for each of our market regions at November 30, 2005 and 2004:

		Controlled
November 30, 2005	Owned	Optioned	JVs	Total
East	42,407	67,339	16,777	126,523
Central	25,388	15,543	19,604	60,535
West	34,892	44,131	58,725	137,748
Total	102,687	127,013	95,106	324,806
		Controlled
November 30, 2004	Owned	Optioned	JVs	Total
East	23,559	47,474	18,487	89,520
Central	24,355	24,060	14,916	63,331
West	39,826	22,380	41,010	103,216
Total	87,740	93,914	74,413	256,067

At November 30, 2005, our market regions consisted of homebuilding divisions located in the following states: East: Florida, Maryland, Delaware, Virginia, New Jersey, New York, North Carolina and South Carolina. Central: Texas, Illinois and Minnesota. West: California, Colorado, Arizona and Nevada.

Construction and Development

We generally supervise and control the development of land and the design and building of our residential communities. We hire subcontractors for site improvements and virtually all of the work involved in the construction of homes. Generally, arrangements with our subcontractors provide that our subcontractors will complete specified work in accordance with price schedules and applicable building codes and laws. The price schedules may be subject to change to meet changes in labor and material costs or for other reasons. We believe that the sources and availability of raw materials to our subcontractors are adequate for our current and planned levels of operation. We generally do not own heavy construction equipment, and we have a relatively small labor force used to supervise land development and construction of homes and perform routine maintenance and minor amounts of other work. We finance construction and land development activities primarily with cash generated from operations and public debt issuances, as well as cash borrowed under our revolving credit facility.

Marketing

We offer a diversified line of homes for first-time, move-up and active adult homebuyers. With homes priced from under $100,000 to above $1,000,000 and available in a variety of environments ranging from urban infill communities to golf course communities, we are focused on providing homes for a wide spectrum of buyers. Our Everything’s Included^® and Design Studio^SM programs provide customers with the flexibility to choose how they would like to purchase their new home. In our Everything’s Included^® program, we make the homebuying experience simple by including desirable, top-of-the-line features as standard items. In our Design Studio^SM program, we provide an individualized homebuying experience and personalized design consultation in our design studios, offering market targeted upgrades and options for a new home. We sell our homes primarily from models that we have designed and constructed.

We employ sales associates who are paid salaries, commissions or both to complete on-site sales of homes. We also sell homes through independent brokers. We advertise our communities in newspapers and other local and regional publications, on billboards and through our website, www.lennar.com. Our website allows homebuyers to search for homes with specific design criteria in their price range and desired location. In addition, we advertise our active adult communities in areas where prospective active adult homebuyers live.

We have participated in charitable down-payment assistance programs for a small percentage of our homebuyers. Through these programs, we make a donation to a non-profit organization that provides financial assistance to a homebuyer, who would not otherwise have sufficient funds for a down payment.

Quality Service

We strive to continually improve customer satisfaction for each homeowner throughout the pre-sale, sale, construction, closing and post-closing periods. Through the participation of sales associates, on-site construction

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supervisors and customer care associates, all working in a team effort, we strive to create a quality homebuilding experience for our customers, which we believe leads to enhanced customer retention and referrals.

The quality of our homes is substantially affected by the efforts of on-site management and others engaged in the construction process, by the materials we use in particular homes or by other similar factors. Currently, most management team members’ bonus plans are, in part, contingent upon achieving certain customer satisfaction standards.

We have a “Heightened Awareness” program, which is a focused initiative designed to objectively evaluate and measure the quality of construction in our communities. The purpose of this program is to ensure that the homes delivered to our customers meet our high standards of quality and value. Our communities are inspected and reviewed on a periodic basis by our trained associates. This program is an example of our commitment to provide quality homes to our customers. In addition to our “Heightened Awareness” program, we have a quality assurance program in certain markets where we employ third-party consultants to inspect our homes during the construction process. These inspectors provide us with documentation of all inspection reports and follow-up verification. We also obtain independent surveys of selected customers through a third-party consultant and use the survey results to further improve our standard of quality and customer satisfaction.

We warrant our new homes against defective material and workmanship for a minimum period of one year after the date of closing. Although we subcontract virtually all segments of construction to others and our contracts call for the subcontractors to repair or replace any deficient items related to their trade, we are primarily responsible to correct any deficiencies.

Deliveries

The table below indicates the number of deliveries for each of our market regions during our last three fiscal years:

Region	2005	2004	2003
East	12,467	11,323	10,348
Central	13,074	11,122	9,993
West	16,818	13,759	11,839
Total	42,359	36,204	32,180

Of the total home deliveries listed above, 1,477, 1,015 and 768, respectively, represent deliveries from unconsolidated entities for the years ended November 30, 2005, 2004 and 2003.

Backlog

Backlog represents the number of homes under sales contracts. Substantially all of the homes currently in backlog are expected to be delivered during fiscal 2006. Homes are sold using sales contracts, which are generally accompanied by sales deposits. In some instances, purchasers are permitted to cancel sales contracts if they are unable to close on the sale of their existing home, fail to qualify for financing or under certain other circumstances. We experienced a cancellation rate of 17% in 2005, compared to 16% and 20%, respectively, in 2004 and 2003. Although cancellations can delay the sales of our homes, they have not had a material impact on sales, operations or liquidity because we closely monitor our prospective buyers’ ability to obtain financing and use that information to adjust construction start plans to match anticipated deliveries of homes. We do not recognize revenue on homes under sales contracts until the sales are closed and title passes to the new homeowners, except for our mid-to-high-rise condominiums under construction for which revenue is recognized under percentage-of-completion accounting.

The table below indicates the backlog dollar value for each of our market regions as of the end of our last three fiscal years:

Region	2005		2004	2003
	(In thousands)
East	$	2,931,247	2,177,884	1,526,970
Central		775,505	633,703	558,919
West		3,177,486	2,243,686	1,801,411
Total	$	6,884,238	5,055,273	3,887,300

Of the dollar value of homes in backlog listed above, $590,129, $644,839 and $367,855, respectively, represent the backlog dollar value from unconsolidated entities at November 30, 2005, 2004 and 2003.

As of December 31, 2005 and 2004, the backlog dollar value was $6.7 billion and $5.1 billion, respectively, of which $0.5 billion and $0.7 billion, respectively, represent the backlog dollar value from unconsolidated entities.

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Financial Services Operations

Mortgage Financing

We provide a full spectrum of conventional, FHA-insured and VA-guaranteed, first and second lien residential mortgage loan products to our homebuyers and others through our financial services subsidiaries, Universal American Mortgage Company, LLC and Eagle Home Mortgage, Inc., located in the same states as our homebuilding divisions, as well as other states. In 2005, our financial services subsidiaries provided loans to approximately 66% of our homebuyers who obtained mortgage financing in areas where we offered services. Because of the availability of mortgage loans from our financial services subsidiaries, as well as independent mortgage lenders, we believe access to financing has not been, and is not, a significant obstacle for most purchasers of our homes.

During 2005, we originated approximately 42,300 mortgage loans totaling $9.5 billion. Substantially all of the loans we originate are sold in the secondary mortgage market on a servicing released, non-recourse basis; however, we remain liable for customary representations and warranties related to loan sales.

We have a corporate risk management policy under which we hedge our interest rate risk on rate-locked loan commitments and loans held-for-sale to mitigate exposure to interest rate fluctuations. We finance our mortgage loan activities with borrowings under our financial services subsidiaries’ warehouse lines of credit or from our general corporate funds.

Title Insurance, Closing Services and Insurance Agency Services

We provide title insurance and title and closing services to our homebuyers and others. We provided title and closing services for approximately 187,700 real estate transactions and issued approximately 193,900 title insurance policies during 2005 through subsidiaries of North American Title Group, Inc. Title and closing services are provided by agency subsidiaries in Arizona, California, Colorado, District of Columbia, Florida, Illinois, Maryland, Minnesota, Nevada, Pennsylvania, Texas, Virginia and Wisconsin. Title insurance underwriting is provided by North American Title Insurance Corporation in the District of Columbia, Florida, Illinois, Maryland, Texas and Virginia and North American Title Insurance Company in Arizona, California, Colorado and Nevada.

We provide our homebuyers and others with personal lines, property and casualty insurance products through our insurance agency subsidiary, Universal American Insurance Agency, Inc., which operates in the same states as our homebuilding divisions, as well as other states. During 2005, we issued, as agent, approximately 14,200 new homeowner policies and renewed approximately 18,500 homeowner policies.

Communication Services

Lennar Communications Ventures oversees our interests and activities in relationships with providers of advanced communication services, and through its subsidiaries provides cable television and high-speed Internet services to residents of our communities and others. At December 31, 2005, we had approximately 12,400 subscribers across Texas, California and Florida.

Seasonality

We have historically experienced variability in our results of operations from quarter-to-quarter due to the seasonal nature of the homebuilding business. We typically experience the highest rate of orders for new homes in the first half of the calendar year, although the rate of orders for our new homes is highly dependent on the number of active communities and the timing of new community openings. We typically have a greater percentage of new home deliveries in the second half of our fiscal year compared to the first half because new home deliveries trail orders for new homes by several months. As a result, our revenues and operating earnings from sales of homes are generally higher in the second half of our fiscal year.

Competition

The residential homebuilding industry is highly competitive. We compete for homebuyers in each of the market regions where we operate with numerous national, regional and local homebuilders, as well as with resales of existing homes and with the rental housing market. We compete for homebuyers on the basis of a number of interrelated factors including location, price, reputation, amenities, design, quality and financing. In addition to competition for homebuyers, we also compete with other homebuilders for desirable properties, raw materials and reliable, skilled labor. We compete for land buyers with third parties in our efforts to sell land to

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homebuilders and others. We believe we are competitive in the market regions where we operate primarily due to our:

• Excellent land position, particularly in land-constrained markets, where we have increased the number of homesites we own or control;

• Strong presence in some of the fastest growing homebuilding markets in the United States; and

• Balance sheet, where we continue to focus on liquidity while maintaining a strong capital structure.

Our financial services operations compete with other mortgage lenders, including national, regional and local mortgage bankers and brokers, savings and loan associations and other financial institutions, in the origination and sale of mortgage loans. Principal competitive factors include interest rates and other features of mortgage loan products available to the consumer. We compete with other insurance agencies, including national, regional and local insurance agencies, in the sale of homeowner insurance and related insurance services. Principal competitive factors include cost and other features of insurance products available to the consumer. We compete with other escrow companies and other title insurance agencies for closing services and title insurance. Principal competitive factors include service and price. We compete with other communication service providers in the sale of high-speed Internet and cable television services. Principal competitive factors include price, quality, service and availability.

Regulation

Homes and residential communities that we build must comply with state and local laws and regulations relating to, among other things, zoning, construction permits or entitlements, construction material requirements, density requirements, building design and property elevation, building codes and handling of waste. These include laws requiring the use of construction materials that reduce the need for energy-consuming heating and cooling systems. These laws and regulations are subject to frequent change and often increase construction costs. In some instances, we must comply with laws that require commitments from us to provide roads and other offsite infrastructure to be in place prior to the commencement of new construction. These laws and regulations are usually administered by counties and municipalities and may result in fees and assessments or building moratoriums. In addition, certain new development projects are subject to assessments for schools, parks, streets and highways and other public improvements, the costs of which can be substantial.

The residential homebuilding industry is also subject to a variety of local, state and federal statutes, ordinances, rules and regulations concerning the protection of health and the environment. These environmental laws include such areas as storm water and surface water management, soil, groundwater and wetlands protection, subsurface conditions and air quality protection and enhancement. Environmental laws and existing conditions may result in delays, may cause us to incur substantial compliance and other costs and may prohibit or severely restrict homebuilding activity in environmentally sensitive regions or areas.

In recent years, several cities and counties in which we have developments have submitted to voters “slow growth” initiatives and other ballot measures that could impact the affordability and availability of land suitable for residential development within those localities. Although many of these initiatives have been defeated, we believe that if similar initiatives were approved, residential construction by us and others within certain cities or counties could be seriously impacted.

In order to make it possible for some of our homebuyers to obtain FHA-insured or VA-guaranteed mortgages, we must construct those homes in compliance with regulations promulgated by those agencies.

Various states have statutory disclosure requirements relating to the marketing and sale of new homes. These disclosure requirements vary widely from state-to-state. In addition, some states require that each new home be registered with the state at or before the time title is transferred to buyers (e.g., the Texas Residential Construction Commission Act).

In some states, we are required to be registered as a licensed contractor and comply with applicable rules and regulations. In various states our new home consultants are required to be registered as licensed real estate agents and adhere to the laws governing the practices of real estate agents.

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Our personal lines insurance and title subsidiaries must comply with applicable insurance laws and regulations. Our mortgage financing subsidiaries and title agencies must comply with applicable real estate lending laws and regulations.

Our mortgage banking and insurance subsidiaries are licensed in the states in which they do business and must comply with laws and regulations in those states regarding mortgage banking and applicable types of insurance companies. These laws and regulations include provisions regarding capitalization, operating procedures, investments, lending and privacy disclosures, forms of policies and premiums.

Our cable subsidiary is generally required to both secure a franchise agreement with each locality in which it operates and to satisfy requirements of the Federal Communications Commission in the ordinary conduct of its business.

A subsidiary of The Newhall Land and Farming Company, of which we indirectly own 50%, provides water to a portion of Los Angeles County, California. This subsidiary is subject to extensive regulation by the California Public Utilities Commission.

Employees

At December 31, 2005, we employed 13,687 individuals of whom 9,765 were involved in our homebuilding operations and 3,922 were involved in our financial services operations. We believe our relations with our employees are good. We do not have collective bargaining agreements relating to any of our employees. We subcontract many phases of our homebuilding operations and some of the subcontractors we use have employees who are represented by labor unions.

Relationship with LNR Property Corporation

In 1997, we transferred our commercial real estate investment and management business to LNR Property Corporation (“LNR”), and spun-off LNR to our stockholders. As a result, LNR became a publicly-traded company, and the family of Stuart A. Miller, our President, Chief Executive Officer and a Director, which had voting control of us, became the controlling shareholder of LNR.

At the time of the spin-off, we entered into an agreement which, among other things, prevented us, in some circumstances, from engaging through December 2002 in any of the businesses in which LNR was engaged, or anticipated becoming engaged, at the time of the spin-off, and prohibited LNR from engaging, at least through December 2002, in any of the businesses in which we were engaged, or anticipated becoming engaged, at the time of the spin-off (except in limited instances in which our then activities or anticipated activities overlapped with LNR). This agreement was extended through November 30, 2005 and expired on that date.

Since the spin-off, we have entered into a number of joint ventures and other transactions with LNR. Many of the joint ventures were formed to acquire and develop land, part of which was subsequently sold to us or other homebuilders for residential building and part of which was subsequently sold to LNR for commercial development. Because LNR was controlled by Mr. Miller and his family, all significant transactions we or our subsidiaries engaged in with LNR or entities in which it had an interest were reviewed and approved by the Independent Directors Committee of our Board of Directors.

In January 2004, a company of which we and LNR each own 50% acquired The Newhall Land and Farming Company (“Newhall”) for approximately $1 billion. The purchase price was paid with (1) approximately $200 million we contributed to the jointly-owned company, (2) approximately $200 million LNR contributed to the jointly-owned company, (3) a $400 million term loan borrowed under $600 million of bank financing obtained by the jointly-owned company and another company of which we and LNR each owned 50% and (4) approximately $217 million from the proceeds of a sale by Newhall of income-producing properties to LNR. Newhall owns approximately 48,000 acres in California, including approximately 34,000 acres in north Los Angeles County that includes two master-planned communities. In connection with the acquisition, we agreed to purchase 687 homesites and received options to purchase an additional 623 homesites from Newhall.

On November 30, 2004, we and LNR each transferred our interests in most of our joint ventures to the jointly-owned company that had acquired Newhall, and that company was renamed LandSource Communities Development LLC.

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In February 2005, LNR was acquired by a privately-owned entity. Although Mr. Miller’s family acquired a 20.4% interest in that privately-owned entity, neither Mr. Miller nor anybody else in his family is an officer or director, or otherwise is involved in the management of LNR or its parent. Nonetheless, because the Miller family has a 20.4% interest in LNR’s parent, significant transactions with LNR or entities in which it has an interest are still reviewed and approved by the Independent Directors Committee of our Board of Directors.

NYSE Certifications

We submitted our 2004 Annual CEO Certification to the New York Stock Exchange on April 21, 2005. The certification was not qualified in any respect. Additionally, we filed with the Securities and Exchange Commission as exhibits to our Form 10-K and Form 10-K/A for the year ended November 30, 2004, the CEO and CFO certifications required under Section 302 of the Sarbanes-Oxley Act.

Available Information

Our corporate website is www.lennar.com. We make available on our website, free of charge, our Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to these reports, as soon as reasonably practicable after we electronically file these documents with, or furnish them to, the Securities and Exchange Commission. Information on our website is not part of this document.

Our website also includes our Corporate Governance Guidelines, our Code of Business Conduct and Ethics and the charters for the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee of our Board of Directors. Each of these documents is also available in print to any stockholder who requests a copy by addressing a request to:

Lennar Corporation

Attention: Office of the General Counsel

700 Northwest 107^th Avenue

Miami, Florida 33172

Item 1A.    Risk Factors.

Risk Factors Relating to Our Business

If any of the following risks develop into actual events, our business, financial condition, results of operations, cash flows, strategies and prospects could be materially adversely affected:

Downward changes in economic conditions generally or in the market regions where we operate could decrease demand and pricing for new homes in these areas.

The residential homebuilding industry is sensitive to changes in economic conditions such as the level of employment, consumer confidence, consumer income, availability of financing and interest rate levels. Adverse changes in any of these conditions generally, or in the market regions where we operate, could decrease demand and pricing for new homes in these areas or result in customer cancellations of pending contracts, which could adversely affect the number of home deliveries we make or reduce the prices we can charge for homes, either of which could result in a decrease in our revenues and earnings.

The homebuilding industry has not experienced an economic down cycle in a number of years, which may have resulted in an overvaluation of land and new homes.

Although the homebuilding business historically has been cyclical, it has not undergone an economic down cycle in a number of years. Further, during 2005, land and home prices rose significantly in many of our markets. This has led some people to assert that the prices of land, new homes and the stock prices of homebuilding companies may be inflated and may decline if the demand for land and new homes weakens. A decline in the prices for land and new homes could adversely affect both our revenues and margins. A decline in our stock price could make raising capital through stock issuances more difficult and expensive.

Federal laws and regulations that adversely affect liquidity in the secondary mortgage market could hurt our business.

Recent federal laws and regulations could have the effect of curtailing the activities of the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac). These

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organizations provide significant liquidity to the secondary mortgage market. Any curtailment of their activities could increase mortgage interest rates and increase the effective cost of our homes, which could reduce demand for our homes and adversely affect our results of operations.

The federal financial institution agencies recently issued proposed Interagency Guidance on Nontraditional Mortgage Products (“Guidance”). If adopted, the Guidance will apply to credit unions, to banks and savings associations and their subsidiaries, and to bank and savings association holding companies and their subsidiaries. Although the Guidance will not apply to independent mortgage companies, it likely will affect the origination operations of many mortgage companies that broker or sell nontraditional mortgage loan products to such entities. If the Guidance is adopted, it could reduce the number of potential customers who could qualify for loans to purchase homes from us and others.

Customers may be unwilling or unable to purchase our homes at times when mortgage-financing costs are high or as credit quality declines.

The majority of our homebuyers finance their purchases through our financial services operations or third-party lenders. In general, housing demand is adversely affected by increases in interest rates and by decreases in the availability of mortgage financing as a result of declining customer credit quality or other issues. If mortgage interest rates increase and the ability or willingness of prospective buyers to finance home purchases is adversely affected, our operating results may be adversely affected.

Competition for homebuyers could reduce our deliveries or decrease our profitability.

The homebuilding industry is highly competitive for skilled labor, materials and suitable land, as well as homebuyers. We compete in each of our markets with numerous national, regional and local homebuilders. This competition with other homebuilders could reduce the number of homes we deliver, or cause us to accept reduced margins in order to maintain sales volume.

We also compete with resales of existing used or foreclosed homes, housing speculators and available rental housing. Increased competitive conditions in the residential resale or rental market in the regions where we operate could decrease demand for new homes and increase cancellations of sales contracts in backlog.

Government entities in regions where we operate have adopted or may adopt, slow or no growth initiatives, which could adversely affect our ability to build or timely build in these areas.

Some municipalities where we operate have approved, and others where we operate may approve, various slow growth or no growth homebuilding initiatives and other ballot measures that could negatively impact the availability of land and building opportunities within those localities. Approval of slow growth, no growth or similar initiatives (including the effect of these initiatives on existing entitlements and zoning) could adversely affect our ability to build or timely build and sell homes in the affected markets and or create additional administrative and regulatory requirements and costs, which, in turn, could have an adverse effect on our future revenues and earnings.

Natural disasters and severe weather conditions could delay deliveries, increase costs and decrease demand for new homes in affected areas.

Our homebuilding operations are located in many areas that are subject to natural disasters and severe weather. The occurrence of natural disasters or severe weather conditions can delay new home deliveries, increase costs by damaging inventories and negatively impact the demand for new homes in affected areas. Furthermore, if our insurance does not fully cover business interruptions or losses resulting from these events, our earnings, liquidity or capital resources could be adversely affected.

Supply shortages and other risks related to the demand for skilled labor and building materials could increase costs and delay deliveries.

Increased costs or shortages of skilled labor and/or lumber, framing, concrete, steel and other building materials could cause increases in construction costs and construction delays. We generally are unable to pass on increases in construction costs to those customers who have already entered into sales contracts, as those sales contracts generally fix the price of the home at the time the contract is signed, which may be well in advance of the construction of the home. Sustained increases in construction costs may, over time, erode our margins, and pricing competition for materials and labor may restrict our ability to pass on any additional costs, thereby decreasing our margins.

9

We may not be able to acquire land suitable for residential homebuilding at reasonable prices, which could increase our costs and reduce our revenues, earnings and margins.

Our long-term ability to build homes depends upon our acquiring land suitable for residential building at reasonable prices in locations where we want to build. Over the past few years, we have experienced an increase in competition for suitable land as a result of land constraints in many of our markets. As competition for suitable land increases, and as available land is developed, the cost of acquiring suitable remaining land could rise, and the availability of suitable land at acceptable prices may decline. Any land shortages or any decrease in the supply of suitable land at reasonable prices could limit our ability to develop new communities or result in increased land costs. We may not be able to pass through to our customers any increased land costs, which could adversely impact our revenues, earnings and margins.

Compliance with federal, state and local regulations related to our business could have substantial costs both in time and money, and some regulations could prohibit or restrict some homebuilding ventures.

We are subject to extensive and complex laws and regulations that affect the land development and homebuilding process, including laws and regulations related to zoning, permitted land uses, levels of density, building design, elevation of properties, water and waste disposal and use of open spaces. In addition, we are subject to laws and regulations related to workers’ health and safety. We also are subject to a variety of local, state and federal laws and regulations concerning the protection of health and the environment. In some of the markets where we operate, we are required to pay environmental impact fees, use energy-saving construction materials and give commitments to municipalities to provide certain infrastructure such as roads and sewage systems. We generally are required to obtain permits, entitlements and approvals from local authorities to commence and complete residential development or home construction. Such permits, entitlements and approvals may, from time-to-time, be opposed or challenged by local governments, neighboring property owners or other interested parties, adding delays, costs and risks of non-approval to the process. Our obligation to comply with the laws and regulations under which we operate, and our obligation to ensure that our employees, subcontractors and other agents comply with these laws and regulations, could result in delays in construction and land development, cause us to incur substantial costs and prohibit or restrict land development and homebuilding activity in certain areas in which we operate.

Changing market conditions may adversely affect our ability to sell our land and home inventories at expected prices, which could reduce our margins.

The lag time between when we acquire land for development and when we can bring communities to market can vary significantly. The market value of home inventories, undeveloped land and developed homesites can fluctuate significantly during this time period because of changing market conditions. Recently we have been able to sell homes at higher prices than we anticipated when we acquired the land on which they were built, which has helped us to achieve unusually high profit margins. However, in the future, we may need to sell homes or other property at prices that generate lower margins than we anticipate when we purchase land. We may also be required to record material write-downs to our land or home inventories if their market values decline.

Inflation may result in increased costs that we may not be able to recoup if demand declines.

Inflation can have a long-term impact on us because increasing costs of land, materials and labor may require us to increase the sales price of homes in order to maintain satisfactory margins. However, inflation is often accompanied by higher interest rates, which can have a negative impact on housing demand, in which case we may not be able to raise home prices sufficiently to keep up with the rate of inflation and our margins could decrease.

Tax law changes could make home ownership more expensive or less attractive.

Significant expenses of owning a home, including mortgage interest expense and real estate taxes, generally are deductible expenses for an individual’s federal, and in some cases state, income taxes, subject to various limitations under current tax law and policy. If the federal government or a state government changes income tax laws, as has been discussed recently, to eliminate or substantially modify these income tax deductions, then the after-tax cost of owning a new home would increase substantially. This could adversely impact demand for, and/or sales prices of, new homes.

10

We may be unable to obtain suitable financing and bonding for the development of our communities.

Our business depends substantially on our ability to obtain financing for the development of our residential communities and to provide bonds to ensure the completion of our projects. If we are unable to finance the development of our communities through our credit facility or other debt, or if we are unable to provide required surety bonds for our projects, our business operations and revenues could be adversely affected.

We may be unable to renew or extend our significant outstanding debt instruments when they mature.

Our senior unsecured credit facility consists of a $1.7 billion revolving credit facility maturing in June 2010 and includes access to an additional $500 million via an accordion feature, under which the facility may be increased to $2.2 billion, subject to additional commitments. In January 2006, we increased the commitment under the credit facility to $2.2 billion via access of the accordion feature. Also, our Financial Services Division has warehouse lines of credit totaling $1.3 billion, with borrowings under these lines of credit totaling $1.2 billion at November 30, 2005. These warehouse lines of credit mature in 2006 and 2007. We cannot assure that we will be able to extend or renew these debt arrangements on terms acceptable to us, or at all. If we are unable to renew or extend these debt arrangements, it could adversely affect our liquidity and capital resources.

We may not be able to identify or integrate suitable acquisition targets, which could adversely affect our ability to execute our growth strategy.

Our ability to execute our growth strategy depends in part on our ability to identify and purchase suitable acquisition candidates, as well as our ability to successfully integrate acquired operations into our business. The integration of operations of acquired companies with our operations, including the consolidation of systems, procedures, personnel and facilities, the relocation of staff, and the achievement of anticipated cost savings, economies of scale and other business efficiencies, presents significant challenges to our management, particularly if several acquisitions occur at the same time.

Additional factors may adversely impact our acquisition growth strategy. Our acquisition strategy may require spending significant amounts of capital. If we are unable to obtain sufficient debt or equity financing on acceptable terms, or at all, we may need to reduce the scope of our acquisition growth strategy, which could have a material adverse effect on our growth prospects. The competition from our competitors or others pursuing the same acquisition candidates may increase purchase prices of businesses and/or prevent us from acquiring certain acquisition candidates. If any of the aforementioned factors cause us to alter our growth strategy, our results of operations and growth prospects could be adversely affected.

We could be hurt by the loss of key management personnel.

Our future success depends, to a significant degree, on the efforts of our senior management. Our operations could be adversely affected if key members of senior management cease to be active in our company.

We have a stockholder who exercises significant influence over matters that are brought to a vote of our stockholders.

Stuart A. Miller, our President, Chief Executive Officer and a Director, has voting control, through personal holdings and family-owned entities, of Class A and Class B common stock that enables Mr. Miller to cast approximately 47% of the votes that may be cast by the holders of our outstanding Class A and Class B common stock combined. That gives significant influence to Mr. Miller in electing our directors and approving most matters that are presented to our stockholders. Mr. Miller’s voting power might discourage someone from acquiring us or from making a significant equity investment in us, even if we needed the investment to meet our obligations and to operate our business. Also, because of his voting power, Mr. Miller may be able to authorize actions in matters that are contrary to our other stockholders’ desired actions or interests.

Item 1B. Unresolved Staff Comments.

Not applicable.

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Executive Officers of Lennar Corporation

The following individuals are our executive officers as of February 7, 2006:

Name	Position	Age
Robert J. Strudler	Chairman of the Board	63
Stuart A. Miller	President and Chief Executive Officer	48
Jonathan M. Jaffe	Vice President and Chief Operating Officer	46
Bruce E. Gross	Vice President and Chief Financial Officer	47
Marshall H. Ames	Vice President	62
Diane J. Bessette	Vice President and Controller	45
David B. McCain	Vice President	45
Mark Sustana	Secretary and General Counsel	44

Mr. Strudler was the Vice Chairman of our Board of Directors and Chief Operating Officer from May 2000 through November 2004. Effective December 1, 2004, Mr. Strudler resigned as Chief Operating Officer and was elected as the Chairman of our Board of Directors. Prior to May 2000, Mr. Strudler was the Chairman and Co-Chief Executive Officer of U.S. Home Corporation.

Mr. Miller has been our President and Chief Executive Officer since 1997 and is one of our Directors. Before 1997, Mr. Miller held various executive positions with us.

Mr. Jaffe has been a Vice President since 1994 and has served as our Chief Operating Officer since December 1, 2004. Prior to that time, Mr. Jaffe served as a Regional President in our Homebuilding Division. Additionally, prior to his appointment as Chief Operating Officer, Mr. Jaffe was one of our Directors from 1997 through June 2004.

Mr. Gross has been a Vice President and our Chief Financial Officer since 1997. Prior to that, Mr. Gross was Senior Vice President, Controller and Treasurer of Pacific Greystone Corporation.

Mr. Ames has been a Vice President since 1982 and has been responsible for Investor Relations since 2000.

Ms. Bessette joined us in 1995, has been our Controller since 1997 and became a Vice President in 2000.

Mr. McCain joined us in 1998 as a Vice President and as our General Counsel and Secretary. In 2003, Mr. McCain was appointed President and Chief Executive Officer of Lennar Financial Services, LLC.

Mr. Sustana joined us in 2005 as our Secretary and General Counsel. Before joining Lennar, Mr. Sustana held various legal positions at GenTek, Inc., a manufacturer of communication products, industrial components and performance chemicals.

Item 2.    Properties.

We lease and maintain our executive offices in an office complex in Miami, Florida. Our homebuilding and financial services offices are located in the markets where we conduct business, primarily in leased space. We believe that our existing facilities are adequate for our current and planned levels of operation.

Because of the nature of our homebuilding operations, significant amounts of property are held as inventory in the ordinary course of our homebuilding business. We discuss these properties in the discussion of our homebuilding operations in Item 1 of this document.

Item 3.    Legal Proceedings.

We are party to various claims and lawsuits which arise in the ordinary course of business. Although the specific allegations in the lawsuits differ, most of them involve claims that we failed to construct buildings in particular communities in accordance with plans and specifications or applicable construction codes and seek reimbursement for sums allegedly needed to remedy the alleged deficiencies, assert contract issues or relate to personal injuries. Lawsuits of these types are common within the homebuilding industry. We do not believe that the ultimate resolution of these claims or lawsuits will have a material adverse effect on our business, financial position, results of operations or cash flows.

Item 4.    Submission of Matters to a Vote of Security Holders.

Not applicable.

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PART II

Item 5.    Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Our Class A and Class B common stock are listed on the New York Stock Exchange under the symbols “LEN” and “LEN.B,” respectively. The following table shows the high and low sales prices for our Class A and Class B common stock for the periods indicated, as reported by the NYSE, and cash dividends declared per share adjusted for our January 2004 two-for-one stock split:

	Class A Common Stock High/Low Prices				Cash Dividends Per Class A Share
Fiscal Quarter	2005		2004		2005		2004
First	$	62.49 – 44.15	$	50.90 – 42.55	13¾	¢	12½	¢
Second	$	62.09 – 50.30	$	56.98 – 41.33	13¾	¢	12½	¢
Third	$	68.86 – 57.46	$	46.50 – 40.30	13¾	¢	12½	¢
Fourth	$	62.78 – 52.34	$	48.75 – 41.37	16	¢	13¾	¢

	Class B Common Stock High/Low Prices				Cash Dividends Per Class B Share
Fiscal Quarter	2005		2004		2005		2004
First	$	57.40 – 40.81	$	48.30 – 40.40	13¾	¢	12½	¢
Second	$	57.07 – 46.90	$	53.82 – 38.60	13¾	¢	12½	¢
Third	$	64.00 – 53.50	$	43.20 – 37.40	13¾	¢	12½	¢
Fourth	$	58.12 – 48.96	$	44.99 – 37.70	16	¢	13¾	¢

As of January 31, 2006, the last reported sale price of our Class A common stock was $62.56 and the last reported sale price of our Class B common stock was $57.79. As of January 31, 2006, there were approximately 1,200 and 800 holders of record, respectively, of our Class A and Class B common stock.

On January 12, 2006, our Board of Directors declared a quarterly cash dividend of $0.16 per share for both our Class A and Class B common stock, which is payable on February 17, 2006 to holders of record at the close of business on February 7, 2006. We regularly pay quarterly dividends as set forth in the table above. We currently expect that comparable cash dividends will continue to be paid in the future although we have no commitment to do that.

In June 2001, our Board of Directors authorized our stock repurchase program to permit future purchases of up to 20 million shares (adjusted for the January 2004 two-for-one stock split) of our outstanding common stock. During the three months ended November 30, 2005, we repurchased the following shares of our Class A common stock (amounts in thousands, except per share amounts):

Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares That May Yet Be Purchased Under the Plans or Programs
September 1, 2005 to September 30, 2005	—	$	—	—	13,240
October 1, 2005 to October 31, 2005	500		53.64	500	12,740
November 1, 2005 to November 30, 2005	290		54.75	290	12,450
Total	790	$	54.05	790

The information required by Item 201(d) of Regulation S-K is provided under Item 12 of this document.

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Item 6.    Selected Financial Data.

The following table sets forth our selected financial and operating information as of or for each of the years ended November 30, 2001 through 2005. The information presented below is based upon Lennar’s historical financial statements, except for the results of operations of a subsidiary of the Financial Services Division’s title company that was sold in May 2005 and have been classified as discontinued operations. Share and per share amounts have been retroactively adjusted to reflect the effect of our April 2003 10% Class B common stock distribution and our January 2004 two-for-one stock split.

	At or for the Years Ended November 30,
	2005		2004 (1)	2003 (1)	2002 (1)	2001 (1)
	(Dollars in thousands, except per share amounts)
Results of Operations:
Revenues:
Homebuilding	$	13,304,599	10,000,632	8,348,645	6,751,301	5,554,747
Financial services	$	562,372	500,336	556,581	482,008	422,149
Total revenues	$	13,866,971	10,500,968	8,905,226	7,233,309	5,976,896
Operating earnings from continuing operations:
Homebuilding	$	2,277,091	1,548,488	1,164,089	834,056	666,123
Financial services	$	104,768	110,731	153,719	126,941	87,669
Corporate general and administrative expenses	$	187,257	141,722	111,488	85,958	75,831
Loss on redemption of 9.95% senior notes	$	34,908	—	—	—	—
Earnings from continuing operations before provision for income taxes	$	2,159,694	1,517,497	1,206,320	875,039	677,961
Earnings from discontinued operations before provision for income taxes (2)	$	17,261	1,570	734	670	1,462
Earnings from continuing operations	$	1,344,410	944,642	750,934	544,712	416,946
Earnings from discontinued operations	$	10,745	977	457	417	899
Net earnings	$	1,355,155	945,619	751,391	545,129	417,845
Diluted earnings per share:
Earnings from continuing operations	$	8.17	5.70	4.65	3.51	2.72
Earnings from discontinued operations	$	0.06	0.00	0.00	0.00	0.01
Net earnings	$	8.23	5.70	4.65	3.51	2.73
Cash dividends declared per share—Class A common stock	$	0.573	0.513	0.144	0.025	0.025
Cash dividends declared per share—Class B common stock	$	0.573	0.513	0.143	0.0225	0.0225
Financial Position:
Total assets (3)	$	12,541,225	9,165,280	6,775,432	5,755,633	4,714,426
Debt:
Homebuilding	$	2,592,772	2,021,014	1,552,217	1,585,309	1,505,255
Financial services (including limited-purpose finance subsidiaries)	$	1,270,438	900,340	740,469	862,618	707,077
Stockholders’ equity	$	5,251,411	4,052,972	3,263,774	2,229,157	1,659,262
Shares outstanding (000s)		157,559	156,230	157,836	142,811	140,833
Stockholders’ equity per share	$	33.33	25.94	20.68	15.61	11.78
Delivery and Backlog Information
(including unconsolidated entities):
Number of homes delivered		42,359	36,204	32,180	27,393	23,899
Backlog of home sales contracts		18,565	15,546	13,905	12,108	8,339
Backlog dollar value	$	6,884,238	5,055,273	3,887,300	3,200,206	1,981,632

(1) In May 2005, the Company sold a subsidiary of the Financial Services Division’s title company. As a result of the sale, the subsidiary’s results of operations have been reclassified as discontinued operations to conform with the 2005 presentation.

(2) Earnings from discontinued operations before provision for income taxes includes a gain of $15.8 million for the year ended November 30, 2005 related to the sale of a subsidiary of the Financial Services Division’s title company.

(3) As of November 30, 2004, 2003, 2002 and 2001, the Financial Services Division had assets of discontinued operations of $1.0 million, $1.3 million, $0.4 million and $0.4 million, respectively, related to a subsidiary of the Division’s title company that was sold in May 2005.

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Item 7.     Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with “Selected Financial Data” and our audited consolidated financial statements and accompanying notes included elsewhere in this document.

Special Note Regarding Forward-Looking Statements

Some of the statements in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, and elsewhere in this Annual Report on Form 10-K, are “forward-looking statements,” as that term is defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements regarding our business, financial condition, results of operations, cash flows, strategies and prospects. You can identify forward-looking statements by the fact that these statements do not relate strictly to historical or current matters. Rather, forward-looking statements relate to anticipated or expected events, activities, trends or results. Because forward-looking statements relate to matters that have not yet occurred, these statements are inherently subject to risks and uncertainties. Many factors could cause our actual activities or results to differ materially from the activities and results anticipated in forward-looking statements. These factors include those described under the caption “Risk Factors Relating to Our Business” in Item 1A of this document. We do not undertake any obligation or duty to update forward-looking statements.

Outlook

Fiscal 2005 proved to be a very strong year for Lennar and other large national homebuilders, as the pace of price appreciation on new homes drove record level profit margins in various markets. During fiscal 2005, we accumulated a record level backlog dollar value of new home orders, which at November 30, 2005 was 36% higher than it was at the end of fiscal 2004. With communities in place to meet our delivery goals and a backlog of $6.7 billion as of December 31, 2005, we believe that we are well positioned for fiscal 2006.

As we enter fiscal 2006, there have been early indications of a slower sales pace in certain markets in which we operate. While these indicators point to the likelihood that price appreciation in these markets will not continue at the level experienced in fiscal 2005, we believe that in most of these markets, with interest rates reasonably low, employment trends remaining positive and inventory levels only moderately up, our focus on inventory management and excellent land positions should support another record year for our company.

Our strong balance sheet and ample liquidity position us well for opportunities, as we focus primarily on growing our company organically. However, we remain opportunistic towards the acquisition of small and possibly large homebuilders. In addition to maintaining a strong balance sheet and growing bottom-line profitability, we remain focused on achieving strong returns on capital by managing our land portfolio and controlling additional homesites through options and strategic joint ventures.

Results of Operations

Overview

We achieved record revenues, profits and earnings per share from continuing operations in 2005. Our net earnings from continuing operations in 2005 were $1.3 billion, or $8.17 per share diluted ($8.65 per share basic), compared to $944.6 million, or $5.70 per share diluted ($6.08 per share basic), in 2004. The increase in net earnings from continuing operations was attributable to strength in our Homebuilding Division’s operations. In particular, both our deliveries and average sales price on homes delivered increased due to strong demand and supply constraints in strategic markets, low interest rates and favorable economic and demographic trends.

Earnings per share amounts for all years have been adjusted to reflect the effect of our April 2003 10% Class B common stock distribution and our January 2004 two-for-one stock split.

Homebuilding

Our Homebuilding Division sells and constructs homes primarily for first-time, move-up and active adult homebuyers. We sell homes under both our Everything’s Included^® and Design Studio^SM programs. Our land operations include the purchase, development and sale of land for our homebuilding activities, as well as the sale

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of land to third parties. In certain circumstances, we diversify our operations through strategic alliances and minimize our risks by investing with third parties in unconsolidated entities. The following tables set forth selected financial and operational information for the years indicated. The results of operations of the homebuilders we acquired during these years are included in the tables since the respective dates of the acquisitions.

Homebuilding Division’s Selected Financial and Operational Data

	Years Ended November 30,
	2005			2004		2003
	(Dollars in thousands, except average sales price)
Revenues:
Sales of homes	$	12,711,789		9,559,847		8,040,470
Sales of land		592,810		440,785		308,175
Total revenues		13,304,599		10,000,632		8,348,645
Costs and expenses:
Cost of homes sold		9,410,343		7,275,446		6,180,777
Cost of land sold		391,984		281,409		234,844
Selling, general and administrative		1,375,480		1,044,483		872,735
Total costs and expenses		11,177,807		8,601,338		7,288,356
Equity in earnings from unconsolidated entities		133,814		90,739		81,937
Management fees and other income, net		61,515		69,251		26,817
Minority interest expense, net		45,030		10,796		4,954
Operating earnings	$	2,277,091		1,548,488		1,164,089
Gross margin on home sales		26.0	%	23.9	%	23.1	%
SG&A expenses as a % of revenues from home sales		10.8	%	10.9	%	10.9	%
Operating margin as a % of revenues from home sales		15.2	%	13.0	%	12.3	%
Average sales price	$	311,000		272,000		256,000

Summary of Home and Backlog Data By Region

At November 30, 2005, our market regions consisted of homebuilding divisions located in the following states: East: Florida, Maryland, Delaware, Virginia, New Jersey, New York, North Carolina and South Carolina. Central: Texas, Illinois and Minnesota. West: California, Colorado, Arizona and Nevada.

	For the Years Ended November 30,
	2005	2004	2003
Deliveries
East	12,467	11,323	10,348
Central	13,074	11,122	9,993
West	16,818	13,759	11,839
Total	42,359	36,204	32,180

Of the total home deliveries listed above, 1,477, 1,015 and 768, respectively, represent deliveries from unconsolidated entities for the years ended November 30, 2005, 2004 and 2003.

New Orders
East	12,577	12,467	11,640
Central	13,793	11,192	9,696
West	17,035	14,008	12,187
Total	43,405	37,667	33,523

Of the new orders listed above, 1,254, 1,700 and 1,553, respectively, represent new orders from unconsolidated entities for the years ended November 30, 2005, 2004 and 2003.

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	November 30,
	2005	2004	2003
Backlog—Homes
East	8,128	7,327	6,121
Central	3,286	2,567	2,416
West	7,151	5,652	5,368
Total	18,565	15,546	13,905

Of the homes in backlog listed above, 1,359, 1,585 and 1,226, respectively, represent homes in backlog from unconsolidated entities at November 30, 2005, 2004 and 2003.

Backlog Dollar Value (In thousands)
East	$	2,931,247	2,177,884	1,526,970
Central		775,505	633,703	558,919
West		3,177,486	2,243,686	1,801,411
Total	$	6,884,238	5,055,273	3,887,300

Of the dollar value of homes in backlog listed above, $590,129, $644,839 and $367,855, respectively, represent the backlog dollar value from unconsolidated entities at November 30, 2005, 2004 and 2003.

Backlog represents the number of homes under sales contracts. Substantially all of the homes currently in backlog are expected to be delivered in fiscal 2006. Homes are sold using sales contracts, which are generally accompanied by sales deposits. In some instances, purchasers are permitted to cancel sales contracts if they are unable to close on the sale of their existing home, fail to qualify for financing or under certain other circumstances. We experienced a cancellation rate of 17% in 2005, compared to 16% and 20% in 2004 and 2003, respectively. Although cancellations can delay the sales of our homes, they have not had a material impact on sales, operations or liquidity because we closely monitor our prospective buyers’ ability to obtain financing and use that information to adjust construction start plans to match anticipated deliveries of homes. We do not recognize revenue on homes under sales contracts until the sales are closed and title passes to the new homeowners, except for our mid-to-high-rise condominiums under construction for which revenue is recognized under percentage-of-completion accounting.

During 2005, we entered metropolitan New York City and the Boston and Reno, Nevada markets and we expanded our presence in our East and West regions through homebuilding acquisitions. During 2004, we expanded our presence in all of our regions through homebuilding acquisitions. During 2003, we expanded our operations in California and South Carolina through homebuilding acquisitions. The results of operations of the acquisitions are included in our results of operations since their respective acquisition dates.

2005 versus 2004

Revenues from home sales increased 33% in 2005 to $12.7 billion from $9.6 billion in 2004. Revenues were higher primarily due to a 16% increase in the number of home deliveries and a 15% increase in the average sales price of homes delivered in 2005. New home deliveries, excluding unconsolidated entities, increased to 40,882 homes in the year ended November 30, 2005 from 35,189 homes last year. In 2005, new home deliveries were higher in each of our regions, compared to 2004. The average sales price of homes delivered increased to $311,000 in the year ended November 30, 2005 from $272,000 in 2004.

Gross margins on home sales were $3.3 billion, or 26.0%, in the year ended November 30, 2005, compared to $2.3 billion, or 23.9%, in 2004. Gross margin percentage on home sales increased 210 basis points primarily due to a product mix favoring our higher margin states, as well as a significant gross margin percentage improvement in Arizona, California and Florida.

Homebuilding interest expense (primarily included in cost of homes sold and cost of land sold) was $187.2 million in 2005, compared to $134.2 million in 2004. The increase in interest expense was due to higher interest costs resulting from higher debt, as well as increased deliveries during 2005, compared to 2004, due to the growth in our homebuilding operations. Our homebuilding debt to total capital ratio as of November 30, 2005 was 33.1%, compared to 33.3% as of November 30, 2004.

Selling, general and administrative expenses as a percentage of revenues from home sales were 10.8% in the year ended November 30, 2005, compared to 10.9% in the year ended November 30, 2004.

Gross profit on land sales totaled $200.8 million in the year ended November 30, 2005, compared to $159.4 million in 2004. Some of these land sales were from consolidated joint ventures, which resulted in minority

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interest expense. Minority interest expense, net from these land sales and other activities of the consolidated joint ventures was $45.0 million and $10.8 million, respectively, in the years ended November 30, 2005 and 2004. Management fees and other income, net, totaled $61.5 million in the year ended November 30, 2005, compared to $69.3 million in 2004. Equity in earnings from unconsolidated entities was $133.8 million in the year ended November 30, 2005, compared to $90.7 million last year. Sales of land, minority interest expense, net, management fees and other income, net and equity in earnings from unconsolidated entities may vary significantly from period to period depending on the timing of land sales and other transactions entered into by us and unconsolidated entities in which we have investments.

At November 30, 2005, we owned approximately 102,700 homesites and had access to an additional 222,100 homesites through either option contracts or unconsolidated entities in which we have investments. At November 30, 2005, 14% of the homesites we owned were subject to home purchase contracts. Our backlog of sales contracts was 18,565 homes ($6.9 billion) at November 30, 2005, compared to 15,546 homes ($5.1 billion) at November 30, 2004. The higher backlog was primarily attributable to our growth and strong demand for our homes, which resulted in higher new orders in 2005, compared to 2004. As a result of acquisitions combined with our organic growth, inventories, excluding consolidated inventory not owned, increased 54% during 2005, while revenues from sales of homes increased 33% for the year ended November 30, 2005, compared to prior year.

2004 versus 2003

Revenues from home sales increased 19% in 2004 to $9.6 billion from $8.0 billion in 2003. Revenues were higher primarily due to a 12% increase in the number of home deliveries and a 6% increase in the average sales price of homes delivered in 2004. New home deliveries, excluding unconsolidated entities, increased to 35,189 homes in the year ended November 30, 2004 from 31,412 homes in 2003. In 2004, new home deliveries were higher in each of our regions, compared to 2003. The average sales price of homes delivered increased to $272,000 in the year ended November 30, 2004 from $256,000 in 2003.

Gross margins on home sales were $2.3 billion, or 23.9%, in 2004, compared to $1.9 billion, or 23.1%, in 2003. Margins were positively impacted by an improvement in our East and West regions. This improvement was primarily attributable to favorable pricing conditions, particularly in our land-constrained markets, as well as a change in product mix. This improvement was partially offset by warranty expense related to the resolution of a dispute.

Homebuilding interest expense (primarily included in cost of homes sold and cost of land sold) was $134.2 million in 2004, compared to $141.3 million in 2003. The decrease in interest expense was due to lower interest costs resulting from a lower debt leverage ratio while we continued to grow.

Selling, general and administrative expenses as a percentage of revenues from home sales were 10.9% in both 2004 and 2003.

Gross profit on land sales totaled $159.4 million in the year ended November 30, 2004, compared to $73.3 million in 2003. Some of these land sales were from consolidated joint ventures, which resulted in minority interest expense. Minority interest expense, net from these land sales and other activities of the consolidated joint ventures was $10.8 million and $5.0 million, respectively, in the years ended November 30, 2004 and 2003. Management fees and other income, net, totaled $69.3 million in 2004, compared to $26.8 million in 2003. Equity in earnings from unconsolidated entities was $90.7 million in 2004, compared to $81.9 million in 2003. This improvement resulted from an increase in homes delivered by our unconsolidated homebuilding joint ventures. Sales of land, minority interest expense, net, management fees and other income, net and equity in earnings from unconsolidated entities may vary significantly from period to period depending on the timing of land sales and other transactions entered into by us and unconsolidated entities in which we have investments.

At November 30, 2004, we owned approximately 87,700 homesites and had access to an additional 168,300 homesites through either option contracts or unconsolidated entities in which we have investments. At November 30, 2004, 13% of the homesites we owned were subject to home purchase contracts. Our backlog of sales contracts was 15,546 homes ($5.1 billion) at November 30, 2004, compared to 13,905 homes ($3.9 billion) at November 30, 2003. The higher backlog was primarily attributable to our growth and strong demand for our homes, which resulted in higher new orders in 2004, compared to 2003. As a result of acquisitions combined with our organic growth, inventories, excluding consolidated inventory not owned, increased 35% during 2004, while revenues from sales of homes increased 19% for the year ended November 30, 2004, compared to 2003.

Financial Services

Our Financial Services Division provides mortgage financing, title insurance, closing services and insurance agency services for both buyers of our homes and others. The Division sells substantially all of the loans it

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originates in the secondary mortgage market on a servicing released, non-recourse basis; however, we remain liable for customary representations and warranties related to loan sales. The Division also provides high-speed Internet and cable television services to residents of our communities and others. The following table sets forth selected financial and operational information relating to our Financial Services Division. The results of operations of companies we acquired during these years are included in the table since the respective dates of the acquisitions.

Financial Services Division’s Selected Financial and Operational Data

	Years Ended November 30,
	2005			2004		2003
	(Dollars in thousands)
Revenues	$	562,372		500,336		556,581
Costs and expenses		457,604		389,605		402,862
Operating earnings from continuing operations	$	104,768		110,731		153,719
Dollar value of mortgages originated	$	9,509,000		7,517,000		7,603,000
Number of mortgages originated		42,300		37,900		41,000
Mortgage capture rate of Lennar homebuyers		66	%	71	%	72	%
Number of title and closing service transactions		187,700		187,700		245,600
Number of title policies issued		193,900		185,100		175,000

2005 versus 2004

Operating earnings from continuing operations for the Financial Services Division were $104.8 million in the year ended November 30, 2005, compared to $110.7 million last year. The decrease was primarily due to reduced profitability from the Division’s mortgage operations as a result of a more competitive mortgage environment in 2005, as well as a $6.5 million pretax gain generated from monetizing a majority of the Division’s alarm monitoring contracts in 2004. This decrease was partially offset by improved profitability from the Division’s title operations in 2005. The Division’s mortgage capture rate (i.e., the percentage of our homebuyers, excluding cash settlements, who obtained mortgage financing from us in areas where we offered services) was 66% in the year ended November 30, 2005, compared to 71% 2004. The decrease in the capture rate was a result of a more competitive mortgage environment. During 2005, we sold North American Exchange Company (“NAEC”), a subsidiary of the Financial Services Division’s title company, which generated a $15.8 million pretax gain.

2004 versus 2003

Operating earnings from continuing operations from our Financial Services Division decreased to $110.7 million in 2004, compared to $153.7 million in 2003. The decrease in operating earnings from continuing operations in 2004 was primarily due to a more competitive mortgage environment and a slowdown in refinance activity, which resulted in reduced profitability from our mortgage and title operations. The decline in operating earnings from continuing operations was partially offset by a $6.5 million gain generated by monetizing the majority of our alarm monitoring contracts in 2004. The Division’s mortgage capture rate (i.e., the percentage of our homebuyers, excluding cash settlements, who obtained mortgage financing from us in areas where we offered services) was relatively consistent in the year ended November 30, 2004, compared to 2003.

Corporate General and Administrative

Corporate general and administrative expenses as a percentage of total revenues were 1.4% in the year ended November 30, 2005 and 1.3% in both the years ended November 30, 2004 and 2003.

Financial Condition and Capital Resources

At November 30, 2005, we had cash related to our homebuilding and financial services operations of $1.1 billion, compared to $1.4 billion at November 30, 2004. The decrease in cash was primarily due to an increase in inventories, contributions to unconsolidated entities, repurchases of common stock and acquisitions partially offset by our net earnings, distributions of capital from unconsolidated entities and proceeds from debt issuances as we position ourselves for future growth.

We finance our land acquisition and development activities, construction activities, financial services activities and general operating needs primarily with cash generated from our operations and public debt issuances, as well as cash borrowed under our revolving credit facility and warehouse lines of credit.

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Operating Cash Flow Activities

During 2005 and 2004, cash flows provided by operating activities amounted to $323.0 million and $420.2 million, respectively. During 2005, cash flows provided by operating activities consisted primarily of net earnings, an increase in accounts payable and other liabilities and distributions of earnings from unconsolidated entities partially offset by an increase in inventories due to an increase in construction in progress to support a significantly higher backlog and land purchases to facilitate future growth, an increase in receivables resulting primarily from land sales and equity in earnings from unconsolidated entities.

During 2004, cash flows provided by operating activities consisted primarily of net earnings, distributions of earnings from unconsolidated entities, a decrease in financial services loans held-for-sale and an increase in accounts payable and other liabilities offset in part by an increase in inventories to support a significantly higher backlog and an increase in receivables resulting primarily from land sales. In particular, inventories increased by $870.2 million during 2004 due to an increased number of home starts to support a significantly higher backlog combined with the accelerated takedown of homesites that had been under option.

Investing Cash Flow Activities

Cash flows used in investing activities totaled $1.0 billion during 2005, compared to $534.1 million in 2004. In 2005, we used $416.0 million of cash for acquisitions, $919.8 million of cash was contributed to unconsolidated entities and we had an increase in financial services loans held-for-investment of $117.4 million. This usage of cash was partially offset by $466.8 million of distributions of capital from unconsolidated entities. In 2004, we used $105.7 million of cash for acquisitions and $751.2 million of cash was contributed to unconsolidated entities. In particular, we contributed approximately $200 million to an unconsolidated entity to fund the entity’s purchase of Newhall. This usage of cash was partially offset by $330.6 million of distributions of capital from unconsolidated entities.

During 2005, we entered metropolitan New York City and the Boston and Reno, Nevada markets and we expanded our presence in our East and West regions through homebuilding acquisitions. The results of operations of these acquisitions are included in our results of operations since their respective acquisition dates. We are always looking at the possibility of acquiring homebuilders and other companies. However, at November 30, 2005, we had no agreements or understandings regarding any significant transactions.

Financing Cash Flow Activities

Homebuilding debt to total capital is a financial measure commonly used in the homebuilding industry and is presented to assist in understanding the leverage of our homebuilding operations. By providing a measure of leverage of our homebuilding operations, management believes that this measure enables readers of our financial statements to better understand our financial position and performance. Homebuilding debt to total capital as of November 30, 2005 and 2004 is calculated as follows:

	2005			2004
	(Dollars in thousands)
Homebuilding debt	$	2,592,772		2,021,014
Stockholders’ equity		5,251,411		4,052,972
Total capital	$	7,844,183		6,073,986
Homebuilding debt to total capital		33.1	%	33.3	%

The ratio at November 30, 2005 was consistent with the ratio in the prior year. In addition to the use of capital in our homebuilding and financial services operations, we actively evaluate various other uses of capital, which fit into our homebuilding and financial services strategies and appear to meet our profitability and return on capital goals. This may include acquisitions of, or investments in, other entities, the payment of dividends or repurchases of our outstanding common stock or debt. These activities may be funded through any combination of our credit facilities, cash generated from operations, sales of assets or the issuance of public debt, common stock or preferred stock.

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The following table summarizes our homebuilding senior notes and other debts payable:

	November 30,
	2005		2004
	(Dollars in thousands)
5.125% zero-coupon convertible senior subordinated notes due 2021	$	157,346	274,623
7 5/8 % senior notes due 2009		276,299	274,890
5.125% senior notes due 2010		299,715	—
9.95% senior notes due 2010		—	304,009
5.95% senior notes due 2013		345,203	344,717
5.50% senior notes due 2014		247,326	247,105
5.60% senior notes due 2015		502,127	—
Senior floating-rate notes due 2007		200,000	200,000
Senior floating-rate notes due 2009		300,000	300,000
Mortgage notes on land and other debt		264,756	75,670
	$	2,592,772	2,021,014

Our average debt outstanding was $3.0 billion in 2005, compared to $2.0 billion in 2004. The average rates for interest incurred were 5.7% in 2005, compared to 6.4% in 2004. Interest incurred for the year ended November 30, 2005 was $172.9 million, compared to $137.9 million in 2004. The majority of our short-term financing needs, including financings for land acquisition and development activities and general operating needs, are met with cash generated from operations and funds available under our new unsecured credit facility (the “New Facility”), which replaced our senior unsecured credit facilities (the “Credit Facilities”) in June 2005. The New Facility consists of a $1.7 billion revolving credit facility maturing in June 2010. The New Facility also includes access to an additional $500 million via an accordion feature, under which the New Facility may be increased to $2.2 billion, subject to additional commitments. We repaid the outstanding balance under the Credit Facilities with borrowings under the New Facility. As of November 30, 2005, the commitment under the New Facility’s revolving credit facility was increased by $40 million via access of the accordion feature, reducing the access to additional commitments under the accordion feature to $460 million as of November 30, 2005. Subsequent to November 30, 2005, we received the remaining additional commitments of $460 million under the accordion feature increasing the New Facility to $2.2 billion. The New Facility is guaranteed by substantially all of our subsidiaries other than finance company subsidiaries (which include mortgage and title insurance subsidiaries). Interest rates on outstanding borrowings are LIBOR-based, with margins determined based on changes in our leverage ratio and credit ratings, or an alternate base rate. At November 30, 2005, no amounts were outstanding under the New Facility. During the year ended November 30, 2005, the average daily borrowings under the Credit Facilities and the New Facility were $685.4 million.

We have a structured letter of credit facility (the “LC Facility”) with a financial institution. The purpose of the LC Facility is to facilitate the issuance of up to $200 million of letters of credit on a senior unsecured basis. In connection with the LC Facility, the financial institution issued $200 million of its senior notes, which are linked to our performance on the LC Facility. If there is an event of default under the LC Facility, including our failure to reimburse a draw against an issued letter of credit, the financial institution would assign its claim against us, to the extent of the amount due and payable by us under the LC Facility, to its noteholders in lieu of their principal repayment on their performance-linked notes.

In June 2005, we entered into a letter of credit facility with a financial institution. The purpose of the letter of credit facility is to facilitate the issuance of up to $150 million of letters of credit on a senior unsecured basis through the facility’s expiration date of June 2008.

At November 30, 2005, we had letters of credit outstanding in the amount of $1.2 billion, which includes $194.3 million outstanding under the LC Facility and $148.2 million outstanding under the letter of credit facility entered into in June 2005. The majority of these letters of credit are posted with regulatory bodies to guarantee our performance of certain development and construction activities or are posted in lieu of cash deposits on option contracts. Of our total letters of credit outstanding, $244.6 million were collateralized against certain borrowings available under the New Facility.

In April 2005, we sold $300 million of 5.60% senior notes due 2015 (the “Senior Notes”) at a price of 99.771%. Substitute registered notes were subsequently issued. Proceeds from the offering, after initial purchaser’s discount and expenses, were $297.5 million. We added the proceeds to our working capital to be used for general corporate purposes. Interest on the Senior Notes is due semi-annually. The Senior Notes are unsecured and unsubordinated. Substantially all of our subsidiaries other than finance company subsidiaries guaranteed the Senior Notes.

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In May 2005, we redeemed all of our outstanding 9.95% senior notes due 2010 (the “Notes”). The redemption price was $337.7 million, or 104.975% of the principal amount of the Notes outstanding, plus accrued and unpaid interest as of the redemption date. The redemption of the Notes resulted in a $34.9 million pretax loss.

In July 2005, we sold an additional $200 million of Senior Notes at a price of 101.407%. The Senior Notes were the same issue as the Senior Notes we sold in April 2005. Proceeds from the offering, after initial purchaser’s discount and expenses, were $203.9 million. We added the proceeds to our working capital to be used for general corporate purposes. Interest on the Senior Notes is due semi-annually. The Senior Notes are unsecured and unsubordinated. Substantially all of our subsidiaries other than finance company subsidiaries guaranteed the Senior Notes. At November 30, 2005, the carrying value of the Senior Notes sold in April and July 2005 was $502.1 million.

In September 2005, we sold $300 million of 5.125% senior notes due 2010 (the “New Senior Notes”) at a price of 99.905% in a private placement. Proceeds from the offering, after initial purchaser’s discount and expenses, were $298.2 million. We added the proceeds to our working capital to be used for general corporate purposes. Interest on the New Senior Notes is due semi-annually. The New Senior Notes are unsecured and unsubordinated. Substantially all of our subsidiaries other than finance company subsidiaries guaranteed the New Senior Notes. We have agreed to exchange the New Senior Notes for registered notes. The registered notes will have substantially identical terms as the New Senior Notes, except that the registered notes will not include transfer restrictions that are applicable to the New Senior Notes. At November 30, 2005, the carrying value of the New Senior Notes was $299.7 million.

In March and April 2004, we issued a total of $300 million of senior floating-rate notes due 2009 (the “Floating Rate Notes”) in a registered offering, which are callable at par beginning in March 2006. Proceeds from the offerings, after underwriting discount and expenses, were $298.5 million. We used the proceeds to partially prepay the term loan B portion of the Credit Facilities and added the remainder to our working capital to be used for general corporate purposes. We repaid the remaining outstanding balance of the term loan B with cash from our working capital. Interest on the Floating Rate Notes is three-month LIBOR plus 0.75% (5.17% as of November 30, 2005) and is payable quarterly, compared to the term loan B interest of three-month LIBOR plus 1.75%. The Floating Rate Notes are unsecured and unsubordinated. At November 30, 2005, the carrying value of the Floating Rate Notes was $300.0 million. Substantially all of our subsidiaries, other than finance company subsidiaries, have guaranteed the Floating Rate Notes.

In August 2004, we sold $250 million of 5.50% senior notes due 2014 at a price of 98.842% in a private placement. Proceeds from the offering, after initial purchaser’s discount and expenses, were $245.5 million. We used the proceeds to repay borrowings under our Credit Facilities. Interest on the senior notes is due semi-annually. The senior notes are unsecured and unsubordinated. Substantially all of our subsidiaries, other than finance company subsidiaries, guaranteed the senior notes. At November 30, 2005, the carrying value of the senior notes was $247.3 million. We also sold $200 million of senior floating-rate notes due 2007 in a private placement. The senior floating-rate notes are callable at par beginning in February 2006. Proceeds from the offering, after initial purchaser’s discount and expenses, were $199.3 million. We used the proceeds to repay borrowings under our Credit Facilities. Interest on the senior floating-rate notes is three-month LIBOR plus 0.50% (4.92% as of November 30, 2005) and is payable quarterly. The senior floating-rate notes are unsecured and unsubordinated. Substantially all of our subsidiaries, other than finance company subsidiaries, guaranteed the senior floating-rate notes. At November 30, 2005, the carrying value of the senior floating-rate notes was $200.0 million.

Substantially all of our subsidiaries, other than finance company subsidiaries, have guaranteed all our Senior Notes and Floating Rate Notes (the “Guaranteed Notes”). The guarantees are full and unconditional and the guarantor subsidiaries are 100% directly and indirectly owned by Lennar Corporation. The principal reason our subsidiaries, other than finance company subsidiaries, guaranteed the Guaranteed Notes is so holders of the Guaranteed Notes will have rights at least as great with regard to our subsidiaries as any other holders of a material amount of our unsecured debt. Therefore, the guarantees of the Guaranteed Notes will remain in effect while the guarantor subsidiaries guarantee a material amount of the debt of Lennar Corporation, as a separate entity, to others. At any time, however, when a guarantor subsidiary is no longer guaranteeing at least $75 million of Lennar Corporation’s debt other than the Guaranteed Notes, either directly or by guaranteeing other subsidiaries’ obligations as guarantors of Lennar Corporation’s debt, guarantor subsidiaries guarantee of the Guaranteed Notes will be suspended. Currently, the only debt the guarantor subsidiaries are guaranteeing other than the Guaranteed Notes is Lennar Corporation’s principal revolving bank credit line. Therefore, if, the guarantor subsidiaries cease guaranteeing Lennar Corporation’s obligations under the principal revolving bank

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credit line and are not guarantors of any new debt, the guarantor subsidiaries’ guarantees of the Guaranteed Notes will be suspended until such time, if any, as they again are guaranteeing at least $75 million of Lennar Corporation’s debt other than the Guaranteed Notes.

If the guarantor subsidiaries are guaranteeing the revolving credit line totaling at least $75 million, we will treat the guarantees of the Guaranteed Notes as remaining in effect even during periods when Lennar Corporation’s borrowings under the revolving credit line is less than $75 million. Because it is possible that our banks will permit some or all of the guarantor subsidiaries to stop guaranteeing the revolving credit line, it is possible that, at some time or times in the future, the Guaranteed Notes will no longer be guaranteed by the guarantor subsidiaries.

At November 30, 2005, our Financial Services Division had warehouse lines of credit totaling $1.3 billion to fund our mortgage loan activities. Borrowings under the facilities were $1.2 billion at November 30, 2005 and were collateralized by mortgage loans and receivables on loans sold but not yet funded by the investor with outstanding principal balances of $1.3 billion. There are several interest rate-pricing options, which fluctuate with market rates. The effective interest rate on the facilities at November 30, 2005 was 5.1%. The warehouse lines of credit mature in August 2006 ($700 million) and in April 2007 ($600 million), at which time we expect the facilities to be renewed. At November 30, 2005, we had advances under a conduit funding agreement with a major financial institution amounting to $10.7 million. Borrowings under this agreement are collateralized by mortgage loans and had an effective interest rate of 5.0% at November 30, 2005. We also had a $25 million revolving line of credit with a bank that matures in August 2006, at which time the Division expects the line of credit to be renewed. The line of credit is collateralized by certain assets of the Division and stock of certain title subsidiaries. Borrowings under the line of credit were $23.6 million and had an effective interest rate of 4.9% at November 30, 2005.

We have various interest rate swap agreements, which effectively convert variable interest rates to fixed interest rates on $200 million of outstanding debt related to our homebuilding operations. The interest rate swaps mature at various dates through fiscal 2008 and fix the LIBOR index (to which certain of our debt interest rates are tied) at an average interest rate of 6.8% at November 30, 2005. The net effect on our operating results is that interest on the variable-rate debt being hedged is recorded based on fixed interest rates. Counterparties to these agreements are major financial institutions. At November 30, 2005, the fair market value of the interest rate swaps was a $6.7 million liability. Our Financial Services Division, in the normal course of business, uses derivative financial instruments to reduce its exposure to fluctuations in interest rates. The Division enters into forward commitments and, to a lesser extent, option contracts to protect the value of loans held-for-sale from increases in market interest rates. We do not anticipate that we will suffer credit losses from counterparty non-performance.

We have met all of our quantifiable debt covenants. There have been no significant changes in liquidity from the balance sheet date to the date of issuance of this Annual Report on Form 10-K, except as noted above related to the remaining additional commitments of $460 million received under the accordion feature increasing the New Facility to $2.2 billion.

Changes in Capital Structure

In January 2004, we effected a two-for-one stock split in the form of a 100% stock dividend of Class A and Class B common stock. All share and per share amounts (except authorized shares, treasury shares and par value) have been retroactively adjusted to reflect the split. There was no net effect on total stockholders’ equity as a result of the stock split.

In June 2001, our Board of Directors authorized our stock repurchase program to permit future purchases of up to 20 million shares (adjusted for the January 2004 two-for-one stock split) of our outstanding common stock. During 2005, we repurchased a total of 5.1 million shares of our outstanding Class A common stock under our stock repurchase program for an aggregate purchase price of $274.9 million, or $53.38 per share. As of November 30, 2005, 12.4 million shares of our common stock can be repurchased in the future under the program.

In addition to the Class A common shares purchased under our stock repurchase program, we repurchased approximately 229,000 Class A common shares related to the vesting of restricted stock and distributions of common stock from our deferred compensation plan during the year ended November 30, 2005.

In September 2005, our Board of Directors voted to increase the annual dividend rate with regard to our Class A and Class B common stock to $0.64 per share per year (payable quarterly) from $0.55 per share per year (payable quarterly). Dividend rates reflect our January 2004 two-for-one stock split.

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In recent years, we have sold convertible and non-convertible debt into public markets, and at year-end, we had a shelf registration statement effective under the Securities Act of 1933, as amended, under which we could sell to the public up to $1.0 billion of debt securities, common stock, preferred stock or other securities. At November 30, 2005, we had another shelf registration statement effective under the Securities Act of 1933, as amended, under which we could issue up to $400 million of equity or debt securities in connection with acquisitions of companies or interests in companies, businesses or assets.

Based on our current financial condition and credit relationships, we believe that our operations and borrowing resources will provide for our current and long-term capital requirements at our anticipated levels of growth.

Off-Balance Sheet Arrangements

We strategically invest in unconsolidated entities that acquire and develop land (1) for our homebuilding operations or for sale to third parties or (2) for the construction of homes for sale to third-party homebuyers. Through these entities, we reduce and share our risk by limiting the amount of our capital invested in land, while increasing access to potential future homesites. The use of these entities also, in some instances, enables us to acquire land to which we could not otherwise obtain access, or could not obtain access on as favorable terms, without the participation of a strategic partner. Our partners in these entities generally are unrelated homebuilders, land sellers and financial or other strategic partners.

Most of the entities in which we invest are accounted for by the equity method of accounting. At November 30, 2005, our recorded investment in unconsolidated entities was $1.3 billion and our estimated maximum exposure to loss with regard to unconsolidated entities was our recorded investments in these entities in addition to the exposure under the guarantees discussed below. In many instances, we are appointed as the day-to-day manager of these entities and receive fees for performing this function. During 2005, 2004 and 2003, we received management fees and reimbursement of expenses totaling $58.6 million, $40.6 million and $39.0 million, respectively, from unconsolidated entities in which we had investments. We and/or our partners sometimes obtain options or enter into other arrangements under which we can purchase portions of the land held by the unconsolidated entities. Option prices are generally negotiated prices that approximate fair market value when we receive the options. During 2005, 2004 and 2003, $431.2 million, $547.6 million and $460.5 million, respectively, of the unconsolidated entities’ revenues were from land sales to our homebuilding divisions. We do not include in our equity in earnings from unconsolidated entities our pro rata share of unconsolidated entities’ earnings resulting from land sales to our homebuilding divisions. Instead, we account for those earnings as a reduction of our cost of purchasing the land from the unconsolidated entities. This in effect defers recognition of our share of the unconsolidated entities’ earnings related to these sales until we deliver a home and title passes to a homebuyer.

Summarized operating results for unconsolidated entities in which we had investments were as follows:

	Years Ended November 30,
	2005			2004		2003
	(Dollars in thousands)
Revenues	$	2,676,628		1,641,018		1,314,674
Costs and expenses		2,020,470		1,199,243		938,981
Net earnings of unconsolidated entities	$	656,158		441,775		375,693
Our share of net earnings	$	241,631		148,868		148,914
Our share of net earnings—recognized		133,814		90,739		81,937
Our share of net earnings—deferred	$	107,817		58,129		66,977
Our investment in unconsolidated entities	$	1,282,686		856,422		390,334
Equity of the unconsolidated entities	$	3,334,549		1,795,010		885,722
Our investment % in the unconsolidated entities		38.5	%	47.7	%	44.1	%

At November 30, 2005, the unconsolidated entities in which we had investments had total assets of $8.8 billion and total liabilities of $5.5 billion, which included $4.5 billion of notes and mortgages payable. In some instances, we and/or our partners have provided guarantees of debt of certain unconsolidated entities on a pro rata basis. At November 30, 2005, we had repayment guarantees of $324.3 million and limited maintenance guarantees of $761.1 million related to unconsolidated entity debt. The fair market value of the repayment guarantees is insignificant. When we and/or our partners provide guarantees, the unconsolidated entity generally receives more favorable terms from its lenders than would otherwise be available to it. The limited maintenance guarantees only apply if an unconsolidated entity defaults on its loan arrangements and the value of the collateral (generally land and improvements) is less than a specified percentage of the loan balance. If we are required to make a payment under a limited maintenance guarantee to bring the value of the collateral above the specified

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percentage of the loan balance, the payment would constitute a capital contribution or loan to the unconsolidated entity and increase our share of any funds it distributes. At November 30, 2005, there were no assets held as collateral that, upon the occurrence of any triggering event or condition under a guarantee, we could obtain and liquidate to recover all or a portion of the amounts to be paid under a guarantee.

Contractual Obligations and Commercial Commitments

The following table summarizes our contractual obligations at November 30, 2005:

			Payments Due by Period
Contractual Obligations	Total		Less than 1 year	1 to 3 years	3 to 5 years	More than 5 years
	(In thousands)
Homebuilding—Senior notes and other debts payable	$	2,592,772	27,631	382,325	930,814	1,252,002
Financial services—Notes and other debts payable (including limited-purpose finance subsidiaries)		1,270,438	1,269,782	—	—	656
Interest commitments under interest bearing debt		768,800	138,135	238,980	167,266	224,419
Operating leases		238,733	77,975	87,424	43,676	29,658
Total contractual cash obligations	$	4,870,743	1,513,523	708,729	1,141,756	1,506,735

We are subject to the usual obligations associated with entering into contracts (including option contracts) for the purchase, development and sale of real estate in the routine conduct of our business. Option contracts for the purchase of land generally enable us to defer acquiring portions of properties owned by third parties and unconsolidated entities until we are ready to build homes on them. This reduces our financial risk associated with land holdings. At November 30, 2005, we had access to acquire approximately 222,100 homesites through option contracts and unconsolidated entities in which we have investments. At November 30, 2005, we had $741.6 million of non-refundable option deposits and advanced costs related to certain of these homesites.

We are committed, under various letters of credit, to perform certain development and construction activities and provide certain guarantees in the normal course of business. Outstanding letters of credit under these arrangements totaled $1.2 billion at November 30, 2005. Additionally, we had outstanding performance and surety bonds related to site improvements at various projects with estimated costs to complete of $1.8 billion. We do not believe there will be any draws upon these bonds, but if there were any, they would not have a material effect on our financial position, results of operations or cash flows.

Our Financial Services Division had a pipeline of loans in process totaling approximately $3.7 billion at November 30, 2005. To minimize credit risk, we use the same credit policies in the approval of our commitments as are applied to our lending activities. Loans in process for which interest rates were committed to the borrowers totaled approximately $511.7 million as of November 30, 2005. Substantially all of these commitments were for periods of 60 days or less. Since a portion of these commitments is expected to expire without being exercised by the borrowers, the total commitments do not necessarily represent future cash requirements.

Our Financial Services Division uses mandatory mortgage-backed securities (“MBS”) forward commitments and MBS option contracts to hedge its interest rate exposure during the period from when it extends an interest rate lock to a loan applicant until the time at which the loan is sold to an investor. These instruments involve, to varying degrees, elements of credit and interest rate risk. Credit risk is managed by entering into MBS forward commitments and MBS option contracts only with investment banks with primary dealer status and loan sales transactions with permanent investors meeting our credit standards. Our risk, in the event of default by the purchaser, is the difference between the contract price and fair market value. At November 30, 2005, we had open commitments amounting to $321.0 million to sell MBS with varying settlement dates through February 2006.

Economic Conditions

During 2005, the homebuilding environment remained strong due to a positive supply/demand relationship, as well as low interest rates. As a result of this favorable environment and growth in the number of our active communities, our new orders increased by 15% in 2005. Although the homebuilding business historically has

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been cyclical, it has not undergone an economic down cycle in a number of years. Further, during 2005, home prices rose significantly in many of our markets. This has led some people to assert that the prices of land, new homes and the stock prices of homebuilding companies may be inflated and may decline if the demand for new homes weakens. A decline in the prices for new homes could adversely affect both our revenues and margins. A decline in our stock price could make raising capital through stock issuances more difficult and expensive.

Market and Financing Risk

We finance our contributions to joint ventures, land acquisition and development activities, construction activities, financial services activities and general operating needs primarily with cash generated from operations and public debt issuances, as well as cash borrowed under our revolving credit facility and warehouse lines of credit. We also purchase land under option agreements, which enables us to acquire homesites when we are ready to build homes on them. The financial risks of adverse market conditions associated with land holdings are managed by prudent underwriting of land purchases in areas we view as desirable growth markets, careful management of the land development process and limitation of risks by using partners to share the costs of purchasing and developing land, as well as obtaining access to land through option contracts.

Seasonality

We have historically experienced variability in our results of operations from quarter-to-quarter due to the seasonal nature of the homebuilding business. We typically experience the highest rate of orders for new homes in the first half of the calendar year, although the rate of orders for new homes is highly dependent on the number of active communities and the timing of new community openings. We typically have a greater percentage of new home deliveries in the second half of our fiscal year compared to the first half because new home deliveries trail orders for new homes by several months. As a result, our revenues and operating earnings from sales of homes are generally higher in the second half of our fiscal year.

Interest Rates and Changing Prices

Inflation can have a long-term impact on us because increasing costs of land, materials and labor result in a need to increase the sales prices of homes. In addition, inflation is often accompanied by higher interest rates, which can have a negative impact on housing demand and the costs of financing land development activities and housing construction. Rising interest rates, as well as increased materials and labor costs, may reduce gross margins. In recent years, the increases in these costs have followed the general rate of inflation and hence have not had a significant adverse impact on us. In addition, deflation can impact the value of real estate and make it difficult for us to recover our land costs. Therefore, either inflation or deflation could adversely impact our future results of operations.

New Accounting Pronouncements

In December 2004, the Financial Accounting Standards Board (“FASB”) issued Staff Position 109-1, Application of FASB Statement No. 109, Accounting for Income Taxes, to the Tax Deduction on Qualified Production Activities Provided by the American Jobs Creation Act of 2004 (“FSP 109-1”). The American Jobs Creation Act, which was signed into law in October 2004, provides a tax deduction on qualified domestic production activities. When fully phased-in, the deduction will be up to 9% of the lesser of “qualified production activities income” or taxable income. Based on the guidance provided by FSP 109-1, this deduction should be accounted for as a special deduction under Statement of Financial Accounting Standards (“SFAS”) No. 109, Accounting for Income Taxes, and will reduce tax expense in the period or periods that the amounts are deductible on the tax return. FSP 109-1 was effective December 21, 2004 and the tax benefit resulting from the new deduction will be effective beginning in our first quarter of fiscal year 2006, which begins December 1, 2005. We are evaluating the impact of this law on our future financial statements and currently estimate the future reduction in our federal income tax rate to be approximately 75 basis points.

In December 2004, the FASB issued SFAS No. 123 (revised 2004), Share-Based Payment (“SFAS No. 123(R)”). SFAS No. 123(R) establishes accounting standards for transactions in which a company exchanges its equity instruments for goods or services. In particular, the statement will require companies to record compensation expense for all share-based payments, such as employee stock options, at fair market value. The statement’s effective date is the first interim or annual reporting period of the first fiscal year that begins on or after June 15, 2005 (our first quarter of fiscal year 2006 which begins December 1, 2005). We estimate that the adoption of SFAS No. 123(R) will result in a charge to net earnings of approximately $0.09 per share diluted for the year ending November 30, 2006.

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In March 2005, the SEC released Staff Accounting Bulletin No. 107, Share-Based Payment (“SAB No. 107”). SAB No. 107 provides the SEC staff position regarding the application of SFAS No. 123(R). SAB No. 107 contains interpretive guidance related to the interaction between SFAS No. 123(R) and certain SEC rules and regulations, as well as provides the staff’s views regarding the valuation of share-based payment arrangements for public companies. SAB No. 107 also highlights the importance of disclosures made related to the accounting for share-based payment transactions.

In May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections—a replacement of APB Opinion No. 20 and FASB Statement No. 3 (“SFAS No. 154”). SFAS No. 154, which replaces APB Opinion No. 20, Accounting Changes, and SFAS No. 3, Reporting Accounting Changes in Interim Financial Statements, changes the requirements for the accounting and reporting of a change in an accounting principle. The statement requires retrospective application of changes in an accounting principle to prior periods’ financial statements unless it is impracticable to determine the period-specific effects or the cumulative effect of the change. SFAS No. 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005 (our fiscal year beginning December 1, 2006). The adoption of SFAS No. 154 is not expected to have a material impact on our financial position, results of operations or cash flows.

Critical Accounting Policies and Estimates

Our accounting policies are more fully described in Note 1 of the notes to our consolidated financial statements included in Item 8 of this document. As discussed in Note 1, the preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions about future events that affect the amounts reported in our consolidated financial statements and accompanying notes. Future events and their effects cannot be determined with absolute certainty. Therefore, the determination of estimates requires the exercise of judgment. Actual results could differ from those estimates, and such differences may be material to our consolidated financial statements. Listed below are those policies and estimates that we believe are critical and require the use of significant judgment in their application.

Homebuilding Operations

Revenue Recognition

Revenues from sales of homes are recognized when sales are closed and title passes to the new homeowners. Revenues from sales of land are recognized when a significant down payment is received, the earnings process is complete, title passes and collectibility of the receivable is reasonably assured. We believe that the accounting policy related to revenue recognition is a critical accounting policy because of the significance of revenue recognition.

Effective December 1, 2004, as a result of the determination that we met all applicable requirements under SFAS No. 66, Accounting for Sales of Real Estate, we began to apply the percentage-of-completion method to our mid-to-high-rise condominiums under construction. In accordance with SFAS No. 66, we record a portion of the value of condominium home contracts as revenue when (1) construction is beyond a preliminary stage, (2) the buyer is committed to the extent of being unable to require a full refund except for non-delivery of the home, (3) sufficient homes have already been sold to assure the entire property will not revert to rental property, (4) sales prices are collectible and (5) aggregate sales proceeds and costs can be reasonably estimated. Revenue recognized under the percentage-of-completion method is calculated based upon the percentage of total costs incurred in relation to total estimated costs to complete, and is adjusted for estimated cancellations due to potential customer defaults. The change to the percentage-of-completion method did not have a material impact on our financial condition as of November 30, 2005, or our results of operations or cash flows for the year ended November 30, 2005. Actual revenues and costs to complete construction in the future could differ from our current estimates. If our estimates of revenues and development costs change, then our revenues, cost of sales and related cumulative profits will be revised in the period that estimates change.

Inventories

Inventories are stated at cost, unless the inventory within a community is determined to be impaired, in which case the impaired inventory would be written down to fair market value. Inventory costs include land, land development and home construction costs, real estate taxes, deposits on land purchase contracts and interest related to development and construction. Land, land development, amenities and other costs are accumulated by specific area and allocated to homes within the respective areas.

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We evaluate our inventory for impairment whenever indicators of impairment exist. Accounting standards require that if the sum of the undiscounted future cash flows expected to result from an asset is less than the reported value of the asset, an asset impairment must be recognized in the consolidated financial statements. The amount of impairment to recognize is calculated by subtracting the fair market value of the asset from the carrying value of the asset.

We believe that the accounting estimate related to inventory valuation and impairment is a critical accounting estimate because: (1) it is highly susceptible to change due to the assumptions about future sales and cost of sales and (2) the impact of recognizing impairments on the assets reported in our consolidated balance sheets, as well as our net earnings, could be material. Our assumptions about future home sales prices and volumes require significant judgment because historically the residential homebuilding industry has been cyclical and sensitive to changes in economic conditions. Although the homebuilding business historically has been cyclical, it has not undergone a down cycle in a number of years.

No material impairment charges were recorded during the years ended November 30, 2005, 2004 and 2003. While no material impairment existed as of November 30, 2005, there can be no assurances that future economic or financial developments, including general interest rate increases or a slowdown in the economy, might not lead to an impairment of inventory.

Warranty Costs

Although we subcontract virtually all segments of construction to others and our contracts call for the subcontractors to repair or replace any deficient items related to their trade, we are primarily responsible to correct any deficiencies. Additionally, in some instances, we may be held responsible for the actions of or losses incurred by subcontractors. Warranty reserves are established at an amount estimated to be adequate to cover potential costs for materials and labor with regard to warranty-type claims expected to be incurred subsequent to the delivery of a home. Reserves are determined based upon historical data and trends with respect to similar product types and geographical areas. We believe the accounting estimate related to the reserve for warranty costs is a critical accounting estimate because the estimate requires a large degree of judgment.

At November 30, 2005, the reserve for warranty costs was $144.9 million. While we believe that the reserve for warranty costs is adequate, there can be no assurances that historical data and trends will accurately predict our actual warranty costs. Additionally, there can be no assurances that future economic or financial developments might not lead to a significant change in the reserve.

Investments in Unconsolidated Entities

We frequently invest in entities that acquire and develop land for sale to us in connection with our homebuilding operations or for sale to third parties. Our partners generally are unrelated homebuilders, land sellers and financial or other strategic partners.

Most of the unconsolidated entities through which we acquire and develop land are accounted for by the equity method of accounting because we are not the primary beneficiary, as defined under FASB Interpretation No. 46(R) (“FIN 46(R)”), Consolidation of Variable Interest Entities, and we have a significant, but less than controlling, interest in the entities. We record our investments in these entities in our consolidated balance sheets as “Investments in Unconsolidated Entities” and our pro rata share of the entities’ earnings or losses in our consolidated statements of earnings as “Equity in Earnings from Unconsolidated Entities,” as described in Note 6 of the notes to our consolidated financial statements. Advances to these entities are included in the investment balance.

Management uses its judgment when determining if we are the primary beneficiary of, or have a controlling interest in, an unconsolidated entity. Factors considered in determining whether we have significant influence or we have control include risk and reward sharing, experience and financial condition of the other partners, voting rights, involvement in day-to-day capital and operating decisions and continuing involvement. The accounting policy relating to the use of the equity method of accounting is a critical accounting policy due to the judgment required in determining whether we are the primary beneficiary or have control or significant influence.

As of November 30, 2005, we believe that the equity method of accounting is appropriate for our investments in unconsolidated entities where we are not the primary beneficiary and we do not have a controlling interest, but rather share control with our partners. At November 30, 2005, the unconsolidated entities in which we had investments had total assets of $8.8 billion and total liabilities of $5.5 billion.

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Financial Services Operations

Revenue Recognition

Loan origination revenues, net of direct origination costs, are recognized when the related loans are sold. Gains and losses from the sale of loans and loan servicing rights are recognized when the loans are sold and shipped to an investor. Premiums from title insurance policies are recognized as revenue on the effective dates of the policies. Escrow fees are recognized at the time the related real estate transactions are completed, usually upon the close of escrow. Interest income on loans held-for-sale is recognized as earned over the terms of the mortgage loans based on the contractual interest rates. In all circumstances, we do not recognize revenue until the earnings process is complete and collectibility of the receivable is reasonably assured. We believe that the accounting policy related to revenue recognition is a critical accounting policy because of the significance of revenue recognition.

Allowance for Loan Losses

We provide an allowance for loan losses when and if we determine that loans or portions of them are not likely to be collected. In evaluating the adequacy of the allowance for loan losses, we consider various factors such as past loan loss experience, regulatory examinations, present economic conditions and other factors considered relevant by management. Anticipated changes in economic conditions, which may influence the level of the allowance, are considered in the evaluation by management when the likelihood of the changes can be reasonably determined. This analysis is based on judgments and estimates and may change in response to economic developments or other conditions that may influence borrowers’ financial conditions or prospects. At November 30, 2005, the allowance for loan losses was $1.2 million. While we believe that the 2005 year-end allowance was adequate, particularly in view of the fact that we usually sell the loans in the secondary mortgage market on a non-recourse basis within 60 days after we originate them, there can be no assurances that future economic or financial developments, including general interest rate increases or a slowdown in the economy, might not lead to increased provisions to the allowance or a higher occurrence of loan charge-offs. This allowance requires management’s judgment and estimate. For these reasons, we believe that the accounting estimate related to the allowance for loan losses is a critical accounting estimate.

Homebuilding and Financial Services Operations

Goodwill Valuation

Goodwill represents the excess of the purchase price over the fair market value of net assets acquired. The process of determining goodwill requires judgment. Evaluating goodwill for impairment involves the determination of the fair market value of our reporting units. Inherent in such fair market value determinations are certain judgments and estimates, including the interpretation of current economic indicators and market valuations, and our strategic plans with regard to our operations. To the extent additional information arises or our strategies change, it is possible that our conclusion regarding goodwill impairment could change, which could have a material effect on our financial position and results of operations. For those reasons, we believe that the accounting estimate related to goodwill impairment is a critical accounting estimate.

We review goodwill annually (or more frequently under certain conditions) for impairment in accordance with SFAS No. 142, Goodwill and Other Intangible Assets. We performed our annual impairment test of goodwill as of September 30, 2005 and determined that goodwill was not impaired.

At November 30, 2005, goodwill was $253.1 million. While we believe that no impairment existed as of November 30, 2005, there can be no assurances that future economic or financial developments, including general interest rate increases or a slowdown in the economy, might not lead to an impairment of goodwill.

Valuation of Deferred Tax Assets

We record income taxes under the asset and liability method, whereby deferred tax assets and liabilities are recognized based on the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and attributable to operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply in the years in which the temporary differences are expected to be recovered or paid. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in earnings in the period when the changes are enacted.

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We believe that the accounting estimate for the valuation of deferred tax assets is a critical accounting estimate because judgment is required in assessing the likely future tax consequences of events that have been recognized in our financial statements or tax returns. We base our estimate of deferred tax assets and liabilities on current tax laws and rates and, in certain cases, business plans and other expectations about future outcomes. Changes in existing tax laws or rates could affect actual tax results and future business results may affect the amount of deferred tax liabilities or the valuation of deferred tax assets over time. Our accounting for deferred tax consequences represents our best estimate of future events. Although it is possible there will be changes that are not anticipated in our current estimates, we believe it is unlikely such changes would have a material period-to-period impact on our financial position or results of operations.

At November 30, 2005, our net deferred tax asset was $111.1 million. Based on our assessment, it appears more likely than not that the net deferred tax asset will be realized through future taxable earnings.

Stock-Based Compensation

With the approval of a committee consisting of members of our Board of Directors, from time-to-time we issue to employees options to purchase our common stock. The committee approves grants only from amounts remaining available for grant that were formally authorized by our common stockholders. We grant approved options with an exercise price not less than the market price of the common stock on the date of the option grant. We account for options under the provisions of Accounting Principles Board (“APB”) Opinion No. 25, Accounting for Stock Issued to Employees, and, accordingly, recognize no compensation expense for the grants. SFAS No. 123, Accounting for Stock-Based Compensation, and SFAS No. 148, Accounting for Stock-Based Compensation—Transition and Disclosure, an amendment of FASB Statement No. 123, require us to disclose the effects on net earnings and basic and diluted earnings per share had we recorded compensation expense in accordance with SFAS No. 123.

In December 2004, the FASB issued SFAS No. 123(R). SFAS No. 123(R) establishes accounting standards for transactions in which a company exchanges its equity instruments for goods or services. In particular, the statement will require companies to record compensation expense for all share-based payments, such as employee stock options, at fair market value. The statement’s effective date is the first interim or annual reporting period of the first fiscal year that begins on or after June 15, 2005 (our first quarter of fiscal year 2006 beginning December 1, 2005). We estimate that the adoption of SFAS No. 123(R) will result in a charge to net earnings of approximately $0.09 per share diluted for the year ending November 30, 2006.

In March 2005, the SEC released Staff Accounting Bulletin No. 107, Share-Based Payment (“SAB No. 107”). SAB No. 107 provides the SEC staff position regarding the application of SFAS No. 123(R). SAB No. 107 contains interpretive guidance related to the interaction between SFAS No. 123(R) and certain SEC rules and regulations, as well as provides the staff’s views regarding the valuation of share-based payment arrangements for public companies. SAB No. 107 also highlights the importance of disclosures made related to the accounting for share-based payment transactions.

We believe that the accounting estimate for the valuation of share-based payment is a critical accounting estimate because judgment is required in determining the valuation of the stock options granted to employees.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

We are exposed to market risks related to fluctuations in interest rates on our investments, debt obligations, loans held-for-sale and loans held-for-investment. We utilize derivative instruments, including interest rate swaps, in conjunction with our overall strategy to manage our exposure to changes in interest rates. We also utilize forward commitments and option contracts to mitigate the risks associated with our mortgage loan portfolio.

The table on the following page provides information at November 30, 2005 about our significant derivative financial instruments and other financial instruments that are sensitive to changes in interest rates. For investments available-for-sale, loans held-for-sale, loans held-for-investment and investments held-to-maturity, senior notes and other debts payable and notes and other debts payable, the tables present principal cash flows and related weighted average effective interest rates by expected maturity dates and estimated fair market values at November 30, 2005. Weighted average variable interest rates are based on the variable interest rates at November 30, 2005. For interest rate swaps, the table presents notional amounts and weighted average interest rates by contractual maturity dates and estimated fair market values at November 30, 2005. Notional amounts are used to calculate the contractual cash flows to be exchanged under the contracts. Our limited-purpose finance subsidiaries have placed mortgages and other receivables as collateral for various long-term financings. These limited-purpose finance subsidiaries pay the principal of, and interest on, these financings almost entirely from the cash flows generated by the related pledged collateral and are excluded from the following table. Our trading investments do not have interest rate sensitivity, and therefore, are also excluded from the following table.

See Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 and Notes 1 and 16 of the notes to consolidated financial statements in Item 8 for a further discussion of these items and our strategy of mitigating our interest rate risk.

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Information Regarding Interest Rate Sensitivity

Principal (Notional) Amount by

Expected Maturity and Average Interest Rate

November 30, 2005

	Years Ending November 30,														Fair Market Value at November 30, 2005
	2006			2007		2008		2009		2010		Thereafter		Total
	(Dollars in millions)
ASSETS
Homebuilding:
Investments available-for-sale:
Fixed rate	$	—		—		—		—		—		8.9		8.9	8.9
Average interest rate		—		—		—		—		—		7.5	%	—	—
Financial services:
Loans held-for-sale, net:
Fixed rate	$	—		—		—		—		—		320.5		320.5	320.5
Average interest rate		—		—		—		—		—		6.7	%	—	—
Variable rate	$	—		—		—		—		—		242.0		242.0	242.0
Average interest rate		—		—		—		—		—		6.2	%	—	—
Loans held-for-investment and investments held-to-maturity:
Fixed rate	$	105.3		52.0		4.3		0.2		0.8		15.1		177.7	175.9
Average interest rate		6.0	%	6.4	%	7.6	%	11.7	%	6.0	%	8.6	%	—	—
Variable rate	$	—		—		—		0.1		0.1		1.7		1.9	1.5
Average interest rate		—		—		—		5.2	%	5.2	%	5.2	%	—	—
LIABILITIES
Homebuilding:
Senior notes and other debts payable:
Fixed rate	$	27.6		35.3		50.8		297.7		301.6		1,252.0		1,965.0	2,072.9
Average interest rate		3.8	%	6.3	%	4.4	%	7.6	%	5.1	%	5.6	%	—	—
Variable rate	$	—		200.0		96.2		300.0		31.6		—		627.8	628.0
Average interest rate		—		4.9	%	6.0	%	4.6	%	8.7	%	—		—	—
Financial services:
Notes and other debts payable:
Variable rate	$	1,269.8		—		—		—		—		—		1,269.8	1,269.8
Average interest rate		5.1	%	—		—		—		—		—		—	—
OTHER FINANCIAL INSTRUMENTS
Homebuilding liabilities:
Interest rate swaps:
Variable to fixed-notional amount	$	—		130.3		69.7		—		—		—		200.0	6.7
Average pay rate		—		6.8	%	6.8	%	—		—		—		—	—
Average receive rate		—		LIBOR		LIBOR		—		—		—		—	—

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Management’s Annual Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation of our management, including our CEO and CFO, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework in Internal Control—Integrated Framework, our management concluded that our internal control over financial reporting was effective as of November 30, 2005. Our management’s assessment of the effectiveness of our internal control over financial reporting as of November 30, 2005 has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their attestation report which is included herein.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Lennar Corporation

We have audited management’s assessment, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting, that Lennar Corporation and subsidiaries (the “Company”) maintained effective internal control over financial reporting as of November 30, 2005, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that the Company maintained effective internal control over financial reporting as of November 30, 2005, is fairly stated, in all material respects, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of November 30, 2005, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements as of and for the year ended November 30, 2005 of the Company and our report dated February 7, 2006 expressed an unqualified opinion on those financial statements.

/s/ DELOITTE & TOUCHE LLP

Certified Public Accountants

Miami, Florida

February 7, 2006

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Item 8.    Financial Statements and Supplementary Data.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Lennar Corporation

We have audited the accompanying consolidated balance sheets of Lennar Corporation and subsidiaries (the “Company”) as of November 30, 2005 and 2004, and the related consolidated statements of earnings, stockholders’ equity, and cash flows for each of the three years in the period ended November 30, 2005. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Lennar Corporation and subsidiaries as of November 30, 2005 and 2004, and the results of its operations and its cash flows for each of the three years in the period ended November 30, 2005, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Company’s internal control over financial reporting as of November 30, 2005, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 7, 2006 expressed an unqualified opinion on management’s assessment of the effectiveness of the Company’s internal control over financial reporting and an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

/s/ DELOITTE & TOUCHE LLP

Certified Public Accountants

Miami, Florida

February 7, 2006

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LENNAR CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

November 30, 2005 and 2004

	2005			2004
	(In thousands, except per share amounts)
ASSETS
Homebuilding:
Cash	$	909,557		1,310,920
Restricted cash		22,681		11,552
Receivables, net		299,232		153,285
Inventories:
Finished homes and construction in progress		4,625,563		3,140,520
Land under development		2,867,463		1,725,755
Consolidated inventory not owned		370,505		275,795
Total inventories		7,863,531		5,142,070
Investments in unconsolidated entities		1,282,686		856,422
Goodwill		195,156		183,345
Other assets		266,747		249,229
		10,839,590		7,906,823
Financial services		1,701,635		1,258,457
Total assets	$	12,541,225		9,165,280
LIABILITIES AND STOCKHOLDERS’ EQUITY
Homebuilding:
Accounts payable	$	876,830		554,666
Liabilities related to consolidated inventory not owned		306,445		222,769
Senior notes and other debts payable		2,592,772		2,021,014
Other liabilities		1,997,824		1,232,654
		5,773,871		4,031,103
Financial services		1,437,700		1,038,478
Total liabilities		7,211,571		5,069,581
Minority interest		78,243		42,727
Stockholders’ equity:
Preferred stock		—		—
Class A common stock of $0.10 par value per share
Authorized: 2005 and 2004-300,000 shares
Issued: 2005-130,247 shares; 2004-123,722 shares		13,025		12,372
Class B common stock of $0.10 par value per share
Authorized: 2005 and 2004-90,000 shares
Issued: 2005-32,781 shares; 2004-32,598 shares		3,278		3,260
Additional paid-in capital		1,526,420		1,277,780
Retained earnings		4,046,563		2,780,637
Unearned compensation		(39,432	)	(2,564	)
Deferred compensation plan; 2005-439 Class A common shares and 44 Class B common shares; 2004-695 Class A common shares and 70 Class B common shares		(4,047	)	(6,410	)
Deferred compensation liability		4,047		6,410
Treasury stock, at cost; 2005-5,468 Class A common shares; 2004-90 Class A common shares		(293,222	)	(3,938	)
Accumulated other comprehensive loss		(5,221	)	(14,575	)
Total stockholders’ equity		5,251,411		4,052,972
Total liabilities and stockholders’ equity	$	12,541,225		9,165,280

See accompanying notes to consolidated financial statements.

36

LENNAR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

Years Ended November 30, 2005, 2004 and 2003

	2005		2004	2003
	(Dollars in thousands, except per share amounts)
Revenues:
Homebuilding	$	13,304,599	10,000,632	8,348,645
Financial services		562,372	500,336	556,581
Total revenues		13,866,971	10,500,968	8,905,226
Costs and expenses:
Homebuilding		11,177,807	8,601,338	7,288,356
Financial services		457,604	389,605	402,862
Corporate general and administrative		187,257	141,722	111,488
Total costs and expenses		11,822,668	9,132,665	7,802,706
Equity in earnings from unconsolidated entities		133,814	90,739	81,937
Management fees and other income, net		61,515	69,251	26,817
Minority interest expense, net		45,030	10,796	4,954
Loss on redemption of 9.95% senior notes		34,908	—	—
Earnings from continuing operations before provision for income taxes		2,159,694	1,517,497	1,206,320
Provision for income taxes		815,284	572,855	455,386
Earnings from continuing operations		1,344,410	944,642	750,934
Discontinued operations:
Earnings from discontinued operations before provision for income taxes		17,261	1,570	734
Provision for income taxes		6,516	593	277
Earnings from discontinued operations		10,745	977	457
Net earnings	$	1,355,155	945,619	751,391
Basic earnings per share (1):
Earnings from continuing operations	$	8.65	6.08	5.10
Earnings from discontinued operations		0.07	0.01	0.00
Net earnings	$	8.72	6.09	5.10
Diluted earnings per share (1):
Earnings from continuing operations	$	8.17	5.70	4.65
Earnings from discontinued operations		0.06	0.00	0.00
Net earnings	$	8.23	5.70	4.65

(1) Earnings per share amounts have been retroactively adjusted to reflect the effect of the Company’s April 2003 10% Class B stock distribution and January 2004 two-for-one stock split (See Notes 12 and 14).

See accompanying notes to consolidated financial statements.

37

LENNAR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Years Ended November 30, 2005, 2004 and 2003

	2005			2004		2003
	(Dollars in thousands)
Class A common stock (1):
Beginning balance	$	12,372		12,533		13,012
Conversion of 3 7/8% zero-coupon senior convertible debentures to Class A common shares		—		—		1,356
Conversion of 5.125% zero-coupon convertible senior subordinated notes to Class A common shares		409		—		—
Par value of retired treasury stock		—		(240	)	(1,972	)
Employee stock and director plans		244		79		137
Balance at November 30,		13,025		12,372		12,533
Class B common stock (1):
Beginning balance		3,260		3,251		1,940
Employee stock plans		18		9		11
10% Class B common stock distribution		—		—		1,300
Balance at November 30,		3,278		3,260		3,251
Additional paid-in capital (1):
Beginning balance		1,277,780		1,358,304		866,026
10% Class B common stock distribution		—		—		351,368
Conversion of 3 7/8% zero-coupon senior convertible debentures to Class A common shares		—		—		269,968
Conversion of 5.125% zero-coupon convertible senior subordinated notes to Class A common shares		127,869		—		—
Conversion of other debt		—		25		6
Employee stock and director plans		82,083		14,869		18,049
Performance-based stock options		(492	)	844		—
Tax benefit from employee stock plans and vesting of restricted stock		39,180		13,142		10,951
Retirement of treasury stock		—		(109,404	)	(158,064	)
Balance at November 30,		1,526,420		1,277,780		1,358,304
Retained earnings:
Beginning balance		2,780,637		1,914,963		1,538,945
Net earnings		1,355,155		945,619		751,391
10% Class B common stock distribution including cash paid for fractional shares of $298 in 2003		—		—		(352,966	)
Cash dividends—Class A common stock		(70,495	)	(63,252	)	(19,167	)
Cash dividends—Class B common stock		(18,734	)	(16,693	)	(3,240	)
Balance at November 30,		4,046,563		2,780,637		1,914,963
Unearned compensation:
Beginning balance		(2,564	)	(4,301	)	(7,337	)
Issuance of restricted stock		(44,276	)	(420	)	—
Performance-based stock options		492		(844	)	—
Amortization of restricted stock and performance-based stock options		6,916		3,001		3,036
Balance at November 30,		(39,432	)	(2,564	)	(4,301	)
Deferred compensation plan:
Beginning balance		(6,410	)	(4,919	)	(1,103	)
Deferred compensation activity		2,363		(1,491	)	(3,816	)
Balance at November 30,		(4,047	)	(6,410	)	(4,919	)

See accompanying notes to consolidated financial statements.

38

LENNAR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY—(Continued)

Years Ended November 30, 2005, 2004 and 2003

	2005			2004		2003
	(Dollars in thousands)
Deferred compensation liability:
Beginning balance	$	6,410		4,919		1,103
Deferred compensation activity		(2,363	)	1,491		3,816
Balance at November 30,		4,047		6,410		4,919
Treasury stock, at cost:
Beginning balance		(3,938	)	—		(158,992	)
Employee stock plans		(14,385	)	(4,020	)	(1,044	)
Purchases of treasury stock		(274,899	)	(109,562	)	—
Retirement of treasury stock		—		109,644		160,036
Balance at November 30,		(293,222	)	(3,938	)	—
Accumulated other comprehensive loss:
Beginning balance		(14,575	)	(20,976	)	(24,437	)
Unrealized gains arising during period on interest rate swaps, net of tax		10,049		6,734		3,461
Unrealized gains arising during period on available-for-sale investment securities, net of tax		185		53		—
Company’s portion of unconsolidated entity’s minimum pension liability, net of tax		(880	)	(386	)	—
Balance at November 30,		(5,221	)	(14,575	)	(20,976	)
Total stockholders’ equity	$	5,251,411		4,052,972		3,263,774
Comprehensive income	$	1,364,509		952,020		754,852

(1) Class A common stock, Class B common stock and additional paid-in capital have been retroactively adjusted to reflect the effect of the Company’s January 2004 two-for-one stock split (See Note 14).

See accompanying notes to consolidated financial statements.

39

LENNAR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended November 30, 2005, 2004 and 2003

	2005			2004		2003
	(Dollars in thousands)
Cash flows from operating activities:
Net earnings from continuing operations	$	1,344,410		944,642		750,934
Adjustments to reconcile net earnings from continuing operations to net cash provided by operating activities:
Depreciation and amortization		65,169		55,573		54,503
Amortization of discount on debt		14,389		17,713		21,408
Equity in earnings from unconsolidated entities		(133,814	)	(90,739	)	(81,937	)
Distribution of earnings from unconsolidated entities		221,131		128,535		137,657
Minority interests		45,030		10,796		4,954
Tax benefit from employee stock plans and vesting of restricted stock		39,180		13,142		10,951
Deferred income tax provision (benefit)		10,220		81,532		(51,206	)
Loss on redemption of 9.95% senior notes		34,908		—		—
Changes in assets and liabilities, net of effect from acquisitions:
Increase in receivables		(221,275	)	(385,204	)	(50,657	)
Increase in inventories		(1,687,491	)	(870,194	)	(267,234	)
Increase in other assets		(30,150	)	(1,289	)	(33,025	)
(Increase) decrease in financial services loans held-for-sale		(114,657	)	94,948		165,773
Increase in accounts payable and other liabilities		741,690		418,573		54,296
Net earnings from discontinued operations		10,745		977		457
Adjustment to reconcile net earnings from discontinued operations to net cash provided by operating activities (including gain on sale of discontinued operations of ($15,816) in 2005)		(16,510	)	1,187		(1,985	)
Net cash provided by operating activities		322,975		420,192		714,889
Cash flows from investing activities:
(Increase) decrease in restricted cash		(11,129	)	32,584		11,538
Net additions to operating properties and equipment		(21,747	)	(27,389	)	(18,848	)
Contributions to unconsolidated entities		(919,817	)	(751,211	)	(235,650	)
Distributions of capital from unconsolidated entities		466,800		330,614		170,066
(Increase) decrease in financial services loans held-for-investment		(117,359	)	1,211		(93	)
Purchases of investment securities		(37,350	)	(48,562	)	(29,614	)
Proceeds from investment securities		36,078		34,376		17,674
Acquisitions, net of cash acquired		(416,049	)	(105,730	)	(159,389	)
Proceeds from the sale of business		17,000		—		—
Net cash used in investing activities		(1,003,573	)	(534,107	)	(244,316	)
Cash flows from financing activities:
Net borrowings (repayments) under financial services short-term debt		372,849		162,277		(118,989	)
Net proceeds from senior floating-rate notes due 2009		—		298,500		—
Net proceeds from senior floating-rate notes due 2007		—		199,300		—
Net proceeds from 5.125% senior notes		298,215		—		—
Net proceeds from 5.50% senior notes		—		245,480		—
Net proceeds from 5.60% senior notes		501,460		—		—
Net proceeds from 5.95% senior notes		—		—		341,730
Redemption of 9.95% senior notes		(337,731	)	—		—
Proceeds from other borrowings		53,198		—		—
Principal payments on term loan B and other borrowings		(190,240	)	(404,089	)	(186,078	)
(Payments) receipts related to minority interests, net		(33,181	)	(18,396	)	2,682
Common stock:
Issuances		38,069		14,537		18,197
Repurchases		(289,284	)	(113,582	)	(1,044	)
Dividends and other		(89,229	)	(79,945	)	(22,705	)
Net cash provided by financing activities		324,126		304,082		33,793

See accompanying notes to consolidated financial statements.

40

LENNAR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS—(Continued)

Years Ended November 30, 2005, 2004 and 2003

	2005			2004		2003
	(Dollars in thousands)
Net increase (decrease) in cash	$	(356,472	)	190,167		504,366
Cash at beginning of year		1,415,815		1,225,648		721,282
Cash at end of year	$	1,059,343		1,415,815		1,225,648
Summary of cash:
Homebuilding	$	909,557		1,310,920		1,157,140
Financial services		149,786		104,895		68,508
	$	1,059,343		1,415,815		1,225,648
Supplemental disclosures of cash flow information:
Cash paid for interest, net of amounts capitalized	$	15,844		—		6,559
Cash paid for income taxes, net	$	571,498		278,444		503,410
Supplemental disclosures of non-cash investing and financing activities:
Conversion of debt to equity	$	128,278		25		271,330
Purchases of inventory financed by sellers	$	159,078		45,892		15,395
Land distributions from unconsolidated entities	$	74,498		31,311		6,050
Acquisitions:
Fair market value of assets acquired, inclusive of cash of $0 in 2005, $1,392 in 2004 and $9,004 in 2003	$	409,262		88,822		159,453
Goodwill recorded		13,781		26,656		30,326
Fair market value of liabilities assumed		(6,994	)	(8,356	)	(21,386	)
Cash paid	$	416,049		107,122		168,393

See accompanying notes to consolidated financial statements.

41

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.    Summary of Significant Accounting Policies

Basis of Consolidation

The accompanying consolidated financial statements include the accounts of Lennar Corporation and all subsidiaries, partnerships and other entities in which Lennar Corporation has a controlling interest and variable interest entities (see Note 17) in which Lennar Corporation is deemed the primary beneficiary (the “Company”). The Company’s investments in both unconsolidated entities in which a significant, but less than controlling, interest is held and in variable interest entities in which the Company is not deemed to be the primary beneficiary are accounted for by the equity method. All significant intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

Stock Split

In December 2003, the Company’s Board of Directors approved a two-for-one stock split in the form of a 100% stock dividend of Class A and Class B common stock payable to stockholders of record on January 6, 2004. The additional shares were distributed on January 20, 2004. All share and per share amounts (except authorized shares, treasury shares and par value) have been retroactively adjusted to reflect the stock split. There was no net effect on total stockholders’ equity as a result of the stock split.

Stock-Based Compensation

The Company grants stock options to certain employees for fixed numbers of shares with, in each instance, an exercise price not less than the fair market value of the shares at the date of the grant. The Company accounts for the stock option grants in accordance with Accounting Principles Board (“APB”) Opinion No. 25, Accounting for Stock Issued to Employees. No compensation expense is recognized if stock options granted have exercise prices greater than or equal to the fair market value of the Company’s stock on the date of the grant. Compensation expense is recognized for stock option grants if the options are performance-based and the Company’s stock has appreciated from the grant date to the measurement date to a fair market value greater than the exercise price of the options. Compensation expense for performance-based options is recognized using the straight-line method over the vesting period of the options based on the difference between the exercise price of the options and the fair market value of the Company’s stock on the measurement date. The Company also grants restricted stock, which is valued based on the market price of the common stock on the date of grant. Compensation expense arising from restricted stock grants is recognized using the straight-line method over the period of the restrictions. Unearned compensation for performance-based options and restricted stock is shown as a reduction of stockholders’ equity in the consolidated balance sheets.

42

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table illustrates the effect on net earnings and earnings per share if the Company had applied the fair market value recognition provisions of Statement of Financial Accounting Standards (“SFAS”) No. 123, Accounting for Stock-Based Compensation, as amended by SFAS No. 148, Accounting for Stock-Based Compensation—Transition and Disclosure, to stock-based employee compensation:

	Years Ended November 30,
	2005			2004		2003
	(In thousands, except per share amounts)
Net earnings, as reported	$	1,355,155		945,619		751,391
Add: Total stock-based employee compensation expense included in reported net earnings, net of tax		3,999		1,868		1,890
Deduct: Total stock-based employee compensation expense determined under fair market value based method for all awards, net of tax		(16,912	)	(13,086	)	(8,938	)
Pro forma net earnings	$	1,342,242		934,401		744,343
Earnings per share (1):
Basic—as reported	$	8.72		6.09		5.10
Basic—pro forma	$	8.64		6.01		5.05
Diluted—as reported	$	8.23		5.70		4.65
Diluted—pro forma	$	8.16		5.63		4.61

(1) Per share amounts have been retroactively adjusted to reflect the effect of the Company’s January 2004 two-for-one stock split.

The fair market value of these options was determined at the date of the grant using the Black-Scholes option-pricing model. The significant weighted average assumptions for the years ended November 30, 2005, 2004 and 2003 were as follows:

	2005	2004	2003
Dividend yield	1.0%	1.1%	0.9%
Volatility rate	27%-34%	27%-36%	39%-46%
Risk-free interest rate	3.8%-4.6%	2.8%-4.5%	2.2%-3.6%
Expected option life (years)	2.0-5.0	2.0-5.0	2.0-5.0

Revenue Recognition

Revenues from sales of homes are recognized when the sales are closed and title passes to the new homeowners. Revenues from sales of land are recognized when a significant down payment is received, the earnings process is complete, title passes and the collectibility of the receivables is reasonably assured.

Effective December 1, 2004, as a result of the determination that the Company met all applicable requirements under SFAS No. 66, Accounting for Sales of Real Estate, the Company began to apply the percentage-of-completion method to its mid-to-high-rise condominiums under construction. In accordance with SFAS No. 66, the Company records a portion of the value of condominium home contracts as revenue when (1) construction is beyond a preliminary stage, (2) the buyer is committed to the extent of being unable to require a full refund except for non-delivery of the home, (3) sufficient homes have already been sold to assure the entire property will not revert to rental property, (4) sales prices are collectible and (5) aggregate sales proceeds and costs can be reasonably estimated. Revenue recognized under the percentage-of-completion method is calculated based upon the percentage of total costs incurred in relation to total estimated costs to complete, and is adjusted for estimated cancellations due to potential customer defaults. The change to the percentage-of-completion method did not have a material impact on the Company’s financial condition as of November 30, 2005, or its results of operations or cash flows for the year ended November 30, 2005. Actual revenues and costs to complete construction in the future could differ from the Company’s current estimates. If the Company’s estimates of revenues and development costs change, then its revenues, cost of sales and related cumulative profits will be revised in the period that estimates change.

43

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Advertising Costs

The Company expenses advertising costs as incurred. Advertising costs were $82.3 million, $60.3 million and $54.9 million for the years ended November 30, 2005, 2004 and 2003, respectively.

Cash

The Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. Due to the short maturity period of the cash equivalents, the carrying amounts of these instruments approximate their fair market values. Cash as of November 30, 2005 and 2004 included $193.6 million and $127.3 million, respectively, of cash primarily held in escrow for approximately three days.

Restricted Cash

Restricted cash consists of customer deposits on home sales held in restricted accounts until title transfers to the homebuyer as required by the state and local governments in which the homes were sold.

Inventories

Inventories are stated at cost unless the inventory within a community is determined to be impaired, in which case the impaired inventory would be written down to fair market value. Inventory costs include land, land development and home construction costs, real estate taxes, deposits on land purchase contracts and interest related to development and construction. The Company evaluates long-lived assets for impairment based on the undiscounted future cash flows of the assets. Write-downs of inventories deemed to be impaired would be recorded as adjustments to the cost basis of the respective inventories. No material impairment charges were recorded during the years ended November 30, 2005, 2004 and 2003.

Construction overhead and selling expenses are expensed as incurred. Homes held-for-sale are classified as inventories until delivered. Land, land development, amenities and other costs are accumulated by specific area and allocated to homes within the respective areas.

Interest and Real Estate Taxes

Interest and real estate taxes attributable to land and homes are capitalized as inventories while they are being actively developed. Interest related to homebuilding and land, including interest costs relieved from inventories, is included in cost of homes sold and cost of land sold. Interest expense related to the financial services operations is included in its costs and expenses.

During 2005, 2004 and 2003, interest incurred by the Company’s homebuilding operations was $172.9 million, $137.9 million and $131.8 million, respectively; interest capitalized into inventories was $171.1 million, $137.6 million and $129.5 million, respectively; and interest expense primarily included in cost of homes sold and cost of land sold was $187.2 million, $134.2 million and $141.3 million, respectively.

Operating Properties and Equipment

Operating properties and equipment are recorded at cost and are included in other assets in the consolidated balance sheets. The assets are depreciated over their estimated useful lives using the straight-line method. At the time operating properties and equipment are disposed of, the asset and related accumulated depreciation are removed from the accounts and any resulting gain or loss is credited or charged to earnings. The estimated useful life for operating properties is 30 years, for furniture, fixtures and equipment is two to ten years and for leasehold improvements is five years or the life of the lease, whichever is shorter.

Investment Securities

Investment securities are classified as available-for-sale unless they are classified as trading or held-to-maturity. Securities classified as trading are carried at fair market value and unrealized holding gains and losses are recorded in earnings. Securities classified as held-to-maturity are carried at amortized cost because they are

44

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

purchased with the intent and ability to hold to maturity. Available-for-sale securities are recorded at fair market value. Any unrealized holding gains or losses on available-for-sale securities are reported in a separate component of stockholders’ equity, net of tax, until realized.

At November 30, 2005 and 2004, investment securities classified as held-to-maturity totaled $32.1 million and $31.6 million, respectively, and were included in the assets of the Financial Services Division. The held-to-maturity securities consist mainly of certificates of deposit and U.S. treasury securities. At November 30, 2005 and 2004, investment securities classified as trading totaled $8.7 million and $8.6 million, respectively, and were included in other assets of the Homebuilding Division. The trading securities are comprised mainly of marketable equity mutual funds designated to approximate the Company’s liabilities under its deferred compensation plan. Additionally, at November 30, 2005 and 2004, investment securities classified as available-for-sale totaled $8.9 million and $8.6 million, respectively, and were included in other assets of the Homebuilding Division. The available-for-sale securities are comprised of municipal bonds with an original maturity of 20 years and a cost basis of $8.5 million at November 30, 2005 and 2004.

Derivative Financial Instruments

SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended by SFAS No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities, establishes accounting and reporting standards for derivative instruments and for hedging activities by requiring that all derivatives be recognized in the balance sheet and measured at fair market value. Gains or losses resulting from changes in the fair market value of derivatives are recognized in earnings or recorded in other comprehensive income and recognized in the statement of earnings when the hedged item affects earnings, depending on the purpose of the derivatives and whether they qualify for hedge accounting treatment.

The Company’s policy is to designate at a derivative’s inception the specific assets, liabilities, or future commitments being hedged and monitor the derivative to determine if it remains an effective hedge. The effectiveness of a derivative as a hedge is based on high correlation between changes in its value and changes in the value of the underlying hedged item. The Company recognizes gains or losses for amounts received or paid when the underlying transaction settles. The Company does not enter into or hold derivatives for trading or speculative purposes.

The Company has various interest rate swap agreements, which effectively convert variable interest rates to fixed interest rates on $200 million of outstanding debt related to its homebuilding operations. The swap agreements have been designated as cash flow hedges and, accordingly, are reflected at their fair market value in other liabilities in the consolidated balance sheets at November 30, 2005 and 2004. The related loss is deferred, net of tax, in stockholders’ equity as accumulated other comprehensive loss. The Company accounts for its interest rate swaps using the shortcut method, as described in SFAS No. 133. Amounts to be received or paid as a result of the swap agreements are recognized as adjustments to interest incurred on the related debt instruments. The Company believes that there will be no ineffectiveness related to the interest rate swaps and therefore no portion of the accumulated other comprehensive loss will be reclassified into future earnings. The net effect on the Company’s operating results is that interest on the variable-rate debt being hedged is recorded based on fixed interest rates.

The Financial Services Division, in the normal course of business, uses derivative financial instruments to reduce its exposure to fluctuations in interest rates. The Division enters into mortgage-backed securities (“MBS”) forward commitments and, to a lesser extent, MBS option contracts to protect the value of fixed rate-locked loan commitments and loans held-for-sale from fluctuations in market interest rates. These derivative financial instruments are designated as fair market value hedges, and, accordingly, for all qualifying and highly effective fair market value hedges, the changes in the fair market value of the derivative and the loss or gain on the hedged asset related to the risk being hedged are recorded currently in earnings.

Goodwill

Goodwill represents the excess of the purchase price over the fair market value of net assets acquired. At November 30, 2005 and 2004, goodwill was $253.1 million and $239.4 million, respectively. During fiscal 2005 and 2004, the Company’s goodwill increased $13.8 million and $26.7 million, respectively, due to current year

45

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

acquisitions in the respective years and payment of contingent consideration related to prior period acquisitions. Goodwill is included in the assets of the Homebuilding Division ($195.2 million and $183.3 million at November 30, 2005 and 2004, respectively) and the assets of the Financial Services Division ($58.0 million and $56.0 million at November 30, 2005 and 2004, respectively) in the consolidated balance sheets.

The Company reviews goodwill annually (or more frequently under certain conditions) for impairment in accordance with SFAS No. 142, Goodwill and Other Intangible Assets. The Company performed its annual impairment test of goodwill as of September 30, 2005 and determined that goodwill was not impaired. No impairment was recorded during the years ended November 30, 2005, 2004 or 2003. As of November 30, 2005 and 2004, there were no material identifiable intangible assets, other than goodwill.

Income Taxes

Income taxes are accounted for in accordance with SFAS No. 109, Accounting for Income Taxes. Under SFAS No. 109, deferred tax assets and liabilities are determined based on temporary differences between financial reporting carrying values and tax bases of assets and liabilities, and are measured by using enacted tax rates expected to apply to taxable income in the years in which those differences are expected to reverse.

Product Warranty

Warranty and similar reserves for homes are established at an amount estimated to be adequate to cover potential costs for materials and labor with regard to warranty-type claims expected to be incurred subsequent to the delivery of a home. Reserves are determined based on historical data and trends with respect to similar product types and geographical areas. Warranty reserves are included in other liabilities in the consolidated balance sheets. The activity in the Company’s warranty reserve was as follows:

	November 30,
	2005			2004
	(In thousands)
Warranty reserve, beginning of year	$	116,826		116,571
Provision		177,285		142,398
Payments		(149,195	)	(142,143	)
Warranty reserve, end of year	$	144,916		116,826

Self-Insurance

Certain insurable risks such as general liability, medical and workers’ compensation are self-insured by the Company up to certain limits. Undiscounted accruals for claims under the Company’s self-insurance program are based on claims filed and estimates for claims incurred but not yet reported.

Minority Interest

The Company has consolidated certain joint ventures because the Company either was determined to be the primary beneficiary pursuant to Financial Accounting Standards Board (“FASB”) Interpretation No. 46(R) (“FIN 46(R)”), Consolidation of Variable Interest Entities, or has a controlling interest in these joint ventures. Therefore, the entities’ financial statements are consolidated in the Company’s financial statements and the partners’ equity is recorded as minority interest. Also included in minority interest is the estimated fair market value of all third-party interests in variable interest entities. At November 30, 2005 and 2004, minority interest was $78.2 million and $42.7 million, respectively. Minority interest expense, net was $45.0 million, $10.8 million and $5.0 million, respectively, for the years ended November 30, 2005, 2004 and 2003.

Earnings per Share

Earnings per share is accounted for in accordance with SFAS No. 128, Earnings per Share, which requires a dual presentation of basic and diluted earnings per share on the face of the consolidated statement of earnings.

46

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Basic earnings per share is computed by dividing net earnings attributable to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the Company.

Financial Services

Loan origination revenues, net of direct origination costs, are recognized when the related loans are sold. Gains and losses from the sale of loans and loan servicing rights are recognized when the loans are sold and shipped to an investor. Premiums from title insurance policies are recognized as revenue on the effective dates of the policies. Escrow fees are recognized at the time the related real estate transactions are completed, usually upon the close of escrow.

Loans held-for-sale by the Financial Services Division that are designated as hedged assets are carried at fair market value because the effect of changes in fair market value are reflected in the carrying amount of the loans and in earnings. Premiums and discounts recorded on these loans are presented as an adjustment to the carrying amount of the loans and are not amortized.

When the Division sells loans in the secondary mortgage market, a gain or loss is recognized to the extent that the sales proceeds exceed, or are less than, the book value of the loans. Loan origination fees, net of direct origination costs, are deferred and recognized as a component of the gain or loss when loans are sold.

Loans for which the Division has the positive intent and ability to hold to maturity consist of mortgage loans carried at cost, net of unamortized discounts. Discounts are amortized over the estimated lives of the loans using the interest method. Interest income on loans held-for-sale is recognized as earned over the term of the mortgage loans based on the contractual interest rates.

The Division also provides an allowance for loan losses when and if management determines that loans, or portions thereof, are uncollectible. The provision recorded and the adequacy of the related allowance is determined by management’s continuing evaluation of the loan portfolio in light of past loan loss experience, regulatory examinations, present economic conditions and other factors considered relevant by management. Anticipated changes in economic factors, which may influence the level of the allowance, are considered in the evaluation by management when the likelihood of the changes can be reasonably determined. While management uses the best information available to make such evaluations, future adjustments to the allowance may be necessary as a result of future economic and other conditions that may be beyond management’s control.

New Accounting Pronouncements

In December 2004, the FASB issued Staff Position 109-1, Application of FASB Statement No. 109, Accounting for Income Taxes, to the Tax Deduction on Qualified Production Activities Provided by the American Jobs Creation Act of 2004 (“FSP 109-1”). The American Jobs Creation Act, which was signed into law in October 2004, provides a tax deduction on qualified domestic production activities. When fully phased-in, the deduction will be up to 9% of the lesser of “qualified production activities income” or taxable income. Based on the guidance provided by FSP 109-1, this deduction should be accounted for as a special deduction under SFAS No. 109, Accounting for Income Taxes, and will reduce tax expense in the period or periods that the amounts are deductible on the tax return. FSP 109-1 was effective December 21, 2004 and the tax benefit resulting from the new deduction will be effective beginning in the Company’s first quarter of fiscal year 2006 beginning December 1, 2005. The Company is evaluating the impact of this law on its future financial statements and currently estimates the future reduction in its federal income tax rate to be approximately 75 basis points.

In December 2004, the FASB issued SFAS No. 123 (revised 2004), Share-Based Payment (“SFAS No. 123(R)”). SFAS No. 123(R) establishes accounting standards for transactions in which a company exchanges its equity instruments for goods or services. In particular, the statement will require companies to record compensation expense for all share-based payments, such as employee stock options, at fair market value. The statement’s effective date is the first interim or annual reporting period of the first fiscal year that begins on or after June 15, 2005 (the Company’s first quarter of fiscal year 2006 beginning December 1, 2005). The Company estimates that the adoption of SFAS No. 123(R) will result in a charge to net earnings of approximately $0.09 per share diluted for the year ending November 30, 2006.

47

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

In March 2005, the SEC released Staff Accounting Bulletin No. 107, Share-Based Payment (“SAB No. 107”). SAB No. 107 provides the SEC staff position regarding the application of SFAS No. 123(R). SAB No. 107 contains interpretive guidance related to the interaction between SFAS No. 123(R) and certain SEC rules and regulations, as well as provides the staff’s views regarding the valuation of share-based payment arrangements for public companies. SAB No. 107 also highlights the importance of disclosures made related to the accounting for share-based payment transactions.

In May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections—a replacement of APB opinion No. 20 and FASB Statement No. 3 (“SFAS No. 154”). SFAS No. 154, which replaces APB Opinion No. 20, Accounting Changes, and SFAS No. 3, Reporting Accounting Changes in Interim Financial Statements, changes the requirements for the accounting and reporting of a change in an accounting principle. The statement requires retrospective application of changes in an accounting principle to prior periods’ financial statements unless it is impracticable to determine the period-specific effects or the cumulative effect of the change. SFAS No. 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005 (the Company’s fiscal year beginning December 1, 2006). The adoption of SFAS No. 154 is not expected to have a material impact on the Company’s financial position, results of operations or cash flows.

Reclassifications

Certain prior year amounts in the consolidated financial statements have been reclassified to conform with the 2005 presentation. These reclassifications had no impact on reported net earnings.

2.    Discontinued Operations

In May 2005, the Company sold North American Exchange Company (“NAEC”), a subsidiary of the Financial Services Division’s title company, which generated a $15.8 million pretax gain. NAEC’s revenues were $3.3 million, $3.9 million and $2.4 million, respectively, for the years ended November 30, 2005, 2004 and 2003. As of November 30, 2005, there were no remaining assets or liabilities of discontinued operations. As of November 30, 2004, assets and liabilities of discontinued operations were $1.0 million and $0.3 million, respectively.

3.    Acquisitions

During 2005, the Company expanded its presence through homebuilding acquisitions in its East and West regions. In connection with these acquisitions and contingent consideration related to prior period acquisitions, the Company paid $416.0 million. The results of operations of these acquisitions are included in the Company’s results of operations since their respective acquisition dates. The pro forma effect of these acquisitions on the results of operations is not presented as the effect is not material. Total goodwill associated with these acquisitions and contingent consideration related to acquisitions prior to 2005 was $13.8 million.

During 2004, the Company expanded its presence through homebuilding acquisitions in all of its regions, expanded its mortgage operations in Oregon and Washington and expanded its title and closing business into Minnesota through the acquisition of Title Protection, Inc. In connection with these acquisitions and contingent consideration related to prior period acquisitions, the Company paid $105.7 million, net of cash acquired. The results of operations of these acquisitions are included in the Company’s results of operations since their respective acquisition dates. The pro forma effect of these acquisitions on the results of operations is not presented as the effect is not material. Total goodwill associated with these acquisitions and contingent consideration related to acquisitions prior to 2004 was $26.7 million.

During 2003, the Company expanded its presence in California and South Carolina through its homebuilding acquisitions, and purchased a title company, which expanded the Company’s title and closing business into the Chicago market. In connection with these acquisitions and contingent consideration related to prior period acquisitions, the Company paid $159.4 million, net of cash acquired. The results of operations of these acquisitions are included in the Company’s results of operations since their respective acquisition dates. The pro forma effect of these acquisitions on the results of operations is not presented as the effect was not considered material. Total goodwill associated with these acquisitions and contingent consideration related to acquisitions prior to 2003 was $30.3 million.

48

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

4.    Operating and Reporting Segments

The Company has two operating and reporting segments: Homebuilding and Financial Services. The Company’s reportable operating segments are strategic business units that offer different products and services. The accounting policies of the segments are described in the summary of significant accounting policies in Note 1. Segment amounts include all elimination adjustments made in consolidation.

The Homebuilding Division’s operations primarily include the sale and construction of single-family attached and detached homes, and to a lesser extent, condominiums, as well as the purchase, development and sale of residential land directly and through the Company’s unconsolidated entities. At November 30, 2005, the Company had homebuilding divisions located in the following states: Arizona, California, Colorado, Delaware, Florida, Illinois, Maryland, Minnesota, Nevada, New Jersey, New York, North Carolina, South Carolina, Texas and Virginia.

The Financial Services Division provides mortgage financing, title insurance, closing services and insurance agency services for both buyers of the Company’s homes and others. Substantially all of the loans it originates are sold in the secondary mortgage market on a servicing released, non-recourse basis. The Financial Services Division also provides high-speed Internet and cable television services to residents of the Company’s communities and others. At November 30, 2005, the Financial Services Division operated in the same markets as the Homebuilding Division, as well as other states.

49

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Financial information related to the Company’s reportable operating segments was as follows:

	Years Ended November 30,
	2005		2004	2003
	(Dollars in thousands)
Homebuilding revenues:
Sales of homes	$	12,711,789	9,559,847	8,040,470
Sales of land		592,810	440,785	308,175
Total homebuilding revenues		13,304,599	10,000,632	8,348,645
Homebuilding costs and expenses:
Cost of homes sold		9,410,343	7,275,446	6,180,777
Cost of land sold		391,984	281,409	234,844
Selling, general and administrative		1,375,480	1,044,483	872,735
Total homebuilding costs and expenses		11,177,807	8,601,338	7,288,356
Equity in earnings from unconsolidated entities		133,814	90,739	81,937
Management fees and other income, net		61,515	69,251	26,817
Minority interest expense, net		45,030	10,796	4,954
Homebuilding operating earnings	$	2,277,091	1,548,488	1,164,089
Financial services revenues	$	562,372	500,336	556,581
Financial services costs and expenses		457,604	389,605	402,862
Financial services operating earnings	$	104,768	110,731	153,719
Total segment operating earnings	$	2,381,859	1,659,219	1,317,808
Corporate general and administrative expenses		187,257	141,722	111,488
Loss on redemption of 9.95% senior notes		34,908	—	—
Earnings from continuing operations before provision for income taxes	$	2,159,694	1,517,497	1,206,320

The following table sets forth additional financial information relating to the Company’s reportable operating segments:

	Years Ended November 30,
	2005		2004	2003
	(In thousands)
Homebuilding:
Interest expense	$	187,154	134,193	141,347
Depreciation and amortization	$	54,823	45,848	46,545
Net additions to operating properties and equipment	$	11,739	7,552	4,633
Financial services:
Interest income, net	$	33,989	27,003	32,218
Depreciation and amortization	$	10,346	9,725	7,958
Net additions to operating properties and equipment	$	10,008	19,837	14,215

During 2005, 2004 and 2003, interest included in the Homebuilding Division’s cost of homes sold was $168.8 million, $128.0 million and $135.9 million, respectively. During 2005, 2004 and 2003, interest included in the Homebuilding Division’s cost of land sold was $16.5 million, $5.8 million and $3.2 million, respectively. All other interest related to the Homebuilding Division is included in management fees and other income, net.

50

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

5.    Receivables

	November 30,
	2005			2004
	(In thousands)
Accounts receivable	$	103,275		78,829
Mortgages and notes receivable		198,376		75,796
		301,651		154,625
Allowance for doubtful accounts		(2,419	)	(1,340	)
	$	299,232		153,285

The Company’s receivables result primarily from the sale of land. The Company performs ongoing credit evaluations of its customers. The Company generally does not require collateral for accounts receivable. Notes receivable are generally collateralized by the property sold to the buyer. Allowances are maintained for potential credit losses based on historical experience, present economic conditions and other factors considered relevant by the Company.

6.    Investments in Unconsolidated Entities

Summarized condensed financial information on a combined 100% basis related to unconsolidated entities in which the Company has investments that are accounted for by the equity method was as follows:

	November 30,
	2005		2004
	(In thousands)
Assets:
Cash	$	334,530	380,213
Inventories		7,615,489	3,305,999
Other assets		875,741	527,468
	$	8,825,760	4,213,680
Liabilities and equity:
Accounts payable and other liabilities	$	1,004,940	534,336
Notes and mortgages payable		4,486,271	1,884,334
Equity of:
The Company		1,282,686	856,422
Others		2,051,863	938,588
	$	8,825,760	4,213,680

	Years Ended November 30,
	2005		2004	2003
	(In thousands)
Revenues	$	2,676,628	1,641,018	1,314,674
Costs and expenses		2,020,470	1,199,243	938,981
Net earnings of unconsolidated entities	$	656,158	441,775	375,693
Company’s share of net earnings—recognized	$	133,814	90,739	81,937

The Company’s partners generally are unrelated homebuilders, land sellers and financial or other strategic partners. The unconsolidated entities follow accounting principles generally accepted in the United States of America. The Company shares in the profits and losses of these unconsolidated entities generally in accordance with its ownership interests. In many instances, the Company is appointed as the day-to-day manager of the unconsolidated entities and receives management fees for performing this function. During 2005, 2004 and 2003, the Company received management fees and reimbursement of expenses from the unconsolidated entities totaling $58.6 million, $40.6 million and $39.0 million, respectively.

51

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The Company and/or its partners sometimes obtain options or enter into other arrangements under which the Company can purchase portions of the land held by the unconsolidated entities. Option prices are generally negotiated prices that approximate fair market value when the Company receives the options. During 2005, 2004 and 2003, $431.2 million, $547.6 million and $460.5 million, respectively, of the unconsolidated entities’ revenues were from land sales to the Company. The Company does not include in its equity in earnings from unconsolidated entities its pro rata share of unconsolidated entities’ earnings resulting from land sales to its homebuilding divisions. Instead, the Company accounts for those earnings as a reduction of the cost of purchasing the land from the unconsolidated entities. This in effect defers recognition of the Company’s share of the unconsolidated entities’ earnings related to these sales until the Company delivers a home and title passes to a homebuyer.

In some instances, the Company and/or its partners have provided guarantees on debt of certain unconsolidated entities on a pro rata basis. At November 30, 2005, the Company had repayment guarantees of $324.3 million and limited maintenance guarantees of $761.1 million related to unconsolidated entity debt ($200.0 million of the limited maintenance guarantees related to LandSource Communities Development LLC). The fair market value of the repayment guarantees is insignificant. When the Company and/or its partners provide guarantees, the unconsolidated entity generally receives more favorable terms from its lenders than would otherwise be available to it. The limited maintenance guarantees only apply if an unconsolidated entity defaults on its loan arrangements and the value of the collateral (generally land and improvements) is less than a specified percentage of the loan balance. If the Company is required to make a payment under a limited maintenance guarantee to bring the value of the collateral above the specified percentage of the loan balance, the payment would constitute a capital contribution or loan to the unconsolidated entity and increase the Company’s share of any funds the unconsolidated entity distributes. At November 30, 2005, there were no assets held as collateral that, upon the occurrence of any triggering event or condition under a guarantee, the Company could obtain and liquidate to recover all or a portion of the amounts to be paid under a guarantee.

In November 2003, the Company and LNR Property Corporation (“LNR”) each contributed its 50% interests in certain of its jointly-owned unconsolidated entities that had significant assets to a new limited liability company named LandSource Communities Development LLC (“LandSource”) in exchange for 50% interests in LandSource. In addition, in July 2003, the Company and LNR formed, and obtained 50% interests in, NWHL, which in January 2004 purchased The Newhall Land and Farming Company (“Newhall”) for a total of approximately $1 billion. Newhall’s primary business is developing two master-planned communities in Los Angeles County, California.

LandSource was formed as a vehicle to obtain financing based on the value of the combined assets of the joint venture entities that the Company and LNR contributed to LandSource. The Company and LNR used LandSource’s financing capacity, together with the financing value of Newhall’s assets, to obtain improved financing for part of the purchase price of Newhall and for working capital to be used by the LandSource subsidiaries and Newhall.

The Company and LNR each contributed approximately $200 million to NWHL, and LandSource and NWHL jointly obtained $600 million of bank financing, of which $400 million was a term loan used in connection with the acquisition of Newhall (the remainder of the acquisition price was paid with proceeds of a sale of income-producing properties from Newhall to LNR for $217 million at the closing of the transaction). The remainder of the bank financing was a $200 million revolving credit facility that is available to finance operations of Newhall and other property ownership and development companies that are jointly owned by the Company and LNR. The Company agreed to purchase 687 homesites and obtained options to purchase an additional 623 homesites from Newhall. The Company is not obligated with regard to the borrowings by LandSource and NWHL, except that the Company and LNR have made limited maintenance guarantees and have committed to complete any property development commitments in the event LandSource or NWHL defaults.

In November 2004, LandSource was merged into NWHL. NWHL was renamed LandSource Communities Development LLC (“Merged LandSource”) upon completion of the merger. The Company and LNR may use Merged LandSource for future joint ventures. The consolidated assets and liabilities of Merged LandSource were $1.4 billion and $767.5 million, respectively, at November 30, 2005 and $1.3 billion and $709.5 million, respectively, at November 30, 2004. The Company’s investment in Merged LandSource was $332.7 million and $318.7 million at November 30, 2005 and 2004, respectively.

52

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

7.    Operating Properties and Equipment

	November 30,
	2005			2004
	(In thousands)
Operating properties	$	12,203		7,126
Leasehold improvements		22,027		18,170
Furniture, fixtures and equipment		37,966		32,190
		72,196		57,486
Accumulated depreciation and amortization		(41,544	)	(36,175	)
	$	30,652		21,311

Operating properties and equipment are included in other assets in the consolidated balance sheets.

8.    Other Liabilities

	November 30,
	2005		2004
	(In thousands)
Income taxes currently payable	$	463,588	267,090
Accrued compensation		396,614	277,037
Other		1,137,622	688,527
	$	1,997,824	1,232,654

9.    Senior Notes and Other Debts Payable

	November 30,
	2005		2004
	(Dollars in thousands)
5.125% zero-coupon convertible senior subordinated notes due 2021	$	157,346	274,623
7 5/8% senior notes due 2009		276,299	274,890
5.125% senior notes due 2010		299,715	—
9.95% senior notes due 2010		—	304,009
5.95% senior notes due 2013		345,203	344,717
5.50% senior notes due 2014		247,326	247,105
5.60% senior notes due 2015		502,127	—
Senior floating-rate notes due 2007		200,000	200,000
Senior floating-rate notes due 2009		300,000	300,000
Mortgage notes on land and other debt		264,756	75,670
	$	2,592,772	2,021,014

In June 2005, the Company replaced its senior unsecured credit facilities (the “Credit Facilities”) with a new senior unsecured credit facility (the “New Facility”). The New Facility consists of a $1.7 billion revolving credit facility maturing in June 2010. The New Facility also includes access to an additional $500 million via an accordion feature, under which the New Facility may be increased to $2.2 billion, subject to additional commitments. The Company repaid the outstanding balance under the Credit Facilities with borrowings under the New Facility. As of November 30, 2005, the commitment under the New Facility’s revolving credit facility was increased by $40 million via access of the accordion feature, reducing the access to additional commitments under the accordion feature to $460 million as of November 30, 2005. Subsequent to November 30, 2005, the Company received the remaining additional commitments of $460 million under the accordion feature increasing the New Facility to $2.2 billion. The New Facility is guaranteed by substantially all of the Company’s subsidiaries other than finance company subsidiaries (which include mortgage and title insurance subsidiaries). Interest rates on outstanding borrowings are LIBOR-based, with margins determined based on changes in the Company’s leverage ratio and credit ratings, or an alternate base rate, as described in the credit agreement. At November 30, 2005, no amounts were outstanding under the New Facility.

53

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The Company has a structured letter of credit facility (the “LC Facility”) with a financial institution. The purpose of the LC Facility is to facilitate the issuance of up to $200 million of letters of credit on a senior unsecured basis. In connection with the LC facility, the financial institution issued $200 million of their senior notes, which were linked to the Company’s performance on the LC Facility. If there is an event of default under the LC Facility, including the Company’s failure to reimburse a draw against an issued letter of credit, the financial institution would assign its claim against the Company, to the extent of the amount due and payable by the Company under the LC Facility, to its noteholders in lieu of their principal repayment on their performance-linked notes.

In June 2005, the Company entered into a letter of credit facility with a financial institution. The purpose of the letter of credit facility is to facilitate the issuance of up to $150 million of letters of credit on a senior unsecured basis through the facility’s expiration date of June 2008.

At November 30, 2005, the Company had letters of credit outstanding in the amount of $1.2 billion, which includes $194.3 million outstanding under the LC Facility and $148.2 million outstanding under the letter of credit facility entered into in June 2005. The majority of these letters of credit are posted with regulatory bodies to guarantee the Company’s performance of certain development and construction activities or are posted in lieu of cash deposits on option contracts. Of the Company’s total letters of credit outstanding, $244.6 million were collateralized against certain borrowings available under the New Facility.

In April 2005, the Company sold $300 million of 5.60% senior notes due 2015 (the “Senior Notes”) at a price of 99.771%. Substitute registered notes were subsequently issued. Proceeds from the offering, after initial purchaser’s discount and expenses, were $297.5 million. The Company added the proceeds to the Company’s working capital to be used for general corporate purposes. Interest on the Senior Notes is due semi-annually. The Senior Notes are unsecured and unsubordinated. Substantially all of the Company’s subsidiaries other than finance company subsidiaries guaranteed the Senior Notes.

In May 2005, the Company redeemed all of its outstanding 9.95% senior notes due 2010 (the “Notes”). The redemption price was $337.7 million, or 104.975% of the principal amount of the Notes outstanding, plus accrued and unpaid interest as of the redemption date. The redemption of the Notes resulted in a $34.9 million pretax loss.

In July 2005, the Company sold an additional $200 million of Senior Notes at a price of 101.407%. The Senior Notes were the same issue as the Senior Notes the Company sold in April 2005. Proceeds from the offering, after initial purchaser’s discount and expenses, were $203.9 million. The Company added the proceeds to the Company’s working capital to be used for general corporate purposes. Interest on the Senior Notes is due semi-annually. The Senior Notes are unsecured and unsubordinated. Substantially all of the Company’s subsidiaries other than finance company subsidiaries guaranteed the Senior Notes. At November 30, 2005, the carrying value of the Senior Notes sold in April and July 2005 was $502.1 million.

In September 2005, the Company sold $300 million of 5.125% senior notes due 2010 (the “New Senior Notes”) at a price of 99.905%. Proceeds from the offering, after initial purchaser’s discount and expenses, were $298.2 million. The Company added the proceeds to the Company’s working capital to be used for general corporate purposes. Interest on the New Senior Notes is due semi-annually. The New Senior Notes are unsecured and unsubordinated. Substantially all of the Company’s subsidiaries other than finance company subsidiaries guaranteed the New Senior Notes. The Company has agreed to exchange the New Senior Notes for registered notes. The registered notes will have substantially identical terms as the New Senior Notes, except that the registered notes will not include transfer restrictions that are applicable to the New Senior Notes. At November 30, 2005, the carrying value of the New Senior Notes was $299.7 million.

In March and April 2004, the Company issued a total of $300 million of senior floating-rate notes due 2009 (the “Floating Rate Notes”), in a registered offering, which are callable at par beginning in March 2006. Proceeds from the offerings, after underwriting discount and expenses, were $298.5 million. The Company used the proceeds to partially prepay the term loan B portion of the Credit Facilities and added the remainder to the Company’s working capital to be used for general corporate purposes. The Company repaid the remaining outstanding balance of the term loan B with cash from the Company’s working capital. Interest on the Floating Rate Notes is three-month LIBOR plus 0.75% (5.17% as of November 30, 2005) and is payable quarterly,

54

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

compared to the term loan B interest of three-month LIBOR plus 1.75%. The Floating Rate Notes are unsecured and unsubordinated. At November 30, 2005 and 2004, the carrying value of the Floating Rate Notes was $300.0 million. Substantially all of our subsidiaries, other than finance company subsidiaries, have guaranteed the Floating Rate Notes.

In August 2004, the Company sold $250 million of 5.50% senior notes due 2014 at a price of 98.842% in a private placement. Proceeds from the offering, after initial purchaser’s discount and expenses, were $245.5 million. The Company used the proceeds to repay borrowings under its Credit Facilities. Interest on the senior notes is due semi-annually. The senior notes are unsecured and unsubordinated. Substantially all of the Company’s subsidiaries, other than finance company subsidiaries, guaranteed the senior notes. At November 30, 2005 and 2004, the carrying value of the senior notes was $247.3 million and $247.1 million, respectively. The Company also sold $200 million of senior floating-rate notes due 2007 in a private placement. The senior floating-rate notes are callable at par beginning in February 2006. Proceeds from the offering, after initial purchaser’s discount and expenses, were $199.3 million. The Company used the proceeds to repay borrowings under its Credit Facilities. Interest on the senior floating-rate notes is three-month LIBOR plus 0.50% (4.92% as of November 30, 2005) and is payable quarterly. The senior floating-rate notes are unsecured and unsubordinated. Substantially all of the Company’s subsidiaries, other than finance company subsidiaries, guaranteed the senior floating-rate notes. At November 30, 2005, the carrying value of the senior floating-rate notes was $200.0 million.

At November 30, 2005, the Company had mortgage notes on land and other debt bearing interest at rates up to 11.0% with an average interest rate of 5.9%. The notes are due through 2010 and are collateralized by land. At November 30, 2005 and 2004, the carrying value of the mortgage notes on land and other debt was $264.8 million and $75.7 million, respectively.

The minimum aggregate principal maturities of senior notes and other debts payable during the five years subsequent to November 30, 2005 are as follows:

	Debt Maturities
	(In thousands)
2006	$	27,631
2007		235,288
2008		147,037
2009		597,669
2010		333,145

55

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The remaining principal obligations are due subsequent to November 30, 2010. The Company’s debt arrangements contain certain financial covenants with which the Company was in compliance at November 30, 2005.

10.  Financial Services

The assets and liabilities related to the Company’s financial services operations were as follows:

	November 30,
	2005		2004 (1)
	(In thousands)
Assets:
Cash	$	149,786	105,469
Receivables, net		675,877	513,089
Loans held-for-sale, net		562,510	447,607
Loans held-for-investment, net		147,459	29,248
Title plants		19,452	18,361
Investments held-to-maturity		32,146	31,574
Goodwill		57,988	56,019
Other (including limited-purpose finance subsidiaries)		56,417	57,090
	$	1,701,635	1,258,457
Liabilities:
Notes and other debts payable	$	1,269,782	896,934
Other (including limited-purpose finance subsidiaries)		167,918	141,544
	$	1,437,700	1,038,478

(1) In May 2005, the Company sold a subsidiary of the Financial Services Division’s title company. As of November 30, 2005, the Division had no remaining assets or liabilities related to discontinued operations. As of November 30, 2004, assets and liabilities related to discontinued operations were $1.0 million (primarily cash and investment securities) and $0.3 million (other liabilities), respectively.

At November 30, 2005, the Financial Services Division had warehouse lines of credit totaling $1.3 billion to fund its mortgage loan activities. Borrowings under the facilities were $1.2 billion and $872.8 million at November 30, 2005 and 2004, respectively, and were collateralized by mortgage loans and receivables on loans sold but not yet funded by the investor with outstanding principal balances of $1.3 billion and $894.7 million, respectively. There are several interest rate-pricing options, which fluctuate with market rates. The effective interest rate on the facilities at November 30, 2005 and 2004 was 5.1% and 2.9%, respectively. The warehouse lines of credit mature in August 2006 ($700 million) and in April 2007 ($600 million), at which time the Division expects the facilities to be renewed. At November 30, 2005 and 2004, the Division had advances under a conduit funding agreement with a major financial institution amounting to $10.7 million and $5.2 million, respectively. Borrowings under this agreement are collateralized by mortgage loans and had an effective interest rate of 5.0% and 3.2% at November 30, 2005 and 2004, respectively. The Division also had a $25 million revolving line of credit with a bank that matures in August 2006, at which time the Division expects the line of credit to be renewed. The line of credit is collateralized by certain assets of the Division and stock of certain title subsidiaries. Borrowings under the line of credit were $23.6 million and $18.9 million at November 30, 2005 and 2004, respectively, and had an effective interest rate of 4.9% and 3.1% at November 30, 2005 and 2004, respectively. The Division’s notes and other debts payable totaling $1.3 billion are due in 2006.

The limited-purpose finance subsidiaries of the Division have placed mortgages and other receivables as collateral for various long-term financings. These limited-purpose finance subsidiaries pay the principal of, and interest on, these financings almost entirely from the cash flows generated by the related pledged collateral, which includes a combination of mortgage notes, mortgage-backed securities and funds held by a trustee. At November 30, 2005 and 2004, the balances outstanding for the bonds and notes payable were $0.7 million and $3.4 million, respectively. The borrowings mature in 2015 through 2018 and carry interest rates ranging from 8.9% to 11.7%. The annual principal repayments are dependent upon collections on the underlying mortgages, including prepayments, and therefore cannot be reasonably determined.

56

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

11.  Income Taxes

The provision (benefit) for income taxes consisted of the following:

From continuing operations:
	Years Ended November 30,
	2005			2004	2003
	(In thousands)
Current:
Federal	$	717,109		440,241	448,254
State		87,955		51,082	58,338
		805,064		491,323	506,592
Deferred:
Federal		9,232		71,615	(45,451	)
State		988		9,917	(5,755	)
		10,220		81,532	(51,206	)
	$	815,284		572,855	455,386
From discontinued operations:
	Years Ended November 30,
	2005			2004	2003
	(In thousands)
Current:
Federal	$	5,791		520	190
State		731		66	24
		6,522		586	214
Deferred:
Federal		(5	)	6	56
State		(1	)	1	7
		(6	)	7	63
	$	6,516		593	277

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of the assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The tax effects of significant temporary differences that give rise to the net deferred tax asset are as follows:

	November 30,
	2005		2004
	(In thousands)
Deferred tax assets:
Reserves and accruals	$	235,744	187,531
Capitalized expenses		83,727	65,708
Investments in unconsolidated entities		35,508	21,092
Other		26,463	33,041
Total deferred tax assets		381,442	307,372
Deferred tax liabilities:
Completed contract reporting differences		190,795	84,786
Section 461(f) deductions		34,960	35,445
Other		44,592	60,303
Total deferred tax liabilities		270,347	180,534
Net deferred tax asset	$	111,095	126,838

57

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The Homebuilding Division’s net deferred tax asset amounting to $104.5 million and $120.3 million at November 30, 2005 and 2004, respectively, is included in other assets in the consolidated balance sheets.

At November 30, 2005 and 2004, the Financial Services Division had a net deferred tax asset of $6.6 million and $6.5 million, respectively, which is included in the assets of the Financial Services Division.

SFAS No. 109 requires the reduction of deferred tax assets by a valuation allowance if, based on the weight of available evidence, it is more likely than not that a portion or all of the deferred tax asset will not be realized. Based on management’s assessment, it is more likely than not that the net deferred tax asset will be realized through future taxable earnings.

A reconciliation of the statutory rate and the effective tax rate follows:

	Percentage of Pre-tax Earnings
	2005		2004		2003
Statutory rate	35.00	%	35.00	%	35.00	%
State income taxes, net of federal income tax benefit	2.75	%	2.75	%	2.75	%
Effective rate	37.75	%	37.75	%	37.75	%

12.    Earnings Per Share

Basic and diluted earnings per share for the years ended November 30, 2005, 2004 and 2003 were calculated as follows:

	2005		2004	2003
	(In thousands, except per share amounts)
Numerator—Basic earnings per share:
Earnings from continuing operations	$	1,344,410	944,642	750,934
Earnings from discontinued operations		10,745	977	457
Numerator for basic earnings per share—net earnings	$	1,355,155	945,619	751,391
Numerator—Diluted earnings per share:
Earnings from continuing operations	$	1,344,410	944,642	750,934
Interest on zero-coupon senior convertible debentures due 2018, net of tax		—	—	4,116
Interest on zero-coupon convertible senior subordinated notes due 2021, net of tax		7,699	8,557	4,105
Numerator for diluted earnings per share from continuing operations		1,352,109	953,199	759,155
Numerator for diluted earnings per share from discontinued operations		10,745	977	457
Numerator for diluted earnings per share—net earnings	$	1,362,854	954,176	759,612
Denominator:
Denominator for basic earnings per share—weighted average shares		155,398	155,398	147,334
Effect of dilutive securities:
Employee stock options and restricted stock		2,598	2,973	3,152
Zero-coupon senior convertible debentures due 2018		—	—	8,380
Zero-coupon convertible senior subordinated notes due 2021		7,526	8,969	4,486
Denominator for diluted earnings per share—adjusted weighted average shares and assumed conversions		165,522	167,340	163,352
Basic earnings per share:
Earnings from continuing operations	$	8.65	6.08	5.10
Earnings from discontinued operations		0.07	0.01	0.00
Net earnings	$	8.72	6.09	5.10
Diluted earnings per share:
Earnings from continuing operations	$	8.17	5.70	4.65
Earnings from discontinued operations		0.06	0.00	0.00
Net earnings	$	8.23	5.70	4.65

58

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Basic and diluted earnings per share amounts and weighted average shares outstanding have been adjusted to reflect the effect of the Company’s April 2003 10% Class B stock distribution and the January 2004 two-for-one stock split.

At November 30, 2005 and 2003, anti-dilutive options outstanding were not material. At November 30, 2004, options to purchase 2.3 million shares of Class A common stock were outstanding and anti-dilutive.

In 2001, the Company issued zero-coupon convertible senior subordinated notes due 2021, (“Convertible Notes”). The indenture relating to the Convertible Notes provides that the Convertible Notes are convertible into the Company’s Class A common stock during limited periods after the market price of the Company’s Class A common stock exceeds 110% of the accreted conversion price at the rate of 14.2 Class A common shares per $1,000 face amount of notes at maturity, which would total 9.0 million shares (adjusted for the January 2004 two-for-one stock split). For this purpose, the “market price” is the average closing price of the Company’s Class A common stock over the last twenty trading days of a fiscal quarter.

Other events that would cause the Convertible Notes to be convertible are: (a) a call of the Convertible Notes for redemption; (b) the credit ratings assigned to the Convertible Notes by any two of Moody’s Investors Service, Inc., Standard & Poor’s Ratings Services and Fitch Ratings are two rating levels below the initial rating; (c) a distribution to all holders of the Company’s Class A common stock of options expiring within 60 days entitling the holders to purchase common stock for less than its quoted price; or (d) a distribution to all holders of the Company’s Class A common stock of common stock, assets, debt, securities or rights to purchase securities with a per share value exceeding 15% of the closing price of the Class A common stock on the day preceding the declaration date for the distribution.

During the year ended November 30, 2005, $288.7 million face value of Convertible Notes were converted to 4.1 million shares of the Company’s Class A common stock. The weighted average of these shares is included in the calculation of basic earnings per share for the year ended November 30, 2005. The calculation of diluted earnings per share included 7.5 million shares for the year ended November 30, 2005, compared to 9.0 million shares and 4.5 million shares (adjusted for the January 2004 two-for-one stock split) for the years ended November 30, 2004 and 2003, respectively, related to the dilutive effect of non-converted Convertible Notes.

13.    Comprehensive Income

Comprehensive income represents changes in stockholders’ equity from non-owner sources. The components of comprehensive income were as follows:

	Years Ended November 30,
	2005			2004		2003
	(Dollars in thousands)
Net earnings	$	1,355,155		945,619		751,391
Unrealized gains arising during period on interest rate swaps, net of 37.75% tax effect		10,049		6,734		3,461
Unrealized gains arising during period on available-for-sale investment securities, net of 37.75% tax effect		185		53		—
Company’s portion of unconsolidated entity’s minimum pension liability, net of 37.75% tax effect		(880	)	(386	)	—
Comprehensive income	$	1,364,509		952,020		754,852

Accumulated other comprehensive loss consisted of the following at November 30, 2005 and 2004:

	November 30,
	2005			2004
	(In thousands)
Unrealized loss on interest rate swaps	$	(4,193	)	(14,242	)
Unrealized gain on available-for-sale investment securities		238		53
Unrealized loss on Company’s portion of unconsolidated entity’s minimum pension liability		(1,266	)	(386	)
Accumulated other comprehensive loss	$	(5,221	)	(14,575	)

59

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

14.    Capital Stock

Preferred Stock

The Company is authorized to issue 500,000 shares of preferred stock with a par value of $10 per share and 100 million shares of participating preferred stock with a par value of $0.10 per share. No shares of preferred stock or participating preferred stock have been issued as of November 30, 2005.

Common Stock

On April 8, 2003, at the Company’s Annual Meeting of Stockholders, the Company’s stockholders approved an amendment to the Company’s certificate of incorporation that eliminated the restrictions on the transfer of the Company’s Class B common stock and eliminated a difference between the dividends on the common stock (renamed Class A common stock) and the Class B common stock. The only significant remaining difference between the Class A common stock and the Class B common stock is that the Class A common stock entitles holders to one vote per share and the Class B common stock entitles holders to ten votes per share.

Because stockholders approved the change to the terms of the Class B common stock, the Company distributed to the holders of record of its stock at the close of business on April 9, 2003, one share of Class B common stock for each ten shares of Class A common stock or Class B common stock held at that time. The distribution occurred on April 21, 2003, and the Company’s Class B common stock became listed on the New York Stock Exchange (“NYSE”). The Company’s Class A common stock was already listed on the NYSE. Approximately 13 million shares of Class B common stock (adjusted for the January 2004 two-for-one stock split) were issued as a result of the stock distribution.

Additionally, the Company’s stockholders approved an amendment to the certificate of incorporation increasing the number of shares of common stock the Company is authorized to issue to 300 million shares of Class A common stock and 90 million shares of Class B common stock. However, the Company has committed to Institutional Shareholder Services that it will not issue, without a subsequent stockholder vote, shares that would increase the outstanding Class A common stock to more than 170 million shares or increase the outstanding Class B common stock to more than 45 million shares.

In December 2003, the Company’s Board of Directors approved a two-for-one stock split in the form of a 100% stock dividend of Class A and Class B common stock payable to stockholders of record on January 6, 2004. The additional shares were distributed on January 20, 2004. All share and per share amounts (except authorized shares, treasury shares and par value) have been retroactively adjusted to reflect the split. There was no net effect on total stockholders’ equity as a result of the stock split.

In September 2005, the Company’s Board of Directors voted to increase the annual dividend rate with regard to the Company’s Class A and Class B common stock to $0.64 per share per year (payable quarterly) from $0.55 per share per year (payable quarterly). Dividend rates were adjusted for the Company’s January 2004 two-for-one stock split. During 2005, 2004 and 2003, Class A and Class B common stockholders received per share annual dividends of $0.57, $0.51 and $0.14, respectively.

As of November 30, 2005, Stuart A. Miller, the Company’s President, Chief Executive Officer and a Director, directly owned, or controlled through family-owned entities, approximately 22 million shares of Class A and Class B common stock, which represented approximately 47% voting power of the Company’s stock.

In June 2001, the Company’s Board of Directors increased the previously authorized stock repurchase program to permit future purchases of up to 20 million shares (adjusted for the January 2004 two-for-one stock split) of the Company’s outstanding common stock. During 2005, the Company repurchased a total of 5.1 million shares of its outstanding Class A common stock under the stock repurchase program for an aggregate purchase price of $274.9 million, or $53.38 per share. During 2004, the Company granted approximately 2.4 million stock options (adjusted for the Company’s January 2004 two-for-one stock split) to employees under the Company’s 2003 Stock Option and Restricted Stock Plan, and repurchased a similar number of shares of its outstanding Class A common stock under the stock repurchase program for an aggregate purchase price of approximately $109.6 million, or $45.64 per share (adjusted for the Company’s January 2004 two-for-one stock split). During 2003, the Company did not repurchase any of its outstanding Class A common stock in the open market under these authorizations. As of November 30, 2005, 12.4 million Class A common shares can be repurchased in the future under the program.

60

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

In addition to the Class A common shares purchased under the Company’s stock repurchase program, the Company repurchased approximately 229,000 and 91,000 Class A common shares during the years ended November 30, 2005 and 2004, respectively, related to the vesting of restricted stock and distributions of common stock from the Company’s deferred compensation plan.

At November 30, 2005, the Company had a shelf registration statement effective under the Securities Act of 1933, as amended, under which the Company could sell to the public up to $1.0 billion of debt securities, common stock, preferred stock or other securities. At November 30, 2005, the Company had another shelf registration statement effective under the Securities Act of 1933, as amended, under which the Company could issue up to $400 million of equity or debt securities in connection with acquisitions of companies or interests in companies, businesses or assets.

Restrictions on Payment of Dividends

Other than as required to maintain the financial ratios and net worth required by the New Facility, there are no restrictions on the payment of dividends on common stock by the Company. There are no agreements which restrict the payment of dividends by subsidiaries of the Company other than as required to maintain the financial ratios and net worth requirements under the Financial Services Division’s warehouse lines of credit.

Stock Option Plans

The Lennar Corporation 2003 Stock Option and Restricted Stock Plan (the “2003 Plan”) provides for the granting of Class A and Class B stock options and stock appreciation rights and awards of restricted common stock to key officers, employees and directors. The exercise prices of stock options and stock appreciation rights may not be less than the market value of the common stock on the date of the grant. No options granted under the 2003 Plan may be exercisable until at least six months after the date of the grant. Thereafter, exercises are permitted in installments determined when options are granted. Each stock option and stock appreciation right will expire on a date determined at the time of the grant, but not more than ten years after the date of the grant. At November 30, 2005, there were 724,000 common shares of restricted stock outstanding under the 2003 Plan. The stock was valued based on its market price on the date of the grant. The grants vest over four years from the date of issuance.

The Lennar Corporation 2000 Stock Option and Restricted Stock Plan (the “2000 Plan”) provided for the granting of Class A stock options and stock appreciation rights and awards of restricted common stock to key officers, employees and directors. No options granted under the 2000 Plan may be exercisable until at least six months after the date of the grant. Thereafter, exercises are permitted in installments determined when options are granted. Each stock option and stock appreciation right will expire on a date determined at the time of the grant, but not more than ten years after the date of the grant. At November 30, 2005, there were no shares of Class A and Class B restricted stock outstanding under the Plan.

The Lennar Corporation 1997 Stock Option Plan (the “1997 Plan”) provided for the granting of Class A stock options and stock appreciation rights to key employees of the Company to purchase shares at prices not less than the market value of the common stock on the date of the grant. No options granted under the 1997 Plan may be exercisable until at least six months after the date of the grant. Thereafter, exercises are permitted in installments determined when options are granted. Each stock option and stock appreciation right granted will expire on a date determined at the time of the grant, but not more than ten years after the date of the grant.

The Lennar Corporation 1991 Stock Option Plan (the “1991 Plan”) provided for the granting of Class A stock options to key employees of the Company to purchase shares at prices not less than market value of the common stock on the date of the grant. No options granted under the 1991 Plan may be exercisable until at least six months after the date of the grant. Thereafter, exercises are permitted in installments determined when options are granted. Each stock option granted will expire on a date determined at the time of the grant, but not more than ten years after the date of the grant.

61

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

A summary of the Company’s stock option activity for the years ended November 30, 2005, 2004 and 2003 (adjusted for the January 2004 two-for-one stock split) is as follows:

	2005				2004				2003
	Stock Options		Weighted Average Exercise Price		Stock Options		Weighted Average Exercise Price		Stock Options		Weighted Average Exercise Price
Outstanding, beginning of year	8,025,292		$	28.26	6,660,968		$	20.01	4,827,348		$	15.98
Grants	1,581,125		$	55.46	2,478,796		$	46.42	2,636,000		$	28.36
Other*	—		$	—	—		$	—	694,824		$	—
Terminations	(541,853	)	$	34.02	(240,386	)	$	33.17	(19,250	)	$	22.74
Exercises	(1,905,016	)	$	20.01	(874,086	)	$	16.55	(1,477,954	)	$	12.27
Outstanding, end of year	7,159,548		$	35.92	8,025,292		$	28.26	6,660,968		$	20.01
Exercisable, end of year	1,390,848		$	22.36	1,338,425		$	15.87	745,336		$	12.96
Available for grant, end of year	5,408,359				7,440,704				9,821,000
Weighted average fair market value per share of options granted during the year under SFAS No. 123			$	16.02			$	13.27			$	8.65

The following table summarizes information about stock options outstanding at November 30, 2005:

	Options Outstanding*				Options Exercisable*
Range of Weighted Average Per Share Exercise Prices*	Number Outstanding at November 30, 2005	Weighted Average Remaining Contractual Life	Weighted Average Per Share Exercise Price		Number Outstanding at November 30, 2005	Weighted Average Per Share Exercise Price
$  4.72—$  8.25	524,575	1.8 years	$	7.39	239,006	$	7.44
$  9.25—$12.87	229,900	2.4 years	$	9.91	41,800	$	10.03
$14.93—$18.88	335,894	5.0 years	$	16.66	312,794	$	16.77
$21.09—$26.32	2,321,671	2.9 years	$	25.06	620,602	$	24.98
$27.85—$43.16	63,949	2.8 years	$	38.87	13,500	$	39.08
$45.19—$56.33	3,524,241	3.5 years	$	49.74	163,146	$	46.74
$56.91—$67.49	159,318	4.7 years	$	59.41	—	$	—

* The Company distributed to the holders of record of its stock at the close of business on April 9, 2003, one share of Class B common stock for each ten shares of Class A common stock or Class B common stock held at that time. As a result of anti-dilution provisions in the Company’s stock option plans, each time an option is exercised with regard to ten shares of Class A common stock, the option holder will also receive one share of Class B common stock. The options cannot be exercised to purchase just Class B common stock, and there is no separate exercise price related to the Class B common stock. The Company did not adjust the number of stock options or the exercise price related to the Class A stock options. There was no accounting consequence from the anti-dilution effect of the Class B common stock distribution.

Employee Stock Ownership/401(k) Plan

Prior to 1998, the Employee Stock Ownership/401(k) Plan (the “Plan”) provided shares of Class A common stock to employees who had completed one year of continuous service with the Company. During 1998, the Plan was amended to exclude any new shares from being provided to employees. All prior year contributions to employees actively employed on or after October 1, 1998 vested at a rate of 20% per year over a five-year period. All active participants in the Plan whose employment terminated prior to October 1, 1998 vested based upon the Plan that was active prior to their termination of employment. Under the 401(k) portion of the Plan, contributions made by employees can be invested in a variety of mutual funds or proprietary funds provided by the Plan trustee. The Company may also make contributions for the benefit of employees. The Company records as compensation expense its contribution to the 401(k) portion of the Plan. This amount was $12.0 million in 2005, $10.3 million in 2004 and $9.1 million in 2003.

62

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

15.    Deferred Compensation Plan

In June 2002, the Company adopted the Lennar Corporation Nonqualified Deferred Compensation Plan (the “Deferred Compensation Plan”) that allows a selected group of members of management to defer a portion of their salaries and bonuses and up to 100% of their restricted stock. All participant contributions to the Deferred Compensation Plan are vested. Salaries and bonuses that are deferred under the Deferred Compensation Plan are credited with earnings or losses based on investment decisions made by the participants. The cash contributions to the Deferred Compensation Plan are invested by the Company in various investment securities that are classified as trading.

Restricted stock is deferred under the Deferred Compensation Plan by surrendering the restricted stock in exchange for the right to receive in the future a number of shares equal to the number of restricted shares that are surrendered. The surrender is reflected as a reduction in stockholders’ equity equal to the value of the restricted stock when it was issued, with an offsetting increase in stockholders’ equity to reflect a deferral of the compensation expense related to the surrendered restricted stock. Changes in the value of the shares that will be issued in the future are not reflected in the consolidated financial statements.

As of November 30, 2005, approximately 438,900 Class A common shares and 43,900 Class B common shares of restricted stock had been surrendered in exchange for rights under the Deferred Compensation Plan, resulting in a reduction in stockholders’ equity of $4.0 million fully offset by an increase in stockholders’ equity to reflect the deferral of compensation in that amount. Shares that the Company is obligated to issue in the future under the Deferred Compensation Plan are treated as outstanding shares in both the Company’s basic and diluted earnings per share calculations for the years ended November 30, 2005, 2004 and 2003.

16.    Financial Instruments

The following table presents the carrying amounts and estimated fair market values of financial instruments held by the Company at November 30, 2005 and 2004, using available market information and what the Company believes to be appropriate valuation methodologies. Considerable judgment is required in interpreting market data to develop the estimates of fair market value. Accordingly, the estimates presented are not necessarily indicative of the amounts that the Company could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies might have a material effect on the estimated fair market value amounts. The table excludes cash, restricted cash, receivables and accounts payable, which had fair market values approximating their carrying values due to the short maturities of these instruments.

	November 30,
	2005			2004
	Carrying Amount		Fair Value	Carrying Amount	Fair Value
	(In thousands)
ASSETS
Homebuilding:
Investments—available-for-sale	$	8,883	8,883	8,585	8,585
Investments—trading		8,660	8,660	8,565	8,565
Financial services:
Loans held-for-sale, net	$	562,510	562,510	447,607	447,607
Loans held-for-investment, net		147,459	145,219	29,248	27,770
Investments—held-to-maturity		32,146	32,149	31,574	31,562
Limited-purpose finance subsidiaries		2,562	2,666	3,406	3,693
LIABILITIES
Homebuilding:
Senior notes and other debts payable	$	2,592,772	2,700,893	2,021,014	2,266,998
Financial services:
Notes and other debts payable	$	1,269,782	1,269,782	896,934	896,934
Limited-purpose finance subsidiaries		656	694	3,406	3,693
OTHER FINANCIAL INSTRUMENTS
Homebuilding liabilities:
Interest rate swaps	$	6,737	6,737	22,879	22,879
Financial services liabilities:
Commitments to originate loans	$	112	112	392	392
Forward commitments to sell loans and option contracts		477	477	394	394

63

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following methods and assumptions are used by the Company in estimating fair market values:

Homebuilding—Since there are no quoted market prices for investments classified as available-for-sale, the fair market value is estimated from available yield curves for investments of similar quality and terms. The fair market value for investments classified as trading is based on quoted market prices. For senior notes and other debts payable, the fair market value of fixed-rate borrowings is based on quoted market prices. Variable-rate borrowings are tied to market indices and therefore approximate fair market value. The fair market value for interest rate swaps is based on dealer quotations and generally represents an estimate of the amount the Company would pay or receive to terminate the agreement at the reporting date.

Financial services—The fair market values are based on quoted market prices, if available. The fair market values for instruments that do not have quoted market prices are estimated by the Company on the basis of discounted cash flows or other financial information.

The Homebuilding Division utilizes interest rate swap agreements to manage interest costs and hedge against risks associated with changing interest rates. Counterparties to these agreements are major financial institutions. Credit losses from counterparty non-performance are not anticipated. A majority of the Division’s variable interest rate borrowings are based on the LIBOR index. At November 30, 2005, the Division had three interest rate swap agreements outstanding with a total notional amount of $200 million, which will mature at various dates through fiscal 2008. These agreements fixed the LIBOR index at an average interest rate of 6.8% at November 30, 2005. The effect of interest rate swap agreements on interest incurred and on the average interest rate was an increase of $11.0 million and 0.40%, respectively, for the year ended November 30, 2005, an increase of $16.5 million and 0.89%, respectively, for the year ended November 30, 2004 and an increase of $16.7 million and 1.03%, respectively, for the year ended November 30, 2003.

The Financial Services Division had a pipeline of loans in process totaling approximately $3.7 billion at November 30, 2005. To minimize credit risk, the Division uses the same credit policies in the approval of the commitments as are applied to the Division’s lending activities. Loans in process for which interest rates were committed to the borrowers totaled $511.7 million as of November 30, 2005. Substantially all of these commitments were for periods of 60 days or less. Since a portion of these commitments is expected to expire without being exercised by the borrowers, the total commitments do not necessarily represent future cash requirements.

The Financial Services Division uses mandatory mortgage-backed securities (“MBS”) forward commitments and MBS option contracts to hedge its interest rate exposure during the period from when it extends an interest rate lock to a loan applicant until the time at which the loan is sold to an investor. These instruments involve, to varying degrees, elements of credit and interest rate risk. Credit risk is managed by entering into MBS forward commitments and MBS option contracts only with investment banks with primary dealer status and loan sales transactions with permanent investors meeting the Division’s credit standards. The Division’s risk, in the event of default by the purchaser, is the difference between the contract price and current fair market value. At November 30, 2005, the Division had open commitments amounting to $321.0 million to sell MBS with varying settlement dates through February 2006.

17.    Consolidation of Variable Interest Entities

In December 2003, the FASB issued FIN 46(R), (which further clarified and amended FIN 46, Consolidation of Variable Interest Entities) which requires the consolidation of certain entities in which an enterprise absorbs a majority of the entity’s expected losses, receives a majority of the entity’s expected residual returns, or both, as a result of ownership, contractual or other financial interests in the entity. Prior to the issuance of FIN 46(R), entities were generally consolidated by an enterprise when it had a controlling financial interest through ownership of a majority voting interest in the entity. FIN 46(R) applied immediately to variable interest entities created after January 31, 2003, and with respect to variable interest entities created before February 1, 2003, FIN 46(R) applied in the Company’s second quarter ended May 31, 2004. The adoption of FIN 46(R) did not have a material impact on the Company’s results of operations or cash flows.

Unconsolidated Entities

At November 30, 2005, the Company had investments in and advances to unconsolidated entities established to acquire and develop land for sale to the Company in connection with its homebuilding operations,

64

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

for sale to third parties or for the construction of homes for sale to third-party homebuyers. The Company evaluated all agreements under FIN 46(R). During the year ended November 30, 2005, the Company consolidated entities under FIN 46(R) that at November 30, 2005 had total combined assets and liabilities of $144.0 million and $90.5 million, respectively.

At November 30, 2005, the Company’s recorded investment in unconsolidated entities was $1.3 billion; however, the Company’s estimated maximum exposure to loss with regard to unconsolidated entities was its recorded investments in these entities in addition to the exposure under the guarantees discussed in Note 6.

Option Contracts

The Company evaluated all option contracts for land and determined it was the primary beneficiary of certain of these option contracts. Although the Company does not have legal title to the optioned land, under FIN 46(R), the Company, if it is deemed the primary beneficiary, is required to consolidate the land under option at fair market value. During the year ended November 30, 2005, the effect of the consolidation of these option contracts was an increase of $516.3 million to consolidated inventory not owned with a corresponding increase to liabilities related to consolidated inventory not owned in the accompanying consolidated balance sheet as of November 30, 2005. This increase was offset primarily by the Company exercising its option to acquire land under certain contracts previously consolidated under FIN 46(R), resulting in a net increase in consolidated inventory not owned of $94.7 million. To reflect the purchase price of the inventory consolidated under FIN 46(R), the Company reclassified $125.9 million of related option deposits from land under development to consolidated inventory not owned. The liabilities related to consolidated inventory not owned represent the difference between the exercise price of the optioned land and the Company’s option deposits.

At November 30, 2005 and 2004, the Company’s exposure to loss related to its option contracts with third parties and unconsolidated entities represented its non-refundable option deposits and advanced costs totaling $741.6 million and $222.4 million, respectively, as well as letters of credit posted in lieu of cash deposits.

18.    Commitments and Contingent Liabilities

The Company is party to various claims, legal actions and complaints arising in the ordinary course of business. In the opinion of management, the disposition of these matters will not have a material adverse effect on the financial condition, results of operations or cash flows of the Company.

The Company is subject to the usual obligations associated with entering into contracts (including option contracts) for the purchase, development and sale of real estate, which it does in the routine conduct of its business. Option contracts for the purchase of land generally enable the Company to defer acquiring portions of properties owned by third parties and certain unconsolidated entities until the Company is ready to build homes on them. The use of option contracts allows the Company to reduce the financial risks associated with long-term land holdings. At November 30, 2005, the Company had access to acquire approximately 222,100 homesites through option contracts and unconsolidated entities in which the Company had investments. At November 30, 2005, the Company had $741.6 million of non-refundable option deposits and advanced costs related to certain of these homesites, which were included in inventories in the consolidated balance sheet.

At November 30, 2005 and 2004, the Company had $69.3 million and $74.0 million, respectively, of reserves recorded in accordance with SFAS No. 5, Accounting for Contingencies, for tax filing positions and related interest based on the Company’s evaluation that uncertainty exists in sustaining the deductions. This reserve is included in other liabilities in the consolidated balance sheets.

65

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The Company has entered into agreements to lease certain office facilities and equipment under operating leases. Future minimum payments under the non-cancelable leases in effect at November 30, 2005 are as follows:

	Lease Payments
	(In thousands)
2006	$	77,975
2007		52,146
2008		35,278
2009		26,268
2010		17,408
Thereafter		29,658

Rental expense for the years ended November 30, 2005, 2004 and 2003 was $116.0 million, $84.7 million and $63.2 million, respectively.

The Company is committed, under various letters of credit, to perform certain development and construction activities and provide certain guarantees in the normal course of business. Outstanding letters of credit under these arrangements totaled $1.2 billion at November 30, 2005. The Company also had outstanding performance and surety bonds related to site improvements at various projects with estimated costs to complete of $1.8 billion. The Company does not believe there will be any draws upon these bonds, but if there were any, they would not have a material effect on the Company’s financial position, results of operations or cash flows.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

19. Supplemental Financial Information

The Company’s obligations to pay principal, premium, if any, and interest under the New Facility, senior floating-rate notes due 2007, senior floating-rate notes due 2009, 7 5/8% senior notes due 2009, 5.125% senior notes due 2010, 5.95% senior notes due 2013, 5.50% senior notes due 2014 and 5.60% senior notes due 2015 are guaranteed by substantially all of the Company’s subsidiaries other than finance company subsidiaries. The guarantees are full and unconditional and the guarantor subsidiaries are 100% directly or indirectly owned by Lennar Corporation. The Company has determined that separate, full financial statements of the guarantors would not be material to investors and, accordingly, supplemental financial information for the guarantors is presented as follows:

Consolidating Balance Sheet

November 30, 2005

	Lennar Corporation			Guarantor Subsidiaries	Non-Guarantor Subsidiaries		Eliminations		Total
	(In thousands)
ASSETS
Homebuilding:
Cash, restricted cash and receivables, net	$	401,467		816,971	13,032		—		1,231,470
Inventories		—		7,619,470	244,061		—		7,863,531
Investments in unconsolidated entities		—		1,282,686	—		—		1,282,686
Goodwill		—		195,156	—		—		195,156
Other assets		80,838		121,354	64,555		—		266,747
Investments in subsidiaries		7,150,775		500,342	—		(7,651,117	)	—
		7,633,080		10,535,979	321,648		(7,651,117	)	10,839,590
Financial services		—		29,341	1,672,294		—		1,701,635
Total assets	$	7,633,080		10,565,320	1,993,942		(7,651,117	)	12,541,225
LIABILITIES AND STOCKHOLDERS’ EQUITY
Homebuilding:
Accounts payable and other liabilities	$	1,026,281		1,783,582	64,791		—		2,874,654
Liabilities related to consolidated inventory not owned		—		306,445	—		—		306,445
Senior notes and other debts payable		2,328,016		250,642	14,114		—		2,592,772
Intercompany		(972,628	)	1,066,147	(93,519	)	—		—
		2,381,669		3,406,816	(14,614	)	—		5,773,871
Financial services		—		7,729	1,429,971		—		1,437,700
Total liabilities		2,381,669		3,414,545	1,415,357		—		7,211,571
Minority interest		—		—	78,243		—		78,243
Stockholders’ equity		5,251,411		7,150,775	500,342		(7,651,117	)	5,251,411
Total liabilities and stockholders’ equity	$	7,633,080		10,565,320	1,993,942		(7,651,117	)	12,541,225

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Consolidating Balance Sheet

November 30, 2004

	Lennar Corporation			Guarantor Subsidiaries	Non-Guarantor Subsidiaries		Eliminations		Total
	(In thousands)
ASSETS
Homebuilding:
Cash, restricted cash and receivables, net	$	1,116,366		303,594	55,797		—		1,475,757
Inventories		—		4,900,834	241,236		—		5,142,070
Investments in unconsolidated entities		—		856,422	—		—		856,422
Goodwill		—		183,345	—		—		183,345
Other assets		98,823		125,019	25,387		—		249,229
Investments in subsidiaries		4,984,722		569,032	—		(5,553,754	)	—
		6,199,911		6,938,246	322,420		(5,553,754	)	7,906,823
Financial services		—		27,956	1,230,501		—		1,258,457
Total assets	$	6,199,911		6,966,202	1,552,921		(5,553,754	)	9,165,280
LIABILITIES AND STOCKHOLDERS’ EQUITY
Homebuilding:
Accounts payable and other liabilities	$	725,061		961,015	101,244		—		1,787,320
Liabilities related to consolidated inventory not owned		—		222,769	—		—		222,769
Senior notes and other debts payable		1,945,344		23,636	52,034		—		2,021,014
Intercompany		(523,466	)	767,079	(243,613	)	—		—
		2,146,939		1,974,499	(90,335	)	—		4,031,103
Financial services		—		6,981	1,031,497		—		1,038,478
Total liabilities		2,146,939		1,981,480	941,162		—		5,069,581
Minority interest		—		—	42,727		—		42,727
Stockholders’ equity		4,052,972		4,984,722	569,032		(5,553,754	)	4,052,972
Total liabilities and stockholders’ equity	$	6,199,911		6,966,202	1,552,921		(5,553,754	)	9,165,280

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Consolidating Statement of Earnings

Year Ended November 30, 2005

	Lennar Corporation			Guarantor Subsidiaries	Non-Guarantor Subsidiaries	Eliminations		Total
	(Dollars in thousands)
Revenues:
Homebuilding	$	—		12,908,793	395,806	—		13,304,599
Financial services		—		9,109	586,424	(33,161	)	562,372
Total revenues		—		12,917,902	982,230	(33,161	)	13,866,971
Costs and expenses:
Homebuilding		—		10,884,961	297,221	(4,375	)	11,177,807
Financial services		—		11,915	471,728	(26,039	)	457,604
Corporate general and administrative		187,257		—	—	—		187,257
Total costs and expenses		187,257		10,896,876	768,949	(30,414	)	11,822,668
Equity in earnings from unconsolidated entities		—		133,814	—	—		133,814
Management fees and other income (expense), net		(2,747	)	60,151	1,364	2,747		61,515
Minority interest expense, net		—		—	45,030	—		45,030
Loss on redemption of 9.95% senior notes		34,908		—	—	—		34,908
Earnings (loss) from continuing operations before provision (benefit) for income taxes		(224,912	)	2,214,991	169,615	—		2,159,694
Provision (benefit) for income taxes		(84,904	)	836,159	64,029	—		815,284
Earnings (loss) from continuing operations		(140,008	)	1,378,832	105,586	—		1,344,410
Earnings from discontinued operations, net of tax		—		—	10,745	—		10,745
Equity in earnings from subsidiaries		1,495,163		116,331	—	(1,611,494	)	—
Net earnings	$	1,355,155		1,495,163	116,331	(1,611,494	)	1,355,155

Consolidating Statement of Earnings

Year Ended November 30, 2004

	Lennar Corporation			Guarantor Subsidiaries	Non-Guarantor Subsidiaries		Eliminations		Total
	(In thousands)
Revenues:
Homebuilding	$	—		9,688,964	311,668		—		10,000,632
Financial services		—		18,000	510,322		(27,986	)	500,336
Total revenues		—		9,706,964	821,990		(27,986	)	10,500,968
Costs and expenses:
Homebuilding		—		8,356,652	247,681		(2,995	)	8,601,338
Financial services		—		14,736	399,860		(24,991	)	389,605
Corporate general and administrative		141,722		—	—		—		141,722
Total costs and expenses		141,722		8,371,388	647,541		(27,986	)	9,132,665
Equity in earnings from unconsolidated entities		—		90,739	—		—		90,739
Management fees and other income (expense), net		—		69,530	(279	)	—		69,251
Minority interest expense, net		—		—	10,796		—		10,796
Earnings (loss) from continuing operations before provision (benefit) for income taxes		(141,722	)	1,495,845	163,374		—		1,517,497
Provision (benefit) for income taxes		(53,500	)	564,681	61,674		—		572,855
Earnings (loss) from continuing operations		(88,222	)	931,164	101,700		—		944,642
Earnings from discontinued operations, net of tax		—		—	977		—		977
Equity in earnings from subsidiaries		1,033,841		102,677	—		(1,136,518	)	—
Net earnings	$	945,619		1,033,841	102,677		(1,136,518	)	945,619

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Consolidating Statement of Earnings

Year Ended November 30, 2003

	Lennar Corporation			Guarantor Subsidiaries	Non-Guarantor Subsidiaries	Eliminations		Total
	(In thousands)
Revenues:
Homebuilding	$	—		8,348,645	—	—		8,348,645
Financial services		—		12,726	555,889	(12,034	)	556,581
Total revenues		—		8,361,371	555,889	(12,034	)	8,905,226
Costs and expenses:
Homebuilding		—		7,291,417	561	(3,622	)	7,288,356
Financial services		—		11,549	399,725	(8,412	)	402,862
Corporate general and administrative		111,488		—	—	—		111,488
Total costs and expenses		111,488		7,302,966	400,286	(12,034	)	7,802,706
Equity in earnings from unconsolidated entities		—		81,937	—	—		81,937
Management fees and other income, net		—		26,817	—	—		26,817
Minority interest expense, net		—		—	4,954	—		4,954
Earnings (loss) from continuing operations before provision (benefit) for income taxes		(111,488	)	1,167,159	150,649	—		1,206,320
Provision (benefit) for income taxes		(42,084	)	440,600	56,870	—		455,386
Earnings (loss) from continuing operations		(69,404	)	726,559	93,779	—		750,934
Earnings from discontinued operations, net of tax		—		—	457	—		457
Equity in earnings from subsidiaries		820,795		94,236	—	(915,031	)	—
Net earnings	$	751,391		820,795	94,236	(915,031	)	751,391

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Consolidating Statement of Cash Flows

Year Ended November 30, 2005

	Lennar Corporation			Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations		Total
	(Dollars in thousands)
Cash flows from operating activities:
Net earnings from continuing operations	$	1,355,155		1,495,163		105,586		(1,611,494	)	1,344,410
Net earnings from discontinued operations		—		—		10,745		—		10,745
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities		(1,091,091	)	(1,325,709	)	(226,874	)	1,611,494		(1,032,180	)
Net cash provided by (used in) operating activities		264,064		169,454		(110,543	)	—		322,975
Cash flows from investing activities:
Increase in investments in unconsolidated entities, net		—		(453,017	)	—		—		(453,017	)
Acquisitions, net of cash acquired		—		(414,079	)	(1,970	)	—		(416,049	)
Other		(5,463	)	(22,151	)	(106,893	)	—		(134,507	)
Net cash used in investing activities		(5,463	)	(889,247	)	(108,863	)	—		(1,003,573	)
Cash flows from financing activities:
Net borrowings under financial services short-term debt		—		—		372,849		—		372,849
Net proceeds from 5.125% senior notes		298,215		—		—		—		298,215
Net proceeds from 5.60% senior notes		501,460		—		—		—		501,460
Redemption of 9.95% senior notes		(337,731	)	—		—		—		(337,731	)
Net repayments under other borrowings		—		(75,209	)	(61,833	)	—		(137,042	)
Payments related to minority interests, net		—		—		(33,181	)	—		(33,181	)
Common stock:
Issuances		38,069		—		—		—		38,069
Repurchases		(289,284	)	—		—		—		(289,284	)
Dividends		(89,229	)	—		—		—		(89,229	)
Intercompany		(1,090,578	)	1,146,903		(56,325	)	—		—
Net cash provided by (used in) financing activities		(969,078	)	1,071,694		221,510		—		324,126
Net increase (decrease) in cash		(710,477	)	351,901		2,104		—		(356,472	)
Cash at beginning of year		1,111,944		143,180		160,691		—		1,415,815
Cash at end of year	$	401,467		495,081		162,795		—		1,059,343

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Consolidating Statement of Cash Flows

Year Ended November 30, 2004

	Lennar Corporation			Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations		Total
	(Dollars in thousands)
Cash flows from operating activities:
Net earnings from continuing operations	$	945,619		1,033,841		101,700		(1,136,518	)	944,642
Net earnings from discontinued operations		—		—		977		—		977
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities		(576,392	)	(857,956	)	(227,597	)	1,136,518		(525,427	)
Net cash provided by (used in) operating activities		369,227		175,885		(124,920	)	—		420,192
Cash flows from investing activities:
Increase in investments in unconsolidated entities, net		—		(420,597	)	—		—		(420,597	)
Acquisitions, net of cash acquired		—		(93,082	)	(12,648	)	—		(105,730	)
Other		(15,110	)	17,955		(10,625	)	—		(7,780	)
Net cash used in investing activities		(15,110	)	(495,724	)	(23,273	)	—		(534,107	)
Cash flows from financing activities:
Net borrowings under financial services short-term debt		—		—		162,277		—		162,277
Net proceeds from senior floating-rate notes due 2009		298,500		—		—		—		298,500
Net proceeds from senior floating-rate notes due 2007		199,300		—		—		—		199,300
Net proceeds from 5.50% senior notes		245,480		—		—		—		245,480
Net repayments under term loan B and other borrowings		(296,000	)	(74,721	)	(33,368	)	—		(404,089	)
Payments related to minority interests, net		—		—		(18,396	)	—		(18,396	)
Common stock:
Issuances		14,537		—		—		—		14,537
Repurchases		(113,582	)	—		—		—		(113,582	)
Dividends		(79,945	)	—		—		—		(79,945	)
Intercompany		(403,966	)	274,080		129,886		—		—
Net cash provided by (used in) financing activities		(135,676	)	199,359		240,399		—		304,082
Net increase (decrease) in cash		218,441		(120,480	)	92,206		—		190,167
Cash at beginning of year		893,503		263,660		68,485		—		1,225,648
Cash at end of year	$	1,111,944		143,180		160,691		—		1,415,815

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Consolidating Statement of Cash Flows

Year Ended November 30, 2003

	Lennar Corporation			Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations		Total
	(Dollars in thousands)
Cash flows from operating activities:
Net earnings from continuing operations	$	751,391		820,795		93,779		(915,031	)	750,934
Net earnings from discontinued operations		—		—		457		—		457
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities		(789,215	)	(324,232	)	176,928		900,017		(36,502	)
Net cash provided by (used in) operating activities		(37,824	)	496,563		271,164		(15,014	)	714,889
Cash flows from investing activities:
Increase in investments in unconsolidated entities, net		(16,346	)	(49,238	)	—		—		(65,584	)
Acquisitions, net of cash acquired		—		(149,212	)	(10,177	)	—		(159,389	)
Other		(9,177	)	4,876		(15,042	)	—		(19,343	)
Net cash used in investing activities		(25,523	)	(193,574	)	(25,219	)	—		(244,316	)
Cash flows from financing activities:
Net repayments under financial services short-term debt		—		—		(118,989	)	—		(118,989	)
Net proceeds from 5.95% senior notes		341,730		—		—		—		341,730
Net borrowings (repayments) under term loan B and other borrowings		(95,237	)	(106,083	)	228		15,014		(186,078	)
Receipts related to minority interests, net		—		—		2,682		—		2,682
Common stock:
Issuances		18,197		—		—		—		18,197
Repurchases		(1,044	)	—		—		—		(1,044	)
Dividends and other		(22,705	)	—		—		—		(22,705	)
Intercompany		94,746		12,432		(107,178	)	—		—
Net cash provided by (used in) financing activities		335,687		(93,651	)	(223,257	)	15,014		33,793
Net increase in cash		272,340		209,338		22,688		—		504,366
Cash at beginning of year		621,163		54,322		45,797		—		721,282
Cash at end of year	$	893,503		263,660		68,485		—		1,225,648

73

LENNAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

20.    Quarterly Data (unaudited)

	First		Second	Third	Fourth
	(In thousands, except per share amounts)
2005
Revenues	$	2,405,731	2,932,974	3,498,332	5,029,934
Gross profit from sales of homes	$	544,443	654,082	846,448	1,256,473
Earnings from continuing operations before provision for income taxes	$	309,645	374,689	541,772	933,588
Earnings from discontinued operations before provision for income taxes	$	726	16,535	—	—
Net earnings	$	193,206	243,537	337,253	581,159
Basic earnings per share:
Earnings from continuing operations	$	1.25	1.51	2.18	3.70
Earnings from discontinued operations	$	0.00	0.07	0.00	0.00
Net earnings	$	1.25	1.58	2.18	3.70
Diluted earnings per share:
Earnings from continuing operations	$	1.17	1.42	2.06	3.54
Earnings from discontinued operations	$	0.00	0.06	0.00	0.00
Net earnings	$	1.17	1.48	2.06	3.54
2004
Revenues	$	1,862,167	2,342,045	2,747,329	3,549,427
Gross profit from sales of homes	$	373,798	483,706	566,540	860,357
Earnings from continuing operations before provision for income taxes	$	223,422	323,220	361,426	609,429
Earnings from discontinued operations before provision for income taxes	$	276	332	376	586
Net earnings	$	139,252	201,411	225,222	379,734
Basic earnings per share:
Earnings from continuing operations	$	0.90	1.30	1.45	2.44
Earnings from discontinued operations	$	0.00	0.00	0.00	0.00
Net earnings	$	0.90	1.30	1.45	2.44
Diluted earnings per share:
Earnings from continuing operations	$	0.84	1.22	1.36	2.29
Earnings from discontinued operations	$	0.00	0.00	0.00	0.00
Net earnings	$	0.84	1.22	1.36	2.29

Quarterly and year-to-date computations of per share amounts are made independently. Therefore, the sum of per share amounts for the quarters may not agree with per share amounts for the year. All earnings per share amounts were adjusted for the January 2004 two-for-one stock split and discontinued operations (See Note 2).

74

Item 9.    Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

Not applicable.

Item 9A.    Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our Chief Executive Officer and Chief Financial Officer participated in an evaluation by our management of the effectiveness of our disclosure controls and procedures as of the end of our fiscal quarter that ended on November 30, 2005. Based on their participation in that evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective as of November 30, 2005 to ensure that required information is disclosed on a timely basis in our reports filed or furnished under the Securities Exchange Act of 1934.

Our CEO and CFO also participated in an evaluation by our management of any changes in our internal control over financial reporting that occurred during the quarter ended November 30, 2005. That evaluation did not identify any changes that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Management’s Annual Report on Internal Control Over Financial Reporting and the Report of Independent Registered Public Accounting Firm obtained from Deloitte & Touche is included elsewhere in this document.

75

Item 9B.    Other Information.

Not applicable.

PART III

Item 10.    Directors and Executive Officers of the Registrant.

The information required by this item for executive officers is set forth under the heading “Executive Officers of Lennar Corporation” in Part I. The other information called for by this item is incorporated by reference to our definitive proxy statement, which will be filed with the Securities and Exchange Commission not later than March 30, 2006 (120 days after the end of our fiscal year).

Item 11.    Executive Compensation.

The information required by this item is incorporated by reference to our definitive proxy statement, which will be filed with the Securities and Exchange Commission not later than March 30, 2006 (120 days after the end of our fiscal year).

Item 12.    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The information required by this item is incorporated by reference to our definitive proxy statement, which will be filed with the Securities and Exchange Commission not later than March 30, 2006 (120 days after the end of our fiscal year), except for the information required by Item 201(d) of Regulation S-K, which is included below.

The following table summarizes our equity compensation plans as of November 30, 2005:

Plan category	Number of shares to be issued upon exercise of outstanding options, warrants and rights (a)(1)	Weighted-average exercise price of outstanding options, warrants and rights (b)		Number of shares remaining available for future issuance under equity compensation plans (excluding shares reflected in column (a)) (c)(2)
Equity compensation plans approved by stockholders	7,159,548	$	35.92	5,408,359
Equity compensation plans not approved by stockholders	—		—	—
Total	7,159,548	$	35.92	5,408,359

(1) This amount includes approximately 341,000 shares of Class B common stock that may be issued under our equity compensation plans.

(2) Both Class A and Class B common stock may be issued.

Item 13.    Certain Relationships and Related Transactions.

The information required by this item is incorporated by reference to our definitive proxy statement, which will be filed with the Securities and Exchange Commission not later than March 30, 2006 (120 days after the end of our fiscal year).

Item 14.    Principal Accountant Fees and Services.

The information required by this item is incorporated by reference to our definitive proxy statement, which will be filed with the Securities and Exchange Commission not later than March 30, 2006 (120 days after the end of our fiscal year).

76

PART IV

Item 15. Exhibits and Financial Statement Schedules.

(a) Documents filed as part of this Report.

1. The following financial statements are contained in Item 8:

Financial Statements	Page in this Report
Report of Independent Registered Public Accounting Firm	35
Consolidated Balance Sheets as of November 30, 2005 and 2004	36
Consolidated Statements of Earnings for the Years Ended November 30, 2005, 2004 and 2003	37
Consolidated Statements of Stockholders’ Equity for the Years Ended November 30, 2005, 2004 and 2003	38
Consolidated Statements of Cash Flows for the Years Ended November 30, 2005, 2004 and 2003	40
Notes to Consolidated Financial Statements	42

2. The following financial statement schedule is included in this Report:

Financial Statement Schedule	Page in this Report
Report of Independent Registered Public Accounting Firm	81
Schedule II—Valuation and Qualifying Accounts	82

Information required by other schedules has either been incorporated in the consolidated financial statements and accompanying notes or is not applicable to us.

3. The following exhibits are filed with this Report or incorporated by reference:

2.1	Separation and Distribution Agreement, dated June 10, 1997, between Lennar and LNR Property Corporation—Incorporated by reference to Exhibit 10.1 of the Registration Statement on Form 10 of LNR Property Corporation filed with the Commission on July 31, 1997.
2.2	Agreement and Plan of Merger dated July 21, 2003, among Lennar, The Newhall Land and Farming Company, LNR Property Corporation, NWHL Investment LLC and NWHL Acquisition, L.P.—Incorporated by reference to Exhibit 2.1 of the Company’s Current Report on Form 8-K dated January 27, 2004.
3.1	Amended and Restated Certificate of Incorporation, dated April 28, 1998—Incorporated by reference to Exhibit 3(a) of the Company’s Annual Report on Form 10-K for the fiscal year ended November 30, 2004.
3.2	Certificate of Amendment to Certificate of Incorporation, dated April 9, 1999—Incorporated by reference to Exhibit 3(a) of the Company’s Annual Report on Form 10-K for the fiscal year ended November 30, 1999.
3.3	Certificate of Amendment to Certificate of Incorporation, dated April 8, 2003—Incorporated by reference to Annex IV to the Schedule 14A dated March 10, 2003.
3.4	Bylaws of the Company, as amended through June 28, 2005—Incorporated by reference to Exhibit 3.1 of the Company’s Quarterly Report on Form 10-Q for the quarter ended May 31, 2005.
4.1	Indenture, dated as of December 31, 1997, between Lennar and Bank One Trust Company, N.A., as trustee—Incorporated by reference to Exhibit 4 of the Company’s Registration Statement on Form S-3, Registration No. 333-45527, filed with the Commission on February 3, 1998.
4.2	Second Supplemental Indenture, dated as of February 19, 1999, between Lennar and Bank One Trust Company, N.A., as trustee (relating to Lennar’s 7 5/8% Senior Notes due 2009)—Incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K, dated February 19, 1999.

77

4.3	Third Supplemental Indenture, dated May 3, 2000, between Lennar and Bank One Trust Company, N.A., as successor trustee (relating to Lennar’s 7 5/8% Senior Notes due 2009)—Incorporated by reference to Exhibit 4(d) of the Company’s Annual Report on Form 10-K for the fiscal year ended November 30, 2000.
4.4	Fifth Supplemental Indenture, dated April 4, 2001, between Lennar and Bank One Trust Company, N.A., as trustee (relating to Lennar’s Zero-Coupon Convertible Senior Subordinated Notes due 2021)—Incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K, dated April 4, 2001.
4.5	Sixth Supplemental Indenture, dated February 5, 2003, between Lennar and Bank One Trust Company, N.A., as trustee (relating to 5.950% Senior Notes due 2013)—Incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K, dated January 31, 2003.
4.6	Eighth Supplemental Indenture, dated January 21, 2005, between Lennar and J.P. Morgan Trust Company, N.A., as trustee (relating to Lennar’s Senior Floating-Rate Notes due 2009)—Incorporated by reference to Exhibit 4.3 to the Registration Statement on Form S-4, Registration No. 333-116975, filed with the Commission on June 29, 2004.
4.7	Indenture, dated August 12, 2004, between Lennar and J.P. Morgan Trust Company, N.A., as trustee (relating to Lennar’s 5.50% Senior Notes due 2014)—Incorporated by reference to Exhibit 4.1 of the Company’s Registration Statement on Form S-4, Registration No. 333-121130, filed with the Commission on December 10, 2004.
4.8	Indenture, dated August 18, 2004, between Lennar and J.P. Morgan Trust Company, N.A., as trustee (relating to Lennar’s Senior Floating-Rate Notes due 2007)—Incorporated by reference to Exhibit 4.1 of the Company’s Registration Statement on Form S-4, Registration No. 333-121132, filed with the Commission on December 10, 2004.
4.9	Indenture, dated April 28, 2005, between Lennar and J.P. Morgan Trust Company, N.A., as trustee (relating to Lennar’s 5.60% Senior Notes due 2015)—Incorporated by reference to Exhibit 4.1 of the Company’s Registration Statement on Form S-4, Registration No. 333-127839, filed with the Commission on August 25, 2005.
4.10	Indenture, dated September 15, 2005, between Lennar and J.P. Morgan Trust Company, N.A., as trustee (relating to Lennar’s 5.125% Senior Notes due 2010)—Incorporated by reference to Exhibit 4.1 of the Company’s Registration Statement on Form S-4, Registration No. 333-130923, filed with the Commission on January 9, 2006.
10.1*	Amended and Restated Lennar Corporation 1997 Stock Option Plan—Incorporated by reference to Exhibit 10(a) of the Company’s Annual Report on Form 10-K for the fiscal year ended November 30, 1997.
10.2*	Lennar Corporation 2000 Stock Option and Restricted Stock Plan—Incorporated by reference to Exhibit 10 of the Company’s Quarterly Report on Form 10-Q for the quarter ended February 28, 2001.
10.3*	Lennar Corporation 2003 Stock Option and Restricted Stock Plan—Incorporated by reference to Annex VI of the Company’s Proxy Statement on Schedule 14A dated March 10, 2003.
10.4*	Lennar Corporation 1991 Stock Option Plan—Incorporated by reference to Registration Statement No. 33-45442.
10.5*	Lennar Corporation Employee Stock Ownership Plan and Trust—Incorporated by reference to Registration Statement No. 2-89104.
10.6*	Amendment dated December 13, 1989 to Lennar Corporation Employee Stock Ownership Plan—Incorporated by reference to the Annual Report on Form 10-K for the fiscal year ended November 30, 1990.

78

10.7*	Lennar Corporation Employee Stock Ownership/401(k) Trust Agreement dated December 13, 1989—Incorporated by reference to the Annual Report on Form 10-K for the fiscal year ended November 30, 1990.
10.8*	Amendment dated April 18, 1990 to Lennar Corporation Employee Stock Ownership/401(k) Plan—Incorporated by reference to the Annual Report on Form 10-K for the fiscal year ended November 30, 1990.
10.9	First Amended and Restated Warehousing Credit and Security Agreement dated October 23, 2003, by and among Universal American Mortgage Company, LLC, Eagle Home Mortgage, Inc., Ameristar Financial Services, Inc., Universal American Mortgage Company of California, UAMC Asset Corp. II and Residential Funding Corporation—Incorporated by reference to Exhibit 10(k) to the Annual Report on Form 10-K for the fiscal year ended November 30, 2003.
10.10*	Lennar Corporation Nonqualified Deferred Compensation Plan—Incorporated by reference to Exhibit 10 of the Company’s Quarterly Report on Form 10-Q for the quarter ended August 31, 2002.
10.11	Credit Agreement, dated June 17, 2005 among Lennar and the lenders named therein—Incorporated by reference to Exhibit 10 of the Company’s Current Report on Form 8-K, dated June 17, 2005.
10.12	Parent Company Guarantee dated January 27, 2004 by Lennar Corporation and LNR Property Corporation in favor of Bank One, N.A., for the benefit of the lenders under the Credit Agreement referred to therein—Incorporated by reference to Exhibit 10(p) to the Annual Report on Form 10-K for the fiscal year ended November 30, 2003.
10.13	Loan Agreement dated May 23, 2003 between UAMC Capital, LLC and the lenders named therein—Incorporated by reference to Exhibit 10(q) to the Annual Report on Form 10-K for the fiscal year ended November 30, 2003.
10.14	Seventh Amendment to First Amended and Restated Warehousing Credit and Security Agreement dated as of November 22, 2004.
10.15*	Aircraft Time-Sharing Agreement, dated August 17, 2005, between U.S. Home Corporation and Stuart Miller—Incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K, dated August 17, 2005.
10.16*	Amendment No. 1 to Aircraft Time-Sharing Agreement, dated September 1, 2005, between U.S. Home Corporation and Stuart Miller.
10.17	Second Amended and Restated Warehousing Credit and Security Agreement dated April 21, 2005, by and among the Lender Parties named in the agreement and Residential Funding Corporation.
21	List of subsidiaries.
23	Consent of Independent Registered Public Accounting Firm.
31.1	Rule 13a-14a/15d-14(a) Certification of Stuart A. Miller.
31.2	Rule 13a-14a/15d-14(a) Certification of Bruce E. Gross.
32	Section 1350 Certifications of Stuart A. Miller and Bruce E. Gross.

* Management contract or compensatory plan or arrangement.

79

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

LENNAR CORPORATION

/s/                        STUART A. MILLER

Stuart A. Miller

President, Chief Executive Officer and Director

Date: February 7, 2006

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:

Principal Executive Officer:
Stuart A. Miller	/s/	STUART A. MILLER
President, Chief Executive Officer and Director	Date:	February 7, 2006

Principal Financial Officer:
Bruce E. Gross	/s/	BRUCE E. GROSS
Vice President and Chief Financial Officer	Date:	February 7, 2006

Principal Accounting Officer:
Diane J. Bessette	/s/	DIANE J. BESSETTE
Vice President and Controller	Date:	February 7, 2006

Directors:
Robert J. Strudler	/s/	ROBERT J. STRUDLER
Chairman of the Board	Date:	February 7, 2006

Irving Bolotin	/s/	IRVING BOLOTIN
	Date:	February 7, 2006

Steven L. Gerard	/s/	STEVEN L. GERARD
	Date:	February 7, 2006

R. Kirk Landon	/s/	R. KIRK LANDON
	Date:	February 7, 2006

Sidney Lapidus	/s/	SIDNEY LAPIDUS
	Date:	February 7, 2006

Hervé Ripault	/s/	HERVÉ RIPAULT
	Date:	February 7, 2006

Donna Shalala	/s/	DONNA SHALALA
	Date:	February 7, 2006

Jeffrey Sonnenfeld	/s/	JEFFREY SONNENFELD
	Date:	February 7, 2006

80

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Lennar Corporation

We have audited the consolidated financial statements of Lennar Corporation and subsidiaries (the “Company”) as of November 30, 2005 and 2004, and for each of the three years in the period ended November 30, 2005, management’s assessment of the effectiveness of the Company’s internal control over financial reporting as of November 30, 2005, and the effectiveness of the Company’s internal control over financial reporting as of November 30, 2005, and have issued our reports thereon dated February 7, 2006; such consolidated financial statements and reports are included elsewhere in this Form 10-K. Our audits also included the consolidated financial statement schedule of the Company listed in Item 15(a)2. The consolidated financial statement schedule is the responsibility of the Company’s management. Our responsibility is to express an opinion based on our audits. In our opinion, such consolidated financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

/s/ DELOITTE & TOUCHE LLP

Certified Public Accountants

Miami, Florida

February 7, 2006

81

LENNAR CORPORATION AND SUBSIDIARIES

Schedule II—Valuation and Qualifying Accounts

Years Ended November 30, 2005, 2004 and 2003

			Additions
Description	Beginning balance		Charged to costs and expenses	Charged to other accounts	Deductions		Ending balance
	(In thousands)
Year ended November 30, 2005
Allowances deducted from assets to which they apply:
Allowances for doubtful accounts and notes receivable	$	1,784	1,803	—	(805	)	2,782
Allowance for loan losses	$	1,407	269	32	(528	)	1,180
Year ended November 30, 2004
Allowances deducted from assets to which they apply:
Allowances for doubtful accounts and notes receivable	$	2,088	737	43	(1,084	)	1,784
Allowance for loan losses	$	3,090	51	149	(1,883	)	1,407
Year ended November 30, 2003
Allowances deducted from assets to which they apply:
Allowances for doubtful accounts and notes receivable	$	3,166	1,858	13	(2,949	)	2,088
Allowance for loan losses	$	3,077	—	41	(28	)	3,090
Deferred tax asset valuation allowance	$	6,978	—	—	(6,978	)	—

82

EXHIBIT INDEX

Exhibit No.	Description
10.14	Seventh Amendment to First Amended and Restated Warehousing Credit and Security Agreement dated as of November 22, 2004.
10.16	Amendment No. 1 to Aircraft Time-Sharing Agreement, dated September 1, 2005, between U.S. Home Corporation and Stuart Miller.
10.17	Second Amended and Restated Warehousing Credit and Security Agreement dated April 21, 2005, by and among the Lender Parties named in the agreement and Residential Funding Corporation.
21	List of subsidiaries.
23	Consent of Independent Registered Public Accounting Firm.
31.1	Rule 13a-14a/15d-14(a) Certification of Stuart A. Miller.
31.2	Rule 13a-14a/15d-14(a) Certification of Bruce E. Gross.
32	Section 1350 Certifications of Stuart A. Miller and Bruce E. Gross.

EX-10.14

Exhibit 10.14

SEVENTH AMENDMENT TO

FIRST AMENDED AND RESTATED

WAREHOUSING CREDIT AND SECURITY AGREEMENT

SEVENTH AMENDMENT TO FIRST AMENDED AND RESTATED WAREHOUSING CREDIT AND SECURITY AGREEMENT (this “Amendment”) dated as of November 22, 2004, between UNIVERSAL AMERICAN MORTGAGE COMPANY, LLC, a Florida limited liability company (“UAMCLLC”), EAGLE HOME MORTGAGE, INC., a Washington corporation (“EHMI”), AMERISTAR FINANCIAL SERVICES, INC., a California corporation (“AFSI”), UNIVERSAL AMERICAN MORTGAGE COMPANY OF CALIFORNIA, a California corporation (“UAMCC”), and UAMC ASSET CORP. II, a Nevada corporation (“UAMC Asset”) (UAMCLLC, EHMI, AFSI, UAMCC and UAMC Asset, collectively and severally, “Borrower”) RESIDENTIAL FUNDING CORPORATION, a Delaware corporation (“RFC”), JPMORGAN CHASE BANK, N.A., (“JPMorgan Chase”), U.S. BANK NATIONAL ASSOCIATION, a national banking association (“U.S. Bank”), SUNTRUST BANK, a state bank organized under the laws of Georgia (“Suntrust”), NATIONAL CITY BANK OF KENTUCKY, a national banking association (“NCBK”), COMERICA BANK (“Comerica”), CALYON NEW YORK BRANCH, f/k/a CREDIT LYONNAIS NEW YORK BRANCH (“Calyon”), WASHINGTON MUTUAL BANK, FA (“WaMu”) (RFC, Bank One, U.S. Bank, Suntrust, NCBK, Comerica, Calyon, WaMu, and any additional lender as may from time to time become a party hereto and their respective successors and permitted assigns being referred to individually as a “Lender” and collectively as the “Lenders”), and RFC as credit agent for the Lenders (in such capacity, the “Credit Agent”).

A. Borrower, Lenders and Credit Agent have entered into a revolving mortgage warehousing facility with a present Warehousing Commitment Amount of $375,000,000, which is evidenced by a First Amended and Restated Warehousing Credit and Security Agreement dated as of October 23, 2003 (as the same may have been and may be amended or supplemented, the “Agreement”), and by certain Notes as described in the Agreement.

B. Borrower has requested under Section 12.8 of the Agreement that RFC temporarily increase its Warehousing Commitment Amount, and RFC (“Increase Lender”) has agreed to such temporary increase, subject to the terms and conditions of this Amendment.

NOW, THEREFORE, the parties to this Amendment agree as follows:

1. Subject to Borrower’s satisfaction of the conditions set forth in Section 6, the effective date of this Amendment is November 22, 2004 (“Effective Date”).

2. Unless otherwise defined in this Amendment, all capitalized terms have the meanings given to those terms in the Agreement. Defined terms may be used in the singular or the plural, as the context requires. The words “include,” “includes” and “including” are deemed to be followed by the phrase “without limitation.” Unless the context in which it is used otherwise clearly requires, the word “or” has the inclusive meaning represented by the phrase “and/or.” References to Sections and Exhibits are to Sections and Exhibits of this Amendment unless otherwise expressly provided.

3. Exhibit H to the Agreement is amended and restated in its entirety as set forth in Exhibit H to this Amendment. All references in the Agreement and the other Loan Documents to Exhibit H are deemed to refer to the new Exhibit H.

Page 1

4. Exhibit J to the Agreement is amended and restated in its entirety as set forth in Exhibit J to this Amendment. All references in the Agreement and the other Loan Documents to Exhibit J are deemed to refer to the new Exhibit J.

5. Upon execution of this Amendment, Borrower must pay to RFC the pro rata Warehousing Commitment Fee on the increased portion of its Warehousing Commitment Amount for the time period from November 22, 2004 to and including December 22, 2004 (the “Additional Commitment Fee”).

6. Borrower must deliver to Credit Agent (a) nine executed copies of this Amendment, (b) the Additional Commitment Fee for RFC, (c) an amendment fee of $1,000 for the account of each Lender, (d) an amendment fee of $1,000 for the account of Credit Agent, and (e) a $500 document production fee.

7. Borrower represents, warrants and agrees that (a) there exists no Default or Event of Default under the Loan Documents, (b) the Loan Documents continue to be the legal, valid and binding agreements and obligations of Borrower, enforceable in accordance with their terms, as modified by this Amendment, (c) no Lender is in default under any of the Loan Documents and Borrower has no offset or defense to its performance or obligations under any of the Loan Documents, (d) except for changes permitted by the terms of the Agreement, Borrower’s representations and warranties contained in the Loan Documents are true, accurate and complete in all respects as of the Effective Date and (e) there has been no material adverse change in Borrower’s financial condition from the date of the Agreement to the Effective Date.

8. Except as expressly modified, the Agreement is unchanged and remains in full force and effect, and Borrower ratifies and reaffirms all of its obligations under the Agreement and the other Loan Documents.

9. This Amendment may be executed in any number of counterparts, each of which will be deemed an original, but all of which shall together constitute but one and the same instrument.

Page 2

IN WITNESS WHEREOF, Borrower, each Lender and Credit Agent have caused this Amendment to be duly executed on their behalf by their duly authorized officers as of the day and year above written.

BORROWERS:	UNIVERSAL AMERICAN MORTGAGE COMPANY, LLC, a Florida limited liability company
	By:	/s/ Janice Munoz
	Its:	Vice President/Treasurer
	EAGLE HOME MORTGAGE, INC., a Washington corporation
	By:	/s/ Janice Munoz
	Its:	Vice President
	AMERISTAR FINANCIAL SERVICES, INC., a California corporation
	By:	/s/ Janice Munoz
	Its:	Vice President
	UNIVERSAL AMERICAN MORTGAGE COMPANY OF CALIFORNIA, a California corporation
	By:	/s/ Janice Munoz
	Its:	Vice President/Treasurer
	UAMC ASSET CORP. II, a Nevada corporation
	By:	/s/ Janice Munoz
	Its:	Vice President/Treasurer

Page 3

CREDIT AGENT and INCREASE LENDER:	RESIDENTIAL FUNDING CORPORATION, a Delaware corporation
	By:	/s/ David Farrell
	Its:	Director
OTHER LENDERS:	JPMORGAN CHASE BANK, N.A.
	By:	/s/ Kenneth Nelson
	Its:	Director
	U.S. BANK NATIONAL ASSOCIATION, a national banking association
	By:	/s/ Kathleen M. Connor
	Its:	Vice President
	SUNTRUST BANK, a state bank organized under the laws of Georgia
	By:	/s/ Robert E. Hummel
	Its:	Sr. Vice President
	NATIONAL CITY BANK OF KENTUCKY, a national banking association
	By:	/s/ Mary Jo Reiss
	Its:	Vice President
	COMERICA BANK
	By:	/s/ Robert W. Marr
	Its:	Vice President
	CALYON NEW YORK BRANCH
	By:	/s/ Attila Coach
	Its:	Sr. Vice President
	By:	/s/ James Gibson
	Its:	Managing Director
	WASHINGTON MUTUAL BANK, FA
	By:	/s/ Rodney Davis
	Its:	Sr. Vice President

Page 4

REAFFIRMATION

In connection with the Lennar Undertaking dated as of October 23, 2003, Lennar Corporation, a Delaware corporation (“Lennar”) consents to the foregoing Amendment and the transactions contemplated thereby and hereby modifies and reaffirms its obligations under the Lennar Undertaking. Lennar hereby reaffirms that its obligations under the Lennar Undertaking are separate and distinct from Borrower’s obligations to Lenders, and that its obligations under the Lennar Undertaking are in full force and effect, and hereby waives and agrees not to assert any anti-deficiency protections or other rights as a defense to its obligations under the Lennar Undertaking, all as more fully set forth in the Lennar Undertaking, the terms of which are incorporated herein as if fully set forth herein.

LENNAR CORPORATION, a Delaware corporation
By:	/s/ Waynewright Malcolm
Its:	Vice President & Treasurer

Page 5

EX-10.16

EXHIBIT 10.16

AMENDMENT No. 1

to

AIRCRAFT TIME-SHARING AGREEMENT

This Amendment No. 1 to Aircraft Time-Sharing Agreement (“Amendment”) is done as of this 1st day of September, 2005 by and between US Home Corporation (“Lessor”) and Stuart Miller (“Lessee”) (collectively the “Parties”). The Time-Sharing Agreement concluded by and between Lessor and Lessee on August 17, 2005 (“Agreement”) is hereby amended as follows:

1. The second sentence of Article 10(a) is hereby replaced in its entirety with the words:

“Lessee’s use shall include use of the Aircraft for the benefit of any related family member as well as for the transportation of unrelated guests, provided that Lessee shall make no charge nor accept any payment for the transportation of any of such persons.”

2. In order to conform the Agreement to FAR Part 91.23(a), Paragraph 15 shall become the concluding paragraph. Paragraphs 16 through 24 shall become paragraphs 15 through 23, respectively. The changes in ordering are not intended to change the meaning or interpretation of such paragraphs, and all such paragraphs remain in full force and effect.

3. The FAA N-number specified in item (a) of Exhibit A “Description of Aircraft” has changed and is hereby substituted with “N954L.”

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed on the day and year first above written.

Lessor:
US HOME CORPORATION
By:	/s/ L. Christian Marlin
Lessee:
/s/ Stuart Miller
Stuart Miller

EX-10.17

Exhibit 10.17

SECOND AMENDED AND RESTATED WAREHOUSING

CREDIT AND SECURITY AGREEMENT

BETWEEN

UNIVERSAL AMERICAN MORTGAGE COMPANY, LLC,

a Florida limited liability company

EAGLE HOME MORTGAGE, INC., a Washington corporation,

AMERISTAR FINANCIAL SERVICES, INC., a California corporation,

UNIVERSAL AMERICAN MORTGAGE COMPANY OF CALIFORNIA,

a California corporation,

UAMC ASSET CORP. II, a Nevada corporation

The Lenders Party Hereto

AND

RESIDENTIAL FUNDING CORPORATION,

a Delaware corporation

Dated as of April 21, 2005

TABLE OF CONTENTS

1.	THE CREDIT		1-2
	1.1.	The Warehousing Commitment	1-2
	1.2.	Expiration of Warehousing Commitment	1-2
	1.3.	The RFC/WaMu Commitment	1-2
	1.4.	Expiration of RFC/WaMu Commitment	1-2
	1.5.	The RFC Direct Commitment	1-3
	1.6.	Expiration of RFC Direct Commitment	1-3
	1.7.	Swingline Facility	1-3
	1.8.	Notes	1-4
	1.9.	Non-Receipt of funds by Credit Agent.	1-4
	1.10.	Replacement Notes.	1-4
	1.11.	Joint and Several Liability	1-5
	1.12.	Limitation on Warehousing Advances	1-5
2.	PROCEDURES FOR OBTAINING ADVANCES		2-1
	2.1.	Warehousing Advances, Swingline Advances, RFC/WaMu Advances and RFC Direct Advances	2-1
3.	INTEREST, PRINCIPAL AND FEES		3-1
	3.1.	Interest	3-1
	3.2.	Interest Limitation	3-2
	3.3.	Principal Payments	3-2
	3.4.	Buydowns	3-5
	3.5.	Warehousing Commitment Fees	3-6
	3.6.	Agent’s Fee	3-6
	3.7.	Loan Package Fees, Wire Fees, Warehousing Fees	3-7
	3.8.	Miscellaneous Fees and Charges	3-7
	3.9.	Method of Making Payments	3-7
	3.10.	Illegality	3-8
	3.11.	Increased Costs; Capital Requirements	3-8
	3.12.	Withholding Taxes	3-9
4.	COLLATERAL		4-1
	4.1.	Grant of Security Interest	4-1
	4.2.	Maintenance of Collateral Records	4-2
	4.3.	Release of Security Interest in Pledged Assets	4-3
	4.4.	Collection and Servicing Rights	4-4
	4.5.	Return of Collateral at End of Commitments	4-4
	4.6.	Delivery of Collateral Documents	4-5
	4.7.	Borrowers Remains Liable	4-5
	4.8.	Further Assurance	4-5
5.	CONDITIONS PRECEDENT		5-1
	5.1.	Initial Advance	5-1
	5.2.	Each Advance	5-4
	5.3.	Force Majeure	5-5
6.	GENERAL REPRESENTATIONS AND WARRANTIES		6-1
	6.1.	Place of Business	6-1
	6.2.	Organization; Good Standing; Subsidiaries	6-1
	6.3.	Authorization and Enforceability	6-2
	6.4.	Authorization and Enforceability of Lennar Undertaking	6-2

	6.5.	Approvals	6-2
	6.6.	Financial Condition	6-2
	6.7.	Litigation	6-3
	6.8.	Compliance with Laws	6-3
	6.9.	Regulation U	6-3
	6.10.	Investment Company Act	6-3
	6.11.	Payment of Taxes	6-3
	6.12.	Agreements	6-4
	6.13.	Title to Properties	6-4
	6.14.	ERISA	6-4
	6.15.	No Retiree Benefits	6-4
	6.16.	Assumed Names	6-4
	6.17.	Servicing	6-5
7.	AFFIRMATIVE COVENANTS		7-1
	7.1.	Payment of Obligations	7-1
	7.2.	Financial Statements	7-1
	7.3.	Other Borrower Reports	7-1
	7.4.	Maintenance of Existence; Conduct of Business	7-2
	7.5.	Compliance with Applicable Laws	7-2
	7.6.	Inspection of Properties and Books; Operational Reviews	7-3
	7.7.	Notice	7-3
	7.8.	Payment of Debt, Taxes and Other Obligations	7-4
	7.9.	Insurance	7-4
	7.10.	Closing Instructions	7-4
	7.11.	Subordination of Certain Indebtedness	7-4
	7.12.	Other Loan Obligations	7-4
	7.13.	ERISA	7-5
	7.14.	Use of Proceeds of Advances	7-5
8.	NEGATIVE COVENANTS		8-1
	8.1.	Contingent Liabilities	8-1
	8.2.	Restrictions on Fundamental Changes	8-1
	8.3.	Deferral of Subordinated Debt	8-1
	8.4.	Loss of Eligibility	8-2
	8.5.	Accounting Changes	8-2
	8.6.	Leverage Ratio	8-2
	8.7.	Minimum Tangible Net Worth	8-2
	8.8.	Minimum Modified Tangible Net Worth	8-2
	8.9.	Distributions to Members	8-2
	8.10.	Transactions with Affiliates	8-2
	8.11.	Recourse Servicing Contracts	8-3
	8.12.	Limitation on Liens.	8-3
	8.13.	Limitation on Debt.	8-3
9.	SPECIAL REPRESENTATIONS, WARRANTIES AND COVENANTS CONCERNING COLLATERAL		9-1
	9.1.	Special Representations and Warranties Concerning Eligibility as Seller/Servicer of Mortgage Loans	9-1
	9.2.	Special Representations and Warranties Concerning Warehousing Collateral	9-2
	9.3.	Special Affirmative Covenants Concerning Warehousing Collateral	9-4
	9.4.	Special Negative Covenants Concerning Warehousing Collateral	9-5
	9.5.	Special Affirmative Covenants Concerning Construction/Perm Mortgage Loans and Third-Party Builder Construction Mortgage Loans	9-6

	9.6.	Special Representations Concerning Construction/Perm Mortgage Loans and Third Party Builder Construction Mortgage Loans	9-6
	9.7.	Special Representations and Warranties Concerning Receivables	9-7
	9.8.	Special Representations Concerning Pledged Shares	9-7
	9.9.	Special Representations and Warranties Concerning Foreclosure Claim Receivables and Foreclosure Mortgage Loans	9-8
	9.10.	Voting Rights; Dividends; Etc.	9-8
10.	DEFAULTS; REMEDIES		10-1
	10.1.	Events of Default	10-1
	10.2.	Remedies	10-3
	10.3.	Application of Proceeds	10-6
	10.4.	Credit Agent Appointed Attorney-in-Fact	10-7
	10.5.	Right of Set-Off	10-8
	10.6.	Sharing of Payments	10-8
11.	AGENT		11-1
	11.1.	Appointment	11-1
	11.2.	Duties of Agent	11-1
	11.3.	Standard of Care	11-1
	11.4.	Delegation of Duties	11-2
	11.5.	Exculpatory Provisions	11-2
	11.6.	Reliance by Agent	11-2
	11.7.	Non-Reliance on Agent or Other Lenders	11-3
	11.8.	Agent in Individual Capacity	11-3
	11.9.	Successor Agent	11-3
	11.10.	Inspection	11-4
12.	MISCELLANEOUS		12-1
	12.1.	Notices	12-1
	12.2.	Reimbursement Of Expenses; Indemnity	12-1
	12.3.	Indemnification by Lenders	12-2
	12.4.	Financial Information	12-2
	12.5.	Terms Binding Upon Successors; Survival of Representations	12-3
	12.6.	Lenders in Individual Capacity	12-3
	12.7.	Assignment and Participation	12-3
	12.8.	Quarterly Accordion Period Commitment Increases	12-4
	12.9.	Amendments	12-4
	12.10.	Governing Law	12-5
	12.11.	Relationship of the Parties	12-5
	12.12.	Severability	12-5
	12.13.	Consent to Credit References	12-5
	12.14.	Counterparts	12-5
	12.15.	Headings/Captions	12-6
	12.16.	Entire Agreement	12-6
	12.17.	Consent to Jurisdiction	12-6
	12.18.	Waiver of Jury Trial	12-6
	12.19.	Waiver of Punitive, Consequential, Special or Indirect Damages	12-7
	12.20.	Confidentiality	12-7
13.	DEFINITIONS		13-1
	13.1.	Defined Terms	13-1
	13.2.	Other Definitional Provisions; Terms of Construction	13-14

EXHIBITS

Exhibit A-SF	Request for Advance
Exhibit A-Construction	Request for Advance (Construction/Rehab)
Exhibit A-Other Investments	Request for Advance Against Other Investments
Exhibit A-SF/UNI	Request for Advance – Unimproved Land Loans
Exhibit B-SF	Procedures and Documentation for Warehousing Single Family Mortgage Loans
Exhibit B-Construction	Procedures and Documentation for Warehousing Construction/Perm Mortgage Loans and Third-Party Builder Construction Mortgage Loans
Exhibit B-Foreclosure Claim Receivable	Procedures and Documentation for Warehousing Foreclosure Claim Receivable
Exhibit B-Investment	Procedures and Documentation for Warehousing Investment
Mortgage Loans	Mortgage Loans
Exhibit C	Schedule of Servicing Portfolio
Exhibit D	Subsidiaries
Exhibit E	Compliance Certificate
Exhibit F	Schedule of Lines of Credit
Exhibit G	Assumed Names
Exhibit H	Eligible Loans and Other Assets
Exhibit I	Collateral Operations Fee Schedule
Exhibit J	Commitments Schedule
Exhibit K	Advance Certificate
Exhibit L	Existing Liens
Exhibit M	Existing Debt
Exhibit N	Terms of Guaranteed Obligations
Exhibit O	Commitment Summary/Takeout Report

SECOND AMENDED AND RESTATED WAREHOUSING

CREDIT AND SECURITY AGREEMENT

SECOND AMENDED AND RESTATED WAREHOUSING CREDIT AND SECURITY AGREEMENT, dated as of April 21, 2005 between UNIVERSAL AMERICAN MORTGAGE COMPANY, LLC, a Florida limited liability company (“UAMCLLC”), EAGLE HOME MORTGAGE, INC., a Washington corporation (“EHMI”), AMERISTAR FINANCIAL SERVICES, INC., a California corporation (“AFSI”), UNIVERSAL AMERICAN MORTGAGE CO. OF CALIFORNIA, a California corporation (“UAMCC”), and UAMC ASSET CORP. II, a Nevada corporation (“UAMC Asset”) (UAMCLLC, EHMI, AFSI, UAMCC and UAMC Asset, collectively, “Borrowers”) RESIDENTIAL FUNDING CORPORATION, a Delaware corporation (“RFC”), JPMORGAN CHASE BANK, NATIONAL ASSOCIATION, a national banking association (“JPMorgan Chase”), U.S. BANK NATIONAL ASSOCIATION, a national banking association (“U.S. Bank”), SUNTRUST BANK, a state bank organized under the laws of Georgia (“Suntrust”), NATIONAL CITY BANK OF KENTUCKY, a national banking association (“NCBK”), COMERICA BANK (“Comerica”), and CALYON NEW YORK BRANCH (“Calyon”), WASHINGTON MUTUAL BANK, FA (“WaMu”) (RFC, Bank One, U.S. Bank, Suntrust, NCBK, Comerica, Calyon, WaMu, and any additional lender as may from time to time become a party hereto and their respective successors and permitted assigns being referred to individually as a “Lender” and collectively as the “Lenders”), and RFC as credit agent for the Lenders (in such capacity, the “Credit Agent”).

A. Borrowers have requested certain financing from Lenders.

B. Borrowers have asked Lenders and Credit Agent to amend and restate the Existing Agreement (as defined below) and to set forth the terms and conditions upon which Lenders will continue to provide financing to Borrowers.

C. Credit Agent and Lenders have agreed to amend and restate the Existing Agreement to continue to provide that financing to Borrowers subject to the terms and conditions of this Agreement.

D. Subject to Borrowers’ satisfaction of the conditions set forth in Article 5, the “Closing Date” for the transactions contemplated by this Agreement is the date set forth as the Closing Date on the signature page of Credit Agent to this Agreement.

NOW, THEREFORE, the parties to this Agreement agree that the Existing Agreement is amended and restated as follows:

Page 1-1

1. THE CREDIT

1.1. The Warehousing Commitment

On the terms and subject to the conditions and limitations of this Agreement, including Exhibit H, Lenders agree, severally and not jointly, to make Warehousing Advances against Eligible Assets other than Third-Party Builder Construction Mortgage Loans and Unimproved Land Loans, to Borrowers from the Closing Date to the Business Day immediately preceding the Warehousing Maturity Date, pro rata in accordance with their respective Percentage Shares, during which period Borrowers may borrow, repay and reborrow in accordance with the provisions of this Agreement. Lenders and RFC have no obligation to make Warehousing Advances or Swingline Advances in an aggregate amount outstanding at any time in excess of the lesser of (a) the Warehousing Credit Limit or (b) the Aggregate Warehousing Collateral Value. While a Default or Event of Default exists, Lenders may refuse to make any additional Warehousing Advances to Borrowers. Effective as of the Closing Date, all outstanding “Warehousing Advances” and “Swingline Advances” made under the Existing Agreement are deemed to be Warehousing Advances and Swingline Advances, as applicable, made under this Agreement and the Interest Rates and fees set forth in the Existing Agreement, or any separate letter agreement entered into under the Existing Agreement, will no longer apply. All Warehousing Advances under this Agreement constitute a single indebtedness, and all of the Collateral is security for the Warehousing Note and Swingline Note and for the performance of all of the Obligations.

1.2. Expiration of Warehousing Commitment

The Warehousing Commitment expires on the earlier of (“Warehousing Maturity Date”): (a) April 21, 2007, on which date each Lender’s Warehousing Commitment will expire of its own term and the related Warehousing Advances will become due and payable, in each case without the necessity of Notice or action by Lenders or Credit Agent, and (b) the date the Warehousing Commitment is terminated and the Warehousing Advances become due and payable under Section 10.2.

1.3. The RFC/WaMu Commitment

On the terms and subject to the conditions of this Agreement, including Exhibit H, RFC and WaMu agree to make RFC/WaMu Advances to Borrowers against Third-Party Builder Construction Mortgage Loans from the Closing Date to the Business Day immediately preceding the Warehousing Maturity Date, during which period Borrowers may borrow, repay and reborrow RFC/WaMu Advances in accordance with the provisions of this Agreement. The total aggregate principal amount of all RFC/WaMu Advances outstanding at any one time may not exceed the RFC/WaMu Commitment Amount. While a Default or Event of Default exists, RFC and WaMu may refuse to make any additional RFC/WaMu Advances to Borrowers. Effective as of the Closing Date, all outstanding RFC/WaMu Advances made under the Existing Agreement are deemed to be RFC/WaMu Advances made under this Agreement and the Interest Rates and fees set forth in the Existing Agreement, or any separate letter agreement entered into under the Existing Agreement, will no longer apply. All RFC/WaMu Advances under this Agreement constitute a single indebtedness, and all of the Collateral is security for the Notes and for the performance of all of the Obligations.

1.4. Expiration of RFC/WaMu Commitment

The RFC/WaMu Commitment expires on the Warehousing Maturity Date.

Page 1-2

1.5. The RFC Direct Commitment

On the terms and subject to the conditions of this Agreement, including Exhibit H, RFC agrees to make RFC Direct Advances to Borrowers against Unimproved Land Loans from the Closing Date to the Business Day immediately preceding the Warehousing Maturity Date, during which period Borrowers may borrow, repay and reborrow RFC Direct Advances in accordance with the provisions of this Agreement. The total aggregate principal amount of all RFC Direct Advances outstanding at any one time may not exceed the RFC Direct Commitment Amount. While a Default or Event of Default exists, RFC may refuse to make any additional RFC Direct Advances to Borrowers. Effective as of the Closing Date, all outstanding RFC Direct Advances under the Existing Agreement are deemed to be RFC Direct Advances under this Agreement and the Interest Rates and fees set forth in the Existing Agreement, or any separate letter agreement entered into under the Existing Agreement, will no longer apply. All RFC Direct Advances under this Agreement constitute a single indebtedness, and all of the Collateral is security for the Notes and for the performance of all of the Obligations.

1.6. Expiration of RFC Direct Commitment

The RFC Direct Commitment expires on the Warehousing Maturity Date.

1.7. Swingline Facility

On the terms and subject to the conditions set forth herein, RFC may, from time to time to, but not including the Business Day immediately preceding the Warehousing Maturity Date, make Advances (“Swingline Advances”) requested by Borrowers against Eligible Assets other than Third Party Builder Construction Mortgage Loans and Unimproved Land Loans, in an aggregate amount not to exceed the Swingline Facility Amount, without requesting Warehousing Advances from the other Lenders. RFC agrees to provide Borrowers 1 day’s Notice at such time as Borrowers have borrowed the maximum amount available under the Swingline Facility Amount. RFC has no obligation to make Swinglines Advances if the aggregate amount of Swingline Advances and Warehousing Advances outstanding would exceed the lesser of (a) the Warehousing Credit Limit or (b) the Aggregate Warehousing Collateral Value. Lenders hereby agree to purchase from RFC an undivided participation interest in all outstanding Swingline Advances at any time in an amount equal to each Lender’s Percentage Share of such Swingline Advances. RFC may at any time in its sole and absolute discretion (and shall no less frequently than weekly and upon the acceleration of the Obligations following an Event of Default) request the Lenders to make Warehousing Advances in principal amounts equal to their Percentage Shares of outstanding Swingline Advances, and each Lender absolutely and unconditionally agrees to fund such Warehousing Advances, regardless of any Default or Event of Default or other condition which would otherwise excuse such Lender from funding Warehousing Advances, provided that no Lender is required to make Warehousing Advances to repay Swingline Advances or purchase participations in Swingline Advances that would cause such Lender’s aggregate Warehousing Advances (including participations in Swingline Advances) then outstanding to exceed the amount of such Lender’s Warehousing Commitment Amount. Each Lender’s Warehousing Advances made pursuant to the preceding sentence shall be delivered directly to RFC in immediately available funds at the office of Credit Agent by 4:00 p.m. on the day of the request therefor by RFC if such request is made on or before 1:00 p.m., or by 9:00 a.m. on the 1st Business Day following such request if such request is made after 1:00 p.m., and shall be promptly applied against the outstanding Swingline Advances. At the time of any request for Warehousing Advances from Lenders pursuant to this Section 1.7, Credit Agent will deliver to each Lender a certificate in the form of Exhibit K attached hereto (the “Advance Certificate”), certified by Credit Agent. For purposes of the limitations set forth in Exhibit H hereto, Swingline Advances shall be deemed to be Warehousing Advances.

Page 1-3

1.8. Notes

Warehousing Advances made by each Lender against Eligible Assets other than Agreements for Deed and Foreclosure Claim Receivables are evidenced by Borrowers’ promissory notes, payable to each Lender, in the form prescribed by Credit Agent (each, a “Warehousing Note”). Warehousing Advances made by each Lender against Agreements for Deed or Foreclosure Claim Receivables are evidenced by Borrowers’ promissory notes, payable to each Lender, in the form prescribed by the Credit Agent (each, a “Sublimit Note”). RFC/WaMu Advances made by RFC and WaMu and RFC Direct Advances are evidenced by Borrowers’ promissory notes, payable to each of RFC and WaMu, in the form prescribed by the Credit Agent (the “RFC/WaMu Notes”). Swingline Advances made by RFC are evidenced by Borrowers’ promissory note, payable to RFC, in the form prescribed by Credit Agent (the “Swingline Note”). The terms “Warehousing Notes,” “Sublimit Notes,” “RFC/WaMu Notes” and “Swingline Note,” as used in this Agreement, include all amendments, restatements, renewals or replacements of the original “Warehousing Notes,” “Sublimit Notes,” “RFC/WaMu Notes” and “Swingline Note,” and all substitutions for any of them. All terms and provisions of the “Warehousing Notes,” “Sublimit Notes,” “RFC/WaMu Notes” and “Swingline Note” are incorporated into this Agreement.

1.9. Non-Receipt of funds by Credit Agent.

If Credit Agent receives notice from a Lender that such Lender does not intend to make its Percentage Share of any Warehousing Advances, neither Credit Agent nor any other Lender shall have any obligation to fund such Lender’s Percentage Share. Notwithstanding the foregoing, unless a Lender notifies Credit Agent by 3:00 p.m. on the date of a proposed Warehousing Advance that it does not intend to make its Percentage Share of such Warehousing Advance available to Credit Agent at such time and on such date, Credit Agent may assume that such Lender will make such amount available to Credit Agent to be advanced to Borrowers, and in reliance on such assumption, Credit Agent may, at its option, make a corresponding amount available to the Borrowers.

1.9 (a)	If Credit Agent makes such corresponding amount available to the Borrowers and such amount is not made available to Credit Agent by such Lender by close of business on the date of the Warehousing Advance, such Lender shall pay such amount to Credit Agent upon demand plus interest to the date of payment at a rate per annum equal to the Federal Funds Rate.
1.9 (b)	If a Lender fails to pay as provided herein, the Borrowers shall pay such amount to Credit Agent upon demand plus interest (at the rate applicable to the Borrowers for such Warehousing Advance) to the date of repayment.
1.9 (c)	Nothing in this Section 1.7 shall relieve any Lender from its obligation to fund its Percentage Share of any Warehousing Advance, or prejudice any rights the Borrowers may have against any Lender as a result of such Lender’s failure to make its Percentage Share of any Warehousing Advance.

1.10. Replacement Notes.

Upon receipt by Credit Agent of an affidavit of an officer of any Lender as to the loss, theft, destruction or mutilation of any Note, and, in the case of any such mutilation, upon receipt by Credit Agent of such Note, Borrowers will issue, in lieu thereof, a replacement note in the same principal amount thereof and otherwise of like tenor.

Page 1-4

1.11. Joint and Several Liability

Advances shall be made to any Borrower (except to the extent otherwise provided herein), as shall be requested in the Advance Request, but each Advance, regardless of which Borrower it is made to, shall be deemed made to or for the benefit of all Borrowers, and all Borrowers jointly and severally shall be obligated to repay all Advances. With respect to the obligations to repay Advances made to the other Borrowers, each Borrower agrees to the terms set forth in Exhibit N.

1.12. Limitation on Warehousing Advances

Lenders will make Warehousing Advances against Eligible Assets other than Third-Party Builder Construction Mortgage Loans and Unimproved Land Loans, and RFC and WaMu will make RFC/WaMu Advances against Third-Party Builder Construction Mortgage Loans and RFC will make RFC Direct Advances against Unimproved Land Loans, upon the request of Borrowers, in the manner provided in Article 2, for the purposes set forth in Section 7.14. Lenders’ obligation to make Warehousing Advances against Eligible Assets other than Third-Party Builder Construction Mortgage Loans and Unimproved Land Loans, and RFC’s and WaMu’s obligation to make RFC/WaMu Advances against Third-Party Builder Construction Mortgage Loans and RFC’s obligation to make RFC Direct Advances against Unimproved Land Loans are subject to the limitations set forth in Exhibit H.

End of Article 1

Page 1-5

2. PROCEDURES FOR OBTAINING ADVANCES

2.1. Warehousing Advances, Swingline Advances, RFC/WaMu Advances and RFC Direct Advances

2.1 (a)	To obtain a Warehousing Advance, a Swingline Advance, an RFC/WaMu Advance or an RFC Direct Advance under this Agreement, a Borrower must deliver to Credit Agent either a completed and signed request for a Warehousing Advance, a Swingline Advance, an RFC/WaMu Advance or an RFC Direct Advance on the then current form approved by Credit Agent, or an Electronic Advance Request, together with a list of the Mortgage Loans for which the request is being made (“Warehousing Advance Request”), not later than (i) in the case of Electronic Advance Requests, 3:30 p.m. on the Business Day, and (ii) in all other cases, 1 Business Day before the Business Day on which a Borrower desires the Warehousing Advance, Swingline Advance, an RFC/WaMu Advance or an RFC Direct Advance. Subject to the delivery of a Warehousing Advance Request and the satisfaction of the conditions and limitations of this Agreement, including the conditions set forth in Sections 5.1 and 5.2, a Borrower may obtain a Warehousing Advance, a Swingline Advance, an RFC/WaMu Advance or an RFC Direct Advance under this Agreement upon compliance with the procedures set forth in this Section and in the applicable Exhibit B, including delivery to Credit Agent of all required Collateral Documents. Credit Agent’s current form of Warehousing Advance Request is set forth in the applicable Exhibit A. Upon not less than 3 Business Days’ prior Notice to Borrowers, Credit Agent may modify its form of Warehousing Advance Request and any other Exhibit or document referred to in this Section to conform to either current legal requirements or Credit Agent practices and, as so modified, those Exhibits and documents will become part of this Agreement. Credit Agent will promptly notify Lenders of any changes made to any document under the preceding sentence.
2.1 (b)	In making the determination whether a Warehousing Advance or Swingline Advance will be made against an Eligible Asset, Credit Agent will be permitted to rely, without independent investigation of the correctness thereof, on the most recent information supplied by Borrowers to Credit Agent with respect to the Weighted Average Committed Purchase Price.
2.1 (c)	Credit Agent has a reasonable time to examine Borrowers’ Advance Request and the Collateral Documents to be delivered by Borrower before funding the requested Advance, and may reject any Eligible Asset that does not meet the requirements of this Agreement or of the related Purchase Commitment.
2.1 (d)	Borrowers must hold or cause a custodian to hold, in trust for Credit Agent, those original Collateral Documents of which only copies are required to be delivered to Credit Agent under Exhibit B. Unless a Pledged Loan is being held by an Investor for purchase or has been redeemed from pledge by Borrowers, promptly upon request by Credit Agent or, if the recorded Collateral Documents have not yet been returned from the recording office, immediately upon receipt by Borrowers or a custodian of those recorded Collateral Documents, Borrowers must deliver or cause a custodian to deliver to Credit Agent any or all of the original Collateral Documents.
2.1 (e)	To fund Warehousing Advances, RFC/WaMu Advances, RFC Direct Advances and Swingline Advances under this Agreement, Credit Agent will cause the Funding Bank to credit the Wire Disbursement Account upon compliance by Borrowers with the terms of the Loan Documents. Credit Agent will determine, in its sole discretion, the method by which Advances and other amounts on deposit in the Wire Disbursement Account are disbursed by the Funding Bank to or for the account of Borrowers.

End of Article 2

Page 2-1

3. INTEREST, PRINCIPAL AND FEES

3.1. Interest

3.1 (a)	Except as otherwise provided in this Section, Borrowers must pay interest on the unpaid amount of each Advance from the date the Advance is made until it is paid in full at the Interest Rate specified in Exhibit H.
3.1 (b)	Borrowers and any Lender may enter into an agreement (the “Balance Funded Agreement”) pursuant to which Borrowers agree to maintain Eligible Balances on deposit with such Lender or a Designated Bank in consideration of the funding of all or a portion of such Lender’s Warehousing Advances at a Balance Funded Rate or another reduction in the interest and fees payable to such Lender. Borrowers may give written notice to any Lender with which it has a Balance Funded Agreement, as and when provided in such Balance Funded Agreement, of Borrowers’ election to have a portion (the “Balance Funded Portion”) of the principal amount of such Lender’s Warehousing Advances bear interest at the Balance Funded Rate during any calendar month. In the event Borrowers elect to have all or a portion of any Lender’s Warehousing Advances bear interest at the Balance Funded Rate during any month, such Lender shall notify the Credit Agent no later than 12:00 Noon on the second Business Day of the following month of the estimated amount by which the interest to be paid by Borrowers on such Lender’s Warehousing Advances during such month was reduced as a result of the application of such Balance Funded Agreement. If the Eligible Balances maintained by Borrowers with such Lender or its Designated Bank during such month are less than the Balance Funded Portion, if the estimate provided by a Lender pursuant to the previous sentence is not accurate, or if a Lender agrees to another reduction in the interest and fees payable to such Lender, the Lender may charge and separately bill Borrowers a deficiency fee (a “Balance Deficiency Fee”), or credit Borrowers with any amount by which interest billed exceeded interest actually due, the amount of which shall be set forth in the Balance Funded Agreement between Borrowers and such Lender.
3.1 (c)	Credit Agent computes interest on the basis of the actual number of days in each month and a year of 360 days (“Accrual Basis”). Interest shall be due and payable in accordance with Section 3.9.
3.1 (d)	If, for any reason (1) Borrowers repay an Advance on the same day that it was made by Credit Agent, or (2) Borrowers instruct Credit Agent not to make a previously requested Advance after Credit Agent has reserved funds or made other arrangements necessary to enable Credit Agent to fund that Advance, Borrowers must pay Credit Agent for the benefit of Lenders an administrative fee equal to 1 day of interest on that Advance at the Interest Rate that would otherwise have been applicable under Exhibit H for the applicable Eligible Asset type.
3.1 (e)	After an Event of Default occurs and upon Notice to Borrowers by Credit Agent, the unpaid amount of each Advance will bear interest at the Default Rate until the Event of Default has been waived or cured, as provided in this Agreement, or the Advances have been paid in full.
3.1 (f)	Credit Agent will adjust the rates of interest provided for in this Agreement as of the effective date of each change in the applicable index. Credit Agent’s determination of such rates of interest as of any date of determination is conclusive and binding, absent manifest error.

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3.2. Interest Limitation

Credit Agent and Lenders do not intend, by reason of this Agreement, the Notes or any other Loan Document, to receive interest in excess of the amount permitted by applicable law. If Credit Agent or any Lender receives any interest in excess of the amount permitted by applicable law, whether by reason of acceleration of the maturity of this Agreement, the Notes or otherwise, Credit Agent will apply the excess to the unpaid principal balance of the Warehousing Advances, RFC/WaMu Advance or RFC Direct Advance and not to the payment of interest. If all Warehousing Advances, RFC/WaMu Advances and RFC Direct Advances have been paid in full and the Commitments have expired or have been terminated, Credit Agent will remit any excess to Borrowers. This Section controls every other provision of all agreements between Borrowers, Credit Agent and Lenders and is binding upon and available to any subsequent holder of the Notes.

3.3. Principal Payments

3.3 (a)	Borrowers must pay to Credit Agent (i) for the pro rata benefit of Lenders in the case of Warehousing Advances, (ii) for RFC in the case of Swingline Advances, (iii) for the pro rata benefit of RFC and WaMu in the case of RFC/WaMu Advances, and (iv) for the benefit of RFC in the case of RFC Direct Advances, the outstanding principal amount of all Advances on the Warehousing Maturity Date. In addition, on the last Business Day of each Quarterly Accordion Period, Borrowers must pay to Credit Agent for the pro rata benefit of the Lenders, the outstanding principal amount of all Warehousing Advances in excess of the Warehousing Credit Limit as of the next Business Day.
3.3 (b)	Except as otherwise provided in Section 3.1(d), Borrowers may prepay any portion of the Advances without premium or penalty at any time pursuant to Section 3.4 or Section 4.3(d). If at any time the Advances outstanding under this Agreement exceed the lesser of (i) the Warehousing Credit Limit or (ii) the Aggregate Warehousing Collateral Value, Borrowers must immediately pay to Credit Agent for the benefit of Lenders, without the necessity of prior demand or Notice from Credit Agent, and Borrowers authorize Credit Agent to cause the Funding Bank to charge Borrowers’ Operating Account for, the amount of such excess.
3.3 (c)	Borrowers must pay to Credit Agent for the pro rata benefit of Lenders, without the necessity of prior demand or Notice from Credit Agent, and Borrowers authorize Credit Agent to cause the Funding Bank to charge Borrowers’ Operating Account for, or reduce the Buydown by, the amount of any outstanding Advance against a specific Pledged Asset upon the earliest occurrence of any of the following events:
	(1)	One (1) Business Day elapses from the date an Advance was made if the Pledged Loan to be funded by that Advance has not closed and funded.
	(2)	Fifteen (15) Business Days elapse without the return of a Collateral Document delivered by Credit Agent to a Borrower under a Trust Receipt for correction or completion.
	(3)	On the date on which a Pledged Asset is determined to have been originated based on untrue, incomplete or inaccurate information or otherwise to be subject to fraud, whether or not any Borrower had knowledge of the misrepresentation, incomplete or inaccurate information or fraud, or on the date on which any Borrower knows, has reason to know, or receives Notice from Credit Agent, that (A) one or more of the representations and warranties set forth in Article 9 were inaccurate or incomplete in any material respect on any date when made or deemed made or became inaccurate or incomplete after any such date with

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		respect to such Pledged Asset, or (B) any Borrower has failed to perform or comply with any covenant, term or condition set forth in Article 9 with respect to such Pledged Asset.
	(4)	Except in the case of Foreclosure Claim Receivables and Foreclosure Mortgage Loans, on the date a Pledged Asset or a Lien prior to a Mortgage securing repayment of a Pledged Asset has been in default for a period of 60 days or more.
	(5)	Upon the sale, other disposition or prepayment of any Pledged Asset or, with respect to a Pledged Loan included in an Eligible Mortgage Pool, upon the sale or other disposition of the related Agency Security.
	(6)	One (1) Business Day immediately preceding the date scheduled for the foreclosure or trustee sale of the real property and improvements securing a Pledged Loan, unless such foreclosure or trustee sale will give rise to a Foreclosure Claim Receivable against which the related Advance may remain outstanding hereunder.
	(7)	If the outstanding Advances against Pledged Loans exceed the aggregate Purchase Commitments for Pledged Loans.
3.3 (d)	Upon telephonic or written Notice to Borrowers by Credit Agent, Borrowers must pay to Credit Agent for the pro rata benefit of Lenders, and Borrowers authorize Credit Agent to cause the Funding Bank to charge Borrowers’ Operating Account for, or reduce the Buydown by, the amount of any outstanding Advance against a specific Pledged Asset upon the earliest occurrence of any of the following events:
	(1)	For any Pledged Loan, the Warehouse Period elapses.
	(2)	Forty-five (45) days elapse from the date a Pledged Loan was delivered to an Investor or Approved Custodian for examination and purchase or for inclusion in a Mortgage Pool, without the purchase being made or an Eligible Mortgage Pool being initially certified, or upon rejection of a Pledged Loan as unsatisfactory by an Investor or Approved Custodian.
	(3)	Seven (7) Business Days elapse from the date a Wet Settlement Advance was made against a Pledged Loan without receipt by Credit Agent of all Collateral Documents relating to the Pledged Loan.
	(4)	Three (3) Business Days after the mandatory delivery date of the related Purchase Commitment if the specific Pledged Loan or the Pledged Security backed by that Pledged Loan has not been delivered under the Purchase Commitment prior to such mandatory delivery date, or on the date the related Purchase Commitment expires or is terminated, unless, in each case, the Pledged Loan or Pledged Security is eligible for delivery to another Investor under a comparable Purchase Commitment.
	(5)	With respect to any Pledged Loan, any of the Collateral Documents, upon examination by Credit Agent (and at the reasonable discretion of the Credit Agent), are found not to be in compliance with the requirements of this Agreement or the related Purchase Commitment (if a Purchase Commitment is required by Exhibit H), unless such non-compliance is, in Credit Agent’s reasonable judgment, readily curable.

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	(6)	If, after giving effect to a new Advance against a Pledged Asset or to the payment of existing Advances against Pledged Assets, any of the limitations set forth in Exhibit H have been exceeded.
3.3 (e)	In addition to the payments required by Sections 3.3(a), 3.3(c) and 3.3(d), if the principal amount of any Pledged Asset is prepaid in whole or in part while an Advance is outstanding against the Pledged Asset, Borrowers must pay to Credit Agent, without the necessity of prior demand or Notice from Credit Agent, and Borrowers authorize Credit Agent to cause the Funding Bank to charge Borrowers’ Operating Account for the amount of the prepayment to be applied against the Advance.
3.3 (f)	The proceeds of the sale or other disposition of Pledged Assets must be paid directly by the Investor or other obligor to the Cash Collateral Account. Borrowers must give Notice to Credit Agent in writing, by telephone or by RFConnects Delivery to Credit Agent (and if by telephone, followed promptly by written Notice) of the Pledged Assets for which proceeds have been received. Upon receipt of Borrowers’ Notice, Credit Agent will apply any proceeds deposited into the Cash Collateral Account to the payment of the Advances related to the Pledged Assets identified by Borrowers in their Notice, and those Pledged Assets will be considered to have been redeemed from pledge. Credit Agent is entitled to rely upon Borrowers’ affirmation that deposits in the Cash Collateral Account represent payments from Investors or obligors for the purchase of the Pledged Assets specified by Borrowers in their Notice. If the payment from an Investor for the purchase of Pledged Assets is less than the outstanding Advances against the Pledged Assets identified by Borrowers in their Notice, Borrowers must pay to Credit Agent, and Borrowers authorize Credit Agent to cause the Funding Bank to charge Borrowers’ Operating Account in, an amount equal to that deficiency. As long as no Default or Event of Default exists, Credit Agent will return to Borrowers any excess payment from an Investor or obligor for Pledged Assets. For the purposes of this Section 3.3(f), payments made by check into the Cash Collateral Account will be deemed received when the check has cleared in accordance with Credit Agent’s usual procedures.
3.3 (g)	Credit Agent reserves the right to revalue any Pledged Loan or Pledged Security that is not covered by a Purchase Commitment from Fannie Mae or Freddie Mac. Credit Agent reserves the right to revalue any Pledged Loan or Pledged Security that is to be exchanged for an Agency Security if that Agency Security is not covered by a Purchase Commitment. Credit Agent reserves the right to revalue any other Pledged Asset. Borrowers must pay to Credit Agent, without the necessity of prior demand or Notice from Credit Agent, and Borrowers authorize Credit Agent to cause the Funding Bank to charge Borrowers’ Operating Account for, any amount required after any such revaluation to reduce the principal amount of the Advances outstanding against the revalued Eligible Asset to an amount equal to the Advance Rate for the applicable type of Eligible Asset multiplied by the Fair Market Value of the Eligible Asset.
3.3 (h)	Upon the occurrence of any event described in Section 10.1(g) with respect to Lennar, Borrowers shall, at the request of Credit Agent or Majority Lenders, repay all Advances outstanding against Agreements for Deed, Construction/Perm Mortgage Loans and Unimproved Land Loans, and no further Advances will thereafter be made against Agreements for Deed, Construction/Perm Mortgage Loans or Unimproved Land Loans.
3.3 (i)	Prior to the occurrence of an Event of Default and acceleration of all Advances outstanding hereunder or termination of the Warehousing Commitment, the RFC/WaMu Commitment or the RFC Direct Commitment, amounts received by Credit Agent as proceeds of the sale or other disposition of Pledged Assets, shall be allocated among Lenders as follows:

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	(1)	With respect to proceeds from the disposition of Pledged Assets other than Third-Party Builder Construction Loans and Unimproved Land Loans, first, to RFC until the aggregate outstanding principal amount of the Swingline Advances have been paid in full; and second, pro rata to Lenders in accordance with their respective Percentage Shares, until the principal amount of the related Warehousing Advances have been paid in full.
	(2)	With respect to proceeds from the disposition of Third-Party Builder Construction Mortgage Loans, to RFC and WaMu until the principal amount of the related RFC/WaMu Advances have been paid in full.
	(3)	With respect to proceeds from the disposition of Unimproved Land Loans, to RFC until the principal amount of the related RFC Direct Advances have been paid in full.
	(4)	Finally, the balance, if any, to Borrower.
	Following the occurrence of an Event of Default and acceleration of any Obligations outstanding hereunder or termination of the Warehousing Commitment, the RFC/WaMu Commitment and RFC Direct Commitment, all amounts received by Credit Agent on account of the Obligations shall be disbursed by Credit Agent in accordance with the provisions of Section 10.3 hereof.
3.3 (j)	In addition to the payments required pursuant to Sections 3.3(a) – 3.3(i), Borrowers shall repay the Warehousing Advances, RFC/WaMu Advances, RFC Direct Advances and Swingline Advances as set forth in Exhibit H.
3.3 (k)	Credit Agent and Lenders agree that, solely for purposes of calculating interest payable in connection with Swingline Advances, any Release Amount received by the Credit Agent and applied to Swingline Advances shall be deemed to have been applied to outstanding Swingline Advances on the Business Day on which the Credit Agent actually receives such Release Amount (in each case, the “Receipt Date”) provided that (i) no Default or Event of Default exists as of such Receipt Date or at any time thereafter through and including the date on which the Credit Agent applies such Release Amount to Swingline Advances (in each case, the “Credit Date”), and (ii) the outstanding principal balance of all Swingline Advances would be greater than or equal to zero on the Receipt Date and at all times thereafter through and including the applicable Credit Date after giving effect to the application of (1) such Release Amount, (2) all Buydowns, and (3) any other payment of the Swingline Advances. If the foregoing conditions are not satisfied with respect to any Release Amount received by the Credit Agent and applied to Swingline Advances, the Credit Agent will credit the amount of such Release Amount to such Swingline Advance on the applicable Credit Date.

3.4. Buydowns

Borrowers may prepay a portion of the Warehousing Advances outstanding under this Agreement (individually “Buydown” and collectively “Buydowns”) upon Notice to Credit Agent not later than (a) 1:00 p.m. on the Business Day immediately preceding the Business Day on which Borrowers desire to make a Buydown in the amount of $10,000,000 or more or (b) 3:30 p.m. on the Business Day on which Borrower desires to make a Buydown in an amount less than $10,000,000. Each Buydown must be in an amount not less than $1,000,000, and Borrowers may not make Buydowns that exceed the aggregate principal balance of all Warehousing Advances outstanding under this Agreement. A Buydown is a reduction in the aggregate amount of the Warehousing Advances outstanding under this Agreement, but does not represent the prepayment of any particular Warehousing Advance for the purposes of any Pledged Assets

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specifically related to such Warehousing Advances, and does not entitle Borrowers to the release of any Collateral, including Collateral consisting of the proceeds of Pledged Assets described in Sections 3.3(e) or 3.3(f). To reduce interest payable by Borrowers, Credit Agent may apply Buydowns to Warehousing Advances outstanding under this Agreement in any order determined by Credit Agent in its sole discretion. Subject to the satisfaction of the conditions set forth in Sections 5.2(d) and 5.2(e) (which apply as if the requested reborrowing were a Warehousing Advance), Borrowers may, from the Closing Date to the Business Day immediately preceding the Warehousing Maturity Date, reborrow all or any portion of the Buydowns upon Notice to Credit Agent not later than (m) 1:00 p.m. on the Business Day immediately preceding the Business Day on which Borrowers desire to reborrow $10,000,000 or more or (n) 3:30 p.m. on the Business Day that Borrowers desire to reborrow an amount less than $10,000,000. If Credit Agent receives Buydowns or a combination of Buydowns and payments of Warehousing Advances that exceed the aggregate principal balance of the Warehousing Advances outstanding under this Agreement (“Excess Buydown”), as long as no Default or Event of Default exists, Borrowers may request that Credit Agent return all or any portion of an Excess Buydown upon Notice to Credit Agent not later than (y) 1:00 p.m. on the Business Day immediately preceding the Business Day on which Borrowers request the return of $10,000,000 or more or (z) 3:30 p.m. on the Business Day that Borrower requests the return of less than $10,000,000. Alternatively, Credit Agent may, in its sole discretion, return to Borrowers all or any portion of an Excess Buydown by causing the Funding Bank to credit the Operating Account in that amount. Credit Agent will notify each Lender not later than 1:00 p.m. on the Business Day of (i) a reborrowing of the Buydown, or (ii) the return of any Excess Buydown, and each Lender will make its Percentage Share of the (1) requested reborrowing, or (2) the Excess Buydown, available to Credit Agent in immediately available funds at the office of Credit Agent by 4:00 p.m. on that Business Day. Neither Credit Agent nor any Lender has any obligation to pay or provide to Borrowers any interest, dividends or other benefits on an Excess Buydown.

3.5. Warehousing Commitment Fees

Borrowers must pay to each Lender, through Credit Agent, an annual non-refundable fee (“Warehousing Commitment Fee”) in the amount set forth in Exhibit I. The Warehousing Commitment Fee is payable in advance on the Closing Date and on each anniversary of the Closing Date. If any Lender increases its Warehousing Commitment Amount, if the Warehousing Credit Limit is increased by an Additional Lender becoming a party to this Agreement, if RFC and WaMu increase the RFC/WaMu Commitment Amount or if RFC increases the RFC Direct Commitment Amount, Borrowers will pay the prorated portion of the applicable Warehousing Commitment Fee on the amount of such increase or the amount of such Additional Lender’s Warehousing Commitment Amount from the effective date of such increase to the Warehousing Maturity Date. If, at any time, the Warehousing Maturity Date of any Commitment is extended, Borrowers will pay an additional Warehousing Commitment Fee in the prorated amount determined pursuant to the calculations set forth in Exhibit I from the day after the original Warehousing Maturity Date to the extended Warehousing Maturity Date. Borrowers are not entitled to a reduction in the amount of the Warehousing Comitment Fee if (a) the Warehousing Commitment Amount is reduced or (b) the Warehousing Commitment is terminated at the request of Borrowers or as a result of an Event of Default. Credit Agent’s determination of the Warehousing Comitment Fee for any period is conclusive and binding, absent manifest error.

3.6. Agent’s Fee

Borrowers shall pay to Credit Agent, for its own account, such fees as shall be separately agreed between Borrowers and Credit Agent.

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3.7. Loan Package Fees, Wire Fees, Warehousing Fees

At the time of each Advance against an Eligible Asset, Borrowers will incur a loan package fee (“Loan Package Fee”) and a wire fee (“Wire Fee”). Loan Package Fees and Wire Fees may, at Credit Agent’s discretion, be billed separately or combined into a single warehousing fee (“Warehousing Fee”). Borrowers must pay all Loan Package Fees, Wire Fees or Warehousing Fees in the amount separately agreed between Borrowers and Credit Agent within 9 days after the date of Credit Agent’s invoice or, if applicable, within 2 days after the date of Credit Agent’s account analysis statement.

3.8. Miscellaneous Fees and Charges

Borrowers must reimburse Credit Agent for all Miscellaneous Fees and Charges. Borrowers must pay all Miscellaneous Fees and Charges within 9 days after the date of Credit Agent’s invoice or, if applicable, within 2 days after the date of Credit Agent’s account analysis statement.

3.9. Method of Making Payments

3.9 (a)	Credit Agent shall, on or before the 5th Business Day of each month, deliver to Borrowers billings for interest due and payable on Advances, Agent’s Fees, Miscellaneous Charges and other fees and charges calculated through the end of the preceding month. On or before the 10th Business Day of each month, Borrowers will pay to Credit Agent the full amount of interest, fees and changes billed as described above.
3.9 (b)	All payments made on account of the Obligations shall be made by Borrowers to Credit Agent for distribution to Lenders, except for Balance Deficiency Fees, which shall be made directly to the applicable Lender, and fees and charges payable to Credit Agent for its own account. All payments made on account of the principal of and interest on the Warehousing Advances or Swingline Advances in which the Lenders have paid for their participations pursuant to Section 1.3 shall be distributed to the Lenders on a pro-rata basis. All payments made on account of the Obligations shall be made without setoff or counterclaim, free and clear of and without deduction for any taxes, fees or other charges of any nature whatsoever imposed by any taxing authority, and must be received by Credit Agent by 4:00 p.m. on the day of payment, it being expressly agreed and understood that if a payment is received after 4:00 p.m. by Credit Agent such payment will be considered to have been made on the next succeeding Business Day and interest thereon shall be payable by Borrowers at the then applicable rate during such extension. No principal payments resulting from the sale of Pledged Mortgages or Pledged Securities shall be deemed to have been received by Credit Agent until Credit Agent has also received the Notice required under Section 4.3(f). All payments shall be made in lawful money of the United States of America in immediately available funds transferred via wire to the Cash Collateral Account. If any payment required to be made by Borrowers hereunder becomes due and payable on a day other than a Business Day, the due date thereof shall be extended to the next succeeding Business Day and interest shall be payable on Advances so extended at the then applicable rate during such extension.
3.9 (c)	All amounts received by Credit Agent on account of the Obligations (except amounts received in respect of fees, Miscellaneous Charges or expenses payable hereunder to Credit Agent for its own account, amounts payable to RFC for RFC/WaMu Advances, RFC Direct Advances or Swingline Advances) shall be disbursed to the applicable Lenders by wire transfer by 12:00 noon on the Business Day after the date of receipt.

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3.9 (d) Without limiting any other right that Credit Agent or any Lender may have under applicable law or otherwise, while a Default or Event of Default exists, Borrowers authorize Credit Agent to cause the Funding Bank to charge Borrower’s Operating Account for any Obligations due and owing, without the necessity of prior demand or Notice from Credit Agent.

3.10. Illegality

In the event that any Lender shall have determined (which determination shall be conclusive and binding absent manifest error) at any time that the introduction of, or any change in, any applicable law, rule, regulation, order or decree or in the interpretation or the administration thereof by any Person charged with the interpretation or administration thereof, or compliance by such Lender with any request or directive (whether or not having the force of law) of any such Person, shall make it unlawful or impossible for such Lender to charge interest at the Balance Funded Rate based on Borrowers’ Eligible Balances as contemplated by this Agreement, then such Lender shall forthwith give Notice thereof to Credit Agent and Borrowers describing such illegality in reasonable detail. Upon the giving of such Notice, the obligation of such Lender to charge interest at the Balance Funded Rate based on Borrowers’ Eligible Balances shall be immediately suspended for the duration of such illegality and with respect to Advances bearing interest at the Balance Funded Rate, each such Advance of such Lender shall bear interest at the applicable Interest Rate described in Exhibit H. If and when such illegality ceases to exist, such Lender shall notify Credit Agent and Borrowers thereof and such suspension shall cease.

3.11. Increased Costs; Capital Requirements

In the event any applicable law, order, regulation or directive issued by any governmental or monetary authority, or any change therein or in the governmental or judicial interpretation or application thereof, or compliance by any Lender with any request or directive (whether or not having the force of law) by any governmental or monetary authority:

3.11 (a)

Does or shall subject any Lender to any tax of any kind whatsoever with respect to this Agreement or any Advances made hereunder, or change the basis of taxation on payments to such Lender of principal, fees, interest or any other amount payable hereunder (except for change in the rate of tax on the overall gross or net income of such Lender by the jurisdiction in which such Lender principal office is located); or

3.11 (b)

Does or shall impose, modify or hold applicable any reserve, capital requirement, special deposit, compulsory loan or similar requirement against assets held by, or deposits or other liabilities in or for the account of, advances or loans by, or other credit extended by, or any other acquisition of funds by, such Lender which are not otherwise included in the determination of the interest rate as calculated hereunder;

and the result of any of the foregoing is to increase the cost to such Lender of making, renewing or maintaining any Advance or to reduce any amount receivable in respect thereof or to reduce the rate of return on the capital of such Lender or any Person controlling such Lender as it relates to credit facilities in the nature of that evidenced by this Agreement, then, in any such case, Borrowers shall promptly pay any additional amounts necessary to compensate such Lender for such additional cost or reduced amounts receivable or reduced rate of return as determined by such Lender with respect to this Agreement or Advances made hereunder. If a Lender becomes entitled to claim any additional amounts pursuant to this Section, it shall notify Borrowers through Credit Agent of the event by reason of which it has become so entitled and Borrowers shall pay such amount within 15 days thereafter. A certificate as to any additional amount payable pursuant to the foregoing sentence containing the calculation thereof in reasonable detail submitted by a Lender, through Credit Agent, to Borrowers shall be conclusive in the absence of manifest error.

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3.12. Withholding Taxes

3.12 (a)	(1)	Any and all payments by Borrowers hereunder or under the Notes shall be made free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto imposed on it by any jurisdiction (excluding, in the case of each Lender and Credit Agent, (y) franchise taxes imposed on or measured by its income by the jurisdiction under the laws of which such Lender or Credit Agent, as the case may be, is organized or any political subdivision thereof, and, (z) if such Lender or Credit Agent is entitled at such time to a total or partial exemption from withholding that is required to be evidenced by a United States Internal Revenue Service Form, taxes imposed on it by reason of any failure of such Lender or Credit Agent to deliver to Credit Agent or the Borrowers, from time to time as required by Credit Agent or Borrowers, such Form, completed in a manner reasonably satisfactory to Credit Agent or the Borrowers) (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as “Taxes”). If Borrowers shall be required by law to deduct any taxes from or in respect of any sum payable hereunder or under any Note to any Lender or Credit Agent (i) the sum payable shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 3.12) such Lender or Credit Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) Borrowers shall make such deductions, and (iii) Borrowers shall pay the full amount deducted to the relevant taxing authority or other authority in accordance with applicable law.
	(2)	Borrowers will indemnify each Lender and Credit Agent for the full amount of taxes (including, without limitation, any taxes imposed by any jurisdiction on amounts payable under this Section 3.12 paid by such Lender or Credit Agent (as the case may be), and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto, whether or not such taxes were correctly or legally asserted. This indemnification shall be made within 30 days from the date such Lender or Credit Agent (as the case may be) makes written demand therefor.
	(3)	Within 30 days after the date of any payment of taxes, Borrowers will furnish to Credit Agent the original or a certified copy of a receipt evidencing payment thereof.
	(4)	Prior to the Closing Date, in the case of each Lender which is an original signatory hereto, and on the date of the assignment pursuant to which it becomes a Lender, in the case of each other Lender, and from time to time thereafter if requested by Borrowers or Credit Agent, each Lender organized under the laws of a jurisdiction outside the United States that is entitled to an exemption from United States withholding tax, or that is subject to such tax at a reduced rate under an applicable tax treaty, shall provide Credit Agent and Borrowers with an Internal Revenue Service Form W-8BEN or W-8ECI or other applicable form, certificate or document prescribed by the Internal Revenue Service of the United States certifying as to such Lender’s entitlement to such exemption or reduced rate with respect to all payments to be made to such Lender hereunder and under the Notes. Unless Borrowers and Credit Agent have received forms or other documents satisfactory to them indicating that payments hereunder or under any Note are not subject to United States withholding tax or are subject to such tax at a rate reduced by an applicable tax

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	treaty, Borrowers or Credit Agent shall withhold taxes from such payments at the applicable statutory rate in the case of payments to or for any Lender organized under the laws of a jurisdiction outside the United States.
(5)	Any Lender claiming any additional amounts payable pursuant to this Section 3.12 shall use its best efforts (consistent with its internal policy and legal and regulatory restrictions) to change the jurisdiction of its applicable lending office to a jurisdiction in which such Lender already has a lending office if the making of such a change would avoid the need for, or reduce the amount of, any such additional amounts which may thereafter accrue and would not, in the reasonable judgment of such Lender, be otherwise disadvantageous to such Lender.
(6)	Without prejudice to the survival of any other agreement of the Borrowers hereunder, the agreements and obligations of the Borrowers contained in this Section 3.12 shall survive the payment in full of principal and interest hereunder and under the Notes.

3.12 (b) If Borrowers become obligated to pay additional amounts described in Section 3.12(a) as a result of any condition described in such Section and payment of such amount is demanded by any Lender, then unless a Default or an Event of Default shall have occurred and be continuing or such Lender has theretofore taken steps that will promptly remove or cure the conditions creating the cause for such obligation to pay such additional amounts, or has revoked such election, as the case may be, Borrowers may, on 10 Business Days’ prior written Notice to Credit Agent, who shall promptly send a copy of such notice to each Lender, cause such Lender to (and such Lender shall, upon payment in full of all amounts outstanding in respect of such Lender’s Advances, including accrued interest thereon, and all other amounts due and payable to such Lender hereunder) assign pursuant to Section 12.7 all of its rights and obligations under this Agreement to a Lender or other Person selected by Borrowers and reasonably acceptable to Credit Agent.

End of Article 3

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  4. COLLATERAL

4.1. Grant of Security Interest

As security for the payment of the Notes and for the performance of all of Borrowers’ Obligations, Borrowers grant a security interest to Credit Agent, for the benefit of the Lenders, in all of Borrowers’ right, title and interest in and to the following described property, whether now owned or acquired after the date of this Agreement (“Collateral”):

4.1 (a)	All amounts advanced by Credit Agent to or for the account of Borrowers under this Agreement to fund a Mortgage Loan until that Mortgage Loan is closed and those funds disbursed.
4.1 (b)	All Mortgage Loans, including all Mortgage Notes, Mortgages and Security Agreements evidencing or securing those Mortgage Loans, (1) that are delivered or caused to be delivered to Credit Agent or any Lender (including delivery to a third party on behalf of Credit Agent), or that otherwise come into the possession, custody or control of Credit Agent or any Lender (including the possession, custody or control of a third party on behalf of Credit Agent) for the purpose of pledge, or (2) in respect of which Credit Agent has made an Advance under this Agreement (all of the foregoing, collectively, “Pledged Loans”).
4.1 (c)	All Agreements for Deed in respect of which Advances have been made under this Agreement (collectively, “Pledged Agreements for Deed”)
4.1 (d)	All Mortgage-backed Securities that are created in whole or in part on the basis of Pledged Loans or that are delivered or caused to be delivered to Credit Agent or any Lender (including delivery to a third party on behalf of Credit Agent), or that otherwise come into the possession, custody or control of Credit Agent or any Lender (including the possession, custody or control of a third party on behalf of Credit Agent) or that are registered by book-entry in the name of Credit Agent or any Lender (including registration in the name of a third party on behalf of Credit Agent), in each case for the purpose of pledge, or in respect of which an Advance has been made by Credit Agent under this Agreement (collectively, “Pledged Securities”).
4.1 (e)	All private mortgage insurance and all commitments issued by the VA or FHA to insure or guarantee any Pledged Loans; all Purchase Commitments held by Borrowers covering Pledged Loans or Pledged Securities, and all proceeds from the sale of Pledged Loans or Pledged Securities to Investors pursuant to those Purchase Commitments; and all personal property, contract rights, servicing rights or contracts and servicing fees and income or other proceeds, amounts and payments payable to Borrowers as compensation or reimbursement, accounts, payments, intangibles and general intangibles of every kind relating to Pledged Loans, Pledged Securities, Purchase Commitments, VA commitments or guaranties, FHA commitments, private mortgage insurance and commitments, and all other documents or instruments relating to Pledged Loans and Pledged Securities, including any interest of Borrowers in any fire, casualty or hazard insurance policies and any awards made by any public body or decreed by any court of competent jurisdiction for a taking or for degradation of value in any eminent domain proceeding as the same relate to Pledged Loans.
4.1 (f)	All accounts and general intangibles owned by Borrowers (“Receivables”) for the payment of money against (1) VA under a VA Guaranty of, FHA or a private mortgage insurer under an FHA or private insurer’s mortgage insurance policy insuring payment of, or any other

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	Person under any other agreement (including a Servicing Contract) relating to, all or part of a defaulted Mortgage Loan (A) repurchased by Borrowers from an investor or out of a pool of Mortgage Loans serviced by Borrowers or (B) being serviced by Borrowers, (2) obligors and their accounts, Fannie Mae, Freddie Mac, Ginnie Mae or any other investor under a Servicing Contract covering, or out of the proceeds of any sale of or foreclosure sale in respect of, any Mortgage Loan (A) repurchased by Borrowers out of a pool of Mortgage Loans serviced by Borrowers or (B) being serviced by Borrowers, in either case, for the reimbursement of real estate taxes or assessments, or casualty or liability insurance premiums, paid by Borrowers in connection with Mortgage Loans and (3) obligors and their accounts, or Fannie Mae, Freddie Mac, Ginnie Mae or any other investor under or in respect of any Mortgage Loans serviced by Borrowers for repayment of advances made by Borrowers to cover shortages in principal and interest payments.
4.1 (g)	All escrow accounts, documents, instruments, files, surveys, certificates, correspondence, appraisals, computer programs, tapes, discs, cards, accounting records (including all information, records, tapes, data, programs, discs and cards necessary or helpful in the administration or servicing of the Collateral) and other information and data of Borrowers relating to the Collateral.
4.1 (h)	All cash delivered to or otherwise in the possession of Credit Agent or any Lender, the Funding Bank or Credit Agent’s agent, bailee or custodian or designated on the books and records of Borrowers as assigned and pledged to Credit Agent, including all cash deposited in the Cash Collateral Account, the Wire Disbursement Account and the UAMC Asset Account.
4.1 (i)	All Hedging Arrangements related to the Collateral (“Pledged Hedging Arrangements”) and Borrowers’ accounts in which those Hedging Arrangements are held (“Pledged Hedging Accounts”), including all rights to payment arising under the Pledged Hedging Arrangements and the Pledged Hedging Accounts, except that Credit Agent’s security interest in the Pledged Hedging Arrangements and Pledged Hedging Accounts applies only to benefits, including rights to payment, related to the Collateral.
4.1 (j)	All shares of the capital stock of UAMC Asset now owned or hereafter acquired by any Borrower (collectively, the “Pledged Shares”); all certificates representing the Pledged Shares; and all dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the Pledged Shares.
4.1 (k)	All accounts, contract rights and general intangibles related to the Collateral.
4.1 (l)	All cash and non-cash proceeds of the Collateral, including all dividends, distributions and other rights in connection with, and all additions to, modifications of and replacements for, the Collateral, and all products and proceeds of the Collateral, together with whatever is receivable or received when the Collateral or proceeds of Collateral are sold, collected, exchanged or otherwise disposed of, whether such disposition is voluntary or involuntary, including all rights to payment with respect to any cause of action affecting or relating to the Collateral or proceeds of Collateral.

4.2. Maintenance of Collateral Records

As long as the Commitments are outstanding or there remain any Obligations to be paid or performed under this Agreement or under any other Loan Document, each Borrower must preserve and maintain, at its respective chief executive office and principal place of business or in a regional office approved by Credit Agent, or in the office of a computer service bureau engaged by Borrowers and approved by Credit Agent and, upon request, make available to Credit Agent or

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Lenders, the originals, or copies in any case where the originals have been delivered to Credit Agent, Lenders or to an Investor, of its Mortgage Notes, Mortgages and Security Agreements included in Pledged Loans, its Agreements for Deeds, Mortgage-backed Securities delivered to Credit Agent as Pledged Securities, Purchase Commitments, and all related Mortgage Loan documents and instruments, and all files, surveys, certificates, correspondence, appraisals, computer programs, tapes, discs, cards, accounting records and other information and data relating to the Collateral.

4.3. Release of Security Interest in Pledged Assets

4.3 (a)	Except as provided in Section 4.3(b), Credit Agent will release its security interest in Pledged Loans and Agreements for Deed only against payment to Credit Agent of the Release Amount in connection with those Pledged Loans and Agreements for Deed. If Pledged Loans are transferred to a pool custodian or an Investor for inclusion in a Mortgage Pool and Credit Agent’s security interest in the Pledged Loans included in the Mortgage Pool is not released before the issuance of the related Mortgage-backed Security, then that Mortgage-backed Security, when issued, is a Pledged Security, Credit Agent’s security interest continues in the Pledged Loans backing that Pledged Security and Credit Agent is entitled to possession of the Pledged Security in the manner provided in this Agreement.
4.3 (b)	If Pledged Loans are transferred to an Approved Custodian and included in an Eligible Mortgage Pool, Credit Agent’s security interest in the Pledged Loans included in the Eligible Mortgage Pool will be released upon the delivery of the Agency Security to Credit Agent (including delivery to or registration in the name of a third party on behalf of Credit Agent) and that Agency Security is a Pledged Security. Credit Agent’s security interest in that Pledged Security will be released only against payment to Credit Agent of the Release Amount in connection with the Mortgage Loans backing that Pledged Security.
4.3 (c)	Credit Agent has the exclusive right to possession of all Pledged Securities or, if Pledged Securities are issued in book-entry form or issued in certificated form and delivered to a clearing corporation (as that term is defined in the Uniform Commercial Code of Minnesota) or its nominee, Credit Agent has the right to have the Pledged Securities registered in the name of a securities intermediary (as that term is defined in the Uniform Commercial Code of Minnesota) in an account containing only customer securities and credited to an account of Credit Agent with respect to which Credit Agent is the entitlement holder. Credit Agent has no duty or obligation to deliver Pledged Securities to an Investor or to credit Pledged Securities to the account of an Investor or an Investor’s designee except against payment for those Pledged Securities. Borrowers acknowledge that Credit Agent may enter into one or more standing arrangements with securities intermediaries with respect to Pledged Securities issued in book entry form or issued in certificated form and delivered to a clearing corporation or its designee, under which the Pledged Securities are registered in the name of the securities intermediary, and Borrowers agree, upon request of Credit Agent, to execute and deliver to those securities intermediaries Borrowers’ written concurrence in any such standing arrangements.
4.3 (d)	As long as no Default or Event of Default exists or would occur as a result, Borrowers may redeem a Pledged Loan, a Pledged Security or an Agreement for Deed from Credit Agent’s security interest by notifying Credit Agent of its intention to redeem the Pledged Loan, Pledged Security or Agreement for Deed from pledge and either (1) paying, or causing an Investor to pay, to Credit Agent, for application as a prepayment on the principal balance of the Warehousing Notes, the Release Amount in connection with the Pledged Loan or the Pledged Loans backing that Pledged Security or the Agreement for

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	Deed, or (2) delivering substitute Collateral that, in addition to being acceptable to Credit Agent in its sole discretion, will, when included with the remaining Collateral included in the calculation of Aggregate Warehousing Collateral Value, result in an Aggregate Warehousing Collateral Value that is at least equal to the aggregate outstanding Advances.
4.3 (e)	After a Default or Event of Default occurs, Credit Agent may, with no liability to Borrowers or any Person, continue to release its security interest in any Pledged Loan, Pledged Security or Pledged Agreement for Deed against payment of the Release Amount for that Pledged Loan, or for the Pledged Loans backing that Pledged Security or for that Pledged Agreement for Deed.
4.3 (f)	The amount to be paid by Borrowers to obtain the release of Credit Agent’s security interest in a Pledged Loan or Pledged Agreement for Deed (“Release Amount”) will be (1) in connection with the sale of a Pledged Loan or Pledged Agreement for Deed by Borrowers, the payment required in any bailee letter pursuant to which Credit Agent ships that Pledged Loan or Pledged Agreement for Deed to an Investor, Approved Custodian, pool custodian or other party, (2) in connection with the sale of a Pledged Loan or Pledged Agreement for Deed by Credit Agent while an Event of Default exists, the amount paid to Credit Agent in a commercially reasonable disposition of that Pledged Loan or Pledged Agreement for Deed and (3) otherwise, until an Event of Default occurs, the principal amount of the Warehousing Advance outstanding against the Pledged Loan or Pledged Agreement for Deed.

4.4. Collection and Servicing Rights

4.4 (a)

If no Event of Default exists, Borrowers may service and receive and collect directly all sums payable to Borrowers in respect of the Collateral other than proceeds of any Purchase Commitment or proceeds of the sale of any Collateral. All proceeds of any Purchase Commitment or any other sale of Collateral must be paid directly to the Cash Collateral Account for application as provided in this Agreement.

4.4 (b)

After an Event of Default, Credit Agent or its designee is entitled to service and receive and collect all sums payable to Borrowers in respect of the Collateral, and in such case (1) Credit Agent or its designee in its discretion may, in its own name, in the name of Borrowers or otherwise, demand, sue for, collect or receive any money or property at any time payable or receivable on account of or in exchange for any of the Collateral, but Credit Agent has no obligation to do so, (2) Borrowers must, if Credit Agent requests them to do so, hold in trust for the benefit of Credit Agent and immediately pay to Credit Agent at its office designated by Notice, all amounts received by Borrowers upon or in respect of any of the Collateral, advising Credit Agent as to the source of those funds and (3) all amounts so received and collected by Credit Agent will be held by it as part of the Collateral and applied by Credit Agent as provided in this Agreement.

4.5. Return of Collateral at End of Commitments

If (a) the Commitments have expired or been terminated, and (b) no Advances, interest or other Obligations are outstanding and unpaid, Credit Agent will release its security interest and will deliver all Collateral in its possession to Borrowers at Borrowers’ expense. Borrowers’ acknowledgement or receipt for any Collateral released or delivered to Borrowers under any provision of this Agreement is a complete and full acquittance for the Collateral so returned, and Credit Agent is discharged from any liability or responsibility for that Collateral.

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4.6. Delivery of Collateral Documents

4.6 (a)	Credit Agent may deliver documents relating to the Collateral to Borrowers for correction or completion under a Trust Receipt.
4.6 (b)	If no Default or Event of Default exists, upon delivery by Borrowers to Credit Agent of shipping instructions pursuant to the applicable Exhibit B, Credit Agent will deliver the Mortgage Notes evidencing Pledged Loans or Pledged Securities, together with all related loan documents and pool documents previously received by Credit Agent under the requirements of the applicable Exhibit B, to the designated Investor or Approved Custodian or to another party designated by Borrowers and acceptable to Credit Agent in its sole discretion.
4.6 (c)	If a Default or Event of Default exists, Credit Agent may, without liability to Borrowers or any other Person, continue to deliver Pledged Loans or Pledged Securities, together with all related loan documents and pool documents in Credit Agent’s possession, to the applicable Investor, or Approved Custodian or to another party acceptable to Credit Agent in its sole discretion.
4.6 (d)	Upon receipt of Notice from Borrowers under Section 3.3(g), and payment of the Release Amount with respect to a Pledged Asset identified by Borrowers, Credit Agent will, at Borrowers’ request, release to Borrowers any Collateral Documents relating to the redeemed Pledged Asset or the Pledged Loans backing a Pledged Security that Credit Agent has in its possession and that have not been delivered to an Investor or Approved Custodian; provided, that Credit Agent shall, if requested by an Investor or Approved Custodian or consistent with past practices, provide the Collateral Documents for any Pledged Asset purchased to such Investor, and the Collateral Documents for any Pledged Loan backing Mortgage-backed Securities to the Approved Custodian.

4.7. Borrowers Remains Liable

Anything herein to the contrary notwithstanding, Borrowers shall remain liable under each item of the Collateral to observe and perform all the conditions and obligations to be observed and performed by it thereunder, all in accordance with the terms thereof and any other agreement giving rise thereto, and in accordance with and pursuant to the terms and provisions thereof. Whether or not Credit Agent has exercised any rights in any of the Collateral, neither Credit Agent, nor any Lender shall have any obligation or liability under any of the Collateral (or any agreement giving rise thereto) by reason of or arising out of this Agreement or the receipt by Credit Agent of any payment relating thereto, nor shall Credit Agent nor any Lender be obligated in any manner to perform any of the obligations of Borrowers under or pursuant to any of the Collateral (or any agreement giving rise thereto) to make any payment, to make any inquiry as to the nature or the sufficiency of any payment received by it or as to the sufficiency of any performance by any party under any of the Collateral (or any agreement giving rise thereto), to present or file any claim, to take any action to enforce any performance or to collect the payment of any amounts which may have been assigned to it or to which it may be entitled at any time or times.

4.8. Further Assurance

Borrowers authorize Credit Agent to file any financing statements, and Borrowers agree to take whatever other actions are requested by Credit Agent to perfect and continue Credit Agent’s security interest in the Collateral. Borrowers will execute and cooperate with Credit Agent in obtaining from third parties control agreements in form satisfactory to Credit Agent with respect to collateral consisting of investment property, deposit accounts, letter-of-credit rights, and electronic chattel paper.

End of Article 4

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5. CONDITIONS PRECEDENT

5.1. Initial Advance

Lenders’ obligation to make Warehousing Advances, RFC’s and WaMu’s obligation to make RFC/WaMu Advances and RFC’s obligation to make RFC Direct Advances, is subject to the satisfaction, in the sole discretion of Credit Agent, of the following conditions precedent:

5.1 (a)	Credit Agent must receive the following, all of which must be satisfactory in form and content to Credit Agent, in its sole discretion:
	(1)	The Notes and this Agreement duly executed by Borrowers.
	(2)	The Lennar Undertaking, on the form prescribed by Credit Agent, duly executed by Lennar.
	(3)	A certificate of UAMCLLC stating that there has been no change in either UAMCLLC ‘s articles of organization or operating agreement since those delivered in connection with the Existing Agreement.
	(4)	Certificates of good standing dated within 60 days of the date of this Agreement, together with a certification from the Franchise Tax Board or other state tax authority stating that UAMCLLC is in good standing with the Franchise Tax Board or such state tax authority, if applicable.
	(5)	A resolution, consent or approval of all of the members of UAMCLLC authorizing the execution, delivery and performance of this Agreement and the other Loan Documents, each Advance Request and all other agreements, instruments or documents to be delivered by UAMCLLC under this Agreement.
	(6)	A certificate as to the incumbency and authenticity of the signatures of the managers of UAMCLLC executing this Agreement and the other Loan Documents.
	(7)	Assumed Name Certificates dated within 60 days of the date of this Agreement for any assumed name used by UAMCLLC in the conduct of its business.
	(8)	A certificate of EHMI stating that there has been no change in either EHMI’s articles of incorporation or bylaws since those delivered in connection with the Existing Agreement.
	(9)	Certificates of good standing dated within 60 days of the date of this Agreement, together with a certification from the Franchise Tax Board or other state tax authority stating that EHMI is in good standing with the Franchise Tax Board or such state tax authority, if applicable.
	(10)	A resolution of the board of directors of EHMI authorizing the execution, delivery and performance of this Agreement and the other Loan Documents, each Advance Request and all other agreements, instruments or documents to be delivered by EHMI under this Agreement.
	(11)	A certificate as to the incumbency and authenticity of the signatures of the officers of EHMI executing this Agreement and the other Loan Documents.

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(12)	Assumed Name Certificates dated within 60 days of the date of this Agreement for any assumed name used by EHMI in the conduct of its business.
(13)	A certificate of AFSI stating that there has been no change in either AFSI’s articles of incorporation or bylaws since those delivered in connection with the Existing Agreement.
(14)	Certificates of good standing dated within 60 days of the date of this Agreement, together with a certification from the Franchise Tax Board or other state tax authority stating that AFSI is in good standing with the Franchise Tax Board or such state tax authority, if applicable.
(15)	A resolution of the board of directors of AFSI authorizing the execution, delivery and performance of this Agreement and the other Loan Documents, each Advance Request and all other agreements, instruments or documents to be delivered by AFSI under this Agreement.
(16)	A certificate as to the incumbency and authenticity of the signatures of the officers of AFSI executing this Agreement and the other Loan Documents.
(17)	Assumed Name Certificates dated within 60 days of the date of this Agreement for any assumed name used by AFSI in the conduct of its business.
(18)	A certificate of UAMCC stating that there has been no change in either UAMCC’s articles of incorporation or bylaws since those delivered in connection with the Existing Agreement.
(19)	Certificates of good standing dated within 60 days of the date of this Agreement, together with a certification from the Franchise Tax Board or other state tax authority stating that UAMCC is in good standing with the Franchise Tax Board or such state tax authority, if applicable.
(20)	A resolution of the board of directors of UAMCC authorizing the execution, delivery and performance of this Agreement and the other Loan Documents, each Advance Request and all other agreements, instruments or documents to be delivered by UAMCC under this Agreement.
(21)	A certificate as to the incumbency and authenticity of the signatures of the officers of UAMCC executing this Agreement and the other Loan Documents.
(22)	Assumed Name Certificates dated within 60 days of the date of this Agreement for any assumed name used by UAMCC in the conduct of its business.
(23)	A certificate of UAMC Asset stating that there has been no change in either UAMC Asset articles of incorporation or bylaws since those delivered in connection with the Existing Agreement.
(24)	Certificates of good standing dated within 60 days of the date of this Agreement, together with a certification from the Franchise Tax Board or other state tax authority stating that UAMC Asset is in good standing with the Franchise Tax Board or such state tax authority, if applicable.
(25)	A resolution of the board of directors of UAMC Asset authorizing the execution, delivery and performance of this Agreement and the other Loan Documents, each Advance Request and all other agreements, instruments or documents to be delivered by UAMC Asset under this Agreement.

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(26)	A certificate as to the incumbency and authenticity of the signatures of the officers of UAMC Asset executing this Agreement and the other Loan Documents.
(27)	Assumed Name Certificates dated within 60 days of the date of this Agreement for any assumed name used by UAMC Asset in the conduct of its business.
(28)	A certificate of Lennar stating that there has been no change in either Lennar’s articles or certificate of incorporation or bylaws since those delivered in connection with the Existing Agreement,
(29)	Certificates of good standing dated within 60 days of the date of this Agreement, together with a certification from the Franchise Tax Board or other state tax authority stating that Lennar is in good standing with the Franchise Tax Board or such state tax authority, if applicable.
(30)	A resolution of the board of directors of Lennar, certified as of the date of the Agreement by its corporate secretary, authorizing the execution, delivery and performance of Lennar Undertaking, and all other agreements, instruments or documents to be delivered by Lennar under this Agreement.
(31)	A certificate as to the incumbency and authenticity of the signatures of the officers of Lennar executing Lennar Undertaking and all other agreements, instruments or documents to be delivered under this Agreement (Lender being entitled to rely on that certificate until a new incumbency certificate has been furnished to Lender).
(32)	A favorable written opinion of counsel to Borrowers and Lennar (or of separate counsel at the option of Borrowers and Lennar), addressed to Lenders and dated as of the date of this Agreement, covering such matters as Lenders may reasonably request.
(33)	Uniform Commercial Code, tax lien and judgment searches of the appropriate public records for each Borrower that do not disclose the existence of any prior Lien on the Collateral other than in favor of Credit Agent or as permitted under this Agreement.
(34)	Copies of the certificates, documents or other written instruments that evidence Borrowers’ eligibility described in Section 9.1, all in form and substance satisfactory to Credit Agent.
(35)	Copies of each Borrowers’ errors and omissions insurance policy or mortgage impairment insurance policy, and blanket bond coverage policy, or certificates in lieu of policies, showing compliance by each Borrower as of the date of this Agreement with the provisions of Section 7.9.
(36)	An agreement among each Borrower that is selling Loans to Fannie Mae, Credit Agent and Fannie Mae in which Fannie Mae agrees to send all cash proceeds of Mortgage Loans sold by such Borrower to Fannie Mae to the Cash Collateral Account, each in form and substance satisfactory to Credit Agreement.
(37)	Receipt by Credit Agent and Lenders of any fees due on the date of this Agreement.

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	(38)	An executed Electronic Tracking Agreement among Borrowers, Credit Agent and Mortgage Electronic Registration Systems, Inc. (“MERS”), and MERCORP, Inc., pursuant to which Credit Agent will have the authority to, among other things, withdraw Mortgages from the MERS system, if either the Mortgage Loan has been registered on the MERS system naming Borrowers as servicer or subservicer, or the Mortgage Loan has not yet been registered on the MERS system.
5.1 (b)	If, as of the date of this Agreement, any Borrower has any indebtedness for borrowed money to any of its managers, members or Affiliates or any director, officer or shareholder of any manager, member or Affiliate of any manager or member, which indebtedness, when added to all other such indebtedness of each Borrower, results in an aggregate amount of such indebtedness in excess of $35,000,000, the Person to whom that Borrower is indebted must have executed a Subordination of Debt Agreement, on the form prescribed by Credit Agent; and Credit Agent must have received an executed copy of that Subordination of Debt Agreement, certified by the secretary of the respective Borrower to be true and complete and in full force and effect as of the date of the Advance.
5.1 (c)	No Borrower must have incurred any material liabilities, direct or contingent, other than in the ordinary course of its business, since the Audited Statement Date.

5.2. Each Advance

Lenders’ obligation to make each Warehousing Advance, RFC’s and WaMu’s obligation to make each RFC/WaMu Advance and RFC’s obligation to make each RFC Direct Advance is subject to the satisfaction, in the sole discretion of Credit Agent, as of the date of each Advance, of the following additional conditions precedent:

5.2 (a)	Borrowers must have delivered to Credit Agent the applicable Warehousing Advance Request and Collateral Documents required by, and must have satisfied the procedures and substantive requirements set forth in, Article 2 and the Exhibits described in that Article. All items delivered to Credit Agent must be satisfactory to Credit Agent in form and content, and Credit Agent may reject any item that does not satisfy the requirements of this Agreement or any applicable Purchase Commitment.
5.2 (b)	Credit Agent must have received evidence satisfactory to it confirming the making or continuation of any book entry or the due filing and recording in all appropriate offices of all financing statements and other instruments necessary to perfect the security interest of Credit Agent in the Collateral under the Uniform Commercial Code or other applicable law.
5.2 (c)	The representations and warranties of Borrowers contained in Article 6 and Article 9 and the representations and warranties of Lennar under the Lennar Undertaking must be accurate and complete in all material respects as if made on and as of the date of each Advance.
5.2 (d)	Borrowers must have performed all agreements to be performed by each of them under this Agreement, and after giving effect to the requested Advance, no Default or Event of Default will exist under this Agreement.
5.2 (e)	After giving effect to the requested Advance, the Advances outstanding under this Agreement will not exceed the lesser of (i) the Warehousing Credit Limit or (ii) the Aggregate Warehousing Collateral Value.

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5.2 (f)	Lennar must have performed all agreements to be performed by it under the Lennar Undertaking.
	Delivery of a Warehousing Advance Request by a Borrower will be deemed a representation by Borrowers that all conditions set forth in this Section have been satisfied as of the date of the Advance.

5.3. Force Majeure

Notwithstanding Borrowers’ satisfaction of the conditions set forth in this Agreement, Credit Agent and Lenders have no obligation to make a Warehousing Advance, RFC and WaMu have no obligation to make an RFC/WaMu Advance, and RFC has no obligation to make an RFC Direct Advance, if Lenders or Credit Agent are prevented from obtaining the funds necessary to make an Advance, or are otherwise prevented from making an Advance as a result of (a) any fire, flood or other casualty, failure of power, strike, lockout or other labor trouble, banking moratorium, embargo, sabotage, confiscation, condemnation, riot, civil disturbance, insurrection, act of terrorism, war or other activity of armed forces, act of God or other similar reason beyond the control of Lenders or Credit Agent or (b) any bank’s (including the Funding Bank’s) failure to wire all or any portion of an Advance to the Person identified in the related Warehousing Advance Request as the intended mortgagor of the Mortgage Loan to be funded with such Advance (or portion of such Advance) if such failure did not directly result from (i) Lenders’ or Credit Agent’s failure to provide information with respect to such identified mortgagor to such bank within a reasonable time after Borrowers furnished such information to Lenders and Credit Agent in complete and proper form, or (ii) Lenders’ or Credit Agent’s failure to provide routine wire-release authorizations to such bank within a reasonable time after all other conditions precedent to such Advance were properly satisfied. Lenders and Credit Agent will make the requested Warehousing Advance, RFC and WaMu will make the requested RFC/WaMu Advance and RFC will make the requested RFC Direct Advance as soon as reasonably possible following the occurrence of such an event.

End of Article 5

Page 5-5

6. GENERAL REPRESENTATIONS AND WARRANTIES

Each Borrower represents and warrants to Credit Agent and Lenders, as of the date of this Agreement and as of the date of each Warehousing Advance Request and the making of each Advance, that:

6.1. Place of Business

As of the Closing Date, and thereafter until Borrowers provide Credit Agent with Notice of any change:

6.1 (a)	UAMCLLC’s chief executive office and principal place of business is 311 Park Place Boulevard, 5th Floor, Clearwater, FL 33758.
6.1 (b)	EHMI’s chief executive office and principal place of business is 11000 NE 33rd Place, Suite 300, Bellevue, Washington 98004.
6.1 (c)	AFSI’s chief executive office and principal place of business is 24896 Chrisanta Drive, Mission Viejo, CA 92691.
6.1 (d)	UAMCC’s chief executive office and principal place of business is 24896 Chrisanta Drive, Mission Viejo, CA 92691.
6.1 (e)	UAMC Asset’s chief executive office and principal place of business is 700 NW 107th Avenue, 3rd Floor, Miami, Florida 33173.

From and after the time Borrower provides Lenders with Notice of any change of address, the new address shall remain the chief executive office and principal place of business of the applicable Borrower(s) until Notice of a subsequent change of address is given.

6.2. Organization; Good Standing; Subsidiaries

UAMCLLC is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Florida, and has the full legal power and authority to own its property and to carry on its business as currently conducted. EHMI is a corporation duly organized, validly existing and in good standing under the laws of the State of Washington, and has the full legal power and authority to own its property and to carry on its business as currently conducted. AFSI is a corporation duly organized, validly existing and in good standing under the laws of the State of California, and has the full legal power and authority to own its property and to carry on its business as currently conducted. UAMCC is a corporation duly organized, validly existing and in good standing under the laws of the State of California, and has the full legal power and authority to own its property and to carry on its business as currently conducted. UAMC Asset is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada, and has the full legal power and authority to own its property and to carry on its business as currently conducted. Each Subsidiary of each Borrower is duly organized, validly existing and in good standing under the laws of its jurisdiction of formation, and has the full legal power and authority to own its property and conduct its business as currently conducted. Each Borrower and each Subsidiary of each Borrower is duly qualified as a foreign corporation to do business and is in good standing in each jurisdiction in which the transaction of its business makes qualification necessary, except in jurisdictions, if any, where a failure to be in good standing has no material adverse effect on Borrowers’ or the Subsidiaries’ business, operations, assets or financial condition as a whole. For the purposes of this Agreement, good standing includes qualification for any and all licenses and payment of any and all taxes required in the

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jurisdiction of its incorporation and in each jurisdiction in which Borrower transacts business. As of the date of this Agreement, no Borrower has any Subsidiaries except as set forth on Exhibit D, which sets forth with respect to each Subsidiary, its name, address, place of incorporation, each state in which it is qualified as a foreign corporation, and the percentage ownership of its capital stock by the respective Borrower.

6.3. Authorization and Enforceability

Each Borrower has the power and authority to execute, deliver and perform this Agreement, the Notes and the other Loan Documents to which Borrowers are party and to make the borrowings under this Agreement. The execution, delivery and performance by Borrowers of this Agreement, the Notes and the other Loan Documents to which Borrowers are party and the making of the borrowings under this Agreement and the Notes, have been duly and validly authorized by all necessary company action on the part of each Borrower (none of which actions has been modified or rescinded, and all of which actions are in full force and effect) and do not and will not (a) conflict with or violate any provision of law, of any judgments binding upon any Borrower, or of the organizational documents of each Borrower, or (b) conflict with or result in a breach of, constitute a default or require any consent under, or result in or require the acceleration of any indebtedness of any Borrower under any agreement, instrument or indenture to which any Borrower is a party or by which any Borrower or its property may be bound or affected, or result in the creation of any Lien upon any property or assets of any Borrower (other than the Lien on the Collateral granted under this Agreement). This Agreement, the Notes and the other Loan Documents to which Borrowers are party constitute the legal, valid and binding obligations of Borrowers, enforceable in accordance with their respective terms, except that enforceability may be limited by bankruptcy, insolvency or other such laws affecting the enforcement of creditors’ rights and general principles of equity.

6.4. Authorization and Enforceability of Lennar Undertaking

Lennar has the power and authority to execute, deliver and perform the Lennar Undertaking. The Lennar Undertaking constitutes the legal, valid, and binding obligation of Lennar, enforceable in accordance with its terms, except that the enforceability may be limited by bankruptcy, insolvency or other such laws affecting creditors’ rights and general principles of equity.

6.5. Approvals

The execution and delivery of this Agreement, the Notes and the other Loan Documents and the performance of each Borrower’s obligations under this Agreement, the Notes and the other Loan Documents and the validity and enforceability of this Agreement, the Notes and the other Loan Documents do not require any license, consent, approval or other action of any agency, board, bureau, commission, instrumentality or other administrative or regulatory body (in each case, whether federal, state or local, domestic or foreign) other than those that have been obtained and remain in full force and effect.

6.6. Financial Condition

The balance sheet of UAMCLLC (and its Subsidiaries, on a consolidated basis) as of each Statement Date, and the related statements of income, cash flows and changes in stockholders’ equity for the fiscal period ended on each Statement Date, previously furnished to Credit Agent, fairly present the financial condition of UAMCLLC (and its Subsidiaries) as at that Statement Date and the results of its operations for the fiscal period ended on that Statement Date. Each Borrower had, on each Statement Date, no known material liabilities, direct or indirect, fixed or contingent, matured or unmatured, or liabilities for taxes, long-term leases or unusual forward or long-term commitments not disclosed by, or reserved against in, said balance sheet and related

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statements, and at the present time there are no material unrealized or anticipated losses from any loans, advances or other commitments of any Borrower except as previously disclosed to Credit Agent in writing. Those financial statements were prepared in accordance with GAAP applied on a consistent basis throughout the periods involved. Since the Audited Statement Date, there has been no material adverse change in the business, operations, assets or financial condition of any Borrower, nor is any Borrower aware of any state of facts that (with or without notice or lapse of time or both) would or could result in any such material adverse change.

6.7. Litigation

There are no actions, claims, suits or proceedings pending or, to any Borrower’s knowledge, threatened or reasonably anticipated against or affecting Borrowers or any Subsidiary of Borrowers in any court or before any arbitrator or before any agency, board, bureau, commission, instrumentality or other administrative or regulatory body (in each case, whether federal, state or local, domestic or foreign) that, if adversely determined, may reasonably be expected to result in a material adverse change in any Borrower’s business, operations, assets or financial condition as a whole, or that would affect the validity or enforceability of this Agreement, the Notes or any other Loan Document.

6.8. Compliance with Laws

No Borrower nor any Subsidiary of any Borrower is in violation of any provision of any law, or of any judgment, award, rule, regulation, order, decree, writ or injunction of any court or any agency, board, bureau, commission, instrumentality or other administrative or regulatory body (in each case, whether federal, state or local, domestic or foreign) that could result in a material adverse change in any Borrower’s business, operations, assets or financial condition as a whole or that would affect the validity or enforceability of this Agreement, the Notes or any other Loan Document.

6.9. Regulation U

No Borrower is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying Margin Stock, and no part of the proceeds of any Advance made under this Agreement will be used to purchase or carry any Margin Stock or to extend credit to others for the purpose of purchasing or carrying any Margin Stock.

6.10. Investment Company Act

No Borrower is an “investment company” or controlled by an “investment company” within the meaning of the Investment Company Act.

6.11. Payment of Taxes

Each Borrower and each of their respective Subsidiaries has filed or caused to be filed all federal, state and local income, excise, property and other tax returns that are required to be filed with respect to the operations of Borrowers and their Subsidiaries, all such returns are true and correct and Borrowers and each of their Subsidiaries has paid or caused to be paid all taxes shown on those returns or on any assessment, to the extent that those taxes have become due, including all FICA payments and withholding taxes, if appropriate. The amounts reserved as a liability for income and other taxes payable in the financial statements described in Section 6.6 are sufficient for payment of all unpaid federal, state and local income, excise, property and other taxes, whether or not disputed, of Borrowers and their Subsidiaries accrued for or applicable to the period and on the dates of those financial statements and all years and periods prior to those

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financial statements and for which Borrowers and their Subsidiaries may be liable in their own right or as transferee of the assets of, or as successor to, any other Person. No tax Liens have been filed and no material claims are being asserted against any Borrower, any Subsidiary of any Borrower or any property of any Borrower or any Subsidiary of any Borrower with respect to any taxes, fees or charges.

6.12. Agreements

No Borrower nor any Subsidiary of any Borrower is a party to any agreement, instrument or indenture or subject to any restriction materially and adversely affecting its business, operations, assets or financial condition, except as disclosed in the financial statements described in Section 6.6. No Borrower nor any Subsidiary of any Borrower is in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in the Existing Agreement or in any other agreement, instrument, or indenture which default could result in a material adverse change in any Borrower’s business, operations, assets or financial condition as a whole. No holder of any indebtedness of any Borrower or of any of their respective Subsidiaries has given notice of any asserted default under that indebtedness, and no liquidation or dissolution of any Borrower or of any of their Subsidiaries and no receivership, insolvency, bankruptcy, reorganization or other similar proceedings relative to Borrowers or of any of their Subsidiaries or any of their properties is pending, or to the knowledge of Borrowers, threatened.

6.13. Title to Properties

Each Borrower and each Subsidiary of each Borrower has good, valid, insurable and (in the case of real property) marketable title to all of its properties and assets (whether real or personal, tangible or intangible) reflected on the financial statements described in Section 6.6, except for those properties and assets that Borrowers have disposed of since the date of those financial statements either in the ordinary course of business or because they were no longer used or useful in the conduct of Borrowers’ or the respective Subsidiary’s business. All of Borrowers’ properties and assets are free and clear of all Liens except as disclosed in Borrowers’ financial statements.

6.14. ERISA

Each Plan is in compliance with all applicable requirements of ERISA and the Internal Revenue Code and with all material applicable rulings and regulations issued under the provisions of ERISA and the Internal Revenue Code setting forth those requirements, except where any failure to comply would not result in a material loss to Borrowers or any ERISA Affiliate. All of the minimum funding standards or other contribution obligations applicable to each Plan have been satisfied. No Plan is a Multiemployer Plan or a defined-benefit pension plan subject to Title IV of ERISA.

6.15. No Retiree Benefits

Except as required under Section 4980B of the Internal Revenue Code, Section 601 of ERISA or applicable state law, no Borrower or any Subsidiary of any Borrower is obligated to provide post-retirement medical or insurance benefits with respect to employees or former employees.

6.16. Assumed Names

No Borrower originates Mortgage Loans or otherwise conducts business under any names other than its legal name and the assumed names set forth on Exhibit G. Each Borrower has made all filings and taken all other action as may be required under the laws of any jurisdiction in which it originates Mortgage Loans or otherwise conducts business under any assumed name. To the

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best of Borrowers’ knowledge, each Borrower’s use of the assumed names set forth on Exhibit G does not conflict with any other Person’s legal rights to any such name, nor otherwise give rise to any liability by Borrowers to any other Person. Borrowers may amend Exhibit G to add or delete any assumed names used by Borrowers to conduct business. An amendment to Exhibit G to add an assumed name is not effective until Borrowers have delivered to Credit Agent an assumed name certificate in the jurisdictions in which the assumed name is to be used, which must be satisfactory in form and content to Credit Agent, in its sole discretion. In connection with any amendment to delete a name from Exhibit G, Borrowers represent and warrant that they have ceased using that assumed name in all jurisdictions.

6.17. Servicing

Exhibit C is a true and complete list of Borrowers’ Servicing Portfolio. All of Borrowers’ Servicing Contracts are in full force and effect, and are unencumbered by Liens other than Liens disclosed in Exhibit C. No default or event that, with notice or lapse of time or both, would become a default, exists under any of Borrowers’ Servicing Contracts.

End of Article 6

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7. AFFIRMATIVE COVENANTS

As long as the Commitments are outstanding or there remain any Obligations to be paid or performed under this Agreement or under any other Loan Document, Borrowers must:

7.1. Payment of Obligations

Punctually pay or cause to be paid all Obligations, including the Obligations payable under this Agreement and the Notes, in accordance with their terms.

7.2. Financial Statements

Deliver to Credit Agent and each Lender:

7.2 (a)	As soon as available and in any event within 45 days after the end of each fiscal quarter, other than the last fiscal quarter of UAMCLLC’s fiscal year, an interim statement of income of UAMCLLC (and its Subsidiaries, on a consolidated basis) for the immediately preceding fiscal quarter, and the related balance sheet as at the end of the immediately preceding fiscal quarter, all in reasonable detail, subject, however, to year-end audit adjustments.
7.2 (b)	As soon as available and in any event within 90 days after the end of each fiscal year of Borrowers, fiscal year-end statements of income, changes in members’ equity and cash flow of UAMCLLC (and its Subsidiaries, on a consolidated basis) for that year, and the related balance sheet as of the end of that year (setting forth in comparative form the corresponding figures for the preceding fiscal year), all in reasonable detail and accompanied by (1) an opinion as to those financial statements in form and substance satisfactory to Credit Agent and prepared by independent certified public accountants of recognized standing acceptable to Credit Agent and (2) any management letters, management reports or other supplementary comments or reports delivered by those accountants to any Borrower or its board of directors.
7.2 (c)	Together with each delivery of financial statements required by this Section, a Compliance Certificate for each Borrower substantially in the form of Exhibit E.
7.2 (d)	Copies of all regular or periodic financial and other reports that any Borrower files with the Securities and Exchange Commission or any successor governmental agency or other entity.

7.3. Other Borrower Reports

Deliver to Credit Agent and each Lender:

7.3 (a) If at any time Borrowers’ consolidated Servicing Portfolio exceeds $500,000,000, then as soon as available and in any event within 45 days after the end of each Calendar Quarter, a consolidated report (“Servicing Portfolio Report”) as of the end of the Calendar Quarter, as to all Mortgage Loans the servicing rights to which are owned by Borrowers (specified by investor type, recourse and non-recourse) regardless of whether the Mortgage Loans are Pledged Loans. The Servicing Portfolio Report must indicate which Mortgage Loans (1) are current and in good standing, (2) are more than 30, 60 or 90 days past due, (3) are the subject of pending bankruptcy or foreclosure proceedings, or (4) have been converted (through foreclosure or other proceedings in lieu of foreclosure) into real estate owned by Borrowers.

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7.3 (b)	With each Officer’s Certificate, a monthly status report on each Construction/Perm Mortgage Loan, including, without limitation, the loan number, mortgagor name(s), property address, general contractor name, completion status (percent completed or staged draw no. and brief description), estimated completion date (if completion date is behind schedule, then an explanation of delay), date of last on-site inspection, and Pledged Mortgage payment status.
7.3 (c)	Weekly or more frequently as Credit Agent may from time to time request, a commitment summary and pipeline report substantially in the form of Exhibit O (“Commitment Summary Report”) including a report on Borrower’s Weighted Average Committed Purchase Price for each type of Mortgage Loan owned by Borrowers and dated as of the close of business on the first Business Day of each week and provided to Credit Agent by facsimile by the close of business on the next succeeding Business Day.
7.3 (d)	As soon as available and in any event within 45 days after the end of each fiscal quarter, a consolidated loan production report as of the end of that fiscal quarter, presenting the total dollar volume and the number of Mortgage Loans originated and closed or purchased during that fiscal quarter and for the fiscal year-to-date, in form acceptable to Credit Agent in its sole discretion.
7.3 (e)	Upon request by Credit Agent or any Lender a copy of the most recent 10-Q and 10-K of Lennar filed with the Securities and Exchange Commission.
7.3 (f)	Other reports in respect of Pledged Assets, including copies of purchase confirmations issued by Investors purchasing Pledged Loans from Borrowers, in such detail and at such times as Credit Agent in its discretion may reasonably request.
7.3 (g)	With reasonable promptness, such further information regarding the business, operations, assets or financial condition of each Borrower as Credit Agent, or any Lender, through Credit Agent, may reasonably request, including copies of any audits completed by HUD, Ginnie Mae, Fannie Mae or Freddie Mac.

7.4. Maintenance of Existence; Conduct of Business

Preserve and maintain each Borrower’s organizational existence in good standing and all of its rights, privileges, licenses and franchises necessary or desirable in the normal conduct of its business, including its eligibility as lender, seller/servicer or issuer as described under Section 9.1; conduct its business in an orderly and efficient manner; maintain a net worth of acceptable assets as required for maintaining each Borrower’s eligibility as lender, seller/servicer or issuer as described under Section 9.1; and make no material change in the nature or character of its business or engage in any business in which it was not engaged on the date of this Agreement.

7.5. Compliance with Applicable Laws

Comply with the requirements of all applicable laws, rules, regulations and orders of any agency, board, bureau, commission, instrumentality or other administrative or regulatory body (in each case, whether federal, state or local, domestic or foreign), a breach of which could result in a material adverse change in each Borrower’s business, operations, assets, or financial condition as a whole or on the enforceability of this Agreement, the Notes, any other Loan Document or any Collateral, except where contested in good faith and by appropriate proceedings.

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7.6. Inspection of Properties and Books; Operational Reviews

7.6 (a)	Permit Credit Agent, any Lender or any Participant (and their authorized representatives) to discuss the business, operations, assets and financial condition of each Borrower and their respective Subsidiaries with each Borrower’s officers, agents and employees, and to examine and make copies or extracts of each Borrower’s and their respective Subsidiaries’ books of account, all at such reasonable times and, as long as no Default or Event of Default has occurred and is continuing, on such reasonable Notice, as Credit Agent, any Lender or any Participant may request.
7.6 (b)	Provide its accountants with a copy of this Agreement promptly after its execution and authorize and instruct them to answer candidly all questions that the officers of Credit Agent, any Lender or any Participant or any authorized representatives of Credit Agent, any Lender or any Participant may address to them in reference to the financial condition or affairs of each Borrower and their respective Subsidiaries. As long as no Default or Event of Default has occurred and is continuing, Credit Agent or any Lender will provide Borrowers with advance notice of any such inquiry to Borrowers’ accountants. Each Borrower may have its representatives in attendance at any meetings held between the officers or other representatives of Credit Agent, any Lender or any Participant and each Borrower’s accountants under this authorization.
7.6 (c)	Permit Credit Agent, any Lender or any Participant (and their authorized representatives) access to each Borrower’s premises and records for the purpose of conducting a review of each Borrower’s general mortgage business methods, policies and procedures, auditing its loan files and reviewing the financial and operational aspects of such Borrower’s business.

7.7. Notice

Give prompt Notice to Credit Agent of (a) any action, suit or proceeding instituted by or against any Borrower or any of its Subsidiaries in any federal or state court or before any agency, board, bureau, commission, instrumentality or other administrative or regulatory body (in each case, whether federal, state or local, domestic or foreign), which action, suit or proceeding has at issue in excess of $1,000,000, or any such proceedings threatened against any Borrower or any of its Subsidiaries in writing containing the details of that action, suit or proceeding; (b) the filing, recording or assessment of any Lien for any federal, state or local taxes, assessments or other governmental charges against any Borrower, any of its Subsidiaries or any of their respective assets, other than a Lien for taxes, assessments or other governmental charges on real property securing or that previously secured an individual Mortgage Loan that is not a Pledged Loan; (c) an Event of Default; (d) a Default that continues for more than 4 days; (e) the suspension, revocation or termination of any Borrower’s eligibility, in any respect, as lender, seller/servicer or issuer as described under Section 9.1 or the suspension, revocation or termination of any other license or approval required for any Borrower to engage in the business of originating, acquiring and, if applicable, servicing Mortgage Loans; (f) the imposition of any other adverse regulatory or administrative action or sanction on or against Borrower by any agency, board, bureau, commission, instrumentality or other administrative or regulatory body (in each case, whether federal, state or local, domestic or foreign) that could result in a material adverse change in any Borrower’s business, operations, assets or financial condition as a whole or that could affect the validity or enforceability of any Pledged Loan; (g) the transfer, loss, nonrenewal or termination of any Servicing Contracts to which any Borrower is a party, or which is held for the benefit of such Borrower, and the reason for that transfer, loss, nonrenewal or termination; (h) any Prohibited Transaction with respect to any Plan, specifying the nature of the Prohibited Transaction and what action such Borrower proposes to take with respect to it; and (i) any other action, event or condition of any nature that could lead to or result in a material adverse change in the business, operations, assets or financial condition of Borrowers or any of their respective Subsidiaries.

Page 7-3

7.8. Payment of Debt, Taxes and Other Obligations

Pay, perform and discharge, or cause to be paid, performed and discharged, all of the obligations and indebtedness of each Borrower and its Subsidiaries, all taxes, assessments and governmental charges or levies imposed upon Borrowers or their respective Subsidiaries or upon their respective income, receipts or properties before those taxes, assessments and governmental charges or levies become past due, and all lawful claims for labor, materials and supplies or otherwise that, if unpaid, could become a Lien or charge upon any of their respective properties or assets. Each Borrower and their respective Subsidiaries are not required to pay, however, any taxes, assessments and governmental charges or levies or claims for labor, materials or supplies for which such Borrower or its Subsidiaries have obtained an adequate bond or insurance or that are being contested in good faith and by proper proceedings that are being reasonably and diligently pursued and for which proper reserves have been created.

7.9. Insurance

Maintain blanket bond coverage and errors and omissions insurance or mortgage impairment insurance, with such companies and in such amounts as satisfy prevailing requirements applicable to a lender, seller/servicer or issuer as described under Section 9.1, and liability insurance and fire and other hazard insurance on its properties, in each case with responsible insurance companies acceptable to Credit Agent, in such amounts and against such risks as is customarily carried by similar businesses operating in the same location. Within 30 days after Notice from Credit Agent, obtain such additional insurance as Credit Agent may reasonably require, all at the sole expense of Borrowers. Copies of such policies must be furnished to Credit Agent without charge upon request of Credit Agent.

7.10. Closing Instructions

Indemnify and hold Credit Agent and Lenders harmless from and against any loss, including reasonable attorneys’ fees and costs, attributable to the failure of any title insurance company, agent or attorney to comply with any Borrower’s disbursement or instruction letter relating to any Mortgage Loan. Credit Agent has the right to pre-approve Borrowers’ choice of title insurance company, agent or attorney and Borrowers’ disbursement or instruction letter to them in any case in which Borrowers intend to obtain a Warehousing Advance against the Mortgage Loan to be created at settlement or to pledge that Mortgage Loan as Collateral under this Agreement.

7.11. Subordination of Certain Indebtedness

Cause any indebtedness of any Borrower for borrowed money to any member, manager or Affiliate or any shareholder, director or officer of any manager, member or Affiliate of Borrower, which indebtedness, when added to all other such indebtedness of each Borrower, results in an aggregate amount of such indebtedness in excess of $35,000,000, to be subordinated to the Obligations by the (a) execution and delivery to Credit Agent of a Subordination of Debt Agreement, on the form prescribed by Credit Agent, certified by the corporate secretary of that Borrower to be true and complete and in full force and effect and (b) delivery to Credit Agent of the original promissory note evidencing such indebtedness.

7.12. Other Loan Obligations

Perform all material obligations under the terms of each loan agreement, note, mortgage, security agreement or debt instrument by which any Borrower is bound or to which any of its property is subject, and promptly notify Credit Agent in writing of a declared default under or the termination, cancellation, reduction or nonrenewal of any of its other lines of credit or agreements with any other lender. Exhibit F is a true and complete list of all such lines of credit or agreements as of the date of this Agreement. Borrowers must give Credit Agent at least 30 days Notice before entering into any additional lines of credit or agreements.

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7.13. ERISA

Maintain (and cause each ERISA Affiliate to maintain) each Plan in compliance with all material applicable requirements of ERISA and of the Internal Revenue Code and with all applicable rulings and regulations issued under the provisions of ERISA and of the Internal Revenue Code, and not itself or permit any ERISA Affiliate to, (a) engage in any transaction in connection with which any Borrower or any ERISA Affiliate would be subject to either a civil penalty assessed pursuant to Section 502(i) of ERISA or a tax imposed by Section 4975 of the Internal Revenue Code, in either case in an amount exceeding $25,000 or (b) fail to make full payment when due of all amounts that, under the provisions of any Plan, any Borrower or any ERISA Affiliate is required to pay as contributions to that Plan, or permit to exist any accumulated funding deficiency (as such term is defined in Section 302 of ERISA and Section 412 of the Internal Revenue Code), whether or not waived, with respect to any Plan in an aggregate amount exceeding $25,000.

7.14. Use of Proceeds of Advances

Use the proceeds of each Advance solely for the purpose of funding Eligible Assets and against the pledge of those Eligible Assets as Collateral or, in the case of Advances against Foreclosure Mortgage Loans and Foreclosure Claim Receivables, repaying Advances outstanding against or repurchase obligations with respect to the related Mortgage Loans.

End of Article 7

Page 7-5

8. NEGATIVE COVENANTS

As long as the Commitments are outstanding or there remain any Obligations to be paid or performed, Borrowers must not, either directly or indirectly, without the prior written consent of Credit Agent:

8.1. Contingent Liabilities

Assume, guarantee, endorse or otherwise become contingently liable for the obligation of any Person (including any Subsidiary that is not a Borrower), except (a) by endorsement of negotiable instruments for deposit or collection in the ordinary course of business, and (b) for obligations arising in connection with the sale of Mortgage Loans without credit recourse (but subject to recourse for breaches of normal representations, warranties and other provisions) in the ordinary course of Borrowers’ business, obligations arising in connection with the sale of Mortgage Loans without credit recourse (but subject to recourse for breaches of normal representations, warranties and other provisions) to UAMC Capital in connection with the UAMC Capital Warehousing Facility, and other contingent liabilities in an aggregate amount not greater than $10,000,000.

8.2. Restrictions on Fundamental Changes

8.2 (a)	Consolidate, merge or enter into any analogous reorganization or transaction with any Person, except that any Borrower may merge with another Borrower and any Borrower may enter into a merger if the surviving corporation will be a wholly-owned Subsidiary of UAMCLLC.
8.2 (b)	Liquidate, wind up or dissolve (or suffer any liquidation or dissolution).
8.2 (c)	Cease actively to engage in the business of originating or acquiring Mortgage Loans or, if applicable, servicing Mortgage Loans, or make any other material change in the nature or scope of the business in which each Borrower engages as of the date of this Agreement.
8.2 (d)	Sell, assign, lease, convey, transfer or otherwise dispose of (whether in one transaction or a series of transactions) all or any substantial part of each Borrower’s business or assets, whether now owned or acquired after the Closing Date, other than, in the ordinary course of business and to the extent not otherwise prohibited by this Agreement, sales of (1) Mortgage Loans, (2) Mortgage-backed Securities and (3) Servicing Contracts.
8.2 (e)	Change its name or jurisdiction of incorporation or formation without providing 30 days prior written notice to Credit Agent.

8.3. Deferral of Subordinated Debt

Pay any Subordinated Debt of any Borrower in advance of its stated maturity or, after a Default or Event of Default under this Agreement has occurred, make any payment of any kind on any Subordinated Debt of any Borrower until all of the Obligations have been paid and performed in full and any applicable preference period has expired.

Page 8-1

8.4. Loss of Eligibility

Take any action, or fail or omit to take any action, that would (a) cause any Borrower to lose all or any part of its status as an eligible lender, seller/servicer or issuer as described under Section 9.1 or all or any part of any other license or approval required for any Borrower to engage in the business of originating, acquiring and, if applicable, servicing Mortgage Loans or (b) result in the imposition of any other adverse regulatory or administrative action or sanction on or against any Borrower by any agency, board, bureau, commission, instrumentality or other administrative or regulatory body (in each case, whether federal, state or local, domestic or foreign) that could result in a material adverse change in any Borrower’s business, operations, assets or financial condition as a whole or that could affect the validity or enforceability of any Pledged Loan.

8.5. Accounting Changes

Make, or permit any Subsidiary of any Borrower to make, any significant change in accounting treatment or reporting practices, except as required by GAAP, or change its fiscal year or the fiscal year of any Subsidiary of any Borrower.

8.6. Leverage Ratio

Permit UAMCLLC’s Leverage Ratio at any time to exceed 10 to 1.

8.7. Minimum Tangible Net Worth

Permit UAMCLLC’s Tangible Net Worth at any time to be less than (i) $25,000,000, as long as Lennar’s long term debt ratings are the equivalent of BBB- or higher, or (ii) $75,000,000, if at any time any two of Fitch, S&P or Moody’s downgrades Lennar’s long term debt rating to less than the equivalent of BBB-.

8.8. Minimum Modified Tangible Net Worth

Permit UAMCLLC’s Modified Tangible Net Worth at any time to be less than $100,000,000.

8.9. Distributions to Members

Make any distributions to UAMCLLC’s Members or EHMI’s, AFSI’s, UAMCC’s and UAMC Asset’s shareholders (including any purchase or redemption of stock) if a Default or Event of Default exists or would occur as a result of the dividend or distribution.

8.10. Transactions with Affiliates

Directly or indirectly (a) make any loan, advance, extension of credit or capital contribution to any of Borrowers’ Affiliates, except (i) any Borrower may make loans, advances, extensions of credit or capital contributions to another Borrower, (ii) UAMCLLC may make loans to Lennar and Lennar Financial Services, LLC, and (iii) Borrowers may make additional loans, advances, extensions of credit and capital contributions to Affiliates in an aggregate amount at any time outstanding not in excess of $30,000,000, in each case (i), (ii) and (iii) above, as long as no Default or Event of Default exists or would occur as a result of such actions, (b) sell, transfer, pledge or assign any of its assets to or on behalf of those Affiliates, except for sales and repurchases of Mortgage Loans to and from UAMC Capital (which may be evidenced by appropriate intercompany accounting entries) in connection with the UAMC Capital Warehousing Facility, or (c) pay management fees to or on behalf of those Affiliates.

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8.11. Recourse Servicing Contracts

Acquire or enter into Servicing Contracts under which Borrowers must repurchase or indemnify the holder of the Mortgage Loans as a result of defaults on the Mortgage Loans at any time during the term of those Mortgage Loans (but subject to recourse for breaches of normal representations, warranties and other provisions), if the aggregate principal amount of Mortgage Loans serviced pursuant to such Servicing Contracts would exceed by all Borrowers $250,000,000.

8.12. Limitation on Liens.

Create, incur, assume or permit to exist any Lien with respect to any property now owned or hereafter acquired by any Borrower or any Subsidiary, or any income or profits therefrom, except (a) the security interests granted to Credit Agent, for the benefit of Lenders, under the Loan Documents; (b) Liens described on Exhibit L; (c) Liens in connection with deposits or pledges to secure payment of workers’ compensation, unemployment insurance, old age pensions or other social security obligations, in the ordinary course of business of any Borrower or any Subsidiary; (d) Liens for taxes, fees, assessments and governmental charges not delinquent or which are being contested in good faith by appropriate proceedings and for which appropriate reserves have been established in accordance with GAAP; (e) encumbrances consisting of zoning regulations, easements, rights of way, survey exceptions and other similar restrictions on the use of real property and minor irregularities in title thereto which do not materially impair their use in operation of its business; (f) contingent Liens on office equipment arising under leases of office space; (g) Liens on equipment to secure Debt incurred to finance the acquisition of such Equipment, including, without limitations, capitalized leases, (h) Liens incurred in connection with gestation agreements with respect to the property described in the definition of such term, and (i) other Liens, provided the Debt secured by such Liens is permitted pursuant to Section 8.13.

8.13. Limitation on Debt.

Incur or permit to remain outstanding any Debt other than (a) Debt incurred under this Agreement, (b) Debt described on Exhibit M hereto, (c) Debt incurred to finance the acquisition by any Borrower or a Subsidiary of equipment used in the ordinary course of its business, (d) Debt incurred under gestation agreements, (e) current liabilities, not overdue unless contested in good faith, incurred by any Borrower or any Subsidiary otherwise than for borrowed money, (f) deferred taxes arising from capitalized excess servicing fees and capitalized servicing rights, (g) Subordinated Debt, (h) Debt arising under Hedging Arrangements, and (i) other Debt in an aggregate amount at any time outstanding of not more than $50,000,000.

End of Article 8

Page 8-3

9. SPECIAL REPRESENTATIONS, WARRANTIES AND COVENANTS CONCERNING COLLATERAL

9.1. Special Representations and Warranties Concerning Eligibility as Seller/Servicer of Mortgage Loans

Borrowers represent and warrant to Credit Agent and Lenders, as of the date of this Agreement and as of the date of each Warehousing Advance Request and the making of each Warehousing Advance, that each Borrower is approved and qualified and in good standing as a lender, seller/servicer or issuer, as set forth below, and meets all requirements applicable to its status as such:

9.1 (a)	UAMCLLC is approved and qualified and in good standing as a lender or seller/servicer, as set forth below, and meets all requirements applicable to its status as:
	(i)	A HUD-approved non-supervised mortgagee, eligible to originate, purchase, hold, sell and service FHA fully insured Mortgage Loans.
	(ii)	A Ginnie Mae-approved seller/servicer of Mortgage Loans and issuer of Mortgage-backed Securities guaranteed by Ginnie Mae.
	(iii)	A lender in good-standing under the VA loan guarantee program eligible to originate, purchase, hold, sell and service VA-guaranteed Mortgage Loans.
	(iv)	A Fannie Mae-approved seller/servicer of Mortgage Loans, eligible to originate, purchase, hold, sell and service Mortgage Loans to be sold to Fannie Mae.
	(v)	A Freddie Mac-approved seller/servicer of Mortgage Loans, eligible to originate, purchase, hold, sell and service Mortgage Loans to be sold to Freddie Mac.
	(vi)	An RFC-approved seller/servicer of Mortgage Loans, eligible to originate, purchase, hold, sell and service Loans to be sold to RFC.
9.1 (b)	EHMI is approved and qualified and in good standing as a lender or seller/servicer, as set forth below, and meets all requirements applicable to its status as:
	(i)	A HUD-approved non-supervised mortgagee, eligible to originate, purchase, hold, sell and service FHA fully insured Mortgage Loans.
	(ii)	A Ginnie Mae-approved seller/servicer of Mortgage Loans and issuer of Mortgage-backed Securities guaranteed by Ginnie Mae.
	(iii)	A lender in good-standing under the VA loan guarantee program eligible to originate, purchase, hold, sell and service VA-guaranteed Mortgage Loans.
	(iv)	A Fannie Mae-approved seller/servicer of Mortgage Loans, eligible to originate, purchase, hold, sell and service Mortgage Loans to be sold to Fannie Mae.
	(v)	A Freddie Mac-approved seller/servicer of Mortgage Loans, eligible to originate, purchase, hold, sell and service Mortgage Loans to be sold to Freddie Mac.
	(vi)	An RFC-approved seller/servicer of Mortgage Loans, eligible to originate, purchase, hold, sell and service Loans to be sold to RFC.

Page 9-1

9.1 (c)	AFSI is approved and qualified and in good standing as a lender or seller/servicer, as set forth below, and meets all requirements applicable to its status as:
	(i)	A HUD-approved non-supervised mortgagee, eligible to originate, purchase, hold, sell and service FHA fully insured Mortgage Loans.
	(ii)	A lender in good-standing under the VA loan guarantee program eligible to originate, purchase, hold, sell and service VA-guaranteed Mortgage Loans.
9.1 (d)	UAMCC is approved and qualified and in good standing as a lender or seller/servicer, as set forth below, and meets all requirements applicable to its status as:
	(i)	A HUD-approved non-supervised mortgagee, eligible to originate, purchase, hold, sell and service FHA fully insured Mortgage Loans.
	(ii)	A lender in good-standing under the VA loan guarantee program eligible to originate, purchase, hold, sell and service VA-guaranteed Mortgage Loans.

9.2. Special Representations and Warranties Concerning Warehousing Collateral

Each Borrower represents and warrants to Credit Agent and Lenders, as of the date of this Agreement and as of the date of each Warehousing Advance Request and the making of each Advance, that:

9.2 (a)	No Borrower has selected the Collateral in a manner so as to affect adversely Lenders’ interests.
9.2 (b)	Borrowers are the legal and equitable owner and holder, free and clear of all Liens (other than Liens granted under this Agreement) of the Pledged Assets. All Pledged Assets and related Purchase Commitments have been duly authorized and validly issued to Borrowers, and all of the foregoing items of Collateral comply with all of the requirements of this Agreement, and have been and will continue to be validly pledged or assigned to Credit Agent, subject to no other Liens.
9.2 (c)	Each Borrower has, and will continue to have, the full right, power and authority to pledge the Collateral pledged and to be pledged by it under this Agreement.
9.2 (d)	Each Mortgage Loan and each related document included in the Pledged Loans (1) has been duly executed and delivered by the parties to that Mortgage Loan and that related document, (2) has been made in compliance with all applicable laws, rules and regulations (including all laws, rules and regulations relating to usury), (3) is and will continue to be a legal, valid and binding obligation, enforceable in accordance with its terms, without setoff, counterclaim or defense in favor of the mortgagor under the Mortgage Loan or any other obligor on the Mortgage Note, (4) has not been modified, amended or any requirements of which waived, except in writing that is part of the Collateral Documents, and (5) is an Eligible Asset as described on Exhibit H.
9.2 (e)	Each Pledged Loan is secured by a Mortgage, and each Pledged Agreement for Deed constitutes a Lien, on real property and improvements located in one of the states of the United States or the District of Columbia.

Page 9-2

9.2 (f)	Except for open-ended Second Mortgage Loans, Construction/Perm Mortgage Loans and Third Party Builder Construction Mortgage Loans, each Pledged Loan has been closed or will be closed and funded with the Advance made against it.
9.2 (g)	Each First Mortgage Loan is secured by a First Mortgage on the real property and improvements described in or covered by that Mortgage.
9.2 (h)	Each First Mortgage Loan has or will have a title insurance policy, in ALTA form or equivalent, from a recognized title insurance company, insuring the priority of the Lien of the Mortgage and meeting the usual requirements of Investors purchasing those Mortgage Loans.
9.2 (i)	Each Second Mortgage Loan is secured by a Second Mortgage on the real property and improvements described in or covered by that Mortgage.
9.2 (j)	To the extent required by the related Purchase Commitment or by Investors generally for similar Mortgage Loans, each Second Mortgage Loan has or will have a title insurance policy, in ALTA form or equivalent, from a recognized title insurance company, insuring the priority of the Lien of the Mortgage and meeting the usual requirements of Investors purchasing those Mortgage Loans.
9.2 (k)	Each First Mortgage Loan has been evaluated or appraised in accordance with Title XI of FIRREA.
9.2 (l)	Each Second Mortgage Loan has been evaluated or appraised in accordance with industry standards for Investors providing Purchase Commitments for and purchasing those Mortgage Loans.
9.2 (m)	The Mortgage Note for each Pledged Loan is (1) payable or endorsed to the order of Borrower, (2) an “instrument” within the meaning of Article 9 of the Uniform Commercial Code of all applicable jurisdictions and (3) is denominated and payable in United States dollars.
9.2 (n)	No default has existed for 60 days or more under any Mortgage Loan included in the Pledged Loans, except for a Foreclosure Mortgage Loan, or under any Pledged Agreement for Deed.
9.2 (o)	No party to an Eligible Asset or any related document is in violation of any applicable law, rule or regulation that would impair the collectibility of the Eligible Asset or the performance by the mortgagor or any other obligor of its obligations under the Eligible Asset or any related document.
9.2 (p)	No party involved in the origination of a Pledged Asset, including the originator, broker, title company or appraiser, was named on the version of the Exclusionary List in effect on the date of the Mortgage Note for that particular Mortgage Loan.
9.2 (q)	All fire and casualty policies covering the real property and improvements encumbered by each Mortgage included in the Pledged Loans and each Pledged Agreement for Deed (1) name and will continue to name a Borrower and its successors and assigns as the insured under a standard mortgagee clause, (2) are and will continue to be in full force and effect and (3) afford and will continue to afford insurance against fire and such other risks as are usually insured against in the broad form of extended coverage insurance generally available.

Page 9-3

9.2 (r)	Pledged Loans and Pledged Agreements for Deed secured by real property and improvements located in a special flood hazard area designated as such by the Director of the Federal Emergency Management Agency are and will continue to be covered by special flood insurance under the National Flood Insurance Program.
9.2 (s)	The real property and improvements securing each Pledged Asset are free of damage or waste and are in good repair, and no improvement located on or being a part of such real property violates any applicable zoning law or regulation.
9.2 (t)	No notice of any partial or total condemnation has been given with respect to the real property and improvements securing any Pledged Asset.
9.2 (u)	Each Pledged Loan against which an Advance has been or will be made on the basis of a Purchase Commitment meets all of the requirements of that Purchase Commitment, and each Pledged Security against which an Advance is outstanding meets all of the requirements of the related Purchase Commitment.
9.2 (v)	Pledged Loans that are intended to be exchanged for Agency Securities comply or, prior to the issuance of the Agency Securities will comply, with the requirements of any governmental instrumentality, department or agency issuing or guaranteeing the Agency Securities.
9.2 (w)	Pledged Loans that are intended to be used in the formation of Mortgage-backed Securities (other than Agency Securities) comply with the requirements of the issuer of the Mortgage-backed Securities (or its sponsor) and of the Rating Agencies.
9.2 (x)	The original assignments of Mortgage delivered to Credit Agent for each Pledged Loan and Pledged Agreement for Deed are in recordable form and comply with all applicable laws and regulations governing the filing and recording of such documents.
9.2 (y)	None of the mortgagors, guarantors or other obligors of any Pledged Asset is a Person named in any Restriction List and to whom the provision of financial services is prohibited or otherwise restricted by applicable law.
9.2 (z)	No Pledged Loan is a Discontinued Loan.
9.2 (aa)	Each Pledged Asset secured by real property to which a Manufactured Home is affixed will create a valid Lien on that Manufactured Home that will have priority over any other Lien on the Manufactured Home, whether or not arising under applicable real property law.

9.3. Special Affirmative Covenants Concerning Warehousing Collateral

As long as the Commitments are outstanding or there remain any Obligations to be paid or performed under this Agreement or under any other Loan Document, each Borrower will:

9.3 (a)

Warrant and defend the right, title and interest of Credit Agent and Lenders in and to the Collateral against the claims and demands of all Persons.

9.3 (b)

Service or cause to be serviced all Pledged Loans in accordance with the standard requirements of the issuers of Purchase Commitments covering them and all applicable HUD, Fannie Mae and Freddie Mac requirements, including taking all actions necessary to enforce the obligations of the obligors under such Mortgage Loans. Service or cause to be serviced all Mortgage Loans backing Pledged Securities in accordance with applicable governmental requirements and requirements of issuers of Purchase

Page 9-4

	Commitments covering them. Hold all escrow funds collected in respect of Pledged Loans and Mortgage Loans backing Pledged Securities in trust, without commingling the same with non-custodial funds, and apply them for the purposes for which those funds were collected.
9.3 (c)	Execute and deliver to Credit Agent with respect to the Collateral those further instruments of sale, pledge, assignment or transfer, and those powers of attorney, as required by Credit Agent, and do and perform all matters and things necessary or desirable to be done or observed, for the purpose of effectively creating, maintaining and preserving the security and benefits intended to be afforded Credit Agent under this Agreement.
9.3 (d)	Notify Credit Agent within 2 Business Days of any default under, or of the termination of, any Purchase Commitment relating to any Pledged Loan, Eligible Mortgage Pool, or Pledged Security.
9.3 (e)	Promptly comply in all respects with the terms and conditions of all Purchase Commitments, and all extensions, renewals and modifications or substitutions of or to all Purchase Commitments. Deliver or cause to be delivered to the Investor the Pledged Loans and Pledged Securities to be sold under each Purchase Commitment not later than the mandatory delivery date of the Pledged Loans or Pledged Securities under the Purchase Commitment.
9.3 (f)	Compare the names of every mortgagor, guarantor and other obligor of every Mortgage Loan, together with appropriate identifying information concerning those Persons obtained by any Borrower, against every Restriction List, and make certain that none of the mortgagors, guarantors or other obligors of any Mortgage Loan is a Person named in any Restriction List and to whom the provision of financial services is prohibited or otherwise restricted by applicable law.
9.3 (g)	Prior to the origination by any Borrower of any Mortgage Loans for sale to Fannie Mae, enter into an agreement among such Borrower, Lender and Fannie Mae, pursuant to which Fannie Mae agrees to send all cash proceeds of Mortgage Loans sold by such Borrower to Fannie Mae to the Cash Collateral Account.
9.3 (h)	Prior to the origination by any Borrower of any Mortgage Loan to be registered on the MERS system, obtain the approval of Credit Agent and enter into an Electronic Tracking Agreement.

9.4. Special Negative Covenants Concerning Warehousing Collateral

As long as the Commitments are outstanding or there remain any Obligations to be paid or performed, no Borrower will, either directly or indirectly, without the prior written consent of Credit Agent:

9.4 (a)	Amend or modify, or waive any of the terms and conditions of, or settle or compromise any claim in respect of, any Pledged Asset, except in a manner consistent with the terms of the related Purchase Commitment, if applicable, and any FHA Insurance policy or VA guaranty.
9.4 (b)	Sell, transfer or assign, or grant any option with respect to, or pledge (except under this Agreement and, with respect to each Pledged Asset, the related Purchase Commitment) any of the Collateral or any interest in any of the Collateral.

Page 9-5

9.4 (c)	Make any compromise, adjustment or settlement in respect of any of the Collateral or accept any consideration other than cash in payment or liquidation of the Collateral.
9.4 (d)	Cause UAMC Asset to issue any stock or other securities in addition to or in substitution for the Pledged Shares, except to UAMCLLC, and UAMCLLC will pledge hereunder, immediately upon its acquisition (directly or indirectly) thereof, any and all additional shares of stock or other securities of UAMC Asset.

9.5. Special Affirmative Covenants Concerning Construction/Perm Mortgage Loans and Third-Party Builder Construction Mortgage Loans

As long as the Commitments are outstanding or there remain any Obligations to be paid or performed under this Agreement or under any other Loan Document, each Borrower will:

9.5 (a)

Prior to the submission of a request for an initial RFC/WaMu Advance against a Third Party Builder Construction Mortgage Loan, Borrowers reviewed the financial and business ability of the builder to complete the improvements to the premises encumbered by a Pledged Mortgage in a timely and cost efficient manner.

9.5 (b)

Notify Credit Agent within 2 Business Days of the following events: (1) a lien filed against premises encumbered by a Pledged Mortgage and not removed within 15 days of the filing, (2) a Pledged Mortgage being out of balance with the Cost Breakdown and not brought back in balance by the mortgagor within 15 days after such determination by such Borrower, and (3) any damage or destruction of the premises encumbered by a Pledged Mortgage.

9.6. Special Representations Concerning Construction/Perm Mortgage Loans and Third Party Builder Construction Mortgage Loans

Borrowers represent and warrant to Credit Agent and Lenders, as of the date of this Agreement and as of the date of each Advance Request, that:

9.6 (a)	Each Construction/Perm Mortgage Loan and Third Party Builder Construction Loan included in the Pledged Loans (1) has an American Land Title Association Lender’s construction loan policy or commitment, (2) has “all risk” builder’s insurance and workers’ compensation insurance, (3) has a survey prepared and certified by a duly registered surveyor or title company showing no encroachments of the improvements or the proposed improvements to be constructed on the premises encumbered by the Pledged Loan on to other lands or easements or restrictions, unless such encroachments have been insured over or are acceptable to the Investor, (4) has building permits and all necessary licenses and approvals for the construction of the improvements on the premises encumbered by the Pledged Loan, (5) has a “as completed” appraisal, (6) has a fixed price general contract issued by a licensed contractor, and (7) has all necessary utilities available to the premises encumbered by the Pledged Loan.
9.6 (b)	Prior to the initial Advance against a Construction/Perm Mortgage Loan or a Third Party Builder Construction Mortgage Loan included in the Pledged Loans, Borrowers shall have received (1) a Cost Breakdown, (2) a draw schedule, and (3) an inspection report.
9.6 (c)	Prior to each Advance against a Construction/Perm Mortgage Loan or a Third Party Builder Construction Mortgage Loan included in the Pledged Loans, Borrowers (i) shall have received (A) an inspection report confirming completion of the work for which such Advance is being requested and the Total Hard Costs are adequate to complete the improvements and (B) invoices for each soft cost reimbursement for which such Advance is being requested, and (ii) shall not have received a notice of intent to assert a Lien from any contract, subcontractor, material supplier or other Person.

Page 9-6

9.6 (d)

Prior to the final Advance against a Construction/Perm Mortgage Loan or a Third Party Builder Construction Mortgage Loan included in the Pledged Loans, Borrowers shall have received, (1) a final inspection report or certificate of occupancy confirming completion of all work in accordance with the plans and specifications, (2) final lien waivers, (3) final certificate of appraiser that the premises encumbered by the Pledged Loan equals the As Completed Appraised Value, and (4) a datedown endorsement from the title insurance company showing clear title as of the date of disbursement of such Advance.

9.6 (e)

Within 15 days after the final Advance against a Construction/Perm Mortgage Loan or a Third Party Builder Construction Mortgage Loan included in the Pledged Loan, Borrowers shall receive any Mortgage Note modification or modified Mortgage Note delivered in connection with a Construction/Perm Mortgage Loan and a Mortgage Note or Wet Settlement package evidencing a Mortgage Loan which refinances a related Mortgage Loan.

9.7. Special Representations and Warranties Concerning Receivables

Borrowers hereby represent and warrant to Credit Agent and Lenders, as of the date of this Agreement and as of the date of each Advance Request and the making of each Advance that:

9.7 (a)	Borrowers are the legal and equitable owners and holders, free and clear of all Liens (other than Liens granted hereunder) of the Receivables, and the Receivables have been and will continue to be subject to a security interest in favor of the Credit Agent, subject to no other Liens.
9.7 (b)	Borrowers have, and will continue to have, the full right, power and authority to grant a security interest in the Receivables to the Credit Agent.
9.7 (c)	Each Receivable is a valid, enforceable right to retain amounts received from obligors under Mortgage Loans serviced by Borrowers, or a valid, enforceable right to payment from Fannie Mae, Freddie Mac, Ginnie Mae, VA, FHA or a private mortgage insurer, is currently due, and as to which no condition exists that will impair or materially delay payment thereof.
9.7 (d)	To the best of Borrowers’ knowledge, with respect to any Receivables, the mortgagor who is liable for payments that will be applicable to such Receivables, or Fannie Mae, Freddie Mac, Ginnie Mae, FHA, VA or the private mortgage insurer, obligated thereon, has no defense, setoff, claim or counterclaim against Borrowers which can be asserted against the Credit Agent, whether in any proceeding to enforce the Credit Agent’s security interest in such Receivable or otherwise.
9.7 (e)	Except for the Acknowledgment Agreements, to the extent required, no consent of any Person is required for the grant of a security interest in the Receivables to the Credit Agent, and no consent will need to be obtained upon the occurrence of an Event of Default for the Credit Agent to exercise its rights with respect to any of the Receivables.

9.8. Special Representations Concerning Pledged Shares

Borrowers hereby represent and warrant to Credit Agent and Lenders, as of the date of this Agreement and as of the date of each Advance Request for an Advance and the making of each such Advance, that:

Page 9-7

9.8 (a)	UAMCLLC has title to the Pledged Shares and will have title to all further Pledged Shares hereafter issued, free of all Liens except the security interest in favor of the Credit Agent.
9.8 (b)	UAMCLLC has full power and authority to subject the Pledged Shares to the security interest created hereby.
9.8 (c)	No financing statement covering all or part of the Pledged Shares is on file in any public office (except for any financing statements filed by the Credit Agent).
9.8 (d)	The Pledged Shares have been duly authorized and validly issued by UAMC Asset and are fully paid and non-assessable. The certificates representing the Pledged Shares are genuine. The Pledged Shares are not subject to any offset or similar right or claim of the issuers thereof.
9.8 (e)	The Pledged Shares have been delivered to the Credit Agent and constitute 100% of the issued and outstanding shares of capital stock of UAMC Asset.

9.9. Special Representations and Warranties Concerning Foreclosure Claim Receivables and Foreclosure Mortgage Loans

Borrowers hereby represent and warrant to Credit Agent and Lenders, as of the date of this Agreement and as of the date of each Advance Request for an Advance against Foreclosure Claim Receivables or Foreclosure Mortgage Loans and the making of each such Advance, that:

9.9 (a)	The Mortgage Loan with respect to which such Advance was made by Borrowers is in foreclosure, or there will be commenced and continuing bankruptcy or similar proceedings involving the obligor on such Mortgage Loan, or a Borrower has commenced loss mitigation action with respect to such Mortgage Loans.
9.9 (b)	In the event the obligor on such Mortgage Loan fails to make the payment as to which said receivable relates, Borrowers are entitled to reimbursement therefore on a priority basis pursuant to the terms of the applicable Servicing Contract out of proceeds of the sale or other disposition or liquidation of said Mortgage Loan or out of insurance proceeds, including, without limitation, private mortgage insurance proceeds and the proceeds of any guaranty of the obligations of the obligor thereunder.
9.9 (c)	Said receivable is and will be free and clear of all Liens, claims and encumbrances, except Liens in favor of the Credit Agent for the benefit of the Lenders.

9.10. Voting Rights; Dividends; Etc.

9.10 (a)

Subject to paragraph (d) of this Section 9.10, UAMCLLC shall be entitled to exercise or refrain form exercising any and all voting and other consensual rights pertaining to the Pledged Shares for any purpose not inconsistent with the terms of this Agreement; provided, however, that UAMCLLC shall not exercise or refrain from exercising any such right if such action could reasonably be expected to have a material adverse effect on the value of the Collateral or any material part thereof.

9.10 (b)

Any and all dividends paid in respect of the Pledged Shares after the occurrence and during the continuance of any Default or Event of Default shall be forthwith delivered to the Credit Agent to hold as Collateral and shall, if received by any Borrower, be received in trust for the benefit of Lenders, be segregated from the other property or funds of Borrowers, and be forthwith delivered to Credit Agent as Collateral in the same form as so received (with any necessary endorsement or assignment). Each Borrower shall, upon request by Lenders, promptly execute all such documents and do all such acts as may be necessary or desirable to give effect to the provisions of this Section 9.10(b).

Page 9-8

9.10 (c)

Credit Agent will execute and deliver (or cause to be executed and delivered) to UAMCLLC all such proxies and other instruments as UAMCLLC may reasonable request for the purpose of enabling UAMCLLC to exercise the voting and other rights that it is entitled to exercise pursuant to Section 9.10(a) and to receive the dividends that it is authorized to receive and retain pursuant to Section 9.10(b).

9.10 (d)

Upon the occurrence and during the continuance of any Event of Default, Credit Agent shall have the right in its sole discretion, and Borrowers shall execute and deliver all such proxies and other instruments as may be necessary or appropriate to give effect to such right, to terminate all rights of Borrowers to exercise or refrain from exercising the voting and other consensual rights that it would otherwise be entitled to exercise pursuant to Section 9.10(a) hereof, and all such rights shall thereupon become vested in Credit Agent who will thereupon have the sole right to exercise or refrain from exercising such voting and other consensual rights; provided, however, that Credit Agent and Lenders shall not be deemed to possess or have control over any voting rights with respect to any Collateral unless and until Credit Agent has given written notice to Borrowers that any further exercise of such voting rights by Borrowers is prohibited and that Credit Agent and/or its assigns will henceforth exercise such voting rights; and provided further, that neither the registration of any item of Collateral in Credit Agent’s name nor the exercise of any voting rights with respect thereto shall be deemed to constitute a retention by Credit Agent or Lenders of any such Collateral in satisfaction of the Obligations or any part thereof.

End of Article 9

Page 9-9

10. DEFAULTS; REMEDIES

10.1. Events of Default

The occurrence of any of the following is an event of default (“Event of Default”):

10.1 (a)	Any Borrower fails to pay the principal of any Advance when due, whether at stated maturity, by acceleration, or otherwise; or fails to pay any installment of interest on any Advance within 9 days after the date of Credit Agent’s invoice or, if applicable, within 2 days after the date of Credit Agent’s account analysis statement; or fails to pay, within any applicable grace period, any other amount due under this Agreement or any other Obligation of Borrowers to Credit Agent and Lenders.
10.1 (b)	Any Borrower fails to perform or comply with any term or condition applicable to it contained in Sections 7.4 or 7.14, 9.10 or in any Section of Article 8.
10.1 (c)	The suspension, revocation or termination of any Borrower’s eligibility, in any respect, as lender, seller/servicer or issuer as described under Article 9 or of any other license or approval required for any Borrower to engage in the business of originating, acquiring and, if applicable, servicing Mortgage Loans; or the imposition of any other adverse regulatory or administrative action or sanction on or against any Borrower by any agency, board, bureau, commission, instrumentality or other administrative or regulatory body (in each case, whether federal, state or local, domestic or foreign) that could result in a material adverse change in any Borrower’s business, operations, assets or financial condition as a whole or that could affect the validity or enforceability of any Pledged Asset.
10.1 (d)	Any Borrower or any of their Subsidiaries, other than USH Funding Inc. or Edgewater Reinsurance Ltd., fails to pay, or defaults in the payment of any principal or interest on, any other indebtedness or any contingent obligation within any applicable grace period; breaches or defaults with respect to any other material term of any other indebtedness or of any loan agreement, mortgage, indenture or other agreement relating to that indebtedness, if the effect of that breach or default is to cause, or to permit the holder or holders of that indebtedness (or a trustee on behalf of such holder or holders) to cause, indebtedness of Borrower or its Subsidiaries, other than USH Funding Inc. or Edgewater Reinsurance Ltd., in the aggregate amount of $2,000,000 or more to become or be declared due before its stated maturity (upon the giving or receiving of notice, lapse of time, both, or otherwise).
10.1 (e)	Any representation or warranty made or deemed made by any Borrower under this Agreement, in any other Loan Document or in any written statement or certificate at any time given by such Borrower, other than the representations and warranties set forth in Article 9 with respect to specific Pledged Loans, is inaccurate or incomplete in any material respect on the date as of which it is made or deemed made.
10.1 (f)	Any Borrower defaults in the performance of or compliance with any term contained in this Agreement or any other Loan Document other than those referred to in Sections 10.1(a), 10.1(b), 10.1(c), 10.1(d) or 10.1(e) and such default has not been remedied or waived within 30 days after the earliest of (1) receipt by Borrowers of Notice from Credit Agent of that default, (2) receipt by Credit Agent of Notice from Borrowers of that default or (3) the date Borrowers should have notified Credit Agent of that default under Section 7.7(c) or 7.7(d).

Page 10-1

10.1 (g)	An “event of default” (however defined) occurs under any agreement between Borrowers and Credit Agent other than this Agreement and the other Loan Documents.
10.1 (h)	A case (whether voluntary or involuntary) is filed by or against any Borrower under any applicable bankruptcy, insolvency or other similar federal or state law; or a court of competent jurisdiction appoints a receiver (interim or permanent), liquidator, sequestrator, trustee, custodian or other officer having similar powers over any Borrower or over all or a substantial part of their respective properties or assets; or any Borrower (1) consents to the appointment of or possession by a receiver (interim or permanent), liquidator, sequestrator, trustee, custodian or other officer having similar powers over any Borrower, or over all or a substantial part of their respective properties or assets, (2) makes an assignment for the benefit of creditors, or (3) fails, or admits in writing its inability, to pay its debts as those debts become due.
10.1 (i)	Any Borrower fails to perform any contractual obligation to repurchase Mortgage Loans, if such obligations in the aggregate exceed $2,000,000.
10.1 (j)	Any money judgment, writ or warrant of attachment or similar process involving an amount in excess of $2,000,000 is entered or filed against any Borrower or any of their Subsidiaries or any of their respective properties or assets and remains undischarged, unvacated, unbonded or unstayed for a period of 30 days or 5 days before the date of any proposed sale under that money judgment, writ or warrant of attachment or similar process.
10.1 (k)	Any order, judgment or decree decreeing the dissolution of any Borrower is entered and remains undischarged or unstayed for a period of 20 days.
10.1 (l)	Any Borrower purports to disavow any of its Obligations or contests the validity or enforceability of any Loan Document.
10.1 (m)	Lennar purports to disavow any of its obligations under the Lennar Undertaking or contests the validity or enforceability of the Lennar Undertaking.
10.1 (n)	Credit Agent’s or Lenders’ security interest on any portion of the Collateral becomes unenforceable or otherwise impaired and all Advances made against any of that Collateral are not paid in full, or the impairment is not cured, within 10 days after earliest of (i) receipt by Borrower of Notice from Credit Agent of the impairment, (ii) receipt by Credit Agent of Notice from Borrower of the impairment, or (iii) the date Borrower should have notified Credit Agent of the impairment under Article 7.
10.1 (o)	A material adverse change occurs in any Borrower’s financial condition, business, properties or assets, operations or prospects, or in any Borrower’s ability to repay the Obligations.
10.1 (p)	Any Lien for any tax, assessment or other governmental charge is filed or is otherwise enforced against any Borrower or any of its property including any of the Collateral, other than a Lien for taxes, assessments or other governmental charges on real property securing or that previously secured an individual Mortgage Loan that is not a Pledged Loan.
10.1 (q)	UAMCLLC ceases to own, directly, all of the capital stock of each other Borrower, or Lennar ceases to own, directly or indirectly, a majority of each class of the capital stock of UAMCLLC.

Page 10-2

10.1 (r)	UAMC Asset shall incur any Debt, other than Debt owed to Lenders, or any Pledged Asset owned by UAMC Asset shall become subject to any Lien, other than Liens in favor of the Credit Agent.
10.1 (s)	The existence of any Default or Event of Default under Section 10.1 of the Existing Agreement, whether or not known by Credit Agent or any Lender.

10.2. Remedies

10.2 (a)	If a Lender shall have knowledge of a Default or an Event of Default, it shall immediately give Notice thereof to Credit Agent. If Credit Agent has knowledge of a Default or an Event of Default, it shall give Notice thereof to each Lender and to Borrowers. Credit Agent will not be deemed to have knowledge or Notice of the occurrence of a Default or an Event of Default unless Credit Agent has received Notice from a Lender or a Borrower. No Lender will be deemed to have knowledge or Notice of the occurrence of a Default or an Event of Default unless such Lender has received Notice from the Credit Agent or a Borrower.
10.2 (b)	If an Event of Default described in Section 10.1(h) occurs with respect to any Borrower, the Commitments will automatically terminate and the unpaid principal amount of and accrued interest on the Notes and all other Obligations will automatically become due and payable, without presentment, demand or other Notice or requirements of any kind, all of which Borrowers expressly waive.
10.2 (c)	If any other Event of Default occurs, Majority Lenders may, by Notice to each Borrower, terminate the Commitments and declare the Obligations to be immediately due and payable.
10.2 (d)	If any Event of Default occurs, Credit Agent may, on behalf of Lenders, and shall at the direction of the Majority Lenders (subject to Section 11.3(c)), also take any of the following actions:
	(1)	Foreclose upon or otherwise enforce its security interest in any Lien on the Collateral to secure all payments and performance of the Obligations in any manner permitted by law or provided for in the Loan Documents.
	(2)	Notify all obligors under any of the Collateral that the Collateral has been assigned to Credit Agent (or to another Person designated by Credit Agent) and that all payments on that Collateral are to be made directly to Credit Agent (or such other Person); settle, compromise or release, in whole or in part, any amounts any obligor or Investor owes on any of the Collateral on terms acceptable to Credit Agent; enforce payment and prosecute any action or proceeding involving any of the Collateral; and where any Collateral is in default, foreclose on and enforce any Liens securing that Collateral in any manner permitted by law and sell any property acquired as a result of those enforcement actions.
	(3)	Prepare and submit for filing Uniform Commercial Code amendment statements evidencing the assignment to Credit Agent or its designee of any Uniform Commercial Code financing statement filed in connection with any item of Collateral.
	(4)	Act, or contract with a third party to act, at Borrowers’ expense, as servicer or subservicer of Collateral requiring servicing, and perform all obligations required under any Collateral, including Servicing Contracts and Purchase Commitments.

Page 10-3

(5)	Require Borrowers to assemble and make available to Credit Agent the Collateral and all related books and records at a place designated by Credit Agent.
(6)	Enter onto property where any Collateral or related books and records are located and take possession of those items with or without judicial process; and obtain access to Borrowers’ data processing equipment, computer hardware and software relating to the Collateral and use all of the foregoing and the information contained in the foregoing in any manner Credit Agent deems necessary for the purpose of effectuating its rights under this Agreement and any other Loan Document.
(7)	Before the disposition of the Collateral, prepare it for disposition in any manner and to the extent Credit Agent deems appropriate.
(8)	Exercise all rights and remedies of a secured creditor under the Uniform Commercial Code of Minnesota or other applicable law, including selling or otherwise disposing of all or any portion of the Collateral at one or more public or private sales, whether or not the Collateral is present at the place of sale, for cash or credit or future delivery, on terms and conditions and in the manner as Credit Agent may determine, including sale under any applicable Purchase Commitment. Borrowers waive any right they may have to prior notice of the sale of all or any portion of the Collateral to the extent allowed by applicable law. If notice is required under applicable law, Credit Agent will give Borrowers not less than 10 days’ notice of any public sale or of the date after which any private sale may be held. Borrowers agree that 10 days’ notice is reasonable notice. Credit Agent may, without notice or publication, adjourn any public or private sale one or more times by announcement at the time and place fixed for the sale, and the sale may be held at any time or place announced at the adjournment. In the case of a sale of all or any portion of the Collateral on credit or for future delivery, the Collateral sold on those terms may be retained by Credit Agent until the purchaser pays the selling price or takes possession of the Collateral. Credit Agent has no liability to Borrowers if a purchaser fails to pay for or take possession of Collateral sold on those terms, and in the case of any such failure, Credit Agent may sell the Collateral again upon notice complying with this Section.
(9)	Instead of or in conjunction with exercising the power of sale authorized by Section 10.2(c)(8), Credit Agent may proceed by suit at law or in equity to collect all amounts due on the Collateral, or to foreclose Credit Agent ‘s Lien on and sell all or any portion of the Collateral pursuant to a judgment or decree of a court of competent jurisdiction.
(10)	Proceed against Borrowers on the Notes or against Lennar under the Lennar Undertaking.
(11)	Retain all excess proceeds from the sale or other disposition of the Collateral, and apply them to the payment of the Obligations under Section 10.3.

Credit Agent will follow the instructions of the Majority Lenders in exercising or not exercising its rights under this Section 10.2, but (i) Credit Agent will have no obligation to take or not to take any action which it believes may expose it to any liability, and (ii) Credit Agent may, but is under no obligation to, await instructions from the Majority Lenders before exercising or not exercising its rights under this Section 10.2.

Page 10-4

10.2 (e)	Neither Credit Agent nor any Lender will incur liability as a result of the commercially reasonable sale or other disposition of all or any portion of the Collateral at any public or private sale or other disposition. Borrowers waive (to the extent permitted by law) any claims they may have against Credit Agent or any Lender arising by reason of the fact that the price at which the Collateral may have been sold at a private sale was less than the price that Credit Agent might have obtained at a public sale, or was less than the aggregate amount of the outstanding Advances, accrued and unpaid interest on those Advances, and unpaid fees, even if Credit Agent accepts the first offer received and does not offer the Collateral to more than one offeree. Borrowers agree that any sale of Collateral under the terms of a Purchase Commitment, or any other disposition of Collateral arranged by Borrowers, whether before or after the occurrence of an Event of Default, will be deemed to have been made in a commercially reasonable manner.
10.2 (f)	Each Borrower acknowledges that Mortgage Loans are collateral of a type that is the subject of widely distributed standard price quotations and that Mortgage-backed Securities are collateral of a type that is customarily sold on a recognized market. Each Borrower waives any right it may have to prior notice of the sale of Pledged Securities, and agrees that Credit Agent or Lenders may purchase Pledged Loans and Pledged Securities at a private sale of such Collateral.
10.2 (g)	Each Borrower specifically waives and releases (to the extent permitted by law) any equity or right of redemption, stay or appraisal that Borrowers have or may have under any rule of law or statute now existing or adopted after the date of this Agreement, and any right to require Credit Agent to (1) proceed against any Person, (2) proceed against or exhaust any of the Collateral or pursue its rights and remedies against the Collateral in any particular order, or (3) pursue any other remedy within its power. Credit Agent is not required to take any action to preserve any rights of Borrowers against holders of mortgages having priority to the Lien of any Mortgage or Security Agreement included in the Collateral or to preserve Borrowers’ rights against other prior parties.
10.2 (h)	Credit Agent may, but is not obligated to, advance any sums or do any act or thing necessary to uphold or enforce the Lien and priority of, or the security intended to be afforded by, any Mortgage or Security Agreement included in the Collateral, including payment of delinquent taxes or assessments and insurance premiums. All advances, charges, costs and expenses, including reasonable attorneys’ fees and disbursements, incurred or paid by Credit Agent in exercising any right, power or remedy conferred by this Agreement, or in the enforcement of this Agreement, together with interest on those amounts at the Default Rate, from the time paid by Credit Agent until repaid by Borrowers, are deemed to be principal outstanding under this Agreement and the Notes.
10.2 (i)	No failure or delay on the part of Credit Agent or any Lender to exercise any right, power or remedy provided in this Agreement or under any other Loan Document, at law or in equity, will operate as a waiver of that right, power or remedy. No single or partial exercise by Credit Agent or any Lender of any right, power or remedy provided under this Agreement or any other Loan Document, at law or in equity, precludes any other or further exercise of that right, power, or remedy by Credit Agent or any Lender, or Credit Agent’s or any Lender’s exercise of any other right, power or remedy. Without limiting the foregoing, Borrowers waive all defenses based on the statute of limitations to the extent permitted by law. The remedies provided in this Agreement and the other Loan Documents are cumulative and are not exclusive of any remedies provided at law or in equity.
10.2 (j)	Borrowers grant Credit Agent and Lenders a license or other right to use, without charge, Borrowers’ computer programs, other programs, labels, patents, copyrights, rights of use of any name, trade secrets, trade names, trademarks, service marks and

Page 10-5

advertising matter, or any property of a similar nature, as it pertains to the Collateral, in advertising for sale and selling any of the Collateral and Borrowers’ rights under all licenses and all other agreements related to the foregoing inure to Credit Agent’s and Lenders’ benefit until the Obligations are paid in full.

10.3. Application of Proceeds

The proceeds of any sale, disposition or other enforcement of Credit Agent’s security interest in and Lien on all or any part of the Collateral shall be applied by Credit Agent as follows:

10.3 (a)	With respect to the proceeds of Eligible Loans and other Pledged Assets (other than Unimproved Land Loans and Third-Party Builder Construction Mortgage Loans and Collateral related thereto), and related Collateral:
	First, to the payment of the costs and expenses of such sale or enforcement, including reasonable compensation to Credit Agent’s agents and counsel, and all expenses, liabilities and advances made or incurred by or on behalf of Credit Agent in connection therewith.
	Second, to the payment of the costs and expenses of such sale or enforcement, including reasonable compensation to the Lenders’ agents and counsel, and all expenses, liabilities and advances made or incurred by or on behalf of any Lender in connection therewith.
	Third, to RFC, in an amount equal to the amount of accrued interest owed to RFC in respect of Swingline Advances, until paid in full.
	Fourth, to RFC until the principal amount of all Swingline Advances outstanding are paid in full.
	Fifth, to Lenders holding Warehousing Advances, pro rata in accordance with their respective Percentage Shares of accrued interest owed to each of them in respect to Warehousing Advances until the amount is paid in full.
	Sixth, to Lenders holding Warehousing Advances, pro rata in accordance with their respective Percentage Shares, until the principal amounts of all Warehousing Advances outstanding are paid in full.
	Seventh, to Lenders holding Warehousing Advances, pro rata in accordance with their respective Percentage Shares, until all fees and other Obligations (other than those relating to RFC/WaMu Advances or RFC Direct Advances) accrued by or due each Lender and Credit Agent are paid in full.
	Eighth, to RFC and WaMu, pro rata in accordance with the percentage of RFC/WaMu Advances held by each of RFC and WaMu, until all interest, fees and principal relating to RFC/WaMu Advances are paid in full.
	Ninth, to RFC until all interest, fees and principal relating to RFC Direct Advances are paid in full.
	Tenth, to the remaining Obligations.
	Finally, to the payment to Borrowers, or to their successors or assigns, or as a court of competent jurisdiction may direct, of any surplus then remaining from such proceeds.

Page 10-6

10.3 (b)	With respect to the proceeds of Third-Party Builder Construction Mortgage Loans and related Collateral:
	First, to the payment of the costs and expenses of such sale or enforcement, including reasonable compensation to Credit Agent’s agents and counsel, and all expenses, liabilities and advances made or incurred by or on behalf of Credit Agent in connection therewith.
	Second, to RFC and WaMu, pro rata in accordance with the percentage of RFC/WaMu Advances held by each of RFC and WaMu, until all interest, fees and principal relating to RFC/WaMu Advances outstanding are paid in full.
	Third, to Lenders holding Warehousing Advances, pro rata in accordance with their respective Percentage Shares until all outstanding Obligations (other than those relating to RFC Direct Advances) owed to Lenders are paid in full.
	Fourth, to RFC for all interest, fees and principal relating to RFC Direct Advances outstanding are paid in full.
	Finally, to Borrowers, or to their successors or assigns, or as a court of competent jurisdiction may direct, of any surplus then remaining from such proceeds.
10.3 (c)	With respect to the proceeds of Unimproved Land Loans and related Collateral:
	First, to the payment of the costs and expenses of such sale or enforcement, including reasonable compensation to Credit Agent’s agents and counsel, and all expenses, liabilities and advances made or incurred by or on behalf of Credit Agent in connection therewith.
	Second, to RFC until all interest, fees and principal relating to RFC Direct Advances outstanding are paid in full.
	Third, to Lenders holding Warehousing Advances, pro rata in accordance with their respective Percentage Shares until all Obligations (other than those relating to RFC/WaMu Advances) owed to Lenders are paid in full.
	Fourth, to RFC and WaMu, pro rata in accordance with the percentage of RFC/WaMu Advances held by each of RFC and WaMu, for all interest, fees and principal relating to RFC/WaMu Advances outstanding are paid in full.
	Finally, to Borrowers, or to their successors or assigns, or as a court of competent jurisdiction may direct, of any surplus then remaining from such proceeds.
10.3 (d)	If the proceeds of any such sale, disposition or other enforcement are insufficient to cover the costs and expenses of such sale, as aforesaid, and the payment in full of all Obligations, Borrowers will remain liable for any deficiency.

10.4. Credit Agent Appointed Attorney-in-Fact

Each Borrower appoints Credit Agent its attorney-in-fact, with full power of substitution, for the purpose of carrying out the provisions of this Agreement, the Notes and the other Loan Documents and taking any action and executing any instruments that Credit Agent deems necessary or advisable to accomplish that purpose. Borrowers’ appointment of Credit Agent as attorney-in-fact is irrevocable and coupled with an interest. Without limiting the generality of the foregoing, Credit Agent may give notice of its security interest in and Lien on the Collateral to any

Page 10-7

Person, either in Borrowers’ name or in its own name, endorse all Pledged Loans or Pledged Securities payable to the order of Borrowers, change or cause to be changed the book-entry registration or name of subscriber or Investor on any Pledged Security, prepare and submit for filing Uniform Commercial Code amendment statements with respect to any Uniform Commercial Code financing statements filed in connection with any item of Collateral or receive, endorse and collect all checks made payable to the order of Borrowers representing payment on account of the principal of or interest on, or the proceeds of sale of, any of the Pledged Loans or Pledged Securities and give full discharge for those transactions.

10.5. Right of Set-Off

If Borrowers default in the payment of any Obligation or in the performance of any of their duties under the Loan Documents, each Lender may, without Notice to or demand on Borrowers (which Notice or demand each Borrower expressly waives), set-off, appropriate or apply any property of Borrowers held at any time by each Lender, or any indebtedness at any time owed by each Lender to or for the account of Borrowers, against the Obligations, whether or not those Obligations have matured.

10.6. Sharing of Payments

If upon the occurrence of an Event of Default and acceleration of the Obligations any Lender shall hold or receive and retain any payment, whether by setoff, application of deposit balance or security, or otherwise, in respect of the Obligations, then such Lender shall purchase from the other Lenders for cash and at face value and without recourse, such participation in the Obligations held by them as shall be necessary to cause such payment to be shared ratably with each of them; provided, that if such payment or part thereof is thereafter recovered from such purchasing Lender, the related purchases from the other Lenders shall be rescinded ratably and the purchase price restored as to the portion of such excess payment so recovered, but without interest thereon unless the purchasing Lender is required to pay interest on such amounts to the Person recovering such payment, in which case with interest thereon, computed at the same rate, and on the same basis, as the interest that the purchasing Lender is required to pay; provided, further, this provision shall not apply to payments held or received by RFC and WaMu with respect to RFC/WaMu Advances against Third-Party Builder Construction Mortgage Loans; and provided, further, this provision shall not apply to payments held or received by RFC with respect to RFC Direct Advances against Unimproved Land Loans. If any Lender receives a payment from Borrowers not in respect of the Obligations, but relating to another relationship of such Lender and Borrowers, such Lender may apply the payment first to the indebtedness arising out of the other relationship and then against the Obligations as provided above.

End of Article 10

Page 10-8

11. AGENT

11.1. Appointment

Each Lender hereby irrevocably designates and appoints Credit Agent as the agent of such Lender under the Loan Documents and each such Lender hereby irrevocably authorizes Credit Agent to take such action on its behalf under the provisions of the Loan Documents and to exercise such powers and perform such duties as are expressly delegated to Credit Agent by the terms of the Loan Documents, together with such other powers as are reasonably incidental thereto. Credit Agent hereby accepts such appointment and agrees to act in accordance with this Agreement.

11.2. Duties of Agent

11.2 (a)	The provisions of the Loan Documents set forth the exclusive duties of Credit Agent and no implied duties or obligations shall be read into the Loan Documents against Credit Agent. Credit Agent shall not be bound in any way by any agreement or contract other than the Loan Documents and any other agreement to which it is a party. Credit Agent shall act as an independent contractor in performing its obligations as Credit Agent under the Loan Documents and nothing herein contained shall be deemed to create any fiduciary relationship among or between Credit Agent, Borrowers or the Lenders.
11.2 (b)	Credit Agent shall examine the Pledged Loans delivered by or on behalf of the Borrowers hereunder to determine whether each Pledged Loan: (i) includes the documents and instruments to be delivered for each Pledged Loan required pursuant to Section 2.1 and the applicable Exhibits, (ii) conforms with the requirements of this Agreement (including the limitations of Exhibit H), and (iii) is otherwise in conformity with any customary collateral review criteria that Credit Agent may use from time to time. If Credit Agent shall have determined that any Mortgage Loan delivered to Credit Agent does not meet the requirements of this Agreement, Credit Agent may return to Borrowers all Collateral Documents relating thereto.
11.2 (c)	As to any Pledged Loan against which Advances may be made, if Credit Agent shall note any minor discrepancies or deficiencies in any Collateral Documents pertaining thereto, Credit Agent shall: (a) immediately notify Borrowers thereof, (b) if such discrepancies or deficiencies can be cured without returning any Collateral Documents to Borrowers, request that Borrowers cure such discrepancies or deficiencies immediately, and (c) if such discrepancies or deficiencies can only be cured by returning Collateral Documents to Borrowers, return any Collateral Documents containing any discrepancy or deficiency to Borrowers for correction against a Trust Receipt pursuant to Section 4.6(a).
11.2 (d)	Not later than the 10th day of each month, Credit Agent will deliver to each Lender a loans-in-warehouse report for the immediately preceding month setting forth in detail all Pledged Loans and Advances against such Pledged Loans for such month.

11.3. Standard of Care

Credit Agent shall act in accordance with customary standards for those engaged as credit agents or collateral agents of commercial transactions in similar capacities.

11.3 (a) Credit Agent is not required to ascertain or inquire as to the performance or observance of any of the conditions or agreements to be performed or observed by any other party, except as specifically provided in the Loan Documents. Credit Agent disclaims any

Page 11-1

	responsibility for the validity or accuracy of the recitals to the Loan Documents and any representations and warranties contained herein, unless specifically identified as recitals, representations or warranties of Credit Agent.
11.3 (b)	Credit Agent has no responsibility for ascertaining the value, collectibility, insurability, enforceability, effectiveness or suitability of any Collateral, the title of any party therein, the validity or adequacy of the security afforded thereby, or the validity of the Loan Documents (except as to (i) its authority to enter into this Agreement and the other Loan Documents and (ii) its undertaking to perform its duties and obligations hereunder and thereunder).
11.3 (c)	No provision of this Agreement requires Credit Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers, if, in its sole judgment, it shall believe that repayment of such funds or adequate indemnity against such risk or liability is not assured to it.
11.3 (d)	Credit Agent is not responsible for preparing or filing any reports or returns relating to federal, state or local income taxes with respect to this Agreement, other than for its compensation or for reimbursement of expenses.

11.4. Delegation of Duties

Credit Agent may execute any of its duties under the Loan Documents by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. Credit Agent shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care.

11.5. Exculpatory Provisions

Credit Agent or any of its respective officers, directors, employees, agents, attorneys-in-fact or Affiliates shall not be (a) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection with the Loan Documents (except for its or such Person’s own gross negligence or willful misconduct), or (b) responsible in any manner to any of the Lenders for any recitals, statements, representations or warranties made by Borrowers or any officer thereof contained in the Loan Documents or in any certificate, report, statement or other document referred to or provided for in, or received by Credit Agent under or in connection with, the Loan Documents or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of the Loan Documents or for any failure of Borrowers to perform their obligations under any Loan Document. Credit Agent shall not be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, the Loan Documents or to inspect the properties, books or records of Borrowers or any of their Subsidiaries.

11.6. Reliance by Agent

Credit Agent shall be entitled to rely, and shall be fully protected in relying, upon any note, writing, resolution, notice, consent, certification, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message, statement, order or other document or conversation reasonably believed by it to be correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to Borrowers), independent accountants (including, without limitation, accountants to Borrowers) and other experts selected by Credit Agent. Credit Agent may deem and treat the payee of any Note as the owner thereof for all purposes. Credit Agent shall be fully justified in failing or refusing to take any

Page 11-2

action under the Loan Documents unless it shall first receive such advice or concurrence of the Majority Lenders or all of the Lenders, as appropriate, or it shall first be indemnified to its satisfaction by the Lenders ratably in accordance with their respective Percentage Shares against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any action (except for liabilities and expenses resulting from Credit Agent’s gross negligence or willful misconduct), (b) Credit Agent shall in all cases be fully protected in acting, or in refraining from acting, under the Loan Documents in accordance with a request of the Majority Lenders or all of the Lenders, as appropriate, and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders, (c) Credit Agent shall be fully justified in failing or refusing to take any action under the Loan Documents unless it shall first receive such advice or concurrence of Credit Agent, and (d) Credit Agent shall in all cases be fully protected in acting, or in refraining from acting, under the Loan Documents in accordance with a request of or instructions from Credit Agent, and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders.

11.7. Non-Reliance on Agent or Other Lenders

Each Lender expressly acknowledges that neither Credit Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates has made any representations or warranties to such Lender and that no act by Credit Agent hereafter taken, including any review of the affairs of Borrowers, shall be deemed to constitute any representation or warranty by Credit Agent to any Lender. Each Lender represents to Credit Agent that it has, independently and without reliance upon Credit Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and creditworthiness of Borrowers and made its own decision to enter into and make Warehousing Advances, RFC/WaMu Advances or RFC Direct Advances under the Agreement. Each Lender also represents that it will, independently and without reliance upon Credit Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under the Agreement, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of Borrowers. Except for notices, reports and other documents expressly required to be furnished to Lenders by Credit Agent hereunder, Credit Agent shall have no duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, property, financial or other condition or creditworthiness of Borrowers or any Subsidiary which may come into the possession of Credit Agent or any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates.

11.8. Agent in Individual Capacity

Credit Agent may make loans to, purchase Mortgage Loans and other assets from, and generally engage in any kind of business with Borrowers as though it were not an agent hereunder. With respect to the Warehousing Advances, RFC/WaMu Advances or RFC Direct Advances made or renewed by it and any Note issued to it, Credit Agent shall have the same rights and powers under the Loan Documents as any Lender and may exercise the same as though it were not Credit Agent, and the terms “Lender” and “Lenders” shall include Credit Agent in its individual capacity.

11.9. Successor Agent

Credit Agent may resign as such at any time upon giving 30 days Notice to Borrowers and Lenders. Credit Agent may be removed immediately with cause or at any time upon 10 days Notice from the Majority Lenders to Credit Agent and Borrowers. Upon Notice of such resignation or removal, the Majority Lenders may appoint a successor Credit Agent (which successor Credit Agent, assuming that no Default or Event of Default exists, shall be reasonably acceptable to

Page 11-3

Borrowers). The date on which Borrowers, Credit Agent and Lenders have received Notice from such successor of its acceptance of appointment as Credit Agent shall constitute the effective date of resignation or removal of the resigning or removed Credit Agent. If no successor Credit Agent shall have been so appointed by the Majority Lenders, and shall have accepted such appointment within the allotted time period, then, upon 5 days Notice to Borrowers, the resigned or removed Credit Agent may, on behalf of the Lenders, appoint a successor. Upon the effective date of resignation or removal of the resigning or removed Credit Agent, such successor will thereupon succeed to and become vested with all the rights, powers, privileges, and duties of the resigning or removed Credit Agent, but the resigning or removed Credit Agent shall not be discharged from any liability as a result of its or its directors’, officers’, agents’, or employees’ gross negligence or willful misconduct in the performance of its duties and obligations under this Agreement prior to the effective date of its resignation or removal. Upon the effective date of its resignation or removal, Credit Agent shall assign all of its right, title and security interest in and to all Collateral to its successor, without recourse, warranty or representation, express or implied.

11.10. Inspection

Each of the Lenders and their agents, accountants, attorneys and auditors will be permitted during normal business hours at any time and from time to time upon reasonable notice to the Credit Agent to examine (to the extent permitted by applicable law) the files, documents, records and other papers in the possession or under the control of the Credit Agent relating to any or all of the Collateral and to make copies thereof. As long as no Default or Event of Default shall have occurred and be continuing, any such activity will be at no cost or expense to Borrowers; if a Default or Event of Default shall have occurred and be continuing, all costs and expenses associated with the exercise from time to time by any Lender of its rights under this Section shall be promptly paid by Borrowers upon demand.

End of Article 11

Page 11-4

12. MISCELLANEOUS

12.1. Notices

Except where telephonic or facsimile notice is expressly authorized by this Agreement, all communications required or permitted to be given or made under this Agreement (“Notices”) must be in writing and must be sent by manual delivery, overnight courier or United States mail (postage prepaid), addressed as follows (or at such other address as may be designated by Borrowers, Lenders or Credit Agent in a Notice to the other):

If to Borrowers:	Universal American Mortgage Company, LLC 700 NW 107th Avenue, 3rd Floor Miami, FL 33173 Attention: Janice Munoz,                   Vice President and Treasurer Facsimile: (305) 229-6657
If to Credit Agent:	Residential Funding Corporation 7501 Wisconsin Avenue Bethesda, MD 20814 Attention: Jim Clapp, Director Facsimile: (301) 215-6288
If to Lenders:	As set forth on the signature pages hereof or of any amendment hereto.

In addition, Credit Agent will use its best efforts to provide a copy of any Notice to counsel as Borrower may designate, but failure to provide such copy shall not render any such Notice ineffective.

All periods of Notice will be measured from the date of delivery if delivered manually or by facsimile, from the first Business Day after the date of sending if sent by overnight courier or from 4 days after the date of mailing if sent by United States mail, except that Notices to Credit Agent under Article 2 and Section 3.3(f) will be deemed to have been given only when actually received by Credit Agent. Borrowers authorize Credit Agent to accept Borrowers’ bailee pledge agreements, Warehousing Advance Requests, shipping requests, wire transfer instructions and security delivery instructions transmitted to Credit Agent by facsimile or RFConnects Delivery, and those documents, when transmitted to Credit Agent by facsimile or by RFConnects Delivery, have the same force and effect as the originals.

12.2. Reimbursement Of Expenses; Indemnity

Borrowers must: (a) pay such document production fees as Credit Agent may require and all out-of-pocket costs and expenses of Credit Agent, including reasonable fees, service charges and disbursements of counsel (including allocated costs of internal counsel), in connection with the amendment, enforcement and administration of this Agreement, the Notes, and the other Loan Documents and the making and repayment of the Advances, and the payment of interest thereon; (b) indemnify, pay, and hold harmless Credit Agent, and any other holder of the Notes from and against, all present and future stamp, documentary and other similar taxes with respect to the foregoing matters and save Credit Agent, and any other holder of the Notes harmless from and against any and all liabilities with respect to or resulting from any delay or omission to pay such taxes; and (c) indemnify, pay and hold harmless Credit Agent, each Lender, any of their officers, directors, employees or agents and any other holder of the Notes (collectively, the

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“Indemnitees”) from and against all liabilities, obligations, actual losses, damages, penalties, judgments, direct suits, costs, expenses and disbursements of any kind or nature whatsoever (including the reasonable fees and disbursements of counsel of the Indemnitees (including allocated costs of internal counsel), exclusive of indirect, consequential and other similar losses, in connection with any investigative, administrative or judicial proceeding, whether or not the Indemnitees have been designated as parties to such proceeding) that may be imposed upon, incurred by or asserted against such Indemnitees in any manner relating to or arising out of this Agreement, the Notes, or any other Loan Document or any of the transactions contemplated hereby or thereby, including against all liabilities, obligations, losses, damages, penalties, judgments, suits, costs, expenses and disbursements of every kind or nature (including the reasonable fees and disbursements of counsel to the Indemnitees (including allocated costs of internal counsel) in connection with any investigative, administrative or judicial proceeding, whether or not the Indemnitees have been designated as parties to such proceeding) arising from any breach of Sections 9.2(y) or 9.3(f) or the making of any Mortgage Loan in which any mortgagor, guarantor or other obligor is a Person named in any Restriction List and to whom the provision of financial services is prohibited or otherwise restricted by applicable law (collectively, the “Indemnified Liabilities”), except that Borrowers have no obligation under this Agreement to any Indemnity with respect to Indemnified Liabilities arising from the gross negligence or willful misconduct of Indemnitees. To the extent that the undertaking to indemnify, pay and hold harmless as set forth in the preceding sentence may be unenforceable because it is violative of any law or public policy, Borrowers must contribute the maximum portion that they are permitted to pay and satisfy under applicable law to the payment and satisfaction of all Indemnified Liabilities incurred by the Indemnitees or any of them. The agreement of Borrowers contained in this Article survives the expiration or termination of this Agreement and the payment in full of the Notes. Attorneys’ fees and disbursements incurred in enforcing, or on appeal from, a judgment under this Agreement are recoverable separately from and in addition to any other amount included in such judgment, and this clause is intended to be severable from the other provisions of this Agreement and to survive and not be merged into such judgment.

12.3. Indemnification by Lenders

Each Lender agrees to indemnify Credit Agent in its capacity as such (to the extent not reimbursed by Borrowers and without limiting the obligation of Borrowers to do so), ratably according to the respective amounts of their Percentage Shares, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever which may at any time (including without limitation at any time following the payment of the Obligations) be imposed on, incurred by or asserted against Credit Agent in any way relating to or arising out of the Loan Documents or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by Credit Agent under or in connection with any of the foregoing; provided that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from Credit Agent’s gross negligence or willful misconduct. The agreements in this Section shall survive the payment of the Obligations and the termination of this Agreement. Attorneys’ fees and disbursements incurred in enforcing, or on appeal from, a judgment pursuant hereto shall be recoverable separately from and in addition to any other amount included in such judgment, and this clause is intended to be severable from the other provisions of this Agreement and to survive and not be merged into such judgment.

12.4. Financial Information

All financial statements and reports furnished to Credit Agent and Lenders under this Agreement must be prepared in accordance with GAAP, applied on a basis consistent with that applied in preparing the financial statements as at the end of and for each Borrower’s most recent fiscal year (except to the extent otherwise required to conform to good accounting practice).

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12.5. Terms Binding Upon Successors; Survival of Representations

The terms and provisions of this Agreement are binding upon and inure to the benefit of each Borrower, Credit Agent, each Lender and their respective successors and assigns. All of Borrowers’ representations, warranties, covenants and agreements survive the making of any Warehousing Advance, and except where a longer period is set forth in this Agreement, remain effective for as long as the Commitments are outstanding or there remain any Obligations to be paid or performed.

12.6. Lenders in Individual Capacity

Any Lender and its Affiliates may make loans to, accept deposits from and generally engage in any kind of business with Borrowers, any Subsidiary and/or Lennar regardless of its capacity as a Lender hereunder. Any Lender may disclose to the other Lenders information regarding other relationships which it may have with Borrowers and Borrowers hereby consent to these disclosures.

12.7. Assignment and Participation

This Agreement and the Obligations of Borrowers may not be assigned by Borrowers. Any Lender may, subject to the limitations set forth below, assign or transfer, in whole or in part, its Warehousing Commitments in excess of $15,000,000 and the related Warehousing Advances, together with its corresponding rights under this Agreement and the other Loan Documents, and further any Lender may sell participations in all or any part of any of its Warehousing Commitment and the related Warehousing Advances or any other interest in the Obligations or any of its obligations hereunder to another Person, in which event: (a) in the case of an assignment, upon consent by Credit Agent and Borrowers (such consent in each case not to be unreasonably withheld), the assignee shall have, to the extent of such assignment (unless otherwise provided thereby), the same rights and benefits as it would have if it were a “Lender” hereunder, and, if the assignee has expressly assumed, for the benefit of Borrowers, such Lender’s obligations hereunder, such Lender shall be relieved of its obligations hereunder to the extent of such assignment and assumption, and (b) in the case of a participation, the participating Person’s (a “Participant”) rights against the Lender from whom it has purchased such participation in respect of such participation are those set forth in the agreement executed by such Lender in favor of the Participant relating thereto. Such Lender shall remain solely responsible to the other parties hereto for the performance of such Lender’s obligations under the Loan Documents, whether or not such Lender shall remain the holder of any Note. Such Lender shall retain all voting rights with respect to such Note, the Advances hereunder and such Lender’s Warehousing Commitment Amount. Borrowers, Credit Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under the Loan Documents. Without limiting any Lender’s exclusive right to collect and enforce the Obligations owed to it, Borrowers agree that each participation will give rise to a debtor-creditor relationship between Borrowers and Participant, and Borrowers authorize each Participant, upon an occurrence of an Event of Default, to proceed directly by right of setoff, bankers’ lien or otherwise, against any assets of Borrowers that may be held by that Participant. Notwithstanding the foregoing, nothing contained herein shall in any manner or to any extent affect the right of any Lender to pledge or assign Notes and interests in this Agreement to any Federal Reserve Bank pursuant to applicable laws and regulations, or to assign its Notes and its right to receive and retain payments on its Notes provided such Lender remains primarily and directly liable pursuant to the terms and conditions of this Agreement to keep, observe and perform all of its obligations under this Agreement, and all such assignments shall be treated, considered and administered as a sale of a participation and not as an assignment and shall be subject to and governed by the provisions of this Section. Any Lender may furnish any information concerning Borrowers in the possession of such Lender from time to time to Affiliates of such Lender and to assignees and Participants (including prospective assignees and Participants) and Borrowers hereby consent to the provision of such information.

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12.8. Quarterly Accordion Period Commitment Increases

On the first Business Day of each Quarterly Accordion Period, Credit Agent shall recompute the Percentage Share for each Lender based on the new Warehousing Credit Limit for such Quarterly Accordion Period and Credit Agent shall request Warehousing Advances from or shall direct prepayments to each Lender so that the total amount of all then outstanding Warehousing Advances are shared pro rata by each Lender. On the first Business Day following the last day of each Quarterly Accordion Period, (i) Credit Agent shall recompute the Percentage Share for each Lender based on the Warehousing Credit Limit as of such Business Day, (ii) Borrowers shall prepay the Warehousing Advances in an amount equal to the amount by which the aggregate unpaid principal balance of Warehousing Advances exceeds the Warehousing Commitment Amount, and (iii) Credit Agent shall request Warehousing Advances from or direct such prepayments to each Lender so that the total amount of all then outstanding Warehousing Advances are shared pro rata by each Lender.

12.9. Amendments

12.9 (a)

This Agreement may not be amended or terms or provisions hereof waived unless such amendment or waiver is in writing and signed by the Majority Lenders, Credit Agent and Borrower; provided, however, that without the prior written consent of 100% of the Lenders, no amendment or waiver shall: (1) waive or amend any term or provision of Sections 7.4 or 7.14 hereof or the definition of any type of Collateral or the provisions of Section 4.1 hereof, (2) reduce the principal of, or rate of interest or fees on, the Warehousing Advances or any Lender’s Warehousing Commitment, (3) modify the Warehousing Credit Limit, (4) modify any Lender’s Percentage Share of the Warehousing Credit Limit, (5) modify the definition of “Majority Lenders,” or of the number or percentage of Lenders that are required to take action under the Loan Documents, (6) extend the Warehousing Maturity Date or modify the times that payments are due from Borrowers under this Agreement, (7) release any portion of the Collateral, except as expressly contemplated by the Loan Documents or in connection with a sale of such Collateral permitted hereunder, (8) release any Borrower from its obligations under Section 1.9, or amend or waive Section 1.9 or Exhibit N, (9) modify the several nature of each Lender’s obligations under this Agreements, (10) amend or waive the first sentence of Section 12.7, (11) amend or waive Section 3.10, Section 3.11, or Section 3.12, (12) amend Exhibit H, or (13) amend this Section. It is expressly agreed and understood that the failure by the Majority Lenders to elect to accelerate amounts outstanding hereunder or to terminate the obligation of Lenders to make Warehousing Advances, RFC and WaMu to make RFC/WaMu Advances and RFC to make RFC Direct Advances hereunder shall not constitute an amendment or waiver of any term or provision of this Agreement.

12.9 (b)

Borrowers hereby agree that they shall, upon requesting the third and any subsequent amendments of this Agreement or any other Loan Document or any waiver of any material term or provision of this Agreement or any other Loan Document (except an extension of the Warehousing Maturity Date), pay at the time of such request a modification fee (1) to Credit Agent in a minimum amount of $1,000 or such greater amount as may be notified to Borrowers by Credit Agent in its sole discretion and (2) to each Lender (except any Lender which becomes party to the Agreement by virtue of such amendment) in a minimum amount of $1,000 or such greater amount as may be notified to Borrowers by the Majority Lenders, acting through Credit Agent, in their sole discretion. The payment of such modification fees shall be in addition to and shall not limit Borrowers’ reimbursement obligations pursuant to Section 11.2 hereof, and any other fee or charge imposed by Credit Agent or Lenders as a condition to any amendment.

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12.10. Governing Law

This Agreement and the other Loan Documents are governed by the laws of the State of Minnesota, without reference to its principles of conflicts of laws.

12.11. Relationship of the Parties

This Agreement provides for the making and repayment of Warehousing Advances, RFC/WaMu Advances and RFC Direct Advances by Lenders (in their capacities as lenders) to Borrowers (in their capacity as a borrower), for the payment of interest on those Warehousing Advances, RFC/WaMu Advances and RFC Direct Advances and for the payment of certain fees by Borrowers to Lenders and Credit Agent. The relationship between Lenders and Borrowers is limited to that of creditor and secured party on the part of Lenders and of debtor on the part of Borrowers. The provisions of this Agreement and the other Loan Documents for compliance with financial covenants and the delivery of financial statements and other operating reports are intended solely for the benefit of Lenders and Credit Agent to protect their interest as a creditors and secured party. Nothing in this Agreement creates or may be construed as permitting or obligating Credit Agent or any Lender to act as a financial or business advisor or consultant to Borrowers, as permitting or obligating Lenders or Credit Agent to control Borrowers or to conduct Borrowers’ operations, as creating any fiduciary obligation on the part of Credit Agent or any Lender to Borrowers, or as creating any joint venture, agency, partnership or other relationship between Credit Agent or any Lender and Borrowers other than as explicitly and specifically stated in the Loan Documents. Borrowers acknowledge that they have had the opportunity to obtain the advice of experienced counsel of its own choice in connection with the negotiation and execution of the Loan Documents and to obtain the advice of that counsel with respect to all matters contained in the Loan Documents, including the waivers of jury trial and of punitive, consequential, special or indirect damages contained in Sections 12.18 and 12.19, respectively. Borrowers further acknowledge that they are experienced with respect to financial and credit matters and have made their own independent decisions to apply to Lenders for credit and to execute and deliver this Agreement.

12.12. Severability

If any provision of this Agreement or any other Loan Document is declared to be illegal or unenforceable in any respect, that provision is null and void and of no force and effect to the extent of the illegality or unenforceability, and does not affect the validity or enforceability of any other provision of the Agreement or such other Loan Document.

12.13. Consent to Credit References

Borrowers consent to the disclosure of information regarding each Borrower and its Subsidiaries and their relationships with Credit Agent and Lenders to Persons making credit inquiries to Credit Agent or any Lender. This consent is revocable by Borrowers at any time upon Notice to Credit Agent and Lenders as provided in Section 12.1.

12.14. Counterparts

This Agreement may be executed in any number of counterparts, each of which will be deemed an original, but all of which together constitute but one and the same instrument.

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12.15. Headings/Captions

The captions or headings in this Agreement and the other Loan Documents are for convenience only and in no way define, limit or describe the scope or intent of any provision of this Agreement or any other Loan Document.

12.16. Entire Agreement

This Agreement, the Notes and the other Loan Documents represent the final agreement among the parties with respect to their subject matter, and may not be contradicted by evidence of prior or contemporaneous oral agreements among the parties. There are no oral agreements among the parties with respect to the subject matter of this Agreement, the Notes and the other Loan Documents.

12.17. Consent to Jurisdiction

AT THE OPTION OF CREDIT AGENT, THIS AGREEMENT, THE NOTES AND THE OTHER LOAN DOCUMENTS MAY BE ENFORCED IN ANY STATE OR FEDERAL COURT WITHIN THE STATE OF MINNESOTA. EACH BORROWER CONSENTS TO THE JURISDICTION AND VENUE OF THOSE COURTS, AND WAIVES ANY OBJECTION TO THE JURISDICTION OR VENUE OF ANY OF THOSE COURTS, INCLUDING THE OBJECTION THAT VENUE IN THOSE COURTS IS NOT CONVENIENT. ANY SUCH SUIT, ACTION OR PROCEEDING MAY BE COMMENCED AND INSTITUTED BY SERVICE OF PROCESS UPON EACH BORROWER BY FIRST CLASS REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, ADDRESSED TO BORROWER AT ITS ADDRESS LAST KNOWN TO CREDIT AGENT. EACH BORROWER’S CONSENT AND AGREEMENT UNDER THIS SECTION DOES NOT AFFECT CREDIT AGENT’S RIGHT TO ACCOMPLISH SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST ANY BORROWER IN ANY OTHER JURISDICTION OR COURT. IN THE EVENT ANY BORROWER COMMENCES ANY ACTION IN ANOTHER JURISDICTION OR VENUE UNDER ANY TORT OR CONTRACT THEORY ARISING DIRECTLY OR INDIRECTLY FROM THE RELATIONSHIP CREATED BY THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, CREDIT AGENT AT ITS OPTION MAY HAVE THE CASE TRANSFERRED TO A STATE OR FEDERAL COURT WITHIN THE STATE OF MINNESOTA OR, IF A TRANSFER CANNOT BE ACCOMPLISHED UNDER APPLICABLE LAW, MAY HAVE BORROWER’S ACTION DISMISSED WITHOUT PREJUDICE.

12.18. Waiver of Jury Trial

EACH BORROWER, EACH OF LENDERS AND CREDIT AGENT EACH COVENANTS AND AGREES NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY A JURY, AND FULLY WAIVES ANY RIGHT TO TRIAL BY JURY TO THE EXTENT THAT ANY SUCH RIGHT NOW EXISTS OR HEREAFTER ARISES. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN, KNOWINGLY AND VOLUNTARILY, BY BORROWER AND CREDIT AGENT, AND IS INTENDED TO ENCOMPASS EACH INSTANCE AND EACH ISSUE FOR WHICH THE RIGHT TO TRIAL BY JURY WOULD OTHERWISE APPLY. CREDIT AGENT, EACH OF LENDERS AND BORROWER ARE EACH AUTHORIZED AND DIRECTED TO SUBMIT THIS AGREEMENT TO ANY COURT HAVING JURISDICTION OVER THE SUBJECT MATTER AND THE PARTIES TO THIS AGREEMENT AS CONCLUSIVE EVIDENCE OF THIS WAIVER OF THE RIGHT TO JURY TRIAL. FURTHER, EACH BORROWER, EACH OF LENDERS AND CREDIT AGENT EACH CERTIFIES THAT NO REPRESENTATIVE OR AGENT OF THE OTHER PARTY, INCLUDING THE OTHER PARTY’S COUNSEL, HAS REPRESENTED, EXPRESSLY OR OTHERWISE, TO ANY OF ITS REPRESENTATIVES OR AGENTS THAT THE OTHER PARTY WILL NOT SEEK TO ENFORCE THIS WAIVER OF RIGHT TO TRIAL BY JURY.

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12.19. Waiver of Punitive, Consequential, Special or Indirect Damages

BORROWERS WAIVE ANY RIGHT THEY MAY HAVE TO SEEK PUNITIVE, CONSEQUENTIAL, SPECIAL OR INDIRECT DAMAGES FROM CREDIT AGENT, ANY LENDER OR ANY OF THEIR AFFILIATES, OFFICERS, DIRECTORS, EMPLOYEES OR AGENTS WITH RESPECT TO ANY AND ALL ISSUES PRESENTED IN ANY ACTION, PROCEEDING, CLAIM OR COUNTERCLAIM BROUGHT BY BORROWERS AGAINST ANY LENDER, CREDIT AGENT OR ANY OF THEIR AFFILIATES, OFFICERS, DIRECTORS, EMPLOYEES OR AGENTS WITH RESPECT TO ANY MATTER ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT. THIS WAIVER OF THE RIGHT TO SEEK PUNITIVE, CONSEQUENTIAL, SPECIAL OR INDIRECT DAMAGES IS KNOWINGLY AND VOLUNTARILY GIVEN BY BORROWERS, AND IS INTENDED TO ENCOMPASS EACH INSTANCE AND EACH ISSUE FOR WHICH THE RIGHT TO SEEK PUNITIVE, CONSEQUENTIAL, SPECIAL OR INDIRECT DAMAGES WOULD OTHERWISE APPLY. CREDIT AGENT AND EACH LENDER IS AUTHORIZED AND DIRECTED TO SUBMIT THIS AGREEMENT TO ANY COURT HAVING JURISDICTION OVER THE SUBJECT MATTER AND THE PARTIES TO THIS AGREEMENT AS CONCLUSIVE EVIDENCE OF THIS WAIVER OF THE RIGHT TO SEEK PUNITIVE, CONSEQUENTIAL, SPECIAL OR INDIRECT DAMAGES.

12.20. Confidentiality

The Credit Agent and each Lender shall use reasonable efforts to assure that information about the Borrower and its operations, affairs and financial condition, not generally disclosed to the public or to trade and other creditors, which is furnished to the Credit Agent or such Lender pursuant to the provisions hereof is used only for the purposes of this Agreement and any other relationship between the Credit Agent or such Lender and the Borrower and not divulged to any Person other than the Credit Agent, such Lender, its Affiliates and their respective officers, directors, employees and agents, except: (a) to their attorneys and accountants, (b) in connection with the enforcement of the rights of the Credit Agent or such Lender hereunder and under the other Loan Documents or otherwise in connection with applicable litigation, (c) in connection with assignments and participations and the solicitation of prospective assignees and participants referred to in Section 12.7 (provided such assignees, participants and prospecting assignees and participants agree to be bound by this Section 12.20) and (d) as may otherwise be required or requested by any regulatory authority having jurisdiction over the Credit Agent or by any applicable law, rule, regulation or judicial process, the opinion of the Credit Agent’s counsel concerning the making of such disclosure to be binding on the parties hereto.

12.21. Merger of Obligations

Each Borrower understands and agrees that its duties and obligations under the Existing Agreement merge with and into this Agreement, except as expressly modified by this Agreement. Each Borrower agrees that its duties and obligations under the Existing Agreement are not satisfied or extinguished by the execution and delivery of this Agreement.

End of Article 12

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13. DEFINITIONS

13.1. Defined Terms

As used in this Agreement and the Exhibits to this Agreement, the following terms have the following meanings or, as applicable, the meanings given to those terms elsewhere in this Agreement or in Exhibits to this Agreement:

“Accrual Basis” has the meaning set forth in Section 3.1(c).

“Acquisition Cost” means, with respect to any Mortgage Loan, the cash purchase price paid by Borrowers to acquire such Mortgage Loan minus any portion thereof attributable to amounts other than principal payable with respect to such Mortgage Loan.

“Additional Lender” means a Person admitted as a Lender under the Agreement by assignment or by the terms of an amendment hereto. Credit Agent will use its best efforts to notify Borrowers of the identity of any Person (other than RFC) proposed by Credit Agent to be admitted as a Lender at least 10 Business Days prior to the date on which such Person is proposed to be admitted as a Lender, provided that Credit Agent shall incur no liability to Borrowers or any other Person for any failure to give such notification.

“Advance” means a Warehousing Advance, a Swingline Advance, an RFC/WaMu Advance or an RFC Direct Advance.

“Advance Certificate” has the meaning set forth in Section 1.5.

“Advance Rate” means, with respect to any Eligible Loan, the Advance Rate set forth in Exhibit H for that type of Eligible Loan.

“Advance Request” means a Warehousing Advance Request Against Eligible Assets or a Warehousing Advance Request Against Construction/Perm Mortgage Loans.

“Affiliate” means, when used with reference to any Person, (a) each Person that, directly or indirectly, controls, is controlled by or is under common control with, the Person referred to, (b) each Person that beneficially owns or holds, directly or indirectly, 5% or more of any class of voting Equity Interests of the Person referred to, (c) each Person, 5% or more of the voting Equity Interests of which is beneficially owned or held, directly or indirectly, by the Person referred to, and (d) each of such Person’s officers, directors, joint venturers and partners. For these purposes, the term “control” (including the terms “controlled by” and “under common control with”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of the Person in question.

“Aged Mortgage Loans” means Mortgage Loans against which a Warehousing Advance has been outstanding for longer than the Standard Warehouse Period, provided that Aged Mortgage Loans are permitted for such type of Mortgage Loan.

“Aged Warehouse Period” means the maximum number of days a Warehouse Advance against Aged Mortgage Loans of a particular type may remain outstanding, as set forth in Exhibit H.

“Agency Security” means a Mortgage-backed Security issued or guaranteed by Fannie Mae, Freddie Mac or Ginnie Mae.

“Agent’s Fee” has the meaning set forth in Section 3.6 of the Agreement.

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“Aggregate Warehousing Collateral Value” means, as of any date of determination, the total Warehousing Collateral Value of all Pledged Loans and Pledged Securities then subject to a perfected, first priority Lien in favor of Credit Agent and Lenders under this Agreement.

“Agreement” means this Second Amended and Restated Warehousing Credit and Security Agreement, either as originally executed or as it may be amended, restated, renewed or replaced

“Agreement for Deed” means an agreement between Lennar and the purchaser of the Single Family Properties in a development built by Lennar, pursuant to which the purchasers agree to make payments to Lennar and its assigns over a period of time and Lennar agrees, upon receipt of all such payments, to transfer title to the common areas in such development to such purchaser or a homeowners association.

“Appraised Property Value” means with respect to an interest in real property, the then current fair market value of the real property and any improvements on it as of recent date determined in accordance with Title XI of FIRREA by a qualified appraiser who is a member of the American Institute of Real Estate Appraisers or other group of professional appraisers.

“Approved Custodian” means a pool custodian or other Person that Lender deems acceptable, in its sole discretion, to hold Mortgage Loans for inclusion in a Mortgage Pool or to hold Mortgage Loans as agent for an Investor that has issued a Purchase Commitment for those Mortgage Loans.

“As Completed Appraised Value” means the value given by a state-certified appraiser to the real property and improvements on the real property based on the Total Hard Costs and plans and specifications for the improvements on the real property prior to the beginning of any construction or rehabilitation.

“Audited Statement Date” means the date of each Borrower’s most recent audited financial statements (and, if applicable, such Borrower’s Subsidiaries, on a consolidated basis) delivered to Credit Agent and Lenders under the Existing Agreement or this Agreement.

“Balance Deficiency Fee” has the meaning set forth in Section 3.1(b).

“Balance Funded Agreement” has the meaning set forth in Section 3.1(b).

“Balance Funded Portion” has the meaning set forth in Section 3.1(b).

“Balance Funded Rate” means, for Warehousing Advances made by any Lender that is a party to a Balance Funded Agreement, the applicable rate set forth Exhibit H.

“Borrowers” has the meaning set forth in the first paragraph of this Agreement.

“BPO Value” means, with respect to the improved real property, improvements and ownership interest and occupancy rights securing any Mortgage Loan, the lowest fair market value for such real property, improvements and ownership interest and occupancy rights as set forth in an opinion of a real estate broker acceptable to Credit Agent, in its sole discretion, as to the value of such improved real property if sold within a 60-day marketing period. Each such broker price opinion must be obtained from a real estate broker with substantial experience in the purchase and sale of similar properties in the geographic area in which the real property, improvements and ownership interest and occupancy rights to be valued is located and should be as of a date not more than 60 days prior to the date of the related Advance.

“Business Day” means any day other than Saturday, Sunday or any other day on which national banking associations are closed for business.

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“Buydown” has the meaning set forth in Section 3.4.

“Calendar Quarter” means the 3 month period beginning on each January 1, April 1, July 1 or October 1.

“Cash Collateral Account” means a demand deposit account maintained at the Funding Bank in Credit Agent’s name and designated for receipt of the proceeds of the sale or other disposition of Collateral.

“Closing Date” has the meaning set forth in the Recitals to this Agreement.

“Collateral” has the meaning set forth in Section 4.1.

“Collateral Documents” means, with respect to each Mortgage Loan, (a) the Mortgage Note, the Mortgage and all other documents including, if applicable, any Security Agreement, executed in connection with or relating to the Mortgage Loan; (b) as applicable, the original lender’s ALTA Policy of Title Insurance or its equivalent, documents evidencing the FHA Commitment to Insure, the VA Guaranty or private mortgage insurance, the appraisal, the Regulation Z statement, the environmental assessment, the engineering report, certificates of casualty or hazard insurance, credit information on the maker of the Mortgage Note, the HUD-1 or corresponding purchase advice; (c) any other document listed in Exhibit B; and (d) any other document that is customarily desired for inspection or transfer incidental to the purchase of any Mortgage Note by an Investor or that is customarily executed by the seller of a Mortgage Note to an Investor.

“Commitment Increase” has the meaning set forth in Section 12.8.

“Commitments” mean the Warehousing Commitment, the RFC/WaMu Commitment and the RFC Direct Commitment.

“Committed Purchase Price” means for an Eligible Loan (a) the dollar price as set forth in the Purchase Commitment or, if the price is not expressed in dollars, the product of the Mortgage Note Amount multiplied by the price (expressed as a percentage) as set forth in the Purchase Commitment for the Eligible Loan, or (b) if the Eligible Loan is to be used to back an Agency Security, an amount equal to the product of the Mortgage Note Amount multiplied by the price (expressed as a percentage) as set forth in the Purchase Commitment for the Agency Security.

“Compliance Certificate” means a certificate executed on behalf of Borrowers by UAMCLLC’s manager having principal financial accounting responsibilities, substantially in the form of Exhibit E.

“Cost Breakdown” means a list of the costs and expenses to be financed by Advances against a Third Party Builder Construction Mortgage Loan or a Construction/Perm Mortgage Loan, including, without limitation, real property acquisition costs, hard and soft construction costs, architectural fees, the Rehab Escrow and any other costs and expenses budgeted to construct and complete the improvements.

“Credit Agent” has the meaning set forth in the first paragraph of this Agreement.

“Credit Score” means a mortgagor’s overall consumer credit rating, represented by a single numeric credit score using the Fair, Isaac consumer credit scoring system, provided by a credit repository acceptable to Credit Agent and the Investor that issued the Purchase Commitment covering the related Mortgage Loan (if a Purchase Commitment is required by Exhibit H).

“Debt” means (a) all indebtedness or other obligations of a Person (and, if applicable, that Person’s Subsidiaries, on a consolidated basis) that, in accordance with GAAP, would be

Page 13-3

included in determining total liabilities as shown on the liabilities side of a balance sheet of that Person on the date of determination, plus (b) all indebtedness or other obligations of that Person (and, if applicable, that Person’s Subsidiaries, on a consolidated basis) for borrowed money or for the deferred purchase price of property or services. For purposes of calculating a Person’s Debt, Subordinated Debt due more than 1 year after the Warehousing Maturity Date may be excluded from that Person’s indebtedness.

“Default” means the occurrence of any event or existence of any condition that, but for the giving of Notice, the lapse of time or both, would constitute an Event of Default.

“Default Rate” means, for any Advance, the Interest Rate applicable to that Advance plus 2% per annum. If no Interest Rate is applicable to an Advance, “Default Rate” means, for that Advance, the highest Interest Rate then applicable to any outstanding Advance plus 2% per annum.

“Depository Benefit” means the compensation received by any Lender, directly or indirectly, as a result of Borrowers’ maintenance of Eligible Balances with a Designated Bank.

“Designated Bank” means any bank designated by any Lender as a Designated Bank, but only for as long as such Lender has an agreement under which that Lender receives Depository Benefits from that bank.

“Designated Bank Charges” means any fees, interest or other charges that would otherwise be payable to a Designated Bank in connection with Eligible Balances maintained at the Designated Bank, including deposit insurance premiums, service charges and any other charges that may be imposed by governmental authorities from time to time.

“Discontinued Loan” has the meaning set forth in the GMAC-RFC Client Guide.

“Electronic Advance Request” means an electronic transmission through RFConnects Delivery containing the same information as Exhibit A to this Agreement.

“Electronic Tracking Agreement” means an Electronic Tracking Agreement, on the form prescribed by Credit Agent, among a Borrower, Credit Agent, MERS and MERSCORP, Inc.

“Eligible Asset” means a Mortgage Loan, Agreement for Deed or Foreclosure Claim Receivable that satisfies the conditions and requirements set forth in Exhibit H.

“Eligible Balances” means all funds of or maintained by Borrowers (and, if applicable, Borrowers’ Subsidiaries) in demand deposit or time deposit accounts at a Designated Bank, minus balances to support float, reserve requirements and any other reductions that may be imposed by governmental authorities from time to time.

“Eligible Loan” means a Single Family Mortgage Loan that satisfies the conditions and requirements set forth in Exhibit H.

“Eligible Mortgage Pool” means a Mortgage Pool for which (a) an Approved Custodian has issued its initial certification, (b) there exists a Purchase Commitment covering the Agency Security to be issued on the basis of that certification and (c) the Agency Security will be delivered to Credit Agent.

“Equity Interests” means all shares, interests, participations or other equivalents, however, designated, of or in a Person (other than a natural person), whether or not voting, including common stock, membership interests, warrants, preferred stock, convertible debentures and all agreements, instruments and documents convertible, in whole or in part, into any one or more of the foregoing.

Page 13-4

“ERISA” means the Employee Retirement Income Security Act of 1974 and all rules and regulations promulgated under that statute, as amended, and any successor statute, rules and regulations.

“ERISA Affiliate” means any trade or business (whether or not incorporated) that is a member of a group of which any Borrower is a member and that is treated as a single employer under Section 414 of the Internal Revenue Code.

“Event of Default” means any of the conditions or events set forth in Section 10.1.

“Excess Buydown” has the meaning set forth in Section 3.4.

“Exchange Act” means the Securities Exchange Act of 1934 and all rules and regulations promulgated under that statute, as amended, and any successor statute, rules, and regulations.

“Exclusionary List” means the list by that name published and updated periodically by Credit Agent on the www.gmacresidentialfunding.com website.

“Exhibit A” means Exhibit A-SF, Exhibit A-Construction, Exhibit A-Other Investments and Exhibit A-UNI, as applicable to the type of Eligible Asset being financed.

“Exhibit B” means Exhibit B-SF, Exhibit B-Construction, Exhibit B-Foreclosure Claim Receivable and Exhibit B-Investment Mortgage Loans, as applicable to the type of Eligible Asset being financed.

“Existing Agreement” means the First Amended and Restated Warehousing Credit and Security Agreement dated as of October 23, 2003, as amended, between Borrowers, Credit Agent and Lenders.

“Fair Market Value” means, at any time for an Eligible Loan or a related Pledged Security (if the Eligible Loan is to be used to back a Pledged Security) as of any date of determination, the market price for such Eligible Loan or Pledged Security, determined by Credit Agent based on market data for similar Mortgage Loans or Pledged Securities and such other criteria as Credit Agent deems appropriate in its sole discretion.

“Fannie Mae” means Fannie Mae, a corporation created under the laws of the United States, and any successor corporation or other entity.

“Federal Funds Rate” means, for each week, the effective Federal Funds Rate (per annum) of interest in effect on the first Business Day of that week, as published by Bloomberg L.P. If the Federal Funds Rate is not published by Bloomberg L.P. on the first Business Day of any week, then the term “Federal Funds Rate” means the highest Federal Funds Rate published in the The Wall Street Journal in its regular column entitled “Money Rates” on the first Business Day of that week.

“FHA” means the Federal Housing Administration and any successor agency or other entity.

“FHA Mortgage Loan” means an FHA-insured Mortgage Loan included in the Pledged Loans.

“FICA” means the Federal Insurance Contributions Act and all rules and regulations promulgated under that statute, as amended, and any successor statute, rules and regulations.

“FIRREA” means the Financial Institutions Reform, Recovery and Enforcement Act of 1989 and all rules and regulations promulgated under that statute, as amended, and any successor statute, rules and regulations.

Page 13-5

“First Mortgage” means a Mortgage that constitutes a first Lien on the real property and improvements described in or covered by that Mortgage.

“First Mortgage Loan” means a Mortgage Loan secured by a First Mortgage.

“Foreclosure Claim Receivable” means a valid, readily enforceable and liquidated claim of UAMC Asset for the payment of money against FHA or VA under an FHA mortgage insurance policy insuring payment of, or VA guaranty of, all or a part of a defaulted Single Family Mortgage Loan foreclosed by one of the Borrowers.

“Foreclosure Mortgage Loan” means a Mortgage Loan that has been repurchased by a Borrower from an Investor or out of a Mortgage Pool and assigned to UAMC Asset, and is in the process of foreclosure.

“Freddie Mac” means the Federal Home Loan Mortgage Corporation, a corporation created under the laws of the United States, and any successor corporation or other entity.

“Funding Bank” means JPMorgan Chase or any other bank designated by Credit Agent as a Funding Bank.

“Funding Bank Agreement” means a letter agreement on the form prescribed by Credit Agent between the Funding Bank and Borrowers authorizing Credit Agent’s access to the Operating Account.

“GAAP” means generally accepted accounting principles set forth in opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and in statements and pronouncements of the Financial Accounting Standards Board, or in opinions, statements or pronouncements of any other entity approved by a significant segment of the accounting profession, which are applicable to the circumstances as of the date of determination.

“Ginnie Mae” means the Government National Mortgage Association, an agency of the United States government, and any successor agency or other entity.

“GMAC-RFC Client Guide” means the applicable loan purchase guide issued by RFC, as the same may be amended or replaced.

“Government Mortgage Loan” means a closed-end First Mortgage Loan that is either HUD/FHA insured (other than a HUD 203(K) Mortgage Loan or a Title I Mortgage Loan) or VA guaranteed.

“Hedging Arrangements” means, with respect to any Person, any agreements or other arrangements (including interest rate swap agreements, interest rate cap agreements and forward sale agreements) entered into to protect that Person against changes in interest rates or the market value of assets.

“HUD” means the Department of Housing and Urban Development, and any successor agency or other entity.

“HUD 203(K) Mortgage Loan” means an FHA-insured closed-end First Mortgage Loan to an individual obligor the proceeds of which will be used for the purpose of rehabilitating and repairing the related single family property, and which satisfies the definition of “rehabilitation loan” in 24 C.F.R. 203.50(a).

“Indemnified Liabilities” has the meaning set forth in Section 12.2.

Page 13-6

“Indemnitees” has the meaning set forth in Section 12.2.

“Interest Rate” means, for any Advance, the floating rate of interest specified for that Advance in Exhibit H.

“Interim Statement Date” means the date of the most recent unaudited financial statements of each Borrower (and, if applicable, each Borrower’s Subsidiaries, on a consolidated basis) delivered to Credit Agent and Lender under the Existing Agreement or this Agreement.

“Internal Revenue Code” means the Internal Revenue Code of 1986, Title 26 of the United States Code, and all rules, regulations and interpretations issued under those statutory provisions, as amended, and any subsequent or successor federal income tax law or laws, rules, regulations and interpretations.

“Investment” means any direct or indirect purchase or other acquisition by any Person of, or a beneficial interest in, stock or other securities of any other Person, or any direct or indirect loan, advance (other than advances to employees for moving and travel expenses, drawing accounts and similar expenditures in the ordinary course of business) or capital contribution by that Person to any other Person, including all Debt and accounts receivable from that Person which are not current assets or did not arise from sales to that other Person in the ordinary course of business.

“Investment Company Act” means the Investment Company Act of 1940 and all rules and regulations promulgated under that statute, as amended, and any successor statute, rules, and regulations.

“Investment Mortgage Loan” means a Prime First Mortgage Loan or a Subprime Mortgage Loan held by a Borrower for investment rather than sale.

“Investor” means Fannie Mae, Freddie Mac or a financially responsible private institution that Lender deems acceptable, in its sole discretion, to issue Purchase Commitments with respect to a particular category of Eligible Loans.

“JPMorgan Chase” means JPMorgan Chase Bank, National Association, Chicago, Illinois, or any successor bank.

“JPMorgan Chase Prime Rate” means, as of any date of determination, the highest prime rate quoted by JPMorgan Chase and most recently published by Bloomberg L.P. If the prime rate for JPMorgan Chase is not quoted or published for any period, then during that period the term “JPMorgan Chase Prime Rate” means the highest prime rate published in the most recent edition of The Wall Street Journal in its regular column entitled “Money Rates.”

“Lenders” has the meaning set forth in the first paragraph of this Agreement.

“Lennar” means LENNAR CORPORATION, a Delaware corporation.

“Lennar Undertaking” means a guaranty of certain of Borrowers’ Obligations by Lennar.

“Leverage Ratio” means the ratio of a Person’s Debt to Modified Tangible Net Worth.

“LIBOR” means, for each week, the rate of interest per annum that is equal to the arithmetic mean of the U.S. Dollar London Interbank Offered Rates for 1 month periods of certain U.S. banks as of 11:00 a.m. (London time) on the first Business Day of each week on which the London Interbank market is open, as published by Bloomberg L.P. If those interest rates are not offered or published for any period, then during that period LIBOR means the London Interbank Offered Rate for 1 month periods as published in The Wall Street Journal in its regular column entitled “Money Rates” on the first Business Day of each week on which the London Interbank market is open.

Page 13-7

“Lien” means any lien, mortgage, deed of trust, pledge, security interest, charge or encumbrance of any kind (including any conditional sale or other title retention agreement, any lease in the nature of such an agreement and any agreement to give any security interest).

“Loan Documents” means this Agreement, the Notes, the Lennar Undertaking, any agreement of Borrowers relating to Subordinated Debt, and each other document, instrument or agreement executed by Borrowers in connection with any of those documents, instruments and agreements, as originally executed or as any of the same may be amended, restated, renewed or replaced.

“Loan Package Fee” has the meaning set forth in Section 3.7.

“Loan-to-Value Ratio” means, for any Mortgage Loan, the ratio of (a) the maximum amount that may be borrowed under the Mortgage Loan (whether or not borrowed) at the time of origination, plus the Mortgage Note Amounts of all other Mortgage Loans secured by senior or pari passu Liens on the related real property and improvements, to (b) the Appraised Property Value of the related real property and improvements.

“Majority Lenders” means at any date Lenders holding not less than 66-2/3% of the aggregate Warehousing Credit Limit. Notwithstanding the foregoing, if there are only 2 Lenders the term “Majority Lenders” shall, except for purposes of Section 11.2(c), include both Lenders.

“Manufactured Home” means a structure that is built on a permanent chassis (steel frame) with the wheel assembly necessary for transportation in one or more sections to a permanent site or semi-permanent site.

“Margin Stock” has the meaning assigned to that term in Regulation U of the Board of Governors of the Federal Reserve System, as amended.

“MERS” means Mortgage Electronic Registrations Systems, Inc. and any successor entity.

“Miscellaneous Fees and Charges” means the Collateral Operations Fees set forth on Lender’s fee schedule attached as Exhibit I and all miscellaneous disbursements, charges and expenses incurred by or on behalf of Lender for the handling and administration of Advances and Collateral, including costs for Uniform Commercial Code, tax lien and judgment searches conducted by Lender, filing fees, charges for wire transfers and check processing charges, charges for security delivery fees, charges for overnight delivery of Collateral to Investors, recording fees, Funding Bank service fees and overdraft charges and Designated Bank Charges. Upon not less than 3 Business Days’ prior Notice to Borrower, Lender may modify the Collateral Operations Fees set forth in Exhibit I to conform to current Lender practices and, as so modified, the revised Exhibit I will become part of this Agreement.

“Modified Tangible Net Worth” means Tangible Net Worth, but including, as assets, advances and loans to Lennar and Lennar Financial Services, LLC.

“Mortgage” means a mortgage or deed of trust on real property that is improved and substantially completed (including real property to which a Manufactured Home has been affixed in a manner such that the Lien of a mortgage or deed of trust would attach to the Manufactured Home under applicable real property law).

“Mortgage-backed Securities” means securities that are secured or otherwise backed by Mortgage Loans.

Page 13-8

“Mortgage Loan” means any loan evidenced by a Mortgage Note and secured by a Mortgage and, if applicable, a Security Agreement.

“Mortgage Note” means a promissory note secured by one or more Mortgages and, if applicable, one or more Security Agreements.

“Mortgage Note Amount” means, as of any date of determination, the then outstanding and unpaid principal amount of a Mortgage Note (whether or not an additional amount is available to be drawn under that Mortgage Note).

“Mortgage Pool” means a pool of one or more Pledged Loans on the basis of which a Mortgage-backed Security is to be issued.

“Multiemployer Plan” means a “multiemployer plan” as defined in Section 4001(a)(3) of ERISA, to which either Borrower or any ERISA Affiliate of Borrower has any obligation with respect to its employees.

“Notes” means the Warehousing Notes, the Sublimit Notes, the RFC/WaMu Promissory Notes, the RFC Direct Promissory Note and the Swingline Note.

“Notices” has the meaning set forth in Section 12.1.

“Obligations” means all indebtedness, obligations and liabilities of each Borrower to any and all of Credit Agent and Lenders under this Agreement, any Note, any fee letter in favor of the Credit Agent relating to the Agreement, or under any of the other Loan Documents (whether now existing or arising after the date of this Agreement, voluntary or involuntary, joint or several, direct or indirect, absolute or contingent, liquidated or unliquidated, or decreased or extinguished and later increased and however created or incurred), including, without limitation, interest and other amounts that would accrue but for the filing of a petition under any law relating to bankruptcy, insolvency, moratorium, reorganization, winding-up or dissolution.

“Operating Account” means the demand deposit account number 1078657 maintained at the Funding Bank in Borrowers’ name and designated for funding that portion of each Eligible Asset not funded by an Advance made against that Eligible Asset and for returning any excess payment from an Investor for a Pledged Asset.

“Other Investments” has the meaning set forth on Exhibit H.

“Participant” has the meaning set forth in Section 12.7.

“Percentage Share” means, for any Lender at any date, the percentage which such Lender’s Warehousing Commitment Amount bears to the Warehousing Credit Limit as of such date.

“Person” means and includes natural persons, corporations, limited liability companies, limited liability partnerships, limited partnerships, general partnerships, joint stock companies, joint ventures, associations, companies, trusts, banks, trust companies, land trusts, business trusts or other organizations, whether or not legal entities, and governments and agencies and political subdivisions of those governments.

“Plan” means each employee benefit plan (whether in existence on the date of this Agreement or established after that date), as that term is defined in Section 3 of ERISA, maintained for the benefit of directors, officers or employees of Borrower or any ERISA Affiliate.

“Pledged Agreements for Deed” has the meaning set forth in Section 4.1(c).

Page 13-9

“Pledged Assets” means, collectively, Pledged Loans, Pledged Agreements for Deed, Foreclosure Claim Receivables and Pledged Securities.

“Pledged Hedging Accounts” has the meaning set forth in Section 4.1 (i).

“Pledged Hedging Arrangements” has the meaning set forth in Section 4.1 (i).

“Pledged Loans” has the meaning set forth in Section 4.1(b).

“Pledged Securities” has the meaning set forth in Section 4.1(d).

“Pledged Shares” has the meaning set forth in Section 4.1(j).

“Prime Mortgage Loan” has the meaning set forth in Exhibit H.

“Prohibited Transaction” has the meanings set forth for such term in Section 4975 of the Internal Revenue Code and Section 406 of ERISA.

“Purchase Commitment” means a written commitment, in form and substance satisfactory to Lender, issued in favor of Borrower by an Investor under which that Investor commits to purchase Mortgage Loans or Mortgage-backed Securities.

“Quarterly Accordion Period” means, for each fiscal year of UAMCLLC, the three 30-day periods beginning approximately each of May 25, August 25, and November 25, and ending approximately each of June 23, September 23, and December 24, respectively.

“Rating Agency” means any nationally recognized statistical rating organization that in the ordinary course of its business rates Mortgage-backed Securities.

“Rehab Escrow” means an escrow established as part of the initial Advance of a Construction/Perm Mortgage Loan for rehabilitation or renovation of existing improvements in an amount equal to the difference between the amount funded for the financing or refinancing of existing improvements on the real property encumbered by the Pledged Mortgage Loans and the amount funded for the renovation or rehabilitation of the existing improvements.

“Receivables” has the meaning set forth in Section 4.1(f).

“Release Amount” has the meaning set forth in Section 4.3(f).

“Restriction List” and “Restriction Lists” means each and every list of Persons to whom the Government of the United States prohibits or otherwise restricts the provision of financial services. For the purposes of this Agreement, Restriction Lists include the list of Specifically Designated Nationals and Blocked Persons established pursuant to Executive Order 13224 (September 23, 2001) and maintained by the U.S. Department of the Treasury’s Office of Foreign Assets Control or any successor agency or other entity, current as of the day the Restriction List is used for purposes of comparison in accordance with the requirements of this Agreement.

“RFC Direct Advance” means a disbursement by RFC under the RFC Direct Commitment.

“RFC Direct Commitment” means the obligation of RFC to make RFC Direct Advances to Borrowers under Section 1.5.

“RFC Direct Commitment Amount” means the amount designated as such opposite RFC’s name on Exhibit J as the RFC Direct Commitment Amount, as the same may be amended from time to time in accordance with this Agreement.

Page 13-10

“RFConnects Delivery” means Credit Agent’s proprietary service to support the electronic exchange of information between Credit Agent and Borrowers, including Warehousing Advance Requests, shipping requests, payoff requests, wire transfer instructions, security delivery instructions, activity reports and exception reports.

“RFC/WaMu Advance” means a disbursement by RFC and WaMu under the RFC/WaMu Commitment.

“RFC/WaMu Commitment” means the obligation of RFC and WaMu to make RFC/WaMu Advances to Borrowers under Section 1.3.

“RFC/WaMu Commitment Amount” means for RFC and WaMu at any date, the amount designated as such opposite such Lender’s name on Exhibit J as its RFC/WaMu Commitment Amount, as the same may be amended from time to time in accordance with this Agreement.

“RFC/WaMu Notes” has the meaning set forth in Section 1.8. “Second Mortgage” means a Mortgage that constitutes a second Lien on the real property and improvements described in or covered by that Mortgage.

“Second Mortgage Loan” means a Mortgage Loan secured by a Second Mortgage.

“Security Agreement” means a security agreement or other agreement that creates a Lien on personal property, including furniture, fixtures and equipment, to secure repayment of a Mortgage Loan.

“Servicing Contract” means, with respect to any Person, the arrangement, whether or not in writing, under which that Person has the right to service Mortgage Loans.

“Servicing Portfolio” means, as to any Person, the unpaid principal balance of Mortgage Loans serviced by that Person under Servicing Contracts, minus the principal balance of all Mortgage Loans that are serviced by that Person for others under subservicing arrangements.

“Servicing Portfolio Report” has the meaning set forth in Section 7.3(a).

“Single Family Mortgage Loan” means a Mortgage Loan secured by a Mortgage on improved real property on which is located a 1-to-4 family residence.

“Single Family Property” means improved real property containing one to four family residences.

“Standard Warehouse Period” means, for any Mortgage Loan, the maximum number of days a Warehousing Advance against that type of Mortgage Loan, other than against an Aged Mortgage Loan, may remain outstanding, as set forth in Exhibit H.

“Statement Date” means the Audited Statement Date or the Interim Statement Date, as applicable.

“Sublimit” means the aggregate amount of Advances (expressed as a dollar amount of the Warehousing Credit Amount) that is permitted to be outstanding at any one time against a specific type of Eligible Loan.

“Subordinated Debt” means all indebtedness of Borrowers for borrowed money that is effectively subordinated in right of payment to all present and future Obligations either (1) under a Subordination of Debt Agreement on the form prescribed by Credit agent or (2) otherwise on terms acceptable to Credit Agent.

Page 13-11

“Subprime Mortgage Loan” has the meaning set forth in Exhibit H.

“Subsidiary” means any corporation, partnership, association or other business entity in which more than 50% of the shares of stock or other ownership interests having voting power for the election of directors, managers, trustees or other Persons performing similar functions is at the time owned or controlled by any Person either directly or indirectly through one or more Subsidiaries of that Person.

“Super Jumbo Mortgage Loan” has the meaning set forth in Exhibit H.

“Swingline Advance” means an Advance made by RFC under Section 1.7.

“Swingline Facility Amount” means the maximum amount of Swingline Advances to be made by RFC from time to time, but not to exceed $75,000,000.

“Swingline Note” has the meaning set forth in Section 1.8.

“Tangible Net Worth” means the excess of a Person’s (and, if applicable, the Person’s Subsidiaries, on a consolidated basis) total assets over total liabilities as of the date of determination, each determined in accordance with GAAP, plus that portion of Subordinated Debt not due within 1 year of that date. For purposes of calculating a Person’s Tangible Net Worth, advances or loans to shareholders, directors, officers, employees or Affiliates, investments in Affiliates, assets pledged to secure any liabilities not included in the Debt of the Person, intangible assets, Servicing Contracts of the type described in Section 8.11 (to the extent capitalized as an asset), those other assets that would be deemed by HUD to be non-acceptable in calculating adjusted net worth in accordance with its requirements in effect as of that date, as those requirements appear “Consolidated Audit Guide for Audits of HUD Programs,” and other assets Credit Agent deems unacceptable, in its sole discretion, must be excluded from a Person’s total assets.

“Taxes” has the meaning set forth in Section 3.13(a)(1).

“Third Party Builder Construction Mortgage Loan” has the meaning set forth on Exhibit H.

“Third Party Originated Loan” means a Mortgage Loan originated and funded by a third party (other than with funds provided by a Borrower at closing to purchase the Mortgage Loan) and subsequently purchased by a Borrower.

“Title I Mortgage Loan” means an FHA co-insured closed-end First Mortgage Loan or Second Mortgage Loan that is underwritten in accordance with HUD underwriting standards for the Title I Property Improvement Program set forth in, and that is reported for insurance under, the Mortgage Insurance Program authorized and administered under Title I of the National Housing Act of 1934, as amended, and the regulations related to that statute.

“Trust Receipt” means a trust receipt in a form approved by and under which Credit Agent may deliver any document relating to the Collateral to Borrowers for correction or completion.

“UAMC Capital” means UAMC Capital, LLC, a Delaware limited liability company.

“UAMC Capital Warehousing Facility” means the warehousing facility created pursuant to the Loan Agreement dated as of May 23, 2003, by and among UAMC Capital (the “Issuers”) party thereto, Calyon New York Branch, as administrative agent (the “Managing Agent”) party thereto and UAMC, as Servicer, either as originally executed or as it may be amended, restated, renewed or replaced.

Page 13-12

“VA” means the Veterans Administration and any successor agency or other entity.

“Warehouse Period” means, for any Eligible Loan, the maximum number of days a Warehousing Advance against that type of Eligible Loan may remain outstanding as set forth in Exhibit H.

“Warehousing Advance” means a disbursement by a Lender under its Warehousing Commitment.

“Warehousing Advance Request” has the meaning set forth in Section 2.1.

“Warehousing Collateral Value” means, as of any date of determination, (a) with respect to any Eligible Loan, the lesser of (1) the amount of any Warehousing Advance made, or that could be made, against such Eligible Loan under Exhibit H or (2) an amount equal to the Advance Rate for the applicable type of Eligible Loan multiplied by the Fair Market Value of such Eligible Loan; (b) if Eligible Loans have been exchanged for Agency Securities, the lesser of (1) the amount of any Warehousing Advances outstanding against the Eligible Loans backing the Agency Securities or (2) an amount equal to the Advance Rates for the applicable types of Eligible Loans backing the Agency Securities multiplied by the Fair Market Value of the Agency Securities; and (c) with respect to cash, the amount of the cash.

“Warehousing Commitment” means the obligation of each Lender to make Warehousing Advances to Borrowers under Section 1.1.

“Warehousing Commitment Amount” means, for any Lender at any date, that dollar amount designated as such opposite such Lender’s name on Exhibit J as its Warehousing Commitment Amount on such date, as the same may be amended from time to time in accordance with this Agreement.

“Warehousing Commitment Fee” has the meaning set forth in Section 3.5.

“Warehousing Credit Limit” means at any date the sum of the Warehousing Commitment Amounts of all of the Lenders on such date.

“Warehousing Fee” has the meaning set forth in Section 3.6.

“Warehousing Maturity Date” has the meaning set forth in Section 1.2.

“Warehousing Note” has the meaning set forth in Section 1.6.

“Weighted Average Committed Purchase Price” means the weighted average of the Committed Purchase Prices of the unfilled Purchase Commitments (expressed as a percentage) for Mortgage Loans or Mortgage-backed Securities of the same type, interest rate and term.

“Wet Settlement Advance” means an Advance prior to the end of the Wet Settlement Period.

“Wet Settlement Period” means the period of time from the date a Wet Settlement Advance is made against a Pledged Asset until the earlier of (a) the date the Collateral Documents for the Pledged Asset have been delivered to and examined by Credit Agent, or (b) the date the Wet Settlement Advance made against the Pledged Asset is paid in full.

“Wire Disbursement Account” means a demand deposit account maintained at the Funding Bank in Credit Agent’s name for clearing wire transfers requested by Borrowers to fund Warehousing Advances.

“Wire Fee” has the meaning set forth in Section 3.7.

Page 13-13

13.2. Other Definitional Provisions; Terms of Construction

13.2 (a)	Accounting terms not otherwise defined in this Agreement have the meanings given to those terms under GAAP.
13.2 (b)	Defined terms may be used in the singular or the plural, as the context requires.
13.2 (c)	All references to time of day mean the then applicable time in Chicago, Illinois, unless otherwise expressly provided.
13.2 (d)	References to Sections, Exhibits, Schedules and like references are to Sections, Exhibits, Schedules and the like of this Agreement unless otherwise expressly provided.
13.2 (e)	The words “include,” “includes” and “including” are deemed to be followed by the phrase “without limitation.”
13.2 (f)	Unless the context in which it is used otherwise clearly requires, the word “or” has the inclusive meaning represented by the phrase “and/or.”
13.2 (g)	All incorporations by reference of provisions from other agreements are incorporated as if such provisions were fully set forth into this Agreement, and include all necessary definitions and related provisions from those other agreements. All provisions from other agreements incorporated into this Agreement by reference survive any termination of those other agreements until the Obligations of Borrower under this Agreement and the Warehousing Note are irrevocably paid in full and the Warehousing Commitment is terminated.
13.2 (h)	All references to the Uniform Commercial Code shall be deemed to be references to the Uniform Commercial Code in effect on the date of this Agreement in the applicable jurisdiction.
13.2 (i)	Unless the context in which it is used otherwise clearly requires, all references to days, weeks and months mean calendar days, weeks and months.

End of Article 13

Page 13-14

IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the date first above written.

BORROWERS:	UNIVERSAL AMERICAN MORTGAGE COMPANY, LLC, a Florida limited liability company
	By:	/s/ Janice Munoz
	Its:	Vice President/Treasurer
	EAGLE HOME MORTGAGE, INC., a Washington corporation
	By:	/s/ Janice Munoz
	Its:	Vice President
	AMERISTAR FINANCIAL SERVICES, INC., a California corporation
	By:	/s/ Janice Munoz
	Its:	Vice President
	UNIVERSAL AMERICAN MORTGAGE COMPANY OF CALIFORNIA, a California corporation
	By:	/s/ Janice Munoz
	Its:	Vice President/Treasurer
	UAMC ASSET CORP. II, a Nevada corporation
	By:	/s/ Janice Munoz
	Its:	Vice President/Treasurer
CREDIT AGENT:	RESIDENTIAL FUNDING CORPORATION, a Delaware Corporation
	By:	/s/ Jim Clapp
	Its:	Director
	CLOSING DATE:

Signature Page

LENDERS:	RESIDENTIAL FUNDING CORPORATION, a Delaware corporation
	By:	/s/ Jim Clapp
	Its:	Director
	JPMORGAN CHASE, NA,
	a national banking association
	By:	/s/ Thanh Roettele
	Its:	Vice President
	NOTICE ADDRESS:
	Attention:
	Facsimile:
	U.S. BANK NATIONAL ASSOCIATION,
	a national banking association
	By:	/s/ Kathleen Connor
	Its:	Vice President
	NOTICE ADDRESS:
	Attention:
	Facsimile:
	SUNTRUST BANK, a state bank organized
	under the laws of Georgia
	By:	/s/ Robert E. Hummel
	Its:	Sr. Vice President
	NOTICE ADDRESS:
	Attention:
	Facsimile:

Signature Page

NATIONAL CITY BANK OF KENTUCKY, a national banking association
By:	/s/ Jerry W. Johnston
Its:	Executive Vice President
NOTICE ADDRESS:
Attention:
Facsimile:
COMERICA BANK
By:	/s/ Robert Marr
Its:	Vice President
NOTICE ADDRESS:
Attention:
Facsimile:
CALYON NEW YORK BRANCH
By:	/s/ T. Soustra
Its:	Executive Vice President
By:	/s/ Scott Chappelka
Its:	Director
NOTICE ADDRESS:
Attention:
Facsimile:
WASHINGTON MUTUAL BANK, FA
By:	/s/ Cyndi Lopez
Its:	Vice President
NOTICE ADDRESS:
Attention:
Facsimile:

Signature Page

EX-21

Exhibit 21

List of Subsidiaries

Company Name	Where Incorporated	DBAs
Acme Water Supply & Management Company	Florida
Admiral Homes SPE, LLC	Florida
Admiral SPE 2-4, LLC	Florida
AHDG SPE 2-4, LLC	Florida
AHDG SPE, LLC	Florida
AHDG SPE-3, LLC	Florida
Alabama Property Ventures, LLC	Alabama
American Hotel Lofts - Greystone, LLC	California
AmeriStar Financial Services, Inc.	California
Aquaterra Utilities, Inc.	Florida
Arbor Club, LLC	Illinois
ARBOR WEST, LLC	Delaware
ARBORETUM - PCC III, LLC	Delaware
Arboretum Holdings, LLC	Delaware
ARBORWEST-INT-STRAWBERRY COURT, LLC	Delaware
Asbury Woods, LLC	Illinois
Avalon Sienna III, LLC	Illinois
Avalon Sienna, LLC	Illinois
Barnsboro Associates, LLC	New Jersey
Bayhome USH, Inc.	Florida
Bayvest, LLC	Florida
Bella Oaks, LLC	Illinois
Bermuda Springs Developers Joint Venture	Nevada
Bickford Holdings, LLC	Nevada
Blackstone CC, LLC	Colorado
Boca Greens, Inc.	Florida
Boca Isles South Club, Inc.	Florida
Boggy Creek LLC	Florida
Boggy Creek USH, Inc.	Florida
Bramalea California Properties, Inc.	California
Bramalea California Realty, Inc.	California
Bramalea California, Inc.	California
Brazoria County LP, Inc.	Nevada
Brewer Baseline Investors, LLC	California
Builders Acquisition Corp.	Delaware
Builders LP, Inc.	Delaware
Cambria, LLC	Illinois
Cantera Village, LLC	Illinois
Capevest, LLC	Florida
Carson Creek El Dorado, LLC	California
Cary Woods, LLC	Illinois
CBM Management, Inc.	New Jersey
Cedar Branch Associates, LP	New Jersey
Central Florida Executive Title, LLC	Florida
Chancellor Place, LLC	New Jersey

Claremont Ridge, LLC	Illinois
Claridge Estates, LLC	Illinois
Clodine-Bellaire LP, Inc.	Nevada
Club Pembroke Isles, Inc.	Florida
Club Tampa Palms, Inc.	Florida
Colonial Heritage, LLC	Virginia
Colony Escrow, Inc.	Washington
Columbia Station, LLC	Illinois
Concord at Bridlewood, LLC	Illinois
Concord at Cornerstone Lakes, LLC	Illinois
Concord at Interlaken, LLC	Illinois
Concord at Meadowbrook, LLC	Illinois
Concord at Pheasant Run Trails, LLC	Illinois
Concord at Ravenna, LLC	Illinois
Concord at the Glen, LLC	Illinois
Concord City Centre, LLC	Illinois
Concord Hills, Inc.	Illinois
Concord Homes, Inc.	Delaware
Concord Lake, Inc.	Illinois
Concord Mills Estates, LLC	Illinois
Concord Oaks, Inc.	Illinois
Concord Park, Inc.	Illinois
Concord Pointe, Inc.	Illinois
Continental Escrow Company	California
Corta Bella Holdings, LLC	Delaware
Coto de Caza, Ltd.	California
Country Club Villas at Rob Ro, LLC	Illinois
Coventry, LLC	Illinois
Crismon & Baseline, LLC	Arizona
Crowne Hill 100 Holdings, LLC	Delaware
Dalco Land Limited Liability Company	Colorado
Darcy-Joliet, LLC	Illinois
DCA Financial Corp.	Florida
DCA NJ Realty, Inc.	New Jersey
DCA of Lake Worth, Inc.	Florida
DCA of New Jersey, Inc.	New Jersey
E.M.J.V. Corp.	Florida
Eagle Home Mortgage, Inc.	Washington
East Meadows Joint Venture	Florida
Echo Park Delta Development, LLC	United States
Edgewater Reinsurance, Ltd.	Turks & Caicos Islands
Enclave Land, LLC	Illinois
ERMLOE, LLC	Florida
Escena-PSC, LLC	Delaware
Estates Seven, LLC	Delaware
F.P. Construction Corp.	Delaware
Fidelity Guaranty and Acceptance Corp.	Delaware
First & Bush Lofts, LLC	California
Florida Title Consultants	Florida
Fortress Holding - Virginia, LLC	Delaware
Fortress Illinois, LLC	Delaware
Fortress Management, Inc.	Texas

Fortress Missouri, LLC	Delaware
Fortress Mortgage, Inc.	Delaware
Fortress Pennsylvania Realty, Inc.	Pennsylvania
Fortress Pennsylvania, LLC	Delaware
Fortress-Florida, Inc.	Delaware
Fox-Maple Associates, LLC	New Jersey
Foxwood, LLC	Illinois
FR Exchanges, Inc.	Colorado
Francisco Oaks, LLC	California
Gateway Commons, LLC	Maryland
Genesee Communities I, Inc.	Colorado
Genesee Communities II, LLC	Colorado	Fortress Genesee III, LLC
Genesee Communities III, Inc.	Colorado
Genesee Communities IV, LLC	Colorado
Genesee Communities IX, LLC	Colorado
Genesee Communities V, LLC	Colorado
Genesee Communities VI, LLC	Colorado
Genesee Communities VII, LLC	Colorado
Genesee Communities VIII, LLC	Colorado
Genesee Venture, LLC	Colorado
Glenview Place, LLC	Illinois
Glenview Reserve, LLC	Illinois
Glenview Reserve, LLC	Illinois
Glenwood Investors, LLC	Maryland
Golf Associates, LLC	New Jersey
Grand Isle Club, Inc.	Florida
Greenbriar at River Valley, Ltd.	Ohio
Greenfield/Waterbury, LLC	Illinois
Greentree Holdings, LLC	New Jersey
Greystone Construction, Inc.	Arizona
Greystone Homes of Nevada, Inc.	Delaware
Greystone Homes, Inc.	Delaware	GHI, Inc.
Greystone Nevada, LLC	Delaware	GHI Lennar Homes
Greywall Club, LLC	Illinois
Harbourvest, LLC	Florida
Harris County LP, Inc.	Nevada
Haverton, LLC	Illinois
Heartland Colorado, LLC	Colorado
Heathcote Commons LLC	Virginia
Heritage Harbour Realty, Inc.	Florida
Heritage Housing Group, Inc.	Maryland
Heritage USH, Inc.	Florida
HL Partners, LLC	Delaware
Home Buyer’s Advantage Realty, Inc.	Texas
Homecraft Corporation	Texas
Hometrust Insurance Company	Vermont
Homevest, L.L.C	Florida
Homeward Development Corporation	Florida
Houghton Road Land Partners, LLC	Arizona
Imperial Homes Corporation	Florida
Impressions, LLC	Illinois
Inactive Corporations, Inc.	Florida
Independence Land Title Company, LLC	Texas

Independence, LLC	Virginia
Isles at Bayshore Master Association, Inc.	Florida
Kings Ridge Golf Corporation	Florida
Kings Ridge Recreation Corporation	Florida
Kings Wood Development Company, L.C.	Florida
La Canada Holding Company	California
Landmark Homes, Inc.	North Carolina
Laureate Homes of Arizona, Inc.	Arizona
Laureate Partners LLC	Colorado
Legacy Homes, Inc.	North Carolina
Legends Club, Inc.	Florida
Legends Golf Club, Inc.	Florida
LEN - Inland, LLC	Delaware
LEN - Star North Peak Investments, LLC	Delaware
LEN - Star North Peak Investments, LLC	Delaware
LEN-Hiddenbrooke II Sub, LLC	California
LEN-Murrieta Springs, LLC	Delaware
LENH I, LLC	Florida
LENH II, LLC	Florida
LENH III, LLC	Florida
LENH IV, LLC	Florida
Lennar Acquisition Corp. II	California
Lennar Aircraft I, LLC	Delaware
Lennar Associates Management Holding Company	Florida
Lennar Associates Management, LLC	Delaware
Lennar Aviation, Inc.	Delaware
Lennar Carolinas, LLC	Delaware
Lennar CDE, LLC	Delaware
Lennar Central Region Sweep, Inc.	Nevada
Lennar Charitable Housing Foundation	California
Lennar Chicago, Inc.	Illinois
Lennar Coastal Development Group II, LLC	Florida
Lennar Colorado, LLC	Colorado
Lennar Communities Development, Inc.	Delaware
Lennar Communities Nevada, LLC	Nevada
Lennar Communities of Chicago, LLC	Illinois
Lennar Communities of Florida, Inc.	Florida
Lennar Communities of South Florida, Inc.	Florida
Lennar Communities, Inc.	California
Lennar Construction, Inc.	Arizona
Lennar Corporation	Delaware
Lennar Coto Holdings, LLC	California
Lennar Developers, Inc.	Florida

Lennar Developers, Inc. II	Florida
Lennar Developers, Inc. III	Florida
Lennar Family of Builders GP, Inc.	Delaware
Lennar Family of Builders Limited Partnership	Delaware
Lennar Financial Services, LLC	Florida
Lennar Fresno, Inc.	California
Lennar Funding, LLC	Delaware
Lennar Greer Ranch Venture, LLC	California
Lennar Hingham Holdings, LLC	United States
Lennar Hingham JV, LLC	Delaware
Lennar Homes Holding Corp.	Delaware
Lennar Homes of Arizona, Inc.	Arizona
Lennar Homes of California, Inc.	California
Lennar Homes of Colorado, LLP	Colorado
Lennar Homes of Texas Land and Construction, Ltd.	Texas
Lennar Homes of Texas Sales and Marketing, Ltd.	Texas	Bay Oaks Sales Associates Friendswood Development Company Friendswood Land Development Company Houston Village Builders, Inc. Kingswood Sales Associates Lennar Homes Lennar Homes of Texas Lennar Homes of Texas, Inc. NuHome Designs NuHome of Texas Village Builders
Lennar Homes, Inc.	Florida	Classic American Classic American Homes Classic American Homes, Inc. Club Pembroke Isles Coco Pointe Lennar Century 8th Street Developers Lennar Communities, North Florida Division Lennar-Century 8th Street Developers Lennars The Palms @ Pembroke Isles Oak Creek North Community Association, Inc. Verona Trace Club, Inc. Walnut Creek Walnut Creek Club Your Hometown Builder
Lennar Houston Land, LLC	Texas
Lennar Imperial Holdings Limited Partnership	Delaware
Lennar Insurance Services, Inc.	Florida
Lennar La Paz Limited, Inc.	California
Lennar La Paz, Inc.	California
Lennar Land Partners Sub II, Inc.	Nevada
Lennar Land Partners Sub, Inc.	Delaware
Lennar Long Beach Promenade Partners, LLC	Delaware
Lennar Lytle Holdings, LLC	Delaware
Lennar Massachusetts Properties, Inc.	Delaware
Lennar Military Housing, Inc.	Delaware

Lennar MS Legacy, LLC	Delaware
Lennar Nevada Investments, a Nevada general partnership	Nevada
Lennar Nevada, Inc.	Nevada
Lennar New Jersey Properties, Inc.	Delaware
Lennar New York, LLC	New York
Lennar Northeast Properties, Inc.	Nevada
Lennar Northland I, Inc.	California
Lennar Northland II, Inc.	California
Lennar Northland III, Inc.	California
Lennar Northland IV, Inc.	California
Lennar Northland V, Inc.	California
Lennar Northland VI, Inc.	California
Lennar Pacific Properties Management, Inc.	Delaware
Lennar Pacific Properties, Inc.	Delaware
Lennar Pacific, Inc.	Delaware
Lennar Pacific, L.P.	Delaware
Lennar Placentia TOD Properties, LLC	Delaware
Lennar PNW, Inc.	Washington
Lennar Port Imperial South Building 10, LLC	New Jersey
Lennar Port Imperial South Building 12, LLC	New Jersey
Lennar Port Imperial South, LLC	Delaware
Lennar Realty Trust	Maryland
Lennar Realty, Inc.	Florida
Lennar Renaissance, Inc.	California
Lennar Reno, LLC	Nevada	Lennar Lennar
Lennar Riverside West Holdings, LLC	New Jersey
Lennar Riverside West Urban Renewal Company, L.L.C.	New Jersey
Lennar Riverside West, LLC	Delaware
Lennar Rockwell, Inc.	South Carolina
Lennar Sacramento, Inc.	California
Lennar Sales Corp.	California	Greystone Homes, Inc., a Delaware corporation Lennar Bakersfield, Inc. Lennar Homes of California, Inc., a California corporation Lennar Rennaissance, Inc., a California corporation Lennar Sacramento, Inc., a California corporation US Home Winncrest Homes II, a California corporation
Lennar Seaport Partners, LLC	Delaware
Lennar Southland I, Inc.	California
Lennar Southland II, Inc.	California
Lennar Southland III, Inc.	California
Lennar Southwest Holding Corp.	Nevada

Lennar Stockton, Inc.	California
Lennar Texas Holding Company	Texas
Lennar Trading Company, LP	Texas
Lennar West Gateway, LLC	Delaware
Lennar-KB Figueroa Central, LLC	Delaware
Lennar-Kings Lake, Inc.	Florida
Lennar-Lantana Boatyard, Inc.	Florida
Lennar.Com, Inc.	Florida
Lennar/Centex at Echo Lake, LLC	Florida
Lennarstone Marketing Group, LLC	Arizona
Lenwin 1, LLC	California
LFB Engineered Systems, Inc.	California
LFB-FSD, LLC	Florida
LFOB Fresno, LP	Delaware
LFOB Greystone, LP	Delaware
LFOB Lennar, LP	Delaware
LFOB Renaissance, LP	Delaware
LFOB U.S. Home, LP	Delaware
LFS Holding Company, LLC	Delaware
LH Eastwind, LLC	Florida
LHI Renaissance, LLC	Florida
LHI, L.L.C.	United States
LLT, LLC	Delaware
LN, LLC	Florida
LNR-Lennar Figueroa, LLC	Delaware
Long Point Development Corporation	Texas
Lori Gardens Associates, LLC	New Jersey
Lorton Station, LLC	Virginia
LR Liberty Terrace JV, LLC	United States
LR Overlook Phase II, LLC	United States
LR Port Imperial South BB, LLC	New Jersey
LR Port Imperial South BB, LLC (Delaware)	Delaware
LRSP, LLC	Florida
Lucerne Merged Condominiums, Inc.	Florida
M.A.P. Builders, Inc.	Florida
Madrona Village Mews, LLC	Illinois
Madrona Village, LLC	Illinois
Marlborough Development Corporation	California
Marlborough Financial Corporation	California
Marlborough Mortgage Corporation	California
Maywood, LLC	Virginia
Meritus Title Company	California
Mid-County Utilities, Inc.	Maryland
Midland Housing Industries Corp.	California
Midland Investment Corporation	California
Mission Viejo 12S Venture, LP	California
Mission Viejo Holdings, Inc.	California
Mississippi Property Ventures, LLC	Mississippi
Moffett Meadows Partners, LLC	Delaware
Montgomery Crossings, LLC	Illinois
Moreno Valley Lakes 146-Via Del Rey, LLC	Delaware

Mulberry Grove, LLC	Illinois
Murrieta Holdings, LLC	Delaware
Natomas Estates, LLC	California
New Home Brokerage, Inc.	Florida
NGMC Finance Corporation, IV	Florida
North American Asset Development Corporation	California
North American Insurance Services, LLC	Florida
North American Real Estate Services, Inc.	California
North American Title Agency of Arizona, Inc.	Arizona
North American Title Alliance, LLC	Florida
North American Title Company	Minnesota
North American Title Company	Florida
North American Title Company	Illinois
North American Title Company	Maryland
North American Title Company of Colorado	Colorado
North American Title Company, Inc.	California
North American Title Florida Alliance, LLC	Florida
North American Title Group, Inc.	Florida
North American Title Insurance Company	California
North American Title Insurance Corporation	Florida
North County Land Company, LLC	California
Northbridge, LLC	Illinois
Northeastern Properties LP, Inc.	Nevada
Northern Land Company, LLC	Colorado
NuHome Designs, LLC	Texas
Oceanpointe Development Corporation	Florida
Ogden Pointe at the Wheatlands, LLC	Illinois
Ogden Pointe, LLC	Illinois
OLP11N1 SPE, LLC	Florida
OLP11N2 SPE, LLC	Florida
OLP11N3 SPE, LLC	Florida
Orrin Thompson Construction Company	Minnesota
Orrin Thompson Homes Corp.	Minnesota
Paparone Construction Co.	New Jersey
Parkside Estates, LLC	Illinois
PCC III - CAPSTONE, LLC	Delaware
PCC III - CROWNE HILL 100, LLC	Delaware
PCC III - INT - OAK COMMUNITIES, LLC	California
PCC III - INT CROWNE HILL, LLC	Delaware
PCC III - OAK COMMUNITIES, LLC	Delaware
PCC III - VIA DEL REY, LLC	Delaware
Perris Green Valley Associates	California

PL Roseville Holdings, LLC	Delaware
Polo Club Pointe, LLC	Illinois
Polo Club, LLC	Illinois
Port Imperial South Building 14, LLC	New Jersey
Prestonfield L.L.C.	Illinois
Pride Homes Mortgage of Florida, LLC	Florida
Pride Homes Mortgage, LLC	Florida
Pride Homes Title, LLC	Florida
Providence Glen, LLC	Illinois
Providence, LLC	Illinois
Quest Testing	Texas
Raintree Village II, LLC	Illinois
Raintree Village, LLC	Illinois
Rancho Summit, LLC	California
Regents LaJolla Partners, LLC	Delaware
Renaissance Place Hyde Park, LLC	Illinois
Reserve at Creek Run, LLC	New Jersey
Reserve at River Park, LLC	New Jersey
Rivendell Joint Venture	Florida
Rivenhome Corporation	Florida
Riverwalk at Waterside Island, LLC	Florida
Riviera Land Corp.	Florida
Roseridge Development, LLC	California
Roseville Schools, LLC	California
Rottlund Advantage, LLC	Florida
RRKTG Lumber, LLC	Delaware
Rutenberg Homes of Texas, Inc.	Texas
Rutenberg Homes, Inc. (Florida)	Florida
S. Florida Construction II, LLC	Florida
S. Florida Construction III, LLC	Florida
S. Florida Construction IV, LLC	Florida
S. Florida Construction, LLC	Florida
S.D.L.T., LLC	Florida
San Felipe Indemnity Co., Ltd.	Bermuda
Santa Ana Transit Village, LLC	California
Savell Gulley Development Corporation	Texas
Scarsdale, LTD.	United States
SDLT LLC	United States
SEA Joint Venture, LLC	Colorado
Seaport Marina, LLC	Delaware
Seminole/70th, LLC	Florida
SFHR Management, LLC	Illinois
Siena at Old Orchard, LLC	Illinois
Silver Lakes-Gateway Clubhouse, Inc.	Florida
Sky Land Title, LLC	Florida
SLTC, Inc.	Texas	Southwest Land Title Company
Sonoma, LLC	Illinois
Spanish Springs Development, LLC	Nevada

State Home Acceptance Corporation	Florida
Stoney Corporation	Florida
Stoneybrook Clubhouse West, Inc.	Florida
Stoneybrook Clubhouse, Inc.	Florida
Stoneybrook Golf Club, Inc.	Florida
Stoneybrook Joint Venture	Florida
Strategic Cable Technologies, L.P.	Texas
Strategic Holdings, Inc.	Nevada	Lennar Communications Ventures
Strategic Technologies Communications of California, Inc.	California
Strategic Technologies, Inc.	Florida
Summerfield Venture L.L.C.	Illinois
Summerway Investment Corp.	Florida
Summerwood, LLC	Maryland
Summit Acquisition Corp.	Delaware
Summit Enclave, LLC	Illinois
Summit Fields, LLC	Illinois
Summit Glen, LLC	Illinois
Summit Land, LLC	Illinois
Summit Ridge 23, LLC	Illinois
Sunset Crossroads, LLC	Delaware
Sunstar Enterprises, LLC	Delaware
Temecula Valley, LLC	Delaware
Tennessee Avenue Lofts, LLC	Delaware
Texas-Wide General Agency, Inc.	Texas
The Club at Stoneybrook, Inc.	Florida
The Courts of Indian Creek, LLC	Illinois
The Fortress Group, Inc.	Delaware
The Grande By Lennar Builders, Inc.	Florida
The Homeward Foundation	Texas
The Preserve at Oakleaf Plantation SPE, LLC	Florida
The Sexton, LLC	Illinois
Title America Insurance Corporation	Florida
Trade Services Investments, Inc.	California	Trade Services Framers, Inc.
U.S. Home & Development Corporation	Delaware
U.S. Home Acceptance Corporation	Delaware
U.S. Home and Development Corporation	Delaware
U.S. Home Associates Management, Inc.	Delaware
U.S. Home Corporation	Delaware	Lennar Lennar Lennar Lennar Lennar Lennar Lennar Lennar Lennar Lennar Lennar Lennar Lennar Lennar Corporation Patriot Homes

U.S. Home Corporation of New York	New York
U.S. Home Mortgage Corporation	Florida
U.S. Home of Arizona Construction Co.	Arizona
U.S. Home of Colorado Real Estate, Inc.	Colorado
U.S. Home of Colorado, Inc.	Colorado
U.S. Home of West Virginia, Inc.	West Virginia
U.S. Home Realty Corporation	Florida
U.S. Home Realty, Inc.	Texas
U.S. Home Southwest Holding Corp.	Nevada
U.S. Insurors, Inc.	Florida
U.S.H. Corporation of New York	New York
U.S.H. Los Prados, Inc.	Nevada
U.S.H. Realty, Inc.	Maryland
UAMC Asset Corp. II	Nevada
UAMC Capital, LLC	Delaware
UAMC Holding Company, LLC	Delaware
UAMC Holdings II	Nevada
Universal American Insurance Agency, Inc. (FL)	Florida
Universal American Insurance Agency, Inc. (Texas)	Texas
Universal American Mortgage Company of California	California
Universal American Mortgage Company, LLC	Florida
University Community Partners, LLC	Delaware
USH (West Lake), Inc.	New Jersey
USH Acquisition Corp.	Delaware
USH Apartments Corporation	Delaware
USH Bickford, LLC	California
USH Equity Corporation	Nevada
USH Funding Corp.	Texas
USH Heritage Pom, LLC	Arizona
USH Millennium Ventures Corp.	Florida
USH Woodbridge, Inc.	Texas
USHHH, Inc.	Florida
Via Del Rey Holdings, LLC	Delaware
Villages of Rio Pinar Club, Inc.	Florida
WCP, LLC	South Carolina
West Adams Street, LLC	Illinois
West Chocolate Bayou Development Corp.	Texas
West Van Buren, LLC	Illinois
Westbrook Homes, LLC	Delaware
Westchase, Inc.	Nevada
Westchase, Ltd.	Texas
Westchester Woods, LLC	Illinois
Weststone Corporation	Florida
Will Clayton 68, LTD	United States
Willowbrook Investors, LLC	New Jersey
Winchester Lakes, LLC	Florida
Wynnfield Lakes SPE, LLC	Florida

EX-23

Exhibit 23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement No. 333-117090 on Form S-3, Post-Effective Amendment No. 1 to Registration Statement No. 333-70212 on Form S-8/A, Registration Statement No. 333-105019 on Form S-8 and Registration Statement No. 333-130923 on Form S-4 of our reports dated February 7, 2006 relating to the financial statements and financial statement schedule of Lennar Corporation and subsidiaries, and management’s report on the effectiveness of internal control over financial reporting, appearing in this Annual Report on Form 10-K of Lennar Corporation for the year ended November 30, 2005.

/s/ DELOITTE & TOUCHE LLP

Miami, Florida

February 7, 2006

EX-31.1

Exhibit 31.1

CHIEF EXECUTIVE OFFICER’S CERTIFICATION

I, Stuart A. Miller, certify that:

1. I have reviewed this annual report on Form 10-K of Lennar Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/    STUART A. MILLER        

Name: Stuart A. Miller

Title: President and Chief Executive Officer

Date: February 7, 2006

EX-31.2

Exhibit 31.2

CHIEF FINANCIAL OFFICER’S CERTIFICATION

I, Bruce E. Gross, certify that:

1. I have reviewed this annual report on Form 10-K of Lennar Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/    BRUCE E. GROSS        

Name: Bruce E. Gross

Title: Vice President and Chief Financial Officer

Date: February 7, 2006

EX-32

Exhibit 32

Officers’ Section 1350 Certifications

Each of the undersigned officers of Lennar Corporation, a Delaware corporation (the “Company”), hereby certifies that (i) the Company’s Annual Report on Form 10-K for the year ended November 30, 2005 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and (ii) the information contained in the Company’s Annual Report on Form 10-K for the year ended November 30, 2005 fairly presents, in all material respects, the financial condition and results of operations of the Company, at and for the periods indicated.

/s/    STUART A. MILLER        

Name: Stuart A. Miller

Title: President and Chief Executive Officer

/s/    BRUCE E. GROSS        

Name: Bruce E. Gross

Title: Vice President and Chief Financial Officer

Date: February 7, 2006