Report on September 13, 2006 Hearing

STATEMENTS MADE IN COURT BY THE DEBTOR:

Reorganization Plan
Annette Jarvis of Ray Quinney & Nebeker, counsel for the Debtor, stated in court that USACM had secured a term sheet from Silver Point Capital of Greenwich, CT to be the “stalking horse” bidder in an auction process regarding the assets of the Debtor. She stated in court that Silver Point is interested in acquiring the rights to service USACM loans and in buying substantially all the assets of the USA Capital First Trust Deed Fund, LLC, and various assets of the USA Capital Diversified Trust Deed Fund, LLC and USACM. The agreement with Silver Point would be subject to an overbid procedure which will be announced as part of the Plan filing. Jarvis added that the four Committees have indicated their support for the term sheet and its inclusion in the Plan filing. See item below regarding Extending the Debtor’s Period of Exclusivity to File a Plan.

“It is very significant to investors in USACM and borrowers holding loans with this Company that in only five months we have been able to resume payments to investors and now we have a highly-respected financial proponent for our Plan filing,” said Thomas J. Allison, president and chief restructuring officer for USACM. “This is a key development in moving this case forward to a successful conclusion.”

Next Round of Checks and Statements
USACM also disclosed that the next distribution of funds to Direct Lenders and Fund members is tentatively schedule for early October and will include interest and principal payments received into USACM in July and August. Loans that paid off in July and August are Midvale Marketplace, Fiesta Beaumont, Roam Development, Glendale Tower, Urban Housing Alliance, Boise/Gowan, and J. Jireh. USACM is required to submit information about the proposed distribution of funds to the Committees by Sept. 29 for review. The Committees have 10 days to review the proposed distribution and respond with comments. Once approved, USACM will require a few days to implement any changes required before printing and mailing checks. Only physical checks will be sent, no direct deposit, ACH or EFT payments will be made.

RULINGS ON DOCKET ITEMS:

Motion For Relief From The Automatic Stay To Terminate Loan Servicing Agreement For Direct Loan To Boise/Gowan, LLC. The Boise/Gowan Lift Stay Motion has been continued to this date and seeks relief from the automatic stay to change the loan servicing a gent and terminate the Loan Servicing Agreement as to the Boise/Gowan loan.

• RESULT:  The judge continued this motion until the Nov. 15 hearing with the expectation that the proceeds from this loan would be repaid to the Direct Lenders in a distribution of funds prior to the hearing date.  The Boise/Gowan loan was repaid in full in September.
  
  

Debtors Motion To Distribute Funds And To Grant Ordinary-Course Releases And Distribute Proceeds. In this motion, Debtors requested and order authorizing USACM to distribute certain funds held in its collection account to direct lenders, authorizing USA Capital Diversified Trust Deed Funds, LLC and USA Capital First Trust Deed Fund, LLC to further distribute funds to their respective fund members.

• RESULT:  The judge approved the motion to distribute funds and grant ordinary-course releases, with certain conditions related to the motion (below) to amend the Debtor’s protocol for continuing distributions and interim holdbacks.  The modifications to USACM’s future distributions include a requirement to add the costs of the Hilco appraisal and the collection costs for a specific property to that Borrower’s payoff statement and to attempt to collect those costs in the pay off.  If USACM is unable to collect those costs from the Borrower, then the costs will be held back from the distribution of funds to the lenders in that loan.
  
  

Motion To Amend Debtor’s Protocol For Continuing Distributions And Interim Holdbacks. This Motion to Amend, filed by the Official Committee of Unsecured Creditors for USACM, moves the court for approval of an order which grants the request for continuing authority to make payments as requested in the Debtor’s Motion To Distribute Funds And To Grant Ordinary Course Releases And Distribute Proceeds and Debtors’ Modification to Motion to Distribute Funds and Procedures for Ongoing Distributions.

• RESULT:  See above.
  
  

Emergency Motion For Order Extending The Debtors’ Exclusive Period To File A Plan To September 15, 2006. This Emergency Motion, filed by Debtors, requests that the Court: 1). Ratify the approval of the Stipulated Order Extending The Debtors Exclusive Period To File A Plan To September 15, 2006, Extend the Debtors exclusive period for filing a plan to September 15, 2006, and 3). extend and order further extending the Debtors’ exclusivity period for filing a plan to such further date as stipulated by all of the four official committees.

• RESULT: The judge granted the motion to extend the period of exclusivity to Sept. 15 and granted that USACM can extend the period up to Oct. 19 if necessary and only with the consent of all the Committees.
  

Motion To Consolidate Adversary Proceedings Involving Investor Trust Account. This Motion To Consolidate requests that adversary case number 06-1146-LBR be consolidated with adversary case number 06-1167-LBR.

• RESULT:  The judge granted the motion to consolidate USACM’s lawsuit against Wells Fargo Bank for releasing a $100,000 check post-petition to a lender involved in a disputed assignment with the rest of the Interpleador motion.