Jim Walter Homebuilding Group

Walter Industries’ Homebuilding segment consists of Jim Walter Homes and its affiliated company, Neatherlin Homes.

Homebuilding is the Company’s original business, founded in 1946 when James W. (Jim) Walter pioneered the concept of building affordable, unfinished houses for American families who owned their own property but lacked the cash to make a traditional down payment on a home.

Since its inception, Jim Walter Homes has built more than 350,000 houses, and today ranks as America’s largest builder of single-family, on-your-lot homes. Jim Walter Homes' product line features dozens of home models marketed through 47 New Home Galleries across the South.

In its traditional “on your lot” business, the Company builds on property owned by the customer. The value of the land substitutes for the cash down payment required by most lenders.

The Company also offers financing for both the land and home through Walter Mortgage Company, which was established in 2001. This allows buyers to pay off their lot while buying a home.

The Homebuilding segment has made several acquisitions in recent years. In 1997, the Company acquired Neatherlin Homes, a Texas on-your-lot builder.

In 2007, the Company’s average home price was $98,683. That average price has been moving up in recent years, but Jim Walter Homes continues to be in the affordable housing sector, a healthy niche of the nation’s homebuilding market.

Because Jim Walter Homes not only builds homes, but also finances them for up to 30 years, customer satisfaction is essential to the strength of the Homebuilding Group, just as it has been through the Company’s history of over 60 years as America’s leader in affordable housing.

Financing

The focal point of the Financial Services Group is the Company's $1.8 billion mortgage portfolio. The portfolio has been "built" over the past 50 years through the purchasing and servicing of mortgages originated by customers financing their Jim Walter Homes purchase.

In 2001, Walter Mortgage Company was formed to provide more financing options for Jim Walter Homes' customers. These new financing options include assisting customers with land purchases and lot payoffs. Walter Mortgage Company also has undertaken a program through which it purchases loans in the "open market" that meet its strict underwriting criteria. Since its inception, the loan acquisition program has made significant contributions to the mortgage portfolio by adding more than $321.6 million in loans from third parties.

The group has a field collection organization in the southeastern and southwestern United States that serves as the driving factor behind the strong performance of the portfolio. In 2003, the Company established a call center in Fort Worth, Tex. to support the collection efforts of the field organization. The combination of field and phone contact has proven very successful with the Company's non-conforming customer base.

The portfolio delinquency percentage, or percentage of accounts that are more than 30 days past due, was 4.4 percent as of Dec. 31, 2006. This compares very favorably with other non-conforming servicers.

The strong portfolio performance has allowed the Company to issue more than $4.8 billion of mortgage- and asset-backed bonds since 1988. For more information about our bond offerings, or Trusts, please visit our trustee's Web site (Wachovia FirstLink or Bank of New York).

Rounding out the Financial Services Group are Best Insurors and Cardem. Best Insurors is a full-service insurance agency that offers fire and extended coverage, among other products, to customers in the portfolio. Cardem is an offshore captive insurance company that principally reinsures 100 percent of the risk associated with the fire and extended coverage program offered by Best Insurors.