8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

the Securities Exchange Act of 1934

Date of Report (date of earliest event reported): September 18, 2007

Accredited Home Lenders Holding Co.

(Exact name of Registrant as specified in its charter)

Delaware	001-32275	04-3669482
(State or other jurisdiction of incorporation or organization)	(Commission File Number)	(I.R.S. Employer Identification Number)

15253 Avenue of Science, San Diego, CA 92128

(Address of principal executive offices) (Zip Code)

(858) 676-2100

(Registrant’s telephone number, including area code)

N/A

(Former address)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01. Entry into a Material Definitive Agreement Amendment to Merger Agreement

As previously disclosed, on June 4, 2007, Accredited Home Lenders Holding Co. (“Accredited” or the “Company”), entered into an Agreement and Plan of Merger, as amended, (the “Merger Agreement”), with LSF5 Accredited Investments, LLC (“Parent”), and LSF5 Accredited Merger Co., Inc. a wholly-owned subsidiary of Parent (“Purchaser” and, together with Parent, the “Buyer Parties”). On June 15, 2007 the Company and the Buyer Parties agreed to amend the Merger Agreement pursuant to the terms of the First Amendment to Agreement and Plan of Merger (the “First Amendment”).

On September 18, 2007 the Company and the Buyer Parties agreed to amend the Merger Agreement pursuant to the terms of the Second Amendment to Agreement and Plan of Merger (the “Second Amendment”). Pursuant to the Second Amendment, and upon the terms and subject to the conditions thereof, Purchaser will amend its pending offer (the “Amended Offer”) to acquire all of the outstanding shares of common stock, par value $0.001 per share, of the Company to provide for a reduced purchase price of $11.75 per share, net to the holder thereof in cash without interest (the “Amended Offer Price”). Pursuant to the Second Amendment, as soon as practicable after the consummation of the Amended Offer, and subject to the satisfaction or waiver of certain conditions set forth in the Second Amendment, Purchaser will merge with and into the Company (the “Merger”) and the Company will become a wholly-owned subsidiary of Parent. In the Merger, the shares of the Company remaining outstanding following the consummation of the Amended Offer, other than shares held by Parent, Purchaser or by stockholders who have validly exercised their appraisal rights under Delaware law, will be converted into the right to receive the Amended Offer Price.

The obligation of Purchaser to accept for payment and pay for the shares tendered in the Amended Offer is subject to the satisfaction of certain closing conditions set forth in the Second Amendment, including the condition that more than 50% of the outstanding shares of the Company’s common stock shall have been validly tendered in accordance with the terms of the Amended Offer and not properly withdrawn.

Simultaneously with the execution and delivery of the Second Amendment, the Company, Parent and Purchaser entered into an escrow agreement pursuant to which the Buyer Parties have deposited into an escrow fund $295,560,310.75, which represents the aggregate amended tender offer consideration for all outstanding shares of the Company’s common stock as of September 18, 2007. Subject to the terms and conditions of the escrow agreement and the Second Amendment, the funds will be released to Computershare Trust Company, N.A., the depositary for the Amended Offer, upon Accredited’s delivery to the escrow agent of certifications regarding the satisfaction of certain conditions.

Pursuant to the terms of the Second Amendment, the parties have jointly filed a stipulation and order staying the proceedings in Accredited Home Lenders Holding Co. v. Lone Star Fund V (U.S.), L.P., et al., C.A. No. 3160-VCL (the “Delaware Litigation”). Under certain limited circumstances described in the Second Amendment, the Company may lift the stay and resume the Delaware Litigation as if there had been no reduction from the Offer Price of $15.10 per share of Company’s common stock. The Delaware Litigation will be dismissed with prejudice once certain conditions contained in the Second Amendment are met.

In addition, the Company and the Company’s subsidiary Accredited Home Lenders, Inc., as the Borrower (the “Borrower”), entered into an Assignment, Assumption and Amendment Agreement (the “Assignment”) with JPMorgan Chase Bank, N.A. (“JPMorgan”) as the Agent for the Senior Lenders and as Assignor and LSF5 Mortgage Line, LLC, as the Assignee (the “Assignee”), wherein the existing credit facility with JPMorgan was assigned to the Assignee.

The Assignment removes the limitation under the existing credit facility that capped the amount available to be borrowed thereunder at approximately $34 million, such that the facility limit will be reinstated at $49 million. The Assignment also provides for the extension of the maturity date to September 27, 2008 and for the forbearance by the Assignee of all of its rights and remedies arising with respect to the credit facility until March 1, 2008.

A copy of the Second Amendment is attached as Exhibit 2.1 to this report and is incorporated herein by reference. The foregoing description of the Second Amendment does not purport to be complete and is qualified in its entirety by reference to the Second Amendment.

Notice to Investors

This report is neither an offer to purchase nor a solicitation of an offer to sell any securities. The solicitation and the offer to buy shares of Accredited common stock has been made pursuant to an offer to purchase and related materials that Parent filed along with a Tender Offer Statement on Schedule TO with the U.S. Securities and Exchange Commission on June 19, 2007, as amended on July 3, 2007, July 17, 2007, July 30, 2007, August 10, 2007, August 15, 2007, August 16, 2007, August 21, 2007, August 28, 2007, August 31, 2007, September 13, 2007, September 17, 2007 and September 19, 2007. Accredited filed a Solicitation/Recommendation Statement on Schedule 14D-9, with respect to the offer, with the U.S. Securities and Exchange Commission on June 19, 2007, as amended on July 3, 2007, July 17, 2007, July 30, 2007, August 3, 2007, twice on August 10, 2007, twice on August 13, 2007, August 15, 2007, August 29, 2007, August 31, 2007, September 13, 2007, September 17, 2007 and September 19, 2007. The Tender Offer Statement (including an Offer to Purchase, a related Letter of Transmittal and other offer documents) and the Solicitation/Recommendation Statement contains important information that should be read carefully and considered before any decision is made with

respect to the tender offer. These materials have been sent free of charge to all stockholders of Accredited. In addition, all of these materials (and all other materials filed by Accredited with the U.S. Securities and Exchange Commission) will be available at no charge from the U.S. Securities and Exchange Commission through its website at www.sec.gov. Investors and security holders may obtain free copies of the documents filed with the U.S. Securities and Exchange Commission by Accredited at www.accredhome.com.

Forward Looking-Statements

This report contains “forward-looking statements” that involve significant risks and uncertainties. All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including: statements regarding the statements regarding the expected timing of the completion of the transaction; statements regarding the ability to complete the transaction; any statements of expectation or belief; and any statements of assumptions underlying any of the foregoing. Investors and security holders are cautioned not to place undue reliance on these forward-looking statements. Actual results could differ materially from those currently anticipated due to a number of risks and uncertainties. Risks and uncertainties that could cause results to differ from expectations include: uncertainties as to the timing of the tender offer and merger; uncertainties as to how many Accredited stockholders will tender their stock in the offer; the risk that competing offers will be made; the possibility that a governmental entity may prohibit, delay or refuse to grant approval for the consummation of the transaction; the effects of disruption from the transaction making it more difficult to maintain relationships with employees, licensees, other business partners or governmental entities; other business effects, including the effects of industry, economic or political conditions outside of Accredited’s control; transaction costs; actual or contingent liabilities; and other risks and uncertainties discussed in documents filed with the U.S. Securities and Exchange Commission by Accredited, as well as the tender offer documents filed by Parent and the Solicitation/Recommendation Statement filed by Accredited. All of the materials related to the offer (and all other offer documents filed with the U.S. Securities and Exchange Commission) are available at no charge from the U.S. Securities and Exchange Commission through its website at www.sec.gov. Investors and security holders may also obtain free copies of the documents filed with the U.S. Securities and Exchange Commission by Accredited at www.accredhome.com. Accredited does not undertake any obligation to update any forward-looking statements as a result of new information, future developments or otherwise, except as expressly required by law.

Item 8.01. Other Events

On September 18, 2007, Accredited and Lone Star Fund V (U.S.), L.P., through its affiliate Lone Star U.S. Acquisitions, LLC issued a joint press release announcing the execution of the Second Amendment. A copy of the joint press release is attached as Exhibit 99.1 to this report and is incorporated herein by reference.

Item 9.01. Financial Statements and Exhibits

(d)

Exhibit No.	Description
2.1	Second Amendment to Agreement and Plan of Merger, dated as of September 18, 2007 , by and among Accredited Home Lenders Holding Co., LSF5 Accredited Investments, LLC and LSF5 Accredited Merger Co., Inc.
99.1	Joint Press Release of Accredited Home Lenders Holding Co. and Lone Star Fund V (U.S.), L.P., through its affiliate Lone Star U.S. Acquisitions, LLC, dated as of September 18, 2007.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.

Accredited Home Lenders Holding Co.
By:	/s/ David E. Hertzel
	David E. Hertzel
	General Counsel

Dated: September 20, 2007

Exhibit Index

Exhibit No.	Description
Exhibit   2.1	Second Amendment to Agreement and Plan of Merger, dated as of September 18, 2007, by and among Accredited Home Lenders Holding Co., LSF5 Accredited Investments, LLC and LSF5 Accredited Merger Co., Inc.
Exhibit 99.1	Joint Press Release of Accredited Home Lenders Holding Co. and Lone Star Fund V (U.S.), L.P., through its affiliate Lone Star U.S. Acquisitions, LLC, dated as of September 18, 2007.

EX-2.1

Exhibit 2.1

EXECUTED VERSION

SECOND AMENDMENT TO AGREEMENT AND PLAN OF MERGER

THIS SECOND AMENDMENT TO AGREEMENT AND PLAN OF MERGER (this “Second Amendment”) is made and entered into as of September 18, 2007 by and among ACCREDITED HOME LENDERS HOLDING CO., a Delaware corporation (the “Company”), LSF5 ACCREDITED INVESTMENTS, LLC, a Delaware limited liability company (“Parent”), and LSF5 ACCREDITED MERGER CO., INC. a Delaware corporation and wholly-owned subsidiary of Parent (“Purchaser” and, together with the Parent, the “Buyer Parties”).

WHEREAS, the Company and the Buyer Parties, entered into that certain Agreement and Plan of Merger dated as of June 4, 2007, as amended by the First Amendment to Agreement and Plan of Merger dated as of June 15, 2007 (the “Merger Agreement”);

WHEREAS, Section 11.04 of the Merger Agreement provides that at any time prior to the Merger Effective Time, the Merger Agreement may be amended by the parties thereto by action taken by their respective boards of directors (or similar governing body or entity); and

WHEREAS, in accordance with Section 11.04 of the Merger Agreement, the Buyer Parties and the Company have agreed to amend the Merger Agreement as set forth herein.

NOW, THEREFORE, in consideration of the foregoing premises the parties hereto hereby agree as follows:

ARTICLE I

DEFINITIONS

Section 1.01. Unless otherwise defined herein, all capitalized terms used in this Second Amendment have the meanings given to them in the Merger Agreement.

ARTICLE II

AMENDMENTS TO THE MERGER AGREEMENT

Section 2.01. The recitals of the Merger Agreement are hereby amended by the provisions of this Second Amendment to include a new recital inserted as the sixth recital

of the Merger Agreement. As amended, the sixth recital of the Merger Agreement reads in its entirety:

WHEREAS, pursuant to the Second Amendment, the Company and the Buyer Parties have agreed to revise certain terms and to remove certain conditions related to the transactions contemplated hereby and to reduce the Offer Price and the Merger Consideration to $11.75 per Company Common Share;

Section 2.02. Section 1.01 of the Merger Agreement is hereby amended by the provisions of this Second Amendment to reflect the amended defined terms, new defined terms and deleted defined terms, each as set forth on Exhibit A hereto.

Section 2.03. ANNEX I of the Merger Agreement is hereby amended and superseded in all respects by the provisions of this Second Amendment. As amended and restated, ANNEX I of the Merger Agreement reads in its entirety:

Conditions of the Offer

Notwithstanding any other provision of the Offer, Purchaser shall not be obligated to accept for payment, and (subject to the rules and regulations of the SEC, including Rule 14e-1(c) promulgated under the Exchange Act (relating to Parent’s obligation to pay for or return tendered Company Common Shares promptly after termination or withdrawal of the Offer)) shall not be obligated to pay for, or may delay the acceptance for payment of or payment for, any Company Common Shares tendered pursuant to the Offer (and not theretofore accepted for payment or paid for) unless, prior to the expiration of the Offer (as it may have been extended pursuant to Section 2.01(d) of the Agreement), there shall have been tendered and not validly withdrawn Company Common Shares that, considered together with all other Company Common Shares (if any) beneficially owned by Parent and its Affiliates, represent more than 50% of the Company Outstanding Shares. The preceding condition is referred to as the “Minimum Condition.”

Furthermore, Purchaser shall not be required to accept for payment, and (subject to the rules and regulations of the SEC, including Rule 14e-1(c) promulgated under the Exchange Act (relating to Parent’s obligation to pay for or return tendered Company Common Shares promptly after termination or withdrawal of the Offer)) shall not be obligated to pay for, or may delay the acceptance for payment of or payment for, any Company Common Shares tendered pursuant to the Offer (and not theretofore accepted for payment or paid for) if, upon the expiration of the Offer (as it may have been extended pursuant to Section 2.01(d) of the Agreement) and before acceptance of such Company Common Shares for payment, any of the following conditions exists and is continuing, regardless of the circumstances giving rise to such condition:

(a) Any court of competent jurisdiction shall have entered, enacted, issued, promulgated or enforced an injunction or temporary restraining order,

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which injunction or temporary restraining order has not been vacated, prohibiting the acceptance by Purchaser for payment of the Company Common Shares tendered pursuant to the Offer; provided, that Parent and Purchaser shall have used their reasonable best efforts to oppose any such order or to have such order made inapplicable to the acceptance by Purchaser for payment of the Company Common Shares tendered pursuant to the Offer.

(b) The Company shall have failed to deliver to Parent and the Escrow Agent a certificate signed by (i) its chief executive officer and (ii) its executive vice president and secretary, and certifying that the Company has complied in all material respects with its covenants to be complied with under Section 7.01 of this Agreement.

(c) The Agreement shall have been terminated in accordance with its terms.

(d) There shall have occurred (i) any general suspension of, or limitation on trading in securities on the NASDAQ (other than a shortening of trading hours or any coordinated trading halt triggered solely as a result of a specified increase or decrease in a market index) or (ii) a declaration of a banking moratorium or any suspension of payments in respect of banks in the United States, which in either case makes acceptance of Shares for payment, or payment for such Shares, impossible at the Acceptance Time.

Any and all capitalized terms used herein, and not defined herein, shall have the same meaning as set forth in the Agreement and Plan of Merger, dated as of June 4, 2007, by and among ACCREDITED HOME LENDERS HOLDING CO., LSF5 ACCREDITED INVESTMENTS, LLC and LSF5 ACCREDITED MERGER CO., INC., as amended by the First Amendment and by the Second Amendment.

Section 2.04. Section 2.01(d)(iii) of the Merger Agreement is hereby amended and superseded in all respects by the provisions of this Second Amendment. As amended and restated, Section 2.01(d)(iii) of the Merger Agreement reads in its entirety:

(iii) if (A) the Company receives a Company Acquisition Proposal or an Adverse Recommendation Change shall have occurred, in either case five (5) or fewer Business Days prior to the scheduled expiration date (as such expiration date may be extended and reextended in accordance with this Agreement), and (B) the Agreement shall not have been terminated by Parent or the Company pursuant to Section 10.01(g), then, if the Company provides Parent with a written request that Purchaser extend the Expiration Date, then Parent and Purchaser shall extend the Offer to such date as is necessary to ensure that the Offer does not expire until five (5) Business Days from the date of such request; and.

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Section 2.05. Section 2.02 of the Merger Agreement is hereby amended by the provisions of this Second Amendment to include a new paragraph (f). As amended, Section 2.02(f) of the Merger Agreement reads in its entirety:

(f) In connection with the execution and delivery of the Second Amendment, Parent, Purchaser and the Company and The Bank of New York, as escrow agent (the “Escrow Agent”), are entering into an escrow agreement dated as of date of the Second Amendment (the “Escrow Agreement”), in the form attached hereto as Exhibit B, pursuant to which Parent will deposit, simultaneously with the execution and delivery of the Second Amendment, into an escrow account cash in an amount equal to $295,560,310.75 (the “Escrow Funds”). The terms of the Escrow Agreement will specify the time for disbursement of an appropriate portion of the Escrow Funds to the holders of Company Common Shares who have properly tendered and not withdrawn Company Common Shares into the Offer (the “Release Time”).

Section 2.06. Pursuant to Section 2.01 of the Merger Agreement, the Company hereby consents to the reduction of the Offer Price from $15.10 per Company Common Share to $11.75 per Company Common Share.

Section 2.07. Article II of the Merger Agreement is hereby amended by the provisions of this Second Amendment to include a new Section 2.07. As amended, Section 2.07 of the Merger Agreement reads in its entirety:

Section 2.07. Amended Offer. On the date of execution and delivery of the Second Amendment, Parent shall cause Purchaser to, and Purchaser shall, file an amendment to the Tender Offer Statement on Schedule TO relating to the Offer and promptly thereafter shall amend the Offer consistent with the terms of the Second Amendment and file with the SEC and disseminate to holders of Company Common Shares such amended Offer Documents as required by applicable law. Promptly after the date of execution and delivery of the Second Amendment, the Company shall amend the Schedule 14D-9 consistent with the terms of the Second Amendment and file with the SEC and disseminate to holders of Company Common Shares such amended Schedule 14D-9, including a description of the negotiations leading up to the execution and delivery of the Second Amendment and of the fairness opinion delivered to the Company Board in connection therewith, as required by applicable Law (the “Second Amendment Schedule 14D-9/A”). All references in this Agreement to the “Offer”, “Offer Documents” and “Schedule 14D-9” shall include any amendments or supplements thereto pursuant to this Section 2.07.

Section 2.08. Article V of the Merger Agreement is hereby amended and superseded in all respects by the provisions of this Second Amendment. As amended and restated, Article V of the Merger Agreement reads in its entirety:

ARTICLE V

RESERVED

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Section 2.09. Section 7.01 of the Merger Agreement is hereby amended and superseded in all respects by the provisions of this Second Amendment. As amended and restated, Section 7.01 of the Merger Agreement reads in its entirety:

Section 7.01. Conduct of Business by the Company Pending the Merger. Except as required, permitted or otherwise contemplated by this Agreement, neither the Company nor any Company Subsidiary shall, between the date of execution and delivery of the Second Amendment and the Release Time, do any of the following without the prior written consent of Parent, which consent shall not be unreasonably withheld or delayed:

(a) amend, or propose to holders of Company Common Shares any change to, any provision of the Company Charter or the Company Bylaws, or increase the size of the Company Board;

(b) (i) authorize for issuance, issue or sell or agree or commit to issue or sell any shares of any class of capital stock of the Company or any Company Subsidiary or any options, Company Warrants, convertible securities or other rights of any kind to acquire any shares of such capital stock, or any other ownership interest, of the Company or any Company Subsidiary, other than (A) the issuance of Company Common Shares issuable pursuant to Company Stock Awards and Company Warrants outstanding on the date hereof, and (B) the award of Company Stock Options or Company Stock-Based Awards granted in the ordinary course of business; provided, however, that no Company Stock Option award shall, taken together with all other Company Stock Options awarded in 2007, exceed the aggregate Company Stock Options awarded in 2006 (measured by the number of underlying Company Common Shares); provided, further, however, that the Company Stock-Based Awards awarded in any fiscal quarter shall not exceed the average of the quarterly Company Stock-Based Awards awarded during 2006 (measured by the aggregate dollar value of such awards), (ii) repurchase, redeem or otherwise acquire any securities or equity equivalents except in connection with the exercise of Company Stock Options or the vesting of or lapse of restrictions on Company Stock Awards, (iii) declare, set aside or pay any dividends on, or make any other actual, constructive or deemed distributions (whether in cash, shares, property or otherwise) in respect of, any shares of the Company’s capital stock or the shares of stock or other equity interests in any Company Subsidiary that is not directly or indirectly wholly-owned by the Company, other than (A) dividends by any direct or indirect Company Subsidiary to the Company or any other Company Subsidiary, (B) dividends paid by the Reporting Subsidiary on shares of its 9.75% Series A Perpetual Cumulative Preferred Shares (the “Reporting Subsidiary Preferred Shares”), (C) dividends paid by Accredited Preferred Securities Trust I, a Subsidiary of the Company, on its trust preferred securities, and (D) dividend equivalents paid with respect to Company Stock Awards or (iv) split, combine or reclassify any shares, stock or other equity interests of the Company or any Company Subsidiary or issue or authorize the issuance of any securities in respect of, in lieu of or in substitution for shares of such shares, stock or other equity interests;

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(c) acquire (by merger, consolidation, acquisition of equity interests or assets, or any other business combination) any corporation, partnership, limited liability company, joint venture or other business organization (or division thereof) or any property, in each case, for an amount in excess of $10,000,000, except that this Section 7.01(c) shall not be deemed to restrict purchases of inventory, mortgage and real estate related assets and other assets in the ordinary course of business;

(d) except as required by applicable Law or by the terms of the Plans and except for (A) payments to employees (but not to any of the four most senior executives officers of the Company) of retention bonuses or implementation of a retention bonus plan involving payments or other awards exceeding $3,000,000 in the aggregate (for the avoidance of doubt, it being understood that payments made to employees involved in the production or origination of business in lieu of commission or bonus payments shall not be considered retention payments or retention bonuses), and (B) payments made to continuing employees of amounts in respect of accrued “paid time off” to which they would be entitled in connection with resignation of employment, (i) increase the compensation or benefits payable to its directors, officers or employees (other than increases made in the ordinary course of business for employees and merit increases in base salary not exceeding ten percent (10%) (provided, however, that such increases are consistent with past practice or are necessary to respond to bona fide offers of employment made by third parties) or (ii) grant to any director, officer or employee of the Company or of any Company Subsidiary any new severance, change of control or termination pay, grant any increase in, or otherwise alter or amend, any right to receive any severance, change of control or termination pay or benefits or establish, adopt, enter into or amend to materially increase benefits under any bonus, profit sharing, thrift, compensation, stock option, restricted stock, pension, retirement, deferred compensation, employment, loan, retention, consulting, indemnification, termination, severance or other similar plan, agreement, trust, fund, policy or arrangement with any director, officer or employee; or

(e) transfer, sell, pledge, surrender, encumber, divest, or otherwise dispose of any capital stock of any of the Company Subsidiaries, except any such transactions among it and wholly-owned Company Subsidiaries (for the avoidance of doubt, it being understood that a secured party’s exercise of rights in respect of the capital stock of any Company Subsidiary which is pledged as collateral to such secured party shall not be deemed to violate this Section 7.01(e)).

Section 2.10. Section 8.02(a) of the Merger Agreement is hereby amended and superseded in all respects by the provisions of this Second Amendment. As amended and restated, Section 8.02(a) of the Merger Agreement reads in its entirety:

(a) Subject to applicable Law, from the date hereof until the earlier to occur of the termination of this Agreement in accordance with Section 10.01 and the Merger Effective Time, the Company shall, and shall cause the Company Subsidiaries and the officers, directors, employees, auditors and agents of the Company and the

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Company Subsidiaries to afford Parent access during normal business hours to the officers, employees, agents, properties, offices, plants and other facilities, books and records of the Company and the Company Subsidiaries, and all other financial, operating and other data and information as Parent may request. Notwithstanding the foregoing the Company and the Company Subsidiaries shall not be obligated to disclose (i) any information that in the reasonable judgment of the Company, would result in the loss of attorney-client privilege with respect to such information or (ii) any information that would result in a breach of an agreement to which the Company or any of the Company Subsidiaries is a party. The Company shall be entitled to have representatives present at all times during any such inspection.

Section 2.11. Section 8.03 of the Merger Agreement is hereby amended and superseded in all respects by the provisions of this Second Amendment. As amended and restated, Section 8.03 of the Merger Agreement reads in its entirety:

Section 8.03. Solicitation.

(a) From and after the date of this Agreement and continuing until the Acceptance Time, the Company and the Company Subsidiaries and their respective officers, directors, employees, consultants, agents, advisors, affiliates and other representatives shall have the right to directly or indirectly: (i) initiate, solicit and encourage Company Acquisition Proposals, including by way of public disclosure and by way of providing access to non-public information to any Person pursuant to (but only pursuant to) one or more confidentiality agreements (on substantially similar terms as the Confidentiality Agreement) and (ii) enter into and maintain discussions or negotiations with respect to Company Acquisition Proposals or otherwise cooperate with or assist or participate in, or facilitate any such inquiries, proposals, discussions or negotiations.

(b) At any time prior to the Merger Effective Time, the Company Board may make an Adverse Recommendation Change if the Company Board determines that failure to take such action would be inconsistent with its fiduciary duties to the Company Stockholders under applicable Law.

Section 2.12. Section 8.05(a) of the Merger Agreement is hereby amended and superseded in all respects by the provisions of this Second Amendment. As amended and restated, Section 8.05(a) of the Merger Agreement reads in its entirety:

(a) Without limiting any additional rights that any director, officer, trustee, employee, agent, or fiduciary may have under any employment or indemnification agreement or under the Company Charter, the Company Bylaws or this Agreement or, if applicable, similar organizational documents or agreements of any of the Company Subsidiaries, from and after the Release Time, the Surviving Corporation and Parent shall, jointly and severally, to the fullest extent permitted by applicable Law:

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(i) indemnify and hold harmless each person who was as of June 4, 2007, or during the period from June 4, 2007 through the Closing Date, serving as a director, officer, trustee, employee, agent, or fiduciary of the Company or Company Subsidiaries or as a fiduciary under or with respect to any employee benefit plan (within the meaning of Section 3(3) of ERISA) (collectively, the “Indemnified Parties”), in connection with any Claim and any judgments, fines, penalties and amounts paid in settlement (including all interest, assessments and other charges paid or payable in connection with or in respect of such judgments, fines, penalties or amounts paid in settlement) resulting therefrom; and (ii) promptly pay on behalf of or, within thirty (30) days after any request for advancement, advance to each of the Indemnified Parties, to the fullest extent authorized or permitted by applicable Law, as now or hereafter in effect, any Expenses incurred in defending, serving as a witness with respect to or otherwise participating in any Claim in advance of the final disposition of such Claim, including payment on behalf of or advancement to the Indemnified Party of any Expenses incurred by such Indemnified Party in connection with enforcing any rights with respect to such indemnification or advancement, in each case without the requirement of any bond or other security. The indemnification and advancement obligations of the Surviving Corporation and Parent pursuant to this Section 8.05(a) shall extend to acts or omissions occurring at or before the Release Time and any Claim relating thereto (including with respect to any acts or omissions occurring in connection with the approval of this Agreement, and any amendments hereto, and the consummation of the transactions contemplated hereby and thereby, including the consideration and approval thereof and the process undertaken in connection therewith and any Claim relating thereto), and all rights to indemnification and advancement conferred hereunder shall continue as to a person who continues to be or who has ceased to be a director, officer, trustee, employee, agent, or fiduciary of the Company or the Company Subsidiaries after the date hereof and shall inure to the benefit of such person’s heirs, executors and personal and legal representatives. Neither Parent nor the Surviving Corporation shall settle, compromise or consent to the entry of any judgment in any actual or threatened claim, demand, Action, suit, proceeding, inquiry or investigation in respect of which indemnification has been or could be sought by such Indemnified Party hereunder unless such settlement, compromise or judgment includes an unconditional release of such Indemnified Party from all liability arising out of such claim, demand, Action, suit, proceeding, inquiry or investigation or such Indemnified Party otherwise consents thereto.

Section 2.13. Section 8.05 of the Merger Agreement is hereby amended by the provisions of this Second Amendment to include a new paragraph (f). As amended, Section 8.05(f) of the Merger Agreement reads in its entirety:

(f) From and after the Release Time, Parent shall indemnify the Company for any funds expended or advanced by the Company in connection with litigation in connection with this Agreement pursuant to any right of any officer, director, employee or any other Person pursuant to an indemnification agreement with the Company or any right of indemnification of any officer, director, employee or any other Person arising under the Company Charter, the Company Bylaws, this Agreement or

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otherwise, provided, that Parent’s duty to indemnify the Company pursuant to this Section 8.05(f) shall be excess to any available insurance coverage.

Section 2.14. Section 8.05 of the Merger Agreement is hereby amended by the provisions of this Second Amendment to include a new paragraph (g). As amended, Section 8.05(g) of the Merger Agreement reads in its entirety:

(g) From and after the Release Time, Lone Star Fund V (U.S.), L.P. will guarantee all of the indemnity obligations of the Surviving Corporation and Parent set forth in Section 8.05 of the Merger Agreement.

Section 2.15. Article VIII of the Merger Agreement is hereby amended by the provisions of this Second Amendment to include a new Section 8.13. As amended, Section 8.13 of the Merger Agreement reads in its entirety:

Section 8.13. Assumption of Servicer Facility. The Buyer Parties shall cause LSF5 Mortgage Line, LLC, a Delaware limited liability company and affiliate of Parent (“LSF5 Mortgage”) to assume (the “Assumption”) the obligations of JPMorgan Chase Bank, N.A. (“JPMorgan Chase”) under that certain 9/06 Senior Secured Credit Agreement, effective as of September 29, 2006 among JPMorgan Chase, Accredited Home Lenders, Inc. and the Company, as amended (the “JPMorgan Chase Credit Agreement”), in the amount of $49,000,000, to be made (i) on terms and conditions as between LSF5 Mortgage and the Company, no less favorable to the Company than the terms the JPMorgan Chase Credit Agreement and (ii) on terms and conditions related to the release and assignment by JPMorgan Chase that are reasonably acceptable to both the Buyer Parties and the Company, and to be secured by the assets currently pledged to JPMorgan Chase under the JPMorgan Chase Credit Agreement, other assets of the Company and its Subsidiaries permitted to be pledged as collateral under the JPMorgan Chase Credit Agreement and by such other collateral, if any, as may be reasonably agreed upon by the Company and the Buyer Parties, including without limitation interests in “real estate owned” properties. The Buyer Parties agree, in connection with the Assumption, to extend the maturity date until September 27, 2008 and to forbear from exercising any rights or remedies thereunder until March 1, 2008. In connection with the Assumption, simultaneously with the execution and delivery of the Second Amendment, the Buyer Parties will cause LSF5 Mortgage to place $49,000,000 (the “Assumption Funds”) in an escrow account at The Bank of New York for holding and distribution in accordance with an escrow agreement, dated as of the date of the Second Amendment, among LSF5 Mortgage, the Company and The Bank of New York, as escrow agent.

Section 2.16. Article VIII of the Merger Agreement is hereby amended by the provisions of this Second Amendment to include a new Section 8.14. As amended, Section 8.14 of the Merger Agreement reads in its entirety:

Section 8.14 Stay of Proceedings. Immediately upon execution of the Second Amendment, the parties agree to jointly file a stipulation and order staying the

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proceedings in Accredited Home Lenders Holding Co. v. Lone Star Fund V (U.S.), L.P., et al., C.A. No. 3160-VCL (the “Delaware Litigation”) in the form attached as Exhibit C hereto and not to commence any similar litigation in any court or tribunal. In the event that, on any date after the date of the Second Amendment, the Company believes that the Buyer Parties have breached a material obligation under the Second Amendment and shall not have accepted for payment and paid for Company Common Shares validly tendered and not withdrawn in the Offer (the “Stay Release Date”), the Company will have the right to lift the stay, in which case the parties agree to consent to the earliest practicable trial date following completion of remaining discovery and briefing and not to oppose the lifting of the stay. If the stay is lifted under the terms of this Section 8.14, all parties shall be entitled to resume the Delaware Litigation and shall be returned to their respective positions without prejudice to any rights, causes of action or defenses asserted in the Delaware Litigation as if there had been no reduction from the Offer Price of $15.10 per share of Company Common Stock (so that, for purposes of clarity, the Offer Price shall be $15.10) and excluding any events that may have occurred after the execution of the Second Amendment; provided, that in the event that the resumption of the Delaware Litigation follows a breach by the Buyer Parties of their obligations to deposit the Escrow Funds or to perform their obligations set forth in Section 8.13 as required by the Second Amendment, then solely in that instance for purposes of the Delaware Litigation the Merger Agreement shall be treated as if all terms of the Second Amendment other than Section 2.06 of the Second Amendment (so that, for purposes of clarity, the Offer Price shall be $15.10) had been in effect from the date the Merger Agreement was initially signed such that, among other things, the Buyer Parties shall not have any rights or defenses based on Annex I or Section 10.03(e) or the second sentence of Section 10.03(b)(iii) of the Merger Agreement as in effect initially, including any right based on such provisions to cap damages or limit the Company’s right to specific performance; provided, further that the parties hereby agree that the Buyer Parties shall have no liability in such reinstated Delaware Litigation if it is determined that the Buyer Parties did not breach the Merger Agreement following the execution of the Second Amendment. The parties hereby agree that the terms of this Second Amendment shall not be used as evidence of the proper interpretation or meaning of the Merger Agreement as in effect prior to the execution of this Second Amendment. After the Stay Release Date, to the extent the Company is entitled to reinstate the Delaware Litigation, the Company also may contemporaneously seek, in the alternative, to enforce, either by separate action or by amendment of pleadings in the Delaware Litigation, the Merger Agreement as amended by the Second Amendment, including by seeking the remedy of specific performance. The parties shall execute and file a stipulation providing for the dismissal with prejudice of the Delaware Litigation upon the earlier to occur of the following: (i) Escrow Funds having been released to the depositary under the Escrow Agreement and (ii) this Agreement being terminated in accordance with its terms other than as a result of a breach by the Buyer Parties of a material obligation in this Agreement after the execution of this Second Amendment; provided that if the dismissal is due to the release of Escrow Funds to the depositary under the Escrow Agreement and the Merger has not yet occurred, such dismissal shall not be with prejudice solely to an action by the Company to enforce the provisions of the Agreement that require the Buyer Parties to consummate the Merger at $11.75 per Share following the closing of the

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Offer, and upon consummation of the Merger the dismissal shall be with prejudice to all claims and actions. For the avoidance of doubt, the parties agree that it is their intention, upon which the Buyer Parties have relied, that the Delaware Litigation will so be dismissed with prejudice unless, after the date of the Second Amendment and prior to the occurrence of one of the events set forth in the preceding sentence, the Buyer Parties shall have breached a material obligation under the Merger Agreement as amended by the Second Amendment and have failed to accept for payment and paid for the Company Common Shares tendered in the Offer. In the event the procedural mechanism set forth in this Section 8.14 is not satisfactory to the court, the parties shall work with one another in good faith to effectuate to the maximum extent possible their substantive agreement as set forth in this Section 8.14

Section 2.17. Section 10.01(b) of the Merger Agreement is hereby amended and superseded in all respects by the provisions of this Second Amendment. As amended and restated, Section 10.01(b) of the Merger Agreement reads in its entirety:

(b) by either Parent or the Company at any time after December 31, 2007 (the “Outside Date”) if the Acceptance Time shall not have occurred on or before the Outside Date; provided, however, that the right to terminate this Agreement under this Section 10.01(b) shall not be available to a party whose failure to fulfill any obligation under this Agreement materially contributed to the failure of the Acceptance Time to occur on or before such date; provided, further, however, that the passage of such period shall be tolled for any part thereof during which (i) any party or the Escrow Agent shall be subject to an injunction, temporary restraining order or other order, decree, ruling or action restraining, enjoining or otherwise prohibiting the acceptance for payment of Company Common Shares pursuant to the Offer or the consummation of the Merger or (ii) any of the conditions described in clause (d) of Annex I shall have occurred, but in the case of this clause (ii), in no event shall the tolling of such period extend the Outside Date beyond March 31, 2008;

Section 2.18. Section 10.01(e) of the Merger Agreement is hereby amended and superseded in all respects by the provisions of this Second Amendment. As amended and restated, Section 10.01(e) of the Merger Agreement reads in its entirety:

(e) RESERVED.

Section 2.19. Section 10.01 of the Merger Agreement is hereby amended by the provisions of this Second Amendment to include a new paragraph (i). As amended, Section 10.01(i) of the Merger Agreement reads in its entirety:

(i) by Parent, if upon any scheduled expiration of the Offer which occurs on or after the twentieth (20th) business day following the date on which the Company files the Second Amendment Schedule 14D-9/A with the SEC, the Minimum Condition is not satisfied; provided, that Parent shall have no right to terminate this Agreement pursuant to this Section 10.01(i) (x) in connection with any scheduled

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expiration of the Offer at which the Minimum Condition is not satisfied if, at the time of such expiration of the Offer, (A) any injunction, temporary restraining order or other order, decree, ruling or action, enjoining or otherwise prohibiting the acceptance for payment of Company Common Shares or the consummation of the Offer that is not final or remains appealable (any of the foregoing, a “Temporary Restraint”) shall be in effect or (B) any of the conditions described in clause (d) of Annex I are in effect or (y) at any time when Parent or Purchaser is in material breach of any representation, warranty or obligation under this Agreement and such breach by Parent or Purchaser has arisen at or after the date of execution and delivery of the Second Amendment. Notwithstanding the proviso included at the end of the immediately preceding sentence, any Temporary Restraint in effect as a result of an action or proceeding voluntarily initiated by the Company (but not including, for this purpose, a derivative or similar action asserted on behalf of the Company) shall not prohibit Parent from terminating this Agreement pursuant to this Section 10.01(i).

Section 2.20. Each of Section 10.03(b)(i) and Section 10.03(b)(ii) of the Merger Agreement is hereby amended and superseded in all respects by the provisions of this Second Amendment. As amended and restated, each of Section 10.03(b)(i) and Section 10.03(b)(ii) of the Merger Agreement reads in its entirety:

(i) RESERVED.

(ii) (A) by Parent or the Company pursuant to Section 10.01(b), Section 10.01(d) or Section 10.01(g), (B) at or prior to the Termination Date, a Company Acquisition Proposal shall have been publicly announced (and not withdrawn) prior to such date and (C) concurrently with such termination or within twelve (12) months following the Termination Date, the Company enters into a definitive agreement to consummate or consummates such Company Acquisition Proposal, then the Company shall pay to Parent the Parent Termination Fee if and when the entering into of such definite agreement or consummation of such Company Acquisition Proposal occurs; provided, that for purposes of this Section 10.03(b)(ii), “50%” shall be substituted for “15%” in the phrases dealing with assets and “50%” shall be substituted for “15%” in phrases dealing with equity securities or voting power in the definition of Company Acquisition Proposal; or

Section 2.21. Section 10.03(b)(iii) of the Merger Agreement is hereby amended and superseded in all respects by the provisions of this Second Amendment. As amended and restated, Section 10.03(b)(iii) of the Merger Agreement reads in its entirety:

(iii) by the Company pursuant to Section 10.01(f) or Section 10.01(h), Parent shall pay to the Company the Company Termination Fee.

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Section 2.22. Section 10.03(d) of the Merger Agreement is hereby amended and superseded in all respects by the provisions of this Second Amendment. As amended and restated, Section 10.03(d) of the Merger Agreement reads in its entirety:

(d) For purposes of this Agreement, “Parent Termination Fee” means $6,000,000 and “Company Termination Fee” means $12,000,000.

Section 2.23. Section 10.03(e) of the Merger Agreement is hereby amended and superseded in all respects by the provisions of this Second Amendment. As amended and restated, Section 10.03(e) of the Merger Agreement reads in its entirety:

(e) Each of Parent and the Buyer Parties acknowledges and agrees that in the event that Parent is entitled to receive the Parent Termination Fee pursuant to this Agreement, the right of Parent to receive such amount shall constitute the Buyer Parties’ sole and exclusive remedy for, and such amount shall constitute liquidated damages in respect of, any termination of this Agreement regardless of the circumstances giving rise to such termination.

ARTICLE III

APPROVALS

Section 3.01.

(a) The Company hereby approves of and consents to the Offer and represents that the Company Board, at a meeting duly called and held, unanimously (i) approved the Merger Agreement, as amended by the First Amendment and this Second Amendment, and approved the transactions contemplated thereby, including the Offer and the Merger, in accordance with the DGCL; (ii) declared that the Offer and the other transactions contemplated by the Merger Agreement, as amended by the First Amendment and this Second Amendment, are fair to, in the best interests of, and advisable to, the Company and the Company Stockholders; (iii) adopted resolutions recommending that the Company Stockholders accept the Offer, tender their Company Common Shares pursuant to the Offer and adopt the Merger Agreement, as amended by the First Amendment and this Second Amendment, and approve the Merger, if required; provided, however, that the Company Board may withdraw, modify or amend its recommendation as provided in Section 8.03 of the Merger Agreement; and (iv) adopted resolutions taking all other actions necessary to render Section 203 of the DGCL inapplicable to each of the Offer, the Merger and the transactions contemplated by the Merger Agreement, as amended by the First Amendment and this Second Amendment.

(b) No vote of the members of Parent is necessary to approve the Merger Agreement, as amended by the First Amendment and this Second Amendment, the Merger or the other transactions contemplated hereby. Each of the Buyer Parties has all necessary corporate or other power and authority to execute and deliver this Second

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Amendment, to perform its obligations hereunder and to consummate the transactions contemplated by the Merger Agreement, as amended by the First Amendment and this Second Amendment. The execution and delivery of this Second Amendment by each of the Buyer Parties and the consummation by the Buyer Parties of the transactions contemplated by the Merger Agreement, as amended by the First Amendment and this Second Amendment, have been duly and validly authorized by all necessary corporate action (other than, if the Merger is not consummated pursuant to Section 253 of the DGCL, the adoption of this Agreement by Parent as sole stockholder of Purchaser), and no other corporate proceedings on the part of the Buyer Parties are necessary to authorize this Second Amendment or to consummate the transactions contemplated by the Merger Agreement, as amended by the First Amendment and this Second Amendment. This Second Amendment has been duly and validly executed and delivered by the Buyer Parties and, assuming due authorization, execution and delivery by the Company, constitutes a legal, valid and binding obligation of each of the Buyer Parties enforceable against each of the Buyer Parties in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and similar Laws or by general equity principles.

ARTICLE IV

MISCELLANEOUS

Section 4.01. On and after the date hereof, each reference in the Merger Agreement to “this Agreement,” “hereunder,” “hereof,” “herein” or words of like import referring to the Merger Agreement, and each reference in any of the agreements or certificates to be delivered in connection with the Merger Agreement to the “Merger Agreement,” “thereunder,” “thereof” or words of like import referring to the Merger Agreement, shall mean and be a reference to the Merger Agreement as amended by this Second Amendment.

Section 4.02. The Merger Agreement as amended by this Second Amendment constitutes the entire agreement among the parties pertaining to the subject matter hereof and supersedes all prior and contemporaneous agreements, understandings, representations or other arrangements, whether express or implied, written or oral, of the parties in connection therewith except to the extent expressly incorporated or specifically referred to herein. In the event of a conflict between the respective provisions of the Merger Agreement and this Second Amendment, the terms of this Second Amendment shall control.

Section 4.03. Except as specifically amended by the terms of this Second Amendment, the terms and conditions of the Merger Agreement are and shall remain in full force and effect for all purposes.

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Section 4.04. This Second Amendment may be executed and delivered (including by facsimile transmission) in two or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement.

Section 4.05. All disputes, claims or controversies arising out of or relating to this Second Amendment, or the negotiation, validity or performance of this Second Amendment, shall be governed by and construed in accordance with the laws of the State of Delaware without regard to its rules of conflict of laws.

Section 4.06. This Second Amendment shall be binding upon and inure solely to the benefit of each party hereto, and nothing in this Second Amendment, express or implied, is intended to or shall confer upon any other person any right, benefit or remedy of any nature whatsoever under or by reason of this Second Amendment, other than the provisions of Section 2.12 and 2.14 (which are intended to be for the benefit of the persons covered thereby or the persons entitled to payment thereunder and may be enforced by such persons); provided, that the parties acknowledge that the Company may seek to enforce the provisions of Articles I through IV of the Merger Agreement that call for the payment of consideration to stockholders of the Company pursuant to the Offer and the Merger.

[SIGNATURE PAGE FOLLOWS]

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IN WITNESS WHEREOF, Parent, Purchaser, and the Company have caused this Second Amendment to be executed as of the date first written above by their respective officers thereunto duly authorized.

LSF5 ACCREDITED INVESTMENTS, LLC
By	/s/ MARC L. LIPSHY

Name:	Marc L. Lipshy
Title:	Vice President

LSF5 ACCREDITED MERGER CO., INC.
By	/s/ MARC L. LIPSHY

Name:	Marc L. Lipshy
Title:	Vice President

ACCREDITED HOME LENDERS HOLDING CO.
By	/s/ JAMES A. KONRATH

Name:	James A. Konrath
Title:	Chief Executive Officer

EXHIBIT A

Amended Defined Terms Inserted in Section 1.01(a):

“Adverse Recommendation Change” means (a) any withdrawal (or amendment or modification in a manner adverse to Parent, other than any action not constituting a withdrawal that the Company Board determines, after consultation with counsel and in the good faith exercise of its business judgment, is reasonably likely to be required to comply with either state or federal securities laws) or public proposal to withdraw (or amend or modify in a manner adverse to Parent, other than any action not constituting a withdrawal that the Company Board determines, after consultation with counsel and in the good faith exercise of its business judgment, is reasonably likely to be required to comply with either state or federal securities laws) of the Company Board Recommendation (including pursuant to the Schedule 14D-9 or any amendment thereto) or of the approval of the Company Board of this Agreement, the Merger or the other transactions contemplated hereby or (b) any recommendation, adoption or approval, or to public proposal to recommend, adopt or approve, any Company Acquisition Proposal by the Company Board.

Defined Terms Inserted in Section 1.01(a)

“Company Material Contract” means each such “material contract” (as such term is defined in Item 601(b)(10) of Regulation S-K under the Securities Act) to which the Company or any Company Subsidiary is a party or by which any of their respective properties or assets is bound.

“Company Stockholder Approval” means the adoption of the Agreement by the holders of at least a majority of the outstanding Company Common Shares entitled to vote in accordance with the DGCL.

“Company Stock Awards” means all Company Stock Options, Company Restricted Shares, Company Stock-Based Awards and other purchase rights and stock awards granted pursuant to the Incentive Plans.

“Company Subsidiary” means each of Aames Investment Acceptance Corporation, Aames Capital Acceptance Corp., Aames Capital Corporation, Accredited Home Lenders, Inc., Accredited Home Lenders Canada, Inc., Accredited Mortgage Loan REIT Trust, Accredited Preferred Securities Trust I, Accredited Processing Services, Inc., AHL Acquisition, LLC, AHL Acquisition Corporation, Inzura Insurance Services, Inc., One Stop Mortgage, Inc., Rossmore Financial Insurance Services, Inc., Vendor Management Services, LLC, Vendor Management Services of Alabama, LLC, Windosor Management of Washington, Inc. and Windsor Management Co. (collectively, the “Company Subsidiaries”).

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“First Amendment” means the First Amendment to this Agreement, dated as of June 15, 2007, by and among the Company and the Buyer Parties.

“Mortgage” means a mortgage, deed of trust or other security instrument that creates a lien on real property.

“Mortgaged Property” means the real property that secures a Mortgage Note and that is subject to a Mortgage.

“Mortgage Loan” means any Residential Mortgage Loan, other than a Warehouse Loan, that was originated or purchased and subsequently sold by the Company or any Company Subsidiary, as applicable, and that has not been repaid or refinanced.

“Mortgage Note” means, with respect to a Residential Mortgage Loan, a promissory note or notes, or other evidence of indebtedness, with respect to such Residential Mortgage Loan secured by a Mortgage or Mortgages, together with any assignment, reinstatement, extension, endorsement or modification thereof.

“Plan” means collectively, all employee benefit plans (as defined in Section 3(3) of ERISA) and all bonus, stock option, stock purchase, restricted stock, incentive, deferred compensation, retiree medical or life insurance, supplemental retirement, severance or other benefit plans, programs or arrangements, and all material employment, termination, severance or other contracts or agreements to which the Company or any Company Subsidiary is a party, with respect to which the Company or any Company Subsidiary has any obligation or which are maintained, contributed to or sponsored by the Company or any Company Subsidiary for the benefit of any current or former employee, officer, director or consultant of the Company or any Company Subsidiary other than any such benefit plans, programs, arrangements, contracts or agreements maintained outside the United States primarily for the benefit of current or former employees, officers, directors or consultants of the Company or any Company Subsidiary.

“Residential Mortgage Loan” means a loan evidenced by a Mortgage Note with respect to which the Mortgaged Property is Residential Property.

“Residential Property” means any Mortgaged Property, securing a Residential Mortgage Loan, consisting of a single parcel of real property with a detached single-family residence thereon, or a two- to four-family dwelling, a townhouse, or an individual condominium unit in a condominium, a cooperative unit, or an individual unit in a planned unit development.

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“Second Amendment” means the Second Amendment to this Agreement, dated as of September 18, 2007, by and among the Company and the Buyer Parties.

“Warehouse Loan” means a Residential Mortgage Loan secured by a Mortgage, that, as of the Merger Effective Time, is owned by the Company.

Defined Terms Inserted in Section 1.01(b):

Defined Term	Location of Definition
Assumption	Section 8.13
Assumption Funds	Section 8.13
Delaware Litigation	Section 8.14
Escrow Agent	Section 2.02(f)
Escrow Agreement	Section 2.02(f)
Escrow Funds	Section 2.02(f)
JPMorgan Chase	Section 8.13
JPMorgan Chase Credit Agreement	Section 8.13
LSF5 Mortgage	Section 8.13
Release Time	Section 2.02(f)
Stay Release Date	Section 8.14
Second Amendment Schedule 14D-9/A	Section 2.07
Temporary Restraint	Section 10.01(i)

Defined Terms Deleted Terms from Section 1.01(a):

“Company Press Releases”

“Company SEC Reports”

“Company Superior Proposal”

“Environmental Law”

“Excluded Reports”

“GAAP”

“Hazardous Substances”

“Intellectual Property”

“Investor”

“knowledge of the Company” or “knowledge”

“Material Adverse Effect”

“Parent Expenses”

“Permitted Liens”

“Previously Disclosed”

“Sarbanes-Oxley Act”

“Securities Act”

“Tax Return”

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“Voting Debt”

Defined Terms Deleted Terms from Section 1.01(b):

“Agency”

“Applicable Requirements”

“Bankruptcy and Equity Exception”

“Company Intellectual Property”

“Company Preferred Shares”

“ERISA Affiliate”

“Foreclosure”

“HSR Act”

“HSR Exempt Business”

“HUD”

“Insurer”

“Investor Agreement”

“IRS”

“Mortgage Loan Documents”

“Mortgagor”

“Originator”

“Permits”

“PMI”

“Prior Servicer”

“Retained Interest”

“State Agency”

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EX-99.1

Exhibit 99.1

Contacts:

For Accredited Home Lenders Holding Co.:

Rick Howe

(858) 676-2148

For Lone Star Funds:

Ed Trissel

Joele Frank, Wilkinson Brimmer Katcher

(212) 895-8654

FOR IMMEDIATE RELEASE

ACCREDITED AND LONE STAR ANNOUNCE AMENDED MERGER AGREEMENT

Includes $11.75 per share tender price, minimal conditions to closing beyond tender of majority of shares, and resolution of Delaware lawsuit

SAN DIEGO and DALLAS, Sept. 18, 2007 — Accredited Home Lenders Holding Co. (NASDAQ: LEND) (“Accredited” or “Company”), a nationwide mortgage company specializing in non-prime residential mortgage loans, and Lone Star Fund V (U.S.) L.P., through its affiliate Lone Star U.S. Acquisitions, LLC (“Lone Star”), today announced that they have amended their June 4, 2007 merger agreement to settle the pending lawsuit between the companies and reduce the price at which Lone Star agrees to acquire all of the common stock of the Company to $11.75 per share.

The acquisition remains structured as an all-cash tender offer for all outstanding shares of Accredited common stock to be followed by a merger in which each remaining untendered share of Accredited will be converted into the same $11.75 cash per share price paid in the tender offer. The outstanding 9.75% Series A Perpetual Cumulative Preferred Shares, par value $1.00 per share, of Accredited Mortgage Loan REIT Trust (NYSE: AHH.PrA) will remain outstanding.

Lone Star has deposited approximately $295 million with The Bank of New York Mellon, as escrow agent, to fund payment of the amended tender offer price for all outstanding shares of the Company’s common stock. The funds are distributable to Computershare Trust Company, N.A., the depositary for the tender offer, upon Accredited’s delivery to the escrow agent of certifications regarding satisfaction of the closing conditions.

The amended merger agreement eliminates most of the original merger agreement’s conditions to closing the amended tender offer. The primary remaining conditions to closing are the valid tender without withdrawal of more than 50% of Accredited’s outstanding shares (the “Minimum Condition”) and the absence of any injunction or similar order preventing the closing.

Lone Star’s obligation to close the amended tender offer is not subject to any conditions related to the accuracy of representations or warranties made by Accredited, to the absence of a material adverse change, or to the compliance by Accredited with negative covenants, other than limited negative covenants specifically identified in the amended merger agreement.

The amended tender offer will be extended so that the scheduled expiration date will be 12:00 midnight, New York City time, on the tenth business day following the date on which Accredited files an amendment to its Solicitation/Recommendation Statement on Schedule 14D-9 setting forth the basis for the Board of Directors’ recommendation of the amended merger agreement (the “14D-9/A”) with the Securities and Exchange Commission (“SEC”). Lone Star will generally have the right to terminate the amended merger agreement if the Minimum Condition has not been satisfied at any scheduled expiration date after the 20^th business day following the date of filing of Accredited’s 14D-9/A.

In addition, Lone Star has agreed to provide to Accredited financing of $49 million, approximately $34 million of which will be applied to extinguish outstanding debt from one of the Company’s creditors, leaving approximately $15 million of additional liquidity for the Company.

Accredited and Lone Star have agreed to an immediate stay of the lawsuit filed by the Company in the Delaware Chancery Court. The lawsuit will be dismissed with prejudice immediately upon the payment for shares pursuant to the amended tender offer or the termination of the merger agreement in accordance with its terms. The dismissal with prejudice can occur even if the Minimum Condition is not satisfied, so long as Lone Star does not materially breach any of its obligations under the amended merger agreement.

James A. Konrath, chairman and chief executive officer of Accredited, said, “This new agreement fairly settles our dispute and will expedite the completion of the merger with Lone Star. We will now turn to the business of rebuilding Accredited for a brighter future with Lone Star.”

Accredited’s Board of Directors has unanimously approved the amended merger agreement and unanimously recommends that holders of Accredited’s common shares tender their shares. The basis for the Board of Directors’ recommendation will be set forth in Accredited’s 14D-9A filed with the SEC.

Piper Jaffray & Co. is acting as Dealer-Manager for the tender offer. The Information Agent for the tender offer is Georgeson Inc. Any questions or requests for assistance or copies of the offer to purchase and the letter of transmittal may be directed to the Dealer-Manager or the Information Agent at their respective telephone numbers and locations. Piper Jaffray & Co. can be reached at 800 Nicollet Mall, Suite 800, Minneapolis, MN 55402 or (877) 371-5212. Georgeson Inc. can be reached at 17 State Street, 10th floor, New York, NY 10004. Banks and bankers can call (212) 440-9800 and all others can call toll-free at (888) 605-7543.

Accredited has been represented in the transaction by its legal counsel, Dewey Ballantine LLP and Morris, Nichols, Arsht & Tunnell LLP. Milestone Advisors, LLC rendered an opinion to Accredited’s Board of Directors regarding the fairness, from a financial point of view, of the consideration to be received by Accredited’s stockholders pursuant to the amended tender offer and the merger. Lone Star is represented in the transaction by its financial advisor Piper Jaffray & Co., and its legal counsel, Sullivan & Cromwell LLP.

This release is for informational purposes only and is not an offer to purchase or a solicitation of an offer to purchase Accredited’s common shares, nor is it an offer or solicitation of an offer to sell any securities. The amended offer will be made solely by means of the amended offer to purchase to be filed with the SEC and disseminated to holders of Accredited’s common shares.

About Accredited Home Lenders Holding Co.

Accredited Home Lenders Holding Co. is a non-prime mortgage company operating throughout the U.S. and in Canada. Accredited is in the business of originating, financing, securitizing, servicing, and selling non-prime mortgage loans secured by residential real estate. Founded in 1990, the company is headquartered in San Diego. Additional information may be found at www.accredhome.com.

About Accredited Mortgage Loan REIT Trust

Accredited Mortgage Loan REIT Trust, a subsidiary of Accredited Home Lenders Holding Co., is a Maryland real estate investment trust formed in May 2004 for the purpose of acquiring, holding and managing real estate assets.

About Lone Star Funds

Lone Star is a leading U.S. private equity firm. Since 1995, the principals of Lone Star have organized private equity funds totaling more than $13.3 billion to invest globally in corporate secured and unsecured debt instruments, real estate related assets and select corporate opportunities. Additional information may be found at www.lonestarfunds.com.

Forward Looking Statements

Certain matters discussed in this news release, including without limitation completion of the amended tender offer and merger and any expected benefits of the merger, constitute forward-looking statements within the meaning of the federal securities laws. Completion of the amended tender offer and merger is subject to satisfaction of a minimum tender condition, and there can be no assurance this condition can be satisfied or that the transactions described in this press release will be completed. In addition, actual results and the timing of certain events could differ materially from those projected in or contemplated by forward-looking statements due to a number of factors, including but not limited to, the risk factors and other disclosures contained in Accredited Home Lenders Holding Co.’s annual report on Form 10-K for the period ended December 31, 2006, its quarterly report on Form 10-Q for the first quarter ended March 31, 2007, and the other disclosures contained in documents filed by the Company with the SEC. The Company cautions readers that the non-prime mortgage industry and the Company’s business are subject to numerous significant risks and uncertainties.

Additional Information

This release is for informational purposes only and is neither an offer to purchase nor a solicitation of an offer to sell Accredited’s common stock. Investors and security holders are urged to read both the amended tender offer statement and the amended solicitation/recommendation statement regarding the amended tender offer described in this press release when they become available because they will contain important information. The amended tender offer statement will be filed by Lone Star with the SEC, and the amended solicitation/recommendation statement will be filed by Accredited with the SEC. Investors and security holders may obtain a free copy of these statements (when available) and other documents filed by Lone Star or Accredited with the SEC at the website maintained by the SEC at www.sec.gov. The tender offer statement and related materials, solicitation/recommendation statement, and such other documents may be obtained for free by directing such requests to Investor Relations of Accredited at 858.676.2148.