10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2007.

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             .

Commission File Number: 001-31916

AMERICAN HOME MORTGAGE INVESTMENT CORP.

(Exact Name of Registrant as Specified in its Charter)

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

538 Broadhollow Road, Melville, New York	11747
(Address of Principal Executive Offices)	(Zip Code)

(516) 949-3900

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer” and “large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer  x    Accelerated Filer  ¨    Non-Accelerated Filer  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

As of May 4, 2007, there were 54,278,645 shares of the registrant’s common stock, par value $0.01 per share, outstanding.

AMERICAN HOME MORTGAGE INVESTMENT CORP. AND SUBSIDIARIES

TABLE OF CONTENTS

PART I-FINANCIAL INFORMATION
		Page
Item 1.	Financial Statements (Unaudited)
	Consolidated Balance Sheets as of March 31, 2007 and December 31, 2006	1
	Consolidated Statements of Income for the Three Months Ended March 31, 2007 and 2006	2
	Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 31, 2007 and 2006	3
	Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2007 and 2006	4
	Notes to Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	32
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	50
Item 4.	Controls and Procedures	52
	PART II-OTHER INFORMATION
Item 1.	Legal Proceedings	53
Item 1A.	Risk Factors	53
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	53
Item 3.	Defaults Upon Senior Securities	53
Item 4.	Submission of Matters to a Vote of Security Holders	53
Item 5.	Other Information	53
Item 6.	Exhibits	54
SIGNATURES
INDEX TO EXHIBITS

AMERICAN HOME MORTGAGE INVESTMENT CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except per share amounts)

	March 31, 2007			December 31, 2006
	(Unaudited)
Assets:
Cash and cash equivalents	$	836,860		$	398,166
Securities purchased under agreements to resell		58,675			—
Accounts receivable and servicing advances		316,673			432,418
Securities (including securities pledged of $6,547,901 as of March 31, 2007 and $8,690,803 as of December 31, 2006)		7,557,886			9,308,032
Mortgage loans held for sale, net		955,451			1,523,737
Mortgage loans held for sale, at fair value		3,926,296			—
Mortgage loans held for investment, net of allowance of $16,586 as of March 31, 2007 and $14,191 as of December 31, 2006		6,010,969			6,329,721
Derivative assets		22,718			32,142
Mortgage servicing rights		525,565			506,341
Premises and equipment, net		87,723			86,211
Goodwill		133,248			133,128
Other assets		121,871			79,089
Total assets	$	20,553,935		$	18,828,985
Liabilities and Stockholders’ Equity:
Liabilities:
Warehouse lines of credit	$	4,013,190		$	1,304,541
Commercial paper		1,696,256			1,273,965
Reverse repurchase agreements		6,727,505			8,571,459
Deposits		184,614			24,016
Collateralized debt obligations		4,719,376			4,854,801
Payable for securities purchased		595,277			289,716
Derivative liabilities		36,550			12,644
Trust preferred securities		336,616			336,078
Accrued expenses and other liabilities		396,109			361,923
Notes payable		531,867			417,467
Income taxes payable		92,831			112,089
Total liabilities		19,330,191			17,558,699
Commitments and contingencies		—			—
Stockholders’ Equity:
Preferred Stock, par value $0.01 per share, 10,000,000 shares authorized:
9.75% Series A Cumulative Redeemable, 2,150,000 shares issued and outstanding as of March 31, 2007 and December 31, 2006		50,857			50,857
9.25% Series B Cumulative Redeemable, 3,450,000 shares issued and outstanding as of March 31, 2007 and December 31, 2006		83,183			83,183
Common Stock, par value $0.01 per share, 100,000,000 shares authorized, 50,273,878 and 50,195,499 shares issued and outstanding as of March 31, 2007 and December 31, 2006, respectively		503			502
Additional paid-in capital		965,034			963,617
Retained earnings		173,900			257,283
Accumulated other comprehensive loss		(49,733	)		(85,156	)
Total stockholders’ equity		1,223,744			1,270,286
Total liabilities and stockholders’ equity	$	20,553,935		$	18,828,985

See notes to consolidated financial statements (unaudited).

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AMERICAN HOME MORTGAGE INVESTMENT CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

(In thousands, except per share amounts)

	Three Months Ended March 31,
	2007			2006
Net interest income:
Interest income	$	394,277		$	300,613
Interest expense		(333,738	)		(254,035	)
Total net interest income		60,539			46,578
Provision for loan losses		(9,143	)		(1,311	)
Total net interest income after provision for loan losses		51,396			45,267
Non-interest income:
Gain on sales of mortgage loans		126,817			171,907
(Loss) gain on securities and derivatives		(4,242	)		8,465
Loan servicing fees		46,084			24,333
Changes in fair value of mortgage servicing rights:
Due to realization of cash flows		(24,959	)		(18,735	)
Due to changes in valuation assumptions, net of hedge gain		(1,076	)		114
Net loan servicing fees		20,049			5,712
Other non-interest income		3,221			1,769
Total non-interest income		145,845			187,853
Non-interest expenses:
Salaries, commissions and benefits, net		107,871			99,267
Occupancy and equipment		21,306			17,970
Data processing and communications		5,377			7,126
Office supplies and expenses		4,851			4,332
Marketing and promotion		4,278			5,800
Travel and entertainment		7,797			6,753
Professional fees		6,904			5,331
Other		20,850			15,882
Total non-interest expenses		179,234			162,461
Net income before income tax (benefit) expense		18,007			70,659
Income tax (benefit) expense		(12,675	)		16,200
Net income	$	30,682		$	54,459
Dividends on preferred stock		3,305			3,305
Net income available to common stockholders	$	27,377		$	51,154
Per share data:
Basic	$	0.55		$	1.03
Diluted	$	0.54		$	1.02
Weighted average number of shares—basic		50,223			49,715
Weighted average number of shares—diluted		50,499			50,070

See notes to consolidated financial statements (unaudited).

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AMERICAN HOME MORTGAGE INVESTMENT CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited)

THREE MONTHS ENDED MARCH 31, 2007 AND 2006

(Dollars in thousands)	Preferred Stock		Common Stock		Additional Paid-in Capital		Retained Earnings			Accumulated Other Comprehensive Loss			Total Stockholders’ Equity
Balance at January 1, 2006	$	134,040	$	496	$	947,512	$	203,778		$	(78,810	)	$	1,207,016
Comprehensive income:
Net income		—		—		—		54,459			—			54,459
Net change in accumulated other comprehensive loss		—		—		—		—			13,990			13,990
Comprehensive income														68,449
Cumulative effect adjustment due to adoption of SFAS No. 156		—		—		—		(2,917	)		—			(2,917	)
Issuance of Common Stock - earnouts		—		3		9,555		—			—			9,558
Issuance of Common Stock - 1999 Omnibus Stock Incentive Plan		—		1		698		—			—			699
Stock-based employee compensation expense		—		—		410		—			—			410
Dividends declared on Series A Preferred Stock		—		—		—		(1,310	)		—			(1,310	)
Dividends declared on Series B Preferred Stock		—		—		—		(1,995	)		—			(1,995	)
Dividends declared on Common Stock		—		—		—		(45,503	)		—			(45,503	)
Balance at March 31, 2006	$	134,040	$	500	$	958,175	$	206,512		$	(64,820	)	$	1,234,407
Balance at January 1, 2007	$	134,040	$	502	$	963,617	$	257,283		$	(85,156	)	$	1,270,286
Comprehensive income:
Net income		—		—		—		30,682			—			30,682
Net change in accumulated other comprehensive loss		—		—		—		—			(19,030	)		(19,030	)
Comprehensive income														11,652
Cumulative effect adjustment due to adoption of SFAS No. 159		—		—		—		(54,453	)		54,453			—
Issuance of Common Stock - 1999 Omnibus Stock Incentive Plan		—		1		798		—			—			799
Stock-based employee compensation expense		—		—		322		—			—			322
Tax benefit from stock options exercised		—		—		297		—			—			297
Dividends declared on Series A Preferred Stock		—		—		—		(1,310	)		—			(1,310	)
Dividends declared on Series B Preferred Stock		—		—		—		(1,995	)		—			(1,995	)
Dividends declared on Common Stock		—		—		—		(56,307	)		—			(56,307	)
Balance at March 31, 2007	$	134,040	$	503	$	965,034	$	173,900		$	(49,733	)	$	1,223,744

See notes to consolidated financial statements (unaudited).

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AMERICAN HOME MORTGAGE INVESTMENT CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(In thousands)

	Three Months Ended March 31,
	2007			2006
Cash flows from operating activities:
Net income	$	30,682		$	54,459
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation and amortization		5,637			3,953
Provision for loans held for investment		9,143			1,311
Provision (recovery) for loans held for sale		60,543			(412	)
Change in fair value of mortgage servicing rights		26,421			18,621
Accretion and amortization of mortgage-backed securities, net		(8,530	)		2,331
Deferred cash flow hedge gain, net of amortization		8,323			3,909
Gain on sales of mortgage-backed securities and derivatives		(5,155	)		—
Unrealized loss on mortgage-backed securities		14,073			3,090
Unrealized loss (gain) on free standing derivatives		3,431			(4,765	)
Increase (decrease) in forward delivery contracts		13,174			(24,041	)
Capitalized mortgage servicing rights on sold loans		(45,645	)		(69,768	)
(Increase) decrease in interest rate lock commitments		(8,904	)		7,131
Fair value in excess of cost basis on mortgage loans held for sale, fair value		(44,831	)		—
Cost basis adjustments on mortgage loans held for sale, fair value		(52,100	)		—
Decrease in mortgage loan basis adjustments		9,836			4,731
Excess tax benefits from share-based payment arrangements		(297	)		—
Other		3,111			(198	)
(Increase) decrease in operating assets:
Accounts receivable		118,178			6,829
Servicing advances		(2,433	)		(3,281	)
Other assets		11,210			(1,451	)
Increase (decrease) in operating liabilities:
Accrued expenses and other liabilities		22,412			93,876
Income taxes payable		(18,961	)		16,173
Origination of mortgage loans held for sale		(16,624,997	)		(12,203,014	)
Principal received from sales of mortgage loans held for sale		13,255,213			13,372,986
Additions to mortgage-backed securities and derivatives		(67,834	)		—
Principal proceeds from sales of self-originated mortgage-backed securities		—			1,809,796
Cash received from residual assets in securitizations		16,519			27,353
Principal repayments of mortgage-backed securities		39,340			93,845
Net cash (used in) provided by operating activities		(3,232,441	)		3,213,464
Cash flows from investing activities:
Purchases of premises and equipment		(7,149	)		(10,765	)
Origination of mortgage loans held for investment		(121,224	)		(970,335	)
Proceeds from repayments and dispositions of mortgage loans held for investment		425,385			137,545
Net increase in securities purchased under agreements to resell		(58,675	)		—
Purchases of mortgage-backed securities		(1,452,021	)		(1,389,336	)
Principal proceeds from sales of purchased mortgage-backed securities		2,737,023			—
Principal repayments of purchased mortgage-backed securities		474,015			438,297
Net increase in investment in Federal Home Loan Bank stock, at cost		(713	)		—
Acquisition of business		—			(550,077	)
Net cash provided by (used in) investing activities		1,996,641			(2,344,671	)
Cash flows from financing activities:
Increase (decrease) in warehouse lines of credit, net		2,708,649			(1,719,610	)
Decrease in reverse repurchase agreements, net		(1,843,954	)		(907,094	)
Increase in deposits		160,598			—
(Decrease) increase in collateralized debt obligations		(135,425	)		1,847,293
Increase (decrease) in payable for securities purchased		305,561			(46,425	)
Increase (decrease) in commercial paper, net		422,291			(5,549	)
Decrease in drafts payable, net		(2,751	)		(4,377	)
Increase in trust preferred securities		538			330
Increase in notes payable, net		114,400			11,405
Proceeds from issuance of Common Stock		802			652
Excess tax benefits from share-based payment arrangements		297			—
Dividends paid		(56,512	)		(48,477	)
Net cash provided by (used in) financing activities		1,674,494			(871,852	)
Net increase (decrease) in cash and cash equivalents		438,694			(3,059	)
Cash and cash equivalents, beginning of period		398,166			575,650
Cash and cash equivalents, end of period	$	836,860		$	572,591
Supplemental disclosure of cash flow information:
Interest paid	$	318,455		$	181,955
Income taxes paid	$	6,345		$	32
Supplemental disclosure of non-cash investing information:
Net transfer of loans held for sale to loans held for investment	$	10,135		$	—

See notes to consolidated financial statements (unaudited).

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AMERICAN HOME MORTGAGE INVESTMENT CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization – American Home Mortgage Investment Corp. (“AHM Investment”) is a mortgage REIT focused on earning net interest income from mortgage loans and securities, and, through its taxable subsidiaries, on earning income from originating and selling mortgage loans and servicing mortgage loans for institutional investors. Mortgages are originated through a network of loan origination offices and mortgage brokers or are purchased from correspondents, and are serviced at the Company’s Irving, Texas servicing center. As used herein, references to the “Company,” “American Home,” “we,” “our” and “us” refer to AHM Investment collectively with its subsidiaries.

Basis of Presentation – The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company’s estimates and assumptions primarily arise from risks and uncertainties associated with interest rate volatility, prepayment volatility, credit exposure and regulatory changes. Although management is not currently aware of any factors that would significantly change its estimates and assumptions in the near term, future changes in market trends and conditions may occur which could cause actual results to differ materially.

Due to the Company’s exercising significant influence on the operations of its joint ventures, their balances and operations have been fully consolidated in the accompanying consolidated financial statements and all intercompany accounts and transactions have been eliminated.

Cash and Cash Equivalents – Cash and cash equivalents are demand deposits and short-term investments with a maturity of 90 days or less. The carrying amount of cash and cash equivalents approximates its fair value.

Fair Value – A substantial portion of the Company’s assets and certain of the Company’s liabilities are carried at fair value. At the beginning of 2007, the Company adopted Statement of Financial Accounting Standards (“SFAS”) No. 157, “Fair Value Measurements” (“SFAS No. 157”), and SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS No. 159”). The fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. With the adoption of SFAS No. 159, the Company recognized a gain of approximately $44.8 million during the three months ended March 31, 2007, related to the fair value in excess of cost basis of mortgage loans held for sale. The Company’s cost basis adjustments relating to the direct costs of originating the loans were $52.1 million during the three months ended March 31, 2007, and were recognized in earnings. The transition adjustment to beginning retained earnings related to the adoption of SFAS No. 159 was a loss of $54.5 million, net of tax, all of which related to applying the fair value option to securities.

Securities, at Fair Value – The fair values of the Company’s securities carried at fair value are generally based on market prices provided by certain dealers who make markets in these financial instruments. Changes in the fair value of securities are recognized in earnings and are included in (loss) gain on securities and derivatives.

Mortgage Loans Held for Sale – Mortgage loans held for sale originated prior to January 1, 2007 are carried at the lower of cost or aggregate market value (“LOCOM”). The cost basis includes the capitalized value of the prior interest rate lock commitments (“IRLCs”) related to the mortgage loans and any net deferred origination costs. For mortgage loans held for sale that are hedged with forward sale commitments, if the Company meets hedge accounting requirements, the carrying value is adjusted for the change in market during the time the hedge was deemed to be highly effective. The market value is determined by outstanding commitments from investors or current investor yield requirements calculated on the aggregate basis.

Mortgage Loans Held for Sale, at Fair Value – Mortgage loans held for sale originated after January 1, 2007 are carried at fair value. The fair value of mortgage loans held for sale may be determined by either outstanding commitments from investors, recent trade prices for identical or similar loans, or other observable data. Unrealized gain or loss is recognized in earnings for the difference between the cost basis, including upfront costs and fees, and the fair value of the loans. Unrealized gain or loss is included in gain on sales of mortgage loans.

Mortgage Loans Held for Investment – Mortgage loans held for investment represent loans securitized through transactions structured as financings, or pending securitization through transactions that are expected to be structured as financings. Mortgage loans held for investment are carried at the aggregate of their remaining unpaid principal balances, including the capitalized value of the prior IRLCs related to the mortgage loans, plus net deferred origination costs, less any related charge-offs and allowance for loan losses. Loan fees and direct origination costs are deferred and amortized into interest income over the contractual life of the loan using the level-yield method.

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Allowance for Losses on Mortgage Loans Held for Investment— The Company maintains an allowance for loan losses for its mortgage loans held for investment, based on the Company’s estimate of current existing losses. Additions to the allowance for loan losses are based on assessments of certain factors, including historical loan loss experience of similar types of loans, the Company’s loan loss experience, the amount of past due and nonperforming loans, specific known risks, the value of collateral securing the loans, and current and anticipated economic and interest rate conditions. Evaluation of these factors involves subjective estimates and judgments that may change. Additions to the allowance for loan losses are provided through a charge to income and recorded within provision for loan losses in the consolidated statements of income. The allowance for loan losses is reduced by subsequent charge-offs, net of recoveries.

Real Estate Owned—The Company’s real estate owned (“REO”) represents property acquired through foreclosure or other proceedings. REO is carried at the lower of cost or fair value, less costs to sell. REO is reported in other assets in the consolidated balance sheet. The Company periodically evaluates all REO, and reductions in carrying value are recognized in other non-interest expenses in the consolidated statements of income.

Mortgage Servicing Rights – In March 2006, the Financial Accounting Standards Board (“FASB”) released SFAS No. 156, “Accounting for Servicing Financial Assets, an amendment of SFAS No. 140” (“SFAS No. 156”). SFAS No. 156 amends SFAS No. 140 to require that all separately recognized servicing assets and liabilities be initially measured at fair value, if practical. The effective date of this statement is as of the beginning of the entity’s first fiscal year that begins after September 15, 2006; however, early adoption is permitted as of the beginning of any fiscal year, provided the entity has not issued financial statements for the interim period. The initial recognition and measurement of servicing assets and servicing liabilities are required to be applied prospectively to transactions occurring after the effective date. The Company elected to early adopt SFAS No. 156 as of January 1, 2006 and, upon measurement of its mortgage servicing rights (“MSRs”) at fair value, recorded a cumulative effect adjustment to retained earnings of $718 thousand after tax. The Company’s election increased MSRs by $1.2 million. Prior to January 1, 2006, MSRs were carried at the lower of cost or fair value, based on defined interest rate risk strata, and the gross MSR asset was amortized in proportion to and over the period of estimated net servicing income. The Company estimates the fair value of its MSRs by obtaining market information from one of the market’s primary independent MSR brokers.

Premises and Equipment – Premises and equipment is stated at cost less accumulated depreciation and amortization. Depreciation is provided using the straight-line method over the estimated service lives of the premises and equipment. Leasehold improvements are amortized over the lesser of the life of the lease or service lives of the improvements using the straight-line method. Depreciation and amortization are recorded within occupancy and equipment expense in the consolidated statements of income.

Goodwill – Goodwill represents the excess purchase price over the fair value of net assets acquired from business acquisitions. The Company’s goodwill includes earnouts, consisting of cash and shares of the Company’s common stock, par value $0.01 per share (“Common Stock”), paid to former shareholders of previously acquired companies. The Company tests for impairment at least annually and will test for impairment more frequently if events or circumstances indicate that an asset may be impaired. The Company tests for impairment by comparing the fair value of goodwill, as determined by using a discounted cash flow method, with its carrying value. Any excess of carrying value over the fair value of the goodwill would be recognized as an impairment loss in continuing operations. The discounted cash flow calculation related to the Company’s loan origination segment includes a forecast of the expected future loan originations and the related revenues and expenses. The discounted cash flow calculation related to the Company’s mortgage holdings segment includes a forecast of the expected future net interest income, gain on securities and derivatives and the related revenues and expenses. These cash flows are discounted using a rate that is estimated to be a weighted-average cost of capital for similar companies.

Reverse Repurchase Agreements – The Company has entered into reverse repurchase agreements to finance certain of its investments. These agreements are secured by a portion of the Company’s investments and bear interest rates that have historically moved in close relationship to the London Inter-Bank Offer Rate (“LIBOR”). Reverse repurchase agreements are accounted for as borrowings and recorded as a liability on the consolidated balance sheet.

Collateralized Debt Obligations – The Company has issued adjustable-rate collateralized debt obligations (“CDOs”) to finance certain portions of its mortgage loans. The CDOs are collateralized by primarily adjustable-rate mortgage (“ARM”) loans that have been placed in a trust and bear interest rates that have historically moved in close relationship to LIBOR. CDOs are accounted for as borrowings and recorded as a liability on the consolidated balance sheet.

Commercial Paper –The Company maintains a wholly owned special purpose entity for the purpose of issuing commercial paper in the form of short-term Secured Liquidity Notes (“SLNs”) to finance certain portions of the Company’s mortgage loans held for sale and mortgage loans held for investment. The commercial paper may be secured by the Company’s mortgage loans held for sale, mortgage loans held for investment, mortgage-backed securities (“MBS”) or cash and bears interest at prevailing money market rates approximating LIBOR. Commercial paper is accounted for as a borrowing and recorded as a liability on the consolidated balance sheet.

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Trust Preferred Securities – The Company has formed wholly owned statutory business trusts (“Trusts”) for the purpose of issuing trust preferred securities. The Company does not consolidate its Trusts, which results in a liability to the Trusts, which is recorded in trust preferred securities on the consolidated balance sheet.

Derivative Financial Instruments –The Company has developed risk management programs and processes designed to manage market risk associated with normal business activities.

Interest Rate Lock Commitments (“IRLCs”). The Company’s mortgage committed pipeline includes IRLCs that have been extended to borrowers who have applied for loan funding and meet certain defined credit and underwriting criteria and have locked their terms and rates. The Company uses mortgage forward delivery contracts to economically hedge the IRLCs. The Company classifies and accounts for the IRLCs associated with loans expected to be sold as free-standing derivatives. Accordingly, IRLCs related to loans held for sale are recorded at fair value with changes in fair value recorded to current earnings.

Forward Delivery Commitments Used to Economically Hedge IRLCs. The Company uses mortgage forward delivery contracts to economically hedge the IRLCs, which are also classified and accounted for as free-standing derivatives and thus are recorded at fair value with the changes in fair value recorded to current earnings.

Forward Delivery Commitments Used to Hedge Mortgage Loans Held for Sale. The Company’s risk management objective for its mortgage loans held for sale is to protect earnings from an unexpected charge due to a decline in value. The Company’s strategy is to engage in a risk management program involving the use of mortgage forward delivery contracts designated as fair value hedging instruments to hedge 100% of its agency-eligible conforming loans and most of its non-conforming loans held for sale. At the inception of the hedge, to qualify for hedge accounting, the Company formally documents the relationship between the forward delivery contracts and the mortgage inventory as well as its objective and strategy for undertaking the hedge transaction. For conventional conforming fixed-rate loans, the notional amount of the forward delivery contracts, along with the underlying rate and terms of the contracts, are equivalent to the unpaid principal amount of the mortgage inventory being hedged; hence, the forward delivery contracts effectively fix the forward sales price and thereby substantially eliminate interest rate and price risk to the Company. The Company classifies and accounts for these forward delivery contracts as fair value hedges. The derivatives are carried at fair value with the changes in fair value recorded to current earnings. When the hedges are deemed highly effective, the book value of the hedged loans held for sale is adjusted for its change in fair value during the hedge period.

Total Return Swaps Used to Economically Hedge MSRs. The Company uses agency trust principal only total return swaps to economically hedge its MSRs, which are also classified and accounted for as free-standing derivatives and thus are recorded at fair value with the changes in fair value recorded to current earnings.

Swaptions Used to Economically Hedge MSRs. The Company uses swaptions to economically hedge its MSRs, which are also classified and accounted for as free-standing derivatives and thus are recorded at fair value with the changes in fair value recorded to current earnings.

Interest Rate Swap Agreements. The Company enters into interest rate swap agreements which require it to pay a fixed interest rate and receive a variable interest rate based on LIBOR. The fair value of interest rate swap agreements is based on the net present value of estimated future interest payments over the remaining life of the interest rate swap agreement. All changes in the unrealized gains and losses on swap agreements designated as cash flow hedges have been recorded in accumulated other comprehensive income (loss) and are reclassified to earnings as interest expense is recognized on the Company’s hedged borrowings. For interest rate swap agreements accounted for as cash flow hedges, the net amount accrued for the variable interest receivable and fixed interest payable affects the amount recorded as interest expense. If it becomes probable that the forecasted transaction, which in this case refers to interest payments to be made under the Company’s short-term borrowing agreements, will not occur by the end of the originally specified time period, as documented at the inception of the hedging relationship, or within an additional two-month time period thereafter, then the related gain or loss in accumulated other comprehensive income (loss) would be reclassified to income. Certain swap agreements are designated as cash flow hedges against the benchmark interest rate risk associated with the Company’s borrowings. Although the terms and characteristics of the Company’s swap agreements and hedged borrowings are nearly identical, due to the explicit requirements of SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“SFAS No. 133”), the Company does not account for these hedges under a method defined in SFAS No. 133 as the “shortcut” method, but rather the Company performs an assessment of the hedge effectiveness and measures the effectiveness of these hedges on an ongoing basis, and, to date, has calculated effectiveness of approximately 100%. The Company classifies and accounts for interest rate swap agreements that are not designated as cash flow hedges as free-standing derivatives. Accordingly, these swap agreements are recorded at fair value with changes in fair value recorded to current earnings as a component of (loss) gain on securities and derivatives as they are used to offset the price change exposure of mortgage-backed securities classified as trading. For interest rate swap agreements accounted for as free-standing derivatives, the net amount accrued for the variable interest receivable and fixed interest payable is recorded in current earnings as (loss) gain on securities and derivatives.

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Termination of Hedging Relationships. The Company employs a number of risk management monitoring procedures to ensure that the designated hedging relationships are demonstrating, and are expected to continue to demonstrate, a high level of effectiveness. Hedge accounting is discontinued on a prospective basis if it is determined that the hedging relationship is no longer highly effective or expected to be highly effective in offsetting changes in fair value or cash flows of the hedged item. Additionally, the Company may elect to de-designate a hedge relationship during an interim period and re-designate upon the rebalancing of a hedge profile and the corresponding hedge relationship. When hedge accounting is discontinued, the Company continues to carry the derivative instruments at fair value with changes in their value recorded in earnings.

Gain on Sale of Loans – The Company recognizes gain on sale of loans, net of hedge gains or losses, for the difference between the sales price and the adjusted book value of the loans, less associated market valuation reserves and recourse liabilities, at the time of sale. The adjusted book value of the loans includes the original principal amount plus SFAS No. 133 basis adjustments plus deferrals of fees and points received and direct loan origination costs. Recourse liabilities could include the potential repurchase of loans or indemnification of losses based on violations of representations and warranties which are customary to the business. The Company’s recourse liabilities are recorded in accrued expenses and other liabilities on the consolidated balance sheet.

The Company has elected to utilize the fair value option to measure mortgage loans held for sale originated after January 1, 2007, in accordance with SFAS No. 159. With the adoption of SFAS No. 159, the Company records in current earnings as gain on sale of loans its fair value in excess of cost basis of mortgage loans held for sale.

Loan Origination Fees and Direct Origination Costs – The Company records loan fees, discount points and certain direct origination costs as an adjustment of the cost of the loan or security and such amounts are included in revenues when the loan or security is sold or the loan is marked to fair value. When loans held for investment are securitized, net deferred origination costs are amortized over the life of the loan using the level-yield method and such amounts adjust interest income. When loans are securitized and held as trading securities, net deferred origination costs are an adjustment to the cost of the security and such amounts affect the amount recorded as (loss) gain on securities and derivatives.

Interest Recognition – The Company accrues interest income for all loans and securities as it is earned and interest expense as it is incurred. Loans are placed on a nonaccrual status when any portion of the principal or interest is 90 days past due or earlier when concern exists as to the ultimate collectibility of principal or interest. Loans return to accrual status when principal and interest become current and are anticipated to be fully collectible.

The Company enters into interest rate swap agreements which require it to pay a fixed interest rate and receive a variable interest rate based on the LIBOR. For interest rate swap agreements accounted for as cash flow hedges, the net amount accrued for the variable interest receivable and fixed interest payable affects the amount recorded as interest expense. For interest rate swap agreements accounted for as free-standing derivatives, the net amount accrued for the variable interest receivable and fixed interest payable is recorded in current earnings as (loss) gain on securities and derivatives.

Servicing Fees – The Company recognizes servicing fees when the fees are collected.

Marketing and Promotion – The Company charges the costs of marketing, promotion and advertising to expense in the period incurred.

Income Taxes – The Company accounts for income taxes in conformity with SFAS No. 109, “Accounting for Income Taxes,” which requires an asset and liability approach for accounting and reporting of income taxes. Deferred tax assets and liabilities are recognized for the future tax consequences (“temporary differences”) attributable to the differences between the carrying amounts of assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which temporary differences are expected to be recovered or settled. A valuation allowance is provided for deferred tax assets where realization is not considered “more likely than not.” The Company recognizes the effect of changes in tax laws or rates on deferred tax assets and liabilities in the period that includes the enactment date.

Stock Option Plans – Effective January 1, 2006, the Company adopted the fair value recognition provisions of SFAS No. 123R, “Share Based Payment” (“SFAS No. 123R”), using the modified prospective method. Under this method, compensation cost includes the portion vesting in the period for (1) all share-based payments granted prior to, but not vested as of December 31, 2005, based on the grant date fair value estimated in accordance with the original provisions of SFAS No. 123 and (2) all share-based payments granted subsequent to December 31, 2005, based on the grant date fair value estimated using a binomial lattice-based option valuation model. The Company’s policy is to recognize compensation cost for awards with only service conditions and a graded vesting schedule on a straight-line basis over the requisite service period for the entire award. Additionally, the Company’s policy is to issue authorized but unissued shares of Common Stock to satisfy stock option exercises.

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Earnings Per Share – Basic earnings per share excludes dilution and is computed by dividing net income available to common stockholders by the weighted-average number of shares of Common Stock outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue Common Stock were exercised or converted into Common Stock or resulted in the issuance of Common Stock that then shared in the earnings of the Company.

Cash Flows – Cash and cash equivalents are demand deposits and short-term investments with a maturity of 90 days or less.

Recently Issued Accounting Standards – In February 2006, the FASB issued SFAS No. 155, “Accounting for Certain Hybrid Financial Instruments” (“SFAS No. 155”). Key provisions of SFAS No. 155 include: (1) a broad fair value measurement option for certain hybrid financial instruments that contain an embedded derivative that would otherwise require bifurcation; (2) clarification that only the simplest separations of interest payments and principal payments qualify for the exception afforded to interest-only strips and principal-only strips from derivative accounting under paragraph 14 of SFAS No. 133 (thereby narrowing such exception); (3) a requirement that beneficial interests in securitized financial assets be analyzed to determine whether they are free standing derivatives or whether they are hybrid instruments that contain embedded derivatives requiring bifurcation; (4) clarification that concentrations of credit risk in the form of subordination are not embedded derivatives; and (5) elimination of the prohibition on a QSPE holding passive derivative financial instruments that pertain to beneficial interests that are or contain a derivative financial instrument. In general, these changes will reduce the operational complexity associated with bifurcating embedded derivatives, and increase the number of beneficial interests in securitization transactions, including interest-only strips and principal-only strips, required to be accounted for in accordance with SFAS No. 133. SFAS No. 155 is effective for all financial instruments acquired or issued after the beginning of the first fiscal year that begins after November 15, 2006. The adoption of SFAS No. 155 did not have a material effect on the Company’s consolidated financial statements.

In June 2006, the FASB issued FIN 48, “Accounting for Uncertainty in Income Taxes – An Interpretation of SFAS No. 109” (“FIN 48”). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with SFAS No. 109, “Accounting for Income Taxes.” FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. FIN 48 is effective for financial statements issued for fiscal years beginning after December 15, 2006. The adoption of FIN 48 did not have a material effect on the Company’s consolidated financial statements.

In September 2006, the SEC issued SAB No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statement” (“SAB 108”), on quantifying financial statement misstatements. In summary, SAB 108 was issued to address the diversity in practice of evaluating and quantifying financial statement misstatements and the related accumulation of such misstatements. SAB 108 states that both a balance sheet approach and an income statement approach should be used when quantifying and evaluating the materiality of a potential misstatement and contains guidance for correcting errors under this dual perspective. SAB 108 is effective for financial statements issued for fiscal years ending after November 15, 2006. The adoption of SAB 108 did not have a material effect on the Company’s consolidated financial statements.

In September 2006, the FASB issued SFAS No. 157, which provides for enhanced guidance for using the fair value to measure assets and liabilities. SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (“GAAP”), and expands disclosures about fair value measurements. SFAS No. 157 is applicable under other accounting pronouncements that either require or permit fair value measurements and does not require any new fair value measurements. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years.

Effective January 1, 2007, the Company adopted the methods of fair value as prescribed in SFAS No. 157 to value financial assets and liabilities. As defined in SFAS No. 157, fair value is based on exit price or the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. Based on the observability of the inputs used in the valuation techniques, the Company is required to provide the following information according to the fair value hierarchy. The fair value hierarchy ranks the quality and reliability of the information used to determine fair values. Financial assets and liabilities carried at fair value will be classified and disclosed in one of the following three categories:

Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities.

Level 2: Observable prices based on inputs not quoted on active markets, but corroborated by market data.

Level 3: Unobservable inputs used when little or no market data is available.

The Company has applied this definition of fair value in conjunction with its adoption of SFAS No. 159.

In February 2007, the FASB issued SFAS No. 159, which provides companies with an option to report selected financial assets and liabilities at fair value. The objective of SFAS No. 159 is to reduce both complexity in accounting for financial instruments and the volatility in

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earnings caused by measuring related assets and liabilities differently. SFAS No. 159 establishes presentation and disclosure requirements and requires companies to provide additional information that will help investors and other users of financial statements to more easily understand the effect of a company’s choice to use fair value on its earnings. SFAS No. 159 also requires entities to display the fair value of those assets and liabilities for which the entity has chosen to use fair value on the face of the balance sheet. SFAS No. 159 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and early adoption is permitted for fiscal years beginning on or before November 15, 2007 provided that the entity makes that choice in the first 120 days of the fiscal year, has not issued financial statements for any interim period of the fiscal year of adoption and also elects to apply the provisions of SFAS No. 157. Effective January 1, 2007, the Company is electing to utilize the fair value option to value a portion of its mortgage loans held for sale and substantially all of its marketable securities. The Company did not elect the fair value option for its mortgage loans held for sale held as of December 31, 2006 due to cost-benefit considerations.

NOTE 2 – CASH AND CASH EQUIVALENTS

Cash and cash equivalents are demand deposits and short-term investments with a maturity of 90 days or less. The carrying amount of cash and cash equivalents approximates its fair value.

Included within cash and cash equivalents are reserve balances that the Company is required to maintain due to contractual or fiduciary obligations. These restrictions include funds collected for various escrow responsibilities, including funds held for tax and insurance collections. The Company’s reserved funds as of March 31, 2007, and December 31, 2006 are $310.1 million and $218.1 million, respectively.

NOTE 3 – FAIR VALUE

The following tables present the Company’s financial assets and liabilities that were accounted for at fair value as of March 31, 2007 by level within the fair value hierarchy. As required by SFAS No. 157, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

	March 31, 2007
	Level 1		Level 2		Level 3		Total
(In thousands)
Securities	$	—	$	7,556,464	$	—	$	7,556,464
Mortgage loans held for sale		271,338		3,654,958		—		3,926,296
Derivative assets		—		22,718		—		22,718
Mortgage servicing rights		—		525,565		—		525,565
Total assets at fair value	$	271,338	$	11,759,705	$	—	$	12,031,043
	March 31, 2007
	Level 1		Level 2		Level 3		Total
(In thousands)
Derivative liabilities	$	—	$	36,550	$	—	$	36,550
Total liabilities at fair value	$	—	$	36,550	$	—	$	36,550

The Company elected to early adopt SFAS No. 159 as of January 1, 2007, and in doing so, began employing the use of fair value measurement for a portion of its mortgage loans held for sale and its marketable securities. The Company has elected to utilize the fair value option to measure mortgage loans held for sale originated after January 1, 2007. With the adoption of SFAS No. 159, the Company recognized a gain of approximately $44.8 million during the three months ended March 31, 2007, related to the fair value in excess of cost basis of mortgage loans held for sale. The Company’s cost basis adjustments relating to the adoption of SFAS No. 159 were $52.1 million during the three months ended March 31, 2007.

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The Company’s primary reasons for electing the fair value option were mitigating volatility in earnings from different measurement attributes, simplification, and cost-benefit considerations. The transition adjustment to beginning retained earnings related to the adoption of SFAS No. 159 was a loss of $54.5 million, net of tax, all of which related to applying the fair value option to securities.

NOTE 4 – SECURITIES

The following table presents the Company’s securities as of March 31, 2007 and December 31, 2006:

	March 31, 2007		December 31, 2006
(In thousands)
Mortgage-backed securities:
Agency	$	354,935	$	212,591
Privately issued—rated		7,018,617		8,887,249
Privately issued—unrated		180,128		204,710
Total mortgage-backed securities		7,553,680		9,304,550
Fannie Mae bonds		1,994		1,979
Corporate bonds		186		188
Trust preferred securities		592		593
Equity securities		12		13
Total securities at fair value		7,556,464		9,307,323
FHLB stock, at cost		1,422		709
Total securities	$	7,557,886	$	9,308,032

The Company’s securities held at March 31, 2007 were primarily either agency obligations or were rated AAA or AA by Standard & Poor’s.

A substantial portion of the Company’s securitizations qualified as sales under SFAS No. 140, which resulted in the recording of residual assets and MSRs on the consolidated balance sheet. The principal balance of off-balance sheet securitized loans that the Company has securitized privately was $12.0 billion and $10.7 billion as of March 31, 2007 and December 31, 2006, respectively. The credit exposure associated with the Company’s off-balance sheet securitized loans is limited to the fair value of the Company’s residual assets from securitizations totaling $182.9 million and $206.1 million as of March 31, 2007 and December 31, 2006, respectively. As of March 31, 2007, the Company’s nonperforming off-balance sheet securitized loans were $310.1 million, or 2.59% of the total portfolio. As of December 31, 2006, the Company’s nonperforming off-balance sheet securitized loans were $266.0 million, or 2.48% of the total portfolio.

The significant assumptions used in estimating the fair value of residual cash flows as of March 31, 2007 and December 31, 2006 were as follows:

	March 31, 2007		December 31, 2006
Weighted-average prepayment speed (CPR)	28.70	%	30.48	%
Weighted-average discount rate	19.03	%	16.74	%
Weighted-average annual default rate	0.83	%	0.63	%
Weighted-average loss severity	21.11	%	22.33	%

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NOTE 5 – MORTGAGE LOANS

Mortgage Loans Held For Sale, at Fair Value

The following table presents the Company’s mortgage loans held for sale, at fair value, as of March 31, 2007:

(In thousands)	March 31, 2007
Mortgage loans held for sale	$	3,829,365
Mark to fair value equal to cost basis adjustments		52,100
Mark to fair value in excess of cost basis adjustments		44,831
Total mortgage loans held for sale, at fair value	$	3,926,296

At March 31, 2007, the Company marked to fair value $3.8 billion of mortgage loans held for sale and recognized a gain of approximately $44.8 million related to the fair value in excess of cost basis on mortgage loans held for sale. The Company’s cost basis adjustments relating to the direct costs of originating the loans were $52.1 million during the three months ended March 31, 2007.

As of March 31, 2007, the Company held no mortgage loans held for sale, at fair value, which were contractually past due 90 days or more as to principal or interest payments.

Mortgage Loans Held For Sale, Net

The following table presents the Company’s mortgage loans held for sale, net, as of March 31, 2007 and December 31, 2006:

(In thousands)	March 31, 2007			December 31, 2006
Mortgage loans held for sale	$	1,001,815		$	1,533,613
SFAS No. 133 basis adjustments		(1,199	)		(2,467	)
Deferred origination costs, net		7,650			14,639
LOCOM valuation reserves		(52,815	)		(22,048	)
Total mortgage loans held for sale, net	$	955,451		$	1,523,737

During the three months ended March 31, 2007, the Company sold or added at fair value mortgage loans totaling $17.2 billion and realized $126.8 million in gains.

During the three months ended March 31, 2006, the Company sold mortgage loans totaling $13.5 billion and realized $171.9 million in gains.

During the three months ended March 31, 2007, the Company deferred $253.1 million of loan origination costs as an adjustment to the cost basis for additions to mortgage loans held for sale. The Company’s gain on sale of loans was reduced by $208.0 million of deferred origination costs associated with mortgage loans sold and $52.1 million of cost basis adjustments for mortgage loans held for sale at fair value during the three months ended March 31, 2007.

During the three months ended March 31, 2006, the Company deferred $127.9 million of loan origination costs as an adjustment to the cost basis for additions to mortgage loans held for sale. The Company’s gain on sale of loans was reduced by $134.7 million of deferred origination costs associated with mortgage loans sold during the three months ended March 31, 2006.

As of March 31, 2007, the Company’s nonaccruing mortgage loans held for sale was $242.9 million, or 5.03% of the total mortgage loans held for sale portfolio. As of December 31, 2006, the Company’s nonaccruing mortgage loans held for sale was $124.3 million, or 8.13% of the total mortgage loans held for sale portfolio.

As of March 31, 2007 and December 31, 2006, the Company held no accruing mortgage loans held for sale which were contractually past due 90 days or more as to principal or interest payments.

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Mortgage Loans Held For Investment, Net

The following table presents the Company’s mortgage loans held for investment, net, as of March 31, 2007 and December 31, 2006:

	March 31,			December 31,
(In thousands)	2007			2006
Mortgage loans held for investment:
One-to-four family	$	5,964,664		$	6,276,890
Commercial		4,562			4,580
Mortgage loans held for investment		5,969,226			6,281,470
SFAS No. 133 basis adjustments		(2,736	)		(2,967	)
Deferred origination costs, net		61,065			65,409
Allowance for loan losses		(16,586	)		(14,191	)
Total mortgage loans held for investment, net	$	6,010,969		$	6,329,721

During the three months ended March 31, 2007, the Company deferred $361.1 thousand of loan origination costs as an adjustment to the cost basis for mortgage loans added to its held for investment portfolio. The Company’s interest income was reduced by $4.7 million of deferred origination cost amortization on mortgage loans held for investment during the three months ended March 31, 2007.

During the three months ended March 31, 2006, the Company deferred $8.4 million of loan origination costs as an adjustment to the cost basis for mortgage loans added to its held for investment portfolio. The Company’s interest income was reduced by $2.8 million of deferred origination cost amortization on mortgage loans held for investment during the three months ended March 31, 2006.

As of March 31, 2007, the Company’s mortgage loans held for investment includes $4.9 billion of mortgage loans pledged as collateral for its collateralized debt obligations.

As of December 31, 2006, the Company’s mortgage loans held for investment includes $5.0 billion of mortgage loans pledged as collateral for its collateralized debt obligations.

The following table presents the activity in the Company’s allowance for loan losses for the three months ended March 31, 2007 and 2006:

	Three Months Ended March 31,
	2007			2006
	(In thousands)
Balance at beginning of period	$	14,191		$	2,142
Provision for loan losses		9,143			1,311
Charge-offs		(6,748	)		—
Balance at end of period	$	16,586		$	3,453

As of March 31, 2007, the Company’s nonaccruing mortgage loans held for investment was $96.1 million, or 1.61% of the total mortgage loans held for investment portfolio. As of December 31, 2006, the Company’s nonaccruing mortgage loans held for investment was $82.4 million, or 1.31% of the total mortgage loans held for investment portfolio.

As of March 31, 2007 and December 31, 2006, the Company held no accruing loans held for investment which were contractually past due 90 days or more as to principal or interest payments.

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NOTE 6 – DERIVATIVE ASSETS AND LIABILITIES

The following table presents the Company’s derivative assets and liabilities as of March 31, 2007 and December 31, 2006:

	March 31,		December 31,
(In thousands)	2007		2006
Derivative Assets
Interest rate lock commitments	$	13,524	$	11,728
Interest rate swaps		5,556		9,759
Swaptions		2,185		2,367
Forward delivery contracts—loan commitments		—		4,253
Forward delivery contracts—loans held for sale		—		2,342
Other		1,453		1,693
Derivative assets	$	22,718	$	32,142
Derivative Liabilities
Interest rate swaps	$	24,323	$	1,624
Forward delivery contracts—loan commitments		2,903		—
Total return swaps		2,725		3,178
Forward delivery contracts—loans held for sale		2,282		—
Interest rate lock commitments		733		7,842
Other		3,584		—
Derivative liabilities	$	36,550	$	12,644

As of March 31, 2007 and December 31, 2006, the notional amount of forward delivery contracts was approximately $7.6 billion and $4.8 billion, respectively.

As of March 31, 2007 and December 31, 2006, the notional amount of interest rate swap agreements was approximately $5.2 billion and $8.4 billion, respectively.

As of March 31, 2007 and December 31, 2006, the notional amount of swaptions was approximately $380.0 million.

As of March 31, 2007 and December 31, 2006, the notional amount of total return swaps was approximately $148.7 million and $152.6 million, respectively.

The Company’s forward delivery contracts have a high correlation to the price movement of the loans being hedged. The ineffectiveness in hedging loans held for sale recorded on the consolidated balance sheets was insignificant as of March 31, 2007 and December 31, 2006.

The unrealized loss on interest rate swap agreements, interest rate caps and other derivative liabilities relating to cash flow hedges recorded in accumulated other comprehensive loss was $49.7 million and $30.7 million as of March 31, 2007 and December 31, 2006, respectively. During the three months ended March 31, 2007, the increase in unrealized loss on cash flow hedges, net of amortization, was $19.0 million. During the three months ended March 31, 2006, the increase in unrealized gain on cash flow hedges, net of amortization, was $49.8 million. These changes in unrealized gain and loss on cash flow hedges are reported in net change in accumulated other comprehensive loss in the consolidated statements of stockholders’ equity.

The Company estimates that $6.4 million of the unrealized loss as of March 31, 2007 will be reclassified from accumulated other comprehensive loss to interest expense for the twelve months ended March 31, 2008.

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NOTE 7 – MORTGAGE SERVICING RIGHTS

The Company elected to early adopt SFAS No. 156 as of January 1, 2006, and has recorded its MSRs at fair value. The Company’s adoption of SFAS No. 156 resulted in a cumulative-effect adjustment as of January 1, 2006, which increased MSRs by $1.2 million.

Prior to January 1, 2006, MSRs were carried at the lower of cost or fair value, based on defined interest rate risk strata, and the gross MSR asset was amortized in proportion to and over the period of estimated net servicing income. Prior to the Company’s adoption of SFAS No. 156, the Company evaluated MSRs for impairment based on risk strata and a valuation allowance was recognized for MSRs that had an amortized balance in excess of the estimated fair value for the individual risk stratification.

The following table presents the activity in the Company’s MSRs for the three months ended March 31, 2007 and 2006:

	Three Months Ended March 31,
(In thousands)	2007			2006
Balance at beginning of period	$	506,341		$	340,377
Cumulative-effect adjustment as of beginning of year		—			1,156
Fair value measurement method adjustment		—			(20,706	)
Additions		45,645			69,768
Changes in fair value resulting from:
Realization of cash flows		(24,959	)		(18,735	)
Changes in valuation assumptions		(1,462	)		114
Balance at end of period	$	525,565		$	371,974
Impairment allowance:
Balance at beginning of period	$	—		$	(20,706	)
Fair value measurement method adjustment		—			20,706
Balance at end of period	$	—		$	—
Total mortgage servicing rights	$	525,565		$	371,974

The amount of contractually specified servicing fees earned by the Company during the three months ended March 31, 2007 and 2006 were $33.1 million and $20.3 million, respectively.

The estimated fair value of MSRs is determined by obtaining a market valuation from one of the market’s primary independent MSR brokers. To determine the market value of MSRs, the MSR broker uses a valuation model which incorporates assumptions relating to the estimate of the cost of servicing the loan, a discount rate, a float value, an inflation rate, ancillary income per loan, prepayment speeds and default rates that market participants use for similar MSRs. Market assumptions are held constant over the life of the portfolio. The key risks inherent in MSRs are changes in interest rates and prepayment speeds.

The Company uses free standing derivatives to hedge the risk of changes in fair value of MSRs, with the resulting gain or loss reflected in income. During the three months ended March 31, 2007, the Company recognized in earnings $387 thousand in unrealized gains on free standing derivatives used to economically hedge the MSRs. These gains are recorded in change in fair value of mortgage servicing rights due to changes in valuation assumptions, net of hedge gain, in the consolidated statements of income.

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The significant assumptions used in estimating the fair value of MSRs at March 31, 2007 and December 31, 2006 were as follows:

	March 31, 2007		December 31, 2006
Weighted-average prepayment speed (PSA)	488		487
Weighted-average discount rate	11.69	%	11.50	%
Weighted-average default rate	2.30	%	2.56	%

The following table presents certain information regarding the Company’s servicing portfolio of loans serviced for others at March 31, 2007 and December 31, 2006:

	March 31, 2007			December 31, 2006
	(Dollars in thousands)
Loan servicing portfolio—loans sold or securitized	$	39,631,213		$	38,480,246
ARM loans as a percentage of total loans		76	%		76	%
Average loan size	$	247		$	241
Weighted-average servicing fee		0.348	%		0.347	%
Weighted-average note rate		7.30	%		7.08	%
Weighted-average remaining term (in months)		371			369
Weighted-average age (in months)		17			15

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NOTE 8 – GOODWILL

The following table presents the activity in the Company’s goodwill for the three months ended March 31, 2007 and 2006:

(In thousands)	Loan Origination Segment		Mortgage Holdings Segment		Banking Segment		Total
Balance at January 1, 2006	$	74,687	$	24,840	$	—	$	99,527
Acquisitions		700		—		—		700
Earnouts from previous acquisitions		10,103		—		—		10,103
Balance at March 31, 2006	$	85,490	$	24,840	$	—	$	110,330
Balance at January 1, 2007	$	87,050	$	24,840	$	21,238	$	133,128
Earnouts from previous acquisitions		120		—		—		120
Balance at March 31, 2007	$	87,170	$	24,840	$	21,238	$	133,248

In October 2006, the Company, through its wholly-owned subsidiary American Home Mortgage Holdings, Inc., acquired Flower Bank, fsb, now known as American Home Bank (“AH Bank”). The goodwill relating to the AH Bank acquisition was $21.2 million. The details of the AH Bank acquisition are included in Note 21 to the Consolidated Financial Statements (“Acquisitions”).

As of December 31, 2006, the Company completed a goodwill impairment test by comparing the fair value of goodwill with its carrying value and did not recognize impairment.

NOTE 9 – WAREHOUSE LINES OF CREDIT, REVERSE REPURCHASE AGREEMENTS AND COMMERCIAL PAPER

Warehouse Lines of Credit

To originate a mortgage loan, the Company draws against either a $3.3 billion SLN commercial paper program, a $2.0 billion pre-purchase facility with UBS Real Estate Securities Inc., a facility of $2.0 billion with Bear Stearns, a $1.3 billion bank syndicated facility led by Bank of America, N.A. (which includes a $446 million term loan facility which the Company uses to finance its MSRs), a facility of $125 million with J.P. Morgan Chase, a $750 million facility with IXIS Real Estate Capital, Inc. (“IXIS”), a $350 million facility with Credit Suisse First Boston Mortgage Capital LLC (“CSFB”), a $1.0 billion facility with Barclays Bank PLC (“Barclays”), a $250 million facility with ABN AMRO, or a $1.5 billion syndicated facility led by Calyon New York Branch (“Calyon”). The Bank of America, J.P. Morgan Chase, ABN AMRO, and Calyon facilities are committed facilities. The IXIS and CSFB facilities are partially committed facilities. The interest rate on outstanding balances fluctuates daily based on a spread to the LIBOR and interest is paid monthly. In addition, we have purchase and sale gestation facilities with UBS, Greenwich Capital Financial Products, Inc. (“Greenwich”), Societe Generale, and Deutsche Bank (“Deutsche”). The facilities are secured by mortgage loans and other assets of the Company.

The facilities contain various covenants pertaining to maintenance of net worth, working capital and maximum leverage. At March 31, 2007, the Company was in compliance with respect to the loan covenants.

Included within the Bank of America line of credit, the Company has a working capital sub-limit that allows for borrowings up to $50 million at a rate based on a spread to the LIBOR that may be adjusted for earnings on compensating balances on deposit at creditors’ banks. As of March 31, 2007, borrowings under the working capital line of credit were $50.0 million.

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The following tables summarize the Company’s warehouse lines of credit:

	March 31, 2007			December 31, 2006
	(Dollars in thousands)
Balance outstanding at end of period	$	4,013,190		$	1,304,541
Weighted-average interest rate at end of period		5.65	%		5.94	%
	Three Months Ended March 31,
	2007			2006
	(In thousands)
Average balance outstanding for the period	$	7,224,668		$	6,713,022
Maximum balance outstanding at any month end		5,194,848			5,028,564

As of March 31, 2007 and December 31, 2006, the Company’s warehouse lines of credit had remaining maturities within 30 days.

Reverse Repurchase Agreements

The Company has arrangements to enter into reverse repurchase agreements, a form of collateralized short-term borrowing, with eighteen different financial institutions and on March 31, 2007 had borrowed funds from eleven of these firms. Because the Company borrows money under these agreements based on the fair value of its mortgage-backed securities, and because changes in interest rates can negatively impact the valuation of mortgage-backed securities, the Company’s borrowing ability under these agreements could be limited and lenders could initiate margin calls in the event interest rates change or the value of the Company’s mortgage-backed securities declines for other reasons.

The following tables summarize the Company’s reverse repurchase agreements:

	March 31, 2007			December 31, 2006
	(Dollars in thousands)
Balance outstanding at end of period	$	6,727,505		$	8,571,459
Weighted-average interest rate at end of period		5.38	%		5.40	%
	Three Months Ended March 31,
	2007			2006
	(In thousands)
Average balance outstanding for the period	$	8,533,063		$	9,309,261
Maximum balance outstanding at any month end		9,199,441			9,126,012

As of March 31, 2007 and December 31, 2006, the Company’s reverse repurchase agreements had the following remaining maturities:

	March 31, 2007		December 31, 2006
	(In thousands)
Within 30 days	$	403,868	$	511,095
31 to 89 days		347,631		684,774
90 to 365 days		5,050,381		2,499,057
Greater than 1 year		925,625		4,876,533
Total reverse repurchase agreements	$	6,727,505	$	8,571,459

As of March 31, 2007 and December 31, 2006, the Company’s reverse repurchase agreements outstanding had a weighted-average remaining maturity of nine months and eleven months, respectively.

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Commercial Paper

The Company maintains a wholly owned special purpose entity for the purpose of issuing commercial paper in the form of short-term SLNs to finance certain portions of the Company’s mortgage loans. The special purpose entity allows for issuance of short-term SLNs with maturities of up to 180 days, extendable up to 300 days. The SLNs bear interest at prevailing money market rates approximating the LIBOR. The SLN program capacity, based on aggregate commitments of underlying credit enhancers, was $3.3 billion at March 31, 2007.

The SLNs were collateralized by mortgage loans held for sale, mortgage loans held for investment and cash with a balance of $1.8 billion as of March 31, 2007. The SLNs were collateralized by mortgage loans held for sale, mortgage loans held for investment and cash with a balance of $1.4 billion as of December 31, 2006.

The following tables summarize the Company’s SLNs:

	March 31, 2007			December 31, 2006
	(Dollars in thousands)
Balance outstanding at end of period	$	1,696,256		$	1,273,965
Weighted-average interest rate at end of period		5.37	%		5.39	%
	Three Months Ended March 31,
	2007			2006
	(In thousands)
Average balance outstanding for the period	$	2,557,841		$	2,666,665
Maximum balance outstanding at any month end		2,751,799			3,095,867

As of March 31, 2007 and December 31, 2006, the Company’s SLNs had remaining maturities within 30 days.

NOTE 10 – DEPOSITS

The Company assumed $30.7 million of deposits in connection with its acquisition of AH Bank. The following table presents the Company’s deposits as of March 31, 2007 and December 31, 2006:

	March 31, 2007		December 31, 2006
	(In thousands)
Checking deposits:
Non-interest bearing	$	822	$	1,168
Interest bearing		84		82
Checking deposits		906		1,250
Savings deposits		18		8
Money market deposits		163,169		192
Time deposits		20,521		22,566
Total deposits	$	184,614	$	24,016

The Company’s accrued but unpaid interest on deposits totaled $65 thousand as of March 31, 2007 and $95 thousand as of December 31, 2006.

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The Company’s time deposit accounts in amounts of $100,000 or more totaled $2.3 million as of March 31, 2007 and December 31, 2006. The following table presents the contractual maturities of the Company’s time deposits in amounts of $100,000 or more as of March 31, 2007 and December 31, 2006:

	March 31, 2007		December 31, 2006
	(In thousands)
90 to 180 days	$	677	$	356
180 days to 1 year		1,065		1,267
Greater than 1 year		527		631
Total	$	2,269	$	2,254

There were no demand deposits with overdrafts as of March 31, 2007 and December 31, 2006.

NOTE 11 – COLLATERALIZED DEBT OBLIGATIONS

In March 2007, the Company issued $161.9 million of CDOs in the form of AAA and AA-rated floating-rate pass-through certificates to third-party investors. The interest rates on the floating-rate pass-through certificates reset monthly and are indexed to one-month LIBOR. In the first quarter of 2007, the Company incurred CDO issuance costs of $1.5 million related to this transaction, which were deducted from the proceeds of the transactions and are being amortized over the expected life of the CDOs.

In March 2006, the Company issued $1.9 billion of CDOs in the form of AAA and AA-rated floating-rate pass-through certificates to third-party investors. The interest rates on the floating-rate pass-through certificates reset monthly and are indexed to one-month LIBOR. In the first quarter of 2006, the Company incurred CDO issuance costs of $4.0 million, which were deducted from the proceeds of the transactions and are being amortized over the expected life of the CDOs.

As of March 31, 2007, the Company’s CDOs had a balance of $4.7 billion and an effective interest cost of 5.50%. As of March 31, 2007, the CDOs were collateralized by mortgage loans held for investment of $4.7 billion.

As of December 31, 2006, the Company’s CDOs had a balance of $4.9 billion and an effective interest cost of 5.53%. As of December 31, 2006, the CDOs were collateralized by mortgage loans held for investment of $4.9 billion.

As of March 31, 2007 and December 31, 2006, the Company’s CDOs had the following remaining contractual maturities:

	March 31, 2007		December 31, 2006
	(In thousands)
15 to 20 years	$	24,735	$	30,927
20 to 25 years		173,976		151,957
25 to 30 years		1,644,089		1,678,306
Greater than 30 years		2,876,576		2,993,611
Total collateralized debt obligations	$	4,719,376	$	4,854,801

NOTE 12 – TRUST PREFERRED SECURITIES

As of March 31, 2007, the Company has formed eight Trusts for the purpose of issuing trust preferred securities.

The Company’s trust preferred securities outstanding as of March 31, 2007 and December 31, 2006 were $336.6 million and $336.1 million, respectively.

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The following table summarizes the Company’s trust preferred securities:

	Three Months Ended March 31,
	2007		2006
Weighted-average interest rate	8.09	%	7.66	%
Weighted-average interest rate spread	LIBOR + 2.74	%	LIBOR + 2.92	%
Weighted-average remaining maturity (years)	28.96		29.58

NOTE 13 – NOTES PAYABLE

Notes payable primarily consist of amounts borrowed under a term loan facility with a bank syndicate led by Bank of America. Under the terms of this facility, the Company may borrow the lesser of 70% of the value of its MSRs, or $446.3 million. As of March 31, 2007, borrowings under the term loan were $391.7 million. This term loan expires on August 9, 2007, but the Company has an option to extend the term for twelve additional months at a higher interest rate. Interest is based on a spread to the LIBOR and may be adjusted for earnings on compensating balances. As of March 31, 2007, the interest rate was 6.07%.

In October 2006, the Company assumed $3.0 million of subordinated notes in connection with its acquisition of AH Bank. The subordinated notes mature on December 8, 2011. The interest rates on the subordinated notes reset monthly and are indexed to six-month LIBOR. As of March 31, 2007, the interest rate was 9.10%.

In 2005, the Company sold $85.0 million in Mortgage Warehouse Subordinated Notes (“Subordinated Notes”). The Company received a premium, net of issuance costs, of $1.5 million related to the Subordinated Notes offering, which is being amortized to interest expense over the expected life of the Subordinated Notes. As of March 31, 2007, the balance of Subordinated Notes outstanding, net of unamortized premium and issuance costs, was $85.8 million. The Subordinated Notes mature on May 20, 2009. The interest rates on the Subordinated Notes reset monthly and are indexed to one-month LIBOR. As of March 31, 2007, the interest rate was 7.32%.

As of March 31, 2007, included in notes payable is a mortgage note of $25.4 million on an office building located in Melville, New York at a rate of 5.82%, and a mortgage note of $0.9 million on an office building located in Mount Prospect, Illinois at a rate of 7.18%.

As of March 31, 2007, the Company had $25.0 million of Federal Home Loan Bank (“FHLB”) advances with an interest rate of 5.39% and with remaining maturities within 30 days. Advances from the FHLB are collateralized by pledges of restricted cash of $46.6 million.

The following table presents the Company’s notes payable as of March 31, 2007 and December 31, 2006:

	March 31,		December 31,
(In thousands)	2007		2006
Term loan	$	391,700	$	298,500
Subordinated notes		88,817		88,910
Notes—office buildings		26,350		26,457
FHLB advances		25,000		3,600
Total notes payable	$	531,867	$	417,467

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The following table presents the maturities of the Company’s notes payable as of March 31, 2007 and December 31, 2006:

	March 31, 2007		December 31, 2006
	(In thousands)
Within 1 year	$	417,557	$	302,953
1 to 2 years		1,626		1,629
2 to 3 years		85,486		85,573
3 to 4 years		454		447
4 to 5 years		3,478		3,475
Greater than 5 years		23,266		23,390
Total notes payable	$	531,867	$	417,467

NOTE 14 – COMMON STOCK AND PREFERRED STOCK

Under the Company’s charter, the Company’s Board of Directors is authorized to issue 110,000,000 shares of stock, of which up to 100,000,000 shares may be Common Stock and up to 10,000,000 shares may be preferred stock. As of March 31, 2007, there were 50,273,878 shares of Common Stock issued and outstanding, 2,150,000 shares of 9.75% Series A Cumulative Redeemable Preferred Stock (“Series A Preferred Stock”) issued and outstanding and 3,450,000 shares of 9.25% Series B Cumulative Redeemable Preferred Stock (“Series B Preferred Stock”) issued and outstanding. On or after July 7, 2009, the Company may, at its option, redeem the Series A Preferred Stock, in whole or part, at any time and from time to time, for cash at a price of $25 per share, plus accumulated or unpaid dividends (whether or not declared), if any, to the date of redemption. On or after December 15, 2009, the Company may, at its option, redeem the Series B Preferred Stock, in whole or part, at any time and from time to time, for cash at a price of $25 per share, plus accumulated or unpaid dividends (whether or not declared), if any, to the date of redemption.

During the three months ended March 31, 2007, the Company declared dividends totaling $56.3 million, or $1.12 per share of Common Stock, which were paid on April 27, 2007. During the three months ended March 31, 2006, the Company declared dividends totaling $45.5 million, or $0.91 per share of Common Stock, which were paid on April 28, 2006.

During the three months ended March 31, 2007, the Company declared dividends totaling $1.3 million, or $0.609375 per share of Series A Preferred Stock, which were paid on April 30, 2007. During the three months ended March 31, 2006, the Company declared dividends totaling $1.3 million, or $0.609375 per share of Series A Preferred Stock, which were paid on May 1, 2006.

During the three months ended March 31, 2007, the Company declared dividends totaling $2.0 million, or $0.578125 per share of Series B Preferred Stock, which were paid on April 30, 2007. During the three months ended March 31, 2006, the Company declared dividends totaling $2.0 million, or $0.578125 per share of Series B Preferred Stock, which were paid on May 1, 2006.

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NOTE 15 – INCOME TAXES

A reconciliation of the statutory income tax provision to the effective income tax (benefit) expense is as follows:

	Three Months Ended March 31,
	2007				2006
	(Dollars in thousands)
Tax provision at statutory rate	$	6,303		35.0%	$	24,731		35.0	%
Non-taxable REIT income		(18,562	)	(103.1)		(10,989	)	(15.6	)
State and local taxes, net of federal income tax benefit		(1,412	)	(7.8)		1,997		2.8
Meals and entertainment		278		1.5		461		0.7
Other		718		4.0		—		—
Income tax (benefit) expense	$	(12,675	)	(70.4%)	$	16,200		22.9	%

The major sources of temporary differences and their deferred tax effect at March 31, 2007 and December 31, 2006 are as follows:

	March 31, 2007		December 31, 2006
	(In thousands)
Deferred income tax liabilities:
Capitalized cost of mortgage servicing rights	$	192,933	$	179,545
Loan origination costs		22,302		29,651
Depreciation		—		1,482
Deferred state income taxes		—		2,332
Mark-to-market adjustments		16,247		13,783
Other		2,992		—
Deferred income tax liabilities		234,474		226,793
Deferred income tax assets:
Tax loss carryforwards		92,560		89,298
Allowance for bad debts and foreclosure reserve		23,284		16,909
Mark-to-market adjustments		2,835		—
AMT credit		1,745		1,745
Bonus accrual		13,152		1,227
Deferred compensation		7,651		7,004
Depreciation		765		—
Other		—		186
Deferred income tax assets		141,992		116,369
Net deferred income tax liabilities	$	92,482	$	110,424

American Home Mortgage Servicing, Inc. has approximately $26 million of separate company federal net operating loss carryforwards which begin to expire in 2008. In addition, American Home Mortgage Holdings, Inc. has approximately $234 million of federal and approximately $119 million of state net operating loss carryforwards which begin to expire in 2024 and 2009, respectively. The weighted average of the expiration of the state net operating loss carryforwards is approximately fifteen years.

At March 31, 2007 and December 31, 2006, no valuation allowance has been established against deferred tax assets since it is more likely than not that the deferred tax assets will be realized.

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The Company has been audited by various state tax jurisdictions which have settled with a “no change” decision or an immaterial assessment. In addition, the Company is currently under examination by other tax jurisdictions which the Company expects to result in no material assessments. The Company regularly assesses the likelihood of additional assessments in each of the tax jurisdictions in the calculation of its provision and maintains an appropriate reserve as needed.

The Company has evaluated FIN 48. FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB Statement No. 109, “Accounting for Income Taxes.” FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. Interest and penalties are accrued and reported as interest expenses and other expenses on the consolidated statement of income. In addition, the 2003-2006 tax years remain open to examination by the major taxing jurisdictions. As of March 31, 2007, the adoption of FIN 48 has had no material impact on the Company’s consolidated financial statements.

NOTE 16 – EARNINGS PER SHARE

The following is a reconciliation of the denominators used in the computations of basic and diluted earnings per share for the three months ended March 31, 2007 and 2006:

	Three Months Ended March 31,
(Dollars in thousands, except per share amounts)	2007		2006
Numerator for basic earnings per share - Net income available to common stockholders	$	27,377	$	51,154
Denominator:
Denominator for basic earnings per share
Weighted average number of common shares outstanding during the period		50,222,881		49,715,423
Net effect of dilutive stock options		276,026		354,813
Denominator for diluted earnings per share		50,498,907		50,070,236
Net income per share available to common stockholders:
Basic	$	0.55	$	1.03
Diluted	$	0.54	$	1.02

NOTE 17 – STOCK INCENTIVE PLANS

Pursuant to the Company’s 1999 Omnibus Stock Incentive Plan (the “Plan”), eligible employees, officers and directors may be offered the opportunity to acquire the Company’s Common Stock through the grant of options and the award of restricted stock under the Plan. The total number of shares that may be optioned or awarded under the Plan is 4,000,000 shares of Common Stock. The Plan provides for the granting of options at the fair market value on the date of grant. The options issued primarily vest 50% on the two-year anniversary of the grant date and 50% on the three-year anniversary of the grant date, and expire ten years from the grant date.

Effective January 1, 2006, the Company adopted SFAS No. 123R, which requires that the compensation cost relating to share-based payment transactions (including employee stock options, restricted share plans, performance-based awards, share appreciation rights, and employee share purchase plans) be recognized as an expense in the Company’s consolidated financial statements. Under SFAS No. 123R, the related compensation cost is measured based on the fair value of the award at the date of grant. The Company adopted the fair value recognition provisions of SFAS No. 123R, using the modified prospective method. Under this method, compensation cost in the three months ended March 31, 2007 and March 31, 2006 includes the portion vesting in the period for (1) all share-based payments granted prior to, but not vested as of, December 31, 2005, based on the grant date fair value estimated in accordance with the original provisions of SFAS No. 123 and (2) all share-based payments granted subsequent to December 31, 2005, based on the grant date fair value estimated using a binomial lattice-based option valuation model.

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During the three months ended March 31, 2007 and 2006, the Company recognized compensation expense of $322 thousand and $410 thousand, respectively, relating to stock options granted under the Plan. The expense, before income tax effect, is included in salaries, commissions and benefits expense. The income tax benefit recognized in income for the three months ended March 31, 2007 and 2006 for stock options was $62 thousand and $101 thousand, respectively.

During the three months ended March 31, 2007 and 2006, the fair value of the options granted was estimated using the binomial lattice option-pricing model. Under the binomial lattice option-pricing model, the fair value of each option award is estimated, with the assistance of an outside consulting service, on the date of grant, which incorporates ranges of assumptions for inputs as shown in the following table. The assumptions are as follows:

Dividend yield range: The expected dividend yield assumption is based on the Company’s current dividend yield as the best estimate of projected dividend yield for periods within the contractual life of the option.

Expected volatility range: The expected volatility assumption is a blend of implied volatility based on market-traded options on the Company’s Common Stock and historical volatility of the Company’s Common Stock over the contractual life of the options.

Risk-free interest rate range: The risk-free interest rate assumption is based on the U.S. Treasury yield curve in effect at the time of grant for periods within the contractual life of the option.

Expected term range: The Company uses historical data to estimate option exercise and employee termination behavior within the valuation model; separate groups of employees that have similar historical exercise behavior are considered separately for valuation purposes. The expected life of options granted is derived from the output of the option valuation model and represents the period of time the options are expected to be outstanding.

The weighted-average fair value per share of options granted during the three months ended March 31, 2007 and 2006 was $3.39 and $4.57, respectively. The fair value of the options granted during the three months ended March 31, 2007 and 2006 was estimated using the binomial lattice option-pricing model with the following assumptions used for the grants:

	Three Months Ended March 31,
	2007	2006
Dividend yield range	14.6% - 16.9%	12.6% - 13.1%
Expected volatility range	33.0% - 42.0%	40.0%
Risk-free interest rate range	4.2% - 5.0%	4.3% - 4.6%
Expected term range (in years)	7.4 - 7.5	7.0 - 7.6

The following table presents a summary of the Company’s stock option activity for the three months ended March 31, 2007 and 2006:

	Three Months Ended March 31,
	2007				2006
	Number of Options		Weighted Average Exercise Price		Number of Options		Weighted Average Exercise Price
Options outstanding - beginning of period	1,576,570		$	25.69	1,501,384		$	23.09
Granted	415,000			25.91	352,159			27.81
Exercised	(65,154	)		12.31	(51,351	)		12.68
Canceled	—			—	(53,000	)		16.18
Options outstanding - end of period	1,926,416		$	26.24	1,749,192		$	24.52
Options exercisable - end of period	619,670		$	22.31	400,693		$	12.73

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The intrinsic value of an option is defined as the difference between an option’s current market value and the grant price. The intrinsic value of options exercised during the three months ended March 31, 2007 and 2006 was $0.8 million and $0.9 million, respectively.

As of March 31, 2007, the intrinsic value and weighted-average remaining life of the Company’s options outstanding were $5.0 million and 8.2 years, respectively.

As of March 31, 2007, the intrinsic value and weighted-average remaining life of the Company’s exercisable options outstanding were $4.0 million and 6.6 years, respectively.

As of March 31, 2007, the total remaining unrecognized compensation expense related to the Company’s unvested stock options was $3.2 million. This unrecognized compensation expense is expected to be recognized over a weighted-average period of 2.2 years.

As of March 31, 2007, the Company has awarded 244,003 shares of restricted Common Stock under the Plan. During the three months ended March 31, 2007 and 2006, the Company recognized compensation expense of $118 thousand and $47 thousand, respectively, relating to shares of restricted Common Stock granted under the Plan. As of March 31, 2007, 203,806 shares are vested. In general, unvested restricted stock is forfeited upon the recipient’s termination of employment.

NOTE 18 – BANK REGULATORY CAPITAL

AH Bank is subject to capital adequacy guidelines adopted by the Office of Thrift Supervision (“OTS”). The most recent notifications received from the OTS categorized AH Bank as well capitalized.

(In thousands)	Actual				Minimum For Capital Adequacy Purposes				Minimum to be Well Capitalized Under Prompt Corrective Action Provisions
As of March 31, 2007	Amount		Ratio		Amount		Ratio		Amount		Ratio
Total capital (to risk-weighted assets)	$	53,495	78.10	%	$	5,480	8.00	%	$	6,850	10.00	%
Tier 1 capital (to risk-weighted assets)	$	49,821	72.73	%	$	2,740	4.00	%	$	4,110	6.00	%
Tier 1 capital (average assets)	$	49,821	18.49	%	$	10,775	4.00	%	$	13,469	5.00	%
(In thousands)	Actual				Minimum For Capital Adequacy Purposes				Minimum to be Well Capitalized Under Prompt Corrective Action Provisions
As of December 31, 2006	Amount		Ratio		Amount		Ratio		Amount		Ratio
Total capital (to risk-weighted assets)	$	51,847	155.02	%	$	2,676	8.00	%	$	3,345	10.00	%
Tier 1 capital (to risk-weighted assets)	$	48,426	144.79	%	$	1,338	4.00	%	$	2,007	6.00	%
Tier 1 capital (average assets)	$	48,426	57.94	%	$	3,343	4.00	%	$	4,179	5.00	%

NOTE 19 – COMMITMENTS AND CONTINGENCIES

Loans Sold to Investors – In the normal course of business, the Company is obligated to repurchase loans based on violations of representations and warranties, which are subsequently unable to be sold through normal investor channels. At March 31, 2007 and December 31, 2006, the recourse reserve against exposure to repurchased loans was $18.4 million and $6.9 million, respectively.

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NOTE 20 – CONCENTRATIONS OF CREDIT RISK

Loan concentrations are considered to exist when there are amounts loaned to a multiple number of borrowers with similar characteristics, which would cause their ability to meet contractual obligations to be similarly impacted by economic or other conditions. The Company invests in pay option ARM, interest-only ARM, HELOC and certain other types of loans identified as potentially having a concentration of credit risk. The Company, however, generally has purchased supplemental credit insurance for the pay option ARM loans retained in the Company’s portfolio if such loans have an initial loan-to-value ratio between 75% and 80%. In addition, the Company generally is the beneficiary of a borrower-paid insurance policy on these types of loans if the initial loan-to-value ratio is greater than 80%.

The following table classifies the Company’s mortgage loans held for investment and off-balance sheet securitized loans by product type as of March 31, 2007:

	March 31, 2007
	(Dollars in thousands)
	Loan Balance		Percentage of Total Portfolio
Interest-only	$	7,862,697	43.8	%
Pay option ARMs		5,858,528	32.7
Second liens		619,377	3.5
Other		3,589,308	20.0
Total	$	17,929,910	100.0	%

The following table presents the geographic concentrations for the Company’s mortgage loans held for investment and off-balance sheet securitized loans as of March 31, 2007:

	March 31, 2007
	(Dollars in thousands)
	Loan Balance		Percentage of Total Portfolio
California	$	4,393,863	24.5	%
Florida		2,014,843	11.2
Illinois		1,312,894	7.3
Virginia		1,078,109	6.0
New York		893,692	5.0
Other		8,236,509	46.0
Total	$	17,929,910	100.0	%

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NOTE 21 – ACQUISITIONS

Flower Bank, fsb (now known as American Home Bank)

On October 19, 2006, the Company, through its wholly-owned subsidiary, American Home Mortgage Holdings, Inc., completed its acquisition of Flower Bank, fsb. In connection with its acquisition, the Company recapitalized Flower Bank through a $50 million investment in its new subsidiary. Flower Bank subsequently changed its name to American Home Bank on February 1, 2007. AH Bank is expected to hold mortgages, consumer loans and securities as its primary assets, and fund its holdings through deposits including escrow balances.

The following table summarizes the fair value of the assets acquired and liabilities assumed as of the date of the acquisition:

(In thousands)
Cash and cash equivalents	$	2,140
Accounts receivable and servicing advances		677
Securities		3,418
Mortgage loans held for investment, net		25,540
Mortgage servicing rights		343
Premises and equipment		220
Other assets		2,174
Total assets acquired		34,512
Deposits		30,689
Accrued expenses and other liabilities		5,811
Notes payable		3,000
Total liabilities assumed		39,500
Net liabilities assumed		(4,988	)
Cash paid		16,250
Goodwill	$	21,238

Waterfield Financial Corporation

On January 12, 2006, American Home Mortgage Corp. (“AHM”), an indirect, wholly-owned subsidiary of AHM Investment, entered into a Stock and Mortgage Loan Purchase Agreement with Union Federal Bank of Indianapolis (“Union Federal”) and Waterfield Financial Corporation (“WFC”), pursuant to which AHM agreed to purchase from Union Federal 100% of the outstanding capital stock of WFC and certain mortgage loans held by Union Federal, comprised of warehouse loans held for sale by Union Federal as of December 31, 2005 (the “Warehouse Loans”), construction loans held by Union Federal as of the closing and certain other loans held by Union Federal as of the closing, for a cash purchase price equal to the net book value of such assets, as modified by certain agreed upon adjustments, as of the respective closing dates (or, in the case of the Warehouse Loans, as of January 12, 2006).

- 28 -

The following table summarizes the fair value of the assets acquired and liabilities assumed as of the date of the acquisition:

(In thousands)
Mortgage loans held for sale, net	$	559,340
Accounts receivable		2,002
Other assets		2,442
Total assets acquired		563,784
Other liabilities		13,707
Total liabilities assumed		13,707
Net assets acquired		550,077
Cash paid		550,077
Goodwill	$	—

NOTE 22 – SEGMENTS AND RELATED INFORMATION

The Company’s segments are Mortgage Holdings, Loan Origination, Loan Servicing and Banking. The Mortgage Holdings segment uses the Company’s equity capital and borrowed funds to invest in mortgage-backed securities and mortgage loans held for investment, thereby producing net interest income. The Loan Origination segment originates mortgage loans through the Company’s retail and wholesale loan production offices and its correspondent channel, as well as its direct-to-consumer channel supported by its call center. The Loan Servicing segment includes investments in MSRs as well as servicing operations primarily for other financial institutions. The Banking Segment includes loans held for investment, securities and deposits held in AH Bank. The Company’s segments are presented on a consolidated basis and do not include the effects of separately recording intercompany transactions.

The Mortgage Holdings segment includes realized gains or losses on sales of mortgage-backed securities and unrealized mark-to-market gains or losses subsequent to the securitization date on mortgage-backed securities classified as trading securities.

The Loan Origination segment includes unrealized gains or losses that exist on the date of securitization of self-originated loans that are classified as trading securities.

- 29 -

	Three Months Ended March 31, 2007
	(In thousands)
	Mortgage Holdings Segment			Loan Origination Segment			Loan Servicing Segment			Banking Segment			Total
Net interest income:
Interest income	$	219,506		$	171,579		$	—		$	3,192		$	394,277
Interest expense		(182,047	)		(145,532	)		(5,740	)		(419	)		(333,738	)
Net interest income		37,459			26,047			(5,740	)		2,773			60,539
Provision for loan losses		(8,965	)		(178	)		—			—			(9,143	)
Net interest income after provision for loan losses		28,494			25,869			(5,740	)		2,773			51,396
Non-interest income:
Gain on sales of mortgage loans		—			126,817			—			—			126,817
(Loss) gain on securities and derivatives		(4,245	)		—			—			3			(4,242	)
Loan servicing fees		—			—			46,072			12			46,084
Change in fair value of mortgage servicing rights:
Due to realization of cash flows		—			—			(24,940	)		(19	)		(24,959	)
Due to changes in valuation assumptions, net of hedge gain		—			—			(1,076	)		—			(1,076	)
Net loan servicing fees		—			—			20,056			(7	)		20,049
Other non-interest income		—			2,475			717			29			3,221
Total non-interest income		(4,245	)		129,292			20,773			25			145,845
Non-interest expenses:
Salaries, commissions and benefits, net		3,012			98,662			5,797			400			107,871
Occupancy and equipment		2			20,328			874			102			21,306
Data processing and communications		3			5,150			183			41			5,377
Office supplies and expenses		—			4,631			219			1			4,851
Marketing and promotion		21			4,184			73			—			4,278
Travel and entertainment		46			7,664			84			3			7,797
Professional fees		1,204			5,668			27			5			6,904
Other		3,845			14,901			2,047			57			20,850
Total non-interest expenses		8,133			161,188			9,304			609			179,234
Net income before income tax (benefit) expense		16,116			(6,027	)		5,729			2,189			18,007
Income tax (benefit) expense		—			(14,851	)		1,356			820			(12,675	)
Net income	$	16,116		$	8,824		$	4,373		$	1,369		$	30,682
Dividends on preferred stock		3,305			—			—			—			3,305
Net income available to common stockholders	$	12,811		$	8,824		$	4,373		$	1,369		$	27,377
	March 31, 2007
Segment assets	$	12,728,262		$	6,798,671		$	736,385		$	290,617		$	20,553,935

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	Three Months Ended March 31, 2006
	(In thousands)
	Mortgage Holdings Segment			Loan Origination Segment			Loan Servicing Segment			Total
Net interest income:
Interest income	$	154,946		$	145,667		$	—		$	300,613
Interest expense		(128,555	)		(122,327	)		(3,153	)		(254,035	)
Net interest income		26,391			23,340			(3,153	)		46,578
(Provision) recovery of loan losses		(2,507	)		1,196			—			(1,311	)
Net interest income after (provision) recovery of loan losses		23,884			24,536			(3,153	)		45,267
Non-interest income:
Gain on sales of mortgage loans		—			171,907			—			171,907
Gain on securities and derivatives		8,190			275			—			8,465
Loan servicing fees		—			—			24,333			24,333
Change in fair value of mortgage servicing rights:
Due to realization of cash flows		—			—			(18,735	)		(18,735	)
Due to changes in valuation assumptions, net of hedge gain		—			—			114			114
Net loan servicing fees		—			—			5,712			5,712
Other non-interest income		—			782			987			1,769
Total non-interest income		8,190			172,964			6,699			187,853
Non-interest expenses:
Salaries, commissions and benefits, net		5,025			90,337			3,905			99,267
Occupancy and equipment		2			17,650			318			17,970
Data processing and communications		16			6,949			161			7,126
Office supplies and expenses		—			4,278			54			4,332
Marketing and promotion		4			5,791			5			5,800
Travel and entertainment		—			6,701			52			6,753
Professional fees		1,454			3,877			—			5,331
Other		2,003			5,016			8,863			15,882
Total non-interest expenses		8,504			140,599			13,358			162,461
Net income before income tax expense (benefit)		23,570			56,901			(9,812	)		70,659
Income tax expense (benefit)		—			19,860			(3,660	)		16,200
Net income	$	23,570		$	37,041		$	(6,152	)	$	54,459
Dividends on preferred stock		3,305			—			—			3,305
Net income available to common stockholders	$	20,265		$	37,041		$	(6,152	)	$	51,154
	March 31, 2006
Segment assets	$	12,935,531		$	3,650,025		$	491,454		$	17,077,010

NOTE 23 – SUBSEQUENT EVENTS

Subsequent to March 31, 2007, the Company has reduced its net holdings of mortgage-backed securities and securities purchased under agreements to resell by approximately $655 million to accommodate higher loan balances in part resulting from a carryover of loans in inventory from the previous quarter. A significant portion of these loans have been contractually sold and are awaiting settlement.

On May 4, 2007, the Company issued and sold 4,000,000 shares of Common Stock in an underwritten public offering pursuant to an underwriting agreement, dated April 30, 2007 (the “Underwriting Agreement”), between the Company and Citigroup Global Markets Inc., as underwriter (the “Underwriter”). The Company received proceeds of $92.4 million, before expenses, based on the sales price to the Underwriter of $23.10 per share. Also, pursuant to the terms of the Underwriting Agreement, the Company granted the Underwriter a 30-day option to purchase up to an additional 600,000 shares of Common Stock to cover over-allotments, if any. The Company intends to use the net proceeds from the offering for general corporate purposes.

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ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Cautionary Note Regarding Forward-Looking Statements

This report contains certain forward-looking statements within the meaning of the federal securities laws. Some of the forward-looking statements can be identified by the use of forward-looking words. When used in this report, statements that are not historical in nature, including, but not limited to, the words “anticipate,” “may,” “estimate,” “should,” “seek,” “expect,” “plan,” “believe,” “intend,” and similar words, or the negatives of those words, are intended to identify forward-looking statements. In addition, statements that contain a projection of revenues, earnings (loss), capital expenditures, dividends, capital structure or other financial terms are intended to be forward-looking statements. Certain statements regarding the following particularly are forward-looking in nature:

• our business strategy;

• future performance, developments, market forecasts or projected dividends;

• projected acquisitions or joint ventures; and

• projected capital expenditures.

It is important to note that the description of our business in general, and our mortgage-backed securities holdings in particular, is a statement about our operations as of a specific point in time. It is not meant to be construed as an investment policy, and the types of assets we hold, the amount of leverage we use, the liabilities we incur and other characteristics of our assets and liabilities are subject to reevaluation and change without notice.

The forward-looking statements in this report are based on our management’s beliefs, assumptions and expectations of our future economic performance, taking into account the information currently available to it. These statements are not statements of historical fact and are not guarantees of future performance, events or results. Forward-looking statements are subject to a number of factors, risks and uncertainties, some of which are not currently known to us, that may cause our actual results, performance or financial condition to be materially different from the expectations of future results, performance or financial position. These factors include, without limitation, those factors set forth in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2006, entitled “Risk Factors,” as well as general economic, political, market, financial or legal conditions and any other factors, risks and uncertainties discussed in filings we make with the Securities and Exchange Commission (“SEC”).

In light of these risks, uncertainties and assumptions, any forward-looking events discussed in this report might not occur, and we qualify any and all of our forward-looking statements entirely by these cautionary factors. You are cautioned not to place undue reliance on forward-looking statements. Such forward-looking statements are inherently uncertain, and you must recognize that actual results may differ from expectations. We are not under any obligation, and we expressly disclaim any obligation, to update or alter any forward-looking statements, whether as a result of new information, future events or otherwise.

Critical Accounting Policies and Estimates

Our accounting policies are described in Note 1 to the Consolidated Financial Statements. We have identified the following accounting policies that are critical to the presentation of our financial statements and that require critical accounting estimates by management.

Fair Value - A substantial portion of our assets and certain of our liabilities are carried at fair value. At the beginning of 2007, we adopted Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (“SFAS No. 157), and Statement of Financial Accounting Standards No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS No. 159”). The fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Securities, at Fair Value - The fair values of our securities carried at fair value are generally based on market prices provided by certain dealers who make markets in these financial instruments. Changes in the fair value of securities are recognized in earnings and are included in (loss) gain on securities and derivatives.

Mortgage Loans Held for Sale - Mortgage loans held for sale originated prior to January 1, 2007 are carried at the lower of cost or aggregate market value. For such mortgage loans held for sale that are hedged with forward sale commitments, the carrying value is adjusted for the change in market during the time the hedge was deemed to be highly effective. The market value is determined by outstanding commitments from investors or current yield requirements calculated on an aggregate basis.

- 32 -

Mortgage Loans Held for Sale, at Fair Value - Mortgage loans held for sale originated after January 1, 2007 are carried at fair value. The fair value of mortgage loans held for sale may be determined by either outstanding commitments from investors, recent trade prices for identical or similar loans, or other observable data. Unrealized gain or loss is recognized in earnings for the difference between the cost basis, including upfront costs and fees, and the fair value of the loans. Unrealized gain or loss is included in gain on sales of mortgage loans.

Mortgage Loans Held for Investment - Mortgage loans held for investment are carried at the aggregate of their remaining unpaid principal balances, plus net deferred origination costs, less any related charge-offs and allowance for loan losses. Our periodic evaluation of the adequacy of the allowance for loan losses is based on our past loan loss experience, known and inherent risks in the loan portfolio, adverse circumstances which may affect the borrowers’ ability to repay, the estimated value of the underlying real estate collateral and current market conditions within the geographic areas surrounding the underlying real estate. The allowance for loan losses is increased by provision to loan losses charged to income and reduced by charge-offs, net of recoveries.

Mortgage Servicing Rights (“MSRs”) - When we acquire servicing assets through either purchase or origination of loans and sell or securitize those loans with servicing assets retained, the fair value attributable to the servicing assets is capitalized as MSRs on the consolidated balance sheets. We estimate the fair value of the servicing assets by obtaining market information from one of the market’s primary independent MSR brokers.

Derivative Assets and Derivative Liabilities - Our mortgage-committed pipeline includes interest rate lock commitments (“IRLCs”) that have been extended to borrowers who have applied for loan funding and meet certain defined credit and underwriting criteria and have locked their terms and rates. IRLCs associated with loans expected to be sold are recorded at fair value with changes in fair value recognized in earnings and included in gain on sales of mortgage loans.

We use other derivative instruments, including mortgage forward delivery contracts and treasury futures options, to economically hedge the IRLCs, which are also classified and accounted for as free-standing derivatives and thus are recorded at fair value with the changes in fair value recognized in earnings and included in gain on sales of mortgage loans.

We use mortgage forward delivery contracts designated as fair value hedging instruments to economically hedge 100% of our agency-eligible conforming fixed-rate loans and most of our non-conforming fixed-rate loans held for sale. For loans that we apply hedge accounting to, at the inception of the hedge, we formally document the relationship between the forward delivery contracts and the mortgage inventory, as well as our objective and strategy for undertaking the hedge transactions. In the case of our conventional conforming fixed-rate loan products, the notional amount of the forward delivery contracts, along with the underlying rate and terms of the contracts, are equivalent to the unpaid principal amount of the mortgage inventory being hedged; hence, the forward delivery contracts effectively fix the forward sales price and thereby substantially eliminate interest rate and price risk to us. We classify and account for these forward delivery contracts as fair value hedges. The derivatives are carried at fair value with the changes in fair value recognized in earnings and reported in gain on sales of mortgage loans. When the hedges are deemed to be highly effective, the book value of the hedged loans held for sale is adjusted for its change in fair value during the hedge period.

We enter into interest rate swap agreements to manage our interest rate exposure when financing our mortgage-backed securities and certain ARM loans. Certain swap agreements accounted for as cash flow hedges and certain swap agreements not designated as cash flow hedges are both carried on the balance sheet at fair value. The fair values of our swap agreements are generally based on market prices provided by certain dealers who make markets in these financial instruments or by third-party pricing services.

We use agency trust principal only total return swaps and swaptions to economically hedge our MSRs. Our total return swaps and swaptions are classified and accounted for as free-standing derivatives and thus are recorded at fair value with the changes in fair value recognized in earnings and are included in change in fair value of mortgage servicing rights due to changes in valuation assumptions, net of hedge gain (loss).

Goodwill - Goodwill represents the excess purchase price over the fair value of net assets stemming from business acquisitions, including identifiable intangibles. We test for impairment, at least annually, by comparing the fair value of goodwill, as determined by using a discounted cash flow method, with its carrying value. Any excess of carrying value over the fair value of the goodwill would be recognized as an impairment loss in continuing operations. The discounted cash flow calculation related to our loan origination segment includes a forecast of the expected future loan originations and the related revenues and expenses. The discounted cash flow calculation related to our Mortgage Holdings segment includes a forecast of the expected future net interest income, gain on securities and the related revenues and expenses. These cash flows are discounted using a rate that is estimated to be a weighted-average cost of capital for similar companies.

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Financial Condition

The following table presents the Company’s consolidated balance sheets as of March 31, 2007 and December 31, 2006:

AMERICAN HOME MORTGAGE INVESTMENT CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands)

	March 31, 2007			December 31, 2006
Assets:
Cash and cash equivalents	$	836,860		$	398,166
Securities purchased under agreements to resell		58,675			—
Accounts receivable and servicing advances		316,673			432,418
Securities		7,557,886			9,308,032
Mortgage loans held for sale, net		955,451			1,523,737
Mortgage loans held for sale, at fair value		3,926,296			—
Mortgage loans held for investment, net		6,010,969			6,329,721
Derivative assets		22,718			32,142
Mortgage servicing rights		525,565			506,341
Premises and equipment, net		87,723			86,211
Goodwill		133,248			133,128
Other assets		121,871			79,089
Total assets	$	20,553,935		$	18,828,985
Liabilities and Stockholders’ Equity:
Liabilities:
Warehouse lines of credit	$	4,013,190		$	1,304,541
Commercial paper		1,696,256			1,273,965
Reverse repurchase agreements		6,727,505			8,571,459
Deposits		184,614			24,016
Collateralized debt obligations		4,719,376			4,854,801
Payable for securities purchased		595,277			289,716
Derivative liabilities		36,550			12,644
Trust preferred securities		336,616			336,078
Accrued expenses and other liabilities		396,109			361,923
Notes payable		531,867			417,467
Income taxes payable		92,831			112,089
Total liabilities		19,330,191			17,558,699
Stockholders’ Equity:
Preferred Stock		134,040			134,040
Common Stock		503			502
Additional paid-in capital		965,034			963,617
Retained earnings		173,900			257,283
Accumulated other comprehensive loss		(49,733	)		(85,156	)
Total stockholders’ equity		1,223,744			1,270,286
Total liabilities and stockholders’ equity	$	20,553,935		$	18,828,985

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Total assets at March 31, 2007 were $20.55 billion, a $1.72 billion increase from $18.83 billion at December 31, 2006. The increase in total assets primarily reflects an increase in mortgage loans held for sale at fair vale of $3.93 billion, partially offset by a decrease in securities of $1.75 billion, a decrease in mortgage loans held for sale at the lower of cost or market of $568.3 million and a decrease in loans held for investment of $318.7 million. At March 31, 2007, 36.8% of our total assets were securities, 29.2% were mortgage loans held for investment, 19.1% were mortgage loans held for sale at fair value and 4.7% were mortgage loans held for sale at the lower of cost or market, compared to 49.4%, 33.6%, 0.0% and 8.1%, respectively, at December 31, 2006.

The following table summarizes our mortgage-backed securities owned at March 31, 2007 and December 31, 2006, classified by type of issuer and by ratings categories:

	March 31, 2007				December 31, 2006
	Carrying Value		Portfolio Mix		Carrying Value		Portfolio Mix
		(Dollars in thousands)
Agency securities	$	354,935	4.7	%	$	212,591	2.3	%
Privately issued:
AAA		6,602,927	87.4			8,527,203	91.6
AA		53,585	0.7			54,880	0.6
A		176,484	2.3			170,831	1.8
BBB		147,950	2.0			129,669	1.4
BB		19,104	0.3			4,666	0.1
B		15,794	0.2			—	—
Unrated		182,901	2.4			204,710	2.2
Total mortgage-backed securities	$	7,553,680	100.0	%	$	9,304,550	100.0	%

The following tables classify our mortgage-backed securities portfolio by type of interest rate index at March 31, 2007 and December 31, 2006:

	March 31, 2007				December 31, 2006
	Carrying Value		Portfolio Mix		Carrying Value		Portfolio Mix
	(Dollars in thousands)
Index:
One-month LIBOR	$	431,172	5.7	%	$	467,071	5.0	%
Six-month LIBOR		3,577,779	47.3			4,463,283	48.0
One-year LIBOR		3,079,631	40.8			3,903,594	42.0
One-year constant maturity treasury		324,310	4.3			335,948	3.6
One-year monthly treasury average		140,788	1.9			134,654	1.4
Total mortgage-backed securities	$	7,553,680	100.0	%	$	9,304,550	100.0	%

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The following table classifies our mortgage loans held for investment and mortgage-backed securities portfolio by product type at March 31, 2007 and December 31, 2006:

	March 31, 2007				December 31, 2006
	Carrying Value		Portfolio Mix		Carrying Value		Portfolio Mix
	(Dollars in thousands)
Product:
ARMs less than 3 years	$	3,895,623	28.7	%	$	4,059,711	26.0	%
3/1 Hybrid ARM		264,859	1.9			320,737	2.0
5/1 Hybrid ARM		5,928,709	43.7			7,037,879	45.0
7/1 Hybrid ARM		686,194	5.1			1,390,517	8.9
Home equity/Second		188,112	1.4			208,299	1.3
Other ARM		455,007	3.4			482,067	3.1
Fixed rate		2,146,145	15.8			2,135,061	13.7
Total	$	13,564,649	100.0	%	$	15,634,271	100.0	%

During the three months ended March 31, 2007, we purchased $1.5 billion of mortgage-backed securities.

During the three months ended March 31, 2007, we sold $2.7 billion of mortgage-backed securities.

During the three months ended March 31, 2007, we added $142.6 million of loans held for investment to our portfolio.

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Results of Operations

The following tables present our consolidated and segment statements of income:

AMERICAN HOME MORTGAGE INVESTMENT CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share amounts)

	Three Months Ended
	March 31, 2007			Dec. 31, 2006			Sept. 30, 2006			June 30, 2006			March 31, 2006
Net interest income:
Interest income	$	394,277		$	364,810		$	332,875		$	330,196		$	300,613
Interest expense		(333,738	)		(322,134	)		(289,878	)		(279,992	)		(254,035	)
Net interest income		60,539			42,676			42,997			50,204			46,578
Provision for loan losses		(9,143	)		(6,725	)		(5,365	)		(3,979	)		(1,311	)
Net interest income after provision for loan losses		51,396			35,951			37,632			46,225			45,267
Non-interest income:
Gain on sales of mortgage loans		126,817			202,884			210,621			224,594			171,907
(Loss) gain on securities and derivatives		(4,242	)		(6,358	)		10,899			(7,777	)		8,465
Loan servicing fees		46,084			47,300			43,379			30,417			24,333
Change in fair value of mortgage servicing rights:
Due to realization of cash flows		(24,959	)		(28,940	)		(28,839	)		(26,306	)		(18,735	)
Due to changes in valuation assumptions, net of hedge gain		(1,076	)		3,920			(16,799	)		7,476			114
Net loan servicing fees (loss)		20,049			22,280			(2,259	)		11,587			5,712
Other non-interest income		3,221			2,902			2,018			2,125			1,769
Non-interest income		145,845			221,708			221,279			230,529			187,853
Non-interest expenses:
Salaries, commissions and benefits, net		107,871			105,908			105,676			103,157			99,267
Occupancy and equipment		21,306			20,396			19,228			19,763			17,970
Data processing and communications		5,377			6,346			5,700			6,733			7,126
Office supplies and expenses		4,851			4,324			5,346			5,145			4,332
Marketing and promotion		4,278			4,574			4,868			6,383			5,800
Travel and entertainment		7,797			8,966			7,798			7,793			6,753
Professional fees		6,904			7,902			6,076			5,013			5,331
Other		20,850			14,952			16,588			17,192			15,882
Non-interest expenses		179,234			173,368			171,280			171,179			162,461
Net income before income tax (benefit) expense		18,007			84,291			87,631			105,575			70,659
Income tax (benefit) expense		(12,675	)		19,594			15,611			33,224			16,200
Net income	$	30,682		$	64,697		$	72,020		$	72,351		$	54,459
Dividends on preferred stock		3,305			3,304			3,305			3,304			3,305
Net income available to common stockholders	$	27,377		$	61,393		$	68,715		$	69,047		$	51,154
Per share data:
Basic	$	0.55		$	1.22		$	1.37		$	1.38		$	1.03
Diluted	$	0.54		$	1.21		$	1.36		$	1.37		$	1.02
Weighted average number of shares - basic		50,223			50,192			50,148			50,056			49,715
Weighted average number of shares - diluted		50,499			50,602			50,553			50,487			50,070

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AMERICAN HOME MORTGAGE INVESTMENT CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share amounts)

	Three Months Ended March 31,
	2007			2006
Net interest income:
Interest income	$	394,277		$	300,613
Interest expense		(333,738	)		(254,035	)
Net interest income		60,539			46,578
Provision for loan losses		(9,143	)		(1,311	)
Net interest income after provision for loan losses		51,396			45,267
Non-interest income:
Gain on sales of mortgage loans		126,817			171,907
(Loss) gain on securities and derivatives		(4,242	)		8,465
Loan servicing fees		46,084			24,333
Changes in fair value of mortgage servicing rights
Due to realization of cash flows		(24,959	)		(18,735	)
Due to changes in valuation assumptions, net of hedge gain		(1,076	)		114
Net loan servicing fees		20,049			5,712
Other non-interest income		3,221			1,769
Non-interest income		145,845			187,853
Non-interest expenses:
Salaries, commissions and benefits, net		107,871			99,267
Occupancy and equipment		21,306			17,970
Data processing and communications		5,377			7,126
Office supplies and expenses		4,851			4,332
Marketing and promotion		4,278			5,800
Travel and entertainment		7,797			6,753
Professional fees		6,904			5,331
Other		20,850			15,882
Total non-interest expenses		179,234			162,461
Net income before income tax (benefit) expense		18,007			70,659
Income tax (benefit) expense		(12,675	)		16,200
Net income	$	30,682		$	54,459
Dividends on preferred stock		3,305			3,305
Net income available to common stockholders	$	27,377		$	51,154
Per share data:
Basic	$	0.55		$	1.03
Diluted	$	0.54		$	1.02
Weighted average number of shares - basic		50,223			49,715
Weighted average number of shares - diluted		50,499			50,070

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AMERICAN HOME MORTGAGE INVESTMENT CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

MORTGAGE HOLDINGS SEGMENT

(In thousands)

	Three Months Ended March 31,
	2007			2006
Net interest income:
Interest income	$	219,506		$	154,946
Interest expense		(182,047	)		(128,555	)
Net interest income		37,459			26,391
Provision for loan losses		(8,965	)		(2,507	)
Net interest income after provision for loan losses		28,494			23,884
Non-interest income:
(Loss) gain on securities and derivatives		(4,245	)		8,190
Total non-interest income		(4,245	)		8,190
Non-interest expenses:
Salaries, commissions and benefits, net		3,012			5,025
Occupancy and equipment		2			2
Data processing and communications		3			16
Marketing and promotion		21			4
Travel and entertainment		46			—
Professional fees		1,204			1,454
Other		3,845			2,003
Total non-interest expenses		8,133			8,504
Net income before income tax expense		16,116			23,570
Income tax expense		—			—
Net income	$	16,116		$	23,570
Dividends on preferred stock		3,305			3,305
Net income available to common stockholders	$	12,811		$	20,265

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AMERICAN HOME MORTGAGE INVESTMENT CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

LOAN ORIGINATION SEGMENT

(In thousands)

	Three Months Ended March 31,
	2007			2006
Net interest income:
Interest income	$	171,579		$	145,667
Interest expense		(145,532	)		(122,327	)
Net interest income		26,047			23,340
Provision for loan losses		(178	)		1,196
Net interest income after provision for loan losses		25,869			24,536
Non-interest income:
Gain on sales of mortgage loans		126,817			171,907
Gain on securities and derivatives		—			275
Other non-interest income		2,475			782
Total non-interest income		129,292			172,964
Non-interest expenses:
Salaries, commissions and benefits, net		98,662			90,337
Occupancy and equipment		20,328			17,650
Data processing and communications		5,150			6,949
Office supplies and expenses		4,631			4,278
Marketing and promotion		4,184			5,791
Travel and entertainment		7,664			6,701
Professional fees		5,668			3,877
Other		14,901			5,016
Total non-interest expenses		161,188			140,599
Net income before income tax (benefit) expense		(6,027	)		56,901
Income tax (benefit) expense		(14,851	)		19,860
Net income	$	8,824		$	37,041
Dividends on preferred stock		—			—
Net income available to common stockholders	$	8,824		$	37,041

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AMERICAN HOME MORTGAGE INVESTMENT CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

LOAN SERVICING SEGMENT

(In thousands)

	Three Months Ended March 31,
	2007			2006
Net interest income:
Interest income	$	—		$	—
Interest expense		(5,740	)		(3,153	)
Net interest income		(5,740	)		(3,153	)
Provision for loan losses		—			—
Net interest income after provision for loan losses		(5,740	)		(3,153	)
Non-interest income:
Loan servicing fees		46,072			24,333
Change in fair value of mortgage servicing rights:
Due to realization of cash flows		(24,940	)		(18,735	)
Due to changes in valuation assumptions, net of hedge gain		(1,076	)		114
Net loan servicing fees		20,056			5,712
Other non-interest income		717			987
Total non-interest income		20,773			6,699
Non-interest expenses:
Salaries, commissions and benefits, net		5,797			3,905
Occupancy and equipment		874			318
Data processing and communications		183			161
Office supplies and expenses		219			54
Marketing and promotion		73			5
Travel and entertainment		84			52
Professional fees		27			—
Other		2,047			8,863
Total non-interest expenses		9,304			13,358
Net income before income tax expense (benefit)		5,729			(9,812	)
Income tax expense (benefit)		1,356			(3,660	)
Net income	$	4,373		$	(6,152	)
Dividends on preferred stock		—			—
Net income available to common stockholders	$	4,373		$	(6,152	)

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AMERICAN HOME MORTGAGE INVESTMENT CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

BANKING SEGMENT

(In thousands)

	Three Months Ended March 31, 2007
Net interest income:
Interest income	$	3,192
Interest expense		(419	)
Net interest income		2,773
Provision for loan losses		—
Net interest income after provision for loan losses		2,773
Non-interest income:
Gain on securities and derivatives		3
Loan servicing fees		12
Change in fair value of mortgage servicing rights:
Due to realization of cash flows		(19	)
Net loan servicing loss		(7	)
Other non-interest income		29
Total non-interest income		25
Non-interest expenses:
Salaries, commissions and benefits, net		400
Occupancy and equipment		102
Data processing and communications		41
Office supplies and expenses		1
Travel and entertainment		3
Professional fees		5
Other		57
Total non-interest expenses		609
Net income before income tax expense		2,189
Income tax expense		820
Net income	$	1,369
Dividends on preferred stock		—
Net income available to common stockholders	$	1,369

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Comparison of the Three Months Ended March 31, 2007 and 2006

Overview

Net income for the three months ended March 31, 2007 was $30.7 million compared to $54.5 million for the three months ended March 31, 2006, a decrease of $23.8 million, or 43.7%. The decrease in net income was the result of a $42.0 million decrease in non-interest income, a $16.8 million increase in non-interest expenses and a $7.8 million increase in provision for loan losses, partially offset by a $28.9 million decrease in income tax expense and a $13.9 million increase in net interest income. The $42.0 million decrease in non-interest income consists of a $45.1 million decrease in gain on mortgage loans and a $12.7 million decrease in gains on mortgage-backed securities and derivatives, partially offset by a $14.3 million increase in net loan servicing fees and a $1.5 million increase in other non-interest income in the three months ended March 31, 2007 versus the three months ended March 31, 2006.

Net Interest Income

The following table presents the average balances for our interest-earning assets, interest-bearing liabilities, corresponding annualized effective rates of interest and the related interest income or expense for the three months ended March 31, 2007 compared to the three months ended March 31, 2006:

(Dollars in thousands)	Three Months Ended March 31,
	2007						2006
	Average Balance		Interest		Average Yield/Cost		Average Balance		Interest		Average Yield/Cost
Interest earning assets:
Securities (1)	$	8,815,396	$	129,770	5.89	%	$	9,914,293	$	135,093	5.45	%
Securities purchased under agreements to resell		14,893		198	5.32	%		—		—	—
Mortgage loans held for sale		8,668,749		150,938	6.96	%		6,965,722		102,371	5.88	%
Mortgage loans held for investment		6,176,204		111,671	7.23	%		3,785,573		63,149	6.67	%
Other interest-earning assets		135,227		1,700	5.03	%		—		—	—
Total interest-earning assets		23,810,469		394,277	6.62	%		20,665,588		300,613	5.82	%
Interest bearing liabilities:
Warehouse lines of credit		7,224,668		102,285	5.66	%		6,713,022		85,223	5.08	%
Commercial paper (2)		2,557,841		33,853	5.29	%		2,666,665		31,047	4.66	%
Reverse repurchase agreements (3)		8,533,063		113,913	5.34	%		9,309,261		115,505	4.96	%
Deposits		21,291		231	4.34	%		—		—	—
Collateralized debt obligations (4)		4,763,437		68,850	5.78	%		1,253,797		13,580	4.33	%
Trust preferred securities		345,000		7,524	8.72	%		210,000		4,245	8.09	%
Notes payable		463,403		7,082	6.11	%		317,992		4,435	5.58	%
Total interest-bearing liabilities		23,908,703		333,738	5.58	%		20,470,737		254,035	4.96	%
Net interest income			$	60,539					$	46,578
Interest rate spread					1.04	%					0.86	%
Net interest margin					1.02	%					0.90	%

(1) The average yield does not give effect to changes in the fair value that are reflected as a component of stockholders’ equity for the 2006 period.

(2) Includes $9 thousand of net interest income on interest rate swap agreements for the 2007 period.

(3) Includes $962 thousand of net interest income and $8.4 million of net interest expense on interest rate swap agreements for the 2007 and 2006 periods, respectively.

(4) Includes $274 thousand of net interest expense on interest rate swap agreements for the 2007 period.

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The following table presents the effects of changes in interest rates and changes in volume of interest-earning assets and interest-bearing liabilities on our interest income and interest expense for the three months ended March 31, 2007 compared to the three months ended March 31, 2006:

(In thousands)	Three Months Ended March 31, 2007 Compared to Three Months Ended March 31, 2006
	Average Rate		Average Volume			Total
Securities	$	48,235	$	(53,558	)	$	(5,323	)
Securities purchased under agreements to resell		—		198			198
Mortgage loans held for sale		20,834		27,733			48,567
Mortgage loans held for investment		12,195		36,327			48,522
Other interest-earning assets		—		1,700			1,700
Interest income		81,264		12,400			93,664
Warehouse lines of credit		10,232		6,830			17,062
Commercial paper		9,946		(7,140	)		2,806
Reverse repurchase agreements		36,109		(37,701	)		(1,592	)
Deposits		—		231			231
Collateralized debt obligations		5,906		49,364			55,270
Trust preferred securities		779		2,500			3,279
Notes payable		455		2,192			2,647
Interest expense		63,427		16,276			79,703
Net interest income	$	17,837	$	(3,876	)	$	13,961

Interest Income: Interest income on securities for the three months ended March 31, 2007 was $129.8 million, compared to $135.1 million for the three months ended March 31, 2006, a $5.3 million, or 3.9%, decrease. This decrease reflects primarily the decrease in our securities portfolio as we grew our portfolio of loans held for investment, partially offset by a higher yield due to higher interest rates in 2007 versus 2006.

Interest income on our mortgage loans held for sale for the three months ended March 31, 2007 was $150.9 million, compared to $102.4 million for the three months ended March 31, 2006, an increase of $48.5 million, or 47.4%. The increase in interest income on mortgage loans held for sale was primarily the result of an increase in average volume in 2007 versus 2006 due to higher mortgage origination volume, and higher interest rates in 2007 versus 2006.

For the three months ended March 31, 2007, we recognized $111.7 million of interest income on loans held for investment, compared to $63.1 million for the three months ended March 31, 2006, an increase of $48.5 million, or 76.8%. This increase reflects primarily the growth of our portfolio of whole loans and a higher yield due to higher interest rates in 2007 versus 2006.

Interest Expense: As of March 31, 2007, we entered into reverse repurchase agreements, a form of collateralized short-term borrowing, with eighteen different financial institutions and had borrowed funds from eleven of these counterparties. We borrow funds under these arrangements based on the fair value of our mortgage-backed securities and loans held for investment. Total interest expense on reverse repurchase agreements for the three months ended March 31, 2007 was $113.9 million, compared to interest expense for the three months ended March 31, 2006 of $115.5 million, a $1.6 million decrease. The decrease in reverse repurchase agreements interest expense in 2007 versus 2006 was primarily the result of an decrease in average borrowings due to a reduction in mortgage-backed securities partially offset by higher average borrowing cost due to generally higher short-term interest rates in 2007 versus 2006.

We fund our loan inventory primarily through borrowing facilities with several mortgage warehouse lenders and through a $3.3 billion commercial paper, or secured liquidity note (“SLN”), program. Interest expense on warehouse lines of credit for the three months ended March 31, 2007 was $102.3 million, compared to interest expense for the three months ended March 31, 2006 of $85.2 million, a $17.1 million increase. The increase in warehouse lines of credit interest expense was primarily the result of an increase in average volume due to higher mortgage origination volume and an increase in average rate due to generally higher short-term interest rates in the first quarter of 2007 versus the first quarter of 2006.

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Interest expense on commercial paper for the three months ended March 31, 2007 was $33.9 million, versus $31.0 million for the three months ended March 31, 2006, a $2.8 million increase. The increase in commercial paper interest expense was the result of an increase in average interest rates in the first quarter of 2007 versus the first quarter of 2006 partially offset by lower average borrowings. By funding a portion of our loan inventory through the commercial paper program, we are able to reduce our average funding cost versus borrowing exclusively through warehouse lenders.

Interest expense on collateralized debt obligations for the three months ended March 31, 2007 was $68.9 million, compared to interest expense for the three months ended March 31, 2006 of $13.6 million, a $55.3 million increase. The increase in collateralized debt obligation interest expense was the result of an increase in average volume and an increase in average interest rates in 2007 versus 2006. The increase in average volume in 2007 versus 2006 related to higher borrowings used to fund the growth in our portfolio of loans held for investment.

Provision for Loan Losses

Provision for loan losses for the three months ended March 31, 2007 was $9.1 million, compared to $1.3 million for the three months ended March 31, 2006. The provision for loan losses in the first quarter of 2007 consists of a $2.4 million increase in allowance for loan losses and charge-offs of $6.7 million. The provision for loan losses in the first quarter of 2006 consists of a $1.3 million increase in allowance for loan losses. The increase in provision for loan losses in the first quarter of 2007 versus 2006 was the result of an increase in loans held for investment and an increase in the amount of non-performing loans associated with the loans held for investment. At March 31, 2007, the principal amount of our loans held for investment was $6.0 billion, compared to $4.3 billion at March 31, 2006.

Gain on Mortgage Loans, Mortgage-Backed Securities and Derivatives

Gain on Sales of Mortgage Loans: During the three months ended March 31, 2007, gain on sales of mortgage loans in our Loan Origination segment totaled $126.8 million, or 0.74%, of mortgage loans sold or added at fair value, compared to $171.9 million, or 1.27%, of mortgage loans sold during the three months ended March 31, 2006. The decrease primarily reflects a $61.0 million increase in credit related charges and lower gain on sale margins due to lower demand for and significant price deterioration on loans we sell in the secondary loan market. During the three months ended March 31, 2007, gain on mortgage loans in our Loan Origination segment, excluding credit related charges, totaled $187.4 million, or 1.09%, of mortgage loans sold or added at fair value, compared to $171.5 million, or 1.27%, of mortgage loans sold during the three months ended March 31, 2006.

The following table presents the components of gain on sales of mortgage loans in our Loan Origination segment during the three months ended March 31, 2007 and 2006:

Gain on Sales of Mortgage Loans

	Three Months Ended March 31,
	2007			2006
(In thousands)
Gain on sales of mortgage loans before credit related charges	$	142,529		$	171,495
Fair value in excess of cost basis on mortgage loans added at fair value		44,831			—
Total gain on sales of mortgage loans before credit related charges	$	187,360		$	171,495
Credit related charges		(60,543	)		412
Gain on sales of mortgage loans, net of credit related charges	$	126,817		$	171,907
Mortgage loans sold	$	13,330,737		$	13,533,589
Mortgage loans added at fair value		3,829,297			—
Total mortgage loans sold or added at fair value	$	17,160,034		$	13,533,589
Total gain on sales of mortgage loans before credit related charges as a % of total mortgage loans sold or added at fair value		1.09	%		1.27	%
Reduction to gain on sale of loans for credit related charges as a % of total mortgage loans sold or added at fair value		-0.35	%		0.00	%
Total gain on sales and securitizations of mortgage loans as a % of total mortgage loans sold or added at fair value		0.74	%		1.27	%

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Portfolio Gains and Losses: During the three months ended March 31, 2007, portfolio gains and losses in our Mortgage Holdings segment were a portfolio loss of $4.2 million compared to a portfolio gain of $8.2 million during the three months ended March 31, 2006. The decrease in portfolio gains in the first quarter of 2007 compared to 2006 was the result of a $8.2 million net decrease in gain (loss) on mortgage-backed securities, a $4.1 million decrease in gain on free standing derivatives and a $92 thousand decrease in interest carry income on free standing derivatives.

The following table presents the components of portfolio gains and losses in our Mortgage Holdings segment during the three months ended March 31, 2007 and 2006:

Portfolio Gains and Losses

	Three Months Ended March 31,
	2007			2006
(In thousands)
Loss on mortgage-backed securities	$	(9,586	)	$	(1,366	)
Gain on free standing derivatives		1,560			5,683
Net (loss) gain on mortgage-backed securities and free standing derivatives excluding interest carry income (expense)		(8,026	)		4,317
Interest carry income (expense) on free standing derivatives included in unrealized gain (loss)		3,781			3,873
Total portfolio (loss) gain	$	(4,245	)	$	8,190

Net Loan Servicing Fees

Net loan servicing fees were $20.0 million for the three months ended March 31, 2007 compared to $5.7 million for the three months ended March 31, 2006.

Loan Servicing Fees: Loan servicing fees increased to $46.1 million for the three months ended March 31, 2007 from $24.3 million for the three months ended March 31, 2006, an increase of $21.8 million, or 89.4%, primarily as a result of a $12.8 million increase in contractually specified servicing fees, $3.2 million increase in ancillary income and a $5.7 million increase in escrow earnings. The increase in loan servicing fees in 2007 versus 2006 reflects an increase in loans serviced for others. At March 31, 2007, the principal amount of loans serviced for others, including loans held for sale and loans held for investment, was $50.4 billion, compared to $34.8 billion at March 31, 2006.

Change in Fair Value of MSRs: For the three months ended March 31, 2007, the change in fair value of MSRs was a reduction of $26.0 million. The change in fair value of MSRs in 2007 includes a $24.9 million reduction in fair value due to the realization of servicing cash flows and a $1.5 million reduction due to changes in valuation assumptions, partially offset by a $0.4 million gain on MSR-related hedges. For the three months ended March 31, 2006, the change in fair value of MSRs was a reduction of $18.6 million. The change in fair value of MSRs in 2006 includes a $18.7 million reduction in fair value due to the realization of servicing cash flows and a $0.1 million gain due to changes in valuation assumptions.

The following table presents the components of net loan servicing fees for the three months ended March 31, 2007 and 2006:

	Three Months Ended March 31,
	2007			2006
(In thousands)
Loan servicing fees	$	46,084		$	24,333
Change in fair value of mortgage servicing rights:
Due to realization of cash flows		(24,959	)		(18,735	)
Due to changes in valuation assumptions		(1,463	)		114
Due to gain on related hedges		387			—
Net loan servicing fees	$	20,049		$	5,712

- 46 -

Other Non-Interest Income

Other non-interest income totaled $3.2 million for the three months ended March 31, 2007, compared to $1.8 million for the three months ended March 31, 2006. For the three months ended March 31, 2007, other non-interest income primarily includes reinsurance premiums earned totaling approximately $1.9 million, other fee income of $0.5 million, rental income of $0.2 million, and revenue from title services of $0.2 million. For the three months ended March 31, 2006, other non-interest income primarily includes reinsurance premiums earned totaling approximately $0.7 million, rental income of $0.3 million, revenue from title services of $0.2 million, and other fee income of $0.4 million.

Non-Interest Expenses

Our non-interest expenses for the three months ended March 31, 2007 were $179.2 million compared to $162.5 million for the three months ended March 31, 2006, an increase of $16.8 million, or 10.3%. The increase primarily reflects a $20.6 million rise in our Loan Origination segment non-interest expenses to $161.2 million, or 0.96% of total loan originations in 2007, from $140.6 million, or 1.07% of total loan originations in 2006.

Our operating expenses represent costs that are not eligible to be added to the book value of the loans because they are not considered to be certain direct origination costs under the rules of SFAS No. 91, “Accounting for Nonrefundable Fees and Costs Associated with Originating or Acquiring Loans and Initial Costs of Leases.” Direct origination costs are added to the book value of loans and either reduce the gain on sale of loans if the loans are sold or are amortized over the life of the loan.

Salaries, Commissions and Benefits, net: Salaries, commissions and benefits, net, for the three months ended March 31, 2007 were $107.9 million, compared to $99.3 million for the three months ended March 31, 2006, an increase of $8.6 million, or 8.7%. The increase in expenses reflects higher origination volume in the three months ended March 31, 2007 compared with the three months ended March 31, 2006.

Other Operating Expenses: Operating expenses, excluding salaries, commissions and benefits, were $71.4 million for the three months ended March 31, 2007 compared to $63.2 million for the three months ended March 31, 2006, an increase of $8.2 million, or 12.9%. The increase in operating expenses in 2007 versus 2006 includes a $5.0 million increase in other non-interest expense and an $3.3 million increase in occupancy and equipment expense. The increase in other non-interest expenses in 2007 versus 2006 was primarily due to a $3.1 million increase in lender-paid private mortgage insurance and $2.2 million of losses on sales of real estate owned. The increase in occupancy and equipment expense was due to higher lease obligations and certain fixed asset expenses relating to the increased number of branches in 2007.

Income Tax Expense

We recognized $12.7 million of income tax benefit for the three months ended March 31, 2007, compared to a $16.2 million income tax expense for the three months ended March 31, 2006. The decrease in income tax expense in the first quarter of 2007 versus 2006 reflects a decrease in income before income taxes relating to our taxable REIT subsidiary (“TRS”). The decrease in TRS income before income taxes was primarily the result of a decrease in gain on sale of loans, due to lower margins on loans sold to third parties, and higher credit related charges in the first quarter of 2007 versus 2006.

Loan Originations

We originate and sell or securitize one-to-four family residential mortgage loans. Total loan originations for the three months ended March 31, 2007 were $16.7 billion compared to $13.2 billion for the three months ended March 31, 2006, a 27.2% increase. Mortgage brokers, through our wholesale loan production offices, accounted for 48% of our loan originations for the three months ended March 31, 2007 compared to 55% for the three months ended March 31, 2006. Originations conducted through our retail loan production offices and Internet call center were 27% of our loan originations for the three months ended March 31, 2007 compared to 40% for the three months ended March 31, 2006. During the three months ended March 31, 2007, 25% of our loan originations were purchased from correspondents compared to 5% of our originations in the three months ended March 31, 2006.

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Liquidity and Capital Resources

As of March 31, 2007, we had arrangements to enter into reverse repurchase agreements, a form of collateralized short-term borrowing, with eighteen different financial institutions and had borrowed funds from eleven of these counterparties. Because we borrow money under these agreements based on the fair value of our mortgage-backed securities, and because changes in interest rates can negatively impact the valuation of mortgage-backed securities, our borrowing ability under these agreements could be limited and lenders could initiate margin calls in the event interest rates change or the value of our mortgage-backed securities declines for other reasons.

As of March 31, 2007, we had $6.7 billion of reverse repurchase agreements outstanding with a weighted-average borrowing rate of 5.38% before the impact of interest rate swaps and a weighted-average remaining maturity of nine months. As of December 31, 2006, we had $8.6 billion of reverse repurchase agreements outstanding with a weighted-average borrowing rate of 5.40% before the impact of interest rate swaps and a weighted-average remaining maturity of eleven months.

We issue adjustable-rate collateralized debt obligations to finance certain portions of our mortgage loans held for investment. The collateralized debt obligations are collateralized by ARM loans that have been placed in a trust. As of March 31, 2007, our collateralized debt obligations had a balance of $4.7 billion and an effective interest cost of 5.50%.

To originate a mortgage loan, the Company draws against either a $3.3 billion SLN commercial paper program, a $2.0 billion pre-purchase facility with UBS Real Estate Securities Inc., a facility of $2.0 billion with Bear Stearns, a $1.3 billion bank syndicated facility led by Bank of America, N.A. (which includes a $446 million term loan facility which the Company uses to finance its MSRs), a facility of $125 million with J.P. Morgan Chase, a $750 million facility with IXIS Real Estate Capital, Inc. (“IXIS”), a $350 million facility with Credit Suisse First Boston Mortgage Capital LLC (“CSFB”), a $1.0 billion facility with Barclays Bank PLC (“Barclays”), a $250 million facility with ABN AMRO, or a $1.5 billion syndicated facility led by Calyon New York Branch (“Calyon”). The Bank of America, J.P. Morgan Chase, ABN AMRO, and Calyon facilities are committed facilities. The IXIS and CSFB facilities are partially committed facilities. The interest rate on outstanding balances fluctuates daily based on a spread to the LIBOR and interest is paid monthly. In addition, we have purchase and sale gestation facilities with UBS, Greenwich Capital Financial Products, Inc. (“Greenwich”), Societe Generale, and Deutsche Bank (“Deutsche”). These facilities are secured by the mortgages owned by us and by certain of our other assets. Advances drawn under these facilities bear interest at rates that vary depending on the type of mortgages securing the advances. These loans are subject to sublimits, advance rates and terms that vary depending on the type of securing mortgages and the ratio of our liabilities to our tangible net worth. At May 4, 2007 the aggregate outstanding balance under the commercial paper program was $2.7 billion, the aggregate outstanding balance under the warehouse facilities was $4.7 billion, the aggregate outstanding balance in drafts payable was $7.1 million and the aggregate maximum amount available for additional borrowings was $5.0 billion.

The documents governing our warehouse facilities contain a number of compensating balance requirements and restrictive financial and other covenants that, among other things, require us to adhere to a maximum ratio of total liabilities to tangible net worth and maintain a minimum level of tangible net worth and liquidity, as well as to comply with applicable regulatory and investor requirements. The facility agreements also contain covenants limiting the ability of our subsidiaries to transfer or sell assets other than in the ordinary course of business and to create liens on the collateral without obtaining the prior consent of the lenders, which consent may not be unreasonably withheld.

In addition, under our warehouse facilities, we generally cannot continue to finance a mortgage loan that we hold if:

• the loan is rejected as “unsatisfactory for purchase” by the ultimate investor and has exceeded its permissible 120-day warehouse period;

• we fail to deliver the applicable mortgage note or other documents evidencing the loan within the requisite time period;

• the underlying property that secures the loan has sustained a casualty loss in excess of 5% of its appraised value; or

• the loan ceases to be an eligible loan (as determined pursuant to the applicable facility agreement).

As of March 31, 2007, our aggregate warehouse facility borrowings were $4.0 billion (including $50.0 million of borrowings under a working capital sub-limit) and our outstanding drafts payable were $10.1 million, compared to $1.3 billion in aggregate warehouse facility borrowings (including $50.0 million of borrowings under a working capital sub-limit), and outstanding drafts payable of $12.8 million as of December 31, 2006. At March 31, 2007, our loans held for investment were $6.0 billion and our loans held for sale were $4.9 billion compared to loans held for investment of $6.3 billion and loans held for sale of $1.5 billion as of December 31, 2006.

- 48 -

In addition to the warehouse facilities, we have purchase and sale agreements with UBS, Greenwich, Societe Generale, and Deutsche. These agreements allow us to accelerate the sale of our mortgage loan inventory, resulting in a more effective use of the warehouse facilities. Aggregate amounts sold and being held under these agreements at March 31, 2007 and December 31, 2006 were $2.8 billion and $6.2 billion, respectively. Aggregate amounts so held under these agreements at May 4, 2007 were $1.9 billion. These agreements are not committed facilities and may be terminated at the discretion of the counterparties.

We make certain representations and warranties under the purchase and sale agreements regarding, among other things, the loans’ compliance with laws and regulations, their conformity with the ultimate investors’ underwriting standards and the accuracy of information. In the event of a breach of these representations or warranties or in the event of an early payment default, we may be required to repurchase the loans and/or indemnify the investor for damages caused by that breach. We have implemented strict procedures to ensure quality control and conformity to underwriting standards and minimize the risk of being required to repurchase loans.

We also have a $446.3 million term loan facility with a bank syndicate led by Bank of America which we use to finance our MSRs. The term loan facility expires on August 9, 2007, but we have an option to extend the term for twelve additional months at a higher interest rate. We expect to renew the term loan facility at similar or better terms prior to the expiration date. Interest is based on a spread to the LIBOR and may be adjusted for earnings on escrow balances. At March 31, 2007 and December 31, 2006, borrowings under our term loan facility were $391.7 million and $298.5 million, respectively.

Cash and cash equivalents increased to $836.9 million at March 31, 2007 from $398.1 million at December 31, 2006.

Our primary sources of cash and cash equivalents during the three months ended March 31, 2007 were as follows:

• $13.3 billion of proceeds from principal received from sales of mortgage loans held for sale;

• $2.7 billion of principal proceeds from sales of mortgage-backed securities; and

• $2.7 billion increase in warehouse lines of credit, net.

Our primary uses of cash and cash equivalents during the three months ended March 31, 2007 were as follows:

• $16.6 billion of origination of mortgage loans;

• $1.8 billion decrease in reverse repurchase agreements, net; and

• $1.5 billion of purchases of mortgage-backed securities.

Commitments

The Company had the following commitments (excluding derivative financial instruments) at March 31, 2007:

	Total		Less than 1 Year		1 - 3 Years		3 - 5 Years		After 5 Years
(In thousands)
Warehouse lines of credit	$	4,013,190	$	4,013,190	$	—	$	—	$	—
Commercial paper		1,696,256		1,696,256		—		—		—
Reverse repurchase agreements		6,727,505		5,801,880		925,625		—		—
Deposits		184,614		182,627		1,481		506		—
Collateralized debt obligations		4,719,376		382,801		3,248,033		880,209		208,333
Trust preferred securities		336,616		—		—		—		336,616
Notes payable		531,867		417,557		87,112		3,932		23,266
Operating leases		138,699		40,872		54,215		27,034		16,578

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ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Movements in interest rates can pose a major risk to the Company in either a rising or declining interest rate environment. The Company depends on substantial borrowings to conduct its business. These borrowings are all done at variable interest rate terms, which will increase as short-term interest rates rise. Additionally, when interest rates rise, loans held for sale, loans held for investment and any applications in process with locked-in rates decrease in value. To preserve the value of such fixed-rate loans or applications in process with locked-in rates, agreements are executed for mandatory loan sales to be settled at future dates with fixed prices. These sales take the form of forward sales of mortgage-backed securities.

When interest rates decline, fallout may occur as a result of customers withdrawing their applications. In those instances, the Company may be required to purchase loans at current market prices to fulfill existing mandatory loan sale agreements, thereby incurring losses upon sale. Additionally, when interest rates decline, the interest income the Company receives from its mortgage loans held for investment as well as mortgage loans held for sale will decrease. The Company uses an interest rate hedging program to manage these risks. Through this program, mortgage-backed securities are purchased and sold forward and options are acquired on treasury futures contracts.

In the event that the Company does not deliver into the forward delivery commitments or exercise its option contracts, the instruments can be settled on a net basis. Net settlement entails paying or receiving cash based upon the change in market value of the existing instrument. All forward delivery commitments and option contracts to buy securities are to be contractually settled within nine months of the balance sheet date.

The Company’s hedging program contains an element of risk because the counterparties to its mortgage and treasury securities transactions may be unable to meet their obligations. While the Company does not anticipate nonperformance by any counterparty, it is exposed to potential credit losses in the event the counterparty fails to perform. The Company’s exposure to credit risk in the event of default by a counterparty is the difference between the contract and the current market price. The Company minimizes its credit risk exposure by limiting the counterparties to well-capitalized banks and securities dealers who meet established credit and capital guidelines.

Movements in interest rates also impact the value of MSRs. When interest rates decline, the loans underlying the MSRs are generally expected to prepay faster, which reduces the market value of the MSRs. To reduce the sensitivity of earnings to interest rate and market value fluctuations, the Company may use free-standing derivatives to hedge the risk of changes in the fair value of MSRs, with the resulting gains or losses reflected in income. Changes in the fair value of the MSRs from changing mortgage interest rates are generally offset by gains or losses in the fair value of the derivatives depending on the amount of MSRs we hedge. We may choose not to fully hedge MSRs, partly because origination volume tends to act as a natural hedge. For example, as interest rates decline, servicing values decrease and fees from origination volume tend to increase. Conversely, as interest rates increase, the fair value of the MSRs increases, while fees from origination volume tend to decline.

The Company enters into interest rate swap agreements to manage its interest rate exposure when financing its loans held for investment and its mortgage-backed securities. The Company generally borrows money based on short-term interest rates by entering into borrowings with maturity terms of less than one year, and frequently nine to twelve months. The Company’s loans held for investment and mortgage-backed securities financing vehicles generally have an interest rate that reprices based on frequency terms of one to twelve months. The Company’s mortgage-backed securities have an initial fixed interest rate period of three to five years. When the Company enters into a swap agreement, it generally agrees to pay a fixed rate of interest and to receive a variable interest rate, generally based on LIBOR. These swap agreements have the effect of converting the Company’s variable-rate debt into fixed-rate debt over the life of the swap agreements. These instruments are used as a cost-effective way to lengthen the average repricing period of the Company’s variable-rate and short-term borrowings such that the average repricing of the borrowings more closely matches the average repricing of the Company’s mortgage-backed securities. The Company’s duration gap was approximately one month on March 31, 2007.

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The following tables summarize the Company’s interest rate sensitive instruments as of March 31, 2007 and December 31, 2006:

	March 31, 2007
	Carrying Amount		Estimated Fair Value
	(In thousands)
Assets:
Securities purchased under agreements to resell	$	58,675	$	58,675
Securities		7,557,886		7,557,886
Derivative assets (1)		22,718		133,476
Mortgage loans held for sale, net		955,451		989,858
Mortgage loans held for sale, at fair value		3,926,296		3,926,296
Mortgage loans held for investment, net		6,010,969		6,052,955
Mortgage servicing rights		525,565		525,565
Liabilities:
Reverse repurchase agreements	$	6,727,505	$	6,727,486
Collateralized debt obligations		4,719,376		4,712,798
Deposits		184,614		184,614
Derivative liabilities		36,550		36,550
	December 31, 2006
	Carrying Amount		Estimated Fair Value
	(In thousands)
Assets:
Securities	$	9,308,032	$	9,308,032
Derivative assets (1)		32,142		130,091
Mortgage loans held for sale, net		1,523,737		1,573,564
Mortgage loans held for investment, net		6,329,721		6,461,449
Mortgage servicing rights		506,341		506,341
Liabilities:
Reverse repurchase agreements	$	8,571,459	$	8,571,538
Collateralized debt obligations		4,854,801		4,856,258
Deposits		24,016		24,016
Derivative liabilities		12,644		12,644

(1) Derivative assets includes interest rate lock commitments (“IRLCs”) to fund mortgage loans. The carrying value excludes the value of the mortgage servicing rights (“MSRs”) attached to the IRLCs in accordance with SEC SAB No. 105. The fair value includes the value of MSRs.

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Changes in fair value that are stated in the table below are derived based upon assuming immediate and equal changes to market interest rates of various maturities. The base or current interest rate curve is adjusted by the levels shown below:

	March 31, 2007
(In thousands)	-100 Basis Points			-50 Basis Points			+50 Basis Points			+100 Basis Points
Changes in fair value of securities, net of the related financing and hedges	$	(26,834	)	$	(5,721	)	$	(9,320	)	$	(31,408	)
Changes in fair value of mortgage loans held for sale and interest rate lock commitments, net of the related financing and hedges		(3,737	)		(8,331	)		15,760			34,117
Changes in fair value of mortgage loans held for investment, net of the related financing and hedges		13,874			7,507			(8,348	)		(17,436	)
Changes in fair value of mortgage servicing rights, net of the related financing and hedges		(13,632	)		(10,307	)		(307	)		(744	)
Net change	$	(30,329	)	$	(16,852	)	$	(2,215	)	$	(15,471	)

ITEM 4.

CONTROLS AND PROCEDURES

Controls and Procedures

The Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of its disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of the end of the fiscal quarter covered by this quarterly report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were effective as of the end of the fiscal quarter covered by this quarterly report. The Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the Company’s internal controls over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) to determine whether any changes occurred during the first quarter of 2007 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. Based on that evaluation, there has been no such change during the first quarter of 2007.

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PART II-OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

None.

ITEM 1A.

RISK FACTORS

There have been no material changes during the quarter ended March 31, 2007 to the risk factors previously disclosed in the “Risk Factors” section of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2006.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

ITEM 5.

OTHER INFORMATION

On April 30, 2007, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Citigroup Global Markets Inc., as underwriter (the “Underwriter”), pursuant to which the Company issued and sold to the Underwriter 4,000,000 shares of Common Stock on May 4, 2007, at a sales price to the Underwriter of $23.10 per share. The Company also granted the Underwriter a 30-day option to purchase up to an additional 600,000 shares of Common Stock to cover over-allotments, if any. The Underwriting Agreement contains customary representations, warranties and agreements by the Company, and customary conditions to closing, indemnification rights, obligations of the parties and termination provisions. The offering was made pursuant to the Company’s effective shelf registration statement on Form S-3 (Registration No. 333-121304) (the “Registration Statement”). The Underwriting Agreement is filed as Exhibit 1.1 to this Quarterly Report on Form 10-Q and is incorporated into the Registration Statement by reference.

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ITEM 6.

EXHIBITS

The following exhibits are filed with this Quarterly Report on Form 10-Q:

Exhibit No.		Description
1.1	—	Underwriting Agreement, dated as of April 30, 2007, between American Home Mortgage Investment Corp. and Citigroup Global Markets Inc.
10.1	—	Employment Agreement, dated as of January 1, 2004, by and between American Home Mortgage Holdings, Inc. and Robert F. Johnson, Jr.
10.2	—	Master Repurchase Agreement, dated as of February 28, 2007, by and among American Home Mortgage Acceptance, Inc., American Home Mortgage Corp., American Home Mortgage Investment Corp. and American Home Mortgage Servicing, Inc. and ABN AMRO Bank N.V.
10.3	—	Letter Agreement, dated as of February 28, 2007, by and among American Home Mortgage Acceptance, Inc., American Home Mortgage Corp., American Home Mortgage Investment Corp. and American Home Mortgage Servicing, Inc., the purchasers party thereto, the group agents party thereto and ABN AMRO Bank N.V.
10.4	—	Performance Guaranty, dated as of February 28, 2007, by American Home Mortgage Holdings, Inc. and American Home Mortgage Investment Corp. in favor of ABN AMRO Bank N.V.
10.5	—	Custodial Agreement, dated as of February 28, 2007, by and among American Home Mortgage Acceptance, Inc., American Home Mortgage Corp., American Home Mortgage Investment Corp. and American Home Mortgage Servicing, Inc., ABN AMRO Bank N.V. and Deutsche Bank National Trust Company.
31.1	—	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or 15(d)-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	—	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or 15(d)-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	—	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	—	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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SIGNATURES

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

	AMERICAN HOME MORTGAGE INVESTMENT CORP.
	(Registrant)
Date: May 10, 2007	By:	/s/ Michael Strauss
		Michael Strauss
		Chairman, Chief Executive Officer and President

Date: May 10, 2007	By:	/s/ Stephen A. Hozie
		Stephen A. Hozie
		Executive Vice President and Chief Financial Officer (Principal Financial Officer)

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INDEX TO EXHIBITS

Exhibit No.		Description
1.1	—	Underwriting Agreement, dated as of April 30, 2007, between American Home Mortgage Investment Corp. and Citigroup Global Markets Inc.
10.1	—	Employment Agreement, dated as of January 1, 2004, by and between American Home Mortgage Holdings, Inc. and Robert F. Johnson, Jr.
10.2	—	Master Repurchase Agreement, dated as of February 28, 2007, by and among American Home Mortgage Acceptance, Inc., American Home Mortgage Corp., American Home Mortgage Investment Corp. and American Home Mortgage Servicing, Inc. and ABN AMRO Bank N.V.
10.3	—	Letter Agreement, dated as of February 28, 2007, by and among American Home Mortgage Acceptance, Inc., American Home Mortgage Corp., American Home Mortgage Investment Corp. and American Home Mortgage Servicing, Inc., the purchasers party thereto, the group agents party thereto and ABN AMRO Bank N.V.
10.4	—	Performance Guaranty, dated as of February 28, 2007, by American Home Mortgage Holdings, Inc. and American Home Mortgage Investment Corp. in favor of ABN AMRO Bank N.V.
10.5	—	Custodial Agreement, dated as of February 28, 2007, by and among American Home Mortgage Acceptance, Inc., American Home Mortgage Corp., American Home Mortgage Investment Corp. and American Home Mortgage Servicing, Inc., ABN AMRO Bank N.V. and Deutsche Bank National Trust Company.
31.1	—	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or 15(d)-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	—	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or 15(d)-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	—	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	—	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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EX-1.1

Exhibit 1.1

Execution Version

American Home Mortgage Investment Corp.

4,000,000 Shares ¹

Common Stock

($0.01 par value)

Underwriting Agreement

New York, New York

April 30, 2007

Citigroup Global Markets Inc.

As Representative of the Underwriters,

c/o Citigroup Global Markets Inc.

388 Greenwich Street

New York, New York 10013

Ladies and Gentlemen:

American Home Mortgage Investment Corp., a corporation organized under the laws of Maryland (the “Company”), proposes to sell to the several underwriters named in Schedule II hereto (the “Underwriters”), for whom you (the “Representatives”) are acting as representatives, the number of shares of common stock, $0.01 par value (“Common Stock”), of the Company set forth in Schedule I hereto (the “Securities”) (said shares to be issued and sold by the Company being hereinafter called the “Underwritten Securities”). The Company also proposes to grant to the Underwriters an option to purchase up to the number of additional shares of Common Stock set forth in Schedule I hereto to cover over-allotments, if any (the “Option Securities”; the Option Securities, together with the Underwritten Securities, being hereinafter called the “Securities”). To the extent there are no additional Underwriters listed on Schedule I other than you, the term Representatives as used herein shall mean you, as Underwriters, and the terms Representatives and Underwriters shall mean either the singular or plural as the context requires. Any reference herein to the Registration Statement, the Base Prospectus, any Preliminary Prospectus or the Final Prospectus shall be deemed to refer to and include the documents incorporated by reference therein pursuant to Item 12 of Form S-3 which were filed under the Exchange Act on or before the Effective Date of the Registration Statement or the issue date of the Base Prospectus, any Preliminary Prospectus or the Final Prospectus, as the case may be; and any reference herein to the terms “amend,” “amendment” or “supplement” with respect to the Registration Statement, the Base Prospectus, any Preliminary Prospectus or the Final Prospectus shall be deemed to refer to and include the filing of any document under the Act

¹ Plus an option to purchase from the Company, up to 600,000 additional Securities to cover over-allotments.

or the Exchange Act, as the case may be, after the Effective Date of the Registration Statement or the issue date of the Base Prospectus, any Preliminary Prospectus or the Final Prospectus, as the case may be, deemed to be incorporated therein by reference. Certain terms used herein are defined in Section 20 hereof.

1. Representations and Warranties. The Company represents and warrants to, and agrees with, the Underwriters as set forth below in this Section 1.

(a) The Company meets the requirements for use of Form S-3 under the Act and has prepared and filed with the Commission a registration statement (the file number of which is set forth in Schedule I hereto) on Form S-3, including a related Base Prospectus, for registration under the Act of the offering and sale of the Securities. Such Registration Statement, including any amendments thereto filed prior to the Execution Time, have become effective. The Company may have filed with the Commission, as part of an amendment to the Registration Statement or pursuant to Rule 424(b), one or more preliminary prospectus supplements relating to the Securities, each of which has previously been furnished to you. The Company will file with the Commission a final prospectus supplement relating to the Securities in accordance with Rule 424(b). As filed, such final prospectus supplement shall contain all information required by the Act and the rules thereunder, and, except to the extent the Representatives shall agree in writing to a modification, shall be in all substantive respects in the form furnished to you prior to the Execution Time or, to the extent not completed at the Execution Time, shall contain only such specific additional information and other changes (beyond that contained in the Base Prospectus and any Preliminary Prospectus) as the Company has advised you, prior to the Execution Time, will be included or made therein. The Registration Statement, at the Execution Time, meets the requirements set forth in Rule 415(a)(1)(x).

(b) On each Effective Date, the Registration Statement did, and when the Final Prospectus is first filed in accordance with Rule 424(b) and on the Closing Date (as defined herein) and on any date on which Option Securities are purchased, if such date is not the Closing Date (a “settlement date”), the Final Prospectus (and any supplement thereto) will, comply in all material respects with the applicable requirements of the Act and the Exchange Act and the respective rules thereunder; on each Effective Date and at the Execution Time, the Registration Statement did not and will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein not misleading; and on the date of any filing pursuant to Rule 424(b) and on the Closing Date and any settlement date, the Final Prospectus (together with any supplement thereto) will not include any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that the Company makes no representations or warranties as to the information contained in or omitted from the Registration Statement or the Final Prospectus (or any supplement thereto) in reliance upon and in conformity with information furnished in writing to the Company by or on behalf of any Underwriters through the Representatives specifically for inclusion in the Registration Statement or the Final Prospectus (or any supplement thereto), it being understood and agreed that the only such information furnished by or on behalf of any Underwriters consists of the information described as such in Section 8 hereof.

2

(c) (i) The Disclosure Package does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The preceding sentence does not apply to statements in or omissions from the Disclosure Package based upon and in conformity with written information furnished to the Company by any Underwriters through the Representatives specifically for use therein, it being understood and agreed that the only such information furnished by or on behalf of any Underwriters consists of the information described as such in Section 8 hereof. The documents incorporated by reference in any Preliminary Prospectus or the Final Prospectus conformed, and any further documents so incorporated will conform, when filed with the Commission, in all material respects to the requirements of the Exchange Act or the Securities Act, as applicable, and the rules and regulations of the Commission thereunder.

(d) (i) At the time of the most recent amendment to the Registration Statement for the purposes of complying with Section 10(a)(3) of the Act (whether such amendment was by post-effective amendment, incorporated report filed pursuant to Sections 13 or 15(d) of the Exchange Act or form of prospectus), (ii) at the time the Company or any person acting on its behalf (within the meaning, for this clause only, of Rule 163(c)) made any offer relating to the Securities in reliance on the exemption in Rule 163, and (iii) at the Execution Time (with such date being used as the determination date for purposes of this clause (iii)), the Company was or is (as the case may be) a “well-known seasoned issuer” as defined in Rule 405. The Company has been, since the time of initial filing of the Registration Statement and continues to be, eligible to use Form S-3 for the offering of the Shares.

(e) (i) At the earliest time after the filing of the Registration Statement that the Company or another offering participant made a bona fide offer (within the meaning of Rule 164(h)(2)) of the Securities and (ii) as of the Execution Time (with such date being used as the determination date for purposes of this clause (ii)), the Company was not and is not an Ineligible Issuer (as defined in Rule 405), without taking account of any determination by the Commission pursuant to Rule 405 that it is not necessary that the Company be considered an Ineligible Issuer.

(f) Each Issuer Free Writing Prospectus, if any, do not include any information that conflicts with the information contained in the Registration Statement, including any document incorporated therein by reference and any prospectus supplement deemed to be a part thereof that has not been superseded or modified. The foregoing sentence does not apply to statements in or omissions from any Issuer Free Writing Prospectus based upon and in conformity with written information furnished to the Company by the Underwriters through the Representatives specifically for use therein, it being understood and agreed that the only such information furnished by or on behalf of any Underwriters consists of the information described as such in Section 8 hereof.

3

(g) the Company has an authorized and outstanding capitalization as set forth in the Disclosure Package and Final Prospectus under the caption “Capitalization;” the outstanding shares of capital stock of the Company and its subsidiaries (as defined below) have been duly and validly authorized and issued and are fully paid and non-assessable and were not issued in violation of any preemptive right, resale right, right of first refusal or similar right, and all of the outstanding shares of capital stock of the subsidiaries are directly or indirectly owned of record and beneficially by the Company; except as disclosed in the Disclosure Package and Final Prospectus, there are no outstanding (i) securities or obligations of the Company or any of its subsidiaries convertible into or exchangeable for any capital stock of the Company or any such subsidiary, (ii) warrants, rights or options to subscribe for or purchase from the Company or any such subsidiary any such capital stock or any such convertible or exchangeable securities or obligations, or (iii) obligations of the Company or any such subsidiary to issue any shares of capital stock, any such convertible or exchangeable securities or obligation, or any such warrants, rights or options;

(h) each of the Company and the Company’s subsidiaries has been duly incorporated and is validly existing as a corporation or limited liability company in good standing under the laws of its respective jurisdiction of incorporation or organization with full corporate or limited liability company power and authority, as the case may be, to own its respective properties and to conduct its respective business as described in the Disclosure Package and the Final Prospectus and, in the case of the Company, to execute and deliver this Agreement and to consummate the transactions contemplated hereby; complete and correct copies of the articles of incorporation, charter or organizational documents, as applicable, and of the bylaws, and all amendments and supplements thereto (collectively, “Charter Documents”), of the Company and the subsidiaries have been delivered to the Representatives, and except as set forth in the exhibits to the Registration Statement no changes therein will be made subsequent to the date hereof and prior to the Closing Date or, if later, each settlement date;

(i) the Company and each of the subsidiaries are duly qualified in or licensed by each jurisdiction in which they conduct their respective businesses, and the Company and each of the subsidiaries are duly qualified, and are in good standing, in each jurisdiction in which they own or lease real property or maintain an office and in which such qualification is necessary, except where the failure to be so qualified or licensed and in good standing, individually and in the aggregate, would not have a material adverse effect on the assets, business, operations, earnings, prospects, properties or condition (financial or otherwise) of the Company and its subsidiaries taken as a whole whether or not arising from transactions occurring in the ordinary course of business (a “Material Adverse Effect”); except as disclosed in the Disclosure Package or Final Prospectus, no subsidiary is prohibited or restricted, directly or indirectly, from paying dividends to the Company, or from making any other distribution with respect to such subsidiary’s capital stock or from repaying to the Company or any other subsidiary any amounts which may from time to time become due under any loans or advances to such subsidiary from the Company or such other subsidiary, or from transferring any such subsidiary’s property or assets to the Company or to any other subsidiary; other than as disclosed in the Disclosure Package or Final Prospectus, the Company does not own, directly or indirectly, any capital stock or other equity securities of any other corporation or any ownership interest in any partnership, joint venture or other association;

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(j) the Company and its subsidiaries are in compliance in all material respects with all applicable laws, rules, regulations, orders, decrees and judgments, including those relating to transactions with affiliates;

(k) neither the Company nor any of its subsidiaries is in breach of or in default under (nor has any event occurred which with notice, lapse of time, or both would constitute a breach of, or default under), its respective Charter Documents, or in the performance or observance of any covenant contained in any license, indenture, mortgage, loan or credit agreement to which the Company or any of its subsidiaries is a party or by which any of them or their respective properties is bound, except for such breaches or defaults which, individually and in the aggregate, would not have a Material Adverse Effect, and the execution, delivery and performance of this Agreement, consummation of the transactions contemplated hereby (including the issuance and sale of the Securities) and the application of the net proceeds from the offering and sale of the Securities to be sold by the Company in the manner set forth in the Disclosure Package and Final Prospectus under the caption “Use of Proceeds” will not (A) conflict with, or result in any breach of, or constitute a default under (nor constitute any event which with notice, lapse of time, or both would constitute a breach of, or default under), (i) any provision of the Charter Documents of the Company or any of its subsidiaries, (ii) any provision of any license, indenture, mortgage, loan or credit agreement or other agreement or instrument to which the Company or any of its subsidiaries is a party or by which any of them or their respective properties may be bound or affected, or (iii) any federal, state, local or foreign law, regulation or rule or any decree, judgment or order applicable to the Company or any of its subsidiaries, except in the case of clauses (ii) or (iii) for such breaches or defaults which, individually and in the aggregate, would not have a Material Adverse Effect or (B) result in the creation or imposition of any lien, charge, claim or encumbrance (collectively, “Lien”) upon any property or asset of the Company or its subsidiaries, except for such Liens which, individually and in the aggregate, would not have a Material Adverse Effect;

(l) all necessary corporate action has been duly and validly taken by the Company to authorize the issuance and sale of the Securities by the Company; the execution and delivery of this Agreement has been duly authorized by the Company and this Agreement is a legal, valid and binding agreement of the Company, enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally, and by general principles of equity, and except to the extent that the indemnification and contribution provisions of Section 8 hereof may be limited by federal or state securities laws and public policy considerations in respect thereof;

(m) no approval, authorization, consent or order of or filing with any federal, state or local governmental or regulatory commission, board, body, authority or agency is required in connection with the Company’s execution, delivery and performance of this Agreement, its consummation of the transaction contemplated hereby, and its issuance,

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sale and delivery of the Securities, other than (A) such as have been obtained, or will have been obtained at the Closing Date or each settlement date, as the case may be, under the Act, (B) such approvals as have been obtained in connection with the approval of the listing of the Securities on the New York Stock Exchange and (C) any necessary qualification under the securities or blue sky laws of the various jurisdictions in which the Securities are being offered by the Underwriters;

(n) each of the Company and its subsidiaries has all necessary licenses, authorizations, consents and approvals and has made all necessary filings required under any federal, state or local law, regulation or rule, and has obtained all necessary authorizations, consents and approvals from other persons, required in order to conduct their respective businesses as described in the Disclosure Package and Final Prospectus, except to the extent that any failure to have any such licenses, authorizations, consents or approvals, to make any such filings or to obtain any such authorizations, consents or approvals would not, individually and in the aggregate, have a Material Adverse Effect; neither the Company nor any of its subsidiaries is in violation of, in default under, or has received any notice regarding a possible violation, default or revocation of any such license, authorization, consent or approval or any federal, state, local or foreign law, regulation or rule or any decree, order or judgment applicable to the Company or any of its subsidiaries the effect of which, individually or in the aggregate, would reasonably be expected to result in a Material Adverse Effect;

(o) there are no actions, suits, proceedings, inquiries or investigations pending or, to the knowledge of the Company, threatened against the Company or any of its subsidiaries or any of their respective officers and directors or to which the properties, assets or rights of any such entity are subject, at law or in equity, before or by any federal, state, local or foreign governmental or regulatory commission, board, body, authority, arbitral panel or agency which could result in a judgment, decree, award or order having a Material Adverse Effect or preventing the consummation of the transactions contemplated hereby;

(p) the financial statements, including the notes thereto, included or incorporated by reference in the Disclosure Package and the Final Prospectus present fairly in all material respects the consolidated financial position of the entities to which such financial statements relate (the “Covered Entities”) as of the dates indicated and the consolidated results of operations and changes in financial position and cash flows of the Covered Entities for the periods specified; such financial statements have been prepared in conformity with United States generally accepted accounting principles applied on a consistent basis during the periods involved and in accordance with Regulation S-X promulgated by the Commission; the financial statement schedules included or incorporated by reference in the Registration Statement fairly present the information shown therein; the unaudited pro forma financial information (including the related notes) included or incorporated by reference in the Disclosure Package and Final Prospectus or any Preliminary Prospectus complies as to form in all material respects to the applicable accounting requirements of the Act and the rules and regulations thereunder, and management of the Company believes that the assumptions underlying the pro forma adjustments are reasonable; such pro forma adjustments have been properly

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applied to the historical amounts in the compilation of the information and such information fairly presents with respect to the Company and the subsidiaries, the financial position, results of operations and other information purported to be shown therein at the respective dates and for the respective periods specified;

(q) Deloitte & Touche LLP whose reports on the consolidated financial statements of the Company and its subsidiaries are filed with the Commission and incorporated by reference in the Registration Statement, Disclosure Package and Final Prospectus, are and were during the periods covered by their reports independent public accountants as required by the Act and the regulations thereunder;

(r) the capital stock of the Company conforms in all material respects to the description thereof contained in the Registration Statement, Disclosure Package and the Final Prospectus;

(s) the Securities have been duly authorized and, when issued and duly delivered against payment therefor as contemplated by this Agreement, will be validly issued, fully paid and nonassessable, free and clear of any pledge, Lien, security interest or other claim, and the issuance and sale of the Securities by the Company is not subject to preemptive or other similar rights arising by operation of law, under the Charter Documents of the Company, under any agreement to which the Company or any of its subsidiaries is a party or otherwise;

(t) neither the Company nor any of its affiliates (i) is required to register as a “broker” or “dealer” in accordance with the provisions of the Exchange Act, or the rules and regulations thereunder, or (ii) directly, or indirectly through one or more intermediaries, controls or has any other association with (within the meaning of Article I of the Bylaws of the National Association of Securities Dealers, Inc. (the “NASD”)) any member firm of the NASD;

(u) the form of certificate used to evidence the Common Stock complies in all material respects with all applicable statutory requirements and any requirements under the Company’s certificate of incorporation;

(v) the Company has good and marketable title in fee simple to its office headquarters, free and clear of all Liens, except for such Liens or defects in title which would not individually and in the aggregate have a Material Adverse Effect; and any real property and buildings held under lease by the Company or any subsidiary are held under valid, existing and enforceable leases, except for any exceptions which would not individually and in the aggregate have a Material Adverse Effect;

(w) the Company and each of its subsidiaries have in place a system of internal accounting controls sufficient to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and including those policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the

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Company, (ii) provide reasonable assurance that transactions are recorded as necessary to permit the preparation of the Company’s consolidated financial statements in accordance with generally accepted accounting principles, (iii) provide reasonable assurance that receipts and expenditures of the Company are being made only in accordance with management’s general or specific authorization, and (iv) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on its financial statements;

(x) each of the Company and the subsidiaries has filed on a timely basis all necessary federal, state, local and foreign income and franchise tax returns required to be filed through the date hereof and have paid all taxes shown as due thereon; and no tax deficiency has been asserted against any such entity, nor does any such entity know of any tax deficiency which is likely to be asserted against any such entity which, if determined adversely to any such entity, could, individually or in the aggregate, have a Material Adverse Effect; all tax liabilities are adequately provided for on the respective books of such entities;

(y) neither the Company nor any of its subsidiaries nor, to the knowledge of the senior executive officer’s of the Company, any officer or director purporting to act on behalf of the Company or any of its subsidiaries has at any time: (i) made any contributions to any candidate for political office, or failed to disclose fully any such contributions, in violation of law, (ii) made any payment to any state, federal or foreign governmental officer or official, or other person charged with similar public or quasi-public duties, other than payments required or allowed by applicable law, (iii) made any payment outside the ordinary course of business to any investment officer or loan broker or person charged with similar duties of any entity to which the Company or any of its subsidiaries sells or from which the Company or any of its subsidiaries buys loans or servicing arrangements for the purpose of influencing such agent, officer, broker or person to buy loans or servicing arrangements from or sell loans to the Company or any of its subsidiaries, (iv) engaged in any transactions, maintained any bank account or used any corporate funds except for transactions, bank accounts and funds which have been and are reflected in the normally maintained books and records of the Company and its subsidiaries or (v) made any other payment of funds of the Company or its subsidiaries or received or retained any funds in violation of any law, rule or regulation, which payment, receipt or retention of funds is of a character required to be disclosed in the Registration Statement, Disclosure Package or the Prospectus;

(z) the Company acknowledges and agrees that (i) the Underwriters are acting as a principal and not as an agent or fiduciary of the Company and (ii) its engagement of the Underwriters in connection with the offering of the Securities contemplated hereby and not in any other capacity; none of the Underwriters, their representatives or their legal counsel is advising or has advised the Company, its affiliates or any other person as to any legal, tax, investment, accounting, financial or regulatory matters in any jurisdiction with respect to the transactions contemplated hereby; the Company shall consult with its own advisors concerning such matters and agrees that it is solely responsible for making its own judgments in connection with the offering of the Securities contemplated hereby (irrespective of whether the Underwriters have advised or are currently advising the Company on related or other matters);

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(aa) the Company has not distributed and will not distribute any Prospectus or other offering material in connection with the offer and sale of the Securities;

(bb) neither the Company nor any of the subsidiaries is and, after giving effect to the offering and sale of the Securities, will be an “investment company” or an entity “controlled” by an “investment company”, as such terms are defined in the Investment Company Act of 1940, as amended (the “Investment Company Act”);

(cc) the Company meets the requirements for qualification and taxation as a “real estate investment trust” (a “REIT”) under the Internal Revenue Code of 1986, as amended (the “Code”); and

(dd) as of the date of this Agreement and as of the date of the filing of the Company’s report on Form 10-K for the year ended December 31, 2006, the Company meets the requirements for use of Form S-3 pursuant to the standards for such form prior to October 21, 1992.

Any certificate signed by any officer of the Company and delivered to the Representatives or counsel for the Underwriters in connection with the offering of the Securities shall be deemed a representation and warranty by the Company, as to matters covered thereby, to each Underwriter.

2. Purchase and Sale. (a) Subject to the terms and conditions and in reliance upon the representations and warranties herein set forth, the Company agrees to sell to each Underwriter, and each Underwriter agrees, severally and not jointly, to purchase from the Company, at the purchase price set forth in Schedule I hereto, the number of Underwritten Securities set forth opposite such Underwriter’s name in Schedule II hereto.

(b) Subject to the terms and conditions and in reliance upon the representations and warranties herein set forth, the Company hereby grants an option to the Underwriters to purchase, severally and not jointly, up to the number of Option Securities set forth in Schedule I hereto at the same purchase price per share as the Underwriters shall pay for the Underwritten Securities. Said option may be exercised only to cover over-allotments in the sale of the Underwritten Securities by the Underwriters. Said option may be exercised in whole or in part at any time on or before the 30th day after the date of the Final Prospectus upon written or telegraphic notice by the Representatives to the Company setting forth the number of Option Securities as to which the several Underwriters are exercising the option and the settlement date. The number of Option Securities to be purchased by each Underwriter shall be the same percentage of the total number of Option Securities to be purchased by the several Underwriters as such Underwriters is purchasing of the Underwritten Securities, subject to such adjustments as you in your absolute discretion shall make to eliminate any fractional shares.

3. Delivery and Payment. Delivery of and payment for the Underwritten Securities and the Option Securities (if the option provided for in Section 2(b) hereof shall have

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been exercised on or before the third Business Day immediately preceding the Closing Date) shall be made on the date and at the time specified in Schedule I hereto or at such time on such later date not more than three Business Days after the foregoing date as the Representatives shall designate, which date and time may be postponed by agreement between the Representatives and the Company or as provided in Section 9 hereof (such date and time of delivery and payment for the Securities being herein called the “Closing Date”). Delivery of the Securities shall be made to the Representatives for the respective accounts of the several Underwriters against payment by the several Underwriters through the Representatives of the purchase price thereof to or upon the order of the Company by wire transfer payable in same-day funds to an account specified by the Company. Delivery of the Underwritten Securities and the Option Securities shall be made through the facilities of The Depository Trust Company unless the Representatives shall otherwise instruct.

If the option provided for in Section 2(b) hereof is exercised after the third Business Day immediately preceding the Closing Date, the Company will deliver the Option Securities (at the expense of the Company) to the Representatives, at 388 Greenwich Street, New York, New York, on the date specified by the Representatives (which shall be within three Business Days after exercise of said option) for the respective accounts of the Underwriters, against payment by the Underwriters through the Representatives of the purchase price thereof to or upon the order of the Company by wire transfer payable in same-day funds to an account specified by the Company. If settlement for the Option Securities occurs after the Closing Date, the Company will deliver to the Representatives on the settlement date for the Option Securities, and the obligation of the Underwriters to purchase the Option Securities shall be conditioned upon receipt of, supplemental opinions, certificates and letters confirming as of such date the opinions, certificates and letters delivered on the Closing Date pursuant to Section 6 hereof.

4. Offering by Underwriters. It is understood that the several Underwriters propose to offer the Securities for sale to the public as set forth in the Final Prospectus.

5. Agreements. The Company agrees with the several Underwriters that:

(a) Prior to the termination of the offering of the Securities, the Company will not file any amendment of the Registration Statement or supplement (including the Final Prospectus or any Preliminary Prospectus) to the Base Prospectus or any Rule 462(b) Registration Statement unless the Company has furnished you a copy for your review prior to filing and will not file any such proposed amendment or supplement to which you reasonably object. The Company will cause the Final Prospectus, properly completed, and any supplement thereto to be filed in a form approved by the Representatives with the Commission pursuant to the applicable paragraph of Rule 424(b) within the time period prescribed and will provide evidence satisfactory to the Representatives of such timely filing. The Company will promptly advise the Representatives (i) when the Final Prospectus, and any supplement thereto, shall have been filed (if required) with the Commission pursuant to Rule 424(b) or when any Rule 462(b) Registration Statement shall have been filed with the Commission, (ii) when, prior to termination of the offering of the Securities, any amendment to the Registration Statement shall have been filed or become effective, (iii) of any request by the Commission or its staff for any amendment of the Registration Statement, or any

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Rule 462(b) Registration Statement, or for any supplement to the Final Prospectus or for any additional information, (iv) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or of any notice objecting to its use or the institution or threatening of any proceeding for that purpose and (v) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Securities for sale in any jurisdiction or the institution or threatening of any proceeding for such purpose. The Company will use its best efforts to prevent the issuance of any such stop order or the occurrence of any such suspension or objection to the use of the Registration Statement and, upon such issuance, occurrence or notice of objection, to obtain as soon as possible the withdrawal of such stop order or relief from such occurrence or objection, including, if necessary, by filing an amendment to the Registration Statement or a new registration statement and using its best efforts to have such amendment or new registration statement declared effective as soon as practicable.

(b) If, at any time prior to the filing of the Final Prospectus pursuant to Rule 424(b), any event occurs as a result of which the Disclosure Package would include any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein in the light of the circumstances under which they were made or the circumstances then prevailing not misleading, the Company will (i) notify promptly the Representatives so that any use of the Disclosure Package may cease until it is amended or supplemented; (ii) amend or supplement the Disclosure Package to correct such statement or omission; and (iii) supply any amendment or supplement to you in such quantities as you may reasonably request.

(c) If, at any time when a prospectus relating to the Securities is required to be delivered under the Act (including in circumstances where such requirement may be satisfied pursuant to Rule 172), any event occurs as a result of which the Final Prospectus as then supplemented would include any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein in the light of the circumstances under which they were made at such time not misleading, or if it shall be necessary to amend the Registration Statement, file a new registration statement or supplement the Final Prospectus to comply with the Act or the Exchange Act or the respective rules thereunder, including in connection with use or delivery of the Final Prospectus, the Company promptly will (i) notify the Representatives of any such event, (ii) prepare and file with the Commission, subject to the second sentence of paragraph (a) of this Section 5, an amendment or supplement or new registration statement which will correct such statement or omission or effect such compliance, (iii) use its best efforts to have any amendment to the Registration Statement or new registration statement declared effective as soon as practicable in order to avoid any disruption in use of the Final Prospectus and (iv) supply any supplemented Final Prospectus to you in such quantities as you may reasonably request.

(d) As soon as practicable, the Company will make generally available to its security holders and to the Representatives an earnings statement or statements of the Company and its subsidiaries which will satisfy the provisions of Section 11(a) of the Act and Rule 158.

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(e) The Company will furnish to the Representatives and counsel for the Underwriters, without charge, signed copies of the Registration Statement (including exhibits thereto) and to the Underwriters a copy of the Registration Statement (without exhibits thereto) and, so long as delivery of a prospectus by the Underwriters or dealer may be required by the Act (including in circumstances where such requirement may be satisfied pursuant to Rule 172), as many copies of each Preliminary Prospectus, the Final Prospectus and each Issuer Free Writing Prospectus and any supplement thereto as the Representatives may reasonably request. The Company will pay the expenses of printing or other production of all documents relating to the offering.

(f) The Company will arrange, if necessary, for the qualification of the Securities for sale under the laws of such jurisdictions as the Representatives may designate and will maintain such qualifications in effect so long as required for the distribution of the Securities; provided that in no event shall the Company be obligated to qualify to do business in any jurisdiction where it is not now so qualified or to take any action that would subject it to service of process in suits, other than those arising out of the offering or sale of the Securities, in any jurisdiction where it is not now so subject.

(g) The Company agrees that, unless it has or shall have obtained the prior written consent of the Representatives, and each Underwriter, severally and not jointly, agrees with the Company that, unless it has or shall have obtained, as the case may be, the prior written consent of the Company, it has not made and will not make any offer relating to the Securities that would constitute an Issuer Free Writing Prospectus or that would otherwise constitute a “free writing prospectus” (as defined in Rule 405) required to be filed by the Company with the Commission or retained by the Company under Rule 433; provided that the prior written consent of the parties hereto shall be deemed to have been given in respect of the Free Writing Prospectuses included in Schedule III hereto. Any such free writing prospectus consented to by the Representatives or the Company is hereinafter referred to as a “Permitted Free Writing Prospectus.” The Company agrees that (x) it has treated and will treat, as the case may be, each Permitted Free Writing Prospectus as an Issuer Free Writing Prospectus and (y) it has complied and will comply, as the case may be, with the requirements of Rules 164 and 433 applicable to any Permitted Free Writing Prospectus, including in respect of timely filing with the Commission, legending and record keeping.

(h) The Company will not sell, offer or agree to sell, contract to sell, hypothecate, pledge, grant any option to sell or otherwise dispose of, directly or indirectly, any shares of Common Stock or securities convertible into or exercisable or exchangeable for Common Stock or warrants or other rights to purchase Common Stock or enter into any swap or any other agreement or any transaction that transfers, in whole or in part, directly or indirectly, the economic consequences of ownership of Common Stock, or file or cause to be declared effective a registration statement under the Securities Act relating to the offer and sale of any shares of Common Stock or securities convertible into or exercisable or exchangeable for Common Stock or other rights to purchase Common Stock for a period of 30 days after the date hereof (the “Lock-Up Period”), without the prior written consent of the Representative, except for (i) the sales to the Underwriters pursuant to this Agreement and (ii) (x) the issuance of employee

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stock options granted under the Company’s employee benefit plans, (y) securities issued in connection with the Company’s dividend reinvestment plan, as described in the Registration Statement and the Prospectus or incorporated by reference therein or (z) securities issued in connection with strategic acquisitions by the Company or transactions involving the exchange of the Company’s stock for the stock of other entities;

(i) The Company will not take, directly or indirectly, any action designed to or that would constitute or that might reasonably be expected to cause or result in, under the Exchange Act or otherwise, stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Securities.

(j) The Company agrees to pay the costs and expenses relating to the following matters: (i) the preparation, printing or reproduction and filing with the Commission of the Registration Statement (including financial statements and exhibits thereto), each Preliminary Prospectus, the Final Prospectus and each Issuer Free Writing Prospectus, and each amendment or supplement to any of them; (ii) the printing (or reproduction) and delivery (including postage, air freight charges and charges for counting and packaging) of such copies of the Registration Statement, each Preliminary Prospectus, the Final Prospectus and each Issuer Free Writing Prospectus, and all amendments or supplements to any of them, as may, in each case, be reasonably requested for use in connection with the offering and sale of the Securities; (iii) the preparation, printing, authentication, issuance and delivery of certificates for the Securities, including any stamp or transfer taxes in connection with the original issuance and sale of the Securities; (iv) the printing (or reproduction) and delivery of this Agreement, any blue sky memorandum and all other agreements or documents printed (or reproduced) and delivered in connection with the offering of the Securities; (v) the registration of the Securities under the Exchange Act and the listing of the Securities on the New York Stock Exchange; (vi) any registration or qualification of the Securities for offer and sale under the securities or blue sky laws of the several states (including filing fees and the reasonable fees and expenses of counsel for the Underwriters relating to such registration and qualification); (vii) any filings required to be made with the NASD, Inc. (including filing fees and the reasonable fees and expenses of counsel for the Underwriters relating to such filings); (viii) the transportation and other expenses incurred by or on behalf of Company representatives in connection with presentations to prospective purchasers of the Securities; (ix) the fees and expenses of the Company’s accountants and the fees and expenses of counsel (including local and special counsel) for the Company; and (x) all other costs and expenses incident to the performance by the Company of its obligations hereunder.

6. Conditions to the Obligations of the Underwriters. The obligations of the Underwriters to purchase the Underwritten Securities and the Option Securities, as the case may be, shall be subject to the accuracy of the representations and warranties on the part of the Company contained herein as of the Execution Time, the Closing Date and any settlement date pursuant to Section 3 hereof, to the accuracy of the statements of the Company made in any certificates pursuant to the provisions hereof, to the performance by the Company of its obligations hereunder and to the following additional conditions:

(a) The Final Prospectus, and any supplement thereto, have been filed in the manner and within the time period required by Rule 424(b); any material required to be filed by the Company pursuant to Rule 433(d) under the Act, shall have been filed with the Commission within the applicable time periods prescribed for such filings by Rule 433; and no stop order suspending the effectiveness of the Registration Statement or any notice objecting to its use shall have been issued and no proceedings for that purpose shall have been instituted or threatened.

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(b) The Company shall furnish to the Underwriters at the Closing Date and at each settlement date, if any, opinions of Thacher Proffitt & Wood LLP, special counsel to the Company and its subsidiaries, and Ballard, Spahr, Andrews & Ingersoll, LLP, Maryland corporate counsel to the Company and its subsidiaries, as to matters of Maryland law, and Alan B. Horn, general counsel of the Company, addressed to the Underwriters and dated the Closing Date and any settlement date and in form and substance satisfactory to Underwriters’ counsel, in the form set forth in Exhibit A hereto:

(c) The Representatives shall have received from Deloitte & Touche LLP, letters dated, respectively, as of the date of this Agreement, the Closing Date and any settlement date, as the case may be, addressed to the Representatives, in form and substance satisfactory to the Representatives, relating to the financial statements of the Company and its subsidiaries, including any pro forma financial statements and such other matters customarily covered by comfort letters issued in connection with registered public offerings in the forms heretofore approved by the Representatives.

(d) The Representatives shall have received at the Closing Date and at each settlement date, as applicable, the favorable opinion of Cadwalader, Wickersham & Taft LLP, counsel for the Underwriters, dated the Closing Date or any settlement date, as applicable, addressed to the Representatives with respect to such matters as the Representatives reasonably may request.

(e) No amendment or supplement to the Registration Statement or Prospectus shall have been filed to which the Underwriters shall have objected in writing.

(f) Subsequent to the Execution Time or, if earlier, the dates as of which information is given in the Registration Statement (exclusive of any amendment thereof) and the Final Prospectus (exclusive of any amendment or supplement thereto), there shall not have been any change, or any development involving a prospective change, in or affecting the condition (financial or otherwise), earnings, business or properties of the Company and its subsidiaries taken as a whole, whether or not arising from transactions in the ordinary course of business, except as set forth in or contemplated in the Disclosure Package and the Final Prospectus (exclusive of any amendment or supplement thereto) the effect of which, is, in the sole judgment of the Representatives, so material and adverse as to make it impractical or inadvisable to proceed with the offering or delivery of the Securities as contemplated by the Registration Statement (exclusive of any amendment thereof), the Disclosure Package and the Final Prospectus (exclusive of any amendment or supplement thereto).

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(g) Between the time of execution of this Agreement and the Closing Date or any settlement date, as the case may be, (i) no material and unfavorable change or any development involving a prospective material adverse change, financial or otherwise (other than such change or development specifically identified in the Registration Statement and Base Prospectus at the time of this Agreement), in the business, properties, financial condition, results of operation of the Company and its subsidiaries taken as a whole shall occur or become known (ii) no obligation, direct or contingent, which is material to the Company and its subsidiaries taken as a whole, shall have been incurred by the Company or its subsidiaries, other than in the ordinary course of business, (iii) there shall be no material change in the capital stock or outstanding indebtedness of the Company or its subsidiaries, other than in the ordinary course of business and (iv) there shall not have been any dividend or distribution of any kind declared, paid or made on the capital stock of the Company (except as described in the Base Prospectus as amended and supplemented).

(h) The NASD shall not have raised any objection with respect to the fairness and reasonableness of the underwriting terms and arrangements.

(i) The Securities shall have been approved for listing on the New York Stock Exchange.

(j) The Company will, at the Closing Date and at any settlement date, deliver to the Underwriters a certificate of its Chairman of the Board and Chief Executive Officer and its Executive Vice President and Chief Financial Officer to the effect that, to each of such officer’s knowledge, the representations and warranties of the Company set forth in this Agreement are true and correct on and as of such date with the same effect as if made on such date, and the Company has performed all covenants and agreements and satisfied all conditions contained in this Agreement required to be performed or satisfied by it at or prior to such date and the conditions set forth in paragraphs (f), (g) and (i) have been satisfied, in each case as of such date.

(k) The Company shall have furnished to the Underwriters such other documents and certificates as to the accuracy and completeness of any statement in the Registration Statement, Disclosure Package and the Final Prospectus, the representations, warranties and statements of the Company contained herein, and the performance by the Company of its covenants contained herein, and the fulfillment of any conditions contained herein, as of the Closing Date or any settlement date as the Underwriters may reasonably request.

(l) The Company shall have performed such of its obligations under this Agreement as are to be performed by the terms hereof at or before the Closing Date or any settlement date.

7. Reimbursement of Underwriters’ Expenses. If the sale of the Securities provided for herein is not consummated because any condition to the obligations of the Underwriters set forth in Section 6 hereof is not satisfied, because of any termination pursuant to Section 10 hereof or because of any refusal, inability or failure on the part of the Company to

15

perform any agreement herein or comply with any provision hereof other than by reason of a default by the Underwriters, the Company will reimburse the Underwriters severally through Citigroup Global Markets Inc. on demand for all expenses (including reasonable fees and disbursements of counsel) that shall have been incurred by them in connection with the proposed purchase and sale of the Securities.

8. Indemnification and Contribution. (a) The Company agrees to indemnify and hold harmless each Underwriter, the directors, officers, employees and agents of each Underwriter and each person who controls any Underwriter within the meaning of either the Act or the Exchange Act against any and all losses, claims, damages or liabilities, joint or several, to which they or any of them may become subject under the Act, the Exchange Act or other Federal or state statutory law or regulation, at common law or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the registration statement for the registration of the Securities as originally filed or in any amendment thereof, or in the Base Prospectus, any Preliminary Prospectus or any other preliminary prospectus supplement relating to the Securities, Disclosure Package and the Final Prospectus or any Issuer Free Writing Prospectus, or in any amendment thereof or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and agrees to reimburse each such indemnified party, as incurred, for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the Company will not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon any such untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance upon and in conformity with written information furnished to the Company by or on behalf of the Underwriters through the Representatives specifically for inclusion therein. This indemnity agreement will be in addition to any liability which the Company may otherwise have.

(b) The Underwriters severally and not jointly agrees to indemnify and hold harmless the Company, each of its directors, each of its officers who signs the Registration Statement, and each person who controls the Company within the meaning of either the Act or the Exchange Act, to the same extent as the foregoing indemnity from the Company to the Underwriters, but only with reference to written information relating to the Underwriters furnished to the Company by or on behalf of the Underwriters through the Representatives specifically for inclusion in the documents referred to in the foregoing indemnity. This indemnity agreement will be in addition to any liability which the Underwriters may otherwise have. The Company acknowledges that the statements set forth (i) in the last paragraph of the cover page regarding delivery of the Securities and, under the heading “Underwriting” or “Plan of Distribution”, (ii) the list of Underwriters and their respective participation in the sale of the Securities, (iii) the sentences related to concessions and reallowances and (iv) the paragraph related to stabilization, syndicate covering transactions and penalty bids in any Preliminary Prospectus and the Final Prospectus constitute the only information furnished in writing by or on behalf of the Underwriters for inclusion in any Preliminary Prospectus, the Final Prospectus or any Issuer Free Writing Prospectus.

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(c) Promptly after receipt by an indemnified party under this Section 8 of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Section 8, notify the indemnifying party in writing of the commencement thereof; but the failure so to notify the indemnifying party (i) will not relieve it from liability under paragraph (a) or (b) above unless and to the extent it did not otherwise learn of such action and such failure results in the forfeiture by the indemnifying party of substantial rights and defenses and (ii) will not, in any event, relieve the indemnifying party from any obligations to any indemnified party other than the indemnification obligation provided in paragraph (a) or (b) above. The indemnifying party shall be entitled to appoint counsel of the indemnifying party’s choice at the indemnifying party’s expense to represent the indemnified party in any action for which indemnification is sought (in which case the indemnifying party shall not thereafter be responsible for the fees and expenses of any separate counsel retained by the indemnified party or parties except as set forth below); provided, however, that such counsel shall be satisfactory to the indemnified party. Notwithstanding the indemnifying party’s election to appoint counsel to represent the indemnified party in an action, the indemnified party shall have the right to employ separate counsel (including local counsel), and the indemnifying party shall bear the reasonable fees, costs and expenses of such separate counsel if (i) the use of counsel chosen by the indemnifying party to represent the indemnified party would present such counsel with a conflict of interest, (ii) the actual or potential defendants in, or targets of, any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that there may be legal defenses available to it and/or other indemnified parties which are different from or additional to those available to the indemnifying party, (iii) the indemnifying party shall not have employed counsel satisfactory to the indemnified party to represent the indemnified party within a reasonable time after notice of the institution of such action or (iv) the indemnifying party shall authorize the indemnified party to employ separate counsel at the expense of the indemnifying party. An indemnifying party will not, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified parties are actual or potential parties to such claim or action) unless such settlement, compromise or consent includes an unconditional release of each indemnified party from all liability arising out of such claim, action, suit or proceeding.

(d) In the event that the indemnity provided in paragraph (a), (b) or (c) of this Section 8 is unavailable to or insufficient to hold harmless an indemnified party for any reason, the Company and the Underwriters severally agree to contribute to the aggregate losses, claims, damages and liabilities (including legal or other expenses reasonably incurred in connection with investigating or defending the same) (collectively “Losses”) to which the Company and one or more of the Underwriters may be subject in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and by the Underwriters on the other from the offering of the Securities;

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provided, however, that in no case shall any Underwriter (except as may be provided in any agreement among underwriters relating to the offering of the Securities) be responsible for any amount in excess of the underwriting discount or commission applicable to the Securities purchased by such Underwriter hereunder. If the allocation provided by the immediately preceding sentence is unavailable for any reason, the Company and the Underwriters severally shall contribute in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the Company on the one hand and of the Underwriters on the other in connection with the statements or omissions which resulted in such Losses as well as any other relevant equitable considerations. Benefits received by the Company shall be deemed to be equal to the total net proceeds from the offering (before deducting expenses) received by it, and benefits received by the Underwriters shall be deemed to be equal to the total underwriting discounts and commissions, in each case as set forth on the cover page of the Final Prospectus. Relative fault shall be determined by reference to, among other things, whether any untrue or any alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information provided by the Company on the one hand or the Underwriters on the other, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The Company and the Underwriters agree that it would not be just and equitable if contribution were determined by pro rata allocation or any other method of allocation which does not take account of the equitable considerations referred to above. Notwithstanding the provisions of this paragraph (d), no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 8, each person who controls an Underwriter within the meaning of either the Act or the Exchange Act and each director, officer, employee and agent of an Underwriter shall have the same rights to contribution as such Underwriter, and each person who controls the Company within the meaning of either the Act or the Exchange Act, each officer of the Company who shall have signed the Registration Statement and each director of the Company shall have the same rights to contribution as the Company, subject in each case to the applicable terms and conditions of this paragraph (d).

9. Reserved.

10. Termination. This Agreement shall be subject to termination in the absolute discretion of the Representatives, by notice given to the Company prior to delivery of and payment for the Securities, if at any time prior to such delivery and payment (i) trading in the Company’s Common Stock shall have been suspended by the Commission or the New York Stock Exchange or trading in securities generally on the New York Stock Exchange shall have been suspended or limited or minimum prices shall have been established on such exchange, (ii) a banking moratorium shall have been declared either by Federal or New York State authorities or (iii) there shall have occurred any outbreak or escalation of hostilities, declaration by the United States of a national emergency or war, or other calamity or crisis the effect of which on financial markets is such as to make it, in the sole judgment of the Representatives, impractical or inadvisable to proceed with the offering or delivery of the Securities as contemplated by any Preliminary Prospectus, the Disclosure Package or the Final Prospectus (exclusive of any amendment or supplement thereto).

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11. Representations and Indemnities to Survive. The respective agreements, representations, warranties, indemnities and other statements of the Company or its officers and of the Underwriters set forth in or made pursuant to this Agreement will remain in full force and effect, regardless of any investigation made by or on behalf of any Underwriter or the Company or any of the officers, directors, employees, agents or controlling persons referred to in Section 8 hereof, and will survive delivery of and payment for the Securities. The provisions of Sections 7 and 8 hereof shall survive the termination or cancellation of this Agreement.

12. Notices. All communications hereunder will be in writing and effective only on receipt, and, if sent to the Representatives, will be mailed, delivered or telefaxed to the Citigroup Global Markets Inc. General Counsel (fax no.: (212) 816- 7912) and confirmed to the General Counsel, Citigroup Global Markets Inc., at 388 Greenwich Street, New York, New York, 10013, Attention: General Counsel; or, if sent to the Company, will be mailed, delivered or telefaxed to (516) 949-3901 and confirmed to it at 538 Broadhollow Road, Melville, New York 11747, Attention: Alan Horn.

13. Successors. This Agreement will inure to the benefit of and be binding upon the parties hereto and their respective successors and the officers, directors, employees, agents and controlling persons referred to in Section 8 hereof, and no other person will have any right or obligation hereunder.

14. No fiduciary duty. The Company hereby acknowledges that (a) the purchase and sale of the Securities pursuant to this Agreement is an arm’s-length commercial transaction between the Company, on the one hand, and the Underwriters and any affiliate through which it may be acting, on the other, (b) the Underwriters are acting as principal and not as an agent or fiduciary of the Company and (c) the Company’s engagement of the Underwriters in connection with the offering and the process leading up to the offering is as independent contractors and not in any other capacity. Furthermore, the Company agrees that it is solely responsible for making its own judgments in connection with the offering (irrespective of whether any of the Underwriters has advised or is currently advising the Company on related or other matters). The Company agrees that it will not claim that the Underwriters have rendered advisory services of any nature or respect, or owe an agency, fiduciary or similar duty to the Company, in connection with such transaction or the process leading thereto.

15. Integration. This Agreement supersedes all prior agreements and understandings (whether written or oral) between the Company and the Underwriters, or any of them, with respect to the subject matter hereof.

16. Applicable Law. This Agreement will be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and to be performed within the State of New York.

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17. Waiver of Jury Trial. The Company hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby.

18. Counterparts. This Agreement may be signed in one or more counterparts, each of which shall constitute an original and all of which together shall constitute one and the same agreement.

19. Headings. The section headings used herein are for convenience only and shall not affect the construction hereof.

20. Definitions. The terms that follow, when used in this Agreement, shall have the meanings indicated.

“Act” shall mean the Securities Act of 1933, as amended, and the rules and regulations of the Commission promulgated thereunder.

“Base Prospectus” shall mean the base prospectus referred to in paragraph 1(a) above contained in the Registration Statement at the Execution Time.

“Business Day” shall mean any day other than a Saturday, a Sunday or a legal holiday or a day on which banking institutions or trust companies are authorized or obligated by law to close in New York City.

“Commission” shall mean the Securities and Exchange Commission.

“Disclosure Package” shall mean (i) the Base Prospectus, (ii) the Preliminary Prospectus, if any, used most recently prior to the Execution Time, (iii) the Schedule IV information, (iv) the Issuer Free Writing Prospectuses, if any, identified in Schedule III hereto, and (v) any other Free Writing Prospectus that the parties hereto shall hereafter expressly agree in writing to treat as part of the Disclosure Package.

“Effective Date” shall mean each date and time that the Registration Statement, any post-effective amendment or amendments thereto and any Rule 462(b) Registration Statement became or becomes effective.

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder.

“Execution Time” shall mean the date and time that this Agreement is executed and delivered by the parties hereto.

“Final Prospectus” shall mean the prospectus supplement relating to the Securities that was first filed pursuant to Rule 424(b) after the Execution Time, together with the Base Prospectus.

“Free Writing Prospectus” shall mean a free writing prospectus, as defined in Rule 405.

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“Issuer Free Writing Prospectus” shall mean an issuer free writing prospectus, as defined in Rule 433.

“Preliminary Prospectus” shall mean any preliminary prospectus supplement to the Base Prospectus referred to in paragraph 1(a) above which is used prior to the filing of the Final Prospectus, together with the Base Prospectus.

“Registration Statement” shall mean the registration statement referred to in paragraph 1(a) above, under File No. 333-121304, including exhibits and financial statements and any prospectus supplement relating to the Securities that is filed with the Commission pursuant to Rule 424(b) and deemed part of such registration statement pursuant to Rule 430B, as amended on each Effective Date and, in the event any post-effective amendment thereto or any Rule 462(b) Registration Statement becomes effective prior to the Closing Date, shall also mean such registration statement as so amended or such Rule 462(b) Registration Statement, as the case may be.

“Rule 158”, “Rule 163”, “Rule 164”, “Rule 172”, “Rule 405”, “Rule 415”, “Rule 424”, “Rule 430B”, “Rule 433” and “Rule 462” refer to such rules under the Act.

“Rule 462(b) Registration Statement” shall mean a registration statement and any amendments thereto filed pursuant to Rule 462(b) relating to the offering covered by the registration statement referred to in Section 1(a) hereof.

“Schedule IV information” shall mean the information set forth on Schedule IV to this Underwriting Agreement.

“Well-Known Seasoned Issuer” shall mean a well-known seasoned issuer, as defined in Rule 405.

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If the foregoing is in accordance with your understanding of our agreement, please sign and return to us the enclosed duplicate hereof, whereupon this letter and your acceptance shall represent a binding agreement among the Company and the Underwriters.

Very truly yours,
American Home Mortgage Investment Corp.
By:	/s/ Michael Strauss
Name:	Michael Strauss
Title:	Chief Executive Officer and President

The foregoing Agreement is hereby confirmed and accepted as of the date specified in Schedule I hereto.
Citigroup Global Markets Inc.
By:	/s/ Victor J. Voorheis
Name:	Victor J. Voorheis
Title:	Managing Director
For itself and the other Underwriters, if any, named in Schedule II to the foregoing Agreement.

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SCHEDULE I

Underwriting Agreement dated April 30, 2007

Registration Statement No. 333-121304

Representatives: Citigroup Global Markets Inc.

Title and Description of Securities:

Title: Common Stock

Number of Underwritten Securities to be sold by the Company: 4,000,000

Number of Option Securities to be sold by the Company: 600,000

Price per Share to the Underwriters: $23.10

Closing Date, Time and Location:

May 4, 2007, at 10:00 a.m. at:

Cadwalader, Wickersham & Taft LLP

One World Financial Center

New York, NY 10281

Type of Offering: Non-Delayed

Date referred to in Section 5(h) after which the Company may offer or sell securities issued by the Company without the consent of the Representatives:

SCHEDULE II

Underwriters	Number of Underwritten Securities to be Purchased
Citigroup Global Markets Inc.	4,000,000
Total	4,000,000

SCHEDULE III

Schedule of Free Writing Prospectuses included in the Disclosure Package:

None.

SCHEDULE IV

Price to Public- Variable Price

Number of Underwritten Securities to be sold by the Company: 4,000,000

Number of Option Securities to be sold by the Company: 600,000

Underwriter: Citigroup Global Markets Inc.

EX-10.1

Exhibit 10.1

EMPLOYMENT AGREEMENT

This Employment Agreement, dated as of January 1, 2004 (the “Agreement”), is by and between American Home Mortgage Holdings, Inc., a Delaware corporation having a place of business at 520 Broadhollow Road, Melville, NY 11747 (the “Company”), and Robert F. Johnson, Jr., [address omitted] (the “Executive”).

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

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

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

2. Term. The term of this Agreement shall commence on January 1, 2004, and shall continue until four weeks after the resignation or discharge of the Executive.

3. Position, Duties and Responsibilities, Rights.

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

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

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

4. Compensation.

(a) During the term of this Agreement, the Company shall pay the Executive, and the Executive agrees to accept a base salary at the rate of not less than $259,000.00 per year (the annual base salary as increased from time to time during the term of this Agreement being hereinafter referred to as the “Base Salary”). The Base Salary shall be paid in installments no

less frequently than monthly. Any increase in Base Salary or other compensation shall not limit or reduce any other obligation of the Company hereunder, and once established at an increased specified rate, the Executive’s Base Salary hereunder shall not thereafter be reduced.

(b) During the term of this Agreement, the Executive will be paid a bonus for each calendar quarter (each, a “Bonus Period”) from Secondary Market Profits (also referred to herein as “SMPs”, and defined as the aggregate price difference for all loans sold during month, between the price the Company receives for a loan and the price the Company would have received for the loan had it sold the loan to the best efforts investor offering the highest price for the loan, that resulting total plus or minus the gain or loss from hedging activities allocated to the quarter), as set forth below. For purposes of this subsection, highest price shall be based on the lock-in period granted a customer. For purposes of this subsection, hedging activities shall include pairing-out of unfilled forward sales contracts and options trading. Bonuses will be earned as follows;

(i) From SMPs for each Bonus Period arising from loans originated by American Home Mortgage Corp. which are not brokered to American Home Mortgage Acceptance, Inc, or any other REIT-qualified affiliate of the Company (the “For-Profit Volume”) as follows: (A) first $300,000 of SMPs— 2%; (B) second $300,000 of SMPs-1.75%; (C) third $300,000 of SMPs— 1.5%; and (D) SMPs from $900,000 to $10 million— .75%. In addition, if SMPs exceed $10 million (the “Above Target Profit”), the Executive shall earn a bonus on Above Target Profit of .5%, to the extent such Above Target Profit is up to 25 basis points of For Profit Volume, and .75% of Above Target Profits is in excess of 25 basis points of For Profit Volume.

(ii) From SMPs for each Bonus Period arising from loans originated by American Home Acceptance, Inc., and any other REIT-qualified affiliate of the Company, as follows: total loan origination volume of the Company, divided by For Profit Volume, times the bonus computed per subsection (4)(b)(i), above, less the amount paid the Executive per subsection 4(b)(i), above.

(iii) Calculation of the amount due the Executive pursuant to this paragraph 4(b) shall be made in good faith by the Company and communicated to the Executive in writing. If the Executive disagrees with the calculation he shall notify the Company’s General Counsel in writing within 30 days of receiving the calculation prepared by the Company. If the Executive does not so notify the company, the Company’s calculation will be considered accepted by the Executive, and will be final, and the Executive hereby waives any claim resulting from the calculation.

(c) During the term of this Agreement, the Executive shall be entitled to fringe benefits, in each case at least equal to and on the same terms and conditions as those attached to the Executive’s office on the date hereof, as the same may be improved from time to time during the term of this Agreement, as well as to reimbursement, upon proper accounting, of all reasonable expenses and disbursements incurred by the Executive in the course of the Executive’s duties.

(d) The Company shall grant the Executive 10,000 stock options as of the effective date of this Agreement, in accordance with the terms of the Company’s 1999 Omnibus Stock Incentive Plan.

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(e) The Company agrees to pay the Executive a one-time bonus of $75,000 upon the execution of this Agreement. The Executive shall be obligated to repay said bonus in full if his employment is terminated prior to December 31, 2004 either by the Company for cause, or if the Executive resigns. For purposes of this Agreement, a termination shall be deemed “for cause” (i) if the Executive repeatedly fails to substantially perform the Executive’s duties hereunder, other than by reason of death or disability; or (ii) if the Executive is grossly negligent or engages in insubordination or gross misconduct in the performance of the Executive’s duties hereunder; or (iii) the Executive engages in an act of dishonesty, fraud, theft, misappropriation or embezzlement, or any conduct resulting in a felony conviction; or (iv) if the Executive breaches any provision of this Agreement; or (v) if the Executive violates any of the written policies of the Company after written notice of the violation from the CEO or the General Counsel of the Company.

5. Termination of Employment. The employment created hereby is at will. The Company may terminate this Agreement by discharging the Executive. The Executive may terminate this Agreement by resigning with four weeks notice to the Company. Discharge or resignation may be for any reason or for no reason. If the Company terminates this Agreement for any reason, the Executive shall be paid $97,125, plus any compensation earned pursuant to section 4(b), above, through the date of termination.

6. Enforceability. In the event that any provision of this Agreement is determined to be invalid or unenforceable, the remaining terms and conditions of this Agreement shall be unaffected and shall remain in full force and effect, and any such determination of invalidity or enforceability shall not affect the validity or enforceability of any other provision of this Agreement.

7. Notices. All notices which may be necessary or proper for either the Company or the Executive to give to the other shall be in writing and shall be sent by hand delivery, registered or certified mail, return receipt requested or overnight courier, if to the Executive, to him at [address omitted], and, if to the Company, to it at its principal executive offices at 520 Broadhollow Road, Melville, NY 11747, Attention; General Counsel, and shall be deemed given when sent. Either party may by like notice to the other party change the address at which it is to receive notices hereunder.

8. Non-Disparagement, Non-Solicitation, Confidential Information. The Company and the Executive agree that neither will disparage the other and that their representatives will not disparage either party hereto. The Executive agrees that for a period of one year following the termination of this Agreement, the Executive will not solicit any employee of the Company to leave the Company or hire any employee of the Company. The Company and the Executive agree to keep the terms of this Agreement confidential except that the Executive may divulge the terms of this Agreement to the Executive’s spouse, attorney, financial advisor and accountant provided they agree to keep the terms of this Agreement confidential. The Executive agrees to protect, not disclose, and not use for the Executive’s benefit any confidential information or trade secrets belonging to the Company, including information regarding proprietary procedures and techniques, accounts, or personnel (excepting information that was already disclosed by the Company or otherwise was made public other than by breach of this Agreement by the Executive). The preceding two sentences shall not apply to disc1osures required due to the laws or regulations of governments, or the orders of courts having jurisdiction over the Company and the Executive. This section 9 shall survive the termination of this Agreement.

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9. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND BE ENFORCEABLE IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first written above.

American Home Mortgage Holdings, Inc.
By:	/s/ Alan B. Horn
Name:	Alan B. Horn
Title:	General Counsel
	/s/ Robert F. Johnson, Jr.
	Robert F. Johnson, Jr.

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EX-10.2

Exhibit 10.2

Execution Copy

MASTER REPURCHASE AGREEMENT

Dated as of February 28, 2007

Between

AMERICAN HOME MORTGAGE ACCEPTANCE, INC.,

AMERICAN HOME MORTGAGE CORP.,

AMERICAN HOME MORTGAGE INVESTMENT CORP.

and

AMERICAN HOME MORTGAGE SERVICING, INC.,

as Sellers

and

ABN AMRO BANK N.V.,

in its capacity as “Agent” for the “Purchasers”,

as Buyer

Table of Contents

1.	Applicability	1
2.	Definitions	1
3.	Initiation; Confirmation; Termination	13
4.	Margin Maintenance	15
5.	Collections	16
6.	Security Interest	16
7.	Payment and Transfer	17
8.	Segregation of Documents Relating to Purchased Mortgage Loans	17
9.	Substitution	17
10.	Representations and Warranties	18
11.	Events of Default	18
12.	Servicing of the Purchased Mortgage Loans	24
13.	Single Agreement	24
14.	Notices and Other Communications	25
15.	Payment of Expenses; Indemnity	26
16.	Buyer as Attorney-in-Fact	27
17.	Wire Instructions	28
18.	Entire Agreement; Severability	28
19.	Non assignability; Termination	28
20.	Counterparts	29
21.	GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL	29
22.	No Waivers, Etc.	29
23.	Use of Employee Plan Assets	30
24.	Intent	30
25.	Disclosure Relating to Certain Federal Protections	31
26.	Contribution with Respect to Seller Obligations.	31
1.	Additional Representations	1
2.	Identification of Purchasers	1
3.	Multiple Principals	1
4.	Interpretation of Terms	1

EXHIBIT A ELIGIBLE MORTGAGE LOAN CRITERIA

EXHIBIT B CONCENTRATION PERCENTAGES

EXHIBIT C FORM OF CONFIRMATION

EXHIBIT D FORM OF INITIAL LOAN SCHEDULE

EXHIBIT E FORM OF REPURCHASE LOAN SCHEDULE

EXHIBIT F FORM OF SUPPLEMENTAL LOAN SCHEDULE

MASTER REPURCHASE AGREEMENT

Dated as of February 28, 2007

Between:

AMERICAN HOME MORTGAGE ACCEPTANCE, INC., AMERICAN HOME

MORTGAGE CORP., AMERICAN HOME MORTGAGE INVESTMENT CORP. and

AMERICAN HOME MORTGAGE SERVICING, INC. (each, a “Seller”)

and

ABN AMRO BANK N.V., in its capacity as “Agent” for the “Purchasers” described below (“Buyer”)

1. Applicability

From time to time the parties hereto may enter into transactions in which American Home Mortgage Acceptance, Inc. (“AHMA”), American Home Mortgage Corp. (“AHM”), American Home Mortgage Investment Corp. (“AHMIC”) and American Home Mortgage Servicing, Inc. (“AHMS” and together with AHMA, AHM and AHMIC, the “Sellers” and each a “Seller”) agrees to transfer to ABN AMRO Bank N.V. (“ABN AMRO”), as “Agent” for the “Purchasers” described below (in such capacity, “Buyer”) Mortgage Loans against the transfer of funds by Buyer, with a simultaneous agreement by Buyer to transfer to such Seller such Mortgage Loans at a date certain or on demand, against the transfer of funds by such Seller. Each such transaction shall be referred to herein as a “Transaction” and shall be governed by this Agreement (including any supplemental terms or conditions contained in Annex I hereto or any other Annexes or Exhibits hereto and in the Letter Agreement), as the same shall be amended from time to time in accordance with the terms hereof and of the Letter Agreement.

2. Definitions.

“ABN AMRO” shall have the meaning specified in Paragraph 1 hereof.

“Accepted Servicing Practices” shall mean those mortgage servicing and administering practices customarily required by Sellers for the Servicer of the Mortgage Loans, in each case in accordance with (i) any and all applicable federal, state and local laws, and the servicing provisions of the applicable Agency Guidelines, (ii) the exercise by the Servicer of a level of care and diligence no less stringent than the Servicer customarily employs and exercises in servicing and administering similar construction mortgage loans for its own account and that are in accordance with accepted mortgage servicing practices of prudent lending institutions servicing mortgage loans of the same type as the Mortgage Loans in the jurisdiction in which the related Mortgaged Properties are located and (iii) the related Mortgage Contracts.

“Account Control Agreement” shall mean the Account Control Agreement dated as of the date hereof among the Sellers, the Servicer, the Agent and the Bank.

“Act of Insolvency” shall mean, with respect to any Person, the occurrence of any of the events described in Paragraphs 11(a)(vi), (vii) or (viii) with respect to such Person.

“Additional Purchased Mortgage Loans” shall have the meaning set forth in Paragraph 4(a) hereof.

“Affected Party” shall have the meaning specified in the Letter Agreement.

“Affiliate” shall mean, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with, such specified Person. For purposes of this definition, “control” when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract, or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

“Agency Agreement” shall mean that certain Agency Agreement, dated as of the date hereof, among Buyer, the Group Agents and the Purchasers, as the same may be amended, restated, supplemented or otherwise modified from time to time.

“Agency Guidelines” shall mean the FHLMC Guidelines, the GNMA Guidelines and the FNMA Guidelines, as applicable, as such guidelines have been amended from time to time with respect to Sellers.

“Agent” shall mean ABN AMRO, in its capacity as “Agent” for the Purchasers under the Letter Agreement.

“Agent Fee Letter” shall mean the Agent Fee Letter, dated as of the date hereof, among Sellers and the Agent, as the same may be amended, restated, supplemented or otherwise modified from time to time.

“Agreement” shall mean this Master Repurchase Agreement, dated as of February 28, 2007, among Sellers and Buyer, as amended, restated, supplemented or otherwise modified from time to time.

“AHMH” shall mean American Home Mortgage Holdings, Inc. a Delaware corporation.

“AHMIC” shall mean American Home Mortgage Investment Corp., a Maryland corporation.

“Authorized Representative” shall mean with respect to each Seller, any representative of such Seller involved in, or responsible for, entering into Transactions and with respect to each Seller and the Servicer, any representative of such Seller and the Servicer

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authorized to act on such respective Seller’s or Servicer’s behalf, and whose name appears on a list of authorized officers (or as may be designated by such Person) furnished to the Buyer and Group Agents by the Sellers and the Servicer, as such list may from time to time be amended.

“Bank” shall mean Deutsche Bank National Trust Company, in its capacity as the bank which holds the Buyer’s Account.

“Bankruptcy Code” shall mean Title 11 of the United States Code (11 U.S.C. Section 101 et seq.), as amended by the Bankruptcy Reform Act and as further amended from time to time or any successor statute.

“Bankruptcy Reform Act” shall mean the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, effective as of October 17, 2005.

“Breakage Costs” shall mean all amounts owing by any Seller to the Agent for the account of the Purchasers under Paragraph 7 of the Letter Agreement.

“Business Day” shall mean any day other than (i) a Saturday or Sunday or (ii) any day on which banks located in New York City, New York or in Chicago, Illinois, are authorized or required by law or executive order to be closed.

“Buyer’s Account” shall mean that certain collection account number 57564 in the name of the Buyer held at the Bank.

“Collection Account” shall have the meaning specified in the Letter Agreement.

“Commitment Termination Date” shall have the meaning specified in the Letter Agreement.

“Concentration Category” shall mean, with respect to the Mortgage Loans, each category set forth in Exhibit B under the heading “Concentration Category”.

“Concentration Limit” shall mean, as of any date of determination, with respect to the Mortgage Loans included in any Concentration Category, the product of (a) the “Concentration Percentage” set forth in Exhibit B for such Concentration Category as of such date and (b) the aggregate Outstanding Principal Balance of all Purchased Mortgage Loans as of such date.

“Confirmation” shall mean a confirmation substantially in the form of Exhibit C hereto delivered pursuant to Paragraph 3 hereof.

“Credit and Collection Policy” shall mean those credit and collection policies and practices of Sellers and the Servicer, in existence on the date hereof relating to originating, acquiring, servicing and enforcing Mortgage Loans (including credit requirements as to the sellers, contractors, builders, inspectors, custodians and servicers for any such Mortgage Loans) and the foreclosure and liquidation of the related Mortgaged Properties, in each case as delivered by each Seller to Agent and as subsequently modified from time to time in accordance with the Transaction Documents.

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“Custodial Agreement” shall mean the Custodial Agreement dated as of the date hereof, among Sellers, the Servicer, Buyer and the Custodian providing for the custody of the Purchased Mortgage Loans, as the same may be amended, restated, supplemented or otherwise modified from time to time.

“Custodian” shall mean Deutsche Bank National Trust Company in its capacity as custodian under the Custodial Agreement or any successor thereto mutually agreeable to Buyer and Sellers.

“Daily Market Value Report” shall have the meaning specified in the Letter Agreement.

“Default Rate” shall have the meaning specified in the Letter Agreement.

“Debtor Laws” shall mean all applicable liquidation, conservatorship, bankruptcy, fraudulent transfer or conveyance, moratorium, arrangement, receivership, insolvency, reorganization or similar laws from time to time in effect affecting the rights of creditors generally.

“Defaulted Loan” shall mean a Mortgage Loan (i) as to which any Monthly Payment remains unpaid for 90 days or more from the original due date for such Monthly Payment, (ii) as to which an Act of Insolvency has occurred with respect to any Mortgagor thereof, or (iii) which, consistent with the Credit and Collection Policy, has been or should be written off as uncollectible.

“Delinquent Loan” shall mean a Mortgage Loan that is not reported as a Defaulted Loan and (a) with respect to which any Monthly Payment, or part thereof, is 30 days or more past the original due date for such Monthly Payment, or (b) which, consistent with the applicable Seller’s Credit and Collection Policy, has been or should be classified as delinquent by such Seller.

“Electronic Tracking Agreement” shall mean the Electronic Tracking Agreement dated the date hereof among the Agent, Sellers, the Servicer, MERS and MERSCORP, INC., as such agreement may be amended, restated, supplemented or otherwise modified from time to time.

“Eligible Mortgage Loan” shall have the meaning specified in Exhibit A.

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time.

“Event of Default” shall have the meaning specified in Paragraph 11.

“Excess Concentration Amount” shall mean, as of any date of determination, the sum (without duplication) of the following amounts for each Concentration Category: The amount for each Concentration Category equal to (a) the aggregate Loan Collateral Value of all Eligible Mortgage Loans in such Concentration Category, minus (b) the Concentration Limit applicable to such Concentration Category.

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“FDIA” shall mean the Federal Deposit Insurance Act, as amended.

“Fee Letter” shall mean the Fee Letter, dated as of the date hereof, among Sellers and the Group Agents party thereto from time to time, as the same may be amended, restated, supplemented or otherwise modified from time to time.

“FHA” shall mean the Federal Housing Administration, which is a subdivision of HUD, or any successor thereto. The term “FHA” is used interchangeably in this Agreement with the term “HUD”.

“FHLMC” shall mean the Federal Home Loan Mortgage Corporation, or any successor thereto.

“FHLMC Guidelines” shall mean the Freddie Mac Seller and Servicer Guidelines, as such guidelines may hereafter from time to time be amended.

“FICO Score” shall mean a statistical credit score obtained by many mortgage lenders in connection with a loan application to help assess a borrower’s creditworthiness. A FICO score is generated by models developed by a third party and made available to lenders through Fair Isaac Corporation, TransUnion LLC, Experian or any successor credit bureau. The FICO score is based on a borrower’s historical credit data, including, among other things, payment history, delinquencies on accounts, levels of outstanding indebtedness, length of credit history, types of credit and bankruptcy experience.

“FNMA” shall mean the Federal National Mortgage Association, or any successor thereto.

“FNMA Guidelines” shall mean the FNMA Selling and Servicing Guides and all amendments or additions thereto.

“GAAP” shall mean generally accepted accounting principles as in effect in the United States from time to time, consistently applied.

“GNMA” shall mean Government National Mortgage Association or any successor thereto.

“GNMA Guidelines” shall mean the GNMA Mortgage-Backed Securities Guide 5500.3 and all amendments or additions thereto.

“Governmental Authority” shall mean any applicable nation or government, any agency, department, state or other political subdivision thereof, or any instrumentality thereof, and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. Government Authority shall include, without limitation, each of FNMA, FHLMC, FHA, HUD, VA and GNMA.

“Group Agents” shall have the meaning specified in the Letter Agreement.

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“Incipient Event of Default” shall mean any event which, with the giving of notice or lapse of time or both, would constitute an Event of Default.

“Indebtedness” shall mean, for any Person, without duplication, and at any time, (a) all obligations required by GAAP to be classified on such Person’s balance sheet as liabilities, (b) obligations secured (or for which the holder of the obligations has an existing contingent or other right to be so secured) by any Lien existing on property owned or acquired by such Person, (c) obligations that have been (or under GAAP should be) capitalized for financial reporting purposes, and (d) all guaranties, endorsements, and other contingent obligations with respect to obligations of others.

“Initial Loan Schedule” shall mean a schedule of Purchased Mortgage Loans in the form of Exhibit D delivered on the Initial Purchase Date.

“Initial Purchase Date” shall mean February 28, 2007.

“IRC” shall mean the Internal Revenue Code of 1986, as amended from time to time and any successor statute.

“Letter Agreement” shall mean that certain letter agreement, dated as of the date hereof, among Buyer, Sellers, the Servicer, the Group Agents and the Purchasers, with respect to the Transactions contemplated hereunder, as the same may be amended, restated, supplemented or otherwise modified from time to time.

“Lien” shall mean any security interest, mortgage, deed of trust, charge, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), or other security agreement of any kind or nature whatsoever, including, without limitation, any conditional sale or other title retention agreement or any financing lease having substantially the same economic effect as any of the foregoing and the filing of any financing statement under the UCC or comparable law of any jurisdiction to evidence any of the foregoing.

“Loan Collateral Value” shall mean, as of any date of determination with respect to each Purchased Mortgage Loan, an amount equal to the lesser of (a) the then Outstanding Principal Balance of such Mortgage Loan as of such date and (b) the Market Value of such Mortgage Loan as of such date; provided that Mortgage Loans which are not Eligible Mortgage Loans as of any date shall have a Loan Collateral Value of zero.

“Loan Documents” shall mean with respect to each Purchased Mortgage Loan, all of the Principal Mortgage Documents and all of the Other Mortgage Documents with respect to such Mortgage Loan.

“Loan Schedule” shall mean the Initial Loan Schedule and each Supplemental Loan Schedule, which shall in any event exclude any Mortgage Loans specified in any Repurchase Loan Schedule.

“Loan-to-Value Ratio” shall mean, for any Mortgage Loan as of the related Purchase Date, a fraction (expressed as a percentage) having (i) an amount equal to the applicable Seller’s maximum funding commitment under the related Mortgage Contract on the

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date of origination of such Mortgage Loan as its numerator; and (ii) as its denominator, the appraised value of the related Mortgaged Property on the date of origination of such Mortgage Loan.

“Lock-Box” shall have the meaning specified in the Letter Agreement.

“Manufactured Home” shall mean a single-family home constructed on a chassis at a factory and shipped in one or more sections to a housing site, then installed on a semi-permanent foundation.

“Margin Deficit” shall have the meaning specified in Paragraph 4(a) hereof.

“Margin Excess” shall have the meaning specified in Paragraph 4(b) hereof.

“Market Value” shall mean, as of any date with respect to any Purchased Mortgage Loan, the fair market value of such Purchased Mortgage Loan determined as of the prior Business Day and in accordance with Paragraph 3(d); provided, that the Market Value of any Mortgage Loan which is not an Eligible Mortgage Loan shall be zero.

“Material Adverse Effect” shall mean, with respect to any Person, any material adverse effect on (i) the validity or enforceability of this Agreement or any other Transaction Document, (ii) the business, operations, total Property or financial condition of such Person, (iii) the Purchased Assets taken as a whole, (iv) the enforceability or priority of the Lien in favor of Agent on any material portion of the Purchased Assets, or (v) the ability of such Person to fulfill its obligations under this Agreement or any other Transaction Document.

“MERS” shall mean Mortgage Electronic Registration Systems, Inc., a Delaware corporation.

“Monthly Payment” shall mean with respect to any Mortgage Loan, the scheduled monthly payment of principal and/or interest by the related Mortgagor on such Mortgage Loan.

“Monthly Report” shall have the meaning specified in the Letter Agreement.

“Mortgage” shall mean the mortgage, deed of trust or other instrument creating a lien on a fee simple estate in Mortgaged Property securing a Mortgage Note together with any amendments, riders, addendums, modification agreements, extensions or renewals thereof and any new mortgage taken in exchange or substitution therefor in connection with a modification, conversion or refinancing of such mortgage or the related Mortgage Note.

“Mortgage Contract” shall mean a residential construction loan agreement, building loan agreement, loan agreement, construction loan agreement or other financing agreement entered into by a Seller and a Mortgagor, evidencing the related Seller’s obligation to provide funding of such Mortgagor’s construction project and setting forth, among other things, the terms and provisions related to the repayment of funds extended to the Mortgagor thereunder.

“Mortgage Loan” shall mean, at any time, any fixed rate or floating rate mortgage loan which is secured by a Mortgage on real estate and which is made to a Mortgagor for the

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construction of a new single family detached residential property pursuant to the related Mortgage Contract, including all amounts owed or to be owed by such Mortgagor with respect to all Mortgagor Advances advanced or to be advanced to such Mortgagor under such Mortgage Contract, and includes (i) such mortgage loan whether in the construction period or in the permanent loan term and (ii) any mortgage loan secured by a Mortgage on such residential property made in exchange or substitution therefor and/or in connection with a modification, conversion or refinancing of such Mortgage Loan.

“Mortgage Note” shall mean the original, executed promissory note or other evidence of indebtedness of a Mortgagor under a Mortgage Loan, together with any rider, amendment, addendums, modification agreements, extension or renewal thereof and any original promissory note taken in exchange or substitution therefor and/or in connection with a modification, conversion or refinancing of such Mortgage Loan from a construction loan to a permanent mortgage loan or otherwise.

“Mortgaged Property” shall mean the underlying real property subject to a Mortgage (including, without limitation, all buildings, improvements and fixtures thereon and all additions, alterations and replacements made at any time with respect to the foregoing) securing a Mortgage Loan.

“Mortgagor” shall mean the obligor on a Mortgage Note.

“Mortgagor Advance” shall mean, with respect to any Mortgage Loan, a loan or advance made to the Mortgagor under the related Mortgage Contract and evidenced by the related Mortgage Note.

“Net Collateral Value” shall mean, as of any date of determination, an amount equal to (A) the sum of the Loan Collateral Values for all Purchased Mortgage Loans which are Eligible Mortgage Loans as of such date, minus (B) the Excess Concentration Amount as of such date minus (C) the Required Reserve Amount as of such date.

“OTC Loan” shall mean a Mortgage Loan which the Sellers refer to as a “one-time-close loan”, in which the Mortgage Note and Mortgage related to such Mortgage Loan both include construction loan addendums or riders, as applicable, to the permanent mortgage loan documentation.

“Other Mortgage Documents” shall have the meaning assigned to such term in the Custodial Agreement.

“Outstanding Principal Balance” shall mean, as of any date of determination with respect to any Mortgage Loan, the unpaid outstanding principal balance of such Mortgage Loan as of such date.

“PBGC” shall mean the Pension Benefit Guaranty Corporation referred to and defined in ERISA and any successor entity performing similar functions.

“Performance Guarantors” shall mean AHMIC and AHMH, and their successors and assigns.

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“Performance Guaranty” shall mean the Performance Guaranty dated the date hereof among the Performance Guarantors and Buyer, as the same may be amended, restated, supplemented or otherwise modified from time to time.

“Person” shall mean an individual, partnership, corporation (including a business trust), joint-stock company, limited liability company, trust, unincorporated association, joint venture, government (or any agency or political subdivision thereof) or other entity.

“Price Differential” shall mean, with respect to any Transaction hereunder as of any date, the aggregate amount obtained by daily application of the Pricing Rate (or weighted average of the Pricing Rates, in the event that portions of the Purchase Price are being funded at different Pricing Rates) for such Transaction to the amount equal to the Purchase Price for such Transaction on a 360 day per year basis for the actual number of days during the period commencing on (and including) the Purchase Date for such Transaction and ending on (but excluding) the date of determination (reduced by any amount of such Price Differential previously paid by the applicable Seller to Buyer with respect to such Transaction).

“Pricing Rate” shall mean the per annum percentage rate for determination of the Price Differential, which rate shall be determined in accordance with the Letter Agreement.

“Principal Mortgage Documents” shall have the meaning assigned to such term in the Custodial Agreement.

“Property” shall mean, any interest in any kind of property or asset, whether real, personal or mixed, or tangible or intangible.

“Purchase Date” shall mean, with respect to each Transaction, the date on which the Mortgage Loans subject to such Transaction are to be transferred or were transferred, as the case may be, by the applicable Sellers to Buyer hereunder.

“Purchase Price” shall mean, with respect to any Transaction, (i) on the Purchase Date in respect thereof, the price at which Purchased Mortgage Loans subject to such Transaction are sold by the applicable Sellers to Buyer hereunder, and (ii) thereafter, except where Buyer and such Sellers agree otherwise, such price decreased by the amount of any cash transferred by such Sellers to Buyer and applied to reduce the Purchase Price pursuant to Paragraph 4(a) hereof.

“Purchased Assets” shall have the meaning specified in Paragraph 6 hereof.

“Purchased Mortgage Loans” shall mean, with respect to any Transaction, the Mortgage Loans sold by the applicable Sellers to Buyer in such Transaction hereunder, as adjusted to give effect to include Additional Purchased Mortgage Loans delivered pursuant to Paragraph 4(a) hereof and any Purchased Mortgage Loans repurchased by such Sellers or transferred to such Sellers. Unless the context shall otherwise require, the term “Purchased Mortgage Loans” shall refer to all Purchased Mortgage Loans under all Transactions. “Purchased Mortgage Loan” shall include (i) the entire Outstanding Principal Balance of each Mortgage Loan, regardless of whether Buyer has advanced against all Mortgagor Advances with respect to such Mortgage Loan, and (ii) all rights (but not the obligations unless Buyer has

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exercised its rights under Section 11 to sell such Mortgage Loan after the occurrence of an Event of Default) to make future Mortgagor Advances under the Mortgage Contract related to such Mortgage Loan.

“Purchasers” shall mean the commercial paper conduits, financial institutions and other entities party to the Letter Agreement from time to time as “Purchasers” thereunder.

“Related Security” shall mean, with respect to any Purchased Mortgage Loan, all of the applicable Seller’s right, title and interest in and to: (i) the Mortgaged Property; (ii) all other security interests or liens securing the repayment of such Purchased Mortgage Loan, together with the related Mortgages, assignments and financing statements; (iii) all insurance contracts, guaranties, contracts, supporting obligations and other contracts supporting the repayment of such Purchased Mortgage Loan; (iv) all Loan Documents relating to such Purchased Mortgage Loans; (v) Collections with respect thereto; (vi) all servicing and custodial rights with respect thereto; (vii) all recourse rights against the originators or sellers thereof, (viii) the Buyer’s Account; (ix) all Takeout Commitments, to the extent that there are such commitments; and (x) all proceeds of such Purchased Mortgage Loan or of the foregoing property described in clauses (i) through (ix) above.

“Repurchase Conditions” shall mean, with respect to any repurchase by any Seller of any Purchased Mortgage Loans or any request that Buyer transfer to such Seller Purchased Mortgage Loans on account of a Margin Excess:

(i) such Seller shall have delivered to Buyer a notice, by no later than 11:00 a.m. (New York City time) one (1) Business Day prior to the proposed repurchase or transfer together with a Repurchase Loan Schedule identifying the Purchased Mortgage Loans to be repurchased or transferred on such date;

(ii) the Servicer shall have delivered to Buyer a Supplemental Loan Schedule and a Daily Market Value Report (after giving effect to the conveyance of any Additional Purchased Mortgage Loans by such Seller occurring on or before the day the proposed repurchase or transfer is to take place) which shows that, after giving effect to the repurchase of the repurchased or transferred Mortgage Loans and to any payment of the Repurchase Price to occur simultaneously with such repurchase, there will be no Margin Deficit;

(iii) the Agent shall have received payment with respect to such repurchase or transfer in an amount sufficient to prevent the occurrence of a Margin Deficit by no later than 2:30 p.m. (New York City time) on the date of the proposed release; and

(iv) no Incipient Event of Default or Event of Default shall have occurred and be continuing or would occur as a result of the Agent’s release of its security interest in the Mortgage Loans to be so repurchased or transferred.

Delivery of a Repurchase Loan Schedule referred to in clause (i) above shall be a representation and warranty by such Seller that (i) the Repurchase Conditions described above (other than the condition set forth in clause (iii)) have been satisfied and (ii) no adverse selection was used in selecting the Mortgage Loans to be so repurchased.

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“Repurchase Date” shall mean, with respect to each Transaction, the date on which the Sellers are to repurchase the Purchased Mortgage Loans subject to such Transaction from Buyer, which date shall be the earliest of the following: (i) (a) for Mortgage Loans which were purchased by a Seller from Waterfield, the 180^th day after the date hereof or if not a Business Day, the immediately preceding Business Day or such earlier Business Day set forth in the applicable Confirmation, or, subject to the notice requirements set forth in the Repurchase Conditions, such earlier Business Day selected by the applicable Sellers and (b) for all other Mortgage Loans, on the 364^th day after the Purchase Date or if not a Business Day, the immediately preceding Business Day with respect to such Mortgage Loan or such earlier Business Day set forth in the applicable Confirmation, or, subject to the notice requirements set forth in the Repurchase Conditions, such earlier Business Day selected by the applicable Sellers, (ii) within one (1) Business Day after the date such Purchased Mortgage Loan is no longer an Eligible Mortgage Loan, (iii) the date declared by the Buyer to be the Repurchase Date with respect to such Transaction pursuant to Paragraph 11(b) and (iv) on the Termination Date, including a Termination Date declared by the Agent after the occurrence of an Event of Default.

“Repurchase Loan Schedule” shall mean a schedule of Purchased Mortgage Loans being repurchased on a Repurchase Date substantially in the form of Exhibit E.

“Repurchase Price” shall mean, with respect to each Transaction, the price at which Purchased Mortgage Loans subject to such Transaction are to be resold by Buyer to the applicable Sellers upon termination of such Transaction, which will be determined in each case (including Transactions terminable upon demand) as the sum of (i) the Purchase Price as of the date of such determination, plus (ii) if any accrued and unpaid Price Differential is then due and owing, such accrued and unpaid Price Differential, plus (iii) any other accrued and unpaid fees, expenses, indemnities and other amounts then due and owing to the Agent, any Group Agent or any Purchaser, including, without limitation, under Paragraph 4(d) or Paragraph 7 of the Letter Agreement or under Paragraph 15 hereof.

“Required Group Agents” shall have the meaning specified in the Letter Agreement.

“Required Reserve Amount” shall mean as of any date of determination an amount equal to 6.00% of the positive difference between (i) the aggregate Loan Collateral Values of all Eligible Mortgage Loans as of such date and (ii) the Excess Concentration Amount as of such date.

“Servicer” shall mean American Home Mortgage Servicing, Inc. in its capacity as servicer of the Purchased Mortgage Loans, or any successor thereto mutually agreeable to Buyer and Sellers.

“Subsidiary” shall mean, with respect to any Person, any corporation or other entity of which securities having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by such Person, or one or more of its Subsidiaries, or by such Person and one or more of its Subsidiaries.

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“Supplemental Loan Schedule” shall mean a schedule of Purchased Mortgage Loans after giving effect to each Transaction and each repurchase of Mortgage Loans, substantially in the form of Exhibit F.

“Takeout Agreement” shall mean an agreement between a Takeout Investor and a Seller, pursuant to which such Takeout Investor has committed to purchase from such Seller certain of the Purchased Mortgage Loans, as such agreement may be amended, restated, supplemented or otherwise modified from time to time.

“Takeout Commitment” shall mean, with respect to each Takeout Investor, an amount equal to the aggregate Takeout Value for all Purchased Mortgage Loans that such Takeout Investor has committed to purchase from any Seller pursuant to one or more Takeout Agreements.

“Takeout Investor” shall mean any entity which purchases Mortgage Loans from a Seller.

“Takeout Value” shall mean, with respect to any Purchased Mortgage Loan, the price that a Takeout Investor has agreed to pay to a Seller for such Purchased Mortgage Loan.

“Tangible Net Worth” shall mean, with respect to any Person, the excess of total assets of such Person over the total liabilities of such Person determined in accordance with GAAP, but excluding from the determination of total assets: (a) all assets which would be classified as intangible assets under GAAP, including, without limitation, goodwill (whether representing the excess cost over book value of assets acquired or otherwise), patents, trademarks, trade names, copyrights, franchises and deferred charges (including, without limitation, unamortized debt discount and expense, organization costs and research and product development costs), (b) loans or other extensions of credit to officers, employees, shareholders or Affiliates of such Person (other than the Servicer, Sellers, and the Performance Guarantors) and (c) investments in Subsidiaries of such Person (other than the Servicer, Sellers, and the Performance Guarantors).

“Termination Date” shall mean the earliest of (i) that Business Day which Sellers designate as the Termination Date by written notice to Buyer at least thirty (30) days prior to such date, (ii) the date of declaration of the Termination Date by Buyer following an Event of Default, and (iii) the Commitment Termination Date.

“Transaction” has the meaning set forth in Paragraph 1 hereof but shall include, as the context may require, (i) each transfer of Mortgage Loans to Buyer against the transfer of funds by Buyer or on account of a Margin Deficit, (ii) each transfer of Mortgage Loans to Buyer in connection with any repurchase, withdrawal or substitution of Mortgage Loans, and (iii) any portion of any Transaction remaining outstanding after giving effect to any repurchase, withdrawal or substitution of Mortgage Loans under this Agreement.

“Transaction Documents” shall mean this Agreement, the Letter Agreement, the Custodial Agreement, the Electronic Tracking Agreement, the Performance Guaranty, the Agency Agreement, the Fee Letter, the Agent Fee Letter and the Account Control Agreement, in each case as amended, restated, supplemented or otherwise modified from time to time.

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“TTC Loan” shall mean a Mortgage Loan which the Sellers refer to as a “two-time-close loan”, which matures at the end of the construction term, and is expected to be refinanced by a Seller from a construction loan to a permanent mortgage loan at maturity.

“UCC” shall mean the Uniform Commercial Code, as amended from time to time, as in effect in the relevant jurisdiction.

“Unapproved Mortgage Loan” shall mean a Mortgage Loan which was originated by an entity other than a Seller, which entity was either merged into or consolidated with or into a Seller subsequent to such origination and which has not been approved by the Required Group Agents.

“VA” shall mean the Department of Veterans Affairs, or any successor thereto.

“Waterfield” shall mean Waterfield Financial Corporation, an Indiana corporation.

“Wet Loan” shall mean a wet-funded Mortgage Loan for which, as of the related Purchase Date, the Loan Documents required to be delivered to the Custodian under the Custodial Agreement have not yet been delivered and which shall have the following additional characteristics:

(i) the initial Mortgagor Advance has been funded by the applicable Seller prior to such Purchase Date;

(ii) the initial Mortgagor Advance has not been returned to such Seller by the escrow or closing agent for such Wet Loan; and

(iii) upon recordation of the related Mortgage, such Mortgage Loan will constitute a first priority lien on the premises described therein.

Capitalized terms used and not otherwise defined in this Agreement shall have the meanings set forth in the Letter Agreement.

3. Initiation; Confirmation; Termination

(a) Subject to the terms of the Letter Agreement and the satisfaction of the conditions precedent set forth therein and in this Paragraph 3, on the Purchase Date for each Transaction, the applicable Purchased Mortgage Loans shall be transferred to Buyer for the account of the Purchasers against the transfer of the Purchase Price therefor to the account specified pursuant to Paragraph 17(a). Notwithstanding anything to the contrary herein, (i) Buyer is not providing a commitment to enter into any Transactions hereunder, (ii) Buyer shall not be obligated to consummate any Transaction hereunder unless the applicable Sellers has received the full amount of the Purchase Price for such Transaction directly from the Purchasers and (iii) Buyer shall not be obligated to fund any amount of the Purchase Price for any Transaction hereunder if any Purchaser fails to fund such amount.

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(b) In the event that one or more of the Sellers desire to enter into a Transaction hereunder, such Sellers shall deliver to Buyer prior to 12:00 noon, New York City time, one (1) Business Day prior to the proposed Purchase Date, a signed Confirmation. The Confirmation, together with this Agreement and the Letter Agreement, shall constitute conclusive evidence of the terms agreed to between Buyer and the applicable Sellers with respect to the Transaction to which the Confirmation relates. In the event of any conflict between the terms of such Confirmation and this Agreement or between the terms of such Confirmation and the Letter Agreement, the terms of this Agreement or, if applicable, of the Letter Agreement, shall prevail. Not later than 12:00 noon (New York City time) on the applicable Purchase Date, the Agent shall have received the Trust Receipt from the Custodian in accordance with Paragraph 9(b)(i) of the Letter Agreement. The Purchase Price with respect to such Purchased Mortgage Loans shall be transferred to the applicable Sellers to the account specified pursuant to Paragraph 17(a) not later than 4:00 p.m. (New York City time) on such Purchase Date subject to the satisfaction of the conditions precedent set forth herein and in the Letter Agreement.

(c) The termination of each Transaction will be effected on the Repurchase Date set forth in the related Confirmation. Termination of each Transaction will be effected by transfer to the applicable Sellers or their agents of the Purchased Mortgage Loans against the transfer of the applicable Repurchase Price to the Group Agents in accordance with the Letter Agreement.

(d) Each Confirmation shall include a calculation of the Market Value of the Purchased Mortgage Loans and a Daily Market Value Report, in each case, after giving effect to such Confirmation. On the Initial Purchase Date, the applicable Sellers shall include with their Confirmation the Initial Loan Schedule. On each subsequent Purchase Date, the applicable Sellers shall include with each Confirmation a Supplemental Loan Schedule with respect to all of the Purchased Mortgage Loans after giving effect to the subject Transaction. Each Seller shall determine, in accordance with its standard policies and procedures, the Market Value of each Purchased Mortgage Loan transferred by it and included (or to be included) in such calculations and the related Loan Schedule, which Market Values shall be determined as of the Business Day immediately preceding the date on which such Confirmation is delivered and will provide promptly upon request the data and assumptions for each such Purchased Mortgage Loan based on which such Market Value was determined. Within three (3) Business Days after the date on which Buyer receives a Confirmation or Daily Market Value Report, Buyer may dispute a Seller’s or Servicer’s determination of Market Value by notifying such Seller or Servicer of the discrepancy in writing. Each Seller or Servicer and Buyer will make a good faith effort to resolve the discrepancy in the calculation of Market Value. If the discrepancy is not resolved within five (5) days in a manner reasonably satisfactory to Buyer, such Seller or Servicer, as applicable, will be required to re-calculate the Market Value of the Purchased Mortgage Loans using the market values proposed by a mutually reasonably agreeable third party, or if such third party cannot be determined within in such five (5) day period, using the market values proposed by Buyer. Such recalculated Market Value shall be used in any reports delivered to the Buyer, the Purchasers or the Custodian until the calculation of Market Value dispute is resolved to the satisfaction of Buyer in a good faith, commercially reasonable manner. Following the resolution of the dispute, such Seller or Servicer, as applicable, will incorporate adjustments, if any, agreed to with Buyer in future calculations of the Market Value.

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(e) The Sellers are jointly and severally obligated to pay the applicable Repurchase Price and repurchase the related Purchased Mortgage Loans from Buyer on the applicable Repurchase Date. The Sellers shall satisfy the Repurchase Conditions with respect to each repurchase hereunder on or prior to the Repurchase Date; provided that the failure to so satisfy any Repurchase Condition shall not relieve the Sellers of their joint and several obligations to pay the Repurchase Price on the applicable Repurchase Date with respect to any Transaction hereunder. Each obligation to repurchase exists without regard to any prior or intervening liquidation or foreclosure with respect to any Purchased Mortgage Loan. The applicable Sellers may accelerate the Repurchase Date with respect to any Transaction by written notice to the Agent and the Group Agents, provided that the Repurchase Conditions have been satisfied as of such accelerated Repurchase Date. Notwithstanding the satisfaction of the Repurchase Conditions with respect to any repurchase, each Seller agrees that (i) if the portion of any Repurchase Price received by any Group for such repurchase is less than $500,000, the applicable Group Agent may elect to hold all or a portion of such amount until it elects, in a commercially reasonable manner, to apply such amounts to the repayment of the Promissory Notes or other funds raised to fund the applicable Tranche (provided, however, that in the event that the aggregate amount so held under this clause (i) is greater than or equal to $500,000, such Group Agent shall be required to immediately apply such amount) and (ii) the Sellers shall be jointly and severally liable to pay the amounts required to be paid pursuant to Paragraph 7 of the Letter Agreement with respect to any such amounts so held pursuant to clause (i).

(f) With respect to any Transaction, Buyer may conclusively rely upon, and shall incur no liability to any Seller in acting upon, any request or other communication that Buyer reasonably believes to have been given or made by any Authorized Representative.

4. Margin Maintenance

(a) If on any Business Day the Net Collateral Value is less than the aggregate Purchase Price for all outstanding Transactions at such time (a “Margin Deficit”), then Sellers shall jointly and severally be required, to transfer to Buyer no later than 2:30 p.m. (New York City time) on the following Business Day, cash or additional Mortgage Loans (such additional Mortgage Loans being referred to as “Additional Purchased Mortgage Loans”) so that the cash and Net Collateral Value, including any such Additional Purchased Mortgage Loans, will thereupon equal or exceed the aggregate Purchase Price for all outstanding Transactions at such time (after re-calculating the Required Reserve Amount on such additional Mortgage Loans or remaining Mortgage Loans). Any cash received on such day shall be applied to reduce the Purchase Price in respect of the Purchased Mortgage Loans on the next Business Day.

(b) If on any Business Day the Net Collateral Value exceeds the aggregate Purchase Price for all outstanding Transactions at such time (a “Margin Excess”), then Sellers may by notice to Buyer request that Buyer transfer cash or Purchased Mortgage Loans to Sellers, so that the Net Collateral Value, after deduction of any such cash or any Purchased Mortgage Loans so transferred, will thereupon not exceed such aggregate Purchase Price. Any such request for Buyer to transfer cash must be made in a minimum amount of $2,000,000 or an integral multiple of $500,000 in excess thereof. Buyer’s obligation to transfer cash in connection with any such request shall be subject to the satisfaction of the applicable conditions precedent set forth in Section 9(b) of the Letter Agreement, and Buyer’s obligation to transfer Purchased

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Mortgage Loans to Sellers in connection with any such request shall be subject to satisfaction of the Repurchase Conditions. If Purchased Mortgage Loans are to be transferred to one or more of the Sellers in connection with a Margin Excess, then such Sellers may direct the Custodian to release such Purchased Mortgage Loans in an amount not to exceed the applicable Margin Excess; provided, that, all terms and conditions (including the Repurchase Conditions) set forth herein and in the Letter Agreement with respect to such Transaction have been complied with.

(c) To the extent there are funds on deposit in the Buyer’s Account on any day after the application to and payment of all amounts then due and payable to the Agent, the Group Agents and the Purchasers, then the Sellers may (or if Buyer has exercised exclusive control of the Buyer’s Account, at the request of the Sellers, Buyer shall) direct the Custodian to release such funds to the Sellers; provided, that no funds shall be released unless after giving effect to such release, all of the conditions set forth in clauses (ii) through (x) of Paragraph 9(b) of the Letter Agreement shall be satisfied. Notwithstanding the foregoing, in the event that amounts received into the Buyer’s Account cannot be applied to or transferred for the payment of any amounts then due and payable to the Agent, any Group Agent or any Purchaser because of the failure to satisfy the Repurchase Conditions or for any other reason, then no funds on deposit in the Buyer’s Account shall be released to any Seller until after such amounts can be applied to or transferred for the payment of such amounts then due and payable; provided that such funds shall be applied to or transferred for the payment of such amounts on the earlier of: (i) the date on which the Repurchase Conditions are satisfied, in the case of a repurchase of Purchased Mortgage Loans and (ii) two (2) Business Days after such funds are received in the Buyer’s Account.

(d) Any cash transferred pursuant to this Paragraph 4 shall be allocated pro rata among the Purchase Prices for all of the outstanding Transactions.

(e) Each Seller agrees to calculate (or cause Servicer to calculate) the Market Value of each Mortgage Loan to be transferred by it on the requested Purchase Date and on each Business Day thereafter.

5. Collections

The Sellers shall cause the Collections to be managed and administered in accordance with the provisions of the Letter Agreement. The Buyer may deliver a “Notice of Exclusive Control” under, and as such term is defined in, the Account Control Agreement at any time in its sole discretion.

6. Security Interest

Although the parties intend that all Transactions hereunder be sales and purchases and not loans, in the event any such Transactions are deemed to be loans, each Seller shall be deemed to have pledged, and hereby does pledge, to Buyer as security for the performance by all Sellers of their obligations under each such Transaction, and all of their payment and performance obligations under the Transaction Documents and shall be deemed to have granted, and hereby does grant, to Buyer a security interest in, all of such Seller’s now existing or hereafter acquired or arising right, title and interest in, to and under (i) all of the Purchased

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Mortgage Loans with respect to all Transactions to which such Seller is a party hereunder, (ii) all Mortgage Notes, Mortgages and Related Security related to such Purchased Mortgage Loans, and (iii) all proceeds of the foregoing (collectively, the “Purchased Assets”). Each Seller hereby authorizes Buyer to file such financing statements relating to such Seller’s rights in the Purchased Assets as Buyer may deem appropriate, and appoints Buyer as such Seller’s attorney-in-fact in accordance with Paragraph 16 to (i) authenticate any such financing statement or statements in such Seller’s name and (ii) take such other actions as Buyer deems necessary or appropriate to perfect and continue the lien and security interest granted hereby and to protect, preserve and realize upon the Purchased Assets. Sellers shall pay all fees and expenses associated with perfecting such security interest including, without limitation, the cost of filing financing statements under the Uniform Commercial Code and recording assignments of mortgage as and when required by Buyer in its sole discretion. This Agreement shall constitute a security agreement, and Buyer shall have all of the rights of a secured party under applicable law and each of Sellers and Buyer represents and warrants as to itself that each remittance of amounts by a Seller to Buyer or a Purchaser under this Agreement or the Letter Agreement will have been (x) in payment of a debt incurred by such Seller in the ordinary course of business or financial affairs of such Seller and the Purchasers and (y) made in the ordinary course of business or financial affairs of such Seller and the Purchasers.

7. Payment and Transfer

Unless otherwise mutually agreed, all transfers of funds hereunder shall be in immediately available funds.

8. Segregation of Documents Relating to Purchased Mortgage Loans

All documents relating to Purchased Mortgage Loans in the possession of a Seller shall be segregated from other documents and securities in its possession and shall be identified as being subject to this Agreement. Segregation may be accomplished by appropriate identification on the books and records of the holder, including a financial or securities intermediary or a clearing corporation. Each Seller shall mark its master data processing records to indicate which of the Mortgage Loans constitute Purchased Mortgage Loans. The parties acknowledge that the Loan Documents will be held by the Custodian in accordance with the Custodial Agreement, and that certain other documents relating to the Purchased Mortgage Loans will be held by the Servicer in accordance with Sellers’ practices and procedures, and that none of such documents shall be deemed “in the possession of Seller” for purposes of this Paragraph 8. All of the applicable Seller’s interest in the applicable Purchased Mortgage Loans shall pass to Buyer on the related Purchase Date and nothing in this Agreement shall preclude Buyer from engaging in repurchase transactions with the Purchased Mortgage Loans or otherwise selling, transferring, pledging or hypothecating the Purchased Mortgage Loans, but no such transaction shall relieve Buyer of its obligations to transfer the Purchased Mortgage Loans to the applicable Seller pursuant to Paragraph 3 or 4 hereof.

9. Substitution

Each Seller may substitute other Mortgage Loans for Purchased Mortgage Loans transferred by it hereunder. Each such substitution shall be deemed a Repurchase of the

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Purchased Mortgage Loans to be transferred to such Seller in connection with such substitution and subject to satisfaction of the Repurchase Conditions. Each such substitution shall be made by transfer to Buyer of such other Mortgage Loans and transfer to such Seller of such Purchased Mortgage Loans. After substitution, the substituted Mortgage Loans shall be deemed to be Purchased Mortgage Loans.

10. Representations and Warranties

On the date hereof, each Seller makes each of the representations and warranties set forth in the Letter Agreement and on the Purchase Date for any Transaction, each Seller shall be deemed to repeat all of the representations and warranties made by it in the Letter Agreement.

11. Events of Default

(a) Each of the following events shall, upon the occurrence and continuance thereof, be an “Event of Default”:

(i)(a) any Seller shall fail to repurchase any Mortgage Loan that is required to be repurchased under the Transaction Documents and such failure shall remain unremedied for one (1) Business Day; (b) any Seller shall fail to make any payment of Price Differential or Fees owed to any Purchaser, Group Agent or the Agent on the date such payment is due and such failure shall remain unremedied for one (1) Business Day; (c) any Seller shall fail to make any other payment when due, of any fee, expense or other amount due hereunder, or under any other Transaction Document if such failure is not cured within five (5) calendar days of the due date of such payment or if such fee, expense or other amount due does not have a due date, within five (5) calendar days after the written request by any Purchaser, Group Agent or the Agent of such payment; or (d) the Servicer shall fail to make any payment or deposit to be made by it under any Transaction Document when due if such failure is not cured within five (5) calendar days of the due date of such payment or deposit, or if such amount due under such Transaction Document does not have a due date, within five (5) calendar days after the written request by any Purchaser, Group Agent or the Agent of such payment or deposit; or

(ii) any Seller fails to keep or perform any covenant or material obligations contained in this Agreement (other than as referred to in Paragraph 11(a)(i)) and such failure continues unremedied beyond the expiration of any applicable grace or notice period that may be expressly provided for in such covenant or material obligations; or

(iii) any Seller, the Servicer or either Performance Guarantor defaults in the due observance or performance of any of the covenants or agreements contained in any Transaction Document other than this Agreement, and (unless such default otherwise constitutes an Incipient Event of Default or an Event of Default pursuant to other provisions of this Paragraph 11(a)) such default continues unremedied beyond the expiration of any applicable grace or notice period that may be expressly provided for in such Transaction Document; or

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(iv) any warranty or representation by or on behalf of any Seller, the Servicer or either Performance Guarantor contained in this Agreement or any other Transaction Document or any statement, warranty or representation in any Daily Market Value Report, Monthly Report, officer’s certificate or other writing furnished in connection with this Agreement, proves to have been incorrect or misleading in any material respect as of the date made or deemed made; provided, that, this shall not include representations or warranties with respect to specific Mortgage Loans, including but not limited to Mortgage Loan-level representations or warranties unless such incorrect statements are made knowingly or intentionally; or

(v)(a) any Seller, the Servicer or either Performance Guarantor fails to make when due or within any applicable grace period any payment on any Indebtedness with an unpaid principal balance of over $1,500,000; or (b) any event or condition occurs under any provision contained in any such obligation or any agreement securing or relating to such obligation (or any other breach or default under such obligation or agreement occurs) if the effect thereof is to cause or permit with the giving of notice or lapse of time or both the holder or trustee of such obligation to cause such obligation to become due prior to its stated maturity; or (c) any such obligation becomes due (other than by regularly scheduled payments) prior to its stated maturity; or (d) regarding each of the Sellers, the Performance Guarantors or the Servicer any of the foregoing occurs with respect to any one or more items of Indebtedness with unpaid principal balances exceeding, in the aggregate, $1,500,000 with respect to each of the Sellers, either Performance Guarantor and the Servicer; or

(vi) any Seller, the Servicer or either Performance Guarantor generally shall not pay its debts as they become due or shall admit in writing its inability to pay its debts, or shall make a general assignment for the benefit of creditors; or

(vii) any Seller, the Servicer or either Performance Guarantor shall (a) apply for or consent to the appointment of a receiver, trustee, custodian, intervenor or liquidator of it or of all or a substantial part of its assets, (b) file a voluntary petition in bankruptcy, (c) file a petition or answer seeking reorganization or an arrangement with creditors or to take advantage of any Debtor Laws, (d) file an answer admitting the allegations of, or consent to, or default in answering, a petition filed against it in any bankruptcy, reorganization or insolvency proceeding, or (e) take action for the purpose of effecting any of the foregoing; or

(viii) an involuntary petition or complaint shall be filed against any Seller, the Servicer or either Performance Guarantor seeking bankruptcy or reorganization of any of the Sellers, the Servicer, or the Performance Guarantors or the appointment of a receiver, custodian, trustee, intervenor or liquidator of any Seller, the Servicer or either Performance Guarantor, all or substantially all of the assets of any of the Sellers, the Servicer, or the Performance Guarantors; or an order, order for relief, judgment or decree shall be entered by any court of competent jurisdiction or other competent authority approving a petition or complaint seeking reorganization of any Seller, the Servicer or either Performance Guarantor or appointing a receiver, custodian, trustee, intervenor or liquidator of any Seller, the Servicer or either Performance Guarantor, or of all or substantially all of the assets of any Seller, the Servicer or either Performance Guarantor; or

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(ix) any Seller, the Servicer or either Performance Guarantor shall fail within thirty (30) days to pay, bond or otherwise discharge any final judgment or order (or judgments or orders) for payment of money in excess of $5,000,000 (singly or in the aggregate); or

(x) any Person shall levy on, seize or attach all or any material portion of the assets of any Seller, the Servicer or either Performance Guarantor and within thirty (30) days thereafter such Seller, the Servicer or either Performance Guarantor shall not have dissolved such levy or attachment, as the case may be, and, if applicable, regained possession of such seized assets; or

(xi) an event or condition specified in Paragraph 10(w) of the Letter Agreement shall occur or exist; or

(xii) any of the applicable Sellers or the Servicer becomes ineligible to originate, sell or service Mortgage Loans to FNMA, FHLMC or GNMA, or FNMA, FHLMC or GNMA shall impose any sanctions upon or terminate or revoke any rights of the Servicer or any of the applicable Sellers; or

(xiii)(x) any Governmental Authority cancels any Seller’s or the Servicer’s right to be either a seller or servicer of such Governmental Authority’s insured or guaranteed Mortgage Loans or mortgage-backed securities, or (y) any Seller or the Servicer receives notice from a Governmental Authority that such Governmental Authority intends to revoke such Seller’s or Servicer’s right to be a seller or servicer of such Governmental Authority’s insured or guaranteed Mortgage Loans or mortgaged-backed securities and such notice is not withdrawn within ten (10) days of the receipt thereof; or

(xiv) failure of any Seller or the Servicer to correct an imbalance in any escrow account established with such Seller or Servicer as either an originator, purchaser or servicer of Mortgage Loans, which imbalance may have a Material Adverse Effect, within two (2) Business Days after demand by any beneficiary of such account or by Buyer; or

(xv) failure of any of the Sellers or the Servicer, to meet, at all times, the minimum net worth requirements of FNMA, FHLMC, or GNMA as an originator, seller or servicer, as applicable to the extent such Person is required to satisfy such requirements; or

(xvi) any material provision of this Agreement or any other Transaction Document shall for any reason cease to be in full force and effect, or be declared null and void or unenforceable in whole or in part; or the validity or enforceability of any such document shall be challenged or denied; or

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(xvii) a “change in control,” with respect to the ownership of AHMIC shall have occurred after the date hereof (and as used in this subparagraph, the term “change in control” shall mean an acquisition by any Person, partnership or group, as defined under the Securities Exchange Act of 1934, as amended, of a direct or indirect beneficial ownership of 10% or more of the then-outstanding voting stock of either Performance Guarantor); or AHMIC shall cease at any time to own directly or indirectly 100% of the stock of each Seller (other than itself) and the Servicer; or

(xviii) there shall have occurred any event that could be reasonably expected to have a Material Adverse Effect on the enforceability or collectability of any significant portion of the Purchased Mortgage Loans (provided that to the extent such event gives rise to an obligation by the Sellers to repurchase any Mortgage Loans pursuant to this Agreement and the Sellers do so repurchase in accordance with the provisions of the this Agreement, no Event of Default shall occur under this Paragraph 11(a)(xviii)) or there shall have occurred any other event that could be reasonably expected to have a Material Adverse Effect on the ability of any Seller or the Servicer to collect a significant portion of Mortgage Loans or the ability of the Sellers or the Servicer to perform hereunder or a Material Adverse Effect has occurred in the financial condition or business of the Sellers since inception or the Servicer since September 30, 2006; or

(xix)(a) any litigation (including, without limitation, derivative actions), arbitration proceedings or governmental proceedings not disclosed in writing by any Seller to the Purchasers, Buyer and the Group Agents prior to the date of execution and delivery of this Agreement is pending against any Seller or the Servicer or any Affiliate thereof, or (b) any development not so disclosed has occurred in any litigation (including, without limitation, derivative actions), arbitration proceedings or governmental proceedings so disclosed, which, in the case of either clause (a) and/or (b), in the reasonable, good faith opinion of the Required Group Agents, could reasonably be expected to have a Material Adverse Effect on any Seller, the Servicer or either Performance Guarantor; or

(xx) the Internal Revenue Service shall file notice of a lien pursuant to Section 6323 of the IRC with regard to any of the assets of any Seller or the Servicer and such lien shall not have been released within 30 days, or the PBGC shall, or shall indicate its intention to, file notice of a lien pursuant to Section 4068 of ERISA with regard to any of the assets of any Seller or the Servicer; or

(xxi) there shall exist a Margin Deficit that has not been cured within the time period set forth in Paragraph 4; or

(xxii) a successor Custodian shall not have been appointed and accepted such appointment within 180 days after the retiring Custodian shall have given written notice of resignation pursuant to Section 4.4 of the Custodial Agreement; or

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(xxiii) Buyer shall cease to have a valid and perfected first priority security interest in the Mortgage Loans and the other Purchased Assets for the benefit of the Purchasers; or

(xxiv) either (i) AHMS’s Tangible Net Worth shall be less than $30,000,000 or (ii) AHMS’s Tangible Net Worth, combined with the Tangible Net Worth of AHM and AHMA shall be less than $147,000,000; or

(xxv) any Seller or Servicer shall fail to deliver to Buyer a Daily Market Value Report, a Loan Schedule or a Monthly Report on the day on which the same shall be required to be delivered and such failure shall continue for two (2) Business Days for a Daily Market Value Report or a Loan Schedule or five (5) Business Days for a Monthly Report; or

(xxvi) any Seller shall become subject to registration as an “investment company” as defined in, or subject to regulation under, the Investment Company Act of 1940, as amended.

(b) If any Event of Default occurs, all Sellers shall be deemed the defaulting party with respect to any Event of Default. If an Event of Default shall have occurred and be continuing then, Buyer may, at its option by written notice to the Sellers, (i) declare the Repurchase Date for each Transaction hereunder, if it has not already occurred, to be deemed immediately to occur (except that, in the event that the Purchase Date for any Transaction has not yet occurred as of the date of such exercise, such Transaction shall be deemed immediately canceled), (ii) replace the Servicer in accordance with the Letter Agreement and (iii) direct or cause the Servicer or Sellers to direct, all Mortgagors to remit all Collections to an account specified by Buyer.

(c) If Buyer exercises the option referred to in subparagraph (b)(i) of this Paragraph 11, (i) the Sellers’ joint and several obligations hereunder to repurchase all Purchased Mortgage Loans in such Transactions at the Repurchase Price therefor on the Repurchase Date determined in accordance with subparagraph (b)(i) of this Paragraph, shall thereupon become immediately due and payable, (ii) all Collections paid or collected after such exercise shall be payable to and retained by Buyer and shall be applied to the aggregate unpaid Repurchase Price, Price Differential and any other amounts owing by Sellers hereunder and under the other Transaction Documents, (iii) Sellers shall, if directed by Buyer in writing, immediately deliver or cause the Custodian or the Servicer to deliver to Buyer any documents then in any Seller’s, Servicer’s or the Custodian’s possession relating to Purchased Mortgage Loans subject to such Transactions, including all Loan Documents and Mortgage Notes (if and to the extent not repurchased pursuant to (i) above) and (iv) Buyer may, by notice to Sellers, declare the Termination Date to have occurred.

(d) If Buyer exercises the option referred to in subparagraph (b)(i) of this Paragraph 11, then, Buyer may, without prior notice to Sellers, (i) immediately sell on a servicing released or servicing retained basis as Buyer deems desirable, in a recognized market at such price or prices as Buyer may in its sole commercially reasonable discretion deem satisfactory, any or all Purchased Mortgage Loans subject to such Transactions and apply the

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proceeds thereof to the aggregate unpaid Repurchase Prices, Price Differential and any other amounts owing by Sellers hereunder or under any other Transaction Document or (ii) in its sole commercially reasonable discretion elect, in lieu of selling all or a portion of such Purchased Mortgage Loans, to give Sellers credit for such Purchased Mortgage Loans in an amount equal to the price therefor on such date, obtained from a generally recognized source or the most recent closing bid quotation from such a source, against the aggregate unpaid Repurchase Prices and any other amounts owing by Sellers hereunder. The proceeds of any such disposition shall be applied first to the reasonable costs and expenses incurred by Buyer in connection with or as a result of an Event of Default; second to all Breakage Costs, costs of cover and/or related hedging transactions; third, to the aggregate and accrued Price Differential owed hereunder, fourth to the remaining aggregate Repurchase Prices owed hereunder and fifth, to any other accrued and unpaid obligations of Sellers hereunder and under the other Transaction Documents, and any remaining funds shall be promptly returned to Sellers. Additionally, the parties hereto agree that (i) Buyer may, at its option, by notice to the defaulting party, terminate the applicable Seller’s obligation to provide future Mortgagor Advances pursuant to the related Mortgage Contracts with respect to each Mortgage Loan, (ii) at its option, Buyer shall have the right (but not the obligation) to make any future Mortgagor Advances under the related Mortgage Contracts with respect to the Mortgage Loans and (iii) in connection with any sale of any Mortgage Loan, all rights and obligations of the related Seller with respect to such Mortgage Loan shall be sold with such Mortgage Loan (including, without limitation, the right to fund Mortgagor Advances and all rights and obligations under the Mortgage Contracts).

(e) The parties acknowledge and agree that (1) the Purchased Mortgage Loans subject to any Transaction hereunder are instruments traded in a recognized market, (2) in the absence of a generally recognized source for prices or bid or offer quotations for any Purchased Mortgage Loans, Buyer may establish the source therefor in its sole commercially reasonable discretion and (3) all prices, bids and offers shall be determined together with accrued interest (except to the extent contrary to market practice with respect to the relevant Purchased Mortgage Loans). The parties further recognize that it may not be possible to purchase or sell all of the Purchased Mortgage Loans on a particular Business Day, or in a transaction with the same purchaser, or in the same manner because the market for such Purchased Mortgage Loans may not be liquid at such time. In view of the nature of the Purchased Mortgage Loans, the parties agree that liquidation of a Transaction or the underlying Purchased Mortgage Loans does not require a public purchase or sale and that a good faith private purchase or sale shall not be deemed to have been made in a commercially unreasonable manner solely as a result of there not being a public sale. Accordingly, Buyer may elect the time and manner of liquidating any Purchased Mortgage Loan and nothing contained herein shall obligate Buyer to liquidate any Purchased Mortgage Loan on the occurrence of an Event of Default or to liquidate all Purchased Mortgage Loans in the same manner or on the same Business Day and no such exercise of any right or remedy shall constitute a waiver of any other right or remedy of Buyer.

(f) In addition to the foregoing, the Sellers shall be jointly and severally liable to Buyer for (i) the amount of all reasonable legal or other expenses incurred by Buyer in connection with or as a result of an Event of Default, (ii) damages in an amount equal to the cost (including all fees, expenses and commissions determined in good faith) of entering into replacement transactions and entering into or terminating hedge transactions in connection with or as a result of an Event of Default and (iii) any other loss, damage, cost or expense directly arising or resulting from the occurrence of an Event of Default in respect of a Transaction.

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(g) To the extent permitted by applicable law, the Sellers shall be jointly and severally liable to Buyer for interest on any amounts owing by the Sellers hereunder, from the date any Seller becomes liable for such amounts hereunder until such amounts are (i) paid in full by or on behalf of such Seller or (ii) satisfied in full by the exercise of Buyer’s rights hereunder. Interest on any sum payable by the Sellers to Buyer under this Paragraph 11 shall be at a rate equal to the greater of the Pricing Rate for the relevant Transaction and the Default Rate.

(h) If an Event of Default occurs, Buyer shall have, in addition to its rights hereunder, any rights otherwise available to it under any other agreement entered into in connection with the Transactions contemplated by this Agreement or applicable law.

(i) The exercise by Buyer of remedies and the application of all of the provisions of this Paragraph 11 after the occurrence of an Event of Default shall be conducted in good faith and in a commercially reasonable manner.

12. Servicing of the Purchased Mortgage Loans

(a) The parties hereto agree and acknowledge that, notwithstanding the purchase and sale of the Purchased Mortgage Loans contemplated hereby, Sellers shall cause the Purchased Mortgage Loans to be serviced by the Servicer in accordance with Accepted Servicing Practices for the benefit of each Seller and its assigns; provided, however, that the obligation of each Seller to cause the servicing of any Purchased Mortgage Loans for the benefit of Buyer as aforesaid shall cease upon the payment to Buyer of the Repurchase Price therefor.

(b) Sellers shall cause the Purchased Mortgage Loans to be serviced and administered and shall have full power and authority, acting alone, to cause the Servicer to do any and all things in connection with such servicing which Sellers may deem necessary or desirable and consistent with the terms of this Agreement and Paragraph 13 of the Letter Agreement, and may, subject to the other terms hereof, retain all principal prepayments and other Collections received by Sellers with respect to such Purchased Mortgage Loans pursuant to the terms hereof. Sellers, in performing the aforementioned duties, shall employ procedures (including collection procedures) and shall cause the Servicer to exercise the same care it customarily employs and exercises in servicing and administering construction mortgage loans for its own account, in accordance with Accepted Servicing Practices.

(c) Buyer may, in its sole discretion if an Event of Default shall have occurred and be continuing, (i) direct the Custodian to deliver all Loan Documents to Buyer or Buyer’s designee and (ii) terminate the Servicer as servicer with respect to any Purchased Assets, in each case at the cost and expense of Sellers.

13. Single Agreement

Buyer and each Seller acknowledge that, and have entered hereinto and will enter into each Transaction hereunder in consideration of and in reliance upon the fact that, all Transactions hereunder constitute a single business and contractual relationship and have been

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made in consideration of each other. Accordingly, Buyer and each Seller agrees (i) to perform all of its obligations in respect of each Transaction hereunder, and that a default in the performance of any such obligations by any Seller shall constitute a default in respect of all Transactions hereunder, (ii) that each of Buyer (together with the Purchasers), on the one hand, and the Sellers, on the other hand, shall be entitled to set off claims and apply property held by them in respect of any Transaction against obligations owing to them in respect of any other Transactions hereunder (including, with respect to Buyer’s such right, to set off or net claims against the property of any Seller regardless of which Seller’s obligations are outstanding) and (iii) that payments, deliveries and other transfers made by Buyer or any Purchaser, on the one hand, and any Seller, on the other hand, in respect of any Transaction shall be deemed to have been made in consideration of payments, deliveries and other transfers in respect of any other Transactions hereunder, and the obligations to make any such payments, deliveries and other transfers may be applied against each other and netted (including, with respect to Buyer’s such right, to set off or net claims against the property of any Seller regardless of which Seller’s obligations are outstanding).

14. Notices and Other Communications

Except as otherwise expressly provided herein, all notices, statements, demands or other communications required or permitted under this Agreement shall be in writing (including, without limitation, overnight courier, electronic mail or facsimile communication). Such notices shall be effective upon receipt, or in the case of overnight courier, two (2) days after being deposited with such courier, or, in the case of notice by facsimile, when electronic confirmation of receipt is obtained, in each case if addressed to the applicable party at the address specified below (or as to any party to such other address as shall be subsequently designated by such party in a written notice to the other party hereto):

if to AHMA:

American Home Mortgage Acceptance, Inc.

538 Broadhollow Road

Melville, New York, 11747

Attention: General Counsel

Facsimile: (800) 209-7276

Telephone Confirmation: (516) 396-7703

if to AHM:

American Home Mortgage Corp.

538 Broadhollow Road

Melville, New York 11747

Attention: General Counsel

Facsimile: (800) 209-7276

Telephone Confirmation: (516) 396-7703

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if to AHMIC:

American Home Mortgage Investment Corp.

538 Broadhollow Road

Melville, New York, 11747

Attention: General Counsel

Facsimile: (800) 209-7276

Telephone Confirmation: (516) 396-7703

if to AHMS:

American Home Mortgage Servicing, Inc.

538 Broadhollow Road

Melville, New York, 11747

Attention: General Counsel

Facsimile: (800) 209-7276

Telephone Confirmation: (516) 396-7703

if to Buyer:

ABN AMRO Bank N.V.

540 West Madison Street

Chicago, Illinois 60661 Attention: Therese Gremley

Facsimile: (312) 992-1527

E-mail Address: therese.gremley@abnamro.com

Telephone Confirmation: (312) 904-6263

15. Payment of Expenses; Indemnity

(a) The Sellers agree jointly and severally to pay reasonably promptly following demand all reasonable out-of-pocket costs and expenses of Buyer, the Group Agents and the Purchasers in connection with the preparation, execution, delivery, modification, administration, amendment and enforcement of the Transaction Documents (including, without limitation, (i) all collateral review and UCC search and filing expenses; (ii) the reasonable fees and expenses of counsel, in connection with the preparation, execution and delivery of this Agreement and the other Transaction Documents; (iii) all initial and periodic audit costs (subject to the limitations set forth in Paragraph 11(h) of the Letter Agreement), (iv) all rating agency fees, and (v) the reasonable fees and expenses of counsel for Buyer, the Group Agents and the Purchasers with respect to advising it in connection with (A) the post-closing administration of this Agreement or of the other Transaction Documents; (B) any amendment, modification or waiver hereof or thereof; and (C) enforcement of any rights or remedies of Buyer, the Group Agents or the Purchasers hereunder or thereunder, whether in any action, suit or litigation, any bankruptcy, insolvency or other similar proceeding, including presenting claims in or otherwise participating in or monitoring any bankruptcy, insolvency or other similar proceeding and any proceeds ancillary thereto. The obligation of Sellers jointly and severally to pay such fees and expenses incurred prior to or in connection with the termination of this Agreement shall survive the termination of this Agreement.

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(b) In addition to the foregoing, the Sellers hereby agree, jointly and severally, to indemnify and hold harmless each of the Buyer, the Group Agents, the Purchasers, any Affected Party, their respective successors, transferees, participants and assigns and all affiliates, officers, directors, shareholders, controlling persons, employees and agents of any of the foregoing (collectively, the “Indemnified Parties”) forthwith on demand, from and against any and all damages, losses, claims, liabilities and related reasonable costs and expenses, including attorneys’ fees and disbursements (all of the foregoing being collectively referred to as “Indemnified Amounts”) awarded against or incurred by any of them arising out of or relating to this Agreement or the exercise or performance of any of its or their powers or duties, in respect of any Mortgage Loan, or related to its or their possession of, or dealings with, the Purchased Assets, excluding, however, any Indemnified Amounts resulting from gross negligence, willful misconduct, or unlawful collection activity directed against a Seller under a mortgage loan included in the Purchased Assets on the part of such Indemnified Party.

(c) If for any reason the indemnification provided in Paragraph 15(b) above is unavailable to an Indemnified Party or is insufficient to hold an Indemnified Party harmless, then the Sellers shall jointly and severally contribute to the amount paid or payable by such Indemnified Party as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect not only the relative benefits received by such Indemnified Party on the one hand and Sellers on the other hand but also the relative fault of such Indemnified Party as well as any other relevant equitable considerations. Each party hereto agrees that it shall not assert any claim against any Indemnified Party for, and no Indemnified Party will have any liability for, special, indirect, consequential or punitive damages in connection with the Transaction Documents, or the Transactions contemplated hereby.

16. Buyer as Attorney-in-Fact

Buyer is hereby appointed on the date hereof the attorney-in-fact of each Seller for the purpose, following and during the continuance of an Event of Default, of carrying out the provisions of this Agreement and taking any action and executing any instruments that Buyer may, in good faith, deem necessary or advisable to accomplish the purposes hereof, which appointment as attorney-in-fact is irrevocable and coupled with an interest. Without limiting the generality of the foregoing, each Seller authorizes the Buyer to take any and all steps in such Seller’s name and on behalf of such Seller that are necessary or desirable, in the determination of the Buyer, to collect amounts due under the Purchased Assets, including, without limitation, to have the right and power, as of the date hereof, to be exercised only following and during the continuance of an Event of Default (i) to endorse notes, checks, or instruments and complete blanks in documents, (ii) to execute any financing statements and assignments of mortgages on behalf of such Seller, (iii) to receive, endorse and collect all checks made payable to the order of such Seller representing any payment on account of the principal of or interest on any of the Purchased Mortgage Loans and to give full discharge for the same, and (iv) to enforce the Purchased Assets and the other related rights.

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17. Wire Instructions

(a) Any amounts to be transferred by Buyer to any Seller hereunder shall be sent by wire transfer in immediately available funds to the account of Sellers set forth below, or at such other account as directed in writing to Buyer by the Sellers.

Bank: Deutsche Bank Trust Company Americas

Account Name: American Home Mortgage

Acct. No.: 00-380-082

ABA No. 021-001-033

(b) Any amounts to be transferred by any Seller to Buyer hereunder shall be sent by wire transfer in immediately available funds to the account of Buyer set forth below, or at such other account as directed in writing to Sellers by Buyer.

Bank: ABN AMRO Bank

New York, New York

Account Name: Amsterdam Funding Corp.

Acct. No.: 671042302550

ABA No. 026 0095 80

(c) Amounts received after 2:30 p.m., New York City time, on any Business Day shall be deemed to have been paid and received on the next succeeding Business Day.

18. Entire Agreement; Severability

This Agreement, as supplemented by the Letter Agreement, shall supersede any existing agreements between the parties containing general terms and conditions for repurchase transactions. Each provision and agreement herein shall be treated as separate and independent from any other provision or agreement herein and shall be enforceable notwithstanding the unenforceability of any such other provision or agreement.

19. Non assignability; Termination

(a) No Seller’s rights and obligations under this Agreement or under any Transaction shall be assigned by such Seller without the prior written consent of Buyer and any such assignment without the prior written consent of Buyer shall be null and void. Buyer and the Purchasers may assign their rights and obligations hereunder as set forth in the Letter Agreement. Subject to the foregoing, this Agreement and any Transactions shall be binding upon and shall inure to the benefit of the parties and their respective successors and assigns.

(b) Subparagraph (a) of this Paragraph 19 shall not preclude a party from assigning, charging or otherwise dealing with all or any part of its interest in any sum payable to it under Paragraph 11 hereof.

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20. Counterparts

This Agreement may be executed in any number of counterparts, each of which counterparts shall be deemed to be an original, and such counterparts shall constitute but one and the same instrument.

21. GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL

(a) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. EACH PARTY HERETO HEREBY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND OF ANY NEW YORK STATE COURT SITTING IN THE CITY OF NEW YORK FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. NOTHING IN THIS PARAGRAPH 21 SHALL AFFECT THE RIGHT OF BUYER TO BRING ANY ACTION OR PROCEEDING AGAINST ANY SELLER OR ITS PROPERTY IN THE COURTS OF OTHER JURISDICTIONS. EACH PARTY HERETO CONSENTS TO THE SERVICE OF ANY AND ALL PROCESS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES OF SUCH PROCESS TO IT AT ITS ADDRESS FOR NOTICES HEREUNDER SPECIFIED IN PARAGRAPH 14.

(b) EACH PARTY HERETO HEREBY WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE AMONG ANY OF THEM ARISING OUT OF, CONNECTED WITH, RELATING TO OR INCIDENTAL TO THE RELATIONSHIP BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT OR THE OTHER TRANSACTION DOCUMENTS.

22. No Waivers, Etc.

No express or implied waiver of any Event of Default by Buyer shall constitute a waiver of any other Event of Default and no exercise of any remedy hereunder by Buyer shall constitute a waiver of its right to exercise any other remedy hereunder. No modification or waiver of any provision of this Agreement and no consent by any party to a departure herefrom shall be effective unless and until such shall be in writing and duly executed by both of the parties hereto.

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23. Use of Employee Plan Assets

(a) If assets of an employee benefit plan subject to any provision of ERISA are intended to be used by either party hereto (the “Plan Party”) in a Transaction, the Plan Party shall so notify the other party prior to the Transaction. The Plan Party shall represent in writing to the other party that the Transaction does not constitute a prohibited transaction under ERISA or is otherwise exempt therefrom, and the other party may proceed in reliance thereon but shall not be required so to proceed.

(b) Subject to the last sentence of subparagraph (a) of this Paragraph, any such Transaction shall proceed only if the Plan Party furnishes or has furnished to the other party its most recent available audited statement of its financial condition and its most recent subsequent unaudited statement of its financial condition.

(c) By entering into a Transaction pursuant to this Paragraph, any Plan Party shall be deemed (i) to represent to the other party that, since the date of such Plan Party’s latest such financial statements, there has been no material adverse change in such Plan Party’s financial condition which such Plan Party has not disclosed to the other party, and (ii) to agree to provide with respect to any outstanding Transaction the other party with future audited and unaudited statements of its financial condition as they are issued, so long as it is a Plan Party.

24. Intent

(a) The parties hereto intend and acknowledge that each Transaction is a “repurchase agreement” as that term is defined in Section 101 of the Bankruptcy Code (except insofar as the term of such Transaction would render such definition inapplicable), and a “securities contract” as that term is defined in Section 741 the Bankruptcy Code.

(b) The parties hereto understand that their right to accelerate or terminate this Agreement or to liquidate Mortgage Loans delivered to it in connection with Transactions hereunder or to exercise any other remedies pursuant to Paragraph 11 hereof, is a contractual right to accelerate, terminate or liquidate this Agreement or such Transaction as described in Sections 555 and 559 of the Bankruptcy Code.

(c) The parties hereto agree and acknowledge that if a party hereto is an “insured depository institution,” as such term is defined in the FDIA, then each Transaction hereunder is a “qualified financial contract,” as that term is defined in the FDIA and any rules, orders or policy statements thereunder (except insofar as the type of assets subject to such Transaction would render such definition inapplicable).

(d) It is understood that this Agreement constitutes a “netting contract” as defined in and subject to Title IV of the Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”) and each payment entitlement and payment obligation under any Transaction hereunder shall constitute a “covered contractual payment entitlement” or “covered contractual payment obligation”, respectively, as defined in and subject to FDICIA (except insofar as one or both of the parties is not a “financial institution” as that term is defined in FDICIA).

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(e) It is understood and agreed that this Agreement constitutes a “master netting agreement “ as that term is defined in Section 101 of the Bankruptcy Code, and that any party’s right to cause the termination, liquidation, or acceleration of, or to offset net termination values, payment amounts or other transfer obligations arising under or in connection with, this Agreement or any Transaction is a contractual right to cause the termination, liquidation, or acceleration of, or to offset net termination values, payment amounts or other transfer obligations arising under or in connection with, this Agreement, any Transaction Document or any Transaction as described in Section 561 of the Bankruptcy Code.

(f) It is understood and agreed that any cash, securities or other property held by, pledged to, under the control of, or due from Buyer to any Seller pursuant to this Agreement or the Letter Agreement (including, without limitation, proceeds from the liquidation of Purchased Mortgage Loans in connection with the exercise of Buyer’s remedies hereunder upon an Event of Default) and any other transfers of cash or other property to Buyer pursuant to this Agreement or any other Transaction Document, in each case when so transferred, applied, setoff or paid, shall constitute “settlement payments” (as defined in Bankruptcy Code Section 741(8)) or “margin payments” (as defined in Bankruptcy Code Section 101(38)).

25. Disclosure Relating to Certain Federal Protections

The parties hereto acknowledge that they have been advised that:

(a) in the case of Transactions in which one of the parties is a broker or dealer registered with the Securities and Exchange Commission (“SEC”) under Section 15 of the Securities Exchange Act of 1934 (“1934 Act”), the Securities Investor Protection Corporation has taken the position that the provisions of the Securities Investor Protection Act of 1970 (“SIPA”) do not protect the other party with respect to any Transaction hereunder;

(b) in the case of Transactions in which one of the parties is a government securities broker or a government securities dealer registered with the SEC under Section 15C of the 1934 Act, SIPA will not provide protection to the other party with respect to any Transaction hereunder; and

(c) in the case of Transactions in which one of the parties is a financial institution, funds held by the financial institution pursuant to a Transaction hereunder are not a deposit and therefore are not insured by the Federal Deposit Insurance Corporation or the National Credit Union Share Insurance Fund, as applicable.

26. Contribution with Respect to Seller Obligations.

(a) To the extent that any Seller shall make a payment under this Agreement, the Letter Agreement or any other Transaction Document (a “Seller Payment”) which, taking into account all other Seller Payments then previously or concurrently made by any other Seller, exceeds the amount which otherwise would have been paid by or attributable to such Seller if each Seller had paid the aggregate obligations of the Sellers hereunder and under the other Transaction Documents (collectively, the “Seller Obligations”) satisfied by such Seller Payment in the same proportion as such Seller’s “Allocable Amount” (as defined below) (as determined immediately prior to such Seller Payment) bore to the aggregate Allocable Amounts of each of

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the Sellers as determined immediately prior to the making of such Seller Payment, then, following payment in full in cash of the Seller Payment and the Seller Obligations, and the termination or expiration of all Commitments under the Letter Agreement, such Seller shall be entitled to receive contribution and indemnification payments from, and be reimbursed by, each other Seller for the amount of such excess, pro rata based upon their respective Allocable Amounts in effect immediately prior to such Seller Payment.

(b) As of any date of determination, the “Allocable Amount” of any Seller shall be equal to the maximum amount of the claim which could then be recovered from such Seller under this Agreement and the other Transaction Documents without rendering such claim voidable or avoidable under Section 548 of Chapter 11 of the Bankruptcy Code or under any applicable state Uniform Fraudulent Transfer Act, Uniform Fraudulent Conveyance Act or similar statute or common law.

(c) This Paragraph 26 is intended only to define the relative rights of the Sellers, and nothing set forth in this Paragraph 26 is intended to or shall impair the obligations of the Sellers, jointly and severally, to pay any amounts as and when the same shall become due and payable in accordance with the terms of this Agreement and the other Transaction Documents. The parties hereto acknowledge that the rights of contribution and indemnification hereunder shall constitute assets of the Seller or Sellers to which such contribution and indemnification is owing. The rights of the indemnifying Sellers against other Sellers under this Paragraph 26 shall be exercisable upon the full and indefeasible payment of the Seller Obligations in cash and the termination or expiry of the Commitments under the Letter Agreement.

[signature pages follow]

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AMERICAN HOME MORTGAGEACCEPTANCE, INC., as a Seller
By:	/s/ Alan B. Horn
Name:	Alan B. Horn
Title:	Executive Vice President General Counsel & Secretary
AMERICAN HOME MORTGAGE CORP., as a Seller
By:	/s/ Alan B. Horn
Name:	Alan B. Horn
Title:	Executive Vice President General Counsel & Secretary

AMERICAN HOME MORTGAGE INVESTMENT CORP., as a Seller
By:	/s/ Alan B. Horn
Name:	Alan B. Horn
Title:	Executive Vice President General Counsel & Secretary
AMERICAN HOME MORTGAGE SERVICING, INC., as a Seller
By:	/s/ Alan B. Horn
Name:	Alan B. Horn
Title:	Executive Vice President General Counsel & Secretary

Signature Page to

Master Repurchase Agreement

ABN AMRO BANK N.V. in its capacity as Agent, as Buyer
By:	/s/ Kevin J. Hayes
Name:	Kevin J. Hayes
Title:	Director
By:	/s/ Therese Gremley
Name:	Therese Gremley
Title:	Vice President

Signature Page to

Master Repurchase Agreement

ANNEX I

BUYER ACTING AS AGENT

This Annex I forms a part of the Master Repurchase Agreement dated as of February 28, 2007 (the “Agreement”) among American Home Mortgage Acceptance, Inc., American Home Mortgage Corp., American Home Mortgage Investment Corp., American Home Mortgage Servicing, Inc. and ABN AMRO Bank N.V. (“ABN AMRO”). The parties acknowledge that ABN AMRO is entering into the Agreement as Buyer solely in its capacity as Agent for the Purchasers, who will be acting as principals thereunder, and this Annex I therefore sets forth certain terms and conditions governing all Transactions. Capitalized terms used but not defined in this Annex I shall have the meanings ascribed to them in the Agreement.

1. Additional Representations.

Agent hereby represents, which representation shall continue during the term of any Transaction that each Purchaser has duly authorized Agent to execute and deliver the Agreement and enter into Transactions on its behalf.

2. Identification of Purchasers.

The Purchasers for whom Agent is acting as Buyer under the Agreement may change from time to time as set forth in the Letter Agreement. Each Seller acknowledges that Agent shall not have any obligation to provide it with confidential information regarding the financial status of the Purchasers.

3. Multiple Principals.

In the event that Agent at any time is acting for more than one Purchaser in respect of Transactions under the Agreement, Agent and each Seller hereby agrees to aggregate such Transactions as if they were transactions by a single Purchaser, except to the extent that the Letter Agreement expressly requires otherwise. The parties agree that (i) the margin maintenance obligations of each Seller under Paragraph 4(a) of the Agreement shall, subject to any greater requirement imposed by applicable law, be determined on an aggregate basis for all Transactions entered into by Buyer; and (ii) Buyer’s remedies upon the occurrence of an Event of Default shall be determined as if all Purchasers were a single Buyer.

4. Interpretation of Terms.

All references to “Buyer” in the Agreement shall, subject to the provisions of this Annex I, be construed to reflect that (i) each Purchaser shall have, in connection with any Transaction or Transactions entered into by Agent on its behalf, the rights, responsibilities, privileges and obligations of a “Buyer”, directly entering into such Transaction or Transactions with the other party under the Agreement, and (ii) the Purchasers have designated Agent as their sole agent for performance of Buyer’s obligations to Sellers, and for receipt of performance by each Seller of its obligations to Buyer, in connection with any Transaction or Transactions under the Agreement (including, among other things, as Agent for each Purchaser in connection with transfers of securities, cash or other property and (except as otherwise provided in the Letter

Agreement) as agent for giving and receiving all notices under the Agreement). Both Agent and the Purchasers shall be deemed “parties” to the Agreement and all references to a “party” or “either party” in the Agreement shall be deemed revised accordingly.

EXHIBIT A

ELIGIBLE MORTGAGE LOAN CRITERIA

“Eligible Mortgage Loan” shall mean, at any time, a Mortgage Loan:

(a) which is either an OTC Loan or a TTC Loan and under which the initial Mortgagor Advance has been funded by the applicable Seller prior to the related Purchase Date;

(b) which is not an Unapproved Mortgage Loan;

(c) which is secured by a first priority Mortgage in the related Mortgaged Property;

(d) which is not a Delinquent Loan or Defaulted Loan;

(e) which (i) has been directly originated by the applicable Seller or (ii) has been purchased by the applicable Seller from Waterfield and re-underwritten by the Servicer using such Seller’s complete underwriting standards for directly originated Mortgage Loans and satisfies and complies with all applicable requirements of the Credit and Collection Policy;

(f) for which the Mortgagor is required to make monthly payments of principal and/or interest;

(g) for which the Mortgagor has been directed to make all Monthly Payments and all repayments of principal thereon to a Lock-Box or a Collection Account;

(h)(i) which has been originated in accordance with, and complies with all applicable requirements of the Credit and Collection Policy in effect at the time of such origination, which was designed to provide guidelines in underwriting the creditworthiness of the Mortgagors and to determine the Mortgagors’ ability to repay the debt, (ii) with respect to which, in accordance with the Credit and Collection Policy, the applicable Seller considered, among other things, the credit history of the Mortgagor and other credit indicators such as income verification and/or debt-to-income ratios of the Mortgagor, and (iii) which was originated in compliance with local, state and federal law applicable thereto at the time of origination, including without limitation, required disclosures of points, charges and fees;

(i) which was not originated based solely on an estimation of the value of the Mortgaged Property without any consideration of the potential ability of the Mortgagor to repay the amount owed under the Mortgage Loan;

(j) with respect to which Buyer has a valid and perfected first priority security interest, free and clear of any other Lien;

(k) which, if a Wet Loan, such Mortgage Loan was not originated more than 10 days prior to such date of determination;

(l) that is denominated and payable only in United States dollars within the United States and with respect to which the related Mortgagor is a natural person who is a United States citizen or resident alien of the United States;

(m) which is serviced in accordance with the Accepted Servicing Practices and the Credit and Collection Policy;

(n) with respect to which the related Mortgagor is not a government or a governmental subdivision or agency;

(o) with respect to which (i) the related Mortgaged Property is a single family detached home and is not a Manufactured Home or a mobile home and (ii) the related Mortgagor is not a developer and, to the knowledge of the applicable Seller, the residence to be constructed on the related Mortgaged Property is not being constructed for speculative purposes;

(p)(i) the Mortgage Note, Mortgage and, if applicable, the Mortgage Contract with respect to which contain customary and enforceable provisions adequate for realization of the benefits of the collateral, (ii) the Mortgage Note for which is considered a “promissory note” within the meaning of the UCC of all applicable jurisdictions, (iii) has not been assigned or pledged, the applicable Seller has good title thereto and such Seller is the sole owner free and clear of any and all liens, encumbrances, pledges, security interests of any nature, except for utility easements, rights-of-way and similar customarily permitted encumbrances, and (iv) with respect to which the related Mortgaged Property is not subject to any delinquent tax or assessment lien;

(q) which, together with the related Mortgage, is not subject to any dispute, claim, right of rescission, set-off, counterclaim or other defense or right of an obligor or guarantor;

(r) which, together with the related Mortgage, Mortgage Note and Mortgage Contract, does not contravene in any material respect any laws, rules or regulations applicable thereto (including, without limitation, laws, rules and regulations relating to truth in lending, fair credit billing, fair credit reporting, equal credit opportunity, fair debt collections practices, usury, abusive and predatory lending and privacy) and with respect to which, no party to the related Mortgage, Mortgage Note and Mortgage Contract is in violation of any such law, rule or regulation in any material respect;

(s) with respect to which the Mortgage Note (properly signed by the related Mortgagor, in full financial effect and endorsed in blank) together with the other Loan Documents required to be delivered to the Custodian pursuant to the Custodial Agreement shall have been delivered to the Custodian to hold for the benefit of the Purchasers unless such Mortgage Loan is a Wet Loan which was originated not more than 10 days prior to such date of determination;

(t) with respect to which the related Mortgaged Property is insured by an ALTA or equivalent lender’s title policy, insuring the originator of such Mortgage Loan as to the first priority lien of the Mortgage in the original principal amount of the Mortgage Loan, the insurer of which is qualified to do business in the state in which the related Mortgaged Property is located;

(u) with respect to which, if the Mortgaged Property relating to such Mortgage Loan is in an area designated as a flood area by the Federal Emergency Management

Exhibit A-2

Agency, a flood insurance policy is in effect that meets the requirements of the current guidelines of the Federal Insurance Administration, is with a generally acceptable insurance carrier and is in an amount not less than the Outstanding Principal Balance of such Mortgage Loan and the related Mortgaged Property is covered by fire, hazard, homeowner’s and other appropriate insurance, which name the applicable Seller or Servicer as loss payee;

(v) with respect to which (i) the related Mortgagor was not required to purchase any credit life, disability, accident or health insurance product as a condition of obtaining the Mortgage Loan and (ii) the related Mortgagor was not required to obtain a prepaid single-premium credit life, disability, accident or health policy in connection with the origination of the Mortgage Loan;

(w) with respect to which the related Mortgage and Mortgage Note contain provisions that permit foreclosure for nonpayment of such Mortgage Loan;

(x) with respect to which the related Mortgaged Property is free and clear of any damage that would materially and adversely affect its value;

(y) with respect to which no material defaults, breaches, violations or events of acceleration have occurred or been waived under the related Mortgage, Mortgage Note or Mortgage Contract;

(z) with respect to which the applicable Seller has full right to sell, assign and transfer the Mortgage Loan, including the Mortgage, the Mortgage Note and the Mortgage Contract, without the consent of the related Mortgagor or any other Person;

(aa) such Mortgage Loan and the underlying Mortgage, Mortgage Note and Mortgage Contract are legal, valid and binding obligations of the related Mortgagor, duly and properly executed by the parties thereto, enforceable against such Mortgagor in accordance with their terms;

(bb) such Mortgage Loan is a whole loan and not a participation interest;

(cc) with respect to which there is only one original executed Mortgage Note;

(dd) which constitutes a “mortgage loan” within the meaning of the Bankruptcy Code;

(ee) which does not contain any shared appreciation or other contingent interest feature;

(ff) with respect to which the related Mortgage Note contains provisions for the acceleration of the payment of the Outstanding Principal Balance of such Mortgage Loan if, without complying with the requirements of such Mortgage Note, the related Mortgaged Property, or any controlling interest therein, is directly or indirectly transferred or sold;

(gg) which, if an OTC Loan, has an original maximum construction completion term of 18 months;

Exhibit A-3

(hh) which, if a TTC Loan, has an original maximum construction completion term of 20 months;

(ii) with respect to which the original construction completion term set forth at the time of origination has not been extended more than 2 times or for a period greater than 6 months in the aggregate;

(jj) with respect to which the conversion date or permanent loan commencement date has not occurred and such Mortgage Loan has not otherwise been converted to, substituted with or replaced by, a permanent mortgage loan or otherwise repaid;

(kk) with respect to which (i) the underlying Mortgaged Property and all buildings, fixtures, other improvements and all building materials located on the Mortgaged Property are covered by hazard and builder’s general liability and risk insurance equal to at least 100% of the insurance value of any improvements on the property and which names either the related Seller or Servicer as loss payee and (ii) to the extent required by the underlying Mortgage Contract, the related builder and/or Mortgaged Property shall be covered by performance bonds, workmen’s compensation and other insurance related thereto;

(ll) with respect to which the related Seller is not in default in any material respect under the terms of the related Mortgage Contract;

(mm) with respect to which all conditions precedent set forth in the related Mortgage Contract with respect to each related Mortgagor Advance have been satisfied or waived by the Servicer in accordance with the Credit and Collection Policy;

(nn) which either (i) automatically converts at the end of the construction term to a permanent loan having no more than a 30-year fixed rate or adjustable rate amortization schedule without the execution of any other agreement, instrument, mortgage, or modification or (ii) will be refinanced by a permanent loan at the end of the construction term having no more than a 30-year fixed rate or adjustable rate amortization schedule and which has been pre-arranged, underwritten, approved and committed to by the applicable Seller and will be secured by a mortgage on the same Mortgaged Property; and

(oo) with respect to which, at the time such Mortgage Loan was originated or purchased, no improvement located thereon or being a part of the applicable Mortgaged Property was in violation of any applicable zoning law or regulation or lay outside the boundaries of the related Mortgaged Property;

(pp) with respect to which, the Mortgagor is not a debtor in any state or federal bankruptcy or insolvency proceeding;

(qq) with respect to which all points and fees related were disclosed in writing to the applicable Mortgagor in accordance with applicable state and federal law and regulation;

(rr) in connection with the origination of which, an appraisal of the related Mortgaged Property was obtained from a qualified appraiser, satisfactory to the applicable originator, who had no interest, direct or indirect, in the Mortgaged Property or in any loan made on the security thereof, and whose compensation is not affected by the approval or disapproval of such Mortgage Loan, such appraisal was in a form acceptable to FNMA (if applicable);

Exhibit A-4

(ss) with respect to which the related Mortgage Note or Mortgage does not require the holder thereof to release all or any portion of the Mortgaged Property from the lien of the related Mortgage except upon payment in full of all amounts due under such Mortgage Loan;

(tt) with respect to which the applicable Repurchase Date has not yet occurred;

(uu) with respect to which the related Seller has no actual notice of the commencement of a proceeding for the condemnation of all or any material portion of the Mortgaged Property;

(vv) which is not and is not subject to being cross-collateralized with any other Mortgage Loan;

(ww) with respect to which the terms of the related Mortgage, Mortgage Note and Mortgage Contract have not been impaired, waived, altered, or modified in any material respect;

(xx) with respect to which all escrow deposits relating to such Mortgage Loan that are as of the related closing date, required to be deposited with the Mortgagee or its agent have been so deposited;

(yy) with respect to which, if the related Mortgage is a deed of trust, a trustee, duly qualified under applicable law to serve as such, is properly designated and serving under such Mortgage;

(zz) with respect to which the related Seller has not received actual notice of any event (other than payments due but not yet delinquent) that, with the passage of time or with notice and the expiration of any grace or cure period, would constitute a material default, breach or event of acceleration;

(aaa) with respect to which no holder of the Mortgage Loan has advanced funds or induced, solicited or knowingly received any advance of funds from a party other than the owner of the related Mortgaged Property, directly or indirectly for the payment of any amount required by the Mortgage Loan;

(bbb) with respect to which the related Mortgage provides that any insurance proceeds or condemnation proceeds will be applied either to restore or repair the Mortgaged Property or to repay the principal of the Mortgaged Loan.

(ccc) with respect to which the related Mortgaged Property is located within the United States and the Mortgaged Property consists of land and a single family detached residence under construction;

Exhibit A-5

(ddd) which is not (a) a Mortgage Loan subject to 12 CFR Part 226.31, 12 CFR Part 226.32 or 226.34 of Regulation Z, the regulation implementing the Truth-in-Lending Act, which implements the Home Ownership and Equity Protection Act of 1994, as amended, or (b) classified and/or defined, as a “high cost”, “threshold”, “predatory” or “covered” loan (or a similarly classified loan using different terminology under a law imposing additional legal liability for Mortgage Loans having high interest rates, points and/or fees) under any other applicable state, federal or local law;

(eee) with respect to which all filings required by all applicable laws in order to preserve the applicable Seller’s first priority Mortgage and preserve the applicable Seller’s rights as against the applicable Mortgagor and the applicable builder throughout the construction period have been duly and timely filed, including without limitation any required filings of the Mortgage and all modifications, riders and addendums thereto, the Mortgage Contract, the construction contract, notices of commencement, UCC financing statements, and affidavits.

(fff) which, if the Loan-to-Value Ratio for such Mortgage Loan is in excess of 80%, the applicable Mortgagor under such Mortgage Loan has primary mortgage insurance;

(ggg) with respect to which neither the related Seller nor Servicer has received notice of any relief requested or granted to the applicable Mortgagor under such Mortgage Loan pursuant to the Service Members Civil Relief Act of 2003;

(hhh) with respect to which the construction of the related Mortgaged Property shall be performed by a builder (i) acceptable to the applicable Seller, in accordance with the Credit and Collection Policy (ii) which is not an Affiliate of any Seller;

(iii) which, (i) if the related Mortgage Contract contains a commitment of $1,000,000 or less, has a FICO Score of at least 600, (ii) if the related Mortgage Contract contains a commitment of greater than $1,000,000, has a FICO Score of at least 700, and (iii) if the related Mortgage Contract contains a commitment of greater than $1,000,000 and such Mortgage Loan has a Loan-to-Value Ratio of more than 70%, has a FICO Score of at least 740;

(jjj) the FICO Score of which, when included in the weighted average of the FICO Scores for all Purchased Mortgage Loans on any date of determination, does not cause such weighted average FICO Score to be less than 680;

(kkk) which, (i) if the related Mortgage Contract contains a commitment of $1,000,000 or less, has a Loan-to-Value Ratio of not more than 90% and (ii) if the related Mortgage Contract contains a commitment of greater than $1,000,000, has a Loan-to-Value Ratio of not more than 70%;

(lll) the Loan-to-Value Ratio of which, when included in the weighted average of the Loan-to-Value Ratios for all Purchased Mortgage Loans on any date of determination, does not cause such weighted average Loan-to-Value Ratio to be more than 75%; and

(mmm) the Mortgage Contract related to which does not contain a commitment of greater than $3,000,000;

Exhibit A-6

provided however, that no Mortgage Loan originated by Waterfield and purchased by a Seller shall be an Eligible Mortgage Loan after the date which is 180 days after the date hereof.

Exhibit A-7

EXHIBIT B

CONCENTRATION PERCENTAGES

Mortgage Loans. The Concentration Limit with respect to Mortgage Loans for any Concentration Category shall mean, as of any date of determination, the product of (a) the Concentration Percentage for such Concentration Category as of such date, and (b) the aggregate Outstanding Principal Balance of all Purchased Mortgage Loans as of such date.

Concentration Category	Concentration Percentage
Maximum Single Builder/Developer Concentration Limit	2%
Maximum Single State Concentration Limit	15% (New York, California, Florida and Texas) 7.5% (all other states)
Mortgage Loans with commitments greater than $1,000,000	35%
Mortgage Loans with commitments greater than $2,000,000	10%
Mortgage Loans with FICO Scores less than 660	15%
Mortgage Loans with original construction period term greater than 12 months	35%
Mortgage Loans purchased from Waterfield	2%
Maximum Wet Loan Funding	5%

EX-10.3

Exhibit 10.3

Execution Copy

LETTER AGREEMENT

dated as of

February 28, 2007

among

AMERICAN HOME MORTGAGE ACCEPTANCE, INC.

AMERICAN HOME MORTGAGE CORP.

AMERICAN HOME MORTGAGE INVESTMENT CORP.

and

AMERICAN HOME MORTGAGE SERVICING, INC.,

as Sellers,

AMERICAN HOME MORTGAGE SERVICING, INC.,

as Servicer,

THE PURCHASERS FROM TIME TO TIME PARTY HERETO,

THE GROUP AGENTS FROM TIME TO TIME PARTY HERETO,

and

ABN AMRO BANK N.V.,

as Agent

Table of Contents

1.	Defined Terms.	4
2.	Purchases.	14
3.	Buyer Acting as Agent	16
4.	Pricing Rate; Fees; Payments and Computations.	16
5.	Interest Protection.	17
6.	Capital Adequacy.	18
7.	Breakage Costs	19
8.	Taxes.	19
9.	Conditions Precedent.	21
10.	Representations and Warranties	23
11.	Affirmative Covenants	29
12.	Negative Covenants	36
13.	Servicing Provisions.	38
14.	Binding Effect; Assignments and Participations; Joinder.	42
15.	Amendments and Waivers	44
16.	Notices	44
17.	GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL.	44
18.	Right of Setoff	45
19.	Ratable Payments	45
20.	Limitation of Liability.	46
21.	No Insolvency Proceedings	46
22.	Confidentiality.	47
23.	Counterparts	48
24.	No Waiver; Remedies	48
25.	Integration; Binding Effect; Survival of Termination	48

SCHEDULE I	Groups; Commitments; Purchase Limits
SCHEDULE II	List of Closing Documents
SCHEDULE III	Litigation
SCHEDULE IV	Lock-Boxes and Collection Accounts
SCHEDULE V	Trade Names, Fictitious Names, Assumed Names and “Doing Business As Names”
SCHEDULE VI	Notice Addresses
SCHEDULE VII	Authorized Representatives
SCHEDULE VIII	Other Financing Facilities
EXHIBIT A	Form of Daily Market Value Report
EXHIBIT B	Form of Monthly Report
EXHIBIT C-1	Form of Seller Certificate
EXHIBIT C-2	Form of Servicer Certificate

LETTER AGREEMENT

February 28, 2007

American Home Mortgage Acceptance, Inc.

American Home Mortgage Corp.

American Home Mortgage Investment Corp.

American Home Mortgage Servicing, Inc.

Re: Master Repurchase Agreement dated as of February 28, 2007, among American Home Mortgage Acceptance, Inc., American Home Mortgage Corp., American Home Mortgage Investment Corp., American Home Mortgage Servicing, Inc. , as Sellers, and ABN AMRO Bank N.V., as Buyer

Ladies and Gentlemen:

This letter agreement (this “Letter Agreement”) is entered into by and among AMERICAN HOME MORTGAGE ACCEPTANCE, INC., AMERICAN HOME MORTGAGE CORP., AMERICAN HOME MORTGAGE INVESTMENT CORP. and AMERICAN HOME MORTGAGE SERVICING, INC. (“AHM Servicing”), as Sellers (the “Sellers”), AHM Servicing, in its capacity as the Servicer (the “Servicer”), AMSTERDAM FUNDING CORPORATION, as the initial Conduit Purchaser, the other parties hereto as Conduit Purchasers from time to time, ABN AMRO BANK N.V. (“ABN AMRO”), as a Committed Purchaser, the other parties hereto as Committed Purchasers from time to time, ABN AMRO, as Group Agent for the ABN AMRO Group, the other parties hereto as Group Agents from time to time, and ABN AMRO, as agent for the Conduit Purchasers and the Committed Purchasers (in such capacity, the “Agent”). Reference is hereby made to that certain Master Repurchase Agreement (as amended, restated, supplemented, or otherwise modified from time to time, the “Repurchase Agreement”) dated the date hereof between the Sellers and the Agent, as Buyer. This Letter Agreement sets forth certain commitments, terms, representations, warranties, conditions and pricing information relating to the Repurchase Agreement. Capitalized terms used and not otherwise defined herein shall have the meanings provided in the Repurchase Agreement.

1. Defined Terms.

(a) As used in this Letter Agreement and in the Repurchase Agreement, the following terms shall have the following meanings:

“ABN AMRO Group” means the Purchaser Group for which ABN AMRO is the Group Agent.

“Adjusted Consolidated Funded Debt” means, on any date of determination, the sum of (a) the Consolidated Funded Debt of AHMIC and any other Person which would be reflected on the consolidated balance sheet of AHMIC prepared in accordance with GAAP if such balance sheet were prepared as of such date of determination, less (b) 50% of any Subordinated Debt, less (c) the mortgage debt associated with the building and the land located at 538 Broadhollow Road, Melville, New York.

“Affected Party” has the meaning specified in Paragraph 5(a).

“Aggregate Collateral Value” means an amount equal to the sum of the products of the book values (as determined in accordance with GAAP) of the consolidated assets of AHMIC and its Subsidiaries, such assets being categorized in the classes set forth on the calculation schedule that is part of Exhibit E attached to the Credit Agreement, times the percentage multiplier for each such class set forth on such calculation schedule.

“Anti-Money Laundering Laws” has the meaning specified in Paragraph 11(t).

“Applicable Margin” means a per annum rate equal to 2.00%.

“Applicable Pricing Rate” means, (i) with respect to any portion of an outstanding Purchase Price funded by a Conduit Purchaser through the issuance of Promissory Notes, the CP Rate and (ii) with respect to any portion of the outstanding Purchase Price funded by a Purchaser other than through the issuance of Promissory Notes; the Assignee Rate; provided, however, that, from and after the occurrence and during the continuance of an Event of Default, the “Applicable Pricing Rate” for each Transaction shall be the Default Rate.

“Asset Purchase Agreement” means any asset purchase or other agreement pursuant to which a Conduit Purchaser may from time to time assign to a Liquidity Provider part or all of a Purchase Price funded by such Conduit Purchaser under the Repurchase Agreement.

“Assignee Rate” means, for any Tranche during any Settlement Period, an interest rate per annum equal to the sum of LIBOR plus the Applicable Margin; provided, that (i) if a LIBOR Disruption Event has occurred and is continuing, the Assignee Rate shall be equal to the Base Rate and (ii) from and after the occurrence and during the continuance of an Event of Default, the Assignee Rate shall be equal to the Default Rate.

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“Assignment and Acceptance” means an agreement in form and substance satisfactory to the Agent and the applicable Group Agents pursuant to which a new Conduit Purchaser or Committed Purchaser becomes party to this Letter Agreement.

“Base Rate” means a fluctuating interest rate per annum as shall be in effect from time to time, which rate per annum shall at all times be equal to the lower of:

(i) the rate of interest announced by The Wall Street Journal from time to time as the prime rate; and

(ii) 0.50% per annum above the Federal Funds Rate.

“Code” means the Internal Revenue Code of 1986, as amended from time to time.

“Collection Account” means each concentration account, depositary account, lock-box account or similar account in which any Collections are collected or deposited which is described on Schedule VIII or described in a written notice from the Sellers to each Group Agent.

“Collections” means, with respect to any Purchased Asset, all Monthly Payments and all other cash collections (other than in respect of escrows for taxes and insurance premiums payable under the related Mortgage Loan), all prepayments and repayments thereof, all proceeds of sales of such Purchased Asset, all proceeds from the enforcement of such Purchased Asset and all other cash proceeds of such Purchased Asset.

“Committed Purchaser” means each financial institution listed on Schedule I as a “Committed Purchaser” and each entity specified as such in the Assignment and Acceptance or Joinder Agreement pursuant to which such entity becomes a party hereto, together with its respective successors and permitted assigns.

“Committed Purchaser Share” means at any time with respect to each Committed Purchaser in a Group, a fraction (expressed as a percentage) equal to (a) the Commitment of such Committed Purchaser divided by (b) the sum of the Commitments of all Committed Purchasers in such Group at such time.

“Commitment” means as to a Committed Purchaser the United States Dollar amount set forth on Schedule I hereto as the Commitment of such Committed Purchaser, or, in the case of a Committed Purchaser that becomes a party to this Letter Agreement pursuant to an Assignment and Acceptance or Joinder Agreement, the amount set forth therein as such Committed Purchaser’s “Commitment”, in each case as such amount may be (i) reduced or increased by any Assignment and Acceptance entered into by such Committed Purchaser with another Committed Purchaser in accordance with the terms hereof and (ii) reduced in accordance with Paragraph 2(b).

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“Commitment Termination Date” means February 27, 2008, as such date may be extended in accordance with Paragraph 2(c) hereof; provided, however, that any such extension shall not operate to extend the Repurchase Date for any Purchased Loan.

“Company Representatives” has the meaning specified in Paragraph 22(b).

“Conduit Purchaser” means each of the Persons listed on Schedule I as a “Conduit Purchaser” and each commercial paper conduit specified as such in the Assignment and Acceptance or Joinder Agreement pursuant to which such commercial paper conduit becomes a party hereto, together with its respective successors and permitted assigns.

“Consolidated Funded Debt” means, with respect to any Person and on any date of determination, Indebtedness in any of the following categories:

(a) Debt for borrowed money, including the Credit Agreement Obligations;

(b) Debt constituting an obligation to pay the deferred purchase price of property;

(c) Debt evidenced by a bond, debenture, note or similar instrument;

(d) Debt constituting, as of any date, any lease of property, real or personal, which would be capitalized on a balance sheet of the lessee prepared as of such date in accordance with GAAP, together with any other lease by such lessee which is in substance a financing lease, including, without limitation, any lease under which (i) such lessee has or will have an option to purchase the property subject thereto at a nominal amount or an amount less than a reasonable estimate of the fair market value of such property as of the date such lease is entered into, or (ii) the term of the lease approximates or exceeds the expected useful life of the property leased thereunder.

(e) Debt constituting a non-contingent obligation to reimburse the issuer of any letter of credit or any guarantor or surety for payments made by such issuer, guarantor or surety; and

(f) Any obligation under any guaranty with respect to Debt of any other Person of the types described in clauses (a) through (e) above.

“CP Rate” means,

(i) for any Settlement Period for any Tranche funded by a Conduit Purchaser in the ABN AMRO Group, a rate per annum equal to the weighted average of the rates at which commercial paper notes having a term equal to such Settlement Period may be sold

6

by any placement agent or commercial paper dealer selected by such Conduit Purchaser, as agreed between each such placement agent or commercial paper dealer and such Conduit Purchaser. If such rate is a discount rate, the CP Rate shall be the rate resulting from such Conduit Purchaser’s converting such discount rate to an interest-bearing equivalent rate. The CP Rate shall include all costs and expenses to such Conduit Purchaser of issuing the related commercial paper notes, including all dealer commissions and note issuance costs in connection therewith; and

(ii) for any Settlement Period for any Tranche funded by a Conduit Purchaser in any other Group, the rate per annum identified as the “CP Rate” in the applicable Assignment and Acceptance or Joinder Agreement pursuant to which such Group becomes a party hereto.

“Credit Agreement” means the Second Amended and Restated Credit Agreement, dated as of August 10, 2006, as may be amended from time to time, by and among AHMIC, American Home Mortgage Corp., American Home Mortgage Servicing, Inc., American Home Mortgage Acceptance, Inc., certain lenders from time to time party thereto, and Bank of America, N.A.

“Credit Agreement Obligations” means any and all debts, obligations and liabilities of American Home Mortgage Corp., the Servicer, AHMIC and American Home Mortgage Acceptance, Inc. to Bank of America, N.A. as administrative agent under the Credit Agreement and the lenders from time to time party thereto (whether now existing or hereafter arising, voluntary or involuntary, whether or not jointly owed with others, direct or indirect, absolute or contingent, liquidated or unliquidated, and whether or not from time to time decreased or extinguished and later increased, created or incurred), arising out of or related to the Loan Documents (as defined in the Credit Agreement).

“Daily Market Value Report” has the meaning specified in Paragraph 13(b)(vi).

“Debt” means (a) all indebtedness or other obligations of a Person (and, if applicable, that Person’s subsidiaries, on a consolidated basis) that, in accordance with GAAP consistently applied, would be included in determining total liabilities as shown on the liabilities side of a balance sheet of that Person on the date of determination, plus (b) all indebtedness or other obligations of that Person (and, if applicable, that Person’s subsidiaries, on a consolidated basis) for borrowed money or for the deferred purchase price of property or services. For purposes of calculating a Person’s Debt, Subordinated Debt (as defined below) not due within one year of that date may be excluded from that Person’s indebtedness. For purposes of this definition, “Subordinated Debt” means all indebtedness of a Person for borrowed money that is effectively subordinated in right of payment to all other present and future obligations on terms acceptable to the Required Group Agents.

7

“Default Rate” means a per annum rate equal to the Base Rate plus 2.0%.

“Determination Date” means the second (2^nd) Business Day immediately preceding each Settlement Date.

“Effective Date” means the date on which the conditions precedent set forth in Paragraph 9(a) have been satisfied.

“Employee Plan” means an employee pension benefit plan covered by Title IV of ERISA and established or maintained by any of the Sellers, Servicer or any ERISA Affiliate.

“ERISA Affiliate” means any corporation, trade or business that is, along with AHMIC, a member of a controlled group of corporations or a controlled group of trades or businesses, as described in Sections 414(b), (c), (m) and (o) of the Code, or Section 4001 of ERISA.

“Excluded Taxes” has the meaning specified in Paragraph 8(a).

“Facility Limit” means $250,000,000, as such amount may be reduced in accordance with Paragraph 2(b) hereof.

“Federal Funds Rate” means, with respect to any Purchaser for any period, a fluctuating interest rate per annum equal (for each day during such period) to the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published for such day (or, if such day is not a Business Day, for the immediately preceding Business Day) by the Federal Reserve Bank of New York; or if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by ABN AMRO from three federal funds brokers of recognized standing selected by it.

“Fees” means all “Program Fees” and “Liquidity Fees” as defined in the Fee Letter.

“Final Payout Date” means the date from and after the Termination Date on which (i) all Repurchase Prices (including all accrued and unpaid Price Differential whether or not due and owing as of such date) and other amounts owed by the Sellers under the Repurchase Agreement and the other Transaction Documents are either (i) paid in full by or on behalf of the Sellers or (ii) satisfied in full by the exercise of the Agent’s rights thereunder.

“Financial Officer” means with respect to the Servicer, the Sellers or the Performance Guarantors, the chief financial officer, treasurer or a vice president having the knowledge and authority necessary to prepare and deliver the financial statements and reports required pursuant to Paragraph 11(a) and under the Performance Guaranty.

8

“Governmental Requirement” means any applicable law, statute, code, ordinance, order, rule, regulation, judgment, decree, injunction, franchise, permit, certificate, license, authorization or other requirement (including, without limitation, any of the foregoing that relate to energy regulations and occupational, safety and health standards or controls and any hazardous materials laws) of any Governmental Authority that has jurisdiction over the Servicer, the Custodian or any of the Sellers or any of their respective Properties.

“Group” means each group of Purchasers consisting of one or more Conduit Purchasers, the related Committed Purchasers, the related Liquidity Providers and Program Support Providers, if any, the related Group Agent and their respective assigns and participants.

“Group Agent” means with respect to any one or more Conduit Purchasers and its or their related Committed Purchasers, each entity set forth opposite such Conduit Purchaser’s name on Schedule I, or the entity identified as such on the Assignment and Acceptance or Joinder Agreement pursuant to which such entity becomes a party hereto, and their respective permitted successors and assigns.

“Group Pro Rata Share” means for any Group at any time of determination, a fraction (expressed as a percentage) having the Purchase Limit for such Group as its numerator and the Facility Limit as its denominator; provided, however, that if any Committed Purchaser fails to fund any amount as required hereunder, “Group Pro Rata Share” means, for purposes of making all distributions hereunder, a fraction (expressed as a percentage) having the actual portion of the outstanding Purchase Price funded by such Group as its numerator and the outstanding Purchase Price as its denominator.

“Indemnified Amounts” has the meaning specified in Paragraph 15(b) of the Repurchase Agreement.

“Indemnified Parties” has the meaning specified in Paragraph 15(b) of the Repurchase Agreement.

“Interim Statements” has the meaning specified in Paragraph 10(s)(ii).

“Joinder Agreement” means an agreement in form and substance satisfactory to the Agent, the Sellers and the applicable Group Agent pursuant to which a new Group becomes party to this Letter Agreement.

“LIBOR” means, with respect to any Settlement Period, (a) the rate per annum (rounded upward, if necessary, to the nearest whole multiple of 1/16th of one percent) appearing on Telerate Page 3750 (or any successor page) as the London interbank offered

9

rate for deposits in United States dollars in a principal amount of at least $1,000,000 for a period of one month at approximately 11:00 a.m. (London time) two LIBOR Business Days prior to the first day of such Settlement Period; provided that, (i) if Telerate Page 3750 (or any successor page) is not available to the Agent for any reason, then LIBOR shall be determined by the rate per annum equal to the applicable British Bankers’ Association Interest Settlement Rate for deposits in United States dollars in a principal amount of at least $1,000,000 for a period of one month as reported by any other generally recognized financial information service as of 11:00 a.m. (London time) two LIBOR Business Days prior to the first day of such Settlement Period, and (ii) if no such British Bankers’ Association Interest Settlement Rate is available to the Agent, then LIBOR shall be determined by the rate per annum determined by the Agent to be the rate at which ABN AMRO offers to place deposits in United States dollars in a principal amount of at least $1,000,000 for a period of one month with first-class banks in the London interbank market at approximately 11:00 a.m. (London time) two LIBOR Business Days prior to the first day of such Settlement Period divided by (b) the remainder of one minus the LIBOR Reserve Percentage applicable on such day.

“LIBOR Business Day” means any Business Day other than a Business Day on which banking institutions in London, England trading in dollar deposits in the London interbank market are authorized or obligated by law or executive order to be closed.

“LIBOR Disruption Event” means, with respect to any Settlement Period, any of the following: (a) a determination by any Committed Purchaser that it would be contrary to law or to the directive of any central bank or other governmental authority (whether or not having the force of law) to obtain dollars in the London interbank market to make, fund or maintain its portion of the outstanding Purchase Price during such Settlement Period, (b) a commercially reasonable determination by any Committed Purchaser that the rate at which deposits of United States dollars are being offered in the London interbank market does not accurately reflect the cost to such Person of making, funding or maintaining its portion of the outstanding Purchase Price for such Settlement Period or (c) the inability of any Committed Purchaser to obtain United States dollars in the London interbank market to make, fund or maintain its portion of the outstanding Purchase Prices for such Tranche Period.

“LIBOR Reserve Percentage” means, as of any day, the percentage (expressed as a decimal) in effect on such day, as prescribed by the Federal Reserve Board, for determining the maximum reserve requirements applicable to “Eurocurrency Liabilities” pursuant to Regulation D or any other applicable regulation of the Federal Reserve Board which prescribes reserve requirements applicable to “Eurocurrency Liabilities” as currently defined in Regulation D (which the parties acknowledge is 0% as of the date hereof).

“Liquidation Fees” means, with respect to any Purchaser on account of any prepayment of the Repurchase Price as described in Paragraph 7 hereof or the failure to

10

consummate a purchase by Seller after delivery of a Confirmation, (i) the amount, if any, by which the additional Price Differential (but excluding the Applicable Margin, if included in such Price Differential) which would have accrued during such Settlement Period on the reductions of the Purchase Price allocated to the Tranches funded by such Purchasers had such repurchase not occurred or if such purchase had occurred, exceeds (ii) the income received by the Purchaser which holds such Tranche from the investment of the proceeds of such reductions. A certificate as to the amount of any Liquidation Fee (including the computation of such amount) shall be submitted by the affected Purchaser (or the Agent on its behalf) to the Sellers and shall be conclusive and binding for all purposes, absent manifest error.

“Liquidity Provider” means any of the financial institutions or other entities from time to time party to any Asset Purchase Agreement or any liquidity loan agreement or similar arrangement with a Conduit Purchaser.

“Lock-Box” means each locked postal box to which one or more Mortgagors or other Persons are directed to remit Collections.

“MERS Designated Mortgage Loan” means a Mortgage Loan registered to or by the related Seller on the MERS electronic mortgage registration system.

“Monthly Report” has the meaning specified in Paragraph 13(b)(vi).

“Multiemployer Plan” means a multiemployer plan defined in Sections 3(37) or 4001(a)(3) of ERISA or Section 414(f) of the Code to which Sellers or any ERISA Affiliate is required to make contributions.

“Net Cash Proceeds” means, with respect to the issuance of any capital stock by AHMIC, the amount of cash received by AHMIC in connection with such transaction after deducting therefrom all fees (including, without limitation, investment banking fees), commissions, costs and other expenses to the extent attributable to such transaction.

“Officer’s Certificate” means a certificate signed by the Treasurer, Chief Financial Officer, any Executive Vice President, any Senior Vice President or other senior officer of a Seller, as applicable, authorized to bind such Seller with respect to the Transactions.

“Official Body” means any Governmental Authority or any accounting board or authority (whether or not part of a government) which is responsible for the establishment or interpretation of national or international accounting principles, in each case whether foreign or domestic.

“Participant” has the meaning specified in Paragraph 14(d).

11

“PBGC” means the Pension Benefit Guaranty Corporation or any successor thereto.

“Periodic Visit” has the meaning specified in Paragraph 11(h).

“Product Information” has the meaning specified in Paragraph 22(b).

“Program Support Provider” shall mean any Liquidity Provider, and any insurance company, bank or other funding entity providing liquidity, credit enhancement or back-up purchase support or facilities to any Conduit Purchaser.

“Pro Rata Share” means, at any time with respect to any Committed Purchaser, a fraction (expressed as a percentage) equal to (a) the Commitment of such Committed Purchaser divided by (b) the sum of the Commitments of all Committed Purchasers at such time.

“Promissory Notes” means, collectively, (i) promissory notes issued by a Conduit Purchaser and (ii) participations sold by a Conduit Purchaser pursuant to Paragraph 14(d), provided, that the term “Promissory Notes” shall not include the interests sold by a Conduit Purchaser pursuant to an Asset Purchase Agreement.

“Purchase Limit” means with respect to any Group, the amount set forth under such Group’s name on Schedule I, or as identified in the Assignment and Acceptance or Joinder Agreement pursuant to which the members of such Purchaser Group became parties hereto, as the same may be reduced from time to time pursuant to the terms hereof.

“Purchaser” means each Conduit Purchaser and each Committed Purchaser.

“Purchaser Representatives” has the meaning specified in Paragraph 22(c).

“Report of Visit” has the meaning specified in Paragraph 11(h).

“Required Group Agents” means at any time, the Group Agents related to Groups with Purchase Limits which equal at least 51% of the Facility Limit at such time.

“Requirement of Law” as to any Person means the articles of incorporation, by-laws, certificate of formation and limited liability company agreement or other organizational or governing documents of such Person, and any law, statute, code, ordinance, order, rule, regulation, judgment, decree, injunction, franchise, permit, certificate, license, authorization or other determination, direction or requirement (including, without limitation, any of the foregoing that relate to energy regulations and occupational, safety and health standards or controls and any hazardous materials laws) of any Governmental Authority, in each case applicable to or binding upon such Person or any of its Property or to which such Person or any of its Property is subject.

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“Seller Information” has the meaning specified in Paragraph 22(c).

“Settlement Date” means the tenth (10^th) day of each month, or if any such date is not a Business Day, the immediately succeeding Business Day.

“Settlement Period” means, initially, the period beginning on the initial Purchase Date and ending on the last day of the calendar month immediately following the calendar month in which the initial Purchase Date occurs and, thereafter, means a calendar month; provided, however, if the last day of any such calendar month is not a Business Day and the Pricing Rate for all or any portion of the outstanding Purchase Price is determined by reference to LIBOR, the Settlement Period applicable to such portion of the outstanding Purchase Price shall end on the immediately preceding Business Day.

“Subordinated Debt” means the Debt of AHMIC and its Subsidiaries subordinated to the Credit Agreement Obligations in the manner and to the extent required by Bank of America, N.A., as administrative agent under the Credit Agreement, pursuant to written subordination agreements satisfactory in form and substance to Bank of America, N.A., as administrative agent under the Credit Agreement.

“Takeout Investor” has the meaning set forth in the Repurchase Agreement.

“Takeout Lender” means any entity which makes loans to a Seller, and to which such Seller has pledged such Mortgage Loans as security for such loans as identified by such Seller.

“Tranche” means any portion of the outstanding Purchase Price funded by a Purchaser, the Pricing Rate for which is computed by reference to the CP Rate, the Base Rate and/or LIBOR, as applicable.

“Trust Receipt” means, with respect to any Mortgage Loan or group of Mortgage Loans, a trust receipt or asset certification issued by the Custodian confirming the Custodian’s receipt of the Mortgage Note and the other mortgage documents included in the Loan Documents relating to such Mortgage Loan and required to be delivered to the Custodian under the Custodial Agreement.

(b) Under this Letter Agreement, all accounting terms not specifically defined herein shall be construed in accordance with GAAP as in effect in the United States, and all accounting determinations made and all financial statements prepared hereunder shall be made and prepared in accordance with GAAP. All terms used in Article 9 of the UCC in the State of New York, and not specifically defined herein, are used herein as defined in such Article 9. The

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words “herein,” “hereof,” and “hereunder” and other words of similar import refer to this Letter Agreement as a whole, including the exhibits and schedules hereto, as the same may from time to time be amended or supplemented and not to any particular paragraph, section, subsection, or clause contained in this Letter Agreement, and all references to Paragraphs, Exhibits and Schedules shall mean, unless the context clearly indicates otherwise, the Paragraphs hereof and the Exhibits and Schedules attached hereto, the terms of which Exhibits and Schedules are hereby incorporated into this Letter Agreement. The captions and paragraph numbers appearing in this Letter Agreement are inserted only as a matter of convenience and do not define, limit, construe or describe the scope or intent of the provisions of this Letter Agreement. Each of the definitions set forth in Paragraph 1 hereof shall be equally applicable to both the singular and plural forms of the defined terms. Unless specifically stated otherwise, all references herein to any agreements, documents or instruments shall be references to the same as amended, restated, supplemented or otherwise modified from time to time.

(c) Unless otherwise stated in this Letter Agreement, in the computation of a period of time from a specified date to a later specified date, the word “from” means “from and including” and the words “to” and “until” each means “to but excluding.”

2. Purchases.

(a) Agreement to Enter into Transactions. Each Seller has entered into the Repurchase Agreement pursuant to which the Purchasers may, through the Buyer acting as their Agent, enter into Transactions as principal from time to time. Upon the terms and subject to the conditions set forth in the Repurchase Agreement and this Letter Agreement, from the Effective Date through the Business Day immediately preceding the Termination Date, (i) each Conduit Purchaser may enter a Transaction, in its sole discretion, and (ii) to the extent that (and only to the extent that) the Conduit Purchasers in any Group decline to so purchase the entire amount of the applicable Group Pro Rata Share of such Transaction, the Committed Purchasers in such Group shall enter into such Transaction; provided, that (i) no Purchaser shall enter into any Transaction if, after giving effect thereto, the aggregate outstanding Purchase Prices in respect of all Transactions would exceed the lesser of (x) the Facility Limit at such time and (y) the Net Collateral Value at such time, (ii) no Committed Purchaser shall be obligated to enter into any Transaction if, after giving effect thereto, the aggregate outstanding Purchase Price funded by such Committed Purchaser would exceed its Commitment and (iii) no Purchaser in any Group shall enter into any transaction if, after giving effect thereto, the aggregate outstanding Purchase Price funded by such Group would exceed such Group’s Purchase Limit. The Purchase Price paid for any Transaction on any Purchase Date shall not be less than $2,000,000 or an integral multiple of $500,000 in excess thereof. No Committed Purchaser shall have any obligation to enter into any new Transaction on or after the Commitment Termination Date.

(b) Reduction of Facility Limit. The Sellers may, from time to time upon at least five (5) Business Days’ prior written notice to the Agent, elect to reduce the Facility Limit in whole or in part, provided that after giving effect to any such reduction and any principal payments on such date, the outstanding Purchase Prices in respect of all Transactions shall not

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exceed the Facility Limit. Any such reduction shall be in a minimum amount of $10,000,000 and in integral multiples of $1,000,000 in excess thereof. Any such reduction shall, reduce each Committed Purchaser’s Commitment ratably in accordance with their Pro Rata Shares and each Group’s Purchase Limit in accordance with their Group Pro Rata Shares. Once the Facility Limit is reduced pursuant to this Paragraph 2(b) it may not subsequently be reinstated without the consent of each Committed Purchaser.

(c) Extension of Commitment Termination Date. The Sellers may, not more than sixty (60) nor less than thirty (30) days prior to the then current Commitment Termination Date, by delivering written notice to each Group Agent, request the Committed Purchasers to extend the Commitment Termination Date for an additional 364 days past the then applicable Commitment Termination Date. No Committed Purchaser shall have any obligation to agree to such request and no such extension shall become effective until one or more Committed Purchasers having Commitments equal to 100% of the Facility Limit shall in their sole discretion consent in writing to such extension. At no time will any Commitment have a term of more than 364 days and, if any such request would result in a term of more than 364 days, such request shall be deemed to have been made for such number of days so that, after giving effect to such extension on the date requested, such term will not exceed 364 days. Each Group Agent will indicate consent or rejection of any such request within thirty (30) days but in any event no earlier than thirty (30) days prior to the then current Commitment Termination Date, provided, that any Group Agent’s failure to respond within such period to any request for an extension shall be deemed to be a rejection of the requested extension.

(d) Funding Procedures. In the event that a Seller requests, in accordance with the Repurchase Agreement, that the Purchasers, through the Buyer acting as their Agent, enter into a new Transaction and/or transfer cash to a Seller on account of a Margin Excess, such Seller shall simultaneously notify each Group Agent, and each Group Agent shall promptly notify each Purchaser in its Group, of such request. The Purchase Price for each Transaction shall be funded by each Group ratably in accordance with its Group Pro Rata Share. Each Group Agent shall allocate the Group Pro Rata Share of the Purchase Price among the Conduit Purchasers in its Group (subject to each Conduit Purchaser’s decision to fund such portion of the Purchase Price). Each Conduit Purchaser shall instruct the related Group Agent whether it will accept or reject such request by no later than the close of business on the date of such notice. If the Conduit Purchasers in any Group give notice that they decline to fund any portion of such new Transaction or transfer of cash, the related Group Agent shall immediately notify the applicable Seller and the Committed Purchasers in its Group of the same and, unless such Seller notifies all Group Agents on the date it receives such notice that it wishes to rescind the relevant Confirmation prior to funding, the Transaction (or transfer of cash) or portion thereof that would otherwise be funded by such Conduit Purchasers shall be funded by the Committed Purchasers in the related Group ratably in accordance with their respective Committed Purchaser Shares. Each Committed Purchaser’s commitment to enter into any Transactions or transfer cash under the Repurchase Agreement shall be several from the obligations of any other Committed Purchaser so that no Committed Purchaser shall be responsible for the failure of any other Committed Purchaser to honor its funding obligations hereunder nor shall any Committed Purchaser be

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relieved of its funding obligations hereunder on account of any such failure of another Committed Purchaser. All disbursements of funds by any Purchaser under this Paragraph 2 shall be made by wire transfer of same day funds to the related Group Agent by 12:00 noon (New York City time). Upon receipt of such funds, each Group Agent shall remit such funds by wire transfer of same day funds to the account set forth in Section 17(a) of the Repurchase Agreement, or such other account specified in writing by the applicable Seller, by 4:00 p.m. (New York City time) on the date of such receipt.

3. Buyer Acting as Agent. Pursuant to Annex I of the Repurchase Agreement, the parties hereto acknowledge that Buyer is entering into Transactions solely as Agent for the Purchasers party hereto and shall not be deemed to have any direct ownership interest in the Purchased Mortgage Loans. The Purchasers have nonetheless agreed for purposes of administrative convenience to appoint the Agent as the sole representative of the Purchasers under the Repurchase Agreement and therefore as the Buyer and secured party of record thereunder. Each Seller acknowledges that each Purchaser and Group Agent shall be entitled under the terms of Section 15 of the Repurchase Agreement to be reimbursed and indemnified for all expenses and Indemnified Amounts incurred by such Purchaser or Group Agent to the same extent as such Seller would be obligated to reimburse and/or indemnify such Purchaser or Group Agent if such Purchaser or Group Agent were party to the Repurchase Agreement as the “Buyer” thereunder.

4. Pricing Rate; Fees; Payments and Computations.

(a) The Purchase Price to be paid for any Transaction shall be determined in accordance with the Repurchase Agreement. The parties hereto hereby confirm that the Pricing Rate at which the Price Differential will be calculated for all Transactions for all Tranches will be the Applicable Pricing Rate for such Tranche. On each Settlement Date, the Sellers shall be jointly and severally liable to pay and shall pay to each Group Agent for the account of the Purchasers in its Group, by wire transfer of immediately available funds, such Group’s portion of all accrued and unpaid Price Differential for the most recent Settlement Period based on the weighted average of the Applicable Pricing Rates for each Tranche outstanding and funded by such Group during such Settlement Period. All such calculations shall be made on the basis of a 360-day year and the actual number of days elapsed.

(b) On each Settlement Date, the Sellers shall be jointly and severally liable to pay and shall cause to be paid to each Group Agent for the account of the Purchasers in its Group, by wire transfer of immediately available funds, the portion of all accrued and unpaid Fees due to such Group in respect of the most recent Settlement Period.

(c) On each Repurchase Date for each Transaction, the Repurchase Price shall be allocated among the Groups by the Sellers in accordance with each Group Pro Rata Share of the related Purchase Price for such Transaction and the Price Differential and other amounts due to each Group. The Sellers shall be jointly and severally liable to pay and shall pay to each Group Agent such allocated portion of such Repurchase Price on such Repurchase Date by wire transfer of immediately available funds.

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(d) All amounts to be paid or deposited by a Seller hereunder or under the Repurchase Agreement shall be paid or deposited in accordance with the terms hereof no later than 2:30 p.m. (New York City time) on the day when due in lawful money of the United States of America in immediately available funds to such account as each Group Agent, or the Agent, as applicable, may designate prior to such payment from time to time in writing. In the event that any payment hereunder (whether constituting a repurchase of Mortgage Loans or a payment of Price Differential or any other amount) is rescinded or must otherwise be returned for any reason, the amount of such payment shall be restored and such payment shall be considered not to have been made.

(e) In the event that any Seller fails to pay any Price Differential or Fees on any Settlement Date in accordance with the terms of this Paragraph 4 or otherwise fails to pay when due any other amounts owing hereunder or under any other Transaction Document, the Sellers shall be jointly and severally obligated to pay and shall thereafter owe to the Purchasers interest on such amounts at the Default Rate until such amounts are fully paid, computed on the basis of a year of 360 days for the actual number of days (including the first but excluding the last day) elapsed. Any such accrued amounts which remain unpaid, including interest thereon, as of the Repurchase Date for any Transactions shall be automatically added to the applicable Repurchase Price owed on such Repurchase Date.

5. Interest Protection.

(a) If due to either: (i) the introduction of or any change (including, without limitation, any change by way of imposition or increase of reserve requirements) in or in the interpretation by any Governmental Authority of any law or regulation (other than laws or regulations relating to taxes) after the date hereof or (ii) the compliance by Agent, any Group Agent, any Purchaser, any Liquidity Provider or, with respect to each of the foregoing, the parent company that controls such Person (each, an “Affected Party”) with any directive or request from any central bank or other Governmental Authority (whether or not having the force of law) imposed after the date hereof, (1) there shall be an increase in the cost to such Purchaser or Liquidity Provider of funding or maintaining any purchase of Mortgage Loans under the Repurchase Agreement or of extending a commitment hereunder in respect thereof, or (2) Agent, such Group Agent, Purchaser or Liquidity Provider shall be required to make a payment calculated by reference to the Purchased Mortgage Loans owned by any Purchaser or the Price Differential received by it, then the Sellers shall be jointly and severally obligated to pay and shall, from time to time, within thirty (30) days after demand by the applicable Group Agent, pay such Group Agent for the account of such Affected Party, that portion of such increased costs incurred, amounts not received or required payment made or to be made, which such Group Agent reasonably determines is attributable to funding and maintaining the funding of, or extending a commitment to purchase, any Mortgage Loan hereunder or pursuant to any Asset Purchase Agreement or similar liquidity facility.

(b) Each Group Agent will promptly notify the Sellers of any event of which it has knowledge, occurring after the date hereof, which will entitle any Affected Party to

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compensation pursuant to the preceding paragraph (a). Each affected Purchaser will designate a different funding office if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the judgment of such Purchaser, be otherwise disadvantageous to it. In determining the amount of such compensation, such Purchaser may use any reasonable averaging and attribution methods. The applicable Purchaser or Group Agent on its behalf shall promptly submit to the Sellers a certificate but in no event later than 180 days after the circumstances described in the preceding paragraph (a) first arise, describing such increased costs incurred, amounts not received or receivable or required payment made or to be made, which certificate shall be conclusive in the absence of manifest error.

6. Capital Adequacy.

(a) If either (i) the introduction of or any change in or in the interpretation by any Official Body of any law or regulation or (ii) compliance by any Affected Party with any directive or request from any central bank or other Official Body (whether or not having the force of law) imposed after the date hereof affects or would affect the amount of capital required or expected to be maintained by such Affected Party or such Affected Party reasonably determines that the amount of such capital is increased by or based upon the existence of any Purchaser’s agreement to purchase Mortgage Loans hereunder (or Agent’s agreement to purchase on behalf of such Purchaser as principal) and other similar agreements or facilities and such event would have the effect of reducing the rate of return on capital of such Affected Party by an amount deemed by such Affected Party to be material, then, within thirty (30) days after demand by such Affected Party or the applicable Group Agent, the Sellers shall be jointly and severally obligated to pay and shall pay to such Affected Party (as a third party beneficiary, in the case of any Affected Party other than one of the parties hereto) or such Group Agent for the account of such Affected Party from time to time, as specified by such Affected Party or such Group Agent, additional amounts sufficient to compensate such Affected Party in light of such circumstances, to the extent that such Affected Party or such Group Agent on behalf of such Affected Party reasonably determines such increase in capital to be attributable to the existence of the applicable Purchaser’s agreements hereunder. For the avoidance of doubt, a change in, or change by any Official Body in the interpretation of, the Financial Accounting Standards Board’s Interpretation No. 46 of Accounting Research Bulletin No. 51 shall constitute an introduction or change subject to this Paragraph 6(a).

(b) If any Affected Party shall incur any loss, cost or expense (other than loss of fees or profit) as a result of the failure of any Seller to sell any Mortgage Loan on the date specified in the applicable Confirmation for any reason, the Sellers shall be jointly and severally obligated to pay and shall, within thirty (30) days after demand by such Affected Party or the related Group Agent, pay such Affected Party or such Group Agent the amount of such losses, costs and expenses as reasonably determined by such Affected Party; provided, however, if, in connection with an Asset Purchase Agreement or similar liquidity facility of any Conduit Purchaser in connection with this Letter Agreement or the funding or maintenance of purchases hereunder, such Conduit Purchaser is required to compensate a bank or other financial institution under circumstances substantially similar to those described in this Paragraph 6(b), then upon

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demand by such Conduit Purchaser, the Sellers shall be jointly and severally obligated to pay and shall pay to such Conduit Purchaser such additional amount or amounts as may be necessary to reimburse such Conduit Purchaser for any such amounts paid by it.

(c) The applicable Group Agent will promptly notify the Sellers of any event of which it has knowledge, occurring after the date hereof, which will entitle any Affected Party to compensation pursuant to Paragraph 6(a) or Paragraph 6(b). Each Purchaser will designate a different funding office if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the judgment of such Purchaser, be otherwise disadvantageous to it. In determining the amount of such compensation, such Purchaser may use any reasonable averaging and attribution methods. The applicable Purchaser or Group Agent on its behalf shall promptly submit to the Sellers a certificate describing such compensation but in no event later than 180 days after the circumstances described in the preceding paragraphs (a) or (b) first arise setting forth the calculation and methods in reasonable detail, which certificate shall be conclusive in the absence of manifest error.

7. Breakage Costs. In the event that any Purchaser or any Liquidity Provider shall incur any loss, expense or Liquidation Fee (including, without limitation, any loss or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Purchaser or Liquidity Provider in order to fund or maintain any Transactions or interest in the Purchased Mortgage Loans) after having taken commercially reasonable steps to mitigate such losses and expenses as a result of (i) any repurchase of any Purchased Mortgage Loans at any time other than a Settlement Date, (ii) any repurchase of any Purchased Mortgage Loans for which the related Repurchase Price is less than $500,000 regardless of the Repurchase Date, (iii) any transfer of any Purchased Mortgage Loan or interest therein from a Conduit Purchaser to its Liquidity Providers, or (iv) any Transaction not being funded in accordance with a request therefor under the Repurchase Agreement, then, upon demand from the applicable Group Agent accompanied by a certificate describing in reasonable detail the calculation therefor, the Sellers shall be jointly and severally obligated to pay and shall pay to such Group Agent for the account of such Purchaser or Liquidity Provider, the amount of such loss, expense or Liquidation Fees. Such certificate shall, in the absence of manifest error, be conclusive and binding upon the Sellers. The obligations of the Sellers under this Paragraph 7 shall apply with respect to all repurchases notwithstanding the satisfaction of the Repurchase Conditions.

8. Taxes.

(a) Except to the extent required by applicable law, any and all payments and deposits required to be made hereunder or under any instrument delivered hereunder by any Seller hereunder shall be made free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto (except for (i) net income taxes that are imposed by the United States, (ii) franchise taxes and net income taxes that are imposed on an Affected Party by the state or foreign jurisdiction under the laws of which such Affected Party is organized and (iii) branch profit taxes and any withholding taxes of a type imposed on foreign lenders at the time any foreign Affected Party

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becomes a party hereto, such taxes described in this parenthetical being referred to as “Excluded Taxes”). If any Seller shall be required by law to make any such deduction, (i) the Sellers shall be jointly and severally liable to and shall make an additional payment to such Affected Party, in an amount sufficient so that, after making all required deductions (including deductions applicable to additional sums payable under this Paragraph 8), such Affected Party receives an amount equal to the sum it would have received had no such deductions been made, (ii) such Seller shall make such deductions and (iii) the Sellers shall be jointly and severally obligated to pay and shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law; provided, however, that the Sellers are not obligated to comply with this Paragraph 8(a) if such Affected Party (A) is not organized under the laws of the United States and (B) fails to comply with the provisions set forth in Paragraph 8(c).

(b) In addition, the Sellers jointly and severally agree to pay any present or future stamp or other documentary taxes or any other excise or property taxes or similar levies which arise from any payment made hereunder or under any instrument delivered hereunder or from the execution, delivery or registration of, or otherwise with respect to, this Letter Agreement or any instrument delivered hereunder.

(c) Each Affected Party which is not organized under the laws of the United States or any State thereof shall, on or prior to the date that such Affected Party becomes a party to or obtains rights under this Letter Agreement, and prior to any payment being made by any Seller to such Affected Party, deliver to the Sellers (i) two duly completed and executed copies of the IRS Form W-8 BEN or W-8 ECI (or any successor form) as applicable; and (ii) such other forms or certificates as may be required under the laws of any applicable jurisdiction (on or before the date that any such form expires or becomes obsolete), in order to permit the Sellers to make payments to, and deposit funds to or for the account of, such Affected Party hereunder and under the other Facility Documents without any deduction or withholding for or on account of any tax. Each such Affected Party shall submit to the Sellers (with copies to its applicable Group Agent and the Agent) two updated, completed, and duly executed versions of: (i) all forms referred to in the previous sentence upon the expiry of, or the occurrence of any event requiring a change in, the most recent form previously delivered by it to the Sellers or the substitution of such form; and (ii) such extensions or renewals thereof as may reasonably be requested by the Sellers.

(d) If the Sellers are required to pay additional amounts to or for the benefit of any Affected Party pursuant to this Paragraph as a result of a change of law or treaty occurring after such Affected Party first became a party to this Letter Agreement, such Affected Party will, at the Sellers’ request, change the jurisdiction of its applicable funding office if, in the sole judgment of such Affected Party, such change (i) will eliminate or reduce any such additional payment which may thereafter accrue and (ii) is not otherwise disadvantageous to such Affected Party; provided that if any Affected Party receives or is entitled to a refund of any amounts paid by the Sellers pursuant to this Paragraph 8, such Affected Party will pay over such refund received by it and will cooperate with the Sellers in recovering any such amounts withheld from any relevant tax authorities. Each Purchaser agrees that it will promptly notify the Sellers of any

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event of which it has knowledge, occurring after the date hereof, which would entitle any Affected Party to compensation of additional amounts pursuant to this Paragraph 8; provided that any failure or delay in giving such notice shall not affect the rights of any Affected Party hereunder.

9. Conditions Precedent.

(a) Conditions Precedent to the Agreement. The effectiveness of this Letter Agreement and the Commitment of any Committed Purchasers to fund any Transactions shall be subject to the satisfaction (or waiver by each Group Agent) of each of the following conditions precedent:

(i) The Sellers shall have delivered or caused to be delivered each of the documents listed on Schedule II hereto;

(ii) There shall have been no material adverse change in the financial condition, business or prospects of any Seller since September 30, 2006;

(iii) No action, proceeding or investigation shall have been instituted or threatened, nor shall any order, judgment or decree have been issued or proposed to be issued by any court, agency or authority with respect to any Seller that could reasonably be expected to have a Material Adverse Effect with respect to such Seller; and

(iv) The Sellers shall have paid to the Agent (i) the Structuring Fee described in the Agent Fee Letter and (ii) all out-of-pocket costs and expenses (including, without limitation, reasonable legal fees and expenses) required to be paid hereunder and under the other Transaction Documents that are due and owing as of such date.

(b) Conditions Precedent to each Transaction. The obligation of any Purchasers to fund any Transaction or to transfer cash to any Seller on account of any Margin Excess or to release funds from the Buyer’s Account shall be subject to the satisfaction of each of the following conditions precedent (provided that the obligation to release funds from the Buyer’s Account shall not be subject to clause (i) below):

(i) With respect to each Purchase Date, (a) such Seller shall have delivered to Agent and each Group Agent a signed Confirmation (which Confirmation shall include a calculation of the Market Value), and a revised Loan Schedule with respect to all of the Purchased Mortgage Loans after giving effect to such Transaction, (b) the Servicer shall have delivered a Daily Market Value Report (which shall include a calculation which demonstrates, after giving effect to the contemplated purchase, that no Margin Deficit shall exist) to each Group Agent and a loan schedule in the form attached to the Trust Receipt to the Custodian, the Agent and each Group Agent, and (c) the Custodian shall have delivered to the Agent a Trust Receipt relating to each Mortgage Loan on the Loan Schedule;

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(ii) No Event of Default or Incipient Event of Default shall have occurred and be continuing before or after giving effect to such Transaction;

(iii) No Margin Deficit shall exist either before or after giving effect to such Transaction;

(iv) The Repurchase Agreement, this Letter Agreement and each of the other Transaction Documents shall remain in full force and effect, and the Termination Date shall not have occurred;

(v) Each Seller’s and the Servicer’s representations and warranties in this Letter Agreement and each of the other Transaction Documents to which it is a party and in any Officer’s Certificate delivered to the Agent in connection therewith shall be true and correct in all material respects on and as of the date hereof and such Purchase Date, with the same effect as though such representations and warranties had been made on and as of such date (except for those representations and warranties and Officer’s Certificates which are specifically made only as of a different date, which representations and warranties and Officer’s Certificates shall be correct in all material respects on and as of the date made);

(vi) Each Seller and the Servicer shall have complied in all material respects with all the agreements and satisfied all the conditions under this Letter Agreement, the Repurchase Agreement and each of the other Transaction Documents to which it is a party on its part to be performed or satisfied at or prior to the related Purchase Date;

(vii) No change shall have occurred in any law, rule or regulation that would prohibit the consummation of any transaction contemplated hereby, that would impose limits on the amounts that any Purchaser or the Agent may legally receive or that would impose a material tax or levy on the aggregate Purchase Price then funded or payments received in respect of the Purchase Price or that would cause the acknowledgements set forth in Paragraph 24 of the Repurchase Agreement to no longer be true;

(viii) No action, proceeding or investigation shall have been instituted or threatened, nor shall any order, judgment or decree have been issued or proposed to be issued by any court, agency or authority to set aside, restrain, enjoin or prevent the consummation of any transaction contemplated hereby or seeking material damages against the Agent, any Group Agent or any Purchaser in connection with the transactions contemplated by the Transaction Documents or that could reasonably be expected to have a Material Adverse Effect with respect to any Seller;

(ix) With respect to the Mortgage Loans to be purchased on the Purchase Date for such Transaction, the provisions of the Custodial Agreement have been complied with in all material respects by the Custodian, the Sellers and the Servicer; and

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(x) The Agent shall have received such other documents and certificates as it or any Group Agent shall have reasonably requested in order to confirm each Seller’s and/or Custodian’s compliance with the Transaction Documents.

The acceptance by any Seller of the proceeds of any Purchase Price or other funds released under the terms of the Repurchase Agreement shall be deemed to constitute a representation and warranty by the Sellers that the foregoing conditions have been satisfied.

10. Representations and Warranties. In addition to the representations and warranties made by the Sellers in the Repurchase Agreement, each of each Seller and the Servicer represents and warrants to the Agent, each Group Agent and each Purchaser, and shall on and as of the Purchase Date of any Transaction and the date of transfer of any Additional Purchased Mortgage Loan or any transfers of cash from any Purchaser to any Seller be deemed to have represented and warranted, as follows:

(a) Organization and Good Standing. It (i) is a corporation, duly organized and existing in good standing under the laws of the jurisdiction of its organization, (ii) is duly qualified to do business and in good standing in all jurisdictions in which its failure to be so qualified could have a Material Adverse Effect, (iii) has the requisite entity power and authority to own its properties and assets and to transact the business in which it is engaged and is or will be qualified in those states wherein it proposes to transact business in the future except to the extent that the failure to so qualify could not reasonably be expected to have a Material Adverse Effect and (iv) is in compliance with all Requirements of Law except to the extent that the failure to so comply could not reasonably be expected to have a Material Adverse Effect. American Home Mortgage Corp. is incorporated in New York and in no other jurisdiction, American Home Mortgage Servicing, Inc. is incorporated in Maryland and in no other jurisdiction, American Home Mortgage Acceptance, Inc. is incorporated in Maryland and no other jurisdiction and American Home Mortgage Investment Corp. is incorporated in Maryland and in no other jurisdiction.

(b) Authorization and Power. It has the requisite entity power and authority to execute, deliver and perform this Letter Agreement and the other Transaction Documents to which it is a party; it is duly authorized to and has taken all requisite entity action necessary to authorize it to, execute, deliver and perform this Letter Agreement and the other Transaction Documents to which it is a party and is and will continue to be duly authorized to perform this Letter Agreement and such other Transaction Documents.

(c) No Conflicts or Consents. Neither the execution and delivery by it of this Letter Agreement or the other Transaction Documents to which it is a party, nor the consummation of any of the transactions herein or therein contemplated, nor compliance with the terms and provisions hereof or with the terms and provisions thereof, will (i) contravene or conflict with any Requirement of Law, except where such contravention or conflict could not reasonably be expected to result in a Material Adverse Effect to which it is subject, or any indenture, mortgage, deed of trust, or other material agreement or instrument to which it is a party or by which it may be bound, or to which its Property may be subject, or (ii) result in the creation or imposition of any Lien, except to the extent of the Liens in favor of the Agent on behalf of the Purchasers, on the Property of the Sellers.

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(d) Enforceable Obligations. This Letter Agreement and the other Transaction Documents to which it is a party have been duly and validly executed by it and are its legal, valid and binding obligations, enforceable in accordance with their respective terms, except as limited by Debtor Laws.

(e) Full Disclosure. There is no fact known to it that it has not disclosed to the Agent and the Group Agents that could reasonably be expected to have a Material Adverse Effect. Neither its financial statements nor any Daily Market Value Report, Monthly Report, Confirmation, Loan Schedule, officer’s certificate or statement delivered by it to the Group Agents in connection with this Letter Agreement, contains any untrue or inaccurate statement of material fact or omits to state a material fact necessary to make such information not misleading under the circumstances in which such statements were made.

(f) No Default. No event has occurred which constitutes an Event of Default or an Incipient Event of Default.

(g) Litigation.

(i) Except as set forth on Schedule III, there are no actions, suits or proceedings, including arbitrations and administrative actions, at law or in equity, either by or before any Governmental Authority, now pending or, to its knowledge, threatened by or against it or any of its Subsidiaries, and pertaining to any Governmental Requirement affecting any Seller’s Property or rights or any of its Subsidiaries with damage claims in excess of $1,000,000 which if determined adversely could reasonably be expected to have a Material Adverse Effect.

(ii) Neither it nor any of its Subsidiaries is in default with respect to any Governmental Requirements that could reasonably be expected to have a Material Adverse Effect.

(iii) None of the Sellers nor the Servicer is liable on any judgment, order or decree (or any series of judgments, orders, or decrees) that could reasonably be expected to have a Material Adverse Effect and that has not been paid, stayed or dismissed within 60 days.

(h) Taxes. All tax returns required to be filed by it in any jurisdiction have been filed, except where extensions of time to make those filings have been granted by the appropriate taxing authorities and the extensions have not expired, and all taxes, assessments, fees and other governmental charges upon it or upon any of its properties, income or franchises have been paid prior to the time that such taxes could give rise to a Lien thereon, unless protested in good faith by appropriate proceedings and with respect to which reserves in conformity with GAAP have been established on its books. There is no tax assessment or to Sellers’ and Servicer’s best knowledge, proposed tax assessment against it that could reasonably be expected to have a Material Adverse Effect.

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(i) Aggregate Collateral Value. AHMIC’s ratio of its Aggregate Collateral Value to its Adjusted Consolidated Funded Debt is not less than 1.00 to 1.00.

(j) Permits, Patents, Trademarks, Etc.

(i) It has all permits and licenses necessary for the operation of its business except to the extent that failure to maintain such permits or licenses could not be reasonably expected to have a Material Adverse Effect.

(ii) It owns or possesses (or is licensed or otherwise has the necessary right to use) all patents, trademarks, service marks, trade names and copyrights, technology, know-how and processes, and all rights with respect to the foregoing, which are material to the Sellers or the Servicer and are necessary for the operation of its business, without any conflict with the rights of others. The consummation of the transactions contemplated hereby will not alter or impair any of such rights of it.

(k) Status Under Certain Federal Statutes. It is not (i) a “public utility,” as such term is defined in the Federal Power Act, as amended or (ii) an “investment company,” or a company “controlled” by an “investment company,” within the meaning of the Investment Company Act of 1940, as amended.

(l) Securities Acts. It has not issued any unregistered securities in violation of the registration requirements of the Securities Act of 1933, as amended, or of any other Requirement of Law, and is not violating any rule, regulation, or requirement under the Securities Act of 1933, as amended, or the Securities and Exchange Act of 1934, as amended.

(m) No Approvals Required. Other than consents and approvals previously obtained and actions previously taken, neither the execution and delivery of this Letter Agreement and the other Transaction Documents to which it is a party, nor the consummation of any of the transactions contemplated hereby or thereby requires the consent or approval of, the giving of notice to, or the registration, recording or filing by it of any document with, or the taking of any other action in respect of, any Governmental Authority that has jurisdiction over it or any of its Property.

(n) Environmental Matters. There have been no past, and there are no pending or to Sellers’ knowledge threatened, claims, complaints, notices, or governmental inquiries against it regarding any alleged violation of, or potential liability under, any environmental laws that could reasonably be expected to have a Material Adverse Effect. It and its properties are in substantial compliance in all respects with all environmental laws and related licenses and permits, unless the failure to so comply could not reasonably be expected to have a Material Adverse Effect. No conditions exist at, on or under any Property now or previously owned or leased by it that could give rise to liability under any environmental law that could be expected to have a Material Adverse Effect.

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(o) Principal Office, Etc. The principal office, chief executive office and principal place of business of (i) American Home Mortgage Corp., American Home Mortgage Acceptance, Inc. and American Home Mortgage Investment Corp. is at 538 Broadhollow Road, Melville, New York 11747 and (ii) American Home Mortgage Servicing, Inc. is at 538 Broadhollow Road, Melville, New York 11747 (executive offices), and its principal office is at 4600 Regent Blvd., Suite 201, Irving, Texas 75063. The offices where each Seller keeps all the books, records and other information, if any (including, without limitation, computer programs, tapes, disks, punch cards, data processing software and related property and rights) maintained by such Seller with respect to the Purchased Mortgage Loans and other Purchased Assets (other than books and records maintained by the Custodian on its behalf) are located at each location set forth above. The legal name of each Seller is set forth on the signature page hereto and no Seller has used any trade names, fictitious names, assumed names or “doing business as” names during the past five years except as set forth on Schedule V;

(p) Eligibility. The Servicer and each Seller (to the extent required to operate its business) are approved and qualified and in good standing as a lender or seller/servicer, as follows:

(i) The Servicer and each Seller is a FNMA approved seller/servicer (in good standing) of mortgage loans, eligible to originate, purchase, hold, sell and, with respect to each Seller and the Servicer, service mortgage loans to be sold to FNMA.

(ii) The Servicer and each Seller is a FHLMC approved seller/servicer (in good standing) of mortgage loans, eligible to originate, purchase, hold, sell and service mortgage loans to be sold to FHLMC.

(iii) The Servicer and each Seller is an approved FHA servicer, VA servicer and GNMA issuer (in good standing) of mortgage loans, eligible to originate, purchase, hold, sell and service mortgage loans to be pooled into GNMA mortgage-backed securities pools and to issue GNMA mortgage-backed securities.

(q) Solvency. Both prior to and after giving effect to each Purchase, (i) the fair value of the property of each Seller is greater than the total amount of liabilities, including contingent liabilities, of each Seller, (ii) the present fair salable value of the assets of each Seller is not less than the amount that will be required to pay all probable liabilities of each Seller on their debts as they become absolute and matured, (iii) each Seller does not intend to, and does not believe that it will, incur debts or liabilities beyond each Seller’s abilities to pay such debts and liabilities as they mature and (iv) each Seller is not engaged in a business or a transaction, and is not about to engage in a business or a transaction, for which such Sellers’ property would constitute unreasonably small capital.

(r) No Liens. Each Seller has (or, as to all Purchased Assets delivered to the Custodian after the date of this Letter Agreement, will have) good and indefeasible title to all Purchased Assets purported to be transferred by it, and the Purchased Assets and all proceeds thereof are (or, as to all Purchased Assets delivered to the Custodian after the date of this Letter

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Agreement, will be) free and clear of all Liens and other adverse claims, other than (i) the right of the related Seller to repurchase such Purchased Assets pursuant to the terms herein and in the Repurchase Agreement and/or (ii) Liens in the Purchased Assets or proceeds in favor of the Agent for the benefit of the Purchasers and/or (iii) Liens that will be released simultaneously with the initial purchase of Purchased Assets by Agent under the Repurchase Agreement on the Initial Purchase Date.

(s) Financial Condition.

(i) The balance sheet of each of the Sellers as at September 30, 2006, a copy of which has been furnished to the Group Agents, fairly presents the financial condition of such Sellers as at such date, in accordance with GAAP, and since September 30, 2006, there has been no material adverse change in the business, operations, property or financial condition of the Sellers.

(ii) The Servicer has delivered to the Agent copies of AHMIC’s balance sheet, as of September 30, 2006, and the related consolidated statements of income, and with respect to AHMIC only, stockholder’s equity and cash flows for the six months ended on such date, (“Interim Statements”); and all such financial statements fairly present the financial condition of the Servicer as of their respective dates, subject, in the case of the Interim Statements, to normal year end adjustments and the results of operations of the Servicer for the periods ended on such dates and have been prepared in accordance with GAAP.

(iii) As of the date thereof, there are no obligations, liabilities or Indebtedness (including contingent and indirect liabilities and obligations or unusual forward or long-term commitments) of the Servicer or any Seller required to be recorded under GAAP that are not reflected therein.

(iv) No change that constitutes a Material Adverse Effect has occurred in the financial condition or business of the Servicer since September 30, 2006.

(t) UCC Financing Statements. No effective financing statement or other instrument similar in effect covering any Purchased Mortgage Loan, any interest therein, or the related Purchased Assets or Collections with respect thereto is on file in any recording office except such as (i) may be filed in favor of the Agent in accordance with this Letter Agreement or in connection with a Lien arising solely as the result of any action taken by the Purchasers (or any assignee thereof) or by the Agent or (ii) those that are terminated simultaneously with the initial purchase of such Purchased Mortgage Loan by the Buyer pursuant to the Repurchase Agreement on the Initial Purchase Date.

(u) Credit and Collection Policy. The Credit and Collection Policy, as it relates to any Mortgage Loans which are subject to Agency Guidelines, conforms to such Agency Guidelines.

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(v) Eligible Purchased Assets. Each Purchased Mortgage Loan identified as an Eligible Mortgage Loan in any Daily Market Value Report, Monthly Report or on any Loan Schedule is an Eligible Mortgage Loan as of the date so identified.

(w) Employee Benefit Plans. (i) No Employee Plan of the Servicer or any ERISA Affiliate has incurred an “accumulated funding deficiency” (as defined in Section 302 of ERISA or Section 412 of the Code), (ii) neither the Servicer nor any ERISA Affiliate has incurred liability under ERISA to the PBGC, (iii) neither the Servicer nor any ERISA Affiliate has partially or fully withdrawn from participation in a Multiemployer Plan, (iv) no Employee Plan of the Servicer or any ERISA Affiliate has been the subject of involuntary termination proceedings, (v) neither the Servicer nor any ERISA Affiliate has engaged in any “prohibited transaction” (as defined in Section 406 of ERISA or Section 4975 of the Code), and (vi) no “reportable event” (as defined in Section 4043 of ERISA) has occurred in connection with any Employee Plan of the Servicer or any ERISA Affiliate other than events for which the notice requirement is waived under applicable PBGC regulations.

(x) Ownership. On the date of this Letter Agreement, AHMIC has beneficial ownership, directly or indirectly, of 100% of the issued and outstanding shares of each class of the stock of the Servicer and each Seller (other than AHMIC).

(y) No Adverse Selection. No adverse selection was used in connection with selecting the Mortgage Loans to be sold pursuant to the terms of the Repurchase Agreement nor in selecting any Mortgage Loans to be voluntarily repurchased thereunder.

(z) Collections.

(i) The conditions and requirements set forth in Paragraph 11(u) have at all times been satisfied and duly performed.

(ii) The names and addresses of all banks which hold the Collection Accounts, together with the account numbers of each Collection Account and the post office box number of each Lock-Box, are listed on Schedule IV or as set forth in a written notice from the Sellers to each Group Agent.

(iii) No Seller has granted any Person any Lien on, or dominion and control of, any Lock-Box or Collection Account, or the right to take any Lien on, or dominion and control of, any such Lock-Box or Collection Account at a future time or upon the occurrence of a future event.

(iv) The Sellers identify and post, or cause the Servicer to identify and post, in its master data processing records all Collections to the appropriate Mortgage Loan, indicated by loan number, within one (1) Business Day after receipt.

(aa) Authorized Representatives. Each individual designated as an Authorized Representative of the Seller or the Servicer, is authorized to give and receive notices, requests

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and instructions and to deliver certificates and documents in connection with this Letter Agreement and the Repurchase Agreement on behalf of the Seller or the Servicer, respectively, and the specimen signature for each such Authorized Representative, as applicable, initially authorized hereunder is set forth on Schedule VII. From time to time, the Seller and the Servicer may, by delivering to the others a revised exhibit, change the information previously given pursuant to this provisions, but each of the parties hereto shall be entitled to rely conclusively on the then current exhibit until receipt of a superseding exhibit.

(bb) Other Financing Facilities. Other than the financing facilities described on Schedule VIII or as described in a written notice from the Sellers to each Group Agent, no Seller has entered into any agreements pursuant to which it finances any Mortgage Loans.

(cc) Survival of Representations. All representations and warranties by the Sellers and the Servicer herein shall survive the making of the purchases under the Repurchase Agreement, and any investigation at any time made by or on behalf of the Agent or the Purchasers shall not diminish the right of the Agent, the Group Agents or the Purchasers to rely thereon.

11. Affirmative Covenants. Each of the Servicer and each Seller hereby covenants with the Agent, each Group Agent and each Purchaser, unless the Required Group Agents shall otherwise consent in writing, from the Effective Date until the Final Payout Date, as follows:

(a) Financial Statements and Reports. The Servicer, for so long as the Servicer is one of the Sellers, and thereafter the Sellers, shall furnish to the Group Agents the following, all in form and detail reasonably satisfactory to the Group Agents:

(i) promptly after becoming available, and in any event within 120 days after the close of each fiscal year of AHMIC, such Person’s audited consolidated and consolidating balance sheet as of the end of such fiscal year, and the related statements of income, stockholder’s equity and cash flows of such Person for such year showing within such consolidating balance sheets and statements of income the balance sheet and statements of income for the Sellers accompanied by (i) the related report of independent certified public accountants reasonably acceptable to the Group Agents, which report shall be to the effect that such statements have been prepared in accordance with GAAP applied on a basis consistent with prior periods except for such changes in such principles with which the independent certified public accountants shall have concurred and (ii) if issued, the auditor’s letter or report to management customarily given in connection with such audit;

(ii) promptly after becoming available, and in any event within 60 days after the end of each fiscal quarter, excluding the fourth fiscal quarter, of each fiscal year of AHMIC, the unaudited consolidated and consolidating balance sheet of AHMIC as of the end of such fiscal quarter and the related statements of income, stockholders’ equity and cash flows of AHMIC for such fiscal quarter and the period from the first day of the then current fiscal year of AHMIC through the end of such fiscal quarter, showing within such consolidating balance sheets and statements of income the balance sheet and statements of income for the Sellers certified by a Financial Officer of AHMIC, to have been prepared in accordance with GAAP applied on a basis consistent with prior periods, subject to normal year-end adjustments;

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(iii) promptly upon receipt thereof, a copy of each other report submitted to each of the Servicer, the Sellers and the Performance Guarantors by independent certified public accountants in connection with any annual, interim or special audit of the books of such Person;

(iv) promptly and in any event within twenty (20) days after the reasonable written request of the Agent or the Group Agents at any time and from time to time, a certificate, executed by a responsible officer of the Servicer and the Sellers, setting forth all of such Person’s warehouse borrowings and a description of the collateral related thereto;

(v) promptly and in any event within 60 days after the end of each of the first three (3) quarters in each fiscal year of the Sellers, and within 120 days after the close of the Sellers’ fiscal year, completed officer’s certificates in the from of Exhibits C-1 and C-2 hereto, executed by the president or chief financial officer of each of the Servicer and the Sellers, respectively;

(vi) upon written request of the Agent (who shall so request at the request of any Group Agent), promptly and in any event within 60 days after the end of each quarter (120 days in the case of the fourth quarter), a management report regarding the Sellers’ Mortgage Loan production for the prior quarter and year-to-date, in form and detail as reasonably required by the Agent;

(vii) promptly furnish copies of all reports and notices with respect to any “reportable event” defined in Title IV of ERISA that the Sellers or the Servicer files or that the Sellers or the Servicer is required to file under ERISA with the Internal Revenue Service, the PBGC or the U.S. Department of Labor or that the Sellers or the Servicer receives from the PBGC;

(viii) promptly after any Seller or the Servicer obtains knowledge thereof, notice of the Termination Date;

(ix) promptly after the Servicer obtains knowledge thereof, notice of any Event of Default or Incipient Event of Default;

(x) on each day after and during the continuance of an Event of Default, and at such other times as the Agent or any Group Agent shall reasonably request, a report which sets forth such loan level detail with respect to the Purchased Mortgage Loans (including Mortgagor identities and collection status) as the Agent or any Group Agent shall reasonably request;

(xi) in connection with the intention to implement any proposed material change and the effectiveness of all non-material changes to the Credit and Collection Policy, written notice of such proposed material change or non-material change; and

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(xii) such other material information concerning the business, properties or financial condition of the Sellers as the Agent or any Group Agent may reasonably request.

(b) Taxes and Other Liens. The Sellers shall pay and discharge promptly all taxes, assessments and governmental charges or levies imposed upon it or upon its income or upon any of its Property as well as all claims of any kind (including claims for labor, materials, supplies and rent) that, if unpaid, might become a Lien upon any or all of its Property; provided, however, the Sellers shall not be required to pay any such tax, assessment, charge, levy or claim if the amount, applicability or validity thereof shall currently be contested in good faith by appropriate proceedings diligently conducted by it or on its behalf and if it shall have set up reserves therefor adequate under GAAP.

(c) Maintenance. The Sellers shall maintain their corporate existence and shall comply with all Governmental Requirements except to the extent that failure to maintain such existence could not reasonably be expected to have a Material Adverse Effect.

(d) Further Assurances. The Sellers and the Servicer shall, each within three (3) Business Days after the request of the Agent, cure any defects in the execution and delivery of this Letter Agreement or any other Transaction Document. The Sellers and the Servicer shall, each at its expense, promptly execute and deliver to the Agent, upon the Agent’s reasonable request, all such other and further documents, agreements and instruments necessary to keep the Sellers and the Servicer, as applicable, in compliance with the covenants and agreements of the Sellers and the Servicer, respectively, in this Letter Agreement and in the other Transaction Documents or to further evidence and more fully describe the Purchased Assets, or to correct any omissions in this Letter Agreement or the other Transaction Documents, or more fully to state the security for the obligations set out herein or in any of the other Transaction Documents, or to perfect, protect or preserve any Liens created (or intended to be created) pursuant to any of the other Transaction Documents, or to make any recordings, to file any notices, or obtain any consents.

(e) Compliance with Laws. The Servicer shall comply with all applicable laws, rules, regulations and orders in connection with servicing the Purchased Assets except where such failure to comply could not reasonably be expected to have a Material Adverse Effect.

(f) Insurance.

(i) The Sellers and the Servicer shall each maintain with financially sound and reputable insurers, insurance with respect to its Properties and business against such liabilities, casualties, risks and contingencies and in such types and amounts as is customary in the case of Persons engaged in the same or similar businesses and similarly situated, including, without limitation, a fidelity bond or bonds in form and with coverage and with a company reasonably satisfactory to the Agent and with respect to such individuals or groups of individuals as the Agent may designate. Upon request of the Agent, the Sellers and the Servicer shall each furnish or cause to be furnished to the Agent from time to time a summary of the insurance

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coverage of the Sellers and the Servicer, respectively, in form and substance reasonably satisfactory to the Agent and if requested shall furnish the Agent with copies of the applicable policies.

(ii) With respect to the Purchased Assets (i) the Servicer, for as long as the Servicer is one of the Sellers, and thereafter the Sellers, shall cause the improvements on the land and building materials covered by each Mortgage and the builders and contractors to be kept continuously insured at all times by responsible insurance companies against fire and extended coverage hazards and, to the extent required by the Mortgage Contracts, against builder performance failures and such other risks as specified in the Mortgage Contracts in each case under policies, binders, letters, or certificates of insurance, with a standard mortgagee clause in favor of the original mortgagee and its successors and assigns or, in the case of a MERS Designated Mortgage Loan, the beneficial owner of such mortgage loan, and (ii) the Servicer, for so long as the Servicer is one of the Sellers, and thereafter the Sellers, shall cause each such policy to be in an amount equal to the lesser of the maximum insurable value of the improvements or the original principal amount of the Mortgage, without reduction by reason of any co-insurance, reduced rate contribution, or similar clause of the policies or binders.

(g) Accounts and Records. The Sellers and, so long as the Servicer and one of the Sellers are the same entity, the Servicer shall each keep books of record and account in which full, true and correct entries will be made of all material dealings or transactions in relation to its business and activities, in accordance with GAAP. The Sellers and the Servicer shall each maintain and implement administrative and operating procedures (including, without limitation, an ability to recreate all records pertaining to the performance of the Sellers’ obligations under the agreements made with reference to any Mortgage Loans in the event of the destruction of the originals of such records) and keep and maintain all documents, books, records, computer tapes and other information necessary or advisable for the performance by the Sellers under the Transaction Documents.

(h) Periodic Visits. The Sellers and, so long as the Servicer and one of the Sellers are the same entity, the Servicer shall permit any officer, employee or agent of the Agent (including an independent certified public accountant selected by the Agent) to visit (each such visit, a “Periodic Visit”) and inspect any of its Properties, examine its books of record and accounts, documents (including without limitation computer tapes and disks), telecopies and extracts from the foregoing, and discuss its affairs, finances and accounts with its officers, accountants, and auditors, and to review the business of originating the Mortgage Loans, the sale of the Mortgage Loans by the Sellers, and the servicing of the Mortgage Loans by the Servicer, including the Servicer’s collections systems, all during reasonable business hours and as often as the Agent may desire but no more than twice during any twelve month period beginning on the date hereof and on each anniversary of the date hereof unless an Event of Default has occurred and is continuing. The Sellers agree to pay the reasonable costs of reviews and inspections performed pursuant to this Section 11(h), including the costs and expenses charged by the certified public accountant in preparing and delivering to the Agent with respect to the certified public accountant’s review on a scope and in a form reasonably acceptable to the Agent and each

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Group Agent (such report, a “Report of Visit”); provided that the Sellers shall not be responsible for the costs of more than (i) one such review and inspection and (ii) one Report of Visit during any twelve month period beginning on the date hereof and on each anniversary of the date hereof unless an Event of Default has occurred and is continuing.

(i) Notice of Certain Events. The Sellers and, so long as the Servicer and one of the Sellers are the same entity (other than with respect to clause (g) hereof), the Servicer shall each promptly notify the Agent in writing upon (a) the receipt of any notice from, or the taking of any other material action by, the holder of any of its promissory notes, debentures or other evidences of Indebtedness with respect to a claimed default, together with a detailed statement by a responsible officer of the Sellers or the Servicer, as the case may be, specifying the notice given or other material action taken by such holder and the nature of the claimed default and what action the Sellers or the Servicer is taking or proposes to take with respect thereto, but only if such alleged default or event of default (if it were true) would also be an Incipient Event of Default or Event of Default under the Repurchase Agreement; (b) the commencement of, or any determination in, any legal, judicial or regulatory proceedings that, if adversely determined, could also be an Incipient Event of Default or Event of Default under the Repurchase Agreement; (c) any dispute between the Sellers or the Servicer, as the case may be, and any Governmental Authority or any other Person that, if adversely determined, could have a Material Adverse Effect; (d) any change in the business or financial condition of the Servicer, including, without limitation, the Servicer’s insolvency, that could reasonably be expected to have a Material Adverse Effect, or any adverse change in the business or financial condition of the Sellers, including, without limitation, the Sellers’ insolvency, that could reasonably be expected to have a Material Adverse Effect; (e) any other event or condition known to it that could reasonably be expected to have a Material Adverse Effect with respect to any Seller, the Servicer or any Performance Guarantor; (f) the receipt of any notice from, and or the taking of any action by any Governmental Authority indicating an intent to cancel a Seller’s or the Servicer’s right to be either a seller or servicer of such Governmental Authority’s insured or guaranteed Mortgage Loans; and (g) the receipt of any notice of any final judgment or order for payment of money applicable to the Servicer that could reasonably be expected to have a Material Adverse Effect, or the receipt of any notice of any final judgment or order for payment of money applicable to the Sellers that could reasonably be expected to have a Material Adverse Effect. Upon receipt of any notice under this Paragraph 11(i), the Agent shall provide a copy of such notice to each of the Group Agents.

(j) Performance of Certain Obligations. The Sellers and, so long as the Servicer and any of the Sellers are the same entity, the Servicer shall each perform and observe each of the provisions of each Mortgage Loan on its part to be performed or observed.

(k) Notice of Default. The Sellers shall furnish to the Agent immediately upon becoming aware of the existence of any Incipient Event of Default or Event of Default, a written notice specifying the nature and period of existence thereof and the action that the Sellers are taking or proposes to take with respect thereto.

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(l) Compliance with Material Agreements. The Sellers and, so long as the Servicer and one of the Sellers are the same entity, the Servicer shall each comply in all material respects with all agreements, indentures, mortgages or documents (including, with respect to each Seller, its organizational documents) binding on it or materially affecting its Property or business in all cases where the failure to so comply could reasonably be expected to result in a Material Adverse Effect.

(m) Operations and Properties. The Sellers and, so long as the Servicer and one of the Sellers are the same entity, the Servicer shall each act prudently and in accordance with customary industry standards in managing and operating its Property and shall continue to underwrite, hedge and sell Mortgage Loans in the same diligent manner it has applied in the past.

(n) Full Disclosure. Neither any financial statements nor any Daily Market Value Report, Monthly Report, officer’s certificate or statement delivered by the Sellers or the Servicer to the Group Agents in connection with this Letter Agreement, will contain any untrue or inaccurate statement of material fact or omit to state a material fact necessary to make such information not misleading.

(o) Environmental Compliance. The Sellers and, so long as the Servicer and one of the Sellers are the same entity, the Servicer shall each use and operate all of its facilities and properties in compliance with all environmental laws, keep all necessary permits, approvals, certificates, licenses and other authorizations relating to environmental matters in effect and remain in compliance therewith, and handle all hazardous materials in compliance with all applicable environmental laws.

(p) Reserved.

(q) Special Affirmative Covenants Concerning Purchased Assets.

(i) The Sellers shall at all times warrant and defend the right, title and interest of the Purchasers, the Custodian and the Agent in and to the Purchased Assets against the claims and demands of all Persons whomsoever.

(ii) The Sellers and the Servicer shall each service or cause to be serviced all Purchased Mortgage Loans in the best interests of and for the benefit of the Purchasers, in accordance with the terms of the Transaction Documents, the terms of the Mortgage Note, the Mortgage Contract and the Mortgage, and to the extent consistent with such terms, in accordance with Accepted Servicing Standards, including without limitation taking all actions necessary to enforce the obligations of the Mortgagors under such Purchased Mortgage Loans. The Sellers and the Servicer each shall hold all escrow funds collected in respect of Purchased Mortgage Loans in trust, without commingling the same with any other funds, and apply the same for the purposes for which such funds were collected.

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(iii) Each Seller and the Servicer shall mark its loan management system to the effect that the Sellers have sold all its rights, title and interest in the Purchased Mortgage Loan to the Buyer.

(r) Transaction Documents. The Sellers will perform all of their obligations under each Transaction Document to which it is a party and will enforce each Transaction Document to which it is a party in accordance with its terms in all respects.

(s) Delivery of Wet Loans. Each of the Sellers shall deliver to the Custodian, within 10 days after the date of origination of any Wet Loan, the Loan Documents relating to such Wet Loan which are required to be delivered to the Custodian pursuant to the Custodial Agreement.

(t) Anti-Money Laundering Laws. Within thirty (30) days following the issuance of applicable regulations pursuant to the USA Patriot Act of 2001, or any similar federal, state or local anti-money laundering laws and regulations (collectively, the “Anti-Money Laundering Laws”), each Seller shall have implemented and shall thereafter maintain a compliance program that meets the requirements of such Anti-Money Laundering Laws.

(u) Collections.

(i) Each of the Servicer and each Seller will cause (A) all Collections constituting Monthly Payments and repayments of principal to be remitted directly by the Mortgagors to a Lock-Box, a Collection Account or the Buyer’s Account, (B) all other Collections not described in clause (i) to be remitted by the applicable Takeout Investor, Takeout Lender or any other applicable Person directly to the Buyer’s Account, (C) all Collections constituting repayments of principal to be transferred to the Buyer’s Account within two (2) Business Days after receipt, (D) at the request of the Agent in its sole discretion at any time after the occurrence and during the continuance of an Event of Default, all Monthly Payments to be transferred to the Buyer’s Account within two (2) Business Days after receipt and (E) all proceeds from all Lock-Boxes to be directly deposited by the bank holding such Lock-Box into a Collection Account.

(ii) In the event any Collections are remitted directly to a Seller, the Servicer or any Affiliate of a Seller, such Seller or the Servicer shall or shall cause such Collections to be remitted to a Collection Account, or if required by this Paragraph 11(u), to the Buyer’s Account, in any case within two (2) Business Days following receipt thereof.

(iii) At all times prior to the remittance of Collections to the Buyer’s Account, the Seller or the Servicer, as applicable, will itself hold or, if applicable, will cause such Collections to be held in trust for the exclusive benefit of the Agent and the Purchasers.

(iv) In the event any amount not constituting Collections is deposited into any Collection Account or the Buyer’s Account, the Servicer shall cause such amount to be remitted to the appropriate Person within two (2) Business Days following such remittance.

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(v) Each Seller will maintain exclusive ownership, dominion and control of each Lock-Box and Collection Account free and clear of any Lien and shall not grant any Lien or the right to take dominion and control of any Lock-Box or Collection Account at a future time or upon the occurrence of a future event to any Person.

(vi) Each Seller will identify and post, or cause the Servicer to identify and post, all Collections to the appropriate Mortgage Loan, indicated by loan number, within one (1) Business Day after receipt.

(vii) Each of the Servicer and each Seller agree that the Agent may deliver a “Notice of Exclusive Control” under, and as such term is defined in, the Account Control Agreement at any time in its sole discretion.

12. Negative Covenants. Each of the Servicer and each Seller hereby covenants with the Agent, each Group Agent and each Purchaser, unless the Required Group Agents shall otherwise consent in writing, from the Effective Date until the Final Payout Date, as follows:

(a) Limitations on Mergers and Acquisitions. The Servicer (so long as the Servicer and one of the Sellers are the same entity) shall not (i) merge or consolidate with or into any corporation or other entity unless the Servicer or one of the Sellers is the surviving entity of any such merger or consolidation or (ii) liquidate or dissolve.

(b) Fiscal Year. Neither the Sellers nor, so long as the Servicer and one of the Sellers are the same entity, the Servicer shall change its fiscal year other than to conform with changes that may be made to AHMIC’s fiscal year and then only after notice to the Agent and after whatever amendments are made to this Letter Agreement as may be reasonably required by the Agent, in order that the reporting criteria for the financial covenants contained in Paragraphs 11 and 12 remain substantially unchanged.

(c) Use of Proceeds. The Sellers shall not, directly or indirectly (i) use any of the proceeds of the Purchased Mortgage Loans for the purpose, whether immediate, incidental or ultimate, of buying or carrying any “margin stock”, or of maintaining, reducing or retiring any Indebtedness originally incurred to purchase or carry a stock that is currently any “margin stock,” or for any other purpose that might constitute this transaction a “purpose credit,” in each case within the meaning of Regulation U, or otherwise take or permit to be taken any action that would involve a violation of such Regulation U, Regulation X, Regulation T or Regulation Z (12 C.F.R. 224, as amended) or any other regulation promulgated by the Federal Reserve Board, or (ii) violate Section 7 of the Securities Exchange Act of 1934, as amended, or any rule or regulation thereunder, in each case as now in effect or as the same may hereafter be in effect.

(d) Actions with Respect to Purchased Assets. Neither the Sellers nor the Servicer shall:

(i) Compromise, extend, release, or adjust payments on any Purchased Assets, accept a conveyance of mortgaged Property in full or partial satisfaction of any Mortgage debt or release any Mortgage securing or underlying any Purchased Assets without the prior written consent of the Required Group Agents; or

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(ii) Transfer, sell, assign or deliver any Purchased Assets pledged to the Agent to any Person other than the Agent.

(e) Liens. The Sellers will not sell, assign (by operation of law or otherwise) or otherwise dispose of, or create, incur, permit or suffer to exist any Lien upon or with respect to, any Purchased Asset, or upon or with respect to any account to which any Collections of any Purchased Asset are sent, or assign any right to receive income in respect thereof except as contemplated hereby, other than the Lien granted to the Agent under the Repurchase Agreement.

(f) Employee Benefit Plans. Neither the Sellers nor, so long as the Servicer and one of the Sellers are the same entity, the Servicer may permit any of the events or circumstances described in Paragraph 10(w) to exist or occur.

(g) Change of Principal Office. No Seller shall move its principal office, executive office or principal place of business from the address set forth in Paragraph 10(o) without 30-days’ prior written notice to the Agent. No Seller shall change their name, identity, place of organization or add a new jurisdiction of organization without 30 days’ prior written notice to the Agent.

(h) Deposits to Buyer’s Account. Neither the Sellers nor the Servicer shall deposit or otherwise credit, or cause or permit to be so deposited or credited, to the Buyer’s Account, any cash or cash proceeds other than proceeds of the Purchased Assets.

(i) Credit and Collection Policies. Sellers shall promptly deliver any and all material amendments to its Credit and Collection Policy to the Agent; provided, that the Purchasers shall not be required to purchase any Mortgage Loans originated under any amended criteria if such amendment is not reasonably acceptable to the Required Group Agents.

(j) Minimum Tangible Net Worth.

The Sellers and the Servicer shall not:

(i) Permit at any time AHMIC’s Tangible Net Worth to be less than $914,000,000, plus 75% of the Net Cash Proceeds of any capital stock (including preferred stock) issued by AHMIC after June 30, 2006;

(ii) Permit at any time the Tangible Net Worth of American Home Mortgage Servicing, Inc. to be less than $30,000,000;

(iii) Permit at any time the Tangible Net Worth of American Home Mortgage Corp. to be less than $21,000,000;

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(iv) Permit at anytime the Tangible Net Worth of American Mortgage Acceptance, Inc. to be less than $41,000,000; or

(v) Permit at any time the Tangible Net Worth of American Home Mortgage Servicing, Inc., American Home Mortgage Corp. and American Home Mortgage Acceptance, Inc. to be less than $147,000,000.

(k) Positive Net Income of AHMIC. AHMIC shall not permit its net income to be less than $1.00 for any period of two consecutive fiscal quarters.

(l) Collateral Value to Adjusted Consolidated Funded Debt Ratio. AHMIC shall not permit at any time the ratio of its Aggregate Collateral Value to its Adjusted Consolidated Funded Debt to be less than 1.00 to 1.00.

(m) Change in Payment Instructions to Mortgagors. Except as may be required by the Agent pursuant to the terms of any Transaction Document, none of the Servicer or any Seller will add or terminate any bank as a holder of a Collection Account, or make any change in the instructions to Mortgagors regarding payments to be made to any Lock-Box or Collection Account, unless the Agent shall have received prior written notice of such addition, termination or change; provided, however, that the Servicer may make changes in instructions to Mortgagors regarding payments if such new instructions require such Mortgagor to make payments to another existing Collection Account.

(n) Other Financing Facilities. Except for the financing facilities described on Schedule VIII or as described in a prior written notice from the Sellers to each Group Agent, no Seller will sell, pledge or otherwise finance any Mortgage Loans other than under the Repurchase Agreement.

13. Servicing Provisions.

(a) Designation of Servicer. The servicing, administration and collection of the Purchased Assets shall be conducted by the Servicer so designated hereunder from time to time in accordance with Accepted Servicing Practices for the benefit of the Agent, the Group Agents and the Purchasers. Until the Agent gives notice to the Servicer and the Sellers of the designation of a new Servicer after the occurrence of an Event of Default, American Home Mortgage Servicing, Inc. is hereby designated as, and hereby agrees to perform the duties and obligations of, the Servicer pursuant to the terms hereof. The Agent may at any time following the occurrence of an Event of Default designate as Servicer any Person (including itself) to succeed AHM Servicing. Without the prior written consent of the Required Group Agents, the Servicer shall not be permitted to delegate any of its duties or responsibilities as Servicer to any Person; provided that, the consent of the Required Group Agents shall not be required for (i) the delegation of certain duties and responsibilities related to the payments of taxes and insurance, construction inspections and other matters, where such delegations are consistent with Accepted Servicing Practices or (ii) the delegation of any of its duties or responsibilities to any Seller. If the Agent shall designate as Servicer any Person other than AHM Servicing, all duties and

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responsibilities theretofore delegated by AHM Servicing may, following an Event of Default, at the discretion of the Agent, be terminated forthwith on notice given by the Agent to AHM Servicing. Notwithstanding the foregoing, (i) AHM Servicing shall be and remain primarily liable to the Agent, the Group Agents and the Purchasers for the full and prompt performance of all duties and responsibilities of the Servicer under the Transaction Documents and (ii) the Agent, the Group Agents and the Purchasers shall be entitled to deal exclusively with AHM Servicing in matters relating to the discharge by the Servicer of its duties and responsibilities under the Transaction Documents. The Agent, the Group Agents and the Purchasers shall not be required to give notice, demand or other communication to any Person other than AHM Servicing in order for communication to the Servicer and its sub-servicer or other delegate with respect thereto to be accomplished. AHM Servicing, at all times that it is the Servicer, shall be responsible for providing any sub-servicer or other delegate of the Servicer with any notice given to the Servicer under this Letter Agreement.

(b) Duties of Servicer.

(i) The Servicer shall take or cause to be taken all such actions as may be necessary or advisable to (i) confirm the satisfaction of the conditions precedent to Mortgagor Advances under the Mortgage Contracts prior to the Sellers’ making such Mortgagor Advances, (ii) monitor compliance with the provisions of the Mortgage Contracts by the Mortgagors and the Sellers and (iii) collect each Purchased Asset from time to time, all in accordance Accepted Servicing Practices. The Sellers and the Agent hereby appoint the Servicer, from time to time designated pursuant to Section 15(a), as agent for themselves and for the Purchasers to enforce their respective rights and interests in the Purchased Assets and the Collections thereof.

(ii) The Servicer shall service the Purchased Assets in accordance with the terms of this Letter Agreement.

(iii) The Servicer shall hold in trust for the Sellers and the Purchasers, in accordance with their respective interests, all books and records (including, without limitation, computer tapes or disks) that relate to the Purchased Assets.

(iv) The Servicer shall, as soon as practicable following receipt, turn over to the Sellers, any cash collections or other cash proceeds received with respect to Property not constituting Purchased Assets.

(v) The Servicer shall perform the duties and obligations of the Servicer set forth in the Custodial Agreement and the Account Control Agreement.

(vi) The Servicer shall deliver to the Agent and each Group Agent (i) on each Business Day, a Daily Market Value Report in substantially the form of Exhibit A hereto (the “Daily Market Value Report”) and, (ii) on each Determination Date, a Monthly Report in substantially the form of Exhibit B hereto (the “Monthly Report”).

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(vii) The Servicer shall monitor the adequate and timely payment of taxes and insurance related to the Mortgaged Properties.

(viii) Until such time as the Agent has exercised its right to take exclusive control over the Buyer’s Account, on each Business Day the Servicer shall direct the Bank to remit the amounts on deposit therein to the Agent and the Group Agents, as applicable, to pay the Repurchase Prices and all other amounts due and payable to the Agent, the Group Agents and the Purchasers in accordance with the Transaction Documents. Amounts on deposit in the Buyer’s Account may be released to the Sellers in accordance with Paragraph 4(c) of the Repurchase Agreement and subject to the conditions precedent set forth in clauses (ii) through (x) of Paragraph 9(b).

(c) Certain Rights of the Agent. At any time following the designation of a Servicer other than the Sellers pursuant to Section 15(a) or following an Event of Default:

(i) The Agent may direct the Mortgagors that all payments thereunder be made directly to the Agent or its designee.

(ii) At the Agent’s request and at the Sellers’ expense, the Sellers shall notify each Mortgagor of the Lien on the Purchased Assets and direct that payments be made directly to the Agent or its designee.

(iii) At the Agent’s reasonable request and at the Sellers’ expense, the Sellers and the Servicer shall (i) assemble all of the documents, instruments and other records (including, without limitation, computer tapes and disks) that evidence or relate to the Purchased Mortgage Loans and Collections and Purchased Assets, or that are otherwise necessary or desirable to service and/or collect the Purchased Assets, monitor the compliance with the Mortgage Contracts and perform the obligations of the Seller under the Mortgage Contracts, including, without limitation, all documents related to the contractor or builder and any construction inspector, and shall make the same available to the Agent at a place selected by the Agent or its designee, and (ii) segregate all cash, checks and other instruments received by it from time to time constituting Collections in a manner reasonably acceptable to the Agent and, promptly upon receipt, remit all such cash, checks and instruments, duly endorsed or with duly executed instruments of transfer, to the Agent or its designee.

(d) Rights and Remedies.

(i) If the Servicer fails to perform any of its obligations under this Letter Agreement, the Agent may (but shall not be required to) itself perform, or cause performance of, such obligation; and the Agent’s reasonable costs and expenses incurred in connection therewith shall be payable by the Servicer.

(ii) With respect to each Mortgage Loan, the Servicer shall follow the Accepted Servicing Practices. The exercise by the Agent on behalf of the Purchasers of their rights under this Letter Agreement shall not release the Servicer from any of its duties or

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obligations with respect to any Mortgage Loans. Neither the Agent, nor the Purchasers shall have any obligation or liability with respect to any Mortgage Loans, nor shall any of them be obligated to perform the obligations of the Sellers thereunder.

(e) Servicing Fee. The Sellers shall pay to the Servicer a servicing fee at such times and in such amount as agreed upon between the Sellers and the Servicer. In no event shall any Purchaser, any Group Agent or the Agent be responsible or liable for any servicing fee due or owing to the Servicer.

(f) Indemnities by the Servicer.

Without limiting any other rights the Indemnified Parties may have hereunder or under applicable law, and in consideration of its appointment as Servicer, the Servicer hereby agrees to indemnify each Indemnified Party from and against any and all Indemnified Amounts awarded against or incurred by any of them arising out of or resulting from any of the following excluding, however, (x) Indemnified Amounts to the extent resulting from gross negligence or willful misconduct on the part of such Indemnified Party, (y) recourse for Purchased Assets that are not collected, not paid or uncollectible on account of the insolvency, bankruptcy or financial inability to pay of the applicable Mortgagor or (z) any Excluded Taxes:

(i) any representation or warranty or statement made or deemed made by the Servicer under or in connection with this Letter Agreement that shall have been incorrect in any respect when made;

(ii) the failure by the Servicer to comply in any material respect with any applicable law, rule or regulation with respect to any Purchased Asset or the failure of any Mortgage Loan to conform to any such applicable law, rule or regulation;

(iii) any failure of the Servicer to perform its duties or obligations in accordance with the provisions of this Letter Agreement and the other Transaction Documents;

(iv) the commingling of Collections at any time by the Servicer with other funds;

(v) any action or omission by the Servicer reducing or impairing the rights of the Agent or the Purchasers with respect to any Purchased Asset or the value of any Purchased Asset;

(vi) any Servicer Fees or other costs and expenses payable to any replacement Servicer, to the extent in excess of the Servicer Fees payable to the Servicer hereunder; or

(vii) any claim brought by any Person other than an Indemnified Party arising from any activity by the Servicer or its Affiliates in servicing, administering or collecting any Purchased Asset.

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14. Binding Effect; Assignments and Participations; Joinder.

(a) This Letter Agreement shall be binding upon, and shall inure to the benefit of, the parties hereto and their respective successors and assigns; provided no Seller may assign any of its obligations hereunder without the prior written consent of each Group Agent.

(b) Any Conduit Purchaser may at any time assign all or a portion of its rights and obligations under this Letter Agreement and any other Transaction Document or any Transaction without the consent of, but with notice to the Sellers, to (i) any other Purchaser, (ii) to any Liquidity Provider, (iii) to any commercial paper conduit managed by such Conduit Purchaser’s sponsor or administrator bank, or (iv) any Affiliate of such Conduit Purchaser’s sponsor bank. In addition, any Conduit Purchaser may, with the consent of each Seller (such consent not to be unreasonably withheld, delayed or conditioned) and the Agent, assign at any time all or any portion of its rights and obligations hereunder and interests herein to any other Person not listed in the immediately preceding sentence; provided that the Sellers’ consent to such an assignment shall not be required and the preceding proviso shall not apply after the occurrence and during the continuance of an Event of Default.

(c) Any Committed Purchaser may at any time assign all or a portion of its rights and obligations under this Letter Agreement and any other Transaction Document or any Transaction, without the consent of, but with notice to the Sellers, to (i) any other Committed Purchaser or (ii) any Affiliate of such Committed Purchaser. In addition, any Committed Purchaser may, with the consent of each Seller (such consent not to be unreasonably withheld, delayed or conditioned), the applicable Group Agent and the Agent, assign at any time all or any portion of its rights and obligations hereunder and interests herein to any other Person; provided that the Sellers’ consent to such an assignment shall not be required and the preceding proviso shall not apply after the occurrence and during the continuance of an Event of Default.

(d) Any Purchaser may, without the consent of any Person, sell participations to one or more banks or other entities (each, a “Participant”) in all or a portion of its rights and obligations under the Repurchase Agreement, this Letter Agreement, any Transaction Document or any Transaction; provided that after giving effect to such sale, (i) such Purchaser’s obligations under the Repurchase Agreement and this Letter Agreement shall remain unchanged, (ii) such Purchaser shall remain solely responsible to the other parties to the Repurchase Agreement and this Letter Agreement for the performance of such obligations, and (iii) each of the parties to the Repurchase Agreement and this Letter Agreement shall continue to deal solely and directly with the selling Purchaser in connection with its rights and obligations under the Repurchase Agreement and this Letter Agreement. Any agreement or instrument pursuant to which a Purchaser sells such a participation shall provide that the Participant shall not have any right to direct the enforcement of the Repurchase Agreement, this Letter Agreement or the other Transaction Documents or to approve any amendment, modification or waiver of any provision of the Repurchase Agreement, this Letter Agreement or the other Transaction Documents; provided that such agreement or instrument may provide that the selling Purchaser will not, without the consent of the Participant, agree to any amendment, modification or waiver that (i)

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reduces the Repurchase Price in respect of any Purchased Mortgage Loans or any amount of Price Differential or interest payable under the Repurchase Agreement or this Letter Agreement or delays any scheduled date for payment thereof or (ii) reduces any Fees payable by any Seller to the Agent, the applicable Group Agent or such Purchaser (to the extent relating to payments to the Participant) or delays any scheduled date for payment of such fees. Each Seller acknowledges and agrees that any Purchaser’s source of funds may derive in part from its Participants. Accordingly, references in the terms and provisions of this Letter Agreement and the other Transaction Documents to determinations, reserve and capital adequacy requirements, expenses, increased costs, reduced receipts and the like as they pertain to any Purchaser shall be deemed also to include those of its Participants; provided, that the Sellers shall not be required to make any payments in respect of such items in excess of what would be payable to the applicable Purchaser if the Purchaser had not sold such participation.

(e) Notwithstanding any other provision of this Letter Agreement to the contrary, any Purchaser or Liquidity Provider or credit support provider to a Conduit Purchaser may at any time pledge or grant a security interest in all or any portion of its rights (including, without limitation, rights to payment of the Repurchase Price in respect of any Purchased Mortgage Loans or any amount of Price Differential or interest payable under the Repurchase Agreement or this Letter Agreement) to secure obligations of such Person to a Federal Reserve Bank, without notice to or consent of any Seller, any Group Agent or the Agent; provided, that no such pledge or grant of a security interest shall release any Purchaser from any of its obligations hereunder or substitute any such pledgee or grantee for such Purchaser as a party hereto.

(f) Upon the Sellers’ request, an additional Group may be added to this Letter Agreement at any time by the execution and delivery of a Joinder Agreement by the members of such proposed additional Group, the Sellers, and the Agent, which execution and delivery shall not be unreasonably refused by such parties. Upon the effective date of such Joinder Agreement, (i) each Person specified therein as a “Conduit Purchaser” shall become a party hereto as a Conduit Purchaser, entitled to the rights and subject to the obligations of a Conduit Purchaser hereunder, under the Repurchase Agreement and the other Transaction Documents, (ii) each Person specified therein as a “Committed Purchaser” shall become a party hereto as a Committed Purchaser, entitled to the rights and subject to the obligations of a Committed Purchaser hereunder, under the Repurchase Agreement and the other Transaction Documents, (iii) each Person specified therein as a “Group Agent” shall become a party hereto as a Group Agent, entitled to the rights and subject to the obligations of a Group Agent hereunder, under the Repurchase Agreement and the other Transaction Documents, (iv) the Facility Limit shall be increased by an amount equal to the aggregate Commitments of the Committed Purchasers party to such Joinder Agreement, and (v) appropriate assignments shall be executed among the Groups such that, after giving effect to the addition of the new Group, each Group shall have funded its Group Pro Rata Share of the aggregate Purchase Price. Pursuant to such Joinder Agreement (i) the new Group Agent shall become a party to the Fee Letter with the other Group Agents and the Sellers and (ii) the new Conduit Purchaser, the new Committed Purchaser, and the new Group Agent shall become parties to the Agency Agreement with the other Conduit Purchasers, Committed Purchasers and Group Agents.

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(g) The Agent may at any time assign all or a portion of its rights and obligations under this Letter Agreement and any other Transaction Document or any Transaction, without the consent of, but with notice to the Sellers, to (i) any Group Agent or (ii) any Affiliate of a Group Agent. In addition, the Agent may, with the consent of the Sellers (such consent not to be unreasonably withheld, delayed or conditioned) and the Group Agents, assign at any time all or any portion of its rights and obligations hereunder and interests herein to any other Person; provided that the Sellers’ consent to such an assignment shall not be required after the occurrence and during the continuance of an Event of Default.

(h) Any Group Agent may at any time assign all or a portion of its rights and obligations under this Letter Agreement and any other Transaction Document or any Transaction, without the consent of, but with notice to the Sellers, to (i) any other Group Agent or (ii) any Affiliate of a Group Agent. In addition, any Group Agent may, with the consent of the Sellers (such consent not to be unreasonably withheld, delayed or conditioned) and the Group Agents, assign at any time all or any portion of its rights and obligations hereunder and interests herein to any other Person; provided that the Sellers’ consent to such an assignment shall not be required after the occurrence and during the continuance of an Event of Default.

15. Amendments and Waivers. No amendment, waiver, supplement or other modification of this Letter Agreement shall be effective unless made in writing and executed by each of the Sellers, the Servicer, the Agent, and the Required Group Agents (or if required by the Agency Agreement, each Group Agent).

16. Notices. All notices and other communications provided for hereunder shall, unless otherwise stated herein, be in writing (including communication by facsimile copy) and shall be personally delivered or sent by registered mail, return receipt requested, or by courier or by facsimile, to each party hereto, at its address specified in Paragraph 14 of the Repurchase Agreement or in the case of the Group Agents and the Purchasers, as set forth on Schedule VI hereto or at such other address as shall be designated by such party in a written notice to the other parties hereto. All such notices and communications shall be effective, upon receipt, or in the case of overnight courier, two (2) days after being deposited with such courier, or, in the case of notice by facsimile, when electronic confirmation of receipt is obtained, in each case addressed as aforesaid. Each Seller agrees to provide each Group Agent with copies of any notice delivered to the Agent under the Repurchase Agreement on the same day such notice is delivered.

17. GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL.

(a) THIS LETTER AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. EACH PARTY HERETO HEREBY SUBMITS TO THE NONEXCLUSIVE

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JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND OF ANY NEW YORK STATE COURT SITTING IN THE CITY OF NEW YORK FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS LETTER AGREEMENT. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. NOTHING IN THIS PARAGRAPH 17 SHALL AFFECT THE RIGHT OF AGENT, ANY PURCHASER OR ANY GROUP AGENT TO BRING ANY ACTION OR PROCEEDING AGAINST ANY SELLER OR ITS PROPERTY IN THE COURTS OF OTHER JURISDICTIONS. EACH PARTY HERETO CONSENTS TO THE SERVICE OF ANY AND ALL PROCESS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES OF SUCH PROCESS TO IT AT ITS ADDRESS FOR NOTICES HEREUNDER SPECIFIED IN PARAGRAPH 16.

(b) EACH OF THE PARTIES HERETO HEREBY WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE AMONG ANY OF THEM ARISING OUT OF, CONNECTED WITH, RELATING TO OR INCIDENTAL TO THE RELATIONSHIP BETWEEN THEM IN CONNECTION WITH THIS LETTER AGREEMENT OR THE OTHER TRANSACTION DOCUMENTS.

18. Right of Setoff. Each of the Agent, each Group Agent and each Purchaser is hereby authorized (in addition to any other rights it may have) at any time after the occurrence of the Termination Date due to the occurrence of an Event of Default, or at any time that any obligation of any Seller hereunder or under the Repurchase Agreement is due and payable, to set off claims and apply property held by them against obligations owing to them (including, with respect to the Agent’s, each Group Agent’s and each Purchasers’ such right, to set off or net claims against the property of any Seller regardless of which Seller’s obligations are outstanding) to, or for the account of, such Seller or any other Seller against the amount of the obligations owing by such Seller to such Person. Each Seller hereby irrevocably and unconditionally waives all right to setoff that it may have under contract (including this Letter Agreement), applicable law or otherwise with respect to any funds or monies of the Agent, any Group Agent or any Purchaser at any time held by or in the possession of such Seller.

19. Ratable Payments. If any Purchaser, whether by setoff or otherwise, has payment made to it with respect to any obligation of any Seller in a greater proportion than that received by any other Purchaser entitled to receive a ratable share of such amount, such Purchaser agrees, promptly upon demand, to purchase for cash without recourse or warranty a portion of such obligation held by the other Purchasers so that after such purchase each Purchaser will hold its ratable proportion of such obligations, as applicable; provided that if all or any portion of such excess amount is thereafter recovered from such Purchaser, such purchase shall be rescinded and the purchase price restored to the extent of such recovery, but without interest.

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20. Limitation of Liability.

(a) Each party hereto agrees that it shall not assert any claim against any Indemnified Party for, and no Indemnified Party will have any liability for, special, indirect, consequential or punitive damages in connection with the Transaction Documents, or the transactions contemplated hereby.

(b) Notwithstanding anything to the contrary contained herein, the obligations of the Conduit Purchasers under this Letter Agreement are solely the corporate obligations of each such Conduit Purchaser and shall be payable only at such time as funds are actually received by, or are available to, such Conduit Purchaser in excess of funds necessary to pay in full all outstanding Promissory Notes issued by such Conduit Purchaser and, to the extent funds are not available to pay such obligations, the claims relating thereto shall not constitute a claim against such Conduit Purchaser. Each party hereto agrees that the payment of any claim (as defined in Section 101 of Title 11 of the Bankruptcy Code) of any such party shall be subordinated to the payment in full of all Promissory Notes. Notwithstanding the foregoing, if any Seller pays the Repurchase Price and all other amounts due and payable hereunder, such Seller shall have the rights under the Repurchase Agreement for the transfer to it of its Purchased Mortgage Loans related to such Repurchase Price without such subordination.

(c) No recourse under any obligation, covenant or agreement of any Conduit Purchaser contained in this Letter Agreement shall be had against any incorporator, stockholder, officer, director, member, manager, employee or agent of such Conduit Purchaser or any of its Affiliates (solely by virtue of such capacity) by the enforcement of any assessment or by any legal or equitable proceeding, by virtue of any statute or otherwise; it being expressly agreed and understood that this Letter Agreement is solely a corporate obligation of such Conduit Purchaser, and that no personal liability whatsoever shall attach to or be incurred by any incorporator, stockholder, officer, director, member, manager, employee or agent of any Conduit Purchaser or any of its Affiliates (solely by virtue of such capacity) or any of them under or by reason of any of the obligations, covenants or agreements of such Conduit Purchaser contained in this Letter Agreement, or implied therefrom, and that any and all personal liability for breaches by any Conduit Purchaser of any of such obligations, covenants or agreements, either at common law or at equity, or by statute, rule or regulation, of every such incorporator, stockholder, officer, director, member, manager, employee or agent is hereby expressly waived as a condition of and in consideration for the execution of this Letter Agreement.

21. No Insolvency Proceedings. Each party hereto hereby agrees that it will not institute against any Conduit Purchaser any Act of Insolvency so long as any Promissory Notes of such Conduit Purchaser shall be outstanding or there shall not have elapsed one year plus one day since the last day on which any such Promissory Notes shall have been outstanding.

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22. Confidentiality.

(a) Each of the parties hereto hereby agrees that, from the commencement of discussions with respect to the transaction contemplated by this Letter Agreement, each of the parties hereto (and each of their respective, and their respective Affiliates’, employees, officers, directors, advisors, representatives and agents) are permitted to disclose to any and all Persons, without limitation of any kind, the structure and tax aspects (as such terms are used in Sections 6011, 6111 and 6112 of the IRC and the regulations promulgated thereunder) of the transaction, and all materials of any kind (including opinions or other tax analyses) that are provided to any of the parties hereto related to such structure and tax aspects. In this regard, each of the parties hereto hereby acknowledges and agrees that the disclosure of the structure or tax aspects of the transaction is not limited in any way by an express or implied understanding or agreement, oral or written (whether or not such understanding or agreement is legally binding). Furthermore, each of the parties hereto hereby acknowledges and agrees that it does not know or have reason to know that its use or disclosure of information relating to the structure or tax aspects of the transaction is limited in any other manner (such as where the transaction is claimed to be proprietary or exclusive) for the benefit of any other Person. In this regard, each of the parties hereto intends that the transaction will not be a “confidential transaction” under the above-mentioned Sections of the IRC and regulations.

(b) Subject to subparagraph (a) of this Paragraph 22, no party hereto may disclose to any Person or entity the existence of this Letter Agreement or the terms hereof (including, without limitation, any specific pricing information provided by the Agent or the amount or terms of any fees payable to the Group Agents or the Purchasers in connection with the transaction), to the extent such terms do not constitute “structure” or “tax aspects” under Section 6011, 6111 or 6112 of the IRC or the regulations promulgated thereunder, or the existence and status of any ongoing negotiations between the Sellers, the Agent, the Group Agents and the Purchasers concerning the transaction (collectively, the “Product Information”), except (i) to the extent required by applicable law, regulation, subpoena or other legal process, (ii) to the extent requested by any governmental or regulatory authority having jurisdiction over the Agent, any Group Agent, any Purchaser, any Purchaser Representative, the Servicer, any Seller or any Company Representative, (iv) to any applicable rating agency responsible for rating the Promissory Notes of any Conduit Purchaser, (v) to any actual or potential subordinated investor in any Conduit Purchaser that has signed a confidentiality agreement containing restrictions on disclosure substantially similar to this paragraph, or (vi) to any Purchaser Representative, or with respect to any Seller or the Servicer, to its and its Affiliates’ officers, directors, employees, agents, accountants, legal counsel and other representatives (collectively “Company Representatives”), in each case, who have a need to know the Product Information for the purpose of assisting in the negotiation and completion of the transaction and who agree to be bound by the provisions of this section. The Sellers, the Servicer, the Agent, the Group Agents and the Purchasers, as applicable will be responsible for any failure of any of its respective Purchaser Representatives or Company Representatives, as applicable, to comply with the provisions of this Paragraph 22. Product Information shall not include, however, information that is a matter of general public knowledge or has heretofore been or is hereafter published in any source generally available to the public.

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(c) None of the Agent, the Group Agents or the Purchasers will disclose to any person or entity the confidential or proprietary information of any Seller furnished to the Agent, any Group Agent or any Purchaser in connection with this Letter Agreement and the Transactions (the “Seller Information”), except (i) to their respective and their Affiliates’ officers, directors, employees, agents, accountants, legal counsel and other representatives (collectively, the “Purchaser Representatives”) who have a need to know the Seller Information for the purpose of assisting in the negotiation of the Repurchase Agreement and the consummation of the Transactions contemplated thereunder and hereunder and who agree to be bound by the provisions in this Paragraph 22, (ii) to the extent required by applicable law, regulation, subpoena or other legal process, (iii) to the extent requested by any governmental or regulatory authority having jurisdiction over the Agent, any Group Agent, any Purchaser or any Purchaser Representative, (iv) to any applicable rating agency responsible for rating the Promissory Notes of any Conduit Purchaser; or (v) to any actual or potential subordinated investor in any Conduit Purchaser that has signed a confidentiality agreement containing restrictions on disclosure substantially similar to this paragraph.

23. Counterparts. This Letter Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same agreement.

24. No Waiver; Remedies. No failure on the part of the Agent, any Group Agent or any Purchaser to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law.

25. Integration; Binding Effect; Survival of Termination. This Letter Agreement and the other Transaction Documents contain the final and complete integration of all prior expressions by the parties hereto with respect to the subject matter hereof and shall constitute the entire agreement among the parties hereto with respect to the subject matter hereof superseding all prior oral or written understandings. This Letter Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns (including any trustee in bankruptcy). Any provisions of this Letter Agreement which are prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. This Letter Agreement shall create and constitute the continuing obligations of the parties hereto in accordance with its terms and shall remain in full force and effect until the Final Payout Date; provisions of Paragraphs 5 through 8, 17, 20, 21 and 22 and the obligations of the Sellers under Paragraph 15 of the Repurchase Agreement shall survive the termination of this Letter Agreement.

[Signature pages follow]

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Please confirm our mutual agreement as set forth herein and acknowledge receipt of this Letter Agreement by executing below.

Very truly yours,
ABN AMRO BANK N.V., as the Agent, and as Group Agent for the ABN AMRO Group
By:	/s/ Kevin J. Hayes
Name:	Kevin J. Hayes
Title:	Director
By:	/s/ Therese Gremley
Name:	Therese Gremley
Title:	Vice President
AMSTERDAM FUNDING CORPORATION, as a Conduit Purchaser in the ABN AMRO Group
By:	/s/ Bernard J. Angelo
Name:	Bernard J. Angelo
Title:	Vice President

Signature Page to

Letter Agreement

CONFIRMED AND ACKNOWLEDGED:
AMERICAN HOME MORTGAGE ACCEPTANCE, INC., as a Seller
By:	/s/ Alan B. Horn
Name:	Alan B. Horn
Title:	Executive Vice President General Counsel & Secretary
AMERICAN HOME MORTGAGE CORP., as a Seller
By:	/s/ Alan B. Horn
Name:	Alan B. Horn
Title:	Executive Vice President General Counsel & Secretary
AMERICAN HOME INVESTMENT CORP., as a Seller
By:	/s/ Alan B. Horn
Name:	Alan B. Horn
Title:	Executive Vice President General Counsel & Secretary
AMERICAN HOME MORTGAGE SERVICING, INC., as a Seller and as Servicer
By:	/s/ Alan B. Horn
Name:	Alan B. Horn
Title:	Executive Vice President General Counsel & Secretary

Signature Page to

Letter Agreement

SCHEDULE I

Groups; Commitments; Purchase Limits

ABN AMRO Group

Group Agent:	ABN AMRO Bank N.V.
Conduit Purchasers:	Amsterdam Funding Corporation
Purchase Limit:	$250,000,000
Committed Purchaser:	ABN AMRO Bank N.V.
Commitment:	$250,000,000

SCHEDULE VI

Notice Addresses

ABN AMRO Group

Group Agent:	ABN AMRO Bank N.V.
	540 West Madison Street
	Chicago, Illinois 60661
	Attention: Therese Gremley
	Facsimile: (312) 992-1527
	E-mail Address: therese.gremley@abnamro.com
	Telephone Confirmation: (312) 904-6263
Conduit Purchasers:	Amsterdam Funding Corporation
	c/o Global Securitization Services, LLC
	114 West 47th Street, Suite 1715
	New York, New York 10036
	Attention: Andrew Stidd
	Telephone: (212) 302-8330
	Telecopy: (212) 302-8767
	with a copy to:
	ABN AMRO Bank N.V.
	Structured Finance, Asset Securitization
	540 West Madison Street
	Chicago, Illinois 60661
	Attention: Amsterdam-Administrator
	Telephone: (312) 904-6263
	Telecopy: (312) 992-1527
Committed Purchaser:	ABN AMRO Bank N.V.
	540 West Madison Street
	Chicago, Illinois 60661
	Attention: Therese Gremley
	Facsimile: (312) 992-1527
	E-mail Address: therese.gremley@abnamro.com
	Telephone Confirmation: (312) 904-6263

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EX-10.4

Exhibit 10.4

Execution Copy

PERFORMANCE GUARANTY

This Performance Guaranty (this “Guaranty”), dated as of February 28, 2007, is executed by American Home Mortgage Holdings, Inc., a Delaware corporation, and American Home Mortgage Investment Corp., a Maryland corporation (each, a “Performance Guarantor” and together, the “Performance Guarantors”), in favor of ABN AMRO Bank N.V. (“ABN AMRO”), as agent for the Purchasers, Group Agents and other Indemnified Parties under the Repurchase Agreement referred to below (the “Agent”).

WHEREAS, American Home Mortgage Corp., American Home Mortgage Acceptance, Inc., American Home Mortgage Investment Corp., and American Home Mortgage Servicing, Inc., (collectively, the “Sellers” and each a “Seller”) have entered into a Master Repurchase Agreement (the “Repurchase Agreement”) dated as of February 28, 2007 with the Agent, as Buyer pursuant to which the Sellers, subject to the terms and conditions therein and in the Letter Agreement, may sell certain Mortgage Loans and related property to the Agent for the benefit of the Purchasers and pursuant to the Letter Agreement American Home Mortgage Servicing, Inc. (the “Servicer”) has agreed to perform the duties and obligations as “Servicer” thereunder.

WHEREAS, as an inducement for the Purchasers to enter into the Letter Agreement and the Transactions contemplated by the Repurchase Agreement, the Performance Guarantors have agreed to guaranty the due and punctual performance of the Sellers and the Servicer under the Repurchase Agreement, the Letter Agreement and the other Transaction Documents;

WHEREAS, it is a condition precedent to the Purchasers agreeing to enter into the Letter Agreement and the Transactions contemplated by the Repurchase Agreement that the Performance Guarantors execute and deliver to the Agent a performance guaranty substantially in the form hereof; and

WHEREAS, the Performance Guarantors wish to guaranty the due and punctual performance of the Sellers’ obligations as “Sellers” and of the Servicer’s obligations as “Servicer” to the Agent, the Group Agents and the Purchasers under or in respect of the Repurchase Agreement as provided herein, and the Performance Guarantors, as the owners, directly or indirectly, of all of the outstanding shares of capital stock of the Sellers and of the Servicer, will derive substantial benefit from the transactions contemplated under the Repurchase Agreement and the other Transaction Documents;

NOW, THEREFORE, each of the Performance Guarantors hereby agrees with the Agent for the benefit of itself, each Group Agent, each Purchaser and each Indemnified Party as follows:

Section 1. Definitions.

As used herein:

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

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“Obligations” means, collectively, all Seller Obligations of each Seller and all Servicer Obligations.

“Seller Obligations” means collectively, all covenants, agreements, terms, conditions and indemnities to be performed and observed by a Seller solely in its capacity as a “Seller” under and pursuant to the Repurchase Agreement, the Letter Agreement, each other Transaction Document and each other document executed and delivered by such Seller as a “Seller” pursuant to the Repurchase Agreement or the Letter Agreement, including, without limitation, the due and punctual payment of all sums which are or may become due and owing by such Seller as a “Seller” under the Repurchase Agreement, the Letter Agreement or any other Transaction Document, whether for the payment of any Repurchase Price, the deposit of collections received by it or for fees, expenses (including counsel fees), indemnified amounts or otherwise, whether upon any termination or for any other reason, including any renewals, extensions and modifications thereof.

“Servicer Obligations” means collectively, all covenants, agreements, terms, conditions and indemnities to be performed and observed by AHMS solely in its capacity as “Servicer” under and pursuant to the Repurchase Agreement, the Letter Agreement, each other Transaction Document and each other document executed and delivered by the Servicer as “Servicer” pursuant to the Repurchase Agreement or the Letter Agreement, including, without limitation, the due and punctual payment of all sums which are or may become due and owing by the Servicer as “Servicer” under the Repurchase Agreement, the Letter Agreement or any other Transaction Document, whether for the deposit of collections received by it or for fees, expenses (including counsel fees), indemnified amounts or otherwise, whether upon any termination or for any other reason, including any renewals, extensions and modifications thereof.

All capitalized terms used herein, and not otherwise herein defined shall have their respective meanings as defined in the Repurchase Agreement or the Letter Agreement, as applicable.

Section 2. Guaranty of Performance of Obligations. Each of the Performance Guarantors, jointly and severally, hereby unconditionally guarantees to the Agent, the Group Agents, the Purchasers and each other Indemnified Party, the full and punctual payment and performance by each Seller of the Seller Obligations and by the Servicer of the Servicer Obligations.

This Guaranty is an absolute, unconditional and continuing guaranty of the full and punctual performance of all of the Obligations and is in no way conditioned upon any requirement that the Agent, the Group Agents or the Purchasers first take any action against any Seller or the Servicer with respect to the Obligations or attempt to collect any of the amounts owing by any Seller or the Servicer to the Purchasers, the Group Agents or the Agent from any Seller or the Servicer or resort to any collateral security, any balance of any deposit account or credit on the books of any Purchasers in favor of any Seller or the Servicer, any guarantor of the Obligations or any other Person. Should any Seller or the Servicer default in the payment or performance of any of the Obligations, the Agent or the Required Group Agents may cause the

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immediate performance by each of the Performance Guarantors of the Obligations and cause any payment Obligations to become forthwith due and payable to the Agent, the Group Agents and the Purchasers, without demand or notice of any nature (other than as expressly provided herein), all of which are expressly waived by each of the Performance Guarantors.

Each of the Performance Guarantor’s liability under this Guaranty shall be absolute and unconditional irrespective of (i) any lack of validity or enforceability of the Repurchase Agreement, the Letter Agreement or any other document executed in connection therewith or delivered thereunder, (ii) any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations, or any other amendment or waiver of or any consent to departure from the Repurchase Agreement, the Letter Agreement or any other document executed in connection therewith or delivered thereunder, (iii) any taking, exchange, release or non-perfection of any collateral, or any taking, release or amendment or waiver of or consent to departure from any other guaranty, for all or any of the Obligations, (iv) any law, regulation or order of any jurisdiction affecting any term of all or any Obligations or the rights of the Agent, any Group Agent, any of the Purchasers or any other Indemnified Party, (v) any manner of application of collateral, or proceeds thereof, to all or any of the Obligations, or any manner of sale or other disposition of any collateral for all or any of the Obligations or any other assets of any Seller or the Servicer, (vi) any change, restructuring or termination of the corporate structure or existence of any Seller or the Servicer, or (vii) any other circumstance which might otherwise constitute a defense available to, or a discharge of, any Seller, the Servicer or a guarantor. In the event that performance of any of the Obligations is stayed upon the insolvency, bankruptcy or reorganization of any Seller or the Servicer, or for any other reason, all such Obligations shall be immediately performed by the Performance Guarantors.

Section 3. Performance Guarantors’ Further Agreements to Pay. Each of the Performance Guarantors further agrees, jointly and severally, in the event the Performance Guarantors fail to perform their obligations under this Guaranty, to pay to the Agent, the Group Agents, the Purchasers and any other Indemnified Party, forthwith upon demand all reasonable costs and expenses (including court costs and legal expenses) incurred or expended by the Agent, the Group Agents, the Purchasers or any Indemnified Party in connection with the enforcement of this Guaranty.

Section 4. Waivers by Performance Guarantors; Agent’s, Group Agents’ and Purchasers’ Freedom to Act. Each of the Performance Guarantors waives notice of (a) acceptance of this Guaranty, (b) any action taken or omitted by the Agent, any Group Agent, any Purchaser or any Indemnified Party in reliance on this Guaranty, and (c) any requirement that the Agent, the Group Agents, the Purchasers or any Indemnified Party be diligent or prompt in making demands under this Guaranty, giving notice of any Incipient Event of Default or Event of Default, default or omission by any Seller or the Servicer or asserting any other rights of the Agent, any Group Agent, any Purchaser or any Indemnified Party under this Guaranty. To the maximum extent permitted by applicable law, each of the Performance Guarantors also irrevocably waives all defenses that at any time may be available in respect of the Obligations by virtue of any statute of limitations, valuation, stay, moratorium law or other similar law now or thereafter in effect.

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The Agent shall be at liberty, upon its own initiative or at the request of the Required Group Agents, without giving notice to or obtaining the assent of the Performance Guarantors and without relieving either of the Performance Guarantors of any liability under this Guaranty, to deal with the Sellers and the Servicer and with each other party who now is or after the date hereof becomes liable in any manner for any of the Obligations, in such manner as the Agent in its sole discretion deems fit or the Required Group Agents in their sole discretion deem fit, and to this end each of the Performance Guarantors agrees that the validity and enforceability of this Guaranty, including without limitation, the provisions of Section 8 hereof, shall not be impaired or affected by any of the following: (a) any extension, modification or renewal of, or indulgence with respect to, or substitutions for, the Obligations or any part thereof or any agreement relating thereto at any time; (b) any failure or omission to enforce any right, power or remedy with respect to the Obligations or any part thereof or any agreement relating thereto, or any collateral securing the Obligations or any part thereof; (c) any waiver of any right, power or remedy or of any Incipient Event of Default or Event of Default or default with respect to the Obligations or any part thereof or any agreement relating thereto; (d) any release, surrender, compromise, settlement, waiver, subordination or modification, with or without consideration, of any other obligation of any person or entity with respect to the Obligations or any part thereof; (e) the enforceability or validity of the Obligations or any part thereof or the genuineness, enforceability or validity of any agreement relating thereto or with respect to the Obligations or any part thereof; (f) the application of payments received from any source to the payment of any payment Obligations of any Seller or of the Servicer, any part thereof or amounts which are not covered by this Guaranty even though the Agent, the Group Agents or the Purchasers might lawfully have elected to apply such payments to any part or all of the payment Obligations of any Seller or the Servicer or to amounts which are not covered by this Guaranty; (g) the existence of any claim, setoff or other rights which either of the Performance Guarantors may have at any time against any Seller or the Servicer in connection herewith or any unrelated transaction; (h) any assignment or transfer of the Obligations or any part thereof; or (i) any failure on the part of any Seller or the Servicer to perform or comply with any term of the Repurchase Agreement or any other document executed in connection therewith or delivered thereunder, all whether or not the Performance Guarantors shall have had notice or knowledge of any act or omission referred to in the foregoing clauses (a) through (i) of this Section.

Section 5. Unenforceability of Obligations Against the Sellers or the Servicer. Notwithstanding (a) any change of ownership of any Seller or the Servicer or the insolvency, bankruptcy or any other change in the legal status of any Seller or the Servicer; (b) the change in or the imposition of any law, decree, regulation or other governmental act which does or might impair, delay or in any way affect the validity, enforceability or the payment when due of the Obligations; (c) the failure of any Seller, the Servicer or either of the Performance Guarantors to maintain in full force, validity or effect or to obtain or renew when required all governmental and other approvals, licenses or consents required in connection with the Obligations or this Guaranty, or to take any other action required in connection with the performance of all obligations pursuant to the Obligations or this Guaranty; or (d) if any of the moneys included in the Obligations have become unrecoverable from any Seller or the Servicer for any reason other than final payment in full of the payment Obligations in accordance with their terms, this Guaranty shall nevertheless be binding on each of the Performance Guarantors. This Guaranty shall be in addition to any other guaranty or other security for the Obligations, and it shall not be rendered unenforceable by the invalidity of any such other guaranty or security.

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Section 6. Representations and Warranties.

Section 6.1. Existence and Standing. Each of the Performance Guarantors is a corporation duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation and has all requisite corporate authority to conduct its business in each jurisdiction in which its business is conducted.

Section 6.2. Authorization; Validity. Each of the Performance Guarantors has the corporate power and authority to execute and deliver this Guaranty, perform its obligations hereunder and consummate the transactions herein contemplated. The execution and delivery by each of the Performance Guarantors of this Guaranty, the performance of its obligations and consummation of the transactions contemplated hereunder have been duly authorized by proper corporate proceedings, and this Guaranty constitutes the legal, valid and binding obligation of each of the Performance Guarantors, enforceable against such Performance Guarantor in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors’ rights generally and by general equity principles (whether considered as a proceeding at law or in equity).

Section 6.3. No Conflict; Government Consent. Neither the execution and delivery by either of the Performance Guarantors of this Guaranty, nor the consummation of the transactions herein contemplated, nor compliance with the provisions hereof will contravene or conflict with any law, rule, regulation, order, writ, judgment, injunction, decree or award binding on such Performance Guarantor or any of its Subsidiaries, except where such contravention or conflict would not reasonably be expected to have a Material Adverse Effect, or such Performance Guarantor’s certificate of incorporation or by-laws or the provisions of any indenture, instrument or agreement to which such Performance Guarantor is a party or is subject, or by which it, or its property, is bound, except where such contravention or conflict would not reasonably be expected to have a Material Adverse Effect, or result in the creation or imposition of any Lien in, of or on the property of such Performance Guarantor or any of its subsidiaries pursuant to the terms of any such indenture, instrument or agreement.

Section 6.4. Financial Statements. The consolidated financial statements of American Home Mortgage Investment Corp. and the Sellers and the Servicer, heretofore delivered to the Purchasers as required by the Letter Agreement, were prepared in accordance with generally accepted accounting principles in effect on the date such statements were prepared and fairly present the consolidated financial condition and operations of American Home Mortgage Investment Corp. and the Sellers and the Servicer at such date and the consolidated results of their operations for the period then ended.

Section 6.5. Material Adverse Change. Since September 30, 2006, there has been no change in the business, properties, financial condition or results of operations of either of the Performance Guarantors and the Sellers and the Servicer which is reasonably likely to have a Material Adverse Effect on (i) the business, properties, financial condition or results of operations of such Performance Guarantor and the Sellers and the Servicer taken as a whole, (ii) the ability of such Performance Guarantor to perform its obligations under this Guaranty, or (iii) the validity or enforceability of any portion of this Guaranty or the rights or remedies of the Agent, the Group Agents or the Purchasers hereunder.

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Section 6.6. Taxes. Each of the Performance Guarantors and the Sellers and the Servicer have filed all United States federal tax returns and all other tax returns which are required to be filed, except where the failure to file would not reasonably be expected to have a Material Adverse Effect, and have paid all taxes due pursuant to said returns or pursuant to any assessment received by either of the Performance Guarantors or any Seller or the Servicer, except such taxes, if any, as are being contested in good faith and as to which adequate reserves have been provided. No tax liens have been filed which are reasonably likely to have a Material Adverse Effect on (i) the business, properties, financial condition or results of operations of the Performance Guarantors and the Sellers and the Servicer taken as a whole, (ii) the ability of either of the Performance Guarantors to perform its obligations under this Guaranty, or (iii) the validity or enforceability of any portion of this Guaranty or the rights or remedies of the Agent, the Group Agents or the Purchasers hereunder, and no claims are being asserted in writing with respect to any such taxes. The charges, accruals and reserves on the books of each of the Performance Guarantors and the Sellers and the Servicer in respect of any taxes or other governmental charges are adequate.

Section 6.7. Litigation and Contingent Obligations. There is no litigation, arbitration, governmental investigation, proceeding or inquiry pending or, to the knowledge of any of their officers, threatened against or affecting either Performance Guarantor or any Seller or the Servicer which is reasonably likely to have a material adverse effect on (i) the business, properties, financial condition or results of operations of such Performance Guarantor and the Sellers and the Servicer taken as a whole, (ii) the ability of such Performance Guarantor to perform its obligations under this Guaranty, or (iii) the validity or enforceability of any portion of this Guaranty or the rights or remedies of the Agent, the Group Agents or the Purchasers hereunder. Neither of the Performance Guarantors have any material contingent obligations not provided for or disclosed in the financial statements referred to in Section 6.4.

Section 7. Covenants. Each of the Performance Guarantors hereby covenants and agrees, jointly and severally, for the benefit of the Agent, the Group Agents and the Purchasers, until the Obligations have been satisfied in full and the Repurchase Agreement and the Letter Agreement have been terminated, as follows:

(a) to promptly notify the Agent upon (i) any dispute between such Performance Guarantor and any Governmental Authority or any other Person that, if adversely determined, would have a Material Adverse Effect; (ii) any material adverse change in the business, operations or financial condition of such Performance Guarantor, including, without limitation, such Performance Guarantor’s insolvency; (iii) any event or condition known to it that, if adversely determined, would have a Material Adverse Effect; and (iv) the receipt of any notice of any final judgment or order for payment of money applicable to such Performance Guarantor in excess of $1,500,000;

(b) to pay and discharge promptly all taxes, assessments and governmental charges or levies imposed upon it or upon its income or upon any of its Property as well as all claims of any kind (including claims for labor, materials, supplies and rent) that, if unpaid, might become a Lien upon any or all of its Property; provided, however, such Performance Guarantor shall not be required to pay any such tax, assessment, charge, levy or claim if the amount, applicability or validity thereof shall currently be contested in good faith by appropriate proceedings diligently conducted by it or on its behalf and if it shall have set up reserves therefor adequate under GAAP;

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(c) to maintain its corporate existence, rights and franchises; and

(d) to observe and comply in all material respects with all Governmental Requirements; and

Section 8. Subrogation; Subordination. Each of the Performance Guarantors shall not enforce or otherwise exercise any right of subrogation to any of the rights of the Agent, any Group Agent, any Purchaser or any Indemnified Party against any Seller or the Servicer, until the Obligations have been indefeasibly paid in full; notwithstanding anything to the contrary contained herein, until the Obligations have been indefeasibly paid in full, each of the Performance Guarantors hereby waives all rights of subrogation (whether contractual, under Section 509 of the United States Bankruptcy Code, at law or in equity or otherwise) to the claims of the Agent, any Group Agent, any Purchaser or any Indemnified Party against any Seller or the Servicer and all contractual, statutory or legal or equitable rights of contribution, reimbursement, indemnification and similar rights and “claims” (as that term is defined in the United States Bankruptcy Code) which such Performance Guarantor might now have or hereafter acquire against any Seller or the Servicer that arises from the existence or performance of such Seller’s or the Servicer’s Obligations; until the Obligations have been indefeasibly paid in full, neither Performance Guarantor will claim any setoff, recoupment or counterclaim against any Seller or the Servicer in respect of any liability of such Performance Guarantor to any Seller or the Servicer; and such Performance Guarantor waives any benefit of and any right to participate in any collateral security which may be held by the Agent, any Group Agent, any Purchaser or any Indemnified Party. The payment of any amounts due with respect to any indebtedness for borrowed money of any Seller or the Servicer now or thereafter owed to either of the Performance Guarantors is hereby subordinated to the prior payment in full of all of the Obligations. Each of the Performance Guarantors agrees that, after the occurrence, and during the continuation, of any default in the payment or performance of any of the Obligations, such Performance Guarantor will not demand, sue for or otherwise attempt to collect any such indebtedness of any Seller or the Servicer to such Performance Guarantor until all of the Obligations shall have been paid and performed in full. If, notwithstanding the foregoing sentence, either of the Performance Guarantors shall collect, enforce or receive any amounts in respect of such indebtedness while any Obligations are still unperformed or outstanding, such amounts shall be collected, enforced and received by such Performance Guarantor as trustee for the Agent, the Group Agents, the Purchasers and the Indemnified Parties and be paid over to the Agent on account of the Obligations without affecting in any manner the liability of such Performance Guarantor under the other provisions of this Guaranty. The provisions of this Section 8 shall be supplemental to and not in derogation of any rights and remedies of the Agent, the Group Agents, the Purchasers or the Indemnified Parties under any separate subordination agreement which the Agent, the Group Agents, the Purchasers or the Indemnified Parties may at any time and from time to time enter into with either of the Performance Guarantors.

Section 9. Termination of Guaranty. Each of the Performance Guarantor’s obligations hereunder shall continue in full force and effect until all Obligations are finally paid and satisfied in full and the Repurchase Agreement and the Letter Agreement are terminated;

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provided, however, that this Guaranty shall continue to be effective or shall be reinstated, as the case may be, if at any time payment or other satisfaction of any of the Obligations is rescinded or must otherwise be restored or returned upon the bankruptcy, insolvency, or reorganization of any Seller or the Servicer, as applicable, or otherwise, as though such payment had not been made or other satisfaction occurred, whether or not the Agent is in possession of this Guaranty. No invalidity, irregularity or unenforceability by reason of the Bankruptcy Code or any insolvency or other similar law, or any law or order of any government or agency thereof purporting to reduce, amend or otherwise affect the Obligations shall impair, affect, be a defense to or claim against the obligations of each of the Performance Guarantors under this Guaranty.

Section 10. Effect of Bankruptcy. This Guaranty shall survive the insolvency of any Seller or the Servicer and the commencement of any case or proceeding by or against any Seller or the Servicer under the federal Bankruptcy Code or other federal, state or other applicable bankruptcy, insolvency or reorganization statutes. No automatic stay under the federal Bankruptcy Code or other federal, state or other applicable bankruptcy, insolvency or reorganization statutes to which any Seller or the Servicer is subject shall postpone the obligations of the Performance Guarantors under this Guaranty.

Section 11. Setoff. Regardless of the other means of obtaining payment of any of the Obligations, each of the Agent, the Group Agents and the Purchasers is hereby authorized at any time and from time to time during the existence of an Event of Default, with prompt notice to the Performance Guarantors (any prior notice being expressly waived by the Performance Guarantors) and to the fullest extent permitted by law, to set off and apply such deposits and other sums of either Performance Guarantor held by it against the obligations of each of the Performance Guarantors under this Guaranty, whether or not the Agent, such Group Agent or such Purchaser shall have made any demand under this Guaranty and although such obligations may be contingent or unmatured.

Section 12. Taxes. All payments to be made by each of the Performance Guarantors hereunder shall be made free and clear of any deduction or withholding. If either of the Performance Guarantors is required by law to make any deduction or withholding on account of tax or otherwise from any such payment, the sum due from it in respect of such payment shall be increased to the extent necessary to ensure that, after the making of such deduction or withholding, the Agent, the Group Agents, the Purchasers and the Indemnified Parties receive a net sum equal to the sum which they would have received had no deduction or withholding been made.

Section 13. Further Assurances. Each of the Performance Guarantors agrees that it will permit the Agent, the Group Agents and the Purchasers or any of their duly authorized representatives, during normal business hours, and upon reasonable notice to consult and discuss with such Performance Guarantor’s Treasurer or Controller, with respect to such Performance Guarantor’s business, finances, accounts and affairs. Each Performance Guarantor agrees that it will, from time to time, at the request of the Agent, the Group Agents and the Purchasers, provide to the Agent, the Group Agents and the Purchasers information relating to the business and affairs of such Performance Guarantor as the Agent, the Group Agents or the Purchasers may reasonably request. Each of the Performance Guarantors also agrees to do all such things and execute all such documents as the Agent, the Group Agents or the Purchasers may reasonably consider necessary or desirable to give full effect to this Guaranty and to perfect and preserve the rights and powers of the Agent, the Group Agents and the Purchasers hereunder.

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Section 14. Successors and Assigns. This Guaranty shall be binding upon each of the Performance Guarantors, its successors and assigns, and shall inure to the benefit of and be enforceable by the Agent, the Group Agents, the Purchasers, the Indemnified Parties and their successors, transferees and assigns. Neither of the Performance Guarantors may assign or transfer any of its obligations hereunder without the prior written consent of each of the Group Agents and any attempted assignment shall be null and void.

Section 15. Amendments and Waivers. No amendment or waiver of any provision of this Guaranty nor consent to any departure by either of the Performance Guarantors therefrom shall be effective unless the same shall be in writing and signed by the Agent and the Performance Guarantors. No failure on the part of the Agent or any other Indemnified Party to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right.

Section 16. Notices. All notices and other communications called for hereunder shall be made in writing and, unless otherwise specifically provided herein, shall be deemed to have been duly made or given when delivered by hand or mailed first class, postage prepaid, or, in the case of telegraphic, telecopied or telexed notice, when transmitted, answer back received, addressed as follows: if to the Performance Guarantors, at the address set forth beneath their respective signatures hereto, and if to the Agent, the Group Agents or any Purchaser at its address specified in the Repurchase Agreement or the Letter Agreement, as applicable, or at such other address as either party may designate in writing to the other.

Section 17. GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL

(a) THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. EACH PERFORMANCE GUARANTOR HEREBY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND OF ANY NEW YORK STATE COURT SITTING IN THE CITY OF NEW YORK FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS GUARANTY OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PERFORMANCE GUARANTOR HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. NOTHING IN THIS SECTION 17 SHALL AFFECT THE RIGHT OF AGENT TO BRING ANY ACTION OR PROCEEDING AGAINST ANY PERFORMANCE GUARANTOR OR ITS PROPERTY IN THE COURTS OF OTHER JURISDICTIONS. EACH PARTY HERETO CONSENTS TO THE SERVICE OF ANY AND ALL PROCESS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES OF SUCH PROCESS TO IT AT ITS ADDRESS FOR NOTICES HEREUNDER SPECIFIED IN SECTION 16.

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(b) EACH OF THE PARTIES HERETO HEREBY WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE AMONG ANY OF THEM ARISING OUT OF, CONNECTED WITH, RELATING TO OR INCIDENTAL TO THE RELATIONSHIP BETWEEN THEM IN CONNECTION WITH THIS GUARANTY OR THE OTHER TRANSACTION DOCUMENTS.

Section 18. Miscellaneous. This Guaranty constitutes the entire agreement of the Performance Guarantors with respect to the matters set forth herein. The rights and remedies herein provided are cumulative and not exclusive of any remedies provided by law or any other agreement, and this Guaranty shall be in addition to any other guaranty of or collateral security for any of the Obligations. The provisions of this Guaranty are severable, and in any action or proceeding involving any state corporate law, or any state or federal bankruptcy, insolvency, reorganization or other law affecting the rights of creditors generally, if the obligations of either of the Performance Guarantors hereunder would otherwise be held or determined to be avoidable, invalid or unenforceable on account of the amount of such Performance Guarantor’s liability under this Guaranty, then, notwithstanding any other provision of this Guaranty to the contrary, the amount of such liability shall, without any further action by such Performance Guarantor, the Agent, any Group Agent, any Purchaser or any Indemnified Party, be automatically limited and reduced to the highest amount that is valid and enforceable as determined in such action or proceeding. The invalidity or unenforceabihty of any one or more sections of this Guaranty shall not affect the validity or enforceability of its remaining provisions. Captions are for the ease of reference only and shall not affect the meaning of the relevant provisions. The meanings of all defined terms used in this Guaranty shall be equally applicable to the singular and plural forms of the terms defined.

[Signatures Follow]

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IN WITNESS WHEREOF, the Performance Guarantors have caused this Guaranty to be executed and delivered as of the date first above written.

AMERICAN HOME MORTGAGE HOLDINGS, INC.
By:	/s/ Alan B. Horn
Name:	Alan B. Horn
Title:	Executive Vice President General Counsel & Secretary
Address:	538 Broadhollow Road Melville, New York 11747
AMERICAN HOME MORTGAGE INVESTMENT CORP.
By:	/s/ Alan B. Horn
Name:	Alan B. Horn
Title:	Executive Vice President General Counsel & Secretary
Address:	538 Broadhollow Road Melville, New York 11747

Signature Page

to

Performance Guaranty

Agreed to:

ABN AMRO BANK N.V. in its capacity as Agent, as Buyer
By:	/s/ Kevin J. Hayes
Name:	Kevin J. Hayes
Title:	Director
By:	/s/ Therese Gremley
Name:	Therese Gremley
Title:	Vice President

Signature Page

to

Performance Guaranty

EX-10.5

Exhibit 10.5

Execution Copy

CUSTODIAL AGREEMENT

By and Among:

AMERICAN HOME MORTGAGE ACCEPTANCE, INC.,

as a Seller,

AMERICAN HOME MORTGAGE CORP.,

as a Seller,

AMERICAN HOME MORTGAGE INVESTMENT CORP.,

as a Seller,

AMERICAN HOME MORTGAGE SERVICING, INC.,

as a Seller and as the Servicer,

ABN AMRO BANK N.V.,

as the Agent,

and

DEUTSCHE BANK NATIONAL TRUST COMPANY,

As the Custodian

Dated as of February 28, 2007

TABLE OF CONTENTS

		Page
ARTICLE I GENERAL TERMS		1
1.1.	Certain Definitions.	1
ARTICLE II APPOINTMENT OF CUSTODIAN		2
2.1.	Appointment.	2
2.2.	Custodial Fees.	2
ARTICLE III LOAN FILE PROCEDURES		2
3.1.	Delivery of the Loan File to the Custodian.	2
3.2.	Power of Attorney.	5
3.3.	Transfer and Shipping of Mortgage Loans.	6
3.4.	Releases of Mortgage Loans for Servicing.	8
3.5.	Wet Loans.	8
3.6.	Delivery of Trust Receipt.	8
3.7.	Mortgage Loans Reporting.	9
3.8.	Further Obligations of the Custodian.	9
3.9.	Segregation of the Loan File.	9
3.10.	Delivery of Required Documents to the Agent.	10
ARTICLE IV THE CUSTODIAN		10
4.1.	Instructions to the Custodian.	10
4.2.	Reliance by the Custodian; Responsibility of the Custodian.	10
4.3.	Agents and Affiliates.	14
4.4.	Successor Custodian.	14
4.5.	Right of Inspection.	15
4.6.	Accounting in Certain Circumstances.	15
ARTICLE V INDEMNIFICATION		16
5.1.	Indemnities by the Servicer	16
ARTICLE VI MISCELLANEOUS		16
6.1.	Notices.	16
6.2.	Amendments, Etc.	16
6.3.	Invalidity.	17
6.4.	Survival of Agreements.	17
6.5.	Termination.	17
6.6.	Cumulative Rights.	17
6.7.	Successors and Assigns.	17

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6.8.	The Custodian Representations and Warranties.	17
6.9.	Sellers, Servicer and Agent Representations and Warranties.	18
6.10.	Counterparts.	18
6.11.	No Proceedings.	18
6.12.	Electronic Counterparts.	18
6.13.	Governing Law.	18
6.14.	Waiver of Jury Trial.	19
6.15.	References to Repurchase Documents	19

SCHEDULES AND EXHIBITS

Schedule I	Loan File Review Functions
Schedule II	Addresses and Notices
Exhibit A	Definitions
Exhibit B	Form of Shipping Request
Exhibit C-1	Form of Bailee and Security Agreement Letter (Takeout Investor)
Exhibit C-2	Form of Bailee and Security Agreement Letter (Takeout Lender)
Exhibit D	Form of Servicer Trust Receipt and Security Agreement
Exhibit E	Form of Custodian Daily Report
Exhibit F	Form of Trust Receipt
Exhibit F-1	Form of Wet Loan Trust Receipt
Exhibit G	Form of Purchase Date Notice Schedule
Exhibit H	[Reserved]
Exhibit I	Authorized Representatives of the Sellers
Exhibit J	Authorized Representatives of the Servicer
Exhibit K	Authorized Representatives of the Agent
Exhibit L	Authorized Representatives of the Custodian

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CUSTODIAL AGREEMENT

Dated as of February 28, 2007

THIS CUSTODIAL AGREEMENT (as amended, restated, supplemented or otherwise modified from time to time, this “Agreement”), among AMERICAN HOME MORTGAGE ACCEPTANCE, INC. a Maryland corporation (“AHMA”), AMERICAN HOME MORTGAGE CORP., a New York corporation (“AHMC”), AMERICAN HOME MORTGAGE INVESTMENT CORP., a Maryland corporation (“AHMIC”) and AMERICAN HOME MORTGAGE SERVICING, INC., a Maryland corporation (“AHMS” and together with AHMA, AHMC and AHMIC, the “Sellers” and each, a “Seller”), AHMS, in its capacity as the Servicer (the “Servicer”), ABN AMRO BANK N.V. (“ABN AMRO”), in its capacity as the “Agent” for the “Purchasers” under and as defined in the Master Repurchase Agreement referred to below (the “Agent”), and DEUTSCHE BANK NATIONAL TRUST COMPANY, in its capacity as custodian hereunder (the “Custodian”).

WHEREAS, the Sellers have entered into (i) that certain Master Repurchase Agreement dated as of the date hereof (as the same may be amended, restated, supplemented or otherwise modified from time to time, the “Repurchase Agreement”), among the Sellers and the Agent, as Buyer, and (ii) that certain Letter Agreement dated as of the date hereof (as the same may be amended, restated, supplemented or otherwise modified from time to time, the “Letter Agreement” and together with the Repurchase Agreement, the “Repurchase Documents”), among the Sellers, AHMS, in its capacity as Servicer, the entities party thereto as Conduit Purchasers (the “Conduit Purchasers”), the entities party thereto as Committed Purchasers (the “Committed Purchasers”; the Committed Purchasers and the Conduit Purchasers, each a “Purchaser”), the entities party thereto as Group Agents (the “Group Agents”), and ABN AMRO, as the Agent, pursuant to which the Purchasers may purchase Mortgage Loans from the Sellers from time to time; and

WHEREAS, the parties now desire to enter into this Agreement to provide for the holding and monitoring of the Mortgage Loans and the Loan Files to be furnished pursuant to the Repurchase Agreement and the Letter Agreement;

NOW, THEREFORE, the parties agree as follows:

ARTICLE I

GENERAL TERMS

1.1. Certain Definitions.

Unless otherwise defined herein, in the Repurchase Agreement or the Letter Agreement, terms are used herein as defined in Exhibit A hereto.

ARTICLE II

APPOINTMENT OF CUSTODIAN

2.1. Appointment.

(a) The Agent, on behalf of the Purchasers, hereby appoints Deutsche Bank National Trust Company, as “Custodian” under this Agreement and authorizes the Custodian to take such action on the Agent’s behalf and to exercise such powers and perform such duties as are hereby expressly delegated to the Custodian by the terms of this Agreement, together with such powers as are reasonably incidental thereto.

(b) The Custodian hereby accepts such appointment and agrees to hold, maintain, and administer for the exclusive benefit of the Agent and the Purchasers all Loan Documents at any time delivered to it by or on behalf of any Seller as herein provided. The Custodian acknowledges and agrees that it is acting and will act with respect to the Loan Files for the exclusive benefit of the Agent and the Purchasers and shall not be subject with respect to the Loan Files in any manner or to any extent to the direction or control of any Seller except as expressly permitted hereunder. The Custodian (or its designee) for the benefit of the Agent and the Purchasers, agrees to act in accordance with this Agreement and in accordance with any written instructions of the Agent as provided in this Agreement. Under no circumstances shall the Custodian deliver possession of the Loan Files to any Seller except in accordance with the express terms of this Agreement or otherwise upon the written instruction of the Agent as provided in this Agreement.

2.2. Custodial Fees.

The Servicer agrees to pay such fees and expenses (including reasonable attorneys’ fees and expenses) of the Custodian as shall be agreed to in writing between the Custodian and the Servicer. The obligation of the Servicer to pay the Custodian’s fees and expenses for its services under this Agreement shall survive the termination of this Agreement and the earlier resignation or removal of the Custodian.

ARTICLE III

LOAN FILE PROCEDURES

3.1. Delivery of the Loan Documents to the Custodian.

(a) Periodically, the Sellers may deliver Mortgage Loans and the related Loan Documents to the Custodian to hold as bailee for the Agent. For any Mortgage Loan delivered to the Custodian after the date hereof in connection with a financing facility (other than the Repurchase Agreement) to which a Seller is a party, but which such Seller intends to subsequently finance under the Repurchase Agreement, such Seller shall: (1) clearly identify on the outside of the file containing the Loan Documents that such mortgage Loan is a construction loan; (2) properly mark the Mortgage, as applicable, that such Mortgage Loan is a construction loan; and (3) provide an updated Purchase Date Notice Schedule identifying the Mortgage Loans as construction loans. The Sellers may deliver from time to time such other documents as shall

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be specified in a notice by the Agent to the Custodian as documents that are required to be delivered to the Custodian pursuant to this Agreement in order to meet the requirements of the Repurchase Documents or agreements required by the Repurchase Documents. Each delivery shall be made in association with the sale of a Mortgage Loan to the Agent, for the benefit of the Purchasers. In connection with the sale, pledge or other transfer of each Mortgage Loan to the Agent, the applicable Seller shall deliver to the Custodian, via electronic transmission, the related Purchase Date Notice Schedule(s).

(b) In connection with each Mortgage Loan sold, pledged or otherwise transferred to the Agent, the applicable Seller shall deliver to the Custodian the following items (collectively, the “Principal Mortgage Documents”):

(i) the original of each Mortgage Note, endorsed in blank (without recourse) and all intervening endorsements thereto;

(ii) an original executed assignment in blank for each Mortgage securing such Mortgage Loan, in recordable form, executed by the applicable Seller, in the case of each Mortgage Loan that is not a MERS Designated Mortgage Loan;

(iii) a certified copy of the executed Mortgage related to such Mortgage Note, certified by the Servicer, escrow agent, title company, closing attorney or an Affiliate of the Servicer as a true and correct copy; and

(iv) the “Construction Loan Agreement”, or comparable agreement identified as such by Seller, including all exhibits and addendums attached thereto (provided, however, that with respect to any such Mortgage Loans sold, pledged or otherwise transferred to the Agent on the date hereof, the applicable Seller shall not be obligated to deliver such documents until the date that is five (5) Business Days following the date hereof).

(c) The Servicer shall hold in trust for the Agent for the benefit of the Purchasers, with respect to each Mortgage Loan and related Purchased Assets sold, pledged or otherwise transferred pursuant to the Repurchase Agreement (the following being referred to, collectively, as the “Other Mortgage Documents”):

(i) the original filed Mortgage relating to such Mortgage Loan; provided, however, that until an original Mortgage is received from the public official charged with its filing and recordation, a copy, certified by the closing agent to be a true and correct copy of the filed and recorded original, may be used by the applicable Seller to satisfy this requirement;

(ii) other than with respect to a HUD repossessed property that is sold to a consumer, a mortgagee’s policy of title insurance (or binding unexpired commitment to issue such insurance if the policy has not yet been delivered to the Servicer) insuring that the original mortgagee and its successors and assigns have a perfected, first-priority Lien created by the Mortgage securing such Mortgage Loan (subject to title exceptions that conform to the related Takeout Commitment,

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if applicable) in a policy amount not less than the principal commitment amount of such Mortgage Loan and all endorsements thereof bringing down such policy to the date of each Mortgagor Advance;

(iii) the original hazard insurance policy and other insurance policies referred to in Paragraph 11(f) of the Letter Agreement which relate to such Mortgage Loan, appropriately indicating that all insurance proceeds will be paid to the original mortgagee and its successors and assigns, or other evidence of insurance acceptable to the Agent;

(iv) the form of current appraisal of the Mortgaged Property described in the Mortgage, prepared by a state licensed appraiser, that complies with all applicable Governmental Requirements, provided, however, that no appraisal shall be required for Mortgage Loans (x) financing HUD repossessed property that is sold to a consumer, financed with an FHA loan, fully insurable and in accordance with FHA guidelines, but for which an appraisal is not required, or (y) representing so called “VA Rate Reduction” or FHA streamline refinances, insurable in accordance with VA and FHA guidelines, but for which an appraisal is not required;

(v) the itemized project budget or other comparable document;

(vi) the sources and uses of funds statement or other comparable document;

(vii) the plans and specifications or other comparable document;

(viii) all inspection sheets prepared by the applicable construction inspector;

(ix) all surveys of the Mortgaged Property;

(x) all lien waivers, certificates related to construction payments and other documents showing proof of construction bill payments;

(xi) all construction agreements, construction notes and other documents between the Mortgagor and the related contractor or builder; and

(xii) all other documents necessary to underwrite, sell, enforce or service such Mortgage Loan.

Upon (3) three Business Days’ prior written notice by the Agent to the Custodian and the Servicer, the Servicer will deliver and the Custodian will receive from the Servicer all Other Mortgage Documents, held in trust. The Custodian shall hold such items received as bailee for the Agent or such other party as may be designated in such notice, but shall not be obligated to review or verify the contents of any file of Other Mortgage Documents.

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(d) The Servicer shall provide the Custodian and the Agent with full access to all Other Mortgage Documents held in trust for the Agent at all times upon reasonable prior notice.

(e) With respect to each Mortgage Loan subject to a Transaction, the related Principal Mortgage Documents (other than with respect to Wet Loans), and the related Purchase Date Notice Schedule that are received by the Custodian by (i) 11:30 a.m. (eastern time) on a Business Day prior to a Purchase Date for Newly Delivered Mortgage Loans and Pre-Closing Mortgage Loans and (ii) 10:00 a.m. (eastern time) two (2) Business Days prior to a Purchase Date for Previously Delivered Mortgage Loans, the Custodian shall include the Mortgage Loans identified in such Purchase Date Notice Schedules on the Custodian Daily Report to be delivered electronically on such Purchase Date, even if the Custodian has not completed its review of the related Principal Mortgage Documents. Mortgage Loans for which the Principal Mortgage Documents (other than with respect to Wet Loans) and the related Purchase Date Notice Schedules are received by the Custodian subsequent to the foregoing times shall be deemed received on the next succeeding Business Day. The Custodian shall prepare by 12:00 noon (eastern time) on such Purchase Date, the Custodian Daily Report provided for in Section 3.7 hereof, and furnish it electronically to the Agent, the Group Agents (who are identified to the Custodian in writing by the Agent) and the Sellers. The Custodian shall review the Principal Mortgage Documents for up to 250 Mortgage Loans delivered with any such Purchase Date Notice Schedule no later than the opening of business of the Custodian on the Business Day following delivery of the Purchase Date Notice Schedule related to Previously Delivered Mortgage Loans and/or Newly Delivered Mortgage Loans. The Custodian shall have one (1) additional Business Day to review each additional set of 250 Mortgage Loans in excess of the initial set of 250 Previously Delivered Mortgage Loans and/or Newly Delivered Mortgage Loans. The Custodian’s responsibility to review such Loan Files is limited to the review steps described on Schedule I hereto.

(f) The Custodian shall, acting on behalf of the Agent for the benefit of the Purchasers, and as agent and bailee of, and as custodian for, the Agent for the benefit of the Purchasers, retain possession and custody of the documents delivered to the Custodian pursuant hereto, which documents shall, subject to Section 4.2(k) and Section 4.4, remain in the state of California for all purposes (including but not limited to the perfection of the security interest of the Agent, for the benefit of the Purchasers, in such collateral) until the Mortgage Loan related thereto is released pursuant to Section 3.3 hereof or the termination of this Agreement.

(g) Notwithstanding the foregoing provisions of this Section 3.1, the Servicer on behalf of the Agent may ship Other Mortgage Documents to Takeout Investors or Takeout Lenders under bailment for review prior to the pledge of a Mortgage Loan or the purchase of a Mortgage Loan under a Takeout Commitment, in each case subject to and in accordance with the provisions of Section 3.3.

3.2. Power of Attorney.

(a) Subject to subsection (b) below, each Seller hereby irrevocably appoints the Agent, for the benefit of the Purchasers, as its attorney in fact, with full power of substitution, for and on behalf and in the name of each Seller, to: (i) endorse and deliver to any Person any

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check, instrument or other paper coming into the Custodian’s, the Agent’s or any Purchaser’s possession and representing payment made in respect of any Mortgage Note or Takeout Commitment or in respect of the Mortgage Loans or the Loan Documents; (ii) prepare, complete, execute, deliver and record any assignment to be delivered to the Custodian, the Agent or to any other Person of any Mortgage relating to any Mortgage Note delivered hereunder; (iii) endorse and deliver any Mortgage Note and do every other thing necessary or desirable to effect transfer of all or any part of the Loan Documents to the Agent, for the benefit of the Purchasers, or to any other Person; (iv) take all necessary and appropriate action with respect to all Loan Documents to be delivered to the Custodian or the Agent or held by any Seller or the Servicer in trust for the Agent for the benefit of the Purchasers; (v) commence, prosecute, settle, discontinue, defend, or otherwise dispose of any claim relating to any Takeout Commitment, Mortgage Loan or any other part of the Loan Documents; and (vi) sign any Seller’s name wherever appropriate to effect the performance of this Agreement.

(b) This Section 3.2 shall be liberally, not restrictively, construed so as to give the greatest latitude to the Agent’s powers, as each Seller’s attorney-in-fact, to collect, sell, and deliver any of the Loan Documents and all other documents relating thereto. The powers and authorities herein conferred on the Agent may be exercised by the Agent through any Person who, at the time of the execution of a particular instrument, is an authorized officer or agent of the Agent. The power of attorney conferred by this Section 3.2 shall become effective upon the date hereof and is granted for a valuable consideration and is coupled with an interest and irrevocable so long as the Repurchase Documents shall remain in effect; provided, that the Agent agrees that it shall not exercise such power of attorney until after the occurrence and during the continuance of an Event of Default. All Persons dealing with the Agent, any officer thereof, or any substitute attorney, acting pursuant hereto shall be fully protected in treating the powers and authorities conferred by this Section 3.2 as existing and continuing in full force and effect until advised by the Agent that the Letter Agreement and the Repurchase Agreement have been terminated.

3.3. Transfer and Shipping of Mortgage Loans.

(a) So long as no Incipient Event of Default or Event of Default is continuing and there is no Margin Deficit, any Seller or the Servicer (on behalf of the Sellers) may (and while an Incipient Event of Default or Event of Default is continuing, upon the direction of the Agent, each Seller shall) from time to time submit a Shipping Request that would permit the repurchase by such Seller of Purchased Mortgage Loans from the respective Purchasers and a simultaneous sale or pledge of such Mortgage Loans to, or the pooling of Mortgage Loans for, a Takeout Investor or Takeout Lender, or to another Person as directed in writing by the Agent. Upon the receipt by the Custodian of a Shipping Request from the Sellers identifying Mortgage Loans to be delivered to a Takeout Investor or Takeout Lender, as applicable, and so long as either (x) the Custodian has not received written notice from the Agent of the existence of a Margin Deficit, an Incipient Event of Default or an Event of Default or that such an event would be caused by the actions contemplated by this Section 3.3 (such a notice being referred to as a “Default Notice”) or, (y) the Custodian has received a Default Notice, but the Agent has either approved the Shipping Request or revoked the Default Notice pursuant to the last sentence of this paragraph (a):

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(i) The Custodian shall deliver to the Takeout Investor or the Takeout Lender (or such other person), as applicable, or its designee identified to the Custodian in writing, under the Custodian’s “Bailee and Security Agreement Letter (Takeout Investor)” in the form of Exhibit C-1 hereto or “Bailee and Security Agreement Letter (Takeout Lender)” substantially in the form of Exhibit C-2 hereto, as applicable, or such other form as may be mutually agreed upon by the Agent and the Custodian, the Loan Files related to the Mortgage Loans to be sold or pledged which are held by the Custodian as bailee for the Agent pursuant to Section 3.1 hereof, with the release of the Agent’s ownership or security interest for the benefit of the Purchasers in such items being conditioned upon the Custodian’s receipt of either (A) written notice from the Agent that the applicable Repurchase Price has been received for such Mortgage Loans, or (B) written consent of the Agent;

(ii) If required by a Takeout Investor or Takeout Lender, the Servicer shall, as agent for the Agent, deliver to such Takeout Investor or Takeout Lender, or such Person’s designee, under a letter agreement or other arrangement approved by the Agent the items held by the Servicer pursuant to Section 3.1(c) that are related to the Mortgage Loans to be transferred on the condition that such Takeout Investor or Takeout Lender or its designee shall hold or control such Other Mortgage Documents as bailee for the Agent for the benefit of the Purchasers until the Sellers have paid the full Repurchase Price (or such other purchase price amount set forth in the written consent of the Agent) to the Purchasers for such Mortgage Loans in accordance with the Transaction Documents; and

(iii) With respect to each Shipping Request that is received by the Custodian by 10:30 a.m. (eastern time) on a Business Day, the Custodian shall use due diligence and best efforts to review such Shipping Request and prepare the Loan Files related to the Mortgage Loans identified in each Shipping Request, for shipment prior to the close of business on the day the Shipping Request is received by the Custodian, and, in any event shall review such Shipping Request and prepare the Loan Files related to the Mortgage Loans identified in such Shipping Request no later than 24 hours after such Shipping Request is received by the Custodian; provided that the Custodian shall not be required to ship more than 500 Loan Files on any Business Day.

In the event that the Agent has delivered a Default Notice to the Custodian and the Margin Deficit, Incipient Event of Default or Event of Default which gave rise to such notice, as applicable, has been cured or remedied by the Sellers and no other Margin Deficit, Incipient Event of Default or Event of Default has occurred and is continuing at such time, then the Agent shall promptly deliver a notice to the Custodian indicating the Agent’s revocation of such Default Notice.

(b) Continuation of Lien. Unless released in writing by the Agent as herein provided, the security interest in favor of the Agent for the benefit of the Purchasers, in the Mortgage Loans and in the Loan Files delivered to any Person pursuant to this Section 3.3 shall continue in effect until such time as the Agent shall have received payment in full of the amount described in Section 3.3(a)(i).

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3.4. Releases of Mortgage Loans for Servicing.

The Servicer may from time to time request in writing that the Custodian deliver items in the Loan File related to a Mortgage Loan so that (a) the Mortgage Note may be replaced by a corrected Mortgage Note, or (b) any servicing action may take place with respect to such Mortgage Loan. Upon receipt by the Custodian of such a request from the Servicer, and so long as the Custodian has not received a Default Notice, the Custodian shall deliver to the Servicer, upon receipt of the “Servicer Trust Receipt and Security Agreement Letter,” substantially in the form of Exhibit D, hereto, or such other form as may be approved by the Agent and the Custodian, the items in the Loan File to be corrected or serviced, such delivery to be conditioned upon the receipt by the Custodian within fourteen (14) calendar days of either a corrected Mortgage Note, in the case of Mortgage Notes delivered for correction, or the items in the Loan File originally delivered to the Servicer by the Custodian, in the case of a Mortgage Loan delivered for a servicing action; provided, that at no time shall Mortgage Loans having an aggregate original loan amount in excess of $6,000,000 be so delivered to the Servicer pursuant to this Section 3.4 and remain unreturned by the Servicer at any one time. Notwithstanding the foregoing, in the event that a Mortgage Loan is released to the Servicer pursuant to this Section 3.4 in connection with the conversion or modification of such Mortgage Loan from a construction loan to a permanent mortgage loan or a repayment of such Mortgage Loan and the Sellers have not paid the Repurchase Price with respect to such Mortgage Loan to the Purchasers in accordance with the Transaction Documents, then the Sellers shall as soon as possible, but in no event later than 10 days after such release, deliver to the Custodian all of the Principal Mortgage Documents, and if required, all of the related Other Mortgage Documents, with respect to such converted, modified or replacement permanent mortgage loan related to such Mortgage Loan.

3.5. Wet Loans.

(a) Pursuant to the Repurchase Documents, the Sellers may from time to time request that the Purchasers purchase certain Mortgage Loans prior to the delivery to the Custodian of the corresponding Principal Mortgage Documents (individually a “Wet Loan”; collectively the “Wet Loans”). The Sellers and the Agent acknowledge that purchases in respect of Wet Loans are subject to various terms and conditions of the Repurchase Documents.

(b) Delivery of Principal Mortgage Documents. Within ten (10) days after the date that a Purchase Date Notice Schedule identifying one or more Wet Loans which have been sold under the Repurchase Agreement is delivered to the Custodian, the applicable Seller shall deliver to the Custodian all of the Principal Mortgage Documents pertaining to such Wet Loans.

3.6. Delivery of Trust Receipt.

Upon the request of the applicable Seller, on or before 12:00 noon (New York City time) on each Purchase Date, the Custodian shall deliver to the Servicer, the applicable

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Seller and the Agent (i) the cumulative Trust Receipt in the form of Exhibit F covering all Mortgage Loans subject to this Agreement and held by the Custodian (including the Mortgage Loans being purchased on such Purchase Date, but excluding all Wet Loans being purchased on such Purchase Date) and (ii) the cumulative Trust Receipt in the form of Exhibit F-1 covering all Wet Loans subject to this Agreement and held by the Custodian (including the Wet Loans being purchased on such Purchase Date), both of which are fully completed and executed by the Custodian.

3.7. Mortgage Loans Reporting.

(a) At the commencement of each Business Day, and in no event later than 12:00 noon (eastern time), the Custodian shall furnish to the Sellers, the Servicer, each Group Agent identified pursuant to Section 3.1(e) and the Agent electronically a duly completed report in the form of Exhibit E hereto, (the “Custodian Daily Report”) specifying and certifying the information provided for therein and as set forth on Schedule I hereto, noting, except for any Wet Loans and other Mortgage Loans with respect to which the Custodian has not completed its review of the Principal Mortgage Documents, any applicable Exceptions to Schedule I thereto.

(b) The Custodian may assume the accuracy of all information supplied by any Seller to the Custodian with respect to any Mortgage Loan, or related electronic transmission, received by the Custodian, including but not limited to the Purchase Date Notice, the applicable Seller’s commitment related to any Mortgage Loan, the unpaid principal balance of any Mortgage Loan as of the Purchase Date and whether a Mortgage Loan is an OTC Loan or a TTC Loan.

(c) The Custodian may assume the accuracy of the information supplied by any Seller to the Custodian, whether written or in any other form acceptable to the Custodian, with respect to a determination as to whether amounts remitted to the Group Agents represent the Repurchase Price paid for a specific Mortgage Loan.

3.8. Further Obligations of the Custodian.

The Custodian shall promptly notify the Agent if the Custodian receives written notice (i) that any Lien (other than for the Agent for the benefit of the Purchasers) has been placed, or attempted to be placed, on any Mortgage Loan or that the Agent’s ownership interest shall have been challenged or (ii) that any Takeout Investor or Takeout Lender has rejected any items of the Loan File that is related to a Mortgage Loan that has been delivered to the Custodian.

3.9. Segregation of the Loan File.

The Custodian shall keep and maintain the Mortgage Loans and the Loan Files on its documents, books and records separate and apart from its other property and from any property securing any liabilities of any Seller to any other Person. Without limitation of the foregoing, the Custodian shall keep and maintain the Mortgage Loans and the Loan Files on its documents, books and records separate and apart from any collateral provided by any Seller in favor of any other person purchasing mortgage loans from or providing financing to such Seller. This provision does not require physical separation of the Principal Mortgage Documents or Other Mortgage Documents from collateral held for other loans, but each Mortgage Loan must be maintained in a separate file folder from the documents related to any other mortgage loan.

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3.10. Delivery of Required Documents to the Agent.

Upon written request of the Agent, after the occurrence and during the continuance of an Event of Default under the Repurchase Documents of which a Responsible Officer of the Custodian has received written notice, the Custodian shall deliver within five (5) days to the Agent or its designee any or all documents and other items of the Loan File which are then in the possession or control of the Custodian. The Agent shall provide the Sellers with a copy of any such notice delivered to the Custodian. All special handling and delivery costs shall be paid by the Sellers.

ARTICLE IV

THE CUSTODIAN

4.1. Instructions to the Custodian.

As to any matter not expressly provided for by this Agreement, the Custodian shall not be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Agent acting on behalf of the Purchasers; provided, however, that the Custodian shall not be required to take any action which may expose the Custodian to any liability that the Custodian determines to be unreasonable in light of the circumstances or that is contrary to this Agreement or any Governmental Requirement.

4.2. Reliance by the Custodian; Responsibility of the Custodian.

(a) The Custodian shall perform its duties hereunder in accordance with the standards followed by the Custodian in dealing with similar property for its own account. Notwithstanding anything to the contrary in this Agreement or any other Transaction Document, neither the Custodian nor any of its respective directors, officers, agents, representatives, employees, attorneys-in-fact or Affiliates shall be liable for any action taken or omitted to be taken by it or them (in their capacity as or on behalf of the Custodian) under or in connection with this Agreement or the other Transaction Documents, except for its or their own negligence or willful misconduct, for which the Custodian shall be liable (provided, however, that the foregoing shall not prevent or otherwise limit the right of the Sellers, the Agent or the Purchasers to bring a breach of contract action against the Custodian). In no event shall the Custodian, its directors, officers, agents or employees be liable, directly or indirectly, for any special, indirect, punitive or consequential damages.

(b) All Loan Files at any time delivered to the Custodian hereunder shall be held by the Custodian in a fire resistant vault, drawer or other suitable depositary maintained and controlled solely by the Custodian, conspicuously marked to show the interest therein of the Custodian as bailee for the Agent on behalf of the Purchasers and not commingled with any other assets or property of, or held by the Custodian for any person. The Custodian shall have responsibility only for documents which have been actually delivered to the Custodian in

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connection herewith and which have not been released to the Agent, the Sellers, the Servicer, a Takeout Investor, a Takeout Lender, a transferee or their respective agent or designee in accordance with this Agreement. In the event that a Mortgage Note has been delivered to the Custodian and, subsequently, the Custodian cannot locate such Mortgage Note, then the Custodian shall prepare and execute a lost note affidavit with appropriate indemnification of the Purchasers and the applicable Seller, and shall deliver such lost note affidavit to the party that otherwise would have been entitled to delivery of the related Mortgage Note in accordance with this Agreement at the time such Mortgage Note would have been delivered.

(c) Under no circumstances shall the Custodian be obligated to verify the authenticity of any signature on any of the documents received or examined by it in connection with this Agreement or the authority or capacity of any person to execute or issue any such document nor shall the Custodian be responsible for the value, form, substance, validity, perfection (other than by taking and continuing possession of the Loan Files), priority, effectiveness or enforceability of any of such documents nor shall the Custodian be under a duty to inspect, review or examine the documents to determine whether they are appropriate for the represented purpose or that they have been actually recorded or that they are other than what they purport to be on their face.

(d) The Custodian may accept but shall not be responsible for examining, determining the meaning or effect of, or notifying or advising any Seller or the Agent in any way concerning, any item or document in any file regarding a Mortgage Loan that is not one of the items or documents listed in Section 3.1(b). Each Seller shall be solely responsible for providing to the Custodian each and every document listed in Section 3.1(b) and for completing or correcting any omission, or incomplete or inconsistent document.

(e) The Custodian shall (i) except for Wet Loans for which it has not yet received the Principal Mortgage Documents, hold all Principal Mortgage Documents relating to each Mortgage Loan exclusively for the Agent for the benefit of the Purchasers under the terms of this Agreement (i.e., is not held by the Custodian for the benefit of any other Person), and (ii) in the case of Wet Loans, monitor and report in each Custodian Daily Report the amount of such Wet Loans and identify the Wet Loans for which the related Principal Mortgage Documents have not been delivered to the Custodian. Except as otherwise expressly provided in this Agreement, the Custodian shall have no duty to investigate or conduct any due diligence with respect to such information.

(f) In order to comply with laws, rules and regulations applicable to banking institutions, including those relating to the funding of terrorist activities and money laundering, the Custodian is required to obtain, verify and record certain information relating to individuals and entities which maintain a business relationship with the Custodian. Accordingly, each of the parties agrees to provide to the Custodian upon its request from time to time such party’s complete name, address, tax identification number and such other identifying information together with copies of such party’s constituting documentation, securities disclosure documentation and such other identifying documentation as may be available for such party.

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(g) The Custodian is an agent and bailee only and is not intended to be, nor shall it be construed to be a trustee or fiduciary under this Agreement of or for any of the Sellers or the Agent.

(h) The Custodian shall retain possession and custody of the Principal Mortgage Documents received from the Sellers and pertaining to each Mortgage Loan as agent and bailee of, and as custodian for, the Agent for all purposes until the Mortgage Loan is released pursuant to Section 3.3 or 3.4 hereof or otherwise released by the Agent in a written notice to the Custodian in the event of a repurchase or substitution of such Mortgage Loan pursuant to the Repurchase Agreement.

(i) Without limitation of the generality of the foregoing, the Custodian: (i) may consult with legal counsel (including counsel for the Sellers), independent public accountants and other experts selected by the Custodian or the Sellers and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts; (ii) except as provided in this Agreement, makes no warranty or representation to the Agent or the Purchasers and shall not be responsible to the Agent or the Purchasers for any statements, warranties or representations made in or in connection with this Agreement or the other Transaction Documents; (iii) except as provided in Sections 3.1(e), 3.7, 3.8 and this Section 4.2, shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of this Agreement on the part of the Sellers or to inspect the property (including the books and records) of the Sellers; (iv) shall not be responsible to the Agent or the Purchasers for the due execution, legality, validity, suitability, collectability, or enforceability of this Agreement or any other instrument or document furnished pursuant hereto as it relates to any party other than the Custodian, or for the genuineness, effectiveness, sufficiency, value, perfection or priority of any Mortgage Loan and the related Loan File; (v) shall incur no liability under or in respect of this Agreement by acting upon any notice, consent, certificate or other instrument or writing (which may be by facsimile or electronic transmission) believed in good faith by the Custodian, to be genuine and signed or sent by the proper Person; (vi) shall be entitled to rely on the terms of this Agreement and shall be under no obligation to review the terms of the other Transaction Documents, and in the event of any conflict between this Agreement and the Transaction Documents, the terms of this Agreement shall control with respect to the rights and obligations of the Custodian; and (vii) in the event of any amendment, revision, restatement, waiver or other change to the Transaction Documents which could have the effect of increasing the level of effort or changing the scope of work of the Custodian under this Agreement and which was not consented to in writing by the Custodian, shall not be given effect so as to modify in quantity or otherwise the obligations of the Custodian under this Agreement; (as an example only of the foregoing, and to avoid doubt in interpretation of this subsection (vii), an increase in the aggregate commitments of the Purchasers of the Letter Agreement shall not, unless the Custodian receives two weeks’ advance written notice of any such amendment, revision, restatement, waiver or other change to the Transaction Documents, require the Custodian to review Mortgage Loans that would relate to such increased commitment).

(j) The Custodian may execute any of its duties under this Agreement by or through agents, attorneys, custodians, nominees or attorneys-in-fact (which agents, attorneys, custodians, nominees or attorneys-in-fact shall be accorded the same rights and obligations

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applicable to the Custodian) and shall be entitled to rely on advice of counsel concerning all matters pertaining to such duties. The Custodian shall not be responsible for the actions or non-actions of any agent, attorneys, custodians, nominees or attorneys-in-fact selected by it with due care; provided, however, such appointment shall not relieve the Custodian from performance of its duties hereunder and, provided, that nothing contained herein shall affect in any manner or any extent the rights of the Sellers or the Agent against such agents or attorneys-in-fact.

(k) Any entity into which the Custodian may be merged or converted or with which may be consolidated, or any entity resulting from any merger, conversion or consolidation to which the Custodian shall be a party, or any entity succeeding to the business of the Custodian, shall be the successor of the Custodian hereunder, without the execution or filing of any paper or any further act on the part of any of the parties hereto, anything herein to the contrary notwithstanding.

(l) Other than for any liability pursuant to Sections 4.2(a) or (b), none of the provisions of this Agreement shall require the Custodian to expend or risk its own funds or otherwise to incur any liability, financial or otherwise, in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers if it shall have reasonable grounds for believing that repayment of such funds or indemnity satisfaction to it against such risk or liability is not assured to it.

(m) The Custodian may conclusively rely and shall be fully protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval or other paper or document believed by it to be genuine and to have been signed or presented to the proper party or parties.

(n) Custodian is not responsible for preparing or filing any reports or returns relating to federal, state or local income taxes with respect to this Agreement, other than for Custodian’s compensation or for reimbursement of expenses.

(o) The Custodian shall have no duties or responsibilities except those that are specifically set forth herein, shall not be liable except for the performance of such duties and obligations and no implied covenants or obligations shall be read into this Agreement against the Custodian.

(p) Each individual designated as an authorized representative of each Seller, the Servicer, the Agent (each, an “Authorized Representative”) or a Responsible Officer of the Custodian, is authorized to give and receive notices, requests and instructions and to deliver certificates and documents in connection with this Agreement on behalf of such Seller, the Servicer, the Agent, and the Custodian, respectively, and the specimen signature for each such Authorized Representative or Responsible Officer, as applicable, initially authorized hereunder is set forth on Exhibit I, J, K, and L, respectively. From time to time, the Custodian, the Sellers, the Servicer and the Agent may, by delivering to the others a revised exhibit, change the information previously given pursuant to this provision, but each of the parties hereto shall be entitled to rely conclusively on the then current exhibit until receipt of a superseding exhibit.

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(q) In the absence of the designation of method of shipment and shipper(s) in a Shipping Request, the Custodian is authorized to use a nationally recognized courier.

4.3. Agents and Affiliates.

The Custodian and its respective Affiliates may accept deposits from, lend money to, act as trustee under indentures of, and generally engage in any kind of business with, the Sellers, any of the Sellers’ Affiliates and any Person who may do business with or own securities of the Sellers or any such Affiliate, all as if the Custodian were not the Custodian and without any duty to account therefor to the Agent or the Purchasers.

4.4. Successor Custodian.

The Custodian may resign at any time by giving not less than, sixty (60) days’ advance written notice thereof to the Sellers and the Agent. The Custodian may be removed at any time with cause, and upon thirty (30) days written notice without cause, by the Agent on behalf of the Purchasers; provided, that the Agent shall pay as soon as reasonably practical after demand therefor all costs and expenses incurred by the Custodian or the Sellers in connection with the removal of the Custodian by the Agent without cause. Upon request of the Sellers, so long as no Event of Default or Incipient Event of Default exists, the Custodian shall be removed by the Agent, provided that any removal by the Sellers without cause shall be preceded by thirty (30) days’ written notice to the Custodian and the Sellers shall pay immediately upon demand all costs and expenses incurred by any Purchaser, the Agent or the Custodian in connection therewith. Upon any such resignation or removal, the Agent, at the direction of the Required Group Agents, shall have the right to appoint a successor Custodian. Any successor Custodian appointed by the Agent, provided that no Event of Default or Incipient Event of Default exists, shall be satisfactory to the Sellers at the time of appointment. In the case of a retirement or resignation, if no successor Custodian shall have been so appointed by the Agent (and approved by the Sellers, if applicable), and shall have accepted such appointment, within 60 days after the retiring Custodian’s giving of notice of resignation, then the retiring Custodian shall deliver all Loan Files in its possession to the Agent and the Custodian shall be discharged from its duties and obligations under this Agreement. After a notice of retirement or resignation has been given by the Custodian and until a successor Custodian shall have been appointed, the Agent shall pay all reasonable fees and out of pocket expenses owed to the Custodian by the Servicer pursuant to any written agreement between the Custodian and the Servicer, provided, however, that the Sellers shall reimburse the Agent for all such payments. No such resignation or removal shall be effective until the earlier of (1) the date on which a successor Custodian shall have been appointed, and accepted such appointment, in accordance with this Section 4.4 or (2) the day upon which a period of 60 days has passed after notice of such resignation or removal. Upon the acceptance of any appointment of the Custodian hereunder by a successor Custodian, such successor Custodian shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Custodian, and the retiring Custodian shall be discharged from its duties and obligations under this Agreement. The retiring or removed Custodian shall take all steps reasonably necessary to provide for an orderly transfer of the Loan Files and all related documentation to the successor Custodian at the Servicer’s expense (except in the case of removal of the Custodian by the Agent without cause, which shall be at the Agent’s expense). After any retiring Custodian’s resignation or removal hereunder as the Custodian, the provisions of this Article IV shall inure to its benefit as to any actions taken or omitted to be taken by it while it was a Custodian under this Agreement.

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4.5. Right of Inspection.

The Custodian shall permit any officer, employee or agent of the Sellers, the Servicer or the Agent that may so request to visit and inspect the premises on which the custodial duties of the Custodian hereunder are performed, examine the books and records of the Custodian which pertain to such custodial duties, take copies and extracts therefrom, and discuss the performance of such custodial duties with the officers of the Custodian that are responsible therefor, at such time, after reasonable prior written notice (which shall be at least two (2) Business Days) to the Custodian, as may be mutually acceptable to the Custodian and such Sellers, Servicer or Agent during the Custodian’s normal business hours.

4.6. Accounting in Certain Circumstances.

Subject to the provisions of Section 4.2 hereof, in the event that the Custodian, acting in its capacity as custodian for the Agent, shall receive any money in respect of any Mortgage Loan, whether pursuant to Section 3.3 hereof or otherwise, the Custodian shall provide a statement to the Agent and the Sellers by the end of the Business Day following receipt thereof, which specifies the amount received and shall promptly (but in no event later than the next Business Day) deposit such amounts into the Buyer’s Account and prior to such deposit to be held for the benefit of the Agent; provided, however, that all expenses of the Custodian reasonably allocable to such statement shall be added to the expenses of the Custodian reimbursed by the Servicer. All such funds received after 4:00 p.m. (eastern time) shall be considered to have been received on the following Business Day. All such funds received shall be held uninvested (and the Custodian shall not be liable for interest thereon), unless written instructions are given to the Custodian by the Servicer, and in such case, funds shall be invested in Eligible Investments specified by the Servicer in such instructions; provided, however, that if the Servicer directs that funds be invested in Eligible Investments, the Servicer shall be required to ensure that all investments must mature on each Settlement Date (as defined in the Letter Agreement). The Servicer agrees that it shall not give any instruction to invest unless such investment is permitted by the Transaction Documents. The Custodian shall provide such other information in such detail and at such time or times as the Sellers or the Agent may reasonably request. The Custodian and its affiliates are permitted to receive additional compensation that could be deemed to be in the Custodian’s economic self-interest for (i) serving as investment advisor, administrator, shareholder, servicing agent, custodian or sub-custodian with respect to certain Eligible Investments, (ii) using affiliates to effect transactions in certain Eligible Investments and (iii) effecting transactions in certain Eligible Investments. Such compensation shall not be an amount that is reimbursable or payable pursuant to this Agreement.

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ARTICLE V

INDEMNIFICATION

5.1. Indemnities by the Servicer. Without limiting any other rights that any such Person may have hereunder or under applicable law, the Servicer hereby agrees to indemnify the Custodian, its successors, transferees, participants and assigns and all affiliates, officers, directors, shareholders, controlling persons, employees and agents of any of the foregoing (each an “Indemnified Party”), forthwith on demand, from and against any and all actual damages, losses, claims, liabilities and related costs and expenses, including attorneys’ fees, expenses and disbursements (all of the foregoing being collectively referred to as “Indemnified Amounts”) awarded against or incurred by any of them arising out of or relating to this Agreement, any other Transaction Document, or the exercise or performance of any of its or their powers or duties hereunder, or in respect of any Mortgage Loans or Takeout Commitment, or related in any way to their possession of, or dealings with, the Loan Files, excluding, however, Indemnified Amounts to the extent resulting from negligence or willful misconduct on the part of any such Indemnified Party. This Section 5.1 shall survive the termination of this Agreement and the earlier resignation or removal of the Custodian.

ARTICLE VI

MISCELLANEOUS

6.1. Notices.

Any notice, demand or request required or permitted to be given under or in connection with this Agreement, or the other Transaction Documents (except as may otherwise be expressly required therein) shall be in writing and shall be mailed by first class or express mail, postage prepaid, or sent by facsimile or other similar form of electronic transmission, or personally delivered to an officer of the receiving party. With the exception of certain administrative and collateral reports that may be directed to specific departments of the Agent, all such communications shall be mailed, sent or delivered to the parties hereto at their respective addresses as set forth in Schedule II hereto, or at such other addresses or to such officer’s, individual’s or department’s attention as any party may have furnished the other parties in writing. Any communication so addressed and mailed shall be deemed to be given when so mailed; and any notice so sent by electronic transmission shall be deemed to be given when receipt of such transmission is acknowledged, and any communication so delivered in person shall be deemed to be given when receipted for by, or actually received by, an authorized officer of the Custodian, the Agent or the applicable Seller, as the case may be.

6.2. Amendments, Etc.

This Agreement may not be amended, supplemented or modified without the written consent of the Sellers, the Servicer, the Custodian and the Agent. Any such waiver and any such amendment, supplement or modification shall be binding upon the Sellers, the Servicer, the Custodian, the Agent and all the Purchasers.

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6.3. Invalidity.

In the event that any one or more of the provisions contained in this Agreement or any other Transaction Document shall, for any reason, be held invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of such document.

6.4. Survival of Agreements.

All covenants and agreements herein shall survive until the termination of the Repurchase Documents.

6.5. Termination.

This Agreement shall terminate upon the earliest of the written notice to the Custodian of the termination of the Repurchase Agreement, the Letter Agreement or as otherwise consented to in writing by the Agent, and provided that the Custodian has not received a notice that an Event of Default has occurred, the Sellers and the Servicer. Any Loan Files in the possession of the Custodian at the time of termination shall be delivered as directed by the Agent.

6.6. Cumulative Rights.

The rights, powers, privileges and remedies of the Custodian and the Agent under this Agreement, and any other Transaction Document shall be cumulative, and the exercise or partial exercise of any such right, power, privilege or remedy shall not preclude the exercise of any other right or remedy. The exercise of any right, power, privilege or remedy of the Custodian or the Agent under this Agreement or any Transaction Document, shall not exhaust any such right, power, privilege or remedy of the Custodian or the Agent.

6.7. Successors and Assigns.

This Agreement is binding upon and inures to the parties to this Agreement and their respective successors and permitted assigns and shall remain in full force and effect until such time, after the Termination Date, as all obligations to be performed hereunder shall have been performed. The Sellers’ and the Servicer’s obligations in respect of indemnification and payment provisions shall be continuing and shall survive any termination of this Agreement, subject to any applicable statute of limitations. The Custodian may not assign its rights or obligations hereunder, except pursuant to Section 4.2(k) or 4.4, and any such attempted assignment shall be null and void.

6.8. The Custodian Representations and Warranties.

The Custodian represents and warrants that it: (a) is a national banking association; (b) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization; (c) fully satisfies the requirements for acting as a GNMA approved custodian, FNMA approved custodian and FHLMC approved custodian; (d) has the power and authority to transact the business in which it is engaged; and (e) has the power and requisite authority to execute, deliver and perform this Agreement, and is duly authorized to, and has taken all action necessary to authorize it to, execute, deliver and perform this Agreement.

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6.9. Sellers, Servicer and Agent Representations and Warranties.

Each of the Sellers, the Servicer and the Agent represents and warrants as to itself that it: (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization; (b) has the power and authority to transact the business in which it is engaged; and (c) has the power and requisite authority to execute, deliver and perform this Agreement, and is duly authorized to, and has taken all action necessary to authorize it to, execute, deliver and perform this Agreement.

6.10. Counterparts.

This Agreement may be executed in two or more counterparts, and it shall not be necessary that the signatures of each of the parties hereto be contained on any one counterpart hereof; each counterpart shall be deemed an original, but all counterparts together shall constitute one and the same instrument.

6.11. No Proceedings.

The Custodian hereby agrees that so long as any Conduit Purchaser has any outstanding indebtedness for borrowed money and for one year and one day thereafter, it will not institute against any Conduit Purchaser, or join any other Person in instituting against any Conduit Purchaser, any bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding, or other proceeding under any federal or state bankruptcy or similar law; provided, however, the foregoing shall not prohibit the Custodian from filing proofs of claim in such a proceeding instituted by another Person. This Section 6.11 shall survive the termination of this Agreement and the earlier resignation or removal of the Custodian.

6.12. Electronic Counterparts.

Any form or report contemplated by this Agreement may be furnished to the Custodian electronically and may be formatted in a manner convenient for electronic transmission so long as the required information is provided in an equally useable form to the format, if any, provided in this Agreement. It being understood and agreed that the Custodian shall not be responsible to verify the identity of the sender of any electronic transmissions received by it.

6.13. Governing Law.

THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. EACH OF THE PARTIES HERETO HEREBY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND OF ANY NEW YORK STATE COURT SITTING IN THE CITY OF NEW YORK FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH OF THE PARTIES HERETO HEREBY

18

IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. NOTHING IN THIS PARAGRAPH 6.13 SHALL AFFECT THE RIGHT OF BUYER TO BRING ANY ACTION OR PROCEEDING AGAINST ANY SELLER, THE CUSTODIAN OR ANY OF THEIR PROPERTY IN THE COURTS OF OTHER JURISDICTIONS. EACH PARTY HERETO CONSENTS TO THE SERVICE OF ANY AND ALL PROCESS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES OF SUCH PROCESS TO IT AT ITS ADDRESS FOR NOTICES HEREUNDER SPECIFIED IN SCHEDULE II HERETO.

6.14. Waiver of Jury Trial.

EACH OF THE PARTIES HERETO HEREBY WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE AMONG ANY OF THEM ARISING OUT OF, CONNECTED WITH, RELATING TO OR INCIDENTAL TO THE RELATIONSHIP BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT OR THE OTHER TRANSACTION DOCUMENTS.

6.15. References to Repurchase Documents. Notwithstanding any references herein to the Repurchase Agreement and the Letter Agreement, as applicable, the parties hereto acknowledge that the Custodian is not a party to the Repurchase Agreement or the Letter Agreement and has no obligations or rights thereunder and shall not be obligated to read the Repurchase Agreement or the Letter Agreement, know the terms and conditions contained therein or to be on notice of any of their provisions except to the extent of terms not otherwise defined herein but incorporated herein by reference to the Repurchase Agreement and the Letter Agreement, as applicable.

* * * * *

19

IN WITNESS WHEREOF, the parties hereto have caused this agreement to be duly executed as of the date first above written.

AMERICAN HOME MORTGAGE ACCEPTANCE, INC., as a Seller
By:	/s/ Alan B. Horn
Name:	Alan B. Horn
Title:	Executive Vice President General Counsel & Secretary
AMERICAN HOME MORTGAGE CORP., as a Seller
By:	/s/ Alan B. Horn
Name:	Alan B. Horn
Title:	Executive Vice President General Counsel & Secretary
AMERICAN HOME MORTGAGE INVESTMENT CORP., as a Seller
By:	/s/ Alan B. Horn
Name:	Alan B. Horn
Title:	Executive Vice President General Counsel & Secretary
AMERICAN HOME MORTGAGE SERVICING, INC., as a Seller and as Servicer
By:	/s/ Alan B. Horn
Name:	Alan B. Horn
Title:	Executive Vice President General Counsel & Secretary

Signature Page to

Custodial Agreement

ABN AMRO BANK N.V., as Agent
By:	/s/ Kevin J. Hayes
Name:	Kevin J. Hayes
Title:	Director
By:	/s/ Therese Gremley
Name:	Therese Gremley
Title:	Vice President

Signature Page to

Custodial Agreement

DEUTSCHE BANK NATIONAL TRUST COMPANY, as Custodian
By:	/s/ Norma L. Catone
Name:	Norma L. Catone
Title:	Vice President
By:	/s/ Angel Sanchez
Name:	Angel Sanchez
Title:	Authorized Signer

Signature Page to

Custodial Agreement

SCHEDULE I

LOAN FILE REVIEW FUNCTIONS

1. Review Functions. In each Custodian Daily Report, the Custodian shall certify, with respect to each Mortgage Loan listed in the schedule attached thereto, the following, noting any applicable Exceptions on the schedule thereto:

(a) all documents required to be delivered to it pursuant to Sections 3.1(b)(i) through 3.1(b)(iv) of this Agreement are in Custodian’s possession.

(b) each assignment of a Mortgage Loan delivered by a Seller pursuant to Section 3.1(b) bears an original signature of such Seller and appears to be duly completed (including all Schedules thereto).

(c) each Mortgage Note and Mortgage bears an original signature or signatures which appear to be those of the person or persons named as the maker and Mortgagor (trustor) or, in the case of a certified copy of the Mortgage, such copy bears what appears to be a reproduction of such signature or signatures.

(d) except for the endorsement in blank of the Mortgage Note by a Seller, and any intervening endorsements included in the file delivered to the Custodian, neither the Mortgage Note nor the Mortgage contain any irregular writings and appear regular on their face.

(e) based only on the Custodian’s examination of the documents listed in Sections 3.1(b)(i) through 3.1(b)(iii) of this Agreement, the information set forth with respect to each Mortgage Loan on the applicable Purchase Date Notice Schedule accurately reflects the following (within the tolerances, if any, shown in parentheses):

(i) Mortgage Loan number,

(ii) the note date,

(iii) the maturity date,

(iv) the original loan amount,

(v) the original interest rate,

(vi) the name of the borrower(s), and

(vii) the property address.

(f) if provided, each assignment of mortgage has been assigned as described in Section 3.1(b)(ii) of this Agreement, provided that the Custodian shall have no obligation to confirm that the assignments are in recordable form. If intervening assignments are included in the file, each such intervening assignment bears the signature of the

Schedule I-1

mortgagee and/or the assignor (and any other subsequent assignors) that appears to be an original or, if photocopies, that such copies bear a reproduction of such signature or signatures.

(g) the Mortgage Note is endorsed in blank and such endorsement bears an original signature of the applicable Seller.

(h) no Mortgage Note has an original loan amount in excess of $3,000,000.

(i) no Mortgage Note or Mortgage bears evidence (on its face or reverse side) that it is subject to any Lien in favor of any Person other than the Agent, for the benefit of the Purchasers.

(j) at least one of the riders or addendums delivered with the related Mortgage Note is a “construction loan addendum” or “construction loan rider” to the such Mortgage Note.

(k) at least one of the riders or addendums delivered with the Mortgage is a “construction loan addendum” or “construction loan rider” to such Mortgage or the Mortgage contains language to the effect that such loan is a construction loan.

2. Review Function Limitations.

Notwithstanding the foregoing:

(i) the Custodian shall have no obligation to determine, certify or note as Exceptions the items described in paragraphs (j) or (k) above with respect to any Pre-Closing Mortgage Loan;

(ii) other than the items specified in paragraphs (j) and (k) above with respect to Previously Delivered Mortgage Loans and Newly Delivered Mortgage Loans, the Custodian shall have no obligation to determine or certify that the documents described in Section 3.1(b)(i) through 3.1(b)(iv) contain all amendments, riders, addendums, modification agreements, extensions or renewals thereto; and

(iii) with respect to any Pre-Closing Mortgage Loan, the Custodian shall have no obligation to certify or note as an Exception the Custodian’s possession of the document described in Section 3.1(b)(iv) until the date which is two (2) Business Days after the date on which the Custodian has received such document from the applicable Seller; provided such document is delivered to the Custodian on or subsequent to the date hereof.

Schedule I-2

SCHEDULE II

ADDRESSES AND NOTICES

Sellers:

if to AHMA:

538 Broadhollow Road

Melville, New York, 11747

Attention: General Counsel

Facsimile: (800) 209-7276

Telephone Confirmation: (516) 396-7703

if to AHM:

American Home Mortgage Corp.

538 Broadhollow Road

Melville, New York 11747

Attention: General Counsel

Facsimile: (800) 209-7276

Telephone Confirmation: (516) 396-7703

if to AHMIC:

American Home Mortgage Investment Corp.

538 Broadhollow Road

Melville, New York, 11747

Attention: General Counsel

Facsimile: (800) 209-7276

Telephone Confirmation: (516) 396-7703

if to AHMS:

American Home Mortgage Servicing, Inc.

538 Broadhollow Road

Melville, New York, 11747

Attention: General Counsel

Facsimile: (800) 209-7276

Telephone Confirmation: (516) 396-7703

Schedule II-1

Servicer:	American Home Mortgage Servicing, Inc.
	538 Broadhollow Road
	Melville, New York, 11747
	Attention: General Counsel
	Facsimile: (800) 209-7276
	Telephone Confirmation: (516) 396-7703
Agent:	ABN AMRO Bank N.V.
	540 West Madison Street
	Chicago, Illinois 60661
	Attention: Therese Gremley
	Facsimile: (312) 992-1527
	Telephone Confirmation: (312) 904-6263
Custodian:	DEUTSCHE BANK NATIONAL TRUST COMPANY
	1761 East St. Andrew Place
	Santa Ana, California 92705
	Telephone: (714) 247-6000
	Telecopy: (714) 656-2614
	Attention: Mortgage Custody - AH072C

Schedule II-2

EXHIBIT A

DEFINITIONS

As used in this Agreement, the following terms have the following meanings:

“Account Control Agreement” shall mean the Account Control Agreement dated as of the date hereof among the Sellers, the Servicer, the Agent and the Bank.

“Additional Purchased Mortgage Loans” shall mean Mortgage Loans provided by Seller to Buyer pursuant to Paragraph 4(a) of the Repurchase Agreement.

“Affiliate” shall mean, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with, such specified Person. For purposes of this definition, “control” when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract, or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

“Agent” has the meaning as set forth in the preamble of this Agreement

“Agreement” has the meaning as set forth in the preamble of this Agreement.

“Authorized Representatives” is defined in Section 4.2(p).

“Bailee and Security Agreement Letter” is defined in Section 3.3(a)(i).

“Bank” shall mean Deutsche Bank National Trust Company, in its capacity as the bank which holds the Buyer’s Account.

“Business Day” shall mean any day other than (i) a Saturday or Sunday or (ii) any day on which banks in New York City, Chicago, Illinois, or Los Angeles, California are authorized or obligated by law or executive order to be closed.

“Buyer’s Account” shall mean that certain collection account number 57564 maintained in the name of the Buyer by the Bank for the deposit of cash pursuant to this Agreement and the Repurchase Documents.

“Corporate Trust Office” shall mean the principal office of the Custodian at which at any particular time its corporate trust business shall be administered which office at the date of the execution of this Agreement is located at 1761 East St. Andrew Place, Santa Ana, California 92705, Attention: Mortgage Custody – AH072C or at any other time at such other address as the Custodian may designate from time to time by written notice to the parties thereto.

“Custodian” has the meaning set forth in the preamble of this Agreement.

“Custodian Daily Report” is defined in Section 3.7 of this Agreement.

Exhibit A-1

“Default Notice” has the meaning set forth in Section 3.3(a) of this Agreement.

“Eligible Investments” shall mean:

(a) direct obligations of, or guaranteed as to the full and timely payment of principal and interest by, the United States or obligations of any agency or instrumentality thereof, if such obligations are backed by the full faith and credit of the United States;

(a) federal funds, certificates of deposit, time deposits and bankers’ acceptances (which shall each have an original maturity of not more than 90 days and, in the case of bankers’ acceptances, shall in no event have an original maturity of more than 365 days) of any United States depository institution or trust company organized under the laws of the United States or any state and subject to examination and supervision by federal or state financial institutions regulatory authorities; provided, however, that the short-term obligations of such depository institution or trust company are rated “A-1+” by Standard & Poor’s, “P-1” by Moody’s and, if rated by Fitch, “F1+” by Fitch;

(b) commercial paper (having original maturities of not more than 30 days) of any corporation incorporated under the laws of the United States or any state thereof which on the date of the acquisition are rated “A-1+” by Standard & Poor’s, “P-1” by Moody’s and, if rated by Fitch, “F1+” by Fitch;

(c) securities of money market funds rated “Aam” or better by Standard & Poor’s, “Aa” or better by Moody’s and, the highest such ratings category by Fitch (if rated by Fitch); and

(d) any other investment approved in writing by the Agent.

provided, that in the case of each of the investments described above, such investment is a “securities entitlement” within the meaning of Section 8-102(17) of the UCC.

Any such Eligible Investment may be purchased by or through the Agent or the Bank or any of their affiliates.

“Exceptions” means exceptions to the specifications and certifications made by the Custodian on the Custodian Daily Report as set forth on Schedule I hereto.

“Indemnified Amounts” is defined in Section 5.1.

“Indemnified Party” is defined in Section 5.1.

“Letter Agreement” has the meaning as set forth in the preamble to this Agreement.

“Loan Documents” shall mean with respect to each Mortgage Loan, all of the Principal Mortgage Documents and all of the Other Mortgage Documents with respect to such Mortgage Loan.

Exhibit A-2

“Loan File” shall mean, with respect to any Mortgage Loan, the Principal Mortgage Documents and if applicable, the Other Mortgage Documents that have been delivered to the Custodian pursuant to this Agreement.

“Margin Deficit” shall have the meaning specified in Paragraph 4(a) of the Repurchase Agreement.

“MERS” shall mean Mortgage Electronic Registration Systems, Inc., a Delaware corporation.

“MERS Designated Mortgage Loan” shall mean a Mortgage Loan registered to or by any Seller on the MERS electronic mortgage registration system.

“Mortgage” shall mean the mortgage, deed of trust or other instrument creating a lien on a fee simple estate in Mortgaged Property securing a Mortgage Note together with any amendments, riders, addendums, modification agreements, extensions or renewals thereof and any new mortgage taken in exchange or substitution therefor in connection with a modification, conversion or refinancing of such mortgage or the related Mortgage Note.

“Mortgage Contract” shall mean a residential construction loan agreement, building loan agreement, loan agreement, construction loan agreement or other financing agreement entered into by a Seller and a Mortgagor, evidencing the related Seller’s obligation to provide funding of such Mortgagor’s construction project and setting forth, among other things, the terms and provisions related to the repayment of funds extended to the Mortgagor thereunder.

“Mortgage Loan” shall mean, at any time, any fixed rate or floating rate mortgage loan which is secured by a Mortgage on real estate and which is made to a Mortgagor for the construction of a new single family detached residential property pursuant to the related Mortgage Contract, including all amounts owed or to be owed by such Mortgagor with respect to all Mortgagor Advances advanced or to be advanced to such Mortgagor under such Mortgage Contract, and includes (i) such mortgage loan whether in the construction period or in the permanent loan term and (ii) any mortgage loan secured by a Mortgage on such residential property made in exchange or substitution therefor and/or in connection with a modification, conversion or refinancing of such Mortgage Loan.

“Mortgage Note” shall mean the original, executed promissory note or other evidence of indebtedness of a Mortgagor under a Mortgage Loan, together with any rider, amendment, addendums, modification agreements, extension or renewal thereof and any original promissory note taken in exchange or substitution therefor and/or in connection with a modification, conversion or refinancing of such Mortgage Loan from a construction loan to a permanent mortgage loan or otherwise.

“Mortgaged Property” shall mean the underlying real property subject to a Mortgage (including, without limitation, all buildings, improvements and fixtures thereon and all additions, alterations and replacements made at any time with respect to the foregoing) securing a Mortgage Loan.

“Mortgagor” shall mean the obligor on a Mortgage Note.

Exhibit A-3

“Mortgagor Advance” shall mean, with respect to any Mortgage Loan, a loan or advance made to the Mortgagor under the related Mortgage Contract and evidenced by the related Mortgage Note.

“Newly Delivered Mortgage Loan” shall mean a Mortgage Loan which is not a Previously Delivered Mortgage Loan or a Pre-Closing Mortgage Loan.

“OTC Loan” shall mean a Mortgage Loan which the Sellers refer to as a “one-time-close loan”, in which the Mortgage Note and Mortgage related to such Mortgage Loan both include construction loan addendums or riders, as applicable, to the permanent mortgage loan documentation.

“Other Mortgage Documents” is defined in Section 3.1(c).

“Pre-Closing Mortgage Loan” shall mean a Mortgage Loan listed on Schedule III hereto for which the Custodian possessed the related Principal Mortgage Documents related to such Mortgage Loan prior to the date hereof and the applicable Seller has received confirmation of the Custodian’s review (which review shall, in any event, include the steps described in Schedule I hereto).

“Previously Delivered Mortgage Loan” shall mean a Mortgage Loan (other than a Pre-Closing Mortgage Loan) for which the Custodian possessed the related Principal Mortgage Documents prior to the delivery of the Purchase Date Notice Schedule related to such Mortgage Loan and the applicable Seller has received confirmation of the Custodian’s review (which review shall, in any event, include the steps described in Schedule I hereto).

“Principal Mortgage Documents” is defined in Section 3.1(b).

“Purchase Date Notice Schedule” shall mean a Schedule delivered by a Seller to the Custodian with respect to Mortgage Loans substantially in the form attached hereto as Exhibit G.

“Purchaser” shall have the meaning as set forth in the preamble hereto.

“Purchased Mortgage Loans” shall mean, with respect to any Transaction, the Mortgage Loans sold by the applicable Sellers to Buyer in such Transaction hereunder, as adjusted to give effect to include Additional Purchased Mortgage Loans delivered pursuant to Paragraph 4(a) of the Repurchase Agreement and any Purchased Mortgage Loans repurchased by such Sellers or transferred to such Sellers. Unless the context shall otherwise require, the term “Purchased Mortgage Loans” shall refer to all Purchased Mortgage Loans under all Transactions. “Purchased Mortgage Loan” shall include (i) the entire Outstanding Principal Balance of each Mortgage Loan, regardless of whether Buyer has advanced against all Mortgagor Advances with respect to such Mortgage Loan, and (ii) all rights (but not the obligations unless Buyer has exercised its rights under Section 11 to sell such Mortgage Loan after the occurrence of an Event of Default) to make future Mortgagor Advances under the Mortgage Contract related to such Mortgage Loan.

“Repurchase Agreement” has the meaning as set forth in the preamble to this Agreement.

Exhibit A-4

“Repurchase Documents” has the meaning as set forth in the preamble to this Agreement.

“Repurchase Price” has the meaning as set forth in the Repurchase Agreement

“Responsible Officer” shall mean when used with respect to the Custodian any officer within the Corporate Trust Office including any Vice President, Managing Director, Director, Assistant Vice President, Associate or any other officer of the Custodian customarily performing functions similar to those performed by any of the above designated officers having direct responsibility for the administration of this Agreement and also, with respect to a particular matter, any other officer to whom such matter is referred because of such officer’s knowledge and familiarity with the particular subject.

“Review Function Limitations” shall mean the limitations described in Section 2 of Schedule I hereto.

“Seller” has the meaning as set forth in the preamble of this Agreement.

“Servicer” shall mean initially American Home Mortgage Servicing, Inc. in its capacity as servicer of the Purchased Mortgage Loan, or any successor thereto mutually agreeable to the Agent and the Sellers.

“Servicer Trust Receipt and Security Agreement Letter” is defined in Section 3.4.

“Shipping Request” means the shipping request presented by the applicable Seller or the Servicer to the Custodian substantially in the form attached as Exhibit B (as amended, modified or supplemented from time to time as agreed to by the parties hereto).

“Takeout Agreement” shall mean an agreement between a Takeout Investor and a Seller, pursuant to which such Takeout Investor has committed to purchase from such Seller certain of the Purchased Mortgage Loans, as such agreement may be amended, restated, supplemented or otherwise modified from time to time.

“Takeout Commitment” shall mean, with respect to each Takeout Investor, an amount equal to the aggregate Takeout Value for all Purchased Mortgage Loans that such Takeout Investor has committed to purchase from any Seller pursuant to one or more Takeout Agreements.

“Takeout Investor” shall mean any entity which purchases Mortgage Loans from a Seller as identified by such Seller.

“Takeout Lender” shall mean any entity which makes loans to a Seller, and to which such Seller has pledged such Mortgage Loans as security for such loans as identified by such Seller.

“Takeout Value” shall mean, with respect to any Purchased Mortgage Loan, the price that a Takeout Investor has agreed to pay to a Seller for such Purchased Mortgage Loan.

“Transaction” has the meaning set forth in Paragraph 1 to the Repurchase Agreement, but shall include, as the context may require, (i) each transfer of Mortgage Loans to Buyer

Exhibit A-5

against the transfer of funds by Buyer or on account of a Margin Deficit, (ii) each transfer of Mortgage Loans to Buyer in connection with any repurchase, withdrawal or substitution of Mortgage Loans, and (iii) any portion of any Transaction remaining outstanding after giving effect to any repurchase, withdrawal or substitution of Mortgage Loans under this Agreement.

“Transaction Documents” shall mean the Repurchase Agreement, the Letter Agreement, this Agreement, the Electronic Tracking Agreement, the Performance Guaranty, the Agency Agreement, the Fee Letter, the Agent Fee Letter, the Account Control Agreement and the Collection Account Agreements, in each case as amended, restated, supplemented or otherwise modified from time to time.

“Trust Receipt” means the trust receipt issued by the Custodian evidencing the Mortgage Loans it holds, in the form attached as Exhibit F and/or Exhibit F-1, as applicable.

“TTC Loan” shall mean a Mortgage Loan which the Sellers refer to as a “two-time-close loan”, which matures at the end of the construction term, and is expected to be refinanced by a Seller from a construction loan to a permanent mortgage loan at maturity.

“Wet Loan” shall mean a wet-funded Mortgage Loan for which, as of the related Purchase Date, the Loan Documents required to be delivered to the Custodian under this Agreement have not yet been delivered and which shall have the following additional characteristics:

(i) the initial Mortgagor Advance has been funded by the applicable Seller prior to such Purchase Date;

(ii) the initial Mortgagor Advance has not been returned to such Seller by the escrow or closing agent for such Wet Loan; and

(iii) upon recordation of the related Mortgage, such Mortgage Loan will constitute a first priority lien on the premises described therein.

Exhibit A-6

EX-31.1

Exhibit 31.1

Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Michael Strauss, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of American Home Mortgage Investment Corp.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4. The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

/s/ Michael Strauss

Michael Strauss

Chairman, Chief Executive Officer and President

May 10, 2007

EX-31.2

Exhibit 31.2

Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Stephen A. Hozie, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of American Home Mortgage Investment Corp.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4. The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

/s/ Stephen A. Hozie

Stephen A. Hozie

Executive Vice President and Chief Financial Officer

May 10, 2007

EX-32.1

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of American Home Mortgage Investment Corp. (the “Registrant”) on Form 10-Q for the quarter ended March 31, 2007 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael Strauss, Chairman of the Board, Chief Executive Officer and President of the Registrant, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

May 10, 2007

/s/ Michael Strauss

Michael Strauss

Chairman, Chief Executive Officer and President

EX-32.2

Exhibit 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of American Home Mortgage Investment Corp. (the “Registrant”) on Form 10-Q for the quarter ended March 31, 2007, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Stephen A. Hozie, Executive Vice President and Chief Financial Officer of the Registrant, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

May 10, 2007

/s/ Stephen A. Hozie

Stephen A. Hozie

Executive Vice President and Chief Financial Officer