FINANCIAL STAEMENTS OF CIFG GUARANTY

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SACO I TRUST 2006-12

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Title: FINANCIAL STAEMENTS OF CIFG GUARANTY
Date: 12/19/2006

CIFG Guaranty

Consolidated Financial Statements

December 31, 2005, 2004 and 2003

Report of Independent Auditors	2

Consolidated Balance Sheets as of December 31, 2005 and 2004	3

Consolidated Statements of Operations for the years ended December 31, 2005, 2004 and 2003	4

Consolidated Statements of Changes in Shareholder’s Equity and Comprehensive income (loss) for the years ended December 31, 2005, and 2004 and 2003	5

Consolidated Statements of Cash Flows for the years ended December 31, 2005, 2004 and 2003	6

Notes to Consolidated Financial Statements	7-35

Report of Independent Auditors

To the Members of the Supervisory Board

and Shareholder of CIFG Guaranty:

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, changes in shareholder's equity and comprehensive income (loss), and cash flows present fairly, in all material respects, the financial position of CIFG Guaranty and its subsidiaries (the "Company") at December 31, 2005 and 2004, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2005 in conformity with accounting principles generally accepted in the United States of America. 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 of these statements in accordance with auditing standards generally accepted in the United States of America. 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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As discussed in Note 2 to the consolidated financial statements, the Company has restated the accompanying financial statements for the years ended December 31, 2004 and 2003.

New York, New York

June 15, 2006

CIFG Guaranty

Consolidated Balance Sheets

(In ‘000s except per share amounts)

				As of December 31,
				2005			2004
Assets	€			$ (Unaudited) (a)			€
							Restated
Investments
Fixed income securities, available for sale, at fair value
(amortized cost of €604,550 and €147,854)	€	595,927		$	705,548		€	147,600
Short-term investments, at cost (approximates fair value)		53,659			63,530			413,476
Total investments		649,586			769,078			561,076

Cash		9,651			11,426			7,239
Premiums receivable		9,876			11,693			6,212
Receivable for securities sold		3,379			4,001			1,628
Investment income due and accrued		11,350			13,438			1,409
Prepaid reinsurance premium		2,538			3,005			1,488
Intangible asset - licenses acquired in acquisition		7,037			8,331			6,108
Property and equipment, net of accumulated depreciation of €1,477 in 2005, and €905 in 2004		844			999			938
Deferred acquisition costs, net		41,235			48,820			24,555
Other assets		712			843			1,705
Total assets	€	736,208		$	871,634		€	612,358

Liabilities and Shareholder’s Equity
Liabilities
Deferred premium revenue	€	152,538		$	180,597		€	83,440
Loss and loss adjustment reserves		3,325			3,937			1,917
Payable for investments purchased		8,796			10,414			51
Deferred income taxes		10,632			12,587			6,056
Accounts payable and accrued expenses		16,314			19,315			11,581
Income taxes payable		3,897			4,614			401
Other liabilities		1,292			1,531			409
Total liabilities		196,794			232,995			103,855

Shareholder’s Equity
Common stock (par value €10 per share; authorized, issued and outstanding shares- 56,408,451)		564,085			667,848			564,085
Additional paid-in-capital		6,644			7,866			2,867
Retained earnings (accumulated deficit)		1,495			1,770			(12,666	)
Legal reserve		786			932			517
Accumulated other comprehensive loss (net of deferred Income taxes of (€3,018) and (€89))		(31,370	)		(37,142	)		(46,300	)
Unearned compensation-restricted stock		(2,226	)		(2,635	)		---
Total shareholder’s equity		539,414			638,639			508,503
Total liabilities and shareholder’s equity	€	736,208		$	871,634		€	612,358

(a) The financial statements are stated in euros. The translation of euros into U.S. dollars is presented solely for the convenience of the reader, using the observed exchange rate at December 31, 2005 of $1.18395 to €1.00. The convenience translation should not be construed as representation that the euro amounts have been, could have been, or could in the future be, converted into U.S. dollars at this or any rate of exchange.

The accompanying notes are an integral part of these financial statements.

CIFG Guaranty

Consolidated Statements of Operations

(In ‘000s)

	Years ended December 31,
				2005			2004			2003
	€			$ (Unaudited) (a)			€			€
							Restated			Restated
Revenues
Gross premiums written	€	93,038		$	110,152		€	56,518		€	66,161
Ceded premiums written		(1,385	)		(1,640	)		(1,399	)		(27	)
Net premiums written		91,653			108,512			55,119			66,134
Change in net deferred premium revenue		(53,822	)		(63,723	)		(28,740	)		(52,485	)
Net premium earned (net of ceded earned premium of €326 in 2005, €230 in 2004 and €63 in 2003)		37,831			44,790			26,379			13,649
Net investment income		14,823			17,550			2,938			2,742
Net realized capital gains		2,491			2,949			6,181			6,560
Net realized and unrealized (losses) gains on financial guarantees at fair value		(210	)		(249	)		2			(67	)
Net foreign exchange losses		(617	)		(730	)		(857	)		(1,424	)
Other income		343			406			832			1,786
Total revenues		54,661			64,716			35,475			23,246

Expenses
Losses and loss adjustment expenses		1,569			1,858			1,154			514
Amortization of deferred acquisition costs		5,071			6,004			2,785			1,294
Operating expenses		22,677			26,848			19,804			18,979
Other expense		---			---			---			227
Total expenses		29,317			34,710			23,743			21,014

Income before income taxes		25,344			30,006			11,732			2,232
Provision for income tax:
Current taxes		4,320			5,115			458			6
Deferred taxes		6,595			7,808			3,774			1,891
Net Income	€	14,429		$	17,083		€	7,500		€	335

The accompanying notes are an integral part of these financial statements.

CIFG Guaranty

Consolidated Statements of Changes in Shareholder’s Equity and

Comprehensive Income (Loss)- (In ‘000s)

	Years ended December 31,
	2005						2004 Restated						2003 Restated
Common Shares
Shares at beginning of period		56,408						49,759						30,000
Issuance of company shares		---						6,649						19,759
Shares as of December 31		56,408						56,408						49,759

Common Stock
Balance at beginning of period	€	564,085					€	497,587					€	300,000
Issuance of Company shares		---						66,498						197,587
Balance as of December 31		564,085						564,085						497,587

Additional paid-in capital
Balance at beginning of period		2,867						---						---
Stock- based compensation		1,551						2,867						---
Stock-based compensation restricted stock		2,226						---						---
Balance as of December 31		6,644						2,867						---

Retained earnings (accumulated deficit)
Balance at beginning of period, as previously reported		---						---						(15,894	)
Restatement adjustment		---						---						(4,090	)
Balance at beginning of period, as restated		(12,666	)					(19,898	)					(19,984	)
Net income		14,429		€	14,429			7,500		€	7,500			335		€	335
Transfer to Legal reserve		(268	)					(268	)					(249	)
Balance as of December 31		1,495						(12,666	)					(19,898	)

Legal Reserve
Balance at beginning of period		517						249						---
Transfer from retained earnings		269						268						249
Balance as of December 31		786						517						249

Accumulated other comprehensive income (loss)
Balance at beginning of period, as previously reported		---						---						(15,110	)
Restatement adjustment		---						---						295
Balance at beginning of period, as restated		(46,300	)					(35,753	)					(14,815	)
Net change in unrealized depreciation of securities, net of deferred tax benefit expense of €2,930 in 2005, €89 in 2004, €863 in 2003					(5,440	)					(596	)					(1,602	)
Change in currency translation					20,370						(9,951	)					(19,336	)
Other comprehensive income (loss)		14,930			14,930			(10,547	)		(10,547	)		(20,938	)		(20,938	)
Total comprehensive income (loss)				€€	29,359					€	(3,047	)				€	(20,603	)

Balance as of December 31		(31,370	)					(46,300	)					(35,753	)

Unearned Compensation- restricted stock
Balance beginning of period		---						---						---
Stock-based compensation-restricted stock		(2,226	)					---						---
Balance as of December 31,		(2,226	)					---						---
Total Shareholder’s Equity	€	539,414					€	508,503					€	442,185

Disclosure of reclassification amounts
Unrealized depreciation arising during the period, net of taxes	€	(5,438	)				€	(601	)				€	(2,295	)
Less: reclassification adjustment for net gains (losses) included in net income, net of taxes		(2	)					5						693
Net unrealized depreciation of securities, net of taxes	€	(5,440	)					(596	)				€	(1,602	)

The accompanying notes are an integral part of these financial statements.

CIFG Guaranty

Consolidated Statements of Cash Flows

(€ ‘000s)

	Years ended December 31,
	2005			2004			2003
				Restated			Restated
Cash flows from operating activities
Net Income	€	14,429		€	7,500		€	335

Adjustments to reconcile net income to net cash
provided by operating activities
Amortization of bond premium		3,399			489			998
Depreciation		402			395			404
Increase in loss and loss adjustment expense reserves		1,355			1,302			581
Increase in deferred premium revenue		55,007			18,052			43,670
(Increase) decrease in prepaid reinsurance premiums		(1,050	)		(1,226	)		92
Increase in deferred acquisition costs		(16,909	)		(8,054	)		(13,158	)
Increase in stock based compensation payable		1,551			2,867			---
Increase in premium receivable		(2,987	)		(2,330	)		(402	)
Increase (decrease) in ceded reinsurance balances payable		645			(212	)		(62	)
Increase (decrease) in accounts payable and accrued expenses		4,577			225			(721	)
Increase in investment income due and accrued		(9,836	)		(882	)		(99	)
Increase in deferred income taxes payable		7,502			3,756			1,709
Net realized (gains) on sale of investments		(2,491	)		(6,181	)		(6,560	)
Net realized and unrealized (gains) losses on financial guarantees at fair value		210			(2	)		67
Increase in current income taxes payable		3,477			404			2
(Decrease) increase in inter-company payable to affiliates		(184	)		190			22
Other, net		460			(1,773	)		(875	)
Net cash provided by operating activities		59,557			14,520			26,003


Cash flows from investing activities
(Purchase) of fixed income securities		(477,778	)		(116,881	)		(24,214	)
Proceeds from the sale of fixed income securities		6,854			2,757			18,067
Proceeds from the maturity of fixed income securities		39,412			23,332			516
Sale (purchase) of short-term investments, net		369,988			9,517			(204,122	)
Capital expenditures		(150	)		(152	)		(152	)
Payment for purchase of subsidiary, net of cash acquired		---			---			(15,895	)
Net cash (used) by investing activities		(61,674	)		(81,427	)		(225,800	)


Cash flows from financing activities
Issuance of common shares		---			66,498			197,587
Net cash provided by financing activities		---			66,498			197,587


Effect of exchange rate changes on cash		4,529			5,347			2,872


Increase in cash		2,412			4,938			662
Cash at beginning of the year		7,239			2,301			1,639
Cash at the end of the year	€	9,651		€	7,239		€	2,301


Supplemental disclosures of cash flow information
Taxes paid	€	460		€	--		€	601

The accompanying notes are an integral part of these financial statements.

CIFG Guaranty

Notes to Consolidated Financial Statements (continued)

December 31, 2005, 2004 (restated) and 2003 (restated)

(Amounts in thousands)

1. Business and Organization

CIFG Guaranty, formerly known as CDC IXIS Financial Guaranty S.A. (“CIFG Guaranty” or, together with its consolidated subsidiaries, the “Company”), is a French société anonyme that is a wholly owned subsidiary of CIFG Holding (“CIFG Holding”), a French société anonyme formerly known as CDC IXIS Financial Guaranty Holding S.A., which in turn is a wholly owned subsidiary of Caisse Nationale des Caisses d’Epargne (“CNCE”), a French société anonyme . CIFG Holding and its subsidiaries (the “CIFG Group”) constitute a monoline financial guaranty group engaged solely in the financial guaranty business.

The consolidated financial statements of the Company are comprised of CIFG Guaranty, CIFG Europe formerly known as CDC IXIS Financial Guaranty Europe, a French société anonyme which is a wholly-owned subsidiary of CIFG Guaranty; CIFG Services, Inc. (“CIFG Services”) formerly known as CDC IXIS Financial Guaranty Services Inc., a wholly-owned subsidiary of CIFG Guaranty and CIFG Assurance North America, Inc. (“CIFG NA”) formerly known as CDC IXIS Financial Guaranty North America, Inc and certain variable interest entities (described below).

The name changes referenced above were effective October 29, 2004 for CIFG Guaranty and CIFG Europe. The name changes of CIFG Services and CIFG NA were effective January 11, 2005 and February 23, 2005, respectively.

Effective September 20, 2003, CIFG NA's original direct parent, CIFG Services, transferred all of the outstanding shares of CIFG NA to five voting trustees in accordance with a voting trust agreement, dated September 17, 2003, in order to comply with certain U.S. state restrictions regarding the ownership or control of U.S. insurance companies by a foreign government or any agency or instrumentality thereof. While the voting trustees possess and shall be entitled to exercise all rights and powers of an absolute owner of such shares as provided for in CIFG NA’s charter and applicable law, CIFG Services is the beneficial owner of the Voting Trust. As such, CIFG Services is entitled to receive all dividends and distributions declared and paid by CIFG NA, and thus, the financial statements of CIFG NA are included in these consolidated financial statements.

CIFG Guaranty, established in 2001, is a financial guaranty reinsurance company domiciled in France that provides reinsurance solely to CIFG Europe and CIFG NA. CIFG Europe, established in 2001, is a monoline financial guaranty company domiciled in France that is licensed to conduct business in all 15 original member states of the European Union. CIFG NA, established in 2002, is a monoline financial guaranty company domiciled in the State of New York that, as of December 31, 2005, was licensed to transact financial guaranty insurance in 43 U.S. states, the District of Columbia, the U.S. Virgin Islands and the Commonwealth of Puerto Rico.

In the ordinary course of business, the Company’s subsidiaries CIFG Europe and CIFG NA have issued financial guaranty contracts in respect of certain obligations of certain variable interest entities (VIEs). Specifically, CIFG Europe has issued financial guaranty contracts in respect of obligations of Mogador Ltd., a VIE that is a corporation established in Jersey, which is owned by Mogador Trust, a Jersey-based charitable trust. CIFG NA

has issued financial guaranty contracts in respect of certain obligations of multiple distinct New York State business trusts, collectively known as the New Generation Funding

Trusts. The financial guaranty contracts generally provide credit protection to investors who have entered into credit default swap (CDS) transactions with the respective VIEs. Other than the CDS transactions described above, the VIEs own no assets and have no outstanding debt and, by virtue of support provided by the financial guaranty contracts, CIFG Europe and CIFG NA consider themselves to be the primary beneficiaries of these VIEs. Accordingly, these VIEs are consolidated by these subsidiaries.

Each of, CIFG Guaranty, CIFG Europe and CIFG NA, have received an insurer financial strength rating of “AAA” from Fitch Ratings, an insurer financial strength rating of “Aaa” from Moody’s Investors Services Inc., and an insurer financial enhancement rating of “AAA” from Standard and Poor’s Rating Services (“S&P”), the highest rating assigned by each rating agency.

2. Restatement of Previously Issued Financial Statements

The Company has restated its financial statements for the years ended December 31, 2004 and 2003. The restatement arises from the correction of an error related to the Company’s application of certain aspects of “Statement of Financial Accounting Standards (“FAS”) No. 60 - “Accounting and Reporting by Insurance Enterprises” (“FAS 60”) to insurance policies that do not qualify for the financial guaranty scope exception under FAS 133 - “Accounting for Derivative Instruments and Hedging” (“FAS 133”) and FAS 149 - “Amendment of FAS 133 Derivative Instruments and Hedging Activities” (“FAS 149”). These financial guaranty contracts are accounted for as derivatives on a fair value basis under FAS 133. The Company considers these contracts to be generally an extension of its financial guaranty insurance contracts in that the Company compensates the guaranteed party for economic losses caused by credit events, and the risks undertaken are substantially the same as the risks in the financial guaranty form.

Financial guaranty insurance contracts that meet the scope exception under FAS 133 are subject to FAS 60, which provides for the deferral of acquisition costs that are primarily related to, and vary with, the production of new business. In addition, FAS 60 provides for the establishment of loss and loss adjustment reserves. (See Notes 3, 5 and 12 for further details). In prior years, the Company deferred acquisition costs and established loss and loss adjustment reserves for all of its financial guaranty contracts, including those accounted for as derivative contracts subject to FAS 133 and thus carried at fair value. The deferral of acquisition costs and the establishment of loss reserves and loss adjustment expenses for these credit derivative contracts which are accounted for under FAS 133 is not in accordance with U.S. GAAP. Accordingly, the Company has expensed deferred acquisition costs and has reversed the loss and loss adjustment reserves established for financial guaranty contracts carried at fair value in these restated financial statements.

The aforementioned approach was also used in years prior to 2003. Accordingly, opening accumulated deficit and other comprehensive income have been corrected by an adjustment of €4.1 million and €295 thousand, respectively.

The impact of the aforementioned adjustments on the balance sheet, income statement and statement of cash flows are as follows:

	As of December 31, 2004
Selected Balance Sheet Accounts	Previously Reported			Restated

Deferred acquisition cost, net	€	33,628		€	24,555
Total assets		621,431			612,358

Loss and loss adjustment expense reserves		4,173			1,917
Deferred tax liabilities, net		7,760			6,056
Total liabilities		107,816			103,855

Accumulated deficit		(6,165	)		(12,666	)
Accumulated other comprehensive loss		(47,172	)		(46,300	)
Total shareholder’s equity		513,615			508,503
Total liabilities and shareholder’s equity		621,431			612,358