1256536--3/1/2007--AMERICAN_HOME_MORTGAGE_INVESTMENT

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In addition to the other information contained in this Annual Report on Form 10-K, the following risk factors should be considered carefully in evaluating the Company s business. The Company s business, financial condition or results of operations could be materially adversely affected by any of these risks. Additional risks not presently known to the Company or that the Company currently deems immaterial may also adversely affect its business, financial condition or results of operations. Risks Related to Our Business We have a limited operating history with respect to our portfolio strategy. An interruption or reduction in the securitization market would harm our financial position. Our results from holding mortgage assets may be harmed by changes in the level of interest rates, changes to the difference between short- and longer-term interest rates, changes to the difference between interest rates for mortgage assets compared to other debt instruments, and an absence of or reduction in the availability, at favorable terms, of repurchase financing and other liquidity sources typically utilized by mortgage REITs. Our business requires a significant amount of cash, and if it is not available, our business and financial performance will be significantly harmed. We may not be able to achieve our optimal leverage. Our use of repurchase facilities to borrow funds may be limited or curtailed in the event of disruptions in the repurchase market. Our use of repurchase agreements to borrow funds may give our lenders greater rights in the event that either we or a lender files for bankruptcy. Our efforts to match fund our mortgage-backed securities with our borrowings may not be effective to protect against losses due to movements in interest rates. Our credit facilities contain covenants that restrict our operations and any default under our credit facilities would have a material adverse effect on our financial condition. Our credit facilities are subject to margin calls based on the lender s opinion of the value of our loan collateral. An unanticipated large margin call could harm our liquidity. If warehouse lenders and securitization underwriters face exposure stemming from legal violations committed by the companies to whom they provide financing or underwriting services, this could increase our borrowing costs and harm the market for whole loans and mortgage-backed securities. If the prepayment rates for our mortgage assets are higher than expected, our results of operations may be significantly harmed. We may suffer credit losses with respect to, and be required to repurchase, loans that we originate and sell, regardless of credit enhancements that we purchase. Our hedging strategy may adversely affect our borrowing cost and expose us to other risks. The results from our mortgage origination business will be harmed by rising interest rates. The results from our mortgage servicing business will be harmed by falling interest rates. An increase in interest rates could reduce the value of our loan inventory and commitments and our hedging strategy may not protect us from interest rate risk and may lead to losses. We may fail to generate expected returns on our mortgage-related assets because of interest rate caps associated with adjustable-rate mortgages. We are subject to losses due to fraudulent and negligent acts on the part of loan applicants, mortgage brokers, other vendors and our employees. A material difference between the assumptions used in the determination of the value of our residual interests and our actual experience could harm our financial position. We depend upon distributions from our operating subsidiaries to fund our operations and may be subordinate to the rights of their existing and future creditors. Our financial results fluctuate as a result of seasonality and other factors, including the demand for mortgage loans, which makes it difficult to predict our future performance. We may not be able to manage our growth efficiently, which may harm our results and may, in turn, harm the market price of our securities and our ability to distribute dividends. We face risks in connection with any completed or potential acquisition, which could have a material adverse impact on our growth or our operations. We face intense competition that could harm our market share and our revenues. The success and growth of our business will depend on our ability to adapt to technological changes. An interruption in or breach of our information systems may result in lost business. We face intense competition for personnel that could harm our business and in turn negatively affect the market price of our securities and our ability to distribute dividends. The conduct of the independent brokers through whom we originate our wholesale loans could subject us to fines or other penalties. We depend on brokers for a substantial portion of our loan production. The loss of key purchasers of our loans or a reduction in prices paid could harm our financial condition. We may be required to return proceeds obtained from the sale of loans, which would negatively impact our results of operations. Changes in existing government sponsored and federal mortgage programs could negatively affect our mortgage banking business. We must comply with numerous government regulations and we are subject to changes in law that could increase our costs and adversely affect our business. As a mortgage lender, we must comply with numerous licensing requirements, and our inability to remain in compliance with such requirements could adversely affect our operations and our reputation generally. The loss of our relationships with government agencies and related entities would have an adverse effect on our business. We are exposed to environmental liabilities with respect to properties to which we take title, which could increase our costs of doing business and adversely impact our results of operations. Our Board of Directors or management may change our operating policies and strategies without prior notice or stockholder approval and such changes could harm our business and results of operations and the value of our securities. Certain provisions of Maryland law and our charter and bylaws could hinder, delay or prevent a change in control of our company. Number of Directors, Board Vacancies, Term of Office Advance Notice Provisions for Stockholder Nominations and Proposals Exclusive Authority of Our Board to Amend the Bylaws Exclusive Authority of Our Board to Amend the Bylaws Duties of Directors with Respect to Unsolicited Takeovers Maryland Control Share Acquisition Act Loss of Investment Company Act exemption would adversely affect us and negatively affect the market price of shares of our securities and our ability to distribute dividends. Risks Relating to Our Status as a REIT Complying with REIT requirements may limit our ability to hedge effectively. We may fail to qualify as a REIT and be subject to tax. Our management has limited experience operating a REIT and our management s past experience may not be sufficient to successfully manage our business as a REIT. Risks Related to Our Capital Stock Various factors may cause the market price of our capital stock to become volatile, which could harm our ability to access the capital markets in the future. There may be substantial sales of our common stock after an offering, which would cause a decline in our stock price. The amount of our dividends may be less than projected. Our ability to pay our dividends depends upon the availability of funds and our actual operating results. If funds are not available or our actual operating results are below our expectations, we may need to sell assets or borrow funds to pay these distributions. Our Board of Directors may authorize the issuance of additional shares that may cause dilution and may depress the price of our common stock. Due to an exception to the stock ownership limitations applicable to our status as a REIT, our Chief Executive Officer and President holds a significant percentage of our outstanding securities.

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1256536--3/1/2007--AMERICAN_HOME_MORTGAGE_INVESTMENT_CORP