UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                    FORM 10-K

       FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

(Mark One)

[X]   Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
      Act of 1934

For the Fiscal Year Ended December 31, 2003.

                                       OR

[_]   Transition Report Pursuant to Section 13 or 15(d) of the Securities
      Exchange Act of 1934

For the Transition Period From ___________ to ___________.

                        Commission File Number 001-31916

                     AMERICAN HOME MORTGAGE INVESTMENT CORP.
             (Exact Name of Registrant as Specified in Its Charter)

               Maryland                                 20-0103914
    (State or Other Jurisdiction of        (I.R.S. Employer Identification No.)
    Incorporation or Organization)

                    520 Broadhollow Road, Melville, NY 11747
               (Address of Principal Executive Offices) (Zip Code)

                                 (516) 949-3900
              (Registrant's Telephone Number, Including Area Code)

           Securities registered pursuant to Section 12(b) of the Act:

    TITLE OF EACH CLASS                                   NAME OF EACH EXCHANGE
Common Stock, $0.01 par value                            New York Stock Exchange

        Securities registered pursuant to Section 12(g) of the Act: None

            Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

            Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [_]

            Indicate by check mark whether the registrant is an accelerated
filer (as defined in Exchange Act Rule 12b-2). Yes [X] No [ ]

            The aggregate market value of the common stock held by
non-affiliates of the registrant (assuming for these purposes, but without
conceding, that all executive officers and directors are "affiliates" of the
registrant), as of December 31, 2003, was approximately $394,714,235 (computed
by reference to the closing price of the common stock of American Home Mortgage
Holdings, Inc., the predecessor corporation of the registrant ("Holdings"), on
the Nasdaq National Market as of the last business day of Holdings' most
recently completed second fiscal quarter).

            As of March 8, 2004, there were 39,858,660 shares of Common Stock
outstanding.

Documents Incorporated By Reference: The information required to be furnished pursuant to Part III of this Form 10-K will be set forth in, and incorporated by reference from, the registrant's definitive proxy statement for the registrant's 2004 Annual Meeting of Stockholders, which definitive proxy statement will be filed by the registrant with the Securities and Exchange Commission not later than 120 days after the end of the registrant's fiscal year ended December 31, 2003.

TABLE OF CONTENTS Page PART I ITEM 1. BUSINESS............................................................2 ITEM 2. PROPERTIES.........................................................13 ITEM 3. LEGAL PROCEEDINGS..................................................13 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS................14 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS............................................................15 ITEM 6. SELECTED FINANCIAL DATA............................................16 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS..............................................18 ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.........32 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA........................32 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE...............................................32 ITEM 9A CONTROLS AND PROCEDURES............................................33 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.................34 ITEM 11. EXECUTIVE COMPENSATION.............................................34 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS........................................34 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.....................34 ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.............................34 PART IV ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K...35 SIGNATURES...................................................................37 INDEX TO FINANCIAL STATEMENTS INDEX TO EXHIBITS

PART I SPECIAL NOTES OF CAUTION Regarding Forward-Looking Statements This report, including, but not limited to, "Management's Discussion and Analysis of Financial Condition and Results of Operations," contains certain forward-looking statements within the meaning of the federal securities laws. Some of the forward-looking statements can be identified by the use of forward-looking words. When used in this report, statements which are not historical in nature, including the words "anticipate," "may," "estimate," "should," "seek," "expect," "plan," "believe," "intend," and similar words, or the negatives of those words, are intended to identify forward-looking statements. Statements which also contain a projection of revenues, earnings (loss), capital expenditures, dividends, capital structure or other financial terms are intended to be forward-looking statements. Certain statements regarding the following particularly are forward-looking in nature: o our business strategy; o future performance, developments, market forecasts, or projected dividends; o projected acquisitions or joint ventures; and o projected capital expenditures. It is important to note that the description of our business in general, and our mortgage-backed securities holdings in particular, is a statement about our operations as of a specific point in time. It is not meant to be construed as an investment policy, and the types of assets we hold, the amount of leverage we use, the liabilities we incur and other characteristics of our assets and liabilities are subject to reevaluation and change without notice. The forward-looking statements in this report are based on our management's beliefs, assumptions, and expectations of our future economic performance, taking into account the information currently available to it. These statements are not statements of historical fact. Forward-looking statements are subject to a number of factors, risks and uncertainties, some of which are not currently known to us, that may cause our actual results, performance or financial condition to be materially different from the expectations of future results, performance or financial position. These factors include, without limitation: o our limited operating history with respect to our proposed portfolio strategy; o our proposed portfolio strategy may be changed or modified by our management without advance notice to stockholders, and that we may suffer losses as a result of such modifications or changes; o our need for a significant amount of cash to operate our business; o risks associated with the use of leverage; o disruptions in the market for repurchase facilities; o failure to match the interest rates on our borrowings with the interest rates on the mortgage-backed securities we hold; o failure to maintain our status as a real estate investment trust; o changes in federal and state tax laws affecting real estate investment trusts; o general economic, political, market, financial or legal conditions; and o the other factors referenced in this report, including, without limitation those under the captions "Management's Discussion and Analysis of Financial Condition and Results of Operations." 1

In light of these risks, uncertainties and assumptions, any forward-looking events discussed in this report might not occur, and we qualify any and all of our forward-looking statements entirely by these cautionary factors. You are cautioned not to place undue reliance on forward-looking statements. Such forward-looking statements are inherently uncertain, and actual results may differ from expectations. We are not under any obligation, and we expressly disclaim any obligation, to update or alter any forward-looking statements, whether as a result of new information, future events or otherwise. ITEM 1. BUSINESS General We are in the business of investing in mortgage-backed securities resulting from the securitization of prime-quality residential mortgage loans that we originate and service. Self-originating the loans underlying our securities allows us to invest in those securities at a lower cost than acquiring similar assets in the capital markets, and therefore is expected to enhance the return we earn on those securities. Our business strategy is to securitize most of the adjustable-rate mortgage, or ARM, loans that we originate, to hold substantially all of the securities resulting from these securitizations, to service those loans underlying our securities and to sell the fixed-rate mortgage loans that we originate. Generally, loans we originate are high-credit-quality prime loans that are either eligible for sale to Fannie Mae or Freddie Mac, or are jumbo loans for borrowers with higher FICO credit scores. We will elect in our 2003 tax return to be treated as a real estate investment trust, or REIT, and we expect to qualify as a REIT for federal income tax purposes from our date of incorporation. Consequently, the net interest income we earn on the securities we hold generally is not subject to federal income tax to the extent we distribute those earnings to stockholders. We originate loans through our mortgage banking operation, which made approximately $21.7 billion of loans in 2003, and which is ranked as the nation's 25th largest residential mortgage lender. We offer a broad array of home mortgage products through an extensive nationwide network of retail loan production offices as well as through our wholesale and Internet mortgage lending operations. We operate 272 loan production offices in 34 states and make loans throughout all 50 states. Our mortgage banking operation also services the loans underlying the securities we retain for investment as well as certain of the loans we sell to third-party purchasers. The notional amount of loans we service was approximately $8.3 billion as of December 31, 2003. We seek to generate attractive, long-term investment returns from the mortgage-backed securities that we hold. We believe that our return is enhanced as the result of our ability to self-originate the mortgage loans underlying these securities, which results in a lower acquisition cost of the securities, and not from anticipating market forces, such as the direction of interest rates. We limit our exposure to fluctuating interest rates by attempting to match the duration of our liabilities with the duration of our mortgage loan holdings. We also seek to reduce risk by holding primarily securities backed by ARM loans with investment characteristics that are less sensitive to changes in interest rates and that are easier to match-fund than fixed-rate loans. We hold our mortgage-backed securities directly or in qualified REIT subsidiaries, or QRSs, while our mortgage banking operation is housed in our taxable REIT subsidiaries, or TRSs. As a result, the net interest income we earn on our long-term mortgage portfolio is generally not subject to federal income tax to the extent we distribute those earnings to stockholders. Although the activities we conduct in our TRSs, including sourcing, selling and servicing mortgage loans, are subject to federal and state corporate income tax, we are able to retain any after-tax income they generate, and, as a result, may increase our consolidated capital and thereby grow our business through retained earnings. In addition, we may dividend all or a portion of our after-tax TRS earnings to our stockholders. After-tax income from our TRSs paid as dividends to our stockholders is taxable as ordinary income for federal income tax purposes, but may qualify to be taxable to U.S. individuals at a reduced tax rate of 15%. Income and gain from our portfolio of mortgage-backed securities held in the REIT or our QRS is taxable as ordinary income or capital gains for federal income tax purposes. In this report, unless the context indicates otherwise, references to the "Company," "we," "our" and "us" refer to the activities of and the assets and liabilities of the business and operations of American Home Mortgage Investment Corp. ("AHM Investment"), including our material subsidiaries, American Home Mortgage Holdings, Inc. ("AHM Holdings"), American Home Mortgage Corp. ("AHM Corp."), Columbia National, Incorporated ("Columbia"), and American Home Mortgage Acceptance, Inc. ("AHM Acceptance"). Company History AHM Investment was incorporated in July 2003 under the laws of the State of Maryland. AHM Investment was formed in order to combine the net assets of Apex Mortgage Capital, Inc., a Maryland corporation operating as a REIT ("Apex"), with the 2

mortgage origination and servicing businesses of AHM Holdings. In December 2003, AHM Investment became the parent company of AHM Holdings through an internal reorganization and acquired Apex by merger. In connection with these transactions, the common stock of AHM Investment was exchanged for the outstanding shares of common stock of AHM Holdings and Apex. Our strategy in combining the net assets of Apex with the origination and servicing businesses of AHM Holdings was, among other things, to realize the benefits of holding a portfolio of self-originated mortgage-backed securities. Prior to the merger, Apex operated and elected to be taxed as a REIT. Apex was formed on September 15, 1997, primarily to acquire United States agency and other highly rated, single-family real estate adjustable and fixed rate mortgage-related assets. Apex commenced operations on December 9, 1997, following the initial public offering of Apex's common stock. Historically, AHM Corp. operated as an independent mortgage lender from its formation in 1988 until 1999. On June 15, 1999, AHM Holdings was formed to serve as a holding company for AHM Corp. On October 6, 1999, AHM Holdings completed its initial public offering of common stock and became the parent holding company of AHM Corp. Since its initial public offering, the Company has grown primarily by acquisition. The Company's major acquisitions are as follows: o In December 1999, AHM Holdings acquired Marina Mortgage Company, Inc., a California mortgage banking corporation ("Marina"). Marina initially operated as a wholly-owned subsidiary of AHM Holdings and was merged with and into AHM Corp. on December 31, 2001. AHM Holdings purchased Marina for a combination of cash and stock consideration. o In June 2000, AHM Holdings acquired First Home Mortgage Corp., an Illinois corporation ("First Home"), which was concurrently merged with and into AHM Corp. Before the acquisition, First Home was an independent mortgage lender based in metropolitan Chicago. AHM Holdings purchased First Home for a combination of cash and stock consideration. o In October 2000, AHM Corp. acquired four loan origination offices from Roslyn National Mortgage Corporation for cash consideration of approximately $500,000 and the assumption of certain liabilities, including the assumption of the real property leases for the four acquired branch offices. o In March 2001, AHM Corp. acquired the Pennsylvania and Maryland loan origination offices of ComNet Mortgage Services ("ComNet"), the residential mortgage division of Commonwealth Bank, a subsidiary of Commonwealth Bancorp, for a nominal amount of cash as well as the assumption of real property leases of the five acquired branch offices. o In June 2002, the Company acquired Columbia National, Incorporated, a Maryland corporation, and its captive reinsurance subsidiary, CNI Reinsurance, Ltd., for cash consideration of $37 million. Prior to the acquisition, Columbia was an independent mortgage lender and servicer based in Columbia, Maryland. Columbia now operates as a wholly owned subsidiary of AHM Holdings. o In March 2003, AHM Corp. paid $2.4 million in cash for certain assets of Principal Residential Mortgage, Inc. ("Principal"), the mortgage banking subsidiary of the Principal Financial Group, including (i) Principal's 75 mortgage branches located in 21 states and (ii) Principal's then-current mortgage loan application pipeline. o In June 2003, AHM Corp. acquired six mortgage loan origination offices from American Mortgage LLC and American National Bank of DeKalb County for cash consideration of approximately $1.6 million. In addition, in August 2001, AHM Holdings entered into an agreement to acquire Valley Bancorp, Inc. ("Valley Bancorp") and its wholly-owned subsidiary, Valley Bank of Maryland, a federal savings bank located in suburban Baltimore, Maryland, for a combination of cash and stock, subject to certain adjustments. Under the terms of the definitive agreement, the Company will pay 1.275 times Valley Bancorp's book value, or approximately $5.9 million. The acquisition agreement between AHM Holdings and Valley Bancorp has been extended through July 31, 2004. This transaction is subject to regulatory approval and no assurance can be given that such approval will be obtained or that the acquisition agreement with Valley Bancorp will be further extended if necessary. Before our conversion into a REIT, our business strategy was to sell the loans we originated and the largest component of our net income was generated by the gain on sale of such loans. Our historical financial results were generated by this discontinued strategy of selling virtually all of the loans that we originated. Since our REIT conversion, our business strategy is to hold the mortgage-backed securities resulting from the securitization of ARM loans we originate, and, consequently, we believe that the largest component of our net income in the future will be net interest income generated by our holdings. While 3

we expect that holding our originations in securitized form will be beneficial to our financial results, we cannot assure you that our new business strategy will be successful. Access to Our Periodic SEC Reports and Other Information The Company's website is http://www.americanhm.com. The Company makes available free of charge on its website its annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, Forms 3, 4 and 5 filed on behalf of directors and executive officers and any amendments to such reports filed pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as soon as reasonably practicable after such material is electronically filed with, or furnished to, the Securities and Exchange Commission (the "SEC"). We also will provide any of the foregoing information without charge upon written request to Alan B. Horn, Corporate Secretary, American Home Mortgage Investment Corp., 520 Broadhollow Road, Melville, New York 11747. In addition, concurrently with the filing with the SEC of our proxy materials for our 2004 Annual Meeting of Stockholders, we intend to make available on our website (i) the charters for the committees of the Company's Board of Directors, including the Audit Committee, Compensation Committee and Nominating/Corporate Governance Committee, (ii) the Company's Corporate Governance Principles and (iii) the Company's Code of Business Conduct and Ethics (the "Code of Ethics") governing its directors, officers and employees. Within the time period required by the SEC and the New York Stock Exchange, Inc. (the "NYSE"), the Company will post on its website any modifications to the Code of Ethics and any waivers applicable to Senior Financial Officers, as defined in the Code of Ethics, as required by the Sarbanes-Oxley Act of 2002. Description of Business Our business consists of originating and servicing primarily prime quality residential mortgage loans, securitizing or selling certain loans and holding mortgage-backed securities for spread income. We expect to qualify as a REIT for U.S. federal income tax purposes. Our REIT-eligible assets and activities are held and performed at the parent level or in qualified REIT subsidiaries. As of December 31, 2003, we had one QRS, AHM Acceptance. Our assets and activities that are not REIT-eligible, such as the mortgage origination and servicing businesses, are conducted by AHM Holdings, a taxable REIT subsidiary, and its subsidiaries, AHM Corp. and Columbia. Mortgage-Backed Securities Holdings Segment Our current portfolio strategy, which is subject to change at any time without advance notice to our stockholders and which is expected to change from time to time, is to use our equity capital and borrowed funds to invest in mortgage-backed securities resulting from the securitization of loans we originate, thereby producing net interest income. Accordingly, we expect net interest income from our securities to be the largest component of our earnings in the future. We believe that the cost advantage we obtain from self-originating loans and holding such loans in securitized form in the REIT or our QRS is primarily the result of two economic factors. First, through self-origination, we avoid the intermediation costs associated with purchasing mortgage assets in the capital markets. Second, the interest income we generate in the REIT or our QRS will not be subject to tax, whereas, had we sold our loans in the capital markets, we would have been subject to tax on the gain on sale of loans. We expect that our strategy and the use of borrowings to produce the mortgage-backed securities we hold will produce an attractive return for our stockholders. We seek to avoid many of the risks typically associated with companies that purchase mortgage-backed securities in the capital markets. For example, we attempt to closely match the duration of our assets with the duration of our liabilities. We also structure our liabilities to mitigate potential negative affects of changes in the relationship between short- and longer-term interest rates. We purchase credit enhancements from Fannie Mae and Freddie Mac to mitigate potential losses from borrower defaults. Consequently, the securities we hold typically are either obligations of Fannie Mae or Freddie Mac or are rated AAA by Standard & Poor's. Finally, substantially all of the Company's securities are backed by ARM loans. Because we are focused on holding ARM loans rather than fixed-rate loans, we believe we will be less adversely affected by early repayments due to falling interest rates or a reduction in our net interest income due to rising interest rates. The Company generally borrows a substantial portion of the funds required to invest in its mortgage-backed securities, and will seek to maintain an overall debt-to-equity ratio ranging from 8:1 to 12:1. Our liabilities are primarily termed repurchase agreements with maturities ranging from one to twelve months. We use interest rate swaps to extend the duration of our liabilities to attempt to match the duration of our assets. We use termed repurchase agreements with laddered maturities to reduce the risk of a disruption in the repurchase market. We also believe we are less susceptible to a disruption in the repurchase market because we hold primarily Fannie Mae and Freddie Mac securities and securities rated AAA by Standard & 4

Poor's, which have typically been eligible for repurchase market financing even when repurchase financing was not available for other classes of mortgage assets. Under our current business strategy, we expect to maximize the operational and tax benefits provided by our REIT structure. Our TRSs accept and process loan applications. Loan applications that meet the requirements of the REIT, which typically consist of ARMs and hybrid ARMs, are then sold by our TRSs to our QRS, while loans that do not meet these requirements are closed and sold to third-party purchasers. We generate net interest income from our portfolio of mortgage loans and mortgage-backed securities, which is the difference between (1) the interest income we receive from mortgage loans and mortgage-backed securities we hold and (2) the interest we pay, plus certain administrative costs. Loan Origination Segment The Company's loan origination business originates primarily first mortgages on one- to four-family dwellings through the Company's retail loan production offices, which accounted for approximately 65% of our loan originations in 2003, and through our wholesale and Internet channels. We seek to utilize a combination of skilled loan officers, state of the art technology, a broad and fairly priced product line and a high level of customer service to successfully compete in the marketplace. Once a consumer applies for a loan, our mortgage banking operation processes and underwrites the consumer's application and we fund the consumer's loan by drawing on a warehouse line of credit. The loan is then typically either securitized and the resulting securities held by us as a long-term investment or sold by us at a profit. Our loan origination business has rapidly grown its market share and scale. Our total loan originations have grown to $21.7 billion in 2003. We believe our growth has made our mortgage banking operation more profitable and more effective at serving our customers. Specifically, growth in originations has lowered the per-loan cost of our centralized support operations and, consequently, our overall per-loan cost of origination. Our growth has also given us a relatively large presence in the secondary mortgage market, and, as a result, has improved our ability to execute loan sales to third-party purchasers. Our size has enabled us to negotiate better terms with warehouse lenders and credit enhancers such as Fannie Mae and Freddie Mac. Finally, our size has made it possible for us to profitably enter businesses ancillary to mortgage lending, such as mortgage reinsurance, title brokerage and vendor management. As of December 31, 2003, lending was conducted through 272 loan production offices located in 34 states across the United States, through mortgage brokers and through Internet call centers that serve customers located in all 50 states. In 2003, our retail activities, the community loan offices and Internet call centers accounted for approximately 76% of our loan originations, while mortgage brokers accounted for 24% of our originations. Mortgage brokers are expected to account for an increased percentage of our originations in 2004 due to our recent opening of a number of wholesale branches in the western United States. We offer a broad array of mortgage products, but primarily make high-credit-quality loans; more than 80% of our originations are eligible for Fannie Mae, Freddie Mac or Ginnie Mae programs, while most of the balance of our loans consists of jumbo loans for borrowers with higher FICO credit scores. AHM Holdings has grown its loan origination franchise substantially since becoming a public company in October of 1999. In 2003, total loan originations were approximately $21.7 billion, compared to $12.2 billion in 2002, $7.8 billion in 2001 and $3.0 billion in 2000. AHM Holdings' growth has resulted from growing its network of loan production offices primarily by acquisitions, and to a lesser extent by increasing its originations from mortgage brokers and growing its Internet business. AHM Holdings grew its loan production offices to 272 as of December 31, 2003, from 28 in October 1999, by acquiring small to mid-sized mortgage businesses on favorable terms. AHM Holdings has completed seven such acquisitions since December of 1999. In each acquisition, we have generally retained and grown the acquired company's loan production offices while substantially eliminating their centralized support operations and associated costs. These acquisitions have significantly increased our origination capability. The Company's strategy is to continue to opportunistically seek acquisitions to grow its loan origination business. Growth in AHM Holdings' business with mortgage brokers has resulted from adding additional branches and account executives in our mortgage broker channel and increasing the depth of our mortgage broker support capabilities. Originations from mortgage brokers grew to $5.3 billion in 2003, compared to $1.9 billion in 2002. The Company's Mortgage Products. The Company offers a broad and competitive range of mortgage products that aim to meet the mortgage needs of primarily high-credit-quality borrowers. Its product line includes conventional conforming fixed rate loans, adjustable rate mortgages, government fixed rate loans, jumbo fixed rate loans, non-prime loans, home equity or second mortgage loans, alternate "A" loans, construction loans and bridge loans. 5

The following table summarizes information with respect to the most important categories of mortgage loans the Company originated for the years ended December 31, 2003 and 2002: MORTGAGE LOAN ORIGINATION SUMMARY <TABLE> <CAPTION> % of Total Mortgage Type Number of Loans Dollar Volume Dollar Volume ------------- --------------------------- ---------------------------- ------------- -------------- Year Ended December 31, Year Ended December 31, Year Ended December 31, --------------------------- ---------------------------- ------------- -------------- 2003 2002 2003 2002 2003 2002 --------------- ----------- ------------- -------------- ------------- -------------- ($ in millions) <S> <C> <C> <C> <C> <C> <C> Conventional conforming fixed rate 77,303 43,767 $ 12,702.9 $ 7,163.8 58.5% 58.7% Adjustable rate (ARMs) 18,987 7,418 4,116.1 1,775.5 19.0 14.5 Government fixed rate 17,434 12,811 2,296.3 1,739.7 10.6 14.2 Jumbo fixed rate 3,100 2,390 1,393.4 1,060.5 6.4 8.7 Alternate "A" 2,911 362 569.5 71.6 2.6 0.6 Non-prime 2,500 1,384 360.0 227.5 1.7 1.9 Home equity/Second 6,957 3,903 254.5 143.3 1.2 1.2 Construction 45 27 10.5 6.5 - 0.1 Bridge 20 60 2.1 7.1 - 0.1 --------------- ----------- ------------- -------------- ------------- -------------- Total 129,257 72,122 $ 21,705.3 $ 12,195.5 100.0% 100.0% =============== =========== ============= ============== ============= ============== </TABLE> Conventional Conforming Fixed Rate Loans. These mortgage loans conform to the underwriting standards established by Fannie Mae or Freddie Mac. This product is limited to high-quality borrowers with good credit records and involves adequate down payments or mortgage insurance. Adjustable Rate Mortgages (ARM). The ARM's defining feature is a variable interest rate that fluctuates over the life of the loan, usually 30 years. Interest rate fluctuations are based on an index that is related to Treasury bill rates, regional or national average cost of funds of savings and loan associations, or another widely published rate, such as LIBOR. The period between the rate changes is called an adjustment period and may change every six months or one year. The Company also offers ARMs with a fixed period of three years, five years or ten years. Some of the Company's ARMs may include payment caps, which limit the interest rate increase for each adjustment period. Government Fixed Rate Loans. These mortgage loans conform to the underwriting standards established by the Federal Housing Authority ("FHA") or the Veterans Administration (`VA"). These loans may qualify for insurance from the FHA or guarantees from the VA. The Company has been designated by the U.S. Department of Housing and Urban Development ("HUD") as a direct endorser of loans insured by the FHA and as an automatic endorser of loans partially guaranteed by the VA, allowing it to offer FHA or VA mortgages to qualified borrowers. FHA and VA mortgages must be underwritten within specific governmental guidelines, which include borrower income verification, asset verification, borrower creditworthiness, property value and property condition. Jumbo Loans. Jumbo loans are considered non-conforming mortgage loans because they have a principal loan amount in excess of the loan limits set by Fannie Mae and Freddie Mac (which limits were $322,700, but were increased to $333,700 in the fourth quarter of 2003, for single-family, one-unit mortgage loans in the continental United States). The Company offers jumbo loans with creative financing features, such as the pledging of security portfolios. Its jumbo loan program is geared to the more financially-sophisticated borrower. Alternate "A" Loans. Alternate "A" mortgage loans consist primarily of mortgage loans that are first lien mortgage loans made to borrowers whose credit is generally within typical Fannie Mae or Freddie Mac guidelines, but have loan characteristics that make them non-conforming under these guidelines. From a credit risk standpoint, alternate "A" loan borrowers present a risk profile comparable to that of conforming loan borrowers, but entail special underwriting considerations, such as a higher loan to value ratio or limited income verification. Non-Prime Mortgage Loans. Non-prime mortgage loans focus on customers whose borrowing needs are not served by traditional financial institutions. Borrowers of non-prime mortgage loans may have impaired or limited credit profiles, high levels of debt service to income, or other factors that disqualify them for conforming loans. When the Company originates mortgage loans of borrowers with higher credit risk, the Company offsets this risk with higher interest rates than would be 6

charged for its conventional and government loans. Offering this category of mortgage loans on a limited basis allows the Company to provide loan products to borrowers with a variety of credit profiles. Home Equity or Second Mortgage Loans. These loans are generally secured by second liens on the related property. Home equity mortgage loans can take the form of a home equity line of credit, which generally bears an adjustable interest rate, while second mortgage loans are closed-end loans with fixed interest rates. Both types of loans are designed for borrowers with high-quality credit profiles. Home equity lines generally provide for a 5- or 15-year draw period where the borrower withdraws needed cash and pays interest only, followed by a 10- to 20-year repayment period. Second mortgage loans are fixed in amount at the time of origination and typically amortize over 15 to 30 years with a balloon payment due after 15 years. Construction Loans. The Company offers a variety of construction loans for owner-occupied, single-family residences. These loans are available on a rollover basis, meaning that the borrower can secure funding for the land purchase and construction of the home, then roll the financing over into a permanent mortgage loan. During the construction period, interest-only payments are made. Withdrawals during the construction period, to cover the costs associated with each stage of completion, are usually made in five to ten disbursements. Bridge Loans. The bridge loans that the Company makes are short-term loans and may be used in conjunction with its other loan products. Bridge loans provide a means for a borrower to obtain cash based on the equity of a current home that is on the market but not yet sold and to use that cash to purchase a new home. Loan Underwriting. The Company's primary goal in making a decision whether to extend a loan is whether that loan conforms to the expectations and underwriting standards of the secondary mortgage market. Typically, these standards focus on a potential borrower's credit history (often as summarized by credit scores), income and stability of income, liquid assets and net worth and the value and the condition of the property securing the loan. Whenever possible, the Company uses "artificial intelligence" underwriting systems to determine whether a particular loan meets those standards and expectations. In those cases where artificial intelligence is not available, the Company relies on its credit officer staff to make the determination. Quality Control. We perform monthly quality control testing on a statistical sample of the loans we originate. The quality control testing includes checks on the accuracy of the borrower's income and assets and the credit report used to make the loan, reviews whether the loan buyer's underwriting standards were properly applied and examines whether the loan complies with government regulations. Quality control findings are summarized in monthly reports that the Company uses to identify areas that need corrective action or could use improvement. To date, those reports have not identified any material quality control concerns, although there can be no assurances that the Company will not experience material quality control concerns in the future. Sale of Loans and Servicing Rights. With respect to mortgage loans that we originate but do not securitize, the Company typically seeks to sell those loans within 45 days of origination. The Company sells those loans to Fannie Mae, Freddie Mac, large national banks, thrifts and smaller banks, securities dealers, real estate investment trusts and other institutional loan buyers. The Company also swaps loans with Fannie Mae and Freddie Mac in exchange for mortgage-backed securities, which the Company then sells. Typically, the Company sells loans with limited recourse to it. By doing so, with some exceptions, the Company reduces its exposure to default risk at the time it sells the loan, except that it may be required to repurchase the loan if it breaches the representations or warranties that it makes in connection with the sale of the loan, in the event of an early payment default, or if the loan does not comply with the underwriting standards or other requirements of the ultimate investor. The Company sells the loans to investors pursuant to written agreements that establish an ongoing sale program under which those investors stand ready to purchase loans so long as the loans the Company offers for sale satisfy the investors' underwriting standards. In 2003, the three institutions that bought the most loans from the Company were Wells Fargo Funding, Countrywide Financial Corporation and Fannie Mae, which accounted for 46%, 27% and 16%, respectively, of the Company's total loan sales. As the Company shifts its focus toward securitizing its own loans and expands its business of holding mortgage-backed securities, it expects to sell fewer loans than it has previously. With respect to mortgage loans that it originates but does not securitize, the Company generally sells the servicing rights to those loans at the time it sells those loans. The prices at which the Company is able to sell its mortgage servicing rights vary over time and may be materially adversely affected by a number of factors, including, for example, the general supply of, and demand for, mortgage servicing rights and changes in interest rates. From time to time the Company retains the servicing rights on a portion of its loan originations. When the Company retains servicing rights, it earns an annual servicing fee. 7

Loan Servicing Segment As of December 31, 2003, we serviced approximately 68,858 loans with an aggregate principal amount of approximately $8.3 billion. Our servicing business services the loans that back our portfolio of self-originated mortgage-backed securities. It also services loans owned by others, which are typically loans that we or our predecessors originated and sold. We receive an average annual servicing fee of 0.347% of the principal amount of each loan we service for others. Our servicing business collects mortgage payments, administers tax and insurance escrows, mitigates losses on defaulted loans and responds to borrower inquiries. Our servicing capabilities have received the "Select Servicer" rating from Standard & Poor's. We expect our servicing business to grow as we increase our portfolio of self-originated mortgage-backed securities. Our servicing business enables us to retain an ongoing business relationship with our borrowers, which we believe makes it more likely that we will earn those borrowers' business when they need a new loan or wish to refinance an existing loan. We believe that our servicing capability also enables us to sell loans to Fannie Mae, Freddie Mac and Ginnie Mae on more advantageous terms than if we did not service our originations. 8

The following table sets forth certain information regarding the Company's servicing portfolio of single-family mortgage loans serviced for others, for the periods indicated: LOANS SERVICED FOR OTHERS <TABLE> <CAPTION> Year Ended December 31, ----------------------- (Dollars in millions) 2003 2002 ---- ---- <S> <C> <C> Composition of loans serviced for others at end of year: Conventional mortgage loans $6,232.4 $5,111.6 FHA-insured mortgage loans 1,708.6 2,801.5 VA-guaranteed mortgage loans 331.3 628.7 -------- -------- Loans serviced for others at end of year $8,272.3 $8,541.8 ======== ======== Loans serviced for others at beginning of year $8,541.8 $ 23.9 Acquisition of Columbia -- 8,453.8 Loans sold with servicing retained 3,715.0 2,178.8 Prepayments and foreclosures (3,818.5) (1,957.2) Amortization (166.0) (157.5) -------- -------- Loans serviced for others at end of year $8,272.3 $8,541.8 ======== ======== Delinquent mortgage loans and pending foreclosures at end of year 30 days $ 211.5 $ 345.0 60 days 44.4 82.6 90 days 35.8 89.3 -------- -------- Total delinquencies $ 291.7 $ 516.9 ======== ======== Foreclosures pending $ 54.5 $ 104.4 ======== ======== </TABLE> At December 31, 2003, the Company's servicing portfolio of single-family mortgage loans was stratified by interest rate as follows: <TABLE> <CAPTION> Total Portfolio at December 31, 2003 ------------------------------------------------------------------------------------------------------------ Principal Balance Weighted Average MSR Balance Interest Rate (in millions) Percent of Total Maturity (Years) (in millions) ------------------ ----------------------- ------------------- ------------------------ ------------------ <S> <C> <C> <C> <C> Under 6% $ 4,752.1 57.4% 24.6 $ 68.0 6.00-6.99% 1,681.7 20.3% 24.4 22.0 7.00-7.99% 1,395.0 16.9% 24.3 20.7 8% and over 443.5 5.4% 22.2 7.1 ----------------------- ------------------- ------------------ $ 8,272.3 100.0% 24.4 $ 117.8 ======================= =================== ================== </TABLE> The weighted average interest rate of the single-family mortgage loans in our servicing portfolio as of December 31, 2003 was 5.7%. As of December 31, 2003, 69% of the loans in the servicing portfolio bore interest at fixed rates and 31% bore interest at adjustable rates. The weighted average net service fee of the loans in the portfolio was 0.347% as of December 31, 2003. The weighted average interest rate of the fixed-rate loans in the servicing portfolio was 6.46% as of December 31, 2003. Additional Financial Information Regarding Segments Additional financial information regarding the Company's business segments is set forth in "Management's Discussion and Analysis of Financial Condition and Results of Operations" and is incorporated herein by reference. Hedging Activities The Company hedges interest rate risk and price volatility on its mortgage loan interest rate lock commitments and mortgage loans held for sale during the time it commits to acquire or originate mortgages at a pre-determined rate until the time it sells or securitizes mortgages. The Company also hedges interest rate risk associated with funding its portfolio of mortgage- 9

backed securities. To mitigate interest rate and price volatility risks, the Company may enter into certain hedging transactions. The nature and quantity of the Company's hedging transactions are determined based on various factors, including market conditions and the expected volume of mortgage acquisitions and originations. Additional information regarding interest rate hedging is set forth in "Management's Discussion and Analysis of Financial Condition and Results of Operations" and in Note 1 to Consolidated Financial Statements, entitled "Summary of Significant Accounting Policies." Government Regulation The Company's loan origination and loan servicing segments are subject to extensive and complex rules and regulations of, and examinations by, various federal, state, and local government authorities and government sponsored enterprises, including, without limitation, HUD, FHA, VA, Fannie Mae, Freddie Mac and Ginnie Mae. These rules and regulations impose obligations and restrictions on the Company's loan origination and credit activities, including, without limitation, the processing, underwriting, making, selling, securitizing, and servicing mortgage loans. The Company's lending activities also are subject to various federal laws, including the Federal Truth-in-Lending Act and Regulation Z thereunder, the Homeownership and Equity Protection Act of 1994, the Federal Equal Credit Opportunity Act and Regulation B thereunder, the Fair Credit Reporting Act of 1970, the Real Estate Settlement Procedures Act of 1974 and Regulation X thereunder, the Fair Housing Act, the Home Mortgage Disclosure Act and Regulation C thereunder and the Federal Debt Collection Practices Act, as well as other federal statutes and regulations affecting its activities. The Company's loan origination activities also are subject to the laws and regulations of each of the states in which it conducts its activities. These laws, rules, regulations, and guidelines limit mortgage loan amounts and the interest rates, finance charges and other fees the Company may assess, mandate extensive disclosure and notice to its customers, prohibit discrimination, impose qualification and licensing obligations on it, establish eligibility criteria for mortgage loans, provide for inspections and appraisals of properties, require credit reports on prospective borrowers, regulate payment features, and prohibit kickbacks and referral fees, among other things. These rules and requirements also impose on the Company certain reporting and net worth requirements. Failure to comply with these requirements can lead to, among other things, loss of approved status, termination of contractual rights without compensation, demands for indemnification or mortgage loan repurchases, certain rights of rescission for mortgage loans, class action lawsuits, and administrative enforcement actions. Although the Company believes that it has systems and procedures in place to ensure compliance with these requirements and that it currently is in compliance in all material respects with applicable federal, state and local laws, rules and regulations, there can be no assurance of full compliance with current laws, rules and regulations, that more restrictive laws, rules and regulations will not be adopted in the future, or that existing laws, rules and regulations or the mortgage loan documents with borrowers will not be interpreted in a different or more restrictive manner. The occurrence of any such event could make compliance substantially more difficult or expensive, restrict the Company's ability to originate, purchase, sell or service mortgage loans, further limit or restrict the amount of interest and other fees and charges earned from mortgage loans that the Company originates, purchases or services, expose it to claims by borrowers and administrative enforcement actions, or otherwise materially and adversely affect its business, financial condition and results of operations. Members of Congress, government officials and political candidates have from time to time suggested the elimination of the mortgage interest deduction for federal income tax purposes, either entirely or in part, based on borrower income, type of loan or principal amount. Because many of the Company's loans are made to borrowers for the purpose of purchasing a home, the competitive advantage of tax deductible interest, when compared with alternative sources of financing, could be eliminated or seriously impaired by this type of governmental action. Accordingly, the reduction or elimination of these tax benefits could have a material adverse effect on the demand for the kind of mortgage loans the Company offers. The Company also is performing various mortgage-related operations on the Internet. The Internet, and the laws, rules and regulations related to it, are relatively new and still evolving. As such, there exist many opportunities for the Company's business operations on the Internet to be challenged or to become subject to legislation, any of which may materially and adversely affect its business, financial condition, and results of operations. Information Systems The Company's loan origination system controls most aspects of the Company's loan origination operations, from the processing of a loan application through the closing of the loan and the sale of the loan to institutional investors. The system also performs checks and balances on many aspects of the Company's operations and supports the Company's marketing efforts. The Company's system functions on a wide area network that connects all of its branches in "real time." With its wide 10

area network, a transaction at any one of its locations is committed centrally and is therefore immediately available to all personnel at all other locations. An important benefit of the system is that it aids the Company in controlling its business processes. The system assures that the Company's underwriting policies are adhered to, that only loans that are fully approved are disbursed, and that the correct disclosures and loan documents for a borrower are used based upon such borrower's state and loan program. The Company's system also provides its management with operating reports and other key data. In addition, the Company has developed a proprietary website through the efforts of its in-house computer programming staff. The Company's loan servicing system, LSAMS ("Loan Servicing and Accounting Management System"), manages most aspects of the loan servicing function, from loan closing to its ultimate payoff or disposition. The Company has developed enhancements and ancillary systems to further automate this function. Efficiencies have been gained through the use of Interactive Voice Response units that allow customers to ask questions and receive answers 24 hours a day. The Company also utilizes CTI ("Computer-Telephone Integration") to speed the work of customer service agents. The Company's customers are able to utilize the Internet to check on current account information as well as to make monthly payments. FORTRACS, a foreclosure tracking system, has been implemented to streamline the foreclosure process, track bankruptcies, expedite foreclosure claims processing and dispose of real estate owned ("REO") property. The Company's loan servicing system is scalable well beyond its current workload. Seasonality Seasonality affects the Company's loan origination and loan servicing segments, as loan originations and payoffs are typically at their lowest levels during the first and fourth quarters due to a reduced level of home buying activity during the winter months. Loan originations and payoffs generally increase during the warmer months, beginning in March and continuing through October. As a result, the Company may experience higher earnings in the second and third quarters and lower earnings in the first and fourth quarters from its loan origination segment. Conversely, the Company may experience lower earnings in the second and third quarters and higher earnings in the first and fourth quarters from its loan servicing segment. Competition We face intense competition from mortgage REITs, commercial banks, savings and loan associations and other finance and mortgage banking companies, as well as from Internet-based lending companies and other lenders participating on the Internet. Entry barriers in the mortgage industry are relatively low and increased competition is likely. As we seek to expand our business, we will face a greater number of competitors, many of whom will be well-established in the markets that we seek to penetrate. Many of our competitors are much larger than we are, have better name recognition than we do and have far greater financial and other resources than we do. In addition, competition may lower the rates we are able to charge borrowers, thereby potentially lowering the amount of income on future loan sales and sales of servicing rights. Increased competition also may reduce the volume of our loan originations and loan sales. Employees The Company recruits, hires and retains individuals with the specific skills that complement its corporate growth and business strategies. As of December 31, 2003, the Company had 3,250 full-time employees and 69 part-time employees. CERTAIN FEDERAL INCOME TAX CONSIDERATIONS General AHM Investment, with the filing of its initial federal income tax return, will elect to be treated as a REIT for federal income tax purposes. In brief, if AHM Investment meets certain detailed conditions imposed by the REIT provisions of the Internal Revenue Code of 1986, as amended (the "Code"), including a requirement that we invest primarily in qualifying REIT assets (which generally include real estate and mortgage loans) and a requirement that we satisfy certain income tests, AHM Investment will not be taxed at the corporate level on the income that we currently distribute to our stockholders. Therefore, to this extent, AHM Investment's stockholders will avoid double taxation, at the corporate level and then again at the stockholder level when the income is distributed, that they would otherwise experience if AHM Investment failed to qualify as a REIT. If AHM Investment does not qualify as a REIT in any given year, we would be subject to federal income tax as a corporation for the year of the disqualification and for each of the following four years. This disqualification would result in federal income tax, which would reduce the amount of the after-tax cash available for distribution to our stockholders. AHM Investment believes that we have satisfied the requirements for qualification as a REIT since the year ended 2003. AHM 11

Investment intends at all times to continue to comply with the requirements for qualification as a REIT under the Code, as described below. In addition, if AHM Investment were classified as a taxable mortgage pool ("TMP"), AHM Investment's status as a REIT would not be impaired, but a portion of the taxable income generated by AHM Investment's mezzanine debt and other assets constituting a TMP may be characterized as excess inclusion income allocated to AHM Investment's stockholders. Requirements for Qualification as a REIT To qualify for tax treatment as a REIT under the Code, we must meet certain tests, as described briefly below. Ownership of Common Stock For all taxable years after the first taxable year for which we elect to be a REIT, a minimum of 100 persons must hold our shares of capital stock for at least 335 days of a 12-month year (or a proportionate part of a short tax year). In addition, at all times during the second half of each taxable year, no more than 50% in value of our capital stock may be owned directly or indirectly by five or fewer individuals. We are required to maintain records regarding the ownership of our shares and to demand statements from persons who own more than a certain number of our shares regarding their ownership of shares. We must keep a list of those stockholders who fail to reply to such a demand. We are required to use the calendar year as our taxable year for income tax purposes. Nature of Assets On the last day of each calendar quarter, at least 75% of the value of our assets and any assets held by a qualified REIT subsidiary must consist of qualified REIT assets (primarily, real estate and mortgages secured by real estate) ("Qualified REIT Assets"), government assets, cash, and cash items. We expect that substantially all of our assets will continue to be Qualified REIT Assets. On the last day of each calendar quarter, of the assets not included in the foregoing 75% assets test, the value of mortgage-backed securities that we hold issued by any one issuer may not exceed 5% in value of our total assets and we may not own more than 10% of any one issuer's outstanding securities (with an exception for a qualified electing taxable REIT subsidiary). Under that exception, the aggregate value of business that we may undertake through taxable REIT subsidiaries is limited to 20% or less of our total assets. We monitor the purchase and holding of our assets in order to comply with the above asset tests. We may from time to time hold, through one or more taxable REIT subsidiaries, assets that, if we held directly, could otherwise generate income that would have an adverse effect on our qualification as a REIT or on certain classes of our stockholders. Sources of Income We must meet the following separate income-based tests each year: 1. The 75% Test. At least 75% of our gross income for the taxable year must be derived from Qualified REIT Assets including interest (other than interest based in whole or in part on the income or profits of any person) on obligations secured by mortgages on real property or interests in real property. The investments that we have made and will continue to make will give rise primarily to mortgage interest qualifying under the 75% income test. 2. The 95% Test. In addition to deriving 75% of our gross income from the sources listed above, at least an additional 20% of our gross income for the taxable year must be derived from those sources, or from dividends, interest or gains from the sale or disposition of stock or other assets that are not dealer property. We intend to limit substantially all of the assets that we acquire (other than stock in certain affiliate corporations as discussed below) to Qualified REIT Assets. Our strategy to maintain REIT status may limit the type of assets, including hedging contracts and other assets, that we otherwise might acquire. Distributions We must distribute to our stockholders on a pro rata basis each year an amount equal to at least (i) 90% of our taxable income before deduction of dividends paid and excluding net capital gain, plus (ii) 90% of the excess of the net income from foreclosure property over the tax imposed on such income by the Code, less (iii) any "excess noncash income." We intend to make distributions to our stockholders in sufficient amounts to meet the distribution requirement. 12

Taxation of Stockholders For any taxable year in which we are treated as a REIT for federal income tax purposes, the amounts that we distribute to our stockholders out of current or accumulated earnings and profits will be includable by the stockholders as ordinary income for federal income tax purposes unless properly designated by us as capital gain dividends. Our distributions will not be eligible for the dividends received deduction for corporations. Stockholders may not deduct any of our net operating losses or capital losses. If we make distributions to our stockholders in excess of our current and accumulated earnings and profits, those distributions will be considered first a tax-free return of capital, reducing the tax basis of a stockholder's shares until the tax basis is zero. Such distributions in excess of the tax basis will be taxable as gain realized from the sale of our shares. In reading this annual report on Form 10-K and the tax disclosure set forth above, please note that although the Company is combined with all of its subsidiaries for financial accounting purposes, for federal income tax purposes, only AHM Investment and AHM Acceptance (and their assets and income) constitute the REIT, and the Company's remaining subsidiaries constitute a separate consolidated group subject to regular corporate income taxes. The provisions of the Code are highly technical and complex. This summary is not intended to be a detailed discussion of the Code or its rules and regulations, or of related administrative and judicial interpretations. We have not obtained a ruling from the Service with respect to tax considerations relevant to our organization or operation, or to an acquisition of our common stock. This summary is not intended to be a substitute for prudent tax planning and each of our stockholders is urged to consult his or her own tax advisor with respect to these and other federal, state and local tax consequences of the acquisition, ownership, and disposition of shares of our stock and any potential changes in applicable law. Taxation of AHM Investment In each year that AHM Investment qualifies as a REIT, it generally will not be subject to federal income tax on that portion of its REIT taxable income or capital gain that it distributes to stockholders. AHM Investment is subject to corporate level taxation on any undistributed income. In addition, AHM Investment faces corporate level taxation due to any failure to make timely distributions, on the built-in gain on assets acquired from a taxable corporation such as a taxable REIT subsidiary, on the income from any property that it takes in foreclosure and on which it makes a foreclosure property election, and on the gain from any property that is treated as "dealer property" in AHM Investment's hands. ITEM 2. PROPERTIES The Company's current Executive and Administrative Offices are located in the office building at 520 Broadhollow Road, Melville, New York 11747 ("520 Broadhollow Road"), which it leases, and at 538 Broadhollow Road, Melville, New York 11747 ("538 Broadhollow Road"), which it purchased on November 25, 2003. The office building at 538 Broadhollow Road consists of approximately 177,000 square feet. The Company anticipates that it will move all its personnel located at 520 Broadhollow Road to 538 Broadhollow Road by the end of June 2004. The Company owns an office building located at 950 North Elmhurst Road, Mt. Prospect, Illinois, which consists of approximately 35,700 square feet. The Company also leases real estate premises at an additional 269 locations in 34 states. The aggregate annual rent for these locations is approximately $13.4 million. ITEM 3. LEGAL PROCEEDINGS In the ordinary course of its business, the Company is at times subject to various legal proceedings. The Company does not believe that any of its current legal proceedings, individually or in the aggregate, will have a material adverse effect on its operations or financial condition. A multitude of class action lawsuits have been filed against companies in the mortgage banking industry, which allege, among other things, violations of the terms of the mortgage loan documents and certain laws, rules and regulations (including, without limitation, consumer protection laws). These lawsuits may result in similar suits being filed against the Company. In addition, the publicity generated by such lawsuits may result in legislation that affects the manner in which the Company conducts its business and its relationships with mortgage brokers, correspondents and others. Any of these developments may materially and adversely affect the Company's business, financial condition and results of operations. 13

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS At a special meeting of the stockholders of AHM Holdings held on November 21, 2003, the following actions were proposed (which are described in greater detail in AHM Holdings' Definitive Proxy Statement on Schedule 14A filed with the SEC on October 24, 2003): <TABLE> <CAPTION> PROPOSAL FOR AGAINST ABSTAIN -------- --- ------- ------- <S> <C> <C> <C> o Reorganize AHM Holdings by merging AHM Holdings with a newly formed subsidiary of AHM Investment, which at the time was a 12,704,108 50,604 46,264 wholly owned subsidiary of AHM Holdings, and, pursuant to the reorganization, each outstanding share of common stock of AHM Holdings would be converted into the right to receive one share of common stock of AHM Investment, such that AHM Investment would become the parent company of AHM Holdings. o Issue shares of common stock of AHM Investment to stockholders of 12,573,890 222,683 4,403 Apex under the Agreement and Plan of Merger, dated as of July 12, 2003, by and among Apex, AHM Holdings, and AHM Investment. o Adopt Apex's Amended and Restated 1997 Stock Option Plan. 11,760,753 981,614 58,608 </TABLE> Each of the above proposals was approved by the stockholders of AHM Holdings. 14

PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company's common stock is listed on the NYSE under the symbol "AHH" and began trading on December 4, 2003. Before our internal reorganization and merger with Apex, effective as of December 3, 2003, AHM Holdings was listed on the Nasdaq National Market under the symbol "AHMH." The following table shows the high, low and closing sales prices for our common stock during each fiscal quarter during the years ended December 31, 2003 and 2002 and the cash distributions declared during that period per share: <TABLE> <CAPTION> Stock Prices ------------------------------------------ Cash Distributions High Low Close Declared Per Share ----------- ---------- ---------- ------------------ <S> <C> <C> <C> <C> Year Ended December 31, 2003 Fourth Quarter $25.27 $17.50 $22.51 $ 0.55 Third Quarter 23.90 14.88 17.57 0.13 Second Quarter 21.20 9.94 19.36 0.13 First Quarter 10.90 9.56 10.01 0.10 Year Ended December 31, 2002 Fourth Quarter $11.86 $ 8.39 $11.00 $ 0.05 Third Quarter 12.90 9.46 10.99 0.04 Second Quarter 17.94 10.90 12.46 0.03 First Quarter 16.24 11.77 15.47 0.03 </TABLE> As of March 8, 2004, the closing sales price of the Company's common stock, as reported on the NYSE, was $27.95. As of March 8, 2004, the Company had 195 stockholders of record. As of February 13, 2004, there were approximately 25,000 beneficial owners of the Company's common stock. To maintain our qualification as a REIT, we intend to make regular quarterly distributions to our stockholders. In order to qualify as a REIT for federal income tax purposes, we must distribute to our stockholders with respect to each year at least 90% of our REIT taxable income. Although we generally intend to distribute to our stockholders each year an amount at least equal to 90% of our REIT taxable income for that year, distributions paid by us will be at the discretion of our Board of Directors and will depend on our actual cash flow, our financial condition, capital requirements, the annual distribution requirements under the REIT provisions of the Code, and other factors that our Board of Directors deems relevant. Securities Authorized for Issuance Under Equity Compensation Plans Information regarding our equity compensation plans as of December 31, 2003 is disclosed in Item 12 of this report, "Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters." Recent Issuances of Unregistered Securities The following is a description of the Company's securities that were not registered under the Securities Act of 1933, as amended (the "Securities Act"), which were sold during the quarter ended December 31, 2003. The Company acquired First Home on June 30, 2000. In addition to the shares paid to former First Home stockholders as initial consideration, the Company is required to issue unregistered shares of common stock to the former stockholders as additional consideration under the earnout provisions of the merger agreement. On October 1, 2003, pursuant to these earnout provisions, the Company issued an aggregate of 4,274 shares of common stock to such stockholders as additional consideration. In addition, on November 10, 2003, the Company issued an aggregate of 93,287 shares of common stock to such stockholders. These securities were exempt from registration under Section 4(2) of the Securities Act because they were issued pursuant to the terms of a private transaction rather than through a public offering. 15

ITEM 6. SELECTED FINANCIAL DATA The following selected financial data as of December 31, 2003 and 2002 and for the years ended December 31, 2003, 2002 and 2001 have been derived from our audited consolidated financial statements, beginning on page F-1 of this report. The selected financial data as of December 31, 2001, 2000 and 1999 and for the years ended December 31, 2000 and 1999 have been derived from prior year audited consolidated financial statements. The following selected consolidated financial data as of and for each of the years in the four-year period ended December 31, 2002 is derived from the consolidated financial statements of AHM Holdings. These consolidated financial statements include all adjustments which we consider necessary for a fair presentation of our consolidated financial position and results of operations for these periods. You should not assume that the results below indicate results that we will achieve in the future, particularly because in the future we expect net interest income, rather than gain on sales of loans, to be the principal component of our revenues. The operating data are derived from unaudited financial information that we compiled. You should read the information below along with all the other financial information and analysis presented in this report, including our financial statements and related notes, and "Management's Discussion and Analysis of Financial Condition and Results of Operations." 16

<TABLE> <CAPTION> Year Ended December 31, ------------------------------------------------------------------------------- 2003 2002 2001 2000 1999 ------------------------------------------------------------------------------- (In thousands, except per share data) <S> <C> <C> <C> <C> <C> Statement of Income Data: Gain on sales of loans and securities $ 382,236 $ 216,595 $ 118,554 $ 52,731 $ 21,957 Interest income, net 45,148 23,671 9,098 3,271 1,704 Net loan servicing fees (loss) (2,482) (11,592) - - - Total revenues 432,131 232,821 128,053 58,280 24,862 Total non-interest expenses 309,147 164,368 87,466 48,114 19,525 Income before income taxes 122,017 67,560 41,701 9,658 5,302 Income taxes (1) 48,223 28,075 16,253 4,267 1,441 Net income 73,794 39,485 25,448 5,391 3,861 Per share data: Basic earnings per share $ 4.16 $ 2.72 $ 2.45 $ 0.63 $ 0.69 Diluted earnings per share 4.07 2.65 2.34 0.63 0.69 Dividends declared per share 0.91 0.15 0.12 - - Weighted average number of shares outstanding: Basic 17,727 14,509 10,374 8,580 5,595 Diluted 18,113 14,891 10,883 8,580 5,603 Balance Sheet Data (end of period): Cash and cash equivalents $ 53,148 $ 24,416 $ 26,393 $ 6,005 $ 3,414 Mortgage-backed securities 1,763,628 - - - - Mortgage loans, net 1,223,827 831,981 419,351 143,967 65,115 Mortgage servicing rights, net 117,784 109,023 46 37 34 Total assets 3,402,390 1,119,050 501,125 183,532 85,884 Warehouse lines of credit 1,121,760 728,466 351,454 130,484 56,805 Reverse repurchase agreements 1,344,327 - - - - Total liabilities 3,003,911 954,430 421,931 156,339 67,861 Total stockholders' equity 397,970 164,096 78,617 26,612 18,000 Ratios: Return on average equity (2) 34.11% 32.52% 54.15% 24.66% 32.20% Debt to equity ratio (3) 6.51 5.11 4.96 5.37 3.45 Operating Data: Loan originations $ 21,705,250 $ 12,196,000 $ 7,766,000 $ 3,043,000 $ 1,348,000 Retail 16,386,791 10,329,000 6,495,000 2,749,000 1,166,000 Wholesale 5,318,459 1,867,000 1,271,000 294,000 182,000 Loans sold 20,758,110 12,331,000 7,497,000 2,967,000 1,330,000 </TABLE> ------------- (1) Before September 29, 1999, the Company elected to be treated as an S corporation for federal and state income tax purposes. Before the Company elected to be treated as an S corporation, all federal taxes were taxable to and paid by the Company's sole stockholder. (2) This measure is calculated by dividing net income by the average stockholders' equity outstanding during the year expressed as a percentage. (3) This ratio is calculated by dividing debt, which is comprised of reverse repurchase agreements, warehouse lines of credit and other borrowings, by stockholders'equity. 17

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Critical Accounting Policies Our accounting policies are described in Note 1 to the Consolidated Financial Statements. We have identified the following accounting policies that are critical to the presentation of our financial statements and that require critical accounting estimates by management. Mortgage-Backed Securities - We record our mortgage-backed securities at fair value. The fair values of our mortgage-backed securities are generally based on market prices provided by certain dealers who make markets on these financial instruments or third-party pricing services. If the fair value of a mortgage-backed security is not reasonably available, management estimates the fair value, which requires management's judgment and may not be indicative of the amounts we could realize in a current market exchange. Mortgage Loans Held for Sale - Mortgage loans held for sale are carried at the lower of cost or aggregate market value. The cost basis includes the capitalized value of the IRLCs related to the mortgage loans and any net deferred origination costs. For mortgage loans held for sale that are hedged with forward sale commitments, the carrying value is adjusted for the change in market during the time the hedge was deemed to be highly effective. The market value is determined by outstanding commitments from investors or current yield requirements calculated on an aggregate basis. Mortgage Servicing Rights - When we acquire servicing assets through either purchase or origination of loans and sell or securitize those loans with servicing assets retained, the total cost of the loans is allocated to the servicing assets and the loans (without the servicing assets) based on their relative fair values. The amount attributable to the servicing assets is capitalized as mortgage servicing rights ("MSRs") on the consolidated balance sheets. The MSRs are amortized to expense in proportion to and over the period of estimated net servicing income. The MSRs are assessed for impairment based on the fair value of those assets. We estimate the fair value of the servicing assets by obtaining market information from a primary mortgage servicing rights broker. When the book value of capitalized servicing assets exceeds their fair value, impairment is recognized through a valuation allowance. In determining impairment, the mortgage servicing portfolio is stratified by the predominant risk characteristic of the underlying mortgage loans. We have determined that the predominant risk characteristic is the interest rate on the underlying loan. We measure impairment for each stratum by comparing the estimated fair value to the recorded book value. Temporary impairment is recorded through a valuation allowance and amortization expense in the period of occurrence. In addition, we periodically evaluate our MSRs for other than temporary impairment to determine if the carrying value before the application of the valuation allowance is recoverable. We receive a sensitivity analysis of the estimated fair value of our MSRs assuming a 200 basis point instantaneous increase in interest rates from an independent mortgage servicing rights broker. The fair value estimate includes changes in market assumptions that would be expected given the increase in mortgage rates (e.g., prepayment speeds would be lower). We believe this 200-basis-point increase in mortgage rates to be an appropriate threshold for determining the recoverability of the temporary impairment because that size rate increase is foreseeable and consistent with historical mortgage rate fluctuations. When using this instantaneous change in rates, if the fair value of the strata of MSRs is estimated to increase to a point where all of the impairment would be recovered, the impairment is considered to be temporary. When we determine that a portion of the MSRs is not recoverable, the related MSRs and the previously established valuation allowance are correspondingly reduced to reflect other than temporary impairment. Derivative Assets and Derivative Liabilities - Our mortgage-committed pipeline includes interest rate lock commitments ("IRLCs") that have been extended to borrowers who have applied for loan funding and meet certain defined credit and underwriting criteria. IRLCs are recorded at fair value with changes in fair value recorded to current earnings. The fair value of the IRLCs is determined by an estimate of the ultimate gain on sale of the loans, including the value of MSRs, net of estimated net costs remaining to originate the loan. In March 2004, the Securities and Exchange Commission ("SEC") issued Staff Accounting Bulletin No. 105, which provides industry guidance that will change the timing of recognition of MSRs for 18

IRLCs initiated after March 31, 2004. See "Recently Issued Accounting Standards" in Note 1 to the Consolidated Financial Statements. We use other derivative instruments, including mortgage forward delivery contracts and treasury futures options, to economically hedge the IRLCs, which are also classified and accounted for as free-standing derivatives and thus are recorded at fair value with the changes in fair value recorded to current earnings. We use mortgage forward delivery contracts designated as fair value hedging instruments to hedge 100% of our agency-eligible conforming loans and most of our non-conforming loans held for sale. At the inception of the hedge, we formally document the relationship between the forward delivery contracts and the mortgage inventory, as well as our objective and strategy for undertaking the hedge transactions. In the case of our conventional conforming fixed rate loan products, the notional amount of the forward delivery contracts, along with the underlying rate and terms of the contracts, are equivalent to the unpaid principal amount of the mortgage inventory being hedged; hence, the forward delivery contracts effectively fix the forward sales price and thereby substantially eliminate interest rate and price risk to us. We classify and account for these forward delivery contracts as fair value hedges. The derivatives are carried at fair value with the changes in fair value recorded to current earnings. When the hedges are deemed to be highly effective, the book value of the hedged loans held for sale is adjusted for its change in fair value during the hedge period. We enter into interest rate swap agreements to manage our interest rate exposure when financing our mortgage-backed securities. The swap agreements are accounted for as cash flow hedges and carried on the balance sheet at fair value. The fair values of our swap agreements are generally based on market prices provided by certain dealers who make markets on these financial instruments or third-party pricing services. If the fair value of a trading security is not reasonably available, management estimates the fair value, which requires management's judgment and may not be indicative of the amounts we could realize in a current market exchange. Goodwill - Goodwill represents the excess purchase price over the fair value of net assets stemming from business acquisitions, including identifiable intangibles. We test for impairment by comparing the fair value of goodwill, as determined by using a discounted cash flow method, with its carrying value. Any excess of carrying value over the fair value of the goodwill would be recognized as an impairment loss in continuing operations. The discounted cash flow calculation related to our loan origination segment includes a forecast of the expected future loan originations and the related revenues and expenses. The discounted cash flow calculation related to our mortgage-backed securities holdings segment includes a forecast of the expected future net interest income, gain on mortgage-backed securities and the related revenues and expenses. These cash flows are discounted using a rate that is estimated to be a weighted-average cost of capital for similar companies. We further test to ensure that the fair value of all our business units does not exceed our total market capitalization. 19

Financial Condition Prior to the Company's reorganization as a REIT and the merger with Apex, our total assets consisted primarily of mortgage loans held for sale in the secondary market. At December 31, 2003, 51.8% of our total assets were mortgage-backed securities and 36.0% were mortgage loans held for sale, compared to 0% and 74.3%, respectively, at December 31, 2002. Total assets increased $2.3 billion to $3.4 billion at December 31, 2003 from $1.1 billion at December 31, 2002. The increase primarily reflects mortgage-backed securities totaling $1.7 billion at December 31, 2003 and a $0.4 billion rise in mortgage loans held for sale. The growth in mortgage-backed securities was primarily funded by an increase in reverse repurchase agreements of $1.3 billion and a payable for mortgage-backed securities purchased of $0.3 billion. The increase in loans held for sale was funded by a $0.4 billion rise in warehouse lines of credit. The following table summarizes our mortgage-backed securities owned at December 31, 2003, classified by type of issuer and by ratings categories: <TABLE> <CAPTION> December 31, 2003 ----------------------------------------------------------------------------------------------- Trading Securities Securities Available for Sale Total -------------------------- ----------------------------- --------------------------- Carrying Portfolio Carrying Portfolio Carrying Portfolio Value Mix Value Mix Value Mix ----------- ----------- ------------ ------------ ------------- ---------- (Dollars in thousands) <S> <C> <C> <C> <C> <C> <C> Agency securities $ 287,577 60.0% $ 713,790 55.6% $ 1,001,367 56.8% Privately issued: AAA 167,974 35.0 570,025 44.4 737,999 41.8 AA 11,322 2.4 - - 11,322 0.6 A 6,470 1.3 - - 6,470 0.4 Unrated (1) 6,470 1.3 - - 6,470 0.4 ------------ ---------- -------------- ------------ ------------- ----------- Total $ 479,813 100.0% $ 1,283,815 100.0% $ 1,763,628 100.0% ============ ========== ============== ============ ============= =========== </TABLE> (1) An unrated subordinated certificate retained by the Company as a credit enhancement for its privately issued securities. The following table classifies our mortgage-backed securities portfolio by type of interest rate index at December 31, 2003: <TABLE> <CAPTION> December 31, 2003 ----------------------------------------------------------------------------------------------- Securities Trading Securities Available for Sale Total -------------------------- ------------------------------ ----------------------------- Carrying Portfolio Carrying Portfolio Carrying Portfolio Value Mix Value Mix Value Mix ---------- ---------- ------------ ------------ ------------- ---------- (Dollars in thousands) <S> <C> <C> <C> <C> <C> <C> Index: One-month LIBOR $ 189,772 39.6% $ - - % $ 189,772 10.8% Six-month LIBOR - - 517,248 40.3 517,248 29.3 One-year LIBOR 261,548 54.5 610,963 47.6 872,511 49.5 One-year constant maturity treasury 28,493 5.9 155,604 12.1 184,097 10.4 ----------- ----------- ------------- ---------- -------------- ---------- Total $ 479,813 100.0% $ 1,283,815 100.0% $ 1,763,628 100.0% =========== =========== ============= ========== ============== ========== </TABLE> 20

The following table classifies our mortgage-backed securities portfolio by product type at December 31, 2003: <TABLE> <CAPTION> December 31, 2003 ------------------------------------------------------------------------------------------------------ Securities Trading Securities Available for Sale Total -------------------------------- ------------------------------- ------------------------------- Carrying Portfolio Carrying Portfolio Carrying Portfolio Value Mix Value Mix Value Mix --------------- ------------- --------------- ------------- --------------- ------------- (Dollars in thousands) <S> <C> <C> <C> <C> <C> <C> Product: 1 month ARM $ 189,771 39.6% $ - -% $ 189,771 10.8% 6 month ARM - - 182,559 14.2 182,559 10.3 1 x 1 ARM - - 30,338 2.3 30,338 1.7 3/1 Hybrid ARM 133,019 27.7 415,674 32.4 548,693 31.1 5/1 Hybrid ARM 133,140 27.7 619,688 48.3 752,828 42.7 7/1 Hybrid ARM 23,883 5.0 35,556 2.8 59,439 3.4 --------------- ------------- --------------- ------------- --------------- ------------- Total $ 479,813 100.0% $ 1,283,815 100.0% $ 1,763,628 100.0% =============== ============= =============== ============= =============== ============= </TABLE> During 2003, we purchased $1.3 billion of mortgage-backed securities. The average premium paid for mortgage-backed securities purchased during the year ended December 31, 2003 was 1.63%. During 2003, we sold $529.3 million of mortgage-backed securities. The book price of our mortgage-backed securities, excluding unrealized gains and losses, was 101.5% of par as of December 31, 2003. We had a payable for securities purchased of $259.7 million as of December 31, 2003. 21

Results of Operations The following table sets forth, for the periods indicated, the Company's results from its mortgage-backed securities activities. Any trends illustrated in the following table are not necessarily indicative of future results. Our mortgage-backed securities holdings segment ("MBS Holdings Segment") began operations on December 3, 2003 as a result of the Company's reorganization into a REIT and its merger with Apex, and thus there was no MBS Holdings Segment operations for the years ended December 31, 2002 and 2001. Mortgage-Backed Securities Holdings Segment <TABLE> <CAPTION> Year Ended December 31, ---------------------------------------------- 2003 2002 2001 ------------- ------------- ------------- (In thousands) <S> <C> <C> <C> Revenues: Gain on mortgage-backed securities $ 2,740 $ - $ - Interest income 3,108 - - Interest expense (2,302) - - ------------- ------------- ------------- Interest income, net 806 - - ------------- ------------- ------------- Total revenues 3,546 - - ------------- ------------- ------------- Net income before cumulative effect of change in accounting principle $ 3,546 $ - $ - ============= ============= ============= Segment assets $ 1,865,414 $ - $ - ============= ============= ============= </TABLE> 22

The following table sets forth, for the periods indicated, our loan origination segment's operating results ("Loan Origination Segment"). Any trends illustrated in the following table are not necessarily indicative of future results. <TABLE> <CAPTION> Loan Origination Segment Year Ended December 31, ----------------------------------------- 2003 2002 2001 ----------- ----------- ----------- (In thousands) <S> <C> <C> <C> Revenues: Gain on sales of mortgage loans and mortgage-backed securities $ 379,496 $ 216,595 $ 118,554 Interest income 102,921 55,871 45,494 Interest expense (54,869) (29,131) (36,396) ----------- ----------- ----------- Interest income, net 48,052 26,740 9,098 ----------- ----------- ----------- Other 7,229 4,147 401 ----------- ----------- ----------- Total revenues 434,777 247,482 128,053 ----------- ----------- ----------- Expenses: Salaries, commissions and benefits, net 201,454 105,198 55,778 Occupancy and equipment 26,609 15,302 8,250 Marketing and promotion 12,225 7,982 6,313 Data processing and communications 13,102 7,787 4,442 Office supplies and expenses 12,082 5,901 4,359 Professional fees 6,693 5,197 2,454 Travel and entertainment 9,926 4,581 1,682 Other 18,914 8,743 4,188 ----------- ----------- ----------- Total expenses 301,005 160,691 87,466 ----------- ----------- ----------- Net income before income taxes and minority interest in income of consolidated joint ventures 133,772 86,791 40,587 Income taxes 54,100 35,696 16,253 ----------- ----------- ----------- Minority interest in income of consolidated joint ventures 967 893 1,028 ----------- ----------- ----------- Net income before cumulative effect of change in accounting principle $ 78,705 $ 50,202 $ 23,306 =========== =========== =========== Segment assets $ 1,372,976 $ 997,826 $ 501,125 =========== =========== =========== </TABLE> 23

The following table sets forth, for the periods indicated, our loan servicing segment's operating results ("Loan Servicing Segment"). Any trends illustrated in the following table are not necessarily indicative of future results. The Loan Servicing Segment was immaterial prior to the acquisition of Columbia in June 2002 and thus the results of our Loan Servicing Segment are included in the results of our Loan Origination Segment in previous years. <TABLE> <CAPTION> Loan Servicing Segment Year Ended December 31, ----------------------------------------------- 2003 2002 2001 ------------- ------------- ------------- (In thousands) <S> <C> <C> <C> Revenues: Interest expense $ (3,710) $ (3,069) $ - ------------- ------------- ------------- Loan servicing fees 43,008 25,139 - Amortization (51,824) (26,399) - Impairment reserve recovery (provision) 6,334 (10,332) - ------------- ------------- ------------- Net loan servicing fees (loss) (2,482) (11,592) - ------------- ------------- ------------- Total revenues (6,192) (14,661) - ------------- ------------- ------------- Expenses: Salaries and benefits, net 3,485 1,697 - Occupancy and equipment 406 204 - Marketing and promotion 14 14 - Data processing and communications 99 66 - Office supplies and expenses 1,230 610 - Professional fees 854 246 - Travel and entertainment 38 6 - Other 2,016 834 - ------------- ------------- ------------- Total expenses 8,142 3,677 - ------------- ------------- ------------- Net loss before income tax benefit (14,334) (18,338) - Income tax benefit (5,877) (7,621) - ------------- ------------- ------------- Net loss before cumulative effect of change in accounting principle $ (8,457) $ (10,717) $ - ============= ============= ============= Segment assets $ 164,000 $ 121,224 $ - ============= ============= ============= </TABLE> 24

Results of Operations - Comparison of the Years Ended December 31, 2003 and 2002 Mortgage-Backed Securities Holdings Segment Our MBS Holdings Segment began operations on December 3, 2003 as a result of the reorganization of the Company into a REIT and the merger with Apex. The segment's business is the holding for net interest income of ARM-backed securities. Revenues. Total revenues for the MBS Holdings Segment were $3.5 million, consisting entirely of $2.7 million of gain on mortgage-backed securities and $0.8 million of net interest income. Loan Origination Segment The Loan Origination Segment's primary business is the origination and sale of primarily one-to-four family residential mortgage loans. The segment grew significantly in 2003 both organically and through acquisitions. The historically low interest rates of 2003 resulted in record loan originations industry-wide as record numbers of borrowers refinanced their mortgages and purchased new homes. During 2003, the segment acquired 75 retail branches of Principal Residential Mortgage, Inc. and the retail and wholesale branches of American Mortgage LLC, and also hired 325 former employees of Capitol Commerce Mortgage Company. Total loan originations for 2003 were $21.7 billion compared to $12.2 billion for 2002, a 77.9% increase. At December 31, 2003, the segment had 272 loan origination offices and 2,791 employees compared with 131 loan origination offices and 2,528 employees at December 31, 2002. Gain on Sales of Mortgage Loans. The Loan Origination Segment's primary source of revenue is the gain on sales of mortgage loans originated by the segment. Gain on sales of mortgage loans for 2003 totaled $376.6 million on loan sales of $20.8 billion, compared with $216.6 million on sales of $12.3 billion for 2002. The average gain on sale margin increased to 1.81% for 2003 from 1.76% for 2002. Net Interest Income. Total interest income for 2003 on our Loan Origination Segment's mortgages held for sale was $104.8 million, compared to interest income for 2002 of $57.5 million, an increase of $47.3 million, or 82.3%. The increase was primarily due to higher average loan inventory in 2003. Our Loan Origination Segment funds its loan inventory primarily through borrowing facilities with several mortgage warehouse lenders. Total interest expense for 2003 was $60.5 million, compared to interest expense for 2002 of $33.8 million, a 79.0% increase, which was primarily due to increased borrowings to fund our loan inventory. Other Revenue. Other revenue totaled $7.2 million in 2003 compared to $4.1 million in 2002. For the year ended December 31, 2003, other income primarily includes revenue from title services of $2.2 million, fulfillment fees of $1.9 million and volume incentive bonuses received from loan purchasers totaling approximately $1.4 million. The fulfillment fees represent non-recurring fees received from Principal Residential Mortgage, Inc. ("PRM") for loans closed by us on behalf of PRM. As part of the agreement to acquire the retail branches of PRM (the "Principal Branches"), we agreed to assume the costs incurred to close out PRM's application pipeline as of the date of the agreement on behalf of PRM for a per loan fee. For the year ended December 31, 2002, other income primarily consists of revenue from title services of $1.9 million and volume incentive bonuses received from loan purchasers totaling approximately $0.8 million. Expenses. Total expenses of our Loan Origination Segment for 2003 were $301.0 million, or 139 basis points of total loan originations, compared to $160.7 million, or 132 basis points of total loan originations, for 2002. We made significant investments in our infrastructure, particularly in information technology and corporate services, to support the growth of our Loan Origination Segment. Our operating expenses represent costs that are not eligible to be added to the book value of the loans because they are not considered direct origination costs under the rules of Statement of Financial Accounting Standards ("SFAS") No. 91 "Accounting for Nonrefundable Fees and Costs Associated with Originating or Acquiring Loans and Initial Costs of Leases." Direct origination costs are added to the book value of loans and either reduce the gain on sale of loans if the loans are sold or are amortized over the life of the loan. Salaries, commissions and benefits for 2003 were $201.5 million, or 93 basis points of total loan originations, compared to $105.2 million, or 86 basis points of total loan originations, for 2002. Operating expenses, excluding salaries, commissions and benefits, were 46 basis points of total loan originations for both 2003 and 2002. 25

Loan Servicing Segment The Loan Servicing Segment total revenues for the year ended December 31, 2003 were a loss of $6.2 million compared to a loss of $14.7 million in 2002, an increase of $8.5 million, or 57.8%. Net loan servicing fees was a loss of $2.5 million for the year ended December 31, 2003, compared to a loss of $11.6 million for 2002. Loan servicing fees increased to $43.0 million in 2003 from $25.1 million in 2002, an increase of $17.9 million, or 71.1%. The increase was primarily the result of the inclusion of Columbia for the full year in 2003. Amortization increased to $51.8 million in 2003 from $26.4 million in 2002, an increase of $25.4 million, or 96.2%. The increase was primarily the result of the inclusion of Columbia for the full year in 2003. We recognized a temporary impairment recovery of $6.3 million in 2003 versus an impairment provision of $10.3 million in 2002, resulting in an increase in net loan servicing fees of $16.6 million. This impairment recovery is due to an increase in the fair value of servicing rights attributable to a decrease in estimated future prepayment speeds. Expenses. The Loan Servicing Segment expenses are associated with the administration of the servicing portfolio acquired through our acquisition of Columbia in June 2002. Income Taxes. Income tax benefit decreased to $5.9 million in 2003 from a $7.6 million benefit in 2002, a decrease of $1.7 million, or 22.3%. Results of Operations - Comparison of the Years Ended December 31, 2002 and 2001 Loan Origination Segment Revenues. The Loan Origination Segment total revenues for the year ended December 31, 2002, were $247.5 million compared to $128.1 million in 2001, an increase of $119.4 million, or 93.3%. The increase was a result of increases in gains on sale of mortgage loans, net interest income and other income. Gain on sales of mortgage loans increased to $216.6 million in 2002 from $118.6 million in 2001, an increase of $98.0 million, or 82.7%. In general, the increase was the result of higher originations, sales and pipeline values, as well as improved margins. The higher volumes were a result of lower interest rates which generated higher purchase and refinance volumes from existing locations. Additionally, the increase is attributable to the acquisition of Columbia. Interest income, net, increased to $26.7 million in 2002 from $9.1 million in 2001, an increase of $17.6 million, or 193.9%. The increase resulted primarily from an increase in loans held for sale, an increase in our effective interest rate spread and the acquisition of Columbia. Other revenue totaled $4.1 million in 2002 compared to $0.4 million in 2001. For the year ended December 31, 2002, other income primarily consists of revenue from title services in the amount of $1.9 million and volume incentive bonuses received from loan purchasers totaling approximately $0.8 million. For the year ended December 31, 2001, other income primarily consists of volume incentive bonuses received from loan purchasers totaling approximately $0.4 million. Expenses. Salaries, commissions and benefits increased to $105.2 million in 2002 from $55.8 million in 2001, an increase of $49.4 million, or 88.6%. The increase was largely due to the inclusion of expenses of Columbia, and increased staffing levels and overtime due to increased loan volumes. As of December 31, 2002, we employed 2,528 loan origination employees compared to 1,325 loan origination employees at December 31, 2001. Occupancy and equipment expenses increased to $15.3 million in 2002 from $8.2 million in 2001, an increase of $7.1 million, or 85.4%. The increase in costs reflects the inclusion of expenses of Columbia, the opening of new community loan offices and greater depreciation charges as a result of our increased investments in computer networks. Marketing and promotion expenses increased to $8.0 million in 2002 from $6.3 million in 2001, an increase of $1.7 million, or 26.4%. The increase was primarily due to increased loan volume and the inclusion of Columbia expenses. 26

Data processing and communication costs increased to $7.8 million in 2002 from $4.4 million in 2001, an increase of $3.3 million, or 75.3%. The increase was a result of the inclusion of expenses of Columbia and the opening of new community loan offices. Office supplies and expenses increased to $5.9 million in 2002 from $4.4 million in 2001, an increase of $1.5 million, or 35.4%. The increase was a result of the inclusion of expenses of Columbia and the opening of new community loan offices. Professional fees increased to $5.2 million in 2002 from $2.5 million in 2001, an increase of $2.7 million, or 111.8%. This increase was primarily due to the inclusion of expenses of Columbia. Travel and entertainment expenses increased to $4.6 million in 2002 from $1.7 million in 2001, an increase of $2.9 million, or 172.3%. This increase was primarily due to the inclusion of expenses of Columbia and the addition of new loan originators. Other expenses increased to $8.7 million in 2002 from $4.2 million in 2001, an increase of $4.6 million, or 108.7%. These expenses, which consist generally of insurance, indemnification and foreclosure costs, outside services, storage and moving expenses and licenses and permits, increased as a result of the inclusion of Columbia, the opening of new community offices and higher loan origination. Income Taxes. Income taxes increased to $35.7 million in 2002 from $16.3 million in 2001, an increase of $19.4 million, or 119.6%. Loan Servicing Segment Our Loan Servicing Segment was immaterial before the acquisition of Columbia in June 2002 and thus the Loan Servicing Segment results are included in the Loan Origination Segment results in prior years. Revenues. The Loan Servicing Segment's total revenues for the year ended December 31, 2002, were a loss of $14.7 million, which included a net loan servicing fees loss of $11.6 million and interest expense, net, of $3.1 million. Net loan servicing fees was a loss of $11.6 million in 2002. The loan servicing portfolio was acquired as part of the Columbia acquisition in June 2002. The servicing losses are a result of the reduction in interest rates since the acquisition which resulted in both faster actual prepayments and higher forecasted future prepayments than what were expected at the time of the acquisition. The loss in 2002 primarily resulted from a temporary impairment provision of $10.3 million due to a reduction in the fair value of servicing rights attributable to an increase in estimated future prepayment speeds and $26.4 million amortization as a result of faster than expected loan repayments. Expenses. These expenses are associated with the administration of the servicing portfolio acquired through the Columbia acquisition in June 2002. Income Taxes. Income tax benefit was $7.6 million in 2002. Liquidity and Capital Resources We have arrangements to enter into reverse repurchase agreements, a form of collateralized short-term borrowing, with 14 different financial institutions and on December 31, 2003 had borrowed funds from five of these firms. Because we borrow money under these agreements based on the fair value of our mortgage-backed securities, and because changes in interest rates can negatively impact the valuation of mortgage-backed securities, our borrowing ability under these agreements could be limited and lenders could initiate margin calls in the event interest rates change or the value of our mortgage-backed securities declines for other reasons. As of December 31, 2003, we had $1.3 billion of reverse repurchase agreements outstanding with a weighted-average borrowing rate of 1.26% and a weighted-average remaining maturity of 6.9 months. To originate a mortgage loan, we draw against a $1.2 billion pre-purchase facility with UBS Real Estate Securities Inc. (formerly Paine Webber Real Estate Securities Inc.) ("UBS"), a $450 million bank syndicated facility led by Residential Funding Corporation ("RFC"), a $450 million facility with CDC IXIS Capital Markets North America Inc. ("CDC"), a facility of $350 million with Morgan Stanley Bank ("Morgan Stanley") and a facility of $200 million with Credit Lyonnais. These facilities are secured by the mortgages owned by us and by certain of our other assets. Advances drawn under the facilities bear interest at rates that vary depending on the type of mortgages securing the advances. These loans are subject to sublimits, advance rates and terms that vary depending on the type of securing mortgages and the ratio of the Company's liabilities to its tangible net worth. At March 8, 2004, the aggregate outstanding balance under the warehouse facilities was $1.5 billion, the aggregate outstanding balance in drafts payable was $46.1 million and the aggregate maximum amount available for additional borrowings was $978.8 million. 27

The documents governing our warehouse facilities contain a number of compensating balance requirements and restrictive financial and other covenants that, among other things, require us to adhere to a maximum ratio of total liabilities to tangible net worth and maintain a minimum level of tangible net worth and liquidity, as well as to comply with applicable regulatory and investor requirements. The facility agreements also contain covenants limiting the ability of our subsidiaries to transfer or sell assets other than in the ordinary course of business and to create liens on the collateral without obtaining the prior consent of the lenders, which consent may not be unreasonably withheld. In addition, under our warehouse facilities, we cannot continue to finance a mortgage loan that we hold if: o the loan is rejected as "unsatisfactory for purchase" by the ultimate investor and has exceeded its permissible 120-day warehouse period; o we fail to deliver the applicable mortgage note or other documents evidencing the loan within the requisite time period; o the underlying property that secures the loan has sustained a casualty loss in excess of 5% of its appraised value; or o the loan ceases to be an eligible loan (as determined pursuant to the applicable warehousing agreement). As of December 31, 2003, our aggregate warehouse facility borrowings were $1.1 billion (including $29 million of borrowings under a working capital sub-limit) and our outstanding drafts payable were $25.6 million, compared to $728.5 million in borrowings and $42.6 million in drafts payable as of December 31, 2002. At December 31, 2003, our loans held for sale were $1.2 billion compared to $832.0 million at December 31, 2002. In addition to the UBS, CDC, RFC, Morgan Stanley, and Credit Lyonnais warehouse facilities, we have a purchase and sale agreement with UBS. This agreement allows us to accelerate the sale of our mortgage loan inventory, resulting in a more effective use of the warehouse facility. Amounts sold and being held under these agreements at December 31, 2003 and 2002 were $236 million and $801 million, respectively. The amount so held under this agreement at March 8, 2004 was $167.5 million. This agreement is not a committed facility and may be terminated at the discretion of the counterparty. We make certain representations and warranties under the purchase and sale agreements regarding, among other things, the loans' compliance with laws and regulations, their conformity with the ultimate investors' underwriting standards and the accuracy of information. In the event of a breach of these representations or warranties or in the event of an early payment default, we may be required to repurchase the loans and indemnify the investor for damages caused by that breach. We have implemented strict procedures to ensure quality control and conformity to underwriting standards and minimize the risk of being required to repurchase loans. From time to time we have been required to repurchase loans that we sold; however, the liability for the fair value of those obligations has been immaterial. We also have a $100 million term loan facility with a bank syndicate led by RFC which we use to finance our mortgage servicing rights. The term loan facility expires on May 28, 2004. Interest is based on a spread to the LIBOR and may be adjusted for earnings on escrow balances. At December 31, 2003 and 2002, borrowings under our term loan were $71.5 million and $66.0 million, respectively. Cash and cash equivalents increased to $53.1 million at December 31, 2003, from $24.4 million at December 31, 2002. Our primary sources of cash and cash equivalents during the year ended December 31, 2003, were as follows: o $ 1.0 billion increase in reverse repurchase agreements; o $ 393.3 million increase in warehouse lines of credit; and o $ 259.7 million increase in payable for mortgage-backed securities purchased. Our primary uses of cash and cash equivalents during the year ended December 31, 2003, were as follows: o $ 1.3 billion increase in mortgage-backed securities; and o $ 391.8 million net increase in mortgage loans held for sale. Cash and cash equivalents decreased to $24.4 million at December 31, 2002, from $26.4 million at December 31, 2001. 28

Our primary sources of cash and cash equivalents during the year ended December 31, 2002, were as follows: o $184.0 million increase in warehouse lines of credit; o $ 43.7 million in proceeds from issuance of capital stock; and o $ 19.3 million increase in accrued expenses and other liabilities. Our primary uses of cash and cash equivalents during the year ended December 31, 2002, were as follows: o $202.6 million net increase in mortgage loans held for sale; o $ 33.5 million for the acquisition of businesses, net of cash acquired; o $ 25.4 million increase in accounts receivable; and o $ 10.4 million decrease in notes payable. Our ability to originate loans depends in large part on our ability to sell these mortgage loans at par or for a premium in the secondary market so that we may generate cash proceeds to repay borrowings under our warehouse facilities. The value of our loans depends on a number of factors, including: o interest rates on our loans compared to market interest rates; o the borrower credit risk classification; o loan-to-value ratios; and o general economic conditions. Inflation For the period 1997 to 2003, inflation has been relatively low and we believe that inflation has not had a material effect on our results of operations. To the extent inflation increases in the future, interest rates will also likely rise, which would reduce the number of loans we originate. Such a reduction would adversely affect our future results of operations. Off-Balance Sheet Arrangements At December 31, 2003, the Company did not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is reasonably likely to be material to investors. 29

Contractual Obligations The Company had the following contractual obligations (excluding derivative financial instruments) at December 31, 2003: <TABLE> <CAPTION> Less Than After Total 1 Year 1 - 3 Years 4 - 5 Years 5 Years ----- ------ ----------- ----------- ------- <S> <C> <C> <C> <C> <C> (In thousands) Warehouse facilities $1,121,760 $1,121,760 $ -- $ -- $ -- Operating leases 42,551 13,364 23,664 3,531 1,992 Notes payable 99,655 73,439 622 701 24,893 Reverse repurchase agreements 1,344,327 1,344,327 -- -- -- Payable for securities purchased 259,701 259,701 -- -- -- </TABLE> Risk Management Movements in interest rates can pose a major risk to us in either a rising or declining interest rate environment. We depend on substantial borrowings to conduct our business. These borrowings are all done at variable interest rate terms which will increase as short term interest rates rise. Additionally, when interest rates rise, loans held for sale and any applications in process with locked-in rates decrease in value. To preserve the value of such loans or applications in process with locked-in rates, agreements are executed for mandatory loan sales to be settled at future dates with fixed prices. These sales take the form of forward sales of mortgage-backed securities. When interest rates decline, fallout may occur as a result of customers withdrawing their applications. In those instances, we may be required to purchase loans at current market prices to fulfill existing mandatory loan sale agreements, thereby incurring losses upon sale. We use an interest rate hedging program to manage these risks. Through this program, mortgage-backed securities are purchased and sold forward and options are acquired on treasury futures contracts. In the event that we do not deliver into the forward delivery commitments or exercise our option contracts, the instruments can be settled on a net basis. Net settlement entails paying or receiving cash based upon the change in market value of the existing instrument. All forward delivery commitments and option contracts to buy mortgage-backed securities are to be contractually settled within six months of the balance sheet date. Our hedging program contains an element of risk because the counterparties to our mortgage and treasury securities transactions may be unable to meet their obligations. While we do not anticipate nonperformance by any counterparty, we are exposed to potential credit losses in the event the counterparty fails to perform. Our exposure to credit risk in the event of default by a counterparty is the difference between the contract and the current market price. We minimize our credit risk exposure by limiting the counterparties to well-capitalized banks and securities dealers who meet established credit and capital guidelines. Movements in interest rates also impact the value of mortgage servicing rights. When interest rates decline, the loans underlying the mortgage servicing rights are generally expected to prepay faster, which reduces the market value of the mortgage servicing rights. We consider the expected increase in loan origination volumes and the resulting additional origination related income as a natural hedge against the expected change in the value of mortgage servicing rights. Lower mortgage rates generally reduce the fair value of the mortgage servicing rights, as increased prepayment speeds are highly correlated with lower levels of mortgage interest rates. The Company enters into interest rate swap agreements ("Swap Agreements") to manage its interest rate exposure when financing its mortgage-backed securities. The Company generally borrows money based on short-term interest rates, by entering into borrowings with maturity terms of less than one year, and frequently 6 to 12 months. The Company's mortgage-backed securities generally have an interest rate that reprices based on frequency terms of one to twelve months. The Company's mortgage-backed securities have an initial fixed interest rate period of three to ten years. When the Company enters into a Swap Agreement, it generally agrees to pay a fixed rate of interest and to receive a variable interest rate, generally based on LIBOR. The notional balances of the Swap Agreements generally decline over the life of these instruments. These Swap Agreements have the effect of converting the Company's variable-rate debt into fixed-rate debt over the life of the Swap Agreements. These instruments are used as a cost-effective way to lengthen the average repricing period of the Company's 30

variable-rate and short-term borrowings such that the average repricing of the borrowings more closely matches the average repricing of the Company's mortgage-backed securities. The following tables summarize the Company's interest rate sensitive instruments as of December 31, 2003 and 2002: <TABLE> <CAPTION> December 31, 2003 ----------------- ----------------------------------- Notional Carrying Estimated Amount Amount Fair Value ----------------- ----------------- ---------------- (In thousands) <S> <C> <C> <C> Assets: Mortgage-backed securities $ 1,759,064 $ 1,763,628 $ 1,763,628 Interest rate lock commitments 1,140,350 20,837 20,837 Mortgage loans held for sale, net 1,175,730 1,192,219 1,192,219 Mortgage servicing rights, net 8,272,294 117,784 117,784 Liabilities: Reverse repurchase agreements $ 1,344,327 $ 1,344,327 $ 1,344,327 Forward delivery commitments- Loan commitments 477,863 4,358 4,358 Forward delivery commitments - Loans held for sale 1,161,217 2,300 2,300 Interest rate swaps 755,000 6,036 6,036 <CAPTION> December 31, 2002 ----------------------------------------------------- Notional Carrying Estimated Amount Amount Fair Value ----------------- ----------------- ---------------- (In thousands) <S> <C> <C> <C> Assets: Interest rate lock commitments $ 1,644,701 $ 29,346 $ 29,346 Option contracts to buy securities 150,000 725 725 Mortgage loans held for sale, net 684,337 695,043 695,043 Mortgage servicing rights, net 8,541,790 109,023 109,023 Liabilities: Forward delivery commitments- Loan commitments $ 1,099,905 $ 7,204 $ 7,204 Forward delivery commitments - Loans held for sale 663,544 1,866 1,866 </TABLE> Management's fair value estimates are made as of a specific point in time based on present value or other valuation techniques. These techniques involve uncertainties and are significantly affected by the assumptions used and the judgments made regarding risk characteristics of various financial instruments, discount rates, estimates of future cash flows, future expected loss experience and other factors. Changes in assumptions could significantly affect these estimates and the resulting fair values. Derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in an immediate sale of the instrument. Also, because of differences in methodologies and assumptions used to estimate fair values, the fair values used by the Company should not be compared to those of other companies. A further discussion of the methods and assumptions we use to estimate the above financial instruments is presented in Note 1 to the Consolidated Financial Statements. Newly Issued Accounting Pronouncements In April 2003, the Financial Accounting Standards Board (the "FASB") issued SFAS No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities" ("SFAS No. 149"). SFAS No. 149 amends and clarifies accounting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities under SFAS No. 133. SFAS No. 149 is effective for contracts entered into or modified after June 30, 2003, and for hedging relationships designated after June 30, 2003. The implementation of SFAS No. 149 did not have a material impact on the Company's consolidated financial statements. In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity" ("SFAS No. 150"). SFAS No. 150 establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. Most of the guidance in SFAS No. 150 is effective for all financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of 31

the first interim period beginning after June 15, 2003. The implementation of SFAS No. 150 did not have a material impact on the Company's consolidated financial statements. In November 2002, the FASB issued FASB Interpretation ("FIN") No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others," ("FIN No. 45"), which expands on the accounting guidance of SFAS No. 5, "Accounting for Contingencies," SFAS No. 57, "Related Party Disclosures," and SFAS No. 107, "Disclosures about Fair Value of Financial Instruments." FIN No. 45 elaborates on the disclosures to be made by a guarantor about its obligations under certain guarantees issued. FIN No. 45 also clarifies that a guarantor is required to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. The implementation of FIN No. 45 did not have a material impact on the Company's consolidated financial statements. In January 2003, The FASB issued FIN No. 46, "Consolidation of Variable Interest Entities, an Interpretation of Accounting Research Bulletin ("ARB") No. 51, Consolidated Financial Statements" ("FIN No. 46"), which was revised in December 2003. This interpretation addresses consolidation by business enterprises of variable interest entities ("VIEs") when specific characteristics are met. FIN No. 46 clarifies the application of ARB No. 51 to certain entities with equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. The provisions of FIN No. 46 were effective February 1, 2003 for new and modified VIEs and July 1, 2003 for other entities. The implementation of FIN No. 46 did not have a material impact on the Company's consolidated financial statements. In November 2003, the Emerging Issues Task Force ("EITF") reached a consensus on EITF Issue No. 03-1, "The Meaning of Other-Than-Temporary Impairment and its Application to Certain Investments" that certain quantitative and qualitative disclosures are required for equity and fixed maturity securities that are impaired at the balance sheet date but for which an other-than-temporary impairment has not been recognized. The guidance requires companies to disclose the aggregate amount of unrealized losses and the related fair value of investments with unrealized losses for securities that have been in an unrealized loss position for less than 12 months and separately for those that have been in an unrealized loss position for over 12 months, by investment category. The Company has adopted these disclosure requirements in Note 3 to the Consolidated Financial Statements. On March 9, 2004, the SEC issued Staff Accounting Bulletin No. 105 ("SAB No. 105"), which provides guidance regarding loan commitments that are accounted for as derivative instruments under SFAS No. 133 (as amended), Accounting for Derivative Instruments and Hedging Activities. In SAB No. 105, the SEC stated that the value of expected future cash flows related to servicing rights should be excluded when determining the fair value of derivative interest rate lock commitments. This guidance must be applied to rate locks initiated after March 31, 2004. Under the new policy, the value of the expected future cash flow related to servicing rights is not recognized until the underlying loans are sold. The impact that this new policy will have on the Company's results of operations in the second quarter of 2004 will be influenced by that quarter's amount of rate lock volume associated with loans expected to be sold and by the timing of when loan sales are executed. As rate lock volume is highly sensitive to changes in interest rates and the timing of loan sales may be affected by market conditions, the Company cannot provide a reliable estimate of the impact this change will have to its results of operations in the second quarter of 2004. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The information required to be included in this Item 7A regarding Quantitative and Qualitative Disclosures about Market Risk is included in Item 7 of this report, "Management's Discussion and Analysis of Financial Condition and Results of Operations--Risk Management." ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information required by this Item 8 is incorporated by reference to the Company's Consolidated Financial Statements together with the Notes to Consolidated Financial Statements and Independent Auditors' Report beginning on page F-1 of this annual report on Form 10-K. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. 32

ITEM 9A. CONTROLS AND PROCEDURES The Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of its disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the fiscal year covered by this annual report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company's disclosure controls and procedures were effective as of the end of the fiscal year covered by this annual report. The Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, has evaluated the Company's internal controls over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) to determine whether any changes occurred during the fourth quarter of 2003 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting. Based on that evaluation, there has been no such change during the fourth quarter of 2003. 33

PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The Company intends to file with the SEC a definitive proxy statement on Schedule 14A in connection with the Company's 2004 Annual Meeting of Stockholders (the "Proxy Statement"), which will involve the election of directors, within 120 days after the end of the year covered by this annual report on Form 10-K. Information regarding directors and executive officers of the Company will be set forth in the Proxy Statement and is incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION The information required to be furnished pursuant to this item will be set forth in the Proxy Statement and is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The information required to be furnished pursuant to this item will be set forth in the Proxy Statement and is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required to be furnished pursuant to this item will be set forth in the Proxy Statement and is incorporated herein by reference. ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES The information required to be furnished pursuant to this item will be set forth in the Proxy Statement and is incorporated herein by reference. 34

PART IV ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) Documents Filed with this Report. The following documents are filed as part of this annual report on Form 10-K: 1. Financial Statements The information called for by this paragraph is set forth in the Financial Statements and Independent Auditors' Report beginning at page F-1 of this annual report on Form 10-K. 2. Financial Statement Schedules None. 3. Exhibits The information called for by this paragraph is contained in the Index to Exhibits to this annual report on Form 10-K, which is incorporated herein by reference. (b) Reports on Form 8-K. During the quarter ended December 31, 2003, AHM Investment filed with the SEC the following Current Reports on Form 8-K: o Current Report on Form 8-K, dated December 24, 2003, and filed on December 24, 2003, which reported that the Company filed with the SEC a universal shelf registration statement on Form S-3 for the possible future offer and sale of up to an aggregate of $500 million of common stock, preferred stock, debt securities and/or warrants to purchase common stock and preferred stock. o Current Report on Form 8-K, dated December 3, 2003, and filed on December 17, 2003, which reported that the Company completed its internal reorganization and the acquisition of Apex. Pursuant to Item 7 of Form 8-K, the Company also filed the following financial information: (i) audited consolidated balance sheets of Apex as of December 31, 2002 and 2001; (ii) audited consolidated statements of income, changes in stockholders' equity and cash flows of Apex for the years ended December 31, 2002, 2001 and 2000; (iii) unaudited condensed consolidated balance sheet of Apex as of September 30, 2003; (iv) unaudited condensed statements of income, changes in stockholders' equity and cash flows of Apex for the nine months ended September 30, 2003 and 2002; (v) pro forma condensed balance sheet as of September 30, 2003; and (vi) pro forma condensed statements of income for the year ended December 31, 2002 and the nine-month period ended September 30, 2003. In addition, during the quarter ended December 31, 2003, AHM Holdings, one of the Company's predecessor corporations, filed with the SEC the following Current Reports on Form 8-K: o Current Report on Form 8-K, dated December 2, 2003, and filed on December 3, 2003, which reported that AHM Holdings made a presentation at the Friedman Billings Ramsey Investor Conference in New York, New York, and attached the text of the materials it provided to investors at the conference. o Current Report on Form 8-K, dated October 28, 2003, and filed on October 28, 2003, pertaining to AHM Holdings' financial results for the fiscal quarter ended September 30, 2003. o Current Report on Form 8-K, dated October 23, 2003, and filed on October 24, 2003, was filed to correct a typographical error in the Independent Auditors' Report filed with the AHM Holdings' Annual Report on Form 10-K for the fiscal year ended December 31, 2002, in that the previously filed Independent Auditors' Report was replaced with a properly executed copy showing the conformed signature of Deloitte & Touche LLP, the AHM Holdings' independent auditors. 35

Apex, the Company's other predecessor corporation, did not file any Current Reports on Form 8-K during the quarter ended December 31, 2003. 36

SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant, American Home Mortgage Investment Corp., a corporation organized and existing under the laws of the State of Maryland, has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 15th day of March, 2004. AMERICAN HOME MORTGAGE INVESTMENT CORP. By: /s/ Michael Strauss --------------------------------------------- Name: Michael Strauss Title: President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Signature Title Date Chairman of the Board, /s/ Michael Strauss President and March 15, 2004 ----------------------------- Chief Executive Officer Michael Strauss (Principal Executive Officer) Chief Financial Officer /s/ Stephen A. Hozie (Principal Financial Officer March 15, 2004 ----------------------------- and Principal Accounting Stephen A. Hozie Officer) /s/ John A. Johnston Director March 15, 2004 ----------------------------- John A. Johnston /s/ Nicholas R. Marfino Director March 15, 2004 ----------------------------- Nicholas R. Marfino /s/ Michael A. McManus, Jr. Director March 15, 2004 ----------------------------- Michael A. McManus, Jr. /s/ C. Cathleen Raffaeli Director March 15, 2004 ----------------------------- C. Cathleen Raffaeli /s/ Kenneth P. Slosser Director March 15, 2004 ----------------------------- Kenneth P. Slosser 37

INDEX TO FINANCIAL STATEMENTS AMERICAN HOME MORTGAGE INVESTMENT CORP. TABLE OF CONTENTS -------------------------------------------------------------------------------- <TABLE> <CAPTION> Page <S> <C> Independent Auditors' Report F-1 Consolidated Balance Sheets as of December 31, 2003 and 2002 F-2 Consolidated Statements of Income for the Years Ended December 31, 2003, 2002 and 2001 F-3 Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 2003, 2002 and 2001 F-4 Consolidated Statements of Cash Flows for the Years Ended December 31, 2003, 2002 and 2001 F-5 Notes to Consolidated Financial Statements F-6 -- F-36 </TABLE>

-------------------------------------------------------------------------------- INDEPENDENT AUDITORS' REPORT To the Board of Directors and Stockholders of American Home Mortgage Investment Corp. We have audited the accompanying consolidated balance sheets of American Home Mortgage Investment Corp. and its subsidiaries (the "Company") as of December 31, 2003 and 2002, and the related consolidated statements of income, changes in stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2003. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits 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. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of American Home Mortgage Investment Corp. and its subsidiaries at December 31, 2003 and 2002, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2003 in conformity with accounting principles generally accepted in the United States of America. /s/ Deloitte & Touche LLP March 15, 2004 Princeton, New Jersey F-1

AMERICAN HOME MORTGAGE INVESTMENT CORP. AND SUBSIDIARIES <TABLE> <CAPTION> CONSOLIDATED BALANCE SHEETS ------------------------------------------------------------------------------------------------------------------------------------ December 31, --------------------------------------------- (Dollars in thousands, except per share amounts) 2003 2002 --------------------------------------------- <S> <C> <C> Assets: Cash and cash equivalents $ 53,148 $ 24,416 Accounts receivable and servicing advances 84,311 51,770 Mortgage-backed securities (including securities pledged of $1,426,477 in 2003) 1,763,628 - Mortgage loans held for sale, net 1,223,827 831,981 Derivative assets 20,837 30,071 Mortgage servicing rights, net 117,784 109,023 Premises and equipment, net 41,738 13,001 Goodwill 83,445 50,932 Other assets 13,672 7,856 ---------------------- -------------------- Total assets $ 3,402,390 $ 1,119,050 ====================== ==================== Liabilities and Stockholders' Equity: Liabilities: Warehouse lines of credit $ 1,121,760 $ 728,466 Drafts payable 25,625 42,599 Reverse repurchase agreements 1,344,327 - Payable for securities purchased 259,701 - Derivative liabilities 10,394 7,204 Accrued expenses and other liabilities 75,647 64,945 Notes payable 99,655 68,261 Income taxes payable 66,802 42,955 ---------------------- -------------------- Total liabilities 3,003,911 954,430 ---------------------- -------------------- Commitments and contingencies (Note 16) Minority interest 509 524 Stockholders' Equity: Preferred stock, $0.01 per share par value, 10,000,000 shares authorized, none issued and outstanding -- -- Common stock, $0.01 per share par value, 100,000,000 shares authorized, 25,270,100 and 16,717,459 shares issued and outstanding in 2003 and 2002, respectively 252 167 Additional paid-in capital 281,432 95,785 Retained earnings 121,029 68,144 Accumulated other comprehensive loss (4,743) - ---------------------- -------------------- Total stockholders' equity 397,970 164,096 ---------------------- -------------------- Total liabilities and stockholders' equity $ 3,402,390 $ 1,119,050 ====================== ==================== See notes to consolidated financial statements. </TABLE> F-2

AMERICAN HOME MORTGAGE INVESTMENT CORP. AND SUBSIDIARIES <TABLE> <CAPTION> CONSOLIDATED STATEMENTS OF INCOME ------------------------------------------------------------------------------------------------------------------------------------ Year Ended December 31, ----------------------------------------------- (Dollars in thousands, except per share data) 2003 2002 2001 ------------ ------------ ------------ <S> <C> <C> <C> Revenues: Gain on sales of mortgage loans and mortgage-backed securities $ 382,236 $ 216,595 $ 118,554 Interest income 106,029 55,871 45,494 Interest expense (60,881) (32,200) (36,396) ------------ ------------ ------------ Interest income, net 45,148 23,671 9,098 ------------ ------------ ------------ Loan servicing fees 43,008 25,139 -- Amortization (51,824) (26,399) -- Impairment reserve recovery (provision) 6,334 (10,332) -- ------------ ------------ ------------ Net loan servicing fees (loss) (2,482) (11,592) -- ------------ ------------ ------------ Other 7,229 4,147 401 ------------ ------------ ------------ Total revenues 432,131 232,821 128,053 ------------ ------------ ------------ Expenses: Salaries, commissions and benefits, net 204,939 106,895 55,778 Occupancy and equipment 27,015 15,506 8,250 Marketing and promotion 12,239 7,996 6,313 Data processing and communications 13,201 7,853 4,442 Office supplies and expenses 13,312 6,511 4,359 Professional fees 7,547 5,443 2,454 Travel and entertainment 9,964 4,587 1,682 Other 20,930 9,577 4,188 ------------ ------------ ------------ Total expenses 309,147 164,368 87,466 ------------ ------------ ------------ Income before income taxes and minority interest in income of consolidated joint ventures 122,984 68,453 40,587 Income taxes 48,223 28,075 16,253 ------------ ------------ ------------ Income before minority interest in income of consolidated joint ventures 74,761 40,378 24,334 Minority interest in income of consolidated joint ventures 967 893 1,028 ------------ ------------ ------------ Net income before cumulative effect of change in accounting principle 73,794 39,485 23,306 Cumulative effect of change in accounting principle, net of taxes -- -- 2,142 ------------ ------------ ------------ Net income $ 73,794 $ 39,485 $ 25,448 ============ ============ ============ Per share data: Basic before cumulative effect of change in accounting principle $ 4.16 $ 2.72 $ 2.25 Basic after cumulative effect of change in accounting principle $ 4.16 $ 2.72 $ 2.45 Diluted before cumulative effect of change in accounting principle $ 4.07 $ 2.65 $ 2.14 Diluted after cumulative effect of change in accounting principle $ 4.07 $ 2.65 $ 2.34 Weighted average number of shares - basic 17,727,253 14,508,515 10,373,858 Weighted average number of shares - diluted 18,113,397 14,891,001 10,883,403 </TABLE> See notes to consolidated financial statements. F-3

AMERICAN HOME MORTGAGE INVESTMENT CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY <TABLE> <CAPTION> THREE YEARS ENDED DECEMBER 31, 2003 ----------------------------------------------------------------------------------------------------------------------------------- Accumulated Shares of Additional Other Total Common Common Paid-in Retained Comprehensive Stockholders' (Dollars in thousands) Stock Stock Capital Earnings Loss Equity ----------------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> <C> <C> Balance at December 31, 2000 8,985,584 $ 90 $ 20,463 $ 6,059 $ -- $ 26,612 ========== ========== ========== ========== ========== ========== Comprehensive income: Net income -- -- -- 25,448 -- 25,448 ---------- Comprehensive income 25,448 Issuance of common stock, purchase of Marina Mortgage Company, Inc. 157,985 1 969 -- -- 970 Issuance of common stock, 1999 Omnibus Stock Incentive Plan 270,515 3 1,871 -- -- 1,874 Tax benefit from stock options exercised -- -- 1,439 -- -- 1,439 Issuance of common stock, warrants 174,916 2 1,363 -- -- 1,365 Issuance of common stock, secondary stock offering 2,402,200 24 21,848 -- -- 21,872 Dividends declared -- -- -- (963) -- (963) ---------- ---------- ---------- ---------- ---------- ---------- Balance at December 31, 2001 11,991,200 120 47,953 30,544 -- 78,617 ========== ========== ========== ========== ========== ========== Comprehensive income: Net income -- -- -- 39,485 -- 39,485 ---------- Comprehensive income 39,485 Issuance of common stock, secondary stock offering 3,700,000 37 36,836 -- -- 36,873 Issuance of common stock, underwriters' over allotment 555,000 5 5,603 -- -- 5,608 Issuance of common stock, earnouts 269,201 3 3,401 -- -- 3,404 Issuance of common stock, 1999 Omnibus Stock Incentive Plan 187,058 2 1,306 -- -- 1,308 Issuance of common stock, warrants 15,000 -- 117 -- -- 117 Tax benefit from stock options exercised -- -- 569 -- -- 569 Dividends declared -- -- -- (1,885) -- (1,885) ---------- ---------- ---------- ---------- ---------- ---------- Balance at December 31, 2002 16,717,459 167 95,785 68,144 -- 164,096 ========== ========== ========== ========== ========== ========== Comprehensive income: Net income -- -- -- 73,794 -- 73,794 Net unrealized gain on mortgage-backed securities available for sale -- -- -- -- 1,292 1,292 Gross unrealized loss on interest rate swaps -- -- -- -- (6,035) (6,035) ---------- Comprehensive income 69,051 Issuance of common stock, purchase of Apex Mortgage Capital, Inc. 7,691,682 77 177,248 -- -- 177,325 Issuance of common stock, earnouts 406,708 4 5,160 -- -- 5,164 Issuance of common stock, 1999 Omnibus Stock Incentive Plan 444,251 4 2,772 -- -- 2,776 Issuance of common stock, warrants 10,000 -- 467 -- -- 467 Dividends declared -- -- -- (20,909) -- (20,909) ---------- ---------- ---------- ---------- ---------- ---------- Balance at December 31, 2003 25,270,100 $ 252 $ 281,432 $ 121,029 $ (4,743) $ 397,970 ========== ========== ========== ========== ========== ========== </TABLE> See notes to consolidated financial statements F-4

AMERICAN HOME MORTGAGE INVESTMENT CORP. AND SUBSIDIARIES <TABLE> <CAPTION> CONSOLIDATED STATEMENTS OF CASH FLOWS ------------------------------------------------------------------------------------------------------------------------------------ Year Ended December 31, ----------------------------------------------- (In thousands) 2003 2002 2001 ------------ ------------ ------------ <S> <C> <C> <C> Cash flows from operating activities: Net income $ 73,794 $ 39,485 $ 25,448 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization 6,023 3,348 2,569 Amortization and impairment of mortgage servicing rights 45,490 24,140 6 Origination of mortgage loans held for sale (21,705,251) (11,569,425) (7,328,170) Proceeds on sales and securitizations of mortgage loans 21,313,405 11,366,837 7,052,946 Increase in income taxes payable 23,847 11,966 12,526 Other 676 1,033 2,089 (Increase) decrease in operating assets: Accounts receivable (28,848) (25,442) (9,576) Derivative assets 9,234 (24,203) (6,027) Other assets (5,117) 1,828 (1,383) Increase (decrease) in operating liabilities: Minority interest (15) (53) (4) Accrued expenses and other liabilities (7,989) 19,346 6,043 Derivative liabilities 3,190 7,204 -- ------------ ------------ ------------ Net cash used in operating activities (271,561) (143,936) (243,533) ------------ ------------ ------------ Cash flows from investing activities: Purchase of real estate owned, net (372) (190) (83) Purchases of premises and equipment, net (34,760) (4,649) (3,648) Increase in mortgage-backed securities (1,251,362) -- -- Acquisition of businesses, net of cash acquired 6,378 (33,452) (2,771) Earnouts related to previous acquisitions (2,636) (1,644) -- Capitalization of mortgage servicing rights (54,251) (31,118) (15) Net sales of loans held for investment (307) 1,048 (1,398) ------------ ------------ ------------ Net cash used in investing activities (1,337,310) (70,005) (7,915) ------------ ------------ ------------ Cash flows from financing activities: Increase in warehouse lines of credit 393,294 183,958 220,970 Increase in reverse repurchase agreements 1,014,677 -- -- Increase in payable for securities purchased 219,451 -- -- (Decrease) increase in drafts payable (16,974) (3,448) 27,010 Proceeds from issuance of capital stock 2,761 43,692 25,777 Dividends paid (7,000) (1,885) (963) Increase (decrease) in notes payable 31,394 (10,353) (958) ------------ ------------ ------------ Net cash provided by financing activities 1,637,603 211,964 271,836 ------------ ------------ ------------ Net increase (decrease) in cash and cash equivalents 28,732 (1,977) 20,388 Cash and cash equivalents, beginning of year 24,416 26,393 6,005 ------------ ------------ ------------ Cash and cash equivalents, end of year $ 53,148 $ 24,416 $ 26,393 ============ ============ ============ Supplemental disclosure of cash flow information: Interest paid $ 58,668 $ 22,361 $ 6,879 Income taxes paid 25,748 15,736 3,417 </TABLE> See notes to consolidated financial statements. F-5

AMERICAN HOME MORTGAGE INVESTMENT CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -------------------------------------------------------------------------------- NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization - On December 3, 2003, American Home Mortgage Holdings, Inc. ("AHM Holdings") completed its merger with Apex Mortgage Capital, Inc. ("Apex"). Under the terms of the agreement, AHM Holdings reorganized through a reverse triangular merger that caused American Home Mortgage Investment Corp. ("AHM Investment"), a newly formed Maryland corporation that operates and will elect to be treated as a real estate investment trust, or REIT, for federal income tax purposes, to become AHM Holdings' parent. AHM Investment was formed to combine the net assets of Apex, a Maryland corporation that operated and elected to be treated as a REIT, with the mortgage origination and servicing businesses of AHM Holdings. As used herein, references to the "Company," "American Home," "we," "our" and "us" refer to AHM Investment collectively with its subsidiaries. AHM Investment is a mortgage REIT focused on earning net interest income from purchased and self-originated mortgage-backed securities, and through its taxable subsidiaries, on earning income from originating and selling mortgage loans and servicing mortgage loans for institutional investors. Mortgages are originated through a network of 272 loan origination offices as well as through mortgage brokers and are serviced at the Company's Columbia, Maryland servicing center. Basis of Presentation - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company's estimates and assumptions primarily arise from risks and uncertainties associated with interest rate volatility, credit exposure and regulatory changes. Although management is not currently aware of any factors that would significantly change its estimates and assumptions in the near term, future changes in market trends and conditions may occur which could cause actual results to differ materially. When necessary, certain reclassifications of prior year financial statement amounts have been made to conform to the current year presentation. Due to the fact that the Company exercises significant influence on the operations of its joint ventures (see Note 18), their balances and operations have been fully consolidated in the accompanying consolidated financial statements and all intercompany accounts and transactions have been eliminated. Cash and Cash Equivalents - Cash and cash equivalents include cash on hand, amounts due from banks and overnight deposits. Mortgage-backed Securities - Mortgage-backed securities are classified as either trading or available for sale. Trading securities are reported at fair value, and changes in fair value are reported in gain on mortgage-backed securities in the statements of operations. Available for sale securities are reported at fair value, with unrealized gains and losses excluded from earnings and reported in accumulated other comprehensive income (loss). Realized gains and losses on sales of available for sale securities are determined on an average cost basis and included in gain on sales of mortgage loans and mortgage-backed securities. When the fair value of an available for sale security is less than amortized cost, management considers whether there is an other-than-temporary impairment in the value of the security (e.g., whether the security will be sold prior to the recovery of fair value). If, in management's judgment, an other-than-temporary impairment exists, the cost basis of the security is written down to the then-current fair value, and the unrealized loss is transferred from accumulated other comprehensive income as an immediate reduction of current earnings (i.e., as if the loss had been realized in the period of impairment). Mortgage Loans Held for Sale - Mortgage loans held for sale are carried at the lower of cost or aggregate market value. The cost basis includes the capitalized value of the IRLCs related to the mortgage loans and any net deferred origination costs. For mortgage loans held for sale that are hedged with forward sale commitments, the carrying value is adjusted for the change in market during the time the hedge was deemed to be highly effective. The market value is determined by outstanding commitments from investors or current yield requirements calculated on an aggregate basis. F-6

Mortgage Servicing Rights - Mortgage servicing rights ("MSRs") are carried at the lower of cost or fair value, based on defined risk strata and are amortized in proportion to and over the period of estimated net servicing income. When the Company sells certain loans and retains the servicing rights, it allocates the cost basis of the loans between the assets sold and the MSRs based on their relative fair values on the date of sale. The Company estimates the fair value of its MSRs by obtaining market information from one of the primary mortgage servicing rights brokers. When the book value of capitalized MSRs exceeds their fair value, impairment is recognized through a valuation allowance. In determining impairment, the mortgage servicing portfolio is stratified by the predominant risk characteristic of the underlying mortgage loans. The Company has determined that the predominant risk characteristic is the interest rate on the underlying loans. The Company measures impairment for each stratum by comparing the estimated fair value to the recorded book value. Temporary impairment is recorded through a valuation allowance and amortization expense in the period of occurrence. In addition, the Company periodically evaluates its MSRs for other than temporary impairment to determine if the carrying value before the application of the valuation allowance is recoverable. The Company receives a sensitivity analysis of the estimated fair value of its MSRs assuming a 200 basis point instantaneous increase in interest rates from an independent mortgage servicing rights broker. The fair value estimate includes changes in market assumptions that would be expected given the increase in mortgage rates (e.g., prepayment speeds would be lower). The Company believes this 200-basis-point increase in mortgage rates to be an appropriate threshold for determining the recoverability of the temporary impairment because that size rate increase is foreseeable and consistent with historical mortgage rate fluctuations. When using this instantaneous change in rates, if the fair value of the strata of MSRs is estimated to increase to a point where all of the impairment would be recovered, the impairment is considered to be temporary. When the Company determines that a portion of the MSRs is not recoverable, the related MSRs and the previously established valuation allowance are correspondingly reduced to reflect other than temporary impairment. Premises and Equipment - Premises and equipment is stated at cost less accumulated depreciation and amortization. Depreciation is provided using the straight-line method over their estimated service lives. Leasehold improvements are amortized over the lesser of the life of the lease or service lives of the improvements using the straight-line method. Depreciation and amortization are recorded within occupancy and equipment expense within the consolidated financial statements. Goodwill - Goodwill represents the excess purchase price over the fair value of net assets acquired from business acquisitions and which were being amortized over their initial estimated lives, generally 20 years. Effective January 1, 2002, the Company no longer amortizes goodwill, but instead tests for impairment at least annually. The Company will test for impairment more frequently if events or circumstances indicate that an asset may be impaired. The Company tests for impairment by comparing the fair value of goodwill, as determined by using a discounted cash flow method, with its carrying value. Any excess of carrying value over the fair value of the goodwill would be recognized as an impairment loss in continuing operations. The discounted cash flow calculation related to the Company's loan origination segment includes a forecast of the expected future loan originations and the related revenues and expenses. The discounted cash flow calculation related to the Company's mortgage-backed securities holdings segment includes a forecast of the expected future net interest income, gain on mortgage-backed securities and the related revenues and expenses. These cash flows are discounted using a rate that is estimated to be a weighted-average cost of capital for similar companies. F-7

Summarized below is the pro forma net income as adjusted for the amortization expense no longer recorded. <TABLE> <CAPTION> Year Ended December 31, ---------------------------------------------- (In thousands, except per share amounts) 2003 2002 2001 ------------ ------------ ------------ <S> <C> <C> <C> Net income before cumulative effect of change in accounting principle as reported $ 73,794 $ 39,485 $ 23,306 Goodwill amortization, net of taxes -- -- 834 Adjusted net income before cumulative effect of change in accounting principle ------------ ------------ ------------ $ 73,794 $ 39,485 $ 24,140 ============ ============ ============ Earnings per share Basic before cumulative effect of change in accounting principle $ 4.16 $ 2.72 $ 2.25 Goodwill amortization, net of taxes -- -- 0.08 Adjusted basic before cumulative effect of change in accounting principle ------------ ------------ ------------ $ 4.16 $ 2.72 $ 2.33 ============ ============ ============ Diluted before cumulative effect of change in accounting principle $ 4.07 $ 2.65 $ 2.14 Goodwill amortization, net of taxes -- -- 0.08 Adjusted diluted before cumulative effect of change in accounting principle ------------ ------------ ------------ $ 4.07 $ 2.65 $ 2.22 ============ ============ ============ Net income after cumulative effect of change in accounting principle as reported $ 73,794 $ 39,485 $ 25,448 Goodwill amortization, net of taxes -- -- 834 Adjusted net income after cumulative effect of change in accounting principle ------------ ------------ ------------ $ 73,794 $ 39,485 $ 26,282 ============ ============ ============ Earnings per share Basic after cumulative effect of change in accounting principle $ 4.16 $ 2.72 $ 2.45 Goodwill amortization, net of taxes -- -- 0.08 Adjusted basic after cumulative effect of change in accounting principle ------------ ------------ ------------ $ 4.16 $ 2.72 $ 2.53 ============ ============ ============ Diluted after cumulative effect of change in accounting principle $ 4.07 $ 2.65 $ 2.34 Goodwill amortization, net of taxes -- -- 0.08 Adjusted diluted after cumulative effect of change in accounting principle ------------ ------------ ------------ $ 4.07 $ 2.65 $ 2.42 ============ ============ ============ </TABLE> F-8

Reverse Repurchase Agreements - The Company has entered into reverse repurchase agreements to finance certain of its investments. These agreements are secured by a portion of the Company's investments and bear interest rates that have historically moved in close relationship to LIBOR. Reverse repurchase agreements are accounted for as short-term borrowings and recorded as a liability on the balance sheet. Drafts Payable - Drafts payable represent outstanding mortgage loan disbursements that the Company has provided to its customers for the purchase of a home. The amounts outstanding do not bear interest and are transferred into the warehouse facility when they are presented to a bank. Derivative Financial Instruments - The Company has developed risk management programs and processes designed to manage market risk associated with normal business activities. Interest Rate Lock Commitments. The Company's mortgage committed pipeline includes interest rate lock commitments ("IRLCs") that have been extended to borrowers who have applied for loan funding and meet certain defined credit and underwriting criteria. The Company classifies and accounts for the IRLCs as free-standing derivatives. Accordingly, IRLCs are recorded at fair value with changes in fair value recorded to current earnings. The fair value of the IRLCs is determined by an estimate of the ultimate gain on sale of the loans, including the value of MSRs, net of estimated net costs to originate the loan. In March 2004, the Securities and Exchange Commission ("SEC") issued guidance that will change the timing of recognition of MSRs for IRLCs initiated after March 31, 2004. See "Recently Issued Accounting Standards" in this note. Forward Delivery Commitments Used to Hedge IRLCs. The Company uses mortgage forward delivery contracts to economically hedge the IRLCs, which are also classified and accounted for as free-standing derivatives and thus are recorded at fair value with the changes in fair value recorded to current earnings. Forward Delivery Commitments Used to Hedge Mortgage Loans Held for Sale. The Company's risk management objective for its mortgage loans held for sale is to protect earnings from an unexpected charge due to a decline in value. The Company's strategy is to engage in a risk management program involving the use of mortgage forward delivery contracts designated as fair value hedging instruments to hedge 100% of its agency-eligible conforming loans and most of its non-conforming loans held for sale. At the inception of the hedge, the Company formally documents the relationship between the forward delivery contracts and the mortgage inventory as well as its objective and strategy for undertaking the hedge transactions. For conventional conforming fixed rate loans, the notional amount of the forward delivery contracts, along with the underlying rate and terms of the contracts, are equivalent to the unpaid principal amount of the mortgage inventory being hedged; hence, the forward delivery contracts effectively fix the forward sales price and thereby substantially eliminate interest rate and price risk to the Company. The Company classifies and accounts for these forward delivery contracts as fair value hedges. The derivatives are carried at fair value with the changes in fair value recorded to current earnings. When the hedges are deemed highly effective, the book value of the hedged loans held for sale is adjusted for its change in fair value during the hedge period. Forward Purchase Contracts Used to Hedge Mortgage Servicing Rights. From time to time, the Company hedges its exposure to impairment of the mortgage servicing rights by the use of mortgage forward purchase contracts. These derivatives are classified and accounted for as fair value hedges. The mortgage forward purchase contracts are carried at fair value with the changes in their fair value recorded to current earnings. When the hedges are deemed to be highly effective, the book value of the hedged mortgage servicing rights is adjusted for its change in fair value attributable to the hedged risk during the hedge period. The Company assesses the effectiveness of the hedge by using statistical analysis to measure the correlation of the changes in the value of the forward purchase contract to the changes in the value of the mortgage servicing rights being hedged during the hedge period. During 2003, the Company did not hedge its exposure to impairment of the mortgage servicing rights by the use of mortgage forward purchase contracts. Interest Rate Swap Agreements - All swap agreements are designated as cash flow hedges against the benchmark interest rate risk associated with the Company's borrowings. Although the terms and characteristics of the Company's swap agreements and hedged borrowings are nearly identical, due to the explicit requirements of Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities," the Company does not account for these hedges under a method defined in SFAS No. 133 as the "shortcut" method, but rather the Company calculates the effectiveness of these hedges on an ongoing basis, and to date, has calculated effectiveness of approximately 100%. All changes in the unrealized gains and losses on swap agreements have been recorded in "Accumulated other comprehensive loss" and are reclassified to earnings as interest expense is recognized on the Company's hedged borrowings. If it becomes probable that the forecasted transaction, which in this case refers to interest payments to be made under the Company's short-term borrowing agreements, will not occur by the end of the originally specified time period, as documented at the inception of the hedging relationship, or F-9

within an additional two-month time period thereafter, then the related gain or loss in "Accumulated other comprehensive income" would be reclassified to income. Termination of Hedging Relationships. The Company employs a number of risk management monitoring procedures to ensure that the designated hedging relationships are demonstrating, and are expected to continue to demonstrate, a high level of effectiveness. Hedge accounting is discontinued on a prospective basis if it is determined that the hedging relationship is no longer highly effective or expected to be highly effective in offsetting changes in fair value of the hedged item. Additionally, the Company may elect to de-designate a hedge relationship during an interim period and re-designate upon the rebalancing of a hedge profile and the corresponding hedge relationship. When hedge accounting is discontinued, the Company continues to carry the derivative instruments at fair value with changes in their value recorded in earnings. Gain on Sale of Loans - The Company recognizes gain on sale of loans for the difference between the sales price and the adjusted book value of the loans at the time of sale. The adjusted book value of the loans includes the original principal amount plus adjustments related to previously recognized income plus deferrals of fees and points received and direct loan origination costs. Loan Origination Fees and Direct Origination Costs - The Company records loan fees, discount points and certain direct origination costs as an adjustment of the cost of the loan or security and such amounts are included in revenues when the loan or security is sold. When loans are securitized and held, net deferred origination costs are amortized over the life of the security using the level-yield method and such amounts are included in interest income. Gain on sales of mortgage loans and salaries, compensation and benefits have been reduced by $87.1 million, $57.5 million and $44.2 million due to direct loan origination costs, including commission costs, incurred for the years ended December 31, 2003, 2002 and 2001, respectively. Interest Recognition - The Company accrues interest income as it is earned. Loans are placed on a nonaccrual status when any portion of the principal or interest is 90 days past due or earlier when concern exists as to the ultimate collectibility of principal or interest. Loans return to accrual status when principal and interest become current and are anticipated to be fully collectible. Interest expense is recorded on outstanding lines of credit at a rate based on a spread to the LIBOR. Servicing Fees - The Company recognizes servicing fees when the fees are collected. Marketing and Promotion - The Company charges the costs of marketing, promotion and advertising to expense in the period incurred. Income Taxes - The Company accounts for income taxes in conformity with SFAS No. 109, "Accounting for Income Taxes," which requires an asset and liability approach for accounting and reporting of income taxes. Deferred tax assets and liabilities are recognized for the future tax consequences ("temporary differences") attributable to the differences between the carrying amounts of assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which temporary differences are expected to be recovered or settled. A valuation allowance is provided for deferred tax assets where realization is not considered "more likely than not." The Company recognizes the effect of changes in tax laws or rates on deferred tax assets and liabilities in the period that includes the enactment date. Stock Option Plans - In 1999, the Company established the 1999 Omnibus Stock Incentive Plan, as amended (the "Plan"). The Company has elected to account for its stock option plan using Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees," and to provide pro forma net income and pro forma earnings per share disclosures for employee stock option grants as if the fair-value based method, as required by SFAS No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure - an amendment of FASB Statement No. 123," had been applied. Had compensation cost been determined based on the fair value at the grant dates for awards under the Plan, the Company's net income before cumulative effect of change in accounting principle would have been $73.1 million, $38.9 million and $24.1 million for the years ended December 31, 2003, 2002 and 2001, respectively. Basic earnings per share would have been $4.12, $2.68 and $2.32 for 2003, 2002 and 2001, respectively. Diluted earnings per share would have been $4.03, $2.61 and $2.21 for 2003, 2002 and 2001, respectively. F-10

<TABLE> <CAPTION> Year Ended December 31, ------------------------------------------------------------ (In thousands, except per share data) 2003 2002 2001 ------------ ------------ ------------ <S> <C> <C> <C> Net income, as reported $ 73,794 $ 39,485 $ 25,448 Less: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects (724) (615) (1,351) ------------ ------------ ------------ Pro forma net income $ 73,070 $ 38,870 $ 24,097 ============ ============ ============ Earnings per share: Basic - as reported $ 4.16 $ 2.72 $ 2.45 Basic - pro forma $ 4.12 $ 2.68 $ 2.32 Diluted - as reported $ 4.07 $ 2.65 $ 2.34 Diluted - pro forma $ 4.03 $ 2.61 $ 2.21 </TABLE> Earnings Per Share - Basic earnings per share excludes dilution and is computed by dividing net income available to common stockholders by the weighted-average number of shares of common stock outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the Company. Cash Flows - Cash and cash equivalents are demand deposits and short-term investments with a maturity of 90 days or less. Recently Issued Accounting Standards - In April 2003, the Financial Accounting Standards Board ("the FASB") issued SFAS No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities" ("SFAS No. 149"). SFAS No. 149 amends and clarifies accounting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities under SFAS No. 133. SFAS No. 149 is effective for contracts entered into or modified after June 30, 2003, and for hedging relationships designated after June 30, 2003. The implementation of SFAS No. 149 did not have a material impact on the Company's consolidated financial statements. In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity" ("SFAS No. 150"). SFAS No. 150 establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. Most of the guidance in SFAS No. 150 is effective for all financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. The implementation of SFAS No. 150 did not have a material impact on the Company's consolidated financial statements. In November 2002, the FASB issued FASB Interpretation ("FIN") No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others," ("FIN No. 45"), which expands on the accounting guidance of SFAS No. 5, "Accounting for Contingencies," SFAS No. 57, "Related Party Disclosures," and SFAS No. 107, "Disclosures about Fair Value of Financial Instruments." FIN No. 45 elaborates on the disclosures to be made by a guarantor about its obligations under certain guarantees issued. FIN No. 45 also clarifies that a guarantor is required to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. The implementation of FIN No. 45 did not have a material impact to the Company's consolidated financial statements. In January 2003, The FASB issued FIN No. 46, "Consolidation of Variable Interest Entities, an Interpretation of Accounting Research Bulletin ("ARB") No. 51, Consolidated Financial Statements" ("FIN No. 46"), which was revised in December 2003. This interpretation addresses consolidation by business enterprises of variable interest entities ("VIEs") when specific characteristics are met. FIN No. 46 clarifies the application of ARB No. 51 to certain entities with equity investors who do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its F-11

activities without additional subordinated financial support from other parties. The provisions of FIN No. 46 were effective February 1, 2003 for new and modified VIEs and July 1, 2003 for other entities. The implementation of FIN No. 46 did not have a material impact to the Company's consolidated financial statements. In November 2003, the Emerging Issues Task Force ("EITF") reached a consensus on EITF Issue No. 03-1, "The Meaning of Other-Than-Temporary Impairment and its Application to Certain Investments" that certain quantitative and qualitative disclosures are required for equity and fixed maturity securities that are impaired at the balance sheet date but for which an other-than-temporary impairment has not been recognized. The guidance requires companies to disclose the aggregate amount of unrealized losses and the related fair value of investments with unrealized losses for securities that have been in an unrealized loss position for less than 12 months and separately for those that have been in an unrealized loss position for over 12 months, by investment category. The Company has adopted the disclosure requirements in Note 3 to the Consolidated Financial Statements. On March 9, 2004, the SEC issued Staff Accounting Bulletin No. 105 ("SAB No. 105"), which provides guidance regarding loan commitments that are accounted for as derivative instruments under SFAS No. 133 (as amended), Accounting for Derivative Instruments and Hedging Activities. In SAB No. 105, the SEC stated that the value of expected future cash flows related to servicing rights should be excluded when determining the fair value of derivative interest rate lock commitments. This guidance must be applied to rate locks initiated after March 31, 2004. Under the new policy, the value of the expected future cash flow related to servicing rights is not recognized until the underlying loans are sold. The impact that this new policy will have on the Company's results of operations in the second quarter of 2004 will be influenced by that quarter's amount of rate lock volume associated with loans expected to be sold and by the timing of when loan sales are executed. As rate lock volume is highly sensitive to changes in interest rates and the timing of loan sales may be affected by market conditions, the Company cannot provide a reliable estimate of the impact this change will have to its results of operations in the second quarter of 2004. NOTE 2 - ACCOUNTS RECEIVABLE AND SERVICING ADVANCES The following table presents the Company's accounts receivable and servicing advances as of December 31, 2003 and 2002: <TABLE> December 31, -------------------------------------- (In thousands) 2003 2002 -------------------------------------- <S> <C> <C> Loan sales receivables $ 38,419 $ 21,985 Mortgage payments receivable 18,041 12,741 Tax and insurance advances 7,373 9,213 Accrued interest 8,333 1,141 Other 12,145 6,690 --------------- --------------- Accounts receivable and servicing advances $ 84,311 $ 51,770 =============== =============== </TABLE> NOTE 3 - MORTGAGE-BACKED SECURITIES The following table presents the Company's mortgage-backed securities as of December 31, 2003: <TABLE> <CAPTION> Trading Securities (In thousands) Securities Available for Sale Total ------------------ ------------------- --------------- <S> <C> <C> <C> Principal amount $ 473,424 $ 1,259,700 $ 1,733,124 Unamortized premium 3,117 22,823 25,940 --------------- ---------------- --------------- Adjusted cost 476,541 1,282,523 1,759,064 Gross unrealized gains 3,382 1,969 5,351 Gross unrealized losses (110) (677) (787) --------------- ---------------- --------------- Fair value $ 479,813 $ 1,283,815 $ 1,763,628 =============== ================ =============== </TABLE> F-12

During 2003, the Company sold $529.3 million of mortgage-backed securities and realized $2.4 million in gains and $18.0 thousand in losses. The Company's mortgage-backed securities with gross unrealized losses at December 31, 2003 have been in an unrealized loss position for less than one month. The Company has credit exposure on loans it has securitized. The following table summarizes the loan delinquency information as of December 31, 2003: (in thousands) <TABLE> <CAPTION> Percent of Total Delinquency Status Loan Count Loan Balance Securitizations Percent of Total Assets --------------------------------- ----------------------------------------------------------------------------------------- <C> <C> <C> <C> <C> 60 to 89 days 1 $ 692 0.13% 0.02% -------------- ------------------- ------------------------- ------------------------- 1 $ 692 0.13% 0.02% ============== =================== ========================= ========================= </TABLE> As of December 31, 2003 the Company had a payable for securities purchased of $259.7 million of mortgage-backed securities. NOTE 4 - MORTGAGE LOANS HELD FOR SALE, NET The following table presents the Company's mortgage loans held for sale, net, as of December 31, 2003 and 2002: <TABLE> <CAPTION> December 31, --------------------------------------- (In thousands) 2003 2002 --------------- --------------- <S> <C> <C> Mortgage loans held for sale $ 1,203,803 $ 819,690 Deferred origination costs, net 22,324 14,157 Forward delivery contracts (2,300) (1,866) --------------- --------------- Mortgage loans held for sale, net $ 1,223,827 $ 831,981 =============== =============== </TABLE> NOTE 5 - DERIVATIVE ASSETS AND LIABILITIES The following table presents the Company's derivative assets and liabilities as of December 31, 2003 and 2002: <TABLE> <CAPTION> December 31, -------------------------------------- (In thousands) 2003 2002 --------------- --------------- <S> <C> <C> Derivative Assets: Interest rate lock commitments $ 20,837 $ 29,346 Options on treasury future contracts -- 725 --------------- --------------- Derivative assets $ 20,837 $ 30,071 =============== =============== Derivative Liabilities: Forward delivery contracts - loan commitments $ 4,358 $ 7,204 Forward delivery contracts - loans held for sale(1) 2,300 1,866 Interest rate swaps 6,036 -- --------------- --------------- Derivative liabilities $ 12,694 $ 9,070 =============== =============== </TABLE> (1) This amount is included in mortgage loans held for sale (see Note 4). At December 31, 2003, the notional amount of forward delivery contracts and interest rate swaps amounted to approximately $1.6 billion and $755.0 million, respectively. The forward delivery contracts have a high correlation to the price movement of the loans being hedged. The ineffectiveness in hedging loans held for sale recorded on the balance sheet was a $16 thousand loss as of December 31, 2003. F-13

NOTE 6 - MORTGAGE SERVICING RIGHTS, NET The following table presents the activity in the Company's mortgage servicing rights, net, for the years ended December 31, 2003 and 2002: <TABLE> <CAPTION> Year Ended December 31, -------------------------------------- (In thousands) 2003 2002 --------------- --------------- <S> <C> <C> Mortgage Servicing Rights: Balance at beginning of period $ 119,225 $ 46 Acquisition of Columbia -- 102,000 Additions 54,251 31,118 Amortization (51,824) (26,399) Change in fair value attributable to hedged risk during the hedge period -- 12,460 --------------- --------------- Balance at end of period $ 121,652 $ 119,225 --------------- --------------- Impairment Allowance: Balance at beginning of period $ (10,202) $ -- Impairment recovery (provision) 6,334 (10,202) --------------- --------------- Balance at end of period $ (3,868) $ (10,202) --------------- --------------- Mortgage servicing rights, net $ 117,784 $ 109,023 =============== =============== </TABLE> Aggregate Amortization Expense ------------------------------ Year ended December 31, 2003 $51,824 Estimated Amortization Expense ------------------------------ Year ended December 31, 2004 $22,821 Year ended December 31, 2005 18,034 Year ended December 31, 2006 14,196 Year ended December 31, 2007 11,366 Year ended December 31, 2008 9,248 Thereafter 45,987 On a quarterly basis, the Company reviews MSRs for impairment based on risk strata. The MSRs are stratified based on the predominant risk characteristics of the underlying loans. The Company's predominant risk characteristic is interest rate. A valuation allowance is recognized for MSRs that have an amortized balance in excess of the estimated fair value for the individual risk stratification. The estimated fair value of MSRs is determined by obtaining a market valuation from an independent MSR broker. To determine the market value of MSRs, the MSR broker uses a valuation model which incorporates assumptions relating to the estimate of the cost of servicing the loan, a discount rate, a float value, an inflation rate, ancillary income per loan, prepayment speeds and default rates that market participants use for similar MSRs. Market assumptions are held constant over the life of the portfolio. The significant assumptions used in estimating the fair value of MSRs at December 31, 2003 and December 31, 2002 were as follows: <TABLE> <CAPTION> December 31, 2003 December 31, 2002 ----------------- ----------------- <S> <C> <C> Weighted average prepayment speed (PSA) 397 620 Weighted average discount rate 9.82% 10.13% Weighted average default rate 4.02% 9.00% </TABLE> F-14

The table below illustrates hypothetical fair values of the Company's MSRs at December 31, 2003 caused by assumed immediate adverse changes to the key assumptions used by the Company to determine fair value (dollars in thousands): Fair value of MSRs at December 31, 2003 $ 117,784 <TABLE> <CAPTION> Fair Value Change in Fair Value ---------------- -------------------- <S> <C> <C> Prepayment speed: Impact of adverse 10% change $114,040 $(3,744) Impact of adverse 20% change 110,642 (7,142) Discount rate: Impact of adverse 10% change 116,016 (1,768) Impact of adverse 20% change 114,303 (3,481) Default rate: Impact of adverse 10% change 117,766 (18) Impact of adverse 20% change 117,748 (36) </TABLE> These sensitivities are hypothetical, are presented for illustrative purposes only, and should be used with caution. NOTE 7 - PREMISES AND EQUIPMENT, NET The following table presents the Company's premises and equipment, net, as of December 31, 2003 and 2002: <TABLE> <CAPTION> December 31, -------------------------------------- (In thousands) 2003 2002 -------------------------------------- <S> <C> <C> Buildings $ 26,725 $ 1,850 Office equipment 20,613 12,818 Furniture and fixtures 7,323 5,630 Leasehold improvements 1,631 1,253 --------------- --------------- Gross premises and equipment 56,292 21,551 --------------- --------------- Less accumulated depreciation and amortization (14,554) (8,550) --------------- --------------- Premises and equipment, net $ 41,738 $ 13,001 =============== =============== </TABLE> On November 25, 2003, the Company acquired an office building located in Melville, New York, which consists of approximately 177,000 square feet. The purchase price of this office building was $24.9 million. Depreciation and amortization expense for the years ended December 31, 2003, 2002 and 2001 was $6.0 million, $3.3 million and $1.7 million, respectively. F-15

NOTE 8 - GOODWILL The following table presents the activity in the Company's goodwill for the year ended December 31, 2003: <TABLE> <CAPTION> Loan Mortgage-Backed Origination Securities (In thousands) Segment Holdings Segment Total --------------- ---------------- --------------- <S> <C> <C> <C> Balance at December 31, 2002 $ 50,932 $ -- $ 50,932 Acquisition of Apex Mortgage Capital, Inc. -- 24,840 24,840 Earnouts from previous acquisitions 7,673 -- 7,673 --------------- ---------------- --------------- Balance at December 31, 2003 $ 58,605 $ 24,840 $ 83,445 =============== =============== =============== </TABLE> NOTE 9 - WAREHOUSE LINES OF CREDIT As of December 31, 2003, the Company has a committed bank syndicated facility led by Residential Funding Corporation ("RFC") and a pre-purchase facility with UBS Real Estate Securities Inc. (formerly Paine Webber Real Estate Securities Inc.) ("UBS"). The Company also has committed facilities with CDC IXIS Capital Markets North America Inc. ("CDC"), Morgan Stanley Bank ("Morgan Stanley") and Credit Lyonnais. The RFC facility is for $450 million, the UBS facility is for $1.2 billion, the CDC facility is for $450 million, the Morgan Stanley facility is for $350 million and the Credit Lyonnais facility is for $200 million. The interest rate on outstanding balances fluctuates daily based on a spread to the LIBOR and interest is paid monthly. On December 31, 2002, a committed facility between the Company and RFC was not renewed in connection with the Company's borrowings from RFC being consolidated into one facility. RFC extended the line for an additional 60 days to allow the loans remaining to settle. The lines of credit are secured by mortgage loans and other assets of the Company. The lines contain various covenants pertaining to maintenance of net worth and working capital. At December 31, 2003, the Company was in compliance with the loan covenants. Included within the RFC line of credit, the Company has a working capital sub-limit that allows for borrowings up to $35 million at a rate based on a spread to the LIBOR that may be adjusted for earnings on compensating balances on deposit at creditors' banks. As of December 31, 2003, borrowings under the working capital line of credit were $29 million. The following table presents the Company's warehouse lines of credit as of December 31, 2003 and 2002: <TABLE> <CAPTION> December 31, 2003 December 31, 2002 ------------------------------ ------------------------------ Weighted Weighted Outstanding Average Outstanding Average (Dollars in thousands) Balance Rate Balance Rate ------------------------------ ------------------------------ <S> <C> <C> <C> <C> CDC $ 406,444 1.98% $ 244,295 2.35% RFC 293,344 2.06 287,077 3.21 Credit Lyonnais 200,702 1.88 -- -- UBS 128,345 3.21 142,262 3.06 Morgan Stanley 92,925 1.92 54,832 2.18 -------------- -------------- Warehouse lines of credit $ 1,121,760 2.12% $ 728,466 2.81% ============== ============== </TABLE> F-16

NOTE 10 - REVERSE REPURCHASE AGREEMENTS The Company has arrangements to enter into reverse repurchase agreements, a form of collateralized short-term borrowing, with 14 different financial institutions and on December 31, 2003 had borrowed funds from five of these firms. Because the Company borrows money under these agreements based on the fair value of its mortgage-backed securities, and because changes in interest rates can negatively impact the valuation of mortgage-backed securities, the Company's borrowing ability under these agreements could be limited and lenders could initiate margin calls in the event interest rates change or the value of the Company's mortgage-backed securities declines for other reasons. As of December 31, 2003, the Company had $1.3 billion of reverse repurchase agreements outstanding with a weighted-average borrowing rate of 1.26% and a weighted-average remaining maturity of 6.9 months. At December 31, 2003, the reverse repurchase agreements had the following remaining maturities: December 31, 2003 ------------- (In thousands) Within 30 days $ 184,302 31 to 89 days - 90 to 365 days 1,160,025 ------------- Reverse repurchase agreements $ 1,344,327 ============= NOTE 11 - NOTES PAYABLE Notes payable primarily consist of amounts borrowed under a term loan facility with a bank syndicate led by RFC. Under the terms of this facility, the Company may borrow the lesser of 65% of the value of its MSRs or $100 million. As of December 31, 2003, borrowings under the term loan were $71.5 million. This term loan expires on May 28, 2004. Interest is based on a spread to the LIBOR and may be adjusted for earnings on compensating balances. At December 31, 2003, the interest rate was 3.8%. Included in notes payable are a mortgage note of $26.5 million on an office building located in Melville, New York which was purchased during 2003 at a rate of 5.8%, a mortgage note of $1.1 million on an office building located in Mount Prospect, Illinois at a rate of 7.5% and the discounted value of note obligations incurred for acquiring Marina. The Company is obligated to pay Marina's prior stockholders $2.5 million over a five-year period expiring in 2004. The payments for other notes have been discounted at an imputed interest rate of 10%. F-17

The following table presents the Company's notes payable as of December 31, 2003 and 2002: <TABLE> <CAPTION> December 31, ----------------------------------------------- (In thousands) 2003 2002 ---------------------- -------------------- <S> <C> <C> Term loan $ 71,500 $ 66,000 Notes - office buildings 27,594 1,165 Notes to former Marina shareholders 561 1,096 ---------------------- -------------------- Notes payable $ 99,655 $ 68,261 ====================== ==================== </TABLE> Maturities of notes payable are as follows: (In thousands) 2004 $ 73,439 2005 302 2006 320 2007 340 2008 361 Thereafter 24,893 ---------------------- Total $ 99,655 ====================== NOTE 12 - OTHER REVENUES AND EXPENSES The following table summarizes the significant components of the Company's other revenues and expenses for the years ended December 31, 2003, 2002 and 2001: <TABLE> <CAPTION> Year Ended December 31, ------------------------------------------------------ (In thousands) 2003 2002 2001 -------------- --------------- -------------- <S> <C> <C> <C> Other revenues: Title services revenue $ 2,158 $ 1,936 $ -- Principal fulfillment fees 1,912 -- -- Volume incentives 1,438 801 336 Reinsurance premiums 808 564 -- Other 913 846 65 -------------- -------------- -------------- Other revenues $ 7,229 $ 4,147 $ 401 ============== ============== ============== Other expenses: Indemnification and foreclosure costs $ 3,733 $ 2,153 $ -- Litigation expense 3,641 350 -- Insurance 1,936 1,377 686 Outside services 1,081 604 645 Storage and moving 1,172 582 262 Licenses and permits 2,009 579 191 Other 7,358 3,932 2,404 -------------- -------------- -------------- Other expenses $ 20,930 $ 9,577 $ 4,188 ============== ============== ============== </TABLE> NOTE 13 - INCOME TAXES AHM Investment, with the filing of its initial federal income tax return, will elect to be treated as a REIT for federal income tax purposes. In brief, if AHM Investment meets certain detailed conditions imposed by the REIT provisions of the Internal Revenue Code of 1986, as amended (the "Code"), including a requirement that it invest primarily in qualifying REIT assets (which generally F-18

include real estate and mortgage loans) and a requirement that it satisfy certain income tests, it will not be taxed at the corporate level on the taxable income that it currently distributes to its stockholders. Therefore, to this extent, AHM Investment's stockholders will avoid double taxation, at the corporate level and then again at the stockholder level when the income is distributed, that they would otherwise experience if AHM Investment failed to qualify as a REIT. If AHM Investment does not qualify as a REIT in any given year, it would be subject to federal income tax as a corporation for the year of the disqualification and for each of the following four years. This disqualification would result in federal income tax, which would reduce the amount of the after-tax cash available for distribution to its stockholders. AHM Investment believes that it has satisfied the requirements for qualification as a REIT since the year ended 2003. AHM Investment intends at all times to continue to comply with the requirements for qualification as a REIT under the Code. In addition, if AHM Investment were classified as a taxable mortgage pool ("TMP"), AHM Investment's status as a REIT would not be impaired, but a portion of the taxable income generated by AHM Investment's mezzanine debt and other assets constituting a TMP may be characterized as excess inclusion income allocated to AHM Investment's stockholders. On August 14, 2003, AHM Investment formed American Home Mortgage Acceptance, Inc. ("AHM Acceptance"). AHM Acceptance is a qualified REIT subsidiary and, as such, is disregarded for federal income tax purposes. As a disregarded entity, the taxable income of AHM Acceptance is deemed to be income of AHM Investment. A reconciliation of the statutory income tax provision to the effective income tax provision is as follows: <TABLE> <CAPTION> Year Ended December 31, ------------------------------------------------------------------------------------------- 2003 2002 2001 ------------------------- ------------------------- ------------------------- (Dollars in thousands) <S> <C> <C> <C> <C> <C> <C> Tax provision at statutory rate $ 43,044 35.0% $ 23,959 35.0% $ 14,205 35.0% Non-taxable REIT income (1,540) (1.2) -- -- -- -- State and local taxes, net of federal income tax benefit 6,428 5.2 4,225 6.2 2,015 5.0 Minority income adjustment (338) (0.3) (312) (0.5) (390) (1.0) Goodwill -- -- -- -- 289 0.7 Other 629 0.5 203 0.3 134 0.3 ----------- ------- ----------- ------- ----------- ------- Income taxes $ 48,223 39.2% $ 28,075 41.0% $ 16,253 40.0% =========== ======= =========== ======= =========== ======= </TABLE> The income tax provision for the years ended December 31, 2003, 2002 and 2001 is comprised of the following components: <TABLE> <CAPTION> Year Ended December 31, ---------------------------------------------------------------------- 2003 2002 2001 ---------------------------------------------------------------------- (In thousands) <S> <C> <C> <C> Current tax provision: Federal $ 24,570 $ 4,785 $ 12,676 State 6,529 1,446 3,192 --------------------- ---------------------- --------------------- 31,099 6,231 15,868 --------------------- ---------------------- --------------------- Deferred tax provision: Federal 14,079 17,307 477 State 3,045 4,537 (92) --------------------- ---------------------- --------------------- 17,124 21,844 385 --------------------- ---------------------- --------------------- Income taxes $ 48,223 $ 28,075 $ 16,253 ===================== ====================== ===================== </TABLE> F-19

The major sources of temporary differences and their deferred tax effect at December 31 are as follows: <TABLE> <CAPTION> December 31, ------------------------------------------- 2003 2002 -------------------- -------------------- (In thousands) <S> <C> <C> Deferred tax liabilities: Capitalized cost of mortgage servicing rights $ 50,083 $ 45,916 Loan origination costs 11,926 7,522 Depreciation 576 609 Mark-to-market adjustments 11,041 12,057 -------------------- -------------------- Deferred tax liabilities 73,626 66,104 -------------------- -------------------- Deferred tax assets: Tax loss carryforwards 10,441 21,504 Allowance for bad debts and foreclosure reserve 3,133 3,152 Deferred state income taxes 2,855 1,789 Other 691 277 -------------------- -------------------- Deferred tax assets 17,120 26,722 -------------------- -------------------- Net deferred tax liabilities $ 56,506 $ 39,382 ==================== ==================== </TABLE> As discussed in Note 22, effective June 13, 2002, AHM Holdings acquired all of the outstanding stock of Columbia. This was accounted for under the purchase method of accounting for financial statement purposes. For federal income tax purposes, the historical basis of the assets and liabilities were carried over to AHM Holdings. Columbia has approximately $28 million of net operating loss carryforwards which begin to expire in 2008. F-20

NOTE 14 - EARNINGS PER SHARE The following is a reconciliation of the denominators used in the computations of basic and diluted earnings per share for the years ended December 31, 2003, 2002 and 2001: <TABLE> <CAPTION> Year Ended December 31, ----------------------------------------------------------------- (Dollars in thousands, except per share amounts) 2003 2002 2001 --------------------- --------------------- -------------------- <S> <C> <C> <C> Numerator for basic earnings per share - Net income: Net income before cumulative effect of change in accounting principle $ 73,794 $ 39,485 $ 23,306 ===================== ===================== ==================== Net income $ 73,794 $ 39,485 $ 25,448 ===================== ===================== ==================== Denominator: Denominator for basic earnings per share Weighted average number of common shares outstanding during the period 17,727,253 14,508,515 10,373,858 Net effect of dilutive stock options 386,144 382,486 509,545 --------------------- --------------------- -------------------- Denominator for diluted earnings per share 18,113,397 14,891,001 10,883,403 ===================== ===================== ==================== Net income per share: Basic before cumulative effect of change in accounting principle $ 4.16 $ 2.72 $ 2.25 ===================== ===================== ==================== Basic after cumulative effect of change in accounting principle $ 4.16 $ 2.72 $ 2.45 ===================== ===================== ==================== Diluted before cumulative effect of change in accounting principle $ 4.07 $ 2.65 $ 2.14 ===================== ===================== ==================== Diluted after cumulative effect of change in accounting principle $ 4.07 $ 2.65 $ 2.34 ===================== ===================== ==================== </TABLE> NOTE 15 - STOCK OPTION PLAN In 1999, the Company established the Omnibus Stock Incentive Plan, as amended. Pursuant to the Plan, employees, officers and directors are offered the opportunity to acquire the Company's common stock through the grant of options and the award of restricted stock under the Plan. The total number of shares that may be optioned or awarded under the Plan is 3,000,000 shares of common stock. The Plan provides for the granting of options at the fair market value at the date of grant. The options issued primarily vest on the two-year anniversary from the grant date and expire ten years from the grant date. As of December 31, 2003, the Company awarded 163,211 shares of restricted stock. During the years ended December 31, 2003, 2002 and 2001, the Company recognized compensation expense of $537 thousand, $213 thousand and $304 thousand, respectively, relating to shares of restricted stock. At December 31, 2003, 77,751 shares are vested. In general, unvested restricted stock is forfeited upon the recipient's termination of employment. F-21

The following table presents a summary of stock option activity for the years ended December 31, 2003, 2002 and 2001: <TABLE> <CAPTION> 2003 ----------------------------------------------- Weighted Number Average of Exercise Exercise Options Price Price ----------------------------------------------- <S> <C> <C> <C> Options outstanding, beginning of year 1,000,258 $4.75 - $19.61 $ 8.17 Granted 324,376 10.06 - 19.36 14.58 Exercised (331,041) 4.75 - 10.25 5.95 Canceled (34,727) 5.50 - 10.93 6.77 ------------- Options outstanding, end of year 958,866 $4.75 - $19.61 $ 11.11 ============= Options exercisable, end of year 349,559 ============= <CAPTION> 2002 ---------------------------------------------- Weighted Number Average of Exercise Exercise Options Price Price ---------------------------------------------- <S> <C> <C> <C> <C> Options outstanding, beginning of year 968,362 $4.75 - $19.61 $ 6.84 Granted 268,708 9.40 - 14.40 11.71 Exercised (187,058) 4.75 - 6.44 5.93 Canceled (49,754) 5.50 - 13.50 9.72 ------------- Options outstanding, end of year 1,000,258 $4.75 - $19.61 $ 8.17 ============= Options exercisable, end of year 438,297 ============= <CAPTION> 2001 -------------------------------------------- Weighted Number Average of Exercise Exercise Options Price Price -------------------------------------------- <S> <C> <C> <C> <C> Options outstanding, beginning of year 749,871 $4.75 - $6.44 $ 5.87 Granted 476,242 4.75 - 19.61 7.89 Exercised (253,800) 6.00 6.00 Canceled (3,951) 5.13 - 5.50 5.31 ------------ Options outstanding, end of year 968,362 $4.75 - $19.61 $ 6.84 ============ Options exercisable, end of year 353,701 ============ </TABLE> The following table summarizes stock options outstanding as of December 31, 2003: <TABLE> <CAPTION> Options Outstanding Options Exercisable ----------------------------------------------------------------- Weighted Weighted Weighted Average Average Average Range of Number Exercise Remaining Number Exercise Exercise Prices Outstanding Price Life (Years) Outstanding Price ---------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> <C> <C> <C> $4.75 - $5.50 142,981 $ 5.36 6.9 142,981 $ 5.36 6.00 - 6.44 115,712 6.21 6.3 105,712 6.20 7.13 - 10.25 100,611 9.42 8.5 24,813 8.77 10.50 - 10.95 141,833 10.75 8.8 - - 11.19 - 13.00 170,686 12.32 8.2 57,532 12.11 13.14 - 16.05 87,043 14.00 8.9 3,521 14.20 16.15 - 19.61 200,000 16.88 9.3 15,000 16.84 --------------- -------------- 958,866 $ 11.11 8.2 349,559 $ 7.55 =============== ============== </TABLE> The Plan is a compensatory stock option plan. There was no intrinsic value of the options when granted, as the exercise price was equal to the quoted market price at the grant date. No compensation cost has been recognized for the years ended December 31, 2003, 2002 and 2001. F-22

The weighted-average fair value per share of options granted during 2003, 2002 and 2001 was $4.81, $4.08 and $2.53, respectively. The fair value of the options granted is estimated using the Black-Scholes option-pricing model with the following weighted-average assumptions used for the grants: <TABLE> <CAPTION> Year Ended December 31, ------------------------------------------------------------------------- 2003 2002 2001 ---------------------- ---------------------- ----------------------- <S> <C> <C> <C> Dividend yield 3.0 % 3.0 % 1.0 % Expected volatility 51.0 % 54.0 % 85.0 % Risk-free interest rate 5.0 % 5.0 % 5.0 % Expected life 3 years 3 years 2 years </TABLE> NOTE 16 - COMMITMENTS AND CONTINGENCIES Loans Sold to Investors - Generally, the Company is not exposed to significant credit risk on its loans sold to investors. In the normal course of business, the Company is obligated to repurchase loans which are subsequently unable to be sold through normal investor channels. Management believes this is a rare occurrence and that the Company can usually sell the loans directly to a permanent investor. Loan Funding and Delivery Commitments - At December 31, 2003 and 2002, the Company had commitments to fund loans approximating $4.0 billion and $3.7 billion, respectively. At December 31, 2003 and 2002, the Company had commitments to fund loans with agreed upon rates approximating $1.1 billion and $1.6 billion, respectively. The Company hedges the interest rate risk of such commitments primarily with mandatory delivery commitments, which totaled $477.9 million and $1.1 billion at December 31, 2003 and 2002, respectively. The remaining commitments to fund loans with agreed-upon rates are anticipated to be sold through "best-efforts" and investor programs. The Company does not anticipate any material losses from such sales. Net Worth Requirements - The Company's subsidiaries are required to maintain certain specified levels of minimum net worth to maintain their approved status with Fannie Mae, the Federal Home Loan Mortgage Corporation, the U.S. Department of Housing and Urban Development and other investors. At December 31, 2003, the highest minimum net worth requirement applicable to each subsidiary was $1.0 million. Outstanding Litigation - The Company is involved in litigation arising in the normal course of business. Although the amount of any ultimate liability arising from these matters cannot presently be determined, the Company does not anticipate that any such liability will have a material effect on the Company's consolidated financial position or results of operations. Mortgage Reinsurance - The Company's captive reinsurance subsidiary, Melville Reinsurance Corp. ("MRC"), has entered mortgage reinsurance agreements with a primary mortgage insurance company. Under this agreement, MRC absorbs mortgage insurance losses in excess of a specified percentage of loss retained by the primary mortgage insurer in exchange for a portion of the primary mortgage insurer's insurance premium. Approximately $378.9 million of the Company's conventional servicing portfolio is covered by this mortgage reinsurance agreement. Each annual book of business has a maximum life of 10 years and the maximum exposure is the amount of assets held in the trust on behalf of MRC. At December 31, 2003, those assets totaled $125 thousand. No reserve has been recorded and management believes no reserve is required based upon loss experience. The Company's other captive reinsurance subsidiary, CNI Reinsurance, Ltd. ("CNIRE") has entered mortgage reinsurance agreements with three primary mortgage insurance companies. Under these agreements, CNIRE absorbs mortgage insurance losses in excess of a specified percentage of the principal balance of a pool of loans, subject to a cap, in exchange for a portion of the pool's mortgage insurance premium. Approximately $664.4 million of the conventional servicing portfolio is covered by such mortgage reinsurance agreements. Each annual book of business has a maximum life of ten years and the maximum exposure is the amount of assets held in the trust on behalf of CNIRE. At December 31, 2003 those assets totaled $2.1 million. No reserve has been recorded and management believes no reserve is required based upon loss experience. NOTE 17 - OPERATING LEASES Certain facilities and equipment are leased under short-term lease agreements expiring at various dates through December 2010. All such leases are accounted for as operating leases. Total rental expense for premises and equipment, which is F-23

included in occupancy and equipment expense within the consolidated financial statements, amounted to $18.5 million, $10.1 million and $6.2 million for the years ended December 31, 2003, 2002 and 2001, respectively. The Company's obligations under noncancelable operating leases which have an initial term of more than one year as of December 31, 2003 are as follows (in thousands): 2004 $ 13,364 2005 10,278 2006 7,758 2007 5,628 2008 3,531 Thereafter 1,992 -------------- Total $ 42,551 ============== NOTE 18 - MINORITY INTEREST The following table summarizes the activity in the Company's minority interest account relating to various joint ventures for the years ended December 31, 2003, 2002 and 2001: (In thousands) Balance as of December 31, 2000 $ 581 Minority interest in income 693 Distribution to minority partners (697) -------------- Balance as of December 31, 2001 577 -------------- Minority interest in income 645 Distribution to minority partners (698) -------------- Balance as of December 31, 2002 524 -------------- Minority interest in income 665 Distribution to minority partners (680) -------------- Balance as of December 31, 2003 $ 509 ============== NOTE 19 - CONCENTRATIONS OF CREDIT RISK Loan concentrations are considered to exist when there are amounts loaned to a multiple number of borrowers with similar characteristics, which would cause their ability to meet contractual obligations to be similarly impacted by economic or other conditions. In management's opinion, at December 31, 2003 and 2002, there were no significant concentrations of credit risk within loans held for sale. The Company had originations of loans during the year ended December 31, 2003, exceeding 5% of total originations as follows: Illinois 17.5 % California 12.5 Maryland 11.5 Virginia 7.6 New York 6.7 NOTE 20 - FAIR VALUE OF FINANCIAL INSTRUMENTS Fair value estimates are made as of a specific point in time based on estimates using present value or other valuation techniques. These techniques involve uncertainties and are significantly affected by the assumptions used and the judgments made regarding F-24

risk characteristics of various financial instruments, discount rates, estimates of future cash flows, future expected loss experience and other factors. Changes in assumptions could significantly affect these estimates and the resulting fair values. Derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in an immediate sale of the instrument. Also, because of differences in methodologies and assumptions used to estimate fair values, the Company's fair values should not be compared to those of other companies. Fair value estimates are based on existing financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company. The carrying values of the following assets and liabilities all approximate their fair values due to their short-term nature, terms of repayment or interest rate associated with the asset or liability: o Cash and cash equivalents o Accounts receivable and servicing advances o Warehouse lines of credit o Reverse repurchase agreements o Payable for mortgage-backed securities purchased The following describes the methods and assumptions used by the Company in estimating fair values of other financial instruments: a. Mortgage-Backed Securities - Fair value is based on published market valuations or price quotations provided by securities dealers. b. Mortgage Loans Held for Sale, net - Fair value is estimated using the quoted market prices for securities backed by similar types of loans and current investor or dealer commitments to purchase loans. c. Mortgage Servicing Rights, net - The estimated fair value of MSRs is determined by obtaining a market valuation from one of the primary MSR brokers. To determine the market value of MSRs, the MSR broker uses a valuation model which incorporates assumptions relating to the estimate of the cost of servicing per loan, a discount rate, a float value, an inflation rate, ancillary income per loan, prepayment speeds and default rates that market participants use for similar servicing rights. d. Derivative Assets - Derivative assets includes IRLCs. The fair value of IRLCs is determined by an estimate of the ultimate gain on sale of loans, including the value of the MSRs, net of estimated net costs to originate the loan. Fair value also considers the difference between current mortgage rates and the note rate of the IRLC. e. Notes Payable - Fair market value is estimated based on the maturity and interest rate of the related debt instruments. Carrying amount estimates fair market value. f. Drafts Payable - Fair market value is estimated based on the maturity and interest rate of the related debt instruments. Carrying amount estimates fair market value. g. Derivative Liabilities - Derivative liabilities includes forward delivery commitments, interest rate swaps and option contracts to buy securities. The fair value is estimated using current market prices from dealers or brokers. F-25

The following tables set forth information about financial instruments and other selected assets, except for those noted above for which the carrying value approximates fair value. <TABLE> <CAPTION> December 31, 2003 December 31, 2002 ---------------------------------- ---------------------------------- Carrying Estimated Carrying Estimated Amount Fair Value Amount Fair Value ---------------------------------- ---------------------------------- (In thousands) <S> <C> <C> <C> <C> Assets: Cash and cash equivalents $ 53,148 $ 53,148 $ 24,416 $ 24,416 Accounts receivable and servicing advances 84,311 84,311 51,770 51,770 Mortgage-backed securities 1,763,628 1,763,628 - - Mortgage loans held for sale, net 1,223,827 1,225,963 831,981 835,843 Mortgage servicing rights, net 117,784 117,784 109,023 109,023 Derivative assets 20,837 20,837 30,071 30,071 Liabilities: Warehouse lines of credit $ 1,121,760 $ 1,121,760 $ 728,466 $ 728,466 Notes payable 99,655 99,655 68,261 68,261 Drafts payable 25,625 25,625 42,599 42,599 Reverse repurchase agreements 1,344,327 1,344,327 - - Payable for securities purchased 259,701 259,701 - - Derivative liabilities 10,394 10,394 7,204 7,204 </TABLE> F-26

NOTE 21 - CONDENSED FINANCIAL INFORMATION OF AMERICAN HOME MORTGAGE INVESTMENT CORP. The following provides condensed financial information for the financial position, results of operations and cash flows of AHM Investment as of December 31, 2003 and AHM Holdings as of December 31, 2002: Parent Company Only - Condensed Balance Sheets (Dollars in thousands, except per share amounts) <TABLE> <CAPTION> December 31, -------------------------------------- 2003 2002 --------------- --------------- <S> <C> <C> Assets: Cash $ 7,401 $ 1 Accounts receivable 2,400 -- Mortgage-backed securities 1,757,753 -- Goodwill 24,841 -- Investment in subsidiaries 229,879 164,095 Other assets 3,981 -- --------------- --------------- Total assets $ 2,026,255 $ 164,096 =============== =============== Liabilities and Stockholders' Equity: Liabilities: Reverse repurchase agreements $ 1,344,327 $ -- Payable for securities purchased 259,701 -- Derivative liabilities 6,035 -- Accrued expenses and other liabilities 16,147 -- --------------- --------------- Total liabilities 1,626,210 -- --------------- --------------- Stockholders' Equity: Preferred stock, $0.01 par value, 10,000,000 shares authorized, none issued and outstanding -- -- Common stock, $0.01 par value, 100,000,000 shares authorized, 25,270,100 and 16,717,459 shares issued and outstanding in 2003 and 2002, respectively 252 167 Additional paid-in-capital 281,432 95,785 Retained earnings 123,104 68,144 Accumulated other comprehensive loss (4,743) -- --------------- --------------- Total stockholders' equity 400,045 164,096 --------------- --------------- Total liabilities and stockholders' equity $ 2,026,255 $ 164,096 =============== =============== </TABLE> F-27

Condensed Income Statements <TABLE> <CAPTION> Year Ended December 31, ------------------------------------------------------------- 2003 2002 2001 ------------------- ------------------ ------------------ Revenues: (In thousands) <S> <C> <C> <C> Gain on securities $ 5,631 $ -- $ -- Interest income 3,108 -- -- Interest expense (2,302) -- -- ------------------- ------------------ ------------------ Interest income, net 806 -- -- ------------------- ------------------ ------------------ Equity in earnings of subsidiaries 67,512 39,485 25,448 ------------------- ------------------ ------------------ Total revenues 73,949 39,485 25,448 ------------------- ------------------ ------------------ Total expenses 155 -- -- ------------------- ------------------ ------------------ Net income $ 73,794 $ 39,485 $ 25,448 =================== ================== ================== </TABLE> F-28

Condensed Statements of Cash Flows <TABLE> <CAPTION> Year Ended December 31, ------------------------------------------------------------- 2003 2002 2001 --------------------- ----------------- ----------------- (In thousands) <S> <C> <C> <C> Cash flows from operating activities: Net income $ 73,794 $ 39,485 $ 25,448 Increase in: Intercompany receivable (3,785) -- -- Accounts receivable 1,293 -- -- Accrued expenses and other liabilities (2,544) -- -- Derivative liabilities 6,035 -- -- Other (561) -- -- Investment in earnings of subsidiaries (67,512) (39,485) (25,448) --------------------- ----------------- ----------------- Cash provided by operating activities 6,720 -- -- --------------------- ----------------- ----------------- Cash flows from investing activities Increase in mortgage-backed securities (1,240,744) -- -- Acquisition of businesses, net of cash acquired 6,455 -- -- Investment in subsidiaries -- (37,000) -- --------------------- ----------------- ----------------- Cash used in investing activities (1,234,289) (37,000) -- --------------------- ----------------- ----------------- Cash flows from financing activities Increase in reverse repurchase agreements 1,014,677 -- -- Increase in payable for securities purchased 219,451 -- -- Proceeds from issuance of stock -- 37,000 -- Dividends received from subsidiary 842 -- -- --------------------- ----------------- ----------------- Cash provided by financing activities 1,234,970 37,000 -- --------------------- ----------------- ----------------- Net increase in cash 7,401 -- -- Cash, beginning of year -- 1 1 --------------------- ----------------- ----------------- Cash, end of year $ 7,401 $ 1 $ 1 ===================== ================= ================= </TABLE> NOTE 22 - ACQUISITIONS Apex Mortgage Capital, Inc. On December 3, 2003, AHM Holdings completed its merger with Apex, a Maryland corporation that operated and elected to be treated as a REIT. Immediately prior to the merger, under the terms of the reorganization agreement between AHM Holdings and AHM Investment, AHM Holdings reorganized through a reverse triangular merger that caused AHM Investment, a newly formed Maryland corporation that operates and will elect to be treated as a REIT for federal income tax purposes, to become AHM Holdings' parent. The shares issued to former Apex stockholders in the merger were valued at $177.3 million. F-29

The following table summarizes the fair value of the assets acquired and liabilities assumed as of the date of the acquisition. (In thousands) December 3, 2003 ----------------- Cash $ 6,454 Securities - trading 5,182 Securities - available for sale 511,827 Accounts receivable 3,694 Other assets 20 ----------------- Total assets acquired 527,177 ----------------- Reverse repurchase agreements 329,650 Payable for securities purchased 40,250 Other liabilities 4,792 ----------------- Total liabilities assumed 374,692 ----------------- Net assets acquired 152,485 Shares issued 177,325 ----------------- Goodwill $ 24,840 ================= The goodwill which resulted from the acquisition of Apex is not deductible for tax purposes. The following table summarizes the required disclosures of the pro forma combined entity, as if the acquisition occurred on January 1, 2002: <TABLE> <CAPTION> Year Ended December 31, ------------------------------------------ (In thousands, except per share amounts) 2003 2002 ---------------- ---------------- <S> <C> <C> Revenue $ 347,047 $ 291,169 Income before income taxes and minority interest 24,789 120,398 Net (loss) income (24,401) 92,323 Earnings per share - basic $ (0.96) $ 3.82 ================ ================ Earnings per share - diluted $ (0.95) $ 3.76 ================ ================ </TABLE> Columbia National, Incorporated Effective June 13, 2002, the Company acquired 100 percent of the outstanding common shares of Columbia. The results of Columbia's operations have been included in the consolidated financial statements since that date. Prior to the acquisition, Columbia was an independent mortgage lender based in Columbia, Maryland. Columbia, now a wholly owned subsidiary of AHM Holdings, engages in the origination, sale and servicing of residential first mortgage loans. Columbia operated 57 loan origination offices in 17 states and has 361 primarily commission-compensated loan originators. The purchase price was $37 million. F-30

The following table summarizes the fair value of the assets acquired and liabilities assumed as of the date of acquisition. (In thousands) June 13, 2002 ------------- Cash $ 3,548 Accounts receivable 7,770 Mortgage loans held for sale 189,249 Mortgage loans held for investment, net 1,706 Mortgage servicing rights 102,000 Premises and equipment, net 2,628 Other assets 4,122 ------------- Total assets acquired 311,023 ------------- Warehouse lines of credit 193,053 Drafts payable 3,687 Notes payable 75,600 Current and deferred tax liabilities 13,995 Other liabilities 9,698 ------------- Total liabilities assumed 296,033 ------------- Net assets acquired 14,990 Cash paid 37,000 ------------- Goodwill $ 22,010 ============= The goodwill which resulted from the acquisition of Columbia is not deductible for tax purposes. The following table summarizes the required disclosures of the pro forma combined entity, as if the acquisition occurred on January 1, 2001: <TABLE> <CAPTION> Year Ended December 31, ------------------------------------------ (Dollars in thousands, except per share amounts) 2002 2001 ------------------------------------------ <S> <C> <C> Revenue $ 268,929 $ 209,369 Income before income taxes and minority interest 70,439 46,085 Net income before cumulative effect of change in accounting principle 40,675 26,484 Earnings per share - basic $ 2.80 $ 2.55 ================ ================ Earnings per share - diluted $ 2.73 $ 2.43 ================ ================ </TABLE> American Mortgage LLC In June 2003, AHM Corp. purchased the retail, wholesale and internet mortgage lending branches of American Mortgage LLC (the "American Mortgage Branches"). The Company paid $1.6 million in cash and received the current application pipeline of the American Mortgage Branches, including $550 million of locked loan applications. F-31

Principal Residential Mortgage, Inc. In March 2003, AHM Corp. purchased the retail mortgage lending branches of Principal Residential Mortgage, Inc. (the "Principal Branches"). The Company paid $2.4 million in cash for the current application pipeline and the assets of the Principal Branches consisting of 75 branches in 21 states. Valley Bancorp, Inc. In August 2001, AHM Holdings entered into an agreement to acquire Valley Bancorp, Inc. ("Valley Bancorp") and its wholly-owned subsidiary, Valley Bank of Maryland ("Valley Bank"), a federal savings bank located in suburban Baltimore, Maryland, for a combination of cash and stock, subject to certain adjustments. Under the terms of the definitive agreement, the Company will pay 1.275 times Valley Bancorp's book value, or approximately $5.9 million. The acquisition agreement between AHM Holdings and Valley Bancorp has been extended through July 31, 2004. This transaction is subject to regulatory approval and no assurance can be given that such approval will be obtained or that the acquisition agreement with Valley Bancorp will be further extended if necessary. ComNet Mortgage Services In March 2001, the Company acquired the Pennsylvania and Maryland loan production offices of ComNet Mortgage Services (the "ComNet Branches"), the residential mortgage division of Commonwealth Bank, a subsidiary of Commonwealth Bancorp, Inc. ("Commonwealth"), Commonwealth's mortgage application pipeline and certain fixed assets and assumed the real property leases of the ComNet Branches. The ComNet Branches have become part of the American Home branch network and have helped the Company to expand its originations in the mid-Atlantic region through both a retail and wholesale presence. At December 31, 2003, goodwill relating to this transaction was $1.0 million. F-32

NOTE 23 - SEGMENTS AND RELATED INFORMATION The Company has three segments, the Loan Origination Segment, the Loan Servicing Segment and the Mortgage-Backed Securities Holdings Segment. The Loan Origination Segment originates mortgage loans through the Company's retail and internet branches and loans sourced through mortgage brokers (wholesale channel). The Loan Servicing Segment includes investments in mortgage servicing rights as well as servicing operations primarily for other financial institutions. The Loan Servicing Segment was immaterial prior to the acquisition of Columbia in June 2002 and thus the Loan Servicing Segment results are included in the Loan Origination Segment results in prior years. The Mortgage-Backed Securities Holdings Segment uses the Company's equity capital and borrowed funds to invest in mortgage-backed securities, thereby producing net interest income. <TABLE> <CAPTION> Mortgage-Backed Securities Holdings Segment Year Ended December 31, ------------------------------------------------------- 2003 2002 2001 --------------- --------------- --------------- (In thousands) <S> <C> <C> <C> Revenues: Gain on mortgage-backed securities $ 2,740 $ -- $ -- Interest income 3,108 -- -- Interest expense (2,302) -- -- --------------- --------------- --------------- Interest income, net 806 -- -- --------------- --------------- --------------- Total revenues 3,546 -- -- --------------- --------------- --------------- --------------- --------------- --------------- Net income before cumulative effect of change in accounting principle $ 3,546 $ -- $ -- =============== =============== =============== Segment assets $ 1,865,414 $ -- $ -- =============== =============== =============== </TABLE> F-33

<TABLE> <CAPTION> Loan Origination Segment Year Ended December 31, ------------------------------------------------------- 2003 2002 2001 --------------- --------------- --------------- (In thousands) <S> <C> <C> <C> Revenues: Gain on sales of mortgage loans and mortgage-backed securities $ 379,496 $ 216,595 $ 118,554 Interest income 102,921 55,871 45,494 Interest expense (54,869) (29,131) (36,396) --------------- --------------- --------------- Interest income, net 48,052 26,740 9,098 --------------- --------------- --------------- Other 7,229 4,147 401 --------------- --------------- --------------- Total revenues 434,777 247,482 128,053 --------------- --------------- --------------- Expenses: Salaries, commissions and benefits, net 201,454 105,198 55,778 Occupancy and equipment 26,609 15,302 8,250 Marketing and promotion 12,225 7,982 6,313 Data processing and communications 13,102 7,787 4,442 Office supplies and expenses 12,082 5,901 4,359 Professional fees 6,693 5,197 2,454 Travel and entertainment 9,926 4,581 1,682 Other 18,914 8,743 4,188 --------------- --------------- --------------- Total expenses 301,005 160,691 87,466 --------------- --------------- --------------- Net income before income taxes and minority interest in income of consolidated joint ventures 133,772 86,791 40,587 Income taxes 54,100 35,696 16,253 --------------- --------------- --------------- Minority interest in income of consolidated joint ventures 967 893 1,028 --------------- --------------- --------------- Net income before cumulative effect of change in accounting principle $ 78,705 $ 50,202 $ 23,306 =============== =============== =============== Segment assets $ 1,372,976 $ 997,826 $ 501,125 =============== =============== =============== </TABLE> F-34

<TABLE> <CAPTION> Loan Servicing Segment Year Ended December 31, ------------------------------------------------------- 2003 2002 2001 --------------- --------------- --------------- (In thousands) <S> <C> <C> <C> Revenues: Interest expense $ (3,710) $ (3,069) $ -- --------------- --------------- --------------- Loan servicing fees 43,008 25,139 -- Amortization (51,824) (26,399) -- Impairment reserve recovery (provision) 6,334 (10,332) -- --------------- --------------- --------------- Net loan servicing fees (loss) (2,482) (11,592) -- --------------- --------------- --------------- Total revenues (6,192) (14,661) -- --------------- --------------- --------------- Expenses: Salaries and benefits, net 3,485 1,697 -- Occupancy and equipment 406 204 -- Marketing and promotion 14 14 -- Data processing and communications 99 66 -- Office supplies and expenses 1,230 610 -- Professional fees 854 246 -- Travel and entertainment 38 6 -- Other 2,016 834 -- --------------- --------------- --------------- Total expenses 8,142 3,677 -- --------------- --------------- --------------- Net loss before income tax benefit (14,334) (18,338) -- Income tax benefit (5,877) (7,621) -- --------------- --------------- --------------- Net loss before cumulative effect of change in accounting principle $ (8,457) $ (10,717) $ -- =============== =============== =============== Segment assets $ 164,000 $ 121,224 $ -- =============== =============== =============== </TABLE> NOTE 24 - SELECTED QUARTERLY FINANCIAL DATA (Unaudited) Selected quarterly financial data are presented below by quarter for the years ended December 31, 2003 and 2002: <TABLE> <CAPTION> Quarter Ended ------------------------------------------------------------ December 31 September 30, June 30, March 31, 2003 2003 2003 2003 ------------ ------------ ------------ ------------ (In thousands, except per share amounts) <S> <C> <C> <C> <C> Gain on sale of mortgage loans and securities $ 59,166 $ 105,577 $ 129,282 $ 88,211 Total revenues 86,205 121,912 129,460 94,554 Income before income taxes and minority interest 17,152 30,999 46,712 28,121 Net income 11,911 18,694 26,877 16,312 Earnings per share - basic $ 0.60 $ 1.08 $ 1.58 $ 0.97 Earnings per share - diluted $ 0.59 $ 1.06 $ 1.55 $ 0.96 </TABLE> F-35

<TABLE> <CAPTION> Quarter Ended ------------------------------------------------------------ December 31 September 30, June 30, March 31, 2002 2002 2002 2002 ------------ ------------ ------------ ------------ (In thousands, except per share amounts) <S> <C> <C> <C> <C> Gain on sale of mortgage loans $ 79,631 $ 71,204 $ 35,127 $ 30,633 Total revenues 84,699 73,712 40,468 33,942 Income before income taxes and minority interest 26,094 21,581 10,244 10,534 Net income 13,509 12,772 6,501 6,703 Earnings per share - basic $ 0.81 $ 0.78 $ 0.50 $ 0.56 Earnings per share - diluted $ 0.80 $ 0.76 $ 0.49 $ 0.54 </TABLE> NOTE 25 - SUBSEQUENT EVENT In March 2004, the Company closed a $359.3 million public offering of 14,375,000 shares of its common stock priced at $25.00 per share, which included the exercise of the underwriters' option to purchase 1,875,000 additional shares of common stock to cover over-allotments. The proceeds to the Company, including exercise of the over-allotment option, was $340.9 million, after underwriting discounts, commissions and other expenses. F-36

INDEX TO EXHIBITS Exhibit No. Description ------------ -------------------------------------------------------- 2.1 -- Agreement and Plan of Merger, dated December 29, 1999, between the Registrant, Marina Mortgage Company, Inc. ("Marina") and the Stockholders of Marina listed on the signature pages thereto (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K of American Home Mortgage Holdings, Inc. (File No. 000-27081) filed with the SEC on January 12, 2000). 2.2 -- Agreement and Plan of Merger, dated January 17, 2000, by and among the Registrant, American Home Mortgage Sub II, Inc., First Home Mortgage Corp. ("First Home") and the Stockholders of First Home listed on the signature pages thereto (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K of American Home Mortgage Holdings, Inc. (File No. 000-27081) filed with the SEC on February 1, 2000). 2.3 -- Agreement and Plan of Reorganization, dated as of August 24, 2001, between American Home Mortgage Holdings, Inc. and Valley Bancorp, Inc. (incorporated by reference to Appendix A to the Registration Statement on Form S-4 of American Home Mortgage Holdings, Inc. (File No. 333-76384) filed with the SEC on January 7, 2002). 2.4 -- Stock Purchase Agreement, dated June 13, 2002, by and among Columbia National Holdings, Inc., Columbia National, Incorporated and American Home Mortgage Holdings, Inc. (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K of American Home Mortgage Holdings, Inc. (File No. 000-27081) filed with the SEC on June 14, 2002). 2.5 -- Agreement and Plan of Merger, dated as of July 12, 2003, by and among American Home Mortgage Holdings, Inc., the Registrant (formerly named AHM New Holdco, Inc.) and Apex Mortgage Capital, Inc. (incorporated by reference to Annex A to Amendment No. 3 to the Registration Statement on Form S-4 of the Registrant (File No. 333-107545) filed with the SEC on October 24, 2003). 2.6 -- Agreement and Plan of Reorganization, dated as of September 11, 2003, by and among American Home Mortgage Holdings, Inc., the Registrant (formerly named AHM New Holdco, Inc.) and AHM Merger Sub, Inc. (incorporated by reference to Annex B to Amendment No. 3 to the Registration Statement on Form S-4 of the Registrant (File No. 333-107545) filed with the SEC on October 24, 2003). 3.1 -- Articles of Amendment and Restatement of the Registrant. 3.2 -- Amended and Restated Bylaws of the Registrant. 4.1 -- Reference is hereby made to Exhibits 3.1 and 3.2 of this report. 4.2 -- Specimen Certificate for the Common Stock of the Registrant. 10.1.1 -- Employment Agreement, dated as of August 26, 1999, by and between American Home Mortgage Holdings, Inc. and Michael Strauss (incorporated by reference to Exhibit 10.1 to Amendment No. 3 to the Registration Statement on Form S-1 of American Home Mortgage Holdings, Inc. (File No. 333-82409) filed with the SEC on August 31, 1999). 10.1.2 -- Amendment to Employment Agreement, dated as of April 1, 2000, by and between American Home Mortgage Holdings, Inc. and Michael Strauss (incorporated by reference to Exhibit 10.1.2 to Amendment No. 2 to the Registration Statement on Form S-3 on Form S-1 of American Home Mortgage Holdings, Inc. (File No. 333-60050) filed with the SEC on June 7, 2001.

Exhibit No. Description ------------ -------------------------------------------------------- 10.2.1 -- Employment Agreement, dated as of March 9, 1998, by and between American Home Mortgage Corp. and James P. O'Reilly (incorporated by reference to Exhibit 10.5 to the Registration Statement on Form S-1 of American Home Mortgage Holdings, Inc. (File No. 333-82409) filed with the SEC on July 7, 1999). 10.2.2 -- Amendment to Employment Agreement, dated as of February 1, 2001, by and between American Home Mortgage Corp. and James P. O'Reilly (incorporated by reference to Exhibit 10.4.2 to Amendment No. 2 to the Registration Statement on Form S-3 on Form S-1 of American Home Mortgage Holdings, Inc. (File No. 333-60050) filed with the SEC on June 7, 2001). 10.3.1 -- Employment Agreement, dated December 29, 1999, between American Home Mortgage Holdings, Inc., and John A. Johnston (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K (File No. 000-27081) filed with the SEC by American Home Mortgage Holdings, Inc. on January 12, 2000). 10.3.2 -- Non-Competition Agreement, dated December 29, 1999, between American Home Mortgage Holdings, Inc., and John A. Johnston (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K (File No. 000-27081) filed with the SEC by American Home Mortgage Holdings, Inc. on January 12, 2000). 10.4 -- Employment Agreement, dated January 17, 2000, between the Registrant and Jeffrey L. Lake (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K of American Home Mortgage Holdings, Inc. (File No. 000-27081) filed with the SEC on February 1, 2000). 10.5 -- Employment Agreement, dated as of January 11, 2001, by and between American Home Mortgage Holdings, Inc. and Donald Henig (incorporated by reference to Exhibit 10.36 to the Annual Report on Form 10-K of American Home Mortgage Holdings, Inc. (File No. 000-27081) filed with the SEC on April 1, 2002). 10.6 -- Employment Agreement, dated as of January 19, 2001, by and between American Home Mortgage Holdings, Inc. and Dena Kwaschyn (incorporated by reference to Exhibit 10.37 to the Annual Report on Form 10-K of American Home Mortgage Holdings, Inc. (File No. 000-27081) filed with the SEC on April 1, 2002). 10.7 -- Employment Agreement, dated as of March 1, 2003, by and between American Home Mortgage Holdings, Inc. and Stephen Hozie. 10.8 -- Employment Agreement, dated as of August 4, 2003, by and between American Home Mortgage and Kenneth Alverson. 10.9 -- Employment Agreement, dated as of June 19, 2003, by and between American Home Mortgage and Tom McDonagh. 10.10 -- Employment Agreement, dated as of September 1, 2003, by and between American Home Mortgage and Ronald Rosenblatt, Ph.D. 10.11 -- Software Licensing Agreement, dated as of July 7, 1999, by and between American Home Mortgage Holdings, Inc. and James P. O'Reilly (incorporated by reference to Exhibit 10.11 to the Registration Statement on Form S-1 of American Home Mortgage Holdings, Inc. (File No. 333-82409) filed with the SEC on July 7, 1999). 10.12 -- 1999 Omnibus Stock Incentive Plan of American Home Mortgage Holdings, Inc.

Exhibit No. Description ------------ -------------------------------------------------------- 10.13 -- Amended and Restated 1997 Stock Option Plan of Apex Mortgage Capital, Inc. (incorporated by reference to Annex J to Amendment No. 3 to the Registration Statement on Form S-4 of the Registrant (File No. 333-107545) filed with the SEC on October 24, 2003). 10.14.1 -- Mortgage Loan Purchase Agreement, dated February 26, 1999, between Paine Webber Real Estate Securities Inc. and American Home Mortgage Corp. (incorporated by reference to Exhibit 10.34.1 to the Annual Report on Form 10-K of American Home Mortgage Holdings, Inc. (File No. 000-27081) filed with the SEC on April 1, 2002). 10.14.2 -- Mortgage Loan Repurchase Agreement, dated February 26, 1999, between Paine Webber Real Estate Securities Inc. and American Home Mortgage Corp. (incorporated by reference to Exhibit 10.34.2 to the Annual Report on Form 10-K of American Home Mortgage Holdings, Inc. (File No. 000-27081) filed with the SEC on April 1, 2002). 10.14.3 -- Mortgage Loan Custodial Agreement, dated February 26, 1999, between Paine Webber Real Estate Securities Inc., American Home Mortgage Corp. and Bankers Trust Company (incorporated by reference to Exhibit 10.34.3 to the Annual Report on Form 10-K of American Home Mortgage Holdings, Inc. (File No. 000-27081) filed with the SEC on April 1, 2002). 10.15.1 -- Master Repurchase Agreement, dated as of April 17, 2002, by and between CDC Mortgage Capital Inc., as Buyer, and American Home Mortgage Corp., as Seller (incorporated by reference to Exhibit 10.35 to the Annual Report on Form 10-K of American Home Mortgage Holdings, Inc. (File No. 000-27081) filed with the SEC on March 31, 2003). 10.15.2 -- Custodial and Disbursement Agreement, dated as of April 17, 2002, by and among CDC Mortgage Capital Inc., as Buyer, American Home Mortgage Corp., as Seller, Deutsche Bank National Trust Company, as Custodian, and Deutsche Bank National Trust Company, as Disbursement Agent (incorporated by reference to Exhibit 10.36 to the Annual Report on Form 10-K of American Home Mortgage Holdings, Inc. (File No. 000-27081) filed with the SEC on March 31, 2003). 10.15.3 -- Guarantee, dated as of April 15, 2002, made by American Home Mortgage Holdings, Inc. on behalf of American Home Mortgage Corp. in favor of CDC Mortgage Capital Inc. (incorporated by reference to Exhibit 10.37 to the Annual Report on Form 10-K of American Home Mortgage Holdings, Inc. (File No. 000-27081) filed with the SEC on March 31, 2003). 10.16.1 -- Warehousing Credit, Term Loan and Security Agreement, dated as of May 3, 2001, by and among Columbia National, Incorporated, the Lenders party thereto, Residential Funding Corporation, U.S. Bank National Association, Allfirst Bank and U.S. Bank National Association (incorporated by reference to Exhibit 10.38 to the Annual Report on Form 10-K of American Home Mortgage Holdings, Inc. (File No. 000-27081) filed with the SEC on March 31, 2003). 10.16.2 -- Guaranty, dated June 28, 2002, made and given by American Home Mortgage Holdings, Inc. to Residential Funding Corporation, U.S. Bank National Association, Allfirst Bank, Fleet National Bank, National City Bank of Kentucky, Credit Lyonnais New York Branch, Guaranty Bank, F.S.B. and Colonial Bank (incorporated by reference to Exhibit 10.39 to the Annual Report on Form 10-K of American Home Mortgage Holdings, Inc. (File No. 000-27081) filed with the SEC on March 31, 2003).

Exhibit No. Description ------------ -------------------------------------------------------- 10.16.3 -- Tenth Amendment to Warehousing Credit, Term Loan and Security Agreement, dated as of December 31, 2002, by and among between Columbia National, Incorporated, American Home Mortgage Corp., Residential Funding Corporation, U.S. Bank National Association, Allfirst Bank, Fleet National Bank, Credit Lyonnais New York Branch, Guaranty Bank, F.S.B., National City Bank of Kentucky and Colonial Bank (incorporated by reference to Exhibit 10.40 to the Annual Report on Form 10-K of American Home Mortgage Holdings, Inc. (File No. 000-27081) filed with the SEC on March 31, 2003). 10.16.4 -- Eleventh Amendment to Warehousing Credit, Term Loan and Security Agreement, dated as of March 14, 2003, by and among Columbia National, Incorporated, American Home Mortgage Corp., Residential Funding Corporation, U.S. Bank National Association, Allfirst Bank, Fleet National Bank, Credit Lyonnais New York Branch, Guaranty Bank, F.S.B. and Colonial Bank (incorporated by reference to Exhibit 10.41 to the Annual Report on Form 10-K of American Home Mortgage Holdings, Inc. (File No. 000-27081) filed with the SEC on March 31, 2003). 10.17.1 -- Loan Agreement, dated as of August 8, 2003, by and among AHM SPV I, LLC, La Fayette Asset Securitization LLC, Credit Lyonnais New York Branch, and American Home Mortgage Corp. 10.17.2 -- Collateral Agency Agreement, dated as of August 8, 2003, by and among AHM SPV I, LLC, American Home Mortgage Corp., Credit Lyonnais New York Branch, and Deutsche Bank National Trust Company. 10.17.3 -- Originator Performance Guaranty, dated as of August 8, 2003, by American Home Mortgage Holdings, Inc. in favor of AHM SPV I, LLC, together with Assignment of Originator Performance Guaranty, dated as of August 8, 2003, in favor of Credit Lyonnais New York Branch. 10.17.4 -- Servicer Performance Guaranty, dated as of August 8, 2003, by American Home Mortgage Holdings, Inc. in favor of Credit Lyonnais New York Branch. 10.18.1 -- Amended and Restated Master Loan and Security Agreement, dated as of November 26, 2003, by and among American Home Mortgage Corp., American Home Mortgage Acceptance, Inc., the Registrant, American Home Mortgage Holdings, Inc., Columbia National, Incorporated, the Lenders from time to time party thereto, and Morgan Stanley Bank. 10.18.2 -- Fourth Amended and Restated Promissory Note, dated as of November 26, 2003, made by American Home Mortgage Corp., American Home Mortgage Acceptance, Inc., the Registrant, American Home Mortgage Holdings, Inc., and Columbia National, Incorporated, in favor of Morgan Stanley Bank. 10.18.3 -- Amended and Restated Custodial Agreement, dated as of November 26, 2003, by and among American Home Mortgage Corp., American Home Mortgage Acceptance, Inc., the Registrant, American Home Mortgage Holdings, Inc., Columbia National, Incorporated, Morgan Stanley Bank and Deutsche Bank National Trust Company. 10.19 -- Agreement of Lease, dated October 20, 1995, between Reckson Operating Partnership, L.P., as Landlord, Choicecare Long Island, Inc., as Assignor, and American Home Mortgage Corp., as Assignee, as amended on September 30, 1999 (incorporated by reference to Exhibit 10.35 to the Annual Report on Form 10-K of American Home Mortgage Holdings, Inc. (File No. 000-27081) filed with the SEC on March 30, 2000). 10.20 -- Agreement of Lease, dated as of November 24, 2003, between AHM SPV II, LLC, and American Home Mortgage Corp. 10.21 -- Lease Agreement, dated as of November 1, 2003, between Suffolk County Development Agency (Suffolk County, New York) and AHM SPV II, LLC.

Exhibit No. Description ------------ -------------------------------------------------------- 21 -- Subsidiaries of the Registrant. 23 -- Consent of Deloitte & Touche LLP. 31.1 -- Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or 15(d)-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2 -- Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or 15(d)-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1 -- Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.2 -- Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

                                                                     Exhibit 3.1

                      ARTICLES OF AMENDMENT AND RESTATEMENT

                                       OF

                     AMERICAN HOME MORTGAGE INVESTMENT CORP.



      American Home Mortgage Investment Corp., a Maryland corporation (the
"Corporation"), having its principal office in the State of Maryland at c/o The
Corporation Trust Incorporated, 300 East Lombard Street, Baltimore, Maryland
21202, hereby certifies to the State Department of Assessments and Taxation of
Maryland that:

      FIRST: The Corporation desires to, and does hereby, amend and restate its
charter (the "Charter") as currently in effect and as hereinafter amended. The
following provisions are all of the provisions of the Charter currently in
effect and as hereinafter amended:



                                    ARTICLE I

                                  INCORPORATOR

      The undersigned, Douglas M. Fox, whose post office address is c/o Ballard
Spahr Andrews & Ingersoll, LLP, 300 East Lombard Street, Baltimore, Maryland
21202, being at least eighteen (18) years of age, acting as incorporator, does
hereby form a corporation under the general laws of the State of Maryland.



                                   ARTICLE II

                                 CORPORATE NAME

      The name of the corporation (the "Corporation") is:

                     American Home Mortgage Investment Corp.



                                   ARTICLE III

                                    PURPOSES

      The purposes for which the Corporation is formed are to engage in any
lawful act or activity for which corporations may be organized under the general
laws of the State of


Maryland now or hereafter in force. Subject to, and not in limitation of, the authority of the preceding sentence, at and following the Merger Effective Time (as such term is defined in Article V hereof), the Corporation shall engage in business as a real estate investment trust (a "REIT") under the Internal Revenue Code of 1986, as amended, or any successor statute (the "Code"), qualifying as such under Sections 856 through 860 of the Code, unless and until the Board of Directors shall have determined that it is no longer in the best interests of the Corporation to engage in such business. The foregoing enumerated purposes and objects shall be in no way limited or restricted by reference to, or inference from, the terms of any other clause of this or any other Article of the Charter, and each shall be regarded as independent, and they are intended to be and shall be construed as powers as well as purposes and objects of the Corporation and shall be in addition to, and not in limitation of, the general powers of corporations under the general laws of the State of Maryland. ARTICLE IV PRINCIPAL OFFICE IN MARYLAND AND RESIDENT AGENT Section 1. Principal Office. The present address of the principal office of the Corporation in the State of Maryland is: c/o The Corporation Trust Incorporated 300 East Lombard Street Baltimore, Maryland 21202 Section 2. Resident Agent. The name and address of the resident agent of the Corporation in the State of Maryland is: The Corporation Trust Incorporated 300 East Lombard Street Baltimore, Maryland 21202 The resident agent is a corporation organized under the laws of, and located in, the State of Maryland. ARTICLE V CAPITAL STOCK Section 1. Authorized Shares of Capital Stock. (a) Authorized Shares. The total number of shares of capital stock of all classes that the Corporation has authority to issue is one hundred and ten million (110,000,000) shares, consisting of: (i) one hundred million (100,000,000) shares of common stock, par value one cent -2-

($0.01) per share (the "Common Stock"); and (ii) ten million (10,000,000) shares of preferred stock, par value one cent ($0.01) per share (the "Preferred Stock"), which may be issued in one or more series as described in Section 5 of Article V hereof. The Common Stock and each series of the Preferred Stock shall each constitute a separate class of capital stock of the Corporation. The Common Stock and the Preferred Stock are collectively referred to herein as the "Equity Stock." The Board of Directors may from time to time classify and reclassify any unissued shares of Equity Stock in accordance with, or as contemplated by, Section 6 (and also, in the case of the Preferred Stock, Section 5) of Article V hereof. (b) Aggregate Par Value. The aggregate par value of all of the Corporation's authorized Equity Stock having par value is $1,100,000.00. Section 2. Restrictions and Limitations on the Equity Stock of the Corporation; REIT Provisions. Subsequent to the Merger Effective Time and until the Restriction Termination Date (as each such term is defined in Article V hereof), all shares of Equity Stock of the Corporation shall be subject to the following restrictions and limitations: (a) Definitions. For purposes of this Article V and, unless otherwise provided, the other Articles of the Charter, and the interpretation of the stock legend set forth herein, the following terms shall have the following meanings: "Acquire" shall mean the acquisition of Beneficial Ownership of Equity Stock, whether by a Transfer, Non-Transfer Event or by any other means, including, without limitation, acquisition pursuant to the acquisition or exercise of Acquisition Rights or any other option, warrant, pledge or other security interest or similar right to acquire Equity Stock, but shall not include the acquisition of any such rights unless, as a result, the acquiror would be considered a Beneficial Owner, as defined below. "Acquisition" shall have the correlative meaning. "Acquisition Rights" shall mean rights to Acquire Equity Stock pursuant to: (i) the exercise of any option or warrant issued by the Corporation and outstanding at the opening of business on the first business day following the Merger Effective Time (whether exercisable on that day or not); or (ii) any pledge of Equity Stock made pursuant to an agreement executed on or before the opening of business on the first business day following the Merger Effective Time. "Beneficial Ownership" shall mean ownership of Equity Stock by a Person who would be treated as an owner of such Equity Stock either directly or indirectly under Section 542(a)(2) of the Code, taking into account, for this purpose, constructive ownership determined under Section 544 of the Code, as modified by Sections 856(h)(1)(B) and 856(h)(3)(A) of the Code and determined without regard to whether such ownership has the effect of meeting the stock ownership requirement of Section 542(a)(2) of the Code. The terms "Beneficial Owner," "Beneficially Own" and "Beneficially Owned" shall have the correlative meanings. "Charitable Beneficiary" shall mean, with respect to any Share Trust, one or more organizations described in each of Section 170(b)(1)(A) (other than clauses (vii) or (viii) thereof) and Section 170(c)(2) of the Code that are named by the Corporation as the beneficiary or -3-

beneficiaries of such Share Trust, in accordance with the provisions of Section 4(a) of this Article V. "Code" shall mean the Internal Revenue Code of 1986, as amended and in effect from time to time, or any successor statute thereto, as interpreted by the applicable regulations thereunder. Any reference herein to a specific section or sections of the Code shall be deemed to include a reference to any corresponding provision of future law. "Excepted Holder" shall mean a stockholder of the Corporation for whom an Excepted Holder Limit is created by the Board of Directors pursuant to or as contemplated by Section 2(f) of this Article V. "Excepted Holder Limit" shall mean, provided that the affected Excepted Holder agrees to comply with any requirements established by the Board of Directors pursuant to or as contemplated by Section 2(f) of this Article V, as applicable to such Excepted Holder, the ownership limit with respect to the Common Stock and/or Equity Stock of the Corporation established by the Board with respect to such Excepted Holder, pursuant to or as contemplated by Section 2(f) of this Article V. The Excepted Holder Limit, unless and insofar as may otherwise be provided upon the establishment thereof, shall apply to an Excepted Holder in lieu of the Ownership Limit, and the Excepted Holder Limit may be made applicable to either or both of the Common Stock and the Equity Stock. "Market Price" on any date shall mean, with respect to any class or series of outstanding shares of the Corporation's stock, the Closing Price for such shares on such date. The "Closing Price" on any date shall mean the last sale price for such shares, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, for such shares, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or the Nasdaq National Market or, if such shares are not listed or admitted to trading on the New York Stock Exchange or the Nasdaq National Market, as reported on the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which such shares are listed or admitted to trading or, if such shares are not listed or admitted to trading on any national securities exchange, the last quoted price, or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by the National Association of Securities Dealers, Inc., Automated Quotation System, or, if such system is no longer in use, the principal other automated quotation system that may then be in use or, if such shares are not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in such shares selected by the Board of Directors or, in the event that no trading price is available for such shares, the fair market value of the shares, as determined in good faith by the Corporation's Board of Directors. "Merger Effective Time" means the date and time at which the Merger Transaction becomes effective pursuant to Articles of Merger filed and accepted for record by the State Department of Assessments and Taxation of Maryland. -4-

"Merger Transaction" means the merger of Apex Mortgage Capital, Inc., a Maryland corporation ("Apex"), with and into the Corporation. "Non-Transfer Event" shall mean an event other than a purported Transfer that would cause any Person to Beneficially Own Common Stock or Equity Stock in excess of the Ownership Limit (or would cause the Corporation to fail to qualify as a REIT), including, without limitation, a change in the capital structure of the Corporation. "Ownership Limit" shall initially mean (i) with respect to the Common Stock, 6.5% of whichever is the more restrictive of (a) the total number, and (b) the value of the total number, of outstanding shares of Common Stock, and (ii) with respect to the Equity Stock, 6.5% of whichever is the more restrictive of (a) the total number, and (b) the value of the total number, of outstanding shares of Equity Stock. The Board of Directors may impose additional restrictions in the nature of an Ownership Limit as applicable to any separate class or series of Preferred Stock, as provided for under the terms established for such separate class or series. "Permitted Transferee" shall mean any Person designated as a Permitted Transferee in accordance with the provisions of Section 4(e) of this Article V. "Person" shall mean an individual, corporation, partnership, limited liability company or partnership, estate, trust (including a trust qualified under Section 401(a) or 501(c)(17) of the Code), a portion of a trust permanently set aside for or to be used exclusively for the purposes described in Section 642(c) of the Code, association, private foundation within the meaning of Section 509(a) of the Code, joint stock company or other entity and also includes a group as that term is used for purposes of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended, but does not include an underwriter that participates in a public offering of the Corporation's Common Stock and/or other Equity Stock for a period of thirty (30) days following purchase by such underwriter of the Common Stock and/or other Equity Stock. "Purported Beneficial Transferee" shall mean, with respect to any purported Transfer that results in Shares-in-Trust as defined below in Section 4 of this Article V, the purported beneficial transferee for whom the Purported Record Transferee would have Acquired shares of Equity Stock of the Corporation if such Transfer had been valid under Section 2(b) of this Article V. "Purported Record Transferee" shall mean, with respect to any purported Transfer that results in Shares-in-Trust, the Person who would have been the record holder of the shares of Equity Stock of the Corporation if such Transfer had been valid under Section 2(b) of this Article V. "REIT" shall mean a real estate investment trust under Section 856 et seq. of the Code. "Restriction Termination Date" shall mean the first day after the Merger Effective Time on which the Corporation determines pursuant to Section 2(h) of this Article V that it is no longer in the best interests of the Corporation to attempt to, or continue to, qualify as a REIT. -5-

"Share Trust" shall mean any separate trust created pursuant to Section 4(a) of this Article V and administered in accordance with the terms of Section 4 of this Article V for the exclusive benefit of any Charitable Beneficiary. "Shares-in-Trust" shall mean any shares of Equity Stock designated Shares-in-Trust pursuant to Section 4(a) of this Article V. "Share Trustee" shall mean the trustee of the Share Trust, which is selected by the Corporation but not affiliated with the Corporation or the Charitable Beneficiary, and any successor trustee appointed by the Corporation. "Transfer" shall mean any sale, transfer, gift, assignment, devise or other disposition of shares of Equity Stock or the right to vote or receive dividends on shares of Equity Stock (including, without limitation, (i) the granting of any option or entering into any agreement for the sale, transfer or other disposition of shares of Equity Stock or the right to vote or receive dividends on shares of Equity Stock or (ii) the sale, transfer, assignment or other disposition or grant of any Acquisition Rights or other securities or rights convertible into or exchangeable for shares of Equity Stock, or the right to vote or receive dividends on shares of Equity Stock), whether voluntary or involuntary, whether of record or beneficially and whether by operation of law or otherwise. (b) Ownership Limitation and Transfer Restrictions. (i) Except as provided in or by operation of Section 2(f) of this Article V, from and after the Merger Effective Time and prior to the Restriction Termination Date: (w) no Person shall have Beneficial Ownership of Common Stock or Equity Stock in excess of the Ownership Limit; (x) no Excepted Holder shall have Beneficial Ownership of Common Stock or Equity Stock in excess of the Excepted Holder Limit for such Excepted Holder; (y) no Person shall Acquire shares of Equity Stock if, as a result of such action, the shares of Equity Stock would be beneficially owned by fewer than 100 Persons (determined without reference to any rules of attribution under the Code); and (z) no Person shall Acquire shares of Equity Stock or any interest therein if, as a result of such acquisition, the Corporation would be "closely held" within the meaning of Section 856(h) of the Code, or would otherwise fail to qualify as a REIT, as the case may be. (ii) Any Transfer that would result in a violation of the restrictions in Section (b)(i) above, shall be void ab initio as to the purported Transfer of such number of shares of Common Stock or Equity Stock that would cause the violation of the applicable restriction in Section (b)(i) above, and the Purported Record Transferee (and the Purported Beneficial Transferee, if different) shall acquire no rights in such shares of Equity Stock. (c) Automatic Transfer to Share Trust. (i) If, at any time from and after the Merger Effective Time and prior to the Restriction Termination Date, there is a purported Transfer or Non-Transfer Event such that, if effective, would result in any Person having Beneficial Ownership of Common Stock or Equity Stock in excess of the Ownership Limit (or, in the case of an Excepted Holder, ownership in excess of the Excepted Holder Limit as applicable to such Excepted Holder), then, except as -6-

otherwise provided in or by of operation of Section 2(f) of this Article V as to such Person, (x) the Purported Record Transferee (and the Purported Beneficial Transferee, if different) shall acquire no right or interest (or, in the case of a Non-Transfer Event, the person holding record title to the shares of Common Stock or Equity Stock Beneficially Owned by such Beneficial Owner shall cease to own any right or interest) in such number of shares of Common Stock or Equity Stock that would cause such Purported Record Transferee (and the Purported Beneficial Transferee, if different) to Beneficially Own shares of Common Stock or Equity Stock in excess of the Ownership Limit or Excepted Holder Limit, as the case may be (rounded up to the nearest whole share), (y) such number of shares of Common Stock or Equity Stock in excess of the Ownership Limit or Excepted Holder Limit, as the case may be (rounded up to the nearest whole share), shall be designated Shares-in-Trust and, in accordance with the provisions of Section 4(a) of this Article V, transferred automatically and by operation of law to the Share Trust to be held in accordance with Section 4 of this Article V, and (z) such Purported Record Transferee (and the Purported Beneficial Transferee, if different) shall submit such number of shares of Common Stock or Equity Stock to the Share Trust for registration in the name of the Share Trustee. Any Purported Record Transferee (and the Purported Beneficial Transferee, if different) shall acquire no right or interest (or, in the case of a Non-Transfer Event, the person holding title to the shares Beneficially Owned by such Beneficial Owner shall cease to own any right or interest) in such number of shares that would cause such person to own shares in excess of the Ownership Limit or Excepted Holder Limit, as the case may be. Such transfer to a Share Trust and the designation of shares as Shares-in-Trust shall be effective as of the close of business on the business day prior to the date of the Transfer or Non-Transfer Event, as the case may be. (ii) If, at any time from and after the Merger Effective Time and prior to the Restriction Termination Date, there is a purported Transfer or Non-Transfer Event that, if effective, would (i) result in the Equity Stock being Beneficially Owned by fewer than 100 Persons (determined without reference to any rules of attribution under the Code), (ii) result in the Corporation being "closely held" within the meaning of Section 856(h) of the Code, or (iii) cause the Corporation to otherwise fail to qualify as a REIT, as the case may be, then (x) the Purported Record Transferee (and the Purported Beneficial Transferee, if different) shall acquire no right or interest (or, in the case of a Non-Transfer Event, the person holding record title to the shares of Equity Stock with respect to which such Non-Transfer Event occurred, shall cease to own any right or interest) in such number of shares of Equity Stock, the ownership of which by such Purported Record Transfer (and the Purported Beneficial Transferee, if different) would (A) result in the shares of Equity Stock being Beneficially Owned by fewer than 100 Persons (determined without reference to any rules of attribution under the Code), (B) result in the Corporation being "closely held" within the meaning of Section 856(h) of the Code, or (C) otherwise cause the Corporation to fail to qualify as a REIT, as the case may be, then (y) such number of shares of Equity Stock (rounded up to the nearest whole share) shall be designated Shares-in-Trust and, in accordance with the provisions of Section 4(a) of this Article V, transferred automatically and by operation of law to the Share Trust to be held in accordance with Section 4 of this Article V, and (z) the Purported Record Transferee (and the Purported Beneficial Transferee, if different) shall submit such number of shares of Equity Stock to the Share Trust for registration in the name of the Share Trustee. (iii) To the extent that, upon a purported Transfer or Non-Transfer Event, a violation of any restriction set forth in Section 2(b)(i) above would nonetheless be continuing -7-

(for example, where the ownership of Equity Stock by a single Share Trust would violate the restriction that the Equity Stock must be Beneficially Owned by 100 or more Persons), then shares of Equity Stock shall be transferred to that number of Share Trusts, each having a distinct Share Trustee and a Charitable Beneficiary or Charitable Beneficiaries that are distinct from those of each other Share Trust, such that there is no violation of any restriction set forth in Section 2(b)(i). (d) Remedies for Breach. If the Board of Directors or the Corporation or its designee shall at any time determine in good faith that a person intends to acquire or has attempted to acquire Beneficial Ownership of Common Stock or Equity Stock in violation of Section 2(b) of this Article V, or that a purported Transfer of Common Stock or Equity Stock has otherwise taken place in violation of Section 2(b) of this Article V, the Board of Directors or the Corporation or its designee shall take such action as it deems advisable to refuse to give effect to or to prevent such Transfer or acquisition, including, but not limited to, refusing to give effect to such Transfer or acquisition on the books of the Corporation or instituting proceedings to enjoin such Transfer or acquisition; provided, however, that any Transfer, attempted Transfer, acquisition or attempted acquisition in violation of Section 2(b)(i) of this Article V shall automatically result in the Transfer described in Section 2(c) of this Article V, irrespective of any action (or non-action) by the Board of Directors, except as provided in Section 2(f) of this Article V. (e) Notice of Restricted Transfer. (i) Any Person who acquires or attempts to acquire Common Stock or Equity Stock in violation of Section 2(b) of this Article V, and any Person who is a Purported Record Transferee or a Purported Beneficial Transferee of shares of Common Stock or Equity Stock that are transferred to a Share Trust under Section 2(c) of this Article V, shall immediately give written notice to the Corporation of such event, shall submit to the Corporation such number of shares of Common Stock or Equity Stock to be transferred to the Share Trust and shall provide to the Corporation such other information as the Corporation may request in order to determine the effect, if any, of such Transfer or attempted Transfer or such Non-Transfer Event on the Corporation's status as a REIT. (ii) From and after the Merger Effective Time and prior to the Restriction Termination Date, every Beneficial Owner of more than 5%, in the case of the Corporation then having 2,000 or more stockholders of record, or 1%, in the case of the Corporation then having more than 200 but fewer than 2,000 stockholders of record, or 1/2%, in the case of the Corporation then having fewer than 200 stockholders of record, or such other percentage as may be provided from time to time in the pertinent income tax regulations promulgated under the Code, of the number or value of the outstanding Common Stock or Equity Stock of the Corporation shall, within 30 days after December 31 of each year, give written notice to the Corporation stating the name and address of such Beneficial Owner, the number of shares of Common Stock and Equity Stock Beneficially Owned, and a description of how such shares are held. Each such Beneficial Owner shall provide to the Corporation such additional information that the Corporation may reasonably request in order to determine the effect, if any, of such Beneficial Ownership on the Corporation's status as a REIT and to ensure compliance with the Ownership Limit or Excepted Holder Limit as applicable to such Beneficial Owner. -8-

(iii) From and after the Merger Effective Time and prior to the Restriction Termination Date, each Person who is a Beneficial Owner of Equity Stock of the Corporation and each Person (including the stockholder of record) who is holding Equity Stock of the Corporation for a Beneficial Owner shall provide to the Corporation such information as the Corporation may reasonably request in order to determine the Corporation's status as a REIT, to comply with the requirements of any taxing authority or governmental agency or to determine any such compliance and to ensure compliance with the Ownership Limit or Excepted Holder Limit as applicable to such Beneficial Owner. (f) Exceptions. (i) The Board of Directors may, but in no case shall the Board of Directors be required to, waive, in whole or in part, application of the Ownership Limit or Excepted Holder Limit to a Person otherwise subject to such limit and/or establish, in lieu of the Ownership Limit or Excepted Holder Limit, or any portion or aspect thereof, then applicable to such Person, an Excepted Holder Limit (or a new Excepted Holder Limit) as applicable to the ownership, beneficial or otherwise, of Common Stock and/or Equity Stock by such Person, if it concludes that the ownership of Common Stock and/or Equity Stock by such Person will not (A) result in the Corporation being "closely held" within the meaning of Section 856(h) of the Code, (B) result in shares of Equity Stock being Beneficially Owned by fewer than 100 Persons (determined without reference to any rules of attribution under the Code), or (C) otherwise cause the Corporation to fail to qualify as a REIT under the Code; provided, however, that (i) the Board of Directors obtains from such Person such representations and undertakings, if any, as the Board of Directors may in its sole discretion require (including, without limitation, an agreement as to a reduced Ownership Limit or Excepted Holder Limit for such Person), and (ii) such Person agrees in writing that any violation or attempted violation of any such or any other limitations as the Board of Directors may establish for such Person, or such other restrictions as the Board may in its sole discretion impose with respect to such Person at the time of granting such waiver or exception, will result in transfer to the Share Trust of Common Stock or Equity Stock pursuant to Section 2(c) of this Article V. In making any determination to waive application of the Ownership Limit or Excepted Holder Limit or to establish an Excepted Holder Limit (or a new Excepted Holder Limit) for any Person, the Board of Directors, in its sole and absolute discretion, may, but shall not be required to, receive either a certified copy of a ruling from the Internal Revenue Service or an opinion of counsel satisfactory to the Board of Directors that concludes that the ownership of Equity Stock by such Person will not (A) result in the Corporation being "closely held" within the meaning of Section 856(h) of the Code, (B) result in shares of Equity Stock being beneficially owned by fewer than 100 Persons (determined without reference to any rules of attribution under the Code), or (C) otherwise cause the Corporation to fail to qualify as a REIT under the Code. Unless and until the Board of Directors waives the application of the Ownership Limit or Excepted Holder Limit as applicable to any Person (or even thereafter insofar as such waiver did not or does not operate to relieve some restrictive portion or aspect of the Ownership Limit or Excepted Holder Limit as applicable to such Person), the Ownership Limit and/or Excepted Holder Limit, as applicable, shall apply to such Person, notwithstanding the fact that if such Person were otherwise to Acquire Equity Stock in excess of the Ownership Limit or Excepted Holder Limit, as applicable, such Acquisition would not adversely affect the Corporation's qualification as a REIT under the Code. -9-

(ii) If the Board of Directors makes a determination to waive the Ownership Limit or Excepted Holder Limit, or to establish an Excepted Holder Limit (or a new Excepted Holder Limit) as applicable to any Person, the Board may revoke the waiver, or reduce the Excepted Holder Limit applicable to an Excepted Holder, only (a) with the written consent of such Person at any time, or (b) pursuant to the terms and conditions of the representations and undertakings, if any, entered into with such Person in connection with the granting of the waiver or the establishment of the Excepted Holder Limit for such Person. No Excepted Holder Limit shall be reduced to a percentage that is less than the Ownership Limit. Notwithstanding the foregoing, nothing in this Section 2(f)(ii) is intended to limit or modify the restrictions on ownership contained in Section 2(b) hereof and the authority of the Board of Directors under this Section 2(f). (iii) The Board of Directors has determined, and it is hereby confirmed, that application of the Ownership Limit to Michael Strauss is waived as respects both the Common Stock of the Corporation, specifically, and the Equity Stock of the Corporation, generally, and that in lieu thereof, an Excepted Holder Limit is hereby established for Michael Strauss in respect of the Equity Stock of the Corporation, generally (and not the Common Stock, specifically), at 20% of the value of the total number of shares of Equity Stock of the Corporation outstanding from time to time (or at such greater percentage as shall be determined by the Board of Directors from time to time in accordance with this Section 2(f)); accordingly, Michael Strauss shall be permitted to Beneficially Own up to 20% of the value of the total number of shares of Equity Stock of the Corporation outstanding from time to time. Such waiver and/or such Excepted Holder Limit, as applicable to Michael Strauss, may be revoked or reduced only by operation of the terms of Section 2(f)(ii) of this Article V. (g) Legend. Each certificate for shares of Equity Stock shall bear substantially the following legend: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO SIGNIFICANT RESTRICTIONS ON OWNERSHIP AND TRANSFER. EXCEPT AS OTHERWISE PROVIDED PURSUANT TO THE CHARTER OF THE CORPORATION, NO PERSON MAY BENEFICIALLY OWN (I) SHARES OF COMMON STOCK OF THE CORPORATION IN EXCESS OF 6.5% OF THE MORE RESTRICTIVE OF THE TOTAL NUMBER OR VALUE OF THE OUTSTANDING SHARES OF COMMON STOCK OF THE CORPORATION, (II) SHARES OF EQUITY STOCK OF THE CORPORATION IN EXCESS OF 6.5% OF THE MORE RESTRICTIVE OF THE TOTAL NUMBER OR VALUE OF THE OUTSTANDING SHARES OF EQUITY STOCK OF THE CORPORATION, (III) SHARES OF THE CORPORATION'S EQUITY STOCK IF SUCH ACQUISITION WOULD RESULT IN THE TRUST BEING "CLOSELY HELD" UNDER SECTION 856(h) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), (IV) SHARES OF THE CORPORATION'S EQUITY STOCK IF SUCH ACQUISITION WOULD RESULT IN THE EQUITY STOCK BEING BENEFICIALLY OWNED BY FEWER THAN 100 PERSONS (DETERMINED WITHOUT REFERENCE TO ANY RULES OF ATTRIBUTION UNDER THE CODE), (V) SHARES OF THE CORPORATION'S EQUITY STOCK IF SUCH ACQUISITION WOULD CAUSE THE CORPORATION TO FAIL TO QUALIFY AS A REAL ESTATE INVESTMENT -10-

TRUST UNDER THE CODE, OR (VI) SHARES OF THE CORPORATION'S COMMON STOCK OR EQUITY STOCK IN VIOLATION OF ANY OF THE FURTHER RESTRICTIONS SET FORTH IN THE CORPORATION'S CHARTER. ANY PERSON WHO ATTEMPTS OR PROPOSES TO BENEFICIALLY OWN SHARES OF THE CORPORATION'S COMMON STOCK OR EQUITY STOCK IN EXCESS OF THE ABOVE LIMITATIONS MUST IMMEDIATELY NOTIFY THE CORPORATION IN WRITING. IF AN ATTEMPT IS MADE TO VIOLATE OR THERE IS A VIOLATION OF THESE RESTRICTIONS, (A) ANY PURPORTED TRANSFER WILL BE VOID AB INITIO AND WILL NOT BE RECOGNIZED BY THE CORPORATION AND (B) THE SHARES OF THE CORPORATION'S COMMON STOCK OR EQUITY STOCK IN VIOLATION OF THESE RESTRICTIONS, WHETHER AS A RESULT OF A TRANSFER OR NON-TRANSFER EVENT, WILL BE TRANSFERRED AUTOMATICALLY AND BY OPERATION OF LAW TO A SHARE TRUST AND SHALL BE DESIGNATED SHARES-IN-TRUST. ALL TERMS USED IN THIS LEGEND AND DEFINED IN THE CORPORATION'S CHARTER HAVE THE MEANINGS PROVIDED IN THE CORPORATION'S CHARTER, AS THE SAME MAY BE AMENDED FROM TIME TO TIME, A COPY OF WHICH, INCLUDING THE RESTRICTIONS ON OWNERSHIP AND TRANSFER, WILL BE SENT WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO REQUESTS." (h) REIT Qualification. From and after the Merger Effective Time, but subject to the second sentence immediately following below, the Board of Directors shall use commercially reasonable efforts to cause the Corporation and its stockholders to qualify for United States federal income tax treatment as a REIT in accordance with the provisions of the Code applicable to a REIT and shall not take any action that could adversely affect the ability of the Corporation to qualify as a REIT. In furtherance of the foregoing, but subject to the sentence immediately following below, the Board of Directors shall use commercially reasonable efforts to take such actions as are necessary, and may take such actions as in its sole judgment and discretion are desirable, to preserve the status of the Corporation as a REIT. Notwithstanding the foregoing and anything otherwise contained herein to the contrary, if the Board of Directors determines that it is no longer in the best interests of the Corporation to continue to have the Corporation qualify as a REIT, the Board of Directors may authorize the termination of, and the Corporation may take any and all actions necessary to terminate, the Corporation's REIT election pursuant to Section 856(g) of the Code. (i) Remedies Not Limited. Subject to Section 8 of this Article V, nothing contained in this Article shall limit the authority of the Board of Directors to take such other action as it deems necessary or advisable to protect the Corporation and the interests of its stockholders in preserving the Corporation's status as a REIT. (j) Ambiguity. In the case of an ambiguity in the application of any of the provisions of this Article V, including any definition contained in Section 2(a) hereof, the Board of Directors shall have the power to determine the application of the provisions of this Article V with respect to any situation based on the facts known to it. -11-

(k) Severability. If any provision of this Article V or any application of any such provision is determined to be invalid by a federal or state court having jurisdiction over the issue, the validity of the remaining provisions shall not be affected and other applications of such provision shall be affected only to the extent necessary to comply with the determination of such court. Section 3. Common Stock. Subject to the provisions of Sections 2, 4 and 5 of this Article V, the Common Stock shall have the following preferences, voting powers, restrictions, limitations as to dividends and such other rights as may be afforded by law. (a) Voting Rights. Except as may otherwise be required by law, each holder of shares of Common Stock shall have one vote in respect of each share of Common Stock on all actions to be taken by the holders of Common Stock of the Corporation and, except as otherwise provided in respect of any class of stock hereafter classified or reclassified, the exclusive voting power for all purposes shall be vested in the holders of the Common Stock. (b) Dividend Rights. Subject to the provisions of law and any preferences of any class of stock hereafter classified or reclassified, dividends, including dividends payable in shares of another class of the Corporation's stock, may be paid on the Common Stock of the Corporation at such time and in such amounts as the Board of Directors may deem advisable, and the holders of the Common Stock shall share ratably in any such dividends, in proportion to the number of shares of Common Stock held by them respectively, on a share-for-share basis. (c) Liquidation Rights. In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, the holders of the Common Stock shall be entitled, after payment or provision for payment of the debts and other liabilities of the Corporation and the amount to which the holders of any class of Equity Stock hereafter classified or reclassified having a preference on distributions in the liquidation, dissolution or winding up on the Corporation are entitled, together with the holders of any other class of Equity Stock hereafter classified or reclassified not having a preference on distributions in the liquidation, dissolution or winding up of the Corporation, to share ratably in the remaining net assets of the Corporation. Section 4. Shares-in-Trust. (a) Share Trust. Any shares of Equity Stock transferred to a Share Trust and designated Shares-in-Trust pursuant to Section 2(c) of this Article V shall be held for the exclusive benefit of the Charitable Beneficiary. The Corporation shall name a Charitable Beneficiary and Share Trustee of each Share Trust within five (5) days after discovery of the existence thereof. Any transfer to a Share Trust, and subsequent designation of shares of Equity Stock as Shares-in-Trust, pursuant to Section 2(c) of this Article V shall be effective as of the close of business on the business day prior to the date of the Transfer or Non-Transfer Event that results in the transfer to the Share Trust. Shares-in-Trust shall remain issued and outstanding shares of Equity Stock of the Corporation and shall be entitled to the same rights and privileges on identical terms and conditions as are all other issued and outstanding shares of Equity Stock of the same class and series. When transferred to the Permitted Transferee in accordance with -12-

the provisions of Section 4(c) hereof, such Shares-in-Trust shall cease to be designated as Shares-in-Trust. (b) Dividend Rights. The Share Trustee, as record holder of Shares-in-Trust, shall be entitled to receive all dividends and distributions as may be declared by the Board of Directors on such shares of Equity Stock and shall hold such dividends or distributions in trust for the benefit of the Charitable Beneficiary. The Purported Record Transferee (or the Purported Beneficial Transferee, if applicable) with respect to Shares-in-Trust shall repay to the Share Trustee the amount of any dividends or distributions received by it that (i) are attributable to any shares of Equity Stock designated as Shares-in-Trust and (ii) the record date of which was on or after the date that such shares became Shares-in-Trust. The Corporation shall take all measures that it determines reasonably necessary to recover the amount of any such dividend or distribution paid to the Purported Record Transferee (or Purported Beneficial Transferee, if applicable), including, if necessary, withholding any portion of future dividends or distributions payable on shares of Equity Stock Beneficially Owned by the Person who, but for the provisions of Section 2(c) of this Article V, would Beneficially Own the Shares-in-Trust; and, as soon as reasonably practicable following the Corporation's receipt or withholding thereof, shall pay over to the Share Trustee for the benefit of the Charitable Beneficiary the dividends so received or withheld, as the case may be. (c) Rights Upon Liquidation. In the event of any voluntary or involuntary liquidation, dissolution or winding up of, or any distribution of the assets of (other than a dividend), the Corporation, each Share Trustee of Shares-in-Trust shall be entitled to receive, ratably with each other holder of shares of Equity Stock of the same class or series, that portion of the assets of the Corporation that is available for distribution to the holders of such class and series of Equity Stock. The Share Trustee shall distribute to the Purported Record Transferee the amounts received upon such liquidation, dissolution, or winding up, or distribution; provided, however, that the Purported Record Transferee shall not be entitled to receive amounts pursuant to this Section 4(c) in excess of, in the case of a purported Transfer in which the Purported Record Transferee gave value for shares of Equity Stock and which Transfer resulted in the transfer of the shares to the Share Trust, the price per share, if any, such Purported Record Transferee paid for the shares of Equity Stock and, in the case of a Non-Transfer Event or Transfer in which the Purported Record Transferee did not give value for such shares (e.g., if the shares were received through a gift or devise) and which Non-Transfer Event or Transfer, as the case may be, resulted in the transfer of shares to the Share Trust, the price per share equal to the Market Price on the date of such Non-Transfer Event or Transfer. Any remaining amount in such Share Trust shall be distributed to the Charitable Beneficiary. (d) Voting Rights. The Share Trustee shall be entitled to vote all Shares-in-Trust. Any vote by a Purported Record Transferee as a holder of shares of Equity Stock prior to the discovery by the Corporation that the shares of Equity Stock are Shares-in-Trust shall, subject to applicable law, be rescinded and shall be void ab initio with respect to such Shares-in-Trust and the Purported Record Transferee shall be deemed to have given, as of the close of business on the business day prior to the date of the purported Transfer or Non-Transfer Event that results in the transfer to the Share Trust of shares of Equity Stock under Section 2(c) hereof, an irrevocable proxy to the Share Trustee to vote the Shares-in-Trust in the manner in which the Share Trustee, in its sole and absolute discretion, desires. -13-

(e) Designation of Permitted Transferee. The Share Trustee shall have the exclusive and absolute right to designate a Permitted Transferee of any and all Shares-in-Trust. In an orderly fashion so as not materially and adversely to affect the Market Price of the Shares-in-Trust, the Share Trustee shall designate any Person as Permitted Transferee; provided, however, that (i) the Permitted Transferee so designated purchases for valuable consideration (whether in a public or private sale), at a price as set forth in Section 4(g) of this Article V, the Shares-in-Trust, and (ii) the Permitted Transferee so designated may acquire such Shares-in-Trust without such acquisition resulting in a transfer to a Share Trust and the redesignation of such shares of Equity Stock so acquired as Shares-in-Trust under Section 2(c) of this Article V. Upon the designation by the Share Trustee of a Permitted Transferee in accordance with the provisions of this Section 4(e), the Share Trustee of a Share Trust shall (w) cause to be transferred to the Permitted Transferee that number of Shares-in-Trust acquired by the Permitted Transferee, (x) cause to be recorded on the books of the Corporation that the Permitted Transferee is the holder of record of such number of shares of Equity Stock, (y) cause the Shares-in-Trust to be cancelled, and (z) distribute to the Charitable Beneficiary any and all amounts held with respect to the Shares-in-Trust after making that payment to the Purported Record Transferee pursuant to Section 4(f) of this Article V. (f) Compensation to Record Holder of Shares of Equity Stock that Become Shares-in-Trust. Any Purported Record Transferee shall be entitled (following discovery of the Shares-in-Trust and subsequent designation of the Permitted Transferee in accordance with Section 4(c) of this Article V) to receive from the Share Trustee upon the sale or other disposition of such Shares-in-Trust the lesser of (i) in the case of (x) a purported Transfer in which the Purported Record Transferee (or the Purported Beneficial Transferee, if applicable) gave value for shares of Equity Stock and which Transfer resulted in the transfer of the shares to the Share Trust, the price per share, if any, such Purported Record Transferee (or the Purported Beneficial Transferee, if applicable) paid for the shares of Equity Stock, or (z) a Non-Transfer Event or Transfer in which the Purported Record Transferee (or the Purported Beneficial Transferee, if applicable) did not give value for such shares (e.g., if the shares were received through a gift or devise) and which Non-Transfer Event or Transfer, as the case may be, resulted in the transfer of shares to the Share Trust, the price per share equal to the Market Price on the date of such Non-Transfer Event or Transfer, and (ii) the price per share received by the Share Trustee of the Share Trust from the sale or other disposition of such Shares-in-Trust in accordance with Section 4(e) or (g) of this Article V. Any amounts received by the Share Trustee in respect of such Shares-in-Trust and in excess of such amounts to be paid the Purported Record Transferee pursuant to this Section 4(f) shall be distributed to the Charitable Beneficiary in accordance with the provisions of Section 4(e) of this Article V. Each Charitable Beneficiary and Purported Record Transferee (and Purported Beneficial Transferee, if different) waives any and all claims that each may have against the Share Trustee and the Share Trust arising out of the disposition of the Shares-in-Trust, except for claims arising out of the gross negligence or willful misconduct of, or any failure to make payments in accordance with this Section 4 by, such Share Trustee or the Corporation. (g) Purchase Rights in Shares-in-Trust. Shares-in-Trust shall be deemed to have been offered for sale to the Corporation, or its designee, at a price per share equal to the lesser of (i) the price per share in the transaction that created such Shares-in-Trust (or, in the case of devise, gift or Non-Transfer Event, the Market Price at the time of such devise, gift or Non- -14-

Transfer Event), and (ii) the Market Price on the date the Corporation, or its designee, accepts such offer. The Corporation shall have the right to accept such offer for a period of ninety (90) days after the later of (x) the date of the Non-Transfer Event or purported Transfer which resulted in such Shares-in-Trust and (y) the date the Corporation determines in good faith that a Transfer or Non-Transfer Event resulting in Shares-in-Trust has occurred, if the Corporation does not receive a notice of such Transfer or Non-Transfer Event pursuant to Section 2(e) of this Article V. Section 5. Preferred Stock. The Preferred Stock may be issued from time to time in one or more series as authorized by the Board of Directors. The Board of Directors is expressly authorized, in the resolution or resolutions providing for the issuance of, or otherwise relating to or establishing, any wholly unissued series of Preferred Stock, to fix, state and express the powers, rights, designations, preferences, qualifications, limitations and restrictions thereof, including without limitation: (i) the rate of dividends upon which and the times at which dividends on shares of such series shall be payable and the preference, if any, which such dividends shall have relative to dividends on shares of any other class or series of stock of the Corporation; (ii) whether such dividends shall be cumulative or noncumulative and, if cumulative, the date or dates from which dividends on shares of such series shall be cumulative; (iii) the voting rights, if any, to be provided for shares of such series; (iv) the rights, if any, which the holders of shares of such series shall have in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation; (v) the rights, if any, which the holders of shares of such series shall have to convert such shares into or exchange such shares for other shares of stock of the Corporation, and the terms and conditions, including price and rate of exchange of such conversion or exchange; (vi) the redemption rights (including sinking fund provisions), if any, for shares of such series; and (vii) such other powers, rights, designations, preferences, qualifications, limitations and restrictions as the Board of Directors may desire to so fix. The Board of Directors is also expressly authorized to fix the number of shares constituting such series and to increase or decrease the number of shares of any series prior to the issuance of shares of that series and to increase or decrease the number of shares of any series subsequent to the issuance of shares of that series, but not to decrease such number below the number of shares of such series then outstanding. In case the number of shares of any class shall be so decreased, the shares constituting such decrease shall resume the status that they had prior to the adoption of the resolution originally fixing the number of shares of such series. Notwithstanding any other provision hereof to the contrary, the holders of each class or series of Preferred Stock will share ratably in any dividends with respect to such class or series in proportion to the number of shares held by such holders respectively, on a share-by-share basis. Section 6. Classification and Reclassification of Equity Stock. (a) Subject to the foregoing provisions of Article V hereof, the power of the Board of Directors to classify and reclassify any of the unissued shares of Equity Stock shall include, without limitation, subject to the provisions of the Charter, authority to classify or reclassify any unissued shares of such stock into shares of Common Stock or Preferred Stock or any class or series of Preferred Stock, or shares of preference stock, special stock or other stock, by determining, fixing or altering one or more of the following: -15-

(i) the distinctive designation of such class or series and the number of shares to constitute such class or series; provided that, unless otherwise prohibited by the terms of such or any other class or series, the number of shares of any class or series may be decreased by the Board of Directors in connection with any classification or reclassification of unissued shares and the number of shares of such class or series may be increased by the Board of Directors in connection with any such classification or reclassification, and any shares of any class or series which have been redeemed, purchased, otherwise acquired or converted into Common Stock or any other class or series shall become part of the authorized Equity Stock and be subject to classification and reclassification as provided in this Section. (ii) whether or not and, if so, the rates, amounts and times at which, and the conditions under which, dividends shall be payable on shares of such class or series, whether any such dividends shall rank senior or junior to or on a parity with the dividends payable on any other class or series of stock, and the status of any such dividends as cumulative, cumulative to a limited extent or non-cumulative and as participating or non-participating. (iii) whether or not shares of such class or series shall have voting rights and, if so, the terms of such voting rights. (iv) whether or not shares of such class or series shall have conversion or exchange privileges and, if so, the terms and conditions thereof, including provision for adjustment of the conversion or exchange rate in such events or at such times as the Board of Directors shall determine. (v) whether or not shares of such class or series shall be subject to redemption and, if so, the terms and conditions of such redemption, including the date or dates upon or after which they shall be redeemable and the amount per share payable in case of redemption, which amount may vary under different conditions and at different redemption dates, and whether or not there shall be any sinking fund or purchase account in respect thereof and, if so, the terms thereof. (vi) the rights of the holders of shares of such class or series upon the liquidation, dissolution or winding up of the affairs of, or upon any distribution of, the assets of the Corporation, which rights may vary depending upon whether such liquidation, dissolution or winding up is voluntary or involuntary and, if voluntary, may vary at different dates, and whether such rights shall rank senior or junior to or on a parity with such rights of any other class or series of stock. (vii) whether or not there shall be any limitations applicable, while shares of such class are outstanding, upon the payment of dividends or making of distributions on, or the acquisition of, or the use of moneys for purchase or redemption of, any stock of the Corporation, or upon any other action of the Corporation, including action under this Section, and, if so, the terms and conditions thereof. (viii) any other preferences, rights, restrictions, including restrictions on transferability, and qualifications of shares of such class or series, not inconsistent with law and the Charter of the Corporation. -16-

(b) For the purposes hereof and of any articles supplementary to the Charter providing for the classification or reclassification of any shares of Equity Stock or of any other charter document of the Corporation (unless otherwise provided in any such articles or document), any class or series of stock of the Corporation shall be deemed to rank: (i) prior to another class or series either as to dividends or upon liquidation, if the holders of such class or series shall be entitled to the receipt of dividends or of amounts distributable on liquidation, dissolution or winding up, as the case may be, in preference or priority to holders of such other class or series; (ii) on a parity with another class or series either as to dividends or upon liquidation, whether or not the dividend rates, dividend payment dates or redemption or liquidation price per share thereof be different from those of such other class or series, if the holders of such class or series of stock shall be entitled to receipt of dividends or amounts distributable upon liquidation, dissolution or winding up, as the case may be, in proportion to their respective dividend rates or redemption or liquidation prices, without preference or priority over the holders of such other class or series; and (iii) junior to another class or series either as to dividends or upon liquidation, if the rights of the holders of such class or series shall be subject or subordinate to the rights of the holders of such other class or series in respect of the receipt of dividends or the amounts distributable upon liquidation, dissolution or winding up, as the case may be. Section 7. Charter and Bylaws. All persons who shall Acquire shares of Equity Stock of the Corporation shall Acquire such shares subject to the provisions of the Charter and Bylaws. Section 8. Settlement of New York Stock Exchange Transactions. Nothing in this Article V precludes the settlement of transactions entered into through the facilities of the New York Stock Exchange. Notwithstanding the fact that such settlement occurs, certain transactions may be subject to the provisions requiring Common Stock or Equity Stock to be held in a Share Trust as set forth in Section 2(c) of this Article V. Section 9. Vote Required. Except as specifically required in Section 4 of Article VI of the Charter, notwithstanding any provision of law requiring a greater proportion of the votes entitled to be cast by the stockholders in order to take or approve any action on a matter (including a merger, consolidation, transfer of assets, share exchange or an amendment to the Charter), such action shall be valid and effective if taken or approved by the affirmative vote of at least a majority of all votes entitled to be cast by the stockholders on the matter. ARTICLE VI THE BOARD OF DIRECTORS Section 1. Number and Qualification of Directors. The business and affairs of the Corporation shall be managed by a Board of Directors which may exercise all of the powers of the Corporation except those conferred on, or reserved for, the stockholders hereunder, under the -17-

Corporation's Bylaws or by law. The number of directors of the Corporation is currently six (6), which number may be increased or decreased pursuant to the Bylaws of the Corporation, but in no event shall be less than the minimum number required by the general laws of the State of Maryland. A director need not be a stockholder of the Corporation. Section 2. Classified Board. (a) The Board of Directors of the Corporation shall be classified, with respect to the terms for which the directors severally hold office, into three classes (each, a "Class"), each of which shall be, as nearly as possible, of equal size. (b) The directors of the Corporation (the "Current Directors") shall be the following individuals, who shall be classified into three Classes as follows: Director Class -------- ----- C. Cathleen Raffaeli Class I Kenneth P. Slosser Class I John A. Johnston Class II Michael A. McManus, Jr. Class II Nicholas R. Marfino Class III Michael Strauss Class III Each Current Director in Class II shall serve for a term expiring on the date of the next succeeding annual meeting of stockholders, each Current Director in Class III shall serve for a term expiring on the date of the second succeeding annual meeting of stockholders, and each Current Director in Class I shall serve for a term expiring on the date of the third succeeding annual meeting of stockholders. Subject to the rights of holders of, or the terms applicable to, any class or series of Preferred Stock, at each annual meeting of stockholders, the successors to the class of directors whose term expires at such annual meeting shall be elected to hold office for a term expiring at the annual meeting of stockholders held in the third year following the year of their election and until their successors are duly elected and qualified. Section 3. Quorum. The presence of a majority of the total number of directors shall constitute a quorum for the transaction of business and, except as otherwise provided herein or by applicable law, the vote of a majority of such quorum shall be required for the Board of Directors to act. Section 4. Removal of Directors. Subject to the rights of holders of any class or series of Preferred Stock to remove directors, any director may be removed only for cause and only upon the affirmative vote of the stockholders holding not less than two-thirds (66-2/3%) of all the votes entitled to be cast generally for the election of directors. -18-

Section 5. Filling Vacancies. Except as may be otherwise provided for or fixed pursuant to the provisions of Article V hereof with respect to the rights of holders of Preferred Stock to elect directors, a vacancy on the Board of Directors that occurs or is created (whether arising through death, retirement, resignation or removal or through an increase in the number of authorized directors), may be filled by the affirmative vote of a majority of the remaining directors, even though less than a quorum, or by its sole director. A director so elected to fill a vacancy shall serve until the next annual meeting of stockholders and until such director's successor shall have been duly elected and qualified (so long as such director remains qualified). A director elected by the stockholders to fill a vacancy resulting from the removal of a director shall serve for the remainder of the term of the director so removed. When a vacancy is created as a result of the resignation of a director from the Board of Directors, which resignation is not effective until a future date, such director shall not have the power to vote to fill such vacancy. Section 6. No Cumulative Voting. Stockholders shall not be entitled to cumulative voting rights with respect to the election of directors. Section 7. Reserved Powers of the Board of Directors. The enumeration and definition of particular powers of the Board of Directors included in the foregoing provisions of this Article VI or the provisions of Article VII hereof shall in no way be limited or restricted by reference to or inference from the terms of any other clause of this or any other Article of the Corporation's Charter, or construed as or deemed by inference or otherwise in any manner to exclude or limit any powers conferred upon the Board of Directors under the general laws of the State of Maryland now or hereafter in force. ARTICLE VII PROVISIONS FOR DEFINING, LIMITING AND REGULATING CERTAIN POWERS OF THE CORPORATION AND OF THE STOCKHOLDERS AND DIRECTORS The following provisions are hereby adopted for the purpose of defining, limiting and regulating the powers of the Corporation and of the directors and stockholders: Section 1. Board Authorization of Share Issuances. The Board of Directors is hereby empowered to authorize the issuance from time to time of shares of any class or series of Equity Stock, whether now or hereafter authorized, or securities convertible into any class or series of Equity Stock, whether now or hereafter authorized, for such consideration as may be deemed advisable by the Board of Directors and without any action by the stockholders. Section 2. No Preemptive Rights. Except as provided by the Board of Directors in authorizing the issuance of Preferred Stock pursuant to Section 5 of Article V, no holder of any stock or any other securities of the Corporation, whether now or hereafter authorized, shall have any preemptive right to subscribe to or purchase (i) any shares of Equity Stock of the Corporation, (ii) any warrants, rights, or options to purchase any such shares, or (iii) any other securities of the Corporation or obligations convertible into any shares of Equity Stock of the Corporation or such other securities or into warrants, rights or options to purchase any such shares or other securities of the Corporation. -19-

Section 3. Powers of the Board of Directors. The Board of Directors of the Corporation shall, consistent with applicable law, have the power in its sole discretion: to determine from time to time, in accordance with sound accounting practice or other reasonable valuation methods, what constitutes annual or other net profits, earnings, surplus or net assets in excess of capital; to fix and vary from time to time the amount to be reserved as working capital, or determine that retained earnings or surplus shall remain in the hands of the Corporation; to set apart out of any funds of the Corporation such reserve or reserves in such amount or amounts and for such proper purpose or purposes as it shall determine and to abolish any such reserve or any part thereof; to distribute and pay distributions or dividends in stock, cash or other securities or property, out of surplus or any other funds or amounts legally available therefor, at such times and to the stockholders of record on such dates as it may, from time to time, determine; and to determine whether and to what extent and at what times and places and under what conditions and regulations the books, accounts and documents of the Corporation, or any of them, shall be open to the inspection of stockholders, except as otherwise provided by statute or by the Bylaws of the Corporation, and, except as so provided, no stockholder shall have any right to inspect any book, account or document of the Corporation unless authorized so to do by resolution of the Board of Directors. Section 4. Related Party Transactions. Without limiting any other procedures available by law, set forth in the Bylaws or otherwise established by the Corporation, the Board of Directors may authorize any agreement or transaction with any Person, corporation, association, company, trust, partnership (limited or general) or other organization, although one or more of the directors or officers of the Corporation may be a party to any such agreement or an officer, director, stockholder or member of such other party (an "Interested Officer/Director"), and no such agreement or transaction shall be invalidated or rendered void or voidable solely by reason of the existence of any such relationship if: (i) the existence is disclosed or known to the Board of Directors, and the contract or transaction is authorized, approved or ratified by the affirmative vote of a majority of the directors, excluding the Interested Officers/Directors; or (ii) the existence is disclosed to the stockholders entitled to vote, and the contract or transaction is authorized, approved or ratified by a majority of the votes entitled to be cast by the stockholders, other than the votes of the shares held of record by the Interested Officers/Directors; or (iii) the contract or transaction is fair and reasonable to the Corporation. Any Interested Officer/Director of the Corporation or the stock owned by them or by a corporation, association, company, trust, partnership (limited or general) or other organization in which an Interested Officer/Director may have an interest, may be counted in determining the presence of a quorum at a meeting of the Board of Directors or a committee of the Board of Directors or at a meeting of the stockholders, as the case may be, at which the contract or transaction is authorized, approved or ratified. -20-

ARTICLE VIII INDEMNIFICATION AND LIMITATION OF LIABILITY Section 1. Indemnification. (a) Indemnification of Agents. The Corporation shall indemnify, in the manner and to the fullest extent permitted by law, any person (or the estate of any person) who is or was a party to, or is threatened to be made a party to, any threatened, pending or completed action, suit or proceeding, whether or not by or in the right of the Corporation, and whether civil, criminal, administrative, investigative or otherwise, by reason of the fact that such person is or was a director or officer of the Corporation, or such director or officer is or was serving at the request of the Corporation as a director, officer, agent, trustee, partner or employee of another corporation, partnership, joint venture, limited liability company, trust, real estate investment trust, employee benefit plan or other enterprise. To the fullest extent permitted by law, the indemnification provided herein shall include expenses (including attorneys' fees), judgments, fines and amounts paid in settlement and any such expenses may be paid by the Corporation in advance of the final disposition of such action, suit or proceeding. The Corporation shall indemnify other employees and agents to such extent as shall be authorized by the Board of Directors or the Corporation's Bylaws and be permitted by law. Any repeal or modification of this Section 1(a) by the stockholders of the Corporation shall be prospective only, and shall not adversely affect any right to indemnification or advancement of expenses hereunder existing at the time of such repeal or modification. (b) Insurance. The Corporation may, to the fullest extent permitted by law, purchase and maintain insurance on behalf of any person described in the preceding paragraph against any liability which may be asserted against such person. (c) Indemnification Non-Exclusive. The indemnification provided herein shall not be deemed to limit the right of the Corporation to indemnify any other person for any such expenses to the fullest extent permitted by law, nor shall it be deemed exclusive of any other rights to which any person seeking indemnification from the Corporation may be entitled under any agreement, vote of stockholders or disinterested directors, or otherwise, both as to action in such person's official capacity and as to action in another capacity while holding such office. Section 2. Limitation of Liability. To the fullest extent permitted by statutory or decisional law of the State of Maryland, as amended or interpreted from time to time, no director or officer of the Corporation shall be personally liable to the Corporation or its stockholders, or any of them, for money damages. No amendment of the Charter of the Corporation or repeal of any of its provisions shall limit or eliminate the benefits provided to directors and officers under this provision with respect to any act or omission which occurred prior to such amendment or repeal. ARTICLE IX AMENDMENTS Section 1. Right to Amend Charter. The Corporation reserves the right from time to time to make any amendments to the Charter which may now or hereafter be authorized by law, -21-

including any amendment altering the terms or contract rights, as expressly set forth in the Charter, of any of its outstanding stock. All rights and powers conferred by the Charter on stockholders, directors and officers are granted subject to this reservation. Section 2. Board Amendment of the Charter. Pursuant to Section 2-105(a)(12) of the Maryland General Corporation Law, the Board of Directors, with the approval of a majority of the entire Board of Directors, may amend the Charter to increase or decrease the aggregate number of shares of stock of the Corporation or the number of shares of stock of any class that the Corporation has authority to issue. ARTICLE X DURATION OF CORPORATION The duration of the Corporation shall be perpetual. SECOND: The total number of shares of stock which the Corporation had authority to issue immediately prior to this amendment and restatement was 100, consisting of 100 shares of Common Stock, par value $0.01 per share. The aggregate par value of all shares of stock having par value was $1.00. The total number of shares of stock which the Corporation has authority to issue pursuant to the foregoing amendment and restatement of the Charter is 110,000,000 shares of capital stock, consisting of 100,000,000 shares of Common Stock, par value $0.01 per share, and 10,000,000 shares of Preferred Stock, $0.01 par value per share. The aggregate par value of all authorized shares of stock is $1,100,000. THIRD: The amendment to and restatement of the Charter as hereinabove set forth has been duly advised by the Board of Directors of the Corporation and approved by the sole stockholder of the Corporation as required by law. FOURTH: The current address of principal office of the Corporation in the State of Maryland is as set forth in Article VI of foregoing amendment and restatement of Charter. FIFTH: The number of directors of the Corporation and the names of those currently in office are as set forth in Article VI of the foregoing amendment and restatement of the Charter. SIXTH: The undersigned President of the Corporation acknowledges these Articles of Amendment and Restatement to be the corporate act of the Corporation and as to all matters or facts required to be verified under oath, the undersigned President acknowledges that to the best of his knowledge, information and belief, these matters and facts are true in all material respects and that this statement is made under the penalties for perjury. -22-

IN WITNESS WHEREOF, the Corporation has caused these Articles of Amendment and Restatement to be signed in its name and on its behalf by its President and attested to by its Secretary on this 3rd day of December, 2003. By: /s/ Michael Strauss ------------------------------------ Name: Michael Strauss Title: President ATTEST: By: /s/ Alan B. Horn, Esq. ------------------------- Name: Alan B. Horn, Esq. Title: Secretary

                                                                     Exhibit 3.2






                              AMENDED AND RESTATED
                                     BYLAWS

                                       of

                     AMERICAN HOME MORTGAGE INVESTMENT CORP.

                        Effective as of December 3, 2003




AMENDED AND RESTATED BYLAWS OF AMERICAN HOME MORTGAGE INVESTMENT CORP. (hereinafter called the "Corporation") ARTICLE I OFFICES Section 1. PRINCIPAL OFFICE. The principal executive office of the Corporation shall be located at 520 Broadhollow Road, Melville, New York, 11747 or at such other place or places as the Board of Directors may designate. Section 2. ADDITIONAL OFFICES. The Corporation may have additional offices at such places as the Board of Directors may from time to time determine or as the business of the Corporation may require. Section 3. ACCOUNTING YEAR. The Board of Directors shall have the power from time to time to fix the fiscal year of the Corporation by a duly adopted resolution. ARTICLE II MEETINGS OF STOCKHOLDERS Section 1. PLACE. All meetings of stockholders shall be held at the principal office of the Corporation or at such other place within the United States as shall be stated in the notice of the meeting. Section 2. ANNUAL MEETING. The annual meeting of the stockholders of the Corporation, for the election of members of the Board of Directors and the transaction of such other business that may come properly before the meeting, shall be held at such date and time during the month of June of each calendar year as shall be determined by a majority of the Board of Directors. (a) To be properly brought before the annual meeting, nominations of persons for election to the Board of Directors and any proposal of business to be considered by the stockholders at the annual meeting of the stockholders must be made or brought before the annual meeting either (i) pursuant to the Corporation's notice of meeting, (ii) by or at the direction of the Board of Directors or (iii) by any stockholder of the Corporation who was a stockholder of record both at the time of giving of notice provided for in this Section 2(a) and

at the time of the annual meeting, who is entitled to vote at the meeting and who complied with the notice procedures set forth in this Section 2(a). (b) For nominations or other business to be properly brought before an annual meeting by a stockholder pursuant to clause (iii) of paragraph (a) of this Section 2, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation and such other business must otherwise be a proper matter for action by stockholders. To be timely, a stockholder's notice shall be delivered to the Secretary at the principal executive offices of the Corporation not less than ninety (90) days nor more than one hundred twenty (120) days prior to the first anniversary of the preceding year's annual meeting; provided, however, that in the event that the date of the annual meeting is advanced by more than thirty (30) days or delayed by more than sixty (60) days from such anniversary date, notice by the stockholder to be timely must be so delivered not earlier than the 120th day prior to such annual meeting and not later than the close of business on the later of the 90th day prior to such annual meeting or the tenth day following the day on which public announcement of the date of such meeting is first made by the Corporation. In no event shall the public announcement of a postponement or adjournment of an annual meeting to a later date or time commence a new time period for the giving of a stockholder's notice as described above. Such stockholder's notice shall set forth (i) as to each person whom the stockholder proposes to nominate for election or reelection as a director, all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors in an election contest, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the "Exchange Act") (including such person's written consent to being named in the proxy statement as a nominee and to serving as a director if elected); (ii) as to any other business that the stockholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest in such business of such stockholder on whose behalf the proposal is made; and (iii) as to the stockholder giving the notice on whose behalf the nomination or proposal is made, (x) the name and address of such stockholder, as they appear on the Corporation's books, and (y) the class and number of shares of stock of the Corporation which are owned beneficially and of record by such stockholder and such beneficial owner. (c) Notwithstanding anything in these Bylaws to the contrary, no business shall be conducted at the annual meeting except in accordance with the procedures set forth in this Article II, Section 2. The officer of the Corporation presiding at an annual meeting shall, if the facts warrant, determine that business was not properly brought before the annual meeting in accordance with the provisions of this Article II, Section 2, and if he or she should so determine, he shall so declare to the annual meeting and any such business not properly brought before the meeting shall not be transacted. Section 3. SPECIAL MEETINGS. (a) GENERAL. The President or the Chairman of the Board of Directors, or a majority of the Board of Directors, or a duly authorized committee thereof, may call a special meeting of the stockholders. Subject to subsection (b) of this Section 3, a special -2-

meeting of stockholders shall only be called by the Secretary of the Corporation upon the written request of the stockholders entitled to cast not less than a majority of all the votes entitled to be cast at such meeting. (b) STOCKHOLDER REQUESTED SPECIAL MEETINGS. (1) Any stockholder of record seeking to have stockholders request a special meeting shall, by sending written notice to the Secretary (the "Record Date Request Notice") by registered mail, return receipt requested, request the Board of Directors to fix a record date to determine the stockholders entitled to request a special meeting (the "Request Record Date"). The Record Date Request Notice shall set forth the purpose of the meeting and the matters proposed to be acted on at it, shall be signed by one or more stockholders of record as of the date of signature, shall bear the date of signature of each such stockholder and shall set forth all information relating to each such stockholder that must be disclosed in solicitations of proxies for election of directors in an election contest (even if an election contest is not involved), or is otherwise required, in each case pursuant to Regulation 14A under the Exchange Act, and Rule 14a-11 thereunder. Upon receiving the Record Date Request Notice, the Board of Directors shall set a record date for determining the stockholders entitled to vote at the special meeting. In accordance with Section 2-502 of the Maryland General Corporation Law, the Board of Directors shall have the sole power and authority to set the record date of a special meeting of stockholders and the date, time and place of any such meeting. (2) In order for any stockholder to request a special meeting, one or more written requests for a special meeting signed by stockholders of record as of the Request Record Date entitled to cast not less than a majority (the "Special Meeting Percentage") of all of the votes entitled to be cast at such meeting (the "Special Meeting Request") shall be delivered to the Secretary. In addition, the Special Meeting Request shall set forth the purpose of the meeting and the matters proposed to be acted on at it (which shall be limited to the matters set forth in the Record Date Request Notice received by the Secretary), shall bear the date of signature of each such stockholder signing the Special Meeting Request, shall set forth the name and address, as they appear in the Corporation's books, of each stockholder signing such request and the class and number of shares of stock of the Corporation which are owned of record and beneficially by each such stockholder, shall be sent to the Secretary by registered mail, return receipt requested, and shall be received by the Secretary within 60 days after the Request Record Date. Any requesting stockholder may revoke his, her or its request for a special meeting at any time by written revocation delivered to the Secretary. (3) The Secretary shall inform the requesting stockholders of the reasonably estimated cost of preparing and mailing the notice of meeting (including the Corporation's proxy materials). The Secretary shall not be required to call a special meeting upon stockholder request and such meeting shall not be held unless, in addition to the documents required by paragraph (2) of this Section 3(b), the Secretary receives payment of such reasonably estimated cost prior to the mailing of any notice of the meeting. (4) Except as provided in the next sentence, any special meeting shall be held at such place, date and time as may be designated in the notice of the meeting. In the case of any special meeting called by the Secretary upon the request of stockholders (a -3-

"Stockholder Requested Meeting"), such meeting shall be held at such place, date and time as may be designated by the Board of Directors; provided, however, that the date of any Stockholder Requested Meeting shall be not more than 90 days after the record date for such meeting. In fixing a date for any special meeting, the Board of Directors may consider such factors as such person deems relevant within the good faith exercise of business judgment, including, without limitation, the nature of the matters to be considered, the facts and circumstances surrounding any request for meeting and any plan of the Board of Directors to call an annual meeting or a special meeting. (5) If at any time as a result of written revocations of requests for the special meeting, stockholders of record (or their duly authorized proxies or other agents) as of the Request Record Date entitled to cast less than the Special Meeting Percentage shall have delivered and not revoked requests for a special meeting, the Secretary may refrain from mailing the notice of the meeting or, if the notice of the meeting has been mailed, the Secretary may revoke the notice of the meeting at any time before ten (10) days before the meeting if the Secretary has first sent to all other requesting stockholders written notice of such revocation and of intention to revoke the notice of the meeting. Any request for a special meeting received after a revocation by the Secretary of a notice of a meeting shall be considered a request for a new special meeting. (6) The President or the Chairman of the Board of Directors may appoint regionally or nationally recognized independent inspectors of elections to act as the agent of the Corporation for the purpose of promptly performing a ministerial review of the validity of any purported Special Meeting Request received by the Secretary. For the purpose of permitting the inspectors to perform such review, no such purported request shall be deemed to have been delivered to the Secretary until the earlier of (i) five (5) Business Days after receipt by the Secretary of such purported request and (ii) such date as the independent inspectors certify to the Corporation that the valid requests received by the Secretary represent the Special Meeting Percentage of the issued and outstanding shares of stock that would be entitled to vote at such meeting. Nothing contained in this paragraph (6) shall in any way be construed to suggest or imply that the Corporation or any stockholder shall not be entitled to contest the validity of any request, whether during or after such five (5) Business Day period, or to take any other action (including, without limitation, the commencement, prosecution or defense of any litigation with respect thereto, and the seeking of injunctive relief in such litigation). -4-

Section 4. NOTICE. Not less than ten (10) or more than ninety (90) days before any meeting of stockholders, the Secretary shall give to each stockholder entitled to vote at such meeting and to each stockholder not entitled to vote who is entitled to notice of the meeting, written or printed notice stating the time and place of the meeting and, in the case of a special meeting or as otherwise may be required by any statute, the purpose for which the meeting is called, either by mail or by presenting it to such stockholder personally or by leaving it at his residence or usual place of business, or by any other manner authorized by applicable law. If mailed, such notice shall be deemed to be given when deposited in the United States mail addressed to the stockholder at his post office address as it appears on the records of the Corporation, with postage thereon prepaid. Section 5. SCOPE OF NOTICE. Subject to the provisions of Section 2 of Article II of these Bylaws, any business of the Corporation may be transacted at an annual meeting of stockholders without being specifically designated in the notice, except such business as is required by any statute to be stated in such notice. No business shall be transacted at a special meeting of stockholders except as specifically designated in the notice. Section 6. ORGANIZATION. At every meeting of stockholders, the Chairman of the Board, if there be one, shall conduct the meeting or, in the case of vacancy in office or absence of the Chairman of the Board, one of the following officers present shall conduct the meeting in the order stated: the Vice Chairman of the Board, if there be one, the President, the Vice Presidents in their order of rank and seniority, or a Chairman chosen by the stockholders entitled to cast a majority of the votes which all stockholders present in person or by proxy are entitled to cast, and the Secretary, or, in his absence, an Assistant Secretary, or in the absence of both the Secretary and assistant secretaries, a person appointed by the Chairman shall act as Secretary. Section 7. QUORUM. At any meeting of stockholders, the presence in person or by proxy of stockholders entitled to cast a majority of all the votes entitled to be cast at such meeting shall constitute a quorum; but this Section 7 shall not affect any requirement under any statute, the charter of the Corporation (the "Charter") or these Bylaws for the vote necessary for the adoption of any measure. If, however, such quorum shall not be present at any meeting of the stockholders, the stockholders entitled to vote at such meeting, present in person or by proxy, shall have the power to adjourn the meeting from time to time to a date not more than 120 days after the original record date without notice other than announcement at the adjourned meeting until such quorum is present. At such adjourned meeting at which a quorum shall be present, any business may be transacted which might have been transacted at the meeting as originally notified. Section 8. VOTING. A plurality of all the votes cast at a meeting of stockholders duly called and at which a quorum is present shall be sufficient to elect a director. Each share may be voted for as many individuals as there are directors to be elected and for whose election the share is entitled to be voted. A majority of the votes cast at a meeting of stockholders duly called and at which a quorum is present shall be sufficient to approve any other matter which may properly come before the meeting, unless more than a majority of the votes cast is required by statute, the Charter of the Corporation or these -5-

Bylaws. Unless otherwise provided in the Charter (including any articles supplementary for any series of preferred stock), each outstanding share, regardless of class or series, shall be entitled to one vote on each matter submitted to a vote at a meeting of stockholders. Section 9. PROXIES. A stockholder may cast the votes entitled to be cast by the shares of the stock owned of record by such stockholder either in person or may authorize another person or persons to act for such stockholder as proxy in any manner permitted by applicable law. Such proxy shall be filed with the Secretary of the Corporation before or at the time of the meeting. No proxy shall be valid after eleven (11) months from the date of its execution, unless otherwise provided in the proxy. Section 10. VOTING OF STOCK BY CERTAIN HOLDERS. Stock of the Corporation registered in the name of a partnership, trust, another corporation or other entity, if entitled to be voted, may be voted by the president or a vice president, a general partner or trustee thereof, as the case may be, or a proxy appointed by any of the foregoing individuals, unless some other person who has been appointed to vote such stock pursuant to a bylaw or a resolution of the governing body of such corporation or other entity or agreement of the partners of a partnership presents a certified copy of such bylaw, resolution or agreement, in which case such person may vote such stock. Any director or other fiduciary may vote stock registered in his name as such fiduciary, either in person or by proxy. Shares of stock of the Corporation indirectly owned by the Corporation shall not be voted at any meeting and shall not be counted in determining the total number of outstanding shares entitled to be voted at any given time, unless they are held by it in a fiduciary capacity and are deemed outstanding under applicable law, in which case they may be voted and shall be counted in determining the total number of outstanding shares at any given time. The Board of Directors may adopt by resolution a procedure by which a stockholder may certify in writing to the Corporation that any shares of stock registered in the name of the stockholder are held for the account of a specified person other than the stockholder. The resolution shall set forth the class of stockholders who may make the certification, the purpose for which the certification may be made, the form of certification and the information to be contained in it; if the certification is with respect to a record date or closing of the stock transfer books, the time after the record date or closing of the stock transfer books within which the certification must be received by the Corporation; and any other provisions with respect to the procedure which the Board of Directors considers necessary or desirable. On receipt of such certification, the person specified in the certification shall be regarded as, for the purposes set forth in the certification, the stockholder of record of the specified stock in place of the stockholder who makes the certification. Section 11. INSPECTORS. At any meeting of stockholders, the Chairman of the meeting may, or upon the request of any stockholder shall, appoint one or more persons as inspectors for such meeting. Such inspectors shall ascertain and report the number of shares represented at the meeting based upon their determination of the validity and effect of -6-

proxies, count all votes, report the results and perform such other acts as are proper to conduct the election and voting with impartiality and fairness to all the stockholders. Each report of an inspector shall be in writing and signed by him or by a majority of them if there is more than one inspector acting at such meeting. If there is more than one inspector, the report of a majority shall be the report of the inspectors. The report of the inspector or inspectors on the number of shares represented at the meeting and the results of the voting shall be prima facie evidence thereof. Section 12. VOTING BY BALLOT. Voting on any question or in any election may be viva voce unless the presiding officer shall order or any stockholder shall demand that voting be by ballot. ARTICLE III DIRECTORS Section 1. GENERAL POWERS. The business and affairs of the Corporation shall be managed under the direction of its Board of Directors, except those specifically reserved or granted to the stockholders by statute or by the Charter or these Bylaws, shall be exercised by, or under the authority of, the Board of Directors. Except as otherwise agreed between the Corporation and the Director, each individual Director may engage in other business activities of the type conducted by the Corporation and is not required to present to the Corporation any investment opportunities presented to them even though the investment opportunities may be within the scope of the Corporation's investment policies. Section 2. NUMBER; QUALIFICATIONS. (a) At any regular meeting or at any special meeting called for that purpose, a majority of the entire Board of Directors may establish, increase or decrease the number of directors; provided that the number thereof shall never be less than three (3), or more than twelve (12); and provided, further, that the tenure of office of a director shall not be affected by any decrease in the number of directors. (b) A majority of the members of the Board of Directors shall be independent (each, an "Independent Director"), as determined by the Board of Directors from time to time (such determination to be conclusive) with reference to the listing standards of any national securities exchange or trading market on which the Corporation's Common Stock is traded and with reference to any other laws, rules and regulations applicable to the Corporation; provided, however, that such requirement shall not apply (i) during a period not to exceed sixty (60) days following the death, resignation, incapacity or removal from office of a director prior to the expiration of the director's term of office or (ii) prior to the Merger Effective Time (as such term is defined in Article V of the Charter). Notwithstanding the foregoing requirement that a majority of the Board of Directors be Independent Directors, no action otherwise validly taken by the Board during a period in which it is permitted in -7-

accordance with the preceding sentence that a majority of its members are not Independent Directors shall be invalidated or otherwise affected by such circumstance. Section 3. ANNUAL AND REGULAR MEETINGS. An annual meeting of the Board of Directors shall be held immediately after and at the same place as the annual meeting of stockholders, no notice other than this Bylaw being necessary. The Board of Directors may provide, by resolution, the time and place, either within or without the State of Maryland, for the holding of regular meetings of the Board of Directors without other notice than such resolution. Section 4. SPECIAL MEETINGS. Special meetings of the Board of Directors may be called by or at the request of the Chairman of the Board of Directors, the Chairman of the Executive Committee of the Board of Directors, the Chief Executive Officer of the Company or by a majority of directors then in office. The person or persons authorized to call special meetings of the Board of Directors may fix any place, whether within or without the State of Maryland, as the place for holding any special meeting of the Board of Directors called by them. Section 5. NOTICE. Notice of any special meeting of the Board of Directors shall be delivered personally or by telephone, facsimile transmission, United States mail or courier to each director at his business or residence address. Notice by personal delivery, by telephone or a facsimile transmission shall be given at least two (2) days prior to the meeting. Notice by mail shall be given at least five (5) days prior to the meeting and shall be deemed to be given when deposited in the United States mail properly addressed, with postage thereon prepaid. Telephone notice shall be deemed to be given when the director is personally given such notice in a telephone call to which he is a party. Facsimile transmission notice shall be deemed to be given upon completion of the transmission of the message to the number given to the Corporation by the director and receipt of a completed answer-back indicating receipt. Neither the business to be transacted at, nor the purpose of, any annual, regular or special meeting of the Board of Directors need be stated in the notice, unless specifically required by statute or these Bylaws. Section 6. QUORUM. The presence of a majority of the total number of directors shall constitute a quorum for transaction of business at any meeting of the Board of Directors; provided that, if less than a majority of such directors are present at said meeting, a majority of the directors present may adjourn the meeting from time to time without further notice; and provided, further, that if, pursuant to the Charter or these Bylaws, the vote of a majority of a particular group of directors is required for action, a quorum must also include a majority of such group. The directors present at a meeting which has been duly called and convened may continue to transact business until adjournment, notwithstanding the withdrawal of enough directors to leave less than a quorum. -8-

Section 7. VOTING. The action of the majority of the directors present at a meeting at which a quorum is present shall be the action of the Board of Directors, unless the concurrence of a greater proportion is required for such action by applicable statute. Section 8. TELEPHONE MEETINGS. Directors may participate in a meeting by means of a conference telephone or similar communications equipment if all persons participating in the meeting can hear each other at the same time. Participation in a meeting by these means shall constitute presence in person at the meeting. Section 9. ACTION BY DIRECTORS WITHOUT MEETING. Any action required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting, if a consent in writing to such action is signed by each director and such written consent is filed with the minutes of proceedings of the Board of Directors. Section 10. VACANCIES. Except as may be otherwise provided for or fixed pursuant to the rights of holders of any class or series of preferred stock to elect directors, a vacancy on the Board of Directors that occurs or is created (whether arising through death, retirement, resignation or removal or through an increase in the number of authorized directors), may be filled by the affirmative vote of a majority of the remaining directors, even though less than a quorum, or by its sole director. A director so elected to fill a vacancy shall serve until the next annual meeting of stockholders and until such director's successor shall have been duly elected and qualified. A director elected by the stockholders to fill a vacancy shall serve for the remainder of the term of the class of the director in which the vacancy had existed. When a vacancy is created as a result of the resignation of a director from the Board of Directors, which resignation is not effective until a future date, such director shall not have the power to vote to fill such vacancy. Section 11. COMPENSATION. Directors shall not receive any stated salary for their services as directors but, by resolution of the Board of Directors, may receive compensation from time to time. Directors may be reimbursed for expenses of attendance, if any, at each annual, regular or special meeting of the Board of Directors or of any committee thereof. Section 12. Resignations. Any director or member of a committee may resign at any time. Such resignation shall be made in writing and shall take effect at the time specified therein, or if no time be specified, at the time of the receipt by the Chairman of the Board, the President or the Secretary. Section 13. REMOVAL OF DIRECTORS. Subject to the rights of holders of any class or series of preferred stock to remove directors elected by such class or series, any director may be removed only for cause and only upon the affirmative vote of the stockholders holding not less than two-thirds of all the votes entitled to be cast for the election of directors. Section 14. POLICIES AND RESOLUTIONS. The investment policies of the Corporation and the restrictions thereon shall be established from time to time by the -9-

Board of Directors. The Board of Directors shall insure that the investment policies of the Corporation and the limitations thereon or amendment thereof are at all times: (a) consistent with such policies, limitations and restrictions as are contained in these Bylaws, or in the Corporation's Charter, subject to revision from time to time at the discretion of the Board of Directors without stockholder approval unless otherwise required by law; and (b) following the Merger Effective Date (as defined in the Charter), in compliance with the restrictions applicable to real estate investment trusts (REITs) pursuant to the Internal Revenue Code of 1986, as amended, unless and until the Board of Directors determines that it is no longer in the best interests of the Corporation to continue to have the Corporation qualify as a REIT. Section 15. LOSS OF DEPOSITS. No director shall be liable for any loss which may occur by reason of the failure of the bank, trust company, savings and loan association, or other institution with whom moneys or stock have been deposited. Section 16. SURETY BONDS. Unless required by law, no director shall be obligated to give any bond or surety or other security for the performance of any of his duties. Section 17. RELIANCE. Each director, officer, employee and agent of the Corporation shall, in the performance of his duties with respect to the Corporation, be fully justified and protected with regard to any act or failure to act in reliance in good faith upon the books of account or other records of the Corporation, upon an opinion of counsel or upon reports made to the Corporation by any of its officers or employees or by the adviser, accountants, appraisers or other experts or consultants selected by the Board of Directors or officers of the Corporation, regardless of whether such counsel or expert may also be a director. ARTICLE IV COMMITTEES Section 1. NUMBER, TENURE AND QUALIFICATIONS. The Board of Directors may appoint from among its members an Executive Committee, an Audit Committee, a Compensation Committee and other committees, composed of one or more directors, to serve at the pleasure of the Board of Directors. Section 2. POWERS. (a) The Board of Directors may delegate to committees appointed under Section 1 of this Article IV any of the powers of the Board of Directors, except as prohibited by law. Any such committee, to the extent provided in the resolution of the Board of Directors, and to the maximum extent permitted under Maryland General Corporation Law, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the -10-

Corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to amending the Charter, adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the Corporation's property and assets, recommending to the stockholders a dissolution of the Corporation or a revocation of a dissolution or any other matter requiring the approval of the stockholders of the Corporation, or amending the Bylaws of the Corporation; and no such committee shall have the power or authority to authorize or declare a dividend, to authorize the issuance of stock (except that, if the Board of Directors has given general authorization for the issuance of stock providing for or establishing a method or procedure for determining the maximum number of shares to be issued, a committee of the Board of Directors may, in accordance with that general authorization or any stock option or other plan or program adopted by the Board of Directors: authorize or fix the terms of stock subject to classification or reclassification, including the designations and any of the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications, or terms or conditions of redemption of such shares; within the limits established by the Board of Directors, fix the number of any such class or series of stock or authorize the increase or decrease in the number of shares of any series or class; and otherwise establish the terms on which any stock may be issued, including the price and consideration for such stock), or to approve any merger or share exchange, regardless of whether the merger or share exchange requires stockholder approval. (b) In addition to any other committees that may be established from time to time, the Corporation shall, from and after the Merger Effective Time (as defined in Article V of the Charter), have the following committees, the specific authority and members of which shall be as designated herein, in such committee's charter or otherwise by resolution of the Board of Directors: (i) An Audit Committee, which shall consist solely of Independent Directors and which shall, among other things, engage the independent public accountants, review with the independent public accountants the plans and results of the audit engagement, approve professional services provided by the independent public accountants, review the independence of the independent public accountants, consider the range of audit and non-audit fees and review the adequacy of the Corporation's internal accounting controls. (ii) A Compensation Committee, which shall consist solely of Independent Directors and which shall determine compensation for the Corporation's executive officers, and shall, among other things, review and make recommendations concerning proposals by management with respect to compensation, bonus, employment agreements and other benefits and policies respecting such matters for the executive officers of the Corporation. Section 3. MEETINGS. Notice of committee meetings shall be given in the same manner as notice for special meetings of the Board of Directors. A majority of the members of the committee shall constitute a quorum for the transaction of business at any meeting of the committee. The act of a majority of the committee members present at a meeting shall be the act of such committee. The Board of Directors may designate a -11-

Chairman of any committee, and such Chairman or any two (2) members of any committee (if there are at least two (2) members of the Committee) may fix the time and place of its meeting unless the Board shall otherwise provide. In the absence of any member of any such committee, the members thereof present at any meeting, whether or not they constitute a quorum, may appoint another director to act in the place of such absent member. Each committee shall keep minutes of its proceedings and shall report the same to the Board of Directors at the meeting next succeeding. Section 4. TELEPHONE MEETINGS. Members of a committee of the Board of Directors may participate in a meeting by means of a conference telephone or similar communications equipment if all persons participating in the meeting can hear each other at the same time. Participation in a meeting by these means shall constitute presence in person at the meeting. Section 5. ACTION BY COMMITTEES WITHOUT MEETING. Any action required or permitted to be taken at any meeting of a committee of the Board of Directors may be taken without a meeting, if a consent in writing to such action is signed by each member of the committee and such written consent is filed with the minutes of proceedings of such committee. Section 6. VACANCIES. Subject to the provisions hereof, the Board of Directors shall have the power at any time to change the membership of any committee, to fill all vacancies, to designate alternate members to replace any absent or disqualified member or to dissolve any such committee. ARTICLE V OFFICERS Section 1. GENERAL PROVISIONS. The officers of the Corporation shall include a Chief Executive Officer, a President, a Secretary and a Treasurer and may include a Chairman of the Board, a Vice Chairman of the Board, one or more Vice Presidents, a Chief Operating Officer, a Chief Financial Officer, one or more Assistant Secretaries and one or more Assistant Treasurers. In addition, the Board of Directors may from time to time appoint such other officers with such powers and duties as they shall deem necessary or desirable. The officers of the Corporation shall be elected annually by the Board of Directors at the first meeting of the Board of Directors held after each annual meeting of stockholders. If the election of officers shall not be held at such meeting, such election shall be held as soon thereafter as may be convenient. Each officer shall hold office until his successor is elected and qualifies or until his death, resignation or removal in the manner hereinafter provided. Any two or more offices except President and Vice President may be held by the same person. In its discretion, the Board of Directors may leave unfilled any office except that of President, Treasurer and Secretary. Election of an officer or agent shall not of itself create contract rights between the Corporation and such officer or agent. The Board of Directors may delegate to any committee of the Board of Directors the power to elect subordinate officers -12-

and may delegate to any officer or committee of the Board of Directors the power to retain or appoint employees or other agents. Section 2. REMOVAL AND RESIGNATION. Any officer or agent of the Corporation may be removed by the Board of Directors if in its judgment the best interests of the Corporation would be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. Any officer of the Corporation may resign at any time by giving written notice of his resignation to the Board of Directors, the Chairman of the Board, the president or the Secretary. Any resignation shall take effect at any time subsequent to the time specified therein or, if the time when it shall become effective is not specified therein, immediately upon its receipt. The acceptance of a resignation shall not be necessary to make it effective unless otherwise stated in the resignation. Such resignation shall be without prejudice to the contract rights, if any, of the Corporation. Section 3. VACANCIES. A vacancy in any office may be filled by the Board of Directors for the balance of the term. Section 4. General Powers. All officers of the Corporation as between themselves and the Corporation shall, respectively, have such authority and perform such duties in the management of the property and affairs of the Corporation as may be determined by resolution of the Board of Directors, or in the absence of controlling provisions in a resolution of the Board of Directors, as may be provided in these Bylaws. Section 5. CHIEF EXECUTIVE OFFICER. The Board of Directors may designate a Chief Executive Officer. In the absence of such designation, the Chairman of the Board shall be the Chief Executive Officer of the Corporation. The Chief Executive Officer shall have general responsibility for implementation of the policies of the Corporation, as determined and overseen by the Board of Directors, and for the management of the business and affairs of the Corporation, and shall have all of the powers and authority of management usually vested in the office of chief executive officer of corporations as well as such other duties as may be prescribed from time to time by the Board of Directors. Section 6. CHIEF OPERATING OFFICER. The Board of Directors may designate a Chief Operating Officer. The Chief Operating Officer shall have the responsibilities and duties as set forth by the Board of Directors or the Chief Executive Officer. Section 7. CHIEF FINANCIAL OFFICER. The Board of Directors may designate a Chief Financial Officer. The Chief Financial Officer shall have the responsibilities and duties as set forth by the Board of Directors or the Chief Executive Officer. Section 8. CHAIRMAN AND VICE CHAIRMAN OF THE BOARD. The Chairman of the Board designated by the Board of Directors shall preside over the meetings of the Board of Directors and of the stockholders at which he shall be present. In the absence of the Chairman of the Board, the Vice Chairman of the Board, if there be one, shall preside at such meetings at which he shall be present. The Chairman of the Board and the Vice -13-

Chairman of the Board shall, respectively, perform such other duties as may be assigned to him or them by the Board of Directors. Section 9. PRESIDENT. The President or Chief Executive Officer, as the case may be, shall in general supervise and control all of the business and affairs of the Corporation, and shall have the general powers and duties of management usually vested in the office of president of corporations as well as such other duties as may be prescribed from time to time by the Board of Directors. In the absence of a designation of a Chief Operating Officer by the Board of Directors, the President shall be the Chief Operating Officer. He may execute any deed, mortgage, bond, contract or other instrument, except in cases where the execution thereof shall be expressly delegated by the Board of Directors or by these Bylaws to some other officer or agent of the Corporation or shall be required by law to be otherwise executed. Section 10. VICE PRESIDENTS. In the absence of the President or in the event of a vacancy in such office, the Vice President (or in the event there be more than one Vice President, the Vice Presidents in the order designated at the time of their election or, in the absence of any designation, then in the order of their election) shall perform the duties of the President and when so acting shall have all the powers of and be subject to all the restrictions upon the President; and shall perform such other duties as from time to time may be assigned to him by the president or by the Board of Directors. The Board of Directors may designate one or more Vice Presidents as executive Vice President or as Vice President for particular areas of responsibility. Section 11. SECRETARY. The Secretary shall (a) keep the minutes of the proceedings of the stockholders, the Board of Directors and committees of the Board of Directors in one or more books provided for that purpose; (b) see that all notices are duly given in accordance with the provisions of these Bylaws or as required by law; (c) be custodian of the corporate records and of the seal of the Corporation; (d) keep a register of the post office address of each stockholder which shall be furnished to the Secretary by such stockholder; (e) have general charge of the share transfer books of the Corporation; and (f) in general perform such other duties as from time to time may be assigned to him or her by the Chief Executive Officer, the President or the Board of Directors. Section 12. TREASURER. The Treasurer shall have the custody of the funds and securities of the Corporation and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors. In the absence of a designation of a Chief Financial Officer by the Board of Directors, the Treasurer shall be the Chief Financial Officer of the Corporation. The Treasurer shall disburse the funds of the Corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the President and Board of Directors, at the regular meetings of the Board of Directors or -14-

whenever it may so require, an account of all his transactions as Treasurer and of the financial condition of the Corporation. If required by the Board of Directors, the Treasurer shall give the Corporation a bond in such sum and with such surety or sureties as shall be satisfactory to the Board of Directors for the faithful performance of the duties of his office and for the restoration to the Corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, moneys and other property of whatever kind in his possession or under his or her control belonging to the Corporation. Section 13. ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. The Assistant Secretaries and Assistant Treasurers, in general, shall perform such duties as shall be assigned to them by the Secretary or Treasurer, respectively, or by the president or the Board of Directors. The Assistant Treasurers shall, if required by the Board of Directors, give bonds for the faithful performance of their duties in such sums and with such surety or sureties as shall be satisfactory to the Board of Directors. Section 14. SALARIES. The salaries and other compensation of the officers shall be fixed from time to time by the Board of Directors and no officer shall be prevented from receiving such salary or other compensation by reason of the fact that he or she is also a director. ARTICLE VI CONTRACTS, LOANS, CHECKS AND DEPOSITS Section 1. CONTRACTS. The Board of Directors may authorize any officer or agent to enter into any contract or to execute and deliver any instrument in the name of and on behalf of the Corporation and such authority may be general or confined to specific instances. Any agreement, deed, mortgage, lease or other document executed by one or more of the directors or by an authorized person shall be valid and binding upon the Board of Directors and upon the Corporation when authorized or ratified by action of the Board of Directors. Section 2. CHECKS AND DRAFTS. All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the Corporation shall be signed by such officer or agent of the Corporation in such manner as shall from time to time be determined by the Board of Directors. Section 3. DEPOSITS. All funds of the Corporation not otherwise employed shall be deposited from time to time to the credit of the Corporation in such banks, trust companies or other depositories as the Board of Directors may designate. -15-

ARTICLE VII STOCK Section 1. CERTIFICATES. Each stockholder shall be entitled to a certificate or certificates which shall represent and certify the number of shares of each class of stock held by him in the Corporation. Each certificate shall be signed by the Chairman or Vice Chairman of the Board of Directors, the Chief Executive Officer or the President or a Vice President, and countersigned by the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer, and may be sealed with the seal, if any, of the Corporation. The signatures may be either manual or facsimile. Certificates shall be consecutively numbered; and if the Corporation shall, from time to time, issue several classes of stock, each class may have its own number series. A certificate is valid and may be issued whether or not an officer who signed it is still an officer when it is issued. Each certificate representing shares which are restricted as to their transferability or voting powers, which are preferred or limited as to their dividends or as to their allocable portion of the assets upon liquidation or which are redeemable at the option of the Corporation, shall have a statement of such restriction, limitation, preference or redemption provision, or a summary thereof, plainly stated on the certificate. If the Corporation has authority to issue stock of more than one class, the certificate shall contain on the face or back a full statement or summary of the designations and any preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications and terms and conditions of redemption of each class of stock and, if the Corporation is authorized to issue any preferred or special class in series, the differences in the relative rights and preferences between the shares of each series to the extent they have been set and the authority of the Board of Directors to set the relative rights and preferences of subsequent series. In lieu of such statement or summary, the certificate may state that the Corporation will furnish a full statement of such information to any stockholder upon request and without charge. Section 2. TRANSFERS. No transfers of shares of the Corporation shall be made if (i) void ab initio pursuant to any provision of the Corporation's Charter or (ii) the Board of Directors, pursuant to any provision of the Corporation's Charter, shall have refused to permit the transfer of such shares. Permitted transfers of shares of the Corporation shall be made on the share records of the Corporation only upon the instruction of the registered holder thereof, or by his or her attorney thereunto authorized by power of attorney duly executed and filed with the Secretary or with a transfer agent or transfer clerk, and upon surrender of the certificate or certificates, if issued, for such shares properly endorsed or accompanied by a duly executed share transfer power and the payment of all taxes thereon. Upon surrender to the Corporation or the transfer agent of the Corporation of a stock certificate duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, the Corporation shall issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. The Corporation shall be entitled to treat the holder of record of any share of stock as the holder in fact thereof and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such share or on the part of any other person, whether -16-

or not it shall have express or other notice thereof, except as otherwise provided by the laws of the State of Maryland. Notwithstanding the foregoing, transfers of shares of any class of stock will be subject in all respects to the Charter of the Corporation and all of the terms and conditions contained therein. Section 3. REPLACEMENT CERTIFICATE. Any officer designated by the Board of Directors may direct a new certificate to be issued in place of any certificate previously issued by the Corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate to be lost, stolen or destroyed. When authorizing the issuance of a new certificate, an officer designated by the Board of Directors may, in his or her discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or the owner's legal representative to advertise the same in such manner as he shall require and/or to give bond, with sufficient surety, to the Corporation to indemnify it against any loss or claim which may arise as a result of the issuance of a new certificate. Section 4. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE. The Board of Directors may set, in advance, a record date for the purpose of determining stockholders entitled to notice of or to vote at any meeting of stockholders or determining stockholders entitled to receive payment of any dividend or the allotment of any other rights, or in order to make a determination of stockholders for any other proper purpose. Such date, in any case, shall not be prior to the close of business on the day the record date is fixed and shall be not more than ninety (90) days and, in the case of a meeting of stockholders, not less than ten (10) days before the date on which the meeting or particular action requiring such determination of stockholders of record is to be held or taken. In lieu of fixing a record date, the Board of Directors may provide that the stock transfer books shall be closed for a stated period but not longer than twenty (20) days. If the stock transfer books are closed for the purpose of determining stockholders entitled to notice of or to vote at a meeting of stockholders, such books shall be closed for at least ten (10) days before the date of such meeting. If no record date is fixed and the stock transfer books are not closed for the determination of stockholders, (a) the record date for the determination of stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day on which the notice of meeting is mailed; and (b) the record date for the determination of stockholders entitled to receive payment of a dividend or an allotment of any other rights shall be the close of business on the day on which the resolution of the directors, declaring the dividend or allotment of rights, is adopted. When a determination of stockholders entitled to vote at any meeting of stockholders has been made as provided in this section, such determination shall apply to any adjournment thereof, except when (i) the determination has been made through the closing of the transfer books and the stated period of closing has expired or (ii) the meeting is adjourned -17-

to a date more than 120 days after the record date fixed for the original meeting, in either of which case a new record date shall be determined as set forth herein. Section 5. STOCK LEDGER. The Corporation shall maintain at its principal office or at the office of its counsel, accountants or transfer agent, an original or duplicate share ledger containing the name and address of each stockholder and the number of shares of each class held by such stockholder. Section 6. FRACTIONAL STOCK; ISSUANCE OF UNITS. The Board of Directors may issue fractional stock or provide for the issuance of scrip, all on such terms and under such conditions as they may determine. Notwithstanding any other provision of the Charter or these Bylaws, the Board of Directors may issue units consisting of different securities of the Corporation. Any security issued in a unit shall have the same characteristics as any identical securities issued by the Corporation, except that the Board of Directors may provide that for a specified period, securities of the Corporation issued in such unit may be transferred on the books of the Corporation only in such unit. Section 7. EXEMPTION FROM CONTROL SHARE ACQUISITION STATUTE. Notwithstanding any other provision of the Charter or these Bylaws, Subtitle 7 of Title 3 of the Maryland General Corporation Law, or any successor statute, shall not apply to any acquisition of shares of stock of the Corporation by any person. This Section 7 may be repealed, in whole or in part, at any time, whether before or after an acquisition of control shares and, upon such repeal, may, to the extent provided by any successor bylaw, apply to any prior or subsequent control share acquisition. ARTICLE VIII DISTRIBUTIONS Section 1. AUTHORIZATION. Dividends and other distributions upon the stock of the Corporation may be authorized and declared by the Board of Directors, subject to the provisions of law and the Charter. Dividends and other distributions may be paid in cash, property or stock of the Corporation, subject to applicable provisions of law and the Charter. Section 2. CONTINGENCIES. Before payment of any dividends or other distributions, there may be set aside out of any assets of the Corporation available for dividends or other distributions such sum or sums as the Board of Directors may from time to time, in its absolute discretion, think proper as a reserve fund for contingencies, for equalizing dividends or other distributions, for repairing or maintaining any property of the Corporation or for such other purpose as the Board of Directors shall determine to be in the best interest of the Corporation, and the Board of Directors may modify or abolish any such reserve in the manner in which it was created. -18-

ARTICLE IX INVESTMENT POLICY The Board of Directors may from time to time adopt, amend, revise or terminate any policy or policies with respect to investments by the Corporation as it shall deem appropriate in its sole discretion. ARTICLE X SEAL Section 1. SEAL. The Board of Directors may authorize the adoption of a seal by the Corporation. The seal shall contain the name of the Corporation and the year of its incorporation and the words "Incorporated Maryland." The Board of Directors may authorize one or more duplicate seals and provide for the custody thereof. Section 2. AFFIXING SEAL. Whenever the Corporation is permitted or required to affix its seal to a document, it shall be sufficient to meet the requirements of any law, rule or regulation relating to a seal to place the word "(SEAL)" adjacent to the signature of the person authorized to execute the document on behalf of the Corporation. ARTICLE XI INDEMNIFICATION AND ADVANCE OF EXPENSES Section 1. Indemnification of Agents. To the maximum extent permitted by the laws of the State of Maryland in effect from time to time, the Corporation shall indemnify and, without requiring a preliminary determination of the ultimate entitlement to indemnification, shall pay or reimburse reasonable expenses in advance of final disposition of a proceeding to (a) any individual who is a present or former director or officer of the Corporation and who is made a party to the proceeding by reason of his service in that capacity or (b) any individual who, while a director of the Corporation and at the request of the Corporation, serves or has served another corporation, real estate investment trust, partnership, joint venture, trust, employee benefit plan or any other enterprise as a director, officer, partner or trustee of such corporation, real estate investment trust, partnership, joint venture, trust, employee benefit plan or other enterprise and who is made a party to the proceeding by reason of his service in that capacity. The Corporation may, with the approval of its Board of Directors, provide such indemnification and advance for expenses to a person who served a predecessor of the Corporation in any of the capacities described in (a) or (b) above and to any employee or agent of the Corporation or a predecessor of the Corporation. Neither the amendment nor repeal of this Article, nor the adoption or amendment of any other provision of these Bylaws or the Charter inconsistent with this Article, shall apply to or affect in any respect the applicability of the preceding paragraph with respect to any act or failure to act which occurred prior to such amendment, repeal or adoption. -19-

Section 2. AUTHORITY TO ADVANCE EXPENSES. Expenses incurred by an officer or director (acting in his or her capacity as such) in defending an action, suit or proceeding shall be paid by the Corporation in advance of the final disposition thereof; provided, however, that such expenses shall be advanced only upon delivery to the Corporation of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that he or she is not entitled to indemnification by the Corporation as authorized in this Article or otherwise. Expenses incurred by other agents of the Corporation (or by the directors or officers not acting in their capacity as such, including service with respect to employee benefit plans) may be advanced upon such terms and conditions as the Board of Directors deems appropriate. Any obligation to reimburse the Corporation for expense advances shall be unsecured and no interest shall be charged thereon. Section 3. RIGHT OF CLAIMANT TO BRING SUIT. If a claim under Section 1 or 2 of this Article is not paid in full by the Corporation within ninety (90) days after a written claim has been received by the Corporation, the claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expenses (including attorneys' fees) of prosecuting such claims. Section 4. INSURANCE. The Corporation may to the fullest extent permitted by law, purchase and maintain insurance on behalf of any such person against any liability which may be asserted against such person. Section 5. INDEMNIFICATION NON-EXCLUSIVE. The indemnification provided herein shall not be deemed to limit the right of the Corporation to indemnify any other person for any such expenses to the fullest extent permitted by law, nor shall it be deemed exclusive of any other rights to which any person seeking indemnification from the Corporation may be entitled under any agreement, vote of stockholders or disinterested Directors, or otherwise, both as to action in such person's official capacity and as to action in another capacity while holding such office. Section 6. SUBROGATION. In the event of payment under this Article, the Corporation shall be subrogated to the extent of such payment to all of the rights of recovery of the indemnified person, who shall execute all papers required and shall do everything that may be necessary to secure such rights, including the execution of such documents necessary to enable the Corporation to effectively bring suit to enforce such rights. Section 7. NO DUPLICATION OF PAYMENTS. The Corporation shall not be liable under this Article to make any payment in connection with any claim against the indemnified person to the extent such person has actually received payment (under any insurance policy, agreement, vote or otherwise) of the amounts otherwise indemnifiable hereunder. -20-

ARTICLE XII WAIVER OF NOTICE Whenever any notice is required to be given pursuant to the Charter or these Bylaws or pursuant to applicable law, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. Neither the business to be transacted at nor the purpose of any meeting need be set forth in the waiver of notice, unless specifically required by statute. The attendance of any person at any meeting shall constitute a waiver of notice of such meeting, except where such person attends a meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened. ARTICLE XIII AMENDMENT OF BYLAWS The Board of Directors, by the affirmative vote of at least a majority of the entire Board, shall have the exclusive power to adopt, alter, amend, modify or repeal any provision of these Bylaws and to adopt new Bylaws.

                                                                     EXHIBIT 4.2


                         [GRAPHIC OF STOCK CERTIFICATE]



                           AMERICAN BANK NOTE COMPANY
                               711 ARMSTRONG LANE
                           COLUMBIA, TENNESSEE 38401
                                 (931) 388-3003

                 SALES:      J. NAPOLITANO     212-269-0339 x14
                 / ETHER 13 / LIVE JOBS / A / AMERICAN 14108 FC


              PRODUCTION COORDINATOR: VERONICA GLIATTI 931-490-1706
                            PROOF OF DECEMBER 8, 2003
AMERICAN HOME MORTGAGE INVESTMENT CORP. (Fmly: American Home Mortgage Holdings)
                                  TSB 14108 FC

                               Operator:       Ron
                                       Rev. 1

      PLEASE INITIAL THE APPROPRIATE SELECTION FOR THIS PROOF: ____OK AS IS
____OK WITH CHANGES ____MAKE CHANGES AND SEND ANOTHER PROOF

Colors Selected for Printing: Logo is in EPS format; SUITABLE FOR PRINTING;
Prints in PMS 302. Intaglio prints in SC-7 Dark Blue.

COLOR: This proof was printed from a digital file or artwork on a graphics
quality, color laser printer. It is a good representation of the color as it
will appear on the final product. However, it is not an exact color rendition,
and the final printed product may appear slightly different from the proof due
to the difference between the dyes and printing ink.


IMPORTANT NOTICE The Corporation will furnish to any stockholder, on request and without charge, a full statement of the information required by Section 2-211(b) of the Corporations and Associations Article of the Annotated Code of Maryland with respect to the designations and any preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications, and terms and conditions of redemption of the stock of each class which the Corporation has authority to issue and, (i) the differences in the relative rights and preferences between the shares of each series to the extent set, and (ii) the authority of the Board of Directors to set such rights and preferences of subsequent series. The foregoing summary does not purport to be complete and is subject to and qualified in its entirety by reference to the charter of the Corporation (the "Charter"), a copy of which will be sent without charge to each stockholder who so requests. Such request must be made to the Secretary of the Corporation at its principal office or to the Transfer Agent. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO SIGNIFICANT RESTRICTIONS ON OWNERSHIP AND TRANSFER. EXCEPT AS OTHERWISE PROVIDED PURSUANT TO THE CHARTER OF THE CORPORATION, NO PERSON MAY BENEFICIALLY OWN (I) SHARES OF COMMON STOCK OF THE CORPORATION IN EXCESS OF 6.5% OF THE MORE RESTRICTIVE OF THE TOTAL NUMBER OR VALUE OF THE OUTSTANDING SHARES OF COMMON STOCK OF THE CORPORATION, (II) SHARES OF EQUITY STOCK OF THE CORPORATION IN EXCESS OF 6.5% OF THE MORE RESTRICTIVE OF THE TOTAL NUMBER OR VALUE OF THE OUTSTANDING SHARES OF EQUITY STOCK OF THE CORPORATION, (III) SHARES OF THE CORPORATION'S EQUITY STOCK IF SUCH ACQUISITION WOULD RESULT IN THE CORPORATION BEING "CLOSELY HELD" UNDER SECTION 856(h) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), (IV) SHARES OF THE CORPORATION'S EQUITY STOCK IF SUCH ACQUISITION WOULD RESULT IN THE EQUITY STOCK BEING BENEFICIALLY OWNED BY FEWER THAN 100 PERSONS (DETERMINED WITHOUT REFERENCE TO ANY RULES OF ATTRIBUTION UNDER THE CODE), (V) SHARES OF THE CORPORATION'S EQUITY STOCK IF SUCH ACQUISITION WOULD CAUSE THE CORPORATION TO FAIL TO QUALIFY AS A REAL ESTATE INVESTMENT TRUST UNDER THE CODE, OR (VI) SHARES OF THE CORPORATION'S COMMON STOCK OR EQUITY STOCK IN VIOLATION OF ANY OF THE FURTHER RESTRICTIONS SET FORTH IN THE CORPORATION'S CHARTER. ANY PERSON WHO ATTEMPTS OR PROPOSES TO BENEFICIALLY OWN SHARES OF THE CORPORATIONS' COMMON STOCK OR EQUITY STOCK IN EXCESS OF THE ABOVE LIMITATIONS MUST IMMEDIATELY NOTIFY THE CORPORATION IN WRITING. IF AN ATTEMPT IS MADE TO VIOLATE OR THERE IS A VIOLATION OF THESE RESTRICTIONS, (A) ANY PURPORTED TRANSFER WILL BE VOID AB INITIO AND WILL NOT BE RECOGNIZED BY THE CORPORATION AND (B) THE SHARES OF THE CORPORATION'S COMMON STOCK OR EQUITY STOCK IN VIOLATION OF THESE RESTRICTIONS, WHETHER AS A RESULT OF A TRANSFER OR NON-TRANSFER EVENT, WILL BE TRANSFERRED AUTOMATICALLY AND BY OPERATION OF LAW TO A SHARE TRUST AND SHALL BE DESIGNATED SHARES-IN-TRUST. ALL TERMS USED IN THIS LEGEND AND DEFINED IN THE CORPORATION'S CHARTER HAVE THE MEANINGS PROVIDED IN THE CORPORATION'S CHARTER, AS THE SAME MAY BE AMENDED FROM TIME TO TIME, A COPY OF WHICH, INCLUDING THE RESTRICTIONS ON OWNERSHIP AND TRANSFER, WILL BE SENT WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO REQUESTS. The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations: <TABLE> <S> <C> TEN COM - as tenants in common UNIF GIFT MIN ACT-.........................Custodian........................ TEN ENT - as tenants by the entireties (Cust) (Minor) JT TEN - as joint tenants with right of under Uniform Gifts to Minors survivorship and not as tenants Act.......... in common (State) </TABLE> Additional abbreviations may also be used though not in the above list. For value received, _______________________________ hereby sell, assign and transfer unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE ------------------------------------- ------------------------------------- __________________________________________________________________________ (PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE) __________________________________________________________________________ ____________________________________________________________________shares of the capital stock represented by the within Certificate, and do hereby irrevocably constitute and appoint __________________________________________________________________Attorney to transfer the said stock on the books of the within named Corporation with full power of substitution in the premises. Dated ___________________________ ________________________________________________________ NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER. Signature(s) Guaranteed: _________________________________________________________________________ THE SIGNATURE(S) MUST BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15. KEEP THIS CERTIFICATE IN A SAFE PLACE. IF IT IS LOST, STOLEN, MUTILATED OR DESTROYED, THE CORPORATION WILL REQUIRE A BOND OF INDEMNITY AS A CONDITION TO THE ISSUANCE OF A REPLACEMENT CERTIFICATE. AMERICAN BANK NOTE COMPANY 711 ARMSTRONG LANE COLUMBIA, TENNESSEE 38401 (931) 388-3003 SALES: J. NAPOLITANO 212-269-0339 x14 / ETHER 13 / LIVE JOBS / A / AMERICAN 14108 BK PRODUCTION COORDINATOR: VERONICA GLIATTI 931-490-1706 PROOF OF DECEMBER 9, 2003 AMERICAN HOME MORTGAGE INVESTMENT CORP. (Fmly: American Home Mortgage Holdings) TSB 14108 BK Operator: Ron Rev. 2 PLEASE INITIAL THE APPROPRIATE SELECTION FOR THIS PROOF: ____OK AS IS ____OK WITH CHANGES ______MAKE CHANGES AND SEND ANOTHER PROOF

                                                                    Exhibit 10.7


                             EMPLOYMENT AGREEMENT


This Employment Agreement, dated as of March 1, 2003 (this "Agreement"), is by
and between American Home Mortgage Holdings, Inc., a Delaware corporation having
a place of business at 520 Broadhollow Road, Melville, NY (the "Company"), and
Stephen Hozie, [address omitted] (the "Executive").

      Whereas the Company wishes to assure itself of the services of the
Executive, and the Executive desires to be employed by the Company, upon the
terms and conditions hereinafter set forth.

      Now, Therefore, the Company and the Executive hereby agree as follows:

      1. Employment. The Company agrees to employ the Executive, and the
Executive hereby accepts such employment by the Company during the term set
forth in Section 2 and on the other terms and conditions of this Agreement.

      2. Term. The term of this Agreement shall commence as of March 1, 2003,
and shall continue until four weeks after the resignation or discharge of the
Executive.

      3. Position, Duties and Responsibilities, Rights

      (a) During the term of this Agreement, the Executive shall serve as, and
be elected to and hold the office and title of Chief Financial Officer of the
Company. As such, the Executive shall report only to the Chief Executive Officer
of the Company (the "CEO"), and shall have all of the powers and duties usually
incident to the office of Chief Financial Officer of the Company. In addition,
the Executive shall serve as the Chief Financial Officer of subsidiaries of the
Company if and when requested to do so by the CEO.

      (b) During the term of this Agreement, the Executive agrees to devote
substantially all the Executive's time, efforts and skills to the affairs of the
Company during the Company's normal business hours, except for vacations,
illness and incapacity, but nothing in this Agreement shall preclude the
Executive from devoting reasonable periods to (i) manage the Executive's
personal investments, (ii) participate in professional, educational, public
interest, charitable, civic or community activities, including activities
sponsored by trade organizations, and (iii) serve as a director or member of an
advisory committee of any corporation not in competition with the Company or any
of its subsidiaries, or as an officer, trustee or director of any charitable,
educational, philanthropic, civic, social or industry organizations, or as a
speaker or arbitrator; provided, however, that the performance of the
Executive's duties or responsibilities in any of such capacities does not
materially interfere with the regular performance of the Executive's duties and
responsibilities hereunder.

      4. Place of Performance. In connection with the Executive's employment by
the Company, the Executive shall be based at its principal executive offices
which are currently located in Melville, NY, and shall not be required to be
absent therefrom on travel status or

otherwise for more than a reasonable time each year as necessary or appropriate for the performance of the Executive's duties hereunder. 5. Compensation. (a) During the term of this Agreement, the Company shall pay the Executive, and the Executive agrees to accept a base salary at the rate of not less than $325,000.00 per year (the annual base salary as increased from time to time during the term of this Agreement being hereinafter referred to as the "Base Salary"). The Base Salary shall be paid in installments no less frequently than monthly. Any increase in Base Salary or other compensation shall not limit or reduce any other obligation of the Company hereunder, and once established at an increased specified rate, the Executive's Base Salary hereunder shall not thereafter be reduced. (b) During the term of this Agreement, the Company shall, after the close of each calendar year, pay the Executive an objective achievement bonus, the amount of which will be determined by the CEO. To determine the amount of the objective achievement bonus for a given year, the CEO will consider whether the Executive achieved the objectives set forth in the Executive's business plan for that calendar year. If the CEO determines that all of the objectives were achieved, the CEO will award the Executive an objective achievement bonus of not less than $175,000.00. If some, but not all of the objectives were achieved, the CEO will award a lesser objective achievement bonus. Objective achievement bonuses for a given year will be paid no later than the last day of February of the succeeding year. (c) Commencing for the year beginning January 1, 2003, and for each subsequent year during the term of this agreement, the Company shall pay the Executive, a management evaluation bonus the amount of which will be determined by the CEO. The amount of the management evaluation bonus will be targeted at $75,000.00, but may be a greater or lesser amount. The CEO will determine the actual amount of the management evaluation bonus for a given year based on the CEO's evaluation of the Executive's overall performance during the year. Management evaluation bonuses for a given year will be paid no later than the last day of February of the succeeding year. (d) Commencing for the year beginning January 1, 2003, and for each subsequent year during the term of this agreement, the Company shall, after the close of each calendar year, pay the Executive a company performance award the amount of which will be determined by the CEO. To determine the amount of the company performance award for a given year, the CEO will consider whether the company achieved the objectives set forth in the Company's business plan for that calendar year. If the CEO determines that all of the objectives were achieved, the CEO will award the Executive a company performance bonus of not less than $75,000.00. If some, but not all of the objectives were achieved, the CEO will award a lesser company performance bonus. Company performance bonuses for a given year will be paid no later than the last day of February of the succeeding year. (e) Notwithstanding the amounts, determinants and meanings set forth in sections 5(b), 5(c), and 5(d), the minimum bonus paid to the Executive for the combination of 5(b), 5(c) and 5(d) shall be $162,500 and the maximum cumulative bonus due as a result of sections 5(b), 5(c) and 5(d) shall be $487,500 (i.e., the sum of the payments pursuant to 5(b), 5(c) and 5(d) will range from $162,500 to $487,500 per year).

(f) The Executive will not be entitled to any unpaid bonuses if this Agreement is terminated as described in Section 6. Notwithstanding anything to the contrary, the Executive will not be entitled to any unpaid bonuses if he is no longer an employee of the Company. (g) During the term of this Agreement, the Executive shall be entitled to fringe benefits, in each case at least equal to and on the same terms and conditions as those attached to the Executive's office on the date hereof, as the same may be improved from time to time during the term of this Agreement, as well as to reimbursement, upon proper accounting, of all reasonable expenses and disbursements incurred by the Executive in the course of the Executive's duties. The Executive will be provided the specific benefits and relocation plan set forth on the addendums attached hereto. The Executive agrees to reimburse the Company for amounts it paid to relocate the Executive if the Executive resigns or is terminated for gross misconduct within one year of the Executive commencing employment hereunder. (h) In addition to previously granted stock options, the Executive will be given an Option Grant of 20,000 shares of existing class of the common stock of the Company, effective upon execution of this Agreement. Further, a target Option Grant of 32,500 shares of existing class of the common stock of the Company will be issued in March, 2004. The complete terms of the Option Grant will be governed by the Company's 1999 Omnibus Stock Option Plan. 6. Termination of Employment. The employment created hereby is at will. The Company may terminate this Agreement by discharging the Executive. The Executive may terminate this Agreement by resigning. Discharge or resignation may be for any reason or for no reason. If the company chooses to discharge the Executive, it will deliver a letter of discharge pursuant to the notice provisions of section 10. If the Executive chooses to resign, the Executive will deliver a letter of resignation pursuant to the notice provisions of section 10. 7. Change of Control. Not withstanding anything to the contrary herein, if any person or entity acquires more than 50% of the voting stock of the Company during the one year period from March 1, 2003 through March 1, 2004, the Company will notify the Executive pursuant to the provision of Section 10 hereof that a new majority owner exists. In such case, the Executive will have sixty days to elect to terminate this Agreement due to the change of control by resigning pursuant to Section 6 hereof. If the Executive so elects, within the prescribed timeframe, the Company will pay the Executive severance of $650,000. This section 7 shall survive the termination of this Agreement. 8. Entire Agreement; Amendment. (a) This Agreement contains the entire understanding of the parties with respect to the subject matter hereof and supersedes any and all other agreements between the parties, their predecessors and affiliates, except as specified in section 5(h), above. (b) Any amendment of this Agreement shall not be binding unless in writing and signed by both (i) the CEO and (ii) the Executive. 9. Enforceability. In the event that any provision of this Agreement is determined to be invalid or unenforceable, the remaining terms and conditions of this Agreement shall be unaffected and shall remain in full force and effect, and any such determination of invalidity or enforceability shall not affect the validity or enforceability of any other provision of this Agreement.

10. Notices. All notices which may be necessary or proper for either the Company or the Executive to give to the other shall be in writing and shall be sent by hand delivery, registered or certified mail, return receipt requested or overnight courier, if to the Executive, to him at [address omitted] and, if to the Company, to it at its principal executive offices at 520 Broadhollow Road, Melville, NY 11747, Attention: Chief Executive Officer, with a copy to 520 Broadhollow Road, Melville, NY 11747, Attention: General Counsel, and shall be deemed given when sent. Either party may by like notice to the other party change the address at which it is to receive notices hereunder. 11. Non-Disparagement, Non-Solicitation, Confidential Information. The Company and the Executive agree that neither will disparage the other and that their representatives will not disparage either party hereto. The Executive agrees that for a period of six months following the termination of this Agreement, the Executive will not solicit any employee of the Company to leave the Company or hire any employee of the Company. The Company and the Executive agree to keep the terms of this Agreement confidential except that the Executive may divulge the terms of this Agreement to the Executive's spouse, attorney, financial advisor and accountant provided they agree to keep the terms of this Agreement confidential. The Executive agrees to protect, not disclose, and not use for the Executive's benefit any confidential information or trade secrets belonging to the Company, including information regarding proprietary procedures and techniques, accounts, or personnel (excepting information that was already disclosed by the Company or otherwise was made public other than by breach of this Agreement by the Executive). The preceding two sentences shall not apply to disclosures required due to the laws or regulations of governments, or the orders of courts having jurisdiction over the Company and the Executive. This section 11 shall survive the termination of this Agreement. 12. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND BE ENFORCEABLE IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first written above. American Home Mortgage Holdings, Inc. By: /s/ Michael Strauss --------------------------------- Name: Michael Strauss Title: President and CEO /s/ Stephen Hozie ------------------------------------- Stephen Hozie

                                                                    Exhibit 10.8

                             EMPLOYMENT AGREEMENT

This Employment Agreement, dated as of August 4, 2003 (this "Agreement"), is by
and between American Home Mortgage, Inc., a New York corporation having a place
of business at 520 Broadhollow Road, Melville, NY 11747 (the "Company"), and
Kenneth Alverson, [address omitted] (the "Executive").


            Whereas the Company wishes to assure itself of the services of the
Executive, and the Executive desires to be employed by the Company, upon the
terms and conditions hereinafter set forth.


            Now, Therefore, the Company and the Executive hereby agree as
follows:

            1. Employment. The Company agrees to employ the Executive, and the
Executive hereby accepts such employment by the Company during the term set
forth in Section 2 and on the other terms and conditions of this Agreement.

            2. Term. The term of this Agreement shall commence on August 4,
2003, and shall continue until four weeks after the resignation or discharge of
the Executive, or until August 3, 2006.

            3. Position, Duties and Responsibilities, Rights.

            (a) During the term of this Agreement, the Executive shall serve as,
and be elected to and hold the office and title of Chief Administrative Officer.
As such, the Executive shall have all of the powers and duties usually incident
to such office.

            (b) During the term of this Agreement, the Executive agrees to
devote substantially all the Executive's time, efforts and skills to the affairs
of the Company during the Company's normal business hours, except for vacations,
illness and incapacity, but nothing in this Agreement shall preclude the
Executive from devoting reasonable periods to (i) manage the Executive's
personal investments, (ii) participate in professional, educational, public
interest, charitable, civic or community activities, including activities
sponsored by trade organizations, (iii) serve as a director or member of an
advisory committee of any corporation not in competition with the Company or any
of its subsidiaries, or as an officer, trustee or director of any charitable,
educational, philanthropic, civic, social or industry organizations, or as a
speaker or arbitrator; provided, however, that the performance of the
Executive's duties or responsibilities in any of such capacities does not
materially interfere with the regular performance of the Executive's duties and
responsibilities hereunder

            (c) Place of Performance. In connection with the Executive's
employment by the Company, the Executive shall be based in an office to be
established in Melville, New York, and shall not be required to be absent from
there on travel status or otherwise for more than a reasonable time each year as
necessary or appropriate for the performance of the Executive's duties
hereunder.

4. Compensation. (a) During the term of this Agreement, the Company shall pay the Executive, and the Executive agrees to accept a base salary at the rate of not less than $400,000.00 per year (the annual base salary as increased from time to time during the term of this Agreement being hereinafter referred to as the "Base Salary"). The Base Salary shall be paid in installments no less frequently than monthly. Any increase in Base Salary or other compensation shall not limit or reduce any other obligation of the Company hereunder, and once established at an increased specified rate, the Executive's Base Salary hereunder shall not thereafter be reduced. (b) During the term of this Agreement, the Company shall pay the Executive, a management evaluation bonus the amount of which will be determined by the Company's Chief Executive Officer based on his evaluation of the Executive's overall performance during the year. The amount of the management evaluation bonus will be between 50% and 100% of the Executive's Base Salary. The management evaluation bonus for a given year will be paid no later than the last day of February of the succeeding year. Notwithstanding anything to the contrary, the Executive will not be entitled to any unpaid bonuses if he is no longer an employee of the Company. (c) Upon the Executive commencing employment hereunder, the Executive will receive a sign-on bonus of $200,000. If the Executive ceases to be employed by the Company within six months of the Executive commencing employment hereunder, the Executive shall repay the $200,000 sign-on bonus to the Company. If the Executive ceases to be employed by the Company, and has been employed by the Company for six months or longer, but for less than eighteen months, the Executive shall repay to the Company a portion of the sign-on bonus. The portion of the sign-on bonus to be repaid shall be the product of $200,000 and a fraction, the numerator of which shall be the difference between eighteen and the number of months the Executive was employed by the Company, and the denominator of which shall be twelve. The Executive waives any claim of offset for amounts due pursuant to this subparagraph, and agrees to repay the Company within ten days of ceasing to be employed by the Company. (d) The Executive will be eligible to participate in the Company's stock option and stock grant plans. Upon the Executive commencing employment hereunder, the Executive shall receive an option award for 40,000 shares of the existing class of the common stock of the Company. One-half of the award (20,000 shares) shall vest and be exercisable two years following the date the Executive commences employment hereunder. The remainder of the award (20,000 shares) shall vest and be exercisable three years following the date the Executive commences employment hereunder. Upon the Executive commencing employment hereunder, the Executive shall receive a stock grant of 15,000 shares of the existing class of the common stock of the Company. One-half of the award (7,500 shares) shall vest two years following the date the Executive commences employment hereunder. The remainder of the award (7,500 shares) shall vest three years following the date the Executive commences employment hereunder. The complete terms of the option award and stock grant will be governed by the Company's omnibus stock option plan. In the event that a person or entity, other than Michael Strauss becomes the owner or beneficial owner of more than 50% of the voting securities of the Company that are eligible, without contingency, to vote for the Company's Directors, the option award and stock grant set forth herein shall vest. (e) During the term of this Agreement, the Executive shall be entitled to fringe benefits, in each case at least equal to and on the same terms and conditions as those attached to 2

the Executive's office on the date hereof, as the same may be improved from time to time during the term of this Agreement, as well as to reimbursement, upon proper accounting, of all reasonable expenses and disbursements incurred by the Executive in the course of the Executive's duties. 5. Termination of Employment. The employment created hereby is at will. The Company may terminate this Agreement by discharging the Executive. The Executive may terminate this Agreement by resigning with four weeks notice to the Company. Discharge or resignation may be for any reason or for no reason. If the company chooses to discharge the Executive, it will deliver a letter of discharge pursuant to the notice provisions of section 8. If the Executive chooses to resign, the Executive will deliver a letter of resignation pursuant to the notice provisions of section 8. If the Company terminates this Agreement without cause prior to its expiration, the Company will pay the Executive a severance award equal to twelve months base salary. If the Company terminates this Agreement as a result of a person or entity, other than Michael Strauss becomes the owner or beneficial owner of more than 50% of the voting securities of the Company that are eligible, without contingency, to vote for the Company's Directors, then, in lieu, of the severance award due the Executive in accordance with the immediately preceding sentence, the Company will pay the Executive a severance award equal to the greater of twelve months base salary plus the last management evaluation award paid the Executive or seventeen months base salary. 6. Entire Agreement; Amendment. (a) This Agreement contains the entire understanding of the parties with respect to the subject matter hereof and supersedes any and all other agreements between the parties, their predecessors and affiliates. (b) Any amendment of this Agreement shall not be binding unless in writing and signed by both (i) the Company's Chief Executive Officer and (ii) the Executive. 7. Enforceability. In the event that any provision of this Agreement is determined to be invalid or unenforceable, the remaining terms and conditions of this Agreement shall be unaffected and shall remain in full force and effect, and any such determination of invalidity or enforceability shall not affect the validity or enforceability of any other provision of this Agreement. 8. Notices. All notices which may be necessary or proper for either the Company or the Executive to give to the other shall be in writing and shall be sent by hand delivery, registered or certified mail, return receipt requested or overnight courier, if to the Executive, to him at [address omitted] and, if to the Company, to it at its principal executive offices at 520 Broadhollow Road, Melville, NY 11747, Attention: Corporate Counsel, with a copy to Cadwalader, Wickersham & Taft, 100 Maiden Lane, New York, New York 10038, Attention: Louis Bevilacqua, Esq., and shall be deemed given when sent. Either party may by like notice to the other party change the address at which it is to receive notices hereunder. 9. Non-Disparagement, Non-Solicitation, Confidential Information. The Company and the Executive agree that neither will disparage the other and that their representatives will not disparage either party hereto. The Executive agrees that for a period of one year following the termination of this Agreement, the Executive will not solicit any employee of the Company to leave the Company or hire any employee of the Company. The 3

Company and the Executive agree to keep the terms of this Agreement confidential except that the Executive may divulge the terms of this Agreement to the Executive's spouse, attorney, financial advisor and accountant provided they agree to keep the terms of this Agreement confidential. The Executive agrees to protect, not disclose, and not use for the Executive's benefit any confidential information or trade secrets belonging to the Company, including information regarding proprietary procedures and techniques, accounts, or personnel (excepting information that was already disclosed by the Company or otherwise was made public other than by breach of this Agreement by the Executive). The preceding two sentences shall not apply to disclosures required due to the laws or regulations of governments, or the orders of courts having jurisdiction over the Company and the Executive. This section 9 shall survive the termination of this Agreement. 10. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND BE ENFORCEABLE IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first written above. American Home Mortgage Corp. By: /s/ Michael Strauss --------------------------- Name: Michael Strauss Title: Chief Executive Officer /s/ Kenneth Alverson ------------------------------- Kenneth Alverson 4

                                                                    Exhibit 10.9

                             EMPLOYMENT AGREEMENT

This Employment Agreement, dated as of June 19, 2003 (this "Agreement"), is by
and between American Home Mortgage Inc., a New York corporation having a place
of business at 520 Broadhollow Road, Melville, NY 11747 (the "Company"), and Tom
McDonagh, [address omitted] (the "Executive").

            Whereas the Company wishes to assure itself of the services of the
Executive, and the Executive desires to be employed by the Company, upon the
terms and conditions hereinafter set forth.

            Now, Therefore, the Company and the Executive hereby agree as
follows:

            1. Employment. The Company agrees to employ the Executive, and the
Executive hereby accepts such employment by the Company during the term set
forth in Section 2 and on the other terms and conditions of this Agreement.

            2. Term. The term of this Agreement shall commence on September 1,
2003, and shall continue until June 29, 2005 if not terminated earlier pursuant
to paragraph 5 of this Agreement.

            3. Position, Duties and Responsibilities, Rights.

            (a) During the term of this Agreement, the Executive shall serve as,
and be elected to and hold the office and title of Executive Vice President and
Chief Investment Officer. As such, the Executive shall have all of the powers
and duties usually incident to such office.

            (b) During the term of this Agreement, the Executive agrees to
devote substantially all the Executive's time, efforts and skills to the affairs
of the Company during the Company's normal business hours, except for vacations,
illness and incapacity, but nothing in this Agreement shall preclude the
Executive from devoting reasonable periods to (i) manage the Executive's
personal investments, (ii) participate in professional, educational, public
interest, charitable, civic or community activities, including activities
sponsored by trade organizations, (iii) serve as a director or member of an
advisory committee of any corporation not in competition with the Company or any
of its subsidiaries, or as an officer, trustee or director of any charitable,
educational, philanthropic, civic, social or industry organizations, or as a
speaker or arbitrator; provided, however, that the performance of the
Executive's duties or responsibilities in any of such capacities does not
materially interfere with the regular performance of the Executive's duties and
responsibilities hereunder.

            (c) Place of Performance. In connection with the Executive's
employment by the Company, the Executive shall be primarily based in an office
to be established in Melville, New York, shall not be required to be absent from
there on travel status or otherwise for more than a reasonable time each year as
necessary or appropriate for the performance of the Executive's duties
hereunder.


4. Compensation. (a) During the term of this Agreement, the Company shall pay the Executive, and the Executive agrees to accept a base salary at the rate of not less than $650,000.00 per year (the annual base salary as increased from time to time during the term of this Agreement being hereinafter referred to as the "Base Salary"). The Base Salary shall be paid in installments no less frequently than monthly. Any increase in Base Salary or other compensation shall not limit or reduce any other obligation of the Company hereunder, and once established at an increased specified rate, the Executive's Base Salary hereunder shall not thereafter be reduced. (b) During the term of this Agreement, the Company shall pay the Executive, a management evaluation bonus, the amount of which will be determined by the Company's Chief Executive Officer based on his evaluation of the Executive's overall performance during the year. The amount of the management evaluation bonus will be between $100,000 and $400,000 of the Executives Base Salary. The management evaluation bonus for a given year will be paid no later than the last day of March of the succeeding year. Notwithstanding anything to the contrary, the Executive will not be entitled to any unpaid bonuses if he is no longer an employee of the Company. (c) Upon the Executive commencing employment hereunder, the Executive will receive a sign-on bonus of $75,000. If the Executive ceases to be employed by the Company within twelve months of the Executive commencing employment hereunder, the Executive shall repay the $75,000 sign-on bonus to the Company. (d) The Executive will be eligible to participate in the Company's stock option and stock grant plans. Upon the Executive commencing employment hereunder, the Executive shall receive an option award for 30,000 shares of the existing class of the common stock of the Company. One-half of the award (15,000 shares) shall vest and be exercisable two years following the date the Executive commences employment hereunder. The remainder of the award (15,000 shares) shall vest and be exercisable three years following the date Executive commences employment hereunder. The complete terms of the option award and stock grant will be governed by the Company's omnibus stock option plan. (e) During the term of this Agreement, the Executive shall be entitled to fringe benefits, in each case at least equal to and on the same terms and conditions as those attached to the Executive's office on the date hereof, as the same may be improved from time to time during the term of this Agreement, as well as to reimbursement, upon proper accounting, of all reasonable expenses and disbursements incurred by the Executive in the course of the Executive's duties. (f) The Executive will receive a relocation package including the cost of temporary housing near Melville, NY for up to four months, the cost of a realtor commission of up to 6% to sell property at [address omitted], moving expenses, and house-hunting trips. The Executive will also receive a no-closing cost mortgage at a slightly discounted interest rate upon his purchasing a home near Melville, NY. 5. Termination of Employment. The employment created hereby is at will. The Company may terminate this Agreement by discharging the Executive. The Executive may terminate this Agreement by resigning with four weeks notice to the Company. Discharge or 2

resignation may be for any reason or for no reason. If the Company chooses to discharge the Executive, it will deliver a letter of discharge pursuant to the notice provisions of section 9. If the Executive chooses to resign, the Executive will deliver a letter of resignation pursuant to the notice provisions of section 9. If the Company terminates this Agreement without cause prior to its expiration, the Company will pay the Executive a severance award equal to $1,780.82 per day for the number of days from the date of discharge to June 29, 2005. If any person or entity other than Michael Strauss obtains control of 25% or more of the voting securities of the Company, and the Executive is discharged as a result thereof, or the Executive's responsibilities are diminished as a result thereof and the Executive consequently resigns, then the Company or its successor will pay the Executive a severance award equal to $1,780.82 per day for the number of days from the date of discharge or resignation to June 29, 2005. 6. Non-Competition. In consideration of this Agreement, the Executive agrees that if this Agreement is terminated prior to its expiration the Executive will not directly or indirectly (whether as a sole proprietor, partner or venturer, stockholder, director, officer, employee consultant or in any other capacity as principal or agent or through any person, subsidiary or employee acting as nominee or agent), conduct or engage in or be interested in or associate with any person which conducts or engages in a business that competes with the business of the Company. For purposes of this paragraph, the business of the Company shall be managing investments in mortgage backed securities and activities related thereto. 7. Entire Agreement; Amendment. (a) This Agreement contains the entire understanding of the parties with respect to the subject matter hereof and supersedes any and all other agreements between the parties, their predecessors and affiliates. (b) Any amendment of this Agreement shall not be binding unless in writing and signed by both (i) the Company's Chief Executive Officer and (ii) the Executive. 8. Enforceability. In the event that any provision of this Agreement is determined to be invalid or unenforceable, the remaining terms and conditions of this Agreement shall be unaffected and shall remain in full force and effect, and any such determination of invalidity or enforceability shall not affect the validity or enforceability of any other provision of this Agreement. 9. Notices. All notices which may be necessary or proper for either the Company or the Executive to give to the other shall be in writing and shall be sent by hand delivery, registered or certified mail, return receipt requested or overnight courier, if to the Executive, to him at [address omitted] and, if to the Company, to it at its principal executive offices at 520 Broadhollow Road, Melville, NY 11747, Attention: Corporate Counsel, with a copy to Cadwalader, Wickersham & Taft, 100 Maiden Lane, New York, New York 10038, Attention: Louis Bevilacqua, Esq. and shall be deemed given when sent. Either party may by like notice to the other party change the address at which it is to receive notices hereunder. 10. Non-Disparagement, Non-Solicitation, Confidential Information. The Company and the Executive agree that neither will disparage the other and that their representatives will not disparage either party hereto. The Executive agrees that for a period of one year following the termination of this Agreement, the Executive will not solicit any employee of the Company to leave the Company or hire any employee of the Company. The 3

Company and the Executive agree to keep the terms of this Agreement confidential except that the Executive may divulge the terms of this Agreement to the Executive's spouse, attorney, financial advisor and accountant provided they agree to keep the terms of this Agreement confidential. The Executive agrees to protect, not disclose, and not use for the Executive's benefit any confidential information or trade secrets belonging to the Company, including information regarding proprietary procedures and techniques, accounts, or personnel (excepting information that was already disclosed by the Company or otherwise was made public other than by breach of this Agreement by the Executive). The preceding two sentences shall not apply to disclosures required due to the laws or regulations of governments, or the orders of courts having jurisdiction over the Company and the Executive. This section 9 shall survive the termination of this Agreement. 11. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND BE ENFORCEABLE IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first written above. American Home Mortgage Holdings, Inc. By: /s/ Michael Strauss ------------------------------------ Name: Michael Strauss Title: Chief Executive Officer /s/ Tom McDonagh ---------------------------------------- Tom McDonagh 4

Addendum American Home Mortgage Employee Relocation Program The following represents American Home Mortgage's Relocation Program. You will be eligible for expense reimbursement based on the criteria specified below: o Real estate broker's commissions up to 6%. (Estimated at $54,000) o No fee points/Reduced interest rate mortgage. All fees/taxes associated with the purchase of a new home and the securing of a new mortgage will be waived or paid by AHM. (estimated at $20,000) o We will cover temporary housing expenses for a period not to exceed 60 days while you transition to permanent housing. We can assist also you in securing temporary housing in the area. (estimated at $5,000) o You are responsible for securing a household moving vendor. American Home Mortgage will cover the cost of this move (estimated at $20,000). o American Home will reimburse travel expenses associated with spouse and children trip (maximum of 4) for the purpose of finding a home and schools while you seek permanent housing in the area (Estimated at $6,000). It is understood that failure to remain with the Company, due to a voluntary resignation, for a period of at least one year will require the immediate reimbursement to American Home by you for any payments made by the Company up to that point. 5


                                                                   Exhibit 10.10

                             EMPLOYMENT AGREEMENT

This Employment Agreement, dated as of September 1st, 2003 (this "Agreement"),
is by and between American Home Mortgage Corporation, a New York corporation
having a place of business at 520 Broadhollow Road, Melville, NY 11747 (the
"Company"), and Ronald Rosenblatt, Ph.D., currently residing at [address
omitted] (the "Executive").

            Whereas the Company wishes to assure itself of the services of the
Executive, and the Executive desires to be employed by the Company, upon the
terms and conditions hereinafter set forth.

            Now, Therefore, the Company and the Executive hereby agree as
follows:

            1. Employment. The Company agrees to employ the Executive, and the
Executive hereby accepts such employment by the Company during the term set
forth in Section 2 and on the other terms and conditions of this Agreement.

            2. Term. The term of this Agreement shall commence on September 1,
2003, and shall continue until December 31, 2005 or until four weeks after the
resignation or discharge of the Executive.

            3. Position, Duties and Responsibilities, Rights.

            (a) During the term of this Agreement, the Executive shall serve as,
and be elected to and hold the office and title of Senior Executive Vice
President, Sales Support & Development. Until at least January 2004, Executive
will serve as Executive Vice President for the Enterprise Division. The
Executive shall report to the CEO of the Company throughout the term of this
Agreement. As such, the Executive shall have all of the powers and duties
usually incident to such office.

            (b) During the term of this Agreement, the Executive agrees to
devote substantially all the Executive's time, efforts and skills to the affairs
of the Company during the Company's normal business hours, except for vacations,
illness and incapacity, but nothing in this Agreement shall preclude the
Executive from devoting reasonable periods to (i) manage the Executive's
personal investments, (ii) participate in professional, educational, public
interest, charitable, civic or community activities, including activities
sponsored by trade organizations, (iii) serve as a director or member of an
advisory committee of any corporation not in competition with the Company or any
of its subsidiaries, or as an officer, trustee or director of any charitable,
educational, philanthropic, civic, social or industry organizations, or as a
speaker or arbitrator; provided, however, that the performance of the
Executive's duties or responsibilities in any of such capacities does not
materially interfere with the regular performance of the Executive's duties and
responsibilities hereunder.

            (c) Place of Performance. In connection with the Executive's
employment by the Company for the period through July 31, 2004, the Executive
shall be primarily based both in an office to be established in Melville, New
York, as well as an office in Des Moines, Iowa. After

July 31, 2004, the Executive employment shall be based entirely in Melville, New York and he shall not be required to be absent from there on travel status or otherwise for more than a reasonable time each year as necessary or appropriate for the performance of the Executive's duties hereunder. 4. Compensation. (a) For the period September 1, 2003 through December 31, 2003, the existing compensation agreement shall remain in force. The Executive is currently working under an employment agreement ("Prior Agreement") which provides for a base salary, management evaluation bonus, stock options and fringe benefits. Any and all amounts earned under that Prior Agreement prior to and including December 31, 2003 shall be paid in accordance with that Prior Agreement even if the payments are to be paid at a later date after December 31, 2003. (b) During the term of this Agreement, the Company shall pay the Executive, and the Executive agrees to accept a base salary at the rate of not less than $576,000.00 per year (the annual base salary as increased from time to time during the term of this Agreement being hereinafter referred to as the "Base Salary"). The Base Salary shall be paid in installments no less frequently than monthly. Any increase in Base Salary or other compensation shall not limit or reduce any other obligation of the Company hereunder, and once established at an increased specified rate, the Executive's Base Salary hereunder shall not thereafter be reduced. (c) For each of the calendar years during the term of this Agreement, the Company shall pay the Executive, a management evaluation bonus, the amount of which will be determined by the Company's Chief Executive Officer based on his evaluation of the Executive's overall performance during the year according to mutually agreed upon criteria. The amount of the management evaluation bonus will be targeted at $320,000 with a minimum bonus guaranteed at $170,000 and a maximum bonus of $470,000. The management evaluation bonus for a given year will be paid no later than the last day of March of the succeeding year. Notwithstanding anything to the contrary, the Executive will not be entitled to any unpaid bonuses if he is no longer an employee of the Company. (d) The Executive will be eligible to participate in the Company's stock option plan. Upon execution of this Agreement, the Executive shall receive an option award for 10,000 shares of the existing class of the common stock of the Company. One-half of the award (5,000 shares) shall vest and be exercisable three years following the date this Agreement is executed. The remainder of the award (5,000 shares) shall vest and be exercisable three years following the date this Agreement is executed. The complete terms of the option award and stock grant will be governed by the Company's omnibus stock option plan. (e) During the term of this Agreement, the Executive shall be entitled to fringe benefits, in each case at least equal to and on the same terms and conditions as those attached to the Executive's office on the date hereof, as the same may be improved from time to time during the term of this Agreement, as well as to reimbursement, upon proper accounting, of all reasonable expenses and disbursements incurred by the Executive in the course of the Executive's duties. (f) The Executive will be provided with relocation reimbursement, as detailed on the attached addendum, for real estate commissions, moving expenses, temporary housing, travel expenses associated with his relocation to the Long Island, New York area. The aggregate 2

amount of these expenses shall not exceed $105,000.00. The Executive agrees to reimburse the Company for amounts it paid to relocate the Executive if the Executive voluntarily resigns or is terminated for cause, including gross misconduct, as defined in Section 5, within one year of the Executive's relocation. 5. Termination of Employment. The employment created hereby is at will. The Company may terminate this Agreement by discharging the Executive. The Executive may terminate this Agreement by resigning with four weeks notice to the Company. Discharge or resignation may be for any reason or for no reason. If the Company chooses to discharge the Executive, it will deliver a letter of discharge pursuant to the notice provisions of section 9. If the Executive chooses to resign, the Executive will deliver a letter of resignation pursuant to the notice provisions of section 9. If the Company terminates this Agreement without cause prior to its expiration, the Company will pay the Executive a severance award equal to $2,043.77 per day for the number of days from the date of discharge to December 31, 2005. If any person or entity other than Michael Strauss obtains control of 50% or more of the voting securities of the Company, and the Executive is discharged as a result thereof, or the Executive's responsibilities are diminished as a result thereof and the Executive consequently resigns, then the Company or its successor will pay the Executive a severance award equal to $2,043.77 per day for the number of days from the date of discharge or resignation to December 31, 2005. 6. Entire Agreement; Amendment. (a) This Agreement contains the entire understanding of the parties with respect to the subject matter hereof and supersedes any and all other agreements between the parties, their predecessors and affiliates. (b) Any amendment of this Agreement shall not be binding unless in writing and signed by both (i) the Company's Chief Executive Officer and (ii) the Executive. 7. Enforceability. In the event that any provision of this Agreement is determined to be invalid or unenforceable, the remaining terms and conditions of this Agreement shall be unaffected and shall remain in full force and effect, and any such determination of invalidity or enforceability shall not affect the validity or enforceability of any other provision of this Agreement. 8. Notices. All notices which may be necessary or proper for either the Company or the Executive to give to the other shall be in writing and shall be sent by hand delivery, registered or certified mail, return receipt requested or overnight courier, if to the Executive, to him at [address omitted] and, if to the Company, to it at its principal executive offices at 520 Broadhollow Road, Melville, NY 11747, Attention: Corporate Counsel, with a copy to Cadwalader, Wickersham & Taft, 100 Maiden Lane, New York, New York 10038, Attention: Louis Bevilacqua, Esq. and shall be deemed given when sent. Either party may by like notice to the other party change the address at which it is to receive notices hereunder. 9. Non-Disparagement, Non-Solicitation, Confidential Information. The Company and the Executive agree that neither will disparage the other and that their representatives will not disparage either party hereto. The Executive agrees that for a period of one year following the termination of this Agreement, the Executive will not solicit any employee of the Company to leave the Company or hire any employee of the Company. The 3

Company and the Executive agree to keep the terms of this Agreement confidential except that the Executive may divulge the terms of this Agreement to the Executive's spouse, attorney, financial advisor and accountant provided they agree to keep the terms of this Agreement confidential. The Executive agrees to protect, not disclose, and not use for the Executive's benefit any confidential information or trade secrets belonging to the Company, including information regarding proprietary procedures and techniques, accounts, or personnel (excepting information that was already disclosed by the Company or otherwise was made public other than by breach of this Agreement by the Executive). The preceding two sentences shall not apply to disclosures required due to the laws or regulations of governments, or the orders of courts having jurisdiction over the Company and the Executive. This section 9 shall survive the termination of this Agreement. 10. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND BE ENFORCEABLE IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first written above. American Home Mortgage Holdings, Inc. By: /s/ Michael Strauss --------------------------------- Name: Michael Strauss Title: Chief Executive Officer /s/ Ron Rosenblatt, Ph.D. ------------------------------------- Ron Rosenblatt, Ph.D. 4

Addendum American Home Mortgage Employee Relocation Program The following represents American Home Mortgage's Relocation Program. You will be eligible for expense reimbursement based on the criteria specified below: o Real estate broker's commissions up to 6%. (Estimated at $54,000) o No fee points/Reduced interest rate mortgage. All fees/taxes associated with the purchase of a new home and the securing of a new mortgage will be waived or paid by AHM. (estimated at $20,000) o We will cover temporary housing expenses for a period not to exceed 60 days while you transition to permanent housing. We can assist also you in securing temporary housing in the area. (estimated at $5,000) o You are responsible for securing a household moving vendor. American Home Mortgage will cover the cost of this move (estimated at $20,000). o American Home will reimburse travel expenses associated with spouse and children trip (maximum of 4) for the purpose of finding a home and schools while you seek permanent housing in the area (Estimated at $6,000). It is understood that failure to remain with the Company, due to a voluntary resignation, for a period of at least one year will require the immediate reimbursement to American Home by you for any payments made by the Company up to that point. 5

                                                                   Exhibit 10.12

                      AMERICAN HOME MORTGAGE HOLDINGS, INC.
                        1999 OMNIBUS STOCK INCENTIVE PLAN

                           Adopted on August 16, 1999
                       Effective as of September 23, 1999
                         As amended through May 21, 2003

            1.    Purpose. The purpose of the American Home Mortgage Holdings,
Inc. 1999 Omnibus Stock Incentive Plan (the "Plan") is to maintain the ability
of American Home Mortgage Holdings, Inc. (the "Company") and its subsidiaries to
attract and retain highly qualified and experienced employees, officers and
directors and to give such employees, officers and directors a continued
proprietary interest in the success of the Company and its subsidiaries.
Pursuant to the Plan, such employees, officers and directors will be offered the
opportunity to acquire the Company's Common Stock, par value $.0l per share (the
"Common Stock"), through the grant of options, stock appreciation rights in
tandem with such options, the award of restricted stock under the Plan, bonuses
payable in stock or a combination thereof. Unless the context clearly indicates
otherwise, references herein to "option" or "options" shall include any tandem
stock appreciation right that may be granted in connection with such option or
options in accordance with Section 6(f). As used herein, the term "subsidiary"
shall mean any present or future corporation which is or would be a "subsidiary
corporation" of the Company as the term is defined in Section 424(f) of the
Internal Revenue Code of 1986, as amended from time to time (the "Code").

            2.    Administration of the Plan. The Plan shall be administered by
a compensation committee (the "Committee") as appointed from time to time by the
Board of Directors of the Company (the "Board"), which Committee shall consist
of not less than two members of the Board. With respect to directors of the
Company, the Plan shall be administered by the entire Board. With respect to any
participants who are officers within the meaning of Rule 16a-1(f) promulgated
under the Securities Exchange Act of 1934, as amended (the "Exchange Act")
("Executive Officers"), the Plan shall be administered by the entire Board or a
duly constituted committee of the Board satisfying the requirements of Section
162(m) of the Code. For purposes of awards granted to directors of the Company,
references herein to "Committee" shall mean the entire Board or such duly
constituted committee. A majority of the members of the Committee shall
constitute a quorum. The vote of a majority of a quorum shall constitute action
by the Committee.

            In administering the Plan, the Committee may adopt rules and
regulations for carrying out the Plan. The interpretation and decision with
regard to any question arising under the Plan made by the Committee shall be
final and conclusive on all employees and directors of the Company and its
subsidiaries participating or eligible to participate in the Plan. The Committee
may consult with counsel, who may be counsel to the Company, and shall not incur
any liability for any action taken in good faith in reliance upon the advice of
counsel. The Committee shall determine the employees and directors to whom, and
the time or times at which, grants or awards shall be made and the number of
shares to be included in the grants or awards.


Within the limitations of the Plan, the number of shares for which options will be granted from time to time and the periods for which the options will be outstanding will be determined by the Committee. Each option or stock or other awards granted pursuant to the Plan shall be evidenced by an option agreement or award agreement (an "Agreement"). An Agreement shall not be a precondition to the granting of options or stock or other awards; however, no person shall have any rights under any option or stock or other awards granted under the Plan unless and until the person to whom such option or stock or other award shall have been granted shall have executed and delivered to the Company an Agreement. The Committee shall prescribe the form of all Agreements. A fully executed original of the Agreement shall be provided to both the Company and the recipient of the grant or award. 3. Shares of Stock Subject to the Plan. The total number of shares that may be optioned or awarded under the Plan is 3,000,000 shares of Common Stock except that said number of shares shall be adjusted as provided in Section 13. Any shares subject to an option which for any reason expires or is terminated unexercised and any restricted stock which is forfeited may again be optioned or awarded under the Plan. Shares subject to the Plan may be either authorized and unissued shares or issued shares acquired by the Company or its subsidiaries. 4. Eligibility. Key salaried employees, including officers, and directors of the Company and its subsidiaries are eligible to be granted options and awarded restricted stock under the Plan and to have their bonuses payable in stock. The maximum number of shares of Common Stock that shall be available for the grant of options intended to be incentive stock options, as defined in Section 422 of the Code, shall be 3,000,000 shares (subject to adjustment as provided in Section 13 hereof). The employees and directors who shall receive awards or options under the Plan shall be selected from time to time by the Committee, in its sole discretion, from among those eligible, which may be based upon information furnished to the Committee by the Company's management, and the Committee shall determine, in its sole discretion, the number of shares to be covered by the award or awards and by the option or options granted to each such employee or director selected. Such key salaried employees and directors who are selected to participate in the Plan shall be referred to collectively herein as "Participants." In no event shall any Participant who is a key employee be granted stock options with respect to more than 150,000 shares of Common Stock in any calendar year (subject to adjustment as provided in Section 13 hereof). 5. Duration of the Plan. No award or option may be granted under the Plan more than ten years from the date the Plan is adopted by the Board or the date the Plan receives shareholder approval, whichever is earlier, but awards or options theretofore granted may extend beyond that date. 6. Terms and Conditions of Stock Options. All options granted under this Plan shall be either incentive stock options, as defined in Section 422 of the Code, or options other than incentive stock options; provided, however, that all options granted to persons who are not employees of the Company shall be nonstatutory stock options not intended to qualify as incentive stock options entitled to special tax treatment under Section 422 of the Code. 2

Each such option shall be subject to all the applicable provisions of the Plan, including the following terms and conditions, and to such other terms and conditions not inconsistent therewith as the Committee shall determine. (a) The option price per share shall be determined by the Committee. However, subject to Section 6(k), the option price of incentive stock options shall not be less than 100% of the Fair Market Value of a share of Common Stock at the time the option is granted. For purposes of the Plan, the "Fair Market Value" on any date, means (i) if the Common Stock is listed on a national securities exchange or quotation system, the closing sales prices on such exchange or quotation system on such date or, in the absence of reported sales on such date, the closing sales price on the immediately preceding date on which sales were reported, (ii) if the Common Stock is not listed on a national securities exchange or quotation system, the mean between the bid and asked prices as quoted by the National Association of Securities Dealers, Inc. Automated Quotation System ("NASDAQ") for such date or (iii) if the Common Stock is neither listed on a national securities exchange or quotation system nor quoted by NASDAQ, the fair value as determined by such other method as the Committee determines in good faith to be reasonable. (b) Each option shall be exercisable pursuant to the attainment of such performance goals and/or during and over such period ending not later than ten years from the date it was granted, as may be determined by the Committee and stated in the Agreement. In no event may an option be exercised more than ten years from the date the option was granted. (c) Unless otherwise provided in the Agreement, no option shall be exercisable within six months from the date of the granting of the option. An option shall not be exercisable with respect to a fractional share of Common Stock or with respect to the lesser of 50 shares or the full number of shares then subject to the option. No fractional shares of Common Stock shall be issued upon the exercise of an option. If a fractional share of Common Stock shall become subject to an option by reason of a stock dividend or otherwise, the optionee shall not be entitled to exercise the option with respect to such fractional share. (d) Each Agreement shall state whether the option(s) evidenced thereby will or will not be treated as incentive stock option(s). (e) Each option may be exercised by giving written notice to the Company specifying the number of shares to be purchased, which shall be accompanied by payment in full including, if required by applicable law, taxes, if any. Payment, except as provided in the Agreement, shall be made as follows: (i) in United States dollars by certified check or bank draft; or (ii) by tendering to the Company shares of Common Stock already owned for at least six months by the person exercising the option, which may include shares received as the result of a prior exercise of an option, and having a Fair Market Value on the date on which the option is exercised equal to the cash exercise price applicable to such option; or 3

(iii) by a combination of United States dollars and shares of Common Stock as aforesaid; or (iv) in accordance with a cashless exercise program established by the Committee in its sole discretion under which either (A) if so instructed by the optionee, shares may be issued directly to the optionee's broker or dealer upon receipt of the purchase price in cash from the broker or dealer, or (B) shares may be issued by the Company to an optionee's broker or dealer in consideration of such broker's or dealer's irrevocable commitment to pay to the Company that portion of the proceeds from the sale of such shares that is equal to the exercise price of the option(s) relating to such shares; or (v) in such other manner as permitted by the Committee at the time of grant or thereafter. No optionee shall have any rights to dividends or other rights of a shareholder with respect to shares of Common Stock subject to such optionee's option until such optionee has given written notice of exercise of such optionee's option and paid in full for such shares. (f) Notwithstanding the foregoing, the Committee may, in its sole discretion, grant to a grantee of an option a right (a "stock appreciation right") to elect, in the manner described below, in lieu of exercising such grantee's option for all or a portion of the shares of Common Stock covered by such option, to relinquish such grantee's option with respect to any or all of such shares and to receive from the Company a payment having a value equal to the amount by which (a) the Fair Market Value of a share of Common Stock on the date of such election, multiplied by the number of shares as to which the grantee shall have made such election, exceeds (b) the total exercise price for that number of shares of Common Stock under the terms of such option. A stock appreciation right shall be exercisable at the time the tandem option is exercisable, and the "expiration date" for the stock appreciation right shall be the expiration date for the tandem option. A grantee who makes such an election shall receive payment in the sole discretion of the Committee (i) in cash equal to such excess or (ii) in the nearest whole number of shares of Common Stock of the Company having an aggregate Fair Market Value, which is not greater than the cash amount calculated in clause (i) above; or (iii) a combination of the forms of payment described in clauses (i) and (ii) above. A stock appreciation right may be exercised only when the amount described in clause (a) above exceeds the amount described in clause (b) above. An election to exercise stock appreciation rights shall be deemed to have been made on the day written notice of such election, addressed to the Committee, is received at the Company's offices. An option or any portion thereof with respect to which a grantee has elected to exercise the stock appreciation rights described above shall be surrendered to the Company and such option shall thereafter remain exercisable according to its terms only with respect to the number of shares as to which it would otherwise be exercisable, less the number of shares with respect to which stock appreciation rights have been exercised. The grant of a stock appreciation right shall be evidenced by such form of Agreement as the Committee may prescribe. The Agreement evidencing stock appreciation rights shall be personal and will provide that the stock appreciation rights will not be transferable by the grantee otherwise than by will or the laws of descent and distribution and that they will be exercisable, during the lifetime of the grantee, only by the grantee. 4

(g) Except as provided in the Agreement, an option may be exercised only if at all times during the period beginning with the date of the granting of the option and ending on the date of such exercise, the grantee was an employee or director of either the Company or of a subsidiary of the Company or of another corporation referred to in Section 421(a)(2) of the Code. The Agreement shall provide whether, and if so, to what extent, an option may be exercised after termination of continuous employment, but any such exercise shall in no event be later than the termination date of the option. If the grantee should die, or become permanently disabled as determined by the Committee in accordance with the Agreement, at any time when the option, or any portion thereof, shall be exercisable by such grantee, the option will be exercisable within a period provided for in the Agreement, by the optionee or person or persons to whom such optionee's rights under the option shall have passed by will or by the laws of descent and distribution, but in no event at a date later than the termination of the option. The Committee may require medical evidence of permanent disability, including medical examinations by physicians selected by it. (h) The option by its terms shall be personal and shall not be transferable by the optionee otherwise than by will or by the laws of descent and distribution as provided in Section 6(g). During the lifetime of an optionee, the option shall be exercisable only by the optionee. In the event any option is exercised by the executors, administrators, heirs or distributees of the estate of a deceased optionee as provided in Section 6(g), the Company shall be under no obligation to issue Common Stock thereunder unless and until the Company is satisfied that the person or persons exercising the option are the duly appointed legal representative of the deceased optionee's estate or the proper legatees or distributees thereof. (i) Notwithstanding any intent to grant incentive stock options, an option granted will not be considered an incentive stock option to the extent that it together with any earlier incentive stock options permits the exercise for the first time in any calendar year of more than $100,000 in Fair Market Value of Common Stock (determined at the time of grant). (j) The Committee may, but need not, require such consideration from an optionee at the time of granting an option as it shall determine, either in lieu of, or in addition to, the limitations on exercisability provided in Section 6(e). (k) No incentive stock option shall be granted to an employee who owns or would own immediately before the grant of such option, directly or indirectly, stock possessing more than 10% of the total combined voting power of all classes of stock of the Company. This restriction does not apply if, at the time such incentive stock option is granted, the option price is at least 110% of the Fair Market Value of one share of Common Stock, as determined in accordance with Section 6(a), on the date of grant and the incentive stock option by its terms is not exercisable after the expiration of five years from the date of grant. (l) An option and any Common Stock received upon the exercise of an option shall be subject to such other transfer restrictions and/or legending requirements that are specified in the Agreement. 7. Terms and Conditions of Restricted Stock Awards. All awards of restricted stock under the Plan shall be subject to all the applicable provisions of the Plan, 5

including the following terms and conditions, and to such other terms and conditions not inconsistent therewith, as the Committee shall determine. (a) Awards of restricted stock may be in addition to or in lieu of option grants. (b) During a period set by, and/or until the attainment of particular performance goals based upon criteria established by, the Committee at the time of each award of restricted stock (the "restriction period") as specified in the Agreement, the recipient shall not be permitted to sell, transfer, pledge, or otherwise encumber the shares of restricted stock; except that such shares may be used, if the Agreement permits, to pay the option price of any option granted under the Plan, provided an equal number of shares delivered to the recipient shall carry the same restrictions as the shares so used. (c) If so provided in the Agreement, shares of restricted stock shall become free of all restrictions if (i) the recipient dies, (ii) the recipient's employment terminates by reason of permanent disability, as determined by the Committee, (iii) the recipient retires under specific circumstances set forth in the Agreement, or (iv) there is a Change in Control (as defined in Section 9 hereof) of the Company. The Committee may require medical evidence of permanent disability, including medical examinations by physicians selected by it. If the Committee determines that any such recipient is not permanently disabled, the restricted stock held by such recipient shall be forfeited and revert to the Company. (d) Unless and to the extent otherwise provided in the Agreement in accordance with Section 7(c), shares of restricted stock shall be forfeited and revert to the Company upon the recipient's termination of employment or directorship during the restriction period, except to the extent the Committee, in its sole discretion, finds that such forfeiture might not be in the best interest of the Company and, therefore, waives all or part of the application of this provision to the restricted stock held by such recipient. (e) Stock certificates for restricted stock shall be registered in the name of the recipient but shall be appropriately legended and returned to the Company by the recipient, together with a stock power, endorsed in blank by the recipient. The recipient shall be entitled to vote shares of restricted stock and shall be entitled to all dividends paid thereon, except that dividends paid in Common Stock or other property shall also be subject to the same restrictions. (f) Restricted stock shall become free of the foregoing restrictions upon expiration of the applicable restriction period, and the Company shall then deliver Common Stock certificates evidencing such stock to the recipient. (g) Restricted stock and any Common Stock received upon the expiration of the restriction period shall be subject to such other transfer restrictions and/or legending requirements that are specified in the Agreement. 8. Bonuses Payable in Stock. In lieu of cash bonuses otherwise payable under the Company's or applicable subsidiary's compensation practices to employees and directors eligible to participate in the Plan, the Committee, in its sole discretion, may determine that such bonuses shall be payable in Common Stock or partly in Common Stock and partly in cash. Such bonuses shall be in consideration of services previously performed and as an 6

incentive toward future services and shall consist of shares of Common Stock subject to such terms as the Committee may determine in its sole discretion. The number of shares of Common Stock payable in lieu of a bonus otherwise payable shall be determined by dividing such amount by the Fair Market Value of one share of Common Stock on the date the bonus is payable. 9. Change in Control. (a) In the event of a Change in Control of the Company, the Committee may, in its sole discretion, provide that any of the following applicable actions be taken as a result, or in anticipation, of any such event to assure fair and equitable treatment of Participants: (i) accelerate restriction periods for purposes of vesting in, or realizing gain from, any outstanding option or shares of restricted stock awarded pursuant to this Plan; (ii) offer to purchase any outstanding option or shares of restricted stock made pursuant to this Plan from the holder for its equivalent cash value, as determined by the Committee, as of the date of the Change in Control; or (iii) make adjustments or modifications to outstanding options or with respect to restricted stock as the Committee deems appropriate to maintain and protect the rights and interests of the Participants following such Change in Control. Any such action approved by the Committee shall be conclusive and binding on the Company, its subsidiaries and all Participants; provided, however, that notwithstanding the foregoing, under no circumstances shall the Committee take or approve any action that would result in an "Excess Parachute Payment," as defined in Section 280G(b) of the Code. For purposes hereof, "Change in Control" means a change in control of the Company of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A under the Exchange Act, whether or not the Company is subject to the Exchange Act at such time; provided, however, that without limiting the generality of the foregoing, such a Change in Control shall in any event be deemed to occur if and when: (i) any person (as such term is used in Sections 13(d) and 14(d)(2) of the Exchange Act), the Company, its subsidiaries and affiliates (as defined in Rule 12b-2 under the Exchange Act), becomes the beneficial owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing more than 20% of the combined voting power of the Company's then outstanding securities; (ii) stockholders approve a merger or consolidation as a result of which securities representing less than 51% of the combined voting power of the outstanding voting securities of the surviving or resulting corporation will be beneficially owned, directly or indirectly, in the aggregate by the former stockholders of the Company; (iii) stockholders approve either (A) an agreement for the sale or disposition of all or substantially all of the Company's assets to an entity which is not a subsidiary of the Company, or (B) a plan of complete liquidation; 7

(iv) the persons who were members of the Board immediately before the completion of a tender offer by any person other than the Company or a subsidiary or affiliate of the Company, or before a merger, consolidation, or contested election, or before any combination of such transactions, cease to constitute a majority of the Board as a result of such transaction or transactions; or (v) a change in control of the Company occurs of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A under the Exchange Act if the Company were subject to the provisions of the Exchange Act at the time such change in control occurs (whether or not the Company is subject to the Exchange Act at that time), and at the time such change in control occurs, the Company is the beneficial owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing (A) more than 30% of the combined voting power of the Company's then outstanding securities, and (B) more than the percentage of the combined voting power of the Company's outstanding securities beneficially owned, directly or indirectly, at that time by any other person (as such term is used in Sections 13(d) and 14(d)(2) of the Exchange Act). (b) In no event, however, may (i) any option be exercised prior to the expiration of six months from the date of grant (unless otherwise provided for in the Agreement), or (ii) any option be exercised after ten years from the date it was granted. 10. Transfer, Leave of Absence. For the purpose of the Plan: (a) a transfer of an employee from the Company to a subsidiary or affiliate of the Company, whether or not incorporated, or vice versa, or from one subsidiary or affiliate of the Company to another, and (b) a leave of absence, duly authorized in writing by the Company or a subsidiary or affiliate of the Company, shall not be deemed a termination of employment. 11. Rights of Employees and Directors. (a) No person shall have any rights or claims under the Plan except in accordance with the provisions of the Plan and the Agreement. (b) Nothing contained in the Plan or Agreement shall be deemed to give any employee or director the right to be retained in the service of the Company or its subsidiaries. 12. Tax Withholding Obligations. (a) If required by applicable law, the payment of taxes, upon the exercise of an option pursuant to Section 6(e) or a stock appreciation right pursuant to Section 6(f), shall be in cash at the time of exercise or on the applicable tax date under Section 83 of the Code, if later; provided, however, tax withholding obligations may be met by the withholding of Common Stock otherwise deliverable to the optionee pursuant to procedures approved by the Committee; provided, further, however, the amount of Common Stock so withheld shall not exceed the minimum required withholding obligation. (b) If required by applicable law, recipients of restricted stock, pursuant to Section 7, shall be required to pay taxes to the Company upon the expiration of restriction 8

periods or such earlier dates as elected pursuant to Section 83 of the Code; provided, however, tax withholding obligations may be met by the withholding of Common Stock otherwise deliverable to the recipient pursuant to procedures approved by the Committee. If tax withholding is required by applicable law, in no event shall Common Stock be delivered to any awardee until such awardee has paid to the Company in cash the amount of such tax required to be withheld by the Company or has elected to have such awardee's withholding obligations met by the withholding of Common Stock in accordance with the procedures approved by the Committee or otherwise entered into an agreement satisfactory to the Company providing for payment of withholding tax. (c) the Company shall first withhold from any cash bonus described in Section 8, an amount of cash sufficient to meet its tax withholding obligations before the amount of Common Stock paid in accordance with Section 8 is determined. 13. Changes in Capital; Reorganization. (a) Upon changes in the outstanding Common Stock by reason of a stock dividend, stock split, reverse split, subdivision, recapitalization, an extraordinary dividend payable in cash or property, combination or exchange of shares, separation, reorganization or liquidation, and the like, the aggregate number and class of shares available under the Plan as to which stock options and restricted stock may be awarded, the number and class of shares under (i) each option and the option price per share and (ii) each award of restricted stock shall, in each case, be correspondingly adjusted by the Committee, such adjustments to be made in the case of outstanding options without change in the total price applicable to such options. (b) In the event (i) the Company is merged or consolidated with another entity and the Company is not the surviving corporation, or the Company shall be the surviving corporation and there shall be any change in the Common Stock of the Company by reason of such merger or consolidation, or (ii) all or substantially all of the assets of the Company are acquired by another corporation, or (iii) there is a reorganization or liquidation of the Company (each, a "Reorganization Event"), or (iv) the Board shall propose that the Company enter into a Reorganization Event, then the Board (acting solely through members of the Board who were members of the Board prior to the occurrence of the Reorganization Event) may in its discretion take any or all of the following actions: (i) by written notice to the holders of stock options or restricted stock awards, provide that the stock options or restricted stock awards shall be terminated unless exercised within 30 days (or such longer period as the Board shall determine in its discretion) after the date of such notice; and (ii) advance the dates upon which (A) any or all outstanding stock options and stock appreciation rights shall be exercisable or (B) restrictions applicable to restricted stock awards shall lapse. Whenever deemed appropriate by the Board, any action referred to in this Section 13(b) may be made conditioned upon the consummation of the applicable Reorganization Event. 9

(c) Any adjustments or other action pursuant to this Section 13 shall be made by the Board and the Board's determination as to what adjustments shall be made or actions taken, and the extent thereof, shall be final and binding. 14. Miscellaneous Provisions. (a) The Plan Shall be Unfunded. The Company shall not be required to establish any special or separate fund or to make any other segregation of assets to assure the issuance of shares or the payment of cash upon exercise of any option or stock appreciation right under the Plan. Proceeds from the sale of shares of Common Stock pursuant to options granted under this Plan shall constitute general funds of the Company. The expenses of the Plan shall be borne by the Company. (b) It is understood that the Committee may, at any time and from time to time after the granting of an option or the award of restricted stock or bonuses payable in Common Stock hereunder, specify such additional terms, conditions and restrictions with respect to such option or stock as may be deemed necessary or appropriate to ensure compliance with any and all applicable laws, including, without limitation, terms, restrictions and conditions for compliance with federal and state securities laws and methods of withholding or providing for the payment of required taxes. (c) If at any time the Committee shall determine, in its discretion, that the listing, registration or qualification of shares of Common Stock upon any national securities exchange or quotation system or under any state or federal law, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition of, or in connection with, the sale or purchase of shares of Common Stock hereunder, no option may be exercised or restricted stock or stock bonus may be transferred in whole or in part unless and until such listing, registration, qualification, consent or approval shall have been effected or obtained, or otherwise provided for, free of any conditions not acceptable to the Committee. (d) By accepting any benefit under the Plan, each Participant and each person claiming under or through such Participant shall be conclusively deemed to have indicated such Participant's or person's acceptance and ratification, and consent to, any action taken under the Plan by the Committee, the Company or the Board. (e) THE PLAN SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF. 15. Limits of Liability. (a) Any liability of the Company or any of its subsidiaries to any participant with respect to any option or award shall be based solely upon contractual obligations created by the Plan and the Agreement. (b) None of the Company or any of its subsidiaries, or any member of the Committee or the Board, or any other person participating in any determination of any question under the Plan, or in the interpretation, administration or application of the Plan, shall have any 10

liability to any party for any action taken or not taken in connection with the Plan, except as may expressly be provided by statute. 16. Amendments and Termination. The Board may, at any time, amend, alter or discontinue the Plan; provided, however, no amendment, alteration or discontinuation shall be made which, without the approval of the stockholders, would: (a) except as is provided in Section 13, increase the maximum number of shares of Common Stock reserved for the purpose of the Plan; (b) except as is provided in Section 13, decrease the option price of an option to less than 100% of the Fair Market Value of a share of Common Stock on the date of the granting of the option; (c) change the class of persons eligible to receive an award of restricted stock, options or bonuses payable in Common Stock under the Plan; or (d) extend the duration of the Plan. The Committee may amend the terms of any award of restricted stock or option theretofore granted, retroactively or prospectively, but no such amendment shall impair the rights of any holder without such holder's written consent. 17. Duration. The Plan shall be adopted by the Board as of the date on which it is approved by a majority of the Company's stockholders, which approval must occur within the period ending 12 months after the date the Plan is adopted. The Plan shall terminate upon the earliest of the following dates or events to occur: (a) the adoption of a resolution of the Board, terminating the Plan; or (b) the date all shares of Common Stock subject to the Plan are purchased according to the Plan's provisions; or (c) ten years from the date hereof.

                                                                 Exhibit 10.17.1

                                 LOAN AGREEMENT

                                  By and Among:

                                 AHM SPV I, LLC

                                As the Borrower,

                       LA FAYETTE ASSET SECURITIZATION LLC

                                 As the Issuer,

                         CREDIT LYONNAIS NEW YORK BRANCH

                    As the Administrative Agent and as a Bank

                                       and

                          AMERICAN HOME MORTGAGE CORP.,

                                 As the Servicer

                           Dated as of August 8, 2003


TABLE OF CONTENTS Page ARTICLE I GENERAL TERMS......................................................2 1.1. Certain Definitions..............................................2 1.2. Other Definitional Provisions...................................25 ARTICLE II AMOUNT AND TERMS OF COMMITMENT...................................26 2.1. Maximum Facility Amount.........................................26 2.2. Promissory Notes................................................27 2.3. Notice and Manner of Obtaining Borrowings.......................27 2.4. Fees............................................................29 2.5. Prepayments.....................................................29 2.6. Business Days...................................................30 2.7. Payment Procedures..............................................30 2.8. The Reserve Account.............................................33 2.9. Interest Allocations............................................35 2.10. Interest Rates..................................................35 2.11. Quotation of Rates..............................................35 2.12. Default Rate....................................................35 2.13. Interest Recapture..............................................35 2.14. Interest Calculations...........................................36 2.15. Interest Period.................................................36 2.16. Additional Costs................................................37 2.17. Additional Interest on Advances Bearing a Eurodollar Rate.......39 2.18. Consequential Loss..............................................39 2.19. Taxes...........................................................39 2.20. Replacement Banks...............................................41 ARTICLE III COLLATERAL......................................................41 3.1. Collateral......................................................41 3.2. Delivery of Collateral to Collateral Agent......................42 3.3. Redemption of Mortgage Collateral...............................43 3.4. Releases of Mortgage Notes for Servicing........................46 3.5. Collateral Reporting............................................46 3.6. Take-Out Commitment Reporting...................................47 3.7. Servicer Monthly Reporting......................................47 3.8. Servicer Annual Pipeline Reporting..............................47 ARTICLE IV CONDITIONS PRECEDENT.............................................48 4.1. Initial Borrowing...............................................48 4.2. All Borrowings..................................................50 ARTICLE V REPRESENTATIONS AND WARRANTIES....................................51 5.1. Representations of the Borrower and the Servicer................51 5.2. Additional Representations of the Borrower......................54 5.3. Additional Representations and Warranties of the Servicer.......56 i

5.4. Survival of Representations.....................................57 ARTICLE VI AFFIRMATIVE COVENANTS............................................57 6.1. Financial Statements and Reports................................57 6.2. Taxes and Other Liens...........................................59 6.3. Maintenance.....................................................60 6.4. Further Assurances..............................................60 6.5. Compliance with Laws............................................60 6.6. Insurance.......................................................60 6.7. Accounts and Records............................................61 6.8. Right of Inspection; Audit......................................61 6.9. Notice of Certain Events........................................62 6.10. Performance of Certain Obligations..............................62 6.11. Use of Proceeds; Margin Stock...................................62 6.12. Notice of Default...............................................63 6.13. Compliance with Transaction Documents...........................63 6.14. Compliance with Material Agreements.............................63 6.15. Operations and Properties.......................................63 6.16. Take-Out Commitments............................................63 6.17. Collateral Proceeds.............................................64 6.18. Environmental Compliance........................................64 6.19. Closing Instructions............................................64 6.20. Special Affirmative Covenants Concerning Collateral.............64 6.21. Corporate Separateness..........................................65 6.22. Post-Closing Conditions.........................................66 ARTICLE VII NEGATIVE COVENANTS..............................................66 7.1. Limitations on Mergers and Acquisitions.........................66 7.2. Fiscal Year.....................................................66 7.3. Business........................................................67 7.4. Use of Proceeds.................................................67 7.5. Actions with Respect to Collateral..............................67 7.6. Liens...........................................................68 7.7. Employee Benefit Plans..........................................68 7.8. Change of Principal Office......................................68 7.9. No Commercial, A&D, Etc. Loans..................................68 7.10. Maximum Leverage................................................68 7.11. Indebtedness....................................................68 7.12. Deposits to Collection Account..................................68 7.13. Transaction Documents...........................................69 7.14. Distributions, Etc..............................................69 7.15. Limited Liability Company Agreement.............................69 7.16. Minimum Tangible Net Worth......................................69 7.17. Minimum GAAP Net Worth..........................................69 7.18. Positive Net Income of Performance Guarantor....................69 ii

ARTICLE VIII EVENTS OF DEFAULT..............................................70 8.1. Nature of Event.................................................70 8.2. Default Remedies................................................74 8.3. Paydowns........................................................75 8.4. Waivers of Notice, Etc..........................................76 ARTICLE IX THE ADMINISTRATIVE AGENT.........................................76 9.1. Authorization...................................................76 9.2. Reliance by Agent...............................................76 9.3. Agent and Affiliates............................................77 9.4. Lender Decision.................................................77 9.5. Rights of the Administrative Agent..............................77 9.6. Indemnification of Administrative Agent.........................77 9.7. UCC Filings.....................................................78 ARTICLE X INDEMNIFICATION...................................................78 10.1. Indemnities by the Borrower.....................................78 ARTICLE XI ADMINISTRATION AND COLLECTION OF MORTGAGE LOANS..................79 11.1. Designation of Servicer.........................................79 11.2. Duties of Servicer..............................................79 11.3. Certain Rights of the Administrative Agent......................80 11.4. Rights and Remedies.............................................80 11.5. Indemnities by the Servicer.....................................81 ARTICLE XII MISCELLANEOUS...................................................82 12.1. Notices.........................................................82 12.2. Amendments, Etc.................................................84 12.3. Invalidity......................................................85 12.4. Restrictions on Informal Amendments.............................85 12.5. Cumulative Rights...............................................85 12.6. Construction; Governing Law.....................................85 12.7. Interest........................................................86 12.8. Right of Offset.................................................86 12.9. Successors and Assigns..........................................87 12.10 Survival of Termination.........................................88 12.11 Exhibits........................................................88 12.12 Titles of Articles, Sections and Subsections................... 89 12.13 Counterparts....................................................89 12.14 No Proceedings..................................................89 12.15 Confidentiality.................................................89 12.16 Recourse Against Directors, Officers, Etc.......................90 12.17 Waiver of Jury Trial............................................90 12.18 Consent to Jurisdiction; Waiver of Immunities...................90 12.19 Costs, Expenses and Taxes.......................................91 12.20 Entire Agreement................................................91 12.21 Excess Funds....................................................92 12.22 Amendment Relating to Current Merger Transactions...............92 iii

SCHEDULES AND EXHIBITS Schedule I Bank Commitments and Percentages -ss.3.2(b) Schedule II Approved Investors -ss.3.2(b) Schedule III Litigation -ss.5.1(g)(i) Schedule IV Description of Current Merger Transactions Exhibit A Form of Assignment and Acceptance -ss.1.1 Exhibit B Form of Subordination Agreement -ss.4.1(f) Exhibit C Form of Borrowing Report -ss.2.3(a)(i) Exhibit D Collateral Agency Agreement -ss.1.1 Exhibit D-1 Definitions - ss.1 Exhibit D-2 Form of Security Agreement -ss.3.1(a) Exhibit D-3 Form of Collection Account Control Agreement -ss.3.1(b) Exhibit D-4 Form of Assignment -ss.3.1(c) andss.3.2(a) Exhibit D-5 Form of Transfer Request - ss. 3.3(a) Exhibit D-5A Form of Shipping Request -ss.3.3(b) Exhibit D-6(a) Form of Bailee and Security Agreement Letter -ss.3.4(b)(i) Exhibit D-6(b) Form of Bailee and Security Agreement Letter for Pool Custodian ss.3.4(b)(i) Exhibit D-7 Form of Trust Receipt and Security Agreement for Approved Investors - ss.3.5 Exhibit D-8 Collateral Agent Daily Report -ss.3.5 Exhibit D-9 Borrowing Report Exhibit D-10 UCC Financing Statements -ss.3.1(d) Exhibit D-11 Collection Account Release Notice Exhibit D-12 Assignment of Trade Exhibit E Form of Promissory Note - ss. 2.2 Exhibit F Form of Servicer Monthly Report - ss. 3.7 Exhibit G-1 Form of Servicer Performance Guaranty iv

Exhibit G-2 Form of Originator Performance Guaranty Exhibit H-1 Servicer's Quarterly Officer's Certificate - ss. 6.1(e) Exhibit H-2 Borrower's Quarterly Officer's Certificate - ss. 6.1(e) Exhibit H-3 Performance Guarantor's Quarterly Officer's Certificate Exhibit I-1 Form of Opinion of Counsel to Borrower, Originators and Performance Guarantor on Corporate Matters - ss. 4.1(i) Exhibit I-2 Form of Opinion of Counsel to Borrower and Originators on Security Interest Matters - ss. 4.1(i) Exhibit J Form of Opinion of Counsel to Originators on Bankruptcy Matters - ss. 4.1(j) Exhibit K Form of Hedge Report - ss. 3.6 Exhibit L Form of Reserve Account Control Agreement Exhibit M Each Originator's Credit and Collection Policy v

LOAN AGREEMENT Dated as of August 8, 2003 THIS LOAN AGREEMENT, among AHM SPV I, LLC, a Delaware limited liability company (hereinafter, together with its successors and assigns, the "Borrower"), LA FAYETTE ASSET SECURITIZATION LLC, a Delaware limited liability company (hereinafter, together with its successors and assigns, "La Fayette"), CREDIT LYONNAIS NEW YORK BRANCH ("CL New York"), as a Bank and the Administrative Agent, and AMERICAN HOME MORTGAGE CORP., a New York corporation, as the Servicer (hereinafter, together with its successors and assigns, the "Servicer"). RECITALS 1. Capitalized terms used in these Recitals and not defined in the preamble above have the meanings set forth in Article I. 2. The Originators are engaged in the business of originating, acquiring, investing in, marketing and selling, for their own account, mortgage loans that are made either to finance the purchase of one- to four-family owner-occupied homes or to refinance loans secured by such properties. 3. The Borrower has purchased, and may continue to purchase, Eligible Mortgage Loans from the Originators, as determined from time to time by the Borrower and the Originators. 4. In order to finance such purchases, the Borrower has requested that the Lenders provide the Borrower with credit in the form of revolving loans on the terms and conditions set forth herein. 5. The Issuer may, in its sole discretion, and the Banks shall, in each case subject to the terms and conditions contained in this Agreement, make Advances to the Borrower secured by a lien on, and security interest in, the Mortgage Loans and certain other Collateral. 6. The Lenders have appointed the Administrative Agent as their agent to perform certain administrative duties for the Lenders including, among other things, the administration of the funding of the transactions hereunder and the making of certain determinations hereunder and in connection herewith. AGREEMENTS In consideration of the recitals and the representations, warranties, conditions, covenants and agreements made in this Agreement, the sufficiency of which are acknowledged by all parties hereto, the Borrower, the Lenders, the Servicer and the Administrative Agent, intending to be legally bound, hereby establish a warehouse line of credit in the amount of the Maximum Facility Amount. Accordingly, the Borrower, the Lenders, the Administrative Agent and the Servicer covenant and agree as follows:

ARTICLE I GENERAL TERMS 1.1. Certain Definitions. As used in this Agreement, the following terms have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): "ABR Allocation" means all or any portion of Principal Debt if interest thereon is calculated by reference to the Eurodollar Rate or the Alternate Base Rate. "Accepted Servicing Standards" means the same manner in which the Servicer services and administers similar mortgage loans for its own portfolio, giving due consideration to customary and usual standards of practice of mortgage lenders and loan servicers administering similar mortgage loans but without regard to any relationship that the Servicer or any Affiliate of the Servicer may have with the related Obligor, or the Servicer's right to receive compensation for its services hereunder. "Administrative Agent" means CL New York, in its capacity as administrative agent for the Lenders, or any successor administrative agent. "Administrative Agent Fee Letter" is defined in Section 2.4(a). "Advance" means any amount disbursed by the Lenders to the Borrower pursuant to Section 2.1, whether such amount constitutes an original disbursement of funds to the Borrower under this Agreement or a continuation of an amount outstanding. "Advance Rate" means (i) with respect to a Conforming Loan or a Jumbo Loan (other than a Super Jumbo Loan), ninety-eight percent (98%) and (ii) with respect to a Super Jumbo Loan, ninety-five percent (95%). "Affected Party" means each Lender, the Administrative Agent, each bank party to the Liquidity Agreement and any permitted assignee or participant of any such bank, and any holding company of an Affected Party. "Affiliate" of any Person means (a) any other Person that, directly or indirectly, controls, is controlled by, or is under common control with, such Person, or (b) any other Person who is a director, officer or employee (i) of such Person, or (ii) of any Person described in the preceding clause (a). For purposes of this definition, the term "control" (and the terms "controlled by" and "under common control with"), as used with respect to any Person, shall mean the possession or ownership, directly or indirectly, of the power either (x) to direct or cause the direction of the management and policies of such Person, whether by contract or otherwise, or (y) vote 10% or more of the securities having ordinary power in the election of directors of such Person. "Agent's Account" means, the special account (account number 01-50576-0001-00-0001, ABA No. 026008073) of CL New York maintained at the office of Credit Lyonnais New York Branch at 1301 Avenue of the Americas, New York, New York. 2

"Agreement" or the "Loan Agreement" means this Loan Agreement, as amended, restated, modified or supplemented from time to time. "Alternate Base Rate" means, on any date, a fluctuating rate of interest per annum equal to the higher of: (a) the rate of interest most recently announced by CL New York as its base rate, changing when and as said base rate changes; or (b) the Federal Funds Rate (as defined below) most recently determined by the Administrative Agent plus 1.0% per annum. For purposes of this definition, "Federal Funds Rate" means, for any period, a fluctuating interest rate per annum equal (for each day during such period) to (i) the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published for such day (or, if such day is not a Business Day, for the immediately preceding Business Day) by the Federal Reserve Bank of New York; or (ii) if such rate is not so published for any day that is a Business Day, the average of the quotations for such day on such transactions received by the Administrative Agent from three federal funds brokers of recognized standing selected by it. The Alternate Base Rate is not necessarily intended to be the lowest rate of interest determined by CL New York in connection with extensions of credit. "American Home Mortgage Corp." has the meaning set forth in the preamble to this Agreement. "Annual Extension Date" shall mean (i) August 6, 2004, and (ii) thereafter, if consented to by the Lenders and the Administrative Agent pursuant to Section 2.1(b), the date that is specified by the Lenders and the Administrative Agent in the applicable consent, which date shall not be more than 364 days following the then effective Annual Extension Date. "Approved Investor" means: (a) Fannie Mae, Freddie Mac or Ginnie Mae, or (b) any Person with short-term ratings of at least A-1, P-1 and F1 from S&P, Moody's and Fitch, respectively, or long-term unsecured debt ratings (or in the case of a bank without such ratings that is the principal subsidiary of a bank holding company, the rating of the bank holding company) of at least AA, Aa2 and AA from S&P, Moody's and Fitch, respectively, or (c) all other Persons as may be approved by the Administrative Agent, which approvals may be subject to certain concentration limits; provided that (i) except for an Approved Investor defined above in section (c), if an Approved Investor has a short-term rating or a long-term unsecured debt rating at the time such Person becomes an "Approved Investor" and such Person's short-term ratings or long-term unsecured debt ratings are subsequently downgraded or withdrawn, such Person shall cease to be an "Approved Investor"; provided, further, that with respect to any Take-Out Commitments issued 3

by such Person prior to the date of such downgrade or withdrawal, such Person shall cease to be an "Approved Investor" 60 days following such downgrade or withdrawal; and (ii) if an Approved Investor does not have a short-term rating or a long-term unsecured debt rating, such Person shall cease to be an "Approved Investor" upon prior written notice from the Administrative Agent if the Administrative Agent has good faith concerns about the future performance of such Person; provided, further, that with respect to any Take-Out Commitments issued by such Person prior to such notice, such Person shall cease to be an "Approved Investor" 60 days following such notice. As of the date of this Agreement, Schedule II hereto sets forth the Approved Investors pursuant to the preceding clauses (b) and (c) (and any applicable concentration limits). Schedule II shall be updated from time to time as Approved Investors are added or deleted or concentration limits are changed pursuant to the preceding clauses (b) and (c). "Assignment" is defined in the Collateral Agency Agreement. "Assignment and Acceptance" means an assignment and acceptance agreement entered into by a Bank, an Eligible Assignee and the Administrative Agent, pursuant to which such Eligible Assignee may become a party to this Agreement, in substantially the form of Exhibit A hereto. "Availability" means, at the time determined, the Maximum Facility Amount minus the Principal Debt. "Available Collateral Value" means, at the time determined, the excess of the Collateral Value of all Eligible Mortgage Collateral over the Principal Debt. "Bailee and Security Agreement Letter" is defined in Section 3.4(b)(i) of the Collateral Agency Agreement. "Bank" means CL New York and each Eligible Assignee that shall become a party to this Agreement pursuant to an Assignment and Acceptance. "Bank Commitment" means, for any Bank, (a) with respect to CL New York, the amount set forth on Schedule I hereto, and (b) with respect to a Bank that has entered into an Assignment and Acceptance, the amount set forth therein as such Bank's Bank Commitment, in each case as such amount may be reduced by each Assignment and Acceptance entered into between such Bank and an Eligible Assignee, and as may be further reduced (or terminated) pursuant to the next sentence. Any reduction (or termination) of the Maximum Facility Amount pursuant to the terms of this Agreement shall (unless otherwise agreed by all the Banks) reduce ratably (or terminate) each Bank's Bank Commitment. At no time shall the aggregate Bank Commitments of all Banks exceed the Maximum Facility Amount. "Bank Commitment Percentage" means, for any Bank as of any date, the amount obtained by dividing such Bank's Bank Commitment on such date by the aggregate Bank Commitments of all Banks on such date. As of the date of this Agreement, the Bank Commitment Percentage for each Bank is as set forth on Schedule I hereto. 4

"Bank Margin" means the margin set forth in the Administrative Agent fee letter. "Base Rate Advance" means an Advance that bears interest at a rate per annum determined on the basis of the Alternate Base Rate. "Borrower" has the meaning specified in the preamble of this Agreement. "Borrowing" means Advances by the Lenders under this Agreement. "Borrowing Date" means the date, identified by the Borrower in the relevant Borrowing Report, as the date on which a Borrowing is to be made. "Borrowing Report" means a request, in the form of Exhibit C to this Agreement, for a Borrowing pursuant to Article II. "Business Day" means (a) a day on which (i) commercial banks in New York City, New York, are not authorized or required to be closed and (ii) commercial banks in the State in which the Collateral Agent has its principal office are not authorized or required to be closed, and (b) if this definition of "Business Day" is utilized in connection with a Eurodollar Advance, a day on which dealings in United States dollars are carried out in the London interbank market. "CL New York" has the meaning set forth in the preamble of this Agreement and its successors and assigns. "Closing Protection Rights" means any rights of the Originators or the Borrower to or under (i) a letter issued by a title insurance company to any of the Originators assuming liability for certain acts or failure to act on behalf of a named closing escrow agent, approved attorney or similar Person in connection with the closing of a Mortgage Loan transaction, (ii) a bond, insurance or trust fund established to protect a mortgage lender against a loss or damage resulting from certain acts or failure to act of a closing escrow agent, approved attorney, title insurance company or similar Person, or (iii) any other right or claim that any of the Originators or the Borrower may have against any Person for any loss or damage resulting from such Person's acts or failure to act in connection with the closing of a Mortgage Loan and the delivery of the related Mortgage Loan Collateral to the Collateral Agent, any of the Originators or to the Borrower. "Code" means the Internal Revenue Code of 1986, as amended from time to time. "Collateral" means Property that is subject to a Lien for the benefit of the holders of the Obligations. "Collateral Agency Agreement" means the Collateral Agency Agreement, dated as of the date hereof, among the Borrower, the Collateral Agent and the Administrative Agent, substantially in the form of Exhibit D hereto, as amended, supplemented, restated or otherwise modified from time to time. "Collateral Agent" means Deutsche Bank National Trust Company, and its successors and assigns. 5

"Collateral Agent Daily Report" is defined in Section 3.8(a) of the Collateral Agency Agreement. "Collateral Deficiency" means, at any time, the amount by which the Principal Debt exceeds the lesser of (a) the Collateral Value of all Eligible Mortgage Collateral and (b) if the Collateral Agent holds no Eligible Mortgage Collateral, zero. "Collateral Proceeds" means all amounts received by the Borrower, the Servicer, the Administrative Agent, the Lenders, the Collateral Agent or any other Person, in respect of the Collateral, whether in respect of principal, interest, fees or other amounts, including, without limitation, (i) all amounts received pursuant to Take-Out Commitments, and (ii) with respect to any Mortgage Loan, all funds that are received from or on behalf of the related Obligors in payment of any amounts owed (including, without limitation, purchase prices, finance charges, escrow payments, interest and all other charges) in respect of such Mortgage Loan, or applied to such amounts owed by such Obligors (including, without limitation, insurance payments that Borrower or Servicer applies in the ordinary course of its business to amounts owed in respect of such Mortgage Loan and net proceeds of sale or other disposition of Property of the Obligor or any other party directly or indirectly liable for payment of such Mortgage Loan and available to be applied thereon). "Collateral Value" means (A) with respect to each Eligible Mortgage Loan and at all times, an amount equal to the Advance Rate for such Eligible Mortgage Loan times the least of: (1) the lesser of the original principal amount of such Eligible Mortgage Loan or the acquisition price paid by the related Originator on the closing and funding of such Eligible Mortgage Loan; (2) with respect to which there is a loan-specific Take-Out Commitment, the purchase price to be paid by the Approved Investor for such Mortgage Loan, excluding any servicing release premium; (3) with respect to which there is no loan-specific Take-Out Commitment, a ratable amount determined by multiplying (a) the weighted average purchase price (expressed as a percentage of par) that Approved Investors are obligated to pay, pursuant to Take-Out Commitments (other than any loan-specific Take-Out Commitments), for all Eligible Mortgage Loans, as shown on the most recent Collateral Agent Daily Report, times (b) the original principal amount of such Eligible Mortgage Loan; and (4) while a Default or Event of Default is continuing, the Market Value of such Eligible Mortgage Loan; and (B) with respect to the Collection Account, the balance of collected funds therein that is not subject to any Lien in favor of any Person other than the Lien in favor of the Administrative Agent for the benefit of the holders of the Obligations; provided, however, that 6

(a) at any time, the portion of total Collateral Value that may be attributable to Jumbo Loans (including any Super Jumbo Loans) shall not exceed twenty percent (20%) of the Maximum Facility Amount; (b) at any time, the portion of total Collateral Value that may be attributable to Super Jumbo Loans shall not exceed five percent (5%) of the Maximum Facility Amount; (c) at any time, the portion of total Collateral Value that may be attributable to Mortgage Loans for which the Mortgage Notes have been withdrawn pursuant to Section 3.5 of the Collateral Agency Agreement shall not exceed $5,000,000 as determined in accordance with said Section 3.5 of the Collateral Agency Agreement; (d) at any time, the portion of the total Collateral Value that may be attributable to any single Approved Investor listed on Schedule II pursuant to one or more Take-Out Commitments shall not exceed the concentration limit for such Approved Investor as set forth on Schedule II; (e) at any time, the portion of total Collateral Value that may be attributable to Mortgage Loans that have been Eligible Mortgage Loans owned by the Borrower for more than 90 days shall be zero; (f) a Mortgage Loan that ceases to be an Eligible Mortgage Loan shall have a Collateral Value of zero; and (g) at any time, (A) except the first five and last five Business Days of any month, the portion of total Collateral Value that may be attributable to Wet Loans with respect to which the related Principal Mortgage Documents have not been delivered to the Collateral Agent within nine (9) Business Days after the date the Assignment was delivered to the Collateral Agent shall not exceed thirty percent (30%) of the Maximum Facility Amount, and (B) during the first five and last five Business Days of any month, the portion of total Collateral Value that may be attributable to Wet Loans with respect to which the related Principal Mortgage Documents have not been delivered to the Collateral Agent within nine (9) Business Days after the date the Assignment was delivered to the Collateral Agent shall not exceed fifty percent (50%) of the Maximum Facility Amount. "Collection Account" means the account established pursuant to Section 2.7(b) to be used for (i) the deposit of proceeds from the sale of Mortgage Loans; and (ii) the payment of the Obligations, it being understood that such account is controlled by the Administrative Agent pursuant to the Collection Account Control Agreement, and the Administrative Agent has the authority to direct the transfer of all funds from the Collection Account. "Collection Account Bank" means, initially, Deutsche Bank National Trust Company and, at any time, the institution then holding the Collection Account in accordance with the terms of the Collection Account Control Agreement. "Collection Account Control Agreement" means the Collection Account Control Agreement, dated as of the date hereof, among the Borrower, the Servicer, the Administrative 7

Agent and the Collection Account Bank, substantially in the form of Exhibit D-3 hereto, as amended, modified or supplemented from time to time. "Collection Period" means, initially, the period commencing on the Effective Date and ending on August 31, 2003, and thereafter, each calendar month, beginning on the first day of each month and including the last day of the month. "Collections" means, with respect to any Mortgage Asset, all cash collections (other than in respect of escrows for taxes and insurance premiums payable under the related Mortgage Loan) and other cash proceeds of such Mortgage Asset. "Commercial Paper Notes" means short-term promissory notes issued or to be issued by the Issuer to fund or maintain its Advances or investments in other financial assets. "Commercial Paper Rate" for any Interest Period for the related Advance means: (a) a rate per annum equal to the sum of (i) the rate or, if more than one rate, the weighted average of the rates, determined by converting to an interest-bearing equivalent rate per annum the discount rate (or rates) at which Commercial Paper Notes having a term equal to such Interest Period and to be issued to fund or to maintain such Advance by La Fayette (including, without limitation, Principal Debt and accrued and unpaid interest), may be sold by any placement agent or commercial paper dealer selected by the Administrative Agent, as agreed between each such agent or dealer and the Administrative Agent, plus (ii) the commissions and charges charged by such placement agent or commercial paper dealer with respect to such Commercial Paper Notes expressed as a percentage of such face amount and converted to an interest-bearing equivalent rate per annum, provided the commissions and charges by the agent or dealer must in the Administrative Agent's good faith judgment be within market range; plus (iii) the Conduit Spread; or (b) such other rate as La Fayette and the Borrower shall agree to in writing. "Conduit Spread" means the margin set forth in the Administrative Agent Fee Letter. "Conforming Loan" means (i) a Mortgage Loan that complies with all applicable requirements for purchase under a Fannie Mae, Freddie Mac or similar Governmental Authority standard form of conventional mortgage loan purchase contract, then in effect, or (ii) an FHA Loan or a VA Loan. "Consequential Loss" means any loss (measured by the diminution in yield to the Affected Party as a result of a prepayment) and/or expense (such as any transaction costs incurred in connection with the reinvestment of a prepayment or any cost associated with the issuance of Commercial Paper Notes in anticipation of a Borrowing reported but not accepted by the Borrower) that any Affected Party reasonably incurs in respect of a Borrowing as a consequence of (a) any failure or refusal of Borrower (for any reasons whatsoever other than a default by the Administrative Agent, any Lender or any Affected Party) to take such Borrowing after Borrower shall have requested it under this Agreement, (b) any prepayment or payment of such Borrowing that is a Eurodollar Advance or an Advance bearing interest by reference to the Commercial Paper Rate on a day other than the last day of the Interest Period applicable to such Borrowing, (c) any prepayment of any Borrowing that is not made in compliance with the provisions of Section 2.5(a); provided, that so long as an Event of Default shall not have 8

occurred, the Borrower shall not be responsible for any Consequential Loss resulting from changes in the Settlement Date made by the Administrative Agent, as described in the proviso contained in the definition of "Settlement Date," or (d) Borrower's failure to make a prepayment after giving notice under Section 2.5(a) that a prepayment will be made. "CP Allocation" means all or any portion of Principal Debt if interest thereon is calculated by reference to the Commercial Paper Rate. "CP Borrowing" means a Borrowing bearing interest by reference to the Commercial Paper Rate. "Debt" means (a) all indebtedness or other obligations of a Person (and, if applicable, that Person's subsidiaries, on a consolidated basis) that, in accordance with GAAP consistently applied, would be included in determining total liabilities as shown on the liabilities side of a balance sheet of that Person on the date of determination, plus (b) all indebtedness or other obligations of that Person (and, if applicable, that Person's subsidiaries, on a consolidated basis) for borrowed money or for the deferred purchase price of property or services. For purposes of calculating a Person's Debt, Subordinated Debt (as defined below) not due within one year of that date may be excluded from that Person's indebtedness. For purposes of this definition, "Subordinated Debt" means all indebtedness of a Person for borrowed money that is effectively subordinated in right of payment to all other present and future obligations on terms acceptable to the Majority Banks. "Debtor Laws" means all applicable liquidation, conservatorship, bankruptcy, fraudulent transfer or conveyance, moratorium, arrangement, receivership, insolvency, reorganization or similar laws from time to time in effect affecting the rights of creditors generally. "Default" means any condition or event that, with the giving of notice or lapse of time or both and unless cured or waived, would constitute an Event of Default. "Default Rate" means a per annum rate of interest equal from day to day to the lesser of (a) the sum of the Alternate Base Rate plus two percent and (b) the Maximum Rate. "Default Ratio" means as of the end of any Collection Period, the ratio of (i) the principal amount of all Mortgage Loans that were Defaulted Mortgage Loans at such time, to (ii) the aggregate principal amount of all Mortgage Loans at such time. "Defaulted Mortgage Loan" means a Mortgage Asset under which the Obligor is 30 or more days in payment default or has taken any action, or suffered any event of the type described in Sections 8.1(f), 8.1(g) or 8.1(h) or is in foreclosure. "Deferred Income" means the amount of income that any of the Originators or Borrower has deferred, for accounting purposes, pending the sale of Mortgage Loans, in accordance with Statement of Financial Accounting Standards Number 91 ("SFAS 91") and Statement of Financial Accounting Standards Number 122 ("SFAS 122"), each as currently published by the Financial Accounting Standards Board. 9

"Disbursement Account" means the account established by the Borrower with the Deutsche Bank National Trust Company or another Eligible Institution acceptable to the Administrative Agent, it being understood that such account is controlled by the Administrative Agent pursuant to the Disbursement Account Control Agreement, and the Administrative Agent has the authority to direct the transfer of all funds from the Disbursement Account. "Disbursement Account Control Agreement" means the Disbursement Account Control Agreement, dated as of even date herewith, between the Borrower, the Servicer, the Administrative Agent and Deutsche Bank National Trust Company, substantially in the form attached as Exhibit D-13 to the Collateral Agency Agreement, as amended, modified, supplemented or replaced from time to time. "Effective Date" means August 8, 2003. "Eligible Assignee" means (i) CL New York or any of its Affiliates, (ii) any Person managed by CL New York or any of its Affiliates, or (iii) any financial or other institution that is acceptable to the Administrative Agent. "Eligible Institution" means any depository institution, organized under the laws of the United States or any state, having capital and surplus in excess of $200,000,000, the deposits of which are insured to the full extent permitted by law by the Federal Deposit Insurance Corporation and that is subject to supervision and examination by federal or state banking authorities; provided that such institution also must have a rating of A or higher with respect to long-term deposit obligations from Moody's, A2 or higher with respect to long-term deposit obligations from S&P and A or higher with respect to long-term deposit obligations from Fitch. If such depository institution publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. "Eligible Mortgage Collateral" means Eligible Mortgage Loans and the Collection Account. "Eligible Mortgage Loan" means a Mortgage Loan: (a) that (i) is a closed and funded Mortgage Loan, (ii) has a maximum term to maturity of 30 years and the proceeds of which were used either to finance a portion of the purchase price of a Property encumbered by the related Mortgage or to refinance a loan secured by such Property, (iii) is secured by a perfected first-priority Lien on residential real Property consisting of land and a one-to-four family dwelling thereon which is completed and ready for owner occupancy, including townhouses and condominiums, and (iv) was underwritten according to the applicable Originator's Credit and Collection Policy; (b) that is a Conforming Loan or a Jumbo Loan; (c) in which the Administrative Agent has been granted and continues to hold a perfected, first-priority, security interest for the benefit of the holders of the Obligations; 10

(d) for which the Mortgage Note is payable to or endorsed (without recourse) in blank and each of such Mortgage Loan and the related Mortgage Note is a legal, valid and binding obligation of the Obligor thereof; (e) for which, other than in respect of Wet Loans, the Principal Mortgage Documents have been received by the Collateral Agent and are in form and substance acceptable to the Collateral Agent; (f) that is either (i) eligible (in the case of Conforming Loans) for delivery, or (ii) designated (in the case of Non-Conforming Loans), for delivery under a Take-Out Commitment from an Approved Investor; provided that no more than 45 days have lapsed since the date on which any documentation was shipped to the related Approved Investor; (g) that, upon pledge thereof under this Agreement and application of any related Advance to pay off any prior lienholder as required by the Collateral Agency Agreement and hereunder, together with the related Mortgage Loan Collateral, is owned beneficially by Borrower free and clear of any Lien of any other Person other than the Administrative Agent for the benefit of the holders of the Obligations; (h) that, together with the related Mortgage Loan Collateral, does not contravene any Governmental Requirements applicable thereto (including, without limitation, the Real Estate Settlement Procedures Act of 1974, as amended, and all laws, rules and regulations relating to usury, truth-in-lending, fair credit billing, fair credit reporting, equal credit opportunity, fair debt collection practices, privacy and other applicable federal, state and local consumer protection laws) and with respect to which no party to the related Mortgage Loan Collateral is in violation of any Governmental Requirements (or procedure prescribed thereby) if such violation would impair the collectability of such Mortgage Loan or the saleability of such Mortgage Loan under the applicable Take-Out Commitment; (i) that, (i) is not an Uncovered Mortgage Loan; (ii) is not a Defaulted Mortgage Loan at the time it is transferred to the Borrower pursuant to the Repurchase Agreement; (iii) has not previously been sold to an Approved Investor or any of the Originators and repurchased by Borrower; (iv) if, it was a Wet Loan when it was assigned to the Borrower and the time periods set forth in Section 2.3(c) have occurred, the Principal Mortgage Documents relating to such Wet Loan were delivered to the Collateral Agent; provided, however, that upon delivery of such Principal Mortgage Documents to the Collateral Agent, such Mortgage Loans may subsequently qualify as Eligible Mortgage Loans to support Borrowings subsequent to such delivery; (v) has not been rejected by the Collateral Agent under Section 3.2(c) of the Collateral Agency Agreement; or (vi) has an original principal balance not in excess of $1,000,000.00; (j) that if the Mortgage Loan Collateral has been withdrawn for correction pursuant to Section 3.4 such Mortgage Loan Collateral has been returned to the Collateral Agent within 14 calendar days after withdrawal as required by Section 3.4; (k) that is denominated and payable in U.S. dollars in the United States and the Obligor of which is a natural person who is a U.S. citizen or resident alien or a corporation or an 11

inter vivos revocable trust or other legal entity organized under the laws of the United States or any State thereof or the District of Columbia; (l) that is not subject to any right of rescission, setoff, counterclaim or other dispute whatsoever; (m) that was acquired by the Borrower from any of the Originators within 60 days after its Mortgage Origination Date; (n) that is covered by the types and amounts of insurance required by Section 6.6(b); (o) that is not underwritten on a "no-income - no asset" verification basis or in a manner such that the Obligor credit information contained in the related Mortgage Loan application was not corroborated by credit underwriting standards generally acceptable within the mortgage underwriting business; (p) with respect to which all representations and warranties made by the related Originator in the Repurchase Agreement are true and correct in all material respects and with respect to which all loan level covenants made in the Repurchase Agreement have been complied with; and (q) that is subjected to the following "Quality Control" measures by personnel of any of the Originators before the Mortgage Note is funded by such Originator: (i) for those Mortgage Loans not originated by any of the Originators, is underwritten by any of the Originators prior to funding thereof and after performance of all underwriting procedures, is submitted to any of the Originators for closing where it is reviewed for thoroughness and compliance (including truth-in-lending, good faith estimates and other disclosures) and a verbal verification of employment and in-file credit report are obtained; and (ii) with respect to which, all Mortgage Loan Collateral is prepared by any of the Originators and submitted to the closing agent at the time of funding the related Mortgage Loans; For the purpose of this definition of "Eligible Mortgage Loan": (x) A Conforming Loan is "eligible for delivery" under a Take-Out Commitment if (i) the underwriting criteria utilized and the Mortgage Loan Collateral either match, or are in respect of interest rates (which rates must bear a reasonable relationship to prevailing current market rates of interest for loans with similar maturities), term, product type and delivery period representative of the terms for purchase that are specified in a Take-Out Commitment, and (ii) the aggregate outstanding principal of all Conforming Loans is not more than the aggregate Take-Out Commitments' unutilized amount (i.e. taking in account all Conforming Loans already allocated to the aggregate Take-Out Commitments for purposes of determining Eligible Mortgage Loans whether or not already delivered by the Borrower to the Collateral Agent). 12

(y) A Non-Conforming Loan is "designated for delivery" under a Take-Out Commitment if the underwriting criteria utilized in approving such Mortgage Loan conform to the underwriting criteria, and the terms of repayment (including interest rate and "term to maturity") and other terms and conditions of the Mortgage Loan Collateral match the specifications of that specific Take-Out Commitment that designates that particular Non-Conforming Loan for purchase. "Employee Plan" means an employee pension benefit plan covered by Title IV of ERISA and established or maintained by any of the Originators or any ERISA Affiliate. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time. "ERISA Affiliate" means any corporation, trade or business that is, along with the Performance Guarantor, a member of a controlled group of corporations or a controlled group of trades or businesses, as described in Sections 414(b), (c), (m) and (o) of the Code, or Section 4001 of ERISA. "Eurocurrency Liabilities" has the meaning assigned to that term in Regulation D of the Federal Reserve Board, as in effect from time to time. "Eurodollar Advance" means an Advance that bears interest at a rate per annum determined on the basis of the Eurodollar Rate. "Eurodollar Rate" means, for any Interest Period for any Eurodollar Advance, for each Lender, an interest rate per annum (expressed as a decimal and rounded upwards, if necessary, to the nearest one hundredth of a percentage point) equal to the offered rate per annum for deposits in U.S. Dollars in a principal amount of not less than $10,000,000 for such Interest Period as of 11:00 A.M., London time, two Business Days before (and for value on) the first day of such Interest Period, that appears on the display designated as "Page 3750" on the Telerate Service (or such other page as may replace "Page 3750" on that service for the purpose of displaying London interbank offered rates of major banks); provided, that if such rate is not available on any date when the Eurodollar Rate is to be determined, then an interest rate per annum determined by the Administrative Agent equal to the rate at which it would offer deposits in United States dollars to prime banks in the London interbank market for a period equal to such Interest Period and in a principal amount of not less than $10,000,000 at or about 11:00 A.M. (London time) on the second Business Day before (and for value on) the first day of such Interest Period. "Eurodollar Reserve Percentage" means, with respect to any Bank and for any Interest Period for such Bank's Eurodollar Advance, the reserve percentage applicable during such Interest Period (or, if more than one such percentage shall be so applicable, the daily average of such percentages for those days in such Interest Period during which any such percentage shall be so applicable) under regulations issued from time to time by the Federal Reserve Board (or any successor) for determining the maximum reserve requirement (including, without limitation, any emergency, supplemental or other marginal reserve requirement) for such Bank with respect 13

to liabilities or assets consisting of or including Eurocurrency Liabilities having a term equal to such Interest Period. "Event of Default" is defined in Section 8.1. "Excess Spread" means, as of the last day of each Collection Period, an amount equal to the Portfolio Yield for such Collection Period minus the Eurodollar Rate minus the Conduit Spread (to the extent not included in the interest rate for Advances) and/or Bank Spread (to the extent not included in the interest rate for Advances), as applicable, minus the Servicer Fee for such Collection Period determined in accordance with clause (a) of the definition of definition of Portfolio Yield. "Fannie Mae" means the government sponsored enterprise formerly known as the Federal National Mortgage Association, or any successor thereto. "Federal Reserve Board" means the Board of Governors of the Federal Reserve System, or any successor thereto. "FHA" means the Federal Housing Administration, or any successor thereto. "FHA Loan" means a Mortgage Loan, the ultimate payment of which is partially or completely insured by the FHA or with respect to which there is a current, binding and enforceable commitment for such insurance issued by the FHA. "Financial Officer" means (i) with respect to the Servicer, any of the Originators or the Borrower, the chief financial officer, treasurer or a vice president having the knowledge and authority necessary to prepare and deliver the financial statements and reports required pursuant to Sections 6.1(b) and Section 3.8 and (ii) with respect to the Performance Guarantor, the chief financial officer, the vice president - assistant comptroller, vice president - assistant treasurer or senior vice president-comptroller. "Fitch" means Fitch, Inc., and any successor thereto. "Freddie Mac" means the Federal Home Loan Mortgage Corporation, or any successor thereto. "GAAP" means generally accepted accounting principles as in effect in the United States from time to time. "GAAP Net Worth" means with respect to any Person at any date, the excess of total assets over total liabilities of such Person on such date, each to be determined in accordance with GAAP consistent with those applied in the preparation of the financial statements referred to in Section 6.1 of this Agreement. "Ginnie Mae" means the Government National Mortgage Association, or any successor thereto. 14

"Governmental Authority" means any applicable nation or government, any agency, department, state or other political subdivision thereof, or any instrumentality thereof, and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. Governmental Authority shall include, without limitation, each of Freddie Mac, Fannie Mae, FHA, HUD, VA and Ginnie Mae. "Governmental Requirement" means any law, statute, code, ordinance, order, rule, regulation, judgment, decree, injunction, franchise, permit, certificate, license, authorization or other requirement (including, without limitation, any of the foregoing that relate to energy regulations and occupational, safety and health standards or controls and any hazardous materials laws) of any Governmental Authority that has jurisdiction over the Originators, the Servicer, the Collateral Agent or the Borrower or any of their respective Properties. "Hedge Report" means, with respect to any Conforming Loans included in the Eligible Mortgage Collateral with respect to which there is no loan-specific Take-Out Commitment, a report prepared by the Servicer prepared pursuant to Section 3.6 hereof, showing, as of the close of business on the previous Business Day, all Take-Out Commitments (either in the form of loan-specific Take-Out Commitments or forward purchase commitments obtained to hedge Mortgage Loans) that have been assigned to the Administrative Agent, and certain information with respect to such trades including information as the Administrative Agent may request, in the form of Exhibit K hereto. "HUD" means the Department of Housing and Urban Development, or any successor thereto. "Indebtedness" means, for any Person, without duplication, and at any time, (a) all obligations required by GAAP to be classified on such Person's balance sheet as liabilities, (b) obligations secured (or for which the holder of the obligations has an existing contingent or other right to be so secured) by any Lien existing on property owned or acquired by such Person, (c) obligations that have been (or under GAAP should be) capitalized for financial reporting purposes, and (d) all guaranties, endorsements, and other contingent obligations with respect to obligations of others. "Indemnified Amounts" is defined in Section 10.1. "Indemnified Party" is defined in Section 10.1. "Interest Period" is defined in Section 2.15. "Issuer" means La Fayette and its successors and assigns. "Jumbo Loan" means a Mortgage Loan (other than a Conforming Loan) that (1) is underwritten by an Approved Investor (other than Fannie Mae, Freddie Mac or Ginnie Mae), (2) matches all applicable requirements for purchase under the requirements of a Take-Out Commitment issued for the purchase of such Mortgage Loan, and (3) differs from a Conforming Loan solely because the principal amount of such Mortgage Loan exceeds the limit set for Conforming Loans by Fannie Mae or Freddie Mac from time to time. The term Jumbo Loan includes Super Jumbo Loans. 15

"La Fayette" has the meaning set forth in the preamble to this Agreement. "La Fayette Program Agent" means CL New York, in its capacity as the collateral agent pursuant to a security agreement made by La Fayette for the benefit of certain creditors of La Fayette, and any successor to CL New York in such capacity. "Lenders" means, collectively, the Issuer and the Banks. "Leverage Ratio" means the ratio of a Person's (and, if applicable, the Person's subsidiaries, on a consolidated basis) Debt to Tangible Net Worth. For purposes of calculating a Person's Leverage Ratio, Debt arising under Hedging Arrangements (as defined below) relating to such Person's servicing portfolio, to the extent of assets arising under those Hedging Arrangements, Debt arising under Gestation Agreements (as defined below) covering a mortgage-backed security issued or guaranteed by Fannie Mae, Freddie Mac or Ginnie Mae or Eligible Mortgage Pools (as defined below) and Debt Arising under Investment Line Agreements (as defined below), to the extent of the investments securing the same, may be excluded from a Person's Debt. For purposes of this definition, (i) "Hedging Arrangements" means, with respect to any Person, any agreements or other arrangements (including interest rate swap agreements, interest rate cap agreements and forward sale agreements) entered into to protect that Person against changes in the interest rates or the market value of assets; (ii) "Gestation Agreements" means an agreement under any of the Originators agree to sell or finance (a) a mortgage loan prior to prior to the date of purchase by an investor or (b) a mortgage pool prior to the date a mortgage-backed security backed by the mortgage pool is issued; (iii) Eligible Mortgage Pools means a mortgage pool for which (a) an approved pool custodian has issued its initial certification and (b) there exists a purchase commitment, in favor of any of the Originators by an investor covering a mortgage-backed security issued or guaranteed by Fannie Mae, Freddie Mac or Ginnie Mae, to be issued on the basis of that certification, and (iv) Investment Line Agreements means an agreement under which the Originators agree (a) to borrow funds from any lender or other Person (b) to invest such funds in certain permitted investments and to pledge such investments to that lender or that other Person to secure such loans. "Lien" means any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (whether statutory, consensual or otherwise), or other security arrangement of any kind (including, without limitation, any conditional sale or other title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, and the filing of any financing statement under the uniform commercial code or comparable law of any jurisdiction in respect of any of the foregoing). "Limited Liability Company Agreement" means the Borrower's limited liability company agreement, for which a certificate of formation was filed with the Secretary of State of the State of Delaware, as amended through the date of this Agreement. "Liquidity Agreement" means a liquidity loan agreement, liquidity asset purchase agreement or similar agreement entered into by a Bank and providing for the making of loans to the Issuer, or the purchase of Advances (or interests therein) from the Issuer, to support the Issuer's payment obligations under its Commercial Paper Notes. 16

"Majority Banks" means, at any time, Banks, including Banks that have become party to this Agreement pursuant to an Assignment and Acceptance, having outstanding Advances equal to more than 67% of the aggregate outstanding Advances held by Banks or, if no Advance is then outstanding from any Bank, Banks having more than 67% of the Bank Commitments. "Market Value" means at the time determined, for any (a) Mortgage Loan (other than a Non-Conforming Loan), the market value of such Mortgage Loan based upon the then most recent posted net yield for 30-day mandatory future delivery furnished by Fannie Mae and published and distributed by Telerate Mortgage Services, or, if such posted net yield is not available from Telerate Mortgage Services, such posted net yield obtained by the Administrative Agent from Fannie Mae, or (b) Non-Conforming Loan, or any other Mortgage Loan while the posted rate is not available from Fannie Mae, the value determined by the Administrative Agent in good faith. "Material Adverse Effect" means, with respect to any Person, any material adverse effect on (i) the validity or enforceability of this Agreement, the Notes or any other Transaction Document, (ii) the business, operations, total Property or financial condition of such Person, (iii) the Collateral taken as a whole, (iv) the enforceability or priority of the Lien in favor of the Administrative Agent on any material portion of the Collateral, or (v) the ability of such Person to fulfill its obligations under this Agreement, the Notes or any other Transaction Document. "Maximum Facility Amount" means $200,000,000, as such amount may be reduced pursuant to Section 2.1(c) of this Agreement. "Maximum Rate" means the maximum non-usurious rate of interest that, under applicable law, each of the Lenders is permitted to contract for, charge, take, reserve, or receive on the Obligations. "MERS" means Mortgage Electronic Registration Systems, Inc., a Delaware corporation. "MERS Designated Mortgage Loan" means a Mortgage Loan registered to or by the related Originator on the MERS electronic mortgage registration system. "Moody's" means Moody's Investors Service, Inc., and any successor thereto. "Mortgage" means a mortgage or deed of trust or other security instrument creating a Lien on real property, on a standard form as approved by Fannie Mae, Freddie Mac or Ginnie Mae or such other form as any of the Originators determines is satisfactory for any Approved Investor unless otherwise directed by the Administrative Agent and communicated to the Collateral Agent. "Mortgage Assets" means, collectively: (a) any and all Mortgage Loans in which the Administrative Agent, as secured party, for the benefit of the holders of the Obligations, is granted a security interest pursuant to any Assignment or other document (whether or not the Principal Mortgage Documents related thereto are delivered) heretofore or hereafter from time to time executed by the Borrower; 17

(b) any and all instruments, documents and other property of every kind or description, of or in the name of the Borrower, now or hereafter for any reason or purpose whatsoever, in the possession or control of, or in transit to, the Collateral Agent; (c) any and all general intangibles and Mortgage Loan Collateral that relate in any way to the Mortgage Assets; (d) any and all Take-Out Commitments identified on Hedge Reports from time to time prepared by the Servicer on behalf of any of the Originators and the Borrower; (e) any and all contract rights, chattel paper, certificated securities, uncertificated securities, financial assets, securities accounts or investment property which constitute proceeds of the Mortgage Assets; (f) this Agreement, the Performance Guaranties and the Subordination Agreement, including all moneys due or to become due thereunder, claims of the Borrower arising out of or for breach or default thereunder, and the right of the Borrower to compel performance and otherwise exercise all remedies thereunder; and (g) any and all proceeds of any of the foregoing. "Mortgage Loan" means a loan evidenced by a Mortgage Note and secured by a Mortgage, the beneficial interest of which has been acquired by the Borrower from any of the Originators by purchase pursuant to the Repurchase Agreement (with the record owner thereof being such Originator or, in the case of a MERS Designated Mortgage Loan, MERS as nominee for such Originator, and its successors and assigns). "Mortgage Loan Collateral" means all Mortgage Notes and related Principal Mortgage Documents, Other Mortgage Documents, and other Collateral. "Mortgage Note" means a promissory note, on a standard form approved by Fannie Mae, Freddie Mac or Ginnie Mae or such other form as the Originators determine is satisfactory for any Approved Investor unless otherwise directed by the Administrative Agent and communicated to the Collateral Agent. "Mortgage Origination Date" means, with respect to each Mortgage Loan, the date (transmitted to the Collateral Agent) that is the later of (1) the date of the Mortgage Note or (2) the date such Mortgage Loan was funded and disbursed to or at the direction of the Obligor. "Multiemployer Plan" means a multiemployer plan defined in Sections 3(37) or 4001(a)(3) of ERISA or Section 414(f) of the Code to which Borrower or any ERISA Affiliate is required to make contributions. "Non-Conforming Loan" means a Jumbo Loan. "Note" means each or any of the promissory notes executed by the Borrower, substantially in the form of Exhibit E hereto, together with all renewals, extensions, and replacements for any such note. 18

"Obligations" means any and all present and future indebtedness, obligations, and liabilities of the Borrower to any of the Lenders, the Collateral Agent, each Affected Party, each Indemnified Party and the Administrative Agent, and all renewals, rearrangements and extensions thereof, or any part thereof, arising pursuant to this Agreement or any other Transaction Document, and all interest accrued thereon, and attorneys' fees and other costs incurred in the drafting, negotiation, enforcement or collection thereof, regardless of whether such indebtedness, obligations, and liabilities are direct, indirect, fixed, contingent, joint, several or joint and several. "Obligor" means (i) with respect to each Mortgage Note included in the Collateral, the obligor on such Mortgage Note and (ii) with respect to any other agreement included in the Collateral, any person from whom any of the Originators or the Borrower is entitled to performance. "Originator Performance Guaranty" means the Originator Performance Guaranty, in the form attached hereto as Exhibit G-2, made by the Performance Guarantor in favor of the Originators, and assigned to the Administrative Agent for the benefit of the Lenders. "Originators" means together, American Home Mortgage Corp., a New York corporation and Columbia National Incorporated, a Maryland corporation, and their successors and assigns. "Originator's Credit and Collection Policy" means with respect to each Originator, the Originator's Credit and Collection Policy, attached hereto as Exhibit M. "Other Company" means the Performance Guarantor and all of its Subsidiaries except the Borrower. "Other Mortgage Documents" is defined in Section 3.2(c). "PBGC" means the Pension Benefit Guaranty Corporation or any successor thereto. "Performance Guarantor" means American Home Mortgage Holdings, Inc., a Delaware corporation, and its successors and assigns. "Performance Guarantor Quarterly Certificate" means the form of certificate attached hereto as Exhibit H-3. "Performance Guaranty" means, collectively, the Servicer Performance Guaranty, in the form attached hereto as Exhibit G-1, made by the Performance Guarantor in favor of the Administrative Agent for the benefit of the Lenders, and the Originator Performance Guaranty, in the form attached hereto as Exhibit G-2, made by the Performance Guarantor in favor of the Borrower and assigned to the Administrative Agent for the benefit of the Lenders. "Permitted Investments" means book-entry securities, negotiable instruments or securities represented by instruments in bearer or registered form that evidence any of the following: 19

(a) direct obligations of, and obligations fully guaranteed by, the United States of America or any agency or instrumentality of the United States of America, the obligations of which are backed by the full faith and credit of the United States of America; (b) (i) demand and time deposits in, certificates of deposits of, bankers' acceptances issued by, or federal funds sold by, any depository institution or trust company incorporated under the laws of the United States of America, any State thereof or the District of Columbia or any foreign depository institution with a branch or agency licensed under the laws of the United States of America or any State, subject to supervision and examination by Federal and/or State banking authorities and having a rating of P-1 by Moody's, a rating of at least A-1 by S&P and a rating of at least F1 by Fitch at the time of such investment or contractual commitment providing for such investment or otherwise approved in writing by each Rating Agency or (ii) any other demand or time deposit or certificate of deposit that is fully insured by the Federal Deposit Insurance Corporation; (c) repurchase obligations with respect to (i) any security described in clause (a) above or (ii) any other security issued or guaranteed by an agency or instrumentality of the United States of America, in either case entered into with a depository institution or trust company (acting as principal) described in clause (b)(i) above; (d) short-term securities bearing interest or sold at a discount issued by any corporation incorporated under the laws of the United States of America or any State, the short-term unsecured obligations of which have a rating of P-1 by Moody's, a rating of at least A-1 by S&P and a rating of F1 by Fitch at the time of such investment; provided, however, that securities issued by any particular corporation will not be Permitted Investments to the extent that investment therein will cause the then outstanding principal amount of securities issued by such corporation and held in the Reserve Account to exceed 10% of amounts held in the Reserve Account; (e) commercial paper having a rating of P-1 by Moody's, a rating of at least A-1 by S&P and a rating of at least F1 by Fitch at the time of such investment or pledge as security; (f) money market funds whose investments consist solely of one of the foregoing; or (g) any other investments approved in writing by each Rating Agency. "Permitted Transferee" is defined in Section 3.3(c). "Person" means any individual, corporation (including a business trust), limited liability company, partnership, joint venture, association, joint stock company, trust, unincorporated organization, Governmental Authority, or any other form of entity. "Portfolio Yield" means, with respect to any Collection Period, the percentage equivalent to the amount computed as of the last day of such Collection Period by multiplying (i) 12 by (ii) (a) the aggregate amount of interest accrued (whether or not paid) with respect to all Eligible Mortgage Loans included in the Collateral during such Collection Period divided by (b) the daily average outstanding principal amount of all Eligible Mortgage Loans included in the Collateral during such Collection Period. 20

"Primary Obligations" means, at the time determined, the sum of Principal Debt plus accrued and unpaid interest thereon through the end of the then current Interest Period, plus accrued and unpaid fees under Section 2.4(b). "Principal Debt" means, at the time determined, the unpaid principal balance of all Advances under this Agreement. "Principal Mortgage Documents" is defined in Section 3.2(b). "Program Documents" means, in the case of the Issuer, the Liquidity Agreement relating to this Agreement and the other documents executed and delivered in connection therewith, as each may be amended, supplemented or otherwise modified from time to time. "Property" means any interest in any kind of property or asset, whether real, personal or mixed, or tangible or intangible. "Rating Agency" means S&P, Moody's and Fitch. "Regulation T, U, X and Z," respectively, mean Regulation T, U, X and Z promulgated by the Federal Reserve Board as in effect from time to time, or any successor regulations thereto. "Regulatory Change" is defined in Section 2.16. "Repurchase Agreement" means the Master Repurchase Agreement and the Addendum to the Master Repurchase Agreement incorporated therein, each dated as of the date of this Agreement between the Originators, as sellers, and the Borrower, as purchaser, as the same may be amended, modified or restated from time to time. "Required Reserve Account Amount" means on any date 0.50% of the Maximum Facility Amount on such date. "Requirement of Law" as to any Person means the articles of incorporation, by-laws, certificate of formation and limited liability company agreement or other organizational or governing documents of such Person, and any law, statute, code, ordinance, order, rule, regulation, judgment, decree, injunction, franchise, permit, certificate, license, authorization or other determination, direction or requirement (including, without limitation, any of the foregoing that relate to energy regulations and occupational, safety and health standards or controls and any hazardous materials laws) of any Governmental Authority, in each case applicable to or binding upon such Person or any of its Property or to which such Person or any of its Property is subject. "Reserve Account" is defined in Section 2.8, it being understood that such account is assigned to the Administrative Agent pursuant to the Reserve Account Control Agreement and the Administrative Agent has the authority to direct the transfer of funds from the Reserve Account. "Reserve Account Bank" means the institution then holding the Reserve Account pursuant to Section 2.8. 21

"Reserve Account Control Agreement", dated of even date herewith, between the Borrower, the Servicer, the Administrative Agent and the Reserve Account Bank, substantially in the form attached hereto as Exhibit L, as may be amended, modified, supplemented or replaced. "S&P" means Standard & Poor's Rating Services, a Division of The McGraw-Hill Companies, Inc., and any successor thereto. "Security Agreement" is defined in the Collateral Agency Agreement. "Security Instruments" means (a) the Collateral Agency Agreement, (b) the Security Agreement, (c) the Collection Account Control Agreement, (d) the Reserve Account Control Agreement, and (e) such other executed documents as are or may be necessary to grant to the Administrative Agent a perfected first, prior and continuing security interest in and to the Collateral and any and all other agreements or instruments now or hereafter executed and delivered by or on behalf of the Borrower in connection with, or as security for the payment or performance of, all or any of the Obligations, as amended, modified or supplemented. "Servicer" means at any time the Person then authorized pursuant to Section 11.1 to administer and collect Mortgage Loans on behalf of the Lenders. The initial Servicer shall be American Home Mortgage Corp. "Servicer Default" means (a) any Event of Default, to the extent relating to the Servicer, arising under Sections 8.1(a), (b), (c), (d), (e), (f), (g), (h), (i), (j), (k), (l), (m), (n), (o), (u), (v), (w), (x) or (cc) in each case, without giving effect to any provisions in such sections that make such sections applicable only so long as the Servicer is one of the Originators, (b) if the Servicer is one of the Originators, the Performance Guarantor shall cease to own directly 100% of all of the stock of the Servicer, or (c) if the Servicer is one of the Originators, the Servicer's Tangible Net Worth, combined with the Tangible Net Worth of Columbia National, Incorporated shall be less than $85,000,000. "Servicer Fee" is defined in Section 2.4(b). "Servicer Monthly Report" is defined in Section 3.7. "Servicer Performance Guaranty" means the Servicer Performance Guaranty, in the form attached hereto as Exhibit G-1, made by the Performance Guarantor in favor of the Administrative Agent for the benefit of the Lenders. "Settlement Date" means the 10th day of each calendar month, commencing September 10, 2003 or, if such day is not a Business Day, the next succeeding Business Day, provided, however, that on and after the Termination Date, the Administrative Agent may, by notice to the Borrower and the Servicer, select other days to be Settlement Dates (including days occurring more frequently than once per month). "Shipping Request" means the shipping request presented by the Borrower or the Servicer to the Collateral Agent substantially on the form attached as Exhibit D-5A (as amended, 22

modified or supplemented from time to time as agreed to by the Administrative Agent, the Borrower and the Collateral Agent). "Shortfall Amount" means, with respect to the last day of any Interest Period or any Settlement Date, the excess, if any, of (a) all amounts due pursuant to (i) Section 2.7(c)(iii)(B) or Section 2.7(c)(iv)(C) on the last day of such Interest Period occurring prior to, on or after the Termination Date, as applicable, (ii) Section 2.7(c)(iii)(A), (C), (D), or (F) on any such Settlement Date occurring prior to the Termination Date or (iii) Section 2.7(c)(iv)(A), (B), (E), (C), or (G) on any such Settlement Date occurring on or after the Termination Date, over (b) the sum of the collections then held by the Servicer for the Lenders and the Administrative Agent pursuant to Section 2.7(c)(ii) plus collected funds then on deposit in the Collection Account. "Special Indemnified Amounts" is defined in Section 11.5. "Special Indemnified Party" is defined in Section 11.5. "Subordination Agreement" means the agreement, substantially in the form attached as Exhibit B hereto, executed by the Performance Guarantor and certain of its Affiliates, if applicable, in favor of the Borrower and the Administrative Agent for the benefit of the holders of the Obligations. "Subsidiary" means, with respect to any Person, any corporation or other entity of which securities having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by such Person, or one or more of its Subsidiaries, or by such Person and one or more of its Subsidiaries. "Super Jumbo Loan" means a Jumbo Loan having an original principal balance equal to or in excess of $650,000 but not more than $1,000,000. "Take-Out Commitment" means (A) with respect to Mortgage Loans that are included in the Eligible Mortgage Collateral, a current, valid, binding, enforceable, written commitment, issued by an Approved Investor, to purchase one or more Mortgage Loans from one of the Originators prior to the date that is 90 days from the date that such Mortgage Loan first becomes Eligible Mortgage Collateral and at a specified price and in amounts, form and substance satisfactory to the Administrative Agent, which commitment is not subject to any term or condition (i) that is not customary in commitments of like nature or (ii) that, in the reasonably anticipated course of events, cannot be fully complied with prior to the expiration thereof, which commitment has been assigned to the Borrower (partial assignments being permitted so long as the amount assigned (together with all other Take-Out Commitments) fully covers the amount of the Eligible Mortgage Collateral) and in which a perfected and first-priority security interest has been granted by the Borrower to the Administrative Agent; provided, that promptly upon receipt of the actual written confirmation (each, a "Trade Confirmation") of such trade duly executed by one of the Originators and the trade counterparty (such Trade Confirmation being held in trust for the Collateral Agent pursuant to Section 3.2(c), such Originator must provide such Trade Confirmation upon such receipt to the Administrative Agent, immediately upon its request, and the Administrative Agent, on behalf of the Lenders shall have the right, without notice, to review such Trade Confirmation at the office of, and with the officers of, such Originator, or (B) with 23

respect to the Non-Conforming Loans included in the Eligible Mortgage Collateral, a current, valid, binding, enforceable, written commitment, issued by an Approved Investor, to purchase loans with characteristics of Jumbo Loans from one of the Originators from time to time at a specified price (or a specified spread to an agreed-upon index) and in amounts, and upon terms, satisfactory to the Administrative Agent, which commitment is not subject to any term or condition (i) that is not customary in commitments of like nature or (ii) that, in the reasonably anticipated course of events, cannot be fully complied with prior to the expiration thereof, the rights but not the obligations under which commitment have been assigned to the Borrower (partial assignments being permitted so long as the aggregate amount assigned fully covers the amount of the Eligible Mortgage Collateral) and in which a perfected and first-priority security interest has been granted by the Borrower to the Administrative Agent. "Take-Out Commitment Documents" means (1) with respect to any Mortgage Loan, with respect to which there is no loan-specific Take-Out Commitment, an executed original assignment of trade as described in the definition of "Take-Out Commitment"; and (2) with respect to any Mortgage Loan, with respect to which there is a loan-specific Take-Out Commitment, copies of all Take-Out Commitments. "Take-Out Commitment Master Agreement" means with respect to which there is a loan-specific Take-Out Commitment, the master flow sale agreement, investor bulk sales agreement, or similar agreement setting forth the basic terms of sales to the related Approved Investor. "Tangible Net Worth" means the excess of a Person's (and, if applicable, that Person's subsidiaries, on a consolidated basis) total assets over total liabilities as of the date of determination, each determined in accordance with GAAP applied in a manner consistent with such Person's most recent audited financial statements plus that portion of Subordinated Debt (as defined below) not due within one year of the date of such audited financial statements. For purposes of calculating any Person's Tangible Net Worth, advances or loans to shareholders, directors, officers, employees or Affiliates, investments in Affiliates, assets pledged to secure any liabilities not including in the Debt of that Person, intangible assets, those other assets that would be deemed by HUD to be non-acceptable in calculating adjusted net worth in accordance with its requirements in effect as of that date, as those requirements appear "Consolidated Audit Guide for Audits of HUD Programs", and other assets the Administrative Agent deems unacceptable in its sole discretion shall be excluded from that Person's total assets. For purposes of this definition, "Subordinated Debt" means all indebtedness of a Person for borrowed money that is effectively subordinated in right of payment to all other present and future obligations on terms acceptable to the Majority Banks. "Termination Date" means the earliest to occur of (a) August 6, 2004, unless such date shall be extended pursuant to Section 2.1(b) then the date specified in such Extension Request, (b) the date on which the Maximum Facility Amount is terminated by the Borrower pursuant to Section 2.1(d), and (c) the date, on or after the occurrence of an Event of Default, determined pursuant to Section 8.2. "Transaction Document" means any of this Agreement, the Notes, the Security Instruments, the Collateral Agency Agreement, the Repurchase Agreement, the Administrative Agent Fee Letter, the Subordination Agreement, the Servicer Performance Guaranty, the 24

Originator Performance Guaranty and any and all other agreements or instruments now or hereafter executed and delivered by or on behalf of the Borrower in connection with, or as security for the payment or performance of any or all of the Obligations, as any of such documents may be renewed, amended, restated or supplemented from time to time. "Transfer Request" is defined in Section 3.3(a). "UCC" means the Uniform Commercial Code as adopted in the applicable state, as the same may hereafter be amended. "Uncovered Mortgage Loan" means a Mortgage Loan that would be an Eligible Mortgage Loan but for the expiration, forfeiture, termination, or cancellation of, or default under, the relevant Take-Out Commitment. "VA" means the Department of Veterans Affairs, or any successor thereto. "VA Loan" means a Mortgage Loan, the payment of which is partially or completely guaranteed by the VA under the Servicemen's Readjustment Act of 1944, as amended, or Chapter 37 of Title 38 of the United States Code or with respect to which there is a current binding and enforceable commitment for such a guaranty issued by the VA. "Wet Borrowing" is defined in Section 2.3(c). "Wet Loans" is defined in Section 2.3(c). 1.2. Other Definitional Provisions. (a) Unless otherwise specified therein, all terms defined in this Agreement have the above-defined meanings when used in the Notes or any other Transaction Document, certificate, report or other document made or delivered pursuant hereto. (b) The words "hereof," "herein," "hereunder" and similar terms when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and article, section, subsection, schedule and exhibit references herein are references to articles, sections, subsections, schedules and exhibits to this Agreement unless otherwise specified. (c) As used herein, in the Notes or in any other Transaction Document, certificate, report or other document made or delivered pursuant hereto, accounting terms relating to any Person and not specifically defined in this Agreement or therein shall have the respective meanings given to them under GAAP. (d) All accounting and financial terms used -- and compliance with each financial covenant -- in the Transaction Documents shall be determined under GAAP; however, unless the Administrative Agent has agreed (in writing) to the contrary, the determinations concerning the financial covenants found in Sections 7.1 and 7.10 and the Tangible Net Worth of the Servicer (so long as the Servicer is one of the Originators), including determinations of Deferred Income under SFAS 91 and SFAS 122, shall be made under GAAP, and SFAS 91 and 25

SFAS 122, as in effect on the date of this Agreement. All accounting principles shall be applied on a consistent basis so that the accounting principles in a current period are comparable in all material respects to those applied during the preceding comparable period. ARTICLE II AMOUNT AND TERMS OF COMMITMENT 2.1. Maximum Facility Amount. (a) Subject to the terms of this Agreement and so long as (i) the total Principal Debt never exceeds the Maximum Facility Amount, (ii) the Principal Debt never exceeds the total Collateral Value of all Eligible Mortgage Collateral, (iii) no Borrowing ever exceeds the Availability, and (iv) Borrowings are only made on Business Days before the Termination Date, the Issuer may, in its sole discretion, and if an Issuer does not make such Advance, the Banks shall, ratably in accordance with their Bank Commitments, make Advances to the Borrower from time to time in such amounts as may be requested by the Borrower pursuant to Section 2.3, so long as each Borrowing is the least of (x) the Availability, (y) the Available Collateral Value, and (z) $5,000,000 or integral multiples of $10,000 in excess thereof. Within the limits of the Maximum Facility Amount, the Borrower may borrow, prepay (whether pursuant to Section 2.5 or Section 3.3(a) of this Agreement or otherwise), and reborrow under this Section 2.1. (b) The Borrower may, from time to time by written request to the Lenders and the Administrative Agent (each such notice being an "Extension Request") given not later than 60 days and not sooner than 90 days prior to each Annual Extension Date, request an extension of the then applicable Annual Extension Date. If the Lenders and the Administrative Agent consent, in their sole discretion, to such Extension Request, then (x) the Termination Date shall not occur as of the then applicable Annual Extension Date, and (y) the Annual Extension Date shall be extended as described in the definition of "Annual Extension Date." Any such extension may be accompanied by such additional fees as the parties shall mutually agree. Notwithstanding anything else to the contrary herein, the Termination Date shall occur automatically without further action on the part of the Lenders or the Administrative Agent, on each Annual Extension Date unless an Extension Request has been granted pursuant to this paragraph. (c) The Borrower may, upon at least thirty (30) days prior irrevocable notice to the Administrative Agent, but no more than once every three months, reduce the Maximum Facility Amount; provided, however, that each partial reduction shall be in the aggregate amount of $10,000,000 and in integral multiples of $1,000,000 in excess thereof; provided further, however that no such reduction shall reduce the Maximum Facility Amount below the greater of (i) the total Principal Debt or (ii) $50,000,000. (d) The Borrower may, upon at least thirty (30) days prior irrevocable notice to the Administrative Agent, terminate the Maximum Facility Amount in its entirety upon payment in full of all Obligations. 26

2.2. Promissory Notes. The Advances made by each of the Lenders pursuant to this Article II shall be evidenced by separate Notes each substantially in the form set forth in Exhibit E hereto, each in the maximum principal amount of its Bank Commitment. The Administrative Agent on behalf of the Lenders shall record in its records the date and amount of each Advance to the Borrower and each repayment thereof. The information so recorded shall be rebuttable presumptive evidence of the accuracy thereof. The failure to so record, in the absence of manifest error, any such information or any error in so recording any such information shall not, however, limit or otherwise affect the obligations of the Borrower hereunder or under the Notes to pay the principal of all Advances, together with interest accruing thereon. 2.3. Notice and Manner of Obtaining Borrowings. (a) Borrowings. (i) The Borrower shall give the Administrative Agent and the Collateral Agent notice of each request for a Borrowing, pursuant to a Borrowing Report, and in accordance with the provisions of Section 4.2 hereof. On the Borrowing Date specified in the Borrowing Report and subject to all other terms and conditions of this Agreement, the Issuer may, in its discretion, make available to the Administrative Agent at the office of the Administrative Agent set forth in Section 12.1, in immediately available funds, the Borrowing. (ii) In the event that the Issuer shall elect not to fund a Borrowing requested by the Borrower, each Bank agrees that it shall, on the Borrowing Date specified in the Borrowing Report and subject to all other terms and conditions of this Agreement, make available to the Administrative Agent at the office of the Administrative Agent set forth in Section 12.1, in immediately available funds, an amount equal to the product of (x) such Bank's Bank Commitment Percentage, multiplied by (y) the portion of such Borrowing that the Issuer has elected not to fund. (iii) After the Administrative Agent's receipt of funds pursuant to the preceding paragraph (i) or (ii) and upon fulfillment of the applicable conditions set forth in Article IV, the Administrative Agent will make such funds available to the Borrower a like amount of immediately available funds. So long as the Borrower is otherwise entitled to make a specific Borrowing, Borrowing Reports that are received by the Administrative Agent and the Collateral Agent by 10:30 a.m. (eastern time) on a Business Day will be funded on the next Business Day following receipt of the Borrowing Report. (iv) Notwithstanding the foregoing, a Bank shall not be obligated to make Advances under this Section 2.3 at any time to the extent that the principal amount of all Advances made by such Bank would exceed such Bank's Bank Commitment less the outstanding and unpaid principal amount of any loans or purchases made by such Bank under a Liquidity Agreement. Each Bank's obligation shall be several, such that the failure of any Bank to make available to the Borrower any funds in connection with any Borrowing shall not relieve any other Bank of its obligation, if any, hereunder to make funds available on the date of such 27

Borrowing, but no Bank shall be responsible for the failure of any other Bank to make funds available in connection with any Borrowing. (b) Type of Loan. (i) Each Advance by the Issuer shall initially be funded by the issuance of commercial paper by the Issuer. (ii) Each Advance by a Bank shall be either a Base Rate Advance or a Eurodollar Advance, as determined pursuant to Section 2.15(b). (c) Wet Borrowings. The Borrower may from time to time request that certain Borrowings be funded prior to the delivery to the Collateral Agent of the corresponding Principal Mortgage Documents (individually, a "Wet Borrowing"; collectively, "Wet Borrowings"). Advances in respect of Wet Borrowings shall be made in accordance with Section 2.3(a), subject to the terms and conditions of this Agreement, including, without limitation, the following additional terms and conditions: (i) Pursuant to an Assignment, the Borrower shall grant to the Administrative Agent for the benefit of the holders of the Obligations, from the Borrowing Date of each Wet Borrowing, a perfected, first-priority security interest in the Mortgage Loans identified in Schedule III to said Assignment (such Mortgage Loans being sometimes called "Wet Loans"; (ii) The Assignment in connection with the Borrowing Report delivered by the Borrower to the Administrative Agent and the Collateral Agent, pursuant to which the Borrower requests a Wet Borrowing, shall describe the Mortgage Note or Mortgage Notes to be delivered to the Collateral Agent in connection therewith by the loan number assigned by one of the Originators, original principal amount, the amount funded (minus discount points paid to such Originator) by one of the Originators, Obligor's name and interest rate; (iii) Within nine (9) Business Days after the date that each Assignment is delivered (and inclusion of the related Wet Loan within the computation of Collateral Value as reported on the Collateral Agent Daily Report), to Collateral Agent, the Borrower shall deliver to the Collateral Agent the Principal Mortgage Documents pertaining to any Wet Loan identified on Schedule III of such Assignment; (iv) At any time, (A) except the first five and last five Business Days of any month, the portion of total Collateral Value that may be attributable to Wet Loans with respect to which the related Principal Mortgage Documents have not been delivered to the Collateral Agent within nine (9) Business Days after the date the Assignment was delivered to the Collateral Agent shall not exceed thirty percent (30%) of the Maximum Facility Amount and (B) during the first five and last five Business Days of any month, the portion of total Collateral Value that may be attributable to Wet Loans with respect to which the related Principal Mortgage Documents have not been delivered to the Collateral Agent within nine (9) Business Days after the date the Assignment was delivered to the Collateral Agent shall not exceed fifty percent (50%) of the Maximum Facility Amount; 28

(v) The Borrower shall not request any Wet Borrowing, and no Wet Borrowing shall be made, in respect of any Mortgage Loan that is closed with an escrow agent other than the relevant title insurance company, unless at the time of such request, the Borrower is entitled to the benefit of Closing Protection Rights with provisions substantially similar to one of the prescribed sets of rights set forth in Exhibit L to this Agreement or as otherwise required by the Administrative Agent (it being understood that pursuant to the Security Agreement, the Administrative Agent has a security interest in all Closing Protection Rights). Each request by the Borrower for a Wet Borrowing shall be automatically deemed to constitute a representation and warranty by the Borrower to the effect that immediately before and after giving effect to such Borrowing, the terms and conditions specified in the foregoing clauses (i) through (v) and specified in Section 4.2 are and shall be satisfied in full as of the related Borrowing Date. (d) Failure to Deliver Principal Mortgage Documents. The failure to deliver Principal Mortgage Documents by the ninth Business Day, as required by subparagraph (iii) of Section 2.3(c) and elsewhere in this Agreement, shall not be treated as a Default or an Event of Default so long as the Administrative Agent is satisfied that each such failure, when considered in the light of past and other contemporaneous failures, does not have a Material Adverse Effect; however, (i) if any such Principal Mortgage Documents related to such Wet Loans are not so delivered on a timely basis, the Borrower shall make a mandatory prepayment so that after giving effect thereto, the Collateral Value of Eligible Mortgage Collateral (excluding such Wet Loans) shall equal or exceed the Principal Debt, and (ii) the Wet Loan shall not be an Eligible Mortgage Loan and shall have a Collateral Value of zero until such Principal Mortgage Documents shall have been delivered to the Collateral Agent in connection with a subsequent Borrowing. The Borrower diligently shall pursue delivery to the Collateral Agent of all Principal Mortgage Documents pertaining to any Wet Borrowings. 2.4. Fees. (a) The Borrower shall pay to the Administrative Agent the fees set forth in a letter agreement dated the date hereof (the "Administrative Agent Fee Letter"), between the Administrative Agent and the Borrower, such fees to be payable at such times and in such amounts as shall be specified thereunder. (b) The Borrower shall pay to the Servicer a fee (the "Servicer Fee") of 0.5% per annum on the aggregate outstanding principal balance of the Eligible Mortgage Loans from the date hereof until the Principal Debt is indefeasibly paid in full, payable monthly in arrears on each Settlement Date. The Servicer Fee shall be payable only from Collections pursuant to, and subject to the priority of payments set forth in, Section 2.7(c). 2.5. Prepayments. (a) Optional Prepayments. The Borrower may, at any time and from time to time with five (5) Business Days' notice to the Administrative Agent, prepay the Advances in whole or in part, in the aggregate amount of $1,000,000 or integral multiples of $100,000 in 29

excess thereof, without premium or penalty other than Consequential Loss, if any. Notwithstanding the foregoing, any prepayment made hereunder shall be accompanied by accrued interest on the principal amount being prepaid. After giving notice that a prepayment will be made, the Borrower shall be liable to each Affected Party for any Consequential Loss resulting from such prepayment (including prepayments of Advances bearing interest at the Commercial Paper Rate or Eurodollar Rate on a day other than the last day of the related Interest Period) or the failure to make a prepayment designated in any such notice. (b) Mandatory Prepayments. The Borrower shall immediately on demand by the Administrative Agent make a mandatory prepayment if at any time, and to the extent that, (i) the Principal Debt exceeds the Maximum Facility Amount or (ii) the Principal Debt exceeds the total Collateral Value of all Eligible Mortgage Collateral. The Borrower shall be liable for any Consequential Loss resulting from any such prepayment. 2.6. Business Days. If the date for any payment under this Agreement falls on a day that is not a Business Day, then for all purposes of the Notes and this Agreement the same shall be deemed to have fallen on either (a) the next following Business Day, and such extension of time shall in such case be included in the computation of payments of interest and fees or (b) if the next following Business Day is in another calendar month and payment is being made with respect to a Eurodollar Advance, then on the immediately previous Business Day. 2.7. Payment Procedures. (a) In General. Subject to the provisions of this Section 2.7, all payments on the Principal Debt and interest and fees under the Notes and this Agreement shall be made by the Borrower (or the Collateral Agent or the Servicer on behalf of the Borrower) to the Administrative Agent for the account of the Lenders represented by the Administrative Agent. All such payments shall be made before 11:00 a.m. (eastern time) on the respective due dates in federal or other funds immediately available by that time of day and at the Agent's Account. Funds received after 11:00 a.m. (eastern time) shall be treated for all purposes as having been received by the Administrative Agent on the Business Day next following the date of receipt of such funds from the Borrower. All payments made by the Borrower under this Agreement and the Notes shall be without set off, deduction or counterclaim and the Borrower agrees to pay on demand any present or future stamp or documentary taxes or any other taxes, levies, imposts, duties, charges or fees which arise from payment made hereunder or under the Notes or from the execution or delivery or otherwise with respect to this Agreement or the Notes. (b) The Borrower shall establish and maintain an account (the "Collection Account") with the Collection Account Bank. The Collection Account shall be a fully segregated trust account, unless the Collection Account Bank shall be an Eligible Institution having short-term debt ratings from S&P, Moody's and Fitch no lower than A-1/P-1/F1 respectively, in which case the account need not be a trust account. The Collection Account shall be under the control of the Administrative Agent pursuant to the Collection Account Control Agreement, and the Borrower shall have no right to withdraw any amount from the 30

Collection Account until the Obligations are indefeasibly paid in full. The Servicer shall have no right to access the Collection Account except as otherwise contemplated in Section 2.7(c). (c) Collections. (i) The Servicer shall administer Collections in accordance with the provisions of this Section 2.7. Approved Investors shall be instructed to pay proceeds from the sale of Mortgage Loans into the Collection Account, and such amounts may be released only in accordance with the procedures set forth in Section 3.3 hereof. (ii) The Servicer shall hold, on behalf of the Lenders and the Administrative Agent, from Collections received by it with respect to any Mortgage Asset, amounts necessary to make payments on the following Settlement Date (or end of the related Interest Period) pursuant to Section 2.7(c)(iii) or (iv), as applicable. Such amounts shall be deposited into the Collection Account no later than such Settlement Date or at the end of such Interest Period, or, on or after the Termination Date or upon the occurrence and during the continuation of an Event of Default, within one Business Day after receipt before 11:00 a.m. (eastern time) by the Servicer. (iii) Prior to the Termination Date, the Servicer shall withdraw funds from the Collection Account (to the extent of collected funds therein) and shall make payments from the Collection Account at the following times and in the following order of priority: (A) To the extent not previously paid, on each Settlement Date, the Servicer shall deposit an amount equal to the costs, fees and expenses then due and payable to the Collateral Agent to an account designated by the Collateral Agent. (B) On the last day of each Interest Period for any Advance made by La Fayette that bears interest at the Commercial Paper Rate and on the last day of each Interest Period for any Eurodollar Advance made by any Lender, the Servicer shall deposit an amount equal to accrued interest on such Advance to the Agent's Account. On each Settlement Date, the Servicer shall deposit an amount equal to accrued interest on each Advance that bears interest at the Alternate Base Rate to the Agent's Account. (C) To the extent not previously paid, on each Settlement Date, the Servicer shall deposit an amount equal to the fees, costs and expenses then due and payable to the Administrative Agent under the Administrative Agent Fee Letter to the Agent's Account. (D) On each Settlement Date on which the Required Reserve Account Amount exceeds the amount then on deposit in the Reserve Account, the Servicer shall deposit an amount equal to such excess to the Reserve Account. (E) To the extent not previously paid, on each Settlement Date, the Servicer shall deposit any amounts, other than those listed in clauses (A), (B) and (C) above and other than principal on the Advances, that are then due and 31

payable and of which the Servicer has received prior written notice, including without limitation additional costs under Section 2.16, any additional interest under Section 2.17, Consequential Losses under Section 2.18, indemnities under Section 10.1 and costs, expenses and taxes under Section 12.19, to the Agent's Account. (F) If requested by the Borrower, the Servicer (1) shall remit the amount of any principal prepayment to be made hereunder to the Agent's Account, and (2) to the extent not required to make payments pursuant to clauses (A) through (E) on any Settlement Date or at the end of any Interest Period occurring within 30 days after the Borrower's request, to an account designated by the Borrower to pay for the purchase of Mortgage Assets by the Borrower. (G) On each Settlement Date, the Servicer shall retain for its own account an amount equal to accrued Servicer Fee then due and payable. (iv) On the Termination Date and thereafter, the Administrative Agent shall make payments from the Collection Account (to the extent of collected funds therein) at the following times and in the following order of priority: (A) On each Settlement Date, if the Servicer is not one of the Originators or an Affiliate of one of the Originators, an amount equal to accrued Servicer Fee then due and payable shall be paid to the Servicer. (B) On the last day of each Interest Period for any Advance made by La Fayette that bears interest at the Commercial Paper Rate and on the last day of each Interest Period for any Eurodollar Advance made by any Lender, an amount equal to accrued interest on each such Advance shall be paid to the Agent's Account. On each Settlement Date, an amount equal to accrued interest on Advances that bear interest at the Alternate Base Rate shall be paid to the Agent's Account. (C) To the extent not previously paid, on each Settlement Date, an amount equal to the fees, costs and expenses then due and payable to the Administrative Agent under the Administrative Agent Fee Letter shall be paid to the Agent's Account. (D) To the extent not previously paid, on each Settlement Date, an amount equal to the costs, fees and expenses then due and payable to the Collateral Agent shall be paid to an account designated by the Collateral Agent. (E) On each Settlement Date, an amount equal to the unpaid principal balance of all Advances made by Lenders, or such lesser amount as is available from Collections, shall be paid to the Agent's Account. (F) To the extent not previously paid, on each Settlement Date, any amounts of the type described in Section 2.7(c)(iii)(E) are then due and payable and any other unpaid Obligations shall be paid to the Agent's Account. 32

(G) On the Settlement Date on which all Obligations are paid in full, if the Servicer is one of the Originators or an Affiliate of one of the Originators, an amount equal to accrued Servicer Fee then due and payable shall be paid to the Servicer. (v) Upon receipt of funds deposited into the Agent's Account, the Administrative Agent shall distribute such funds to the Lenders or to itself for application to the Obligations in accordance with the order of priority set forth in Section 2.7(c)(iii) or (iv), as applicable. (vi) On the Termination Date and thereafter, Issuer shall use commercially reasonable efforts to coordinate Interest Periods for advances so that Consequential Losses and other expenses charged to Borrower are mitigated. (d) Interest Payments. Interest on each Advance made by La Fayette that bears interest at the Commercial Paper Rate and interest on each Eurodollar Advance shall be due and payable on the last day of the Interest Period applicable to such Advance. Interest on each Advance that bears interest at a rate based on the Alternate Base Rate shall be due and payable in arrears on each Settlement Date, on the Termination Date, and, thereafter, on demand. (e) Payments from Collection Account. To effect payments (including prepayments) hereunder, the Borrower may use the collected funds (if any) then held on deposit in the Collection Account. 2.8. The Reserve Account. (a) Establishment. An account (the "Reserve Account") shall be established with the Reserve Account Bank. The Borrower, the Servicer, the Administrative Agent and the Reserve Account Bank have entered into the Reserve Account Control Agreement. The Reserve Account is and shall be under the control of the Administrative Agent, and the Borrower has and shall have no right to withdraw any amount from the Reserve Account until the Obligations are indefeasibly paid in full. (b) Taxation. The taxpayer identification number associated with the Reserve Account shall be that of the Borrower, and the Borrower will report for federal, state and local income tax purposes the income, if any, earned on funds in the Reserve Account. (c) New Reserve Account. The Reserve Account Bank shall be an Eligible Institution. In the event the Reserve Account Bank ceases to be an Eligible Institution, the Borrower shall, within ten days after learning thereof, establish a new Reserve Account (and transfer any balance and investments then in the Reserve Account to such new Reserve Account) at another Eligible Institution, which new Reserve Account shall be subject to a replacement Reserve Account Control Agreement. (d) Statements for Reserve Account. On a monthly basis, the Servicer shall cause the Reserve Account Bank to provide the Servicer, the Borrower and the Administrative Agent with a written statement with respect to the preceding calendar month regarding the Reserve Account in a form customary for statements provided by the Reserve Account Bank for 33

other accounts held by it, which statement shall include, at a minimum, the amount on deposit in the Reserve Account, and the dates and amounts of all deposits, withdrawals and investment earnings with respect to the Reserve Account. (e) Payments from Reserve Account. (i) On the Business Day preceding the last day of each Interest Period and each Settlement Date, the Servicer will determine whether any Shortfall Amount will arise with respect to such Interest Period or Settlement Date and will give the Administrative Agent notice of the amount thereof by noon New York City time. By 2:00 p.m. New York City time on the Business Day prior to the last day of each Interest Period and each Settlement Date on which the amount of the Shortfall Amount is greater than zero, the Servicer shall notify the Reserve Account Bank requesting payment thereof. To the extent funds are available in the Reserve Account, the Servicer shall cause the Reserve Account Bank to pay the amount requested to the Agent's Accounts, as specified by the Administrative Agent, by 11:00 a.m. New York City time on the last day of such Interest Period or on such Settlement Date. (ii) On each Settlement Date prior to the Termination Date on which the funds on deposit in the Reserve Account exceed the Required Reserve Account Amount (after giving effect to any payments pursuant to Section 2.8(e)(i)), the Servicer may withdraw and pay to the Borrower such excess from the Reserve Account. (f) Payments to Reserve Account. On the date hereof, the Borrower shall remit to the Reserve Account immediately available funds so that the amount on deposit in the Reserve Account equals the Required Reserve Account Amount. Additional payments shall be deposited to the Reserve Account from time to time pursuant to Section 2.7(c)(iii)(D). (g) Pledge. To secure the payment and performance of the Obligations, the Borrower hereby pledges and assigns to the Administrative Agent for the benefit of the Lenders, and hereby grants to the Administrative Agent for the benefit of the Lenders, a security interest in, all of the Borrower's right, title and interest in and to the Reserve Account, including, without limitation, all funds on deposit therein, all investments arising out of such funds, all interest and any other income arising therefrom, all claims thereunder or in connection therewith, and all cash, instruments, securities, rights and other property at any time and from time to time received, receivable or otherwise distributed in respect of such account, such funds or such investments, and all money at any time in the possession or under the control of, or in transit to such account, or any bailee, nominee, agent or custodian of the Reserve Account Bank, and all proceeds and products of any of the foregoing. Except as provided in the preceding sentence, the Borrower may not assign, transfer or otherwise convey its rights under this Agreement to receive any amounts from the Reserve Account. (h) Termination of Reserve Account. On the date following the Termination Date on which all Obligations have been indefeasibly paid in full, all funds then on deposit in the Reserve Account shall be paid to the Borrower and the Reserve Account shall be closed. 34

2.9. Interest Allocations. The Administrative Agent shall, from time to time and in its sole discretion, determine whether an Advance shall be part of the "CP Allocation" or the "ABR Allocation"; provided, however, that each Advance made by a Bank hereunder shall be allocated to the ABR Allocation. The Administrative Agent shall provide the Borrower with reasonably prompt notice of the allocations made by it pursuant to this Section 2.9. Following designation by the Administrative Agent of any Advance, or any portion thereof, as being a CP Allocation, the Borrower may, at all times that such designation remains in effect, consult with the Administrative Agent as to the number and length of Interest Periods relating to such CP Allocation. In addition, in any Borrowing Report, the Borrower may request that an Advance be part of the CP Allocation and may request the length of any related Interest Period. In selecting the Interest Periods for a CP Allocation, the Administrative Agent shall use reasonable efforts, taking into account market conditions, to accommodate the Borrower's preferences; provided, however, that the Administrative Agent shall have the ultimate authority to make all such selections. 2.10. Interest Rates. Except where specifically otherwise provided, Borrowings in respect of any CP Allocation shall bear interest with respect to each Interest Period comprising such CP Allocation at a rate per annum equal to the Commercial Paper Rate applicable to such Interest Period, and Borrowings in respect of any ABR Allocation shall bear interest at either the Eurodollar Rate plus the Bank Spread, or the Alternate Base Rate; provided, however, that in no event shall the rate of interest with respect to any Borrowings or portion thereof exceed the Maximum Rate. Each change in the Alternate Base Rate and Maximum Rate, subject to the terms of this Agreement, will become effective, without notice to the Borrower or any other Person, upon the effective date of such change. 2.11. Quotation of Rates. It is hereby acknowledged that an officer or other individual appropriately designated by an officer previously identified to the Administrative Agent in a certificate of incumbency or other appropriately designated officer of the Borrower may call the Administrative Agent from time to time in order to receive an indication of the rates then in effect, but such indicated rates shall neither be binding upon the Administrative Agent nor the Lenders nor affect the rate of interest which thereafter is actually in effect. 2.12. Default Rate. So long as any Event of Default exists, all Obligations shall bear interest at the Default Rate until paid, regardless of whether such payment is made before or after entry of a judgment. 2.13. Interest Recapture. If the designated rate applicable to any Borrowing exceeds the Maximum Rate, the rate of interest on such Borrowing shall be limited to the Maximum Rate, but any subsequent reductions in such designated rate shall not reduce the rate of interest thereon below the 35

Maximum Rate until the total amount of interest accrued thereon equals the amount of interest that would have accrued thereon if such designated rate had at all times been in effect. If at maturity (stated or by acceleration), or at final payment of the Notes, the total amount of interest paid or accrued is less than the amount of interest that would have accrued if such designated rates had at all times been in effect, then, at such time and to the extent permitted by applicable Governmental Requirements, the Borrower shall pay an amount equal to the difference between (a) the lesser of the amount of interest that would have accrued if such designated rates had at all times been in effect and the amount of interest that would have accrued if the Maximum Rate had at all times been in effect, and (b) the amount of interest actually paid or accrued on the Notes. 2.14. Interest Calculations. All computations of interest and any other fees hereunder shall be made on the basis of a year of 360 days for the actual number of days (including the first day but excluding the last day) elapsed; provided, however, that any calculations of interest based on the rate set forth in clause (a) of the definition of Alternate Base Rate shall be made on the basis of a year of 365/366 days for the actual number of days (including the first day but excluding the last day) elapsed. All such determinations and calculations by the Administrative Agent shall be conclusive and binding absent manifest error. 2.15. Interest Period. (a) "Interest Period" means with respect to any Advance included in the CP Allocation, each period (i) commencing on, and including, the date that such Advance was initially designated by the Administrative Agent as comprising a part of the CP Allocation hereunder, or the last day of the immediately preceding Interest Period for such Advance (whichever is latest); and (ii) ending on, but excluding, the date that falls such number of days (not to exceed 30 days) thereafter as the Administrative Agent shall select; provided, however, that no more than ten Interest Periods shall be in effect at any one time with respect to Advances included in the CP Allocation. (b) "Interest Period" means with respect to any Advance included in the ABR Allocation, a period of one month (provided that if such Interest Period begins on a date for which there is no corresponding date in the month in which such Interest Period is scheduled to end, the last day of such Interest Period shall be the last Business Day of the month in which such Interest Period is scheduled to end), which Advance shall be a Eurodollar Advance, unless: (i) on or prior to the first day of such Interest Period the Lender with respect to such Advance shall have notified the Administrative Agent that the introduction of or any change in or in the interpretation of any law or regulation makes it unlawful, or any central bank or other governmental authority asserts that it is unlawful, for such Lender to fund such Advance at the Eurodollar Rate (and such Lender shall not have subsequently notified the Administrative Agent that such circumstances no longer exist), or (ii) the Borrower shall have requested a Base Rate Advance or an Interest Period shorter than one month, or 36

(iii) the Administrative Agent does not receive notice, by 12:00 noon (New York City time) on the third Business Day preceding the first day of such Interest Period, that the related Advance will not be funded by issuance of commercial paper, or (iv) the principal amount of such Advance is less than $500,000, or (v) an Event of Default shall have occurred and be continuing, or (vi) the Eurodollar Rate determined pursuant hereto does not accurately reflect the cost of funds to the Issuer or the Banks (as conclusively determined by the Agent) during such Interest Period, or (vii) adequate and reasonable means do not exist for ascertaining the Eurodollar Rate for the relevant Interest Period, in which case (if any of the foregoing events occurs) such Advance shall be a Base Rate Advance. (c) Notwithstanding any provision in this Agreement to the contrary, (x) any Interest Period that would otherwise end on a day that is not a Business Day shall be extended to the next succeeding Business Day (provided, however, if interest in respect of such Interest Period is computed by reference to the Eurodollar Rate, and such Interest Period would otherwise end on a day that is not a Business Day, and there is no subsequent Business Day in the same calendar month as such day, such Interest Period shall end on the immediately preceding Business Day); (y) any Interest Period that commences before the Termination Date and would otherwise end after the Termination Date shall end on the Termination Date; and (z) the duration of each Interest Period that commences on or after the Termination Date shall be of such duration as shall be selected by the Administrative Agent and communicated by notice to the Borrower. 2.16. Additional Costs. (a) If any Affected Party determines in its reasonable discretion that compliance with any law or regulation or any guideline or request, or any change in such law, regulation, guideline or request, or any change in the interpretation, administration or application thereof, from any central bank, any governmental authority or any accounting board or authority (whether or not having the force of law), which is responsible for the establishment or interpretation of national or international accounting principles, in each case whether foreign or domestic (whether or not having the force of law): (i) affects or would affect the amount of capital required or expected to be maintained by such Affected Party and such Affected Party determines that the amount of such capital is increased by or based upon the existence of any commitment to lend or maintain a loan against Mortgage Collateral hereunder or under any commitments to an Investor related to this Agreement or to the funding thereof or any related liquidity facility or credit enhancement facility (or any participation therein) and other commitments of the same type related to this Agreement, or 37

(ii) increases the cost to or imposes a cost on (A) an Affected Party funding or making or maintaining any Advances or any liquidity loan to an Issuer or any commitment of such Affected Party with respect to any of the foregoing, or (B) the Administrative Agent for continuing its, or the Borrower's, relationship with the Lenders; then, upon demand by such Affected Party (with a copy to the Administrative Agent) delivered no later than 180 days after such circumstances first arise, the Borrower shall pay to the Affected Party within 30 days of the delivery of such demand, from time to time as specified by such Affected Party, additional amounts sufficient to compensate such Affected Party in the light of such circumstances, to the extent that such Affected Party reasonably determines such increase in capital or increased costs to be allocable to the existence of any of such commitments. A certificate as to such amounts submitted to the Borrower and the Administrative Agent by such Affected Party setting forth, in reasonable detail, the basis for and the calculation thereof shall be conclusive and binding for all purposes, absent manifest error. (b) In the event that any change in any requirement of law or in the interpretation by any governmental authority or application to an Affected Party of a requirement of law or change thereto by the relevant governmental authority after the date hereof or compliance by an Affected Party with any request or directive (whether or not having the force of law) from any central bank or other governmental authority after the date of this Agreement does or shall impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, or deposits or other liabilities in or for the account of, purchases, advances or loans by, or other credit extended by, or any other acquisition of funds by, any office of such Affected Party which are not otherwise included in the determination of the Alternate Base Rate or Eurodollar Rate (Reserve Adjusted) hereunder and the result of any of the foregoing is to increase the cost to or impose a cost on such Affected Party or to reduce any amount sum received or receivable by any Affected Party under this Agreement, any Note, the Liquidity Agreement with respect thereto, or under the Administrative Agent Fee Letter then, upon demand by the Agent delivered no later than 180 days after such circumstances first arise, the Seller shall pay to the Agent within 30 days of the delivery of such demand, any additional amounts (without duplication of amounts referred to in Section 2.16(a)) necessary to compensate such Affected Party for such additional cost or reduced amount receivable. A certificate as to such additional cost or reduced amount receivable submitted to the Borrower by the Affected Party setting forth, in reasonable detail, the basis for and the calculation thereof shall be conclusive and binding for all purposes, absent manifest error. (c) For the avoidance of doubt, any interpretation of Accounting Research Bulletin No. 51 by the Financial Accounting Standards Board or any other change in national or international generally accepted principles of accounting (whether foreign or domestic) that would require the consolidation of some or all of the assets and liabilities of any Lender, including the assets and liabilities which are the subject of this Agreement and/or other Transaction Documents, with those of any Affected Party (other than such Lender), shall constitute a change in the interpretation, administration or application of a law, regulation, guideline or request subject to Section 2.16(a) and (b). 38

2.17. Additional Interest on Advances Bearing a Eurodollar Rate. The Borrower shall pay to any Affected Party, so long as such Affected Party shall be required under regulations of the Federal Reserve Board to maintain reserves with respect to liabilities or assets consisting of or including Eurocurrency Liabilities, additional interest on the unpaid principal of each Advance or portion thereof made or funded (including fundings to an Issuer for the purpose of maintaining an Advance) by such Affected Party during each Interest Period in respect of which interest is computed by reference to the Eurodollar Rate, for such Interest Period, at a rate per annum equal at all times during such Interest Period to the remainder obtained by subtracting (i) the Eurodollar Rate for such Interest Period from (ii) the rate obtained by dividing such Eurodollar Rate referred to in clause (i) above by that percentage equal to 100% minus the Eurodollar Rate Reserve Percentage of such Affected Party for such Interest Period, payable on each date on which interest is payable on such Advance. Such additional interest shall be determined by such Affected Party and notice thereof given to the Borrower (with a copy to the Administrative Agent) within 30 days after any interest payment is made with respect to which such additional interest is requested. A certificate as to such additional interest submitted to the Borrower and the Administrative Agent by such Affected Party shall be conclusive and binding for all purposes, absent manifest error. 2.18. Consequential Loss. The Borrower shall indemnify each Affected Party against, and shall pay to the Administrative Agent for such Affected Party within ten days after request therefor, any Consequential Loss of any Affected Party. When any Affected Party requests that the Borrower pay any Consequential Loss, it shall deliver to the Borrower and the Administrative Agent a certificate setting forth the basis for imposing such Consequential Loss and the calculation of such amount thereof, which calculation shall be conclusive and binding absent manifest error. 2.19. Taxes. (a) All payments made by the Borrower under this Agreement and the Notes shall be without setoff, deduction or counterclaim, and the Borrower agrees to pay on demand any present or future stamp or documentary taxes or any other taxes, levies, imposts, duties, charges, fees or withholdings which arise from payment made hereunder or under the Notes or from the execution or delivery or otherwise with respect to this Agreement or the Notes but excluding franchise taxes and taxes imposed on or measured by all or part of the gross or net income (but not including any such tax in the nature of a withholding tax) of such Affected Party by the jurisdiction under the laws of which such Affected Party is organized or has its applicable lending office or any political subdivision of any thereof (all such excluded taxes, levies, imposts, deductions, changes, withholding and liabilities collectively or individually referred to herein as "Excluded Taxes" and all such nonexcluded taxes, levies, imposts, deductions, charges, withholdings, and liabilities collectively or individually referred to herein as "Taxes"). If the Borrower shall be required to deduct any Taxes from or in respect of any sum payable hereunder to any Affected Party: (i) the sum payable shall be increased by the amount (an "additional amount") necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 2.19) such Affected Party shall receive an amount equal to the sum it would have received had no such deductions been made, (ii) any Borrower 39

shall make such deductions and (iii) any Borrower shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law. (b) The Borrower agrees to pay to the relevant Governmental Authority in accordance with applicable law all taxes, levies, imposts, deductions, charges, assessments or fees of any kind (including but not limited to any current or future stamp or documentary taxes or any other excise or property taxes, charges, or similar levies, but excluding any Excluded Taxes) imposed upon any Affected Party as a result of the transactions contemplated by this Agreement or that arise from any payment made hereunder or from the execution, delivery, or registration of or otherwise similarly with respect to, this Agreement ("Other Taxes"). (c) Each Lender that is not a U.S. Person (each a "Non-U.S. Lender") shall deliver to the Borrower: (i) two copies of either (A) United States Internal Revenue Service Form W-8BEN (including any successor forms thereto) or (B) United States Internal Revenue Service Form W-8ECI (including any successor forms thereto), or (ii) in the case of a Non-U.S. Lender claiming an exemption from U.S. federal withholding tax under Section 871(h) or 881(c) of the Code with respect to payments of "portfolio interest," a Form W-8BEN (or any subsequent versions thereof or successors thereto) and a certificate representing that such Non-U.S. Lender is not a bank for purposes of Section 881(c) of the Code, in either case properly completed and duly executed by such Non-U.S. Lender claiming complete exemption from U.S. federal withholding tax on payments by each Borrower under this Agreement. Such forms shall be delivered by each Non-U.S. Lender before the date it receives its first payment under this Agreement, and before the date it receives its first payment under this Agreement occurring after the date, if any, that such Non-U.S. Lender changes its applicable lending office by designating a different lending office (a "New Lending Office"). In addition, each Non-U.S. Lender shall deliver such forms promptly after (or, if reasonably practicable, prior to) the obsolescence or invalidity of any form previously delivered by such Non-U.S. Lender. Notwithstanding any other provision of this Section 2.19(c), a Non-U.S. Lender shall not be required to deliver any form pursuant to this Section 2.19(c) that such Non-U.S. Lender is not legally able to deliver. (d) Within 30 days after the Borrower pays any amount to any Affected Party from which it is required by law to make any deduction or withholding, and within 30 days after it is required by law to remit such deduction or withholding to any relevant taxing or other authority, any such Borrower shall deliver to the Administrative Agent for delivery to such Affected Party evidence satisfactory to such Person of such deduction, withholding or payment (as the case may be). (e) If an Issuer or Agent receives the benefit of a tax refund, credit or other benefit which is attributable to any Taxes as to which the Issuer or Agent has been reimbursed by the Borrower, or with respect to which the Borrower have paid an additional amount hereunder, the Issuer or Agent shall within 30 days after the date of such receipt pay over the amount of such refund or credit (to the extent so attributable) to the Borrower, net of all reasonable out-of-pocket third party expenses of such Issuer or Agent related to claiming such refund or credit; provided, however, that (i) the Issuer or Agent, as the case may be, acting in good faith will be the sole judge of the amount of any such refund, credit or reduction and of the date on which such refund, credit or reduction is received, (ii) the Issuer or Agent, as the case may be, acting in good faith shall have absolute discretion as to the order and manner in which it employs or 40

claims tax refunds, credits, reductions and allowances available to it, (iii) the Borrower agrees to repay the Issuer or Agent, as the case may be, upon written request from the Issuer or Agent, as the case may be, the amount of such refund, credit or reduction received by the Borrower, in the event and to the extent, the Issuer or Agent is required to repay such refund, credit or reduction to any relevant Governmental Authority, and (iv) neither the Issuer nor the Agent shall be required to make available its tax returns or any other information relating to its taxes and the computation thereof. (f) Nothing contained in this Section 2.19 shall require an Affected Party to make available any of its tax returns (or any other information that it deems to be confidential or proprietary). 2.20. Replacement Banks. Upon the election of any Affected Party to request reimbursement by the Borrower for increased costs under Sections 2.16 or 2.17 or for compensation in respect of withholding taxes under Section 2.19, the Borrower may, upon prior written notice to the Administrative Agent and such Affected Party, seek a replacement Bank to whom such additional costs or taxes shall not apply and which shall be satisfactory to the Administrative Agent (a "Replacement Bank"); provided, however, that the Borrower may not seek a replacement for a Bank unless the related Issuer is also terminated as a party to this Agreement and all of its outstanding Advances are indefeasibly repaid in full. Each Affected Party agrees that, should it be identified for replacement pursuant to this Section 2.20, upon payment in full of all amounts due and owing to such Affected Party hereunder and under the other Transaction Documents, it will promptly execute and deliver all documents and instruments reasonably required by the Borrower to assign such Affected Party's portion of the Borrowings to the applicable Replacement Bank. Any such replacement shall not relieve the Borrower of its obligation to reimburse the Affected Party for any such increased costs or taxes incurred through the date of such replacement. ARTICLE III COLLATERAL 3.1. Collateral. To secure the payment of the Obligations, the Borrower has executed and delivered to the Administrative Agent and the Collateral Agent, as applicable: (a) the Security Agreement, (b) the Collection Account Control Agreement, (c) the Reserve Account Control Agreement, and (d) the UCC Financing Statements; all as more fully provided for in the Collateral Agency Agreement. The Borrower further agrees to execute all documents and instruments, and perform all other acts deemed necessary by the 41

Administrative Agent to create and perfect, and maintain the security interests and collateral assignments in favor of the Administrative Agent for the benefit of the holders of the Obligations, as perfected first priority security interests. Any security interest or collateral assignments granted to the Administrative Agent under any Transaction Document is for the benefit of the holders of the Obligations, whether or not reference is made to such holders. 3.2. Delivery of Collateral to Collateral Agent. (a) Periodically, the Borrower may deliver Mortgage Loan Collateral to the Collateral Agent to hold as bailee for the Administrative Agent. Each delivery shall be made in association with an Assignment to the Administrative Agent, for the benefit of the holders of the Obligations, in all Mortgage Loans, Take-Out Commitments and related Collateral delivered with or described in such Assignment or any schedules thereto. The Borrower shall use the form of Assignment provided for in the Collateral Agency Agreement. (b) Each Assignment delivered to the Collateral Agent shall be accompanied by a completed Schedule I, Schedule II and Schedule III using the forms of such schedules as prescribed in the Collateral Agency Agreement and, with respect to each Mortgage Loan described in Schedule II to each Assignment, shall deliver or cause to be delivered the following items (collectively, the "Principal Mortgage Documents"): (i) the original of each Mortgage Note, endorsed in blank (without recourse) and all intervening endorsements thereto; (ii) an original executed assignment in blank for each Mortgage securing such Mortgage Loan, in recordable form, executed by the Originator, in the case of each Mortgage Loan that is not a MERS Designated Mortgage Loan, or by an authorized signatory of MERS, in the case of each MERS Designated Mortgage Loan; and (iii) a certified copy of the executed Mortgage related to such Mortgage Note; (c) The Servicer shall hold in trust for the Administrative Agent for the benefit of the holders of the Obligations, with respect to each Mortgage Loan included in the Collateral, (i) the original filed Mortgage relating to such Mortgage Loan, provided, however, that, until an original Mortgage is received from the public official charged with its filing and recordation, a copy, certified by the closing agent to be a true and correct copy of the original sent to be filed and recorded, may be used by the Borrower to satisfy this requirement; however, the Borrower shall thereafter pursue, with reasonable diligence, receipt of the filed and recorded original Mortgage and, if received, shall deliver such original to the Servicer; (ii) other than with respect to a HUD repossessed Property that is sold to a consumer, a mortgagee's policy of title insurance (or binding unexpired commitment to issue such insurance if the policy has not yet been delivered to the Servicer) insuring the Borrower's perfected, first-priority Lien created by the Mortgage securing such Mortgage Loan 42

(subject to such title exceptions that conform to the related Take-Out Commitments) in a policy amount not less than the principal amount of such Mortgage Loan; (iii) the original hazard insurance policy, appropriately endorsed to provide that all insurance proceeds will be paid to any of the Originators or any of the assigns of such Originator, referred to in Section 6.6(b) hereof which relate to such Mortgage Loan, or other evidence of insurance acceptable to the Administrative Agent; (iv) the form of current appraisal of the Property described in the Mortgage, prepared by a state licensed appraiser, that complies with all applicable Governmental Requirements, including all Governmental Requirements that are applicable to the Lenders or any other Affected Party; provided, however, that no appraisal shall be required for Mortgage Loans (x) financing HUD repossessed Property that is sold to a consumer, financed with an FHA loan, fully insurable and in accordance with FHA guidelines, but for which an appraisal is not required, and (y) representing so called VA Rate Reduction or FHA streamline refinances, insurable in accordance with VA and FHA guidelines, but for which an appraisal is not required ; and (v) all other original documents (collectively, the "Other Mortgage Documents"). Upon request of the Administrative Agent, and three Business Days' prior notice by the Administrative Agent to the Collateral Agent, the Servicer shall immediately deliver, or shall cause to be delivered, all such items, held in trust, to the Collateral Agent as bailee for the Administrative Agent or such other party as may be designated in such notice. Upon instructions from the Administrative Agent, the Collateral Agent shall reject as unsatisfactory any items so delivered, noting the rejection on the Schedule of Exceptions, whereupon the Mortgage Loan shall not be an Eligible Mortgage Loan. (d) In connection with each Assignment delivered to the Collateral Agent, the Borrower shall deliver to the Administrative Agent copies of the related Take-Out Commitment Master Agreements with the related Approved Investor, with any confidential economic terms redacted (unless a copy of such agreement or commitment has been delivered previously). (e) The Servicer shall provide the Collateral Agent and the Administrative Agent with full access to all Other Mortgage Documents held in trust for the Administrative Agent at all times. (f) With respect to each Assignment that is received by the Collateral Agent, the Collateral Agent shall review such Assignment and make a written report to the Borrower and the Administrative Agent, all as more fully provided in the Collateral Agency Agreement. 3.3. Redemption of Mortgage Collateral. (a) Generally. Subject to the limitations contained in this Section 3.3, in connection with a sale or other transfer contemplated by clause (a) or (b), and so long as no Default or Event of Default is continuing, the Borrower or the Servicer (on behalf of the Borrower) may request releases of the Administrative Agent's security interest in all or any part 43

of the Collateral (including releases from the Collection Account and release of funds owned by the Borrower and held in the Cash and Collateral Account) at any time, and from time to time; provided that no such request shall be granted unless, in addition to the satisfaction of the other conditions contained in this Section 3.3, (i) (immediately after giving effect to any requested release) the total Collateral Value of all Eligible Mortgage Collateral shall equal or exceed the Principal Debt, or (ii) (A) the Borrower makes a principal payment on account of the Principal Debt in an amount, or (B) the Borrower delivers to the Collateral Agent as bailee for the Administrative Agent substitute Eligible Mortgage Collateral with a Collateral Value, such that after giving effect to such payment or delivery, the total Collateral Value of all Eligible Mortgage Collateral will equal or exceed the Principal Debt. So long as no Default or Event of Default is continuing, the Servicer (on behalf of the Borrower) may transfer funds from the Collection Account to the Disbursement Account; provided, that the Servicer shall not request and the Collateral Agent shall not permit funds to be released from the Disbursement Account unless the total Collateral Value of all Eligible Mortgage Collateral (immediately after giving effect to the requested release) equals or exceeds the Principal Debt, as shown on the most recent Borrowing Report. Each request for a partial release of Collateral (a "Transfer Request") shall be addressed to the Collateral Agent and (i) shall be substantially in the form illustrated in Exhibit D-5 to the Collateral Agency Agreement (or such other form as may be reasonably acceptable to or required by the Administrative Agent, from time to time) or (ii) shall be in the form of an electronic transmission which shall include a schedule substantially in the form illustrated on Schedule I to Exhibit D-5 to the Collateral Agency Agreement (or such other form as may be reasonably acceptable to or required by the Administrative Agent, from time to time). (b) Redemption Pursuant to Sale. So long as no Default or Event of Default is continuing, the Borrower or the Servicer (on behalf of the Borrower) may from time to time submit a Shipping Request that would permit a sale of Mortgage Loan Collateral to, or the pooling of Mortgage Loan Collateral for, an Approved Investor, pursuant to a Take-Out Commitment. Upon the receipt by the Collateral Agent of a Shipping Request from the Borrower identifying Collateral to be delivered to an Approved Investor, and so long as no Default or Event of Default shall be in existence or would be caused thereby: (i) The Collateral Agent shall deliver to the Approved Investor, or its loan servicing provider or custodian, under the Collateral Agent's "Bailee and Security Agreement Letter" substantially in the form provided for in the Collateral Agency Agreement, as appropriate, the items of Mortgage Loan Collateral being sold that are held by the Collateral Agent as bailee for the Administrative Agent pursuant to Section 3.2 hereof, with the release of the security interest in favor of the Administrative Agent for the benefit of the holders of the Obligations in such items being conditioned upon timely payment to the Collection Account of the amount described in Section 3.3(b)(iii) or delivery of additional Eligible Mortgage Collateral; (ii) The Servicer shall, as agent for the Administrative Agent, deliver to such Approved Investor, or such Approved Investor's loan servicing provider or custodian, 44

pursuant to procedures provided for in the Collateral Agency Agreement, the items held by the Servicer pursuant to Section 3.2(c) that are related to the Mortgage Loan Collateral to be transferred on the condition that such Approved Investor or its loan servicing provider or custodian shall hold or control such Other Mortgage Documents as bailee for the Administrative Agent (for the benefit of the holders of the Obligations) until the Approved Investor has either paid the full purchase price for such Mortgage Loan Collateral to the Collection Account, as required by the relevant Take-Out Commitment; (iii) Within forty-five (45) days after the delivery by the Collateral Agent to such Approved Investor or its loan servicing provider or custodian of the items of Mortgage Loan Collateral described in Section 3.3(b)(i) or (ii), the Borrower shall make a payment, or shall cause a payment to be made, to the Collection Account, for distribution to the Administrative Agent for the account of the Lenders in an amount equal to at least the full purchase price for such Mortgage Loan Collateral or shall substitute Eligible Mortgage Collateral as permitted by this Section 3.3; and (iv) With respect to each Shipping Request that is received by the Collateral Agent by 11:30 a.m. (eastern time) on a Business Day, the Collateral Agent shall use due diligence and efforts to review such Shipping Request and prepare the Mortgage Loan files identified in each Shipping Request, for shipment prior to the close of business on such day. (c) Transfers. So long as no Default or Event of Default is continuing, the Borrower shall, at any time, be permitted to transfer Mortgage Loans to any Permitted Transferees (as defined below) by means of its daily electronic transmissions to the Collateral Agent, together with delivery of a Transfer Request delivered to the Collateral Agent, identifying each Mortgage Loan being transferred. The Collateral Agent's sole responsibility with respect to any such transfers shall be to correctly reflect such transfers on its computer system and books and records and to indicate, on its Collateral Agent's Daily Report on the next Business Day, that such transfers have been effected. "Permitted Transferees" means (i) the related Originator, in connection with any sale and transfer thereto effected pursuant to the terms of the Repurchase Agreement and (ii) any Approved Investor approved by the Administrative Agent as a Permitted Transferee. However, requested transfers will not be made if (A) as reflected on the most recent Borrowing Report, total Principal Debt will equal or exceed the total Collateral Value of Eligible Mortgage Collateral immediately after giving effect to a requested transfer and any accompanying substitution of Mortgage Collateral, or (B) the Collateral Agent shall have received written notice from the Administrative Agent that a Default or Event of Default has occurred. (d) Continuation of Lien. Unless released in writing by the Administrative Agent as herein provided, the security interest in favor of the Administrative Agent for the benefit of the holders of the Obligations, in all Mortgage Loan Collateral transmitted pursuant to Section 3.3(b) shall continue in effect until such time as payment in full of the amount described in Section 3.3(b)(iii) shall have been received. (e) Application of Proceeds; No Duty. Neither the Administrative Agent nor the Lenders shall be under any duty at any time to credit Borrower for any amount due from any Approved Investor in respect of any purchase of any Mortgage Collateral contemplated under 45

Section 3.3(b) above, until such amount has actually been received in immediately available funds and deposited to the Collection Account. Neither the Collateral Agent, nor the Lenders, nor the Administrative Agent shall be under any duty at any time to collect any amounts or otherwise enforce any obligations due from any Approved Investor in respect of any such purchase. (f) Mandatory Redemption of Mortgage Collateral. Notwithstanding any provision herein to the contrary, if at any time a Collateral Deficiency exists, the Borrower shall, as promptly as possible and in any event within one (1) Business Day, make a payment to the Collection Account (or make payment directly to the Administrative Agent) or pledge, assign and deliver additional or substitute Eligible Mortgage Collateral to the Administrative Agent for the benefit of the holders of the Obligations, so that, immediately after giving effect to such payment or pledge and assignment, total Collateral Value of Eligible Mortgage Collateral shall be equal or greater than the Principal Debt. (g) Representation in Connection with Releases, Sales and Transfers. The Borrower represents and warrants that each request for any release or transfer pursuant to Section 3.3(a) or Section 3.3(b) shall automatically constitute a representation and warranty to the effect that immediately before and after giving effect to such release or Transfer Request, the Collateral Value of Eligible Mortgage Collateral shall equal or exceed the Principal Debt. (h) Limitation on Releases. Notwithstanding any provision to the contrary, the Collateral Agent shall not release any Collateral unless payment of the purchase price by the Approved Investor shall have been made in immediately available funds to the Collection Account; provided, however, that the foregoing shall not apply if immediately before and after giving effect thereto, the total Collateral Value of Eligible Mortgage Collateral shall equal or exceed the Principal Debt. 3.4. Releases of Mortgage Notes for Servicing. The Servicer may from time to time request, in writing, that the Collateral Agent deliver Mortgage Notes for correction or servicing actions under the Collateral Agent's "Trust Receipt and Security Agreement Letter", in the form provided for in the Collateral Agency Agreement, as and to the extent permitted pursuant to Section 3.5 of the Collateral Agency Agreement. 3.5. Collateral Reporting. Pursuant to the Collateral Agency Agreement, at the commencement of each Business Day, and in no event later than 1:00 p.m. (eastern time), the Collateral Agent shall furnish to the Borrower and the Administrative Agent by facsimile (a hard copy of which shall not subsequently be mailed, sent or delivered to the Administrative Agent, unless so requested by the Administrative Agent) a duly completed Collateral Agent Daily Report in the form of Exhibit D-8 to the Collateral Agency Agreement. 46

3.6. Take-Out Commitment Reporting. (a) Each Assignment delivered to the Collateral Agent shall indicate (x) the Approved Investor with respect to the Take-Out Commitment, or (y) that there is no loan level Take-Out Commitment but that the Mortgage Loan is hedged. For each Mortgage Loan that, as of the fourth Business Day after delivery of the Assignment relating to such Mortgage Loan, is covered by a Take-Out Commitment in the form of a hedge by forward sale commitment but is not covered by a loan-specific Take-Out Commitment, the Servicer shall furnish to the Borrower and the Collateral Agent a duly completed Hedge Report in the form of Exhibit K, no later than 10:00 a.m. (eastern time) (i) on the tenth Business Day after delivery of such Assignment relating to such Mortgage Loan, and (ii) if any changes would be reflected since the last Hedge Report, on each subsequent Business Day. In addition, no later than 10:00 a.m. on the tenth Business Day following the delivery of any Assignment that reflected one or more Mortgage Loans that were covered by a Take-Out Commitment in the form of a forward sale commitment hedge, but not a loan-specific Take-Out Commitment, the Servicer shall furnish the Borrower and the Collateral Agent with a list of Mortgage Loans that subsequently were committed pursuant to the loan-specific Take-Out Commitment, with an code indicating the Investor related to the Take-Out Commitment and an indication of the price associated with the Take-Out Commitment. (b) The Borrower shall provide the Administrative Agent with up-to-date copies of the Take-Out Commitment Master Agreements for each Approved Investor. (c) Upon request of the Administrative Agent at any time, the Servicer shall furnish to the Administrative Agent (x) if there are any Mortgage Loans not subject to a loan level Take-Out Commitment, a duly completed Hedge Report in the form of Exhibit K, and (y) a list of loan-specific Take-Out Commitments, together with copies of any such loan-specific Take-Out Commitments to the extent not previously delivered to the Administrative Agent. 3.7. Servicer Monthly Reporting. No later than 10:00 a.m. (eastern time) on the 15th day of each month (or, if such day is not a Business Day, the next Business Day) and within twenty (20) days after request by the Administrative Agent, the Servicer shall furnish the Borrower and the Administrative Agent (by facsimile or electronic transmission (a hard copy of which shall not subsequently be mailed, sent or delivered to the Administrative Agent, unless so requested by the Administrative Agent) a report executed by a Financial Officer of the Servicer or the Originator, in the form of Exhibit F hereto ("Servicer Monthly Report") which shall provide as of the last day of the previous month (or of the date of such request) (i) a computation of the Default Ratio, (ii) delinquency of Mortgage Loans owned by the Borrower that are financed by the Lenders and constitute Collateral hereunder, and (iii) the other information provided for therein. 3.8. Servicer Annual Pipeline Reporting. No later than 10:00 a.m. (eastern time) promptly after becoming available, and in any event within 90 days after the close of each fiscal year of the Originator, a report, in form and content acceptable to the Administrative Agent, on the Originator's "open and pipeline 47

positions" for Conforming Loans as of the last day of such fiscal year, and the Originator's Mortgage Loan production for such fiscal year for all Mortgage Loans. ARTICLE IV CONDITIONS PRECEDENT 4.1. Initial Borrowing. The effectiveness of this Agreement and the making of the initial Advance hereunder shall not occur until the later of August 8, 2003, or satisfaction of the conditions precedent specified in Section 4.2 hereof and delivery to the Administrative Agent of the following (each of the following documents being duly executed and delivered and in form and substance satisfactory to the Administrative Agent, and, with the exception of the Notes and the UCC statement(s), each in a sufficient number of originals that the Administrative Agent may have an executed original of each document): (a) an executed counterpart of this Agreement; (b) the Notes; (c) the Collateral Agency Agreement, the Security Agreement, the Collection Account Control Agreement, the Reserve Account Control Agreement, the Disbursement Account Control Agreement and such other Security Instruments as may be reasonably requested by the Administrative Agent; (d) the Servicer Performance Guaranty and the Originator Performance Guaranty; (e) the Repurchase Agreement; (f) the Subordination Agreement in the form of Exhibit B; (g) a certificate of the Secretary or Assistant Secretary of each of the Borrower, each Originator and the Performance Guarantor certifying as to (i) resolutions of each Borrower's, each Originator's and the Performance Guarantor's board of directors authorizing the execution, delivery, and performance by each of them of the Transaction Documents to which they are a party and identifying the officers of the Borrower, the Originators and the Performance Guarantor who are authorized to sign such Transaction Documents, (ii) specimen signatures of the officers so authorized, (iii) the certificate of incorporation and (iv) bylaws; (h) a favorable written opinion from counsel to the Borrower, the Originators and the Performance Guarantor on entity matters in a form acceptable to the Administrative Agent; (i) a favorable written opinion from counsel to the Borrower, the Originators on security interest matters in a form acceptable to Administrative Agent; 48

(j) a favorable written opinion from counsel to the Originators as to true sale and non-consolidation matters, in a form acceptable to the Administrative Agent; (k) a certificate from each of (i) the Secretary of State of the State of New York, (ii) the Secretary of State of the State of Maryland, (iii) the Secretary of State of the State of Delaware and (iii) an officer of the Borrower, the Performance Guarantor and each of the Originators with respect to every state in which the Borrower, the Performance Guarantor and each Originator is incorporated or conducts business, as to the good standing of the Borrower, the Performance Guarantor and/or each of the Originators, as applicable, in each state or states for which each certificate is made; (l) the Administrative Agent Fee Letter; (m) evidence of the payment of fees due at closing, as provided in the Administrative Agent Fee Letter; (n) a letter agreement between the Borrower and the Collateral Agent establishing fees for collateral agency, custodial and administrative services, and a mutually agreeable schedule for payment of such fees shall have been executed by the Borrower and the Collateral Agent and shall have been approved by the Administrative Agent; (o) acknowledgment copies of proper Financing Statements (Form UCC-1), filed on or prior to the date of the initial Advance, naming (i) each Originator as the Seller, the Borrower as the secured party/purchaser and the Administrative Agent as the assignee, and (ii) the Borrower as the debtor and the Administrative Agent on behalf of the holders of the Obligations as the secured party, or other, similar instruments or documents, as may be necessary or, in the opinion of the Administrative Agent, desirable under the UCC or any comparable law of all appropriate jurisdictions to perfect the ownership and security interests in the Collateral contemplated by the Repurchase Agreement and this Agreement; (p) a search report provided in writing to the Administrative Agent by CT Corporation, listing all effective financing statements that name the Borrower or any of the Originators as debtor and that are filed in the jurisdictions in which filings were made pursuant to subsection (k) above and in such other jurisdictions as the Administrative Agent shall request, together with copies of such financing statements (none of which shall cover any Mortgage Loans or interests therein or proceeds thereof); (q) evidence of the initial deposit to the Reserve Account in the amount of 0.5% of the Maximum Facility Amount; (r) such other documents as the Administrative Agent may request at any time at or prior to the Borrowing Date of the initial Borrowing hereunder; (s) copies of all Take-Out Commitment Master Agreements with Approved Investors; and (t) the Performance Guarantor Quarterly Certificate, substantially in the form of Exhibit H-3. 49

4.2. All Borrowings. Each Advance (including, without limitation, the initial Advance) pursuant to this Agreement is subject to the following further conditions precedent: (a) (i) prior to 10:30 a.m. (eastern time) on the Business Day before the designated Borrowing Date, the Administrative Agent and the Collateral Agent shall have received a Borrowing Report, verifying that after giving effect to the requested Advance, the Collateral Value of all Eligible Mortgage Collateral shall exceed the Principal Debt (together with any related Assignment) duly executed and delivered by the Borrower; and (ii) the Administrative Agent shall have received, no later than 1:00 p.m. (eastern time), on the proposed date of funding, a Collateral Agent Daily Report, pursuant to Section 3.8 of the Collateral Agency Agreement; (b) all Collateral in which the Borrower has granted a security interest to the Administrative Agent for the benefit of the holders of the Obligations, with the exception of Wet Loans pursuant to Section 2.3(c), shall have been physically delivered to the possession of the Collateral Agent in accordance with Section 3.2; (c) the representations and warranties of the Borrower, the Originators and (so long as the Servicer and one of the Originators is the same entity) the Servicer contained in this Agreement, any Assignment or Borrowing Report, or any Security Instrument or other Transaction Document (other than those representations and warranties that, by their express terms, are limited to the effective date of the document or agreement in which they are initially made) shall be true and correct in all respects on and as of the date of such Advance; (d) no Default or Event of Default or Servicer Default shall have occurred and be continuing, or would result from such Advance, and no change or event that constitutes a Material Adverse Effect shall have occurred and be continuing as of the date of such Advance; (e) the Collection Account shall be established and in existence and free from any Lien other than pursuant to the Collection Account Control Agreement; (f) delivery of a sufficient number of originals such that the Administrative Agent may have an executed original thereof, of such other documents and opinions of counsel, including such other documents as may be necessary or desirable to perfect or maintain the priority of any Lien granted or intended to be granted hereunder or otherwise and including favorable written opinions of counsel with respect thereto, as the Administrative Agent may request; (g) the Termination Date shall not have occurred; and (h) the most recently due Performance Guarantor Quarterly Certificate, substantially in the form of Exhibit H-3, shall have been delivered previously to the Administrative Agent. 50

Each Borrowing Report shall be automatically deemed to constitute a representation and warranty by the Borrower on the Borrowing Date set forth therein to the effect that all of the conditions of this Section 4.2 are satisfied as of such Borrowing Date. ARTICLE V REPRESENTATIONS AND WARRANTIES 5.1. Representations of the Borrower and the Servicer. The Borrower and the Servicer each represents and warrants, as to itself, to the Administrative Agent and the Lenders as follows: (a) Organization and Good Standing. It (i) in the case of the Borrower, is a limited liability company, and, in the case of the Servicer, is a corporation, in each case duly organized and existing in good standing under the laws of the jurisdiction of its organization, (ii) is duly qualified to do business and in good standing in all jurisdictions in which its failure to be so qualified could have a Material Adverse Effect, (iii) has the requisite entity power and authority to own its properties and assets and to transact the business in which it is engaged and is or will be qualified in those states wherein it proposes to transact business in the future and (iv) is in compliance with all Requirements of Law. American Home Mortgage Corp. is incorporated in New York and in no other jurisdiction, and Columbia National Incorporated is incorporated in Maryland and in no other jurisdiction. The Borrower is organized in Delaware and no other jurisdiction. (b) Authorization and Power. It has the requisite entity power and authority to execute, deliver and perform this Agreement and the other Transaction Documents to which it is a party; it is duly authorized to and has taken all requisite entity action necessary to authorize it to, execute, deliver and perform this Agreement and the other Transaction Documents to which it is a party and is and will continue to be duly authorized to perform this Agreement and such other Transaction Documents. (c) No Conflicts or Consents. Neither the execution and delivery by it of this Agreement or the other Transaction Documents to which it is a party, nor the consummation of any of the transactions herein or therein contemplated, nor compliance with the terms and provisions hereof or with the terms and provisions thereof, will (i) contravene or conflict with any Requirement of Law to which it is subject, or any indenture, mortgage, deed of trust, or other agreement or instrument to which it is a party or by which it may be bound, or to which its Property may be subject, or (ii) result in the creation or imposition of any Lien, other than the Liens of the Security Instruments, on the Property of the Borrower. (d) Enforceable Obligations. This Agreement and the other Transaction Documents to which it is a party have been duly and validly executed by it and are its legal, valid and binding obligations, enforceable in accordance with their respective terms, except as limited by Debtor Laws. (e) Full Disclosure. There is no fact known to it that it has not disclosed to the Administrative Agent that could reasonably be expected to have a Material Adverse Effect. 51

Neither its financial statements nor any Borrowing Report, officer's certificate or statement delivered by it to the Administrative Agent in connection with this Agreement, contains or will contain any untrue or inaccurate statement of material fact or omits or will omit to state a material fact necessary to make such information not misleading. (f) No Default. It is not in default under any loan agreement, mortgage, security agreement or other agreement or obligation to which it is a party or by which any of its Property is bound, if such default would also be a Default or an Event of Default (or, with notice or passage of time would become a Default or Event of Default) under either of subparagraphs (e) or(i) of Section 8.1 of this Agreement. (g) Litigation. (i) Except as set forth on Schedule III, there are no actions, suits or proceedings, including arbitrations and administrative actions, at law or in equity, either by or before any Governmental Authority, now pending or, to its knowledge, threatened by or against it or any of its Subsidiaries, and pertaining to any Governmental Requirement affecting its Property or rights or any of its Subsidiaries. (ii) Neither it nor any of its Subsidiaries is in default with respect to any Governmental Requirements. (iii) The Servicer is not liable on any judgment, order or decree (or any series of judgments, orders, or decrees) that could reasonably be expected to have a Material Adverse Effect and that has not been paid, stayed or dismissed within 30 days and the Borrower is not liable on any judgment, order or decree (or any series of judgments, orders or decrees). (h) Taxes. All tax returns required to be filed by it in any jurisdiction have been filed, except where extensions of time to make those filings have been granted by the appropriate taxing authorities and the extensions have not expired, and all taxes, assessments, fees and other governmental charges upon it or upon any of its properties, income or franchises have been paid prior to the time that such taxes could give rise to a Lien thereon, unless protested in good faith by appropriate proceedings and with respect to which reserves in conformity with GAAP have been established on its books. There is no proposed tax assessment against it that could reasonably be expected to have a Material Adverse Effect. (i) Indebtedness. If the Servicer is one of the Originators, the Servicer is in compliance with the maximum leverage test set forth in Section 7.10. (j) Permits, Patents, Trademarks, Etc. (i) It has all permits and licenses necessary for the operation of its business. (ii) It owns or possesses (or is licensed or otherwise has the necessary right to use) all patents, trademarks, service marks, trade names and copyrights, technology, know-how and processes, and all rights with respect to the foregoing, which are necessary for the 52

operation of its business, without any conflict with the rights of others. The consummation of the transactions contemplated hereby will not alter or impair any of such rights of it. (k) Status Under Certain Federal Statutes. It is not (i) a "holding company", or a "subsidiary company" of a "holding company" or an "affiliate" of a "holding company," or of a "subsidiary company" of a "holding company," as such terms are defined in the Public Utility Holding Company Act of 1935, as amended, (ii) a "public utility," as such term is defined in the Federal Power Act, as amended, (iii) an "investment company," or a company "controlled" by an "investment company," within the meaning of the Investment Company Act of 1940, as amended, or (iv) a "rail carrier," or a "person controlled by or affiliated with a rail carrier," within the meaning of Title 49, U.S.C., and it is not a "carrier" to which 49 U.S.C. ss. 11301(b)(1) is applicable. (l) Securities Acts. It has not issued any unregistered securities in violation of the registration requirements of the Securities Act of 1933, as amended, or of any other Requirement of Law, and is not violating any rule, regulation, or requirement under the Securities Act of 1933, as amended, or the Securities and Exchange Act of 1934, as amended. The Borrower is not required to qualify an indenture under the Trust Indenture Act of 1939, as amended, in connection with its execution and delivery of the Notes. (m) No Approvals Required. Other than consents and approvals previously obtained and actions previously taken, neither the execution and delivery of this Agreement and the other Transaction Documents to which it is a party, nor the consummation of any of the transactions contemplated hereby or thereby requires the consent or approval of, the giving of notice to, or the registration, recording or filing by it of any document with, or the taking of any other action in respect of, any Governmental Authority that has jurisdiction over it or any of its Property. (n) Environmental Matters. There have been no past, and there are no pending or threatened, claims, complaints, notices, or governmental inquiries against it regarding any alleged violation of, or potential liability under, any environmental laws that could reasonably be expected to have a Material Adverse Effect. It and its properties are in substantial compliance in all respects with all environmental laws and related licenses and permits, unless the failure to comply strictly in all respects with all environmental laws and related licenses and permits could reasonably be expected to have a Material Adverse Effect. No conditions exist at, on or under any Property now or previously owned or leased by it that could give rise to liability under any environmental law that could be expected to have a Material Adverse Effect. (o) Eligibility. The Servicer and each Originator are approved and qualified and in good standing as a lender or seller/servicer, as follows: (i) The Servicer and each Originator is a Fannie Mae approved seller/servicer and the Borrower is a Fannie Mae approved seller (in good standing) of Mortgage Loans, eligible to originate, purchase, hold, sell and, with respect to each Originator and the Servicer, service Mortgage Loans to be sold to Fannie Mae. 53

(ii) The Servicer and each Originator is a Freddie Mac approved seller/servicer (in good standing) of Mortgage Loans, eligible to originate, purchase, hold, sell and service Mortgage Loans to be sold to Freddie Mac. (iii) The Servicer and each Originator is an approved FHA servicer, VA servicer and Ginnie Mae issuer (in good standing) of mortgage loans, eligible to originate, purchase, hold, sell and service mortgage loans to be pooled into Ginnie Mae MBS Pools and to issue Ginnie Mae MBS. 5.2. Additional Representations of the Borrower. The Borrower further represents and warrants to the Administrative Agent and the Lenders as follows: (a) Activities. The Borrower was formed on July 30, 2003, and the Borrower did not engage in any business activities prior to the date of this Agreement. The Borrower will limit its activities to those specified in the Limited Liability Company Agreement and has no Subsidiaries. (b) Solvency. Both prior to and after giving effect to each Borrowing, (i) the fair value of the property of the Borrower is greater than the total amount of liabilities, including contingent liabilities, of the Borrower, (ii) the present fair salable value of the assets of the Borrower is not less than the amount that will be required to pay all probable liabilities of the Borrower on its debts as they become absolute and matured, (iii) the Borrower does not intend to, and does not believe that it will, incur debts or liabilities beyond the Borrower's abilities to pay such debts and liabilities as they mature and (iv) the Borrower is not engaged in a business or a transaction, and is not about to engage in a business or a transaction, for which the Borrower's property would constitute unreasonably small capital. (c) Purchase of Mortgage Loans. With respect to each Mortgage Loan, the Borrower shall have purchased such Mortgage Loan from one of the Originators in exchange for payment (made by the Borrower to the Originator in accordance with the provisions of the Repurchase Agreement) of cash, the Deferred Purchase Price (as such term is defined in the Repurchase Agreement), or a combination thereof in an amount that constitutes fair consideration and reasonably equivalent value. Each such sale referred to in the preceding sentence shall not have been made for or on account of an antecedent debt owed by one of the Originators to the Borrower and no such sale is or may be voidable or subject to avoidance under any section of the Federal Bankruptcy Code. (d) Priority of Debts and Liens. The Borrower has incurred no Indebtedness except as expressly incurred hereunder and under the other Transaction Documents. Upon delivery of an Assignment to the Collateral Agent, the Administrative Agent will have a valid, enforceable, perfected and first-priority Lien, for the benefit of the holders of the Obligations, in all Mortgage Loan Collateral described in or delivered with such Assignment. Upon delivery of funds for deposit in the Collection Account to the Collateral Agent, the Administrative Agent will have a valid, enforceable, perfected and first-priority Lien for the benefit of the holders of the Obligations, on the Collection Account and related Collateral. 54

(e) No Liens. The Borrower has (or, as to all Mortgage Loan Collateral delivered to the Collateral Agent after the date of this Agreement, will have) good and indefeasible title to all Collateral, and the Mortgage Loan Collateral and all proceeds thereof are (or, as to all Mortgage Loan Collateral delivered to the Collateral Agent after the date of this Agreement, will be) free and clear of all Liens and other adverse claims of any nature, other than (i) the right of the related Originator to repurchase such Mortgage Loan Collateral pursuant to the terms of the Repurchase Agreement and/or (ii) Liens in the Mortgage Loan Collateral or proceeds in favor of the Administrative Agent for the benefit of the holders of the Obligations. (f) Financial Condition. The opening pro forma balance sheet of the Borrower as at August 7, 2003, giving effect to the initial capitalization of the Borrower and the initial Borrowing to be made under this Agreement, a copy of which has been furnished to the Administrative Agent, fairly presents the financial condition of the Borrower as at such date, in accordance with GAAP, and since August 7, 2003, there has been no material adverse change in the business, operations, property or financial or other condition of the Borrower. (g) Principal Office, Etc. The principal office, chief executive office and principal place of business of (i) American Home Mortgage Corp. is at c/o American Home Mortgage Holdings, Inc., 520 Broadhollow Road, Melville, New York 11747, (ii) Columbia National, Incorporated is at c/o American Home Mortgage Holdings, Inc., 520 Broadhollow Road, Melville, New York 11747, and (iii) The Borrower is at c/o American Home Mortgage Holdings, Inc., 520 Broadhollow Road, Melville, New York 11747. (h) Ownership. American Home Mortgage Corp. is the owner of all of the membership interests of the Borrower. (i) UCC Financing Statements. No effective financing statement or other instrument similar in effect covering any Mortgage Loan, any interest therein, or the related Collateral with respect thereto is on file in any recording office except such as may be filed (x) in favor of the Originators or the Borrower in accordance with the Mortgage Loans, (y) in favor of the Borrower in connection with the Repurchase Agreement, or (z) in favor of the Administrative Agent or the holders of the Obligations in accordance with this Agreement or in connection with a Lien arising solely as the result of any action taken by the Lenders (or any assignee thereof) or by the Administrative Agent. (j) Trade Names. The Borrower is not known by and does not use any trade name or doing-business-as name. (k) Origination of Mortgage Loans. (i) Each Mortgage Loan was originated in compliance with local, state and federal law applicable thereto at the time of origination, including without limitation, required disclosures of points, charges and fees. 55

(ii) Each Mortgage Loan was originated using credit policies in effect at the time such origination, which were designated to provide guidelines in underwriting the creditworthiness of the Obligors and to determine the Obligors' ability to repay the debt. In accordance with such policies, each of the Originators considered, among other things, the credit history of the Obligor and other credit indicators such as income verification and/or debt-to-income ratios of the Obligor. No Mortgage Loan was originated based solely on an estimation of the value of the mortgaged property without any consideration of the potential ability of the Obligor to repay the amount owed under the Mortgage Loan. (iii) No Mortgage Loan violates any of the provisions of the Home Ownership and Equity Protection Act of 1994 (14 U.S.C. ss. 1602(aa)) or Regulation Z (12 C.F.R. 226.32). (iv) No Obligor was required to purchase any credit life, disability, accident or health insurance product as a condition of obtaining the Mortgage Loan. No Obligor obtained a prepaid single-premium credit life, disability, accident or health policy in connection with the origination of the Mortgage Loan. 5.3. Additional Representations and Warranties of the Servicer. The Servicer represents and warrants to the Administrative Agent and the Lenders as follows: (a) Financial Condition. (i) The Servicer has delivered to the Administrative Agent (x) copies of the Performance Guarantor's balance sheet, as of March 31, 2003, and the related statements of income, stockholder's equity and cash flows for the year ended on such date, audited by independent certified public accountants of recognized national standing and (y) copies of the Performance Guarantor's balance sheet, as of March 31, 2003, and the related statements of income, stockholder's equity and cash flows for the nine months ended on such date, audited by independent certified public accountants of recognized national standing ("Interim Statements"); and all such financial statements fairly present the financial condition of the Servicer as of their respective dates, subject, in the case of the Interim Statements, to normal year end adjustments and the results of operations of the Servicer for the periods ended on such dates and have been prepared in accordance with GAAP. (ii) As of the date thereof, there are no obligations, liabilities or Indebtedness (including contingent and indirect liabilities and obligations or unusual forward or long-term commitments) of the Servicer required to be recorded under GAAP that are not reflected therein. (iii) No change that constitutes a Material Adverse Effect has occurred in the financial condition or business of the Servicer since March 31, 2003. (b) Employee Benefit Plans. (i) No Employee Plan of the Servicer or any ERISA Affiliate has incurred an "accumulated funding deficiency" (as defined in Section 302 of ERISA or Section 412 of the Code), (ii) neither the Servicer nor any ERISA Affiliate has 56

incurred liability under ERISA to the PBGC, (iii) neither the Servicer nor any ERISA Affiliate has partially or fully withdrawn from participation in a Multiemployer Plan, (iv) no Employee Plan of the Servicer or any ERISA Affiliate has been the subject of involuntary termination proceedings, (v) neither the Servicer nor any ERISA Affiliate has engaged in any "prohibited transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code), and (vi) no "reportable event" (as defined in Section 4043 of ERISA) has occurred in connection with any Employee Plan of the Servicer or any ERISA Affiliate other than events for which the notice requirement is waived under applicable PBGC regulations. (c) Ownership. On the date of this Agreement, the Performance Guarantor has beneficial ownership of 100% of the issued and outstanding shares of each class of the stock of the Servicer and each Originator. 5.4. Survival of Representations. All representations and warranties by the Borrower and the Servicer herein shall survive delivery of the Notes and the making of the Advances, and any investigation at any time made by or on behalf of the Administrative Agent or the Lenders shall not diminish the right of the Administrative Agent or the Lenders to rely thereon. ARTICLE VI AFFIRMATIVE COVENANTS The Borrower and the Servicer shall each at all times comply with the covenants applicable to it contained in this Article VI, from the date hereof until the later of the Termination Date and the date all of the Obligations are indefeasibly paid in full. 6.1. Financial Statements and Reports. The Servicer, for so long as the Servicer is one of the Originators, and thereafter the Borrower, shall furnish to the Administrative Agent the following, all in form and detail satisfactory to the Administrative Agent: (a) promptly after becoming available, and in any event within 120 days after the close of each fiscal year of the Performance Guarantor, such Person's audited consolidated and consolidating balance sheet as of the end of such fiscal year, and the related statements of income, stockholder's equity and cash flows of such Person for such year showing within such consolidating balance sheets and statements of income the balance sheet and statements of income for the Originators accompanied by (i) the related report of independent certified public accountants acceptable to the Administrative Agent, which report shall be to the effect that such statements have been prepared in accordance with GAAP applied on a basis consistent with prior periods except for such changes in such principles with which the independent certified public accountants shall have concurred and (ii) if issued, the auditor's letter or report to management customarily given in connection with such audit; (b) promptly after becoming available, and in any event within 60 days after the end of each fiscal quarter, excluding the fourth fiscal quarter, of each fiscal year of the 57

Performance Guarantor, the unaudited consolidated and consolidating balance sheet of the Performance Guarantor as of the end of such fiscal quarter and the related statements of income, stockholders' equity and cash flows of the Performance Guarantor for such fiscal quarter and the period from the first day of the then current fiscal year of the Performance Guarantor through the end of such fiscal quarter, showing within such consolidating balance sheets and statements of income the balance sheet and statements of income for the Originators certified by a Financial Officer of the Servicer, to have been prepared in accordance with GAAP applied on a basis consistent with prior periods, subject to normal year-end adjustments; (c) promptly upon receipt thereof, a copy of each other report submitted to each of the Servicer, the Originators and the Performance Guarantor by independent certified public accountants in connection with any annual, interim or special audit of the books of such Person; (d) promptly and in any event within twenty (20) days after the request of the Administrative Agent at any time and from time to time, a certificate, executed by the president or chief financial officer of the Servicer and the Originators, setting forth all of such Person's warehouse borrowings and a description of the collateral related thereto; (e) promptly and in any event within 60 days after the end of each of the first three (3) quarters in each fiscal year of the Borrower, and within 120 days after the close of the Borrower's fiscal year, completed officer's certificates in the form of H-1 and H-2 hereto, executed by the president or chief financial officer of each of the Servicer and the Borrower, respectively; (f) promptly and in any event within 60 days after the end of each quarter (120 days in the case of the fourth quarter), a management report regarding the Originators' Mortgage Loan production for the prior quarter and year-to-date, in form and detail as required by the Administrative Agent; (g) promptly furnish copies of all reports and notices with respect to any "reportable event" defined in Title IV of ERISA that the Borrower, any of the Originators or the Servicer files or that the Borrower, any of the Originators or the Servicer is required to file under ERISA with the Internal Revenue Service, the PBGC or the U.S. Department of Labor or that the Borrower, any of the Originators or the Servicer receives from the PBGC; (h) immediately after becoming aware of the expiration, forfeiture, termination, or cancellation of, or default under, any Take-Out Commitment relating to any Collateral, telephone notice thereof confirmed in writing within one Business Day, together with a statement as to what action the Borrower proposes to take with respect thereto; provided that no such notice need be given if such Take-Out Commitment is replaced by another Take-Out Commitment; (i) promptly after becoming available, and in any event within 120 days after the close of each fiscal year of the Borrower, the Borrower's audited balance sheet as of the end of such fiscal year, and the related statements of income, stockholder's equity and cash flows of the Borrower for such year accompanied by (i) the related report of independent certified public 58

accountants acceptable to the Administrative Agent, which report shall be to the effect that such balance sheets have been prepared in accordance with GAAP applied on a basis consistent with prior periods except for such changes in such principles with which the independent public accountants shall have concurred and (ii) if issued, the auditor's letter to report to management customarily given in connection with such audit; (j) promptly after becoming available, and in any event within 60 days after the end of each fiscal quarter, excluding the fourth fiscal quarter, of each fiscal year of the Borrower, the unaudited balance sheet of the Borrower as of the end of such fiscal quarter and the related statements of income, stockholders' equity and cash flows of the Borrower for such fiscal quarter and the period from the first day of such fiscal year through the end of such fiscal quarter, certified by the chief financial officer of the Borrower, to have been prepared in accordance with GAAP applied on a basis consistent with prior periods, subject to normal year-end adjustments; (k) promptly after the Borrower obtains knowledge thereof, notice of any "Event of Default" or "Termination Date" under the Repurchase Agreement; (l) promptly after receipt thereof, copies of all notices received by the Borrower from any of the Originators under the Repurchase Agreement; (m) promptly after the Servicer obtains knowledge thereof, notice of any Servicer Default or of any condition or event that, with the giving of notice or lapse of time or both and unless cured or waived, would constitute a Servicer Default; (n) such other information concerning the business, properties or financial condition of the Borrower or any of the Originators as the Administrative Agent may reasonably request; and (o) (i) promptly upon entering into any Take-Out Commitment Master Agreement, a copy of such agreement and (ii) upon request by the Administrative Agent, or if there is an Event of Default, copies of all Take-Out Commitment Documents with respect to Non-Conforming Loans (if the Take-Out Commitment is made on a confirmation or supplement to a master agreement and the master agreement has been previously delivered to the Administrative Agent, only the confirmation or supplement is required to be delivered pursuant to this clause). 6.2. Taxes and Other Liens. The Borrower shall pay and discharge promptly all taxes, assessments and governmental charges or levies imposed upon it or upon its income or upon any of its Property as well as all claims of any kind (including claims for labor, materials, supplies and rent) that, if unpaid, might become a Lien upon any or all of its Property; provided, however, the Borrower shall not be required to pay any such tax, assessment, charge, levy or claim if the amount, applicability or validity thereof shall currently be contested in good faith by appropriate proceedings diligently conducted by it or on its behalf and if it shall have set up reserves therefor adequate under GAAP. 59

6.3. Maintenance. The Borrower shall (i) maintain its entity existence, rights and franchises and (ii) observe and comply with all Governmental Requirements. The Servicer shall maintain its corporate existence. The Borrower shall maintain its Properties (and any Properties leased by or consigned to it or held under title retention or conditional sales contracts) in good and workable condition at all times and make all repairs, replacements, additions, betterments and improvements to its Properties as are needful and proper so that the business carried on in connection therewith may be conducted properly and efficiently at all times. 6.4. Further Assurances. The Borrower and the Servicer shall, each within three (3) Business Days (or, in the case of Mortgage Notes, such longer period as provided under Section 3.4 of this Agreement) after the request of the Administrative Agent, cure any defects in the execution and delivery of the Notes, this Agreement or any other Transaction Document. The Borrower and the Servicer shall, each at its expense, promptly execute and deliver to the Administrative Agent, upon the Administrative Agent's request, all such other and further documents, agreements and instruments in compliance with or accomplishment of the covenants and agreements of the Borrower and the Servicer, respectively, in this Agreement and in the other Transaction Documents or to further evidence and more fully describe the collateral intended as security for the Notes, or to correct any omissions in this Agreement or the other Transaction Documents, or more fully to state the security for the obligations set out herein or in any of the other Transaction Documents, or to perfect, protect or preserve any Liens created (or intended to be created) pursuant to any of the other Transaction Documents, or to make any recordings, to file any notices, or obtain any consents. 6.5. Compliance with Laws. The Servicer shall comply with all applicable laws, rules, regulations and orders in connection with servicing the Mortgage Assets. 6.6. Insurance. (a) The Borrower and the Servicer shall each maintain with financially sound and reputable insurers, insurance with respect to its Properties and business against such liabilities, casualties, risks and contingencies and in such types and amounts as is customary in the case of Persons engaged in the same or similar businesses and similarly situated, including, without limitation, a fidelity bond or bonds in form and with coverage and with a company satisfactory to the Administrative Agent and with respect to such individuals or groups of individuals as the Administrative Agent may designate. Upon request of the Administrative Agent, the Borrower and the Servicer shall each furnish or cause to be furnished to the Administrative Agent from time to time a summary of the insurance coverage of the Borrower and the Servicer, respectively, in form and substance satisfactory to the Administrative Agent and if requested shall furnish the Administrative Agent with copies of the applicable policies. (b) With respect to Mortgages comprising the Collateral (i) the Servicer, for as long as the Servicer is one of the Originators, and thereafter the Borrower, shall cause the 60

improvements on the land covered by each Mortgage to be kept continuously insured at all times by responsible insurance companies against fire and extended coverage hazards under policies, binders, letters, or certificates of insurance, with a standard mortgagee clause in favor of the original mortgagee and its successors and assigns or, in the case of a MERS Designated Mortgage Loan, the beneficial owner of such mortgage loan, and (ii) the Servicer, for so long as the Servicer is one of the Originators, and thereafter the Borrower, shall cause each such policy to be in an amount equal to the lesser of the maximum insurable value of the improvements or the original principal amount of the Mortgage, without reduction by reason of any co-insurance, reduced rate contribution, or similar clause of the policies or binders. 6.7. Accounts and Records. The Borrower and, so long as the Servicer and one of the Originators are the same entity, the Servicer shall each keep books of record and account in which full, true and correct entries will be made of all dealings or transactions in relation to its business and activities, in accordance with GAAP. The Borrower and the Servicer shall each maintain and implement administrative and operating procedures (including, without limitation, an ability to recreate all records pertaining to the performance of the Borrower's obligations under the Take-Out Commitments and other agreements made with reference to any Mortgage Loans in the event of the destruction of the originals of such records) and keep and maintain all documents, books, records, computer tapes and other information necessary or advisable for the performance by the Borrower of its Obligations. The Borrower shall not enter the "loan servicing" business. 6.8. Right of Inspection; Audit. The Borrower, the Originators and, so long as the Servicer and one of the Originators are the same entity, the Servicer shall: (a) permit any officer, employee or agent of the Administrative Agent (including an independent certified public accountant) to visit and inspect any of its Properties, examine its books of record and accounts, documents (including, without limitation, computer tapes and disks), telecopies and extracts from the foregoing, and discuss its affairs, finances and accounts with its officers, accountants, and auditors, all and as often as the Administrative Agent may desire; and (b) cause to be conducted, at its sole cost and expense, by its independent certified public accountant, an audit, on an annual basis, of (i) the Originators' businesses of originating Mortgage Loans and its collections systems, (ii) the Borrower's business of purchases of Mortgage Loans its collections systems, and (iii) the Servicer's business of servicing of Mortgage Loans its collections systems, such independent certified public accountant shall prepare and deliver to the Administrative Agent a written report with respect to such audit on a scope and in a form reasonably acceptable to the Administrative Agent. The Borrower agrees to pay the reasonable costs of reviews and inspections performed pursuant to this Section 6.8. 61

6.9. Notice of Certain Events. The Borrower and, so long as the Servicer and one of the Originators are the same entity (other than with respect to clause (g) hereof), the Servicer shall each promptly notify the Administrative Agent upon (a) the receipt of any notice from, or the taking of any other action by, the holder of any of its promissory notes, debentures or other evidences of Indebtedness with respect to a claimed default, together with a detailed statement by a responsible officer of the Borrower or the Servicer, as the case may be, specifying the notice given or other action taken by such holder and the nature of the claimed default and what action the Borrower or the Servicer is taking or proposes to take with respect thereto, but only if such alleged default or event of default (if it were true) would also be a Default or Event of Default under this Agreement; (b) the commencement of, or any determination in, any legal, judicial or regulatory proceedings that, if adversely determined, could also be a Default or Event of Default under this Agreement; (c) any dispute between the Borrower or the Servicer, as the case may be, and any Governmental Authority or any other Person that, if adversely determined, could have a Material Adverse Effect; (d) any change in the business, operations prospects or financial conditions of the Servicer, including, without limitation, the Servicer's insolvency, that could reasonably be expected to have a Material Adverse Effect, or any adverse change in the business, operations prospects or financial condition of the Borrower, including, without limitation, the Borrower's insolvency; (e) any event or condition known to it that, if adversely determined, could reasonably be expected to have a Material Adverse Effect; (f) the receipt of any notice from, or the taking of any other action by any Approved Investor indicating an intent not to honor, or claiming a default under a Take-Out Commitment, together with a detailed statement by a responsible officer of the Borrower specifying the notice given or other action taken by such Approved Investor and the nature of the claimed default and what action the Borrower is taking or proposes to take with respect thereto; (g) the receipt of any notice from, and or the taking of any action by any Governmental Authority indicating an intent to cancel the Borrower's or the Servicer's right to be either a seller or servicer of such Governmental Authority's insured or guaranteed Mortgage Loans; and (h) the receipt of any notice of any final judgment or order for payment of money applicable to the Servicer that could reasonably be expected to have a Material Adverse Effect, or the receipt of any notice of any final judgment or order for payment of money applicable to the Borrower. 6.10. Performance of Certain Obligations. The Borrower and, so long as the Servicer and any of the Originators are the same entity, the Servicer shall each perform and observe each of the provisions of each Mortgage Loan and Take-Out Commitment on its part to be performed or observed and will cause all things to be done that are necessary to have each Mortgage Loan covered by a Take-Out Commitment comply with the requirements of such Take-Out Commitment. 6.11. Use of Proceeds; Margin Stock. The proceeds of the Advances shall be used by the Borrower solely for the acquisition of Mortgage Loans under the Repurchase Agreement. None of such proceeds shall be used for the purpose of purchasing or carrying any "margin stock" as defined in Regulation U, or for the purpose of reducing or retiring any Indebtedness that was originally incurred to purchase or carry 62

margin stock or for any other purpose that might constitute this transaction a "purpose credit" within the meaning of such Regulation U. Neither the Borrower nor any Person acting on behalf of the Borrower shall take any action in violation of Regulations U or X or shall violate Section 7 of the Securities Exchange Act of 1934, as amended, or any rule or regulation thereunder, in each case as now in effect or as the same may hereafter be in effect. 6.12. Notice of Default. The Borrower shall furnish to the Administrative Agent immediately upon becoming aware of the existence of any Default or Event of Default, a written notice specifying the nature and period of existence thereof and the action that the Borrower is taking or proposes to take with respect thereto. 6.13. Compliance with Transaction Documents. The Borrower and, so long as the Servicer and one of the Originators are the same entity, the Servicer shall each promptly comply with any and all covenants and provisions of this Agreement applicable to it, the Notes, in the case of the Borrower, and the other Transaction Documents. 6.14. Compliance with Material Agreements. The Borrower and, so long as the Servicer and one of the Originators are the same entity, the Servicer shall each comply in all respects with all agreements, indentures, Mortgages or documents (including, with respect to the Borrower, the Articles of Organization) binding on it or affecting its Property or business in all cases where the failure to so comply could reasonably be expected to result in a Material Adverse Effect. 6.15. Operations and Properties. The Borrower and, so long as the Servicer and one of the Originators are the same entity, the Servicer shall each act prudently and in accordance with customary industry standards in managing and operating its Property and shall continue to underwrite, hedge and sell Mortgage Loans in the same diligent manner it has applied in the past and take no greater credit or market risks than are currently being borne by it. 6.16. Take-Out Commitments. The Borrower shall cause the Originators to obtain, and maintain in full force and effect, Take-Out Commitments reflecting total Approved Investor obligations, as of each date of determination, with an aggregate purchase price at least equal to the total of the original principal balances of the Borrower's entire portfolio of Mortgage Loans issued as proceeds thereof. Each of such Take-Out Commitments shall reflect only those terms and conditions as are permitted hereunder or are acceptable to the Administrative Agent. The Borrower shall obtain, and maintain in full force and effect, forward purchase commitments (which may include options to sell Mortgage Loans to Approved Investors, so long as the Approved Investor is bound thereby) issued by Approved Investors and obligating such Approved Investors to purchase a portion of the Borrower's subsequently acquired Mortgage Loans. 63

6.17. Collateral Proceeds. The Borrower and the Servicer shall instruct all Approved Investors to cause all payments in respect of Take-Out Commitments on Mortgage Loans to be deposited directly in the Collection Account. 6.18. Environmental Compliance. The Borrower and, so long as the Servicer and one of the Originators are the same entity, the Servicer shall each use and operate all of its facilities and properties in compliance with all environmental laws, keep all necessary permits, approvals, certificates, licenses and other authorizations relating to environmental matters in effect and remain in compliance therewith, and handle all hazardous materials in compliance with all applicable environmental laws. 6.19. Closing Instructions. The Borrower agrees to indemnify and hold the Lenders and the Administrative Agent harmless from and against any loss, including attorneys' fees and costs, attributable to the failure of a title insurance company, agent or approved attorney to comply with the disbursement or instruction letter or letters of the Borrower or of the Administrative Agent relating to any Mortgage Loan. The Administrative Agent shall have the right to pre-approve the closing instructions of the Originator to the title insurance company, agent or attorney in any case where the Mortgage Loan to be created at settlement is intended to be warehoused by the Lenders pursuant hereto. 6.20. Special Affirmative Covenants Concerning Collateral. (a) The Borrower shall at all times warrant and defend the right, title and interest of the Lenders, the Collateral Agent and the Administrative Agent in and to the Collateral against the claims and demands of all Persons whomsoever. (b) The Borrower and the Servicer shall each service or cause to be serviced all Mortgage Loans in the best interests of and for the benefit of the Lenders, in accordance with the terms of this Agreement, the terms of the Principal Mortgage Documents, the standard requirements of the issuers of Take-Out Commitments covering the same and to the extent consistent with such terms, in accordance with Accepted Servicing Standards, including without limitation taking all actions necessary to enforce the obligations of the Obligors under such Eligible Mortgage Loans. The Borrower and the Servicer each shall hold all escrow funds collected in respect of Eligible Mortgage Loans in trust, without commingling the same with any other funds, and apply the same for the purposes for which such funds were collected. (c) The Servicer shall, no less than on an annual basis, review financial statements, compliance with financial parameters, Fannie Mae/Freddie Mac approvals (if applicable), and state licenses of all Persons from whom the Originators acquire Mortgage Loans. 64

6.21. Corporate Separateness. (a) The Borrower covenants to take the following actions, and the Servicer covenants to cause the Borrower to take the following actions: The Borrower shall at all times maintain at least one Independent Manager (as such term is defined in the Limited Liability Company Agreement). (b) The Borrower shall not direct or participate in the management of any of the operations of the Other Companies. (c) The Borrower shall allocate fairly and reasonably any overhead for shared office space. The Borrower shall have stationery and other business forms separate from that of the Other Companies. (d) The Borrower shall at all times be adequately capitalized in light of its contemplated business. (e) The Borrower shall at all times provide for its own operating expenses and liabilities from its own funds. (f) The Borrower shall maintain its assets and transactions separately from those of the Other Companies and reflect such assets and transactions in financial statements separate and distinct from those of the Other Companies and evidence such assets and transactions by appropriate entries in books and records separate and distinct from those of the Other Companies. The Borrower shall hold itself out to the public under the Borrower's own name as a legal entity separate and distinct from the Other Companies. The Borrower shall not hold itself out as having agreed to pay, or as being liable, primarily or secondarily, for, any obligations of the Other Companies. (g) The Borrower shall not maintain any joint account with any Other Company or become liable as a guarantor or otherwise with respect to any Indebtedness or contractual obligation of any Other Company. (h) The Borrower shall not grant a Lien on any of its assets to secure any obligation of any Other Company. (i) The Borrower shall not make loans, advances or otherwise extend credit to any of the Other Companies. (j) The Borrower shall conduct its business in its own name and strictly comply with all organizational formalities to maintain its separate existence. (k) The Borrower shall have bills of sale (or similar instruments of assignment) and, if appropriate, UCC-1 financing statements, with respect to all assets purchased from any of the Other Companies. 65

(l) The Borrower shall not engage in any transaction with any of the Other Companies, except as permitted by this Agreement or the Articles of Organization and as contemplated by the Repurchase Agreement. 6.22. Post-Closing Conditions. Within thirty (30) days of the Effective Date of this Agreement, the Borrower shall cause to be delivered to the Administrative Agent (a) a bring down opinion of Cadwalader, Wickersham & Taft LLP that all prior liens on the Mortgage Assets have either been terminated or partially released, such opinion to be satisfactory to the Administrative Agent; and (b) a non-consolidation and true sale opinion of Hunton & Williams satisfactory to the Administrative Agent. ARTICLE VII NEGATIVE COVENANTS The Borrower and the Servicer shall each at all times comply with the covenants applicable to it contained in this Article VII, from the date hereof until the later of the Termination Date and the date all of the Obligations are indefeasibly paid in full: 7.1. Limitations on Mergers and Acquisitions. (a) Except as set forth on Schedule IV attached hereto, the Servicer (so long as the Servicer and one of the Originators are the same entity) shall not (i) merge or consolidate with or into any corporation or other entity unless the Servicer is the surviving entity of any such merger or consolidation or (ii) liquidate or dissolve. (b) Except as set forth on Schedule IV attached hereto, the Borrower will not merge with or into or consolidate with or into, or convey, transfer, lease or otherwise dispose of (whether in one transaction or in a series of transactions), all or substantially all of its assets (whether now owned or hereafter acquired) to, or acquire all or substantially all of the assets or capital stock or other ownership interest of, or enter into any joint venture or partnership agreement with, any Person, other than as contemplated by this Agreement and the Repurchase Agreement. 7.2. Fiscal Year. Neither the Borrower nor, so long as the Servicer and one of the Originators are the same entity, the Servicer shall change its fiscal year other than to conform with changes that may be made to the Performance Guarantor's fiscal year and then only after notice to the Administrative Agent and after whatever amendments are made to this Agreement as may be required by the Administrative Agent, in order that the reporting criteria for the financial covenants contained in Articles VI and VII remain substantially unchanged. 66

7.3. Business. The Borrower will not engage in any business other than as set forth in Section 1.06 of the Limited Liability Company Agreement. 7.4. Use of Proceeds. The Borrower shall not permit the proceeds of the Advances to be used for any purpose other than those permitted by Section 6.11 hereof. The Borrower shall not, directly or indirectly, use any of the proceeds of the Advances for the purpose, whether immediate, incidental or ultimate, of buying any "margin stock" or of maintaining, reducing or retiring any Indebtedness originally incurred to purchase a stock that is currently any "margin stock," or for any other purpose that might constitute this transaction a "purpose credit," in each case within the meaning of Regulation U, or otherwise take or permit to be taken any action that would involve a violation of such Regulation U or of Regulation T or Regulation Z (12 C.F.R. 224, as amended) or any other regulation promulgated by the Federal Reserve Board. 7.5. Actions with Respect to Collateral. Neither the Borrower nor the Servicer shall: (a) Compromise, extend, release, or adjust payments on any Mortgage Collateral, accept a conveyance of mortgaged Property in full or partial satisfaction of any Mortgage debt or release any Mortgage securing or underlying any Mortgage Collateral, except as permitted by the related Approved Investor or as contemplated in the servicing guidelines distributed thereby; (b) Agree to the amendment or termination of any Take-Out Commitment in which the Administrative Agent has a security interest or to substitution of a Take-Out Commitment for a Take-Out Commitment in which the Administrative Agent has a security interest hereunder, if such amendment, termination or substitution may be expected (as determined by the Collateral Agent or the Administrative Agent in either of their sole discretion) to have a Material Adverse Effect or to result in a Default or Event of Default; (c) Transfer, sell, assign or deliver any Mortgage Loan Collateral pledged to the Administrative Agent to any Person other than the Administrative Agent, except pursuant to a Take-Out Commitment or pursuant to either Section 3.3 or Section 3.4; (d) Grant, create, incur, permit or suffer to exist any Lien upon any Mortgage Loan Collateral except for (i) Liens granted to the Administrative Agent to secure the Notes and Obligations and (ii) any rights created by the Repurchase Agreement; or (e) With respect to any Mortgage Loans constituting Collateral, permit the payment instructions relating to a Take-Out Commitment to provide for payment to any Person except directly to the Collection Account. 67

7.6. Liens. The Borrower will not sell, assign (by operation of law or otherwise) or otherwise dispose of, or create or suffer to exist any Lien upon or with respect to, any Mortgage Asset, or upon or with respect to any account to which any Collections of any Mortgage Asset are sent, or assign any right to receive income in respect thereof except as contemplated hereby. 7.7. Employee Benefit Plans. Neither the Borrower nor, so long as the Servicer and one of the Originators are the same entity, the Servicer may permit any of the events or circumstances described in Section 5.3(b) to exist or occur. 7.8. Change of Principal Office. The Borrower shall not move its principal office, executive office or principal place of business from the address set forth in Section 5.2(g) without 30-days' prior written notice to the Administrative Agent. The Borrower shall not change its place of organization or add a new jurisdiction of organization without 30 days' prior written notice to the Administrative Agent. 7.9. No Commercial, A&D, Etc. Loans. The Borrower shall not make or acquire any direct outright ownership interest, participation interest or other creditor's interest in any commercial real estate loan, acquisition and/or development loan, unimproved real estate loan, personal property loan, oil and gas loan, commercial loan, wrap-around real estate loan, unsecured loan, acquisition, development or construction loan. 7.10. Maximum Leverage. The Servicer, so long as the Servicer and one of the Originators are the same entity, and the Originators shall not permit the Leverage Ratio, on a combined basis, at any time to exceed 12 to 1. 7.11. Indebtedness. The Borrower will not incur any Indebtedness, other than any Indebtedness incurred pursuant to this Agreement or the Repurchase Agreement or permitted to be incurred pursuant to the Limited Liability Company Agreement. 7.12. Deposits to Collection Account. Neither the Borrower nor the Servicer shall deposit or otherwise credit, or cause or permit to be so deposited or credited, to the Collection Account, cash or cash proceeds other than Collateral Proceeds. 68

7.13. Transaction Documents. The Borrower will not amend, waive, terminate or modify any provision of any Transaction Document to which it is a party (provided that the Borrower may extend the "Termination Date" or waive the occurrence of any "Event of Default" under the Repurchase Agreement) without, in each case, the prior written consent of the Administrative Agent. The Borrower will perform all of its obligations under each Transaction Document to which it is a party and will enforce each Transaction Document to which it is a party in accordance with its terms in all respects. 7.14. Distributions, Etc. The Borrower will not declare or make any dividend payment or other distribution of assets, properties, cash, rights, obligations or securities on account of any equity ownership interests of the Borrower, or return any capital to its members as such, or purchase, retire, defease, redeem or otherwise acquire for value or make any payment in respect of any equity ownership interests of the Borrower or any warrants, rights or options to acquire any such interests, now or hereafter outstanding; provided, however, that the Borrower may declare and pay cash distributions on its equity ownership interests to its members so long as (a) no Event of Default shall then exist or would occur as a result thereof, (b) such distributions are in compliance with all applicable law including the limited liability company law of the state of Borrower's organization, and (c) such distributions have been approved by all necessary and appropriate action of the Borrower. 7.15. Limited Liability Company Agreement. The Borrower will not amend or delete (a) Sections 1.06, 4.01, 4.02, 4.08, 9.01-9.11, 10.02 and 11.01 or (b) the definition of "Independent Manager" set forth in the Limited Liability Company Agreement. The Borrower will perform all of its obligations under the Limited Liability Company Agreement. 7.16. Minimum Tangible Net Worth. The Servicer, so long as the Servicer and one of the Originators are the same entity, and the Originators shall not permit their Tangible Net Worth, on a combined basis, at any time to be less than $85,000,000. 7.17. Minimum GAAP Net Worth. The Servicer, so long as the Servicer and one of the Originators are the same entity, and the Originators shall not permit their GAAP Net Worth, on a combined basis, at any time to be less than $130,000,000. 7.18. Positive Net Income of Performance Guarantor. The Performance Guarantor shall not permit its net income and the net income of its subsidiaries, on a consolidated basis, to be less than zero for any period of six (6) consecutive months. 69

ARTICLE VIII EVENTS OF DEFAULT 8.1. Nature of Event. An "Event of Default" shall exist if any one or more of the following occurs: (a) the Borrower fails (i) to make any payment of principal of or interest on any of the Notes when due, or (ii) to make any payment when due, of any fee, expense or other amount due hereunder, under the Notes or under any other Transaction Document or, so long as the Servicer is one of the Originators, the Servicer fails to make any payment or deposit to be made by it under this Agreement when due; or (b) the Borrower, any one of the Originators or, so long as the Servicer and one of the Originators are the same entity, the Servicer fails to keep or perform any covenant or agreement contained in this Agreement (other than as referred to in Section 8.1(a)) and such failure continues unremedied beyond the expiration of any applicable grace or notice period that may be expressly provided for in such covenant or agreement; or (c) the Borrower, any one of the Originators, the Servicer (so long as the Servicer and one of the Originators are the same entity) or the Performance Guarantor defaults in the due observance or performance of any of the covenants or agreements contained in any Transaction Document other than this Agreement, and (unless such default otherwise constitutes a Default or an Event of Default pursuant to other provisions of this Section 8.1) such default continues unremedied beyond the expiration of any applicable grace or notice period that may be expressly provided for in such Transaction Document; or (d) any statement, warranty or representation by or on behalf of the Borrower, any one of the Originators, the Servicer (so long as the Servicer and one of the Originators are the same entity) or the Performance Guarantor contained in this Agreement, the Notes or any other Transaction Document or any Borrowing Report, officer's certificate or other writing furnished in connection with this Agreement, proves to have been incorrect or misleading in any respect as of the date made or deemed made; or (e) (i) in the case of the Borrower, the Borrower fails to make when due or within any applicable grace period any payment on any other Indebtedness with an unpaid principal balance or, in the case of the Originators, the Servicer, any one of the Originators, the Servicer (so long as the Servicer and one of the Originators are the same entity) fails to make when due or within any applicable grace period any payment on any other Indebtedness with an unpaid principal balance of over $1,000,000.00 with respect to each Originator and the Servicer ($10,000,000.00 in the case of the Performance Guarantor); or (ii) any event or condition occurs under any provision contained in any such obligation or any agreement securing or relating to such obligation (or any other breach or default under such obligation or agreement occurs) if the effect thereof is to cause or permit with the giving of notice or lapse of time or both the holder or trustee of such obligation to cause such obligation to become due prior to its stated maturity; or (iii) any such obligation becomes due (other than by regularly scheduled payments) prior to its 70

stated maturity; or (iv) in the case of the Borrower, any of the foregoing occurs with respect to any one or more items of Indebtedness with an unpaid principal balance, or, in the case of each of the Originators or the Servicer (so long as the Servicer and one of the Originator are the same entity) any of the foregoing occurs with respect to any one or more items of Indebtedness with unpaid principal balances exceeding, in the aggregate, $1,000,000.00 with respect to each Originator and the Servicer ($10,000,000.00 in the case of the Performance Guarantor); or (f) the Borrower, any one of the Originators, the Servicer (so long as the Servicer and one of the Originators are the same entity) or the Performance Guarantor generally shall not pay its debts as they become due or shall admit in writing its inability to pay its debts, or shall make a general assignment for the benefit of creditors; or (g) the Borrower, any of the Originators, the Servicer (so long as the Servicer and one of the Originators are the same entity) or the Performance Guarantor shall (i) apply for or consent to the appointment of a receiver, trustee, custodian, intervenor or liquidator of it or of all or a substantial part of its assets, (ii) file a voluntary petition in bankruptcy, (iii) file a petition or answer seeking reorganization or an arrangement with creditors or to take advantage of any Debtor Laws, (iv) file an answer admitting the allegations of, or consent to, or default in answering, a petition filed against it in any bankruptcy, reorganization or insolvency proceeding, or (v) take action for the purpose of effecting any of the foregoing; or (h) an involuntary petition or complaint shall be filed against the Borrower, any of the Originators, the Servicer (so long as the Servicer and one of the Originators are the same entity)or the Performance Guarantor seeking bankruptcy or reorganization of the Borrower, any of the Originators, the Servicer, or the Performance Guarantor or the appointment of a receiver, custodian, trustee, intervenor or liquidator of the Borrower, any of the Originators, the Servicer or the Performance Guarantor, all or substantially all of the assets of either the Borrower, any of the Originators, the Servicer, or the Performance Guarantor and such petition or complaint shall not have been dismissed within 60 days of the filing thereof; or an order, order for relief, judgment or, decree shall be entered by any court of competent jurisdiction or other competent authority approving a petition or complaint seeking reorganization of the Borrower, any of the Originators, the Servicer (so long as the Servicer and one of the Originators are the same entity) or the Performance Guarantor or appointing a receiver, custodian, trustee, intervenor or liquidator of the Borrower, any of the Originators, the Servicer or the Performance Guarantor, or of all or substantially all of assets of the Borrower, any of the Originators, the Servicer or the Performance Guarantor; or (i) in the case of the Borrower, the Borrower shall fail within 30 days to pay, bond or otherwise discharge any final judgment or order for payment of money, or, in the case of the Originators, the Servicer and the Performance Guarantor, any of the Originators, the Servicer (so long as the Servicer and one of the Originators are the same entity) or the Performance Guarantor shall fail within 30 days to pay, bond or otherwise discharge any final judgment or order for payment of money in excess of $500,000.00; or any of the Originators, the Servicer (so long as the Servicer and one of the Originators are the same entity) or the Performance Guarantor shall fail within 30 days to pay, bond or otherwise discharge final judgments or orders for payment of money which exceed in the aggregate $500,000.00; or in the case of the Borrower, the Borrower shall fail within 30 days to timely appeal or pay, bond or otherwise discharge any 71

judgments or order for payment which the Borrower may appeal, or in the case of the Originators, the Servicer and the Performance Guarantor, any of the Originators, the Servicer (so long as the Servicer and one of the Originators are the same entity) or the Performance Guarantor shall fail within 30 days to timely appeal or pay, bond or otherwise discharge any judgments or orders for payment of money which exceed, in the aggregate, $500,000.00 and which any of the Originators, the Servicer or the Performance Guarantor may appeal; (j) any Person shall levy on, seize or attach all or any material portion of the assets of the Borrower, any of the Originators, the Servicer (so long as the Servicer and one of the Originators are the same entity) or the Performance Guarantor and within thirty (30) days thereafter the Borrower, the related Originators, the Servicer or the Performance Guarantor shall not have dissolved such levy or attachment, as the case may be, and, if applicable, regained possession of such seized assets; or (k) if an event or condition specified in Section 5.3(b) shall occur or exist; or (l) any of the Originators or the Servicer (so long as the Servicer and one of the Originators are the same entity) becomes ineligible to originate, sell or service Mortgage Loans to Fannie Mae, Freddie Mac or Ginnie Mae, or Fannie Mae, Freddie Mac or Ginnie Mae shall impose any sanctions upon or terminate or revoke any rights of the Servicer (so long as the Servicer and one of the Originators are the same entity) or any of the Originators; or (m) if (x) any Governmental Authority cancels an Originator's right to be either a seller or servicer of such Governmental Authority's insured or guaranteed Mortgage Loans or mortgage-backed securities, (y) any Approved Investor cancels for cause any servicing or underwriting agreement between any of the Originators and such Approved Investor or (z) any of the Originators receives notice from a Governmental Authority that such Governmental Authority intends to revoke such Originator's right to be a seller or servicer of such Governmental Authority's insured or guaranteed Mortgage Loans or mortgaged-backed securities and such notice is not withdrawn within (10) ten days of the receipt thereof; or (n) failure of the Borrower or any of the Originators to correct an imbalance in any escrow account established with the Borrower or the related Originator as either an originator, purchaser or servicer of Mortgage Loans, which imbalance may have a Material Adverse Effect, within two (2) Business Days after demand by any beneficiary of such account or by the Administrative Agent; or (o) failure of any of the Originators or the Servicer to meet, at all times, the minimum net worth requirements of Fannie Mae, Freddie Mac or Ginnie Mae as an originator, seller or servicer, as applicable; or (p) any provision of this Agreement, the Notes or any other Transaction Document shall for any reason cease to be in full force and effect, or be declared null and void or unenforceable in whole or in part; or the validity or enforceability of any such document shall be challenged or denied; or (q) a "change in control," with respect to the ownership of the Performance Guarantor shall have occurred (and as used in this subparagraph, the term "change in control" 72

shall mean an acquisition by any Person, partnership or group, as defined under the Securities Exchange Act of 1934, as amended, of a direct or indirect beneficial ownership of 10% or more of the then-outstanding voting stock of the Performance Guarantor ); or the Performance Guarantor shall cease at any time to own directly 100% of the stock of each Originator; or (r) the total Collateral Value of all Eligible Mortgage Collateral shall be less than the Primary Obligations, at any time, and the Borrower shall fail either to provide additional Eligible Mortgage Collateral with a sufficient Collateral Value, or to pay Principal Debt, in an amount sufficient to correct the deficiency within the time period set forth in Section 2.5(b); or (s) if, as a result of the Borrower's failure to obtain and deliver to the Collateral Agent, Principal Mortgage Documents as required by Section 2.3(c), the Administrative Agent shall determine that the continuation of such condition may have a Material Adverse Effect on the Borrower or the Lenders; or (t) there shall have occurred any event that adversely affects the enforceability or collectability of any significant portion of the Mortgage Loans or the Take-Out Commitments (provided that to the extent such event gives rise to an obligation by any of the Originators to repurchase such Mortgage Loans pursuant to the Repurchase Agreement and such Originator does so repurchase in accordance with the provisions of the Repurchase Agreement, no Event of Default shall occur under this Section 8.1(t) or there shall have occurred any other event that adversely affects the ability of the Borrower, the Servicer or the Collateral Agent to collect a significant portion of Mortgage Loans or Take-Out Commitments or the ability of the Borrower or, so long as the Servicer and any of the Originators are the same entity, the Servicer to perform hereunder or a Material Adverse Effect has occurred in the financial condition or business of the Borrower since inception or, so long as the Servicer and any one of the Originators are the same entity, the Servicer since March 31, 2003; or (u) (i) any litigation (including, without limitation, derivative actions), arbitration proceedings or governmental proceedings not disclosed in writing by the Borrower to the Lenders and the Administrative Agent prior to the date of execution and delivery of this Agreement is pending against the Borrower or any Affiliate thereof, or (ii) any development not so disclosed has occurred in any litigation (including, without limitation, derivative actions), arbitration proceedings or governmental proceedings so disclosed, which, in the case of either clause (i) and/or (ii), in the opinion of the Administrative Agent, could reasonably be expected to have a Material Adverse Effect or impair the ability of the Borrower, any of the Originators, the Servicer or the Performance Guarantor to perform its obligations under this Agreement or any other Transaction Document; or (v) the Internal Revenue Service shall file notice of a lien pursuant to Section 6323 of the Code with regard to any of the assets of the Borrower, any of the Originators or the Servicer (so long as the Servicer and one of the Originators are the same entity) and such lien shall not have been released within 30 days, or the PBGC shall, or shall indicate its intention to, file notice of a lien pursuant to Section 4068 of ERISA with regard to any of the assets of the Borrower, any of the Originators or the Servicer (so long as the Servicer and one of the Originators are the same entity) and as to each of the Originators; or 73

(w) as at the end of any Collection Period, the Default Ratio shall exceed 1%; or (x) a successor Collateral Agent shall not have been appointed and accepted such appointment within 180 days after the retiring Collateral Agent shall have given notice of resignation pursuant to Section 4.4 of the Collateral Agreement; or (y) a "Default," or an "Event of Default" shall occur under the Repurchase Agreement, or the Repurchase Agreement shall cease to be in full force and effect; or (z) all of the outstanding equity ownership interests of the Borrower shall cease to be owned, directly or indirectly, by the Performance Guarantor; or (aa) the Borrower shall cease or otherwise fail to have a good and valid title to (or, to the extent that Article 9 of the UCC is applicable to the Borrower's acquisition thereof, a valid perfected security interest in) a significant portion of the Collateral (other than Collateral released in accordance with Section 3.3) or the Security Instruments shall for any reason (other than pursuant to the terms hereof) fail or cease to create a valid and perfected first priority security interest in the Mortgage Loans and the other Collateral for the benefit of the holders of the Obligations, which in the opinion of the Administrative Agent could reasonably be expected to have a Material Adverse Effect; or (bb) the Tangible Net Worth of the Originators, on a combined basis, shall be less than $85,000,000; or (cc) as at the end of any Collection Period the amount of the Excess Spread is less than fifty (50) basis points; or (dd) as of the Settlement Date following any withdrawal from the Reserve Account pursuant to Section 2.8(e)(i) (after giving effect to any deposit to the Reserve Account pursuant to Section 2.7(c)(iii)(D) on such Settlement Date) the amount on deposit in the Reserve Account shall be less than the Required Reserve Account Amount; or (ee) if, on or prior to the effective date of both of the transactions (or, if such effective dates are different dates, on or prior to the effective date of the last transaction to close of those transactions) described on Schedule IV attached hereto, the failure of the parties hereto to enter into an amendment as described in Section 12.22 of this Agreement. (ff) if the covenants set forth in Section 6.22 are not satisfied on a date that is within thirty (30) days of the Effective Date. 8.2. Default Remedies. (a) Upon the occurrence and continuation of an Event of Default under Sections 8.1(f), (g), (h), (j), (v) or (ee) of this Agreement, the entire unpaid balance of the Obligations shall automatically become due and payable, the Termination Date shall immediately occur and the Maximum Facility Amount shall immediately terminate, all without any notice or action of any kind whatsoever. 74

(b) Upon the occurrence and continuation of an Event of Default under any provision of Section 8.1 other than those set forth in Section 8.2(a), the Administrative Agent may do any one or both of the following: (i) declare the entire unpaid balance of the Obligations immediately due and payable, whereupon it shall be due and payable; and (ii) declare the Termination Date to have occurred and terminate the Maximum Facility Amount. (c) Upon the occurrence of an Event of Default under any provision of Section 8.1 and the acceleration of the unpaid balance of the Obligations pursuant to Section 8.2(a) or (b), the Administrative Agent may do any one or more of the following: (i) reduce any claim to judgment; (ii) exercise the rights of offset or banker's Lien against the interest of the Borrower in and to every account and other Property of the Borrower that are in the possession of the Lenders, the Collateral Agent or the Administrative Agent to the extent of the full amount of the Obligations (the Borrower being deemed directly obligated to the Lenders and the Administrative Agent in the full amount of the Obligations for such purposes); (iii) foreclose or direct the Collateral Agent to foreclose any or all Liens or otherwise realize upon any and all of the rights the Administrative Agent may have in and to the Collateral, or any part thereof; and (iv) exercise any and all other legal or equitable rights afforded by the Transaction Documents, applicable Governmental Requirements, or otherwise, including, but not limited to, the right to bring suit or other proceedings before any Governmental Authority either for specific performance of any covenant or condition contained in any of the Transaction Documents or in aid of the exercise of any right granted to the Lenders or the Administrative Agent in any of the Transaction Documents. (d) Upon the occurrence and continuation of a Default hereunder or under any Transaction Document, the Administrative Agent may, in addition to any and all other legal or equitable rights afforded by the Transaction Documents, deliver an Activation Notice under the Collection Account Control Agreement and/or the Reserve Account Control Agreement. 8.3. Paydowns. Immediately upon the occurrence of an Event of Default, and without any requirement for notice or demand (including, without limitation, any notice or demand otherwise required under Section 8.1), the Borrower shall (a) make a payment to the Administrative Agent equal to the Collateral Deficiency and (b) deliver to the Collateral Agent additional Take-Out Commitment Documents relating to Take-Out Commitments in an amount equal to unrepaid Advances that have been made against any Uncovered Mortgage Loans. Take-Out Commitment Documents for Conforming Loans that are delivered pursuant to clause (b), above, in addition to conforming with all other criteria of this Agreement, shall also substantially conform to the interest rates and "terms to maturity" for all Uncovered Mortgage Loans. This is a special, and not an exclusive, right or remedy and any demand for performance under this Section 8.3 shall not waive or affect the Lenders' or the Administrative Agent's rights to enforce any security interest in the Collateral, collect a deficiency or to pursue damages or any other remedy, as herein provided or as permitted at law or in equity, until all Obligations have been fully paid and performed. 75

8.4. Waivers of Notice, Etc. Except as otherwise provided in this Agreement, the Borrower and each surety, endorser, guarantor and other party liable for payment of any sum or sums of money that may become due and payable, or the performance or any undertaking that may be owed, to the Lenders or the Administrative Agent pursuant to this Agreement, the Notes, or the other Transaction Documents, including the Obligations, jointly and severally waive demand for payment, presentment, protest, notice of protest and nonpayment or other notice of default, notice of acceleration and notice of intention to accelerate, and agree that its or their liability under this Agreement, the Notes or other Transaction Documents shall not be affected by any renewal or extension of the time or place of payment or performance hereof, or any indulgences by the Lenders or the Administrative Agent, or by any release or change in any security for the payment of the Obligations, and hereby consent to any and all renewals, extensions, indulgences, releases or changes, regardless of the number of such renewals, extensions, indulgences, releases or changes. ARTICLE IX THE ADMINISTRATIVE AGENT 9.1. Authorization. Each Lender has appointed the Administrative Agent as its agent to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to the Administrative Agent by the terms hereof, together with such powers as are reasonably incidental thereto. As to any matters not expressly provided for by this Agreement (including, without limitation, enforcement of this Agreement), the Administrative Agent shall not be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Majority Banks, and such instructions shall be binding upon all Lenders; provided, however, that the Administrative Agent shall not be required to take any action that exposes the Administrative Agent to personal liability or that is contrary to this Agreement or applicable law. 9.2. Reliance by Agent. Notwithstanding anything to the contrary in this Agreement or any other Transaction Document, neither the Administrative Agent nor any of its directors, officers, agents, representatives, employees, attorneys-in-fact or Affiliates shall be liable for any action taken or omitted to be taken by it or them (in their capacity as or on behalf of the Administrative Agent) under or in connection with this Agreement or the other Transaction Documents, except for its or their own gross negligence or willful misconduct. Without limitation of the generality of the foregoing, the Administrative Agent: (a) may treat the payee of the Notes as the holder thereof; (b) may consult with legal counsel (including counsel for the Borrower), independent certified public accountants and other experts selected by it or the Borrower and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts; (c) makes no warranty or representation to any Lender or the 76

Administrative Agent and shall not be responsible to any Lender or the Administrative Agent for any statements, warranties or representations made in or in connection with this Agreement or the other Transaction Documents; (d) shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of this Agreement on the part of the Borrower or to inspect the Property (including the books and records) of the Borrower; (e) shall not be responsible to any Lender or the Administrative Agent for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other instrument or document furnished pursuant hereto or the enforceability or perfection or priority of any Collateral; and (f) shall incur no liability under or in respect of this Agreement or any other Transaction Document by acting upon any notice, consent, certificate or other instrument or writing (which may be by telegram, cable or telex) believed by the Administrative Agent to be genuine and signed or sent by the proper Person or party. 9.3. Agent and Affiliates. With respect to any Advance made by CL New York, CL New York shall have the same rights and powers under this Agreement as would any Lender and may exercise the same as though it were not the Administrative Agent. CL New York and its Affiliates may accept deposits from, lend money to, act as trustee under indentures of, and generally engage in any kind of business with, the Borrower, any of the Borrower's Affiliates and any Person who may do business with or own securities of the Borrower or any such Affiliate, all as if CL New York were not the Administrative Agent and without any duty to account therefor to the Lenders. If CL New York is removed as Administrative Agent, such removal will not affect CL New York's rights and interests as a Lender. 9.4. Lender Decision. Each Lender (including each Lender that becomes a party hereto by assignment) acknowledges that it has, independently and without reliance on the Administrative Agent, any of its Affiliates or any other Lender and based on such documents and information as it has deemed appropriate, made its own evaluation and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance on the Administrative Agent, any of its Affiliates or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own decisions in taking or not taking action under this Agreement. 9.5. Rights of the Administrative Agent. Each right and remedy expressly provided by this Agreement as being available to the Administrative Agent shall be exercised by the Administrative Agent only at the direction of the Majority Banks. 9.6. Indemnification of Administrative Agent. Each Bank agrees to indemnify the Administrative Agent (to the extent not reimbursed by or on behalf of the Borrower), ratably according to the respective principal amounts held by it (or if no Advances are then outstanding, each Bank shall indemnify the Administrative Agent ratably according to the amount of its Bank Commitment), from and against any and all 77

liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever that may be imposed on, incurred by, or asserted against the Administrative Agent in any way relating to or arising out of this Agreement or the other Transaction Documents or any action taken or omitted by the Administrative Agent under this Agreement or the other Transaction Documents, provided that no Bank shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the Administrative Agent's gross negligence or willful misconduct. 9.7. UCC Filings. The Lenders and the Borrower expressly recognize and agree that the Administrative Agent may be listed as the assignee or secured party of record on the various UCC filings required to be made hereunder in order to perfect the security interest in the Collateral granted by the Borrower for the benefit of the holders of the Obligations and that such listing shall be for administrative convenience only in creating a record-holder or nominee to take certain actions hereunder on behalf of the holders of the Obligations. ARTICLE X INDEMNIFICATION 10.1. Indemnities by the Borrower. (a) General Indemnity. Without limiting any other rights that any such Person may have hereunder or under applicable law, each of the Borrower and the Servicer, as applicable, hereby agrees to indemnify each of the Lenders, the Administrative Agent, any Affected Party, their respective successors, transferees, participants and assigns and all affiliates, officers, directors, shareholders, controlling persons, employees and agents of any of the foregoing (each an "Indemnified Party"), forthwith on demand, from and against any and all damages, losses, claims, liabilities and related costs and expenses, including attorneys' fees and disbursements (all of the foregoing being collectively referred to as "Indemnified Amounts") awarded against or incurred by any of them arising out of or relating to this Agreement or the exercise or performance of any of its or their powers or duties, in respect of any Mortgage Loan or Take-Out Commitment, or related in any way to its or their possession of, or dealings with, the Collateral, excluding, however, Indemnified Amounts to the extent resulting from gross negligence, willful misconduct, or unlawful collection activity directed against a borrower under a mortgage loan included in the Collateral on the part of such Indemnified Party. (b) Contribution. If for any reason the indemnification provided above in this Section 10.1 is unavailable to an Indemnified Party or is insufficient to hold an Indemnified Party harmless, then each of the Borrower or the Servicer, as applicable, shall contribute to the amount paid or payable by such Indemnified Party as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect not only the relative benefits received by such Indemnified Party on the one hand and Borrower on the other hand but also the relative fault of such Indemnified Party as well as any other relevant equitable considerations. 78

ARTICLE XI ADMINISTRATION AND COLLECTION OF MORTGAGE LOANS 11.1. Designation of Servicer. The servicing, administration and collection of the Mortgage Assets shall be conducted by the Servicer so designated hereunder from time to time. Until the Administrative Agent gives notice to the Borrower and the Originators of the designation of a new Servicer after the occurrence of a Default or an Event of Default, American Home Mortgage Corp. is hereby designated as, and hereby agrees to perform the duties and obligations of, the Servicer pursuant to the terms hereof. The Administrative Agent may at any time following the occurrence of a Servicer Default designate as Servicer any Person (including itself) to succeed the Originators or any successor Servicer, if such Person shall consent and agree to the terms hereof. The Servicer may, with the prior consent of the Administrative Agent, subcontract with any other Person for the servicing, administration or collection of the Mortgage Assets. Any such subcontract shall not affect the Servicer's liability for performance of its duties and obligations pursuant to the terms hereof. 11.2. Duties of Servicer. (a) The Servicer shall take or cause to be taken all such actions as may be necessary or advisable to collect each Mortgage Asset from time to time, all in accordance with applicable laws, rules and regulations, with care and diligence, and in accordance with the servicing guide issued by the Governmental Authority applicable to such Mortgage Asset or, in the case of Non-Conforming Loans, the servicing criteria specified by the Approved Investor that has issued a Take-Out Commitment with respect thereto. The Borrower and the Administrative Agent hereby appoint the Servicer, from time to time designated pursuant to Section 11.1, as agent for themselves and for the Lenders to enforce their respective rights and interests in the Mortgage Assets and the Collections thereof. In performing its duties as Servicer, the Servicer shall exercise the same care and apply the same policies as it would exercise and apply if it owned such Mortgage Loans and shall act in the best interests of the Borrower and the Lenders. (b) The Servicer shall administer the Collections in accordance with the procedures described in Section 2.7 and shall service the Collateral in accordance with Section 6.20 and Section 7.5. (c) The Servicer shall hold in trust for the Borrower and the Lenders, in accordance with their respective interests, all books and records (including, without limitation, computer tapes or disks) that relate to the Mortgage Assets. (d) The Servicer shall, as soon as practicable following receipt, turn over to the Borrower or the Originators, as appropriate, any cash collections or other cash proceeds received with respect to Property not constituting Mortgage Assets. 79

(e) The Servicer shall, from time to time at the request of the Administrative Agent, furnish to the Administrative Agent (promptly after any such request) a calculation of the amounts set aside for the Lenders pursuant to Section 2.7(c). (f) The Servicer shall perform the duties and obligations of the Servicer set forth in the Collateral Agency Agreement and the other Security Instruments. 11.3. Certain Rights of the Administrative Agent. At any time following the designation of a Servicer other than the Originators pursuant to Section 11.1 or following an Event of Default: (a) The Administrative Agent may direct the Obligors that all payments thereunder be made directly to the Administrative Agent or its designee. (b) At the Administrative Agent's request and at the Borrower's expense, the Borrower shall notify each Obligor of the Lien on the Mortgage Assets and direct that payments be made directly to the Administrative Agent or its designee. (c) At the Administrative Agent's request and at the Borrower's expense, the Borrower and the Servicer shall (i) assemble all of the documents, instruments and other records (including, without limitation, computer tapes and disks) that evidence or relate to the Mortgage Assets and Collections and Collateral, or that are otherwise necessary or desirable to collect the Mortgage Assets, and shall make the same available to the Administrative Agent at a place selected by the Administrative Agent or its designee, and (ii) segregate all cash, checks and other instruments received by it from time to time constituting Collections in a manner acceptable to the Administrative Agent and, promptly upon receipt, remit all such cash, checks and instruments, duly endorsed or with duly executed instruments of transfer, to the Administrative Agent or its designee. (d) The Borrower authorizes the Administrative Agent to take any and all steps in the Borrower's name and on behalf of the Borrower that are necessary or desirable, in the determination of the Administrative Agent, to collect amounts due under the Mortgage Assets, including, without limitation, endorsing the Borrower's name on checks and other instruments representing Collections and enforcing the Mortgage Assets and the other Collateral. 11.4. Rights and Remedies. (a) If the Servicer fails to perform any of its obligations under this Agreement, the Administrative Agent may (but shall not be required to) itself perform, or cause performance of, such obligation; and the Administrative Agent's costs and expenses incurred in connection therewith shall be payable by the Servicer. (b) With respect to each Mortgage Loan, the Servicer shall follow procedures (including collection procedures) that the Servicer customarily employs and exercises in servicing and administering mortgage loans for its own account and that are in accordance with accepted mortgage servicing practices of prudent lending institutions servicing mortgage loans of the same type as the Mortgage Loans in the jurisdictions in which the related Mortgaged 80

Properties are located. The exercise by the Administrative Agent on behalf of the Lenders of their rights under this Agreement shall not release the Servicer from any of their duties or obligations with respect to any Mortgage Loans. Neither the Administrative Agent, nor the Lenders shall have any obligation or liability with respect to any Mortgage Loans, nor shall any of them be obligated to perform the obligations of the Borrower thereunder. (c) In the event of any conflict between the provisions of this Article XI of this Agreement and Article VI of the Repurchase Agreement, the provisions of this Agreement shall control. 11.5. Indemnities by the Servicer. Without limiting any other rights that the Administrative Agent, any Lender or any of their respective Affiliates (each, a "Special Indemnified Party") may have hereunder or under applicable law, and in consideration of its appointment as Servicer, the Servicer hereby agrees to indemnify each Special Indemnified Party from and against any and all claims, losses and liabilities (including attorneys' fees) (all of the foregoing being collectively referred to as "Special Indemnified Amounts") arising out of or resulting from any of the following excluding, however, (x) Special Indemnified Amounts to the extent resulting from gross negligence or willful misconduct on the part of such Special Indemnified Party, (y) recourse for Mortgage Assets that are not collected, not paid or uncollectible on account of the insolvency, bankruptcy or financial inability to pay of the applicable Obligor or (z) any income taxes or any other tax or fee measured by income incurred by such Special Indemnified Party arising out of or as a result of this Agreement or the Borrowings hereunder): (a) any representation or warranty or statement made or deemed made by the Servicer under or in connection with this Agreement that shall have been incorrect in any respect when made; (b) the failure by the Servicer to comply in any material respect with any applicable law, rule or regulation with respect to any Mortgage Asset or the failure of any Mortgage Loan to conform to any such applicable law, rule or regulation; (c) the failure to have filed, or any delay in filing, financing statements, Mortgages or assignments of Mortgages under the applicable laws of any applicable jurisdiction with respect to any Mortgage Assets and the other Collateral and Collections in respect thereof, whether at the time of any purchase under the Repurchase Agreement or at any subsequent time; (d) any failure of the Servicer to perform its duties or obligations in accordance with the provisions of this Agreement; (e) the commingling of Collections at any time by the Servicer with other funds; (f) any action or omission by the Servicer reducing or impairing the rights of the Administrative Agent or the Lenders with respect to any Mortgage Asset or the value of any Mortgage Asset; 81

(g) any Servicer Fees or other costs and expenses payable to any replacement Servicer, to the extent in excess of the Servicer Fees payable to the Servicer hereunder; or (h) any claim brought by any Person other than a Special Indemnified Party arising from any activity by the Servicer or its Affiliates in servicing, administering or collecting any Mortgage Asset. ARTICLE XII MISCELLANEOUS 12.1. Notices. Any notice, demand or request required or permitted to be given under or in connection with this Agreement, the Notes or the other Transaction Documents (except as may otherwise be expressly required therein) shall be in writing and shall be mailed by first class or express mail, postage prepaid, or sent by telex, telegram, telecopy or other similar form of rapid transmission, confirmed by mailing (by first class or express mail, postage prepaid) written confirmation at substantially the same time as such rapid transmission, or personally delivered to an officer of the receiving party. With the exception of certain administrative and collateral reports that may be directed to specific departments of the Administrative Agent, all such communications shall be mailed, sent or delivered to the parties hereto at their respective addresses as follows: The Borrower: AHM SPV I, LLC c/o American Home Mortgage Holdings, Inc. 520 Broadhollow Road Melville, New York 11747 Facsimile: (800) 209-7276 Telephone: (516) 396-7703 Attention: General Counsel The Issuer: LA FAYETTE ASSET SECURITIZATION LLC c/o Credit Lyonnais Building 1301 Avenue of the Americas New York, New York 10019 Facsimile: (212) 459-3258 Attention: Conduit Securitization With a copy to the Administrative Agent (except in the case of notice from the Administrative Agent). 82

The Bank: CREDIT LYONNAIS NEW YORK BRANCH Credit Lyonnais Building 1301 Avenue of the Americas New York, New York 10019 Facsimile: (212) 459-3258 Attention: Conduit Securitization The Administrative Agent: CREDIT LYONNAIS NEW YORK BRANCH Credit Lyonnais Building 1301 Avenue of the Americas New York, New York 10019 Telephone No.: (212) 261-7819 Telex No.: 62410 (Answerback: CRED A 62410 UW) Facsimile: (212) 459-3258 Attention: Conduit Securitization The Servicer: AMERICAN HOME MORTGAGE CORP. c/o American Home Mortgage Holdings, Inc. 520 Broadhollow Road Melville, New York 11747 Facsimile: (800) 209-7276 Telephone: (516) 396-7703 Attention: General Counsel The Originators: AMERICAN HOME MORTGAGE CORP. c/o American Home Mortgage Holdings, Inc. 520 Broadhollow Road Melville, New York 11747 Facsimile: (800) 209-7276 Telephone: (516) 396-7703 Attention: General Counsel COLUMBIA NATIONAL, INCORPORATED c/o American Home Mortgage Holdings, Inc. 520 Broadhollow Road Melville, New York 11747 Facsimile: (800) 209-7276 Telephone: (516) 396-7703 Attention: General Counsel The Performance Guarantor: AMERICAN HOME MORTGAGE HOLDINGS, INC. 520 Broadhollow Road Melville, New York 11747 Facsimile: (800) 209-7276 Telephone: (516) 396-7703 Attention: General Counsel 83

or at such other addresses or to such officer's, individual's or department's attention as any party may have furnished the other parties in writing. Any communication so addressed and mailed shall be deemed to be given when so mailed, except with respect to notices and requests given pursuant to Sections 2.3 and 3.3. Borrowing Reports and communications related thereto shall not be effective until actually received by the Collateral Agent, the Administrative Agent, the Issuer or the Borrower, as the case may be; and any notice so sent by rapid transmission shall be deemed to be given when receipt of such transmission is acknowledged, and any communication so delivered in person shall be deemed to be given when receipted for by, or actually received by, an authorized officer of the Borrower, the Collateral Agent, or the Administrative Agent. 12.2. Amendments, Etc. No amendment or waiver of any provision of this Agreement or consent to any departure by the Borrower therefrom shall be effective unless in a writing signed by the Majority Banks, the Administrative Agent (as agent for the Issuer) and the Administrative Agent (and, in the case of any amendment, also signed by the Borrower), and then such amendment, waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. Notwithstanding the foregoing, unless an amendment, waiver or consent shall be made in writing and signed by each of the Banks and the Administrative Agent, and each of the Rating Agencies shall confirm that any amendment will not result in a downgrade or withdrawal of the ratings assigned to any Commercial Paper Notes, no amendment, waiver or consent shall do any of the following: (a) amend the definitions of Eligible Mortgage Loan, Collateral Value, Advance Rate or Majority Banks or (b) amend, modify or waive any provision of this Agreement in any way that would: (i) reduce the amount of principal or interest that is payable on account of any Advance or delay any scheduled date for payment thereof, or (ii) impair any rights expressly granted to an assignee or participant under this Agreement, or (iii) reduce the fees payable by the Borrower, to the Administrative Agent or the Lenders, or (iv) delay the dates on which such fees are payable, or (c) amend or waive the Event of Default set forth in Sections 8.1(f), (g) or (h) relating to the bankruptcy of Performance Guarantor, the Originators or the Borrower, or 84

(d) amend or waive the Event of Default set forth in Section 8.1(i), (j), (v) or (w), or (e) amend clause (a) of the definition of Termination Date, or (f) amend this Section 12.2; and provided, further, that no amendment, waiver or consent shall, unless in writing and signed by the Servicer in addition to the other parties required above to take such action, affect the rights or duties of the Servicer under this Agreement. No failure on the part of the Lenders or the Administrative Agent to exercise, and no delay in exercising, any right thereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. 12.3. Invalidity. In the event that any one or more of the provisions contained in the Notes, this Agreement or any other Transaction Document shall, for any reason, be held invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of such document. 12.4. Restrictions on Informal Amendments. No course of dealing or waiver on the part of the Administrative Agent, the Collateral Agent, any Lender or any Affected Party, or any of their officers, employees, consultants or agents, or any failure or delay by any such Person with respect to exercising any right, power or privilege under the Notes, this Agreement or any other Transaction Document shall operate as an amendment to the express written terms of the Notes, this Agreement or any other Transaction Document or shall act as a waiver of any right, power or privilege of any such Person. 12.5. Cumulative Rights. The rights, powers, privileges and remedies of each of the Lenders, the Collateral Agent and the Administrative Agent under the Notes, this Agreement, and any other Transaction Document shall be cumulative, and the exercise or partial exercise of any such right, power, privilege or remedy shall not preclude the exercise of any other right or remedy. 12.6. Construction; Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF, OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW WHICH SHALL APPLY HERETO). 85

12.7. Interest. Any provisions herein, in the Notes, or in any other Transaction Document, or any other document executed or delivered in connection herewith, or in any other agreement or commitment, whether written or oral, expressed or implied, to the contrary notwithstanding, the Lenders shall in no event be entitled to receive or collect, nor shall or may amounts received hereunder be credited, so that the Lenders shall be paid, as interest, a sum greater than the maximum amount permitted by applicable law to be charged to the Person primarily obligated to pay such Note at the time in question. If any construction of this Agreement, any Note or any other Transaction Document, or any and all other papers, agreements or commitments indicate a different right given to a Lender to ask for, demand or receive any larger sum as interest, such is a mistake in calculation or wording that this clause shall override and control, it being the intention of the parties that this Agreement, each Note, and all other Transaction Documents or other documents executed or delivered in connection herewith shall in all things comply with applicable law and proper adjustments shall automatically be made accordingly. In the event that any of the Lenders shall ever receive, collect or apply as interest, any sum in excess of the maximum nonusurious rate permitted by applicable law (the "Maximum Rate"), if any, such excess amount shall be applied to the reduction of the unpaid principal balance of the Note held by such Lender, and if such Note is paid in full, any remaining excess shall be paid to the Borrower. In determining whether or not the interest paid or payable, under any specific contingency, exceeds the Maximum Rate, if any, the Borrower and each of the Lenders shall, to the maximum extent permitted under applicable law: (a) characterize any nonprincipal payment as an expense or fee rather than as interest, (b) exclude voluntary prepayments and the effects thereof, and (c) "spread" the total amount of interest throughout the entire term of the respective Note; provided that if any Note is paid and performed in full prior to the end of the full contemplated term hereof, and if the interest received for the actual period of existence thereof exceeds the Maximum Rate, if any, the respective Lender shall refund to the Borrower the amount of such excess, or credit the amount of such excess against the aggregate unpaid principal balance of all Advances made by such Lender hereunder at the time in question. 12.8. Right of Offset. The Borrower hereby grants to each of the Lenders and the Administrative Agent and to any assignee or participant a right of offset, to secure the repayment of the Obligations, upon any and all monies, securities or other Property of the Borrower, and the proceeds therefrom now or hereafter held or received by or in transit to such Person, from or for the account of the Borrower, whether for safekeeping, custody, pledge, transmission, collection or otherwise, and also upon any and all deposits (general or special, time or demand, provisional or final) and credits of the Borrower, and any and all claims of the Borrower against such Person at any time existing. Upon the occurrence of any Event of Default, such Person is hereby authorized at any time and from time to time, without notice to the Borrower, to offset, appropriate, and apply any and all items hereinabove referred to against the Obligations. Notwithstanding anything in this Section 12.8 or elsewhere in this Agreement to the contrary, the Administrative Agent and the Lenders and any assignee or participant shall not have any right to offset, appropriate or apply any accounts of the Borrower that consist of escrowed funds (except and to the extent of any beneficial interest of the Borrower in such escrowed funds) that have been so identified by the Borrower in writing at the time of deposit thereof. 86

12.9. Successors and Assigns. (a) This Agreement and the Lenders' rights and obligations herein (including ownership of each Advance) shall be assignable by the Lenders and their successors and assigns to any Eligible Assignee. Each assignor of an Advance or any interest therein shall notify the Administrative Agent and the Borrower of any such assignment. (b) Each Bank may assign to any Eligible Assignee or to any other Bank all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Bank Commitment and any Advances or interests therein owned by it), provided however, that: (i) each such assignment shall be of a constant, and not a varying, percentage of all rights and obligations under this Agreement, (ii) the amount being assigned pursuant to each such assignment (determined as of the date of the Assignment and Acceptance Agreement with respect to such assignment) shall in no event be less than the lesser of (x) $20,000,000 and (y) all of the assigning Bank's Bank Commitment, (iii) the parties to each such assignment shall execute and deliver to the Administrative Agent, for its acceptance and recording in the Register, an Assignment and Acceptance Agreement, together with a processing and recordation fee of $2,500, and (iv) concurrently with such assignment, such assignor Bank shall assign to such assignee Bank an equal percentage of its rights and obligations under the related Liquidity Agreement. Upon such execution, delivery, acceptance and recording, from and after the effective date specified in such Assignment and Acceptance Agreement, (x) the assignee thereunder shall be a party to this Agreement and, to the extent that rights and obligations hereunder or under this Agreement have been assigned to it pursuant to such Assignment and Acceptance Agreement, have the rights and obligations of a Bank hereunder and thereunder and (y) the assigning Bank shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment and Acceptance Agreement, relinquish such rights and be released from such obligations under this Agreement (and, in the case of an Assignment and Acceptance Agreement covering all or the remaining portion of an assigning Bank's rights and obligations under this Agreement, such Bank shall cease to be a party thereto). (c) The Administrative Agent shall maintain at its address referred to in Section 12.1 a copy of each Assignment and Acceptance Agreement delivered to and accepted by it and a register for the recordation of the names and addresses of the Banks and the Bank Commitment of, and aggregate outstanding principal of Advances or interests therein owned by, each Bank from time to time (the "Register"). The entries in the Register shall 87

be conclusive and binding for all purposes, absent manifest error, and the Borrower, the Servicer, the Administrative Agent and the Banks may treat each person whose name is recorded in the Register as a Bank under this Agreement for all purposes of this Agreement. The Register shall be available for inspection by the Borrower, the Servicer, the Administrative Agent or any Bank at any time and from time to time upon prior notice. (d) Each Bank may sell participations, to one or more banks or other entities that are Eligible Assignees, in or to all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Bank Commitment and the Advances or interests therein owned by it); provided, however, that: (i) such Bank's obligations under this Agreement (including, without limitation, its Bank Commitment to the Borrower thereunder) shall remain unchanged, (ii) such Bank shall remain solely responsible to the other parties to this Agreement for the performance of such obligations, and (iii) concurrently with such participation, the selling Bank shall sell to such bank or other entity a participation in an equal percentage of its rights and obligations under the related Liquidity Agreement. The Administrative Agent, the other Banks, the Servicer and the Borrower shall have the right to continue to deal solely and directly with such Bank in connection with such Bank's rights and obligations under this Agreement. (e) The Borrower may not assign its rights or obligations hereunder or any interest herein without the prior written consent of the Administrative Agent and each Lender and any attempted assignment shall be null and void. (f) The parties hereto acknowledge that La Fayette has granted to the La Fayette Program Agent for the benefit of holders of its Commercial Paper Notes, its liquidity banks, and certain other creditors of La Fayette, a security interest in its right, title and interest in and to the Advances, the Transaction Documents and the Collateral. Each reference herein or in any of the other Transaction Documents to the Liens in the Collateral granted to La Fayette under the Transaction Documents shall be deemed to include a reference to such security interest of the La Fayette Program Agent. 12.10. Survival of Termination. The provisions of Article X and Sections 2.12, 11.4, 12.14, 12.15, 12.19, 12.20 and 12.21 shall survive any termination of this Agreement. 12.11. Exhibits. The exhibits attached to this Agreement are incorporated herein and shall be considered a part of this Agreement for the purposes stated herein, except that in the event of any conflict between any of the provisions of such exhibits and the provisions of this Agreement, the provisions of this Agreement shall prevail. 88

12.12. Titles of Articles, Sections and Subsections. All titles or headings to articles, sections, subsections or other divisions of this Agreement or the exhibits hereto are only for the convenience of the parties and shall not be construed to have any effect or meaning with respect to the other content of such articles, sections, subsections or other divisions, such other content being controlling as to the agreement between the parties hereto. 12.13. Counterparts. This Agreement may be executed in two or more counterparts, and it shall not be necessary that the signatures of each of the parties hereto be contained on any one counterpart hereof; each counterpart shall be deemed an original, but all counterparts together shall constitute one and the same instrument. 12.14. No Proceedings. The Borrower, the Servicer, the Administrative Agent and each Bank hereby agrees that it will not institute against the Issuer, or join any other Person in instituting against the Issuer, any bankruptcy, reorganization, arrangement, insolvency, or liquidation proceeding, or other proceeding under any federal or state bankruptcy or similar law so long as any Commercial Paper Notes issued by the Issuer shall be outstanding or there shall not have elapsed one year plus one day since the last day on which any such Commercial Paper Notes shall have been outstanding. The foregoing shall not limit the rights of the Borrower, the Servicer, the Administrative Agent or any Bank to file any claim in or otherwise take any action with respect to any insolvency proceeding that was instituted by any other Person. 12.15. Confidentiality. Except as required by any Governmental Authority or subject to any Governmental Requirement, with respect to either of them or any of their Affiliates, the Borrower and the Servicer each hereby agrees that it will maintain and cause its respective employees to maintain the confidentiality of this Agreement, and the other Transaction Documents (and all drafts thereof), and each Lender and the Administrative Agent agrees that it will maintain and cause its respective employees to maintain the confidentiality of the Collateral and all other non-public information with respect to the Borrower and the Servicer, and their respective businesses obtained by such party in connection with the structuring, negotiating and execution of the transactions contemplated herein, in each case except (a) as may be required or appropriate in communications with its respective independent certified public accountants, legal advisors, or with independent financial rating agencies, (b) as may be required or appropriate in any report, statement or testimony submitted to any municipal, state or Federal regulatory body having or claiming to have jurisdiction over it, (c) as may be required or appropriate in response to any summons or subpoena or in connection with any litigation, (d) as may be required by or in order to comply with any law, order, regulation or ruling, (e) as may be required or appropriate in connection with disclosures to any and all persons, without limitation of any kind, of information relating in the tax treatment and tax structure of the transaction and all materials of any kind (including opinions and other tax analyses) that are provided to the Borrower or any of the 89

Originators relating to such tax treatment and tax structure, (f) in the case of any Bank, any Issuer or the Administrative Agent, to any Liquidity Bank or provider of credit support to an Issuer, any dealer or placement agent for the Issuer's commercial paper, and any actual or potential assignee of, or participant in, any of the rights or obligations of such Lender, or (g) in the case of any Issuer or the Administrative Agent, to any Person whom any dealer or placement agent for the Issuer shall have identified as an actual or potential investor in Commercial Paper Notes; provided that any proposed recipient under clause (e) or (f) shall, as a condition to the receipt of any such information, agree to maintain the confidentiality thereof. 12.16. Recourse Against Directors, Officers, Etc. The Obligations are solely the entity obligations of the Borrower. No recourse for the Obligations shall be had hereunder against any director, officer, employee (in its capacity as such, and not as Servicer), trustee, agent or any Person owning, directly or indirectly, any legal or beneficial interest in the Borrower (in its capacity as such owner, and not as Servicer or otherwise as a party to any Transaction Document). This Section 12.16 shall not, however, (a) constitute a waiver, release or impairment of the Obligations, or (b) affect the validity or enforceability of any other Transaction Document to which the Originators, the Servicer, the Performance Guarantor or any of their Affiliates are a party. 12.17. Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY EXPRESSLY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT, THE NOTES, ANY OTHER TRANSACTION DOCUMENT OR UNDER ANY AMENDMENT, INSTRUMENT OR DOCUMENT DELIVERED OR THAT MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR ARISING FROM ANY BANKING OR OTHER RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT, THE NOTES OR ANY OTHER TRANSACTION DOCUMENT AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. 12.18. Consent to Jurisdiction; Waiver of Immunities. EACH PARTY HERETO HEREBY ACKNOWLEDGES AND AGREES THAT: (a) IT IRREVOCABLY (i) SUBMITS TO THE JURISDICTION, FIRST, OF ANY UNITED STATES FEDERAL COURT, AND, SECOND, IF FEDERAL JURISDICTION IS NOT AVAILABLE, OF ANY NEW YORK STATE COURT, IN EITHER CASE SITTING IN NEW YORK CITY, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, (ii) AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED ONLY IN SUCH NEW YORK STATE OR FEDERAL COURT AND NOT IN ANY OTHER COURT, AND (iii) WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO, THE DEFENSE OF AN INCONVENIENT FORUM TO MAINTENANCE OF SUCH ACTION OR PROCEEDING. 90

(b) TO THE EXTENT THAT IT HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM THE JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID TO EXECUTION, EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, IT HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER OR IN CONNECTION WITH THIS AGREEMENT. 12.19. Costs, Expenses and Taxes. In addition to its obligations under Articles II and X, the Borrower agrees to pay on demand: (a) (i) all reasonable costs and expenses incurred by the Administrative Agent and the Lenders, in connection with the negotiation, preparation, execution and delivery or the administration (including periodic auditing) of this Agreement, the Notes, the other Transaction Documents, and, to the extent related to this Agreement, the Program Documents (including any amendments or modifications of or supplements to the Program Documents entered into in connection herewith), and any amendments, consents or waivers executed in connection therewith, including, without limitation, (A) the fees and expenses of counsel to any of such Persons incurred in connection with any of the foregoing or in advising such Persons as to their respective rights and remedies under any of the Transaction Documents or (to the extent related to this Agreement) the Program Documents, and (B) all out-of-pocket expenses (including fees and expenses of independent accountants) incurred in connection with any review of the books and records of the Borrower or the Servicer either prior to the execution and delivery hereof or pursuant to Section 6.8, and (ii) all costs and expenses actually incurred by the Administrative Agent and the Lenders, in connection with the enforcement of, or any breach of, this Agreement, the Notes, the other Transaction Documents and, to the extent related to this Agreement, the Program Documents (including any amendments or modifications of or supplements to the Program Documents entered into in connection herewith), including, without limitation, the fees and expenses of counsel to any of such Persons incurred in connection therewith, including without limitation, with respect to the Issuer, the cost of rating the Commercial Paper Notes by the Rating Agencies and the reasonable fees and out-of-pocket expenses of counsel to the Issuer; and (b) all stamp and other taxes and fees payable or determined to be payable in connection with the execution, delivery, filing and recording of this Agreement, the Notes, the other Transaction Documents or (to the extent related to this Agreement) the Program Documents, and agrees to indemnify each Indemnified Party against any liabilities with respect to or resulting from any delay in paying or omission to pay such taxes and fees. 12.20. Entire Agreement. THE NOTES, THIS AGREEMENT, AND THE OTHER TRANSACTION DOCUMENTS EXECUTED AND DELIVERED AS OF EVEN DATE HEREWITH REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES HERETO AND THERETO ANY MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, 91

CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES. TO THE EXTENT THAT ANY PROVISIONS OF THE TRANSACTION DOCUMENTS ARE INCONSISTENT WITH THE TERMS OF THIS AGREEMENT, THIS AGREEMENT SHALL CONTROL. 12.21. Excess Funds. The Issuer shall not be obligated to pay any amount pursuant to this Agreement unless the Issuer has excess cash flow from operations or has received funds with respect to such obligation which may be used to make such payment and which funds or excess cash flow are not required to repay when due its Commercial Paper Note or other short term funding backing its Commercial Paper Notes. Any amount which the Issuer does not pay pursuant to the operation of the preceding sentence shall not constitute a claim, as defined in Section 101(5) of the United States Bankruptcy Code, against the Issuer for any such insufficiency unless and until the Issuer does have excess cash flow or excess funds. 12.22. Amendment Relating to Current Merger Transactions. The parties acknowledge that American Home Mortgage Holdings, Inc. and its subsidiaries and affiliates are involved in two transactions as described on Schedule IV attached hereto. Subject to the Lenders' being able to analyze the effect of those two transactions on this Agreement and the other Transaction Documents and to conclude, in the sole and absolute discretion of the Lenders, that there will be Material Adverse Effect, on or prior to the effective date of both of the transactions (or, if such effective dates are different dates, on or prior to the effective date of the last transaction to close of those transactions) described on Schedule IV attached hereto, the parties agree to use good faith efforts to enter into a mutually acceptable amendment to this Agreement and any other applicable Transaction Documents to amend, modify, supplement or restate the representations, warranties, and covenants of the Originators, the Servicer, the Borrower and the Performance Guarantor, as applicable, under this Agreement and any other applicable Transaction Document. [Signatures appear on the following page.] 92

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written. BORROWER AHM SPV I, LLC By: /s/ Stephen A. Hozie -------------------------- Name: Stephen A. Hozie Title: Chief Financial Officer

ISSUER LA FAYETTE ASSET SECURITIZATION LLC By: Credit Lyonnais New York Branch, as Attorney-in-Fact By: /s/ Conrad Meyer -------------------------- Title: Director

ADMINISTRATIVE AGENT CREDIT LYONNAIS NEW YORK BRANCH By: /s/ Conrad Meyer -------------------------- Title: Director BANK CREDIT LYONNAIS NEW YORK BRANCH By: /s/ Conrad Meyer -------------------------- Title: Director

SERVICER AMERICAN HOME MORTGAGE CORP. By: /s/ Stephen A. Hozie ------------------------- Name: Stephen A. Hozie Title: Chief Financial Officer

                                                                 Exhibit 10.17.2


                           COLLATERAL AGENCY AGREEMENT



                                  By and Among:



                                 AHM SPV I, LLC,
                                  As Borrower,

                                       and

                          AMERICAN HOME MORTGAGE CORP.,
                                 As the Servicer

                                       and

                        CREDIT LYONNAIS NEW YORK BRANCH,
                            As Administrative Agent,

                                       and

                      DEUTSCHE BANK NATIONAL TRUST COMPANY,
                               As Collateral Agent



                           Dated as of August 8, 2003

TABLE OF CONTENTS Page ---- ARTICLE I GENERAL TERMS........................................................1 1.1. Certain Definitions................................................1 ARTICLE II APPOINTMENT OF COLLATERAL AGENT.....................................1 2.1. Appointment........................................................1 2.2. Collateral Agency Fees.............................................2 ARTICLE III COLLATERAL PROCEDURES..............................................2 3.1. Collateral.........................................................2 3.2. Delivery of Collateral to the Collateral Agent.....................3 3.3. Power of Attorney..................................................5 3.4. Redemption of Mortgage Collateral..................................6 3.5. Releases of Mortgage Notes for Servicing...........................9 3.6. [RESERVED]........................................................10 3.7. Wet Borrowings....................................................10 3.8. Collateral Reporting..............................................10 3.9. Further Obligations of the Collateral Agent.......................11 3.10. Segregation of Collateral.........................................11 3.11. Delivery of Required Documents to the Administrative Agent........12 3.12. Take-Out Commitment Reporting.....................................12 ARTICLE IV THE COLLATERAL AGENT...............................................13 4.1. Instructions to the Collateral Agent...............................13 4.2. Reliance by the Collateral Agent; Responsibility of the Collateral Agent...............................................13 4.3. Agents and Affiliates.............................................16 4.4. Successor Collateral Agent........................................16 4.5. Right of Inspection...............................................17 4.6. Accounting in Certain Circumstances...............................17 ARTICLE V INDEMNIFICATION.....................................................18 5.1. Indemnities by the Servicer.......................................18 ARTICLE VI MISCELLANEOUS......................................................18 6.1. Notices...........................................................18 6.2. Amendments, Etc...................................................19 6.3. Invalidity........................................................19 6.4. Survival of Agreements............................................19 6.5. Cumulative Rights.................................................19 (i)

6.6. Construction; Governing Law.......................................19 6.7. Successors and Assigns............................................20 6.8. The Collateral Agent Representations and Warranties...............20 6.9. Rights of La Fayette Program Agent................................20 6.10. Counterparts......................................................20 6.11. No Proceedings....................................................20 6.12. Electronic Counterparts...........................................21 6.13. Waiver of Jury Trial..............................................21 6.14. Consent to Jurisdiction; Waiver of Immunities.....................21 6.15. References to Loan Agreement......................................22 SCHEDULES AND EXHIBITS Schedule I Collateral Review Functions - ss.3.2(e) Schedule II Addresses and Notices - ss.6.1 Schedule III Approved Investors Exhibit D-1 Definitions - ss.1 Exhibit D-2 Security Agreement - ss.3.1(a) Exhibit D-3 Form of Collection Account Control Agreement - ss.3.1(b) Exhibit D-4 Form of Assignment - ss.3.1(c) and ss.3.2(a) Exhibit D-5 Form of Transfer Request Exhibit D-5A Form of Shipping Request Exhibit D-6(a) Form of Bailee and Security Agreement Letter for Approved Investors - ss.3.4(b)(i) Exhibit D-6(b) Form of Bailee and Security Agreement Letter for Pool Custodian ss.3.4(b)(i) Exhibit D-7 Form of Trustee Receipt and Security Agreement for Approved Investors - ss.3.5 Exhibit D-8 Form of Collateral Agent Daily Report - ss.3.8(a) Exhibit D-9 Borrowing Report Exhibit D-10 UCC Financing Statements - ss.3.1(d) Exhibit D-11 Collection Account Release Notice - ss. 3.4(a) Exhibit D-12 Assignment of Trade Exhibit D-13 Disbursement Account Control Agreement ii

COLLATERAL AGENCY AGREEMENT Dated as of August 8, 2003 THIS COLLATERAL AGENCY AGREEMENT (the "Agreement"), among AHM SPV I, LLC, a Delaware limited liability company (the "Borrower"), AMERICAN HOME MORTGAGE CORP., a New York corporation, CREDIT LYONNAIS NEW YORK BRANCH ("CL New York"), in its capacity as the administrative agent for the "Lenders" under and as defined in the Loan Agreement referred to below (the "Administrative Agent"), and DEUTSCHE BANK NATIONAL TRUST COMPANY, in its capacity as collateral agent hereunder (the "Collateral Agent"). WHEREAS, the Borrower has entered into a Loan Agreement dated as of August 8, 2003 (as the same may be amended, restated, supplemented or modified from time to time, the "Loan Agreement"), among the Borrower, the Issuer, CL New York, as the Administrative Agent, the Banks, and American Home Mortgage Corp. (the "Servicer"), in its capacity as servicer thereunder, pursuant to which the Lenders may make secured Advances to the Borrower on a revolving basis; WHEREAS, the parties now desire to enter into this Agreement to provide for the holding and monitoring of Collateral to be furnished pursuant to the Loan Agreement; NOW, THEREFORE, the parties agree as follows: ARTICLE I GENERAL TERMS 1.1. Certain Definitions. Unless otherwise defined herein or in the Loan Agreement, terms are used herein as defined in Exhibit D-1 hereto. ARTICLE II APPOINTMENT OF COLLATERAL AGENT 2.1. Appointment. (a) The Administrative Agent, on behalf of the holders of the Obligations, hereby appoints Deutsche Bank National Trust Company, as "Collateral Agent" under this Agreement and authorizes the Collateral Agent to take such action on the Administrative Agent's behalf and to exercise such powers and perform such duties as are hereby expressly delegated to the Collateral Agent by the terms of this Agreement, together with such powers as are reasonably incidental thereto.

(b) The Collateral Agent hereby accepts such appointment and agrees to hold, maintain, and administer for the exclusive benefit of the holders of the Obligations all Collateral at any time delivered to it by or on behalf of the Borrower as herein provided. The Collateral Agent acknowledges and agrees that it is acting and will act with respect to the Collateral for the exclusive benefit of the holders of the Obligations and shall not be subject with respect to the Collateral in any manner or to any extent to the direction or control of the Borrower except as expressly permitted hereunder. The Collateral Agent (or its designee) for the benefit of the Administrative Agent and the holders of the Obligations, agrees to act in accordance with this Agreement and in accordance with any written instructions of the Administrative Agent as provided in this Agreement. Under no circumstances shall the Collateral Agent deliver possession of Collateral to the Borrower except in accordance with the express terms of this Agreement or otherwise upon the written instruction of the Administrative Agent as provided in this Agreement. Upon a written request by the Servicer (who shall not request substitution of Eligible Mortgage Loans if, as reflected in the most recent Borrowing Report, total Collateral Value of Eligible Mortgage Collateral, immediately after giving effect to a requested transfer and any accompanying substitution of Mortgage Loan Collateral, is less than total Principal Debt) and approval by the Borrower, Collateral Agent is authorized to permit substitution of Eligible Mortgage Loans (as certified by the Servicer to be Eligible Mortgage Loans) unless the Collateral Agent shall have received written notice from the Administrative Agent that a Default or Event of Default has occurred. 2.2. Collateral Agency Fees. The Servicer agrees to pay such fees and expenses of the Collateral Agent as shall be agreed to in writing between the Collateral Agent and Servicer. The obligation of the Servicer to pay the Collateral Agent's fees and expenses for its services under this Agreement shall survive the termination of this Agreement and the earlier resignation or removal of the Collateral Agent. ARTICLE III COLLATERAL PROCEDURES 3.1. Collateral. The Borrower shall execute and deliver to the Administrative Agent: (a) a Security Agreement in favor of the Administrative Agent for the benefit of the holders of the Obligations in substantially the form of Exhibit D-2 hereto; (b) a Collection Account Control Agreement in favor of the Administrative Agent for the benefit of the holders of the Obligations substantially in the form of Exhibit D-3 hereto; (c) the Assignments provided for in Section 3.2 hereof in the form of Exhibit D-4 hereto; and (d) UCC financing statements in the form of Exhibit D-10 hereto.

3.2. Delivery of Collateral to the Collateral Agent. (a) Periodically, the Borrower may deliver Mortgage Loan Collateral to the Collateral Agent to hold as bailee for the Administrative Agent. The Borrower may deliver from time to time such other documents as shall be specified in a notice by the Administrative Agent to the Collateral Agent as documents that are required to be delivered to the Collateral Agent pursuant to this Agreement in order to meet requirements of the Loan Agreements or agreements required by the Loan Agreement. Each delivery shall be made in association with an assignment of a security interest (the "Assignment") to the Administrative Agent, for the benefit of the holders of the Obligations, in all Mortgage Loans, Take-Out Commitments and related Collateral delivered with or described in such Assignment or any schedules thereto. The Borrower shall use substantially the form illustrated in Exhibit D-4 hereto for each Assignment, or such other form as may be acceptable to, or required by, the Administrative Agent, from time to time. (b) Each Assignment delivered to the Collateral Agent shall be accompanied by a completed Schedule II and Schedule III, using the forms of such schedules as prescribed in Exhibit D-4 hereto, together with a current Borrowing Report, and with respect to each Mortgage Loan described in Schedule II to each Assignment the following items (collectively, the "Principal Mortgage Documents"): (i) the original of each Mortgage Note, endorsed by the Servicer in blank (without recourse) and all intervening endorsements thereto; (ii) an original executed assignment in blank for each Mortgage securing such Mortgage Loan, in recordable form, executed by the Originator, in the case of each Mortgage Loan that is not a MERS Designated Mortgage Loan; and (iii) a certified copy of the executed Mortgage related to such Mortgage Note, certified by the Servicer, escrow agent, title company, closing attorney or an Affiliate of the Servicer as a true and correct copy. (c) The Servicer shall hold in trust for the Administrative Agent for the benefit of the holders of the Obligations, with respect to each Mortgage Loan included in the Collateral (the following being referred to, collectively, as the "Other Mortgage Documents"): (i) the original filed Mortgage relating to such Mortgage Loan; provided, however, that until an original Mortgage is received from the public official charged with its filing and recordation, a copy, certified by the closing agent to be a true and correct copy of the filed and recorded original, may be used by the Borrower to satisfy this requirement; (ii) other than with respect to a HUD Repossessed Property that is sold to a consumer, a mortgagee's policy of title insurance (or binding unexpired commitment to issue such insurance if the policy has not yet been delivered to the Servicer) insuring that the original mortgagee and its successors and assigns have a perfected, first-priority Lien created by the Mortgage securing such Mortgage Loan (subject to title exceptions that conform to the related Take-Out

Commitment) in a policy amount not less than the principal amount of such Mortgage Loan; (iii) the original hazard insurance policy, appropriately indicating that all insurance proceeds will be paid to the original mortgagee and its successors and assigns, referred to in Section 6.6(b) of the Loan Agreement which relate to such Mortgage Loan, or other evidence of insurance acceptable to the Administrative Agent; (iv) the form of current appraisal of the Property described in the Mortgage, prepared by a state licensed appraiser, that complies with all applicable Governmental Requirements, provided, however, that no appraisal shall be required for Mortgage Loans (x) financing HUD repossessed Property that is sold to a consumer, financed with an FHA loan, fully insurable and in accordance with FHA guidelines, but for which an appraisal is not required, or (y) representing so called VA Rate Reduction or FHA streamline refinances, insurable in accordance with VA and FHA guidelines, but for which an appraisal is not required; and (v) all other original documents. Upon three Business Days' prior written notice by the Administrative Agent to the Collateral Agent, the Collateral Agent will receive from the Servicer all such items, held in trust. The Collateral Agent shall hold such items as bailee for the Administrative Agent or such other party as may be designated in such notice. (d) The Servicer shall provide the Collateral Agent and the Administrative Agent with full access to all Other Mortgage Documents held in trust for the Administrative Agent at all times. (e) With respect to each Assignment, together with the related electronic transmission, that is received by the Collateral Agent by 11:30 a.m. (eastern time) on a Business Day, the Collateral Agent shall include the Mortgage Loans identified thereon on the Collateral Agent Daily Report to be delivered on such Business Day, even if the Collateral Agent has not completed its review of the related Principal Mortgage Documents. The Collateral Agent shall prepare by 1:00 p.m. (eastern time) on such Business Day, the Collateral Agent Daily Report provided for in Section 3.8 hereof, and furnish it to the Administrative Agent and the Borrower. The Collateral Agent shall review the Principal Mortgage Documents for up to 500 Mortgage Loans delivered with any such Assignment no later than the opening of business of the Collateral Agent on the Business Day following delivery of such Collateral Agent Daily Report. The Collateral Agent shall have one (1) additional Business Day to review each additional set of 500 Mortgage Loans in excess of the initial set of 500 Mortgage Loans; provided, that, if the Collateral Agent does not complete its review of any such Principal Mortgage Documents within one (1) Business Day after receiving such Principal Mortgage Documents and including the related Mortgage Loan on a Collateral Agent Daily Report, the Collateral Agent shall report the Collateral Value for any and all such Mortgage Loans as zero on the Collateral Agent Daily Report for the next Business Day. The Collateral Agent's responsibility to review such Collateral is limited to the review steps described on Schedule I hereto.

(f) The Collateral Agent shall, acting on behalf of the Administrative Agent for the benefit of the holders of the Obligations, and as agent and bailee of, and as custodian for, the Administrative Agent for the benefit of the holders of the Obligations, retain possession and custody of the documents delivered to the Collateral Agent pursuant hereto, which documents shall, subject to Section 4.2(k) and 4.4, remain in the state of California for all purposes (including but not limited to the perfection of the security interest of the Administrative Agent, for the benefit of the holders of the Obligations, in such Collateral) until the Collateral is to be released pursuant to Section 3.4 hereof. (g) Notwithstanding the foregoing provisions of Section 3.2, the Servicer on behalf of Borrower may ship Other Mortgage Documents to Approved Investors under bailment for review by the Approved Investor prior to purchase of a Mortgage Note under a Take-Out Commitment. (h) The Servicer shall deliver to the Collateral Agent within the first five (5) Business Day of each calendar month a report (the "Monthly Payment Status Report"), on a form mutually acceptable to the Servicer and the Collateral Agent, describing the delinquency status of each Mortgage Loan as of the last day of the preceding calendar month. 3.3. Power of Attorney. (a) Subject to subsection (b) below, the Borrower hereby irrevocably appoints the Administrative Agent, for the benefit of the holders of the Obligations, its attorney in fact, with full power of substitution, for and on behalf and in the name of the Borrower, to: (i) endorse and deliver to any Person any check, instrument or other paper coming into the Collateral Agent's, the Administrative Agent's or any Lender's possession and representing payment made in respect of any Mortgage Note or Take-Out Commitment Document delivered hereunder or in respect of any other Collateral; (ii) prepare, complete, execute, deliver and record any Assignment to be delivered to the Collateral Agent, the Administrative Agent or to any other Person of any Mortgage relating to any Mortgage Note delivered hereunder as Mortgage Loan Collateral; (iii) endorse and deliver any Mortgage Note as Mortgage Loan Collateral arising as proceeds thereof, and do every other thing necessary or desirable to effect transfer of all or any part of the Mortgage Loan Collateral to the Administrative Agent, for the benefit of the holders of the Obligations, or to any other Person; (iv) take all necessary and appropriate action with respect to all Obligations and the Mortgage Loan Collateral to be delivered to the Collateral Agent or the Administrative Agent or held by the Borrower in trust for the Administrative Agent for the benefit of the holders of the Obligations; (v) commence, prosecute, settle, discontinue, defend, or otherwise dispose of any claim relating to any Take-Out Commitment or any other part of the Mortgage Loan Collateral; and (vi) sign the Borrower's name wherever appropriate to effect the performance of this Agreement. (b) This Section 3.3 shall be liberally, not restrictively, construed so as to give the greatest latitude to the Administrative Agent's powers, as the Borrower's attorney-in-fact, to collect, sell, and deliver any of the Mortgage Loan Collateral and all other documents relating thereto. The powers and authorities herein conferred on the Administrative Agent may be exercised by the Administrative Agent through any Person who, at the time of the execution of a particular instrument, is an authorized officer or agent of the Administrative Agent. The power

of attorney conferred by this Section 3.3 shall become effective upon the occurrence, and remain effective during the continuance, of a Default or an Event of Default and is granted for a valuable consideration and is coupled with an interest and irrevocable so long as the Obligations, or any part thereof, shall remain unpaid or any Bank Commitment is outstanding. All Persons dealing with the Administrative Agent, any officer thereof, or any substitute attorney, acting pursuant hereto shall be fully protected in treating the powers and authorities conferred by this Section 3.3 as existing and continuing in full force and effect until advised by the Administrative Agent that the Obligations have been fully and finally paid and satisfied and all Bank Commitments have been terminated. 3.4. Redemption of Mortgage Collateral. (a) Generally. So long as no Default or Event of Default is continuing, the Servicer (on behalf of the Borrower) may obtain releases of the Administrative Agent's security interest in all or any part of the Collateral (including releases from the Collection Account) at any time, and from time to time, (i) to the extent that total Collateral Value of all Eligible Mortgage Collateral (immediately after giving effect to the requested release) equals or exceeds the Principal Debt, as shown on the most recent Borrowing Report, or (ii) that either (A) the Borrower has made a principal payment on account of the Principal Debt in an amount, or (B) the Borrower has delivered to the Collateral Agent (and the Collateral Agent has received) as bailee for the Administrative Agent substitute Eligible Mortgage Collateral with a Collateral Value, such that after giving effect to such payment or delivery, the total Collateral Value of all Eligible Mortgage Collateral will equal or exceed the Principal Debt. Each request for a partial release of Collateral from the Collection Account shall be addressed to the Collateral Agent and the Administrative Agent and shall be substantially in the form of Exhibit D-11 attached hereto (a "Collection Account Release Notice"). So long as no Default or Event of Default is continuing, the Servicer (on behalf of the Borrower) may by written direction to the Collateral Agent effect a transfer of funds from the Collection Account to the Disbursement Account; provided, that the Servicer shall not request and the Collateral Agent shall not permit funds to be released from the Disbursement Account unless the total Collateral Value of all Eligible Mortgage Collateral (immediately after giving effect to the requested release) equals or exceeds the Principal Debt, as shown on the most recent Borrowing Report. Each request for a partial release of Collateral (excluding releases from either the Collection Account or the Disbursement Account) shall be addressed to the Collateral Agent and shall be substantially in the form illustrated in Exhibit D-5 attached hereto (the "Transfer Request"). (b) Redemption Pursuant to Sale. So long as no Default or Event of Default is continuing, any one of the following may occur: (x) the Borrower, or the Servicer acting for the Borrower, from time to time may sell or pool Mortgage Loans either to an Approved Investor pursuant to a Take-Out Commitment or to one of the Originators under the Repurchase Agreement; (y) the Borrower may provide Mortgage Loans to one of the Originators for sale to an Approved Investor pursuant to a Take-Out Commitment, provided that payment is directed to the Collection Account and the security interest in the Mortgage Loan will not be released and the Borrower will not be deemed to have sold the Mortgage Loans to any of the Originators until the Purchase Price is received in the Collection Account; and (z) the Borrower, or the Servicer acting for the Borrower, may request the Administrative Agent to permit the Borrower to sell Mortgage Loans, or to pool Mortgage Loans, under such other circumstances as may be

described in the request. Upon the receipt by the Collateral Agent of a Shipping Request preliminary to a transaction permitted by this Section 3.4, identifying Collateral to be delivered to an Approved Investor or through any of the Originators, and so long as no Default or Event of Default of which a Responsible Officer of the Collateral Agent shall have received written notice shall be in existence: (i) The Collateral Agent shall deliver to the Approved Investor, or its loan servicing provider or custodian, under the Collateral Agent's "Bailee and Security Agreement Letter," substantially in the form of Exhibit D-6(a), or D-6(b) hereto or such other form as may be approved by the Administrative Agent as appropriate, the items of Mortgage Loan Collateral being sold which are held by the Collateral Agent as bailee for the Administrative Agent pursuant to Section 3.2 hereof, with the release of the security interest in favor of the Administrative Agent for the benefit of the holders of the Obligations in such items being conditioned upon timely payment to the Collection Account of the amount described in Section 3.4(b)(iii); (ii) The Servicer shall, as agent for the Administrative Agent, deliver to such Approved Investor, or such Approved Investor's loan servicing provider or custodian, under a letter agreement or other arrangement approved by the Administrative Agent the items held by the Servicer pursuant to Section 3.2(c) that are related to the Mortgage Loan Collateral to be transferred on the condition that such Approved Investor or its loan servicing provider or custodian shall hold or control such Other Mortgage Documents as bailee for the Administrative Agent for the benefit of the holders of the Obligations until the Approved Investor has paid the full purchase price for such Mortgage Loan Collateral to the Collection Account pursuant to the terms of the related Take-Out Commitment; (iii) Within forty-five (45) days after the delivery by the Collateral Agent to such Approved Investor or its loan servicing provider or custodian of the items of Mortgage Loan Collateral described in Section 3.4(b) or (ii), the Borrower shall make a payment, or shall cause a payment to be made, to the Collection Account, for distribution to the Administrative Agent for the account of the Lenders in an amount at least equal to the full purchase price for such Mortgage Loan Collateral or shall substitute Eligible Mortgage Collateral as permitted by this Section 3.4 it being understood that the Collateral Agent shall have no responsibility to verify the purchase price; and (iv) With respect to each Shipping Request that is received by the Collateral Agent by 11:30 a.m. (eastern time) on a Business Day, the Collateral Agent shall use due diligence and best efforts to review such Shipping Request and prepare the Mortgage Loan files identified in each Shipping Request, for shipment prior to the close of business on the day the Shipping Request is received by the Collateral Agent, and, in any event shall review such Shipping Request and prepare the Mortgage Loan files identified in such Shipping Request no later than 24 hours after such Shipping Request is received by the Collateral Agent.

(c) Transfers. So long as no Default or Event of Default is continuing of which a Responsible Officer of the Collateral Agent has received written notice, subject to Section 3.4(a) and (b), the Borrower or Servicer on behalf of the Borrower shall, at any time, be permitted to cause the Collateral Agent to reflect the transfer of Mortgage Loans to any Permitted Transferees (as defined below) by means of its daily electronic transmissions to the Collateral Agent, together with delivery of a Transfer Request delivered to the Collateral Agent, on or before 11:30 a.m. (eastern time), identifying each Mortgage Loan being transferred. The Collateral Agent's sole responsibility with respect to any such transfers shall be to correctly reflect such transfers on its computer system and books and records and to indicate, on its Collateral Agent's Daily Report to be delivered on such Business Day, that such transfers have been effected. "Permitted Transferees" means any of the Originators, in connection with any sale and transfer thereto effected pursuant to the terms of the Repurchase Agreement and any Approved Investor approved by the Administrative Agent as a Permitted Transferee. However, requested transfers will not be made if (A) as reflected in the most recent Borrowing Report, total Principal Debt will equal or exceed the total Collateral Value of Eligible Mortgage Collateral immediately after giving effect to a requested transfer and any accompanying substitution of Mortgage Collateral, or (B) the Collateral Agent shall have received written notice from the Administrative Agent that a Default or Event of Default has occurred. (d) Continuation of Lien. Unless released in writing by the Administrative Agent as herein provided, the security interest in favor of the Administrative Agent for the benefit of the holders of the Obligations, in all Mortgage Loan Collateral transmitted pursuant to Section 3.4(b) shall continue in effect until such time as the Administrative Agent shall have received payment in full of the amount described in Section 3.4(b)(iii). (e) Application of Proceeds; No Duty. Neither the Administrative Agent, nor the Collateral Agent, nor any Lender shall be under any duty at any time to credit the Borrower for any amounts due from any Approved Investor in respect of any purchase of any Mortgage Collateral contemplated under Section 3.4(b) above, until the Administrative Agent has actually received such amount in the form of immediately available funds, for deposit to the Collection Account. Neither the Administrative Agent, nor the Collateral Agent, nor any Lender shall be under any duty at any time to collect any amounts or otherwise enforce any obligations due from any Approved Investor in respect of any such purchase. (f) Mandatory Redemption of Mortgage Collateral. Notwithstanding any provision hereof to the contrary, if at any time a Collateral Deficiency exists, the Borrower shall, immediately upon receipt of notice (which may be by telephone, promptly confirmed in writing) from the Administrative Agent or the Collateral Agent, make a deposit to the Collection Account or pledge, assign and deliver additional or substitute Eligible Mortgage Collateral to the Administrative Agent for the benefit of the holders of the Obligations, so that, immediately after giving effect to such payment or pledge and assignment, the total Collateral Value of Eligible Mortgage Collateral shall be equal to or greater than the Principal Debt. (g) Representation in Connection with Releases, Sales and Transfers. The Borrower and the Servicer each represents and warrants that each request for any release or transfer pursuant to Section 3.4(a), Section 3.4(b) or Section 3.4(c) shall automatically constitute a representation and warranty to the Lenders, the Administrative Agent, and the Collateral Agent

to the effect that immediately before and after giving effect to such release or Transfer Request, the Collateral Value of Eligible Mortgage Collateral shall equal or exceed the Principal Debt. In connection with any request for a release or a Transfer Request, the Collateral Agent may assume, in the absence of written notice to the contrary received from the Administrative Agent, that immediately before and after giving effect to such release of Collateral or Transfer Request, no Default or Event of Default exists. (h) Limitation on Releases. Notwithstanding any provision to the contrary, the Collateral Agent shall not release any Collateral unless (i) payment of what purports to be the purchase price by the Approved Investor has been made in immediately available funds to the Collection Account; or (ii) immediately before and after giving effect thereto, the total Collateral Value of Eligible Mortgage Collateral (including any Eligible Mortgage Loans substituted for those Eligible Mortgage Loans being released) shall equal or exceed aggregate Principal Debt, as reflected in the most recent Borrowing Report. 3.5. Releases of Mortgage Notes for Servicing. The Servicer may from time to time request, in writing in the form of Exhibit D-7 hereto, that the Collateral Agent deliver a Mortgage Note that constitutes Mortgage Loan Collateral so that (a) such Mortgage Note may be replaced by a corrected Mortgage Note, or (b) any servicing action may take place with respect to such Mortgage Note. Upon receipt by the Collateral Agent of such a request from the Servicer, and so long as the Collateral Agent has not received written notice that a Default or Event of Default shall be in existence, the Collateral Agent shall deliver to the Servicer, under the "Trust Receipt and Security Agreement Letter," substantially in the form of Exhibit D-7, hereto, or such other form as may be approved by the Administrative Agent, the Mortgage Note to be corrected or serviced, such delivery to be conditioned upon the receipt by the Collateral Agent within fourteen (14) calendar days of either a corrected Mortgage Note, in the case of Mortgage Notes delivered for correction, or the Mortgage Note originally delivered to the Servicer by the Collateral Agent, in the case of a Mortgage Note delivered for a servicing action; provided, that (as certified to the Collateral Agent by the Servicer): (i) at no time shall Mortgage Notes having an aggregate Collateral Value in excess of $5,000,000 be so delivered to the Servicer pursuant to this Section 3.5 (the Collateral Value assigned to each such Mortgage Notes delivered for correction shall be determined utilizing as the principal amount of such Mortgage Note the lesser of the uncorrected face value of such Mortgage Note and the correct face value of such Mortgage Note known to the Borrower or the Servicer; provided, however, that if the correct face value of such Mortgage Note is not known to the Collateral Agent, the Collateral Agent may use the uncorrected face value of such Mortgage Note in determining the Collateral Value); (ii) with respect to Mortgage Notes delivered for correction, until such time as a corrected Mortgage Note shall have been delivered to the Collateral Agent, the Collateral Value attributed to each Mortgage Note delivered to the Servicer to be corrected in accordance with this Section 3.5 shall be the lesser of the uncorrected face value of

such Mortgage Note and the corrected face value of such Mortgage Note known to the Borrower and communicated in writing by the Borrower to the Collateral Agent; provided, however, that if the correct face value of such Mortgage Note is not known to the Collateral Agent, the Collateral Agent may use the uncorrected face value of such Mortgage Note in determining the Collateral Value; and (iii) notwithstanding the preceding clause (ii), unless, (A) in the case of Mortgage Notes delivered for correction, the corrected Mortgage Note is endorsed in blank (without recourse) and re-delivered to the Collateral Agent within 14 calendar days of the date of delivery by the Collateral Agent of the Mortgage Note to be corrected, or (B) in the case of Mortgage Notes delivered for servicing actions, the original Mortgage Note is re-delivered to the Collateral Agent within 14 calendar days of the date of delivery by the Collateral Agent of the Mortgage Note to be serviced, the Collateral Value attributed to either the Mortgage Note to be delivered and the corrected Mortgage Note, or the Mortgage Note delivered for servicing, shall be zero beginning on the 15th calendar day; provided, however, that the Collateral Value attributable to the corrected Mortgage Note or the Mortgage Note delivered for correction or servicing will be reinstated promptly upon the subsequent delivery thereof to the Collateral Agent. 3.6. [RESERVED]. 3.7. Wet Borrowings. (a) Pursuant to the Loan Agreement, the Borrower may from time to time request that certain Borrowings be funded after delivery to the Collateral Agent of the related Assignment, but prior to the delivery to the Collateral Agent of the corresponding Principal Mortgage Documents (individually a "Wet Borrowing"; collectively "Wet Borrowings"). The Borrower and the Administrative Agent acknowledge that Advances in respect of Wet Borrowings are subject to various terms and conditions of the Loan Agreement, including those set forth in Section 2.3(c) to the Loan Agreement. (b) Delivery of Principal Mortgage Documents. Within nine (9) Business Days after the date that each Assignment is delivered (and inclusion of the related Wet Loans within the computation of Collateral Value as reported on the Collateral Agent Daily Report) to the Collateral Agent, the Borrower shall deliver to the Collateral Agent all of the Principal Mortgage Documents pertaining to such Wet Loans, or make a mandatory prepayment so that after giving effect thereto, the Collateral Value of Eligible Mortgage Collateral (excluding such Wet Loans) shall equal or exceed the Principal Debt. 3.8. Collateral Reporting. (a) At the commencement of each Business Day, and in no event later than 1:00 p.m. (eastern time), the Collateral Agent shall furnish to the Borrower, Servicer and the Administrative Agent by facsimile (a hard copy of which shall not subsequently be mailed, sent or delivered to any such party, unless so requested in writing by such party) a duly completed report in the form of Exhibit D-8 hereto, (the "Collateral Agent Daily Report") specifying and

certifying the then total Collateral Value of the Eligible Mortgage Collateral and other information, all as more fully provided for therein and as set forth on Schedule I hereto, noting, except for any Wet Loans and other Mortgage Loans with respect to which the Collateral Agent has not completed its review of the Principal Mortgage Documents, any applicable Exceptions on Schedule I thereto. (i) The Collateral Agent may assume the accuracy of all information supplied by the Borrower to the Collateral Agent in any Assignment, or related electronic transmission, received by the Collateral Agent, including but not limited to the acquisition price paid for any Mortgage Loan, the unpaid principal balance of any Mortgage Loan as of its closing and funding date and the weighted average purchase price under Take-Out Commitments used in the related Collateral Value calculation and whether the Mortgage Loan is a Conforming Loan or a Jumbo Loan; and (ii) The Collateral Agent may assume the accuracy of the information supplied by the Borrower to the Collateral Agent, whether written or in any other form acceptable to the Collateral Agent, with respect to a determination as to whether amounts received in the Collection Account represent the purchase price paid for a specific Mortgage Loan and, consequently, whether the Collateral Value of such Mortgage Loan should be removed from such calculation. (b) Two Business Days prior to the date on which the Maximum Facility Amount has changed, the Servicer shall notify the Collateral Agent and the Borrower (by facsimile) of the new Maximum Facility Amount under the Loan Agreement. For purposes of paragraph 4 of the Collateral Agent Daily Report, the Collateral Agent shall assume that the Maximum Facility Amount is $200,000,000 unless it receives written notice to the contrary from the Administrative Agent. (c) The Collateral Agent shall monitor and report on the Collateral Agent Daily Report the amount of Wet Loans and the portion thereof for which the related Principal Mortgage Documents have been delivered to the Collateral Agent within the time period permitted under Section 3.7. 3.9. Further Obligations of the Collateral Agent. The Collateral Agent shall promptly notify the Administrative Agent if the Collateral Agent receives written notice (i) that any Lien (other than for the Administrative Agent for the benefit of the holders of the Obligations) has been placed, or attempted to be placed, on any Collateral for the Obligations or that the Administrative Agent's security interest shall have been challenged or (ii) that any Approved Investor has rejected any Collateral that is related to a Mortgage Loan that has been delivered to the Collateral Agent as Collateral for the Obligations. 3.10. Segregation of Collateral. The Collateral Agent shall keep and maintain the Collateral on its documents, books and records separate and apart from its other Property and from any Property securing any liabilities of the Borrower to any other Person. Without limitation of the foregoing, the Collateral Agent

shall keep and maintain the Collateral on its documents, books and records separate and apart from any collateral provided by the Borrower in favor of any other lender providing financing to the Borrower. This provision does not require physical separation of the Principal Mortgage Documents or Other Mortgage Documents from collateral held for other loans, but each Mortgage Loan must be maintained in a separate file folder from the documents related to any other mortgage loan. 3.11. Delivery of Required Documents to the Administrative Agent. Upon written request of the Administrative Agent, after the occurrence of and during the continuation of an Event of Default under the Loan Agreement of which a Responsible Officer of the Collateral Agent has received written notice, the Collateral Agent shall deliver within two (2) Business Days (or in contemplation of removing the Collateral Agent as collateral agent hereunder, the Collateral Agent shall deliver within five (5) Business Days,) to the Administrative Agent or its designee any or all documents and other items of Collateral which are then in the possession or control of the Collateral Agent. The Administrative Agent shall provide the Borrower with a copy of any such notice delivered to the Collateral Agent. All special handling and delivery costs shall be paid by the Borrower. The Administrative Agent shall hold the interest of La Fayette in the Collateral as agent of the La Fayette Program Agent and subject to the security interest granted by La Fayette to the La Fayette Program Agent. 3.12. Take-Out Commitment Reporting. (a) Each Assignment delivered to the Collateral Agent shall indicate (x) the Approved Investor with respect to the Take-Out Commitment, or (y) that there is no loan level Take-Out Commitment but that the Mortgage Loan is hedged. For each Mortgage Loan that, as of the fourth Business Day after delivery of the Assignment relating to such Mortgage Loan, is covered by a Take-Out Commitment in the form of a hedge by forward sale commitment but is not covered by a loan-specific Take-Out Commitment, the Servicer shall furnish to the Borrower and the Collateral Agent a duly completed Hedge Report in the form of Exhibit K to the Loan Agreement, no later than 10:00 a.m. (eastern time) on the first Business Day of each week. In addition, no later than 10:00 a.m. on the first Business Day following the delivery of any Assignment that reflected one or more Mortgage Loans that were covered by a Take-Out Commitment in the form of a forward sale commitment hedge, but not a loan-specific Take-Out Commitment, the Servicer shall furnish the Borrower and the Collateral Agent with a list of Mortgage Loans that subsequently were committed pursuant to the loan-specific Take-Out Commitment, with an code indicating the Investor related to the Take-Out Commitment and an indication of the price associated with the Take-Out Commitment. (b) The Borrower shall provide the Administrative Agent with up-to-date copies of the Take-Out Commitment Master Agreements for each Approved Investor. (c) Upon request of the Administrative Agent at any time, the Servicer shall furnish to the Administrative Agent (x) if there are any Mortgage Loans not subject to a loan level Take-Out Commitment, a duly completed Hedge Report in the form of Exhibit K, and (y) a

list of loan-specific Take-Out Commitments, together with copies of any such loan-specific Take-Out Commitments to the extent not previously delivered to the Administrative Agent. ARTICLE IV THE COLLATERAL AGENT 4.1. Instructions to the Collateral Agent. As to any matter not expressly provided for by this Agreement, the Collateral Agent shall not be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Administrative Agent acting on behalf of the holders of the Obligations; provided, however, that the Collateral Agent shall not be required to take any action which may expose the Collateral Agent to any liability that such Collateral Agent determines to be unreasonable in light of the circumstances or that is contrary to this Agreement or any Governmental Requirement. 4.2. Reliance by the Collateral Agent; Responsibility of the Collateral Agent. (a) The Collateral Agent shall perform its duties hereunder in accordance with the standards followed by the Collateral Agent in dealing with similar property for its own account. Notwithstanding anything to the contrary in this Agreement or any other Transaction Document, neither the Collateral Agent nor any of its respective directors, officers, agents, representatives, employees, attorneys-in-fact or Affiliates shall be liable for any action taken or omitted to be taken by it or them (in their capacity as or on behalf of the Collateral Agent) under or in connection with this Agreement or the other Transaction Documents, except for its or their own gross negligence or willful misconduct, for which the Collateral Agent shall be liable. In no event shall the Collateral Agent, its directors, officers, agents or employees be liable, directly or indirectly, for any special, indirect, punitive or consequential damages. (b) All Collateral at any time delivered to the Collateral Agent hereunder shall be held by the Collateral Agent in a fire resistant vault, drawer or other suitable depositary maintained and controlled solely by the Collateral Agent, conspicuously marked to show the interest therein of the Collateral Agent as bailee for the Administrative Agent on behalf of the holders of the Obligations and not commingled with any other assets or property of, or held by, the Collateral Agent for any person other than the Borrower or any of the Originators. The Collateral Agent shall have responsibility only for documents which have been actually delivered to the Collateral Agent in connection herewith and which have not been released to the Administrative Agent, the Borrower, the Servicer, a transferee or their respective agent or designee in accordance with this Agreement. In the event that a Mortgage Note has been delivered to the Collateral Agent and, subsequently, the Collateral Agent cannot locate such Mortgage Note, then the Collateral Agent shall prepare and execute a lost note affidavit with appropriate indemnification and shall deliver such lost note affidavit to the party that otherwise would have been entitled to delivery of the related Mortgage Note in accordance with this Agreement at the time such Mortgage Note would have been delivered.

(c) Under no circumstances shall the Collateral Agent be obligated to verify the authenticity of any signature on any of the documents received or examined by it in connection with this Agreement or the authority or capacity of any person to execute or issue any such document nor shall the Collateral Agent be responsible for the value, form, substance, validity, perfection (other than by taking and continuing possession of the Collateral), priority, effectiveness or enforceability of any of such documents nor shall the Collateral Agent be under a duty to inspect, review or examine the documents to determine whether they are appropriate for the represented purpose or that they have been actually recorded or that they are other than what they purport to be on their face. (d) The Collateral Agent may accept but shall not be responsible for examining, determining the meaning or effect of, or notifying or advising the Borrower or the Administrative Agent in any way concerning, any item or document in any file regarding a Mortgage Loan that is not one of the items or documents listed in Section 3.2(b). The Borrower shall be solely responsible for providing to the Collateral Agent each and every document listed in Section 3.2(b) and for completing or correcting any omission, or incomplete or inconsistent document. (e) With respect to the calculations in connection with Collateral Agent Daily Reports, the Collateral Agent shall be entitled to rely upon the information contained in any Assignment. The Collateral Agent shall (i) except for Wet Loans for which it has not yet received the Principal Mortgage Documents, hold all Principal Mortgage Documents relating to each Mortgage Loan exclusively for the benefit of the holders of the Obligations under the terms of this Agreement (i.e., is not held by the Collateral Agent for the benefit of any other Person), and (ii) in the case of Wet Loans, monitor and report the amount of such Wet Loans and the portion thereof for which the related Principal Mortgage Documents have been delivered to the Collateral Agent within the time period permitted under Section 3.7. Except as otherwise expressly provided in this Agreement, the Collateral Agent shall have no duty to investigate or conduct any due diligence with respect to such information. (f) With respect to the determination of whether a Mortgage Loan constitutes an Eligible Mortgage Loan, the Collateral Agent shall be responsible for determining that: (i) such Mortgage Loan meets the requirements of clauses (a(ii)), (d) (with respect to (d), it being understood and agreed that the Collateral Agent is not responsible to determine whether the related Mortgage Note is a legal, valid and binding obligation of the Obligor), (e), (i(iv-vi)), (j) and (m) of the definition of Eligible Mortgage Loan, (ii) that no more than 45 days have lapsed since the date on which the original Mortgage Note evidencing such Mortgage was shipped to the related Approved Investor, and (iii) pursuant to Sections 3.9(i), 3.10 and 4.2(e), to the Collateral Agent's best knowledge such Mortgage Loan is subject to a perfected first-priority Lien in favor of the Administrative Agent for the benefit of the holders of the Obligations, and, to the Collateral Agent's best knowledge, is not subject to any other Lien; but the Collateral Agent may assume that all of the other requirements of the definition of Eligible Mortgage Loan have been satisfied. (g) The Collateral Agent is an agent and bailee only and is not intended to be, nor shall it be construed to be a trustee or fiduciary under this Agreement of or for either or both of the Borrower or the Administrative Agent.

(h) The Collateral Agent shall retain possession and custody of the Principal Mortgage Documents received from the Borrower and pertaining to each Mortgage Loan file as agent and bailee of, and as custodian for, the Administrative Agent for all purposes (including but not limited to the perfection of the security interest of the Administrative Agent for the benefit of the holders of the Obligations) until the Collateral is released pursuant to Section 3.4 or 3.5 hereof. (i) Without limitation of the generality of the foregoing, the Collateral Agent: (i) may consult with legal counsel (including counsel for the Borrower), independent public accountants and other experts selected by the Collateral Agent or the Borrower and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts; (ii) except as provided in this Agreement, makes no warranty or representation to the Administrative Agent or the holders of any Obligations and shall not be responsible to the Administrative Agent or the holders of any Obligations for any statements, warranties or representations made in or in connection with this Agreement or the other Transaction Documents; (iii) except as provided in Sections 3.2(e), 3.4(a), (b), (c), (h), 3.8, 3.9 and this Section 4.2, shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of this Agreement on the part of the Borrower or to inspect the property (including the books and records) of the Borrower; (iv) shall not be responsible to the Administrative Agent or the holders of any Obligations for the due execution, legality, validity, enforceability of this Agreement or any other instrument or document furnished pursuant hereto as it relates to any party other than the Collateral Agent, or for the genuineness, effectiveness, sufficiency, value, perfection or priority of any Collateral; (v) shall incur no liability under or in respect of this Agreement by acting upon any notice, consent, certificate or other instrument or writing (which may be by telegram, telecopy, cable or telex) believed in good faith by the Collateral Agent, to be genuine and signed or sent by the proper Person; (vi) shall be entitled to rely on the terms of this Agreement and shall be under no obligation to review the terms of the other Transaction Documents, and in the event of any conflict between this Agreement and the Transaction Documents, the terms of this Agreement shall control with respect to the rights and obligations of the Collateral Agent; and (vii) in the event of any amendment, revision, restatement, waiver or other change to the Transaction Documents which could have the effect of increasing the level of effort or changing the scope of work of the Collateral Agent under this Agreement and which was not consented to in writing by the Collateral Agent, shall not be given effect so as to modify in quantity or otherwise the obligations of the Collateral Agent under this Agreement; (as an example only of the foregoing, and to avoid doubt in interpretation of this subsection (vii), an increase in the aggregate commitments of the Lenders of the Loan Agreement shall not, unless the Collateral Agent receives two weeks' advance written notice of any such amendment, revision, restatement, waiver or other change to the Transaction Documents, require the Collateral Agent to review Mortgage Loan Collateral that would relate to such increased commitment). (j) The Collateral Agent may execute any of its duties under this Agreement by or through agents, attorneys, custodians, nominees or attorneys-in-fact (which agents, attorneys, custodians, nominees or attorneys-in-fact shall be accorded the same rights and obligations applicable to the Collateral Agent) and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Collateral Agent shall be responsible for the actions or non-actions of any agent, attorneys, custodians, nominees or attorneys-in-fact

selected by it to the extent it would have been liable had it taken such action itself; provided, however, that nothing contained herein shall affect in any manner or any extent the rights of the Borrower or the Administrative Agent against such agents or attorneys-in-fact. (k) Merger of Collateral Agent. Any entity into which the Collateral Agent may be merged or converted or with which may be consolidated, or any entity resulting from any merger, conversion or consolidation to which the Collateral Agent shall be a party, or any entity succeeding to the business of the Collateral Agent, shall be the successor of the Collateral Agent hereunder, without the execution or filing of any paper or any further act on the part of any of the parties hereto, anything herein to the contrary notwithstanding. (l) None of the provisions of this Agreement shall require the Collateral Agent to expend or risk its own funds or otherwise to incur any liability, financial or otherwise, in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers if it shall have reasonable grounds for believing that repayment of such funds or indemnity satisfaction to it against such risk or liability is not assured to it. (m) The Collateral Agent may conclusively rely and shall be fully protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval or other paper or document believed by it to be genuine and to have been signed or presented to the proper party or parites. 4.3. Agents and Affiliates. The Collateral Agent and its respective Affiliates may accept deposits from, lend money to, act as trustee under indentures of, and generally engage in any kind of business with, the Borrower, any of the Originators, any of the Originators' Affiliates and any Person who may do business with or own securities of the Borrower or any such Affiliate, all as if the Collateral Agent were not the Collateral Agent and without any duty to account therefor to the Administrative Agent or the holders of any Obligations. 4.4. Successor Collateral Agent. The Collateral Agent may resign at any time by giving written notice thereof to the Borrower and the Administrative Agent. The Collateral Agent may be removed at any time with cause, and upon thirty (30) days written notice without cause, by the Administrative Agent on behalf of the holders of the Obligations. Upon request of the Borrower, so long as no Default or Event of Default exists, the Collateral Agent shall be removed by the Administrative Agent, provided that any removal without cause shall be preceded by thirty (30) days written notice to the Collateral Agent and the Borrower shall pay immediately upon demand all costs and expenses incurred by any Lender, the Administrative Agent or the Collateral Agent in connection therewith. Upon any such resignation or removal, the Administrative Agent, at the direction of the Majority Banks, shall have the right to appoint a successor Collateral Agent. Any successor Collateral Agent appointed by the Administrative Agent, provided that no Default or Event of Default exists, shall be satisfactory to the Borrower at the time of appointment. In the case of a retirement or resignation, if no successor Collateral Agent shall have been so appointed by the Administrative Agent (and approved by the Borrower, if applicable), and shall have accepted

such appointment, within 60 days after the retiring Collateral Agent's giving of notice of resignation, then the retiring Collateral Agent shall deliver all Mortgage Loan Collateral in its possession to the Administrative Agent and the Collateral Agent shall be discharged from its duties and obligations under this Agreement. After a notice of retirement or resignation has been given by the Collateral Agent and until a successor Collateral Agent shall have been appointed, the Administrative Agent shall pay all reasonable fees and out of pocket expenses owed to the Collateral Agent by the Servicer pursuant to any written agreement between the Collateral Agent and the Servicer, provided, however, that the Borrower shall reimburse the Administrative Agent for all such payments. No such resignation or removal shall be effective until the earlier of (1) the date on which a successor Collateral Agent shall have been appointed, and accepted such appointment, in accordance with this Section 4.4 or (2) the day upon which a period of 60 days has passed after notice of such resignation or removal. Upon the acceptance of any appointment of the Collateral Agent hereunder by a successor Collateral Agent, such successor Collateral Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Collateral Agent, and the retiring Collateral Agent shall be discharged from its duties and obligations under this Agreement. The retiring or removed Collateral Agent shall take all steps reasonably necessary to provide for an orderly transfer of the Collateral and all related documentation to the successor Collateral Agent at the Servicer's expense. After any retiring Collateral Agent's resignation or removal hereunder as the Collateral Agent, the provisions of this Article IV shall inure to its benefit as to any actions taken or omitted to be taken by it while it was a Collateral Agent under this Agreement. 4.5. Right of Inspection. The Collateral Agent shall permit any officer, employee or agent of the Borrower, the Servicer or the Administrative Agent that may so request to visit and inspect the premises on which the custodial duties of the Collateral Agent hereunder are performed, examine the books and records of the Collateral Agent which pertain to such custodial duties, take copies and extracts therefrom, and discuss the performance of such custodial duties with the officers of the Collateral Agent that are responsible therefor, at such time, after reasonable prior written notice to the Collateral Agent, as may be mutually acceptable to the Collateral Agent and such Borrower, Servicer or Administrative Agent during the Collateral Agent's normal business hours. 4.6. Accounting in Certain Circumstances. Subject to the provisions of Section 4.2 hereof, in the event that the Collateral Agent, acting in its capacity as custodian for the Administrative Agent, shall receive any money in respect of Mortgage Loan Collateral, whether pursuant to Section 3.4 hereof or Section 5 of the Security Agreement, or otherwise, the Collateral Agent shall provide an accounting therefor to the Administrative Agent and the Borrower by the end of the Business Day following receipt thereof, such accounting to include the amount received and shall promptly (but in no event later than the next Business Day) deposit such amounts into the Collection Account and prior to such deposit to be held as Collateral under the Security Instruments in favor of the Administrative Agent as provided in Section 3.1; provided, however, that all expenses of the Collateral Agent reasonably allocable to such accounting shall be added to the Obligations as expenses of the Collateral Agent. All such funds received after 4:00 p.m. (eastern time) shall be considered to

have been received on the following Business Day. All such funds received shall be held uninvested (and the Collateral Agent shall not be liable for interest thereon), unless permitted by the applicable Transaction Document and otherwise instructed by the Servicer, and in such case, funds shall be invested in Eligible Investments specified by the Servicer in such instructions; provided, however, that if the Servicer directs that funds be invested in Eligible Investments, the Servicer shall be required to ensure that all investments must mature on each Settlement Date (as defined in the Loan Agreement). The Collateral Agent shall provide such other information in such detail and at such time or times as the Borrower or the Administrative Agent may reasonably request. ARTICLE V INDEMNIFICATION 5.1. Indemnities by the Servicer. General Indemnity. Without limiting any other rights that any such Person may have hereunder or under applicable law, the Servicer hereby agrees to indemnify the Collateral Agent, its successors, transferees, participants and assigns and all affiliates, officers, directors, shareholders, controlling persons, employees and agents of any of the foregoing (each an "Indemnified Party"), forthwith on demand, from and against any and all actual damages, losses, claims, liabilities and related costs and expenses, including attorneys' fees, expenses and disbursements (all of the foregoing being collectively referred to as "Indemnified Amounts") awarded against or incurred by any of them arising out of or relating to this Agreement, the Security Agreement, the Collection Account Control Agreement, the Reserve Account Control Agreement or the Loan Agreement or the exercise or performance of any of its or their powers or duties hereunder or thereunder, or in respect of any Mortgage Loans or Take-Out Commitment, or related in any way to their possession of, or dealings with, the Collateral, excluding, however, Indemnified Amounts to the extent resulting from gross negligence or willful misconduct on the part of such Indemnified Party. This Section 5.1 shall survive the termination of this Agreement and the earlier resignation or removal of the Collateral Agent. ARTICLE VI MISCELLANEOUS 6.1. Notices. Any notice, demand or request required or permitted to be given under or in connection with this Agreement, the Notes or the other Transaction Documents (except as may otherwise be expressly required therein) shall be in writing and shall be mailed by first class or express mail, postage prepaid, or sent by telex, telegram, telecopy or other similar form of rapid transmission, confirmed by mailing (by first class or express mail, postage prepaid) written confirmation at substantially the same time as such rapid transmission, or personally delivered to an officer of the receiving party. With the exception of certain administrative and collateral reports that may be directed to specific departments of the Administrative Agent, all such communications shall be mailed, sent or delivered to the parties hereto at their respective addresses as set forth in Schedule II hereto, or at such other addresses or to such officer's, individual's or department's

attention as any party may have furnished the other parties in writing. Any communication so addressed and mailed shall be deemed to be given when so mailed, except with respect to notices and requests given pursuant to Sections 2.3 and 3.3 of the Loan Agreement. Communications related thereto shall not be effective until actually received by the Collateral Agent, the Administrative Agent, the Issuer or the Borrower, as the case may be; and any notice so sent by rapid transmission shall be deemed to be given when receipt of such transmission is acknowledged, and any communication so delivered in person shall be deemed to be given when receipted for by, or actually received by, an authorized officer of the Collateral Agent, the Administrative Agent or the Borrower, as the case may be. 6.2. Amendments, Etc. This Agreement may not be amended, supplemented or modified without the written consent of the Borrower, the Collateral Agent and the Administrative Agent. Any such waiver and any such amendment, supplement or modification shall be binding upon the Borrower the Collateral Agent, the Administrative Agent and all holders of the Obligations. 6.3. Invalidity. In the event that any one or more of the provisions contained in this Agreement or any other Transaction Document shall, for any reason, be held invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of such document. 6.4. Survival of Agreements. All covenants and agreements herein shall survive until payment in full of the Obligations and termination of the Bank Commitments under the Loan Agreement. 6.5. Cumulative Rights. The rights, powers, privileges and remedies of the Collateral Agent and the Administrative Agent under this Agreement, and any other Transaction Document shall be cumulative, and the exercise or partial exercise of any such right, power, privilege or remedy shall not preclude the exercise of any other right or remedy. The exercise of any right, power, privilege or remedy of the Collateral Agent or the Administrative Agent under this Agreement or any Transaction Document, shall not exhaust any such right, power, privilege or remedy of the Collateral Agent or the Administrative Agent. 6.6. Construction; Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF, OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW WHICH SHALL APPLY HERETO).

6.7. Successors and Assigns. This Agreement is binding upon and inures to the parties to this Agreement and their respective successors and permitted assigns and shall remain in full force and effect until such time, after the Termination Date, as all Obligations shall have been paid in full and all other obligations to be performed hereunder shall have been performed. The Borrower's obligations in respect of indemnification and payment provisions shall be continuing and shall survive any termination of this Agreement, subject to any applicable statute of limitations. The Collateral Agent may not assign its rights or obligations hereunder, except pursuant to Section 4.2(k) or 4.4, and any such attempted assignment shall be null and void. 6.8. The Collateral Agent Representations and Warranties. The Collateral Agent represents and warrants that it: (a) is a national banking association; (b) has the power and authority to own its properties and assets and to transact the business in which it is engaged; and (c) has the power and requisite authority to execute, deliver and perform this Agreement, and is duly authorized to, and has taken all action necessary to authorize it to, execute, deliver and perform this Agreement. 6.9. Rights of La Fayette Program Agent. The parties hereto acknowledge that La Fayette has granted to the La Fayette Program Agent, for the benefit of the holders of certain obligations of La Fayette from time to time, a security interest in La Fayette's right, title and interest in and to the Advances, the Transaction Documents and the Collateral. Each reference herein or in any of the other Transaction Documents to the Liens in the Collateral granted to Administrative Agent with respect to the interest of La Fayette under the Transaction Documents shall be deemed to include a reference to such security interest of the La Fayette Program Agent and the La Fayette Program Agent shall be deemed to be a holder of Obligations. By its execution hereof, the La Fayette Program Agent hereby appoints the Collateral Agent as its agent to hold the Collateral in which it has a security interest for the purpose of perfecting the La Fayette Program Agent's security interest in the Collateral, and the Collateral Agent hereby accepts such appointment. 6.10. Counterparts. This Agreement may be executed in two or more counterparts, and it shall not be necessary that the signatures of each of the parties hereto be contained on any one counterpart hereof; each counterpart shall be deemed an original, but all counterparts together shall constitute one and the same instrument. 6.11. No Proceedings. The Collateral Agent hereby agrees that it will not institute against the Issuer, or join any other Person in instituting against the Issuer, any bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding, or other proceeding under any federal or state bankruptcy or similar law, for one year and one day after the latest Commercial Paper Note issued by the Issuer is paid.

6.12. Electronic Counterparts. Any form or report contemplated by this Agreement may be furnished to the Collateral Agent electronically and may be formatted in a manner convenient for electronic transmission so long as the required information is provided in an equally useable form to the format, if any, provided in this Agreement. It being understood and agreed that the Collateral Agent shall not be responsible to verify the identity of the sender of any electronic transmissions received by it. 6.13. Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY EXPRESSLY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT, THE NOTES, ANY OTHER TRANSACTION DOCUMENT OR UNDER ANY AMENDMENT, INSTRUMENT OR DOCUMENT DELIVERED OR THAT MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR ARISING FROM ANY BANKING OR OTHER RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT, THE NOTES OR ANY OTHER TRANSACTION DOCUMENT AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. 6.14. Consent to Jurisdiction; Waiver of Immunities. EACH PARTY HERETO HEREBY ACKNOWLEDGES AND AGREES THAT: (a) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE PARTIES HERETO CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES, TO THE MAXIMUM EXTENT PERMITTED BY LAW, ANY OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION WITH RESPECT TO THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT. (b) TO THE EXTENT THAT IT HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM THE JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID TO EXECUTION, EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, IT HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER OR IN CONNECTION WITH THIS AGREEMENT.

6.15. References to Loan Agreement. Notwithstanding any references herein to the Loan Agreement, the parties hereto acknowledge that the Collateral Agent is not a party to the Loan Agreement and has no obligations or rights thereunder and shall not be obligated to read the Loan Agreement, know the terms and conditions contained therein or to be on notice of any of its provisions. * * * * *

IN WITNESS WHEREOF, the parties hereto have caused this agreement to be duly executed as of the date first above written. AHM SPV I, LLC, as Borrower By: /s/ Stephen A. Hozie Name: Stephen A. Hozie Title: Chief Financial Officer AMERICAN HOME MORTGAGE CORP., as Servicer By: /s/ Stephen A. Hozie Name: Stephen A. Hozie Title: Chief Financial Officer CREDIT LYONNAIS NEW YORK BRANCH, as Administrative Agent By: /s/ Conrad Meyer Name: Conrad Meyer Title: Director DEUTSCHE BANK NATIONAL TRUST COMPANY, as Collateral Agent By: /s/ Jerome W. Harney Name: Jerome W. Harney Title: Vice President

The following entity executes this Agreement for the sole purpose of acknowledging its rights under Section 6.9 hereof. CREDIT LYONNAIS NEW YORK BRANCH, as La Fayette Program Agent By: /s/ Conrad Meyer Name: Conrad Meyer Title: Director

                                                                 Exhibit 10.17.3

                         ORIGINATOR PERFORMANCE GUARANTY

This Originator Performance Guaranty (the "Guaranty"), dated as of August 8,
2003, is executed by American Home Mortgage Holdings, Inc., a Delaware
corporation (the "Performance Guarantor"), in favor of AHM SPV I, LLC, a
Delaware limited liability company ("SPV").

WHEREAS, SPV has entered into an Addendum to Master Repurchase Agreement dated
as of August 8, 2003 (as amended, restated, supplemented or otherwise modified
from time to time, the "Repurchase Agreement"), with American Home Mortgage
Corp., a New York corporation and Columbia National Incorporated, a Maryland
corporation (collectively, the "Originators"), pursuant to which SPV has agreed
to purchase from time to time certain Mortgage Assets from the Originators;

WHEREAS, as an inducement for SPV to purchase Mortgage Assets pursuant to the
Repurchase Agreement, the Performance Guarantor has agreed to guaranty the due
and punctual performance of the Originators' obligations under the Repurchase
Agreement, including any obligation to repurchase Mortgage Assets as a result of
a breach pursuant to Section 2.05 of the Addendum to the Repurchase Agreement,
provided that the Performance Guarantor shall not guaranty the Originators'
obligations to repurchase Mortgage Assets on the Repurchase Date pursuant to
Sections 3(b) and 3(c) of the Repurchase Agreement;

WHEREAS, it is a condition precedent to SPV agreeing to purchase Mortgage Assets
pursuant to the Repurchase Agreement that the Performance Guarantor execute and
deliver to SPV a performance guaranty substantially in the form hereof; and

WHEREAS, the Performance Guarantor wishes to guaranty the due and punctual
performance of the Originators' obligations to SPV under or in respect of the
Repurchase Agreement as provided herein, and the Performance Guarantor, as the
owner, directly or indirectly, of all of the outstanding shares of capital stock
of the Originators, will derive substantial benefit from the transactions
contemplated under the Repurchase Agreement;

NOW, THEREFORE, the Performance Guarantor hereby agrees with SPV as follows:

      Section 1. Definitions.

      As used herein:

            "Bankruptcy Code" means the United States Bankruptcy Code, 11 U.S.C.
      Sections 101 et seq., as amended.

            "Obligations" means, collectively, all covenants, agreements, terms,
      conditions and indemnities to be performed and observed by the Originators
      under and pursuant to the Repurchase Agreement and each other document
      executed and delivered by the Originators pursuant to the Repurchase
      Agreement (other than the Loan Agreement), except for the Originators'
      obligation to repurchase Mortgage Assets on the Repurchase Date pursuant
      to Sections 3(b) and 3(c) of the Repurchase Agreement, including, without
      limitation, the due and punctual payment of all sums which are or may
      become due and owing by the Originators under the Repurchase Agreement
      whether for repurchase prices

for repurchases pursuant to Section 2.05 of the Addendum to the Repurchase Agreement, fees, expenses (including counsel fees), indemnified amounts or otherwise, whether upon any termination or for any other reason, including any renewals, extensions and modifications thereof. "Loan Agreement" means that certain Loan Agreement dated as of August ], 2003 by and among SPV, certain Issuers parties thereto, certain Banks parties thereto, Credit Lyonnais New York Branch, as administrative agent for the Issuer and Banks, and American Home Mortgage Corp., as the servicer thereunder, as the same may be amended, restated, supplemented or otherwise modified from time to time. "AHM Entities" means, collectively, the Performance Guarantor, the Originators, and SPV. All capitalized terms used herein, and not otherwise herein defined shall have their respective meanings as defined in the Repurchase Agreement. Section 2. Guaranty of Performance of Obligations. The Performance Guarantor hereby unconditionally guarantees to SPV, the full and punctual payment and performance by the Originators of the Obligations. This Guaranty is an absolute, unconditional and continuing guaranty of the full and punctual performance of all of the Obligations and is in no way conditioned upon any requirement that SPV first take any action against the Originators with respect to the Obligations or attempt to collect any of the amounts owing by the Originators to SPV from the Originators or resort to any collateral security, any balance of any deposit account or credit on the books of SPV in favor of the Originators, any guarantor of the Obligations or any other Person. Should the Originators default in the payment or performance of any of the Obligations, SPV may cause the immediate performance by the Performance Guarantor of the Obligations and cause any payment Obligations to become forthwith due and payable to SPV, without demand or notice of any nature (other than as expressly provided herein), all of which are expressly waived by the Performance Guarantor. The Performance Guarantor's liability under this Guaranty shall be absolute and unconditional irrespective of (i) any lack of validity or enforceability of the Repurchase Agreement, the Loan Agreement or any other document executed in connection therewith or delivered thereunder, (ii) any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations, or any other amendment or waiver of or any consent to departure from the Repurchase Agreement, the Loan Agreement or any other document executed in connection therewith or delivered thereunder, (iii) any taking, exchange, release or non-perfection of any collateral, or any taking, release or amendment or waiver of or consent to departure from any other guaranty, for all or any of the Obligations, (iv) any law, regulation or order of any jurisdiction affecting any term of all or any Obligations or the rights of SPV, (v) any manner of application of collateral, or proceeds thereof, to all or any of the Obligations, or any manner of sale or other disposition of any collateral for all or any of the Obligations or any other assets of the Originators, (vi) any change, restructuring or termination of the corporate structure or existence of the Originators, or (vii) any other circumstance which might otherwise constitute a

defense available to, or a discharge of, the Originators or a guarantor. In the event that performance of any of the Obligations is stayed upon the insolvency, bankruptcy or reorganization of the Originators, or for any other reason, all such Obligations shall be immediately performed by the Performance Guarantor. Section 3. Performance Guarantor's Further Agreements to Pay. The Performance Guarantor further agrees, in the event the Performance Guarantor fails to perform its obligations under this Guaranty, to pay to SPV, forthwith upon demand all reasonable costs and expenses (including court costs and legal expenses) incurred or expended by SPV in connection with the enforcement of this Guaranty. Section 4. Waivers by Performance Guarantor; SPV's Freedom to Act. The Performance Guarantor waives notice of (a) acceptance of this Guaranty, (b) any action taken or omitted by SPV in reliance on this Guaranty, and (c) any requirement that SPV be diligent or prompt in making demands under this Guaranty, giving notice of any Default, Event of Default, default or omission by the Originators or asserting any other rights of SPV under this Guaranty. To the maximum extent permitted by applicable law, the Performance Guarantor also irrevocably waives all defenses that at any time may be available in respect of the Obligations by virtue of any statute of limitations, valuation, stay, moratorium law or other similar law now or thereafter in effect. SPV shall be at liberty, without giving notice to or obtaining the assent of the Performance Guarantor and without relieving the Performance Guarantor of any liability under this Guaranty, to deal with the Originators and with each other party who now is or after the date hereof becomes liable in any manner for any of the Obligations, in such manner as SPV in its sole discretion deems fit, and to this end the Performance Guarantor agrees that the validity and enforceability of this Guaranty, including without limitation, the provisions of Section 8 hereof, shall not be impaired or affected by any of the following: (a) any extension, modification or renewal of, or indulgence with respect to, or substitutions for, the Obligations or any part thereof or any agreement relating thereto at any time; (b) any failure or omission to enforce any right, power or remedy with respect to the Obligations or any part thereof or any agreement relating thereto, or any collateral securing the Obligations or any part thereof; (c) any waiver of any right, power or remedy or of any Default, Event of Default, default with respect to the Obligations or any part thereof or any agreement relating thereto; (d) any release, surrender, compromise, settlement, waiver, subordination or modification, with or without consideration, of any other obligation of any person or entity with respect to the Obligations or any part thereof; (e) the enforceability or validity of the Obligations or any part thereof or the genuineness, enforceability or validity of any agreement relating thereto or with respect to the Obligations or any part thereof; (f) the application of payments received from any source to the payment of any payment Obligations of the Originators, any part thereof or amounts which are not covered by this Guaranty even though SPV might lawfully have elected to apply such payments to any part or all of the payment Obligations of the Originators or to amounts which are not covered by this Guaranty; (g) the existence of any claim, setoff or other rights which the Performance Guarantor may have at any time against the Originators in connection herewith or any unrelated transaction; (h) any assignment or transfer of the Obligations or any part thereof; or (i) any failure on the part of the Originators to perform or comply with any term of the Repurchase Agreement or any other document executed in connection therewith or delivered thereunder, all whether or not the

Performance Guarantor shall have had notice or knowledge of any act or omission referred to in the foregoing clauses (a) through (i) of this Section. Section 5. Unenforceability of Obligations Against the Originators. Notwithstanding (a) any change of ownership of either of the Originators or the insolvency, bankruptcy or any other change in the legal status of either of the Originators; (b) the change in or the imposition of any law, decree, regulation or other governmental act which does or might impair, delay or in any way affect the validity, enforceability or the payment when due of the Obligations; (c) the failure of either of the Originators or the Performance Guarantor to maintain in full force, validity or effect or to obtain or renew when required all governmental and other approvals, licenses or consents required in connection with the Obligations or this Guaranty, or to take any other action required in connection with the performance of all obligations pursuant to the Obligations or this Guaranty; or (d) if any of the moneys included in the Obligations have become unrecoverable from either of the Originators for any reason other than final payment in full of the payment Obligations in accordance with their terms, this Guaranty shall nevertheless be binding on the Performance Guarantor. This Guaranty shall be in addition to any other guaranty or other security for the Obligations, and it shall not be rendered unenforceable by the invalidity of any such other guaranty or security. Section 6. Representations and Warranties. Section 6.1. Existence and Standing. The Performance Guarantor is a corporation duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation and has all requisite corporate authority to conduct its business in each jurisdiction in which its business is conducted. Section 6.2. Authorization; Validity. The Performance Guarantor has the corporate power and authority to execute and deliver this Guaranty, perform its obligations hereunder and consummate the transactions herein contemplated. The execution and delivery by the Performance Guarantor of this Guaranty, the performance of its obligations and consummation of the transactions contemplated hereunder have been duly authorized by proper corporate proceedings, and this Guaranty constitutes the legal, valid and binding obligation of the Performance Guarantor enforceable against the Performance Guarantor in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors' rights generally and by general equity principles (whether considered as a proceeding at law or in equity). Section 6.3. No Conflict; Government Consent. Neither the execution and delivery by the Performance Guarantor of this Guaranty, nor the consummation of the transactions herein contemplated, nor compliance with the provisions hereof will contravene or conflict with any law, rule, regulation, order, writ, judgment, injunction, decree or award binding on the Performance Guarantor or any of the other AHM Entities, except where such contravention or conflict would reasonably be expected to have a Material Adverse Effect, or the Performance Guarantor's certificate of incorporation or by-laws or the provisions of any indenture, instrument or agreement to which the Performance Guarantor is a party or is subject, or by which it, or its property, is bound, except where such contravention or conflict would not reasonably be expected to have a Material Adverse Effect, or result in the creation or imposition of any Lien in,

of or on the property of the Performance Guarantor or any of its Subsidiaries pursuant to the terms of any such indenture, instrument or agreement. Section 6.4. Financial Statements. The consolidated financial statements of the Performance Guarantor and its Subsidiaries, heretofore delivered to SPV as required by the Loan Agreement, were prepared in accordance with generally accepted accounting principles in effect on the date such statements were prepared and fairly present the consolidated financial condition and operations of the Performance Guarantor and its Subsidiaries at such date and the consolidated results of their operations for the period then ended. Section 6.5. Material Adverse Change. Since March 31, 2003, there has been no change in the business, properties, financial condition or results of operations of the Performance Guarantor and its Subsidiaries which is reasonably likely to have a Material Adverse Effect on (i) the business, properties, financial condition or results of operations of the Performance Guarantor and its subsidiaries taken as a whole, (ii) the ability of the Performance Guarantor to perform its obligations under this Guaranty, or (iii) the validity or enforceability of any portion of this Guaranty or the rights or remedies of SPV hereunder. Section 6.6. Taxes. The Performance Guarantor and the other AHM Entities have filed all United States federal tax returns and all other tax returns which are required to be filed, except where the failure to file would not reasonably be expected to have a Material Adverse Effect, and have paid all taxes due pursuant to said returns or pursuant to any assessment received by the Performance Guarantor or any of the other AHM Entities, except such taxes, if any, as are being contested in good faith and as to which adequate reserves have been provided. No tax liens have been filed which are reasonably likely to have a Material Adverse Effect on (i) the business, properties, financial condition or results of operations of the Performance Guarantor and the other AHM Entities taken as a whole, (ii) the ability of the Performance Guarantor to perform its obligations under this Guaranty, or (iii) the validity or enforceability of any portion of this Guaranty or the rights or remedies of SPV hereunder, and no claims are being asserted in writing with respect to any such taxes. The charges, accruals and reserves on the books of the Performance Guarantor and the other AHM Entities in respect of any taxes or other governmental charges are adequate. Section 6.7. Litigation and Contingent Obligations. There is no litigation, arbitration, governmental investigation, proceeding or inquiry pending or, to the knowledge of any of their officers, threatened against or affecting the Performance Guarantor or its Subsidiaries which is reasonably likely to have a Material Adverse Effect on (i) the business, properties, financial condition or results of operations of the Performance Guarantor and the other AHM Entities taken as a whole, (ii) the ability of the Performance Guarantor to perform its obligations under this Guaranty, or (iii) the validity or enforceability of any of this Guaranty or the rights or remedies of SPV hereunder. The Performance Guarantor has no material contingent obligations not provided for or disclosed in the financial statements referred to in Section 6.4. Section 7. Covenants. The Performance Guarantor hereby covenants and agrees for the benefit of SPV, until the Obligations have been satisfied in full and the Repurchase Agreement and the Loan Agreement have been terminated, as follows:

(a) to promptly notify SPV upon (i) any dispute between the Performance Guarantor and any Governmental Authority or any other Person that, if adversely determined, would have a Material Adverse Effect; (ii) any material adverse change in the business, operations or financial condition of the Performance Guarantor, including, without limitation, such Performance Guarantor's insolvency; (iii) any event or condition known to it that, if adversely determined, would have a Material Adverse Effect; and (iv) the receipt of any notice of any final judgment or order for payment of money applicable to the Performance Guarantor in excess of $10,000,000; (b) to comply with (a) all applicable laws, rules, regulations and orders, and (b) material agreements, indentures, mortgages and corporate documents, except to the extent that the failure so to comply would not be reasonably expected to have a Material Adverse Effect; (c) to maintain its corporate existence, rights and franchises; (d) observe and comply in all material respects with all Governmental Requirements; and (e) promptly and in any event within 60 days after the end of each of the first three (3) quarters in each fiscal year of the Performance Guarantor, and within 120 days after the close of the Performance Guarantor's fiscal year, completed officer's certificates in the form of Exhibit H-3 attached to the Loan Agreement, executed by the treasurer or other Financial Officer of the Performance Guarantor. Section 8. Subrogation; Subordination. The Performance Guarantor shall not enforce or otherwise exercise any right of subrogation to any of the rights of SPV against the Originators, until the Obligations have been indefeasibly paid in full; notwithstanding anything to the contrary contained herein, until the Obligations have been indefeasibly paid in full, the Performance Guarantor hereby waives all rights of subrogation (whether contractual, under Section 509 of the United States Bankruptcy Code, at law or in equity or otherwise) to the claims of SPV against the Originators and all contractual, statutory or legal or equitable rights of contribution, reimbursement, indemnification and similar rights and "claims" (as that term is defined in the United States Bankruptcy Code) which the Performance Guarantor might now have or hereafter acquire against the Originators that arises from the existence or performance of the Performance Guarantor's obligations hereunder; the Performance Guarantor will not claim any setoff, recoupment or counterclaim against the Originators in respect of any liability of the Performance Guarantor to the Originators, until any of the Obligations have been indefeasibly paid in full; and the Performance Guarantor waives any benefit of and any right to participate in any collateral security which may be held by SPV. Unless otherwise provided for in the Subordination Agreement, the payment of any amounts due with respect to any indebtedness for borrowed money of the Originators now or thereafter owed to the Performance Guarantor is hereby subordinated to the prior payment in full of all the Obligations. The Performance Guarantor agrees that, after the occurrence, and during the continuation, of any default in the payment or performance of any of the Obligations, the Performance Guarantor will not demand, sue for or otherwise attempt to collect any such indebtedness of the Originators to the Performance Guarantor until all of the Obligations shall have been paid and performed in full. If, notwithstanding the foregoing sentence, the Performance Guarantor shall collect, enforce or receive any amounts in respect of such indebtedness while any Obligations are still unperformed or outstanding, such amounts shall be collected, enforced and received by the Performance

Guarantor as trustee for SPV and be paid over to SPV on account of the Obligations without affecting in any manner the liability of the Performance Guarantor under the other provisions of this Guaranty. The provisions of this Section 8 shall be supplemental to and not in derogation of any rights and remedies of SPV under any separate subordination agreement that SPV may at any time and from time to time enter into with the Performance Guarantor. Section 9. Termination of Guaranty. The Performance Guarantor's obligations hereunder shall continue in full force and effect until all Obligations are finally paid and satisfied in full and the Repurchase Agreement and Loan Agreement are terminated; provided, however, that this Guaranty shall continue to be effective or shall be reinstated, as the case may be, if at any time payment or other satisfaction of any of the Obligations is rescinded or must otherwise be restored or returned upon the bankruptcy, insolvency, or reorganization of either of the Originators, or otherwise, as though such payment had not been made or other satisfaction occurred, whether or not SPV is in possession of this Guaranty. No invalidity, irregularity or unenforceability by reason of the Bankruptcy Code or any insolvency or other similar law, or any law or order of any government or agency thereof purporting to reduce, amend or otherwise affect the Obligations shall impair, affect, be a defense to or claim against the obligations of the Performance Guarantor under this Guaranty. Section 10. Effect of Bankruptcy. This Guaranty shall survive the insolvency of either of the Originators and the commencement of any case or proceeding by or against either of the Originators under the federal Bankruptcy Code or other federal, state or other applicable bankruptcy, insolvency or reorganization statutes. No automatic stay under the federal Bankruptcy Code or other federal, state or other applicable bankruptcy, insolvency or reorganization statutes to which either of the Originators is subject shall postpone the obligations of the Performance Guarantor under this Guaranty. Section 11. Setoff. SPV is not authorized at any time to set off and apply any deposits or other sums against the obligations of the Performance Guarantor under this Guaranty. Section 12. Taxes. All payments to be made by the Performance Guarantor hereunder shall be made free and clear of any deduction or withholding. If the Performance Guarantor is required by law to make any deduction or withholding on account of tax or otherwise from any such payment, the sum due from it in respect of such payment shall be increased to the extent necessary to ensure that, after the making of such deduction or withholding, SPV receives a net sum equal to the sum which it would have received had no deduction or withholding been made. Section 13. Further Assurances. The Performance Guarantor agrees that it will permit SPV or any of its duly authorized representatives, during normal business hours, and upon reasonable notice to consult and discuss with the Performance Guarantor's Treasurer or Controller, with respect to the Performance Guarantor's business, finances, accounts and affairs. The Performance Guarantor agree that it will, from time to time, at the request of SPV, provide to SPV information relating to the business and affairs of the Performance Guarantor as SPV may reasonably request. The Performance Guarantor also agrees to do all such things and execute all such documents as SPV may reasonably consider necessary or desirable to give full effect to this Guaranty and to perfect and preserve the rights and powers of SPV hereunder.

Section 14. Successors and Assigns. This Guaranty shall be binding upon the Performance Guarantor, its successors and assigns, and shall inure to the benefit of and be enforceable by SPV and its successors, transferees and assigns. The Performance Guarantor may not assign or transfer any of its obligations hereunder without the prior written consent of SPV and any attempted assignment shall be null and void. SPV (and any assignee of SPV) may at any time assign any and all of its rights hereunder to any other person or entity without the consent of the Performance Guarantor or the Originators, whereupon (i) each reference herein to SPV shall mean and be a reference to such assignee and (ii) such assignee may enforce the Guaranty to the fullest extent as if it were a named party hereto. Without limiting the generality of the foregoing, the Performance Guarantor acknowledges and consents to the assignment by SPV, under and in connection with the Loan Agreement, of all of SPV's right, title and interest in, to and under this Guaranty to the Administrative Agent for the benefit of the Lenders, and the Performance Guarantor agrees that at all times that the Loan Agreement shall be in effect (i) any claim made by SPV hereunder shall be deemed made for the benefit of the Administrative Agent and Lenders and (ii) any payment or remittance to be made hereunder by the Performance Guarantor in respect of any claim being made by or in respect of SPV or SPV's interest under the Repurchase Agreement shall be paid or remitted to the Administrative Agent for the benefit of the Lenders. Section 15. Amendments and Waivers. No amendment or waiver of any provision of this Guaranty nor consent to any departure by the Performance Guarantor therefrom shall be effective unless the same shall be in writing and signed by SPV and the Performance Guarantor. No failure on the part of SPV to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. Section 16. Notices. All notices and other communications called for hereunder shall be made in writing and, unless otherwise specifically provided herein, shall be deemed to have been duly made or given when delivered by hand or mailed first class, postage prepaid, or, in the case of telegraphic, telecopied or telexed notice, when transmitted, answer back received, addressed as follows: if to the Performance Guarantor, at the address set forth beneath its signature hereto, and if to SPV at its address specified in the Repurchase Agreement, or at such other address as either party may designate in writing to the other. Section 17. GOVERNING LAW. THIS GUARANTY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF, OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW WHICH SHALL APPLY HERETO). Section 18. CONSENT TO JURISDICTION. THE PERFORMANCE GUARANTOR HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR NEW YORK STATE COURT SITTING IN NEW YORK, NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS GUARANTY, THE REPURCHASE AGREEMENT OR ANY OTHER DOCUMENT EXECUTED IN CONNECTION

THEREWITH OR DELIVERED THEREUNDER AND THE PERFORMANCE GUARANTOR HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF SPV OR ANY OF ITS ASSIGNS TO BRING PROCEEDINGS AGAINST THE PERFORMANCE GUARANTOR IN THE COURTS OF ANY OTHER JURISDICTION. Section 19. Miscellaneous. This Guaranty constitutes the entire agreement of the Performance Guarantor with respect to the matters set forth herein. The rights and remedies herein provided are cumulative and not exclusive of any remedies provided by law or any other agreement, and this Guaranty shall be in addition to any other guaranty of or collateral security for any of the Obligations. The provisions of this Guaranty are severable, and in any action or proceeding involving any state corporate law, or any state or federal bankruptcy, insolvency, reorganization or other law affecting the rights of creditors generally, if the obligations of the Performance Guarantor hereunder would otherwise be held or determined to be avoidable, invalid or unenforceable on account of the amount of the Performance Guarantor's liability under this Guaranty, then, notwithstanding any other provision of this Guaranty to the contrary, the amount of such liability shall, without any further action by the Performance Guarantor or SPV, be automatically limited and reduced to the highest amount that is valid and enforceable as determined in such action or proceeding. The invalidity or unenforceability of any one or more sections of this Guaranty shall not affect the validity or enforceability of its remaining provisions. Captions are for the ease of reference only and shall not affect the meaning of the relevant provisions. The meanings of all defined terms used in this Guaranty shall be equally applicable to the singular and plural forms of the terms defined.

IN WITNESS WHEREOF, the Performance Guarantor has caused this Guaranty to be executed and delivered as of the date first above written. AMERICAN HOME MORTGAGE HOLDINGS, INC. By: /s/ Stephen A. Hozie --------------------- Name: Stephen A. Hozie Title: Executive Vice President and Chief Financial Officer Address: 520 Broadhollow Road Melville, NY 11747

ASSIGNMENT OF ORIGINATOR PERFORMANCE GUARANTY The undersigned hereby assigns all of its right, title and interest in and to the foregoing Originator Performance Guaranty to Credit Lyonnais New York Branch, in its capacity as administrative agent (the "Administrative Agent") for the "Lenders" under and as defined in that certain Loan Agreement dated as of August 8, 2003 by and among AHM SPV I, LLC ("SPV"), certain parties thereto, the Administrative Agent and American Home Mortgage Corp., as servicer thereunder, as the same may be amended, restated, supplemented or otherwise modified from time to time. American Home Mortgage Holdings, Inc. ("AHMI") acknowledges such assignment, and agrees that the Administrative Agent may further assign, without notice, its right, title and interest in and to the Originator Performance Guaranty without the consent of any person or entity. The Administrative Agent, as the assignee of SPV, shall have the right to enforce the Originator Performance Guaranty and to directly exercise all of SPV's rights and remedies under the Originator Performance Guaranty, and AHMI agrees to cooperate fully with the Administrative Agent in the exercise of such rights and remedies thereunder. AHMI further agrees to give the Administrative Agent copies of all notices it is required to give to SPV under the Originator Performance Guaranty.

Dated: August 8, 2003 AHM SPV I, LLC By: /s/ Stephen A. Hozie --------------------- Name: Stephen A. Hozie Title: Executive Vice President and Chief Financial Officer Acknowledged and agreed to this 8th day of August, 2003 AMERICAN HOME MORTGAGE HOLDINGS, INC. By: /s/ Stephen A. Hozie -------------------- Name: Stephen A. Hozie Title: Executive Vice President and Chief Financial Officer

                                                                 Exhibit 10.17.4

                          SERVICER PERFORMANCE GUARANTY

This Servicer Performance Guaranty (the "Guaranty"), dated as of August 8, 2003,
is executed by American Home Mortgage Holdings, Inc., a Delaware corporation
(the "Performance Guarantor") in favor of Credit Lyonnais New York Branch, as
administrative agent for the Lenders party to the Loan Agreement referred to
below (the "Administrative Agent") and the Lenders.

WHEREAS, American Home Mortgage Corp., a New York corporation and Columbia
National Incorporated, a Maryland corporation (collectively, the "Originators")
have entered into an Addendum to Master Repurchase Agreement with AHM SPV I,
LLC, a Delaware limited liability company ("SPV"), dated as of August 8, 2003
(the "Repurchase Agreement"), pursuant to which the Originators, subject to the
terms and conditions therein, have agreed to sell certain Mortgage Assets to
SPV, subject to the right and obligation of the Originators to repurchase such
Mortgage Assets.

WHEREAS, SPV has entered into a Loan Agreement dated as of August 8, 2003 (as
the same may be amended, restated, supplemented or otherwise modified from time
to time, the "Loan Agreement") by and among SPV, the Issuer parties thereto,
certain Banks parties thereto, the Administrative Agent and American Home
Mortgage Corp., a New York corporation, as the servicer thereunder (in such
capacity, the "Servicer"), pursuant to which (x) the Lenders, subject to the
terms and conditions contained therein, have agreed to make certain revolving
loans to SPV and (y) Servicer, pursuant to the terms and conditions contained
therein, has agreed to perform the duties and obligations as "Servicer"
thereunder;

WHEREAS, as an inducement for the Lenders to make revolving loans to SPV
pursuant to the Loan Agreement, which in turn will enable SPV to purchase the
Mortgage Assets from the Servicer, the Performance Guarantor has agreed to
guaranty the due and punctual performance of the Servicer as "Servicer" under
the Loan Agreement;

WHEREAS, it is a condition precedent to the Lenders agreeing to make revolving
loans pursuant to the Loan Agreement that the Performance Guarantor execute and
deliver to the Administrative Agent a performance guaranty substantially in the
form hereof; and

WHEREAS, the Performance Guarantor wishes to guaranty the due and punctual
performance of the Servicer's obligations as "Servicer" to the Administrative
Agent and the Lenders under or in respect of the Loan Agreement as provided
herein, and the Performance Guarantor, as the owner, directly or indirectly, of
all of the outstanding shares of capital stock of the Servicer, will derive
substantial benefit from the transactions contemplated under the Loan Agreement;

NOW, THEREFORE, the Performance Guarantor hereby agrees with the Administrative
Agent and the Lenders as follows:

Section 1.      Definitions.

As used herein:

"Bankruptcy Code" means the United States Bankruptcy Code, 11 U.S.C. Sections 101 et seq., as amended. "Obligations" means, collectively, all covenants, agreements, terms, conditions and indemnities to be performed and observed by the Servicer solely in its capacity as "Servicer" under and pursuant to the Loan Agreement and each other document executed and delivered by the Servicer as "Servicer" pursuant to the Loan Agreement, including, without limitation, the due and punctual payment of all sums which are or may become due and owing by the Servicer as "Servicer" under the Loan Agreement, whether for the deposit of collections received by it or for fees, expenses (including counsel fees), indemnified amounts or otherwise, whether upon any termination or for any other reason, including any renewals, extensions and modifications thereof. "AHM Entities" means, collectively, the Performance Guarantor, the Servicer, the Originators, and the SPV. All capitalized terms used herein, and not otherwise herein defined shall have their respective meanings as defined in the Loan Agreement. Section 2. Guaranty of Performance of Obligations. The Performance Guarantor hereby unconditionally guarantees to the Administrative Agent and the Lenders, the full and punctual payment and performance by the Servicer of the Obligations. This Guaranty is an absolute, unconditional and continuing guaranty of the full and punctual performance of all of the Obligations and is in no way conditioned upon any requirement that the Administrative Agent or the Lenders first take any action against the Servicer with respect to the Obligations or attempt to collect any of the amounts owing by the Servicer to the Lenders from the Servicer or resort to any collateral security, any balance of any deposit account or credit on the books of any Lenders in favor of the Servicer, any guarantor of the Obligations or any other Person. Should the Servicer default in the payment or performance of any of the Obligations, the Administrative Agent or the Majority Banks may cause the immediate performance by the Performance Guarantor of the Obligations and cause any payment Obligations to become forthwith due and payable to the Administrative Agent and the Lenders, without demand or notice of any nature (other than as expressly provided herein), all of which are expressly waived by the Performance Guarantor. The Performance Guarantor's liability under this Guaranty shall be absolute and unconditional irrespective of (i) any lack of validity or enforceability of the Loan Agreement or any other document executed in connection therewith or delivered thereunder, (ii) any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations, or any other amendment or waiver of or any consent to departure from the Loan Agreement or any other document executed in connection therewith or delivered thereunder, (iii) any taking, exchange, release or non-perfection of any collateral, or any taking, release or amendment or waiver of or consent to departure from any other guaranty, for all or any of the Obligations, (iv) any law, regulation or order of any jurisdiction affecting any term of all or any Obligations or the rights of the Administrative Agent or any of the Lenders, (v) any manner of application of collateral, or proceeds thereof, to all or any of the Obligations, or any manner of sale or other disposition of

any collateral for all or any of the Obligations or any other assets of the Servicer, (vi) any change, restructuring or termination of the corporate structure or existence of the Servicer, or (vii) any other circumstance which might otherwise constitute a defense available to, or a discharge of, the Servicer or a guarantor. In the event that performance of any of the Obligations is stayed upon the insolvency, bankruptcy or reorganization of the Servicer, or for any other reason, all such Obligations shall be immediately performed by the Performance Guarantor. Section 3. Performance Guarantor's Further Agreements to Pay. The Performance Guarantor further agrees, in the event the Performance Guarantor fails to perform its obligations under this Guaranty, to pay to the Administrative Agent and the Lenders, forthwith upon demand all reasonable costs and expenses (including court costs and legal expenses) incurred or expended by the Administrative Agent and the Lenders in connection with the enforcement of this Guaranty. Section 4. Waivers by Performance Guarantor; Administrative Agent's and Lenders' Freedom to Act. The Performance Guarantor waives notice of (a) acceptance of this Guaranty, (b) any action taken or omitted by the Administrative Agent or any Lender in reliance on this Guaranty, and (c) any requirement that the Administrative Agent or the Lenders be diligent or prompt in making demands under this Guaranty, giving notice of any Default, Event of Default or Servicer Default, default or omission by the Servicer or asserting any other rights of the Administrative Agent or any Lender under this Guaranty. To the maximum extent permitted by applicable law, the Performance Guarantor also irrevocably waives all defenses that at any time may be available in respect of the Obligations by virtue of any statute of limitations, valuation, stay, moratorium law or other similar law now or thereafter in effect. The Administrative Agent shall be at liberty, upon its own initiative or at the request of the Majority Banks, without giving notice to or obtaining the assent of the Performance Guarantor and without relieving the Performance Guarantor of any liability under this Guaranty, to deal with the Servicer and with each other party who now is or after the date hereof becomes liable in any manner for any of the Obligations, in such manner as the Administrative Agent in its sole discretion deems fit or the Majority Banks in their sole discretion deem fit, and to this end the Performance Guarantor agrees that the validity and enforceability of this Guaranty, including without limitation, the provisions of Section 8 hereof, shall not be impaired or affected by any of the following: (a) any extension, modification or renewal of, or indulgence with respect to, or substitutions for, the Obligations or any part thereof or any agreement relating thereto at any time; (b) any failure or omission to enforce any right, power or remedy with respect to the Obligations or any part thereof or any agreement relating thereto, or any collateral securing the Obligations or any part thereof; (c) any waiver of any right, power or remedy or of any Default, Event of Default, Servicer Default or default with respect to the Obligations or any part thereof or any agreement relating thereto; (d) any release, surrender, compromise, settlement, waiver, subordination or modification, with or without consideration, of any other obligation of any person or entity with respect to the Obligations or any part thereof; (e) the enforceability or validity of the Obligations or any part thereof or the genuineness, enforceability or validity of any agreement relating thereto or with respect to the Obligations or any part thereof; (f) the application of payments received from any source to the payment of any payment Obligations of the Servicer, any part thereof or amounts which are not covered by this Guaranty even though the Administrative Agent or the Lenders might lawfully have elected to apply such payments to

any part or all of the payment Obligations of the Servicer or to amounts which are not covered by this Guaranty; (g) the existence of any claim, setoff or other rights which the Performance Guarantor may have at any time against the Servicer in connection herewith or any unrelated transaction; (h) any assignment or transfer of the Obligations or any part thereof; or (i) any failure on the part of the Servicer to perform or comply with any term of the Loan Agreement or any other document executed in connection therewith or delivered thereunder, all whether or not the Performance Guarantor shall have had notice or knowledge of any act or omission referred to in the foregoing clauses (a) through (i) of this Section. Section 5. Unenforceability of Obligations Against the Servicer. Notwithstanding (a) any change of ownership of the Servicer or the insolvency, bankruptcy or any other change in the legal status of the Servicer; (b) the change in or the imposition of any law, decree, regulation or other governmental act which does or might impair, delay or in any way affect the validity, enforceability or the payment when due of the Obligations; (c) the failure of the Servicer or the Performance Guarantor to maintain in full force, validity or effect or to obtain or renew when required all governmental and other approvals, licenses or consents required in connection with the Obligations or this Guaranty, or to take any other action required in connection with the performance of all obligations pursuant to the Obligations or this Guaranty; or (d) if any of the moneys included in the Obligations have become unrecoverable from the Servicer for any reason other than final payment in full of the payment Obligations in accordance with their terms, this Guaranty shall nevertheless be binding on the Performance Guarantor. This Guaranty shall be in addition to any other guaranty or other security for the Obligations, and it shall not be rendered unenforceable by the invalidity of any such other guaranty or security. Section 6. Representations and Warranties. Section 6.1. Existence and Standing. The Performance Guarantor is a corporation duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation and has all requisite corporate authority to conduct its business in each jurisdiction in which its business is conducted. Section 6.2. Authorization; Validity. The Performance Guarantor has the corporate power and authority to execute and deliver this Guaranty, perform its obligations hereunder and consummate the transactions herein contemplated. The execution and delivery by the Performance Guarantor of this Guaranty, the performance of its obligations and consummation of the transactions contemplated hereunder have been duly authorized by proper corporate proceedings, and this Guaranty constitutes the legal, valid and binding obligation of the Performance Guarantor enforceable against the Performance Guarantor in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors' rights generally and by general equity principles (whether considered as a proceeding at law or in equity). Section 6.3. No Conflict; Government Consent. Neither the execution and delivery by the Performance Guarantor of this Guaranty, nor the consummation of the transactions herein contemplated, nor compliance with the provisions hereof will contravene or conflict with any law, rule, regulation, order, writ, judgment, injunction, decree or award binding on the Performance Guarantor or any of the other AHM Entities, except where such contravention or

conflict would not reasonably be expected to have a Material Adverse Effect, or the Performance Guarantor's certificate of incorporation or by-laws or the provisions of any indenture, instrument or agreement to which the Performance Guarantor is a party or is subject, or by which it, or its property, is bound, except where such contravention or conflict would not reasonably be expected to have a Material Adverse Effect, or result in the creation or imposition of any Lien in, of or on the property of the Performance Guarantor or any of its subsidiaries pursuant to the terms of any such indenture, instrument or agreement. Section 6.4. Financial Statements. The consolidated financial statements of the Performance Guarantor and its subsidiaries, heretofore delivered to the Lenders as required by the Loan Agreement, were prepared in accordance with generally accepted accounting principles in effect on the date such statements were prepared and fairly present the consolidated financial condition and operations of the Performance Guarantor and its Subsidiaries at such date and the consolidated results of their operations for the period then ended. Section 6.5. Material Adverse Change. Since March 31, 2003, there has been no change in the business, properties, financial condition or results of operations of the Performance Guarantor and its Subsidiaries which is reasonably likely to have a Material Adverse Effect on (i) the business, properties, financial condition or results of operations of the Performance Guarantor and the other AHM Entities taken as a whole, (ii) the ability of the Performance Guarantor to perform its obligations under this Guaranty, or (iii) the validity or enforceability of any portion of this Guaranty or the rights or remedies of the Administrative Agent or the Lenders hereunder. Section 6.6. Taxes. The Performance Guarantor and the other AHM Entities have filed all United States federal tax returns and all other tax returns which are required to be filed, except where the failure to file would not reasonably be expected to have a Material Adverse Effect, and have paid all taxes due pursuant to said returns or pursuant to any assessment received by the Performance Guarantor or any of the other AHM Entities, except such taxes, if any, as are being contested in good faith and as to which adequate reserves have been provided. No tax liens have been filed which are reasonably likely to have a Material Adverse Effect on (i) the business, properties, financial condition or results of operations of the Performance Guarantor and the other AHM Entities taken as a whole, (ii) the ability of the Performance Guarantor to perform its obligations under this Guaranty, or (iii) the validity or enforceability of any portion of this Guaranty or the rights or remedies of the Administrative Agent or the Lenders hereunder, and no claims are being asserted in writing with respect to any such taxes. The charges, accruals and reserves on the books of the Performance Guarantor and the other AHM Entities in respect of any taxes or other governmental charges are adequate. Section 6.7. Litigation and Contingent Obligations. There is no litigation, arbitration, governmental investigation, proceeding or inquiry pending or, to the knowledge of any of their officers, threatened against or affecting the Performance Guarantor or its Subsidiaries which is reasonably likely to have a Material Adverse Effect on (i) the business, properties, financial condition or results of operations of the Performance Guarantor and the other AHM Entities taken as a whole, (ii) the ability of the Performance Guarantor to perform its obligations under this Guaranty, or (iii) the validity or enforceability of any portion of this Guaranty or the rights or remedies of the Administrative Agent or the Lenders hereunder. The Performance Guarantor has

no material contingent obligations not provided for or disclosed in the financial statements referred to in Section 6.4. Section 7. Covenants. The Performance Guarantor hereby covenants and agrees for the benefit of the Administrative Agent and the Lenders, until the Obligations have been satisfied in full and the Loan Agreement has been terminated, as follows: (a) to promptly notify SPV upon (i) any dispute between the Performance Guarantor and any Governmental Authority or any other Person that, if adversely determined, would have a Material Adverse Effect; (ii) any material adverse change in the business, operations or financial condition of the Performance Guarantor, including, without limitation, such Performance Guarantor's insolvency; (iii) any event or condition known to it that, if adversely determined, would have a Material Adverse Effect; and (iv) the receipt of any notice of any final judgment or order for payment of money applicable to the Performance Guarantor in excess of $10,000,000; (b) to pay and discharge promptly all taxes, assessments and governmental charges or levies imposed upon it or upon its income or upon any of its Property as well as all claims of any kind (including claims for labor, materials, supplies and rent) that, if unpaid, might become a Lien upon any or all of its Property; provided, however, the Performance Guarantor shall not be required to pay any such tax, assessment, charge, levy or claim if the amount, applicability or validity thereof shall currently be contested in good faith by appropriate proceedings diligently conducted by it or on its behalf and if it shall have set up reserves therefor adequate under GAAP; (c) to maintain its corporate existence, rights and franchises; and (d) to observe and comply in all material respects with all Governmental Requirements; and (e) promptly and in any event within 60 days after the end of each of the first three (3) quarters in each fiscal year of the Performance Guarantor, and within 120 days after the close of the Performance Guarantor's fiscal year, completed officer's certificates in the form of Exhibit H-3 attached to the Loan Agreement, executed by the treasurer or other Financial Officer of the Performance Guarantor. Section 8. Subrogation; Subordination. The Performance Guarantor shall not enforce or otherwise exercise any right of subrogation to any of the rights of the Administrative Agent or the Lenders against the Servicer, until the Obligations have been indefeasibly paid in full; notwithstanding anything to the contrary contained herein, until the Obligations have been indefeasibly paid in full, the Performance Guarantor hereby waives all rights of subrogation (whether contractual, under Section 509 of the United States Bankruptcy Code, at law or in equity or otherwise) to the claims of the Administrative Agent or any Lender against the Servicer and all contractual, statutory or legal or equitable rights of contribution, reimbursement, indemnification and similar rights and "claims" (as that term is defined in the United States Bankruptcy Code) which the Performance Guarantor might now have or hereafter acquire against the Servicer that arises from the existence or performance of the Servicer' obligations hereunder; until the Obligations have been indefeasibly paid in full, the Performance Guarantor will not claim any setoff, recoupment or counterclaim against the Servicer in respect of any

liability of the Performance Guarantor to the Servicer; and the Performance Guarantor waives any benefit of and any right to participate in any collateral security which may be held by the Administrative Agent or any Lender. Unless otherwise provided for in the Subordination Agreement, the payment of any amounts due with respect to any indebtedness for borrowed money of the Servicer now or thereafter owed to the Performance Guarantor is hereby subordinated to the prior payment in full of all of the Obligations. The Performance Guarantor agrees that, after the occurrence, and during the continuation, of any default in the payment or performance of any of the Obligations, the Performance Guarantor will not demand, sue for or otherwise attempt to collect any such indebtedness of the Servicer to the Performance Guarantor until all of the Obligations shall have been paid and performed in full. If, notwithstanding the foregoing sentence, the Performance Guarantor shall collect, enforce or receive any amounts in respect of such indebtedness while any Obligations are still unperformed or outstanding, such amounts shall be collected, enforced and received by the Performance Guarantor as trustee for the Lenders and be paid over to the Administrative Agent on account of the Obligations without affecting in any manner the liability of the Performance Guarantor under the other provisions of this Guaranty. The provisions of this Section 8 shall be supplemental to and not in derogation of any rights and remedies of the Administrative Agent and the Lenders under any separate subordination agreement which the Administrative Agent and the Lenders may at any time and from time to time enter into with the Performance Guarantor. Section 9. Termination of Guaranty. The Performance Guarantor's obligations hereunder shall continue in full force and effect until all Obligations are finally paid and satisfied in full and the Loan Agreement is terminated; provided, however, that this Guaranty shall continue to be effective or shall be reinstated, as the case may be, if at any time payment or other satisfaction of any of the Obligations is rescinded or must otherwise be restored or returned upon the bankruptcy, insolvency, or reorganization of the Servicer, or otherwise, as though such payment had not been made or other satisfaction occurred, whether or not the Administrative Agent is in possession of this Guaranty. No invalidity, irregularity or unenforceability by reason of the Bankruptcy Code or any insolvency or other similar law, or any law or order of any government or agency thereof purporting to reduce, amend or otherwise affect the Obligations shall impair, affect, be a defense to or claim against the obligations of the Performance Guarantor under this Guaranty. Section 10. Effect of Bankruptcy. This Guaranty shall survive the insolvency of the Servicer and the commencement of any case or proceeding by or against the Servicer under the federal Bankruptcy Code or other federal, state or other applicable bankruptcy, insolvency or reorganization statutes. No automatic stay under the federal Bankruptcy Code or other federal, state or other applicable bankruptcy, insolvency or reorganization statutes to which the Servicer is subject shall postpone the obligations of the Performance Guarantor under this Guaranty. Section 11. Setoff. Regardless of the other means of obtaining payment of any of the Obligations, each of the Administrative Agent and the Lenders is hereby authorized at any time and from time to time during the existence of a Servicer Default, without notice to the Performance Guarantor (any such notice being expressly waived by the Performance Guarantor) and to the fullest extent permitted by law, to set off and apply such deposits and other sums against the obligations of the Performance Guarantor under this Guaranty, whether or not the

Administrative Agent and the Lenders shall have made any demand under this Guaranty and although such obligations may be contingent or unmatured. Section 12. Taxes. All payments to be made by the Performance Guarantor hereunder shall be made free and clear of any deduction or withholding. If the Performance Guarantor is required by law to make any deduction or withholding on account of tax or otherwise from any such payment, the sum due from it in respect of such payment shall be increased to the extent necessary to ensure that, after the making of such deduction or withholding, the Administrative Agent and the Lenders receive a net sum equal to the sum which they would have received had no deduction or withholding been made. Section 13. Further Assurances. The Performance Guarantor agrees that it will permit the Administrative Agent and the Lenders or any of their duly authorized representatives, during normal business hours, and upon reasonable notice to consult and discuss with the Performance Guarantor's Treasurer or Controller, with respect to the Performance Guarantor's business, finances, accounts and affairs. The Performance Guarantor agrees that it will, from time to time, at the request of the Administrative Agent and the Lenders, provide to the Administrative Agent and the Lenders information relating to the business and affairs of the Performance Guarantor as the Administrative Agent and the Lenders may reasonably request. The Performance Guarantor also agrees to do all such things and execute all such documents as the Administrative Agent and the Lenders may reasonably consider necessary or desirable to give full effect to this Guaranty and to perfect and preserve the rights and powers of the Administrative Agent and the Lenders hereunder. Section 14. Successors and Assigns. This Guaranty shall be binding upon the Performance Guarantor, its successors and assigns, and shall inure to the benefit of and be enforceable by the Administrative Agent and the Lenders and their successors, transferees and assigns. The Performance Guarantor may not assign or transfer any of its obligations hereunder without the prior written consent of each of the Lenders and any attempted assignment shall be null and void. Section 15. Amendments and Waivers. No amendment or waiver of any provision of this Guaranty nor consent to any departure by the Performance Guarantor therefrom shall be effective unless the same shall be in writing and signed by the Administrative Agent and the Performance Guarantor. No failure on the part of the Administrative Agent or any Lender to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. Section 16. Notices. All notices and other communications called for hereunder shall be made in writing and, unless otherwise specifically provided herein, shall be deemed to have been duly made or given when delivered by hand or mailed first class, postage prepaid, or, in the case of telegraphic, telecopied or telexed notice, when transmitted, answer back received, addressed as follows: if to the Performance Guarantor, at the address set forth beneath its signature hereto, and if to the Administrative Agent and the Lenders at its address specified in the Loan Agreement, or at such other address as either party may designate in writing to the other.

Section 17. GOVERNING LAW. THIS GUARANTY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF, OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW WHICH SHALL APPLY HERETO). Section 18. CONSENT TO JURISDICTION. THE PERFORMANCE GUARANTOR HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR NEW YORK STATE COURT SITTING IN NEW YORK, NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS GUARANTY, THE LOAN AGREEMENT OR ANY OTHER DOCUMENT EXECUTED IN CONNECTION THEREWITH OR DELIVERED THEREUNDER AND THE PERFORMANCE GUARANTOR HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE ADMINISTRATIVE AGENT, ANY MANAGING AGENT OR ANY LENDER TO BRING PROCEEDINGS AGAINST THE PERFORMANCE GUARANTOR IN THE COURTS OF ANY OTHER JURISDICTION. Section 19. Miscellaneous. This Guaranty constitutes the entire agreement of the Performance Guarantor with respect to the matters set forth herein. The rights and remedies herein provided are cumulative and not exclusive of any remedies provided by law or any other agreement, and this Guaranty shall be in addition to any other guaranty of or collateral security for any of the Obligations. The provisions of this Guaranty are severable, and in any action or proceeding involving any state corporate law, or any state or federal bankruptcy, insolvency, reorganization or other law affecting the rights of creditors generally, if the obligations of the Performance Guarantor hereunder would otherwise be held or determined to be avoidable, invalid or unenforceable on account of the amount of the Performance Guarantor's liability under this Guaranty, then, notwithstanding any other provision of this Guaranty to the contrary, the amount of such liability shall, without any further action by the Performance Guarantor, the Administrative Agent or any Lender, be automatically limited and reduced to the highest amount that is valid and enforceable as determined in such action or proceeding. The invalidity or unenforceability of any one or more sections of this Guaranty shall not affect the validity or enforceability of its remaining provisions. Captions are for the ease of reference only and shall not affect the meaning of the relevant provisions. The meanings of all defined terms used in this Guaranty shall be equally applicable to the singular and plural forms of the terms defined. [Signatures Follow]

IN WITNESS WHEREOF, the Performance Guarantor has caused this Guaranty to be executed and delivered as of the date first above written. AMERICAN HOME MORTGAGE HOLDINGS, INC. By: /s/ Stephen A. Hozie -------------------- Name: Stephen A. Hozie Title: Executive Vice President and Chief Financial Officer Address: 520 Broadhollow Road Melville, NY 11747

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