UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

(Rule 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934

Filed by the Registrant  x
Filed by a Party other than the Registrant  o
Check the appropriate box:
o	Preliminary Proxy Statement
o	Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
x	Definitive Proxy Statement
o	Definitive Additional Materials
o	Soliciting Material Pursuant to §240.14a-12

THE RYLAND GROUP, INC.
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
x	No fee required.
o	Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
	(1)	Title of each class of securities to which transaction applies:
	(2)	Aggregate number of securities to which transaction applies:
	(3)	Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
	(4)	Proposed maximum aggregate value of transaction:
	(5)	Total fee paid:
o	Fee paid previously with preliminary materials.
o	Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
	(1)		Amount previously paid:
	(2)		Form, Schedule or Registration Statement No.:
	(3)		Filing Party:
	(4)		Date Filed:

THE RYLAND GROUP, INC.

24025 Park Sorrento, Suite 400

Calabasas, California 91302

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

To the Stockholders:

Notice is given that the Annual Meeting of Stockholders of The Ryland Group, Inc. (“Ryland”) will be held at The Ritz-Carlton, 4375 Admiralty Way, Marina del Rey, California, on April 29, 2009, at 8:00 a.m., local time, for the following purposes:

1.  To elect eight Directors to serve until the next Annual Meeting of Stockholders or until their successors are elected and shall qualify.

2.  To approve an Amendment to The Ryland Group, Inc. Articles of Incorporation to preserve the value of certain tax assets associated with net operating loss carryforwards under Section 382 of the Internal Revenue Code.

3.  To approve The Ryland Group, Inc. Shareholder Rights Plan designed to preserve the value of certain tax assets associated with net operating loss carryforwards under Section 382 of the Internal Revenue Code.

4.  To consider a proposal from The Nathan Cummings Foundation (a stockholder) requesting stockholder approval of a request that the Board of Directors adopt quantitative goals for reducing greenhouse gas emissions from Ryland’s products and operations.

5.  To consider a proposal from certain retirement systems and pension funds of the employees of the City of New York (stockholders) requesting stockholder approval of a request that the Board of Directors adopt a policy providing stockholders with the opportunity at each annual stockholder meeting to vote on an advisory resolution to ratify the compensation of the named executive officers in the Proxy Statement’s Summary Compensation Table.

6.  To consider a proposal from Amalgamated Bank LongView MidCap 400 Index Fund (a stockholder) requesting stockholder approval of a request that the Board of Directors adopt a policy covering future agreements for payments to senior executives in the event of a change of control, with any payments to be made only if an executive’s employment is terminated and with no accelerated vesting of unvested equity awards.

7.  To ratify the appointment of Ernst & Young LLP as Ryland’s independent registered public accounting firm for the fiscal year ending December 31, 2009.

8.  To act upon other business properly brought before the meeting.

Stockholders of record at the close of business on February 17, 2009 are entitled to vote at the meeting or any adjournment thereof. Please date and sign the enclosed proxy and return it in the accompanying postage-paid return envelope. You may revoke your proxy at any time prior to its exercise by filing with the Secretary of Ryland a notice of revocation or a duly executed proxy bearing a later date. Your proxy may also be revoked by attending the meeting and voting in person.

By Order of the Board of Directors

TIMOTHY J. GECKLE

Secretary

March 12, 2009

PROXY STATEMENT

The enclosed proxy is being solicited by The Ryland Group, Inc. (“Ryland”) for use at the Annual Meeting of Stockholders on April 29, 2009. This Proxy Statement and proxy are first being distributed to stockholders on approximately March 12, 2009.  Ryland’s Annual Report to Stockholders for the year ended December 31, 2008, including financial statements and accompanying notes, is enclosed with this Proxy Statement. If a proxy is properly executed and received by Ryland prior to voting at the meeting, the shares represented by the proxy will be voted in accordance with the instructions contained on the proxy. In the absence of instructions, the shares will be voted FOR the management proposals and AGAINST the stockholder proposals set forth in this Proxy Statement. A proxy may be revoked by a stockholder at any time prior to its exercise by filing with the Secretary of Ryland a notice of revocation or a duly executed proxy bearing a later date. It may also be revoked by attendance at the meeting and election to vote in person.

The election of Directors requires a plurality of the votes cast with a quorum present. For the election of Directors, abstentions and broker non-votes are not votes cast and have no effect on the plurality vote required.

The approval of an Amendment to The Ryland Group, Inc. Articles of Incorporation to preserve the value of certain tax assets associated with net operating loss carryforwards under Section 382 of the Internal Revenue Code requires the affirmative vote of a majority of Ryland’s outstanding shares of Common Stock entitled to vote at the meeting or any adjournment thereof. Abstentions and broker non-votes will have the same effect as a vote against the proposal.

The approval of The Ryland Group, Inc. Shareholder Rights Plan, the stockholder proposals of The Nathan Cummings Foundation, retirement systems and pension funds of the employees of the City of New York and Amalgamated Bank LongView MidCap 400 Index Fund, and the ratification of Ernst & Young LLP as Ryland’s independent registered public accounting firm for the fiscal year ending December 31, 2009, require the affirmative vote of a majority of the votes cast in person or by proxy with a quorum present. Abstentions and broker non-votes will not be considered votes cast for the foregoing purposes.

Ryland will utilize the services of Georgeson Inc. in the solicitation of proxies for this Annual Meeting of Stockholders for a fee of $7,500, plus expenses. Ryland may also solicit proxies by mail, personal interview or telephone by officers and other management employees of Ryland, who will receive no additional compensation for their services. The cost of solicitation of proxies is borne by Ryland. Arrangements will be made by Ryland for the forwarding to beneficial owners, at Ryland’s expense, of soliciting materials by brokerage firms and others.

Only stockholders of record at the close of business on February 17, 2009 are entitled to vote at the meeting or any adjournment thereof. The only outstanding securities of Ryland entitled to vote at the meeting are shares of Common Stock. There were 42,872,897 shares of Common Stock outstanding as of the close of business on February 17, 2009. Ryland’s Common Stock does not have cumulative voting rights. Holders of Common Stock are entitled to one vote per share on all matters. The representation in person or by proxy of at least a majority of the outstanding shares entitled to vote is necessary to provide a quorum at the meeting.

Please read this important notice regarding the availability of proxy materials for the Annual Meeting of Stockholders to be held on April 29, 2009.  This Proxy Statement and proxy as well as the Annual Report to Stockholders for the year ended December 31, 2008, are available at http://investor.shareholder.com/ryl/sec.cfm.

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PROPOSAL NO. 1

ELECTION OF DIRECTORS

The Directors listed below (eight in number) are nominated for election to hold office until the next Annual Meeting of Stockholders or until the election and qualification of their successors. The proxies solicited, unless directed to the contrary, will be voted FOR the eight Directors named below.

Management has no reason to believe that any nominee is unable or unwilling to serve as a Director; but if that should occur for any reason, the proxy holders reserve the right to vote for another person of their choice.

The Board is required under the Securities and Exchange Commission and New York Stock Exchange rules to affirmatively determine the independence of each Director and to disclose such determination in the Proxy Statement for each Annual Meeting of Stockholders. The Board has established Guidelines on Significant Corporate Governance Issues which require independent Directors to meet all elements of the New York Stock Exchange corporate governance standards.  These Guidelines are available on Ryland’s Web site at www.ryland.com and will be provided to stockholders upon request.  During 2008, Ryland purchased building materials and labor in a competitive bid process from Building Materials Holding Corporation (“BMHC”), a company in which Director Robert E. Mellor is the Chairman of the Board and Chief Executive Officer.  The purchases represented approximately 4.35 percent of BMHC’s revenues.  Based on the Board’s Guidelines and the New York Stock Exchange corporate governance standards, the Board, at its meeting held on February 25, 2009, has determined that all non-employee Directors except Mr. Mellor meet the definition of “independence.”

The nomination process for Directors is supervised by Ryland’s Nominating and Governance Committee.  The Committee seeks out appropriate candidates to serve as Directors of Ryland, and the Committee interviews and examines Director candidates and makes recommendations to the Board regarding candidate selection. Once the Committee has selected appropriate candidates for election as a Director, it presents the candidates to the full Board of Directors for election if the selection occurs during the course of the year, or for nomination if the Director is elected by the stockholders. Directors are nominated each year for election by the stockholders and are included in Ryland’s Proxy Statement.

Ryland’s Bylaws provide the procedure for stockholders to make Director nominations. A nominating stockholder must give appropriate notice to Ryland of the nomination not less than 75 days prior to the date of the Annual Meeting of Stockholders. If less than 100 days’ notice of the date of the Annual Meeting of Stockholders is given by Ryland, then Ryland must receive notice of the nomination not later than the close of business on the 10th day following the date Ryland first mailed the notice or made public disclosure of the meeting. The stockholders’ notice shall set forth, as to

(a)each person whom the stockholder proposes to nominate for election as a Director:

·name, age, business address and residence address of the person,

·the principal occupation or employment of the person,

·the number of shares of Ryland stock which are beneficially owned, if any, by the person, and

·any other information relating to the person which is required to be disclosed in solicitations for proxies for the election of Directors pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (“Exchange Act”), or any successor act or regulation; and

(b)the stockholder giving the notice:

·the name and record address of the stockholder, and

·the number of shares of Ryland stock which are beneficially owned by the stockholder.

Ryland may require any proposed nominee to furnish such other information as may be reasonably required by Ryland to determine the qualifications of such proposed nominee to serve as a Director of Ryland.

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Name, Age and
Year in which
First Elected
a Director	Principal Occupation for Five Prior Years and Other Information
R. Chad Dreier	Chairman of the Board of Directors and Chief Executive Officer of Ryland (1)
61 (1993)
Leslie M. Frécon	Chief Executive Officer and Chairman of LFE Capital, LLC; and Director of Associated Packaging
55 (1998)	Technologies, Inc., M.A. Gedney Company, Inc., Avant Holdings, Inc. and Portero, Inc.
Roland A. Hernandez	Chairman of the Board of Directors and Chief Executive Officer of Telemundo Group, Inc. until 2000;
51 (2001)	and Director of Vail Resorts, Inc., MGM Mirage, Inc., Sony Corporation and Lehman Brothers, Inc.
William L. Jews	President and Chief Executive Officer of CareFirst Blue Cross Blue Shield until 2006; and Director of
57 (1995)	Choice Hotels International, Inc., Fortress International Group Inc. and Camden Learning Corporation
Ned Mansour	President of Mattel, Inc. until 2000; and Director of Blue Nile, Inc.
60 (2000)
Robert E. Mellor	Chairman of the Board of Directors and Chief Executive Officer of Building Materials Holding
65 (1999)	Corporation; and Director of Coeur d’Alene Mines Corporation
Norman J. Metcalfe	Director of The Tejon Ranch Company (real estate development) and Building Materials Holding
66 (2000)	Corporation
Charlotte St. Martin	Executive Director of the Broadway League since July 2006; and Executive Vice President of
63 (1996)	Loews Hotels until 2005

(1) Mr. Dreier will retire as Chief Executive Officer of Ryland on May 29, 2009 while continuing in his role as Chairman of the Board of Directors. Effective May 29, 2009, Larry T. Nicholson will be promoted to the position of Chief Executive Officer of Ryland adding to his role as President.

THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR EACH OF THE NOMINEES LISTED ABOVE.

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

To the knowledge of Ryland, the only beneficial owners of more than 5 percent of the outstanding shares of Common Stock, as of February 17, 2009, are:

	Amount and Nature
Name and Address	of Beneficial Ownership	Percent of Class
FMR LLC	6,378,270(1)	14.9%
82 Devonshire Street
Boston, MA 02109
Janus Capital Management LLC	4,499,271(2)	10.5%
151 Detroit Street
Denver, CO 80206
Barclays Global Investors, NA	3,037,280(3)	7.1%
400 Howard Street
San Francisco, CA 94105
State Street Bank and Trust Company	2,780,315(4)	6.5%
One Lincoln Street
Boston, MA 02111
Dimensional Fund Advisers LP	2,664,146(5)	6.2%
Palisades West
Building One
6300 Bee Cave Road
Austin, TX 78746
LMM LLC	2,343,470(6)	5.5%
Legg Mason Capital Management, Inc.
100 Light Street
Baltimore, MD 21202

(1)Based on information contained in a Schedule 13G/A filed with the Securities and Exchange Commission (the “SEC”) on February 17, 2009, FMR LLC (“FMR”) has reported that it beneficially owns the number of shares indicated in the table above. FMR’s wholly-owned subsidiary, Fidelity Management and Research Company (“Fidelity”) beneficially owns 5,276,670 shares of Common Stock as a result of acting as investment adviser to various investment companies registered under Section 8 of the Investment Company Act of 1940. The ownership of one investment company, Growth & Income Fund, amounted to 2,500,000 shares of Common Stock. Edward C. Johnson 3d, Chairman of FMR, and certain affiliated funds each has sole power to dispose of the shares owned by Fidelity, but none of these entities has sole voting power with respect to these shares (which power rests with the Boards of Trustees of various Fidelity funds). Pyramis Global Advisors Trust Company (“PGATC”), an indirect wholly-owned subsidiary of FMR, is the beneficial owner of 1,098,900 shares of Common Stock in its role as investment manager. Mr. Johnson and FMR each has sole dispositive power over 1,098,900 shares and sole voting power over 982,000 shares owned by the accounts managed by PGATC. Fidelity International Limited, a related investment adviser, beneficially owns 2,700 shares of Common Stock.

(2)Based on information contained in a Schedule 13G/A filed with the SEC on February 17, 2009, Janus Capital Management LLC has reported that it has sole power to direct the vote and disposition of all of the shares of Common Stock indicated above in its role as investment advisor to certain managed portfolios including INTECH Investment Management and Perkins Investment Management LLC. Janus Worldwide Fund, one of the managed portfolios to which Janus Capital provides investment advice, beneficially owns 3,255,000 shares of Common Stock.

(3)Based on information contained in a Schedule 13G filed with the SEC on February 5, 2009. Barclays Global Investors, NA has sole dispositive power over 1,041,637 shares and sole voting power over 894,948 shares of Common Stock. Barclays Global Investors, Ltd. has sole dispositive power over 29,090 shares of Common Stock. Barclays Global Fund Advisors has sole dispositive power over 1,966,553 shares and sole voting power over 1,725,218 shares of Common Stock.

(4)Based on information contained in a Schedule 13G filed with the SEC on February 13, 2009, all of these shares are owned with sole voting and shared dispositive power.

(5)Based on information contained in a Schedule 13G filed with the SEC on February 9, 2009, all of these shares are owned with sole dispositive power and 2,602,017 of these shares are owned with sole voting power.

(6)Based on information contained in a Schedule 13G/A filed with the SEC on February 17, 2009, jointly as a group, investment advisers LMM LLC (through the management of Legg Mason Opportunity Trust) and Legg Mason Capital Management, Inc. have shared power to direct the vote and disposition of 2,100,000 shares and 243,470 shares of Common Stock, respectively.

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The following table sets forth, as of February 17, 2009, the number of shares of Ryland’s Common Stock beneficially owned by Ryland’s Directors, each of the executive officers named in the Summary Compensation Table, and by the Directors and executive officers as a group:

	Number of Shares
Name of Beneficial Owner	Beneficially Owned (1)
R. Chad Dreier	496,932
Leslie M. Frécon	109,755
Roland A. Hernandez	74,627
William L. Jews	113,176
Ned Mansour	101,837
Robert E. Mellor	162,569(2)
Norman J. Metcalfe	180,837
Charlotte St. Martin	73,293
Larry T. Nicholson	145,276
Gordon A. Milne	266,634
Keith E. Bass	71,931
Daniel G. Schreiner	159,189
Directors and executive officers as a group (17 persons)	2,661,350

(1)With the exception of Mr. Dreier, no other Director, nominee or executive officer beneficially owns more than 1 percent of Ryland’s outstanding Common Stock. Mr. Dreier beneficially owns 1.2 percent of Ryland’s outstanding Common Stock. Directors, nominees and executive officers as a group beneficially own 6.2 percent of Ryland’s outstanding Common Stock. All of the shares in the table are owned individually with sole voting and dispositive power.

Includes shares subject to stock options which may be exercised within 60 days of February 17, 2009, as follows: Ms. Frécon, 90,000 shares; Mr. Hernandez, 60,000 shares; Mr. Jews, 100,000 shares; Mr. Mansour, 75,000 shares; Mr. Mellor, 128,000 shares; Mr. Metcalfe, 140,000 shares; Ms. St. Martin, 60,000 shares; Mr. Nicholson, 83,000 shares; Mr. Milne, 133,334 shares; Mr. Bass, 40,667 shares; Mr. Schreiner, 84,934 shares; and Directors and executive officers as a group, 1,388,230 shares.

Includes shares represented by restricted stock units as follows: Mr. Dreier, 160,000 shares; Mr. Nicholson, 46,667 shares; Mr. Milne, 79,000 shares; Mr. Bass, 30,000 shares; Mr. Schreiner, 31,667 shares; and Directors and executive officers as a group, 480,002 shares.

Includes shares of Common Stock which have been allocated to participants’ accounts under Ryland’s Retirement Savings Opportunity Plan as follows: Mr. Dreier, 2,932 shares; Mr. Nicholson, 576 shares; and Directors and executive officers as a group, 17,675 shares.

Includes shares of Common Stock that have been allocated to the Directors’ deferred compensation plan accounts as follows: Mr. Hernandez, 6,863 shares; Mr. Mansour, 9,373 shares; and Mr. Metcalfe, 9,373 shares.

(2)Does not include 2,000 shares of Common Stock owned by Mr. Mellor’s wife as to which he disclaims beneficial ownership.

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INFORMATION CONCERNING THE BOARD OF DIRECTORS

During 2008, the Board of Directors held six meetings. All incumbent Directors attended at least 75 percent of the meetings of the Board of Directors and of the committees of the Board of Directors on which they served during 2008. Directors are expected to attend the 2009 Annual Meeting of Stockholders and the entire Board was present at last year’s meeting. The Board of Directors of Ryland has Audit, Compensation, Finance and Nominating and Governance Committees. Each of the committees has adopted a charter, all of which are available either for viewing on Ryland’s Web site at www.ryland.com or upon request from the Corporate Secretary’s office by phone at 818-223-7500 or by writing to The Ryland Group, Inc., 24025 Park Sorrento, Suite 400, Calabasas, California 91302.

The Audit Committee of the Board of Directors was composed of Directors Frécon, Hernandez and Mansour. The Audit Committee reviews Ryland’s financial statements and reports, the audit services provided by Ryland’s independent public accountants and the reports of Ryland’s internal auditors. During 2008, four meetings of the Audit Committee were held.

The Finance Committee of the Board of Directors was composed of Directors Frécon, Hernandez, Mellor and Metcalfe. The Finance Committee reviews and monitors the financial plans and capital structure of Ryland. There were two meetings of the Finance Committee during 2008.

The Nominating and Governance Committee recommends to the Board of Directors candidates to fill vacancies on the Board, makes recommendations about the composition of the Board’s Committees, monitors the role and effectiveness of the Board and oversees the corporate governance process. Directors Jews, Mansour and St. Martin were the members of the Nominating and Governance Committee, which held three meetings during 2008. The Nominating and Governance Committee will consider nominees proposed by stockholders for election to the Board of Directors. Recommendations by stockholders should be forwarded to the Secretary of Ryland, and should identify the nominee by name and provide information about the nominee’s background and experience.

The Compensation Committee of the Board of Directors determines and approves Ryland’s compensation plans and the amount and form of compensation awarded and paid to executive officers and key employees of Ryland, including awards and distributions under Ryland’s compensation plans. Directors Jews, Metcalfe and St. Martin served as Compensation Committee members during 2008. The Compensation Committee members do not have interlocking relationships with compensation committees of other companies. During 2008, the Compensation Committee held four meetings. For information regarding Ryland’s processes and procedures for evaluating and determining executive and Director compensation, please refer to the “Compensation Discussion and Analysis” and the section entitled “Compensation Governance” on page 9 of this Proxy Statement.

As required by the rules of the New York Stock Exchange, the Board of Directors has held, and will continue to hold, regularly scheduled executive sessions of the non-management Directors. The non-management Lead Director, which is currently Mr. Jews, presides at these independent sessions.

The Board of Directors has adopted a Code of Ethics which is applicable to the Board of Directors, senior officers (including Ryland’s principal executive, financial and accounting officers) and employees of Ryland. Any waiver of the Code of Ethics for Directors or executive officers will be promptly disclosed to stockholders on Ryland’s Web site. The Board has also adopted a Policy for the Review of Transactions with Related Persons which governs all transactions with related parties, given the potential for real or perceived conflicts of interest. The Nominating and Governance Committee is responsible for implementing the policy, and reviews, approves or ratifies all transactions with related persons. The policy governs any transaction or series of transactions over $120,000 in which Ryland is or would be a participant, and in which any Director, executive officer or five percent stockholder of Ryland or members of their immediate families would have a direct or indirect material interest. The Code of Ethics and Policy for the Review of Transactions with Related Persons are available on Ryland’s Web site at www.ryland.com and will be provided to stockholders upon written request.

6

AUDIT COMMITTEE REPORT

The Audit Committee oversees Ryland’s financial reporting process on behalf of the Board of Directors. The members of the Audit Committee are “independent” as defined in the listing standards of the New York Stock Exchange, which is the exchange on which Ryland’s Common Stock is listed. The Board of Directors has determined that Director Leslie M. Frécon, a member of the Audit Committee, is an “audit committee financial expert” as that term is defined in Item 407(d)(5) of Regulation S-K promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

The Board of Directors updated and approved the written charter for the Audit Committee at the February 25, 2009 Board meeting. Management has the primary responsibility for the financial statements and the reporting process, including the systems of internal controls. In fulfilling its oversight responsibilities, the Committee reviewed and discussed the audited financial statements with management including a discussion of the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments, and the clarity of disclosures in the financial statements.

The Committee reviewed and discussed with the independent registered public accounting firm, Ernst & Young LLP, which is responsible for expressing an opinion on the conformity of those audited financial statements with generally accepted accounting principles, its judgment as to the quality, not just the acceptability, of Ryland’s accounting principles and such other matters as are required to be discussed with the Committee under generally accepted auditing standards, as well as the matters required to be discussed by the Statement on Auditing Standards No. 61 (Communications with Audit Committees), as amended. The Committee discussed with Ryland’s internal auditors and independent registered public accounting firm the overall scope and plans for their respective audits. In addition, the Committee has discussed with the internal auditors and independent registered public accounting firm, with and without management present, the results of their examinations, their evaluations of Ryland’s internal controls, and the overall quality of Ryland’s financial reporting. The Committee received from the independent registered public accounting firm written disclosures regarding the auditors’ independence required by PCAOB Rule 3526 (Communication with Audit Committees Concerning Independence) and the Committee discussed with the independent registered public accounting firm that firm’s independence and considered the compatibility of non-audit services with the auditors’ independence. The Committee discussed and assessed with management and Ernst & Young LLP, management’s report and Ernst & Young LLP’s report and attestation on internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act.

In reliance on the reviews and discussions referred to above, the Committee recommended to the Board of Directors and the Board of Directors approved the inclusion of the audited financial statements in the Annual Report on Form 10-K for the year ended December 31, 2008, for filing with the SEC. The Committee also approved the selection of Ernst & Young LLP as Ryland’s independent registered public accounting firm for 2009. The Audit Committee noted that Ernst & Young LLP did not provide services subject to the category entitled “All Other Fees” set forth below, and concluded that Ernst & Young LLP’s independence was maintained.

For the fiscal years ended December 31, 2008 and 2007, professional services were performed by Ernst & Young LLP.

Total fees paid to Ernst & Young LLP aggregated $1,186,600 and $1,252,700 for the fiscal years ended December 31, 2008 and 2007, respectively, and were composed of the following:

Audit Fees: The aggregate fees billed for the audit of the financial statements for the fiscal years ended December 31, 2008 and 2007 were $1,062,500 and $1,142,500, respectively. The audit fees also include reviews of the financial statements included in Ryland’s Quarterly Reports on Form 10-Q, testing and evaluating internal controls over financial reporting, and assistance with and review of documents filed with the SEC.

7

Audit-Related Fees: The aggregate fees billed for audit-related services for the fiscal years ended December 31, 2008 and 2007 were $83,000 and $107,000, respectively. These fees are for assurance and related services performed by Ernst & Young LLP that are reasonably related to the performance of the audit or review of Ryland’s financial statements, including employee benefit plan audits, attest services that are not required by statute or regulation, internal control reviews and other financial accounting/reporting matters.

Tax Fees: The aggregate fees billed for tax services for the fiscal years ended December 31, 2008 and 2007 were $41,100 and $3,200, respectively. These fees relate to professional services performed by Ernst & Young LLP with respect to tax compliance, tax advice and tax planning.

All Other Fees: No other fees were paid to Ernst & Young LLP in either fiscal year 2008 or fiscal year 2007.

The Audit Committee annually approves in advance each year’s engagement for audit services. The Committee also established procedures for pre-approval of all audit-related, tax and permitted non-audit services provided by and fees paid to Ernst & Young LLP. Fees for any of these services that will exceed the pre-approval fee limits or fees not contemplated by the original pre-approval must be separately approved by the Audit Committee. The Audit Committee may delegate pre-approval authority to one or more of its members. Any fees pre-approved in this manner are reported to the Audit Committee at its next scheduled meeting. All services and fees described above were pre-approved by the Audit Committee in fiscal year 2008.

Audit Committee of the Board of Directors

Leslie M. Frécon

Roland A. Hernandez

Ned Mansour

February 25, 2009

COMPENSATION COMMITTEE REPORT

The Compensation Committee reviewed and discussed with management the Compensation Discussion and Analysis set forth below as required by Item 402(b) of Regulation S-K promulgated under the Exchange Act. In reliance on the review and discussion referred to above, the Committee recommended to the Board of Directors, and the Board of Directors approved the inclusion of the Compensation Discussion and Analysis in the Proxy Statement for Ryland’s Annual Meeting of Stockholders to be held on April 29, 2009.

Compensation Committee of the Board of Directors

William L. Jews

Norman J. Metcalfe

Charlotte St. Martin

February 25, 2009

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COMPENSATION DISCUSSION AND ANALYSIS

General Overview

Annual and long-term compensation, equity awards and competitive benefits are the primary tools used by Ryland to attract, retain and motivate managers to deliver maximum performance in comparison to our competitors and enhance value to our stockholders. The quality and entrepreneurial culture fostered by Ryland in our management team helps assure the competitive edge we maintain in the marketplace. As a result, Ryland, through the leadership of the Compensation Committee of the Board of Directors, has developed and maintains a compensation program that rewards superior performance and seeks to encourage actions that drive our business strategy. Additionally, while taking into account the need for appropriate succession planning, we seek to maintain the continuity of our management team, and especially the continuity of our senior executive officers.

Compensation Governance

The Compensation Committee is composed of Directors Jews, Metcalfe and St. Martin, all of whom are considered “independent directors” under the New York Stock Exchange corporate governance standards and “outside directors” under Section 162(m) of the Internal Revenue Code (“Code”). This Committee has substantial business expertise and experience in overseeing our compensation programs and linking them to the objectives of our business.

The Compensation Committee is responsible for determining and approving Ryland’s compensation plans and programs. The Compensation Committee sets the amount and form of compensation awarded and paid to Ryland’s executive officers, managers and key employees, including establishing and approving awards and distributions under Ryland’s compensation plans and programs. The Committee is solely responsible for approving all compensation for the executive officers listed in the Summary Compensation Table, including that of Mr. Dreier, Ryland’s Chairman of the Board of Directors and Chief Executive Officer.

The Compensation Committee utilizes independent research provided by an external compensation consultant, the POE Group Inc., and comparative compensation data for similarly situated business organizations and Ryland’s peer group of national publicly-held homebuilders in order to perform its function and benchmark Ryland’s compensation plans and programs. Comparative compensation and benefit information for the Board of Directors, senior executives and managers is examined annually. A variety of external compensation sources and data are used, which include industry specific and general compensation surveys and compensation information extracted from our competitors’ proxy statements. The national homebuilder peer group companies we specifically track include: Beazer Homes USA, Inc., Centex Corporation, D.R. Horton, Inc., Hovnanian Enterprises, Inc., KB Home, Lennar Corporation, Meritage Homes Corporation, M.D.C. Holdings, Inc., NVR, Inc., Pulte Homes, Inc., Standard Pacific Corp. and Toll Brothers, Inc. These companies were chosen for comparison due to their similarity to Ryland in marketplace and principal business, and because they are our competition in the hiring and retention of senior executives and managers.

Executive Compensation Philosophy

Ryland’s executive compensation philosophy, plans and programs are designed to support our overall business strategy, objectives and goals in order to maintain our position as a leader in the homebuilding industry and a leader in maximizing stockholder value. Our approach emphasizes performance-based compensation, which increases or decreases based upon our business results at the local and national level. This performance-based compensation includes equity based benefits and awards, such as stock option and restricted stock unit grants and awards. For Mr. Dreier, approximately 46 percent of 2008 total compensation was performance-based and 54 percent was fixed. Mr. Dreier’s performance-based compensation percentage declined in 2008 primarily because Ryland did not achieve the performance target associated with his restricted stock unit grant and, therefore, Mr. Dreier did not vest on March 1, 2008 in the grant of 40,000 restricted stock units together with the tax assistance related to this restricted stock unit award. For the other named executive officers, approximately 65.7 percent of 2008 average total compensation was performance-based and 34.3 percent was fixed.

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The Compensation Committee annually reviews Ryland’s performance-based compensation payments that include annual bonus incentive payments and the TRG Incentive Plan awards. These payments have declined from previous years when Ryland was achieving record financial performance, reflecting a consistent use of performance-based compensation that varies based on Ryland’s financial performance and achievements as measured against specific goals. This program emphasizes maximizing Ryland’s financial performance while maintaining a variable compensation program that is tracking this performance in a responsible manner. For 2008, the annual bonus incentive payments (short-term performance compensation) reflect the achievement of Ryland’s targeted amount of net cash provided by operating activities during 2008. These payments confirm that Ryland’s variable compensation program is governed by the achievement of goals related to Ryland’s financial performance. The decrease in the TRG Incentive Plan awards for 2008 is reflective of the decline in Ryland’s return on equity in 2008. This long-term incentive program integrates this performance with the longer-term performance of Ryland.

We generally seek to maintain continuity in our compensation programs so that executives and managers are aware of the compensation plan targets and performance criteria and how our plans reward the achievement of and are governed by these targets and criteria. We modify our plans when comparative and competitive conditions dictate the need for a change. Our business strategy supports simple, straightforward compensation programs and plan designs. Our plans generally have performance measures that are easily communicated and understood by all participants, including our senior executive officers and managers. Our performance measures are directly tied to the performance of our business and financial results. These performance measures are discussed and detailed below.

Previously, we proposed, and stockholders approved, the ability to use performance measures based on net cash provided by operating activities to determine performance-based compensation. Targeted cash generation is an important performance measurement given the current economic environment and our need to manage Ryland conservatively with a view to preserving our cash resources.

Base Salary

Each year the Compensation Committee reviews salary recommendations for the executive officers. Base salary levels are generally targeted at or slightly below the average of our industry benchmarks. Base salary, which is a fixed element of total pay, is not emphasized in our total compensation program because of our performance-based compensation philosophy. Base salaries are a necessary part of our compensation program and provide executives with a fixed portion of pay that is not performance-based. Our goal is to provide modest, yet competitive, base pay levels in comparison with our homebuilding peer group. Pursuant to his Employment Agreement, Mr. Dreier’s base salary has not increased since 2002. Between July 2007 and December 2008, the base salaries of Ryland’s executive officers were not adjusted or increased except for Mr. Milne who received a salary increase of 16.7 percent in October 2008 as part of the adjustment of his compensation program based on a competitive analysis of the compensation programs for similarly situated CFOs. Additionally, Mr. Nicholson’s base salary was increased 25 percent to $750,000 in October 2008 as a result of his promotion to President of Ryland. The other executive officers of Ryland received annual salary increases of approximately 3 percent in December 2008 consistent with the projected salary increases for Ryland’s general employee population.

Annual Bonus Incentives

Annual bonus incentives for executives and managers are intended to reward participants for Ryland’s annual financial performance. Historically, annual bonus incentives for all participants were driven by pre-tax income earned at either the Corporate, Region or Division level of Ryland.  The level (Corporate, Region or Division) applicable to participants is determined by their position and level of responsibility within the organization. For 2008, the Compensation Committee used a targeted amount of net cash provided by operating activities as a factor to determine annual bonus incentive payments. Based on his Employment Agreement, Mr. Dreier has a contractual right to an annual bonus payment set at 2 percent of Ryland’s consolidated earnings before taxes adjusted to eliminate the effect of bonus compensation. Historically, the annual bonus

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payment of Ryland’s CFO, Mr. Milne, was set at 0.3 percent of Ryland’s adjusted consolidated earnings before taxes. For 2007, Messrs. Dreier and Milne did not receive an annual bonus payment due to the decrease in Ryland’s pre-tax income and the loss related to inventory impairments during 2007. Because Mr. Nicholson was promoted in July 2007 from President of the Southeast Region to COO, to compensate him for the annual bonus payment he would have received in 2007 as President of the Southeast Region, he received a minimum bonus of $500,000 for 2007.

In February 2008, the Compensation Committee approved amendments to Ryland’s Senior Executive Performance Plan (the “SEPP”) to add performance targets related to net cash provided by operating activities, which is considered to be a key financial performance metric. The Compensation Committee approved performance targets based on net cash provided by operating activities pursuant to the revised SEPP for the senior executives’ 2008 annual bonus incentive programs, contingent upon stockholder approval of the amended SEPP. On April 23, 2008, the stockholders of Ryland approved the revised SEPP at Ryland’s Annual Meeting of Stockholders.

Pursuant to the SEPP, the annual bonus incentive program for Messrs. Dreier, Nicholson and Milne for 2008 provided that if Ryland earned adjusted consolidated earnings before taxes greater than $125 million, they receive an annual bonus incentive payment that is calculated based on annual earnings and profitability. If for 2008, Ryland’s earned adjusted consolidated earnings before taxes were less than $125 million, Messrs. Dreier, Nicholson and Milne had their annual bonus incentive payment determined based upon Ryland’s net cash provided by operating activities as contained within Ryland’s Consolidated Statements of Cash Flows. If Ryland generated $100 million or greater of net cash provided by operating activities in 2008, Messrs. Dreier, Nicholson and Milne had the opportunity to receive the following maximum annual bonus incentive payments:

	Maximum Annual Bonus
	Incentive Payment Opportunity
R. Chad Dreier – Chairman of the Board of Directors and Chief Executive Officer	$	2,500,000
Larry T. Nicholson – President and Chief Operating Officer	$	950,000
Gordon A. Milne – Executive Vice President and Chief Financial Officer	$	350,000

Ryland’s financial results for 2008 resulted in adjusted consolidated earnings before taxes that were less than $125 million while net cash provided by operating activities was greater than $100 million. Accordingly, Messrs. Dreier, Nicholson and Milne earned the maximum annual bonus incentive payment opportunity set forth above.

In April 2008, Mr. Bass was promoted to President of the consolidated South Region of Ryland, which included the former Southeast and Texas Regions. Pursuant to Mr. Bass’s annual bonus incentive program as President of the South Region, if the South Region earned adjusted consolidated earnings before taxes of $30 million or greater in 2008, Mr. Bass’s annual bonus incentive payment was 1.5 percent of the South Region’s adjusted consolidated pre-tax income. If for 2008, the South Region earned adjusted consolidated earnings before taxes that were less than $30 million, Mr. Bass’s annual bonus incentive payment was determined by the net cash provided by operating activities generated by the South Region homebuilding operation. If the South Region generated greater than $30 million of net cash provided by operating activities in 2008, Mr. Bass was eligible to receive a maximum annual bonus incentive payment of $400,000. The South Region’s adjusted consolidated earnings before taxes were less than $30 million, but it generated greater than $30 million of net cash provided by operating activities in 2008. Accordingly, Mr. Bass earned the maximum annual bonus incentive payment opportunity of $400,000.

Mr. Schreiner, President of Ryland Mortgage Company, received an annual bonus incentive payment of 3 percent of the adjusted consolidated pre-tax income of Ryland Mortgage Company, which resulted in an annual bonus incentive payment of $719,869 for 2008.

For the named executive officers, the Compensation Committee will use net cash provided by operating activities as the financial performance measure for determining annual bonus incentive payments for 2009.

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Long-Term Incentives

Ryland uses two long-term incentive compensation vehicles for its executive compensation program. We employ a long-term compensation component to balance the short-term payment of compensation to management. These long-term incentive compensation programs also encourage the retention and stability of Ryland’s team of executive officers and senior managers.

The first long-term incentive compensation program consists of equity grants of stock options and restricted stock units. Equity incentive awards align executives and managers directly with stockholder interests. Ryland’s second long-term incentive compensation program for executive officers and senior managers is a long-term cash payment plan, referred to as the TRG Incentive Plan. The TRG Incentive Plan rewards participants based upon a comparison of Ryland’s three-year average return on equity in relation to other companies within the Fortune 500 and Ryland’s homebuilding industry peer group. A three-year average return on equity measure of performance is used for TRG Incentive Plan awards so that all participants have a common goal based upon the long-term performance of Ryland overall. Retention of executive talent is accomplished by a three-year pro-rated vesting period or a one-year vesting period plus performance criteria established by the Compensation Committee for the equity incentive plan and a three-year vesting period for the TRG Incentive Plan.

Equity Incentive Plan

Common Stock-based awards are viewed as an important component of total executive pay, aligning compensation with increasing stockholder value and, thus, providing an important benefit to stockholders. Over the years, we have used both stock options and restricted stock units to compensate executives and to link the interests of Ryland’s management to its stockholders. Generally, within compensation programs, stock options are viewed as a cost-effective method for providing equity-based long-term incentive compensation to senior executives. Additionally, restricted stock units are awarded to senior executives because restricted stock units deliver greater compensation per share. The greater value derived through restricted stock units has allowed Ryland to utilize fewer shares in providing awards pursuant to its equity incentive plan.

Equity awards in the form of restricted stock units were provided to Mr. Dreier pursuant to his Employment Agreement subject to the terms and conditions of Ryland’s equity incentive plan. As of December 31, 2008, the outstanding grant of 80,000 restricted stock units under Mr. Dreier’s Employment Agreement was subject to annual vesting in two installments of 40,000 units each on March 1, 2009 and March 1, 2010. Pursuant to the terms and conditions of his Employment Agreement, the vesting of these restricted stock unit grants is conditioned on the achievement of a target return on equity by Ryland as discussed further in the section entitled “Restricted Stock Unit Grants” under “Discussion of Compensation Agreements and Plans” on page 24 of this Proxy Statement. Because Ryland did not achieve the targeted return on equity during the fiscal year ended December 31, 2008, Mr. Dreier did not vest in the installment of 40,000 restricted stock units on March 1, 2009 and this vesting of the restricted stock unit award was forfeited by Mr. Dreier. In connection with Mr. Dreier’s retirement from Ryland, the Company amended his Employment Agreement. As a result of this amendment, Mr. Dreier will forfeit the remaining award of 40,000 restricted stock units effective May 29, 2009.

Each year the Compensation Committee reviews and approves proposed grants of awards for all equity incentive plan participants. In February 2008, the Compensation Committee approved amendments to the Performance Award Program to add a performance target related to net cash provided by operating activities. This performance factor was incorporated into the 2008 Equity Incentive Plan and the Performance Award Program approved by stockholders at the Annual Meeting of Stockholders on April 23, 2008. As a result, the Compensation Committee approved equity incentive awards in the form of restricted stock unit grants to the Company’s executive officers pursuant to the Performance Award Program. Mr. Dreier received a grant of 80,000 restricted stock units on May 1, 2008. The vesting of this grant on May 1, 2009 was conditioned on Ryland generating $100 million or greater of net cash provided by operating activities in 2008. Given that Ryland generated greater than $100 million of net cash provided by operating activities in 2008, Mr. Dreier will vest in and receive his restricted stock unit grant of 80,000 shares of Common Stock on May 1, 2009. Mr. Dreier’s restricted stock unit award includes an amount equal to the federal and state income and Medicare taxes that are payable in connection with the vesting and receipt of the shares of Common Stock associated with this award.

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Subject to the terms and conditions of the Company’s equity incentive plan, the named executive officers identified below received the following grants of restricted stock units on May 1, 2008 subject to annual vesting in three equal installments, one-third of the total grant each year, beginning on May 1, 2009, and subject to the executive officers’ continued employment on the vesting date:

	Restricted Stock Unit Grant
Larry T. Nicholson – President and Chief Operating Officer	42,000
Gordon A. Milne – Executive Vice President and Chief Financial Officer	42,000
Keith E. Bass – President, South Region, Ryland Homes	30,000
Daniel G. Schreiner – President, Ryland Mortgage Company	28,000

The vesting of the restricted stock unit grant was conditioned on Ryland generating a targeted amount of net cash provided by operating activities for 2008 as contained within Ryland’s Consolidated Statements of Cash Flows. If Ryland generated $100 million or greater of net cash provided by operating activities in 2008, the executive officers became initially vested in their restricted stock unit grant subject to the three-year vesting period and continued employment by the Executive on the applicable vesting date. Given that Ryland generated greater than $100 million of net cash provided by operating activities in 2008, each of the executive officers vested in the right to receive their restricted stock unit grant subject to continued employment with Ryland over the three-year vesting period.

In September 2008, in connection with the promotion of Mr. Nicholson to the position of President of Ryland, the Board of Directors approved a stock option grant to purchase 100,000 shares of Common Stock of Ryland at an exercise price of $27.38 per share, which was the closing market price of Ryland’s Common Stock on October 1, 2008, the grant date for this award. This stock option award has a five-year term and vests over a three-year period. Additionally, in September 2008, the Board of Directors approved a grant of 30,000 restricted stock units to Mr. Milne as part of an adjustment to his compensation program. This restricted stock unit award, granted to Mr. Milne on November 1, 2008, is not subject to the satisfaction of a performance target.  However, the award is subject to vesting in three equal annual installments of 10,000 units each conditioned on Mr. Milne’s continued employment on each vesting date.

TRG Incentive Plan

The TRG Incentive Plan provides cash awards based on a comparison of Ryland’s three-year return on equity to companies within the Fortune 500 as well as to large public homebuilders like Ryland. This plan complements Ryland’s long-term equity-based plan by offering compensation that is measured by Ryland’s financial performance as related to stockholders’ equity.

All participants in the TRG Incentive Plan are rewarded according to the same determinative reward criteria established by the Compensation Committee, which is based on the comparative return on equity performance for Ryland as a whole. This is important when considering that the short-term annual bonus incentive plan measures payouts based on either Corporate, Region or Division annual profitability or cash flow. Retention of participants in the TRG Incentive Plan is accomplished by having payments vest ratably over a three-year period. All participants are at risk of forfeiting some or all of their potential award payout if they leave Ryland during the three-year vesting period. The delayed vesting of these payments is intended to enhance the retention of the executive officers and senior managers of Ryland.

The TRG Incentive Plan has a minimum payout threshold that must be achieved before any awards are given to participants. This minimum payout threshold is based on the achievement of 75 percent of the return on equity target established by the Compensation Committee. The TRG Incentive Plan also has a maximum award payment set at 300 percent of target performance. The return on equity target compares Ryland’s three-year average return on equity against the three-year average of two different external metrics. The first external comparison metric, which accounts for half of the potential award, compares Ryland’s three-year average return on equity to the median return on equity of the Fortune 500 over a three-year period. This provides a comparison to the broader business community. The second external comparison metric, which accounts for the remainder of the potential award, compares Ryland’s three-year average return on equity to the average return on equity of 10 comparable public homebuilding companies over a three-year period. The comparison companies (Beazer Homes USA, Inc., D.R. Horton, Inc., Hovnanian Enterprises, Inc., KB Home, Lennar Corporation, Meritage Homes Corporation, M.D.C. Holdings,

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Inc., Pulte Homes, Inc., Standard Pacific Corp. and Toll Brothers, Inc.) were selected for their similarity to Ryland in size and principal business, as well as the availability of pertinent annual financial results.

Target awards are based on a percentage of base salary. Mr. Dreier has an award target of 150 percent of base salary. The other named executives have award targets ranging from 80 percent to 125 percent of base salary.

Retirement

Ryland provides plans to meet the retirement needs of its executives. Retirement plans are an important part of our program design because we seek to provide executives with the ability to plan for their future while keeping them focused on the present success of Ryland.

All employees and officers may participate in Ryland’s Retirement Savings Opportunity Plan (“RSOP”). This plan is a 401(k) qualified retirement savings plan. Participants may contribute one percent to 50 percent of their salary and bonus. These contributions can then be directed into a variety of investments under the RSOP. Ryland provides matching contributions to the RSOP for 100 percent of a participant’s contributions up to 6 percent of a participant’s eligible compensation. Certain participants can be adversely affected by statutory limitations inherent in qualified plans because the IRS places limits on maximum annual deferrals, which for Ryland’s plan, equaled $13,800 for these participants in 2008.  As a result, these participants cannot fully participate in this retirement savings plan and receive the full amount of the available matching contribution by Ryland under the RSOP.

The Executive and Director Deferred Compensation Plan II (“EDDCP II”) is a nonqualified deferred compensation plan that allows participants to defer the receipt of additional income and receive the additional matching contributions by Ryland restricted by the RSOP. In January 2005, Ryland adopted the EDDCP II in order to comply with the requirements of Section 409A of the Code, as added by the American Jobs Creation Act of 2004, and the Treasury regulations or other authoritative guidance issued thereunder. Funds contributed to the EDDCP II are directed by participants into a variety of investment funds available under the plan. Matching contributions by Ryland to the RSOP and EDDCP II vest one-third at the end of each of the participant’s first three years of service.

Certain of Ryland’s executive officers, except Mr. Dreier, are provided with a supplemental executive retirement plan to supplement the executives’ retirement planning under the RSOP and EDDCP II. This plan provides participants with the opportunity to receive either a payment of $150,000 annually for 15 years or a lump sum payment equal to the present value of these payments using an 8 percent discount rate, at the participant’s option. Participants vest in this benefit ratably in 20 percent increments over a five-year period of participation in the plan.

Mr. Dreier participates in two separate supplemental executive retirement plans. Effective July 1, 2002, Ryland and Mr. Dreier entered into a Supplemental Executive Retirement Plan (“SERP”), and, effective January 1, 2005, Ryland and Mr. Dreier entered into a Supplemental Executive Retirement Plan II (“SERP II”) in connection with the amendment of Mr. Dreier’s Employment Agreement in 2005. On February 25, 2009, Ryland announced that Mr. Dreier will retire as Chief Executive Officer of Ryland on May 29, 2009 while continuing in his role as Chairman of the Board of Directors. In connection with his retirement, Mr. Dreier will receive lump sum payments of his vested benefits under the SERP and SERP II in the amount of $8,217,100 on May 29, 2009, and in the amount of $16,434,199 on November 30, 2009, the date that is six months after his retirement date.

Policy Regarding Extraordinary Retirement Benefits for Senior Executives

In response to a proposal approved by stockholders at the 2006 Annual Meeting of Stockholders, the Board of Directors adopted the following policy on December 6, 2006:

The Company, after the Effective Date of this Policy, will not, without seeking stockholder approval, agree with any Senior Executive:

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·To provide, under any one or more defined benefit Retirement Plans of the Company, an annual benefit that will exceed one hundred percent (100%) of the Senior Executive’s Final Average Salary; or

·To grant service credit or vesting credit (or accelerate vesting) under any defined benefit Retirement Plan for any period of time that the Senior Executive was not actually employed by the Company or any subsidiary or affiliate of the Company for purposes of determining the Senior Executive’s retirement benefits.

For purposes of this Policy, the following terms shall have the following meanings:

“Final Average Salary” means the average of the highest five calendar years’ salaries of the Senior Executive.

“Retirement Plan” means any pension benefit plan, within the meaning of the Employee Retirement Income Security Act of 1974, of the Company, regardless of whether such plan is a tax-qualified plan or a nonqualified plan.

“Senior Executive” means a person who is an officer of the Company or a subsidiary who is required to file reports pursuant to Section 16 of the Securities Exchange Act of 1934, as amended.

In the event that the Board or Compensation Committee determines that the circumstances of a future agreement with a Senior Executive warrant extraordinary retirement benefits, service or vesting credits, or vesting acceleration in excess of that which is permitted under this Policy (the “Limits”), and the Board determines that it is impractical to submit the matter to a stockholder vote in a timely fashion, then in such event the Board may elect to seek stockholder approval after the parties have mutually agreed to the material terms of the relevant future agreement, provided that the payment of any retirement benefits in excess of the Limits under such agreement is conditioned on subsequent stockholder ratification. The Board may amend or terminate this Policy at any time if it determines in its sole discretion that such action would be in the best interests of the Company, provided that any such action shall be promptly disclosed on the Company’s Web site.

Personal Health and Services Allowance

Executive officers and senior managers are entitled to a Personal Health and Services Allowance (“PHSA”) provided as a percent of their base salary. The PHSA is intended as a means to motivate participants to monitor their physical health and financial stability by incentivizing them to receive an annual medical examination and to have a professional review of their personal finances and tax preparation. This program also communicates Ryland’s interest and concern for the well being of its management, in keeping with the overall goals and philosophy of Ryland’s executive compensation and benefit program. Participants are provided specific medical examination requirements and must maintain proof of their annual medical examination and tax return preparation.  Beyond these two requirements, participants may use the PHSA based on their individual needs.

Mr. Dreier is provided 8 percent of his base salary annually as a PHSA, and other executive officers, including the named executive officers, are provided 7 percent of their base salary annually as a PHSA.

Change of Control Provisions

Mr. Dreier’s Employment Agreement and the Senior Executive Severance Agreements for executive officers other than Mr. Dreier have change of control provisions that are intended to align management with stockholders’ interests by enhancing top management stability in the event of a merger or acquisition. Mr. Dreier is entitled to certain payments and benefits upon a “change of control” of Ryland. The payments and benefits for the other executive officers become payable upon the termination of their employment by Ryland without “cause” or by the officer with “good reason” in accordance with the terms of the agreement, provided that either of these events occurs within a “change of control period.” The “change of control period” begins on the date Ryland becomes aware of or enters into discussions that could involve a change of control and ends on the earlier of two years after the date of a change of control or on the date on which a proposed change of control is no longer discussed or proposed to occur.

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The Compensation Committee determined that the benefits payable to Mr. Dreier are effective and payable as of the date of a “change of control” of Ryland. The Compensation Committee concluded that a “single trigger” for Mr. Dreier was appropriate because of his position as Chief Executive Officer of Ryland and the likelihood that a change of control would materially alter his position at Ryland. A further discussion of the terms of the change of control provisions and the benefits that they provide to the officers is set forth in the section entitled “Potential Payments Upon Termination or Change of Control” on pages 32 through 35 of this Proxy Statement.

Policy Regarding Stockholder Approval of Severance Agreements

In response to a second proposal approved by stockholders at the 2006 Annual Meeting of Stockholders, the Board of Directors adopted the following policy on December 6, 2006:

The Company, after the Effective Date of this Policy, will not enter into a Future Severance Agreement with a Senior Executive that provides for Benefits in an amount exceeding the Severance Benefits Limitation, unless such Future Severance Agreement is approved by a vote of the Company’s stockholders.

For purposes of this Policy, the following terms shall have the following meanings:

“Annual Compensation” means the sum of the annual base salary paid or earned and annual bonus paid or earned, even though paid in a subsequent year, by the Senior Executive and all amounts credited to the Senior Executive, vested and unvested, under any incentive compensation or other benefit or compensation plans in which the Senior Executive participates during a calendar year. In the event the Senior Executive has not been employed by the Company for a complete calendar year, the determination of Annual Compensation shall involve a pro forma projection of annual base salary, annual bonus and amounts that are projected to be credited, vested and unvested, under any incentive compensation or other benefit or compensation plan in which the Senior Executive participates.

“Benefits” means: (i) severance amounts payable in cash to a Senior Executive (including cash amounts payable for the uncompleted portion of an employment term under an agreement), and (ii) special benefits or perquisites provided to a Senior Executive at the time of such Senior Executive’s termination of employment for any reason other than death. The term “Benefits” includes both lump-sum payments and the estimated present value of any periodic payments made, or special benefits or perquisites provided, following and as a result of the termination of such Senior Executive’s employment.

Notwithstanding the foregoing, the term “Benefits” does not include:

(a)the value of any accelerated vesting of any then-outstanding equity-based award;

(b)the value of any accelerated vesting of any then-outstanding cash-based incentive award;

(c)compensation and benefits earned, accrued or otherwise provided, including, without limitation, vacation pay, pro rata bonuses, and deferred compensation accounts, for services rendered through the date of termination of employment (other than any such compensation or benefits awarded at the time and as a result of the Senior Executive’s termination of employment);

(d)payments, including tax gross-ups, related to offsetting the Senior Executive’s excise taxes under Sections 409A or 4999 of the Internal Revenue Code (the “Code”), as amended from time to time;

(e)any post-termination retirement and other benefits, special benefits or perquisites provided under plans, programs or arrangements of the Company applicable to one or more groups of employees in addition to the Senior Executives or which are provided consistent with the Company’s Policy Regarding Extraordinary Retirement Benefits for Senior Executives;

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(f)payments, including tax gross-ups, made with respect to relocation assistance and outplacement services; and

(g)payments and other benefits that also would become payable or are otherwise provided on account of the Senior Executive’s disability or death.

“Future Severance Agreement” means an employment agreement between the Company (or one of its subsidiaries) and a Senior Executive pursuant to which the Senior Executive renders services to the Company (or one of its subsidiaries) as an employee (and not as a consultant or other independent contractor) or a severance agreement between the Company (or one of its subsidiaries) and a Senior Executive related to the termination of employment of the Senior Executive with the Company (or one of its subsidiaries), in either case, entered into on or after the Effective Date (as defined herein) of this Policy, and includes any material modification to increase the formula for determining severance Benefits under any existing agreement with a Senior Executive that is in effect as of the Effective Date.

“Senior Executive” means a person who is or becomes at the time of execution of a Future Severance Agreement an officer of the Company or a subsidiary who is required to file reports pursuant to Section 16 of the Securities Exchange Act of 1934, as amended.

“Severance Benefits Limitation” means 2.99 times the Senior Executive’s highest Annual Compensation for any of the three (3) calendar years immediately preceding the date of termination of employment. For purposes of the preceding sentence, the amount of annual bonus and all amounts credited to the Senior Executive, vested or unvested, under any incentive compensation or other benefit or compensation plans in which the Senior Executive participates shall be determined without regard to whether such amount is currently payable or is or was paid or deferred and without regard to the form of payment (e.g., in cash, equity or other property).

This Policy shall not cover (i) any agreement for future services to be rendered to the Company in a capacity other than as an employee (e.g., consulting or director agreements), or (ii) any agreement to refrain from certain conduct (e.g., covenants not to compete).

The Board delegates to the Compensation Committee full authority to make determinations regarding the interpretation of the provisions of this Policy, in its sole discretion, including, without limitation, the determination of the value of any non-cash items, as well as the present value of any cash or non-cash benefits payable over a period of time.

Due to timing constraints or other reasons, the Board may determine that it would be in the best interests of the Company to enter into a Future Severance Agreement with a Senior Executive that exceeds the Severance Benefits Limitation. In this situation, the Board may elect to seek stockholder approval after the material terms of such an agreement have been agreed upon, provided that the payment of any Benefits in excess of the foregoing limits is contingent upon subsequent stockholder ratification. The Board may amend, waive or cancel this Policy at any time if it determines in its sole discretion that such action would be in the best interests of the Company, provided that any such action shall be promptly disclosed on the Company’s Web site.

Policy with Respect to the $1 Million Deduction Limit

It is the policy of the Compensation Committee to periodically evaluate the qualification of compensation for exclusion from the $1 million limitation on corporate tax deductions under Section 162(m) of the Code, as well as other sections of the Code, while maintaining flexibility to take actions with respect to compensation which it deems to be in the interest of Ryland and its stockholders which may not qualify for tax deductibility. Ryland’s stockholders previously approved the Senior Executive Performance Plan, the TRG Incentive Plan, as amended, and the Performance Award Program under the Equity Incentive Plan to comply with the requirements of Section 162(m) of the Code. Compliance with Section 162(m) of the Internal Revenue Code results in the tax deductibility of related compensation expense.

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SUMMARY COMPENSATION TABLE

Name and Principal Position	Year	Salary		Stock Awards (2)		Option Awards (3)		Non-Equity Incentive Plan Compensation			Change in Pension Value (10)		All Other Compensation (11)		Total
R. Chad Dreier — Chairman of the Board	2008	$	1,000,000	$	800,000	—		$	2,500,000	(4)	$	4,664,500	$	256,553	$	10,957,725
of Directors and Chief Executive Officer								$	1,736,672	(5)
of The Ryland Group, Inc.	2007	$	1,000,000	$	1,979,640	—		$	0	(6)	$	4,086,509	$	5,029,448	$	14,523,355
								$	2,427,758	(7)
	2006	$	1,000,000	$	5,141,800	—		$	11,795,846	(8)	$	3,568,553	$	7,002,661	$	31,872,731
								$	3,363,871	(9)
Larry T. Nicholson — President	2008	$	633,461	$	340,419	$	485,296	$	950,000	(4)	$	180,453	$	445,459	$	3,826,635
and Chief Operating Officer of								$	791,547	(5)
The Ryland Group, Inc.	2007	$	441,635	$	273,681	$	232,698	$	500,000	(6)	$	168,069	$	1,679,612	$	4,030,527
								$	734,832	(7)
	2006	$	295,000	$	387,764	$	50,115	$	3,205,815	(8)	$	147,987	$	216,086	$	4,951,337
								$	648,570	(9)
Gordon A. Milne — Executive Vice	2008	$	622,308	$	451,284	$	173,316	$	350,000	(4)	$	266,936	$	111,263	$	2,753,101
President and Chief Financial Officer of								$	777,994	(5)
The Ryland Group, Inc.	2007	$	538,462	$	410,536	$	149,303	$	0	(6)	$	249,363	$	213,045	$	2,511,355
								$	950,646	(7)
	2006	$	500,000	$	581,662	$	214,779	$	1,769,377	(8)	$	220,304	$	247,170	$	4,758,054
								$	1,224,762	(9)
Keith E. Bass — Senior Vice President	2008	$	332,692	$	133,333	$	250,974	$	400,000	(4)	—		$	408,034	$	1,816,848
of The Ryland Group, Inc.; President of								$	291,815	(5)
the South Region of Ryland Homes (1)	2007	$	231,058	—		$	254,986	$	765,930	(6)	—		$	612,593	$	2,141,353
								$	276,786	(7)
Daniel G. Schreiner — Senior Vice	2008	$	300,000	$	245,258	$	108,323	$	719,869	(4)	$	177,871	$	67,270	$	1,931,192
President of The Ryland Group, Inc.;								$	312,601	(5)
President of Ryland Mortgage Company	2007	$	300,000	$	215,033	$	89,195	$	1,302,717	(6)	$	166,161	$	180,469	$	2,689,688
								$	436,113	(7)
	2006	$	300,000	$	304,669	$	107,389	$	2,039,554	(8)	$	146,798	$	189,536	$	3,689,660
								$	601,714	(9)

(1)Mr. Bass was promoted to the position of Senior Vice President of The Ryland Group, Inc. on July 1, 2007.

(2)Mr. Dreier received a restricted stock grant pursuant to which 80,000 restricted stock units vest on May 1, 2009. Pursuant to FAS 123(R), a pro rata portion of compensation expense related to this vesting of restricted stock units was recognized in 2008. Mr. Dreier received a restricted stock unit grant according to his Employment Agreement pursuant to which 94,000 restricted stock units vested on each of March 1, 2006 and 2007. Pursuant to FAS 123(R), a pro rata portion of compensation expense related to each vesting tranche of these restricted stock units was recognized in 2006, and the remaining pro rata compensation expense for the tranche vesting in 2007 was recognized in 2007. On May 1, 2008, Messrs. Nicholson, Milne, Bass and Schreiner received a grant of restricted stock units that vest ratably on each May 1 of the three years following the grant date. On November 1, 2008, Mr. Milne received a grant of restricted stock units that vest ratably on each November 1 of the three years following the grant date. The portion of this grant that vests on November 1, 2009 is 10,000 units. On May 1 of 2005 and 2006, Messrs. Nicholson, Milne and Schreiner received a grant of restricted stock units that vest ratably on each May 1 of the three years following the grant date. The portions which vested on May 1, 2006 for the executive officers are as follows: Mr. Nicholson, 4,667 units; Mr. Milne, 7,000 units; and Mr. Schreiner, 3,667 units; the portions which vested on May 1, 2007 for the executive officers are as follows: Mr. Nicholson, 9,333 units; Mr. Milne, 14,000 units; and Mr. Schreiner, 7,333 units; the portions which vested on May 1, 2008 for the executive officers are as follows: Mr. Nicholson, 9,333 units; Mr. Milne, 14,000 units; and Mr. Schreiner, 7,333 units; and the portions vesting on May 1, 2009 for the executive officers are as follows: Mr. Nicholson, 18,667 units; Mr. Milne, 21,000 units; Mr. Bass, 10,000 units; and Mr. Schreiner, 13,001 units. Pursuant to FAS 123(R), a pro rata portion of compensation expense related to the 2006 and 2007 vesting tranches of these restricted stock units was recognized in 2006; a pro rata portion of compensation expense related to the 2007 and 2008 vesting tranches was recognized in 2007; and a pro rata portion of compensation expense related to the 2008 and 2009 vesting tranches was recognized in 2008.

(3)Messrs. Nicholson, Milne, Bass and Schreiner received grants of stock options in 2004 which vested one-third per year over a three-year period with the remaining installment of unexercisable options vesting on February 25, 2007. They also received grants of stock options on May 1, 2007 which vest one-third per year over a three-year period. In connection with their promotions, Messrs. Nicholson and Bass received grants of stock options on July 1, 2007 which vest one-third per year over a three-year period. Mr. Bass received stock option grants on each May 1 of 2005 and 2006 which vest one-third per year over a three- year period. In connection with his promotion to the position of President of Ryland, Mr. Nicholson received a grant of stock options on October 1, 2008 which vest one-third per year over a three-year period. Details regarding the outstanding stock options can be found in the section entitled “Outstanding Equity Awards at December 31, 2008” on page 27 of this Proxy Statement. The compensation expense recognized for the stock option grants was based upon the grant-date fair value, which was determined using the Black-Scholes-Merton option pricing formula pursuant to FAS 123(R). Further information regarding their valuation can be found in footnote I to the financial statements in Ryland’s Annual Report on Form 10-K for the year ended December 31, 2008.

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(4)This amount represents the annual bonus incentive payments earned for 2008 and paid out in January 2009. Further information about Ryland’s annual bonus incentive payments is contained in the section entitled “Annual Bonus Incentives” under “Compensation Discussion and Analysis” beginning on page 10 of this Proxy Statement.

(5)This amount consists of the 2008 award determined according to the performance goals set pursuant to the TRG Incentive Plan as described in the section “TRG Incentive Plan” under “Compensation Discussion and Analysis” beginning on page 13 of this Proxy Statement. The first third of the 2008 award was paid out in February 2009 and the remaining two-thirds are expected to be paid out pro rata in February of 2010 and 2011 if the executives are employed by Ryland on December 31st of 2009 and 2010, respectively. This compensation also includes interest of 9.54 percent earned in 2008 on 2006 and 2007 TRG Incentive Plan awards that had not vested.

(6)Messrs. Dreier and Milne did not earn an annual bonus incentive payment for 2007 due to the decrease in Ryland’s pre-tax income and the loss related to inventory impairments during 2007. For Messrs. Nicholson, Bass and Schreiner, this amount represents the annual bonus incentive payment earned in 2007 and paid out in January 2008. Further information about Ryland’s annual bonus incentive payments is contained in the section entitled “Annual Bonus Incentives” under “Compensation Discussion and Analysis” beginning on page 10 of this Proxy Statement.

(7)This amount consists of the 2007 award determined according to the performance goals set pursuant to the TRG Incentive Plan as described in the section “TRG Incentive Plan” under “Compensation Discussion and Analysis” beginning on page 13 of this Proxy Statement. The first third of the 2007 award was paid out in February 2008 and the remaining two-thirds are expected to be paid out pro rata in February of 2009 and 2010 if the executives are employed by Ryland on December 31st of 2008 and 2009, respectively. This compensation also includes interest of 8.75 percent earned in 2007 on 2005 and 2006 TRG Incentive Plan awards that had not yet vested.

(8)This amount represents the annual bonus incentive payments earned for 2006 and paid out in January 2007.

(9)This amount consists of the 2006 award determined according to the performance goals set pursuant to the TRG Incentive Plan as described in the section “TRG Incentive Plan” under “Compensation Discussion and Analysis” beginning on page 13 of this Proxy Statement. The first third of the 2006 award was paid out in February 2007 and the remaining two-thirds were paid out pro rata in February of 2008 and 2009, respectively. This compensation also includes interest of 10.1 percent earned in 2006 on 2004 and 2005 TRG Incentive Plan awards that had not yet vested.

(10)The Change in Pension Value column consists of the aggregate change in the actuarial present value of the executive officers’ accumulated benefit under their supplemental executive retirement plans. Further information about Ryland’s supplemental executive retirement plans is contained in the section entitled “Retirement” under “Compensation Discussion and Analysis” beginning on page 14 of this Proxy Statement.

(11)All Other Compensation includes the following components:

a)Tax assistance related to the receipt of stock upon the vesting of a restricted stock unit grant: Mr. Dreier, 2007 - $4,007,454 and 2006 - $5,752,050;

b)Mr. Dreier’s life insurance plan premium payment: 2008 - $26,549, 2007 - $26,428, 2006 - $26,428, and related tax assistance: 2008 - $23,308, 2007 - $23,202, 2006 - $23,202;

c)Value of term life insurance received under Ryland’s basic and executive life insurance plans: Mr. Dreier, 2008 - $21,744, 2007 - $20,544, 2006 - $17,022; Mr. Nicholson, 2008 - $7,442, 2007 - $6,762, 2006 - $3,595; Mr. Milne, 2008 - $13,677, 2007 - $12,372, 2006 - $8,097; Mr. Bass, 2008 - $2,610, 2007 - $3,072; and Mr. Schreiner, 2008 - $4,692, 2007 - $3,627, 2006 - $3,492;

d)Tax assistance for value of term life insurance received under Ryland’s executive life insurance plan: Mr. Dreier, 2008 - $12,484, 2007 - $11,431, 2006 - $10,641; Mr. Nicholson, 2008 - $4,231, 2007 - $3,635, 2006 - $1,081; Mr. Milne, 2008 - $7,704, 2007 - $6,558, 2006 - $4,807; Mr. Bass, 2008 - $843, 2007 - $599; and Mr. Schreiner, 2008 - $1,817, 2007 - $1,683, 2006 - $1,564;

e)Reimbursement for executive health and fitness costs: Mr. Dreier, 2008 - $2,640, 2007 - $2,640, 2006 - $2,640; Mr. Nicholson, 2007 - $400, 2006 - $2,600; Mr. Milne, 2008 - $753, 2007 - $753, 2006 - $753 and Mr. Bass, 2008 - $1,900; and tax assistance related to reimbursements: Mr. Dreier, 2008 - $924, 2007 - $924, 2006 - $924; Mr. Nicholson, 2007 - $140, 2006 - $910; Mr. Milne, 2008 - $264, 2007 - $264, 2006 - $264; and Mr. Bass, 2008 - $665;

f)Aircraft usage: Mr. Dreier, 2008 - $22,276, 2007 - $15,600, 2006 - $37,269, and related tax assistance: 2008 - $19,557, 2007 - $13,696, 2006 - $32,720, primarily for spousal and family travel to Ryland corporate-related functions;

g)Executive medical reimbursement plan for expenses not covered by Ryland’s health insurance plan: Mr. Dreier, 2008 - $8,271, 2007 - $9,136, 2006 - $12,834; Mr. Nicholson, 2008 - $6,638, 2007 - $6,769, 2006 - $6,574; Mr. Milne, 2008 - $7,777, 2007 - $5,486, 2006 - $11,209; Mr. Bass, 2008 - $7,484, 2007 - $6,511; and Mr. Schreiner, 2008 - $9,345, 2007 - $3,144, 2006 - $2,561;

h)Personal Health and Services Allowance: Mr. Dreier, 2008 - $80,000, 2007 - $80,000, 2006 - $80,000; Mr. Nicholson, 2008 - $44,625, 2007 - $31,325, 2006 - $20,650; Mr. Milne, 2008 - $43,750, 2007 - $38,500, 2006 - $35,000; Mr. Bass, 2008 - $23,625, 2007 - $15,300; and Mr. Schreiner, 2008 - $21,000, 2007 - $21,000, 2006 - $21,000;

i)Ryland’s contributions to the Retirement Savings Opportunity Plan and the Executive and Director Deferred Compensation Plan II: Mr. Dreier, 2008 - $13,800, 2007 - $767,751, 2006 - $959,872; Mr. Nicholson, 2008 -$68,008, 2007 - $218,847, 2006 - $158,061; Mr. Milne, 2008 - $37,339, 2007 - $138,470, 2006 - $164,981; Mr. Bass, 2008 - $65,917, 2007 - $173,829; and Mr. Schreiner, 2008 - $30,415, 2007 - $140,373, 2006 - $138,858;

j)Reimbursement for relocation expenses: Mr. Nicholson, 2008 - $167,480, 2007 - $746,082; and Mr. Bass, 2008 - $205,825, 2007 - $259,250; and tax assistance related to reimbursements: Mr. Nicholson, 2008 - $147,036, 2007 - $655,011; and Mr. Bass, 2008 - $83,429, 2007 - $143,391;

k)For 2006, each executive officer received a discretionary cash award approved by the Compensation Committee in the amount of $10,000;

l)Charitable contribution: For 2006 and 2007, each named executive officer was given the opportunity to designate where Ryland made a $10,000 contribution to a qualified charity on his behalf. Additionally, consistent with charitable contributions made by Ryland on behalf of Directors, Mr. Dreier received the opportunity in 2006, 2007 and 2008 to designate where Ryland made a $25,000 contribution to a qualified charity as a member of the Board of Directors. For 2007, Mr. Dreier and his wife also received the opportunity in connection with Ryland’s management conference to designate where Ryland made a $15,000 contribution to a qualified charity; and

m)Manager’s conference award: Mr. Bass, 2008 - $10,000; and related tax assistance: 2008 - $5,736.

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GRANTS OF PLAN-BASED AWARDS IN 2008

		Approval		Estimated Future Payouts Under Non-Equity Incentive Plan Awards							Estimated Future Payouts Under Equity Incentive		Exercise Price of Option			Grant Date Value of Stock and
Name	Grant Date	Date		Threshold			Target		Maximum		Plan Awards		Awards			Option Awards
R. Chad Dreier	2/27/08	2/27/08		$	1,125,000	(1)	$	1,500,000	$	4,500,000	—		—			—
	2/27/08	4/23/08	(2)	$	0		$	2,500,000	$	2,500,000	—		—			—
	5/1/08	2/27/08		—			—		—		80,000	(4)	—			$	2,651,200	(8)
Larry T. Nicholson	2/27/08	2/27/08		$	547,316	(1)	$	729,754	$	2,189,262	—		—			—
	2/27/08	4/23/08	(2)	$	500,000		$	950,000	$	950,000	—		—			—
	5/1/08	2/27/08		—			—		—		42,000	(4)	—			$	1,391,880	(8)
	10/1/08	9/25/08		—			—		—		100,000	(5)	$	27.38	(7)	$	977,000	(9)
Gordon A. Milne	2/27/08	2/27/08		$	515,738	(1)	$	687,650	$	2,062,951	—		—			—
	2/27/08	4/23/08	(2)	$	0		$	350,000	$	350,000	—		—			—
	5/1/08	2/27/08		—			—		—		42,000	(4)	—			$	1,391,880	(8)
	11/1/08	9/25/08		—			—		—		30,000	(6)	—			$	563,700	(10)
Keith E. Bass	2/27/08	2/27/08		$	200,328	(1)	$	267,104	$	801,311	—		—			—
	2/27/08	4/23/08	(3)	$	0		$	400,000	$	400,000	—		—			—
	5/1/08	2/27/08		—			—		—		30,000	(4)	—			$	994,200	(8)
Daniel G. Schreiner	2/27/08	2/27/08		$	202,500	(1)	$	270,000	$	810,000	—		—			—
	5/1/08	2/27/08		—			—		—		28,000	(4)	—			$	927,920	(8)

(1)These amounts reflect payments that may be made pursuant to the TRG Incentive Plan. The Compensation Committee met on February 27, 2008 and approved performance goals based on Ryland’s three-year average return on equity for the grant of awards for 2008 pursuant to the TRG Incentive Plan which is discussed in the “Compensation Discussion and Analysis” under the section entitled “TRG Incentive Plan” beginning on page 13 of this Proxy Statement. Ryland’s three-year average return on equity for the three years of 2006, 2007 and 2008 was negative 10.4 percent which is 99.6 percent of the TRG Incentive Plan target. As a result, the named executive officers received the following awards for 2008: Mr. Dreier, $1,493,850; Mr. Nicholson, $726,762; Mr. Milne, $684,831; Mr. Bass, $266,009; and Mr. Schreiner, $268,893. The first third of the 2008 awards was paid out in February 2009 and the remaining two-thirds are expected to be paid out pro rata in February of 2010 and 2011 if the executives continue to be employed by Ryland on December 31 of 2009 and 2010, respectively.In addition to the award grant, interest on amounts earned but not yet vested can be credited to the executive officer’s award at a rate established by the Compensation Committee that is reasonable under Section 162(m) of the Code.

(2)These amounts reflect the payments that may be made pursuant to the Senior Executive Performance Plan (the “SEPP”), which is discussed in the “Compensation Discussion and Analysis” under the section entitled “Annual Bonus Incentives” beginning on page 10 of this Proxy Statement.Pursuant to the SEPP, the annual bonus incentive program for Messrs. Dreier, Nicholson and Milne for 2008 provided that if Ryland earned adjusted consolidated earnings before taxes greater than $125 million, they receive an annual bonus incentive payment that is calculated based on annual earnings and profitability. If for 2008, Ryland earned adjusted consolidated earnings before taxes less than $125 million, Messrs. Dreier, Nicholson and Milne had their annual bonus incentive payment determined based upon Ryland’s net cash provided by operating activities. If Ryland generated $100 million or greater of net cash provided by operating activities, Messrs. Dreier, Nicholson and Milne had the opportunity to receive the maximum annual bonus incentive payment. For each $1 million of net cash provided by operating activities below $100 million generated by Ryland in 2008, there would be a corresponding reduction of 1 percent of the maximum annual bonus incentive payment except that Mr. Nicholson had a minimum guaranteed bonus amount of $500,000. Ryland’s financial results for 2008 resulted in adjusted consolidated earnings before taxes that were less than $125 million while net cash provided by operating activities was greater than $100 million. Accordingly, Messrs. Dreier, Nicholson and Milne earned the maximum annual bonus incentive payment opportunity set forth above.

(3)The annual bonus incentive program for Mr. Bass for 2008 provided that if Ryland’s South Region earned adjusted consolidated earnings before taxes greater than $30 million in 2008, his annual bonus incentive payment was 1.5 percent of the South Region’s adjusted consolidated pre-tax income. If for 2008, Ryland’s South Region earned adjusted consolidated earnings before taxes that were less than $30 million, Mr. Bass’s annual bonus incentive payment was determined by the net cash provided by operating activities generated by the South Region homebuilding operation. If the South Region generated $30 million or greater of net cash provided by operating activities in 2008, Mr. Bass would receive the maximum annual bonus incentive payment. If the South Region achieved less than $30 million of net cash provided by operating activities, Mr. Bass’s annual bonus was determined by the amount of actual net cash provided by operating activities generated by the South Region in 2008 as a percentage of $30 million. The South Region’s adjusted consolidated earnings before taxes were less than $30 million, but it generated greater than $30 million of net cash provided by operating activities in 2008. Accordingly, Mr. Bass earned the maximum annual bonus incentive payment opportunity set forth above.

20

(4)The Compensation Committee approved the grant of restricted stock units under Ryland’s 2008 Equity Incentive Plan at its meeting on February 27, 2008 and set a grant date of May 1, 2008. The grants include the right to receive quarterly dividend equivalent payments on the restricted stock units in the amount and to the extent dividends are paid by Ryland on its Common Stock. The performance criteria for this grant was met and the restricted stock units will vest and be paid out in total for Mr. Dreier on May 1, 2009 and vest and be paid out to the other named executive officers in one-third increments on each May 1 of 2009, 2010 and 2011, respectively, provided the executive officer is employed by Ryland on those dates.

(5)This stock option award, granted on October 1, 2008, has a five-year term and vests in one-third increments on October 1, 2009, 2010 and 2011, respectively, if Mr. Nicholson is employed by Ryland on those dates.

(6)The Board of Directors approved this grant of restricted stock units under Ryland’s 2008 Equity Incentive Plan at its meeting on September 25, 2008 and set a grant date of November 1, 2008. This grant includes the right to receive quarterly dividend equivalent payments on the restricted stock units in the amount and to the extent dividends are paid by Ryland on its Common Stock. This restricted stock unit grant was not subject to performance criteria and will vest and be paid out in one-third increments on each November 1 of 2009, 2010 and 2011, respectively, if Mr. Milne is employed by Ryland on those dates.

(7)The exercise price for this stock option award was the closing market price of Ryland’s Common Stock on the grant date.

(8)The grant date value of the restricted stock unit grants equals the number of restricted stock units multiplied by the closing market price of Ryland’s Common Stock on the date of grant, May 1, 2008, which was $33.14 per share.

(9)The grant date value of this stock option award was determined using the Black-Scholes-Merton option pricing formula pursuant to FAS 123(R).

(10)The grant date value of this restricted stock unit grant equals the number of restricted stock units multiplied by the closing market price of Ryland’s Common Stock on the date preceding the date of grant, which was October 31, 2008, because the date of grant, November 1, 2008 was a Saturday, a date on which trading in Ryland’s Common Stock did not occur. The closing market price of Ryland’s Common Stock on October 31, 2008 was $18.79 per share.

21

DISCUSSION OF COMPENSATION AGREEMENTS AND PLANS

Mr. Dreier’s Employment Agreement

On April 20, 2005, Ryland entered into an Amended and Restated Employment Agreement with Mr. Dreier for a period extending until December 30, 2010. The Employment Agreement provides for one-year extensions subject to a right of termination upon notice at least 180 days prior to the end of the agreement’s term. Under the Employment Agreement, Mr. Dreier receives a base salary of $1,000,000 per year and is eligible for an annual cash bonus equal to 2 percent of Ryland’s consolidated pre-tax income, as adjusted by the Compensation Committee to eliminate the effect of bonus and incentive compensation, changes in accounting methods and non-recurring or unusual expenses or charges. The Employment Agreement also provides that Mr. Dreier is entitled to participate in the TRG Incentive Plan with a target performance award equal to 150 percent of his base salary. Pursuant to the Employment Agreement, Mr. Dreier received an award of restricted stock units, subject to performance criteria related to Ryland’s return on equity as established pursuant to the Performance Award Program under Ryland’s Equity Incentive Plan. The performance criteria for 40,000 restricted stock units that would have vested on March 1, 2008 was not met and the award was forfeited. Additionally, the performance criteria for 40,000 restricted stock units that would have vested on March 1, 2009 was not met and this award was also forfeited.

On February 25, 2009, Ryland amended Mr. Dreier’s Employment Agreement in connection with his retirement. This Amendment provides for a termination date of May 29, 2009 for Mr. Dreier’s Employment Agreement. Under the amended Employment Agreement, Mr. Dreier receives a reduced annual base salary of $900,000 per year for the period from February 25, 2009 until his retirement date of May 29, 2009. He is eligible to receive a pro rata share of his 2009 maximum annual bonus incentive payment opportunity. This pro rata share equals $375,000 based upon a maximum annual bonus incentive payment opportunity of $900,000. Mr. Dreier is not eligible to participate in the TRG Incentive Plan for 2009, but he will vest in his deferred TRG Incentive Plan Awards for 2007 and 2008, which will be paid to him on November 30, 2009. Mr. Dreier will receive a lump sum cash payment of $2 million on the date that is six months after his retirement date in consideration for the termination of his Employment Agreement prior to its stated expiration date. Under the amended Employment Agreement, Mr. Dreier will not receive further equity awards or have the opportunity for continued vesting of his existing awards after May 29, 2009. As a result, Mr. Dreier will forfeit, on May 29, 2009, the remaining unvested award of 40,000 restricted stock units under his Employment Agreement. His award of 80,000 restricted stock units that was granted on May 1, 2008 will vest and be paid to Mr. Dreier on May 1, 2009.

The Amendment to Employment Agreement entered into in connection with Mr. Dreier’s retirement from Ryland confirmed that Mr. Dreier is entitled to lump sum payments of his vested benefits under a Supplemental Executive Retirement Plan (“SERP”) and under a Supplemental Executive Retirement Plan II (“SERP II”) in the amount of $8,217,100 on May 29, 2009, and on the date that is six months after his retirement, November 30, 2009, in the amount of $16,434,199. The lump sum payment amounts were calculated in accordance with the SERP and SERP II plan documents which specify that lump sum amounts are calculated using an 8 percent discount rate and an end of the year payment convention for the purpose of calculating the lump sum payment. These payments represent the vested amounts to which Mr. Dreier is entitled under the terms of the SERP and SERP II upon retirement. In addition, Mr. Dreier and his spouse will receive the continuation of his current executive health insurance program for 15 years with the same coverage and benefits that they both currently have with Ryland.

As of December 31, 2008, Ryland has deposited $20,831,946 into a grantor “rabbi” trust (“SERP Trust”) to fund benefits to be provided by Mr. Dreier’s SERP and SERP II. Before the date of a “change of control,” Ryland would be required to deposit into the SERP Trust an amount equal to the present value equivalent of any additional benefits to be provided by the SERP and SERP II calculated using an 8 percent discount rate.

A discussion of the payments and benefits received by Mr. Dreier pursuant to his Employment Agreement in the event of a “change of control” of Ryland is set forth in the section entitled “Potential Payments upon Termination or Change of Control” on pages 32 through 35 of this Proxy Statement.

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Annual Bonuses for Executive Officers

The 2006 annual bonus for Mr. Nicholson was determined based upon 1.5 percent of the adjusted consolidated pre-tax income for the Southeast Region of Ryland Homes given that he was President of this Region. As a result of his promotion in July 2007, Mr. Nicholson’s annual bonus for 2007 was based upon the greater of 0.75 percent of Ryland’s adjusted consolidated pre-tax income, subject to the same adjustments listed for Mr. Dreier, or a $500,000 minimum bonus amount to compensate him for his transition. Mr. Milne’s annual bonus for 2006 and 2007 was determined based upon 0.3 percent of Ryland’s adjusted consolidated pre-tax income, subject to the same adjustments listed for Mr. Dreier. Because of the decrease in Ryland’s pre-tax income and the loss related to inventory impairments during 2007, Mr. Milne did not earn an annual bonus for 2007. Mr. Bass, who was promoted from Orlando Division President to Southeast Region President of Ryland Homes in July 2007, received an annual bonus payment in 2007 based upon the greater of 1.5 percent of the Southeast Region’s adjusted consolidated pre-tax income or 3 percent of the Orlando Division’s adjusted consolidated pre-tax income. The Division bonus amount was determined to be greater. Mr. Schreiner’s annual bonus for 2006, 2007 and 2008 was based on 3 percent of the adjusted consolidated pre-tax income for Ryland Mortgage Company, subject to the same adjustments listed for Mr. Dreier.

For 2008, if Ryland’s adjusted consolidated pre-tax income was less than $125 million, Messrs. Dreier, Nicholson and Milne were eligible to receive an annual bonus determined by Ryland’s net cash provided by operating activities as contained within the Consolidated Statements of Cash Flows. If Ryland generated $100 million or greater of net cash provided by operating activities in 2008, Mr. Dreier was eligible to receive a maximum annual bonus of $2,500,000, Mr. Nicholson was eligible to receive a maximum annual bonus of $950,000 subject to a minimum guaranteed bonus amount of $500,000, and Mr. Milne was eligible to receive a maximum annual bonus of $350,000. For each $1 million of net cash provided by operating activities below $100 million generated by Ryland in 2008, there would be a corresponding reduction of 1 percent of the maximum annual bonus payment.

For 2008, if Ryland’s South Region earned adjusted consolidated pre-tax income less than $30 million, Mr. Bass was eligible to receive an annual bonus based on the South Region’s net cash provided by operating activities.  If the South Region generated greater than $30 million of net cash provided by operating activities in 2008, Mr. Bass was eligible to receive a maximum annual bonus of $400,000. If the South Region achieved less than the target amount of $30 million of net cash provided by operating activities, Mr. Bass’s annual bonus was determined by the amount of actual net cash provided by operating activities generated by the South Region in 2008 as a percentage of the target amount of $30 million. Mr. Schreiner’s annual bonus plan for 2008 was the same as in 2006 and 2007 as discussed above.

TRG Incentive Plan

Each of the named executive officers is entitled to participate in the TRG Incentive Plan.  At its February 2008 meeting, the Compensation Committee approved performance goals for the grant of awards for 2008.  Awards under the TRG Incentive Plan are expressed as a percentage of the participant’s base salary.  Target awards are based on two comparison metrics.  The first comparison metric is based on the most recent three-year median return on equity performance for which information is available for Fortune 500 companies. As a result, 50 percent of the target awards for the 2008 plan year is based on the three-year median return on equity of the Fortune 500 industrial companies for the years 2005, 2006 and 2007, which was 15.2 percent.  The second comparison metric is based on the average of the most recent three-year return on equity performance of 10 of Ryland’s comparative public homebuilding peer group companies.  As a result, the remaining 50 percent of the target awards for the 2008 plan year is based on the average return on equity for 10 comparable public homebuilders in Ryland’s peer group for years 2006, 2007 and 2008, which was negative 20.7 percent. These percentages are the targets for a 100 percent performance award under the plan. There is a threshold for performance awards under the plan, which is 75 percent of the return on equity targets for calculation of awards under the plan. There is also a maximum limit for performance awards under the plan, which is 300 percent of the target awards under the plan. Performance awards are targeted as a percentage of base salary for participants. Pursuant to Mr. Dreier’s Employment Agreement, a target performance award under the TRG Incentive Plan is 150 percent

23

of his base salary or $1.5 million. The other named executive officers have performance award targets between 80 percent and 125 percent of their base salaries.

Ryland’s three-year average return on equity using the three most recent fiscal years of 2006, 2007 and 2008 was negative 10.4 percent. As a result, the 2008 performance awards under the TRG Incentive Plan were calculated at 99.6 percent of the performance award targets for the respective participants. For the named executive officers, the 2008 performance awards are set forth in footnote (1) of the “Grants of Plan-Based Awards in 2008” table on page 20 of this Proxy Statement.

Once the performance awards are determined, they vest ratably over a three-year period. The first one-third of the performance award vests on December 31 of Ryland’s related performance award year. For the 2008 performance award, this vesting date was December 31, 2008. Vesting requires that the participant be employed on the vesting date. The remaining two-thirds of the performance award are credited to an account for each participant and payout is deferred until vested. These deferred award payouts vest in two equal installments on December 31 of each of Ryland’s first and second fiscal years following the performance award year, provided the participant continues to be employed by Ryland on the vesting dates. For the 2008 performance award, the vesting dates for the second and third installments of these awards are December 31, 2009 and December 31, 2010, respectively. The Compensation Committee can credit earnings on amounts held in a participant’s deferred award account in a manner and at a rate that is reasonable under Section 162(m) of the Code.

Upon the death, disability or retirement of a participant, all amounts of deferred performance awards vest and are paid to a participant or a participant’s beneficiary. Upon a participant’s voluntary or involuntary termination of employment, all unvested deferred performance awards are forfeited, and all vested deferred awards are paid in accordance with the terms of the plan; however, if the termination is for “cause,” the participant shall also forfeit all vested unpaid deferred awards. Upon a “change of control” of Ryland, all unvested deferred performance awards vest and are paid within 30 days to the participants.

Equity Incentive Plan

Ryland’s stockholders approved Ryland’s 2008 Equity Incentive Plan (“Equity Incentive Plan”) at the Annual Meeting of Stockholders on April 23, 2008. The Equity Incentive Plan permits the granting of stock options, restricted stock awards, stock units or any combination of the foregoing to Ryland’s employees, officers and others providing services to Ryland. Ryland has issued both stock options and restricted stock units to its executive officers and managers under the Equity Incentive Plan and its predecessor plans.

Restricted Stock Unit Grants

Pursuant to his Employment Agreement and the restricted stock units granted thereunder, Mr. Dreier received 94,000 shares of Ryland’s Common Stock on March 1, 2007, forfeited 40,000 restricted stock units that would have vested on March 1, 2008, forfeited 40,000 restricted stock units that would have vested on March 1, 2009, and has the opportunity to receive 40,000 shares of Ryland’s Common Stock on March 1, 2010, subject to performance criteria and the terms of his Employment Agreement. To satisfy the performance criteria for vesting of the restricted stock units, Ryland’s return on equity for the year preceding the vesting date must be 60 percent or greater than the 10-year median return on equity of the Fortune 500 industrial companies for the 10-year period ending with the year prior to Ryland’s performance year. If the performance criteria are not met, that restricted stock unit grant is forfeited. Because the performance criteria for 2007 and 2008 were not met, Mr. Dreier forfeited the restricted stock unit grant that would have vested on each of March 1, 2008 and March 1, 2009, respectively. Mr. Dreier will forfeit the 40,000 restricted stock units eligible for vesting on March 1, 2010 upon his retirement on May 29, 2009.

On May 1, 2008, Mr. Dreier received a grant of 80,000 restricted stock units. The vesting of this grant on May 1, 2009 is conditioned on the Company generating $100 million or greater of net cash provided by operating activities in 2008. For each $1 million of net cash provided by operating activities below $100 million generated by Ryland in 2008, there is a corresponding reduction by 1 percent of the maximum restricted stock unit grant vesting on May 1, 2009. Because this performance criteria was met in 2008, the maximum amount of 80,000 restricted stock units will vest and be paid out to Mr. Dreier on May 1, 2009. 

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The award of restricted stock units to Mr. Dreier includes payment of an amount equal to the applicable federal and state income and Medicare taxes related to the vesting of the restricted stock units. With respect to unvested restricted stock units, Mr. Dreier receives cash dividend equivalent payments as of each dividend payment date related to Ryland’s Common Stock. In the case of a “change of control” of Ryland or termination of employment by Ryland without “cause,” Mr. Dreier will vest in full and receive any unvested restricted stock units, including payment of applicable federal and state income and Medicare taxes.

On May 1 of 2005, 2006 and 2008, Ryland’s executive officers received grants of restricted stock units. Upon vesting, these awards are paid 50 percent in shares of Ryland’s Common Stock and 50 percent in cash equal to the fair market value of the restricted stock units on the date of vesting. Payment of the fair market value of the vested restricted stock units in cash permits the satisfaction of any applicable tax withholding required in connection with the vesting of these units. These grants of restricted stock units to executive officers vest ratably in annual installments over a three-year period with the first installments vesting on May 1, 2006 for the 2005 grant, May 1, 2007 for the 2006 grant and May 1, 2009 for the 2008 grant. In connection with the 2005 grant and 2006 grant, the performance criteria for these awards were met given that Ryland’s return on equity for 2005 and 2006 was greater than 60 percent of the 10-year median return on equity of the Fortune 500 industrial companies for the 10-year period ending with the 2004 and 2005 calendar years, respectively. Since the performance criteria for these awards were met, the only remaining condition for the vesting of each installment is the continued employment of the executive officer on the applicable vesting date. With respect to the 2008 grant, the vesting of these restricted stock units was conditioned on Ryland generating a targeted amount of net cash provided by operating activities for 2008 as contained within the Consolidated Statements of Cash Flows. If Ryland generates $100 million or greater of net cash provided by operating activities in 2008, the executive officers become vested in their maximum restricted stock unit grant over a three-year vesting period which is conditioned on continued employment on each vesting date. For each $1 million of net cash provided by operating activities below $100 million generated by Ryland in 2008, there is a corresponding reduction of 1 percent of the maximum restricted stock unit grant awarded to the executive officers. Because this performance criteria was met, the only remaining condition for vesting is the continued employment of the executive officer on the applicable vesting date. In connection with an increase to his compensation program, Mr. Milne received a grant of 30,000 restricted stock units on November 1, 2008. This grant is not subject to performance criteria and vests ratably in equal annual installments over a three-year period with the first installment vesting on November 1, 2009 subject to Mr. Milne’s continued employment on each vesting date. Restricted stock unit grants to executive officers include cash dividend equivalent payments with respect to the unvested restricted stock units as of each dividend payment date related to Ryland’s Common Stock. In the case of a “change of control” of Ryland, the unvested restricted stock units shall vest and be paid in full.

Stock Option Awards

On May 1, 2007, Ryland’s executive officers received grants of stock options to purchase shares of Common Stock at an exercise price of $44.65 per share, which was the closing market price of Ryland’s Common Stock on the grant date. On July 1, 2007, Messrs. Nicholson and Bass received grants of 75,000 and 20,000 stock options, respectively, in connection with their promotions. The stock options granted on July 1, 2007 have an exercise price of $37.37 per share, which was the closing market price of Ryland’s Common Stock on the grant date. These grants of stock options vest ratably in equal annual installments over a three-year period with the first installments vesting on May 1, 2008 and July 1, 2008, respectively, and must be exercised within five years of the date of grant. In connection with his promotion to President of Ryland, Mr. Nicholson received a stock option grant to purchase 100,000 shares of Common Stock at an exercise price of $27.38 per share, which was the closing market price of Ryland’s Common Stock on the grant date of October 1, 2008. This grant of stock options vests ratably in equal annual installments over a three-year period with the first installment vesting on October 1, 2009 and must be exercised within five years of the date of grant. These awards for the named executive officers are included in the “Grants of Plan-Based Awards in 2008” table on page 20 of this Proxy Statement. In the case of a “change of control” of Ryland, any unvested stock option awards shall vest and become immediately exercisable.

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Supplemental Executive Retirement Plan for Executive Officers

On July 1, 2003, Ryland established a Senior Executive Supplemental Retirement Plan (“SESRP”) for Ryland’s executive officers. The SESRP provides for payments on the later of the date that is six months after the date of the participant’s “separation from service” or within 60 days of the first day of January following the participant’s 60th birthday, unless the participant elects a later January 1 payment date, which date may be no later than the January 1 following the participant’s 65th birthday (“SESRP Benefit”). The SESRP Benefit vests at a rate of 20 percent per year on each anniversary date of commencement of participation in the SESRP, unless accelerated as a result of a “change of control” or termination of employment without “cause.” The SESRP Benefit will be paid at the election of the participants as either an annual payment of $150,000 for a period of 15 years or a lump sum payment in the amount of the present value equivalent of the benefit calculated using an 8 percent discount rate.

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OUTSTANDING EQUITY AWARDS AT DECEMBER 31, 2008

	Option Awards						Stock Awards
											Equity Incentive Plan Awards
	Number of Securities						Number of		Market Value of		Number of		Market Value of
	Underlying						Shares or Units		Shares or Units		Unearned Shares		Unearned Shares
	Unexercised Options			Option		Option	of Stock That		of Stock That Have		or Units That		or Units That Have
Name	Exercisable	Unexercisable		Exercise Price		Expiration Date	Have Not Vested		Not Vested (7)		Have Not Vested		Not Vested (7)
R. Chad Dreier	80,000	—		$	6.38	4/21/09	—		—		80,000	(8)	$	1,413,600
											80,000	(9)	$	1,413,600
Larry T. Nicholson	20,000	—		$	22.18	3/15/12	4,667	(5)	$	82,466	42,000	(10)	$	742,140
	14,000	—		$	20.99	2/26/13	—		—		—		—
	14,000	—		$	40.00	2/25/14	—		—		—		—
	10,000	20,000	(1)	$	44.65	5/1/12	—		—		—		—
	25,000	50,000	(2)	$	37.37	7/1/12	—		—		—		—
	—	100,000	(3)	$	27.38	10/1/13	—		—		—		—
Gordon A. Milne	10,100	—		$	6.04	9/1/10	7,000	(5)	$	123,690	42,000	(10)	$	742,140
	60,000	—		$	20.99	2/26/13	30,000	(6)	$	530,100	—		—
	60,000	—		$	40.00	2/25/14	—		—		—		—
	13,334	26,666	(1)	$	44.65	5/1/12	—		—		—		—
Keith E. Bass	6,000	—		$	40.00	2/25/14	—		—		30,000	(10)	$	530,100
	14,000	—		$	61.40	5/1/10	—		—		—		—
	9,333	4,667	(4)	$	62.43	5/1/11	—		—		—		—
	4,667	9,333	(1)	$	44.65	5/1/12	—		—		—		—
	6,667	13,333	(2)	$	37.37	7/1/12	—		—		—		—
Daniel G. Schreiner	10,300	—		$	5.97	2/5/09	3,667	(5)	$	64,796	28,000	(10)	$	494,760
	16,600	—		$	6.04	9/1/10	—		—		—		—
	30,000	—		$	20.99	2/26/13	—		—		—		—
	30,000	—		$	40.00	2/25/14	—		—		—		—
	8,334	16,666	(1)	$	44.65	5/1/12	—		—		—		—

(1)These unexercisable stock options were granted on May 1, 2007, and vest ratably in two remaining installments on each May 1 of 2009 and 2010 if the executive officers are employed by Ryland on those dates.

(2)These unexercisable stock options were granted on July 1, 2007, and vest ratably in two remaining installments on each July 1 of 2009 and 2010 if the executive officers are employed by Ryland on those dates.

(3)These unexercisable stock options were granted on October 1, 2008, and vest ratably in three annual installments on each October 1 of 2009, 2010 and 2011 if Mr. Nicholson is employed by Ryland on those dates.

(4)These unexercisable stock options were granted on May 1, 2006, and vest on May 1, 2009 if Mr. Bass is employed by Ryland on that date.

(5)These unvested restricted stock units were granted on May 1, 2006 and the performance criteria described in footnote (8) has been satisfied. Therefore, the executive officers will fully vest in these unvested restricted stock units on May 1, 2009 if they are employed by Ryland on that date.

(6)These unvested restricted stock units were granted on November 1, 2008 and were not subject to performance criteria. Therefore, Mr. Milne will vest in one-third of these unvested restricted stock units on each November 1 of 2009, 2010 and 2011 if he is employed by Ryland on those dates.

(7)The market value of the restricted stock units equals the number of restricted stock units times the closing price of Ryland’s Common Stock on December 31, 2008, which was $17.67 per share.

(8)These restricted stock units have not fully vested and been earned by Mr. Dreier. These restricted stock units are subject to both annual vesting in two equal installments on each March 1 of 2009 and 2010 and performance criteria which require Ryland’s return on equity for the applicable prior year in which the units vest to be equal to or greater than 60 percent of the ten-year median return on equity of the companies within the Fortune 500 for the ten-year period ending with the prior calendar year. Because Ryland did not achieve the performance criteria applicable for 2008, Mr. Dreier did not vest in 40,000 of these restricted stock units on March 1, 2009. Additionally, Mr. Dreier will forfeit the remaining 40,000 restricted stock units when he retires on May 29, 2009.

(9)These unvested restricted stock units were granted on May 1, 2008 and will vest on May 1, 2009 conditioned on Ryland generating $100 million or greater of net cash provided by operating activities in 2008. Because this performance criteria was met in 2008, these 80,000 restricted stock units will vest and be paid to Mr. Dreier on May 1, 2009.

(10)These unvested restricted stock units were granted on May 1, 2008 and the performance criteria in footnote (9) was satisfied. Therefore, the executive officers will vest in one-third of these unvested restricted stock units on each May 1 of 2009, 2010 and 2011 if they are employed by Ryland on those dates.

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OPTION EXERCISES AND STOCK VESTED IN 2008

	Option Awards			Stock Awards
	Number of Shares	Value Realized		Number of Shares	Value Realized
Name	Acquired on Exercise	on Exercise		Acquired on Vesting	on Vesting
R. Chad Dreier	80,000 (1)	$	1,987,496	—		—
	80,000 (1)	$	2,131,424	—		—
	80,000 (1)	$	1,153,192	—		—
	80,000 (1)	$	708,824	—		—
Larry T. Nicholson	—		—	4,666 (3)	$	309,295
Gordon A. Milne	—		—	7,000 (3)	$	463,960
Daniel G. Schreiner	20,000 (2)	$	544,000	3,666 (3)	$	243,015

(1)Pursuant to Mr. Dreier’s Plan for Trading Securities in accordance with Rule 10b5-1(c)(1) under the Exchange Act, Mr. Dreier exercises vested stock options on a quarterly basis on a trading day that follows one trading day after the public release of Ryland’s quarterly or annual earnings. His quarterly exercises took place on January 25, April 25, July 25 and October 24, 2008. The option exercise price for these exercises was $6.38 per share from a grant dated April 21, 1999. The per share market value of the options upon exercise and sale was $31.22, $33.02, $20.79, and $15.24, respectively.

(2)Mr. Schreiner exercised 20,000 vested stock options on May 1, 2008 from a September 17, 1998 grant with a $6.30 per share option exercise price. The per share market value of the options upon exercise and sale was $33.50.

(3)Having met the related performance requirements, Messrs. Nicholson, Milne and Schreiner, respectively, vested on May 1, 2008 in 4,667, 7,000, and 3,667 restricted stock units which were granted on May 1, 2005; and 4,666, 7,000 and 3,666 restricted stock units which were granted on May 1, 2006. The per share market value of the vested restricted stock units on May 1, 2008 was $33.14, which was the closing price of Ryland’s Common Stock on that date. The payment of these vested restricted stock units was provided 50 percent in stock and 50 percent in cash. Therefore, the market value of the shares of Common Stock received by Messrs. Nicholson, Milne and Schreiner was $154,631, $231,980 and $121,491, respectively, and the cash amount received by each of the officers was $154,664, $231,980 and $121,524, respectively.

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2008 PENSION BENEFITS

				Present Value of
		Number of Years		Accumulated Benefit
Name	Plan Name	Credited Service		at December 31, 2008
R. Chad Dreier	SERP and SERP II	6	(1)	$	20,602,636
Larry T. Nicholson	SESRP	4		$	603,390
Gordon A. Milne	SESRP	5		$	1,057,858
Keith E. Bass	SESRP	0		—
Daniel G. Schreiner	SESRP	5		$	704,895

(1) Mr. Dreier has 5 years of credited service under the SERP and 1 year of credited service under the SERP II.

Effective July 1, 2002, Ryland and Mr. Dreier entered into a Supplemental Executive Retirement Plan (“SERP”). The SERP gave him the opportunity to receive a benefit in the form of a lump sum cash payment equivalent to the present value of $2,400,000 per year for a period of 15 years, calculated using an 8 percent discount rate (“SERP Benefit”). The SERP Benefit vested 20 percent per year beginning on December 30, 2003, such that Mr. Dreier fully vested in the SERP Benefit on December 30, 2007. Effective January 1, 2005, Ryland and Mr. Dreier entered into a Supplemental Executive Retirement Plan II (“SERP II”). The SERP II was entered into as a result of the amendment of Mr. Dreier’s Employment Agreement in 2005, which extended the term of his Employment Agreement for three years from December 30, 2007 to December 30, 2010. The SERP II gave him the opportunity to receive an additional benefit in the form of a lump sum cash payment equivalent to the present value of $1,440,000 per year for a period of 15 years, calculated using an 8 percent discount rate (“SERP II Benefit”). The SERP II Benefit vests one-third per year beginning on December 30, 2008, such that it would fully vest on December 30, 2010. Mr. Dreier is immediately 100 percent vested in the SERP II Benefit upon the occurrence of a “change of control” or termination of employment without “cause.” In order to comply with the requirements of Section 409A of the Code, SERP II partially controls the payment of the SERP Benefit.

The present value equivalent of Mr. Dreier’s accumulated benefit at December 31, 2008 under the SERP and SERP II was calculated using 33 percent of the full-benefit payment stream, with payout beginning on January 1, 2011, and the remaining 67 percent payout beginning on July 1, 2011 for 15 years. Each payment stream was then discounted back to present value on December 31, 2008 using an 8 percent discount rate.

The amended Employment Agreement entered into in connection with Mr. Dreier’s retirement from Ryland confirmed that Mr. Dreier is entitled to a lump sum cash payment of a portion of his vested benefit under the SERP in the amount of $8,217,100 on May 29, 2009. On the date that is six months after his retirement, November 30, 2009, Mr. Dreier will receive a lump sum cash payment of his vested benefit pursuant to the SERP and SERP II in the amount of $16,434,199. These lump sum payment amounts were calculated in accordance with the SERP and SERP II plan documents which specify that lump sum payment amounts are calculated using an 8 percent discount rate and an end of the year payment convention for the purpose of calculating the lump sum payment. These payments represent the vested amounts to which Mr. Dreier is entitled under the terms of the SERPs upon retirement on May 29, 2009. In this regard, Mr. Dreier is fully vested in the SERP and one-third vested in the SERP II.

Effective July 1, 2003, Ryland established the Senior Executive Supplemental Retirement Plan (“SESRP”) for the benefit of executive officers. The SESRP gives participants the opportunity to receive a benefit in the form of 15 annual payments in the amount of $150,000 each, or the present value equivalent of this benefit payment in a lump sum cash payment, calculated

29

using an 8 percent discount rate (“SESRP Benefit”). Participants vest at the rate of 20 percent per year on each anniversary date of their participation in the SESRP, provided they are continuously employed by Ryland from commencement of participation in the SESRP through the date of vesting. Messrs. Milne and Schreiner are fully vested in the SESRP Benefit because they were initial participants in the plan in 2003, Mr. Nicholson is 80 percent vested in the SESRP Benefit because his participation began in 2004. Mr. Bass’s participation in the SESRP commenced in 2008. Participants are fully vested in the SESRP Benefit upon the occurrence of a “change of control” or an “involuntary termination of employment without cause” as defined in the plan. Payment of a participant’s vested SESRP Benefit will begin on the later of the date that is six months after the date of the participant’s “separation from service” or within 60 days of the first day of January following the participant’s 60th birthday, unless the participant elects a later January 1 payment date, which date may be no later than the January 1 following his 65th birthday. The present value equivalent of the accumulated benefit at December 31, 2008 for participants in the SESRP was calculated using the applicable vested percent of the full-benefit payment stream with payout beginning on January 1 following the participant’s 60th birthday for 15 years in a lump sum payment in the amount of the present value equivalent of the benefit calculated using an 8 percent discount rate, and then discounting such amount back to present value on December 31, 2008 using a 7 percent discount rate.

The terms of the SERP, SERP II and SESRP are set forth in the relevant plan documents, and the descriptions contained in this Proxy Statement are subject to and governed by the applicable plan documents. Additionally, there are descriptions of these plans set forth in detail under the sections entitled “Mr. Dreier’s Employment Agreement” and “Supplemental Executive Retirement Plan for Executive Officers” under “Discussion of Compensation Agreements and Plans” on pages 22 and 26 of this Proxy Statement, respectively.

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2008 NONQUALIFIED DEFERRED COMPENSATION

	Executive		Company		Aggregate Earnings		Aggregate Withdrawals/		Aggregate Balance at
Name	Contributions in 2008		Contributions in 2008 (1)		(Losses) in 2008 (2)		Distributions in 2008 (3)		December 31, 2008 (4)
R. Chad Dreier	—		—		$	(925,209)	$	11,109,350	—
Larry T. Nicholson	$	98,008	$	54,208	$	(716,030)	$	2,377,294	$	705,362
Gordon A. Milne	$	37,339	$	23,539	$	(784,919)	$	4,068,934	$	48,338
Keith E. Bass	$	126,497	$	52,117	$	(101,323)	$	1,545,444	$	41,011
Daniel G. Schreiner	$	18,000	$	16,615	$	(166,723)	$	2,784,766	$	35,147

(1)   Matching contributions to the EDDCP II made by Ryland are also included in the “All Other Compensation” column of the “Summary Compensation Table” on page 18 of this Proxy Statement.

(2)   Represents earnings or losses related to participants’ accounts that are invested in a variety of independently managed investment funds available under the plan. 

(3)   Because Ryland terminated the Executive and Director Deferred Compensation Plan (“EDDCP”) effective September 30, 2008, the named executive officers’ balances held in the EDDCP were distributed in the following amounts: Mr. Dreier, $7,271,127; Mr. Nicholson, $2,377,294; Mr. Milne, $2,647,221; Mr. Bass, $157,140; and Mr.Schreiner, $1,873,581.

(4)   This aggregate balance represents the participants’accounts in the EDDCP II, which is the remaining nonqualified deferred compensation plan maintained by Ryland.

All contributions set forth in the table above are pursuant to Ryland’s Executive and Director Deferred Compensation Plan II (“EDDCP II”). The EDDCP II was adopted by Ryland to comply with the requirements of Section 409A of the Code, as added by the American Jobs Creation Act of 2004, and the Treasury regulations or any other authoritative guidance issued thereunder. Any contributions to the predecessor nonqualified deferred compensation plan, the EDDCP, were “grandfathered” and governed by the terms of the EDDCP. Effective September 30, 2008, Ryland terminated the EDDCP and distributed all balances to participants. The EDDCP II remains in effect and allows executives to defer receipt of a portion of base salary and annual bonus and receive matching contributions by Ryland in an amount up to 6 percent of an executive’s annual base salary and bonus. These are contributions in excess of the limitations on contributions that apply to Ryland’s qualified deferred compensation plan known as the Retirement Savings Opportunity Plan.  Ryland’s matching contributions vest upon the earlier of one-third at the end of each of the executive’s first three years of service, or the death, disability or retirement of the executive or a “change of control” of Ryland. As of December 31, 2008, all of the named executive officers had fully vested in Ryland’s matching contributions due to their length of employment with Ryland.

Under the EDDCP II, participants make irrevocable deferral elections for their compensation prior to the end of the year preceding the plan year in which the services giving rise to the compensation to be deferred are performed or, at the discretion of the Committee administering the plan, prior to six months before the end of the performance service period for the compensation being deferred if the compensation is determined to be “performance-based.” Participants may defer up to 100 percent of their annual base salary and bonus in the EDDCP II. For purposes of the EDDCP II, compensation that qualifies for deferral does not include amounts earned or paid under Ryland’s TRG Incentive Plan, personal health and services allowance, executive health and fitness benefit, discretionary bonuses, stock options, fringe benefits, relocation expenses, non-monetary awards and other allowances paid to an executive for employment services rendered.

The value of aggregate earnings or losses in deferred accounts within the EDDCP II is determined based upon the performance of investment funds selected by the participant from a range of choices provided by Ryland and the plan administrator. Changes to investment fund elections may be made by the participants from time-to-time, and changes to the selection of funds available under the plan may be made by Ryland at any time upon a minimum of a month’s notice to plan participants.

Participants may elect to receive distributions from their accounts under the EDDCP II on a fixed payment date, upon determination of disability or the occurrence of a “change in control,” or after six months from the date of their “separation from service” with Ryland in the form of a lump sum payment or up to 15 annual installments. Participants also may withdraw their funds due to an unforeseeable financial emergency at the sole discretion of Ryland.

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POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE OF CONTROL

Potential Payments under Mr. Dreier’s Employment Agreement

In accordance with Mr. Dreier’s Employment Agreement, effective and payable on the date of a “change of control” of Ryland, Mr. Dreier receives a lump sum cash payment equal to his unpaid base salary for the remainder of the year in which the “change of control” occurs, a pro rata bonus through the date of the “change of control” based on the results of the preceding year, plus an amount equal to three times the highest annual compensation paid to him in any of the last three years prior to the “change of control” event. For purposes of this calculation, “annual compensation” is the sum of Mr. Dreier’s base salary, any bonus paid or earned even though paid in a subsequent year, vested and unvested, and all amounts and the cash value of any stock, credited or paid, vested and unvested, under any incentive compensation or other benefit or compensation plan of Ryland, including the TRG Incentive Plan or Equity Incentive Plan. Mr. Dreier also receives accelerated vesting of all rights, awards and benefits under Ryland’s benefit, incentive and equity plans in the form of a cash lump sum payment equal to the amount of these rights, awards and benefits.

Mr. Dreier would also receive three years of continued participation, at no cost to him, in the life, accident and health insurance, employee welfare benefit, executive medical reimbursement programs. In addition, Mr. Dreier would receive cash payment for the personal health and services allowance, executive life insurance and any other fringe benefits provided to him prior to the “change of control.” If Mr. Dreier moves his residence to pursue professional or career opportunities within two years after the date of a “change of control,” he will be reimbursed for any expenses incurred in relocating, including taxes payable on the reimbursement, any costs or commissions related to selling his home, and payment of all moving expenses and any other benefits provided by Ryland under its relocation program. Mr. Dreier is entitled to receive, as payment for outplacement services, a lump sum cash payment equal to 10 percent of his base salary.

For purposes of Mr. Dreier’s Employment Agreement, a “change of control” occurs when: a) a third party acquires beneficial ownership of i) over 50 percent of the fair market value or voting power of Ryland’s outstanding voting securities, or ii) 35 percent of the voting power of Ryland’s outstanding voting securities in a one-year period; b) a majority of the Board of Directors is replaced in a one-year period by Directors not endorsed or approved by a majority of the Directors prior to the initiation of replacements; or c) a third party acquires assets of Ryland in a one-year period with a gross fair market value of 40 percent or more of the total gross fair market value of Ryland’s assets prior to the initiation of the acquisition. Mr. Dreier will also receive the foregoing payments, rights and benefits if his employment is terminated by Ryland without “cause,” or Mr. Dreier terminates his employment for “good reason,” if these terminations of employment occur during a “change of control period,” and a “change of control” occurs. A “change of control period” is the period commencing with the date on which Ryland becomes aware of or enters into any discussions or negotiations that could involve a “change of control” or a proposed transaction which could result in a “change of control,” and ending on the first to occur of the effective date of the “change of control” or the date on which the proposed “change of control” is no longer discussed or proposed and is determined not to occur.

If Mr. Dreier’s employment is terminated by Ryland without “cause” or by Mr. Dreier for “good reason,” Mr. Dreier receives a lump sum cash payment of his base salary and a lump sum cash payment equal to the value of his health and welfare benefits for the remaining term of the Employment Agreement or two years, whichever is greater. Ryland shall also pay Mr. Dreier all benefits to which he has a vested right. Mr. Dreier will fully vest in the award of 120,000 restricted stock units. He would also receive tax assistance related to the vesting of this restricted stock unit award in the amount of $1,861,572. He also fully vests in any prior year awards that remain unvested and any awards made for the fiscal year in which termination occurs under the TRG Incentive Plan.

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If any payment under the Employment Agreement would subject Mr. Dreier to an excise tax under Section 4999 or Section 409A of the Code, Ryland or its successor shall pay Mr. Dreier an additional amount sufficient to cover the excise tax and any interest or penalties payable that may be imposed, as well as any applicable federal and state income, Medicare and employment taxes that apply to the additional amounts paid. Based on calculations as of December 31, 2008, Mr. Dreier is not subject to excise taxes because the value of his assumed “change of control” payment is less than the safe harbor amount allowed pursuant to Code Section 280G.

Pursuant to Mr. Dreier’s supplemental executive retirement plans (the “SERP” and “SERP II”), Mr. Dreier is currently fully vested in his SERP Benefit and full vesting of the SERP II Benefit is accelerated immediately upon a “change of control” of Ryland or upon termination of employment by Ryland without “cause.” Payment of the SERP Benefit occurs upon a “change of control” or within 60 days of Mr. Dreier’s retirement or his voluntary or involuntary termination of employment with Ryland. Given that Mr. Dreier has elected a lump sum payment under the SERP and SERP II, he would receive the present value equivalent of his currently fully vested SERP Benefit and SERP II Benefit calculated using an 8 percent discount rate which is $24,651,299. Payment of the currently unvested SERP II Benefit occurs immediately upon a “change of control.” Given that he elected a lump sum payment under the SERP II, he would receive the present value equivalent of the accelerated SERP II Benefit calculated using an 8 percent discount rate which is $8,217,100. In addition, at the time that Mr. Dreier is eligible to receive the SERP Benefit, Mr. Dreier and his spouse are provided with an executive retirement health insurance program for a period of 15 years which provides the same coverage and benefits as the Ryland executive health insurance program in which Mr. Dreier participated prior to his retirement or termination of employment with Ryland.

Additional Payments to Mr. Dreier Upon a
“Change of Control” of Ryland on December 31, 2008

Three times 2006 “annual compensation”	$	86,890,102
Accelerated vesting of 120,000 restricted stock units including tax gross-up	$	3,981,972
Accelerated vesting of deferred awards under the TRG Incentive Plan	$	1,767,448
Estimate of three years of participation in insurance and other special benefits	$	549,741
Outplacement services payment	$	100,000
Acceleration of SERP II Benefit	$	8,217,100
TOTAL	$	101,506,363

Payments to Mr. Dreier Upon a Termination of Employment on
December 31, 2008 by Ryland without “Cause” or by Mr. Dreier for “Good Reason”

Two times base salary	$	2,000,000
Lump sum cash payment equal to the value of health and welfare benefits for two years	$	166,986
Accelerated vesting of 120,000 restricted stock units including tax gross-up	$	3,981,972
Accelerated vesting of deferred awards under the TRG Incentive Plan	$	1,767,448
Acceleration of SERP II Benefit (discounted to include a six month delayed payment period)	$	7,895,951
TOTAL	$	15,812,357

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Potential Payments under Senior Executive Severance Agreements

Prior to 2006, Ryland entered into Senior Executive Severance Agreements with certain of its executive officers, including Messrs. Milne, Nicholson and Schreiner. Pursuant to these agreements, upon a “termination of employment” within a “change of control period,” the executives receive a lump sum cash payment equal to their unpaid salary for the remainder of the year in which the termination of employment occurs, a pro rata bonus through the date of the termination of employment based on the highest bonus earned by the executives in any of the three years prior to their termination, plus an amount equal to two times the highest “annual compensation” paid to them for any of the three years prior to their termination. In 2006, Ryland revised its form of Senior Executive Severance Agreement offered to new executive officers to comply with the newly adopted “Policy Regarding Stockholder Approval of Severance Agreements,” as discussed beginning on page 16 of this Proxy Statement. Mr. Bass executed the revised form of Ryland’s Senior Executive Severance Agreement in June 2007 that is subject to the Policy. Mr. Bass’s agreement provides that upon a “termination of employment” during a “change of control period,” Mr. Bass will receive a lump sum cash payment equal to a pro rata bonus through the date of the “termination of employment” based on the target annual bonus for the year in which the “termination of employment” occurs or in the absence of a specified target annual bonus for that year, the highest bonus earned by Mr. Bass in any of the last three years prior to termination, plus an amount equal to two times the highest “annual compensation” paid to Mr. Bass for any of the three years prior to termination. For purposes of all of the Senior Executive Severance Agreements, “annual compensation” means the sum of an executive’s annual base salary and bonus paid or earned even though paid in a subsequent year, and all amounts credited to the executive, vested and unvested, under any incentive compensation or other benefit or compensation plan of Ryland, including the TRG Incentive Plan and Equity Incentive Plan.

Further, upon termination of employment during a “change of control period,” each of the executives receives two years participation, at no cost to them, in the life, accident and health insurance, employee welfare benefit and executive medical reimbursement plans in which they participate. The estimated cost for participation in these benefits for two years is as follows: Mr. Nicholson, $48,383; Mr. Milne, $42,144; Mr. Bass, $50,073; and Mr. Schreiner, $37,301. In addition, the executives receive an equivalent cash payment for two years of continued participation in the personal health and services allowance, health club benefit and benefits provided to the executive prior to the “change of control.” If any of the executives move their residence in order to pursue professional or career opportunities within two years after the date of their termination of employment within a “change of control period,” they are reimbursed for any expenses incurred in relocating, including taxes payable on the reimbursement, any costs or commissions related to selling their homes, all moving expenses and any other benefits provided by Ryland under its relocation program. Messrs. Nicholson, Milne, and Schreiner will receive a lump sum cash payment equal to 10 percent of their “annual compensation” for the calendar year immediately preceding their termination of employment in lieu of the reimbursement for outplacement services. Under his Senior Executive Severance Agreement, Mr. Bass is eligible to receive reimbursement for outplacement services used within two years of the date of Mr. Bass’s termination of employment during a “change of control period” up to 25 percent of Mr. Bass’s “annual compensation” for the calendar year prior to the date of his termination of employment during a “change of control period.”

The “change of control period” for the Senior Executive Severance Agreements begins on the date Ryland becomes aware of or enters into discussions or negotiations that could involve a “change of control” and ends on the earlier of two years after the effective date of a “change of control” or the date on which a “change of control” is no longer discussed or proposed to occur. For purposes of the Senior Executive Severance Agreements, a “change of control” occurs when: a) a third party acquires beneficial ownership of 20 percent or more of the voting power of Ryland’s outstanding voting securities; b) the first purchase of shares of Ryland’s Common Stock is made under a tender or exchange offer by a third party; c) during any two-year period, members of the Board of Directors at the beginning of the period cease for any reason to constitute a majority of the Board, unless the election of each new Director was approved by two-thirds of the Board members at the beginning of the two-year period who are still in office; or d) Ryland’s stockholders approve a merger, consolidation, liquidation or dissolution of Ryland, or the sale of all or substantially all of Ryland’s assets. For purposes of the Senior Executive Severance Agreements, a “termination of employment” occurs when an executive’s employment is terminated by Ryland without “cause” or by the executive with “good reason.” “Good reason” means a) the executive is assigned any duties or responsibilities that are inconsistent in any respect with his position, duties, responsibilities or status prior to a “change of control period”; b) Ryland requires the executive, without his

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consent, to be based at a location which is more than 50 miles from the executive’s then current primary residence; c) the executive’s base salary, bonus or any other benefits, incentive compensation or compensation plans are reduced; or d) the executive experiences in any year a reduction in the ratio of the executive’s incentive compensation, bonus or other such payments to his base compensation, or a reduction in the method of calculation of the executive’s incentive compensation, bonus or other such payment if these benefits or payments are calculated other than as a percentage of base salary.

All rights, awards and benefits of the executives under Ryland’s benefit, incentive and equity plans immediately vest in full, and the executives receive the amount of these rights, awards and benefits in a cash lump sum payment equal to the amount of these rights, awards and benefits upon a “termination of employment” within a “change of control period.”

If any payment under the Senior Executive Severance Agreements would subject the executive officers to an excise tax under Section 4999 of the Code, Ryland or its successor shall pay the executives an additional amount sufficient to cover the excise tax and any interest or penalties payable that may be imposed, as well as any applicable federal and state income, Medicare and employment taxes that apply to the additional amounts paid.

Pursuant to Ryland’s supplemental executive retirement plan for executive officers (the “SESRP”), vesting of benefits is accelerated immediately upon a “change of control” of Ryland or an “involuntary termination of employment without cause” as defined in the plan.

Payments to named Executive Officers upon a
“Change of Control” as of December 31, 2008

	Larry T.		Gordon A.		Keith E.		Daniel G.
	Nicholson		Milne		Bass		Schreiner
Two times 2006 “annual compensation”	$	9,058,701	$	7,884,856	$	6,477,436	$	6,476,454
Estimation of two years insurance and other benefits	$	207,406	$	209,596	$	128,413	$	102,801
Accelerated vesting of deferred awards under the TRG Incentive Plan	$	730,897	$	762,400	$	268,167	$	318,141
Accelerated vesting of restricted stock units	$	824,606	$	1,395,930	$	530,100	$	559,556
Outplacement assistance (1)	$	224,976	$	213,691	N/A		$	244,962
Acceleration of SESRP Benefit (2)	$	150,848	N/A		$	469,701	N/A
Estimated excise tax and related tax assistance	$	3,882,110	—		$	2,930,303	—
TOTAL	$	15,079,544	$	10,466,473	$	10,804,120	$	7,701,914

(1)Lump sum cash payment equal to 10 percent of 2007 annual compensation for the executives named above except Mr. Bass, who is eligible to receive reimbursement for outplacement assistance up to 25% of his “annual compensation,” which potential reimbursement amount is not determinable at this time.

(2)Messrs. Milne and Schreiner are fully vested in their SESRP Benefit.

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2008 DIRECTOR COMPENSATION

	Fees Earned or				All Other
Name (1)	Paid in Cash (2)		Stock Awards (3)		Compensation (4)		Total
Leslie M. Frécon	$	85,000	$	99,420	$	25,000	$	209,420
Roland A. Hernandez	$	80,000	$	99,420	$	25,000	$	204,420
William L. Jews	$	118,736	$	99,420	$	25,000	$	243,156
Ned Mansour	$	80,000	$	99,420	$	25,000	$	204,420
Robert E. Mellor	$	75,000	$	99,420	$	25,000	$	199,420
Norman J. Metcalfe	$	85,000	$	99,420	$	25,000	$	209,420
Charlotte St. Martin	$	80,000	$	99,420	$	25,000	$	204,420

(1)Mr. Dreier is the Chairman of the Board of Directors as well as Chief Executive Officer of Ryland. His compensation is disclosed in the preceding executive compensation tables. Since he does not receive compensation separately for his duties as a Director, other than the charitable contribution made on his behalf by Ryland, he is not included in the Director Compensation table.

(2)The annual retainer fee, which is paid in quarterly installments, is $60,000. Mr. Jews receives an additional annual retainer fee of $40,000 to serve as Lead Director of the Board of Directors. Mr. Jews was elected Lead Director by the Board of Directors at their meeting on February 27, 2008. Half of the annual retainer fee for all Directors is paid in cash. The other half is used to purchase Ryland’s Common Stock on the Directors’ behalf quarterly, such that Ryland instructed a broker to enter an order to purchase shares of Ryland’s Common Stock on the open market so that the purchases occur immediately after the market opens on the date the retainer is paid by Ryland. Committee members receive a fee of $10,000 per committee per year which is paid in quarterly installments. Committee chairpersons receive an additional fee of $5,000 per year paid in quarterly installments. Subject to Section 409A of the Code, Directors are able to defer their annual retainer and meeting fees and the stock purchased as part of their annual retainer fee into Ryland’s nonqualified deferred compensation plan, the EDDCP II. Ryland does not match Director contributions into the EDDCP II.

(3)On April 26, 2006, Ryland’s stockholders approved the 2006 Non-Employee Director Stock Plan pursuant to which each non-employee Director receives an automatic grant of 3,000 shares of Common Stock each May 1. On May 1, 2008, each of the seven non-employee Directors received 3,000 shares. Pursuant to FAS 123(R), the shares were valued at the closing price of Ryland’s Common Stock of $33.14 on that day.

(4)Each of the Directors receives the ability to designate where Ryland will make a contribution to qualified charities up to $25,000 annually. These contributions are made directly by Ryland and are not included in the Directors’ income.

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PROPOSAL NO. 2

PROPOSAL TO APPROVE AN AMENDMENT
TO RYLAND’S ARTICLES OF INCORPORATION

On February 25, 2009, the Board of Directors declared advisable and approved, subject to the approval of the stockholders, an Amendment to the Company’s Articles of Incorporation to impose certain restrictions on the transfer of our Common Stock which could otherwise adversely affect our ability to use the Company’s net operating loss carryforwards and unrealized losses (collectively, the “NOLs”) for income tax purposes. The proposed Amendment to the Company’s Articles of Incorporation is attached to this Proxy Statement as Appendix A (the “NOL Protective Amendment”).

Background and Reasons for the Proposal

Our Board of Directors approved the Amendment to the Articles of Incorporation in an effort to protect stockholder value by attempting to diminish the risk that our ability to use our NOLs to reduce potential future federal income tax obligations may become substantially limited. We have experienced, and continue to experience, substantial operating losses, including realized losses for tax purposes from sales of inventory and land previously written down for financial statement purposes. NOLs that arise from these losses can be used by us in certain circumstances to offset any current and future taxable income and thus, reduce our federal income tax liability. Our ability to take advantage of these NOLs is subject to certain requirements and restrictions. To the extent that the NOLs are not otherwise limited, we believe that we will be able to carry forward a significant amount of NOLs and that these NOLs could be a substantial asset to us.

The benefit of the NOLs to the Company, including NOLs later arising from realized tax losses on sales of land and inventory previously written down, will be substantially limited, and the timing of the usage of the NOLs could be substantially delayed, if we were to experience an “ownership change” as defined in Section 382 of the Internal Revenue Code (“Section 382”). Any such limitation could significantly impair the value of the asset represented by our available NOLs. An “ownership change” can occur through one or more acquisitions of our stock, whether occurring contemporaneously or pursuant to a single plan, by which one or more 5 percent stockholders increase their ownership of our stock by more than 50 percentage points over their lowest percentage interest within a rolling three-year period. For this purpose, a 5 percent stockholder is a single stockholder that owns or is deemed to own, directly or indirectly, at least 5 percent of our stock and certain groups of stockholders that, in the aggregate, own at least 5 percent of our stock. If such an acquisition were to happen, we would only be allowed to use a limited amount of NOLs and credits to offset our taxable income and tax subsequent to the “ownership change.” The annual limit is obtained by multiplying (i) the aggregate value of our outstanding equity immediately prior to the “ownership change” (reduced by certain capital contributions made during the immediately preceding two years and certain other items) by (ii) the federal long-term tax-exempt interest rate applicable to the month of the “ownership change.” In calculating this annual limit, numerous special rules and limitations apply. If we were to experience an “ownership change” at our current stock price levels, we believe we would be subject to an annual NOL limitation which could result in a material amount of NOLs expiring unused, and which result in a significant impairment to any NOL assets the Company may have at that time.

If the Company were to have taxable income in excess of the NOL limitations following a Section 382 “ownership change,” it would not be able to offset tax on the excess income with the NOLs. Although any loss carryforwards not used as a result of any Section 382 limitation would remain available to offset income in future years (again, subject to the Section 382 limitation) until the NOLs expire, any “ownership change” could significantly defer the utilization of the loss carryforwards, accelerate payment of federal income tax and could cause some of the NOLs to expire unused. Because the aggregate value of our outstanding stock and the federal long-term tax-exempt interest rate fluctuate, it is impossible to predict with any accuracy the annual limitation upon the amount of our taxable income that could be offset by such loss carryforwards and credits were an “ownership change” to occur in the future, but such limitation could be material.

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Section 382 Ownership Calculations

The benefit of our NOLs would be significantly reduced if we were to experience an “ownership change” as defined in Section 382. In order to determine whether an “ownership change” has occurred, the Company must compare the percentage of stock owned by each 5 percent stockholder immediately after any change in the ownership of its stock affecting the percentage owned by a 5 percent stockholder (an “owner shift”) to the lowest percentage of stock owned by each such 5 percent stockholder at any time during the testing period (which is generally a three-year rolling period ending on the day of the owner shift). The amount of the increase in the percentage of Company stock owned by each 5 percent stockholder whose stock ownership percentage has increased is summed up, and an ownership change occurs if the aggregate increase in percentage ownership by all such 5 percent stockholders exceeds 50 percent.

For example, if a single investor acquired 50.1 percent of our stock in a three-year period, an “ownership change” would occur. Similarly, if ten persons, none of whom owned our stock, each acquired slightly over 5 percent of our stock within a three-year period (so that such persons owned, in the aggregate, more than 50 percent), an “ownership change” would occur.

In determining whether an “ownership change” has occurred, the rules of Section 382 are very complex, and are beyond the scope of this summary discussion. Some of the factors that must be considered in making a Section 382 “ownership change” calculation include the following:

·   All holders who each own less than 5 percent of a company’s common stock are generally (but not always) treated as a single 5 percent stockholder. Transactions in the public markets among stockholders who are not 5 percent stockholders are generally (but not always) treated as within this single public group 5 percent stockholders.

·   There are several rules regarding the aggregation and segregation of stockholders who otherwise do not qualify as 5 percent stockholders. Ownership of stock is generally attributed to its ultimate beneficial owner without regard to ownership by nominees, trusts, corporations, partnerships or other entities.

·   Acquisitions by a person which cause that person to become a 5 percent stockholder generally result in a 5 percentage (or more) point change in ownership, regardless of the size of the final purchase that caused the 5 percent threshold to be exceeded.

·   Certain constructive ownership rules, which generally attribute ownership of stock owned by estates, trusts, corporations, partnerships or other entities to the ultimate indirect individual owner thereof, or to related individuals, are applied in determining the level of stock ownership of a particular stockholder. Special rules can result in the treatment of options (including warrants) or other similar interests as having been exercised if such treatment would result in an ownership change.

·   The redemption or buyback of shares by an issuer will increase the ownership of any 5 percent stockholders (including groups of stockholders who are not themselves 5 percent stockholders) and can contribute to an “ownership change.” In addition, it is possible that a redemption or buyback of shares could cause a holder of less than 5 percent to become a 5 percent stockholders, resulting in a 5 percentage (or more) point change in ownership.

Currently, we do not believe that we have experienced an “ownership change,” but calculating whether an “ownership change” has occurred is subject to inherent uncertainty. This uncertainty results from the complexity and ambiguity of the Section 382 provisions, as well as limitations on the knowledge that any publicly traded company can have about the ownership of and transactions in its securities.

It is not possible to fully determine or estimate the level of NOLs that are now or in the future may be available to us to offset a taxable income that we may have or otherwise reduce our taxes. Based upon our results through December 31, 2008, we believe we will be able to “carry back” NOLs realized through that date to get a tax refund of more than $160 million from taxes previously paid by us on income earned in 2006. Future NOLs are primarily realized by us from operating losses and from

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realized losses for tax purposes from any sale of inventory or land that previously has been written down by us. The current amount of unrealized losses related to the sale of inventory or land that was previously written down by us that could be subject to a limitation upon an ownership change is in excess of $475 million.

Although the Board of Directors adopted a Shareholder Rights Plan on December 17, 2008 to assist in protecting the NOLs, and is submitting that Rights Plan to stockholders for approval in this Proxy Statement, it will not completely restrict transactions that could result in an “ownership change” and there is nothing we can do under the Rights Plan to block the impact of any resulting ownership shift. The Board of Directors believes the best interests of stockholders are served by adopting provisions that are designed to restrict direct and indirect transfers of our stock if such transfers will affect the percentage of stock that is treated as owned by a 5 percent stockholder. In addition, the NOL Protective Amendment will include a mechanism to block the impact of a transfer on the ownership shift while allowing purchasers to receive their money back from prohibited purchases. In order to implement these transfer restrictions, the NOL Protective Amendment must be approved by stockholders.

Description of NOL Protective Amendment

The following is a summary of the proposed NOL Protective Amendment. This summary is qualified in its entirety by reference to the full text of the proposed transfer restrictions, which is contained in the proposed Article ELEVENTH of our Articles of Incorporation set forth in Appendix A. Stockholders are urged to read in their entirety the transfer restrictions set forth in Appendix A.

Prohibited Transfers. Although the Section 382 rules apply to 5 percent stockholders as described herein, the Board has determined that it is in the best interest of the Company to apply a more conservative approach by restricting transactions of stockholders that own or would own 4.9 percent of our stock. The transfer restrictions generally will restrict, from and after the effective date, any direct or indirect transfer (such as transfers of stock of the Company that result from the transfer of interests in other entities that own stock of the Company) if the effect would be to:

·   increase the direct or indirect ownership of our stock by any Person (as defined below) from less than 4.9 percent to 4.9 percent or more of our Common Stock; or

·   increase the percentage of our Common Stock owned directly or indirectly by a Person owning or deemed to own 4.9 percent or more of our Common Stock (including existing 4.9 percent stockholders as of the effective date).

“Person” means any individual, firm, corporation or other legal entity, including a group of persons treated as an entity pursuant to Treasury Regulation § 1.382 -3(a)(1)(i), and includes any successor (by merger or otherwise) of such entity.

Transfers subject to the transfer restrictions include sales to Persons whose resulting percentage ownership (direct or indirect) of Common Stock would exceed the 4.9 percent thresholds discussed above, or to Persons whose direct or indirect ownership of Common Stock would by attribution cause another Person to exceed such threshold. Rules of constructive ownership, aggregation, segregation, combination and other stock ownership rules prescribed by the Code (and related regulations) that apply in determining whether a Person constitutes a 5 percent stockholder under Section 382 and whether less than 5 percent stockholders will be treated as one or more “public groups,” each of which is a 5 percent stockholder under Section 382, will apply to the determination of 4.9 percent stockholders under the proposed NOL Protective Amendment. A transfer from one member of the public group to another member of the public group does not increase the percentage of our Common Stock owned directly or indirectly by the public group and, therefore, such transfers are not restricted. For purposes of determining the existence and identity of, and the amount of Common Stock owned by, any stockholder, we will be entitled to rely on the existence or absence of filings with the SEC of Schedules 13D and 13G (or any similar filings) as of any date, subject to our actual knowledge of the ownership of our Common Stock. The transfer restrictions will include the right to require a proposed transferee, as a condition to registration of a transfer of Common Stock, to provide all information reasonably requested regarding such person’s direct and indirect ownership of our Common Stock.

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The transfer restrictions may result in the delay or refusal of certain requested transfers of our Common Stock. As a result, the transfer restrictions could result in prohibiting ownership (thus requiring dispositions) of our Common Stock because of a change in the relationship between two or more persons or entities, or of a transfer of an interest in an entity other than us, such as an interest in an entity that, directly or indirectly, owns our Common Stock. The transfer restrictions will also apply to proscribe the creation or transfer of certain “options” (which are broadly defined by Section 382) in respect of our Common Stock to the extent that, in certain circumstances, creation, transfer or exercise of the option would result in a proscribed level of ownership.

Consequences of Prohibited Transfers.  Upon adoption of the transfer restrictions, any direct or indirect transfer attempted in violation of the restrictions is void as of the date of the purported transfer as to the purported transferee (or, in the case of an indirect transfer, the ownership of the direct owner of Common Stock would terminate simultaneously with the transfer), and the purported transferee (or in the case of any indirect transfer, the direct owner) would not be recognized as the owner of the shares owned in violation of the restrictions for any purpose, including for purposes of voting and receiving dividends or other distributions in respect of such Common Stock, or in the case of options, receiving Common Stock in respect of their exercise. In this Proxy Statement, Common Stock purportedly acquired in violation of the transfer restrictions is referred to as “excess stock.”

In addition to the purported transfer being void as of the date of the purported transfer, upon demand, the purported transferee must transfer the excess stock to our agent along with any dividends or other distributions paid with respect to such excess stock. Our agent is required to sell such excess stock in an arms’ length transaction (or series of transactions) that would not constitute a violation under the transfer restrictions. The net proceeds of the sale, together with any other distributions with respect to such excess stock received by our agent, after deduction of all costs incurred by the agent, will be distributed first to the purported transferee in an amount, if any, up to the cost (or in the case of gift, inheritance or similar transfer, the fair market value of the excess stock on the date of the violative transfer) incurred by the purported transferee to acquire such excess stock, and the balance of the proceeds, if any, will be distributed to a charitable beneficiary. If the excess stock is sold by the purported transferee, such person will be treated as having sold the excess stock on behalf of the agent, and will be required to remit all proceeds to our agent (except to the extent we grant written permission to the purported transferee to retain an amount not to exceed the amount such person otherwise would have been entitled to retain had our agent sold such shares).

To the extent permitted by law, any stockholder who knowingly violates the transfer restrictions is liable for any and all damages suffered by us as a result of such violation, including damages resulting from a reduction in or elimination of the ability to utilize the NOLs and any professional fees incurred in connection with addressing such violation.

With respect to any transfer of Common Stock which does not involve a transfer of a Corporation Security (as defined in the NOL Protective Amendment), but which would cause any 4.9 percent stockholder to violate the transfer restrictions, the following procedure will apply in lieu of those described above. In such case, no such 4.9 percent stockholder is required to dispose of any interest that is not a Corporation Security, but such 4.9 percent stockholder and/or any person whose ownership of Corporation Securities is attributed to such 4.9 percent stockholder is deemed to have disposed of (and is required to dispose of) sufficient Corporation Securities, simultaneously with the transfer, to cause such 4.9 percent stockholder not to be in violation of the transfer restrictions, and such securities will be treated as excess stock to be disposed of through the agent under the provisions summarized above, with the maximum amount payable to such 4.9 percent stockholder or such other person that was the direct holder of such excess stock from the proceeds of sale by the agent being the fair market value of such excess stock at the time of the prohibited transfer.

Public Groups; Modification and Waiver of Transfer Restrictions. The transfer restrictions will contain an exception permitting otherwise prohibited transfers of our Common Stock to a public group. These permitted transfers include transfers to public groups that would be created by the transfer and treated as a 4.9 percent stockholder. This exception is designed to facilitate sales by stockholders into the market to reduce their holdings. In addition, the Board of Directors will have the

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discretion to approve a transfer of Common Stock that would otherwise violate the transfer restrictions if it determines that such transfer is in the Company’s best interests. If the Board of Directors decides to permit a transfer that would otherwise violate the transfer restrictions, that transfer or later transfers may result in an “ownership change” that could limit our use of the NOLs. In deciding whether to grant a waiver, the Board of Directors may seek the advice of counsel and tax experts with respect to the preservation of our federal tax attributes pursuant to Section 382. In addition, the Board of Directors may request relevant information from the acquirer and/or selling party in order to determine compliance with the NOL Protective Amendment or the status of our federal income tax benefits, including an opinion of counsel selected by the Board of Directors (the cost of which will be borne by the transferor and/or the transferee) that the transfer will not result in a Section 382 Limitation. In considering a waiver, we expect the Board of Directors to consider:

·   the impact of the proposed transfer on the cumulative increase in percentage ownership of all 5 percent stockholders taken into account at the time of the transfer for purposes of Section 382 (the “Cumulative 382 Shift”);

·   the then existing level of our Cumulative Section 382 shift in ownership percentage;

·   the timing of the expected “roll-off’ of our existing Cumulative Section 382 shift;

·   the economic impact of any Section 382 Limitation that might result, taking into account factors such as our market capitalization and cash position;

·   the impact on possible future issuances or purchases of our Common Stock by us; and

·   any changes or expected changes in applicable tax law.

If the Board of Directors decides to grant a waiver, it may impose conditions on the acquirer or selling party.

In addition, in the event of a change in law, the Board of Directors is authorized to modify the applicable allowable percentage ownership interest (currently 4.9 percent) or modify any of the definitions, terms and conditions of the transfer restrictions or to eliminate the transfer restrictions, provided the Board of Directors determines, by adopting a written resolution, that such action is reasonably necessary or advisable to preserve the NOLs, or that the continuation of these restrictions is no longer reasonably necessary for such purpose, as applicable. Stockholders of the Company will be notified of any such determination through a filing with the SEC or such other method of notice as the Secretary of the Company deems appropriate.

The Board of Directors may establish, modify, amend or rescind Bylaws, regulations and procedures for purposes of determining whether any transfer of Common Stock would jeopardize the Company’s ability to preserve and use the NOLs.

Implementation and Expiration of the NOL Protective Amendment

If the NOL Protective Amendment is approved by our stockholders at the Annual Meeting of Stockholders, we intend to immediately enforce the restrictions to preserve future use of the NOL assets. The NOL Protective Amendment will expire on the earlier of (i) the Board of Directors’ determination that the NOL Protective Amendment is no longer necessary for the preservation of the NOLs because of the repeal of Section 382 or any successor statute, (ii) the beginning of a taxable year of the Company to which the Board of Directors determines that no NOLs may be carried forward, or (iii) such date as the Board of Directors determines that the NOL Protective Amendment is no longer necessary or appropriate as a tool for the preservation of the NOLs. The Board of Directors is also permitted to accelerate or extend the expiration date of the transfer restrictions in the event of a change in the law or other relevant circumstances.

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Enforceability, Trading and Other Considerations