MANAGEMENT AGREEMENT

THIS MANAGEMENT AGREEMENT (this Agreement) is made as of June 11, 2003 (the Effective Date), by and between (i) Luminent Mortgage Capital, Inc., a Maryland corporation (the Company), and (ii) Seneca Capital Management, LLC, a California limited liability company (the Manager).

THE PARTIES ENTER THIS AGREEMENT on the basis of the following facts, understandings and intentions:

A. The Company intends to use the net proceeds of borrowings and security offerings and the net returns on its investments which are not otherwise distributed to stockholders in Mortgage Assets (defined herein) in a manner which allows the Company to qualify as a real estate investment trust under the Internal Revenue Code of 1986, as amended (the Code) and to qualify for an exemption from being an investment company under the Investment Company Act of 1940, as amended (the Investment Company Act).

B. The Company desires that the Manager undertake, on the Companys behalf, the duties and responsibilities set forth in this Agreement, subject to the direction and oversight of the Board of Directors of the Company (the Board of Directors), on the terms and conditions set forth in this Agreement.

C. The Manager desires to undertake, on the Companys behalf, the duties and responsibilities set forth in this Agreement, subject to the direction and oversight of the Board of Directors, on the terms and conditions set forth in this Agreement.

NOW, THEREFORE, in consideration of the premises and the mutual covenants of the parties hereto, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

1. Definitions. Capitalized terms used in this Agreement shall have the respective meanings assigned to them below:

1.1 Affiliate means, when used with reference to a specified person, any person that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, the specified person. For purposes of this definition, the term person means and includes individuals, corporations, general and limited partnerships, stock companies, land trusts, business trusts and other entities and governments and agencies and political subdivisions thereof. For purposes of this definition, control (including the correlative meanings of the terms controlled by and under common control with), as used with respect to any person, shall mean the possession, directly, or indirectly through one or more intermediaries, of the power to direct or cause the direction of the management and policies of such person, whether by contract, through the ownership of voting securities, partnership interests or other equity interests or otherwise.

1.2 Annual Incentive Amount shall have the meaning set forth in Section 6.2.1(2) of this Agreement.

1.3 Agreement means this Management Agreement dated as of the Effective Date, by and between the Company and the Manager, as the same shall be amended from time to time in accordance with the terms of this Agreement.

1.4 Average Net Invested Assets means for any period the arithmetic average of the aggregate of the net proceeds from offerings of equity securities of the Company (after deducting underwriting discounts and commissions and other costs and expenses related thereto), computed by taking the average of such values at the end of each week during the applicable period.

1.5 Average Net Worth means for any period the average of the net worth of the Company at the end of each week during the period. For purposes of determining the Average Net Worth, the net worth means the difference between (i) the aggregate book value of the consolidated assets of the Company and its subsidiaries, before reserves for depreciation, bad debts or other similar non-cash items, and (ii) the aggregate book value of debt of the Company and its subsidiaries.

1.6 Base Management Compensation shall have the meaning set forth in Section 6.1 of this Agreement.

1.7 Board of Directors shall have the meaning set forth in Recital B of this Agreement.

1.8 cause means a reasonable good faith determination of the Board of Directors based on findings of fact which are disclosed to the Manager that the Manager was grossly negligent, acted with reckless disregard or engaged in willful misconduct or active fraud while discharging its material duties under this Agreement.

1.9 Change of Control means in any transaction or series of transactions (i) any sale, lease, assignment, transfer or other conveyance of all or substantially all of the Companys assets, or (ii) any consolidation or merger involving the Company in which all of the stockholders of the Company immediately prior to the consummation of such transaction, considered collectively, do not immediately following the transaction own shares of the surviving entity constituting at least a majority of the voting power of the surviving entity, (iii) any reclassification or other exchange of capital stock, or any other recapitalization of the Company in which any person or group, as those terms are used in Rule 13d-1 promulgated under the Securities Exchange Act of 1934, as amended, that owned thirty percent (30%) of the voting power of the Company immediately prior to the consummation of such transaction do not immediately following the transaction own at least thirty percent (30%) of the voting power of the Company or in which any person or group that owned less than thirty percent (30%) of the voting power of the Company immediately prior to the consummation of the transaction do not immediately following the transaction own more than thirty percent (30%) of the voting power of the Company, (iv) any liquidation, dissolution or winding up of the Company, or (v) any time fewer than two (2) members of the Board of Directors are individuals which were selected by the Manager. In instances where a natural person selected by the Manager and immediately thereafter appointed to the Board of Directors either resigns or dies, then a Change of Control under clause (v) of the preceding sentence shall not be triggered if (i) the Board of Directors does

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not elect to terminate the Manager within thirty (30) days after the first director resigns or dies, or (ii) the qualified individual next selected by the Manager is appointed as soon as possible after such selection and the Board of Directors does not take any action from the time the Manager selects the next individual until the time the next Manager-selected director is appointed.

1.10 Code shall have the meaning set forth in Recital A of this Agreement.

1.11 Company shall have the meaning set forth in the Introductory Paragraph of this Agreement, and shall include any successor thereto.

1.12 Deferred Payments shall have the meaning set forth in Section 6.2.5 of this Agreement.

1.13 Effective Date shall have the meaning set forth in the Introductory Paragraph of this Agreement.

1.14 Federal Reserve Board means the Board of Governors of the Federal Reserve System.

1.15 GAAP means generally accepted accounting principles, as applied in the United States.

1.16 Governing Instruments means the articles of incorporation or charter, as the case may be, and the bylaws of the Company and its subsidiaries, as those documents may be amended from time to time.

1.17 Incentive Management Compensation shall have the meaning set forth in Section 6.2 of this Agreement.

1.18 Investment Company Act shall have the meaning set forth in Recital A of this Agreement.

1.19 Last Appraiser shall have the meaning set forth in Section 6.2.7 of this Agreement.

1.20 Last Auditor shall have the meaning set forth in Section 6.3 of this Agreement.

1.21 Manager shall have the meaning set forth in the Introductory Paragraph of this Agreement, and shall include any successor thereto.

1.22 Manager Obligations shall have the meaning set forth in Section 2.4.2 of this Agreement.

1.23 Manager Refund shall have the meaning set forth in Section 6.2.1(2) of this Agreement.

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1.24 Mortgage Assets means the following:

(i) mortgage securities (or interests therein), including (a) pass-through certificates (including GNMA certificates, FNMA certificates and FHLMC certificates), (b) collateralized mortgage obligations, (c) securities representing interests in, or secured by, mortgages on real property other than pass-through certificates and CMOs, (d) certificates and other securities collateralized by loans, mortgage derivative securities, subordinated interests and other mortgage-backed and mortgage-collateralized obligations, (e) mortgage derivative securities and (f) subordinated interests;

(ii) mortgage loans, including (a) conforming mortgage loans (i.e., mortgage loans which comply with requirements for inclusion in credit support programs sponsored by FHLMC, FNMA or GNMA or are FHA or VA Loans, all of which are secured by first mortgages or deeds of trust on single-family (one to four units) residences, multifamily residences or commercial properties) and (b) non-conforming mortgage loans; and

(iii) short-term investments, including short-term bank certificates of deposit, short-term U.S. Treasury securities, short-term U.S. government agency securities, commercial paper, repurchase agreements, short-term CMOs, short-term asset-backed securities and other similar types of short-term investment instruments, all of which will have maturities or average lives of less than one (1) year.

1.25 Net Income means for any period the taxable income of the Company and its subsidiaries (including net capital gains, if any, but excluding net capital losses, if any) before deducting (i) the Incentive Management Compensation, (ii) any net operating loss deductions arising from losses in prior periods and (iii) any items which the Code permits to be deducted when calculating taxable income for a REIT.

1.26 Quarterly Incentive Amount shall have the meaning set forth in Section 6.2.1(1) of this Agreement.

1.27 Reconciliation Notice shall have the meaning set forth in Section 6.3 of this Agreement.

1.28 Registration Rights Agreement means that certain Registration Rights Agreement dated as of the date hereof, by and between the Company and Friedman, Billings, Ramsey & Co., Inc., as the same shall be amended from time to time.

1.29 REIT means a real estate investment trust as defined under the Code.

1.30 REIT Provisions of the Code means Sections 856 through 860 of the Code.

1.31 Remaining Amount shall have the meaning set forth in Section 6.2.1(2) of this Agreement.

1.32 Restricted Stock Award Agreement shall be the restricted stock award agreement substantially in the form attached hereto as Exhibit A.

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1.33 Return on Equity means for any period an amount calculated by dividing the Net Income for such period by the Average Net Invested Assets for such period.

1.34 Short-Term Investments means short-term bank certificates of deposit, short-term U.S. Treasury securities, short-term U.S. government agency securities, commercial paper, repurchase agreements, short-term CMOs, short-term asset-backed securities and other similar types of short-term investment instruments, all of which will have maturities or average lives of less than one (1) year.

1.35 Sub-manager means any third party (other than Seneca) which has been selected by the Manager and approved by the Board of Directors to manage all or a portion of the day-to-day operations of the Company and perform the services and other activities described in Section 2.1 of this Agreement. Any approval of a Sub-manager by the Board of Directors may be conditioned or limited in any manner determined by the Board of Directors, including, without limitation, the terms and conditions of any such agreement with a Sub-manager.

1.36 Ten-Year U.S. Treasury Rate means for any period the average of the weekly average yields to maturity for actively traded current coupon U.S. Treasury fixed interest rate securities (adjusted to a constant maturity of ten years) published by the Federal Reserve Board for each week during such period, or, if such rate is not published by the Federal Reserve Board, any Federal Reserve Bank or agency or department of the federal government selected by the Company. If the Company determines in good faith that the Ten-Year U.S. Treasury Rate cannot be calculated as provided above, then the rate shall be the arithmetic average of the per annum average yields to maturities, based upon closing asked prices on each business day during such period, for each actively traded marketable U.S. Treasury fixed interest rate security with a final maturity date not less than eight (8) nor more than twelve (12) years from the date of the closing asked prices as chosen and quoted for each business day in each such period in New York City by at least three recognized dealers in U.S. government securities selected by the Company.

1.37 Threshold Return shall have the meaning set forth in Section 6.2.3 of this Agreement.

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