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

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

                                   (Mark One)

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

                  For the Fiscal Year Ended December 31, 2004.
                                       OR
                 [_] Transition Report Pursuant to Section 13 or
                  15(d) of the Securities Exchange Act of 1934

           For the Transition Period From ___________ to ___________.

                        Commission File Number 001-31916

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

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

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

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

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



                              TITLE OF EACH CLASS                                     NAME OF EACH EXCHANGE
                                                                                  
                    Common Stock, $0.01 par value per share                          New York Stock Exchange
9.75% Series A Cumulative Redeemable Preferred Stock, $0.01 par value per share      New York Stock Exchange
9.25% Series B Cumulative Redeemable Preferred Stock, $0.01 par value per share      New York Stock Exchange


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

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

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

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

As of December 31, 2004, the aggregate market value of the common stock held by
non-affiliates of the registrant was approximately $919,219,641 (computed by
reference to the closing price as of the last business day of the registrant's
most recently completed second fiscal quarter, June 30, 2004). For purposes of
this information, the outstanding shares of common stock owned by directors and
executive officers of the registrant were deemed to be shares of common stock
held by affiliates.

As of March 9, 2005, the registrant had 40,311,830 outstanding shares of common
stock, par value $0.01 per share, which is the registrant's only class of common
stock.



                      Documents Incorporated By Reference:

The information required to be furnished pursuant to Part III of this report on
Form 10-K/A will be set forth in, and incorporated by reference from, the
registrant's definitive proxy statement for the registrant's 2005 Annual Meeting
of Stockholders, which definitive proxy statement will be filed by the
registrant with the Securities and Exchange Commission not later than 120 days
after the end of the registrant's fiscal year ended December 31, 2004.




                                TABLE OF CONTENTS
                                -----------------

This amendment on Form 10-K/A reflects the restatement of the consolidated
financial statements of American Home Mortgage Investment Corp., as discussed in
Note 25 to the consolidated financial statements. Management of the Company
identified material weaknesses in the Company's internal control over financial
reporting, as discussed in Item 9A.

All of the information in this Form 10-K/A is as of March 16, 2005, the filing
date of the original Form 10-K for the year ended December 31, 2004, and has not
been updated for events subsequent to that date other than for the matter
discussed above.

                                                                           Page
                                                                           ----


                                     PART I

Item 1.     Business.......................................................  3

Item 2.     Properties..................................................... 13

Item 3.     Legal Proceedings.............................................. 13

Item 4.     Submission of Matters to a Vote of Security Holders............ 14

                                     PART II

Item 5.     Market for Registrant's Common Equity, Related Stockholder
            Matters and Issuer Purchases of Equity Securities.............. 15

Item 6.     Selected Financial Data........................................ 17

Item 7.     Management's Discussion and Analysis of Financial Condition
            and Results of Operations...................................... 19

Item 7A.    Quantitative and Qualitative Disclosures about Market Risk..... 34

Item 8.     Financial Statements and Supplementary Data.................... 34

Item 9.     Changes in and Disagreements with Accountants on Accounting
            and Financial Disclosure....................................... 34

Item 9A.    Controls and Procedures........................................ 35

Item 9B.    Other Information ............................................. 38

                                    PART III

Item 10.    Directors and Executive Officers of the Registrant............. 39

Item 11.    Executive Compensation......................................... 39

Item 12.    Security Ownership of Certain Beneficial Owners and Management
            and Related Stockholder Matters................................ 39

Item 13.    Certain Relationships and Related Transactions................. 39

Item 14.    Principal Accountant Fees and Services......................... 39

                                     PART IV

Item 15.    Exhibits and Financial Statement Schedules..................... 40

Signatures................................................................. 41

Index to Financial Statements

Index to Exhibits

                                        i


                                     PART I

                            SPECIAL NOTES OF CAUTION

Cautionary Note Regarding Forward-Looking Statements

This report, including, but not limited to, the section entitled "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
contains certain forward-looking statements within the meaning of the federal
securities laws. Some of the forward-looking statements can be identified by the
use of forward-looking words. When used in this report, statements 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:

      o     our business strategy;

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

      o     projected acquisitions or joint ventures; and

      o     projected capital expenditures.

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

The forward-looking statements in this report are based on our management's
beliefs, assumptions and expectations of our future economic performance, taking
into account the information currently available to it. These statements are not
statements of historical fact. Forward-looking statements are subject to a
number of factors, risks and uncertainties, some of which are not currently
known to us, that may cause our actual results, performance or financial
condition to be materially different from the expectations of future results,
performance or financial position. These factors include, without limitation:

      o     our limited operating history with respect to our proposed portfolio
            strategy;

      o     the ability of our management to change or modify our portfolio
            strategy, without advance notice to stockholders, which may cause us
            to suffer losses;

      o     our need for a significant amount of cash to operate our business;

      o     risks associated with the use of leverage;

      o     failure to maintain our status as a real estate investment trust
            ("REIT");

      o     changes in federal and state tax laws affecting REITs;

      o     repayment speeds within the mortgage-backed securities market;

      o     changes in federal and state regulation of mortgage banking;

      o     disruptions in the market for repurchase facilities;

      o     failure to match the interest rates on our borrowings with the
            interest rates on the mortgage-backed securities we hold;

      o     the overall environment for interest rates and their subsequent
            effect on our business;

      o     dividends declared by us that are not as high as expected;

                                       1


      o     risks associated with equity investments and the general volatility
            of the capital markets and the market price of our common stock;

      o     competition for business and personnel;

      o     our ability to identify and complete acquisitions and successfully
            integrate the businesses we acquire;

      o     general economic, political, market, financial or legal conditions;
            and

      o     those 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.

                                       2


ITEM 1.  BUSINESS

American Home Mortgage Investment Corp. ("AHM Investment" and, collectively with
its subsidiaries, the "Company," "we" or "us") is a Maryland corporation in the
business of investing in mortgage-backed securities resulting from the
securitization of residential mortgage loans that its subsidiaries originate and
service. American Home Mortgage Holdings, Inc. ("AHM Holdings"), a Delaware
corporation, is a direct, wholly owned subsidiary of AHM Investment that serves
as the parent holding company for American Home Mortgage Corp. ("AHM Corp."), a
New York corporation, which (together with American Home Mortgage Acceptance,
Inc. ("AHM Acceptance"), a Maryland corporation and direct, wholly owned
subsidiary of AHM Investment) primarily originates the Company's loans, and
American Home Mortgage Servicing, Inc. ("AHM Servicing") (formerly known as
Columbia National, Incorporated), a Maryland corporation, which services the
Company's loans as well as certain loans for third parties.

We use our equity capital and borrowed funds to invest in securities backed by
adjustable-rate mortgages ("ARMs"), and seek to generate income for distribution
to our stockholders based on the difference between the yield on our portfolio
of mortgage-backed securities and the cost of our borrowings. AHM Investment is
organized and operates for U.S. federal income tax purposes as a REIT. As a
REIT, it is required to dividend substantially all of its earnings to its
stockholders, and the net interest income it earns on the securities it holds
generally will not be subject to federal income tax to the extent it distributes
those earnings to its stockholders. See "Certain Federal Income Tax
Considerations" below.

As of December 31, 2004, the Company held a leveraged portfolio of
mortgage-backed securities in the amount of approximately $6.0 billion in order
to generate net interest income and serviced approximately 104,000 loans with an
aggregate principal amount of approximately $16.8 billion. As of December 31,
2004, the Company operated more than 400 loan production offices located in 43
states and made loans throughout all 50 states and the District of Columbia. The
Company originated approximately $23.1 billion in aggregate principal amount of
loans in 2004 and for the fourth quarter of 2004 was ranked as the nation's 20th
largest residential mortgage lender according to National Mortgage News.

The common stock of AHM Investment is traded on the New York Stock Exchange
("NYSE") under the symbol "AHM." AHM Investment's 9.75% Series A Cumulative
Redeemable Preferred Stock and 9.25% Series B Cumulative Redeemable Preferred
Stock are also traded on the NYSE under the symbols "AHM PrA" and "AHM PrB,"
respectively.

The Company's website is http://www.americanhm.com. The Company makes available
free of charge on its website its annual reports on Form 10-K, quarterly reports
on Form 10-Q, current reports on Form 8-K, Forms 3, 4 and 5 filed on behalf of
directors and executive officers and any amendments to such reports filed
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), as soon as reasonably practicable after such
material is electronically filed with, or furnished to, the SEC. We also will
provide any of the foregoing information without charge upon written request to
American Home Mortgage Investment Corp., 538 Broadhollow Road, Melville, New
York 11747, Attention: Investor Relations Director.

Also posted on the Company's website within the "investor relations" section
under the heading "corporate governance" are (i) the charters for the committees
of the Company's Board of Directors which include the Audit Committee,
Compensation Committee and Nominating and Corporate Governance Committee, (ii)
the Company's Corporate Governance Principles and (iii) the Company's Code of
Business Conduct and Ethics (the "Code of Ethics") governing its directors,
officers and employees. These documents also are available in print upon request
of any stockholder to the Company's Investor Relations Director. Within the time
period required by the SEC and the NYSE, the Company will post on its website
any modifications to the Code of Ethics and any waivers applicable to Senior
Financial Officers (as defined in the Code of Ethics).

The certifications by the Company's Chief Executive Officer and Chief Financial
Officer required under Section 302 of the Sarbanes-Oxley Act of 2002 have been
filed as Exhibits 31.1 and 31.2, respectively, to this report on Form 10-K/A.
The Company also has submitted to the NYSE its 2004 Annual Chief Executive
Officer Certification required pursuant to NYSE Corporate Governance Standards
Section 303A.12(a), to the effect that, as of the date of such certification,
the Chief Executive Officer of the Company was not aware of any violation by the
Company of the NYSE's Corporate Governance listing standards.

Description of Our Business

The Company's businesses include holding a leveraged portfolio of
mortgage-backed securities in order to earn net interest income, originating
mortgage loans (and either securitizing those loans or selling these loans for a
profit), and servicing its securitized loans for fee income. A growing portion
of the Company's portfolio of mortgage-backed securities consists of
self-originated securities, and a core strategy of the Company is to hold
self-originated securities, which the Company has, to date, been able to produce
at a lower cost than the price for comparable securities offered for sale in the
capital markets. The Company is organized and operates as a REIT for U.S.
federal income tax purposes. Our REIT-eligible assets and activities are held or

                                       3


performed at the parent level or in qualified REIT subsidiaries ("QRSs"). Our
primary QRS, AHM Acceptance, originates and securitizes REIT-eligible mortgage
loans. Our assets and activities that are not REIT-eligible, such as part of our
mortgage origination business and our servicing business, are conducted by our
direct or indirect taxable REIT subsidiaries ("TRSs"), AHM Holdings, AHM Corp.
and AHM Servicing. Our TRSs are subject to federal and state corporate income
tax.

In general, under our current business strategy, we expect to maximize the
operational and tax benefits provided by our REIT structure. Our TRSs accept and
process loan applications. Loan applications that meet the requirements of the
REIT, which typically consist of ARMs, are then sold by our TRSs to our QRS,
while loan applications that do not meet these requirements are closed and sold
to third-party purchasers. The associated servicing rights of all loans
originated by our QRS are retained by our TRSs. We generate net interest income
from our portfolio of mortgage loans and mortgage-backed securities, which is
the difference between (i) the interest income we receive from mortgage loans
and mortgage-backed securities and (ii) the interest we pay, plus certain
administrative expenses.

The TRSs also engage in other businesses that are ancillary to their
mortgage-backed securities holdings, origination and servicing activities,
including operating two mortgage reinsurance subsidiaries, a title abstract
subsidiary and a vendor management company. The TRSs also are participants in
mortgage lending joint ventures that result in the generation of assets for the
Company.

Mortgage-Backed Securities Holdings Segment

Our current portfolio strategy, which is subject to change at any time without
notice to our stockholders, and which we expect may change from time to time, is
to hold a portfolio of securities backed primarily by ARM loans that we
originate, fund them using equity capital and borrowed funds and generate net
interest income from the difference, or spread, between the yield on our
mortgage-backed securities and our cost of borrowing. Accordingly, we expect net
interest income to be the largest component of our earnings in the future.

A growing percentage of the Company's portfolio of mortgage-backed securities
consists of self-originated securities, and a core strategy of the Company is to
hold self-originated securities, which the Company has, to date, been able to
produce at a lower cost than the price for comparable securities offered for
sale in the capital markets. We believe that the cost advantage we obtain from
self-originating loans, and holding such loans in securitized form in the REIT
or in our primary QRS, is primarily the result of two economic factors. First,
through self-origination, we avoid the intermediation costs associated with
purchasing mortgage assets in the capital markets. Second, the REIT or our
primary QRS is able to acquire loan applications from our TRSs, rather than
purchase closed loans, at a price substantially less than the purchase price of
a closed loan.

The size of the Company's leveraged portfolio of mortgage-backed securities was
$6.0 billion as of December 31, 2004. The Company's securities are funded
through borrowings in the reverse repurchase market. Our termed repurchase
agreements generally have maturities ranging from one to twelve months. Our
securities portfolio is managed defensively to mitigate interest rate, credit
and liability rollover risks. Interest rate risk is managed by using swaps to
extend the duration of the reverse repurchases, thereby causing the Company to
approximately achieve a "matched book," with the durations of its assets and
liabilities approximately equal. In addition, because we are focused on holding
ARM, rather than fixed-rate, loans, we believe we will be less adversely
affected by prepayments due to falling interest rates or a reduction in our net
interest income due to rising interest rates. Credit risk is managed by holding
primarily high-credit quality securities; approximately 95% of the securities we
hold are either agency obligations or are rated AAA or AA by Standard & Poor's.
Agency securities are mortgage-backed securities for which a U.S. government
agency or a government-sponsored or federally chartered corporation, such as
Ginnie Mae, Fannie Mae or Freddie Mac, guarantees payments of principal or
interest on the certificates. Agency securities are not rated, but carry an
implied AAA rating.

Rollover risk is managed by laddering the maturities of the reverse repurchase
borrowings. We also believe we are less susceptible to a disruption in the
repurchase market because we hold primarily agency securities and securities
rated AAA or AA by Standard and Poor's, which have typically been eligible for
repurchase market financing even when repurchase financing was unavailable for
other classes of mortgage assets.

Loan Origination Segment

The Company's loan origination business is the generator of the bulk of its
assets and the source of its gain on sale revenue. It also is the source of the
Company's permanent customer base, i.e., those customers whose loans are being
serviced by the Company. During 2004, the Company made loans to approximately
105,000 borrowers. The Company's total originations for 2004 were $23.1 billion,
and National Mortgage News ranked the Company as the nation's 20th largest
residential mortgage lender for the fourth quarter of 2004.

                                       4


As of December 31, 2004, lending was conducted through over 400 retail and
wholesale loan production offices located in 43 states. The Company's
origination business obtains approximately 50% of its originations through its
retail loan production offices, 49% of its originations from mortgage brokers
through its wholesale loan production offices and 1% of its originations from
direct-to-consumer lending activities supported by the Company's call center. Of
the $23.1 billion aggregate principal amount of loans the Company made during
2004, 52% were to fund home purchases while 48% were to fund refinancings. The
Company offers a broad array of mortgage products and primarily makes loans to
borrowers with good credit profiles. The weighted-average FICO score for our
$23.1 billion of total originations in 2004 was 714. All of the loans the
Company made in 2004 were secured by one- to four-family dwellings.

We seek to utilize a combination of skilled loan officers, state of the art
technology, a broad and fairly priced product line and a high level of customer
service to successfully compete in the marketplace. Once a consumer applies for
a loan, our mortgage banking operation processes and underwrites the consumer's
application and we fund the consumer's loan by drawing on a warehouse line of
credit. The loan is then typically either securitized and the resulting
securities held by us as a long-term investment or sold by us at a profit.

Our loan origination business has rapidly grown its market share and scale since
becoming a public company in 1999. The aggregate principal amount of our total
loan originations were $12.2 billion in 2002, $21.7 billion in 2003 and $23.1
billion in 2004. Inside Mortgage Finance reported our national market share as
0.47% in 2002, 0.60% in 2003 and 0.82% in 2004. We believe our growth has made
our mortgage banking operation more profitable and more effective at serving our
customers. Specifically, growth in originations has lowered the per-loan cost of
our centralized support operations and, consequently, our overall per-loan cost
of origination. Our growth has also given us a relatively large presence in the
secondary mortgage market, and, as a result, has improved our ability to execute
loan sales to third-party purchasers. In addition, our size has enabled us to
negotiate better terms with warehouse lenders and credit enhancers such as
Fannie Mae and Freddie Mac. Finally, our size has made it possible for us to
profitably enter businesses ancillary to mortgage lending, such as mortgage
reinsurance, title brokerage and vendor management.

AHM Holdings has grown its loan origination franchise substantially since
becoming a public company in October of 1999. In 2004, total loan originations
were approximately $23.1 billion, compared to $21.7 billion in 2003, $12.2
billion in 2002, $7.8 billion in 2001 and $3.0 billion in 2000. The Company's
growth has resulted principally from growing its network of loan production
offices by acquisitions, recruiting and hiring of sales personnel and internally
growing its loan production offices. The Company has increased its number of
loan production offices by acquiring small to mid-sized mortgage businesses. AHM
Holdings completed eight such acquisitions since December of 1999. In each
acquisition, we have generally retained and grown the acquired company's loan
production offices while substantially eliminating their centralized support
operations and associated costs. These acquisitions have significantly increased
our origination capability. The Company's strategy is to continue to
opportunistically seek acquisitions to grow its loan origination business.

Growth in our business with mortgage brokers has resulted from adding additional
branches and account executives in our wholesale channel and increasing the
depth of our mortgage broker support capabilities.

Our newly originated loans held pending sale or securitization were $4.9 billion
as of December 31, 2004. These loans are financed through our commercial paper
program, collateralized debt obligations and through borrowings from banks and
securities dealers. The interest rate risk posed by our agency eligible
conforming loans and most of our non-conforming loans is hedged through forward
sales, interest rate swaps or interest rate caps.

Mortgage Products
-----------------

The Company offers a broad and competitive range of mortgage products that aim
to meet the mortgage needs of primarily high-credit-quality borrowers. Its
product line includes conventional conforming fixed rate loans, ARMs, government
fixed rate loans, jumbo fixed rate loans, non-prime loans, home equity or second
mortgage loans, alternate "A" loans, construction loans and bridge loans.

The following table summarizes information with respect to the most significant
categories of mortgage loans the Company originated for the years ended December
31, 2004 and 2003:

                                       5


                            LOAN ORIGINATION SUMMARY



                                                                                                       % of Total
              Loan Type                      Number of Loans            Loan Originations           Dollar Originations
-------------------------------------  ---------------------------  --------------------------  ---------------------------
                                         Year Ended December 31,     Year Ended December 31,      Year Ended December 31,
                                       ---------------------------  --------------------------  ---------------------------
(Dollars in millions)                       2004          2003          2004          2003          2004          2003
-------------------------------------  --------------  -----------  ------------  ------------  ------------  -------------
                                                                                            
Conventional conforming fixed rate             43,295       77,303   $   7,147.5   $  12,702.9         31.0%          58.5%
Adjustable rate mortgages                      34,023       18,987       8,466.9       4,116.1          36.7           19.0
Government fixed rate                           8,840       17,434       1,162.7       2,296.3           5.0           10.6
Jumbo fixed rate                                3,953        3,100       1,704.1       1,393.4           7.4            6.4
Alternate "A"                                  16,102        2,911       3,091.2         569.5          13.4            2.6
Non-prime                                       3,044        2,500         465.9         360.0           2.0            1.7
Home equity/Second                             19,927        6,957       1,025.7         254.5           4.5            1.2
Construction                                        7           45           1.3          10.5             -              -
Bridge                                             19           20           3.8           2.1             -              -
                                       --------------  -----------  ------------  ------------  ------------  -------------
Loan Originations                             129,210      129,257   $  23,069.1   $  21,705.3        100.0%         100.0%
                                       ==============  ===========  ============  ============  ============  =============


Conventional Conforming Fixed Rate Loans. These mortgage loans conform to the
underwriting standards established by Fannie Mae or Freddie Mac. This product is
limited to high-quality borrowers with good credit records and involves adequate
down payments or mortgage insurance.

ARMs. The ARM's defining feature is a variable interest rate that fluctuates
over the life of the loan, usually 30 years. Interest rate fluctuations are
based on an index that is related to Treasury bill rates, regional or national
average cost of funds of savings and loan associations, or another widely
published rate, such as LIBOR. The period between the rate changes is called an
adjustment period and may change every six months or one year. The Company also
offers ARMs with a fixed period of three years, five years or ten years. Some of
the Company's ARMs may include payment caps, which limit the interest rate
increase for each adjustment period.

Government Fixed Rate Loans. These mortgage loans conform to the underwriting
standards established by the Federal Housing Authority ("FHA") or the Veterans
Administration ("VA"). These loans may qualify for insurance from the FHA or
guarantees from the VA. The Company has been designated by the U.S. Department
of Housing and Urban Development ("HUD") as a direct endorser of loans insured
by the FHA and as an automatic endorser of loans partially guaranteed by the VA,
allowing it to offer FHA or VA mortgages to qualified borrowers. FHA and VA
mortgages must be underwritten within specific governmental guidelines, which
include borrower income verification, asset verification, borrower
creditworthiness, property value and property condition.

Jumbo Loans. Jumbo loans are considered non-conforming mortgage loans because
they have a principal loan amount in excess of the loan limits set by Fannie Mae
and Freddie Mac (which limits were $359,650, for single-family, one-unit
mortgage loans in the continental United States). The Company offers jumbo loans
with creative financing features, such as the pledging of security portfolios.
Its jumbo loan program is geared to the more financially-sophisticated borrower.

Alternate "A" Loans. Alternate "A" mortgage loans consist primarily of mortgage
loans that are first lien mortgage loans made to borrowers whose credit is
generally within typical Fannie Mae or Freddie Mac guidelines, but have loan
characteristics that make them non-conforming under these guidelines. From a
credit risk standpoint, alternate "A" loan borrowers present a risk profile
comparable to that of conforming loan borrowers, but entail special underwriting
considerations, such as a higher loan to value ratio or limited income
verification.

Non-Prime Mortgage Loans. Non-prime mortgage loans focus on customers whose
borrowing needs are not served by traditional financial institutions. Borrowers
of non-prime mortgage loans may have impaired or limited credit profiles, high
levels of debt service to income, or other factors that disqualify them for
conforming loans. When the Company originates mortgage loans of borrowers with
higher credit risk, the Company offsets this risk with higher interest rates
than would be charged for its

                                       6


conventional and government loans. Offering this category of mortgage loans on a
limited basis allows the Company to provide loan products to borrowers with a
variety of credit profiles.

Home Equity or Second Mortgage Loans. These loans are generally secured by
second liens on the related property. Home equity mortgage loans can take the
form of a home equity line of credit, which generally bears an adjustable
interest rate, while second mortgage loans are closed-end loans with fixed
interest rates. Both types of loans are designed for borrowers with high-quality
credit profiles. Home equity lines generally provide for a 5- or 15-year draw
period where the borrower withdraws needed cash and pays interest only, followed
by a 10- to 20-year repayment period. Second mortgage loans are fixed in amount
at the time of origination and typically amortize over 15 to 30 years with a
balloon payment due after 15 years.

Construction Loans. The Company offers a variety of construction loans for
owner-occupied, single-family residences. These loans are available on a
rollover basis, meaning that the borrower can secure funding for the land
purchase and construction of the home, then roll the financing over into a
permanent mortgage loan. During the construction period, interest-only payments
are made. Withdrawals during the construction period, to cover the costs
associated with each stage of completion, are usually made in five to ten
disbursements.

Bridge Loans. The bridge loans that the Company makes are short-term loans and
may be used in conjunction with its other loan products. Bridge loans provide a
means for a borrower to obtain cash based on the equity of a current home that
is on the market but not yet sold and to use that cash to purchase a new home.

Loan Underwriting
-----------------

The Company's primary goal in making a decision whether to extend a loan is
whether that loan conforms to the expectations and underwriting standards of the
secondary mortgage market. Typically, these standards focus on a potential
borrower's credit history (often as summarized by credit scores), income and
stability of income, liquid assets and net worth and the value and the condition
of the property securing the loan. Whenever possible, the Company uses
"artificial intelligence" underwriting systems to determine whether a particular
loan meets those standards and expectations. In those cases where artificial
intelligence is not available, the Company relies on its credit officer staff to
make the determination.

Quality Control
---------------

The Company performs monthly quality control testing on a statistical sample of
the loans we originate. The quality control testing includes checks on the
accuracy of the borrower's income and assets and the credit report used to make
the loan, reviews whether the loan buyer's underwriting standards were properly
applied and examines whether the loan complies with government regulations.
Quality control findings are summarized in monthly reports that the Company uses
to identify areas that need corrective action or could use improvement. To date,
those reports have not identified any material quality control concerns,
although there can be no assurances that the Company will not experience
material quality control concerns in the future.

Sale of Loans and Servicing Rights
----------------------------------

With respect to mortgage loans that the Company originates but does not
securitize, the Company typically seeks to sell those loans within 45 days of
origination. The Company sells those loans to Fannie Mae, Freddie Mac, large
national banks, thrifts and smaller banks, securities dealers, real estate
investment trusts and other institutional loan buyers. The Company also swaps
loans with Fannie Mae and Freddie Mac in exchange for mortgage-backed
securities, which the Company then sells.

Typically, the Company sells loans with limited recourse. By doing so, with some
exceptions, the Company reduces its exposure to default risk at the time it
sells the loan, except that it may be required to repurchase the loan if it
breaches the representations or warranties that it makes in connection with the
sale of the loan, in the event of an early payment default, or if the loan does
not comply with the underwriting standards or other requirements of the ultimate
investor.

The Company sells the loans to investors pursuant to written agreements that
establish an ongoing sale program under which those investors stand ready to
purchase loans so long as the loans the Company offers for sale satisfy the
investors' underwriting standards.

In 2004, the three institutions that bought the most loans from the Company were
Wells Fargo Funding, Countrywide Financial Corporation and Fannie Mae, which
accounted for 38%, 25% and 7%, respectively, of the Company's total loan sales.

With respect to mortgage loans that it originates but does not securitize, the
Company generally sells the mortgage servicing rights ("MSRs") to those loans at
the time it sells those loans. The prices at which the Company is able to sell
its MSRs vary over time and may be materially adversely affected by a number of
factors, including, for example, the general supply of, and demand

                                       7


for, MSRs and changes in interest rates. From time to time the Company retains
the servicing rights on a portion of its loan originations. When the Company
retains servicing rights, it earns an annual servicing fee.

On December 31, 2004, the carrying value of the Company's MSRs was $151.4
million. The MSRs are financed by borrowings from a bank syndicate and are not
hedged due to their counter-cyclicality with the Company's mortgage origination
business and their relatively small size.

Loan Servicing Segment

On December 31, 2004, the Company's servicing business, conducted through AHM
Servicing, serviced the home mortgage loans of approximately 104,000 borrowers.
Loans are primarily serviced for the trusts of the Company's securitizations,
and for Fannie Mae and Ginnie Mae. The Company's servicing operation is eligible
to service loans for Fannie Mae, Freddie Mac and Ginnie Mae, and has been rated
a "Select Servicer" by Standard & Poor's.

As of December 31, 2004, AHM Servicing serviced approximately 104,000 loans with
an aggregate principal amount of approximately $16.8 billion. The average annual
servicing fee on our servicing portfolio as of December 31, 2004, was 0.348% of
the principal amount of each loan we service. Our servicing business collects
mortgage payments, administers tax and insurance escrows, seeks to mitigate
losses on defaulted loans and responds to borrower inquiries.

We expect our servicing business to grow as we increase our portfolio of
self-originated mortgage-backed securities. Our servicing business enables us to
retain an ongoing business relationship with our borrowers, which we believe
makes it more likely that we will earn those borrowers' business when they need
a new loan or wish to refinance an existing loan. We believe that our servicing
capability also enables us to sell loans to Fannie Mae, Freddie Mac and Ginnie
Mae on more advantageous terms than if we did not service our loan originations.

The following table sets forth certain information regarding the Company's
servicing portfolio of single-family mortgage loans serviced for others for the
years ended December 31, 2004 and 2003:



LOANS SERVICED FOR OTHERS                                                  Year Ended December 31,
                                                                       -------------------------------
(In millions)                                                               2004             2003
                                                                       --------------   --------------
                                                                                   
Composition at end of year:
Conventional mortgage loans                                             $    10,926.8    $     6,232.4
FHA-insured mortgage loans                                                      823.1          1,708.6
VA-guaranteed mortgage loans                                                    205.7            331.3
                                                                       --------------   --------------
Loans serviced for others at end of year                                $    11,955.6    $     8,272.3
                                                                       ==============   ==============

Loans serviced for others at beginning of year                          $     8,272.3    $     8,541.8
Loans sold or securitized with servicing retained                             6,981.1          3,715.0
Prepayments and foreclosures                                                 (2,649.1)        (3,818.5)
Amortization                                                                   (648.7)          (166.0)
                                                                       --------------   --------------
Loans serviced for others at end of year                                $    11,955.6    $     8,272.3
                                                                       ==============   ==============

Delinquent mortgage loans and pending foreclosures at end of year
30 days                                                                 $       201.9    $       211.5
60 days                                                                          42.4             44.4
90 days                                                                          51.5             35.8
                                                                       --------------   --------------
Total delinquencies                                                     $       295.8    $       291.7
                                                                       ==============   ==============
Foreclosures pending                                                    $        44.6    $        54.5
                                                                       ==============   ==============


                                       8


At December 31, 2004, the Company's servicing portfolio of single-family
mortgage loans serviced for others was stratified by interest rate as follows:



                                                        December 31, 2004
(Dollars in millions)  -----------------------------------------------------------------------------------
      Interest             Principal           Percent of         Weighted Average          Mortgage
        Rate                Balance          Total Principal     Maturity (Years)       Servicing Rights
---------------------  -----------------   ------------------   --------------------   -------------------
                                                                            
Under 6%                $        8,284.1                69.3%                   26.8    $            110.1
6.00-6.99%                       2,228.5                18.6%                   26.4                  24.2
7.00-7.99%                       1,096.2                 9.2%                   25.1                  14.1
8% and over                        346.8                 2.9%                   23.4                   4.1
                       -----------------   ------------------   --------------------   -------------------
                        $       11,955.6               100.0%                   26.5    $            152.5
                       =================   ==================                          ===================


The weighted-average interest rate of the single-family mortgage loans serviced
for others as of December 31, 2004 was 5.5%. As of December 31, 2004, 39% of
loans serviced for others bore interest at fixed rates and 61% bore interest at
adjustable rates. The weighted average net service fee of the Company's loans
serviced for others was 0.348% as of December 31, 2004. The weighted-average
interest rate of the Company's fixed-rate loans serviced for others was 6.32% as
of December 31, 2004.

Financial Information About Industry Segments

The Company primarily conducts its business in three principal segments:
mortgage-backed securities holdings, loan origination and loan servicing. The
business conducted by each segment is described above under "Description of Our
Business." Additional financial information regarding the Company's business
segments as of December 31, 2004, December 31, 2003, and December 31, 2002, and
for the years ended December 31, 2004, December 31, 2003, and December 31, 2002,
is set forth in Note 23 to Consolidated Financial Statements, entitled "Segments
and Related Information," and is incorporated herein by reference.

Company History and Business Development

AHM Investment was incorporated in July of 2003 under the laws of the State of
Maryland. AHM Investment was formed in order to combine the net assets
(consisting primarily of mortgage-backed securities) of Apex Mortgage Capital,
Inc., a Maryland corporation operating as a REIT ("Apex"), with the mortgage
origination and servicing businesses of AHM Holdings. In December of 2003, AHM
Investment became the parent company of AHM Holdings through an internal
reorganization and acquired Apex by merger. Our primary purpose for combining
the net assets of Apex with the origination and servicing businesses of AHM
Holdings was to realize the benefits of holding a portfolio of self-originated,
mortgage-backed securities.

Prior to the Company's conversion into a REIT, our business strategy was to sell
substantially all of the loans we originated and the largest component of our
net income was generated by the gain on sale of such loans. Our historical
financial results prior to 2004 reflect this discontinued strategy of selling
virtually all of the loans that we originated. Since our REIT conversion, our
business strategy is to hold the mortgage-backed securities resulting from the
securitization of ARM loans we originate, and, consequently, we believe that the
largest component of our net income in the future will be net interest income
generated by our mortgage-backed securities holdings.

AHM Corp. was the first company formed as part of the American Home Mortgage
organization. Historically, AHM Corp., currently a direct, wholly owned
subsidiary of AHM Holdings, operated as an independent mortgage lender from its
formation in 1988 until 1999. On June 15, 1999, AHM Holdings was formed, and on
October 6, 1999, AHM Holdings completed an initial public offering of its common
stock and became the parent holding company of AHM Corp. AHM Holdings acquired
AHM Servicing (formerly known as Columbia National, Incorporated) in June of
2002. AHM Acceptance was formed as a direct, wholly owned subsidiary of AHM
Investment in August of 2003.

Hedging Activities

The Company hedges interest rate risk and price volatility on its mortgage loan
interest rate lock commitments and mortgage loans held for sale during the time
it commits to acquire or originate mortgages at a pre-determined rate until the
time it sells or securitizes mortgages. The Company also hedges interest rate
risk associated with funding its portfolio of mortgage-backed

                                       9


securities. To mitigate interest rate and price volatility risks, the Company
may enter into certain hedging transactions. The nature and quantity of the
Company's hedging transactions are determined based on various factors,
including market conditions and the expected volume of mortgage acquisitions and
originations.

Additional information regarding interest rate hedging is set forth in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and in Note 1 to Consolidated Financial Statements, entitled
"Summary of Significant Accounting Policies," and is incorporated herein by
reference.

Government Regulation

The Company's loan origination and loan servicing segments are subject to
extensive and complex rules and regulations of, and examinations by, various
federal, state, and local government authorities and government sponsored
enterprises, including, without limitation, HUD, FHA, VA, Fannie Mae, Freddie
Mac and Ginnie Mae. These rules and regulations impose obligations and
restrictions on the Company's loan origination and credit activities, including,
without limitation, the processing, underwriting, making, selling, securitizing
and servicing of mortgage loans.

The Company's lending activities also are subject to various federal laws,
including the Federal Truth-in-Lending Act and Regulation Z thereunder, the
Homeownership and Equity Protection Act of 1994, the Federal Equal Credit
Opportunity Act and Regulation B thereunder, the Fair Credit Reporting Act of
1970, the Real Estate Settlement Procedures Act of 1974 and Regulation X
thereunder, the Fair Housing Act, the Home Mortgage Disclosure Act and
Regulation C thereunder and the Federal Debt Collection Practices Act, as well
as other federal statutes and regulations affecting its activities. The
Company's loan origination activities also are subject to the laws and
regulations of each of the states in which it conducts its activities.

These laws, rules, regulations and guidelines limit mortgage loan amounts and
the interest rates, finance charges and other fees the Company may assess,
mandate extensive disclosure and notice to its customers, prohibit
discrimination, impose qualification and licensing obligations on it, establish
eligibility criteria for mortgage loans, provide for inspections and appraisals
of properties, require credit reports on prospective borrowers, regulate payment
features, and prohibit kickbacks and referral fees, among other things. These
rules and requirements also impose on the Company certain reporting and net
worth requirements. Failure to comply with these requirements can lead to, among
other things, loss of approved status, termination of contractual rights without
compensation, demands for indemnification or mortgage loan repurchases, certain
rights of rescission for mortgage loans, class action lawsuits, and
administrative enforcement actions.

Although the Company believes that it has systems and procedures in place to
ensure compliance with these requirements and that it currently is in compliance
in all material respects with applicable federal, state and local laws, rules
and regulations, there can be no assurance of full compliance with current laws,
rules and regulations, that more restrictive laws, rules and regulations will
not be adopted in the future, or that existing laws, rules and regulations or
the mortgage loan documents with borrowers will not be interpreted in a
different or more restrictive manner. The occurrence of any such event could
make compliance substantially more difficult or expensive, restrict the
Company's ability to originate, purchase, sell or service mortgage loans,
further limit or restrict the amount of interest and other fees and charges
earned from mortgage loans that the Company originates, purchases or services,
expose it to claims by borrowers and administrative enforcement actions, or
otherwise materially and adversely affect its business, financial condition and
results of operations.

Members of Congress, government officials and political candidates have from
time to time suggested the elimination of the mortgage interest deduction for
federal income tax purposes, either entirely or in part, based on borrower
income, type of loan or principal amount. Because many of the Company's loans
are made to borrowers for the purpose of purchasing a home, the competitive
advantage of tax deductible interest, when compared with alternative sources of
financing, could be eliminated or seriously impaired by this type of
governmental action. Accordingly, the reduction or elimination of these tax
benefits could have a material adverse effect on the demand for the kind of
mortgage loans the Company offers.

The Company also is performing various mortgage-related operations on the
Internet. The Internet, and the laws, rules and regulations related to it, are
relatively new and still evolving. As such, there exist many opportunities for
the Company's business operations on the Internet to be challenged or to become
subject to legislation, any of which may materially and adversely affect its
business, financial condition and results of operations.

Information Systems

The Company's loan origination enterprise system controls most aspects of the
Company's loan origination operations, from the processing of a loan application
through the closing of the loan and the sale of the loan to institutional
investors. The system also performs checks and balances on many aspects of the
Company's operations and supports the Company's marketing efforts. The Company's
enterprise system functions on a wide area network that connects all of its
branches in "real time." With its wide area

                                       10


network, a transaction at any one of its locations is committed centrally and is
therefore immediately available to all personnel at all other locations. An
important benefit of the enterprise system is that it aids the Company in
controlling its business processes. The system assures that the Company's
underwriting policies are adhered to, that only loans that are fully approved
are disbursed, and that the correct disclosures and loan documents for a
borrower are used based upon such borrower's state and loan program. The
Company's enterprise system also provides its management with operating reports
and other key data. In addition, the Company has developed a proprietary website
and supporting call center software through the efforts of its in-house computer
programming staff.

The Company's loan servicing system, LSAMS ("Loan Servicing and Accounting
Management System"), manages most aspects of the loan servicing function, from
loan closing to its ultimate payoff or disposition. The Company has developed
enhancements and ancillary systems to further automate this function.
Efficiencies have been gained through the use of Interactive Voice Response
units that allow customers to ask questions and receive answers 24 hours a day.
The Company also utilizes CTI ("Computer-Telephone Integration") to speed the
work of customer service agents. The Company's customers are able to utilize the
Internet to check on current account information as well as to make monthly
payments. FORTRACS, a foreclosure tracking system, has been implemented to
streamline the foreclosure process, track bankruptcies, expedite foreclosure
claims processing and dispose of real estate owned ("REO") property. The
Company's loan servicing system is scalable well beyond its current workload.

Seasonality

Seasonality affects the Company's loan origination and loan servicing segments,
as loan originations and payoffs are typically at their lowest levels during the
first and fourth quarters due to a reduced level of home buying activity during
the winter months. Loan originations and payoffs generally increase during the
warmer months, beginning in March and continuing through October. As a result,
the Company may experience higher earnings in the second and third quarters and
lower earnings in the first and fourth quarters from its loan origination
segment. Conversely, the Company may experience lower earnings in the second and
third quarters and higher earnings in the first and fourth quarters from its
loan servicing segment.

Competition

We face intense competition from mortgage REITs, commercial banks, savings and
loan associations and other finance and mortgage banking companies, as well as
from Internet-based lending companies and other lenders participating on the
Internet. Entry barriers in the mortgage industry are relatively low and
increased competition is likely. As we seek to expand our business, we will face
a greater number of competitors, many of whom will be well-established in the
markets that we seek to penetrate. Many of our competitors are much larger than
we are, have better name recognition than we do and have far greater financial
and other resources than we do. In addition, competition may lower the rates we
are able to charge borrowers, thereby potentially lowering the amount of income
on future loan sales and sales of MSRs. Increased competition also may reduce
the volume of our loan originations and loan sales.

Employees

The Company recruits, hires and retains individuals with the specific skills
that complement its corporate growth and business strategies. As of December 31,
2004, the Company had 4,730 employees.


                    CERTAIN FEDERAL INCOME TAX CONSIDERATIONS


General

AHM Investment elected to be treated as a REIT for federal income tax purposes
in the federal income tax return for its first taxable year ending December 31,
2003. In brief, if AHM Investment meets certain detailed conditions imposed by
the REIT provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), including a requirement that we invest primarily in qualifying REIT
assets (which generally include real estate and mortgage loans) and a
requirement that we satisfy certain income tests, AHM Investment will not be
taxed at the corporate level on the income that we currently distribute to our
stockholders. Therefore, to this extent, AHM Investment's stockholders will
avoid double taxation, at the corporate level and then again at the stockholder
level when the income is distributed, that they would otherwise experience if
AHM Investment failed to qualify as a REIT.

If AHM Investment does not qualify as a REIT in any given year, we would be
subject to federal income tax as a corporation for the year of the
disqualification and for each of the following four years. This disqualification
would result in federal income tax,

                                       11


which would reduce the amount of the after-tax cash available for distribution
to our stockholders. AHM Investment believes that we have satisfied the
requirements for qualification as a REIT since the year ended December 31, 2003.
AHM Investment intends at all times to continue to comply with the requirements
for qualification as a REIT under the Code, as described below.

In addition, to the extent AHM Investment holds a residual interest in a real
estate mortgage investment conduit or is subject to the "taxable mortgage pool"
("TMP") rules, AHM Investment's status as a REIT will not be impaired, but a
portion of the taxable income generated by the residual interest or AHM
Investment's mezzanine debt and other assets constituting a TMP may be
characterized as "excess inclusion" income allocated to AHM Investment's
stockholders. Any such excess inclusion income (i) will not be allowed to be
offset by the net operating losses of a stockholder, (ii) will be subject to tax
as unrelated business taxable income to a tax-exempt stockholder, (iii) will
result in the application of U.S. federal income tax withholding at the maximum
rate (without reduction for any otherwise applicable income tax treaty) on any
excess inclusion income allocable to a stockholder that is not a "United States
Person" (as defined in the Code), and (iv) may result in AHM Investment having
to pay tax on excess inclusion income to the extent the AHM Investment's
stockholders are certain "disqualified organizations."

Requirements for Qualification as a REIT

To qualify for tax treatment as a REIT under the Code, we must meet certain
tests, as described briefly below.

Ownership of Common Stock

Each taxable year for which we elect to be a REIT, a minimum of 100 persons must
hold our shares of capital stock for at least 335 days of a 12-month year (or a
proportionate part of a short tax year). In addition, at all times during the
second half of each taxable year, no more than 50% in value of our capital stock
may be owned directly or indirectly by five or fewer individuals. We are
required to maintain records regarding the ownership of our shares and to demand
statements from persons who own more than a certain number of our shares
regarding their ownership of shares. We must keep a list of those stockholders
who fail to reply to such a demand.

We are required to use the calendar year as our taxable year for income tax
purposes.

Nature of Assets

On the last day of each calendar quarter, at least 75% of the value of our
assets and any assets held by a QRS must consist of qualified REIT assets
(primarily, real estate and mortgages secured by real estate) ("Qualified REIT
Assets"), government assets, cash and cash items. We expect that substantially
all of our assets will continue to be Qualified REIT Assets. On the last day of
each calendar quarter, of the assets not included in the foregoing 75% assets
test, the value of mortgage-backed securities that we hold issued by any one
issuer may not exceed 5% in value of our total assets and we may not own more
than 10% of any one issuer's outstanding securities (with an exception for a
qualified electing TRS). Under that exception, the aggregate value of business
that we may undertake through TRSs is limited to 20% or less of our total
assets. We monitor the purchase and holding of our assets in order to comply
with the above asset tests.

We may from time to time hold, through one or more TRSs, assets that, if we held
directly, could generate income that would have an adverse effect on our
qualification as a REIT or on certain classes of our stockholders.

Sources of Income

We must meet the following separate income-based tests each year:

1. The 75% Test. At least 75% of our gross income for the taxable year must be
derived from Qualified REIT Assets including interest (other than interest based
in whole or in part on the income or profits of any person) on obligations
secured by mortgages on real property or interests in real property. The
investments that we have made and will continue to make will give rise primarily
to mortgage interest qualifying under the 75% income test.

2. The 95% Test. In addition to deriving 75% of our gross income from the
sources listed above, at least an additional 20% of our gross income for the
taxable year must generally be derived from those sources, or from dividends,
interest or gains from the sale or disposition of stock or other assets that are
not dealer property. We intend to limit substantially all of the assets that we
acquire (other than stock in certain affiliate corporations as discussed below)
to Qualified REIT Assets. Our strategy to maintain REIT status may limit the
type of assets, including certain hedging contracts and other assets, that we
otherwise might acquire.

                                       12


Distributions

We must distribute to our stockholders on a pro rata basis each year an amount
equal to at least (i) 90% of our taxable income before deduction of dividends
paid and excluding net capital gain, plus (ii) 90% of the excess of the net
income from foreclosure property over the tax imposed on such income by the
Code, less (iii) any "excess noncash income." We intend to make distributions to
our stockholders in sufficient amounts to meet the distribution requirement.

Taxation of Stockholders

For any taxable year in which we are treated as a REIT for federal income tax
purposes, the amounts that we distribute to our stockholders out of current or
accumulated earnings and profits will be includable by the stockholders as
ordinary income for federal income tax purposes unless properly designated by us
as capital gain dividends. Our distributions will not be eligible for the
dividends received deduction for corporations and generally will not be treated
as "qualified dividend income" eligible for reduced rates. Stockholders may not
deduct any of our net operating losses or capital losses.

If we make distributions to our stockholders in excess of our current and
accumulated earnings and profits, those distributions will be considered first a
tax-free return of capital, reducing the tax basis of a stockholder's shares
until the tax basis is zero. Such distributions in excess of the tax basis will
be taxable as gain realized from the sale of our shares.

In reading this report on Form 10-K/A and the tax disclosure set forth above,
please note that although the Company is combined with all of its subsidiaries
for financial accounting purposes, for federal income tax purposes, only AHM
Investment and AHM Acceptance (and their assets and income) constitute the REIT,
and the Company's remaining subsidiaries constitute a separate consolidated
group subject to regular corporate income taxes.

The provisions of the Code are highly technical and complex. This summary is not
intended to be a detailed discussion of the Code or its rules and regulations,
or of related administrative and judicial interpretations. We have not obtained
a ruling from the Internal Revenue Service with respect to tax considerations
relevant to our organization or operation, or to an acquisition of our stock.
This summary is not intended to be a substitute for prudent tax planning and
each of our stockholders is urged to consult his or her own tax advisor with
respect to these and other federal, state, local and foreign tax consequences of
the acquisition, ownership and disposition of shares of our stock and any
potential changes in applicable law.

Taxation of AHM Investment

In each year that AHM Investment qualifies as a REIT, it generally will not be
subject to federal income tax on that portion of its REIT taxable income or
capital gain that it distributes to stockholders. AHM Investment is subject to
corporate level taxation on any undistributed income. In addition, AHM
Investment faces corporate level taxation due to any failure to make timely
distributions, on the built-in gain on assets acquired from a taxable
corporation such as a TRS, on the income from any property that it takes in
foreclosure and on which it makes a foreclosure property election, and on the
gain from any property that is treated as "dealer property" in AHM Investment's
hands.

ITEM 2.  PROPERTIES

The Company's executive offices and principal administrative offices occupy
approximately 177,000 square feet located at 538 Broadhollow Road, Melville, New
York 11747, an office building that the Company purchased on November 25, 2003.

In addition, the Company owns an office building located at 950 North Elmhurst
Road, Mt. Prospect, Illinois 60056, which consists of approximately 35,700
square feet.

As of December 31, 2004, the Company leased real estate premises at an
additional 520 locations in 44 states, ranging in size from 100 to 55,423 square
feet with remaining lease terms ranging from one month to six years. The
aggregate annual rent for these locations is approximately $23.5 million.

ITEM 3.  LEGAL PROCEEDINGS

In the ordinary course of its business, the Company is from time to time subject
to various legal proceedings. The Company does not believe that any of its
current legal proceedings, individually or in the aggregate, will have a
material adverse effect on its operations or financial condition.

Columbia National, Incorporated
-------------------------------

As previously reported in our Current Report on Form 8-K dated June 21, 2004 and
our Quarterly Report on Form 10-Q for the quarter ended June 30, 2004, in June
of 2002, the Company acquired Columbia National, Incorporated, a Maryland
corporation ("Columbia"), which is currently a subsidiary of the Company, and
which changed its name in July of 2004 to "American Home Mortgage Servicing,

                                       13


Inc." Prior to the Company's acquisition of Columbia, Columbia discovered
fraudulent loan activity at its Bensalem, Pennsylvania, office and notified the
U.S. Department of Housing and Urban Development ("HUD"). HUD then instituted an
investigation into the loan originations of the Bensalem office. Shortly
thereafter, several years before Columbia was acquired by the Company, Columbia
closed the Bensalem office and terminated the employees involved in the alleged
fraudulent activity. In 2000, Columbia settled with HUD, paying a fine to HUD in
the amount of $24,000 and agreeing to indemnify HUD for certain losses.
Columbia, as loan servicer for institutional investors, subsequently made FHA
insurance claims with respect to approximately 60 loans that were originated by
the Bensalem office between 1997 and 1999. The federal government is now seeking
to recover insurance proceeds paid in connection with certain of those claims,
along with potentially applicable fines and penalties. The Company is
cooperating fully with respect to the federal government's review of these
loans. While the amount of any potential settlement is not known at this time,
the Company does not expect that such amount will materially affect its
financial condition or results of operations.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The Company did not submit any matter to a vote of its security holders during
the quarter ended December 31, 2004.


                                       14


                                     PART II


ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES

The Company's common stock is listed on the NYSE under the symbol "AHM" and
began trading on the NYSE on December 4, 2003. The Company's trading symbol on
the NYSE has been "AHM" since June 1, 2004. From December 4, 2003, until June 1,
2004, the Company's common stock traded on the NYSE under the symbol "AHH."
Before our internal reorganization and merger with Apex, effective as of
December 3, 2003, AHM Holdings was listed on the Nasdaq National Market under
the symbol "AHMH."

The following table shows the high, low and closing sales prices for our common
stock during each fiscal quarter during the years ended December 31, 2004 and
2003 and the cash distributions per share declared during each such period:



                                                   Stock Prices
                                     -----------------------------------------       Cash Distributions
                                         High           Low           Close          Declared Per Share
                                     -----------    -----------    -----------    -----------------------
                                                                                       
Year Ended December 31, 2004
Fourth Quarter                           $34.50        $25.00        $34.25                        $0.66
Third Quarter                             31.65         24.90         27.95                         0.61
Second Quarter                            29.15         21.80         25.93                         0.61
First Quarter                             28.85         21.10         28.80                         0.55
Year Ended December 31, 2003
Fourth Quarter                           $25.27        $17.50        $22.51                        $0.55
Third Quarter                             23.90         14.88         17.57                         0.13
Second Quarter                            21.20          9.94         19.36                         0.13
First Quarter                             10.90          9.56         10.01                         0.10


As of March 9, 2005, the closing sales price of the Company's common stock, as
reported on the NYSE, was $32.01. As of March 9, 2005, the Company had 275
holders of record, and approximately 20,000 beneficial owners, of its common
stock.

Dividends are payable on the last calendar day of each January, April, July and
October on the Company's 9.75% Series A Cumulative Redeemable Preferred Stock,
liquidation preference $25.00 per share ("Series A Preferred Stock"), and 9.25%
Series B Cumulative Redeemable Preferred Stock, liquidation preference $25.00
per share ("Series B Preferred Stock"). The Series A Preferred Stock and Series
B Preferred Stock rank senior to our common stock with respect to dividend
rights, redemption rights and rights upon our voluntary or involuntary
liquidation, dissolution or winding up. The terms of the Series A Preferred
Stock and Series B Preferred Stock require that all accumulated dividends in
arrears be paid prior to the payment of any dividends on our common stock.

To maintain our qualification as a REIT, we intend to make regular quarterly
distributions to our stockholders. In order to qualify as a REIT for federal
income tax purposes, we must distribute to our stockholders with respect to each
year at least 90% of our taxable income. Although we generally intend to
distribute to our stockholders each year an amount equal to our taxable income
for that year, distributions paid by us will be at the discretion of our Board
of Directors and will depend on, among other things, our actual cash flow, our
financial condition, capital requirements, the annual distribution requirements
under the REIT provisions of the Code, as well as any other factors that our
Board of Directors deems relevant.

Securities Authorized for Issuance Under Equity Compensation Plans
------------------------------------------------------------------

Information regarding our equity compensation plans as of December 31, 2004 is
disclosed in Item 12 of this report, "Security Ownership of Certain Beneficial
Owners and Management and Related Stockholder Matters."

                                       15


Recent Issuances of Unregistered Securities
-------------------------------------------

The following is a description of the Company's securities that were not
registered under the Securities Act of 1933, as amended (the "Securities Act"),
which were sold during the quarter ended December 31, 2004:

The Company acquired First Home Mortgage Corp., an independent mortgage lender
based in metropolitan Chicago ("First Home"), on June 30, 2000. In addition to
the shares paid to former First Home stockholders as initial consideration, the
Company is required to issue unregistered shares of common stock to the former
stockholders as additional consideration under the earnout provisions of the
merger agreement. Pursuant to these earnout provisions, in October of 2004,
November of 2004 and December of 2004, the Company issued an aggregate of 1,853,
2,462 and 17,984, respectively, to such stockholders as additional
consideration. These issuances were exempt from registration under Section 4(2)
of the Securities Act because they were pursuant to the terms of a private
transaction rather than through a public offering.


                                       16


ITEM 6.  SELECTED FINANCIAL DATA

The following selected financial data as of December 31, 2004 and 2003 and for
the years ended December 31, 2004, 2003 and 2002 have been derived from our
audited consolidated financial statements, beginning on page F-1 of this report.
The selected financial data as of December 31, 2002, 2001 and 2000 and for the
years ended December 31, 2001 and 2000 have been derived from prior year audited
consolidated financial statements. The following selected consolidated financial
data as of and for each of the years in the three-year period ended December 31,
2002 is derived from the consolidated financial statements of AHM Holdings.
These consolidated financial statements include all adjustments which we
consider necessary for a fair presentation of our consolidated financial
position and results of operations for these periods. You should not assume that
the results below indicate results that we will achieve in the future,
particularly because in the future we expect net interest income, rather than
gain on sales of loans, to be the principal component of our revenues. The
operating data are derived from unaudited financial information that we
compiled.

You should read the information below along with all the other financial
information and analysis presented in this report, including, but not limited
to, our financial statements and related notes, and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."


                                       17


      (In thousands, except per share and operating data)



                                                                       As of and for the Years Ended December 31,
                                                 ---------------------------------------------------------------------------------
                                                         2004 (As            2003             2002           2001          2000
                                                       restated)(4)
                                                 ---------------------------------------------------------------------------------
                                                                                                         
Statement of Income Data:
Net interest income                                    $    112,933     $     49,031     $     24,837     $    9,098    $    3,271
Gain on sales of mortgage loans                             134,099          376,605          216,595        118,554        52,731
Gain on securitizations of mortgage loans                    40,120              149               --             --            --
Unrealized gain on mortgage-backed securities
  and derivatives                                            75,460            3,272               --             --            --
Net loan servicing loss                                      (4,467)          (6,365)         (12,758)            --            --
Total revenues (1)                                          365,241          432,131          232,821        128,053        58,280
Total non-interest expenses                                 315,904          310,114          165,261         88,494        48,622
Income before income tax (benefit) expense                   49,337          122,017           67,560         41,701         9,658
Income tax (benefit) expense                                (25,575)          48,223           28,075         16,253         4,267
Net income                                                   74,912           73,794           39,485         25,448         5,391
Net income available to common shareholders                  70,924           73,794           39,485         25,448         5,391

Per share data:
Basic earnings per share                               $       1.89     $       4.16     $       2.72     $     2.45    $     0.63
Diluted earnings per share                                     1.86             4.07             2.65           2.34          0.63
Dividends declared per share                                   2.43             0.91             0.15           0.12            --

Weighted average number of shares outstanding:
Basic                                                        37,612           17,727           14,509         10,374         8,580
Diluted                                                      38,087           18,113           14,891         10,883         8,580

Balance Sheet Data (end of period):
Cash and cash equivalents                              $    192,821     $     53,148     $     24,416     $   26,393    $    6,005
Mortgage-backed securities                                6,016,866        1,763,628               --             --            --
Mortgage loans held for sale, net                         4,853,394        1,216,353          811,188        419,351       143,967
Mortgage servicing rights, net                              151,436          117,784          109,023             46            37
Total assets                                             11,555,797        3,404,690        1,119,050        501,125       183,532
Warehouse lines of credit                                   735,783        1,121,760          728,466        351,454       130,484
Commercial paper                                            529,790               --               --             --            --
Reverse repurchase agreements                             7,071,168        1,344,327               --             --            --
Collateralized debt obligations                           2,022,218               --               --             --            --
Total liabilities                                        10,729,535        3,006,720          954,954        422,508       156,920
Total stockholders' equity                                  826,262          397,970          164,096         78,617        26,612

Ratios:
Return on average common equity (2)                           10.42%           34.11%           32.52%         54.15%        24.66%
Debt to equity ratio (3)                                      12.73             6.51             5.11           4.96          5.37

Operating Data:
Loan originations                                      $ 23,069,085     $ 21,705,250     $ 12,196,000     $7,766,000    $3,043,000
     Retail                                              11,238,235       16,386,791       10,329,000      6,495,000     2,749,000
     Wholesale                                           11,830,850        5,318,459        1,867,000      1,271,000       294,000
Loans sold to third parties                              13,685,246       20,758,110       12,331,000      7,497,000     2,967,000
Loan servicing portfolio - loans sold or securitized     11,955,608        8,272,294        8,541,723         23,951         7,900
Loans securitized and held                                1,847,987          586,573               --             --            --


------------------------
(1)   Total revenues consist of net interest income and non-interest income.

(2)   This measure is calculated by dividing net income available to common
      shareholders by the average common stockholders' equity outstanding during
      the year expressed as a percentage.

(3)   This ratio is calculated by dividing debt, which is comprised of reverse
      repurchase agreements, collateralized debt obligations, warehouse lines of
      credit, commercial paper and other borrowings, by stockholders' equity.

(4)   See Note 25 to the consolidated financial statements related to the
      restatement of the consolidated financial statements for 2004.

                                       18



ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

This Management's Discussion and Analysis reflects the restatement of our
consolidated financial statements, as discussed in Note 25 to the consolidated
financial statements.

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.

Mortgage-Backed Securities - We record our mortgage-backed securities at fair
value. The fair values of our mortgage-backed securities are generally based on
market prices provided by certain dealers who make markets on these financial
instruments.

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

Mortgage Servicing Rights ("MSRs") - When we acquire servicing assets through
either purchase or origination of loans and sell or securitize those loans with
servicing assets retained, the total cost of the loans is allocated to the
servicing assets and the loans (without the servicing assets) based on their
relative fair values. The amount attributable to the servicing assets is
capitalized as MSRs on the consolidated balance sheets. The MSRs are amortized
to expense in proportion to and over the period of estimated net servicing
income.

The MSRs are assessed for impairment based on the fair value of those assets. We
estimate the fair value of the servicing assets by obtaining market information
from a primary MSR broker. When the book value of capitalized servicing assets
exceeds their fair value, impairment is recognized through a valuation
allowance. In determining impairment, the mortgage servicing portfolio is
stratified by the predominant risk characteristic of the underlying mortgage
loans. We have determined that the predominant risk characteristic is the
interest rate on the underlying loan. We measure impairment for each stratum by
comparing the estimated fair value to the recorded book value. Temporary
impairment is recorded through a valuation allowance and amortization expense in
the period of occurrence. In addition, we periodically evaluate our MSRs for
other than temporary impairment to determine if the carrying value before the
application of the valuation allowance is recoverable. We receive a sensitivity
analysis of the estimated fair value of our MSRs assuming a 200-basis-point
instantaneous increase in interest rates from an independent MSR broker. The
fair value estimate includes changes in market assumptions that would be
expected given the increase in mortgage rates (e.g., prepayment speeds would be
lower). We believe this 200-basis-point increase in mortgage rates to be an
appropriate threshold for determining the recoverability of the temporary
impairment because that size rate increase is foreseeable and consistent with
historical mortgage rate fluctuations. When using this instantaneous change in
rates, if the fair value of the strata of MSRs is estimated to increase to a
point where all of the impairment would be recovered, the impairment is
considered to be temporary. When we determine that a portion of the MSRs is not
recoverable, the related MSRs and the previously established valuation allowance
are correspondingly reduced to reflect other than temporary impairment.

Derivative Assets and Derivative Liabilities - Our mortgage-committed pipeline
includes interest rate lock commitments ("IRLCs") that have been extended to
borrowers who have applied for loan funding and meet certain defined credit and
underwriting criteria. IRLCs associated with loans expected to be sold are
recorded at fair value with changes in fair value recorded to current earnings.
The fair value of the IRLCs initiated on or before March 31, 2004 is determined
by an estimate of the ultimate gain on sale of the loans, including the value of
MSRs, net of estimated net costs remaining to originate the loan and any net
deferred origination costs. In March 2004, the SEC issued Staff Accounting
Bulletin No. 105 ("SAB No. 105"), which provides industry guidance which changed
the timing of recognition of MSRs for IRLCs initiated after March 31, 2004. In
SAB No. 105, the SEC stated that the value of expected future cash flows related
to servicing rights should be excluded when determining the fair value of
derivative IRLCs. Under the new policy, the value of the expected future cash
flows related to servicing rights is not recognized until the underlying loans
are sold.

                                       19


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

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

We enter into interest rate swap agreements to manage our interest rate exposure
when financing our adjustable-rate mortgage loans and mortgage-backed
securities. 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 third-party pricing services.

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-Backed Securities Holdings segment includes a forecast of the expected
future net interest income, gain on mortgage-backed securities and the related
revenues and expenses. These cash flows are discounted using a rate that is
estimated to be a weighted-average cost of capital for similar companies. We
further test to ensure that the fair value of all our business units does not
exceed our total market capitalization.


                                       20


Financial Condition

At December 31, 2004, 52.1% of our total assets were mortgage-backed securities
and 42.0% were mortgage loans held for sale, compared to 51.8% and 35.7%,
respectively, at December 31, 2003.

Total assets increased $8.2 billion to $11.6 billion at December 31, 2004 from
$3.4 billion at December 31, 2003. The increase primarily reflects an increase
in mortgage-backed securities of $4.3 billion and an increase in mortgage loans
held for sale of $3.6 billion. The growth in mortgage-backed securities and
mortgage loans held for sale was primarily funded by an increase in reverse
repurchase agreements of $5.7 billion and an increase in collateralized debt
obligations of $2.0 billion. We began issuing commercial paper in the quarter
ended June 30, 2004, to fund our loans held for sale. As of December 31, 2004,
we had $529.8 million of commercial paper outstanding, which allowed us to
reduce the amount of loans funded by warehouse lines of credit.

The following table summarizes our mortgage-backed securities owned at December
31, 2004 and 2003, classified by type of issuer and by ratings categories:



                                                                    December 31, 2004
                                 -----------------------------------------------------------------------------------------
                                       Trading Securities      Securities Available for Sale             Total
                                 ----------------------------  -----------------------------  ----------------------------
                                    Carrying                      Carrying                       Carrying
                                     Value      Portfolio Mix      Value       Portfolio Mix      Value      Portfolio Mix
                                 -------------  -------------  --------------  -------------  -------------  -------------
                                                                   (Dollars in thousands)
                                                                                           
Agency securities                 $         --             --%  $     612,513          14.5%   $    612,513          10.2%

Privately issued:
   AAA                               1,634,702           90.6       3,542,772           84.1      5,177,474           86.0
   AA                                       --             --          16,043            0.4         16,043            0.3
   A                                    58,480            3.2          15,750            0.4         74,230            1.2
  BBB                                   58,153            3.2           7,910            0.2         66,063            1.1
  Unrated                               54,591            3.0          15,952            0.4         70,543            1.2
                                 -------------  -------------  --------------  -------------  -------------  -------------
Total                             $  1,805,926         100.0%   $   4,210,940         100.0%   $  6,016,866         100.0%
                                 =============  =============  ==============  =============  =============  =============


                                                                    December 31, 2003
                                 -----------------------------------------------------------------------------------------
                                       Trading Securities      Securities Available for Sale             Total
                                 ----------------------------  -----------------------------  ----------------------------
                                    Carrying                      Carrying                       Carrying
                                     Value      Portfolio Mix      Value       Portfolio Mix      Value      Portfolio Mix
                                 -------------  -------------  --------------  -------------  -------------  -------------
                                                                   (Dollars in thousands)
                                                                                           
Agency securities                 $    287,577          60.0%   $     713,790          55.6%   $  1,001,367          56.8%

Privately issued:
   AAA                                 167,974           35.0         570,025           44.4        737,999           41.8
   AA                                   11,322            2.4              --             --         11,322            0.6
   A                                     6,470            1.3              --             --          6,470            0.4
  Unrated                                6,470            1.3              --             --          6,470            0.4
                                 -------------  -------------  --------------  -------------  -------------  -------------
Total                             $    479,813         100.0%   $   1,283,815         100.0%   $  1,763,628         100.0%
                                 =============  =============  ==============  =============  =============  =============


                                       21


The following table classifies our mortgage-backed securities portfolio by type
of interest rate index at December 31, 2004 and 2003:



                                                                 December 31, 2004
                                     ----------------------------------------------------------------------------
                                                                     Securities
                                        Trading Securities       Available for Sale              Total
                                     ------------------------  ------------------------  ------------------------
                                       Carrying    Portfolio     Carrying    Portfolio     Carrying    Portfolio
                                         Value        Mix          Value        Mix          Value        Mix
                                     ------------  ----------  ------------  ----------  ------------  ----------
                                                               (Dollars in thousands)
                                                                                     
Index:
One-month LIBOR                       $    86,199        4.8%   $   114,149        2.7%   $   200,348        3.3%
Six-month LIBOR                           829,413        45.9     2,385,582        56.7     3,214,995        53.4
One-year LIBOR                            890,314        49.3     1,231,392        29.2     2,121,706        35.3
One-year constant maturity treasury            --          --       479,817        11.4       479,817         8.0
                                     ------------  ----------  ------------  ----------  ------------  ----------
Total                                 $ 1,805,926      100.0%   $ 4,210,940      100.0%   $ 6,016,866      100.0%
                                     ============  ==========  ============  ==========  ============  ==========


                                                                 December 31, 2003
                                     ----------------------------------------------------------------------------
                                                                     Securities
                                       Trading Securities        Available for Sale               Total
                                     ------------------------  ------------------------  ------------------------
                                      Carrying     Portfolio    Carrying     Portfolio     Carrying    Portfolio
                                        Value         Mix         Value         Mix         Value         Mix
                                     ------------  ----------  ------------  ----------  ------------  ----------
                                                               (Dollars in thousands)
                                                                                     
Index:
One-month LIBOR                       $  189,772        39.6%   $        --         --%   $   189,772       10.8%
Six-month LIBOR                               --           --       517,248        40.3       517,248        29.3
One-year LIBOR                           261,548         54.5       610,963        47.6       872,511        49.5
One-year constant maturity treasury       28,493          5.9       155,604        12.1       184,097        10.4
                                     ------------  ----------  ------------  ----------  ------------  ----------
Total                                 $  479,813       100.0%   $ 1,283,815      100.0%   $ 1,763,628      100.0%
                                     ============  ==========  ============  ==========  ============  ==========


                                       22


The following table classifies our mortgage-backed securities portfolio by
product type at December 31, 2004 and 2003:



                                                                 December 31, 2004
                            ---------------------------------------------------------------------------------------------
                                                                     Securities
                                  Trading Securities             Available for Sale                    Total
                            ------------------------------  -----------------------------  ------------------------------
                               Carrying                        Carrying                       Carrying
                                 Value       Portfolio Mix       Value      Portfolio Mix       Value       Portfolio Mix
                            --------------  --------------  -------------   -------------  --------------  --------------
                                                               (Dollars in thousands)
                                                                                          
Product:
ARMs less than 3 years       $     149,040            8.3%   $    954,794           22.7%   $   1,103,834           18.3%
3/1 Hybrid ARM                     381,831            21.1        488,696            11.6         870,527            14.5
5/1 Hybrid ARM                   1,275,055            70.6      2,767,450            65.7       4,042,505            67.2
                            --------------  --------------  -------------   -------------  --------------  --------------
Total                        $   1,805,926          100.0%   $  4,210,940          100.0%   $   6,016,866          100.0%
                            ==============  ==============  =============   =============  ==============  ==============


                                                                 December 31, 2003
                            ---------------------------------------------------------------------------------------------
                                                                     Securities
                                  Trading Securities             Available for Sale                    Total
                            ------------------------------  -----------------------------  ------------------------------
                               Carrying                        Carrying                       Carrying
                                 Value       Portfolio Mix       Value      Portfolio Mix       Value       Portfolio Mix
                            --------------  --------------  -------------   -------------  --------------  --------------
                                                               (Dollars in thousands)
                                                                                          
Product:
ARMs less than 3 years       $     189,771           39.6%   $    212,897           16.6%   $     402,668           22.8%
3/1 Hybrid ARM                     133,019            27.7        415,674            32.4         548,693            31.1
5/1 Hybrid ARM                     133,140            27.7        619,688            48.2         752,828            42.7
7/1 Hybrid ARM                      23,883             5.0         35,556             2.8          59,439             3.4
                            --------------  --------------  -------------   -------------  --------------  --------------
Total                        $     479,813          100.0%   $  1,283,815          100.0%   $   1,763,628          100.0%
                            ==============  ==============  =============   =============  ==============  ==============


During the year ended December 31, 2004, we purchased $5.3 billion of
mortgage-backed securities and added $3.9 billion of self-originated
mortgage-backed securities to our portfolio.

During the year ended December 31, 2004, we sold $3.6 billion of mortgage-backed
securities. Of the mortgage-backed securities sold, $2.0 billion were created by
our securitizations and $1.6 billion were market-purchased.

The average cost basis of our mortgage-backed securities, excluding unrealized
gains and losses, was 100.8% of par as of December 31, 2004 and 101.5% of par as
of December 31, 2003.

We had a payable for securities purchased of $259.7 million as of December 31,
2003.

                                       23


Results of Operations

Comparison of the Years Ended December 31, 2004 and 2003


Overview
--------

Net income for the year ended December 31, 2004 was $74.9 million compared to
$73.8 million for the year ended December 31, 2003, an increase of $1.1 million,
or 1.5%. This increase was the result of a $73.8 million decrease in income tax
expense and a $63.9 million increase in net interest income, partly offset by a
$130.8 million decrease in non-interest income and a $5.8 million increase in
non-interest expenses. The $130.8 million decrease in non-interest income
consists of a $242.5 million decrease in gain on sales of mortgage loans which
includes a $30.7 million reduction associated with the Company's adoption of SAB
No. 105, and a $0.2 million decrease in other non-interest income, partly offset
by a $70.0 million increase in realized and unrealized gains on mortgage-backed
securities and derivatives, a $40.0 million increase in gain on securitizations
of mortgage loans and a 1.9 million increase in net loan servicing fees in 2004
versus 2003.

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:



(Dollars in thousands)                                                Year Ended December 31,
                                        --------------------------------------------------------------------------------
                                                          2004                                      2003
                                        --------------------------------------------------------------------------------
                                          Average                      Average       Average                   Average
                                          Balance       Interest     Yield/Cost      Balance      Interest    Yield/Cost
                                        ------------  ------------  -----------  -------------  ------------  ----------
                                                                                            
Interest earning assets:
  Mortgage-backed securities, net (1)    $ 5,268,631   $   191,563        3.64%   $     64,755   $     2,337       3.61%
  Mortgage loans held for sale             2,289,517       122,743        5.36%      1,679,835       103,680       6.17%
                                        ------------  ------------               -------------  ------------
                                           7,558,148       314,306        4.16%      1,744,590       106,017       6.08%
                                        ------------  ------------               -------------  ------------

Interest bearing liabilities:
  Warehouse lines of credit (2)            1,349,435        53,650        3.98%      1,646,238        53,906       3.27%
  Commercial paper                           744,335        16,541        2.22%            -             -           -
  Reverse repurchase agreements (3)        4,976,437       124,637        2.50%         47,051           630       1.34%
  Collateralized debt obligations             56,207         1,775        3.16%            -             -           -
  Notes payable                              118,592         4,770        4.02%         65,915         2,450       3.72%
                                        ------------  ------------               -------------  ------------
                                           7,245,006       201,373        2.78%      1,759,204        56,986       3.24%
                                        ------------  ------------               -------------  ------------

Net interest income                                    $   112,933                               $    49,031
                                                      ============                              ============
Interest rate spread                                                      1.38%                                    2.84%
                                                                    ===========                               ==========
Net interest margin                                                       1.49%                                    2.81%
                                                                    ===========                               ==========


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

(2)   The 2004 period includes $12.8 million of net interest expense on interest
      rate swap agreements.

(3)   The 2004 period includes $41.3 million of net interest expense on interest
      rate swap agreements.

                                       24


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.

                                           Year Ended December 31, 2004
                                                   Compared to
(In thousands)                             Year Ended December 31, 2003
                                   --------------------------------------------
                                      Average        Average
                                       Rate          Volume           Total
                                   -------------   ------------   -------------

Mortgage-backed securities, net     $         18    $   189,208    $    189,226
Mortgage loans held for sale             (14,937)        34,000          19,063
                                   -------------   ------------   -------------
Interest income                          (14,919)       223,208         208,289
                                   -------------   ------------   -------------

Warehouse lines of credit                 10,414        (10,670)           (256)
Commercial paper                              --         16,541          16,541
Reverse repurchase agreements              1,022        122,985         124,007
Collateralized debt obligations               --          1,775           1,775
Notes payable                                216          2,104           2,320
                                   -------------   ------------   -------------
Interest expense                          11,652        132,735         144,387
                                   -------------   ------------   -------------

Net interest income                 $    (26,571)   $    90,473    $     63,902
                                   =============   ============   =============

Interest Income: Interest income on mortgage-backed securities for the year
ended December 31, 2004 was $191.5 million, compared to $2.3 million for the
year ended December 31, 2003, a $189.2 million increase. This increase reflects
the commencement of our holding mortgage-backed securities for net interest
income on December 3, 2003, as a result of the reorganization of the Company
into a REIT and the merger with Apex.

Interest income on our mortgage loans held for sale for the year ended December
31, 2004 was $122.8 million, compared to $103.7 million for the year ended
December 31, 2003, an increase of $19.1 million, or 18.4%. The increase in loans
held for sale interest income was primarily the result of an increase in average
volume, partly offset by a decrease in average rate in 2004 versus 2003.

Interest Expense: We fund our loan inventory primarily through borrowing
facilities with several mortgage warehouse lenders and through a $2.0 billion
Secured Liquidity Note ("SLN") program. Interest expense on warehouse lines of
credit for the year ended December 31, 2004 was $53.6 million, compared to
interest expense for the year ended December 31, 2003 of $53.9 million, a $0.3
million decrease. The decrease in warehouse lines of credit interest expense was
primarily the result of a decrease in average volume, partly offset by an
increase in average rate in 2004 versus 2003. In May 2004, we formed a
wholly-owned special purpose entity for the purpose of issuing commercial paper
in the form of SLNs to finance certain portions of our mortgage loans held for
sale. Interest expense on commercial paper for the year ended December 31, 2004
was $16.5 million. The increase in commercial paper interest expense was due to
borrowings in the year ended December 31, 2004 used to fund our increased loan
inventory.

We have borrowed funds under reverse repurchase agreements, a form of
collateralized short-term borrowing, with nine different financial institutions
as of December 31, 2004. We borrow funds under these arrangements based on the
fair value of our mortgage-backed securities. Total interest expense on reverse
repurchase agreements for the year ended December 31, 2004 was

                                       25


$124.6 million, compared to interest expense for the year ended December 31,
2003 of $0.6 million, a $124.0 million increase. The increase in reverse
repurchase agreements interest expense in 2004 versus 2003 was primarily the
result of an increase in borrowings used to fund the growth of our
mortgage-backed securities portfolio.

Gain on Mortgage Loans, Mortgage-Backed Securities and Derivatives
------------------------------------------------------------------

Gain on Sales of Mortgage Loans: Gain on sales of mortgage loans for the year
ended December 31, 2004 totaled $134.1 million on non-securitized loans sales of
$13.7 billion, compared to $376.6 million on loan sales of $20.8 billion for the
year ended December 31, 2003. Prior to our conversion into a Real Estate
Investment Trust ("REIT") in December 2003, our business strategy was to sell
substantially all of the loans that we originated and recognize gain on sales of
such loans. The decline in volume of loans sold in 2004 versus 2003 reflects our
discontinued strategy of selling virtually all of the loans that we originated.
The average gain on sale margin decreased to 0.98% in 2004 from 1.81% in 2003.
The decline in average margin reflects higher broker fee expenses included as a
reduction to gain on sale of loans as a result of the increased percentage of
wholesale originations in 2004 versus the 2003 period. The change in fair value
of IRLCs and mortgage loans held for sale included in gain on sales of mortgage
loans in the year ended December 31, 2004 was reduced by $30.7 million, or 0.27%
of non-securitized loan sales, on a pre-tax basis as a result of our adoption of
SAB No. 105.

Gain on Securitizations of Mortgage Loans: Gain on securitizations of mortgage
loans totaled $40.1 million during the year ended December 31, 2004 compared to
$0.1 million during the year ended December 31, 2003. These gains reflect the
gains that existed on the date of securitization of self-originated loans
relating to the sale of resultant securities. We securitized loans totaling $9.3
billion during the year ended December 31, 2004, of which $1.9 billion were
accounted for as sales, compared to $521.7 million of total securitized loans
during the year ended December 31, 2003, of which $22.1 million were accounted
for as sales. The increased volume of loans securitized in 2004 versus 2003
reflects our business strategy since our REIT conversion to securitize ARM loans
that we originate. The remaining $7.4 billion of securitized loans in 2004
consists of $3.9 billion of mortgage-backed securities and $3.5 billion of
mortgage loans collateralizing debt obligations created with the execution of
securitization transactions.

Gain on Sales of Mortgage-Backed Securities and Derivatives: Gain on sales of
mortgage-backed securities and derivatives totaled $0.1 million on
mortgage-backed securities sales of $3.6 billion during the year ended December
31, 2004, compared to $2.2 million on mortgage-backed securities sales of $507.2
million during the year ended December 31, 2003. These gains reflect the
realized gains or losses on sales of mortgage-backed securities created by our
securitizations, sales of market-purchased mortgage-backed securities and sales
of related interest rate swaps.

Unrealized Gain on Mortgage-Backed Securities and Derivatives: We recognized
$75.5 million of unrealized gain on mortgage-backed securities and derivatives
relating to market valuations of mortgage-backed securities and derivatives
classified in the trading portfolio during the year ended December 31, 2004,
compared to $3.3 million during the year ended December 31, 2003. During the
year ended December 31, 2004, unrealized gain on mortgage-backed securities and
derivatives includes $67.8 million of unrealized gain on mortgage-backed
securities that existed on the date of securitization, $23.1 million of
mark-to-market unrealized loss on our mortgage-backed securities portfolio and
$30.8 million of unrealized gain on related interest rate swaps.

Net Loan Servicing Fees
-----------------------

Net loan servicing fees were a loss of $4.5 million for the year ended December
31, 2004, compared to a loss of $6.4 million for the year ended December 31,
2003.

Loan Servicing Fees: Loan servicing fees increased to $40.6 million for the year
ended December 31, 2004 from $39.1 million for the year ended December 31, 2003,
an increase of $1.5 million, or 3.7%. Included in loan servicing fees are gains
on Ginnie Mae early buy-out sales of $4.5 million for the year ended December
31, 2004 compared to $11.4 million for the year ended December 31, 2003, a
decrease of $6.9 million, or 60.5%. This decrease partly offset the increase in
loan servicing fees in 2004 period versus 2003 as a result of an increase in
loans serviced for others.

Amortization of MSRs: Amortization of MSRs decreased to $32.6 million for the
year ended December 31, 2004 from $51.8 million for the year ended December 31,
2003, a decrease of $19.2 million, or 37.1%. The decrease in amortization was
due to a higher interest rate environment, which resulted in slower projected
prepayment speeds in the year ended December 31, 2004 versus the year ended
December 31, 2003.

Impairment (Provision) Recovery of MSRs: We recognized a temporary impairment
provision of $12.4 million for the year ended December 31, 2004 versus a
temporary impairment recovery of $6.3 million for the year ended December 31,
2003, resulting in a

                                       26


decrease in net loan servicing fees of $18.7 million. The increase in impairment
provision in the year ended December 31, 2004 was due to a decrease in the fair
value of MSRs, which was attributable to a subsequent increase in estimated
future prepayment speeds versus the initial estimated future prepayment speeds
used to value the MSR upon securitization.

Other Non-Interest Income
-------------------------

Other non-interest income totaled $7.0 million for the year ended December 31,
2004 compared to $7.2 million for the year ended December 31, 2003. For the year
ended December 31, 2004, other non-interest income primarily includes rental
income of $2.1 million, reinsurance premiums earned totaling approximately $1.8
million, income from a legal settlement of $1.5 million and revenue from title
services of $1.0 million. For the year ended December 31, 2003, other
non-interest income primarily includes revenue from title services of $2.2
million, fulfillment fees of $1.9 million and volume incentive bonuses received
from loan purchasers totaling approximately $1.4 million. The fulfillment fees
represent non-recurring fees received from Principal Residential Mortgage, Inc.
("PRM") for loans closed by us on behalf of PRM in connection with our
acquisition of the retail mortgage lending branches of PRM in June of 2003. As
part of the agreement to acquire the retail branches of PRM, we agreed to assume
the costs incurred to close out PRM's application pipeline as of the date of the
agreement on behalf of PRM for a per-loan fee.

Non-Interest Expenses
---------------------

Our non-interest expenses for the year ended December 31, 2004 were $315.9
million, compared to $310.1 million for the year ended December 31, 2003, an
increase of $5.8 million, or 1.9%.

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 Statement of Financial Accounting Standards
("SFAS") No. 91, "Accounting for Nonrefundable Fees and Costs Associated with
Originating or Acquiring Loans and Initial Costs of Leases." Direct origination
costs are added to the book value of loans and either reduce the gain on sale of
loans if the loans are sold or are amortized over the life of the loan.

Salaries, Commissions and Benefits, net: Salaries, commissions and benefits,
net, for the year ended December 31, 2004 were $189.4 million, compared to
$204.9 million for the year ended December 31, 2003, a decrease of $15.5
million, or 7.6%. The decrease in expenses reflects the higher percentage of
wholesale originations in 2004 versus 2003.

Other Operating Expenses: Operating expenses, excluding salaries, commissions
and benefits, were $126.5 million for the year ended December 31, 2004 compared
to $105.2 million for the year ended December 31, 2003, an increase of $21.3
million, or 20.3%. The increase in operating expenses in 2004 versus 2003
includes a $10.6 million increase in occupancy and equipment expense. The
operating expenses in the year ended December 31, 2004 include lease obligations
and certain fixed asset expenses relating to our acquisition of certain
residential home loan centers and associated satellite offices of Washington
Mutual, Inc. in August of 2004.

Income Tax (Benefit) Expense
----------------------------

Income tax expense decreased to a benefit of $25.6 million for the year ended
December 31, 2004, from an expense of $48.2 million for the year ended December
31, 2003, a decrease of $73.8 million. The decrease in income tax expense in
2004 versus 2003 reflects a decrease in income before income taxes relating to
our TRS.

Loan Originations
-----------------

We originate and sell or securitize one-to-four family residential mortgage
loans. Total loan originations for the year ended December 31, 2004 were $23.1
billion compared to $21.7 billion for the year ended December 31, 2003, a 6.3%
increase. Our retail originations, which are conducted through our community
loan production offices and Internet call center, were 49% of our loan
originations in the year ended December 31, 2004 compared to 76% of our
originations in the year ended December 31, 2003. Mortgage brokers accounted for
51% of our loan originations in the year ended December 31, 2004 compared to 24%
of our originations in the year ended December 31, 2003. Mortgage brokers
accounted for an increased percentage of our originations in the year ended
December 31, 2004 due to the opening of wholesale branches in the western United
States.


                                       27


Comparison of the Years Ended December 31, 2003 and 2002

Overview
--------

Net income for the year ended December 31, 2003 was $73.8 million, compared to
$39.5 million for the year ended December 31, 2002, an increase of $34.3
million, or 86.9%. This increase was the result of a $175.2 million increase in
non-interest income, a $24.2 million increase in net interest income, partly
offset by a $144.9 million increase in non-interest expenses and a $20.2 million
increase in income tax expense. The $175.2 million increase in non-interest
income consists of a $160.0 million increase in gain on sales of mortgage loans,
a $5.5 million increase in realized and unrealized gains on mortgage-backed
securities and derivatives, a $6.4 million increase in net loan servicing fees,
a $3.1 million increase in other non-interest income and a $0.2 million increase
in gain on securitizations of mortgage loans in 2003 versus 2002.


Net Interest Income
-------------------

Interest Income: Total interest income for 2003 was $106.0 million, compared to
$55.9 million for 2002, an increase of $50.1 million, or 89.8%. The increase was
primarily due to higher average loan inventory in 2003. In 2003 and 2002, we
funded our loan inventory primarily through borrowing facilities with several
mortgage warehouse lenders.

We began the holding for net interest income of ARM-backed securities on
December 3, 2003, as a result of the reorganization of the Company into a REIT
and the merger with Apex. The total interest income on mortgage-backed
securities for 2003 was $2.3 million.

Interest Expense:Total interest expense for 2003 was $57.0 million, compared to
interest expense for 2002 of $31.0 million, an 83.6% increase, which was
primarily due to increased warehouse lines of credit borrowings to fund our
large loan inventory.

Gain on Mortgage Loans, Mortgage-Backed Securities and Derivatives
------------------------------------------------------------------

Gain on Sales of Mortgage Loans: Our primary source of revenue in the years
ended December 31, 2003 and 2002 was the gain on sales of mortgage loans
originated by us. Gain on sales of mortgage loans for 2003 totaled $376.6
million on loan sales of $20.8 billion, compared with $216.6 million on sales of
$12.3 billion for 2002. The average gain on sale margin increased to 1.81% for
2003 from 1.76% for 2002.

Gain on Securitizations of Mortgage Loans: Gain on securitizations of mortgage
loans totaled $0.1 million on loan securitizations of $22.1 million during the
year ended December 31, 2003. These gains reflect the gains that existed on the
date of securitization of self-originated loans.

Gain on Sales of Mortgage-Backed Securities: During the year ended December 31,
2003, we sold $507.2 million of mortgage-backed securities and recognized $2.2
million of net gains.

Unrealized Gain on Mortgage-Backed Securities: We recognized $3.3 million of
unrealized gain on mortgage-backed securities relating to market valuations of
mortgage-backed securities classified in our trading portfolio.

Net Loan Servicing Fees
-----------------------

Net loan servicing fees were a loss of $6.4 million for the year ended December
31, 2003, compared to a loss of $12.8 million for the year ended December 31,
2002.

Loan Servicing Fees: Loan servicing fees increased to $39.1 million in the year
ended December 31, 2003 from $23.9 million in the year ended December 31, 2002,
an increase of $15.2 million, or 63.2%. The increase was primarily the result of
the inclusion of Columbia National, Incorporated ("CNI") (currently known as
American Home Mortgage Servicing, Inc.), a company that we acquired in June of
2002, for the full year in 2003.

Amortization of MSRs: Amortization of MSRs increased to $51.8 million in the
year ended December 31, 2003 from $26.4 million in the year ended December 31,
2002, an increase of $25.4 million, or 96.2%. The increase was primarily the
result of the inclusion of CNI for the full year in 2003.

Impairment (Provision) Recovery of MSRs: We recognized a temporary impairment
recovery of $6.3 million in the year ended December 31, 2003 versus an
impairment provision of $10.3 million in the year ended December 31, 2002,
resulting in an increase in net loan servicing fees of $16.6 million. This
impairment recovery is due to an increase in the fair value of MSRs attributable
to a decrease in estimated future prepayment speeds.

                                       28


Other Non-Interest Income
-------------------------

Other non-interest income totaled $7.2 million in 2003 compared to $4.1 million
in 2002. For the year ended December 31, 2003, other income primarily includes
revenue from title services of $2.2 million, fulfillment fees of $1.9 million
and volume incentive bonuses received from loan purchasers totaling
approximately $1.4 million. The fulfillment fees represent non-recurring fees
received from PRM for loans closed by us on behalf of PRM. As part of the
agreement to acquire the retail branches of PRM, we agreed to assume the costs
incurred to close out PRM's application pipeline as of the date of the agreement
on behalf of PRM for a per-loan fee. For the year ended December 31, 2002, other
income primarily consists of revenue from title services of $1.9 million and
volume incentive bonuses received from loan purchasers totaling approximately
$0.8 million.


Non-Interest Expenses
---------------------

Our non-interest expenses for the year ended December 31, 2003 were $310.1
million, compared to $165.3 million for the year ended December 31, 2002, an
increase of $144.8 million, or 87.7%. We made significant investments in our
infrastructure, particularly in information technology and corporate services,
to support the growth of our loan origination business. Our non-interest
expenses in the year ended December 31, 2003 include a full year of expenses
associated with the administration of the servicing portfolio acquired through
our acquisition of CNI in June of 2002.

Our operating expenses represent costs that are not eligible to be added to the
book value of the loans because they are not considered direct origination costs
under the rules of 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 year ended December 31, 2003 were $204.9 million, compared to $106.9
million for the year ended December 31, 2002, an increase of $98.0 million, or
91.7%.

Other Operating Expenses: Operating expenses, excluding salaries, commissions
and benefits, were $105.2 million for the year ended December 31, 2003, compared
to $58.4 million for the year ended December 31, 2002, an increase of $46.8
million, or 80.2%.

Income Tax Expense
------------------

Income tax expense increased to $48.2 million for the year ended December 31,
2003, from $28.1 million for the year ended December 31, 2002, an increase of
$20.1 million. The increase in income tax expense in 2003 versus 2002 reflects
an increase in income before income taxes relating to our TRS.

Loan Originations
-----------------

In 2003, our primary business was the origination and sale of primarily
one-to-four family residential mortgage loans. Our origination segment grew
significantly in 2003 both organically and through acquisitions. The
historically low interest rates of 2003 resulted in record loan originations
industry-wide as record numbers of borrowers refinanced their mortgages and
purchased new homes. During 2003, we acquired 75 retail branches of PRM and the
retail and wholesale branches of American Mortgage LLC, and also hired 325
former employees of Capitol Commerce Mortgage Company. Total loan originations
for 2003 were $21.7 billion compared to $12.2 billion for 2002, a 77.9%
increase. At December 31, 2003, the segment had 272 loan origination offices and
2,791 employees, compared to 131 loan origination offices and 2,528 employees at
December 31, 2002.

Liquidity and Capital Resources

We have arrangements to enter into reverse repurchase agreements, a form of
collateralized short-term borrowing, with thirteen different financial
institutions and on December 31, 2004 had borrowed funds from nine of these
firms. Because we borrow money under these agreements based on the fair value of
our mortgage-backed securities, and because changes in interest rates can
negatively impact the valuation of mortgage-backed securities, our borrowing
ability under these agreements could be limited and lenders could initiate
margin calls in the event interest rates change or the value of our
mortgage-backed securities declines for other reasons.

As of December 31, 2004, we had $7.1 billion of reverse repurchase agreements
outstanding with a weighted-average borrowing rate of 2.13% before the impact of
interest rate swaps and a weighted-average remaining maturity of 2.5 months.

                                       29


To originate a mortgage loan, we draw against a $2.0 billion Secured Liquidity
Note Program, a $1.2 billion pre-purchase facility with UBS Real Estate
Securities Inc. ("UBS"), a $600 million bank syndicated facility led by Bank of
America (which includes a $150.0 million term loan facility which we use to
finance our MSRs), a $450 million facility with CDC Mortgage Capital Inc.
("CDC"), a facility of $350 million with Morgan Stanley Bank ("Morgan Stanley"),
a facility of $250 million with Lehman Brothers, a facility of $500 million with
Bear Stearns and a facility of $250 million with Calyon Americas. In addition,
we have a gestation facility with Greenwich Capital Financial Products, Inc.
("Greenwich"). These facilities are secured by the mortgages owned by us and by
certain of our other assets. Advances drawn under the facilities bear interest
at rates that vary depending on the type of mortgages securing the advances.
These loans are subject to sublimits, advance rates and terms that vary
depending on the type of securing mortgages and the ratio of our liabilities to
our tangible net worth. At March 9, 2005, the aggregate outstanding balance
under the warehouse facilities was approximately $2.0 billion, the aggregate
outstanding balance in drafts payable was approximately $15.6 million and the
aggregate maximum amount available for additional borrowings was approximately
$2.1 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 cannot continue to finance a
mortgage loan that we hold if:

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

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

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

      o     the loan ceases to be an eligible loan (as determined pursuant to
            the applicable warehousing agreement).

As of December 31, 2004, our aggregate warehouse facility borrowings were $735.8
million (including $25.5 million of borrowings under a working capital
sub-limit) and our outstanding drafts payable were $26.2 million, compared to
$1.1 billion (including $29.0 million of borrowings under a working capital
sub-limit) and our outstanding drafts payable were $25.6 million as of December
31, 2003. At December 31, 2004, our loans held for sale were $1.3 billion
compared to $1.2 billion at December 31, 2003.

In addition to the UBS, CDC, Bank of America, Morgan Stanley, and Calyon
Americas warehouse facilities, we have purchase and sale agreements with UBS and
Greenwich. These agreements allow us to accelerate the sale of our mortgage loan
inventory, resulting in a more effective use of the warehouse facilities.
Amounts sold and being held under these agreements at December 31, 2004 and
December 31, 2003 were $443.8 million and $236.0 million, respectively. The
amounts so held under these agreements at March 9, 2005 were $259.5 million.
These agreements are not committed facilities and may be terminated at the
discretion of the counterparty.

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

We also have a $150.0 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 December 14, 2005. Interest is based on a spread to the LIBOR and may be
adjusted for earnings on escrow balances. At December 31, 2004 and December 31,
2003, borrowings under our term loan facility were $108.6 million and $71.5
million, respectively.

                                       30


We issued adjustable rate collateralized debt obligations, which are
collateralized by ARM loans held for sale that have been placed in a trust. The
trust receives cash flows from the loans held for sale collateral and uses this
cash to make principal and interest payments on the debt.

Cash and cash equivalents increased to $192.8 million at December 31, 2004, from
$53.1 million at December 31, 2003.

Our primary sources of cash and cash equivalents during the year ended December
31, 2004, were as follows:

      o     $5.7 billion increase in reverse repurchase agreements;

      o     $2.0 billion increase in collateralized debt obligations;

      o     $529.8 million increase commercial paper; and

      o     $343.4 million proceeds from issuance of common stock.

Our primary uses of cash and cash equivalents during the year ended December 31,
2004, were as follows:

      o     $4.3 billion increase in mortgage-backed securities;

      o     $3.6 billion increase in mortgage loans held for sale, net;

      o     $386.0 million net decrease in warehouse lines of credit; and

      o     $259.7 million decrease in payable for mortgage-backed securities
            purchased.

Cash and cash equivalents increased to $53.1 million at December 31, 2003, from
$24.4 million at December 31, 2002.

Our primary sources of cash and cash equivalents during the year ended December
31, 2003, were as follows:

      o     $1.0 billion increase in reverse repurchase agreements;

      o     $393.3 million increase in warehouse lines of credit; and

      o     $259.7 million increase in payable for mortgage-backed securities
            purchased.

Our primary uses of cash and cash equivalents during the year ended December 31,
2003, were as follows:

      o     $1.3 billion increase in mortgage-backed securities; and

      o     $391.8 million net increase in mortgage loans held for sale.

Our ability to originate loans depends in large part on our ability to sell
these mortgage loans at par or for a premium in the secondary market so that we
may generate cash proceeds to repay borrowings under our warehouse facilities.
The value of our loans depends on a number of factors, including, but not
limited to:

      o     interest rates on our loans compared to market interest rates;

      o     the borrower credit risk classification;

      o     loan-to-value ratios; and

      o     general economic conditions.

Inflation

For the period 1997 to 2004, inflation has been relatively low and we believe
that inflation has not had a material effect on our results of operations. To
the extent inflation increases in the future, interest rates will also likely
rise, which would reduce the number of loans we originate. Such a reduction
would adversely affect our future results of operations.

                                       31


Off-Balance Sheet Arrangements

As of December 31, 2004, we did not have any off-balance sheet arrangements that
have or are reasonably likely to have a current or future effect on our
financial condition, changes in financial condition, revenues or expenses,
results of operations, liquidity, capital expenditures or capital resources that
are reasonably likely to be material to investors.


Contractual Obligations

We had the following contractual obligations (excluding derivative financial
instruments) at December 31, 2004:



                                             Total      Less than 1 Year   1 - 3 Years      4 - 5 Years    After 5 Years
                                        --------------- ---------------- --------------- ---------------- ---------------
(In thousands)
                                                                                            
Warehouse liabilities                    $      735,783  $       735,783  $           --  $            --  $           --
Operating leases                                 70,704           21,793          32,475           15,149           1,287
Notes payable                                   135,761          109,904             729              816          24,312
Commercial paper                                529,790          529,790              --               --              --
Reverse repurchase agreements                 7,071,168        7,071,168              --               --              --
Collateralized debt obligations               2,022,218               --         221,112        1,690,215         110,891


Risk Management

Movements in interest rates can pose a major risk to us in either a rising or
declining interest rate environment. We depend on substantial borrowings to
conduct our business. These borrowings are all done at variable interest rate
terms which will increase as short-term interest rates rise. Additionally, when
interest rates rise, loans held for sale and any applications in process with
locked-in rates decrease in value. To preserve the value of such 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, we may be required to
purchase loans at current market prices to fulfill existing mandatory loan sale
agreements, thereby incurring losses upon sale. We use an interest rate hedging
program to manage these risks. Through this program, mortgage-backed securities
are purchased and sold forward and options are acquired on treasury futures
contracts.

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

Our hedging program contains an element of risk because the counterparties to
our mortgage and treasury securities transactions may be unable to meet their
obligations. While we do not anticipate nonperformance by any counterparty, we
are exposed to potential credit losses in the event the counterparty fails to
perform. Our exposure to credit risk in the event of default by a counterparty
is the difference between the contract and the current market price. We minimize
our credit risk exposure by limiting the counterparties to well-capitalized
banks and securities dealers who meet established credit and capital guidelines.

Movements in interest rates also impact the value of MSRs. When interest rates
decline, the loans underlying the MSRs are generally expected to prepay faster,
which reduces the market value of the MSRs. We consider the expected increase in
loan origination volumes and the resulting additional origination related income
as a natural hedge against the expected change in the value of MSRs. Lower
mortgage rates generally reduce the fair value of the MSRs, as increased
prepayment speeds are highly correlated with lower levels of mortgage interest
rates.

We enter into interest rate swap agreements ("Swap Agreements") to manage our
interest rate exposure when financing our ARM loans and our mortgage-backed
securities. We generally borrow 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. Our ARM loans and mortgage-backed securities
financing vehicles generally have an interest rate that reprices based on
frequency terms of one to twelve

                                       32


months. Our mortgage-backed securities have an initial fixed interest rate
period of three to five years. When we enter into a Swap Agreement, we generally
agree to pay a fixed rate of interest and to receive a variable interest rate,
generally based on the LIBOR. These Swap Agreements have the effect of
converting our 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 our variable-rate and short-term borrowings such
that the average repricing of the borrowings more closely matches the average
repricing of our mortgage-backed securities. Our duration gap was 0.07 years as
of December 31, 2004.

The following tables summarize our interest rate sensitive instruments as of
December 31, 2004 and December 31, 2003:

                                                        December 31, 2004
                                                  ----------------------------
                                                    Carrying       Estimated
                                                     Amount        Fair Value
                                                  ------------    ------------

Assets:
Mortgage-backed securities                         $ 6,016,866     $ 6,016,866
Derivative assets (1)                                   24,803          30,838
Mortgage loans held for sale, net                    4,853,394       4,931,366
Mortgage servicing rights, net                         151,436         152,467

Liabilities:
Reverse repurchase agreements                      $ 7,071,168     $ 7,065,072
Collateralized debt obligations                      2,022,218       2,022,218
Derivative liabilities                                   1,860           1,860


                                                        December 31, 2003
                                                  ----------------------------
                                                    Carrying       Estimated
                                                     Amount        Fair Value
                                                  ------------    ------------

Assets:
Mortgage-backed securities                         $ 1,763,628     $ 1,763,628
Derivative assets                                       30,611          30,611
Mortgage loans held for sale, net                    1,216,353       1,218,667
Mortgage servicing rights, net                         117,784         117,784

Liabilities:
Reverse repurchase agreements                      $ 1,344,327     $ 1,344,327
Derivative liabilities                                  12,694          12,694

(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.




Management's fair value estimates are made as of a specific point in time based
on present value or other valuation techniques. These techniques involve
uncertainties and are significantly affected by the assumptions used and the
judgments made regarding risk characteristics of various financial instruments,
discount rates, estimates of future cash flows, future expected loss experience
and other factors. Changes in assumptions could significantly affect these
estimates and the resulting fair values. Derived fair value estimates cannot be
substantiated by comparison to independent markets and, in many cases, could not
be realized in an immediate sale of the instrument. Also, because of differences
in methodologies and assumptions used to estimate fair values, the fair values
used by us should not be compared to those of other companies. A further
discussion of the methods and assumptions we use to estimate the above financial
instruments is presented in Note 1 to the Consolidated Financial Statements.


                                       33


Newly Issued Accounting Pronouncements

In March 2004, the SEC issued SAB No. 105, which provides guidance regarding
loan commitments that are accounted for as derivative instruments under SFAS No.
133 (as amended), "Accounting for Derivative Instruments and Hedging
Activities." In SAB No. 105, the SEC stated that the value of expected future
cash flows related to servicing rights should be excluded when determining the
fair value of derivative IRLCs. This guidance must be applied to derivative
IRLCs initiated after March 31, 2004. Under the new policy, the value of the
expected future cash flow related to servicing rights is not recognized until
the underlying loans are sold. Our results of operations for the year ended
December 31, 2004 were reduced $30.7 million on a pre-tax basis by the adoption
of SAB No. 105.

Emerging Issues Task Force ("EITF") Issue No. 03-1, "The Meaning of
Other-Than-Temporary Impairment and its Application to Certain Investments" was
ratified by the FASB in March 2004. This EITF addresses how to determine the
meaning of other-than-temporary impairment and its application to investments
classified as either available for sale or held to maturity under SFAS No. 115,
"Accounting for Certain Investments in Debt and Equity Securities" (including
individual securities and investments in mutual funds), and investments
accounted for under the cost method or the equity method. In September 2004, the
FASB delayed the effective date of the portion of this EITF that relates to
measuring and recognizing other-than-temporary impairment until implementation
guidance is finalized. This delay does not suspend the requirement to recognize
other-than-temporary impairment required by existing accounting literature.

In December 2004, the FASB issued SFAS No. 123 (revised 2004), "Share-based
Payment" ("SFAS No. 123 Revised"). This statement revises SFAS No. 123,
"Accounting for Stock-Based Compensation," and supersedes APB opinion No. 25,
"Accounting for Stock Issued to Employees," and its related implementation
guidance. The most significant change resulting from this statement is the
requirement for public companies to expense employee share-based payments under
fair value as originally introduced in SFAS No. 123. The statement is effective
for public companies beginning in the first annual reporting period that begins
after June 15, 2005. The Company will adopt this statement when effective and is
currently evaluating the impact.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information required to be included in this Item 7A regarding Quantitative
and Qualitative Disclosures about Market Risk is included in Item 7 of this
report, "Management's Discussion and Analysis of Financial Condition and Results
of Operations--Risk Management."


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information required by this Item 8 is incorporated by reference to the
Company's Consolidated Financial Statements, together with the Notes to
Consolidated Financial Statements and Independent Auditors' Report, beginning on
page F-1 of this report on Form 10-K/A.


ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.


                                       34


ITEM 9A.  CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

The Company's management, including the Company's Chief Executive Officer and
Chief Financial Officer, has evaluated the effectiveness of its disclosure
controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the
Exchange Act) as of the end of the period covered by this annual report. Based
on that evaluation, the Chief Executive Officer and Chief Financial Officer have
concluded that, solely due to the material weaknesses described below under the
heading "Management's Report on Internal Control Over Financial Reporting," the
Company's disclosure controls and procedures were not effective as of the end of
the period covered by this annual report.

Management's Report on Internal Control Over Financial Reporting (as revised)

Management of American Home Mortgage Investment Corp. and its subsidiaries (the
"Company," "we" or "us") is responsible for establishing and maintaining
adequate internal control over financial reporting. The Company's internal
control over financial reporting is designed 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.

A material weakness is a significant deficiency, or combination of significant
deficiencies, that results in more than a remote likelihood that a material
misstatement of the annual or interim financial statements will not be prevented
or detected. A significant deficiency is a control deficiency, or combination of
control deficiencies, that adversely affects the Company's ability to initiate,
authorize, record, process, or report external Financial information reliably in
accordance with generally accepted accounting principles such that there is more
than a remote likelihood that a misstatement of the Company's annual or interim
financial statements that is more than inconsequential will not be prevented or
detected.

Our internal control over financial reporting includes those policies and
procedures that:

      o     pertain to the maintenance of records that, in reasonable detail,
            accurately and fairly reflect the transactions and dispositions of
            the assets of the Company;

      o     provide reasonable assurance that transactions are recorded as
            necessary to permit preparation of financial statements in
            accordance with generally accepted accounting principles and that
            receipts and expenditures are being made in accordance with
            authorizations of the Company's management and directors; and

      o     provide reasonable assurance regarding prevention or timely
            detection of unauthorized acquisition, use or disposition of our
            assets that could have a material effect on our financial
            statements.

Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.

Management of the Company has revised its assessment of the effectiveness of the
Company's internal control over financial reporting as of December 31, 2004
originally included in Management's Report on Internal Control Over Financial
Reporting in the Company's annual report on Form 10-K filed on March 16, 2005,
in which management concluded that the Company's internal control over financial
reporting was effective. Subsequent to filing its annual report on Form 10-K on
March 16, 2005, the Company identified material misstatements in its 2004
financial statements and has restated those annual financial statements.
Management has concluded that these misstatements resulted from control
deficiencies that represent material weaknesses. As a


                                       35


result, management has revised its assessment of the effectiveness of the
Company's internal control over financial reporting due to the following
identified material weaknesses:

      o     The Company's control to review securitization documents in order to
            identify and consider all relevant terms and conditions for the
            proper application of Statement of Financial Accounting Standards
            No. 140 ("SFAS 140"), "Accounting for Transfers and Servicing of
            Financial Assets and Extinguishments of Liabilities," did not
            operate effectively as of December 31, 2004. As a result, the
            Company failed to identify that the Company retained securities that
            benefit from derivatives embedded in the securitization trust of a
            December 2004 securitization of mortgage loans and improperly
            recorded the December 2004 transaction as a sale rather than a
            financing, as required by SFAS 140, in the fourth quarter of 2004.
            SFAS 140 precludes sale accounting treatment for a securitization
            transaction when the issuer retains securities that benefit from
            derivatives embedded in the securitization trust. The Company has
            restated its annual financial statements for the year ended December
            31, 2004, including the quarterly disclosures therein.

      o     The Company's control intended to ensure the proper classification
            of cash flows related to the origination and securitization of
            certain mortgage loans held for sale and the subsequent holding of
            securities retained from securitizations did not operate effectively
            as of December 31, 2004. The Company incorrectly concluded that such
            cash flows should be classified as cash flows from investing
            activities due to its intent to hold the resulting securities in its
            portfolio. As a result, the Company improperly classified cash flows
            related to certain origination, securitization and mortgage-backed
            securities holding activities as cash flows from investing
            activities rather than cash flows from operating activities. The
            Company has restated its annual cash flow statements for the years
            ended December 31, 2004 and 2003 and intends to restate its
            quarterly cash flow statements for the first three quarters of 2004.

In making this assessment, management used the criteria set forth by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO) in
Internal Control-Integrated Framework. Based on its revised assessment and those
criteria, management concludes that the Company did not maintain effective
internal control over financial reporting as of December 31, 2004 due to the
material weaknesses described above.

The Company's Independent Registered Public Accounting Firm, Deloitte & Touche
LLP, has audited and issued a report on management's revised assessment of the
Company's internal control over financial reporting. The report of Deloitte &
Touche LLP appears below.


                                       36


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
American Home Mortgage Investment Corp.

We have audited management's assessment, included in the accompanying
"Management's Report on Internal Control Over Financial Reporting (as revised),"
that American Home Mortgage Investment Corp. and subsidiaries (the "Company")
did not maintain effective internal control over financial reporting as of
December 31, 2004, because of the effects of the material weaknesses identified
in management's assessment based on criteria established in Internal
Control--Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission. The Company's management is
responsible for maintaining effective internal control over financial reporting
and for its assessment of the effectiveness of internal control over financial
reporting. Our responsibility is to express an opinion on management's
assessment and an opinion on the effectiveness of the Company's internal control
over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control over
financial reporting, evaluating management's assessment, testing and evaluating
the design and operating effectiveness of internal control, and performing such
other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinions.

A company's internal control over financial reporting is a process designed by,
or under the supervision of, the company's principal executive and principal
financial officers, or persons performing similar functions, and effected by the
company's board of directors, management, and other personnel, 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. A company's internal control over
financial reporting includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) 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 the financial statements.

Because of the inherent limitations of internal control over financial
reporting, including the possibility of collusion or improper management
override of controls, material misstatements due to error or fraud may not be
prevented or detected on a timely basis. Also, projections of any evaluation of
the effectiveness of the internal control over financial reporting to future
periods are subject to the risk that the controls may become inadequate because
of changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.

In our report dated March 16, 2005, we expressed an unqualified opinion on
management's assessment that the Company maintained effective internal control
over financial reporting and an unqualified opinion on the effectiveness of
internal control over financial reporting. As described in the following
paragraph, the Company subsequently identified material misstatements in its
annual and quarterly financial statements for 2004, necessitating restatement of
the Company's financial statements. Such matters are considered to be material
weaknesses as further discussed in the following paragraph. Accordingly,
management has revised its assessment about the effectiveness of the Company's
internal control over financial reporting and our present opinion on the
effectiveness of the Company's internal control over financial reporting as of
December 31, 2004, as expressed herein, is different from that expressed in our
previous report.

A material weakness is a significant deficiency, or combination of significant
deficiencies, that results in more than a remote likelihood that a material
misstatement of the annual or interim financial statements will not be prevented
or detected. The following material weaknesses have been identified and included
in management's revised assessment:

      o     The Company's control to review securitization documents in order to
            identify and consider all relevant terms and conditions for the
            proper application of Statement of Financial Accounting Standards
            No. 140, "Accounting for Transfers and Servicing of Financial Assets
            and Extinguishments of Liabilities," did not operate effectively as
            of December 31, 2004. As a result, the Company failed to identify
            that the Company retained securities that benefit from derivatives
            embedded in the securitization trust of a December 2004
            securitization of mortgage loans and improperly recorded the
            December 2004 transaction as a sale rather than a financing in the
            fourth quarter of 2004.


                                       37


      o     The Company's control over the proper classification of cash flows
            relating to the origination and securitization of certain mortgage
            loans held for sale and the subsequent holding of securities
            retained from securitizations did not operate effectively as of
            December 31, 2004. As a result, the Company improperly classified
            cash flows related to certain origination, securitization and
            mortgage-backed securities holding activities as cash flows from
            investing activities rather than cash flows from operating
            activities.

These material weaknesses resulted in restatements of the Company's previously
issued interim and annual financial statements as described more fully in Note
25 to the consolidated financial statements. These material weaknesses were
considered in determining the nature, timing, and extent of audit tests applied
in our audit of the consolidated financial statements as of and for the year
ended December 31, 2004 (as restated), of the Company and this report does not
affect our report on such financial statements.

In our opinion, management's revised assessment that the Company did not
maintain effective internal control over financial reporting as of December 31,
2004, is fairly stated, in all material respects, based on the criteria
established in Internal Control--Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission. Also in our opinion,
because of the effects of the material weaknesses described above on the
achievement of the objectives of the control criteria, the Company has not
maintained, effective internal control over financial reporting as of December
31, 2004, based on the criteria established in Internal Control--Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission.

We have also audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the consolidated statement of
financial condition as of December 31, 2004 and the related consolidated
statements of income, cash flows and changes in stockholders' equity for the
year ended December 31, 2004 (as restated) of the Company and our report dated
April 15, 2005 expressed an unqualified opinion on those financial statements.

/s/ Deloitte & Touche LLP
Princeton, New Jersey
April 15, 2005



Changes in Internal Control Over Financial Reporting

The Company's management, including the Company's Chief Executive Officer and
Chief Financial Officer, has evaluated the Company's internal controls over
financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act) to determine whether any changes occurred during the fourth
quarter of 2004 that have materially affected, or are reasonably likely to
materially affect, the Company's internal control over financial reporting.
Based on that evaluation, there has been no such change during the fourth
quarter of 2004.

ITEM 9B.  OTHER INFORMATION

Pre-Approval of Non-Audit Services
----------------------------------


In accordance with Section 10A of the Exchange Act, as amended by Section 202 of
the Sarbanes-Oxley Act of 2002, non-audit-related services were approved by the
Audit Committee of the Company's Board of Directors, to be performed by Deloitte
Tax LLP, an affiliate of Deloitte & Touche LLP, the Company's independent
registered public accounting firm. These pre-approved, non-audit-related
services relate to tax and tax-related services, including tax compliance and
tax consulting services.

Acquisition Agreement with Irwin Mortgage Corporation
-----------------------------------------------------


On March 14, 2005, the Company announced that it had entered into a definitive
agreement with Irwin Mortgage Corporation ("Irwin Mortgage"), a wholly owned
subsidiary of Irwin Financial Corporation, to acquire community mortgage loan
production branches in Arizona, California, Colorado, Hawaii and Washington, as
well as Irwin Mortgage's credit union affinity business, which markets mortgage
loans through mortgage salespersons located onsite at approximately 50 credit
unions. A copy of the press release announcing the acquisition is attached as
Exhibit 99.1 to this report on Form 10-K/A and is incorporated herein by
reference.


                                       38


                                    PART III


ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The Company intends to file with the SEC a definitive proxy statement on
Schedule 14A in connection with the Company's 2005 Annual Meeting of
Stockholders (the "Proxy Statement"), which will involve the election of
directors, within 120 days after the end of the year covered by this report on
Form 10-K/A. Information regarding directors and executive officers of the
Company will be set forth in the Proxy Statement and is incorporated herein by
reference.


ITEM 11.  EXECUTIVE COMPENSATION

The information required to be furnished pursuant to this item will be set forth
in the Proxy Statement and is incorporated herein by reference.


ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS

The information required to be furnished pursuant to this item will be set forth
in the Proxy Statement and is incorporated herein by reference.


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required to be furnished pursuant to this item will be set forth
in the Proxy Statement and is incorporated herein by reference.


ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required to be furnished pursuant to this item will be set forth
in the Proxy Statement and is incorporated herein by reference.


                                       39


                                     PART IV


ITEM 15.  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)   Documents Filed with this report on Form 10-K/A.

      The following documents are filed as part of this report on Form 10-K/A:

      1.    Financial Statements
            --------------------

      The information called for by this paragraph is set forth in the
      Consolidated Financial Statements and Report of Independent Registered
      Public Accounting Firm beginning on page F-1 of this report on Form
      10-K/A, and is incorporated herein by reference.

      2.    Financial Statement Schedules
            -----------------------------

      None.

      3.    Exhibits
            --------

      The information called for by this paragraph is contained in the Index to
      Exhibits to this report on Form 10-K/A, which is incorporated herein by
      reference.


                                       40


                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, on the 22nd day of
April, 2005.


                                    AMERICAN HOME MORTGAGE INVESTMENT CORP.


                                    By:   /s/ Michael Strauss
                                       ----------------------------------------
                                       Name:  Michael Strauss
                                       Title: Chairman, Chief Executive Officer
                                                and President

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated.

Signature                                  Title                Date

/s/ Michael Strauss              Chairman, Chief
------------------------------      Executive Officer           April 22, 2005
Michael Strauss                     and President
                                 (Principal Executive
                                    Officer)


/s/ Stephen A. Hozie             Executive Vice President
------------------------------      and Chief Financial         April 22, 2005
Stephen A. Hozie                    Officer
                                 (Principal Financial
                                    Officer and Principal
                                    Accounting Officer)



/s/ John A. Johnston             Director                       April 22, 2005
------------------------------
John A. Johnston



/s/ Nicholas R. Marfino          Director                       April 22, 2005
------------------------------
Nicholas R. Marfino



/s/ Michael A. McManus, Jr.      Director                       April 22, 2005
------------------------------
Michael A. McManus, Jr.



/s/ C. Cathleen Raffaeli         Director                       April 22, 2005
------------------------------
C. Cathleen Raffaeli



/s/ Kenneth P. Slosser           Director                       April 22, 2005
------------------------------
Kenneth P. Slosser


/s/ Irving J. Thau               Director                       April 22, 2005
------------------------------
Irving J. Thau

                                       41



                          INDEX TO FINANCIAL STATEMENTS
                          -----------------------------


AMERICAN HOME MORTGAGE INVESTMENT CORP.

TABLE OF CONTENTS
--------------------------------------------------------------------------------


                                                                         Page

Report of Independent Registered Public Accounting Firm                   F-1

Consolidated Balance Sheets as of December 31, 2004 (As Restated)
 and 2003                                                                 F-2

Consolidated Statements of Income for the Years Ended
 December 31, 2004 (As Restated), 2003 and 2002                           F-3

Consolidated Statements of Stockholders' Equity for the Years Ended
 December 31, 2004 (As Restated), 2003 and 2002                           F-4

Consolidated Statements of Cash Flows for the Years Ended
 December 31, 2004 (As Restated), 2003 (As Restated) and 2002             F-5

Notes to Consolidated Financial Statements                            F-6 - F-40




REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
American Home Mortgage Investment Corp.

We have audited the accompanying consolidated balance sheets of American Home
Mortgage Investment Corp. and subsidiaries (the "Company") as of December 31,
2004 and 2003, and the related consolidated statements of income, stockholders'
equity and cash flows for each of the three years in the period ended December
31, 2004. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company and its subsidiaries as
of December 31, 2004 and 2003, and the results of their operations and their
cash flows for each of the three years in the period ended December 31, 2004, in
conformity with accounting principles generally accepted in the United States of
America.

As discussed in Note 25, the accompanying 2003 and 2004 consolidated financial
statements have been restated.

We have also audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the effectiveness of the Company's
internal control over financial reporting as of December 31, 2004, based on the
criteria established in Internal Control--Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission and our report
dated April 15, 2005 expressed an unqualified opinion on management's assessment
of the effectiveness of the Company's internal control over financial reporting
and an adverse opinion on the effectiveness of the Company's internal control
over financial reporting because of material weaknesses.


/s/ Deloitte & Touche LLP
Princeton, New Jersey
April 15, 2005


                                      F-1





AMERICAN HOME MORTGAGE INVESTMENT CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                              December 31,

                                                                                                    -------------------------------
(Dollars in thousands, except per share amounts)                                                        2004               2003
                                                                                                    -------------------------------
                                                                                                    (As Restated,
                                                                                                     see Note 25)
                                                                                                                 
Assets:

  Cash and cash equivalents                                                                         $    192,821       $     53,148
  Accounts receivable and servicing advances                                                             116,978             84,311
  Mortgage-backed securities (including securities pledged of $5,968,969 in 2004 and
          $1,426,477 in 2003)                                                                          6,016,866          1,763,628
  Mortgage loans held for sale, net                                                                    4,853,394          1,216,353
  Derivative assets                                                                                       24,803             30,611
  Mortgage servicing rights, net                                                                         151,436            117,784
  Premises and equipment, net                                                                             51,576             41,738
  Goodwill                                                                                                90,877             83,445
  Other assets                                                                                            57,046             13,672
                                                                                                    ------------       ------------

      Total assets                                                                                  $ 11,555,797       $  3,404,690
                                                                                                    ============       ============

Liabilities and Stockholders' Equity:
Liabilities:

  Warehouse lines of credit                                                                         $    735,783       $  1,121,760
  Drafts payable                                                                                          26,200             25,625
  Commercial paper                                                                                       529,790               --
  Reverse repurchase agreements                                                                        7,071,168          1,344,327
  Collateralized debt obligations                                                                      2,022,218               --
  Payable for securities purchased                                                                          --              259,701
  Derivative liabilities                                                                                   1,860             12,694
  Accrued expenses and other liabilities                                                                 152,413             76,156
  Notes payable                                                                                          135,761             99,655
  Income taxes payable                                                                                    54,342             66,802
                                                                                                    ------------       ------------

    Total liabilities                                                                                 10,729,535          3,006,720
                                                                                                    ------------       ------------

Commitments and contingencies (Note 17)                                                                       --                 --

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
       in 2004 and 0 shares issued and outstanding in 2003                                                50,857                 --
       9.25% Series B Cumulative Redeemable, 3,450,000 shares issued and outstanding
       in 2004 and 0 shares issued and outstanding in 2003                                                83,183                 --
  Common stock, par value $0.01 per share, 100,000,000 shares authorized,
      40,288,077 shares issued and outstanding in 2004 and 25,270,100 shares

       issued and outstanding in 2003                                                                        403                252
  Additional paid-in capital                                                                             631,530            281,432
  Retained earnings                                                                                       99,628            121,029
  Accumulated other comprehensive loss                                                                   (39,339)            (4,743)
                                                                                                    ------------       ------------

    Total stockholders' equity                                                                           826,262            397,970
                                                                                                    ------------       ------------

      Total liabilities and stockholders' equity                                                    $ 11,555,797       $  3,404,690
                                                                                                    ============       ============


See notes to consolidated financial statements.

                                      F-2


           AMERICAN HOME MORTGAGE INVESTMENT CORP. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF INCOME
                   (In thousands, except per share amounts)




                                                                                                Year Ended December 31,
                                                                                   -------------------------------------------------
                                                                                        2004               2003              2002
                                                                                   ---------------    -------------     ------------
                                                                                   (As Restated,
                                                                                    see Note 25)
Net interest income:

                                                                                                                 
    Interest income                                                                   $ 314,306         $ 106,017         $  55,871
    Interest expense                                                                   (201,373)          (56,986)          (31,034)
                                                                                      ---------         ---------         ---------
         Total net interest income                                                      112,933            49,031            24,837
                                                                                      ---------         ---------         ---------

    Gain on sales of mortgage loans                                                     134,099           376,605           216,595
    Gain on securitizations of mortgage loans                                            40,120               149                --
    Gain on sales of mortgage-backed securities and derivatives                              63             2,210                --
    Unrealized gain on mortgage-backed securities and derivatives                        75,460             3,272                --

    Loan servicing fees                                                                  40,571            39,125            23,973
    Amortization of mortgage servicing rights                                           (32,615)          (51,824)          (26,399)
    Impairment (provision) recovery of mortgage servicing rights                        (12,423)            6,334           (10,332)
                                                                                      ---------         ---------         ---------
         Net loan servicing (loss) fees                                                  (4,467)           (6,365)          (12,758)
                                                                                      ---------         ---------         ---------

    Other non-interest income                                                             7,033             7,229             4,147
                                                                                      ---------         ---------         ---------
         Total non-interest income                                                      252,308           383,100           207,984
                                                                                      ---------         ---------         ---------

Non-interest expenses:

    Salaries, commissions and benefits, net                                             189,393           204,939           106,895
    Occupancy and equipment                                                              37,642            27,015            15,506
    Data processing and communications                                                   16,165            13,201             7,853
    Office supplies and expenses                                                         13,730            13,312             6,511
    Marketing and promotion                                                              10,409            12,239             7,996
    Travel and entertainment                                                             14,190             9,964             4,587
    Professional fees                                                                    12,159             7,547             5,443
    Other                                                                                22,216            21,897            10,470
                                                                                      ---------         ---------         ---------
         Total non-interest expenses                                                    315,904           310,114           165,261
                                                                                      ---------         ---------         ---------

Net income before income tax (benefit) expense                                           49,337           122,017            67,560

Income tax (benefit) expense                                                            (25,575)           48,223            28,075
                                                                                      ---------         ---------         ---------

Net income                                                                            $  74,912         $  73,794         $  39,485
                                                                                      =========         =========         =========

Dividends on preferred stock                                                              3,988                --                --

                                                                                      ---------         ---------         ---------
Net income available to common shareholders                                           $  70,924         $  73,794         $  39,485
                                                                                      =========         =========         =========

    Per share data:

      Basic                                                                           $    1.89         $    4.16         $    2.72
      Diluted                                                                         $    1.86         $    4.07         $    2.65

      Weighted average number of shares - basic                                          37,612            17,727            14,509
      Weighted average number of shares - diluted                                        38,087            18,113            14,891


See notes to consolidated financial statements

                                      F-3





AMERICAN HOME MORTGAGE INVESTMENT CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
THREE YEARS ENDED DECEMBER 31, 2004

-----------------------------------------------------------------------------------------------------------------------------------
                                                                                                      Accumulated
                                                                           Additional                    Other            Total
                                                     Preferred    Common    Paid-in     Retained     Comprehensive    Stockholders'
(Dollars in thousands)                                 Stock      Stock     Capital     Earnings          Loss           Equity
-----------------------------------------------------------------------------------------------------------------------------------
                                                                                                    
Balance at January 1, 2002                          $        --   $  120   $   47,953   $  30,544    $           --   $      78,617
                                                    ===========   ======   ==========   =========    ==============   =============
Comprehensive income:
  Net income                                                 --       --           --      39,485                --          39,485
                                                                                                                      -------------
Comprehensive income                                                                                                         39,485
  Issuance of common stock - offering                        --       37       36,836          --                --          36,873
  Issuance of common stock -
    underwriters' over allotment                             --        5        5,603          --                --           5,608
  Issuance of common stock - earnouts                        --        3        3,401          --                --           3,404
  Issuance of common stock - 1999 Omnibus
    Stock Incentive Plan                                     --        2        1,306          --                --           1,308
  Issuance of common stock - warrants                        --       --          117          --                --             117
  Tax benefit from stock options exercised                   --       --          569          --                --             569
  Dividends declared on common stock                         --       --           --      (1,885)               --          (1,885)
                                                    -----------   ------   ----------   ---------    --------------   -------------
Balance at December 31, 2002                                 --      167       95,785      68,144                --         164,096
                                                    ===========   ======   ==========   =========    ==============   =============
Comprehensive income:
  Net income                                                 --       --           --      73,794                --          73,794
  Unrealized gain on mortgage-backed
    securities available for sale                            --       --           --          --             1,292           1,292
  Unrealized loss on cash flow hedges                        --       --           --          --            (6,035)         (6,035)
                                                                                                                      -------------
Comprehensive income                                                                                                         69,051
  Issuance of common stock - purchase
    of Apex Mortgage Capital, Inc.                           --       77      177,248          --                --         177,325
  Issuance of common stock - earnouts                        --        4        5,160          --                --           5,164
  Issuance of common stock - 1999 Omnibus
    Stock Incentive Plan                                     --        4        2,772          --                --           2,776
  Issuance of common stock - warrants                        --       --          467          --                --             467
  Dividends declared on common stock                         --       --           --     (20,909)               --         (20,909)
                                                    -----------   ------   ----------   ---------    --------------   -------------
Balance at December 31, 2003                                 --      252      281,432     121,029            (4,743)        397,970
                                                    ===========   ======   ==========   =========    ==============   =============
Comprehensive income:
  Net income (as restated, see Note 25)                      --       --           --      74,912                --          74,912
  Unrealized loss on mortgage-backed
    securities available for sale                            --       --           --          --           (10,711)        (10,711)
  Unrealized loss on cash flow hedges,
   net of amortization                                       --       --           --          --           (23,885)        (23,885)
                                                                                                                      -------------
Comprehensive income (as restated, see Note 25):                                                                             40,316
  Issuance of Series A preferred stock - offering        50,857       --           --          --                --          50,857
  Issuance of Series B preferred stock - offering        83,183       --           --          --                --          83,183
  Issuance of common stock - offering                        --      144      339,647          --                --         339,791
  Issuance of common stock - earnouts                        --        2        5,577          --                --           5,579
  Issuance of common stock, 1999 Omnibus
    Stock Incentive Plan                                     --        5        3,275          --                --           3,280
  Tax benefit from stock options exercised                   --       --        1,599          --                --           1,599
  Dividends declared on Series A preferred stock             --       --           --      (2,959)               --          (2,959)
  Dividends declared on Series B preferred stock             --       --           --      (1,029)               --          (1,029)
  Dividends declared on common stock                         --       --           --     (92,325)               --         (92,325)
                                                    -----------   ------   ----------   ---------    --------------   -------------
Balance at December 31, 2004 (as restated see
  Note 25)                                          $   134,040   $  403   $  631,530   $  99,628    $      (39,339)  $     826,262
                                                    ===========   ======   ==========   =========    ==============   =============



See notes to consolidated financial statements.


                                      F-4


            AMERICAN HOME MORTGAGE INVESTMENT CORP. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)




                                                                                Year Ended December 31,
                                                                     -----------------------------------------------
                                                                          2004             2003             2002
                                                                     -------------    -------------    -------------

                                                                     (As restated,    (As restated,
                                                                     see Note 25)     see Note 25)
                                                                                              
Cash flows from operating activities:
Net income                                                           $      74,912    $      73,794    $      39,485
Adjustments to reconcile net income to net cash
  used in operating activities:
Depreciation and amortization                                                8,404            6,023            3,348
Amortization and impairment of mortgage servicing rights                    45,038           45,490           24,140
Amortization of mortgage-backed securities premiums, net                    27,315              130               --
Deferred cash flow hedge loss, net of amortization                          (4,218)              --               --
Loss (gain) on sales of mortgage-backed securities and derivatives           4,929           (2,210)              --
Unrealized gain on mortgage-backed securities                               (6,916)          (3,272)              --
Unrealized gain on free standing derivatives                               (41,077)              --               --
Additions to mortgage servicing rights on securitized loans                (59,703)          (5,333)              --
Additions to mortgage servicing rights on sold loans                       (18,987)         (48,918)         (31,118)
Decrease (increase) in interest rate lock commitments                       18,586            9,234          (24,203)
Increase in deferred origination costs                                     (25,055)          (8,167)          (6,822)
Decrease (increase) in SFAS No. 133 basis adjustments                       16,449           (5,783)          (7,219)
Other                                                                         (757)             661              980
(Increase) decrease in operating assets:
       Accounts receivable and servicing advances                          (32,667)         (28,848)         (25,442)
       Other assets                                                        (43,130)          (5,117)           1,828
Increase (decrease) in operating liabilities:
       Accrued expenses and other liabilities                               61,226           (7,989)          19,346
       Income taxes payable                                                (12,460)          23,847           11,966
       Forward delivery contracts                                           (4,798)           3,190            7,204
Origination of mortgage loans held for sale                            (23,069,085)     (21,705,251)     (11,569,425)
Proceeds from sales and repayments of mortgage loans                    13,716,001       20,806,549       11,380,878
Proceeds from securitizations and repayments of mortgage loans           5,686,825          520,806               --
Additions to mortgage-backed securities and derivatives                 (3,818,014)        (531,137)              --
Proceeds from sales of mortgage-backed securities                        2,020,635           54,437               --
Principal repayments of mortgage-backed securities                         333,956              159               --
                                                                     -------------    -------------    -------------
       Net cash used in operating activities                            (5,122,591)        (807,705)        (175,054)
                                                                     -------------    -------------    -------------

Cash flows from investing activities:
Purchases of premises and equipment                                        (18,242)         (34,760)          (4,649)
Purchases of mortgage-backed securities                                 (5,293,484)      (1,286,211)              --
Proceeds from sales of mortgage-backed securities                        1,589,297          509,424               --
Principal repayments of mortgage-backed securities                         917,472            7,318               --
Acquisition of businesses, net of cash acquired                                 --            6,378          (33,452)
Other                                                                         (244)          (3,315)            (786)
                                                                     -------------    -------------    -------------
       Net cash used in investing activities                            (2,805,201)        (801,166)         (38,887)
                                                                     -------------    -------------    -------------

Cash flows from financing activities:
(Decrease) increase in warehouse lines of credit, net                     (385,977)         393,294          183,958
Increase in reverse repurchase agreements, net                           5,726,841        1,014,677               --
Increase in collateralized debt obligations                              2,022,218               --               --
(Decrease) increase in payable for securities purchased                   (259,701)         219,451               --
Increase in commercial paper, net                                          529,790               --               --
Increase (decrease) in drafts payable, net                                     575          (16,974)          (3,448)
Proceeds from issuance of preferred stock                                  135,482               --               --
Proceeds from issuance of common stock                                     343,413            2,761           43,692
Dividends paid                                                             (81,282)          (7,000)          (1,885)
Increase (decrease) in notes payable, net                                   36,106           31,394          (10,353)
                                                                     -------------    -------------    -------------
       Net cash provided by financing activities                         8,067,465        1,637,603          211,964
                                                                     -------------    -------------    -------------

Net increase (decrease) in cash and cash equivalents                       139,673           28,732           (1,977)
Cash and cash equivalents, beginning of period                              53,148           24,416           26,393
                                                                     -------------    -------------    -------------
Cash and cash equivalents, end of period                             $     192,821    $      53,148    $      24,416
                                                                     =============    =============    =============
Supplemental disclosure of cash flow information:
Interest paid                                                        $     146,033    $      58,668    $      22,361
Income taxes paid                                                            9,708           25,748           15,736



See notes to consolidated financial statements.


                                      F-5


AMERICAN HOME MORTGAGE INVESTMENT CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------------------------------------------


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization - On December 3, 2003, American Home Mortgage Investment Corp.
("AHM Investment") completed its merger with Apex Mortgage Capital, Inc.
("Apex"), a Maryland corporation that operated and elected to be treated as a
real estate investment trust, or REIT. Under the terms of the transaction,
American Home Mortgage Holdings, Inc. ("AHM Holdings") reorganized through a
reverse triangular merger that caused AHM Investment, a newly formed Maryland
corporation that operates and has elected to be treated as a REIT for federal
income tax purposes, to become AHM Holdings' parent. AHM Investment was formed
to combine the net assets of Apex, consisting primarily of mortgage-backed
securities, with the mortgage origination and servicing businesses of AHM
Holdings. As used herein, references to the "Company," "American Home," "we,"
"our" and "us" refer to AHM Investment collectively with its subsidiaries.

AHM Investment is a mortgage REIT focused on earning net interest income from
purchased and self-originated mortgage-backed securities, and through its
taxable subsidiaries, on earning income from originating and selling mortgage
loans and servicing mortgage loans for institutional investors. Mortgages are
originated through a network of loan origination offices as well as through
mortgage brokers and are serviced at the Company's Columbia, Maryland servicing
center.

Basis of Presentation - The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. The Company's estimates and assumptions
primarily arise from risks and uncertainties associated with interest rate
volatility, 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. When necessary, certain reclassifications of prior
year financial statement amounts have been made to conform to the current year
presentation.

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 include cash on hand,
amounts due from banks and overnight deposits. The carrying amount of cash and
cash equivalents approximates its fair value.

Mortgage-backed Securities - Mortgage-backed securities are classified as either
trading or available for sale. Trading securities are reported at fair value,
and changes in fair value are reported in unrealized gain on mortgage-backed
securities and derivatives in the consolidated statements of income. Available
for sale securities are reported at fair value, with unrealized gains and losses
excluded from earnings and reported in accumulated other comprehensive income
(loss). Realized gains and losses on sales of available for sale securities are
determined on an average cost basis and included in gain on sales of
mortgage-backed securities and derivatives.

When the fair value of an available for sale security is less than amortized
cost, management considers whether there is an other-than-temporary impairment
in the value of the security (e.g., whether the security is likely to be sold
prior to the recovery of fair value) based on estimated credit losses,
prepayment speeds and the length of time in an unrealized loss position. If, in
management's judgment, an other-than-temporary impairment exists, the cost basis
of the security is written down to the then-current fair value, and the
unrealized loss is transferred from accumulated other comprehensive income as an
immediate reduction of current earnings (i.e., as if the loss had been realized
in the period of impairment). Premiums and discounts on the Company's
mortgage-backed securities held in available for sale are amortized to interest
income using the level yield method over the estimated life of the security.

Mortgage Loans Held for Sale - Mortgage loans held for sale are carried at the
lower of cost or aggregate market value. The cost basis includes the capitalized
value of the 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 Servicing Rights - Mortgage servicing rights ("MSRs") are carried at
the lower of cost or fair value, based on defined interest rate risk strata, and
are amortized in proportion to and over the period of estimated net servicing
income. When the Company sells certain loans and retains the servicing rights,
it allocates the cost basis of the loans between the assets sold and the MSRs
based on their relative fair values on the date of sale.

                                      F-6


The Company estimates the fair value of its MSRs by obtaining market information
from one of the primary MSR brokers. When the book value of capitalized MSRs
exceeds its fair value, impairment is recognized through a valuation allowance.
In determining impairment, our mortgage servicing portfolio is stratified by the
predominant risk characteristic of the underlying mortgage loans. The Company
has determined that the predominant risk characteristic is the interest rate on
the underlying loans. The Company measures impairment for each stratum by
comparing the estimated fair value to the recorded book value. Temporary
impairment is recorded through a valuation allowance and amortization expense in
the period of occurrence. In addition, the Company periodically evaluates its
MSRs for other than temporary impairment to determine if the carrying value
before the application of the valuation allowance is recoverable. The Company
receives a sensitivity analysis of the estimated fair value of its MSRs assuming
a 200-basis-point instantaneous increase in interest rates from an independent
MSR broker. The fair value estimate includes changes in market assumptions that
would be expected given the increase in mortgage rates (e.g., prepayment speeds
would be lower). The Company believes this 200-basis-point increase in mortgage
rates to be an appropriate threshold for determining the recoverability of the
temporary impairment because that size rate increase is foreseeable and
consistent with historical mortgage rate fluctuations. When using this
instantaneous change in rates, if the fair value of the strata of MSRs is
estimated to increase to a point where all of the impairment would be recovered,
the impairment is considered to be temporary. When the Company determines that a
portion of the MSRs is not recoverable, the related MSRs and the previously
established valuation allowance are correspondingly reduced to reflect other
than temporary impairment.

Premises and Equipment - Premises and equipment is stated at cost less
accumulated depreciation and amortization. Depreciation is provided using the
straight-line method over 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 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-backed securities
holdings segment includes a forecast of the expected future net interest income,
gain on mortgage-backed securities and the related revenues and expenses. These
cash flows are discounted using a rate that is estimated to be a
weighted-average cost of capital for similar companies. We further test to
ensure that the fair value of all of our business units does not exceed our
total market capitalization.

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 to finance certain portions of its mortgage
loans held for sale. The collateralized debt obligations are collateralized by
ARM loans held for sale that have been placed in a trust and bear interest rates
that have historically moved in close relationship to the LIBOR. Collateralized
debt obligations are accounted for as borrowings and recorded as a liability on
the consolidated balance sheet.

Commercial Paper - The Company formed 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. The commercial paper is secured by the Company's loans held
for sale, mortgage-backed securities and 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.

Drafts Payable - Drafts payable represent outstanding mortgage loan
disbursements that the Company has provided to its customers for the purchase of
a home. The amounts outstanding do not bear interest and are transferred into
one of the warehouse facilities when they are presented to a bank.

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

Interest Rate Lock Commitments. The Company's mortgage committed pipeline
includes IRLCs that have been extended to borrowers who have applied for loan
funding and meet certain defined credit and underwriting criteria. The Company
classifies and accounts for the IRLCs associated with loans expected to be sold
or securitized as free-standing derivatives. Accordingly, IRLCs are recorded at
fair value with changes in fair value recorded to current earnings. The fair
value of the IRLCs initiated on or before March 31, 2004 is determined by an
estimate of the ultimate gain on sale of the loans, including the value of MSRs,
net of estimated net costs to originate the loan. In


                                      F-7


March 2004, the Securities and Exchange Commission ("SEC") issued Staff
Accounting Bulletin No. 105 ("SAB No. 105"), which provided industry guidance
that changed the timing of recognition of the value of MSRs for IRLCs initiated
after March 31, 2004. In SAB No. 105, the SEC stated that the value of expected
future cash flows related to MSRs should be excluded when determining the fair
value of derivative IRLCs. Under the new policy, the value of the expected
future cash flow related to servicing rights is not recognized until the
underlying loans are sold.

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

Forward Delivery Commitments Used to Hedge Mortgage Loans Held for Sale. The
Company's risk management objective for its mortgage loans held for sale is to
protect earnings from an unexpected charge due to a decline in value. The
Company's strategy is to engage in a risk management program involving the use
of mortgage forward delivery contracts designated as fair value hedging
instruments to hedge 100% of its agency-eligible conforming loans and most of
its non-conforming loans held for sale. At the inception of the hedge, 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.

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
are 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 Statement of Financial
Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments
and Hedging Activities," the Company does not account for these hedges under a
method defined in SFAS No. 133 as the "shortcut" method, but rather the Company
calculates the effectiveness of these hedges on an ongoing basis, and, to date,
has calculated effectiveness of approximately 100%. 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 unrealized gain on mortgage-backed 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 unrealized gain on mortgage-backed securities and derivatives.

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

Gain on Sale of Loans - The Company recognizes gain on sale of loans for the
difference between the sales price and the adjusted book value of the loans at
the time of sale. The adjusted book value of the loans includes the original
principal amount plus adjustments related to previously recognized income plus
deferrals of fees and points received and direct loan origination costs.

Loan Origination Fees and Direct Origination Costs - The Company records loan
fees, discount points and certain direct origination costs as an adjustment of
the cost of the loan or security and such amounts are included in revenues when
the loan or security is sold. When loans are securitized and held as securities
available for sale, net deferred origination costs are amortized over the life
of the


                                      F-8


security using the level-yield method and such amounts are included in 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 unrealized gain on mortgage-backed securities and
derivatives. Gain on sales of mortgage loans and salaries, commissions and
benefits have been reduced by $105.0 million, $87.1 million and $57.5 million
due to direct loan origination costs, including commission costs, incurred for
the years ended December 31, 2004, 2003 and 2002, respectively.

Interest Recognition - The Company accrues interest income as it is earned.
Loans are placed on a nonaccrual status when any portion of the principal or
interest is 90 days past due or earlier when concern exists as to the ultimate
collectibility of principal or interest. Loans return to accrual status when
principal and interest become current and are anticipated to be fully
collectible. Interest expense is recorded on outstanding lines of credit at a
rate based on a spread to the LIBOR.

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 unrealized gain on mortgage-backed 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 - In 1999, the Company established the 1999 Omnibus Stock
Incentive Plan, as amended (the "Plan"). The Company has elected to account for
the Plan using Accounting Principles Board ("APB") Opinion No. 25, "Accounting
for Stock Issued to Employees," and to provide pro forma net income and pro
forma earnings per share disclosures for employee stock option grants as if the
fair-value based method, as required by SFAS No. 148, "Accounting for
Stock-Based Compensation - Transition and Disclosure - an amendment of FASB
Statement No. 123," had been applied.

The following table presents pro forma net income available to common
shareholders, basic earnings per share and diluted earnings per share had
compensation cost been determined based on the fair value at the grant dates for
awards under the Plan:






                                                                                                  Year Ended December 31,

                                                                                       ----------       ----------       ----------
(In thousands, except per share data)                                                     2004             2003             2002
                                                                                       ----------       ----------       ----------
                                                                                                                
Net income available to common
   shareholders - as reported                                                          $   70,924       $   73,794       $   39,485

Less: Total stock-based employee compensation expense determined                           (1,188)            (724)            (615)
under fair value based method for all awards, net of related tax effects
                                                                                       ----------       ----------       ----------

Net income available to common
   shareholders - pro forma                                                            $   69,736       $   73,070       $   38,870
                                                                                       ==========       ==========       ==========

Earnings per share:

    Basic - as reported                                                                $     1.89       $     4.16       $     2.72
    Basic - pro forma                                                                  $     1.85       $     4.12       $     2.68

    Diluted - as reported                                                              $     1.86       $     4.07       $     2.65
    Diluted - pro forma                                                                $     1.83       $     4.03       $     2.61



In December 2004, the FASB issued SFAS No. 123 (revised 2004), "Share-based
Payment"("SFAS No. 123 Revised"). This statement revises SFAS No. 123,
"Accounting for Stock-Based Compensation," and supersedes APB opinion No. 25,
"Accounting for Stock Issued


                                      F-9


to Employees," and its related implementation guidance. The most significant
change resulting from this statement is the requirement for public companies to
expense employee share-based payments under fair value as originally introduced
in SFAS No. 123. The statement is effective for public companies beginning in
the first annual reporting period that begins after June 15, 2005. The Company
will adopt this statement when effective and is currently evaluating the impact.
The impact, had the Company adopted the fair-value based method under existing
guidance, is shown in the table above.

Earnings Per Share - Basic earnings per share excludes dilution and is computed
by dividing net income available to common shareholders 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 March 2004, the SEC issued SAB No. 105, which provides guidance regarding
loan commitments that are accounted for as derivative instruments under SFAS No.
133 (as amended), "Accounting for Derivative Instruments and Hedging
Activities." In SAB No. 105, the SEC stated that the value of expected future
cash flows related to servicing rights should be excluded when determining the
fair value of derivative IRLCs. This guidance must be applied to derivative
IRLCs initiated after March 31, 2004. Under the new policy, the value of the
expected future cash flow related to servicing rights is not recognized until
the underlying loans are sold. The Company's results of operations for the year
ended December 31, 2004 were reduced $30.7 million on a pre-tax basis by its
adoption of SAB No. 105.

Emerging Issues Task Force ("EITF") Issue No. 03-1, "The Meaning of
Other-Than-Temporary Impairment and its Application to Certain Investments" was
ratified by the FASB in March 2004. This EITF addresses how to determine the
meaning of other-than-temporary impairment and its application to investments
classified as either available for sale or held to maturity under SFAS No. 115,
"Accounting for Certain Investments in Debt and Equity Securities" (including
individual securities and investments in mutual funds), and investments
accounted for under the cost method or the equity method. In September 2004, the
FASB delayed the effective date of the portion of this EITF that relates to
measuring and recognizing other-than-temporary impairment until implementation
guidance is finalized. This delay does not suspend the requirement to recognize
other-than-temporary impairment required by existing accounting literature.

NOTE 2 - ACCOUNTS RECEIVABLE AND SERVICING ADVANCES

The following table presents the Company's accounts receivable and servicing
advances as of December 31, 2004 and 2003:





                                                                                                       December 31,

                                                                                            ---------------------------------
(In thousands)                                                                                  2004                2003
                                                                                            ---------------------------------
                                                                                                            
          Accrued interest on mortgage-backed                                                 $ 46,089            $  6,556
          securities and derivatives
          Loan sales receivables                                                                26,367              38,311
          Foreclosure advances                                                                  16,309              12,369
          Tax and insurance advances                                                             8,388               7,373
          Accrued interest on mortgage loans held for sale                                       4,106               6,931
          Other                                                                                 15,719              12,771
                                                                                              --------            --------
          Accounts receivable and servicing advances                                          $116,978            $ 84,311
                                                                                              ========            ========




                                      F-10


NOTE 3 - MORTGAGE-BACKED SECURITIES

The following table presents the Company's mortgage-backed securities as of
December 31, 2004 and 2003:




                                                                                    December 31, 2004
                                                             ---------------------------------------------------------------
                                                                  Trading              Securities

          (In thousands)                                         Securities         Available for Sale      Total Securities
                                                             -----------------      ------------------      ----------------
                                                                                                     
          Adjusted cost                                         $ 1,811,214            $ 4,220,359            $ 6,031,573

          Gross unrealized gains                                      5,524                 10,808                 16,332
          Gross unrealized losses                                   (10,812)               (20,227)               (31,039)
                                                                -----------            -----------            -----------
          Fair value                                            $ 1,805,926            $ 4,210,940            $ 6,016,866
                                                                ===========            ===========            ===========





                                                                                    December 31, 2003
                                                             ---------------------------------------------------------------
                                                                  Trading              Securities

          (In thousands)                                         Securities         Available for Sale      Total Securities
                                                             -----------------      ------------------      ----------------
                                                                                                     
          Adjusted cost                                         $   476,541            $ 1,282,523            $ 1,759,064

          Gross unrealized gains                                      3,382                  1,969                  5,351
          Gross unrealized losses                                      (110)                  (677)                  (787)
                                                                -----------            -----------            -----------
          Fair value                                            $   479,813            $ 1,283,815            $ 1,763,628
                                                                ===========            ===========            ===========




During 2004, the Company sold $3.6 billion of mortgage-backed securities,
excluding securities sold contemporaneously with the execution of securitization
transactions, and realized $24.5 million in gains and $15.0 million in losses.
Of the mortgage-backed securities sold, $2.0 billion were created by the
Company's securitizations and $1.6 billion were market-purchased. During 2004,
the Company securitized and held in its portfolio $1.9 billion of
mortgage-backed securities.

The Company's mortgage-backed securities held at December 31, 2004 are primarily
either agency obligations or are rated AAA or AA by Standard & Poor's.

The Company's available for sale mortgage-backed securities with gross
unrealized losses at December 31, 2004 have been in an unrealized loss position
for less than 12 months.

The Company has credit exposure on loans it has securitized privately. The
following table summarizes the loan delinquency information as of December 31,
2004 and 2003:

                                      F-11





                                                                 December 31, 2004

                                   -----------------------------------------------------------------------------------------
(Dollars in thousands)

Delinquency Status                      Loan               Loan               Percentage of               Percentage of
                                        Count            Balance             Total Portfolio              Total Assets
---------------------------------  --------------  -------------------  -------------------------  -------------------------
                                                                                                       
60 to 89 days                                   6   $        2,018                     0.05%                       0.02%
90 and greater days                             2              418                     0.01%                       ---%
Foreclosure                                    48           13,666                     0.35%                       0.12%
                                   --------------   --------------           --------------              --------------
                                               56   $       16,102                     0.41%                       0.14%
                                   ==============   ==============           ==============              ==============


                                           December 31, 2003

                                   -----------------------------------------------------------------------------------------
(Dollars in thousands)

Delinquency Status                      Loan               Loan               Percentage of               Percentage of
                                        Count            Balance             Total Portfolio              Total Assets
---------------------------------  --------------  -------------------  -------------------------  -------------------------

60 to 89 days                                   1   $          692                      0.13%                       0.02%
                                   --------------   --------------            --------------              --------------
                                                1   $          692                      0.13%                       0.02%
                                   ==============   ==============            ==============              ==============




As of December 31, 2004, the fair value of residual assets from securitizations
reported in mortgage-backed securities was $108.0 million. The significant
assumptions used in estimating the fair value of residual cash flows as of
December 31, 2004 were as follows:


                                                             December 31, 2004

                                                             -----------------

          Weighted average prepayment speed (CPR)                       27.27%
          Weighted average discount rate                                17.83%
          Weighted average default rate                                  0.49%


The table below illustrates hypothetical fair values of the Company's residual
assets as of December 31, 2004 caused by assumed immediate adverse changes to
the key assumptions used by the Company to determine fair value (dollars in
thousands):

These sensitivities are hypothetical, are presented for illustrative purposes
only, and should be used with caution.




Fair value of residual assets as of December 31, 2004                              $ 107,965

                                                                                                              Change in Fair
                                                                                     Fair Value                   Value
                                                                              -------------------------  -------------------------
                                                                                                       
Prepayment speed:

          Impact of adverse 10% change                                             $       102,257           $        (5,708)
          Impact of adverse 20% change                                                      97,258                   (10,707)

Discount rate:

          Impact of adverse 10% change                                                     104,374                    (3,591)
          Impact of adverse 20% change                                                     101,074                    (6,891)

Default rate:

          Impact of adverse 10% change                                                     107,223                      (742)
          Impact of adverse 20% change                                                     106,482                    (1,483)



                                      F-12





NOTE 4 - MORTGAGE LOANS HELD FOR SALE, NET

The following table presents the Company's mortgage loans held for sale, net, as
of December 31, 2004 and 2003:


                                                                               December 31,
                                                        -----------------------------------------------------------
(In thousands)                                                     2004                            2003
                                                        ---------------------------     ---------------------------

                                                                                                 
Mortgage loans held for sale                                           $ 4,815,749                     $ 1,187,314
SFAS No. 133 basis adjustments                                                  40                          16,489
Deferred origination costs, net                                             37,605                          12,550

                                                        ---------------------------     ---------------------------
Mortgage loans held for sale, net                                      $ 4,853,394                     $ 1,216,353
                                                        ===========================     ===========================


During 2004, the Company securitized mortgage loans totaling $9.3 billion, of
which $1.9 billion were considered sales under Generally Accepted Accounting
Principles ("GAAP"), and realized $40.1 million in gains. Of the $9.3 billion
securitized, $3.5 billion were considered a financing with no gain recognized in
the year ended December 31, 2004.

NOTE 5 - DERIVATIVE ASSETS AND LIABILITIES

The following table presents the Company's derivative assets and liabilities as
of December 31, 2004 and 2003:




                                                                           December 31,
                                                        ---------------------------------------------------------
(In thousands)                                                    2004                           2003
                                                        -------------------------      --------------------------
Derivative Assets
                                                                                                  
Interest rate lock commitments                                          $ 12,025                        $ 30,611
Interest rate swaps                                                        9,192                              --
Interest rate caps - free standing derivatives                             1,459                              --
Interest rate swaps - free standing derivatives                            2,127                              --
                                                        -------------------------      --------------------------
Derivative assets                                                       $ 24,803                        $ 30,611
                                                        =========================      ==========================

Derivative Liabilities

Forward delivery contracts - Loan commitments                              $ 896                         $ 4,358
Forward delivery contracts - Loans held for sale                             964                           2,300
Interest rate swaps                                                           --                           6,036
                                                        -------------------------      --------------------------
Derivative liabilities                                                   $ 1,860                        $ 12,694
                                                        =========================      ==========================




As of December 31, 2004, the notional amount of forward delivery contracts and
interest rate swap agreements amounted to approximately $954 million and $3.4
billion, respectively.

At December 31, 2003, the notional amount of forward delivery contracts and
interest rate swap agreements amounted to approximately $1.6 billion and $755
million, respectively.

During 2004, the Company realized $3.4 million in losses on sales of interest
rate swap agreements associated with its securitizations of mortgage loans.
These losses are recorded in gain on sales of mortgage-backed securities and
derivatives in the consolidated statements of income.

During 2004, the Company realized $6.1 million in losses on sales of interest
rate swap agreements associated with its sales of mortgage-backed securities.
These losses are recorded in gain on sales of mortgage-backed securities and
derivatives in the consolidated statements of income.

The forward delivery contracts have a high correlation to the price movement of
the loans being hedged. The ineffectiveness in hedging loans held for sale
recorded on the consolidated balance sheets was insignificant as of December 31,
2004 and December 31, 2003.

As of December 31, 2004, the unrealized loss on interest rate swap agreements
relating to cash flow hedges recorded in accumulated other comprehensive loss
was a loss of $29.9 million. The Company estimates that $11.7 million of this
unrealized loss will be reclassified from accumulated other comprehensive loss
to interest expense for the year ended December 31, 2005.


                                      F-13


NOTE 6 - MORTGAGE SERVICING RIGHTS, NET

The following table presents the activity in the Company's mortgage servicing
rights, net, for the years ended December 31, 2004, 2003 and 2002:






                                                                        Year Ended December 31,
                                                 ----------------------------------------------------------------------------
(In thousands)                                              2004                         2003                         2002
                                                 ------------------    -------------------------    -------------------------
Mortgage Servicing Rights:

                                                                                                               
Balance at beginning of period                           $ 121,652                    $ 119,225                         $ 46
Acquisition of Columbia National, Incorporated                  --                           --                      102,000
Additions                                                   78,690                       54,251                       31,118
Amortization                                               (32,615)                     (51,824)                     (26,399)
Change in fair value attributable to hedged
   risk during the hedge period                                 --                           --                       12,460
Other than temporary impairment                             (4,353)                          --                           --
                                                 ------------------    -------------------------    -------------------------

Balance at end of period                                 $ 163,374                    $ 121,652                    $ 119,225
                                                 ------------------    -------------------------    -------------------------

Impairment Allowance:

Balance at beginning of period                            $ (3,868)                   $ (10,202)                         $--
Impairment (provision) recovery                            (12,423)                       6,334                      (10,202)
Other than temporary impairment                              4,353                           --                           --
                                                 ------------------    -------------------------    -------------------------

Balance at end of period                                 $ (11,938)                    $ (3,868)                   $ (10,202)
                                                 ------------------    -------------------------    -------------------------

Mortgage servicing rights, net                           $ 151,436                    $ 117,784                    $ 109,023
                                                 ==================    =========================    =========================



Aggregate Amortization Expense
------------------------------

   Year ended December 31, 2004               $ 32,615

Estimated Amortization Expense
------------------------------

   Year ended December 31, 2005               $ 31,499
   Year ended December 31, 2006                 24,506
   Year ended December 31, 2007                 18,522
   Year ended December 31, 2008                 14,636
   Year ended December 31, 2009                 11,940
    Thereafter                                  62,271

On a quarterly basis, the Company reviews MSRs for impairment based on risk
strata. The MSRs are stratified based on the predominant risk characteristics of
the underlying loans. The Company's predominant risk characteristic is interest
rate. A valuation allowance is recognized for MSRs that have an amortized
balance in excess of the estimated fair value for the individual risk
stratification.

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

                                      F-14


The significant assumptions used in estimating the fair value of MSRs at
December 31, 2004 and December 31, 2003 were as follows:



                                                           December 31, 2004                      December 31, 2003
                                                       ---------------------------             --------------------------
                                                                                                   
Weighted-average prepayment speed (PSA)                                 316                                397
Weighted-average discount rate                                       10.37%                              9.82%
Weighted-average default rate                                         2.76%                              4.02%



The table below illustrates hypothetical fair values of the Company's MSRs at
December 31, 2004 caused by assumed immediate adverse changes to the key
assumptions used by the Company to determine fair value (dollars in thousands):



     Fair value of MSRs at December 31, 2004                          $ 152,467

                                                              Fair Value             Change in Fair Value
                                                       -------------------------   -------------------------
     Prepayment speed:

                                                                                             
          Impact of adverse 10% change                                $ 147,063                    $ (5,404)
          Impact of adverse 20% change                                  141,903                     (10,564)

     Discount rate:

          Impact of adverse 10% change                                  150,319                      (2,148)
          Impact of adverse 20% change                                  148,120                      (4,347)

     Default rate:

          Impact of adverse 10% change                                  152,432                         (35)
          Impact of adverse 20% change                                  152,396                         (71)


These sensitivities are hypothetical, are presented for illustrative purposes
only, and should be used with caution.

The following table presents certain information regarding the Company's
servicing portfolio of loans serviced for others at December 31, 2004 and 2003:



                                                               December 31, 2004                 December 31, 2003
                                                           -----------------------------   -------------------------------
                                                                            (Dollars in thousands)
                                                                                                        
Loan servicing portfolio - loans sold or securitized                       $ 11,955,608                       $ 8,272,294
Average loan size                                                                 $ 156                             $ 120
Weighted-average servicing fee                                                   0.348%                            0.347%
Weighted-average note rate                                                        5.48%                             5.72%
Weighted-average remaining term (in months)                                         318                               298
Weighted-average age (in months)                                                     20                                27



                                      F-15



NOTE 7 - PREMISES AND EQUIPMENT, NET

The following table presents the Company's premises and equipment, net, as of
December 31, 2004 and 2003:





                                                                   December 31,

                                               -----------------------------------------------------
(In thousands)                                           2004                         2003
                                               -----------------------------------------------------
                                                                                    
Buildings and land                                             $ 32,712                    $ 26,725
Office equipment                                                 28,818                      20,613
Furniture and fixtures                                           10,218                       7,323
Leasehold improvements                                            2,772                       1,631

                                               -------------------------    ------------------------
Gross premises and equipment                                     74,520                      56,292
                                               -------------------------    ------------------------

Accumulated depreciation and amortization                       (22,944)                    (14,554)
                                               -------------------------    ------------------------

Premises and equipment, net                                    $ 51,576                    $ 41,738
                                               =========================    ========================





Depreciation and amortization expense for the years ended December 31, 2004,
2003 and 2002 was $8.4 million, $6.0 million and $3.3 million, respectively.

NOTE 8 - GOODWILL

The following table presents the activity in the Company's goodwill for the year
ended December 31, 2004:




(In thousands)                                                         Mortgage-Backed
                                                                          Securities
                                               Loan Origination            Holdings
                                                    Segment                Segment                 Total
                                            ---------------------   --------------------   ---------------------

                                                                                              
Balance at December 31, 2002                            $ 50,932               $     --                $ 50,932

Acquisition of Apex Mortgage Capital, Inc.                    --                 24,840                  24,840
Earnouts from previous acquisitions                        7,673                     --                   7,673

                                            ---------------------   --------------------   ---------------------
Balance at December 31, 2003                            $ 58,605               $ 24,840                $ 83,445
                                            =====================   ====================   =====================

Earnouts from previous acquisitions                        7,432                     --                   7,432

                                            ---------------------   --------------------   ---------------------
Balance at December 31, 2004                            $ 66,037               $ 24,840                $ 90,877
                                            =====================   ====================   =====================




As of December 31, 2004, the Company completed a goodwill impairment test by
comparing the fair value of goodwill with its carrying value and did not
recognize impairment.


                                      F-16


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 a $2.0 billion Secured
Liquidity Note Program, a $1.2 billion pre-purchase facility with UBS Real
Estate Securities Inc. ("UBS"), a $600 million bank syndicated facility led by
Bank of America (which includes a $150.0 million term loan facility which the
Company uses to finance its MSRs), a $450 million facility with CDC Mortgage
Capital Inc. ("CDC"), a facility of $350 million with Morgan Stanley Bank
("Morgan Stanley"), a facility of $250 million with Lehman Brothers, a facility
of $500 million with Bear Stearns and a facility of $250 million with Calyon New
York Branch ("Calyon"). The Bank of America, CDC, Morgan Stanley and Calyon
facilities are committed facilities. In addition, the Company has a gestation
facility with Greenwich Capital Financial Products, Inc. ("Greenwich"). The
interest rate on outstanding balances fluctuates daily based on a spread to the
LIBOR and interest is paid monthly.

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 December 31, 2004, 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 December 31, 2004, borrowings
under the working capital line of credit were $25.5 million.

The following table presents the Company's warehouse lines of credit as of
December 31, 2004 and December 31, 2003:




                                     December 31, 2004                               December 31, 2003
                                  ---------------------------------------------   ----------------------------------------------
                                                                 Weighted                                        Weighted
                                         Outstanding             Average                Outstanding              Average
(Dollars in thousands)                     Balance                 Rate                   Balance                  Rate
                                  ---------------------------------------------   ----------------------------------------------
                                                                                                              
Calyon                                           $ 249,540               3.05%                  $ 200,702                 1.88%
Bank of America                                    244,462                3.53                         --                    --
CDC                                                207,841                2.81                    406,444                  1.98
Greenwich                                           33,400                2.89                         --                    --
Morgan Stanley                                         540                3.06                     92,925                  1.92
RFC                                                     --                  --                    293,344                  2.06
UBS                                                     --                  --                    128,345                  3.21
                                  -------------------------                       ------------------------

Warehouse lines of credit                        $ 735,783               3.13%                $ 1,121,760                 2.12%
                                  =========================                       ========================





Reverse Repurchase Agreements
-----------------------------

The Company has arrangements to enter into reverse repurchase agreements, a form
of collateralized short-term borrowing, with thirteen different financial
institutions and on December 31, 2004 had borrowed funds from nine of these
firms. Because the Company borrows money under these agreements based on the
fair value of its mortgage-backed securities, and because changes in interest
rates can negatively impact the valuation of mortgage-backed securities, the
Company's borrowing ability under these agreements could be limited and lenders
could initiate margin calls in the event interest rates change or the value of
the Company's mortgage-backed securities declines for other reasons.

As of December 31, 2004, the Company had $7.1 billion of reverse repurchase
agreements outstanding with a weighted-average borrowing rate of 2.13% and a
weighted-average remaining maturity of three months. As of December 31, 2003,
the Company had $1.3 billion of reverse repurchase agreements outstanding with a
weighted-average borrowing rate of 1.26% and a weighted-average remaining
maturity of seven months.


                                      F-17


As of December 31, 2004 and 2003, the Company's reverse repurchase agreements
had the following remaining maturities:





                                              December 31,                     December 31,
                                                  2004                             2003
                                      -----------------------------    -----------------------------
                                                             (In thousands)
                                                                                  
Within 30 days                                         $ 3,617,325                      $   184,302
31 to 89 days                                            2,050,529                                -
90 to 365 days                                           1,403,314                        1,160,025
                                      -----------------------------    -----------------------------
Reverse repurchase agreements                          $ 7,071,168                      $ 1,344,327
                                      =============================    =============================





The Company's average reverse repurchase agreements outstanding were $5.0
billion and $47.1 million for the years ended December 31, 2004 and 2003,
respectively.

Commercial Paper
----------------

In May 2004, the Company formed 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. The special purpose entity allows for issuance of short-term notes
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 $2.0 billion at December 31, 2004.

As of December 31, 2004, the Company had $529.8 million of SLNs outstanding,
with an average interest cost of 2.51%. The SLNs were collateralized by loans
held for sale and cash with a balance of $550.0 million as of December 31, 2004.

At December 31, 2004, the Company's commercial paper had the following remaining
maturities:


                                               December 31,
                                                   2004
                                    -----------------------------------
                                              (In thousands)

Within 30 days                                   $ 529,790
31 to 89 days                                           --
                                    -----------------------------------
Commercial paper                                 $ 529,790
                                    ===================================


NOTE 10 - COLLATERALIZED DEBT OBLIGATIONS

In December of 2004, the Company transferred $3.5 billion of its mortgage loans
held for sale to American Home Mortgage Investment Trust 2004-4 ("the Trust") in
a securitization transaction. This securitization transaction was accounted for
as a financing of the mortgage loans held for sale. The Company financed the
transaction by issuing $2.0 billion of collateralized debt obligations, which
were collateralized by loans held for sale transferred to the Trust. As of
December 31, 2004, the collateralized debt obligations had a balance of $2.0
billion and an effective interest cost of 3.16%. As of December 31, 2004, the
collateralized debt obligations were collateralized by mortgage loans held for
sale of $2.0 billion.

NOTE 11 - 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 $150.0
million. As of December 31, 2004, borrowings under the term loan were $108.6
million. This term loan expires on December 14, 2005. Interest is based on a
spread to the LIBOR and may be adjusted for earnings on compensating balances.
At December 31, 2004, the interest rate was 4.41%.

Included in notes payable are a mortgage note of $26.2 million on an office
building located in Melville, New York which was purchased during 2003 at a rate
of 5.8% and a mortgage note of $1.0 million on an office building located in
Mount Prospect, Illinois at a rate of 7.5%.

                                      F-18


The following table presents the Company's notes payable as of December 31, 2004
and 2003:





                                                                      December 31,
                                                     -----------------------------------------------
(In thousands)                                               2004                      2003
                                                     ----------------------     --------------------
                                                                                    
Term loan                                                        $ 108,559                 $ 71,500
Notes - office buildings                                            27,202                   27,594
Notes to former Marina shareholders                                     --                      561

                                                     ----------------------     --------------------
Notes payable                                                    $ 135,761                 $ 99,655
                                                     ======================     ====================




Maturities of notes payable are as follows:

2005                                                                $ 109,904
2006                                                                      354
2007                                                                      375
2008                                                                      394
2009                                                                      422
Thereafter                                                             24,312
                                                       -----------------------
                                                                    $ 135,761
                                                       =======================


NOTE 12 - COMMON STOCK AND PREFERRED STOCK

In March 2004, the Company issued an aggregate of 14,375,000 shares of its
common stock, par value $0.01 per share, ("Common Stock"), at a price of $25 per
share, which included the exercise of the underwriters' option to purchase
1,875,000 additional shares of Common Stock to cover over-allotments. The total
proceeds to the Company, including proceeds from the exercise of the
over-allotment option, were $359.3 million, before underwriting discounts,
commissions and other offering expenses.

In July 2004, the Company issued 2,150,000 shares of 9.75% Series A Cumulative
Redeemable Preferred Stock ("Series A Preferred Stock") at a price of $25 per
share. The total number of shares of Series A Preferred Stock issued includes:
1,400,000 shares of Series A Preferred Stock issued in an underwritten public
offering (the "Series A Initial Offering"), which closed on July 7, 2004;
100,000 shares of Series A Preferred Stock issued in connection with the
underwriters' election to purchase a portion of the shares of Series A Preferred
Stock offered to them in connection with the Series A Initial Offering to cover
over-allotments, which closed on July 12, 2004; and 650,000 shares of Series A
Preferred Stock issued and sold to the underwriters in connection with a
subsequent public offering of Series A Preferred Stock, which closed on July 20,
2004. The total proceeds from both offerings to the Company were $53.8 million
before underwriting discounts, commissions and other offering expenses. 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 $25.00 per share, plus accumulated or unpaid dividends (whether or
not declared), if any, to the date of redemption.

In December 2004, the Company issued 3,450,000 shares of 9.25% Series B
Cumulative Redeemable Preferred Stock ("Series B Preferred Stock") at a price of
$25 per share. The total number of shares of Series B Preferred Stock issued
includes: 3,000,000 shares of Series B Preferred Stock issued in an underwritten
public offering (the "Series B Initial Offering"), which closed on December 15,
2004; and 450,000 shares of Series B Preferred Stock issued in connection with
the underwriters' election to purchase all of the shares of Series B Preferred
Stock offered to them in connection with the Series B Initial Offering to cover
over-allotments, which closed on December 23, 2004. The total proceeds to the
Company were $86.3 million before underwriting discounts, commissions and other
offering expenses. 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 $25.00 per share, plus accumulated or
unpaid dividends (whether or not declared), if any, to the date of redemption.

Under our charter, our 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 December 31, 2004, there were
40,288,077 shares of common stock issued and outstanding, 2,150,000 shares of
our Series A Preferred Stock issued and outstanding and 3,450,000 shares of our
Series B Preferred Stock issued and outstanding.

                                      F-19


During the year ended December 31, 2004, the Company declared dividends totaling
$92.3 million, or $2.43 per common share, of which $26.6 million was paid on
January 25, 2005. During the year ended December 31, 2003, the Company declared
dividends totaling $20.9 million, or $0.91 per common share, of which $13.9
million was paid on January 16, 2004.

During the year ended December 31, 2004, the Company declared dividends totaling
$3.0 million, or $1.376005 per Series A Preferred share, of which $1.3 million
was paid on January 31, 2005.

During the year ended December 31, 2004, the Company declared dividends totaling
$1.0 million, or $0.298387 per Series B Preferred share, all of which was paid
on January 31, 2005.

NOTE 13 - OTHER NON-INTEREST INCOME AND OTHER NON-INTEREST EXPENSES

The following table summarizes the significant components of the Company's other
non-interest income and other non-interest expenses for the years ended December
31, 2004, 2003 and 2002:







                                                                         Year Ended December 31,
                                            ---------------------------  ---------------------------   ------------------------
(In thousands)                                         2004                         2003                         2002
                                            ---------------------------  ---------------------------   ------------------------
Other non-interest income:
                                                                                                             
  Rental income                                               $  2,114                     $    300                   $    148
  Reinsurance premiums                                           1,841                          808                        564
  Legal settlement                                               1,500                           --                         --
  Title services revenue                                         1,002                        2,158                      1,936
  Principal fulfillment fees                                        --                        1,912                         --
  Other                                                            576                        2,051                      1,499
                                            ---------------------------  ---------------------------   ------------------------

     Other non-interest income                                $  7,033                     $  7,229                   $  4,147
                                            ===========================  ===========================   ========================

Other non-interest expenses:
  Indemnification and foreclosure costs                       $  7,072                     $  3,733                   $  2,153
  Insurance                                                      2,684                        1,936                      1,377
  Licenses and permits                                           2,498                        2,009                        579
  Storage and moving                                             1,631                        1,172                        582
  Outside services                                               1,485                        1,081                        604
  Litigation expense                                                55                        3,641                        350
  Other                                                          6,791                        8,325                      4,825
                                            ---------------------------  ---------------------------   ------------------------

     Other non-interest expenses                              $ 22,216                     $ 21,897                   $ 10,470
                                            ===========================  ===========================   ========================



NOTE 14 - INCOME TAXES

AHM Investment, with the filing of its initial federal income tax return for the
2003 tax year, has elected to be taxed as a real estate investment trust
("REIT") for federal income tax purposes. In brief, if AHM Investment meets
certain detailed conditions imposed by the REIT provisions of the Internal
Revenue Code of 1986, as amended (the "Code") including a requirement that it
invest primarily in qualifying REIT assets (which generally include real estate
and mortgage loans) and a requirement that it satisfy certain income tests, it
will not be taxed at the corporate level on the taxable income that it currently
distributes to its stockholders. Therefore, to this extent, AHM Investment's
stockholders will avoid double taxation, at the corporate level and then again
at the stockholder level, when the income is distributed, that they would
otherwise experience if AHM Investment failed to qualify as a REIT.

If AHM Investment does not qualify as a REIT in any given year, it would be
subject to federal income tax as a corporation for the year of the
disqualification and for each of the following four years. This disqualification
would result in federal income tax, which would reduce the amount of the
after-tax cash available for distribution to its shareholders. AHM Investment
believes that it has satisfied the requirements for qualification as a REIT
since the year ended December 31, 2003. AHM Investment intends at all times to
continue to comply with the requirements for qualification as a REIT under the
Code.

On August 14, 2003, AHM Investment formed American Home Mortgage Acceptance, Inc
("AHM Acceptance"). AHM Acceptance is a qualified REIT subsidiary and, as such,
is disregarded for Federal income tax. As a disregarded entity, the taxable
income of AHM Acceptance is deemed to be income of AHM Investment.

                                      F-20



Effective December 3, 2003, as a result of a corporate reorganization, AHM
Investment became the parent corporation of AHM Holdings. As of this date, AHM
Holdings and each of its subsidiaries elected to be treated as taxable REIT
subsidiaries and, as such, continue to be subject to both federal, state, and
local corporate income tax.

A reconciliation of the statutory income tax provision to the effective income
tax provision is as follows:




                                                                   Year Ended December 31,
                                   ----------------------------------------------------------------------------------------------
                                               2004                            2003                            2002
                                   ------------------------------  ------------------------------  ------------------------------
                                                                      (Dollars in thousands)

                                                                                                         
Tax provision at statutory rate          $ 17,268          35.0%         $ 42,706          35.0%         $ 23,647          35.0%
Non-taxable REIT income                   (39,650)         (80.4)          (1,540)          (1.2)              --             --
State and local taxes, net of
     federal income tax benefit            (3,128)          (6.3)           6,428            5.2            4,225            6.3
Other                                         (65)          (0.1)             629            0.5              203            0.3
                                   ---------------  -------------  ---------------  -------------  ---------------  -------------
Income tax (benefit) expense             $(25,575)        (51.8%)        $ 48,223          39.5%         $ 28,075          41.6%
                                   ===============  =============  ===============  =============  ===============  =============



The income tax provision for the years ended December 31, 2004, 2003 and 2002 is
comprised of the following components:




                                                                               December 31,
                                                  -----------------------------------------------------------------------
                                                          2004                     2003                     2002
                                                  -----------------------------------------------------------------------
                                                                              (In thousands)
                                                                                                        
Current tax provision:

  Federal                                                     $ (25,737)               $ 24,570                  $ 4,785
  State                                                           2,326                   6,529                    1,446
                                                  ----------------------   ---------------------    ---------------------
                                                                (23,411)                 31,099                    6,231
                                                  ----------------------   ---------------------    ---------------------

Deferred tax provision:

  Federal                                                         4,987                  14,079                   17,307
  State                                                          (7,151)                  3,045                    4,537
                                                  ----------------------   ---------------------    ---------------------
                                                                 (2,164)                 17,124                   21,844
                                                  ----------------------   ---------------------    ---------------------

Income tax (benefit) expense                                  $ (25,575)               $ 48,223                 $ 28,075
                                                  ======================   =====================    =====================



                                      F-21


The major sources of temporary differences and their deferred tax effect at
December 31, 2004 and 2003 are as follows:




                                                                                December 31,

                                                                   -------------------------------------------
                                                                          2004                   2003
                                                                   --------------------   --------------------
                                                                                 (In thousands)
                                                                                               
Deferred tax liabilities:

Capitalized cost of mortgage servicing rights                                 $ 82,399               $ 50,083
Loan origination costs                                                          11,236                 11,926
Depreciation                                                                     2,341                    576
Mark-to-market adjustments                                                        (811)                11,041
                                                                   --------------------   --------------------
Deferred tax liabilities                                                        95,165                 73,626
                                                                   --------------------   --------------------

Deferred tax assets:

Tax loss carryforwards                                                          36,384                 10,441
Allowance for bad debts and foreclosure reserve                                  2,711                  3,133
Deferred state income taxes                                                        353                  2,855
Broker fees                                                                        528                     --
Other                                                                              847                    691
                                                                   --------------------   --------------------
Deferred tax assets                                                             40,823                 17,120
                                                                   --------------------   --------------------

Net deferred tax liabilities                                                  $ 54,342               $ 56,506
                                                                   ====================   ====================



Effective June 13, 2002, AHM Holdings acquired all of the outstanding stock of
American Home Mortgage Servicing, Inc. ("AHM Servicing") (formerly known as
Columbia National, Incorporated). The acquisition was accounted for under the
purchase method of accounting for financial statement purposes. For federal
income tax purposes, the historical basis of the assets and liabilities were
carried over to AHM Holdings. AHM Servicing has approximately $40 million of
separate company net operating loss carryforwards which begin to expire in 2008.
In addition, AHM Holdings has approximately $40 million of net operating loss
carryforwards which begin to expire in 2024.

      At December 31, 2004 and 2003, no valuation allowance has been established
against deferred tax assets as it is more likely than not that the deferred tax
assets will be realized.

      The Company has been audited by various state tax jurisdictions which have
settled with a no change decision. In addition, the Company is currently under
examination by other tax jurisdictions which the Company expects to result in no
material assessment. 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.

                                      F-22


NOTE 15 - EARNINGS PER SHARE

The following is a reconciliation of the denominators used in the computations
of basic and diluted earnings per share for the years ended December 31, 2004,
2003 and 2002:





                                                                                   Year Ended December 31,

                                                            -----------------------------------------------------------------------
(Dollars in thousands, except per share amounts)                           2004                    2003                    2002
                                                            ------------------------ ----------------------  ----------------------
                                                                                                              
Numerator for basic earnings per share - Net income
  available to common shareholders                                      $    70,924            $    73,794             $    39,485
                                                            ======================== ======================  ======================

Denominator:

  Denominator for basic earnings per share
  Weighted average number of common shares
    outstanding during the period                                        37,611,757             17,727,253              14,508,515

  Net effect of dilutive stock options                                      475,328                386,144                 382,486
                                                            ------------------------ ----------------------  ----------------------

Denominator for diluted earnings per share                               38,087,085             18,113,397              14,891,001
                                                            ======================== ======================  ======================

Net income per share available to common shareholders:

  Basic                                                                      $ 1.89                 $ 4.16                  $ 2.72
                                                            ======================== ======================  ======================

  Diluted                                                                    $ 1.86                 $ 4.07                  $ 2.65
                                                            ======================== ======================  ======================



NOTE 16 - STOCK OPTION PLANS

In 1999, the Company established the 1999 Omnibus Stock Incentive Plan, as
amended (the "Plan"). Pursuant to the Plan, eligible employees, officers and
directors are offered the opportunity to acquire the Company's common stock
through the grant of options and the award of restricted stock under the Plan.
The total number of shares that may be optioned or awarded under the Plan is
3,000,000 shares of common stock. The Plan provides for the granting of options
at the fair market value at the date of grant. The options issued primarily vest
50% on the two-year anniversary from the grant date and 50% on the three-year
anniversary of the grant date, and expire ten years from the grant date.

As of December 31, 2004, the Company has awarded 217,120 shares of restricted
stock under the Plan. During the years ended December 31, 2004, 2003 and 2002,
the Company recognized compensation expense of $769 thousand, $537 thousand and
$213 thousand, respectively, relating to shares of restricted stock. At December
31, 2004, 133,463 shares are vested. In general, unvested restricted stock is
forfeited upon the recipient's termination of employment.

                                      F-23


The following table presents a summary of stock option activity for the years
ended December 31, 2004, 2003 and 2002:



                                                                Year Ended December 31,
                     ---------------------------------------------------------------------------------------------------------------
                                       2004                                 2003                                2002
                     ---------------------------------------------------------------------------------------------------------------
                                                 Weighted                              Weighted                             Weighted
                       Number                    Average     Number                     Average   Number                     Average
                         of          Exercise    Exercise      of          Exercise    Exercise     of          Exercise    Exercise
                       Options        Price       Price      Options        Price        Price    Options        Price        Price
                     ---------------------------------------------------------------------------------------------------------------
                                                                                                  
Options outstanding,
   beginning of year    958,866   $4.75 - $19.61  $ 11.11  1,000,258   $4.75 - $19.61  $  8.17     968,362   $4.75 - $19.61  $ 6.84
Granted                 667,634    21.40 - 34.18    25.19    324,376    10.06 - 19.36    14.58     268,708    9.40 - 14.40    11.71
Exercised              (299,396)   4.75 - 16.38      9.59   (331,041)   4.75 - 10.25      5.95    (187,058)    4.75 - 6.44     5.93
Canceled                (79,002)   5.13 - 21.78     16.28    (34,727)   5.50 - 10.93      6.77     (49,754)   5.50 - 13.50     9.72
                     -----------                          -----------                           -----------
Options outstanding,
   end of year        1,248,102   $4.75 - $34.18  $ 18.65    958,866   $4.75 - $19.61  $ 11.11   1,000,258   $4.75 - $19.61  $ 8.17
                     ===========                          ===========                           ===========

Options exercisable,
   end of year          385,233                              349,559                               438,297
                     ===========                          ===========                           ===========



The following table summarizes stock options outstanding as of December 31,
2004:




                                                                     December 31, 2004
                              -----------------------------------------------------------------------------------------------------
                                                    Options Outstanding                                 Options Exercisable
                              -----------------------------------------------------------------------------------------------------
                                                          Weighted            Weighted                                   Weighted
                                                          Average             Average                                    Average
          Range of                    Number              Exercise           Remaining                Number             Exercise
       Exercise Prices              Outstanding            Price            Life (Years)           Outstanding            Price
-----------------------------------------------------------------------------------------------------------------------------------

                                                                                                      
        $4.75 - $5.50                   59,469           $ 5.30                    5.9                 59,469           $ 5.30
         6.00 - 6.44                    93,726             6.20                    5.3                 93,726             6.20
         7.13 - 10.25                   56,486             9.54                    7.7                 16,875             8.26
        10.50 - 10.95                  101,202            10.76                    7.8                 49,601            10.76
        11.19 - 13.00                   90,642            12.45                    7.3                 56,541            12.33
        13.14 - 16.05                   68,521            14.04                    8.0                 31,021            13.72
        16.15 - 19.61                  178,143            17.13                    8.0                 65,000            16.71
        21.06 - 23.85                  152,100            21.92                    9.1                 13,000            21.40
        24.05 - 26.63                  232,813            24.67                    9.4                     --               --
        27.19 - 34.18                  215,000            30.39                    9.7                     --               --
                            -------------------                                        -----------------------
                                     1,248,102          $ 18.65                    8.3                385,233          $ 10.53
                            ===================                                        =======================


For options granted under the Plan, there was no intrinsic value of the options
when granted, as the exercise price was equal to the quoted market price at the
grant date. No compensation cost has been recognized for the years ended
December 31, 2004, 2003 and 2002.

Pursuant to the terms of the Company's merger with Apex, which was consummated
on December 3, 2003 (following the approval of the Company's stockholders at a
special meeting held on November 21, 2003), the Company assumed the Amended and
Restated 1997 Stock Option Plan of Apex (the "Apex Plan"). Prior to December 3,
2003, the effective date of the merger with Apex, Apex caused all unvested
options granted under the Apex Plan to become vested and exercisable, and each
option granted under the Apex Plan that was not exercised as of December 3, 2003
was terminated and not assumed by the Company.

Prior to the Apex merger, an aggregate of one million shares of common stock
were available for issuance upon exercise of stock options granted under the
Apex Plan. As of the effective date of the merger, Apex had granted options to
purchase 791,000 shares of common stock, which options were either (i)
previously caused to become vested and exercised or (ii) unexercised as of the
effective date of the merger, and therefore terminated and not assumed by the
Company. Accordingly, options to purchase an aggregate of 209,000 shares of the
Company's common stock remain available for grant under the Apex Plan.

                                      F-24


The weighted-average fair value per share of options granted during 2004, 2003
and 2002 was $4.60, $4.81 and $4.08, respectively. The fair value of the
options granted is estimated using the Black-Scholes option-pricing model with
the following weighted-average assumptions used for the grants:




                                                              Year Ended December 31,

                                      -------------------------------------------------------------------------
                                              2004                      2003                     2002
                                      ----------------------    ----------------------  -----------------------
                                                                                      
Dividend yield                                8.5 %                     3.0 %                    3.0 %
Expected volatility                          40.2 %                    51.0 %                   54.0 %
Risk-free interest rate                       5.0 %                     5.0 %                    5.0 %
Expected life                               3 years                   3 years                  3 years





NOTE 17 - COMMITMENTS AND CONTINGENCIES

Loans Sold to Investors - Generally, the Company is not exposed to significant
credit risk on its loans sold to investors. In the normal course of business,
the Company is obligated to repurchase loans which are subsequently unable to be
sold through normal investor channels. Management believes this is a rare
occurrence and that the Company can usually sell the loans directly to a
permanent investor.

Loan Funding and Delivery Commitments - At December 31, 2004 and 2003, the
Company had commitments to fund loans approximating $6.2 billion and $4.0
billion, respectively. At December 31, 2004 and 2003, the Company had
commitments to fund loans with agreed upon rates approximating $1.9 billion and
$1.3 billion, respectively. The Company hedges the interest rate risk of such
commitments primarily with mandatory delivery commitments, which totaled $379.9
million and $477.9 million at December 31, 2004 and 2003, respectively. The
remaining commitments to fund loans with agreed-upon rates are anticipated to be
sold through "best-efforts" and investor programs. The Company does not
anticipate any material losses from such sales.

Net Worth Requirements - The Company's subsidiaries are required to maintain
certain specified levels of minimum net worth to maintain their approved status
with Fannie Mae, the Federal Home Loan Mortgage Corporation, the U.S. Department
of Housing and Urban Development and other investors. At December 31, 2004, the
highest minimum net worth requirement applicable to each subsidiary was $1.0
million.

Outstanding Litigation - The Company is involved in litigation arising in the
normal course of business. Although the amount of any ultimate liability arising
from these matters cannot presently be determined, the Company does not
anticipate that any such liability will have a material effect on the Company's
consolidated financial position or results of operations.

Mortgage Reinsurance - One of the Company's captive reinsurance subsidiaries,
Melville Reinsurance Corp. ("MRC"), has entered mortgage reinsurance agreements
with a primary mortgage insurance company. Under this agreement, MRC absorbs
mortgage insurance losses in excess of a specified percentage of loss retained
by the primary mortgage insurer in exchange for a portion of the primary
mortgage insurer's insurance premium. Approximately $813.1 million of the
Company's conventional servicing portfolio is covered by this mortgage
reinsurance agreement. Each annual book of business has a maximum life of 10
years and the maximum exposure is the amount of assets held in the trust on
behalf of MRC. At December 31, 2004, those assets totaled $1.6 million. No
reserve has been recorded and management believes no reserve is required based
upon loss experience.

The Company's other captive reinsurance subsidiary, CNI Reinsurance, Ltd.
("CNIRE"), has entered mortgage reinsurance agreements with four primary
mortgage insurance companies. Under these agreements, CNIRE absorbs mortgage
insurance losses in excess of a specified percentage of the principal balance of
a pool of loans, subject to a cap, in exchange for a portion of the pool's
mortgage insurance premium. Approximately $380.8 million of the conventional
servicing portfolio is covered by such mortgage reinsurance agreements. Each
annual book of business has a maximum life of ten years and the maximum exposure
is the amount of assets held in the trust on behalf of CNIRE. At December 31,
2004, those assets totaled $4.4 million. No reserve has been recorded and
management believes no reserve is required based upon loss experience.

NOTE 18 - OPERATING LEASES

Certain of the Company's facilities and equipment are leased under short-term
lease agreements expiring at various dates through December 2012. All such
leases are accounted for as operating leases. Total rental expense for premises
and equipment, which is included in occupancy and equipment expense within the
consolidated financial statements, amounted to $24.7 million, $18.5 million and
$10.1 million for the years ended December 31, 2004, 2003 and 2002,
respectively.

                                      F-25


The Company's obligations under noncancelable operating leases which have an
initial term of more than one year as of December 31, 2004 are as follows (in
thousands):


2005                                       $ 21,793
2006                                         17,963
2007                                         14,512
2008                                         10,050
2009                                          5,099
Thereafter                                    1,287
                           -------------------------

Total                                      $ 70,704
                           =========================



NOTE 19 - CONCENTRATIONS OF CREDIT RISK

Loan concentrations are considered to exist when there are amounts loaned to a
multiple number of borrowers with similar characteristics, which would cause
their ability to meet contractual obligations to be similarly impacted by
economic or other conditions. In management's opinion, at December 31, 2004 and
2003, there were no significant concentrations of credit risk within loans held
for sale.

The Company had originations of loans during the year ended December 31, 2004,
exceeding 5% of total originations as follows:


California                                     23.9 %
Illinois                                       15.3
Maryland                                        6.3
Virginia                                        5.2


In 2004, three institutions that bought the most loans from the Company
accounted for 70% of the Company's total loan sales.

    NOTE 20 - FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair value estimates are made as of a specific point in time based on estimates
using present value or other valuation techniques. These techniques involve
uncertainties and are significantly affected by the assumptions used and the
judgments made regarding risk characteristics of various financial instruments,
discount rates, estimates of future cash flows, future expected loss experience
and other factors.

Changes in assumptions could significantly affect these estimates and the
resulting fair values. Derived fair value estimates cannot be substantiated by
comparison to independent markets and, in many cases, could not be realized in
an immediate sale of the instrument. Also, because of differences in
methodologies and assumptions used to estimate fair values, the Company's fair
values should not be compared to those of other companies.

Fair value estimates are based on existing financial instruments without
attempting to estimate the value of anticipated future business and the value of
assets and liabilities that are not considered financial instruments.
Accordingly, the aggregate fair value amounts presented do not represent the
underlying value of the Company.

The carrying values of the following assets and liabilities all approximate
their fair values due to their short-term nature, terms of repayment or interest
rate associated with the asset or liability:

o     Cash and cash equivalents;

o     Accounts receivable and servicing advances;

o     Warehouse lines of credit;

o     Commercial paper;

o     Drafts payable; and

                                      F-26


o     Payable for mortgage-backed securities purchased.

The following describes the methods and assumptions used by the Company in
estimating fair values of other financial instruments:

a. Mortgage-Backed Securities - Fair value is based on published market
valuations or price quotations provided by securities dealers.

b. Mortgage Loans Held for Sale, net - Fair value is estimated using the quoted
market prices for securities backed by similar types of loans and current
investor or dealer commitments to purchase loans.

c. Mortgage Servicing Rights, net - The estimated fair value of MSRs is
determined by obtaining a market valuation from one of the primary MSR brokers.
To determine the market value of MSRs, the MSR broker uses a valuation model
which incorporates assumptions relating to the estimate of the cost of servicing
per loan, a discount rate, a float value, an inflation rate, ancillary income
per loan, prepayment speeds and default rates that market participants use for
similar servicing rights.

d. Derivative Assets - Derivative assets includes IRLCs. Fair value of IRLCs is
estimated using the fees and rates currently charged to enter into similar
agreements, taking into account the remaining terms of the agreements and the
creditworthiness of the counterparties, and includes the value of MSRs. Fair
value also considers the difference between current levels of interest rates and
the committed rates.

e. Notes Payable - Fair market value is estimated based on the maturity and
interest rate of the related debt instruments. Carrying amount estimates fair
market value.

f. Reverse Repurchase Agreements - Fair market value is estimated based on the
maturity and interest rate of the related debt instruments.

g. Collateralized Debt Obligations - Fair market value is estimated based on the
maturity and interest rate of the related debt instruments. Carrying amount
estimates fair market value.

h. Derivative Liabilities - Derivative liabilities includes forward delivery
commitments, interest rate swaps and option contracts to buy securities. The
fair value is estimated using current market prices from dealers or brokers.

                                      F-27


The following tables set forth information about financial instruments and other
selected assets, except for those noted above for which the carrying value
approximates fair value.






                                                        December 31, 2004                            December 31, 2003
                                              ---------------------------------------    ------------------------------------------
                                                 Carrying             Estimated                Carrying             Estimated
                                                  Amount              Fair Value                Amount              Fair Value
                                              -----------------  --------------------    --------------------  --------------------
                                                           (In thousands)                             (In thousands)
Assets:
                                                                                                           
Cash and cash equivalents                            $ 192,821             $ 192,821                $ 53,148              $ 53,148
Accounts receivable and servicing advances             116,978               116,978                  84,311                84,311
Mortgage-backed securities                           6,016,866             6,016,866               1,763,628             1,763,628
Mortgage loans held for sale, net                    4,853,394             4,931,366               1,216,353             1,218,489
Mortgage servicing rights, net                         151,436               152,467                 117,784               117,784
Derivative assets                                       24,803                30,838                  30,611                30,611

Liabilities:

Warehouse lines of credit                            $ 735,783             $ 735,783             $ 1,121,760           $ 1,121,760
Commercial paper                                       529,790               529,790                      --                    --
Notes payable                                          135,761               135,761                  99,655                99,655
Drafts payable                                          26,200                26,200                  25,625                25,625
Reverse repurchase agreements                        7,071,168             7,065,072               1,344,327             1,344,327
Collateralized debt obligations                      2,022,218             2,022,218                      --                    --
Payable for securities purchased                            --                    --                 259,701               259,701
Derivative liabilities                                   1,860                 1,860                  12,694                12,694






NOTE 21 - CONDENSED FINANCIAL INFORMATION OF AMERICAN HOME MORTGAGE INVESTMENT
CORP.

The following provides condensed financial information for the financial
position, results of operations and cash flows of AHM Investment as of December
31, 2004 and December 31, 2003:

                                      F-28


Parent Company Only - Condensed Balance Sheets (In thousands)




                                                                     December 31,
                                                ------------------------------------------------------
                                                          2004                        2003
                                                --------------------------  --------------------------
                                                                                    
Assets:
    Cash                                                      $    30,143                 $     7,401
    Accounts receivable                                            42,127                       2,400
    Mortgage-backed securities                                  7,601,793                   1,757,753
    Goodwill                                                       24,841                      24,841
    Derivative assets                                              11,319                          --
    Investment in subsidiaries                                    289,719                     227,804
    Other assets                                                   13,515                       3,981
                                                --------------------------  --------------------------

Total assets                                                  $ 8,013,457                 $ 2,024,180
                                                ==========================  ==========================

Liabilities and Stockholders' Equity:
Liabilities:

    Reverse repurchase agreements                             $ 7,000,335                 $ 1,344,327
    Payable for securities purchased                                   --                     259,701
    Derivative liabilities                                             --                       6,035
    Accrued expenses and other liabilities                        186,860                      16,147
                                                --------------------------  --------------------------

           Total liabilities                                    7,187,195                   1,626,210
                                                --------------------------  --------------------------

Stockholders' equity:

           Total stockholders' equity                             826,262                     397,970
                                                --------------------------  --------------------------

Total liabilities and stockholders' equity                    $ 8,013,457                 $ 2,024,180
                                                ==========================  ==========================



                                      F-29





Condensed Income Statements

                                                                     Year Ended December 31,
                                                  --------------------------------------------------------------
                                                         2004                  2003                 2002
                                                  --------------------  -------------------   ------------------
                                                                          (In thousands)
                                                                                                   

Net interest income:
  Interest income                                           $ 197,991             $  3,108             $     --
  Interest expense                                           (127,125)              (2,302)                  --
                                                  --------------------  -------------------   ------------------
        Total net interest income                              70,866                  806                   --
                                                  --------------------  -------------------   ------------------

Non-interest income:

  Loss on sale of mortgage loans                                 (385)                  --                   --
  Gain on securities and derivatives                            8,039                5,631                   --
  Equity in earnings of subsidiaries                           24,949               67,512               39,485
                                                  --------------------  -------------------   ------------------
        Total non-interest income                              32,603               73,143               39,485
                                                  --------------------  -------------------   ------------------

        Total non-interest expenses                            28,557                  155                   --
                                                  --------------------  -------------------   ------------------

Net income                                                  $  74,912             $ 73,794             $ 39,485
                                                  ====================  ===================   ==================

Dividends on preferred stock                                    3,988                   --                   --

                                                  --------------------  -------------------   ------------------
Net income available to common shareholders                 $  70,924             $ 73,794             $ 39,485
                                                  ====================  ===================   ==================



                                      F-30





Condensed Statements of Cash Flows

                                                                                      Year Ended December 31,
                                                                  -----------------------------------------------------------------
                                                                         2004                  2003                   2002
                                                                  -------------------   --------------------   --------------------
                                                                                           (In thousands)

Cash flows from operating activities:
                                                                                                               
Net income                                                               $    74,912             $   73,794             $   39,485
Adjustments to reconcile net income to net cash
   used in operating activities
    Amortization of mortgage-backed securities premiums, net                  27,315                    130                     --
    Deferred cash flow hedge loss, net of amortization                        (4,218)                    --                     --
    Unrealized gain on free standing derivatives                             (41,077)                    --                     --
Increase in trading securities                                            (2,911,040)              (474,631)                    --
(Increase) decrease in operating assets
    Accounts receivable                                                      (39,727)                 1,293                     --
    Other assets                                                              (9,534)                 1,689                     --
Increase (decrease) in accrued expenses and other liabilities                161,128                 (2,544)                    --
Investment in earnings of subsidiaries                                       (24,949)               (67,512)               (39,485)
                                                                  -------------------   --------------------   --------------------
           Cash used in operating activities                              (2,767,190)              (467,781)                    --
                                                                  -------------------   --------------------   --------------------

Cash flows from investing activities
Increase in securities available for sale                                 (2,968,250)              (766,243)                    --
Acquisition of businesses, net of cash acquired                                   --                  6,455                     --
Investment in subsidiaries                                                   (35,738)                    --                (37,000)
                                                                  -------------------   --------------------   --------------------
           Cash used in investing activities                              (3,003,988)              (759,788)               (37,000)
                                                                  -------------------   --------------------   --------------------

Cash flows from financing activities
Increase in reverse repurchase agreements                                  5,656,008              1,014,677                     --
(Decrease) increase in payable for securities purchased                     (259,701)               219,451                     --
Proceeds from issuance of stock                                              478,895                     --                 37,000
Dividends paid                                                               (81,282)                    --                     --
Dividends received from subsidiary                                                --                    842                     --
                                                                  -------------------   --------------------   --------------------
           Cash provided by financing activities                           5,793,920              1,234,970                 37,000
                                                                  -------------------   --------------------   --------------------

Net increase in cash                                                          22,742                  7,401                     --

Cash, beginning of year                                                        7,401                     --                      1
                                                                  -------------------   --------------------   --------------------

Cash, end of year                                                        $    30,143             $    7,401             $        1
                                                                  ===================   ====================   ====================





NOTE 22 - ACQUISITIONS

Acquisition of Certain Home Loan Centers of Washington Mutual, Inc.

On August 2, 2004, the Company acquired certain residential mortgage home loan
centers and associated satellite offices that Washington Mutual, Inc. and its
subsidiaries (collectively, "Washington Mutual") previously slated for closure
in 18 states. The Company hired 498 employees who support these home loan
centers and associated satellite offices with the vast majority being sales
professionals focused on retail loan originations. The purchase price was
insignificant to the Company's consolidated financial statements.

Under the terms of the acquisition, the Company assumed Washington Mutual's
lease obligations and purchased certain fixed assets in the acquired offices.
The acquisition was funded from current cash reserves.


                                      F-31


Apex Mortgage Capital, Inc.
---------------------------
On December 3, 2003, AHM Investment completed its merger with Apex, a Maryland
corporation that operated and elected to be treated as a REIT for federal income
tax purposes. Immediately prior to the merger, under the terms of the
reorganization agreement between AHM Holdings and AHM Investment, AHM Holdings
reorganized through a reverse triangular merger that caused AHM Investment to
become AHM Holdings' parent. AHM Investment issued 7,691,682 shares to former
Apex stockholders in the merger valued at $177.3 million.

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


(In thousands)                                  December 3, 2003
                                       -----------------------------------
Cash                                                            $   6,454
Securities - trading                                                5,182
Securities - available for sale                                   511,827
Accounts receivable                                                 3,694
Other assets                                                           20
                                       -----------------------------------
     Total assets acquired                                        527,177
                                       -----------------------------------
Reverse repurchase agreements                                     329,650
Payable for securities purchased                                   40,250
Other liabilities                                                   4,792
                                       -----------------------------------
     Total liabilities assumed                                    374,692
                                       -----------------------------------
     Net assets acquired                                          152,485
Shares issued                                                     177,325
                                       -----------------------------------
Goodwill                                                        $  24,840
                                       ===================================


The goodwill which resulted from the acquisition of Apex is not deductible for
tax purposes.

The following table summarizes the required disclosures of the pro forma
combined entity, as if the acquisition occurred on January 1, 2002:





                                                                             Year Ended December 31,

                                                        -----------------------------------------------------------------
(In thousands, except per share amounts)                             2003                              2002
                                                        -------------------------------   -------------------------------
                                                                                                         
Revenue                                                                      $ 347,047                         $ 291,169

Income before income taxes and minority interest                                24,789                           120,398

Net income before cumulative effect of
     change in accounting principle                                            (24,401)                           92,323

Earnings per share - basic                                                   $   (0.96)                        $    3.82
                                                        ===============================   ===============================

Earnings per share - diluted                                                 $   (0.95)                        $    3.76
                                                        ===============================   ===============================



Valley Bancorp, Inc.

In August 2001, AHM Holdings entered into an agreement to acquire Valley
Bancorp, Inc. ("Valley Bancorp") and its wholly-owned subsidiary, Valley Bank of
Maryland, a federal savings bank located in suburban Baltimore, Maryland. In
2004, subsequent to the merger with Apex and internal reorganization, AHM
Investment, as successor in interest to AHM Holdings, entered into an amended
and restated agreement and plan of reorganization with Valley Bancorp. Under the
terms of the definitive agreement, the Company will pay $46 for


                                      F-32


each share of Valley Bancorp common stock outstanding, and will pay in cash to
the holders of Valley Bancorp stock options the difference between $46 and the
exercise price of such options, or an aggregate of approximately $6.3 million.
The acquisition agreement between AHM Investment and Valley Bancorp has been
extended through July 31, 2005. This transaction is subject to regulatory
approval and no assurance can be given that such approval will be obtained or
that the acquisition agreement with Valley Bancorp will be further extended if
necessary.

    NOTE 23 - SEGMENTS AND RELATED INFORMATION

The Company has three segments, the Mortgage-Backed Securities Holdings Segment,
the Loan Origination Segment, and the Loan Servicing Segment. The
Mortgage-Backed Securities Holdings Segment primarily earns net interest income
from holding mortgage-backed securities created through the securitization of
loans originated by the Loan Origination Segment and mortgage-backed securities
purchased in the capital markets. The Loan Origination Segment originates
mortgage loans through the Company's retail and internet branches and loans
sourced through mortgage brokers (wholesale channel). The Loan Servicing Segment
includes investments in mortgage servicing rights as well as servicing
operations primarily for other financial institutions.

                                      F-33




                                                                                       Year Ended December 31, 2004
                                                                   ---------------------------------------------------------------
                                                                                              (In thousands)
                                                                           Mortgage-
                                                                            Backed
                                                                          Securities         Loan         Loan
                                                                           Holdings       Origination   Servicing
                                                                            Segment         Segment       Segment          Total
                                                                   ---------------------------------------------------------------
                                                                                                         
Net interest income:
Interest income                                                      $   191,563     $   122,743       $      --     $    314,306
Interest expense                                                        (124,397)        (73,071)         (3,905)        (201,373)
                                                                   ---------------------------------------------------------------
   Net interest income                                                    67,166          49,672          (3,905)         112,933
                                                                   ---------------------------------------------------------------

Non-interest income:

Gain on sales of mortgage loans                                               --         134,099               --          134,099
Gain on securitizations of mortgage loans                                     --          40,120               --           40,120
Gain (loss) on sales of mortgage--backed securities and derivatives        3,459          (3,396)              --               63
Unrealized gain on mortgage--backed securities and derivatives             7,679          67,781               --           75,460

Loan servicing fees                                                           --              --           40,571           40,571
Amortization of mortgage servicing rights                                     --              --          (32,615)         (32,615)
Impairment provision of mortgage servicing rights                             --              --          (12,423)         (12,423)
                                                                   ---------------------------------------------------------------
   Net loan servicing fees (loss)                                             --              --          (4,467)          (4,467)

Other non-interest income                                                     --           7,030               3            7,033
                                                                   ---------------------------------------------------------------
   Total non-interest income                                              11,138         245,634          (4,464)         252,308
                                                                   ---------------------------------------------------------------

Non-interest expenses:

   Salaries, commissions and benefits, net                                   229         184,163           5,001          189,393
   Occupancy and equipment                                                     7          37,110             525           37,642
   Data processing and communications                                         15          15,877             273           16,165
   Office supplies and expenses                                               --          12,685           1,045           13,730
   Marketing and promotion                                                     2          10,398               9           10,409
   Travel and entertainment                                                    3          14,042             145           14,190
   Professional fees                                                       3,653           7,855             651           12,159
   Other                                                                  24,900          (5,767)          3,083           22,216
                                                                   ---------------------------------------------------------------
      Total non-interest expenses                                         28,809         276,363          10,732          315,904
                                                                   ---------------------------------------------------------------

Net income before income tax benefit                                      49,495          18,943         (19,101)          49,337
                                                                   ---------------------------------------------------------------

Income tax benefit                                                            --         (16,941)         (8,634)         (25,575)

                                                                   ---------------------------------------------------------------
Net income                                                           $    49,495     $    35,884       $ (10,467)    $     74,912
                                                                   ===============================================================

Dividends on preferred stock                                               3,988              --              --            3,988

                                                                   ---------------------------------------------------------------
Net income available to common shareholders                          $    45,507     $    35,884       $ (10,467)    $     70,924
                                                                   ===============================================================

                                                                                           December 31, 2004
                                                                   ---------------------------------------------------------------

Segment assets                                                       $ 6,136,642     $ 5,194,387       $ 224,768     $ 11,555,797
                                                                   ===============================================================


                                      F-34




                                                                                    Year Ended December 31, 2003
                                                                 ------------------------------------------------------------------
                                                                                             (in thousands)
                                                                       Mortgage-
                                                                        Backed
                                                                      Securities            Loan
                                                                       Holdings          Origination   Loan Servicing
                                                                        Segment            Segment         Segment           Total
                                                                 -----------------------------------------------------------------
                                                                                                          
Net interest income:

Interest income                                                   $     3,108        $   102,921       $     (12)     $   106,017
Interest expense                                                       (2,302)           (54,869)            185          (56,986)
                                                                 -----------------------------------------------------------------
   Total net interest income                                              806             48,052             173           49,031
                                                                 -----------------------------------------------------------------

Non-interest income:

Gain on sales of mortgage loans                                            --            376,605              --          376,605
Gain on securitizations of mortgage loans                                  --                149                              149
Gain on sales of mortgage-backed securities and derivatives             2,210                 --              --            2,210
Unrealized gain on mortgage-backed securities and derivatives             381              2,891              --            3,272

Loan servicing fees                                                        --                 --          39,125           39,125
Amortization of mortgage servicing rights                                  --                 --         (51,824)         (51,824)
Impairment recovery of mortgage servicing rights                           --                 --           6,334            6,334
                                                                 -----------------------------------------------------------------
   Net loan servicing fees (loss)                                          --                 --          (6,365)          (6,365)

Other non-interest income                                                  --              7,229              --            7,229
                                                                 -----------------------------------------------------------------
   Total non-interest income                                            2,591            386,874          (6,365)         383,100
                                                                 -----------------------------------------------------------------

Non-interest expenses:

   Salaries, commissions and benefits, net                                 --            201,454           3,485          204,939
   Occupancy and equipment                                                 --             26,609             406           27,015
   Data processing and communications                                      --             13,102              99           13,201
   Office supplies and expenses                                            --             12,082           1,230           13,312
   Marketing and promotion                                                 --             12,225              14           12,239
   Travel and entertainment                                                --              9,926              38            9,964
   Professional fees                                                       --              6,693             854            7,547
   Other                                                                   --             19,881           2,016           21,897
                                                                 -----------------------------------------------------------------
      Total non-interest expenses                                          --            301,972           8,142          310,114
                                                                 -----------------------------------------------------------------

Net income before income tax expense (benefit)                          3,397            132,954         (14,334)         122,017
                                                                 -----------------------------------------------------------------

Income tax expense (benefit)                                               --             54,100          (5,877)          48,223

                                                                 -----------------------------------------------------------------
Net income                                                        $     3,397        $    78,854       $  (8,457)     $    73,794
                                                                 =================================================================

Dividends on preferred stock                                               --                 --              --               --

                                                                 -----------------------------------------------------------------
Net income available to common shareholders                       $     3,397        $    78,854       $  (8,457)     $    73,794
                                                                 =================================================================

                                                                                         December 31, 2003
                                                                 -----------------------------------------------------------------

Segment assets                                                    $ 1,865,414        $ 1,375,276       $ 164,000      $ 3,404,690
                                                                 =================================================================


                                     F-35




                                                                                     Year Ended December 31, 2002
                                                                 -----------------------------------------------------------------
                                                                                           (In thousands)
                                                                       Mortgage-
                                                                        Backed
                                                                      Securities       Loan
                                                                       Holdings     Origination   Loan Servicing
                                                                        Segment       Segment         Segment               Total
                                                                ----------------------------------------------------------------
                                                                                                         
Net interest income:

Interest income                                                     $--             $  55,871       $      --        $    55,871
Interest expense                                                     --               (29,131)         (1,903)           (31,034)
                                                                -----------------------------------------------------------------
   Total net interest income                                         --                26,740          (1,903)            24,837
                                                                -----------------------------------------------------------------

Non-interest income:

Gain on sales of mortgage loans                                      --               216,595              --            216,595

Loan servicing fees                                                  --                    --          23,973             23,973
Amortization of mortgage servicing rights                            --                    --         (26,399)           (26,399)
Impairment provision of mortgage servicing rights                    --                    --         (10,332)           (10,332)
                                                                -----------------------------------------------------------------
   Net loan servicing fees (loss)                                    --                    --         (12,758)           (12,758)

Other non-interest income                                            --                 4,147              --              4,147
                                                                -----------------------------------------------------------------
   Total non-interest income                                         --               220,742         (12,758)           207,984
                                                                -----------------------------------------------------------------


Non-interest expenses:

   Salaries, commissions and benefits, net                           --               105,198           1,697            106,895
   Occupancy and equipment                                           --                15,302             204             15,506
   Data processing and communications                                --                 7,787              66              7,853
   Office supplies and expenses                                      --                 5,901             610              6,511
   Marketing and promotion                                           --                 7,982              14              7,996
   Travel and entertainment                                          --                 4,581               6              4,587
   Professional fees                                                 --                 5,197             246              5,443
   Other                                                             --                 9,636             834             10,470
                                                                -----------------------------------------------------------------
      Total non-interest expenses                                    --               161,584           3,677            165,261
                                                                -----------------------------------------------------------------

Net income before income tax benefit                                 --                85,898         (18,338)            67,560
                                                                -----------------------------------------------------------------

Income tax benefit                                                   --                35,696          (7,621)            28,075

                                                                -----------------------------------------------------------------
Net income                                                          $--             $  50,202       $ (10,717)       $    39,485
                                                                =================================================================

Dividends on preferred stock                                         --                    --              --                 --

                                                                -----------------------------------------------------------------
Net income available to common shareholders                         $--             $  50,202       $ (10,717)       $    39,485
                                                                =================================================================

                                                                                       December 31, 2002
                                                                -----------------------------------------------------------------
Segment assets                                                      $--             $ 999,939       $ 121,225        $ 1,121,164
                                                                =================================================================


                                      F-36


NOTE 24 - SELECTED QUARTERLY FINANCIAL DATA (Unaudited)

Selected quarterly financial data are presented below by quarter for the years
ended December 31, 2004 and 2003:



                                                                                           Quarter Ended
                                                             -----------------------------------------------------------------------
                                                              December 31,    December 31,   September 30,   June 30,     March 31,
                                                                 2004             2004           2004          2004         2004
                                                             --------------   ------------   -------------  ----------  ------------
                                                             (As Previously  (As Restated)
                                                                Reported)         (1)
                                                                                        (In thousands, except per share amounts)
                                                                                                         
Net interest income                                          $      46,783    $    47,182    $     32,893   $  20,086   $    12,772
Gain on sales of mortgage loans                                     36,004         36,004          28,373      17,141        52,581
Gain on securitizations of mortgage loans                           40,674             --          30,460       7,803         1,857
Gain on sales of mortgage-backed securities
  and derivatives                                                    2,873          2,873          (8,120)     (1,322)        6,632
Unrealized (loss) gain on mortgage-backed securities
  and derivatives                                                   27,224         (6,581)         27,069      36,063        18,909
Net loan servicing (loss) fees                                      (3,062)          (333)         (2,740)      8,218        (9,612)
Non-interest expenses                                              102,606        102,606          78,340      68,251        66,707
Net income before income tax expense (benefit)                      49,370        (21,981)         32,945      20,964        17,409
Income tax expense (benefit)                                           755            755          (9,998)    (12,518)       (3,814)
Net income                                                          48,615        (22,736)         42,943      33,482        21,223
Net income available to common shareholders                         46,275        (25,076)         41,295      33,482        21,223
Per share data:
  Basic                                                      $        1.15    $     (0.62)   $       1.03   $    0.84   $      0.71
  Diluted                                                    $        1.14    $     (0.62)   $       1.02   $    0.83   $      0.70





                                                                                           Quarter Ended
                                                                 ------------------------------------------------------------------
                                                                  December 31,     September 30,       June 30,         March 31,
                                                                      2003              2003             2003              2003
                                                                 ---------------  --------------  -----------------  --------------
                                                                             (In thousands, except per share amounts)
                                                                                                         
Net interest income                                              $       11,704   $       13,684  $         12,874   $      10,769
Gain on sales of mortgage loans                                          53,535          105,577           129,282          88,211
Gain on securitizations of mortgage loans                                   149               --                --              --
Gain on sales of mortgage-backed securities and derivatives               2,210               --                --              --
Unrealized gain on mortgage-backed securities and derivatives             3,272               --                --              --
Net loan servicing fees (loss)                                           13,698            1,228           (13,937)         (7,354)
Non-interest expenses                                                    69,076           91,103            83,271          66,664
Net income before income tax expense                                     17,129           30,809            46,189          27,890
Income tax expense                                                        5,219           12,115            19,312          11,577
Net income                                                               11,910           18,694            26,877          16,313
Net income available to common shareholders                              11,910           18,694            26,877          16,313
Per share data:
  Basic                                                          $         0.60   $       $ 1.08  $           1.58   $        0.97
  Diluted                                                        $         0.59   $       $ 1.06  $           1.55   $        0.96


(1)   The operating results for the quarter ended December 31, 2004 have been
      restated to give effect to the restatement described in Note 25.


                                      F-37


NOTE 25 - RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS

Subsequent to the issuance of the Company's financial statements for the year
ended December 31, 2004, the Company determined it had not applied the proper
accounting treatment pursuant to the provisions of Statement of Financial
Accounting Standards No. 140, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities," for a securitization
transaction in December of 2004. The consolidated financial statements for the
year ended December 31, 2004 have been restated from the amounts previously
reported to correct the accounting for the securitization transaction.

The Company improperly recorded $73.3 million of income before income taxes,
consisting of $40.7 million of gain on securitization of mortgage loans and
$32.6 million of unrealized gain on mortgage-backed securities. Had the
transaction been accounted for properly as a financing, no gain on
securitization of mortgage loans and unrealized gain on mortgage-backed
securities would have been recorded. In addition, the Company improperly
reported $1.6 billion of mortgage-backed securities, $40.5 million of MSR, and
did not properly report $3.6 billion of mortgage loans held for sale and $2.0
billion of collateralized debt obligations.

Subsequent to the securitization, the Company improperly recorded an unrealized
gain of $1.2 million and $2.3 million of interest income relating to the $1.6
billion of mortgage-backed backed securities that had been improperly recorded
as an asset. In addition, subsequent to the securitization, the Company did not
record $4.4 million of interest income relating to $3.6 billion of mortgage
loans held for sale and $1.8 million of interest expense relating to $2.0
billion of collateralized debt obligations which would have been recognized had
the transaction been properly recorded as a financing. Subsequent to the
securitization, the Company improperly recorded $2.7 million of impairment
provision of MSR relating to $40.5 million of MSR.

The Company improperly classified cash flows related to certain origination,
securitization and mortgage-backed securities holding activities as cash flows
from investing activities rather than cash flows from operating activities. As a
result, adjustments were recorded to properly classify sources and uses of cash
in operating and investing activities with the most significant adjustment to
properly classify cash used for origination of mortgage loans held for
securitization of approximately $9.5 billion and cash proceeds from
securitization of mortgage loans of approximately $9.1 billion from cash flows
from investing activities to cash flows from operating activities for the year
ended December 31, 2004. Adjustments were recorded to properly classify sources
and uses of cash in operating and investing activities totaling $584 million
from cash flows from investing activities to cash flows from operating
activities for the year ended December 31, 2003.


The following tables present the significant effects of the restatement:



(In thousands)                                                                                    December 31, 2004
                                                                                    ----------------------------------------------
                                                                                       (As previously
                                                                                          reported)              (As restated)
                                                                                    ---------------------   ----------------------
                                                                                                       
Assets:
  Accounts receivable and servicing advances                                         $           105,338     $            116,978
  Mortgage-backed securities                                                                   7,601,793                6,016,866
  Mortgage loans held for sale, net                                                            1,316,609                4,853,394
  Derivative assets                                                                               23,344                   24,803
  Mortgage servicing rights, net                                                                 189,229                  151,436
  Other assets                                                                                    46,556                   57,046
  Total assets                                                                                 9,618,143               11,555,797

Liabilities and Stockholders' Equity:

  Collateralized debt obligations                                                                     --                2,022,218
  Accrued expenses and other liabilities                                                         165,626                  152,413
  Total liabilities                                                                            8,720,530               10,729,535
  Retained earnings                                                                              170,979                   99,628
  Total stockholders' equity                                                                     897,613                  826,262
  Total liabilities and stockholders' equity                                                   9,618,143               11,555,797


                                      F-38





(In thousands, except per share amounts)                         Year Ended December 31, 2004
                                                                -------------------------------
                                                                (As previously
                                                                   reported)      (As restated)
                                                                --------------    -------------
                                                                            
Interest income                                                 $      312,132    $     314,306
Interest expense                                                      (199,598)        (201,373)
Total net interest income                                              112,534          112,933

Gain on securitizations of mortgage loans                               80,794           40,120
Unrealized gain on mortgage-backed securities and derivatives          109,265           75,460

Impairment provision of mortgage servicing rights                      (15,152)         (12,423)
Net loan servicing (loss) fees                                          (7,196)          (4,467)
Total non-interest income                                              324,058          252,308

Net income before income tax (benefit) expense                         120,688           49,337
Net income                                                             146,263           74,912
Net income available to common shareholders                            142,275           70,924
Comprehensive income                                                   111,667           40,316

Per share data:
  Basic                                                         $         3.78    $        1.89
  Diluted                                                       $         3.74    $        1.86



                                      F-39




                                                               Year Ended December 31, 2004        Year Ended December 31, 2003
                                                              -------------------------------    -------------------------------
(In thousands)                                                (As previously                     (As previously
                                                                 reported)      (As restated)       reported)      (As restated)
                                                              --------------    -------------    --------------    -------------
                                                                                                       
Cash flows from operating activities:
Net income                                                    $      146,263    $      74,912    $       73,794    $      73,794
Adjustments to reconcile net income to net cash
  used in operating activities:
Amortization and impairment of mortgage servicing rights              47,767           45,038            45,490           45,490
(Gain) loss on sales of mortgage-backed securities and
  derivatives                                                         (3,459)           4,929            (2,210)          (2,210)
Unrealized gain on mortgage-backed securities                        (22,677)          (6,916)           (3,272)          (3,272)
Additions to mortgage servicing rights on securitized loans         (100,225)         (59,703)           (5,333)          (5,333)
Decrease (increase) in deferred origination costs                      1,846          (25,055)           (8,167)          (8,167)
      Accounts receivable and servicing advances                     (21,027)         (32,667)          (28,848)         (28,848)
      Other assets                                                   (32,640)         (43,130)           (5,117)          (5,117)
Increase (decrease) in operating liabilities:
      Accrued expenses and other liabilities                          74,439           61,226            (7,989)          (7,989)
Origination of mortgage loans held for sale                      (13,530,884)     (23,069,085)      (21,076,784)     (21,705,251)
Proceeds from securitizations and repayments of mortgage
  loans                                                                   --        5,686,825                --          520,806
Additions to mortgage-backed securities and derivatives                   --       (3,818,014)               --         (531,137)
Proceeds from sales of mortgage-backed securities                         --        2,020,635                --           54,437
Principal repayments of mortgage-backed securities                        --          333,956                --              159
      Net cash provided by (used in) operating activities            263,861       (5,122,591)         (223,503)        (807,705)

Cash flows from investing activities:
Origination of mortgage loans held for securitization             (9,538,201)              --          (628,467)              --
Proceeds from securitizations of mortgage loans                    9,178,665               --           520,806               --
Purchases of mortgage-backed securities                          (10,661,161)      (5,293,484)       (1,817,348)      (1,286,211)
Proceeds from sales of mortgage-backed securities                  3,618,320        1,589,297           563,861          509,424
Principal repayments of mortgage-backed securities                 1,251,428          917,472             7,477            7,318
      Net cash used in investing activities                       (6,169,435)      (2,805,201)       (1,385,368)        (801,166)

Cash flows from financing activities:
Increase in collateralized debt obligations                               --        2,022,218                --               --
      Net cash provided by financing activities                    6,045,247        8,067,465         1,637,603        1,637,603



                                      F-40


                                INDEX TO EXHIBITS

Exhibit No.                          Description
-----------    ------------------------------------------------------
2.1         --  Agreement and Plan of Merger, dated December 29,
                1999, between American Home Mortgage Holdings, Inc.,
                Marina Mortgage Company, Inc. ("Marina") and the
                Stockholders of Marina listed on the signature pages
                thereto (incorporated by reference to Exhibit 2.1 to
                the Current Report on Form 8-K of American Home
                Mortgage Holdings, Inc. (File No. 000-27081) filed
                with the SEC on January 12, 2000).

2.2         --  Agreement and Plan of Merger, dated January 17,
                2000, by and among American Home Mortgage Holdings,
                Inc., American Home Mortgage Sub II, Inc., First
                Home Mortgage Corp. ("First Home") and the
                Stockholders of First Home listed on the signature
                pages thereto (incorporated by reference to Exhibit
                2.1 to the Current Report on Form 8-K of American
                Home Mortgage Holdings, Inc. (File No. 000-27081)
                filed with the SEC on February 1, 2000).

2.3         --  Stock Purchase Agreement, dated June 13, 2002, by
                and among Columbia National Holdings, Inc., Columbia
                National, Incorporated and American Home Mortgage
                Holdings, Inc. (incorporated by reference to Exhibit
                2.1 to the Current Report on Form 8-K of American
                Home Mortgage Holdings, Inc. (File No. 000-27081)
                filed with the SEC on June 14, 2002).

2.4         --  Agreement and Plan of Merger, dated as of July 12,
                2003, by and among American Home Mortgage Holdings,
                Inc., American Home Mortgage Investment Corp.
                (formerly named AHM New Holdco, Inc.) and Apex
                Mortgage Capital, Inc. (incorporated by reference to
                Annex A to Amendment No. 3 to the Registration
                Statement on Form S-4 of American Home Mortgage
                Investment Corp. (File No. 333-107545) filed with
                the SEC on October 24, 2003).

2.5         --  Agreement and Plan of Reorganization, dated as of
                September 11, 2003, by and among American Home
                Mortgage Holdings, Inc., American Home Mortgage
                Investment Corp. (formerly named AHM New Holdco,
                Inc.) and AHM Merger Sub, Inc. (incorporated by
                reference to Annex B to Amendment No. 3 to the
                Registration Statement on Form S-4 of American Home
                Mortgage Investment Corp. (File No. 333-107545)
                filed with the SEC on October 24, 2003).

2.6         --  Second Amended and Restated Agreement and Plan of
                Reorganization by and between American Home Mortgage
                Investment Corp., as successor in interest to
                American Home Mortgage Holdings, Inc., and Valley
                Bancorp, Inc., dated as of August 24, 2001, and
                amended and restated as of February 10 and June 22,
                2004 (filed herewith).

3.1         --  Articles of Amendment and Restatement of American
                Home Mortgage Investment Corp. (incorporated by
                reference to Exhibit 3.1 to the Annual Report on
                Form 10-K of American Home Mortgage Investment Corp.
                (File No. 001-31916) filed with the SEC on March 15,
                2004).

3.2.1       --  Articles Supplementary of American Home Mortgage
                Investment Corp. establishing and fixing the rights
                and preferences of its 9.75% Series A Cumulative
                Redeemable Preferred Stock, which American Home
                Mortgage Investment Corp. filed with the State
                Department of Assessments and Taxation of Maryland
                on July 6, 2004 (incorporated by reference to
                Exhibit 3.1 to the Quarterly Report on Form 10-Q of
                American Home Mortgage Investment Corp. (File No.
                001-31916) filed with the SEC on August 9, 2004).



Exhibit No.                          Description
-----------    ------------------------------------------------------

3.2.2       --  Articles Supplementary of American Home Mortgage
                Investment Corp. establishing and fixing the rights
                and preferences of 747,000 additional shares of its
                9.75% Series A Cumulative Redeemable Preferred
                Stock, which American Home Mortgage Investment Corp.
                filed with the State Department of Assessments and
                Taxation of Maryland on July 19, 2004 (incorporated
                by reference to Exhibit 3.2 to the Quarterly Report
                on Form 10-Q of American Home Mortgage Investment
                Corp. (File No. 001-31916) filed with the SEC on
                August 9, 2004).

3.3         --  Articles Supplementary of American Home Mortgage
                Investment Corp. establishing and fixing the rights
                and preferences of its 9.25% Series B Cumulative
                Redeemable Preferred Stock, which American Home
                Mortgage Investment Corp. filed with the State
                Department of Assessments and Taxation of Maryland
                on December 14, 2004 (filed herewith).

3.4         --  Amended and Restated Bylaws of American Home
                Mortgage Investment Corp. (incorporated by reference
                to Exhibit 3.2 to the Annual Report on Form 10-K of
                American Home Mortgage Investment Corp. (File No.
                001-31916) filed with the SEC on March 15, 2004).

4.1         --  Reference is hereby made to Exhibits 3.1 through 3.4
                above.

4.2.1       --  Specimen Certificate for the Common Stock of
                American Home Mortgage Investment Corp.
                (incorporated by reference to Exhibit 4.2 to the
                Annual Report on Form 10-K of American Home Mortgage
                Investment Corp. (File No. 001-31916) filed with the
                SEC on March 15, 2004).

4.2.2       --  Specimen Certificate for the 9.75% Series A
                Cumulative Redeemable Preferred Stock of American
                Home Mortgage Investment Corp. (incorporated by
                reference to Exhibit 4.1 to the Registration
                Statement on Form 8-A of American Home Mortgage
                Investment Corp. (File No. 001-31916) filed with the
                SEC on June 30, 2004).

4.2.3       --  Specimen Certificate for the 9.25% Series B
                Cumulative Redeemable Preferred Stock of American
                Home Mortgage Investment Corp. (incorporated by
                reference to Exhibit 4.1 to the Registration
                Statement on Form 8-A of American Home Mortgage
                Investment Corp. (File No. 001-31916) filed with the
                SEC on December 10, 2004).

10.1.1      --  Employment Agreement, dated as of August 26, 1999,
                by and between American Home Mortgage Holdings, Inc.
                and Michael Strauss (incorporated by reference to
                Exhibit 10.1 to Amendment No. 3 to the Registration
                Statement on Form S-1 of American Home Mortgage
                Holdings, Inc. (File No. 333-82409) filed with the
                SEC on August 31, 1999).

10.1.2      --  Amendment to Employment Agreement, dated as of April
                1, 2000, by and between American Home Mortgage
                Holdings, Inc. and Michael Strauss (incorporated by
                reference to Exhibit 10.1.2 to Amendment No. 2 to
                the Registration Statement on Form S-3 on  Form S-1
                of American Home Mortgage Holdings, Inc. (File No.
                333-60050) filed with the SEC on June 7, 2001).

10.2        --  Amended and Restated Employment Agreement, dated as
                of April 27, 2004, by and between American Home
                Mortgage Holdings, Inc. and John A. Johnston
                (incorporated by reference to Exhibit 10.8 to the
                Quarterly Report on Form 10-Q of American Home
                Mortgage Investment Corp. (File No. 001-31916) filed
                with the SEC on May 10, 2004).

10.3        --  Employment Agreement, dated as of March 1, 2003, by
                and between American Home Mortgage Holdings, Inc.
                and Stephen Hozie (incorporated by reference to
                Exhibit 10.7 to the Annual Report on Form 10-K of
                American Home Mortgage Investment Corp. (File No.
                001-31916) filed with the SEC on March 15, 2004).



Exhibit No.                          Description
-----------    ------------------------------------------------------

10.4        --  Employment Agreement, dated as of December 23, 2002,
                by and between American Home Mortgage Corp. and Alan
                Horn (incorporated by reference to Exhibit 10.7 to
                the Annual Report on Form 10-K of American Home
                Mortgage Holdings, Inc. (File No. 000-27081) filed
                with the SEC on March 31, 2003).

10.5        --  Employment Agreement, dated as of June 19, 2003, by
                and between American Home Mortgage and Tom McDonagh
                (incorporated by reference to Exhibit 10.9 to the
                Annual Report on Form 10-K of American Home Mortgage
                Investment Corp. (File No. 001-31916) filed with the
                SEC on March 15, 2004).

10.6        --  Employment Agreement, dated as of January 11, 2001,
                by and between American Home Mortgage Holdings, Inc.
                and Donald Henig (incorporated by reference to
                Exhibit 10.36 to the Annual Report on Form 10-K of
                American Home Mortgage Holdings, Inc. (File No.
                000-27081) filed with the SEC on April 1, 2002).

10.7        --  Employment Agreement, dated as of October 1, 2004,
                by and between American Home Mortgage Holdings, Inc.
                and Dena Kwaschyn (filed herewith).

10.8        --  Employment Agreement, dated as of September 1, 2003,
                by and between American Home Mortgage and Ronald
                Rosenblatt, Ph.D (incorporated by reference to
                Exhibit 10.10 to the Annual Report on Form 10-K of
                American Home Mortgage Investment Corp. (File No.
                001-31916) filed with the SEC on March 15, 2004).

10.9        --  Employment Agreement, dated as of December 30, 2004,
                by and between Thomas J. Fiddler and American Home
                Mortgage Holdings, Inc. (filed herewith).

10.10       --  1999 Omnibus Stock Incentive Plan (incorporated by
                reference to Exhibit 10.12 to the Annual Report on
                Form 10-K of American Home Mortgage Investment Corp.
                (File No. 001-31916) filed with the SEC on March 15,
                2004).

10.11       --  Amended and Restated 1997 Stock Option Plan of Apex
                Mortgage Capital, Inc. (incorporated by reference to
                Annex J to Amendment No. 3 to the Registration
                Statement on Form S-4 of American Home Mortgage
                Investment Corp. (File No. 333-107545) filed with
                the SEC on October 24, 2003).

10.12.1     --  Amended and Restated Mortgage Loan Purchase
                Agreement, dated as of February 6, 2004, by and
                among UBS Real Estate Securities Inc., the Company,
                American Home Mortgage Acceptance, Inc., American
                Home Mortgage Holdings, Inc., American Home Mortgage
                Corp. and Columbia National, Incorporated
                (incorporated by reference to Exhibit 10.3 to the
                Quarterly Report on Form 10-Q of American Home
                Mortgage Investment Corp. (File No. 001-31916) filed
                with the SEC on May 10, 2004).

10.12.2     --  Amended and Restated Mortgage Loan Repurchase
                Agreement, dated  as of February 6, 2004, by and
                among UBS Real Estate Securities Inc., American Home
                Mortgage Investment Corp., American Home Mortgage
                Acceptance, Inc., American Home Mortgage Holdings,
                Inc., American Home Mortgage Corp. and Columbia
                National, Incorporated (incorporated by reference to
                Exhibit 10.4 to the Quarterly Report on Form 10-Q of
                American Home Mortgage Investment Corp. (File No.
                001-31916) filed with the SEC on May 10, 2004).




Exhibit No.                          Description
-----------    ------------------------------------------------------

10.12.3     --  Amended and Restated Mortgage Loan Custodial
                Agreement, dated  as of February 6, 2004, by and
                among UBS Real Estate Securities Inc., Deutsche Bank
                National Trust Company, American Home Mortgage
                Investment Corp., American Home Mortgage Acceptance,
                Inc., American Home Mortgage Holdings, Inc.,
                American Home Mortgage Corp. and Columbia National,
                Incorporated (incorporated by reference to Exhibit
                10.5 to the Quarterly Report on Form 10-Q of
                American Home Mortgage Investment Corp. (File No.
                001-31916) filed with the SEC on May 10, 2004).

10.12.4     --  Amended and Restated Mortgage Loan Participation
                Agreement, dated as of February 6, 2004, by and
                among UBS Real Estate Securities Inc., American Home
                Mortgage Investment Corp., American Home Mortgage
                Acceptance, Inc., American Home Mortgage Holdings,
                Inc., American Home Mortgage Corp. and Columbia
                National,   Incorporated (incorporated by reference
                to Exhibit 10.6 to the Quarterly Report on Form 10-Q
                of American Home Mortgage Investment Corp. (File No.
                001-31916) filed with the SEC on May 10, 2004).

10.12.5     --  Amended and Restated Custodial Agreement, dated as
                of February 6, 2004, by and among UBS Real Estate
                Securities Inc., Deutsche Bank National Trust
                Company, American Home Mortgage Investment Corp.,
                American Home Mortgage Acceptance, Inc., American
                Home Mortgage Holdings, Inc., American Home Mortgage
                Corp. and Columbia National, Incorporated
                (incorporated by reference to Exhibit 10.7 to the
                Quarterly Report on Form 10-Q of American Home
                Mortgage Investment Corp. (File No. 001-31916) filed
                with the SEC on May 10, 2004).

10.13.1     --  Second Amended and Restated Master Repurchase
                Agreement, dated as of June 1, 2004, by and among
                American Home Mortgage Investment Corp., American
                Home Mortgage Acceptance, Inc., American Home
                Mortgage Holdings, Inc., American Home Mortgage
                Corp., Columbia National, Incorporated, and CDC
                Mortgage Capital Inc. (incorporated by reference to
                Exhibit 10.3 to the Quarterly Report on Form 10-Q of
                American Home Mortgage Investment Corp. (File No.
                001-31916) filed with the SEC on August 9, 2004).

10.13.2     --  Second Amended and Restated Custodial and
                Disbursement Agreement, dated as of June 1, 2004, by
                and among American Home Mortgage Investment Corp.,
                American Home Mortgage Acceptance, Inc., American
                Home Mortgage Holdings, Inc., American Home Mortgage
                Corp., Columbia National, Incorporated, CDC Mortgage
                Capital Inc., and Deutsche Bank National Trust
                Company (incorporated by reference to Exhibit 10.4
                to the Quarterly Report on Form 10-Q of American
                Home Mortgage Investment Corp. (File No. 001-31916)
                filed with the SEC on August 9, 2004).

10.14.1     --  Loan Agreement, dated as of August 8, 2003, by and
                among AHM SPV I, LLC, La Fayette Asset
                Securitization LLC, Credit Lyonnais New York Branch,
                and American Home Mortgage Corp. (incorporated by
                reference to Exhibit 10.17.1 to the Annual Report on
                Form 10-K of American Home Mortgage Investment Corp.
                (File No. 001-31916) filed with the SEC on March 15,
                2004).

10.14.2     --  Collateral Agency Agreement, dated as of August 8,
                2003, by and among AHM SPV I, LLC, American Home
                Mortgage Corp., Credit Lyonnais New York Branch, and
                Deutsche Bank National Trust Company (incorporated
                by reference to Exhibit 10.17.2 to the Annual Report
                on Form 10-K of American Home Mortgage Investment
                Corp. (File No. 001-31916) filed with the SEC on
                March 15, 2004).




Exhibit No.                          Description
-----------    ------------------------------------------------------

10.14.3     --  Originator Performance Guaranty, dated as of August
                8, 2003, by American Home Mortgage Holdings, Inc. in
                favor of AHM SPV I, LLC, together with Assignment of
                Originator Performance Guaranty, dated as of August
                8, 2003, in favor of Credit Lyonnais New York Branch
                (incorporated by reference to Exhibit 10.17.3 to the
                Annual Report on Form 10-K of American Home Mortgage
                Investment Corp. (File No. 001-31916) filed with the
                SEC on March 15, 2004).

10.14.4     --  Servicer Performance Guaranty, dated as of August 8,
                2003, by American Home Mortgage Holdings, Inc. in
                favor of Credit Lyonnais New York Branch
                (incorporated by reference to Exhibit 10.17.4 to the
                Annual Report on Form 10-K of American Home Mortgage
                Investment Corp. (File No. 001-31916) filed with the
                SEC on March 15, 2004).

10.15.1     --  Amended and Restated Master Loan and Security
                Agreement, dated as of November 26, 2003, by and
                among American Home Mortgage Corp., American Home
                Mortgage Acceptance, Inc., American Home Mortgage
                Investment Corp., American Home Mortgage Holdings,
                Inc., Columbia National, Incorporated, the Lenders
                from time to time party thereto, and Morgan Stanley
                Bank (incorporated by reference to Exhibit 10.18.1
                to the Annual Report on Form 10-K of American Home
                Mortgage Investment Corp. (File No. 001-31916) filed
                with the SEC on March 15, 2004).

10.15.2     --  Fourth Amended and Restated Promissory Note, dated
                as of November 26, 2003, made by American Home
                Mortgage Corp., American Home Mortgage Acceptance,
                Inc., the Registrant, American Home Mortgage
                Holdings, Inc., and Columbia National, Incorporated,
                in favor of Morgan Stanley Bank (incorporated by
                reference to Exhibit 10.18.2 to the Annual Report on
                Form 10-K of American Home Mortgage Investment Corp.
                (File No. 001-31916) filed with the SEC on March 15,
                2004).

10.15.3     --  Amended and Restated Custodial Agreement, dated as
                of November 26, 2003, by and among American Home
                Mortgage Corp., American Home Mortgage Acceptance,
                Inc., American Home Mortgage Investment Corp.,
                American Home Mortgage Holdings, Inc., Columbia
                National, Incorporated, Morgan Stanley Bank and
                Deutsche Bank National Trust Company (incorporated
                by reference to Exhibit 10.18.3 to the Annual Report
                on Form 10-K of American Home Mortgage Investment
                Corp. (File No. 001-31916) filed with the SEC on
                March 15, 2004).

10.15.4     --  Amendment No. 6, dated as of September 27, 2004, to
                the Amended and Restated Master Loan and Security
                Agreement, dated as of November 26, 2003, by and
                among American Home Mortgage Corp., American Home
                Mortgage Acceptance, Inc., American Home Mortgage
                Investment Corp., American Home Mortgage Holdings,
                Inc., and American Home Mortgage Servicing, Inc.,
                the Lenders from time to time party thereto, and
                Morgan Stanley Bank (incorporated by reference to
                Exhibit 10.4 to the Quarterly Report on Form 10-Q of
                American Home Mortgage Investment Corp. (File No.
                001-31916) filed with the SEC on November 9, 2004).

10.15.5     --  Amendment No. 1, dated as of September 27, 2004, to
                the Amended and Restated Custodial Agreement, dated
                as of November 26, 2003, by and among American Home
                Mortgage Corp., American Home Mortgage Acceptance,
                Inc., American Home Mortgage Investment Corp.,
                American Home Mortgage Holdings, Inc., and American
                Home Mortgage Servicing, Inc., Deutsche Bank
                National Trust Company, and Morgan Stanley Bank
                (incorporated by reference to Exhibit 10.5 to the
                Quarterly Report on Form 10-Q of American Home
                Mortgage Investment Corp. (File No. 001-31916) filed
                with the SEC on November 9, 2004).



Exhibit No.                          Description
-----------    ------------------------------------------------------

10.16       --  Agreement of Lease, dated October 20, 1995, between
                Reckson Operating Partnership, L.P., as Landlord,
                Choicecare Long Island, Inc., as Assignor, and
                American Home Mortgage Corp., as Assignee, as
                amended on September 30, 1999 (incorporated by
                reference to Exhibit 10.35 to the Annual Report on
                Form 10-K of American Home Mortgage Holdings, Inc.
                (File No. 000-27081) filed with the SEC on March 30,
                2000).

10.17       --  Agreement of Lease, dated as of November 24, 2003,
                between AHM SPV II, LLC, and American Home Mortgage
                Corp. (incorporated by reference to Exhibit 10.20 to
                the Annual Report on Form 10-K of American Home
                Mortgage Investment Corp. (File No. 001-31916) filed
                with the SEC on March 15, 2004).

10.18       --  Lease Agreement, dated as of November 1, 2003,
                between Suffolk County Development Agency (Suffolk
                County, New York) and AHM SPV II, LLC (incorporated
                by reference to Exhibit 10.21 to the Annual Report
                on Form 10-K of American Home Mortgage Investment
                Corp. (File No. 001-31916) filed with the SEC on
                March 15, 2004).

10.19       --  First Amendment, dated as of September 1, 2004, to
                the Mortgage Loan Purchase and Sale Agreement, dated
                as of January 1, 2004, by and among Greenwich Capital
                Financial Products, Inc., American Home Mortgage
                Corp., and American Home Mortgage Servicing, Inc.
                (incorporated by reference to Exhibit 10.6 to the
                Quarterly Report on Form 10-Q of American Home
                Mortgage Investment Corp. (File No. 001-31916) filed
                with the SEC on November 9, 2004).

21.1        --  Subsidiaries of American Home Mortgage Investment
                Corp. (filed herewith).

23.1        --  Consent of Deloitte & Touche LLP (filed herewith).

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 (filed
                herewith).

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 (filed
                herewith).

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 (filed
                herewith).

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 (filed
                herewith).

99.1        --  Press Release, dated March 14, 2005 (filed herewith).