but with inflation risks still a dominant concern, future FOMC actions are presently uncertain and remain dependent on future incoming data.”

          Mr. Zimmerman stated, “In the fourth quarter of 2006, we identified attractive investment opportunities and, as a result, grew our MBS portfolio. MFA’s MBS portfolio, which had increased to $4.61 billion as of September 30, 2006, was further increased to $6.34 billion as of December 31, 2006. MFA’s leverage as measured by debt-to-equity, which had been 5.9:1 as of September 30, 2006, increased to 8.4:1 by the end of 2006.”

          Mr. Zimmerman added, “MFA’s primary focus is high quality, higher coupon hybrid and adjustable-rate MBS assets. At December 31, 2006, approximately 99% of MFA’s assets consisted of MBS issued or guaranteed by an agency of the U.S. government or a federally chartered corporation, other MBS rated “AAA” by Standard & Poor’s Corporation, MBS-related receivables and cash. The MBS in MFA’s portfolio are primarily adjustable-rate or hybrids, which have an initial fixed interest rate for a specified period of time and, thereafter, generally reset annually. The average coupon on MFA’s MBS portfolio was 6.06% as of December 31, 2006. Assuming a 25% Constant Prepayment Rate (“CPR”), approximately 46% of the MBS in MFA’s portfolio are expected to prepay or have their interest rates reset within the next 12 months, with a total of 97% expected to reset or prepay during the next 60 months.”

          MFA takes into account both coupon resets and expected prepayments when measuring the sensitivity of its MBS portfolio to changing interest rates. In measuring its assets-to-borrowing repricing gap (the “Repricing Gap”), MFA measures the difference between: (a) the weighted average months until coupon adjustment or projected prepayment on its MBS portfolio; and (b) the months remaining on its repurchase agreements applying the same projected prepayment rate and including the impact of interest rate swap agreements. Assuming a 25% CPR, the weighted average time to repricing or assumed prepayment for MFA’s MBS portfolio, as of December 31, 2006, was approximately 23 months and the average term remaining on its repurchase agreements, including the impact of interest rate swaps, was approximately 15 months, resulting in a Repricing Gap of approximately eight months. The prepayment speed on MFA’s MBS portfolio averaged 26.0% CPR during the fourth quarter of 2006.

          During the fourth quarter of 2006, the gross yield on MFA’s interest-earning assets was approximately 6.03%, while the net yield on interest-earning assets was reduced to 5.18%, primarily due to the cost of premium amortization on MFA’s MBS portfolio. The portfolio spread, which is the difference between MFA’s interest-earning asset portfolio net yield of 5.18% and its 5.10% cost of funds, was 0.08% for the fourth quarter of 2006. MFA’s costs for compensation and benefits and other general and administrative expense were $2.0 million for the quarter ended December 31, 2006. As of December 31, 2006, book value per share of common stock was $7.22.

          Stockholders interested in participating in MFA’s Discount Waiver, Direct Stock Purchase and Dividend Reinvestment Plan (the “Plan”) or receiving a Plan prospectus may do so by contacting Mellon Investor Services, the Plan administrator, at 1-866-249-2610 (toll free). For more information about the Plan, interested stockholders may also go to the website