AMERICAN HOME MORTGAGE HOLDINGS INC, S-1/A, 1999-08-18

AMERICAN HOME MORTGAGE HOLDINGS INC
S-1/A, 1999-08-18
MORTGAGE BANKERS & LOAN CORRESPONDENTS

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<PAGE>

As Filed With The Securities And Exchange Commission On August 18, 1999

Registration No. 333-82409

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

AMENDMENT NO. 2

To
FORM S-1

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

--------------
American Home Mortgage Holdings, Inc.
(Exact Name of Registrant as Specified in Its Charter)

Delaware 6162 13-4066303
(State or Other (Primary Standard Industrial (I.R.S. Employer
Jurisdiction Classification Code Number)
Identification Number)
of Incorporation or
Organization)

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12 East 49th Street, New York, NY 10017
(212) 755-8600
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)

--------------
Michael Strauss
President and Chief Executive Officer
American Home Mortgage
12 East 49th Street
New York, NY 10017
(212) 755-8600
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent For Service)

--------------
Copies to:
Louis J. Bevilacqua, Esq. Howard B. Adler, Esq.
Cadwalader, Wickersham & Taft Gibson, Dunn & Crutcher LLP
100 Maiden Lane 1050 Connecticut Avenue, N.W.
New York, NY 10038 Washington, D.C. 20036
(212) 504-6000 (202) 955-8500

--------------
Approximate Date Of Commencement Of Proposed Sale To The Public: As soon as
practicable after the effective date of this registration statement.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement number for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [_]

CALCULATION OF REGISTRATION FEE

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Title of Each Class of Proposed Maximum Amount of
Securities to be Registered Aggregate Offering Price(/1/) Registration Fee
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stock, $0.01 par value(/2/)................ $28,750,000(/2/) *
- -------------------------------------------------------------------------------------------------------
Underwriters' Warrants............................ -- *
- -------------------------------------------------------------------------------------------------------
Common Stock underlying the
Underwriters' Warrants(/3/)...................... $2,750,000 *
- -------------------------------------------------------------------------------------------------------
Total............................................. -- *
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

* A registration fee of $10,508 was paid with the initial filing on July 7,
1999.

(/1/)Estimated under Rule 457(o) solely for the purpose of calculating the
registration fee.
(/2/)Includes shares of common stock subject to an option granted to the
underwriters solely to cover over-allotments, if any. See "Underwriting."
(/3/)Pursuant to Rule 416, the number of shares of common stock issuable upon
exercise of the underwriters' warrants is subject to adjustment in
accordance with the anti-dilution provisions of such warrants.

The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell these securities and it is not soliciting an offer to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS

Subject to Completion, dated August 18, 1999

2,500,000 Shares

[LOGO OF AMERICAN HOME MORTGAGE HOLDINGS, INC.]

American Home Mortgage Holdings, Inc.

Common Stock

$ per share

This is an initial public offering of common stock of American Home Mortgage
Holdings, Inc. We are offering for sale 2,500,000 shares of our common stock.
We are a retail mortgage banking company that originates residential mortgage
loans through the Internet and through more traditional channels and then sells
these loans and the related servicing rights to institutional buyers.

We anticipate the initial public offering price of our common stock will be
between $8.00 and $10.00 per share. The market price of the shares after the
offering may be higher or lower than the initial offering price.

We expect to list our common stock on the Nasdaq National Market under the
symbol "AHMH."

<TABLE>
<CAPTION>
Per Share Total
--------- -----
<S> <C> <C>
Price to public.............................. $ $
Underwriters' discounts and commissions...... $ $
Proceeds to us............................... $ $
</TABLE>

Approximately 38.6% of the net proceeds of the offering will be used to repay
indebtedness incurred to fund an S corporation distribution to Michael Strauss,
our sole existing stockholder.

The underwriters have agreed to underwrite this offering on a firm commitment
basis.

We have granted an over-allotment option to the underwriters. Under this
option, the underwriters may elect to purchase a maximum of 375,000 additional
shares from us within 30 days following the date of this prospectus to cover
over-allotments. We have also granted Friedman, Billings, Ramsey & Co., Inc.
warrants to purchase up to 250,000 additional shares of our common stock as
described in the "Underwriting" section of this prospectus.

Investing in our common stock involves risks. Please read the "Risk Factors"
section beginning on page 7 before purchasing our common stock.

-----------

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.

Friedman Billings Ramsey Advest, Inc.

, 1999
<PAGE>

[MortgageSelect.com logo surrounded by logos of companies with whom we have Web
site relationships; Images of MortgageSelect.com Web pages; Map of the United
States indicating states where we are licensed to do business and locations of
offices; Names and logos of companies that purchase our loans.]
<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary....................................................... 1
Risk Factors............................................................. 7
Special Notes of Caution................................................. 16
Transactions Related to the Offering..................................... 18
Use of Proceeds.......................................................... 19
Dividend Policy.......................................................... 20
Capitalization........................................................... 21
Dilution................................................................. 22
Selected Financial Data.................................................. 23
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 25
Business................................................................. 36
Management............................................................... 53
Certain Transactions..................................................... 59
Principal Stockholders................................................... 59
Description of Capital Stock............................................. 60
Shares Eligible for Future Sale.......................................... 63
Underwriting............................................................. 64
Legal Matters............................................................ 66
Experts.................................................................. 66
Where You Can Find More Information...................................... 66
Index to Consolidated Financial Statements............................... F-1
</TABLE>

-i-
<PAGE>

PROSPECTUS SUMMARY

You should read this Summary section together with the more detailed
information and financial statements and related notes appearing in this
prospectus, including the information under the section "Risk Factors."

THE COMPANY

We are a leading independent retail mortgage banking company focused on
expanding our business of originating residential mortgage loans through the
Internet and other more traditional channels. We sell the loans we originate
and the related servicing rights to institutional buyers, rather than hold the
loans for investment. In 1998, 64.7% of our $1.2 billion in total loan
originations were made to home buyers rather than to home owners seeking to
refinance their mortgages. In the first six months of 1999, we originated
approximately $612.9 million in loans, 61.4% of which were made to home buyers.
Our originations generated total revenues and net income of $20.2 million and
$4.9 million for the year ended December 31, 1998 and generated $14.3 million
of total revenues and $2.5 million of net income for the six months ended June
30, 1999.

In January 1999, we began to market our mortgage products over the Internet.
We originate our mortgage products online through arrangements with a number of
popular Web sites and through our own MortgageSelect.com Web site. During July
1999, we accepted applications over the Internet for $39.5 million in loans,
representing 24.8% of our total application volume. We currently have
relationships with 17 popular Web sites and 57 hyperlinks from other Web sites
to MortgageSelect.com. In addition to an exclusive relationship with Real
Estate Village, an online marketplace of realtors and real estate related
services, we originate mortgage loans through the following Web sites:

. Microsoft HomeAdvisor;

. GetSmart;

. LendingTree;

. Consumer Financial Network;

. RealEstate.com; and

. LoanWeb.

At the core of our traditional business is our retail division. In 1998 and
the first 6 months of 1999, 81.0% and 83.2% of the mortgage loans we originated
were made through this division. Our retail division currently originates
mortgage loans primarily through our 16 community loan offices in the New York
metropolitan area and 6 eastern states. Additionally, we originate mortgage
loans through direct-to-consumer advertising and joint ventures with realtors
and builders. To a lesser extent, we also originate mortgage loans through our
Corporate Affinity Program, telemarketing and our Real Estate Direct Program.
Our wholesale division, which accounted for 19.0% of the mortgage loans we
originated in 1998 and 16.8% in the first six months of 1999, makes loans
through a network of independent mortgage brokers.

Our Strategies for Growth

Our goal is to continue to expand our retail mortgage banking business
primarily through our Internet origination channel and also through our other
traditional origination channels. To achieve this goal, we are focusing on the
following growth initiatives through the remainder of 1999:

Internet Origination Channel

. Form exclusive and participating relationships with additional Web
sites.

. Open our third Internet call center.

1
<PAGE>

. Qualify to offer mortgage loans through the Internet in the remaining 16
states in which we are not yet qualified.

. Launch further enhancements to our Web site to allow real-time credit
approvals and loan commitments (that is, during an applicant's online
session).

. Commence an advertising campaign to increase awareness of, and to direct
potential customers to, our MortgageSelect.com Web site.

Traditional Origination Channels

. Open new community loan offices and expand from our traditional
geographic base.

. Hire additional sales-oriented loan originators.

. Form additional joint ventures with realtors and builders.

. Selectively pursue strategic acquisitions in our industry.

Our Competitive Advantages

We believe that by leveraging the following competitive advantages across
both our Internet and traditional origination channels we will be able to
continue to expand our mortgage origination business:

. Lending to Home Buyers We concentrate our marketing, advertising and
personnel resources on lending to home buyers
rather than to home owners seeking to
refinance their mortgage loans. We believe
home purchase mortgage volume is less
susceptible to interest rate increases. In
1998, 64.7% of our mortgage loans were made
to home buyers as compared to the Mortgage
Bankers Association of America estimate of
the mortgage industry average of
approximately 50% for such year. For the
first 6 months of 1999, 61.4% of our loans
were made to home buyers, compared to an
industry average of approximately 54%.

. Breadth of Product Offering We offer a broad range of loan products which
allows us to meet the needs of a wide variety
of customers.

. Use of Technology We seek to maximize the efficiency of our
operations through the use of advanced
technology.

. Loans Specifically The loans we originate are designed and
Underwritten for Sale to documented specifically to conform to the
Buyers underwriting and credit standards of our
third-party buyers. This helps ensure that
each loan we originate can be sold to one of
our buyers.

We intend to provide customers with a single
. One-Stop Shopping source for mortgages and mortgage-related
products such as title insurance, abstract
services and home equity lines of credit.

. Consultative Sales Strategy Our experienced loan originators focus on
building a rapport with borrowers through
frequent customer contacts and follow ups.

2
<PAGE>

The Mortgage Industry

The mortgage banking industry is the largest consumer debt-related sector in
the United States. In 1998, mortgage loan origination volume in the United
States reached a record high of $1.5 trillion, compared to $834 billion in 1997
according to the Mortgage Bankers Association of America (MBA). The MBA also
reports that mortgage bankers are the leading group of residential mortgage
lenders, originating approximately 60%, or $880 billion, in mortgage loans in
1998. The MBA estimates that $1.2 trillion in mortgages will be originated in
1999.

Mortgage lending traditionally takes place through the manual exchange of
information from the time of application to the loan closing. This traditional
means of lending is cumbersome and inefficient. We believe that Internet
mortgage lending is the solution to these inefficiencies. Forrester Research
estimates that $91.2 billion, or 9.6%, of all mortgage loans will be originated
online by the year 2003, compared to $18.7 billion, or less than 1.5%, in 1999.
In addition, Killen & Associates predicts online mortgage originations will
account for approximately 30% of total mortgage originations by 2005.

General Information

We are located on the Internet at www.MortgageSelect.com. Our executive
offices are located at 12 East 49th Street, New York, NY 10017 and our
telephone number is (212) 755-8600.

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

Unless otherwise indicated, all share and per share data and information in
this prospectus:

. assume that the underwriters will not exercise their over-allotment
option; and

. reflect the exchange of all of the issued and outstanding shares of
common stock of American Home Mortgage Corp. for 4,999,900 shares of our
common stock (the incorporation transaction).

The incorporation transaction will be completed immediately before the
closing of this offering. This transaction will create a holding company for
American Home Mortgage Corp. We are the holding company, American Home Mortgage
Holdings, Inc., and the issuer of the shares offered pursuant to this
prospectus. See the "Transactions Related to the Offering" section in this
prospectus. Unless otherwise stated, "we," "our," "American Home Mortgage" and
"us" refer to American Home Mortgage Holdings, Inc. and its wholly-owned
subsidiary, American Home Mortgage Corp.

References in this prospectus to mortgage originations include only mortgage
originations that were closed during the period.

3
<PAGE>

THE OFFERING

Common stock offered............
2,500,000 shares(/1/)

Common stock to be outstanding
after the offering.............

7,500,000 shares(/1/) (/2/)

Use of proceeds.................
We will use the net proceeds of the offering,
which are estimated to be $19.6 million, (1)
to repay indebtedness incurred to fund an S
corporation distribution to Michael Strauss,
our sole existing stockholder, and (2) for
Internet business expansion and general
corporate and working capital purposes,
including funding of potential acquisitions
of related businesses. For a more detailed
discussion of the S corporation distribution
to the stockholder and the use of proceeds,
please see the "Transactions Related to the
Offering" and "Use of Proceeds" sections of
this prospectus.

Proposed Nasdaq National Market AHMH
symbol.........................

For a more detailed description of our capitalization, please see the
"Capitalization" section of this prospectus.
- ----------------

(/1/)Does not include 375,000 shares of common stock reserved for issuance upon
exercise of the underwriters' over-allotment option and 250,000 shares
reserved for issuance upon exercise of warrants issued to Friedman,
Billings, Ramsey & Co., Inc.

(/2/)Does not include 22,222 shares of restricted stock (assuming an initial
public offering price of $9.00 per share) and options to purchase
shares of common stock under our 1999 Omnibus Stock Incentive Plan to be
granted upon completion of this offering.

4
<PAGE>

SUMMARY FINANCIAL DATA
(in thousands, except per share and operating data)

You should read the summary financial data set forth below in conjunction
with our consolidated financial statements and related notes and the
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" section of this prospectus.
<TABLE>
<CAPTION>
Year Ended December Six Months Ended
31, June 30,
---------------------- -----------------
1996 1997 1998 1998(/1/) 1999
------ ------- ------- --------- -------
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues:
Gain on sale of mortgage loans..... $6,360 $10,597 $18,981 $7,690 $12,963
Other.............................. 225 725 1,236 717 1,345
------ ------- ------- ------ -------
Total revenues................... 6,585 11,322 20,217 8,407 14,308
------ ------- ------- ------ -------
Expenses:
Salaries, commissions and benefits,
net............................... 3,459 5,317 9,430 3,636 7,964
Marketing and promotion............ 814 962 1,236 598 869
Other.............................. 1,668 2,584 4,302 1,820 2,771
------ ------- ------- ------ -------
Total expenses................... 5,941 8,863 14,968 6,054 11,604
------ ------- ------- ------ -------
Income before income taxes and
minority interest................... 644 2,459 5,249 2,353 2,704
State income taxes................. 38 140 328 118 131
Minority interest.................. -- -- 51 (6) 44
------ ------- ------- ------ -------
Net income......................... $ 606 $ 2,319 $ 4,870 $2,241 $ 2,529
====== ======= ======= ====== =======
PRO FORMA DATA (unaudited):
Pro forma provision for income
taxes(/2/).......................... 245 942 1,982 917 1,058
Net income adjusted for pro forma
income tax provision.............. $ 361 $ 1,377 $ 2,888 $1,324 $ 1,471
====== ======= ======= ====== =======
Pro forma net income per share:
Basic.............................. $ 0.39 $ 0.20
Diluted............................ $ 0.39 $ 0.20
======= =======
Pro forma weighted average number of
shares outstanding(/3/):
Basic.............................. 7,500 7,500
Diluted............................ 7,500 7,500
======= =======
</TABLE>

<TABLE>
<CAPTION>
As of June 30, 1999
------------------------
Actual As Adjusted(/4/)
------- ----------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................ $ 2,092 $14,127
Loans held for sale, net............................. 42,056 42,056
Total assets......................................... 50,919 62,953
Warehouse lines of credit............................ 25,313 25,313
Other liabilities.................................... 17,965 18,340
Total stockholder's equity........................... $ 7,571 $19,230
</TABLE>

<TABLE>
<CAPTION>
Year Ended Six Months Ended
December 31, June 30,
---------------- -----------------
1996 1997 1998 1998 1999
---- ---- ------ -------- --------
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Total mortgage originations (in
millions)................................ $491 $724 $1,158 $ 520 $ 613
Home purchases.......................... 348 562 749 327 376
Refinancings............................ 143 162 409 193 237
</TABLE>

5
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(/1/)June 30, 1998 information is derived from our unaudited financial
statements.

(/2/)Before this offering, we elected to be treated as an S corporation for
federal and state income tax purposes. Pro forma income taxes for the
years ended December 31, 1996, 1997 and 1998 and the six months ended June
30, 1998 and 1999 reflect adjustments for federal and state income taxes
as if we had been taxed as a C corporation rather than an S corporation
for such periods. State income taxes and pro forma provision for income
taxes provide for an effective tax rate of 44%. Please see the
"Management's Discussion and Analysis of Financial Condition and Results
of Operations--Termination of S Corporation Status and Income Taxes"
section of this prospectus.

(/3/)The pro forma weighted average number of shares outstanding at December
31, 1998 gives effect to the assumed issuance of 2,500,000 shares of
common stock to generate sufficient cash to pay the S corporation
distribution amount of $5.6 million at December 31, 1998. The pro forma
weighted average number of shares for June 30, 1999 gives effect to the
assumed issuance of 2,500,000 shares of common stock to generate
sufficient cash to pay the S corporation distribution amount of $7.6
million at June 30, 1999. The issuance of common stock was based on an
assumed offering price of $9.00 per share (the midpoint of the range set
forth on the cover page of this prospectus). Please see the "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Termination of S Corporation Status and Income Taxes" section of this
prospectus.

(/4/)As adjusted to give effect to:

--an assumed S corporation distribution of $7.6 million as of June 30, 1999,
which amount we expect will increase as a result of additional S
corporation income from July 1, 1999 to the closing of this offering;

--our recording of a one-time non-cash reduction to earnings in the amount
of $375,000 to recognize a deferred income tax liability as a result of the
termination of our S corporation status, which amount may change by the
amount of net deferred tax assets or liabilities related to our operations
from July 1, 1999 to the closing of this offering; and

--the issuance and sale of our common stock at an assumed offering price of
$9.00 per share (the midpoint of the range set forth on the cover page of
this prospectus) and application of the net proceeds as described in the
"Use of Proceeds" section of this prospectus.

6
<PAGE>

RISK FACTORS

An investment in our common stock involves a number of risks. Before making
an investment decision, you should carefully consider all of the risks
described in this prospectus. If any of the risks discussed in this prospectus
actually occur, our business, financial condition and results of operations
could be materially adversely affected. If this were to occur, the trading
price of our common stock could decline significantly and you may lose all or
part of your investment.

If we do not manage our growth effectively, our financial performance could be
materiallyadversely affected

We have experienced rapid and substantial growth in our mortgage loan
originations and revenues since 1995. We intend to pursue a growth strategy for
the foreseeable future by enhancing and expanding our Internet business,
expanding our traditional business into new geographic areas, increasing the
market share of our existing community loan offices, entering into additional
joint ventures with realtors and builders, and pursuing selective strategic
acquisitions of mortgage lenders and other mortgage banking-related companies.
We cannot assure you that we will accurately anticipate and respond to the
changing demands our expanding operations will face. We anticipate that future
operations will place a significant strain on our management, loan originators,
information systems and other resources. We must attract and integrate new
personnel, improve existing procedures and controls and implement new ones to
support any future growth. Our inability to meet our future hiring needs and to
adapt our procedures and controls accordingly could have a material adverse
effect on our results of operations, financial condition and business
prospects. In addition, we have re-assigned and will continue to re-assign
personnel from our traditional business to meet the demands of our Internet
business, which may have an adverse effect on our overall business. Further, we
must maintain and expand our relationships with popular Web sites in order to
successfully implement our Internet growth strategy. In addition, if we make
strategic acquisitions, we must successfully integrate the mortgage brokers and
other companies we acquire. We cannot assure you that we will achieve our
growth expectations, and our inability to do so could materially adversely
affect our results of operations and business.

Our historical rapid growth may not reflect our future growth potential and we
may not be able to maintain similarly high levels of growth in the future

Since 1995, our earnings have grown by more than 50% year to year through
December 31, 1998, and 12.9% for the first 6 months of 1999 as compared to the
same period of last year. We may not be able to achieve comparable growth in
the future. Market conditions in the past 5 years have favorably impacted the
mortgage banking industry in general. Our growth rate has benefited from low
interest rates and a long period of economic growth. We do not know whether
these favorable conditions will continue. If they do not, however, it is likely
to adversely affect our earnings growth. Because our historical growth rates
are not likely to accurately reflect our future growth or our ability to grow
in the future, we cannot assure you that we will continue to grow at the same
pace or as profitably as we have in the past.

The magnitude and timing of the funds we anticipate expending to implement our
growth strategy may depress our earnings and profitability

We anticipate expending significant funds to implement our growth strategy.
There may be a significant delay between the timing of these expenditures and
any increase in earnings, which may depress our earnings. Our future plans are
subject to both known and unknown risks and uncertainties that may cause our
actual results in future periods to be materially adversely different than our
prior performance. As a result, we cannot guarantee that our future revenues
will increase or that we will continue to be profitable.

If we are unable to implement our Internet strategy successfully, or our
agreements with Internet mortgage Web sites are terminated, our growth would
be limited

A substantial portion of our planned future growth depends on our ability to
originate loans on the Internet. Our Internet success will depend, in part, on
the development and maintenance of the Internet's infrastructure and consumer
acceptance of the Internet as a distribution channel for mortgages. Internet-
based

7
<PAGE>

mortgage lending is relatively new, and we cannot assure you that consumers
will increase their use of the Internet for obtaining mortgage loans. In order
to increase our loan volume on the Internet, we depend on building and
maintaining relationships with operators of Internet mortgage Web sites,
attracting consumers with our loan terms and service, and controlling our
costs. However, our ability to significantly increase the number of loans we
originate over the Internet and to continue to originate loans profitably over
the Internet remains uncertain. In addition, many of our agreements with
Internet mortgage Web sites can be terminated by either party on short notice.
If any of these agreements were terminated, our business and results of
operations could be materially adversely affected.

A period of rising interest rates, an economic slowdown or a recession could
reduce the demand for mortgages

Rising interest rates generally reduce the demand for consumer credit,
including mortgage loans. Interest rates have been at favorably low levels for
the last several years, generally ranging from 6.5% to 7.5% for conforming
loans. There is no assurance that interest rates will continue at favorably low
rates. In an economic slowdown or recession, real estate values and home sales
decline and the number of borrowers defaulting on their loans increases. In a
period of rising interest rates or an economic slowdown, we will originate and
sell fewer loans and could be required to repurchase more of the loans we have
sold as a result of early payment defaults by borrowers. Accordingly, a period
of rising interest rates, an economic slowdown or a recession would adversely
affect our business and results of operations.

An increase in interest rates could reduce the value of our loan inventory

The value of our loan inventory is based, in part, on market interest rates.
Accordingly, we may experience losses on loan sales if interest rates change
rapidly or unexpectedly. If interest rates rise after we fix a price for a
loan, but before we sell that loan, the value of that loan will decrease. If
the amount we receive from selling the loan is less than our cost of
originating the loan, we may incur net losses, and our business and operating
results could be adversely affected.

Our hedging strategy may not protect us from interest rate risk and may lead to
losses

Although we generally sell our loans within 30 days after funding, there may
be unexpected delays that could increase our interest rate exposure. While we
use hedging and other strategies to minimize our exposure to interest rate
risks, no hedging or other strategy can completely protect us. In addition, the
nature and timing of hedging transactions may influence the effectiveness of
these strategies. Poorly designed strategies or improperly executed
transactions could actually increase our risk and losses. In addition, hedging
strategies involve transaction and other costs. We cannot assure you that our
hedging strategy and the hedges that we make will adequately offset the risks
of interest rate volatility or that our hedges will not result in losses. For
further discussion of our hedging strategy, please see the "Management's
Discussion and Analysis of Financial Condition and Results of Operations--Risk
Management" section of this prospectus.

The loss of our key management could result in a material adverse effect on our
business

Our future success depends to a significant extent on the continued services
of our senior management, particularly our President and Chief Executive
Officer, Michael Strauss. The loss of the services of Mr. Strauss, or other key
employees, could have a material adverse effect on our business and results of
operations. We do not maintain "key person" life insurance for any of our
personnel.

The loss of key purchasers of our loans or a reduction in prices paid could
adversely affect our financial condition

We sell substantially all of the mortgages we originate to institutional
buyers. Generally, we sell the servicing rights to our loans at the time we
sell those loans. In the first 6 months of 1999, 78.0% of the loans we

8
<PAGE>

sold were sold to two large national financial institutions and one regional
financial institution, all of which compete with us directly for retail
originations. If these financial institutions or any other significant
purchaser of our loans cease to buy our loans or servicing rights and
equivalent purchasers cannot be found on a timely basis, then our business and
results of operations could be materially adversely affected. Our results of
operations could also be affected if these financial institutions or other
purchasers lower the price they pay to us or adversely change the material
terms of their loan purchases from us.

The prices at which we sell our loans vary over time. A number of factors
determines the price we receive for our loans. These factors include:

. the number of institutions that are willing to buy our loans;

. the amount of comparable loans available for sale;

. the levels of prepayments of, or defaults on, loans;

. the types and volume of loans we sell;

. the level and volatility of interest rates; and

. the quality of our loans.

The prices at which we can sell our mortgage servicing rights vary over time
and may be materially adversely affected by a number of factors, including the
general supply of and demand for mortgage servicing rights and changes in
interest rates. Servicing rights for a particular loan category that was
originated at higher interest rates tend to have a lower value than those
originated with comparatively lower interest rates due to the greater
likelihood that loans with higher interest rates will be prepaid more quickly.
For a more detailed description of our sales strategies, please see the
"Business--Sale of Loans and Servicing Rights" section of this prospectus.

Because our ability to fund mortgage loans depends on the availability of
financing sources, our revenues and business would be negatively affected if
our current financing sources were canceled or not renewed

Our ability to make mortgage loans depends largely on our ability to secure
financing on acceptable terms. Currently, we fund substantially all of our
loans through our warehouse facility and under loan purchase and sale
agreements with 4 institutional investors. Each of these financing arrangements
has a one-year term and is cancelable by the lender at any time. Our financing
facilities require us to observe financial and other covenants. If we are not
able to renew any of these financing arrangements or arrange for new financing
on terms acceptable to us, or if we default on our covenants and are unable to
access funds under any of these arrangements, then we will have to reduce our
mortgage originations, which would reduce our revenues. For a more detailed
description of our financing sources, please see the "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources" section of this prospectus.

Our business may suffer if we cannot attract or retain qualified loan
originators

We depend on our loan originators to generate customers by, among other
things, developing relationships with consumers, real estate agents and
brokers, builders, corporations and others, which we believe leads to repeat
and referral business. Accordingly, we must be able to attract, motivate and
retain skilled loan originators. In addition, our growth strategy contemplates
hiring additional loan originators. The market for such persons is highly
competitive and historically has experienced a high rate of turnover.
Competition for qualified loan originators may lead to increased costs to hire
and retain them. We cannot guarantee that we will be able to attract or retain
qualified loan originators. If we cannot attract or retain a sufficient number
of skilled loan originators, or even if we can retain them but at higher costs,
our business and results of operations could be adversely affected.

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We face intense and increasing competition that could adversely impact our
market share and our revenues

We face intense competition from Internet-based lending companies and other
lenders participating on Web sites, as well as from traditional mortgage
lenders, such as commercial banks, savings and loan associations and other
finance and mortgage banking companies. 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 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. We cannot assure you we
will be able to effectively compete against them or any future competitors.

Competition may lower the rates we are able to charge borrowers, thereby
potentially lowering the amount of premium income on future loan sales and
sales of servicing rights. Increased competition also may reduce the volume of
our loan originations and loan sales. We cannot assure you that we will be able
to compete successfully in this evolving market. For additional information on
the competitive environment in which we operate, please see the "Business--
Competition" section of this prospectus.

Changes in existing government sponsored and federal mortgage programs could
negatively affect our business

Our ability to generate revenue through mortgage sales to institutional
investors largely depends on programs administered by Fannie Mae, the Federal
Home Loan Mortgage Corporation and others which facilitate the issuance of
mortgage-backed securities in the secondary market. A portion of our business
also depends on various programs administered by the Federal Housing
Administration and the Veterans Administration. Any discontinuation of, or
significant reduction in, the operation of those programs could have a material
adverse effect on our business and results of operations. Also, any significant
adverse change in the level of activity in the secondary market or the
underwriting criteria of these entities would reduce our revenues.

We conduct a majority of our business in the northeast and may be adversely
affected by a future decline in economic conditions in that region

In 1998, approximately 73.7%, 15.3% and 8.9% of the mortgages we originated
(as measured by principal balances) were secured by property located in New
York, Connecticut and New Jersey. For the first 6 months of 1999, those
percentages were 73.0%, 16.4% and 7.9%. A decline in economic conditions in
these states or the surrounding regions could materially adversely affect our
business and results of operations. Moreover, if the real estate markets in
these states or regions should experience an overall decline in property
values, the overall quality of our loan portfolio may decline and the rates of
delinquency, foreclosure, bankruptcy and loss on loans we originate may
increase. This would negatively affect our ability to originate loans or to
sell our loans and servicing rights.

We may be required to return proceeds obtained from the sale of loans, which
would negatively impact our results of operations

When we sell a loan to an investor, we are required to make unqualified
representations and warranties regarding the loan, the borrower and the
property. These representations are made based in part on our due diligence and
related information provided to us by the borrower and others. If any of these
representations or warranties are later determined not to be true, we may be
required to repurchase the loan, including principal and interest, from the
investor or indemnify the investor for any damages or losses caused by the
breach of such representation or warranty. In connection with some non-prime
loan sales, we may be required to return a portion of the premium paid by the
investor if the loan is prepaid within the first year after its sale. If, to
any significant extent, we are required to repurchase loans, indemnify
investors or return loan premiums, it could have a material adverse effect on
our business and results of operations.

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Our non-prime mortgage business subjects us to greater risks than our prime
business and if we were to increase our non-prime mortgage business in the
future, our business would become less stable

Under our non-prime mortgage loan programs, we make loans to borrowers who
have impaired or limited credit histories or higher debt-to-income ratios than
prime mortgage lenders allow. For the year ended December 31, 1998,
approximately 2.2% of the dollar amount, or 3.6% of the total number, of our
loans originated were categorized as non-prime. For the first 6 months of 1999,
those percentages were 4.3% and 7.2%. The non-prime mortgage banking industry
is riskier than the conforming mortgage business primarily because there is a
greater risk of default and product offerings for non-prime mortgages
frequently change, which may make selling a non-prime loan to our institutional
investors more difficult. Our failure to adequately address the related risks
could have a material adverse effect on our business and results of operations.

Our financial results may fluctuate as a result of seasonality and other
factors, including the demand for mortgage loans, which makes it difficult to
predict our future performance

Our business is generally subject to seasonal trends. These trends reflect
the general pattern of resales of homes, which typically peak during the spring
and summer seasons and decline from January through March. Our quarterly
results have fluctuated in the past and are expected to fluctuate in the
future, reflecting the seasonality of the industry.

Further, if the closing of a sale of loans or servicing rights is postponed,
the recognition of premium income from these sales is also postponed. If such a
delay causes us to recognize income in the next quarter, our results of
operations for the previous quarter could be materially adversely affected.
Unanticipated delays could also increase our exposure to interest rate
fluctuations by lengthening the period during which our variable rate
borrowings under our credit facilities are outstanding. In addition, the
following factors influence our revenues and net earnings:

. the level and volatility of interest rates;

. the demand for mortgage loans; and

. the size and timing of sales of loans and servicing rights.

These and other factors make it very difficult to predict our results of
operations. If our results of operations do not meet the expectations of our
stockholders and securities analysts, then our common stock price may be
materially adversely affected.

Our dependence on information systems may result in computer problems caused by
the Year 2000

We rely on communications and information systems to conduct our business.
As we implement our growth strategy and increase our origination of mortgages
over the Internet, this reliance will also increase. Any failure or
interruption of our computer systems or third-party computer systems on which
we rely could cause underwriting or other delays. Failures or interruptions may
result from the inability of computer systems to recognize a date using "00" as
the Year 2000. Our computer systems may not be Year 2000 ready. We cannot
assure you that these Year 2000 issues have been or will be adequately
addressed by us or the third parties on which we rely, or that any such
failures or interruptions will not occur. The occurrence of any failures or
interruptions could have a material adverse effect on our business and results
of operations. For a more detailed discussion of our Year 2000 readiness
program, please see the "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Year 2000 Readiness" section of this
prospectus.

The success of our online business depends on system integrity and security

The performance of our Web site and the Web sites in which we participate is
important to our reputation, our ability to attract customers and our ability
to achieve market acceptance of our services. Any system failure
that causes an interruption or an increase in response time of our services
could result in fewer loan applications

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through our Web site. System failures, if prolonged, could reduce the
attractiveness of our services to borrowers and clients. Our operations are
susceptible to outages due to fire, floods, power loss, telecommunications
failures, break-ins and similar events. In addition, despite our implementation
of network security measures, our servers are vulnerable to computer viruses,
break-ins and similar disruptions from unauthorized tampering with our computer
systems. We do not carry sufficient insurance to compensate for losses that may
occur as a result of any of these events.

A significant barrier to online commerce is the secure transmission of
confidential information over public networks. We rely on encryption and
authentication technology licensed from third parties to effect secure
transmission of confidential information, such as that required on a mortgage
loan application. Advances in computer capabilities, new discoveries in
cryptography or other developments may result in a breach of the algorithms we
use to protect customer data. If any compromise of our security occurs, it
would injure our reputation, and could adversely impact the success of our
business.

Our online success depends on our ability to adapt to technological changes

The market for Internet products and services is characterized by rapid
technological developments, evolving industry standards and frequent new
products and enhancements. If faster Internet access becomes more widely
available through cable modems or other technologies, we may be required to
make significant changes to the design and content of our Web site to compete
effectively. As the number of Web pages and users increases, we will need to
modify our Internet infrastructure and our Web site to accommodate increased
traffic. If we cannot modify our Internet systems, we may experience:

.system disruptions;

.slower response times;

.impaired quality and speed of application processing; and

.delays in reporting accurate interest rate information.

If we fail to effectively adapt to increased usage of the Internet or new
technological developments, our business will be adversely affected.

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

Our business is subject to the laws, rules and regulations of various
federal, state and local government agencies regarding the origination,
processing, underwriting, sale and servicing of mortgage loans. These laws,
rules and regulations, among other things, limit the interest rates, finance
charges and other fees we may charge, require us to make extensive disclosure,
prohibit discrimination and impose qualification and licensing obligations on
us. They also impose on us various reporting and net worth requirements. We
also are subject to inspection by these government agencies. Our failure to
comply with these requirements could lead to, among other things, the loss of
approved status, termination of contractual rights without compensation,
demands for indemnification or mortgage loan repurchases, class action lawsuits
and administrative enforcement actions.

Our operations on the Internet are not currently subject to direct
regulation by any government agency in the United States beyond mortgage-
related regulations and regulations applicable to businesses generally. A
number of legislative and regulatory proposals currently under consideration by
federal, state and local governmental organizations may lead to laws or
regulations concerning various aspects of business on the Internet, including:

.user privacy;

.taxation;

.content;

.access charges;

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.liability for third-party activities; and

.jurisdiction.

The adoption of new laws or the application of existing laws may decrease
the use of the Internet, increase our costs or otherwise adversely affect our
business.

Regulatory and legal requirements are subject to change. If such
requirements change and become more restrictive, it would be more difficult and
expensive for us to comply and could affect the way we conduct our business,
which could adversely impact our results of operations. Although we believe we
are currently in material compliance with the laws, rules and regulations to
which we are subject, we cannot assure you that we are, or will be, in full
compliance with applicable laws, rules and regulations.

If we cannot comply with those laws or regulations, or if new laws limit or
eliminate some of the benefits of purchasing a mortgage, our business and
results of operations may be materially adversely affected. For a more detailed
discussion of the types of governmental regulation applicable to our business,
please see the "Business--Government Regulation" section of this prospectus.

As we expand, our inability to trademark the names under which we do business
may subject us to significant legal expenses and impair our marketing efforts

We have conducted our business under the name American Home Mortgage since
1988, and commenced doing business over the Internet under the name
MortgageSelect.com. We cannot obtain trademark protection for either name
because other companies use similar generic terms in their names. As a result,
the use of these names may be challenged in the various states in which we
currently operate or in the states into which we seek to expand by competitors
claiming prior use of a similar name in one or more of those areas. Any
challenges may result in our inability to use those names in such states and
may require us to do business under other names that do not have the goodwill
and name recognition, particularly of American Home Mortgage, associated with
them. It may also prove impractical to do business over the Internet under more
than one name. Our inability to use our names could result in a loss of
business. These challenges may also result in significant legal expenses
arising from the defense of our names and an inability to market our names
nationally.

Our proposed national expansion through the Internet will subject us to laws
and regulations with which we are unfamiliar

As part of the expansion of our Internet business, we intend to offer
mortgage loans in all 50 states through the Internet and are in the process of
obtaining the necessary qualifications or licenses in such states. Because we
currently make loans primarily in the New York metropolitan area and several
other eastern states, we are not familiar with the laws and regulations of
other states and the difficulties of complying with such laws. Moreover, such
laws and regulations were not drafted with the Internet in mind and using the
Internet as an origination channel for mortgage loans may create compliance
issues. Compliance with new laws and regulations may substantially slow our
ability to grow. Our future failure to adequately comply with the laws and
regulations to which we will be subject could result in liability that could
materially adversely affect our business and results of operations.

Pending industry-wide litigation could change the manner in which we do
business and subject us to potential liability

Numerous lawsuits seeking class certification have been filed against
mortgage lenders alleging that certain types of direct and indirect payments
made by those lenders to mortgage brokers are referral fees or unearned fees
prohibited under the Real Estate Settlement Procedures Act. These lawsuits also
allege that consumers were not informed of the brokers' compensation in
violation of law. There is much uncertainty as to the law on this issue because
several federal district courts construing RESPA have reached conflicting
results. If the pending cases on lender payments to brokers are ultimately
resolved against the lenders, it may cause an industry-wide change in the way
independent mortgage brokers are compensated. In addition, future legislation,

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<PAGE>

regulatory interpretations or judicial decisions may require us to change our
broker compensation programs or subject us to material monetary judgments or
other penalties. Any changes or penalties may have a material adverse effect on
our business and results of operations. For a more detailed description of
government regulation, please see the "Business--Government Regulation" section
of this prospectus.

We face risks in connection with any potential acquisition that could have a
material adverse impact on our growth or our operations

We may at times consider selective strategic acquisitions of mortgage
lenders and other mortgage banking-related companies. There is substantial
competition for acquisition opportunities in the mortgage industry. This
competition could result in an increase in the price of, and a decrease in the
number of, attractive acquisition candidates. As a result we may not be able to
successfully acquire attractive candidates on terms we deem acceptable. In
addition, we cannot assure you that we will be able to obtain the requisite
financing on terms we deem acceptable. Pursuing acquisitions also involves a
number of special risks, including adverse short-term effects on our results of
operations, dilution resulting from issuances of our common stock, diversion of
management's time, strain on our financial and administrative infrastructure,
difficulties in integrating acquired businesses and personnel, loss of
personnel and unanticipated legal liabilities. We cannot guarantee you that we
will be able to overcome these acquisition risks or that they will not
adversely affect our growth and results of operations.

If we securitize our loans in the future, we will be subject to additional
risks that we do not currently face

We currently do not securitize the loans we originate, but rather sell or
swap them to institutional buyers. Although we do not currently intend to
securitize our loans, we may decide to do so in the future if market conditions
or other considerations justify doing so. Securitizing our loans would subject
us to numerous additional risks, including:

.delayed operating cash flow;

.conditions in the general securities and securitization markets;

.the need to obtain satisfactory credit enhancements;

.retention of credit enhancing residual interests; and

.increased potential for earnings fluctuations.

If we were to securitize our loans, we would have to adequately address
these and other related risks. Our failure to do so could have a material
adverse effect on our business and results of operations.

If we retain the servicing rights to our loans in the future, we would be
subject to additional risks that we do not currently face

Generally, we sell the servicing rights to our loans at the same time that
we sell those loans. Although we currently do not intend to retain the
servicing rights to our loans, we may decide to do so in the future if market
conditions or other considerations justify doing so. If we were to service our
loans ourselves, we would be subject to additional risks, including:

.decreased operating cash flow; and

. the potential of having to write down the value of the servicing rights
through a charge to earnings, particularly as a result of changing
interest rates and alternative financing options that lead to increased
prepayments.

If we were to retain the servicing rights to our loans, we would have to
adequately address these and other related risks. Our failure to do so could
have a material adverse effect on our business and results of operations.

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The loss of our relationship with Fannie Mae would have an adverse effect on
our business

We have an arrangement with Fannie Mae that allows us to use Fannie Mae's
Desktop Underwriter(R) software through our Internet Web site and to provide
mortgage brokers with use of that software. Our contract with Fannie Mae may be
canceled by either party on 90 days' notice. If Fannie Mae terminates the
agreement, our planned Internet growth and mortgage broker business could be
adversely affected, which could reduce our revenues.

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

In the course of our business, at various times, we may foreclose and take
title (for security purposes) to residential properties, and could be subject
to environmental liabilities with respect to such properties. To date, we have
not been required to perform any environmental investigation or remediation
activities, nor have we been subject to any environmental claims relating to
these activities. We cannot assure you that this will remain the case in the
future. We may be held liable to a governmental entity or to third parties for
property damage, personal injury, and investigation and clean up costs incurred
by these parties in connection with environmental contamination, or may be
required to investigate or clean up hazardous or toxic substances or chemical
releases at a property. The costs associated with an environmental
investigation or remediation activities could be substantial. In addition, as
the owner or former owner of a contaminated site, we may be subject to common
law claims by third parties seeking damages and costs resulting from
environmental contamination emanating from such property.

Our stock price may be volatile, which could result in substantial losses for
our stockholders

Before this offering, there had been no public market for our common stock.
We cannot assure you that an active public market for our common stock will
develop or can be sustained after this offering. Even if an active trading
market does develop, the market price of our common stock is likely to be
highly volatile and could be subject to wide fluctuations in response to such
factors as:

.actual or anticipated changes in our future financial performance;

.changes in financial estimates by securities analysts;

.conditions and trends in the Internet and e-commerce business;

. competitive developments, including announcements by us or our
competitors of new products or services or significant contracts,
acquisitions, strategic partnerships, joint ventures or capital
commitments;

.the operating and stock performance of our competitors;

.changes in interest rates; and

.additions or departures of key personnel.

There may be substantial sales of our common stock after the offering which
would cause a decline in our stock price

Sales of substantial amounts of our common stock in the public market
following this offering, or the perception that such sales could occur, could
have a material adverse effect on the market price of our common stock. We and
our existing stockholder have agreed not to offer, sell or contract to sell or
otherwise dispose of any common stock for a period of 180 days from the
effective date of this prospectus in our case, and for a period of 540 days
from the effective date in Mr. Strauss' case, without the prior written consent
of Friedman, Billings, Ramsey & Co., Inc., subject to certain limited
exceptions. Upon the expiration of these lock-up agreements, or if Friedman,
Billings, Ramsey & Co., Inc. in its sole discretion determines to release all
or any portion of the shares subject to the lock-ups, these shares may be sold
in the public market. For additional information, please see the "Shares
Eligible for Future Sale" section of this prospectus.

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You will experience immediate and substantial dilution as a result of this
offering

The initial offering price per share will exceed our net tangible book value
per share. As a result, you will incur immediate and substantial dilution of
approximately $6.39 in the net tangible book value per share from the assumed
$9.00 price per share paid for the common stock in this offering (the midpoint
of the range set forth on the cover page of this prospectus). For a more
detailed discussion of dilution, please see the "Dilution" section of this
prospectus.

Our existing stockholder will be able to exercise significant control over our
operations

Upon the closing of this offering, our President and Chief Executive
Officer, Mr. Strauss, will own approximately 67% of our outstanding common
stock. If the underwriters exercise their over-allotment option in full, Mr.
Strauss will own approximately 63% of our outstanding common stock.
Accordingly, Mr. Strauss will have the ability to control our affairs and the
outcome of all matters requiring stockholder approval, including:

.the election and removal of directors;

.amendments to our charter; and

.approval of significant corporate transactions, such as an acquisition of
our company or assets.

Mr. Strauss' control position would prevent a change in control transaction
with respect to our company without his approval. For a more detailed
description of Mr. Strauss' ownership of common stock, please see the
"Management" and "Principal Stockholders" sections of this prospectus.

It may be difficult for a third party to acquire us

Some provisions of our amended and restated certificate of incorporation,
bylaws and Delaware law contain anti-takeover provisions that could make it
more difficult for a third party to acquire us, even if such a transaction
would be beneficial to you as a stockholder. For a more detailed discussion of
these provisions, please see the "Description of Capital Stock" section of this
prospectus.

As a holding company, we depend on dividends and distributions from our
operating subsidiary to fund our operations and may, as a result, be
subordinate to the rights of its existing and future creditors

We are a holding company and our principal assets initially are the shares
of the capital stock of our wholly-owned subsidiary, American Home Mortgage
Corp. As a holding company without independent means of generating operating
revenue, we depend on dividends and other payments from our wholly-owned
subsidiary to fund our obligations and meet our cash needs. Our expenses may
include salaries of our executive officers, insurance, professional fees and
service of indebtedness that may be outstanding at various times. Financial
covenants under the existing or future loan agreements of our wholly-owned
subsidiary, or provisions of the laws of the state where our subsidiary is
organized, may limit its ability to make sufficient dividend or other payments
to us to permit us to fund our obligations or meet our cash needs, in whole or
in part. By virtue of our holding company status, our common stock will be
structurally junior in right of payment to all existing and future liabilities
of our subsidiary.

SPECIAL NOTES OF CAUTION

Regarding Forward-Looking Statements

Some of the information in this prospectus may constitute "forward-looking
statements" within the meaning of the federal securities laws. Forward-looking
statements generally discuss our plans and objectives for future operations.
They also include statements containing a projection of revenues, earnings
(loss), capital expenditures, dividends, capital structure or other financial
terms. The following statements particularly are forward-looking in nature:

.our strategy;

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.development of our Internet capabilities;

.projected joint ventures or acquisitions;

.the impact of Year 2000 on our information systems and those of our
vendors;

.projected capital expenditures; and

.use of proceeds of this offering.

The forward-looking statements in this prospectus are based on our
management's beliefs, assumptions, and expectations of our future economic
performance, taking into account the information currently available to them.
These statements are not statements of historical fact. Forward-looking
statements involve 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 condition we express or imply in any forward-looking
statements. Some of the important factors that could cause our actual results,
performance or financial condition to differ materially from our expectations
are:

.general volatility of the capital markets and the market price of our
shares;

. changes in the real estate market, interest rates or the general economy
of the markets in which we operate;

. economic, technological or regulatory changes affecting the use of the
Internet;

. our ability to employ and retain qualified employees;

. our ability, and the ability of our significant vendors, suppliers and
customers, to achieve Year 2000 readiness;

. changes in government regulations that are applicable to our regulated
brokerage and property management businesses;

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

. changes in the demand for our services;

. degree and nature of our competition; and

. the other factors referenced in this prospectus, including, without
limitation, under the captions "Risk Factors," "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and
"Business."

When used in our documents or in any oral presentation, the words "plan,"
"believe," "anticipate," "estimate," "expect," "objective," "projection,"
"forecast," "goal" or similar words are intended to identify forward-looking
statements. We qualify any and all of our forward-looking statements entirely
by these cautionary factors.

Regarding Additional Information

You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information different from that
contained in this prospectus. We are offering to sell, and seeking offers to
buy, shares of common stock only in jurisdictions where offers and sales are
permitted. The information contained in this prospectus is accurate only as of
the date of this prospectus, regardless of the time of delivery of this
prospectus or of any sale of the common stock.

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TRANSACTIONS RELATED TO THE OFFERING

Our subsidiary, American Home Mortgage Corp., has been engaged in the
residential mortgage business since its incorporation in 1988. Immediately
before this offering, Michael Strauss, the sole existing stockholder of
American Home Mortgage Corp., will exchange his shares for an aggregate of
4,999,900 shares of our common stock. As a result of this incorporation
transaction, immediately before this offering, Michael Strauss will own all of
our issued and outstanding shares of common stock.

Since 1988, American Home Mortgage Corp. has elected to be treated for
federal and certain state income tax purposes as an S corporation under the
Internal Revenue Code, and comparable state laws, where permitted and
applicable. As a result, our earnings have been included in the taxable income
of Michael Strauss, our existing stockholder, for federal and state income tax
purposes, and American Home Mortgage Corp. has not been subject to federal and
state income tax on these earnings. Once we receive the contribution of
American Home Mortgage Corp. stock from Michael Strauss, the S corporation
status of American Home Mortgage Corp. will be terminated. Immediately before
such contribution and our conversion to C corporation status, American Home
Mortgage Corp. will distribute to Michael Strauss all previously earned and
undistributed taxable S corporation earnings through the date of the closing of
this offering (the S corporation distribution). That distribution, like
previous distributions to Michael Strauss, represent earnings that have been or
will be taxable to him. If the S corporation distribution had occurred on June
30, 1999, the amount of that distribution would have been approximately $7.6
million. We expect this amount to increase as a result of additional S
corporation income from July 1, 1999 to the closing of this offering. The S
corporation distribution will consist of a promissory note (the S corporation
distribution note) bearing interest at the rate payable on American Home
Mortgage Corp.'s principal credit facility, and it is intended that, on the
closing of this offering, we will contribute the proceeds of the offering to
American Home Mortgage Corp. and American Home Mortgage Corp. will use a
portion of this contribution to repay interest and principal on the S
corporation distribution note. Upon consummation of the incorporation
transaction, American Home Mortgage Corp. will no longer be treated as an S
corporation and, accordingly, will be fully subject to federal and state income
taxes. As a result of American Home Mortgage Corp. becoming taxable as a C
corporation, and of the contribution of its stock to us, for the quarter in
which this offering closes, on a consolidated basis we will record a one-time
non-cash reduction to earnings to recognize a deferred income tax liability. If
this reduction had been recorded at June 30, 1999, earnings would have been
reduced by approximately $375,000. This amount may change by the amount of net
deferred tax assets or liabilities related to the operations of American Home
Mortgage Corp. from July 1, 1999 through the closing of this offering. For more
information, please see the "Capitalization" section of this prospectus.

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USE OF PROCEEDS

The primary purposes of this offering are to repay indebtedness in
connection with the incorporation transaction, to expand our Internet business,
to create a public market for our common stock and to facilitate our future
access to the public markets. We estimate that the net proceeds from the sale
of the shares of common stock we are offering will be $19.6 million. If the
underwriters fully exercise their over-allotment option, our net proceeds will
be approximately $22.7 million. Net proceeds is what we expect to receive after
paying underwriting discounts and estimated offering expenses. For the purpose
of estimating net proceeds, we are assuming that the initial public offering
price will be $9.00 per share (the midpoint of the range set forth on the cover
page of this prospectus).

We intend to use approximately $7.6 million of the net proceeds to pay the
aggregate principal and interest outstanding under the S corporation
distribution note as of June 30, 1999. We expect that the amount of the S
corporation distribution note will increase as a result of additional S
corporation income from the period beginning July 1, 1999 until the closing of
the offering, and that the amount of the net proceeds available for general
corporate and working capital purposes will decrease accordingly.

We intend to use the balance of the net proceeds to expand our Internet
business and for general corporate and working capital purposes, including
funding potential acquisitions of related businesses. While at times we
evaluate potential acquisitions and anticipate continuing to make these
evaluations, we have no present understandings, commitments or agreements with
respect to any acquisitions.

The following table shows how we intend to use the net proceeds (in
thousands):

<TABLE>
<S> <C>
Payment of S corporation distribution note.................. $ 7,571(/1/)
Expansion of Internet business and general working capital.. 12,034(/2/)
Estimated net proceeds.................................... $19,605
</TABLE>
--------

(1) Expected to increase due to additional S corporation
income from July 1, 1999 to the closing of this offering.

(2) Expected to decrease as a result of the increase in income
described in (1) above.

19
<PAGE>

DIVIDEND POLICY

Other than the S corporation distribution note, we do not intend to pay any
dividends on our capital stock in the foreseeable future. We currently intend
to retain future earnings, if any, for the development and expansion of our
business. In addition, because we are a holding company, our ability to pay
cash dividends depends in large part on our subsidiary's ability to make
distributions of cash or property to us. Our warehouse facility imposes
limitations on our subsidiary's ability to pay dividends and other
distributions to us. For a more detailed discussion of these limitations,
please see the "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources" section of this
prospectus.

Our board of directors will make any further determinations as to our
dividend policy. These determinations will depend on a number of factors,
including our future earnings, capital requirements, financial condition and
future prospects and other factors that our board of directors may deem
relevant.

20
<PAGE>

CAPITALIZATION

The following table sets forth our capitalization as of June 30, 1999 on an
actual basis, assuming the incorporation transaction had occurred on June 30,
1999 and as adjusted to reflect:

(1) the sale of 2,500,000 shares of common stock at an assumed offering
price of $9.00 per share (the midpoint of the range set forth on the cover
page of this prospectus);

(2) an assumed S corporation distribution of $7.6 million as of June 30,
1999, which amount we expect will increase as a result of additional S
corporation income from the period from July 1, 1999 to the closing of this
offering; and

(3) the application of the remaining estimated net proceeds as described
under "Use of Proceeds."

You should read the following table in conjunction with the "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
section of this prospectus and our consolidated financial statements and
related notes included elsewhere in this prospectus. For more information,
please see the "Transactions Related to the Offering" section of this
prospectus.

<TABLE>
<CAPTION>
June 30, 1999
---------------
As
Actual Adjusted
------ --------
(in thousands)
<S> <C> <C>
Minority interest......................................... $ 70 $ 70
Stockholders' equity:
Preferred stock, $1.00 par value per share, 1,000,000
shares authorized; no shares issued and outstanding.... -- --
Common stock, $.01 par value per share, 19,000,000
shares authorized; 5,000,000 shares issued and
outstanding actual, and 7,500,000 as adjusted.......... 50 75
Additional paid-in capital.............................. 318 19,155
Retained earnings....................................... 7,253 --
------ -------
Total stockholders' equity................................ $7,621 $19,230
------ -------
Total capitalization...................................... $7,691 $19,300
</TABLE>

21
<PAGE>

DILUTION

Our net tangible book value as of June 30, 1999 was $7.6 million, or $1.51
per share, based on 5,000,000 shares of common stock outstanding, assuming the
incorporation transaction had occurred on June 30, 1999. Net tangible book
value per share represents the amount of our total tangible assets less total
liabilities, divided by the number of shares of our common stock outstanding.

Our pro forma net tangible book value at June 30, 1999 would have been $19.6
million, or $2.61 per share after giving effect to:

. the sale of 2,500,000 shares of common stock at an assumed initial
public offering price of $9.00 per share (the midpoint of the range set
forth on the cover page of this prospectus);

. an assumed S corporation distribution of $7.6 million as of June 30,
1999, which amount we expect will increase as a result of additional S
corporation income from July 1, 1999 to the closing of this offering;
and

. the application of the remaining estimated net proceeds as described
under "Use of Proceeds."

This represents an immediate increase in pro forma net tangible book value
of $1.10 per share to Mr. Strauss, our sole existing stockholder, and an
immediate dilution of $6.39 per share to new investors purchasing common stock
in this offering. The following table illustrates this per share dilution:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share................. $9.00
Net tangible book value per share as of June 30, 1999........... $1.51
Increase per share attributable to new investors, net of payment
of the S
corporation distribution ...................................... 1.10
-----
Pro forma net tangible book value per share after
this offering.................................................. 2.61
-----
Dilution per share to new investors............................. $6.39
=====
</TABLE>

The following table summarizes, on a pro forma basis, as of June 30, 1999,
the number of shares of common stock we have sold, the total consideration paid
to us, and the average price per share paid by our existing stockholder and by
investors purchasing common stock in this offering, before deducting
underwriting discounts and commissions and estimated offering expenses:

<TABLE>
<CAPTION>
Shares Purchased Total Consideration
----------------- ------------------- Average Price
Number Percent Amount Percent Per share
--------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholder........ 5,000,000 66.67% $ 369,000 1.61% $0.07
New investors............... 2,500,000 33.33 22,500,000 98.39 9.00
--------- ------- ----------- ------
Total..................... 7,500,000 100.00% $22,869,000 100.00%
</TABLE>

22
<PAGE>

SELECTED FINANCIAL DATA
(in thousands, except per share and operating data)

The following selected financial data as of December 31, 1997 and 1998 and
June 30, 1999 and for the years ended December 31, 1996, 1997 and 1998 and the
six months ended June 30, 1999 have been derived from our consolidated
financial statements, included elsewhere in this prospectus, which have been
audited by Deloitte & Touche LLP, our independent auditors. The selected
financial data for the six months ended June 30, 1998 have been derived from
our unaudited consolidated financial statements, included elsewhere in this
prospectus. The selected financial data as of December 31, 1994, 1995 and 1996
and for the years ended December 31, 1994 and 1995 have been derived from our
unaudited consolidated financial statements, which are not included in this
prospectus. The pro forma data for the year ended December 31, 1998 and the six
months ended June 30, 1999 have been derived from our consolidated financial
data included elsewhere in this prospectus. These financial statements include
all adjustments, consisting of normal recurring adjustments, which we consider
necessary for a fair presentation of our financial position and results of
operations for these periods. Operating results for the six months ended June
30, 1999 are not necessarily indicative of results that may be expected for the
entire year. You should not assume that the results below indicate results that
we will achieve in the future. 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 prospectus, including our financial
statements and related notes, and the "Management's Discussion and Analysis of
Financial Condition and Results of Operations" section of this prospectus.

<TABLE>
<CAPTION>
Six Months Ended
Year Ended December 31, June 30,
-------------------------------------- -----------------
1994 1995 1996 1997 1998 1998(/1/) 1999
------ ------ ------ ------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME
DATA:
Revenues
Gain on sale of
mortgage loans....... $4,169 $6,361 $6,360 $10,597 $18,981 $7,690 $12,963
Interest income
(expense), net....... (319) (610) 204 369 734 448 708
Other................. -- -- 21 356 502 269 637
------ ------ ------ ------- ------- ------ -------
Total revenues...... 3,850 5,751 6,585 11,322 20,217 8,407 14,308
------ ------ ------ ------- ------- ------ -------
Expenses
Salaries, commissions
and benefits, net.... 3,022 3,930 3,459 5,317 9,430 3,636 7,964
Marketing and
promotion............ 494 445 814 962 1,236 598 869
Occupancy and
equipment............ 104 91 501 909 1,654 648 1,023
Data processing and
communications....... 163 203 337 612 952 424 617
Provision for loss.... -- -- -- 117 153 33 28
Other................. 207 715 830 946 1,543 715 1,103
------ ------ ------ ------- ------- ------ -------
Total expenses...... 3,990 5,384 5,941 8,863 14,968 6,054 11,604
------ ------ ------ ------- ------- ------ -------
Income (loss) before
income taxes and
minority interest..... (140) 367 644 2,459 5,249 2,353 2,704
State income taxes.. 1 29 38 140 328 118 131
Minority interest... -- -- -- -- 51 (6) 44
------ ------ ------ ------- ------- ------ -------
Net income
(loss)........... $ (141) $ 338 $ 606 $ 2,319 $ 4,870 $2,241 $ 2,529
====== ====== ====== ======= ======= ====== =======
PRO FORMA DATA:
Pro forma provision for
income taxes(/2/)..... -- 143 245 942 1,982 917 1,058
Net income adjusted
for pro forma income
tax provision........ $ (141) $ 195 $ 361 $ 1,377 $ 2,888 $1,324 $ 1,471
====== ====== ====== ======= ======= ====== =======
Pro forma net income
per share:
Basic................. $ 0.39 $ 0.20
Diluted............... $ 0.39 $ 0.20
======= =======
Pro forma weighted
average number of
shares
outstanding(/3/):
Basic................. 7,500 7,500
Diluted............... 7,500 7,500
======= =======
</TABLE>

23
<PAGE>

<TABLE>
<CAPTION>
As of December 31,
-------------------------------------- As of June 30,
1994 1995 1996 1997 1998 1999
------ ------- ------- ------- ------- --------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash
equivalents........... $ 649 $ 982 $ 1,226 $ 2,058 $ 2,892 $ 2,092
Loans held for sale,
net................... 4,454 9,070 9,167 24,676 34,667 42,056
Total assets........... 5,281 10,381 11,487 28,914 42,392 50,919
Warehouse lines of
credit................ 4,411 9,026 9,076 24,454 34,070 25,313
Other liabilities...... 361 509 881 1,886 2,298 17,965
Total stockholder's
equity................ $ 509 $ 886 $ 1,530 $ 2,574 $ 5,924 $ 7,571
</TABLE>

<TABLE>
<CAPTION>
Six Months
Ended June
Year Ended December 31, 30,
---------------------------------- -------------
1994 1995 1996 1997 1998 1998 1999
------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Total mortgage originations
(in millions).............. $ 220 $ 341 $ 491 $ 724 $1,158 $ 520 $ 613
Home purchases............ 167 264 348 562 749 327 376
Refinancings.............. $ 53 $ 77 $ 143 $ 162 $ 409 $ 193 $ 237
Number of loans originated.. 1,028 1,674 2,772 4,361 6,543 3,191 3,397
Loan originators at period
end........................ 22 28 40 71 76 72 122
Number of branches at period
end........................ 4 5 7 8 12 12 16
</TABLE>
- --------

(/1/)June 30, 1998 information is derived from our unaudited financial
statements.

(/3/)The pro forma weighted average number of shares for December 31, 1998
includes the effect of the assumed issuance of 2,500,000 shares of common
stock to generate sufficient cash to pay the S corporation distribution
amount of $5.6 million at December 31, 1998. The pro forma weighted
average number of shares for June 30, 1999 includes the effect of the
assumed issuance of 2,500,000 shares of common stock to generate
sufficient cash to pay the S corporation distribution amount of $7.6
million at June 30, 1999. The issuance of common stock was based on an
assumed $9.00 offering price (the midpoint of the range set forth on the
cover page of this prospectus). Please see the "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Termination
of S Corporation Status and Income Taxes" section of this prospectus.

24
<PAGE>

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

General

We are a leading independent retail mortgage banking company primarily
engaged in the business of originating and selling residential mortgage loans.
In 1998, we originated approximately $1.2 billion in loans, of which 64.7% were
made to home buyers and 35.3% were made to owners seeking to refinance. Of the
approximately $612.9 million in loans we originated in the first 6 months of
1999, 61.4% were made to home buyers, compared to 38.6% to home owners seeking
to refinance. We offer a broad array of residential mortgage products targeted
primarily to high-credit-quality borrowers over the Internet, as well as
through our approximately 122 primarily commission-compensated loan
originators. We operate from 16 community loan offices in the New York
metropolitan area and 6 eastern states. We operate primarily as a mortgage
banker, underwriting, funding and selling our loan products to more than 45
different buyers.

Since our founding in 1988, we have focused on growing our origination
volume by building a retail origination network through internal growth and
recently through operators of Internet mortgage Web sites and our own
MortgageSelect.com Web site.

As a mortgage bank, we generate revenues through the origination and
subsequent sale of funded loans. These revenues are made up of net gain on sale
and interest income. Net gain on sale consists of the net gain on the sale of
mortgage loans and mortgage servicing rights, which are sold generally within
30 days of origination. This net gain is recognized based on the difference
between the combined selling price of the loan and its related servicing
rights, and the carrying value of the mortgage loans and servicing rights sold.
Net gain on sale also includes loan-related fees consisting of application,
documentation, commitment and processing fees paid by borrowers. Net interest
income consists of the difference between interest received by us on our
mortgage loans held for sale and interest paid by us under our credit
facilities.

Our expenses largely consist of:

. salaries and benefits paid to employees;

. occupancy and equipment costs;

. Internet-related expenses, including licensing and participation fees
and advertising costs;

. marketing, promotion and advertising costs; and

. data processing and communication costs.

A substantial portion of these expenses is variable in nature. Commissions paid
to loan originators are 100% variable, while other salaries and benefits
fluctuate from quarter to quarter based on our assessment of the appropriate
levels of non-loan originator staffing, which correlates to the current level
of loan origination volume and our perception of future loan origination
volume.

Seasonality affects the mortgage industry as loan originations 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
generally increase during the warmer months beginning in March and continuing
through October. As a result, we expect higher earnings in our second and third
quarters and lower earnings in the first and fourth quarters.

Interest rate and economic cycles also affect the mortgage industry, as loan
originations typically fall in rising interest rate environments. During these
periods, refinancing originations decrease, as higher interest rates provide
reduced economic incentives for borrowers to refinance their existing
mortgages. Due to stable and decreasing interest rate environments over recent
years, our historical performance may not be indicative of results in rising
interest rate environments. In addition, our recent and rapid growth may
distort some of our ratios and financial statistics and may make period-to-
period comparisons difficult. In light of this growth, our historical earnings
performance may be of little relevance in predicting future performance.
Furthermore, our financial statistics may not be indicative of our results in
future periods.

25
<PAGE>

Termination of S Corporation Status and Income Taxes

Since April 1, 1988, our subsidiary, American Home Mortgage Corp., has been
subject to taxation under subchapter S of the Internal Revenue Code and
comparable state laws. As a result, our income has primarily been taxed, for
federal, state and local income tax purposes, directly to our stockholder
rather than to the company itself. In connection with the termination of our S
corporation status and simultaneous with the closing of the offering, we intend
to make a distribution to our existing stockholder in the amount of his
undistributed accumulated S corporation earnings. This distribution will be
made in the form of the S corporation distribution note. We will repay the S
corporation distribution note out of the net proceeds of this offering. If the
S corporation distribution had occurred as of June 30, 1999, the amount would
have been approximately $7.6 million. This amount is expected to increase as a
result of additional S corporation income from July 1, 1999 to the closing of
this offering. Upon termination of our S corporation status, we will record a
one-time, non-cash reduction to earnings to recognize a deferred income tax
liability. If our S corporation status had been terminated as of June 30, 1999,
earnings would have been reduced by approximately $375,000. This amount is
expected to change by the amount of net deferred tax assets or liabilities
related to our operations from July 1, 1999 to the closing of this offering.
The pro forma provision for income taxes in the selected consolidated financial
data shows results as if we had been subject to federal and state taxation at
the tax rates effective for the periods presented.

Results of Operations

The following table sets forth, for the periods indicated, information
derived from our statement of operations expressed as a percentage of total
revenues. Any trends illustrated in the following table are not necessarily
indicative of future results.

<TABLE>
<CAPTION>
Six Months
Year Ended Ended
December 31, June 30,
------------------- ------------
1996 1997 1998 1998 1999
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS:
Gain on sale of mortgage loans............ 96.6% 93.6% 93.9% 91.5% 90.6%
Net interest income....................... 3.1 3.3 3.6 5.3 4.9
Other..................................... 0.3 3.1 2.5 3.2 4.5
----- ----- ----- ----- -----
Total revenues.......................... 100.0 100.0 100.0 100.0 100.0
----- ----- ----- ----- -----
Salaries, commissions and benefits,
net(/1/)................................. 52.5 47.0 46.6 43.2 55.7
Marketing and promotion................... 12.4 8.5 6.1 7.1 6.1
Occupancy and equipment................... 7.6 8.0 8.2 7.7 7.1
Data processing and communications........ 5.1 5.4 4.7 5.0 4.3
Provision for loss........................ -- 1.0 0.8 0.5 0.2
Other..................................... 12.6 8.4 7.6 8.5 7.7
----- ----- ----- ----- -----
Total expenses.......................... 90.2 78.3 74.0 72.0 81.1
----- ----- ----- ----- -----
Net income before taxes and minority
interest............................. 9.8 21.7 26.0 28.0 18.9
State income taxes.................. 0.6 1.2 1.6 1.4 0.9
Minority interest................... -- -- 0.3 (0.1) 0.3
----- ----- ----- ----- -----
Net income as reported.............. 9.2 20.5 24.1 26.7 17.7
----- ----- ----- ----- -----
Net income adjusted for pro forma
income tax provision................. 5.5 12.2 14.3 15.7 10.3
----- ----- ----- ----- -----
</TABLE>
- --------
(/1/)In 1996, our sole stockholder, Mr. Strauss, received a $628,000 one-time
bonus resulting in an increase in the percentage which salaries,
commissions and benefits constituted of our total revenues in such year.

26
<PAGE>

Six Months Ended June 30, 1999 Compared to Six Months Ended June 30, 1998

Total Revenues. Our total revenues for the six months ended June 30, 1999
increased to $14.3 million from $8.4 million for the same period in 1998, an
increase of $5.9 million, or 70.2%, primarily as a result of strong origination
growth and the subsequent sale of loans, and improved margins. Closed loan
sales increased to $608.9 million for the six months ended June 30, 1999 from
$520.3 million for the same period in 1998 (which amounts include $21.0 million
and $25.2 million of originations in which we acted as broker, respectively),
resulting from new community loan office expansion and our Internet activity.
During the six months ended June 30, 1999, we opened 4 new branches. In
addition, refinancings accounted for approximately 38.6% of our origination
volume during the six months ended June 30, 1999 compared to approximately
37.1% during the same period in 1998. We originated $26.5 million in loans over
the Internet during the six months ended June 30, 1999, which resulted in
$447,000 in revenues for the period.

Net gain on sale of mortgage loans increased to $13.0 million for the six
months ended June 30, 1999 from $7.7 million for the same period in 1998, an
increase of $5.3 million, or 68.6%. The increase was attributable to the
increase in our origination volume and improved margins.

Net interest income increased to $708,000 for the six months ended June 30,
1999 from $448,000 for the same period in 1998, an increase of $260,000, or
58.0%. This increase was due to more efficient cash management including the
implementation of sweep accounts, which increased interest income.

Other income increased to $637,000 for the six months ended June 30, 1999
from $269,000 for the same period in 1998, an increase of $368,000, or 136.8%.
The increase was due primarily to volume incentive bonuses from various
investors. These bonuses represent payments received by us when we meet certain
volume targets specified in our various agreements with loan purchasers. We
accrue volume incentive income when targets are reached.

Salaries, Commissions and Benefits. Salaries, commissions and benefits
increased to $8.0 million for the six months ended June 30, 1999 from $3.6
million for the same period in 1998, an increase of $4.3 million, or 119.0%.
The increase related primarily to our Internet expansion efforts, increased
staffing levels, both at new and existing community loan offices, and, to a
lesser extent, the non-deferred portion of commissions paid to loan
originators. As of June 30, 1999, we employed 370 people compared to 237 people
at June 30, 1998. These expenses are expected to continue to increase in 1999
as a result of increased loan origination volume and additional employees
expected to be hired in connection with the expansion of existing operations
and new community loan office openings.

Marketing and Promotion Expenses. Marketing and promotion expenses increased
to $869,000 for the six months ended June 30, 1999 from $598,000 for the same
period in 1998, an increase of $271,000, or 45.3%. The increase was primarily
attributable to new community loan office openings. These expenses are expected
to continue to increase in 1999 as a result of expansion of existing
operations, new community loan office openings, and increased expansion of our
Internet division.

Occupancy and Equipment Expenses. Occupancy and equipment expenses increased
to $1.0 million for the six months ended June 30, 1999 from $648,000 for the
same period in 1998, an increase of $375,000, or 57.9%. The increase was due
primarily to an increase in occupancy costs as a result of opening new
community loan offices and depreciation charges for increased computer
networking. These expenses are expected to continue to increase in 1999 as a
result of expansion of existing operations and new community loan office
openings.

Data Processing and Communications. Data processing and communication costs
increased to $617,000 for the six months ended June 30, 1999 from $424,000 for
the same period in 1998, an increase of $193,000, or 45.5%. The increase was
primarily a result of increased staffing levels and the opening of new
community loan offices.

27
<PAGE>

Other Expenses. Other expenses increased to $1.1 million for the six months
ended June 30, 1999 from $715,000 for the same period in 1998, an increase of
$388,000, or 54.3%. These expenses, which consist primarily of office supplies,
travel, insurance and professional fees, have increased with our general
activity and employment levels.

Net Income. Net income increased to $2.5 million for the six months ended
June 30, 1999 from $2.2 million for the same period in 1998, an increase of
$288,000, or 12.9%. If we had been taxed as a C corporation for those periods,
our net income would have been $1.5 million and $1.3 million, respectively.

Year Ended December 31, 1998 Compared To Year Ended December 31, 1997

Total Revenues. Our total revenues increased to $20.2 million in 1998 from
$11.3 million in 1997, an increase of $8.9 million, or 78.6%, primarily as a
result of strong origination growth and the subsequent sale of loans. Closed
loan sales increased to $1.2 billion in 1998 from $729.6 million in 1997 (which
amounts include $47.5 million and $30.7 million of originations in which we
acted as broker, respectively), resulting from new community loan office
expansion. During 1998, we opened 4 new community loan offices. In addition,
refinancings accounted for approximately 35.3% of our origination volume in
1998 compared to approximately 22.4% in 1997.

Net gain on sale of mortgage loans increased to $19.0 million in 1998 from
$10.6 million in 1997, an increase of $8.4 million, or 79.4%. The increase was
attributable to the increase in our origination volume.

Net interest income increased to $734,000 in 1998 from $369,000 in 1997, an
increase of $365,000, or 98.9%. This increase was due to increased loan
origination volume, as well as increased use of financing agreements or
purchase and sale facilities to increase the interest spread against borrowed
funds.

Other income increased to $502,000 in 1998 from $356,000 in 1997, an
increase of $146,000, or 41.0%. The increase was due primarily to volume
incentive bonuses earned from various purchasers during that period, as well as
to the gain on sale of marketable securities.

Salaries, Commissions and Benefits. Salaries, commissions and benefits
increased to $9.4 million in 1998 from $5.3 million in 1997, an increase of
$4.1 million, or 77.4%. The increase related primarily to increased staffing
levels, both at new and existing community loan offices, and, to a lesser
extent, the non-deferred portion of commissions paid to loan originators. As of
December 31, 1998, we employed 287 people compared to 185 people at December
31, 1997. These expenses are expected to continue to increase in 1999 as a
result of increased loan origination volume and additional employees expected
to be hired in connection with the expansion of existing operations and new
community loan office openings.

Marketing and Promotion Expenses. Marketing and promotion expenses increased
to $1.2 million in 1998 from $962,000 in 1997, an increase of $274,000, or
28.5%. The increase was primarily attributable to new community loan office
openings. These expenses are expected to continue to increase in 1999 as a
result of expansion of existing operations, new community loan office openings
and increased expansion of our Internet division.

Occupancy and Equipment Expenses. Occupancy and equipment expenses increased
to $1.7 million in 1998 from $909,000 in 1997, an increase of $745,000, or
82.0%. The increase was due primarily to an increase in occupancy costs as a
result of opening new community loan offices and depreciation charges for
increased computer networking. These expenses are expected to continue to
increase in 1999 as a result of expansion of existing operations and new
community loan office openings.

Data Processing and Communications. Data processing and communication costs
increased to $952,000 in 1998 from $612,000 in 1997, an increase of $340,000,
or 55.6%. The increase was primarily a result of increased staffing levels and
the opening of new community loan offices.

28
<PAGE>

Other Expenses. Other expenses increased to $1.5 million in 1998 from
$946,000 in 1997, an increase of $597,000, or 63.1%. These expenses, which
consist primarily of office supplies, travel, insurance and professional fees,
have increased with general activity and employment levels.

Net Income. Net income increased to $4.9 million in 1998 from $2.3 million
in 1997, an increase of $2.6 million, or 110.0%. If we had been taxed as a C
corporation for those periods, our net income would have been $2.9 million and
$1.4 million, respectively.

Year Ended December 31, 1997 Compared To Year Ended December 31, 1996

Total Revenues. Our total revenues increased to $11.3 million in 1997 from
$6.6 million in 1996, an increase of $4.7 million, or 71.9%, primarily as a
result of strong origination growth and the subsequent sale of loans. Closed
loan sales increased to $729.6 million in 1997 from $543.4 million in 1996
(which amounts include $30.7 million and $52.7 million of originations in which
we acted as broker, respectively), resulting from new community loan office
expansion and recruitment of additional loan originators. During 1997, we
opened one new community loan office. In addition, refinancings accounted for
approximately 22.4% of our origination volume in 1997 compared to approximately
29.1% in 1996.

Net gain on sale of mortgage loans increased to $10.6 million in 1997 from
$6.4 million in 1996, an increase of $4.2 million, or 66.6%. The increase was
attributable to the increase in origination volume.

Net interest income increased to $369,000 in 1997 from $204,000 in 1996, an
increase of $165,000, or 80.9%. This increase was due to increased loan
origination volume, as well as increased use of financing agreements or sale
facilities to increase the interest spread against borrowed funds.

Other income increased to $356,000 in 1997 from $21,000 in 1996, an increase
of $335,000, or 1,595%. The increase was due primarily to volume incentive
bonuses from various investors.

Salaries, Commissions and Benefits. Salaries, commissions and benefits
increased to $5.3 million in 1997 from $3.5 million in 1996, an increase of
$1.8 million, or 53.7%. The increase in personnel expense related primarily to
increased staffing levels, both at new and existing community loan offices,
and, to a lesser extent, the non-deferred portion of commissions paid to loan
originators. In addition, officer salaries were $130,000 in 1997 compared to
$758,000 in 1996. The 1996 figure reflects the $628,000 one-time bonus paid to
our President and Chief Executive Officer, Mr. Strauss. As of December 31,
1997, we employed 185 people compared to 103 people at December 31, 1996.

Marketing and Promotion Expenses. Marketing and promotion expenses increased
to $962,000 in 1997 from $814,000 in 1996, an increase of $148,000, or 18.2%.
The increase was primarily attributable to new community loan office openings.

Occupancy and Equipment Expenses. Occupancy and equipment expenses increased
to $909,000 in 1997 from $501,000 in 1996, an increase of $408,000, or 81.4%.
The increase was due primarily to an increase in occupancy costs as a result of
opening new community loan offices and depreciation charges for increased
computer networking.

Data Processing and Communications. Data processing and communication costs
increased to $612,000 in 1997 from $337,000 in 1996, an increase of $275,000,
or 81.6%. The increase was primarily a result of increased staffing levels.

Other Expenses. Other expenses increased to $946,000 in 1997 from $830,000
in 1996, an increase of $116,000, or 14.0%. These expenses, which consist
primarily of office supplies, travel, insurance and professional fees, have
increased with general activity and employment levels.

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Net Income. Net income increased to $2.3 million in 1997 from $606,000 in
1996, an increase of $1.7 million, or 282.7%. If we had been taxed as a C
corporation for those periods, our net income would have been $1.4 million and
$361,000, respectively.

Liquidity and Capital Resources

To originate a mortgage loan, we draw against a warehouse facility our
subsidiary, American Home Mortgage Corp., has entered into with First Union
National Bank. The First Union warehouse facility was originally for $40
million. This amount was increased to $50 million through August 31, 1999, by
which time we expect this facility to have been replaced by a new $60 million
warehouse facility that will be agented by First Union. Our existing warehouse
facility is secured by the mortgages we originate and certain of our other
assets. Loans under our warehouse facility bear interest at rates that vary
depending on the type of underlying loan, and these loans are subject to
sublimits, advance rates and terms that vary depending on the type of
underlying loan and the ratio of our liabilities to our tangible net worth. In
1998, we paid a weighted average interest rate on our warehouse facility
borrowings of 6.84%, not including float on checks before they clear our
warehouse facility account, compared with 7.55% in 1997. At August 13, 1999,
the outstanding balance under the warehouse facility was $30.7 million.

The documents governing our warehouse facility contain a number of
compensating balance requirements and restrictive financial and other covenants
that, among other things, require us to maintain a minimum ratio of total
liabilities to tangible net worth and maintain a minimum level of tangible net
worth, liquidity, stockholder's equity and leverage ratios, as well as to
comply with applicable regulatory and investor requirements. The facility also
contains covenants limiting our subsidiary's ability to:

. transfer or sell assets;

. create liens on the collateral;

. pay cash or stock dividends; or

. incur additional indebtedness

without obtaining the prior consent of First Union, which consent may not be
unreasonably withheld. These limits on American Home Mortgage Corp. may in turn
restrict our ability, as the holding company, to pay cash or stock dividends on
our stock.

In addition, under our warehouse facility, First Union will not continue to
finance a mortgage loan that we hold if:

. the loan is rejected as "unsatisfactory for purchase" by the ultimate
investor and has exceeded its permissible 60-day warehouse period;

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

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

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

In addition to the First Union warehouse facility, we have purchase and sale
agreements with Fannie Mae, Greenwich Capital Financial Products, Inc.,
Prudential Securities Funding Corp. and Paine Webber Real Estate Securities,
Inc., under which we sell the loans we have originated to these institutions on
an interim basis. Pursuant to these arrangements, we obtain commitments from
the ultimate buyer, which may be a bank, a pension fund or an investment bank,
to purchase our loans. We then sell our loans, together with the commitment
from the ultimate buyer, to one of the 4 institutions with which we have
purchase and sale

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<PAGE>

agreements. These institutions in turn sell the loans to the party who gave us
the commitment. These agreements allow us to accelerate the resale of our
inventory of mortgage loans, thereby enabling us to use our warehouse facility
more effectively, because we do not have to wait until the closing of a sale to
the ultimate buyer before we receive the purchase price. Amounts sold and being
held under these agreements at August 13, 1999 and December 31, 1998 were $45.2
million and $53.3 million, respectively. The combined capacity available under
our purchase and sale agreements is $168 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 investor's 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. In addition, an outside firm performs
quality control tests for us. Please see the "Business--Quality Control"
section of this prospectus. To date, we have been required to repurchase fewer
than 20 of the loans we have sold.

As of June 30, 1999, our warehouse facility borrowings decreased to $25.3
million from $34.1 million as of December 31, 1998. We had a maximum of $24.7
million available for additional borrowings as of June 30, 1999. At June 30,
1999, our loans held for sale were $42.1 million compared to $34.7 million at
December 31, 1998.

Cash and cash equivalents decreased to $2.1 million at June 30, 1999 from
$2.9 million at December 31, 1998. In December 1998, we changed our primary
warehouse facility to the First Union facility described above. The First Union
warehouse facility allows less funds to be borrowed on a per loan basis than
our prior warehouse arrangement, resulting in our investing more of our own
funds in loan originations.

Our primary uses of cash and cash equivalents during the six months ended
June 30, 1999 were as follows:

. $374,000 to pay the balance of our state and local corporate tax
obligation; and

. $691,000 to purchase furniture and office and computer equipment for new
branch offices.

Cash and cash equivalents increased to $2.9 million at December 31, 1998
from $2.1 million at December 31, 1997. This increase in cash and cash
equivalents was primarily attributable to the increase in our net income to
$5.2 million in 1998, before depreciation and amortization.

Our primary uses of cash and cash equivalents during 1998 were as follows:

. $1.9 million to increase accounts receivable;

. $1.5 million to fund a distribution to our stockholder to enable him to
pay income taxes attributable to him as a result of our S corporation
status; and

. $1.2 million to purchase furniture and office and computer equipment for
existing and new branch offices and to upgrade our telecommunications
system.

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 facility.
The value of our loans depends on a number of factors, including:

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

. the borrower credit risk classification;

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<PAGE>

. loan-to-value ratios; and

. general economic conditions.

Please see the "Risk Factors--The loss of key purchasers of our loans or a
reduction in prices paid could adversely affect our financial condition"
section in this prospectus.

The net proceeds of this offering, together with cash flows from operations,
our existing cash balances and funds available under our working capital credit
facilities, are expected to be sufficient to meet our liquidity requirements
for at least the next 12 months. We do, however, expect to continue our
expansion and expect that eventually we will have to arrange for additional
sources of capital through the issuance of debt or equity or additional bank
borrowings. We have no commitments for any additional financings, and we cannot
assure you that we will be able to obtain any additional financing at the times
required and on terms and conditions acceptable to us. If we fail to obtain
needed additional financing, our growth could slow and operations could be
affected.

Inflation

For the period 1995 to 1998, inflation has been relatively low and we
believe it 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 impact the number of loans we originate. This impact would
adversely affect our future results of operations. Please see the "Risk
Factors--A period of rising interest rates, an economic slowdown or a recession
could reduce the demand for mortgages" section of this prospectus.

Risk Management

Movements in interest rates can pose a major risk to us in either a rising
or declining interest rate environment. When interest rates rise, loans held
for sale and any applications in process with agreed upon rates decrease in
value. To preserve the value of such loans or applications in process with
agreed upon rates, we execute mandatory loan sale agreements (forward sales of
mortgage-backed securities) to be settled at future dates with fixed prices.
However, when interest rates decline, customers may choose to abandon their
applications. In that case, 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 attempt
to manage these risks. Through this program, we purchase and forward sell
mortgage-backed securities and acquire options on mortgage and treasury
securities.

Our board of directors establishes thresholds, which limit our exposure to
such risk. We perform daily analysis to determine our risk exposures under
various interest rate scenarios and manage these risks through a combination of
forward sales of mortgage-backed securities and options on treasury futures.
All derivatives are obtained for hedging (or other than trading) purposes, and
management evaluates the effectiveness of the hedges on an on-going basis.

The following tables summarize our interest rate sensitive instruments:

<TABLE>
<CAPTION>
December 31, 1998 June 30, 1999
-------------------------- --------------------------
Notional Amount Fair Value Notional Amount Fair Value
--------------- ---------- --------------- ----------
<S> <C> <C> <C> <C>
Instruments:
Commitments to fund
mortgages at agreed-
upon rates........... $122,430,687 $2,075,471 $151,910,361 $1,908,706
Forward delivery
commitments.......... 79,841,139 (215,571) 99,730,000 (555,781)
Option contracts to
buy securities....... 4,000,000 (15,320) 18,000,000 (70,203)
</TABLE>

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

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<PAGE>

in market value of the existing instrument. All forward delivery commitments
and option contracts to buy securities are to be contractually settled within
6 months of the balance sheet date.

The following describes the methods and assumptions we use in estimating
fair values of the above 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, our fair values should not be compared to those of other
companies.

. The fair value of commitments to fund with agreed upon rates are
estimated using the fees and rates currently charged to enter into
similar agreements, taking into account the remaining terms of the
agreements and the present creditworthiness of the counterparties. For
fixed rate loan commitments, fair value also considers the difference
between current market interest rates and the existing committed rates.

. The fair value of these instruments is estimated using current market
prices for dealer or investor commitments relative to our existing
positions.

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.

Year 2000 Readiness

Many existing computer programs use only 2 digits to identify a year. These
programs were designed and developed without addressing the impact of the
upcoming change in century. If not corrected, many computer software
applications could fail or create erroneous results by, at or beyond, the Year
2000. We are at risk if any of the information technology systems or non-
information technology systems on which we depend to conduct our operations are
not Year 2000 ready. Potential areas of exposure include our business-critical
computerized applications relating to, among others, loan origination,
servicing, hedging, payroll, financing and financial accounting and reporting.
In addition, our other non business-critical systems and services may be
affected.

Our Internal Systems. Most, if not all, of our computer hardware and
software is less than 2 years old and has been certified as Year 2000 ready. In
addition, we have tested all of our hardware and business-function and
networking software platforms using commercially available diagnostics
programs. Based on our testing, we believe these hardware and software
platforms are Year 2000 ready in all material respects. As a result, we believe
that our exposure to Year 2000-related hardware and software problems will not
be significant. We expect to resolve any further internal Year 2000 readiness
issues primarily through normal upgrades of our software or through replacement
of existing software, where necessary.

Costs. The costs of these upgrades or replacements are included in our
capital expenditure budget and we do not expect them to be material to our
financial position or results of operations. To date, we have not

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<PAGE>

incurred significant expenses to ensure Year 2000 readiness. We estimate our
total cost to become Year 2000 ready will not exceed $25,000. This is only an
estimate, however, and we cannot assure you that our Year 2000 readiness costs
will not exceed this estimate. Recent experience of other companies has shown
that actual costs could exceed estimates. In addition, these upgrades and
replacements, if necessary, may not be completed on schedule or may not
successfully address our Year 2000 readiness issues. However, our actual total
costs are subject to certain risks and uncertainties including, among others,
the readiness of our service providers, vendors and suppliers, and our
financial institutions and significant customers.

Third Parties. We have confirmed the readiness of our systems in some cases,
either as a result of purchasing Year 2000 ready software and hardware or
through conducting analyses of our systems. In addition, we are requesting the
third party providers, vendors, suppliers, financial institutions and customers
that are material to our operations to certify to us in writing that they are
Year 2000 ready. We have obtained such written certification from the supplier
of our main software platform and from the financial institutions to which we
sell the large majority of our loans. We are currently unable to predict
whether Year 2000 issues will affect the operations of our customers, suppliers
or vendors. If our service providers, vendors and suppliers or our financial
institutions and significant customers are adversely affected by the Year 2000
issue, our operations could face substantial interruptions and our business and
financial condition also could be materially adversely affected. These third-
party risks include possible interruptions in our ability to fund loans
utilizing our warehouse facility, our ability to sell loans to Fannie Mae and
other investors, our ability to originate mortgages over the Internet and our
hedging system's ability to link to financial data.

The Internet. In the event that the operational facilities that support our
Web site are not Year 2000 ready, our Web site may become unavailable. For
instance, we depend on the integrity and stability of the Internet to provide
demand for our Internet-generated loan services. We also depend on the Year
2000 readiness of third parties' computer systems. The infrastructure required
to support our operations includes a network of computers and
telecommunications systems over which we have little if any control and which
are operated by numerous unrelated entities and individuals, none of which
individually can control or manage the potential Year 2000 issues that may
impact the entire infrastructure as a whole. A significant disruption in third
parties' ability to access the Internet could have an adverse effect on demand
for our Internet-generated loan services and would have a material adverse
effect on us.

Contingency Plans. Although we are currently assessing potential contingency
plans, we have not developed any worst-case scenario contingency plans to deal
with possible interruptions that may occur as a result of the Year 2000. In
addition, we have not yet developed a contingency plan to address the worst-
case scenario that might occur if (1) our systems fail to be Year 2000 ready,
(2) the systems used by third parties on which we rely fail to be Year 2000
ready or (3) Year 2000 issues make the Internet or our Web site unavailable. In
the event that the Internet or our Web site becomes unavailable, we believe our
dependence on the widespread and unrelated entities that maintain the
Internet's infrastructure makes it impossible for us to develop or implement an
adequate contingency plan. Moreover, if our present efforts to address the Year
2000 readiness issues are not successful, or if third parties on which we
depend do not successfully address these issues, our business, operating
results and financial position could be materially adversely affected.

New Accounting Pronouncements

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities." This statement requires that all derivatives be
carried on the balance sheet at fair value and that changes in the fair value
of derivatives be recognized in income when they occur, unless the derivatives
qualify as hedges in accordance with the standard. If a derivative qualifies as
a hedge, a company can elect to use hedge accounting. The type of accounting to
be applied varies depending upon whether the nature of the exposure that is
being hedged is classified as one of three hedged risks defined in the
statement: change in fair value, change in cash flows and

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<PAGE>

change in foreign-currency. This statement's implementation has been delayed to
be effective for all fiscal quarters of fiscal years beginning after June 15,
2000 and cannot be applied retroactively. We have not yet determined the impact
SFAS No. 133 will have on our financial position or results of operations after
we adopt this statement.

In October 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 134, "Accounting for Mortgage-Backed
Securities Retained after the Securitization of Mortgage Loans Held for Sale by
a Mortgage Banking Enterprise." Statement of Financial Accounting Standards No.
134 is effective for the first fiscal quarter beginning after December 15,
1998. We believe that the adoption of SFAS No. 134 will not have a material
impact on us or our results of operations.

In March 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-1, "Accounting for the Costs of Computer Software
Developed for Internal Use" ("SOP 98-1"), which will become effective for
financial statements for calendar year 1999, with early adoption encouraged.
SOP 98-1 requires the capitalization of eligible costs of specified activities
related to computer software developed or obtained for internal use. We do not
believe that the adoption of this statement will have a material impact on our
financial condition or results of operations.

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<PAGE>

BUSINESS

Introduction

American Home Mortgage is a leading independent retail mortgage banking
company that began operations in 1988. We focus on expanding our business of
originating residential mortgage loans through the Internet and other more
traditional channels. We sell the loans we originate and the related servicing
rights to institutional buyers, rather than hold the loans for investment. In
1998, we originated approximately $1.2 billion in loans largely through our
network of retail branches in the New York metropolitan area and 6 eastern
states. We primarily lend to home buyers rather than to home owners seeking to
refinance their mortgage loans. In 1998, approximately 64.7% of our mortgage
loans were made to home buyers. For the first six months of 1999, that
percentage was 61.4%.

In January 1999, we began to market our mortgage products over the Internet.
We offer our mortgage products online through arrangements with a number of
popular Web sites and through our MortgageSelect.com Web site. Our recent
Internet activity includes:

. accepting applications over the Internet for approximately $39.5 million
in loans, representing 24.8% of our total application volume for the
month of July 1999;

. entering into an exclusive arrangement with Real Estate Village and a
preferred sponsor relationship with Homefair.com in July 1999, and
expanding our current total number of Web site relationships to 17, of
which 6 are accepting applications;

. expanding to 57 the number of Web sites that hyperlink potential loan
applicants directly to our MortgageSelect.com Web site;

. accepting applications through our relationship with Microsoft's
HomeAdvisor;

. commencing operations at our second Internet call center; and

. releasing a new version of our MortgageSelect.com Web site.

Our planned Internet growth initiatives through 1999 include:

. forming exclusive and participating relationships with additional Web
sites;

. opening our third Internet call center;

. qualifying to offer mortgage loans through the Internet in the remaining
16 states in which we are not yet qualified;

. launching further enhancements to our Web site to allow real-time credit
approvals and loan commitments; and

. commencing an advertising campaign, initially in selected markets, to
increase awareness of, and direct customers to, our MortgageSelect.com
Web site.

In addition to our Internet growth initiatives, we have expanded our
traditional mortgage product distribution channels. Specifically, since the
beginning of 1998:

. we opened 8 new community loan offices and hired 51 loan originators,
bringing our total number of community loan offices and loan originators
to 16 and 122, respectively;

. we formed 3 joint ventures with realtors and builders to serve the
mortgage needs of their customers;

. we doubled the number of companies participating in our Corporate
Affinity Program from 10 to 20; and

. we were selected by developers as the exclusive, onsite lender for new
residential developments with a potential for mortgage loan originations
in excess of $300 million.

We intend to continue these initiatives and to further expand from our
traditional geographic base by opening new community loan offices in the
eastern United States and possibly other areas. We also intend to selectively
consider strategic acquisitions of related businesses.

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<PAGE>

Our retail business focuses on offering a broad range of residential
mortgage products primarily to high credit quality borrowers. Typically, we
sell our mortgage loans on a limited recourse basis to institutional buyers
within approximately 30 days of their origination, which limits our exposure to
interest rate fluctuations and credit risks. In addition, we generally sell the
servicing rights on loans we originate. This allows us to avoid the
administrative and collection expenses of managing and servicing a loan
portfolio and the risk of loss of anticipated future servicing revenue due to
mortgage prepayments in a declining interest rate environment.

Our revenues and net income increased from approximately $5.8 million and
$338,000 in 1995 to approximately $20.2 million and $4.9 million in 1998,
respectively. For the first 6 months of 1999, our revenues and net income were
approximately $14.3 million and $2.5 million, respectively. Substantially all
of our revenues are derived from the profits generated by:

. selling our residential mortgage loans;

. discounts and fees charged to borrowers such as application,
underwriting, commitment and loan processing fees; and

. the interest spread during the period we hold mortgage loans for sale.

Industry Overview

The mortgage banking industry involves primarily two businesses: origination
and servicing. Origination is the process of taking a loan application,
gathering the relevant credit and other information on the borrower, and
obtaining funds. Servicing a loan occurs after the loan has been made and
involves the collection of principal and interest, as well as handling
prepayments and foreclosures.

Mortgage lending traditionally takes place through the manual exchange of
information from the time of application to the underwriting phase. This
traditional means of lending is cumbersome and inefficient. Many mortgage
bankers do not have the technology to automate this system in order to achieve
greater efficiency. We believe that Internet mortgage lending is the solution
to these inefficiencies. Forrester Research estimates that approximately $91.2
billion, or 9.6%, of all mortgage loans will be originated online by the year
2003 compared to $18.7 billion or less than 1.5% in 1999. We have established
our own Internet site, MortgageSelect.com, which we expect will account for a
significant portion of our total originations in 1999.

Furthermore, the retail origination market of the mortgage banking industry
is highly fragmented. According to a report by Wholesale Access, a research and
publishing firm in Columbia, Maryland, there were approximately 36,000
independent mortgage brokerage firms at year-end 1998. In terms of volume
originated by individual firms, the report stated that the average brokerage
firm originated $33 million in mortgage loans as compared to the approximately
$1.2 billion we originated in 1998. We believe this industry environment will
aid us in implementing our growth strategy of selectively acquiring other
mortgage lenders who share our business philosophy.

Growth Objectives

The value of our loan originations has grown from $341 million in 1995 to
$1.2 billion in 1998 and from $520.2 million for the first 6 months of 1998 to
$612.9 million for the first 6 months of 1999, primarily through an increase in
the number of our community loan offices and loan originators. Our growth
strategy is to

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<PAGE>

continue to increase our loan origination volume by becoming a leader in
Internet mortgage originations, by expanding our traditional, non-Internet
businesses and by pursuing selective strategic acquisitions of mortgage bankers
and other mortgage-banking related companies.

. Enhance and Expand Our Internet Business. We believe the Internet will
be an increasingly important medium to provide mortgage products and
services. We intend to increase our Internet mortgage origination volume
by expanding our business into the remaining 16 states in which we are
not yet qualified and by establishing relationships with additional Web
sites so as to increase the number of sources that refer customers to
us. With part of the proceeds of this offering, we intend to start an
intensive marketing campaign in selected markets to promote our own
MortgageSelect.com Web site and create name recognition. Please see the
"Use of Proceeds" section in this prospectus. Finally, to maximize the
return on our Web site investment, we intend to enter into contracts to
provide private label Internet origination services to thrifts and
smaller banks.

. Expand Our Traditional Business into New Regions. We intend to extend
our business model and expand our traditional lending activities into
new geographic regions. In the first 6 months of 1999, we opened new
community loan offices in suburban Philadelphia and Maryland. We intend
to open 4 additional offices over the next 12 months in the eastern
United States and possibly other areas. In connection with our
geographic expansion, we plan to advertise in related local and regional
print media to create name recognition and create awareness of our
products and services.

. Increase the Market Share of Our Existing Community Loan Offices. We
hope to further penetrate our existing markets by hiring additional loan
originators and production personnel. We are also using new ways to
market mortgage loans, including joint ventures with realtors and
builders and corporate affinity lending.

. Expand Through Selective Strategic Acquisitions. At various times, we
expect to consider acquiring mortgage lenders that share our business
philosophy regarding progressive marketing, innovative use of technology
and sound underwriting. In order to increase core sales, we may also
consider acquiring other mortgage banking related companies to enhance
our product and service offerings. In evaluating acquisition candidates,
we will consider factors such as the accretive impact of the acquisition
on our earnings, our ability to support and retain production personnel
and our ability to enhance and expand the acquired franchise. We believe
our broad and competitive product line and the technical and other back-
up support we offer make us an attractive partner for potential
acquisition candidates.

Operating Strategy

In operating our business, we focus on the following elements:

. Lending to Home Buyers. We focus on making loans to home buyers rather
than to home owners seeking to refinance their mortgages. We believe
this makes our business less susceptible to interest rate increases
because in a rising interest rate environment home purchase volume tends
to be more stable than mortgage refinancing volume, which tends to
decrease dramatically in response to rising interest rates. In 1998,
64.7% of the mortgage loans we originated were made to home buyers,
compared to 35.3% which were made to owners seeking refinancing. For the
first six months of 1999, those percentages were 61.4% and 38.6%,
respectively. In the latter part of 1998, we received a relatively large
number of mortgage refinancing applications as a result of the low
interest rate environment at that time. Most of those applications
closed in the first quarter of 1999, with some carry-over into the
second quarter of 1999. Loans made to home buyers as a percentage of our
total loan origination volume increased to 68.4% in the second quarter
of 1999 from 53.2% in the first quarter of 1999.

. Maximizing Marketing Efficiency by Offering Broad Product Line. We
believe we have one of the broadest and best-priced product offerings in
the industry. Offering a variety of well-priced loan

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<PAGE>

products enables us to best serve the largest number of mortgage
customers, each of whom may find different loan characteristics
desirable. For a list of our products, please see the "Business--Our
Mortgage Products" section of this prospectus.

. Using Technology to Maximize Efficiency. In a continuous effort to
increase efficiency, we have dedicated ourselves to maintaining state-
of-the-art information systems. In 1998, we installed an "enterprise"
computer system. This system controls most aspects of our operations,
from the processing of a loan application through the closing of the
loan and our sale of the loan to institutional investors. The system
also performs checks and balances on many aspects of our operations, and
it supports our marketing efforts. We believe this integrated approach
reduces our marginal cost per loan. We intend to continually look for
new ways to improve efficiencies through automation.

. Maintaining a Technologically Advanced Web site. In June 1999, we
introduced a new, technologically advanced version of our
MortgageSelect.com Web site that was designed to provide customers with
24-hour access to our interest rates and product terms and the ability
to lock in an interest rate, to file a pre-approval request or
application, to check the status of their pending application and to
obtain their credit report. Our Web site also provides mortgage
customers with an array of "tools" that assist them in determining how
much financing they can afford, what kind of mortgage best suits their
needs and otherwise provides answers to frequently asked questions.
Later in 1999, we intend to introduce a number of enhancements to our
Web site that will enable our customers, in one continuous online
session, to apply for a loan, receive a loan commitment if approved and
lock in an interest rate.

. Underwriting Loans to the Standards of Investors who Buy our Loans. Our
underwriting process is designed to ensure that each loan we originate
can be sold to a third-party investor by conforming the loan to the
underwriting and credit standards of that investor. Whenever possible,
we use "artificial intelligence" underwriting systems, including Fannie
Mae's Desktop Underwriter(R), to ensure consistency with our investors'
predetermined standards. These systems interface with our "enterprise"
computer system. In addition, we have a series of internal and external
quality control procedures in place to ensure compliance with our
underwriting standards.

. Cross Selling and One-Stop Shopping. We have begun offering title
insurance, abstract services and home equity lines of credit to our
mortgage customers. We believe we can enhance the revenues we earn
through the cross-selling of these and other products and services, and
leverage our origination network without significant additional capital
investments.

. Maintaining a Sales-Oriented Culture. Our loan originators are primarily
compensated through sales commissions, which encourages them to be
responsive to our customers. In addition, we foster a consultative sales
strategy that emphasizes proactive and frequent customer assistance. Our
loan originators actively guide customers through the loan application
process, not merely providing information requested by the customer, but
keeping customers informed about rate changes and market conditions.

Business Divisions and Markets

Our business is organized into the following 3 divisions, each of which
focuses on a distinct market segment: our Internet division, our retail
division and our wholesale division.

Our Internet Division

We created our Internet division in January 1999. During that month, we
accepted 14 loan applications with a total principal amount of $2.7 million.
Our Internet division has been expanding rapidly. In July 1999, we accepted
225 Internet loan applications with a total principal amount of approximately
$39.5 million, more than a ten-fold increase from January 1999, and
constituting 24.8% of our mortgage loan applications in July. Forrester
Research estimates that approximately $91.2 billion, or 10%, of all mortgage
loans will be originated online by the year 2003, compared to $18.7 billion,
or less than 1.5%, in 1998. In addition, Killen & Associates

39
<PAGE>

predicts online mortgage originations will account for approximately 30% of
total mortgage originations by 2005. Our goal is to become one of the nation's
leading Internet mortgage originators.

Internet Industry Overview. The Internet has become a substantial medium for
both communication and electronic commerce. International Data Corporation, or
IDC, estimates the number of Internet users worldwide will increase from 115
million in 1998 to approximately 400 million in 2002. In addition, IDC expects
that the number of U.S. households using the Internet for online banking will
grow from less than 6.6 million in 1998 to more than 32 million in 2003,
showing the growth in reliance on the Internet for financial services.
Consumers have become proficient in using the Internet for finding, evaluating
and purchasing a wide variety of products and services.

Because of its flexibility, the Internet provides companies with additional
ways to reach consumers with the most current information about their products
and services. This information can be updated instantaneously to provide new
features and presentations, or to adjust prices and terms according to market
changes. In addition, the Internet provides a cost-efficient means of
conducting a document-intensive business such as mortgage banking. Consumers
can apply online, have access to their file, update information instantly, and
check the status of their loans 24 hours a day, seven days a week.

Our Web Site Relationships. To market and sell loans on the Internet, we
work with many of the leading Web sites in our industry, including Microsoft
HomeAdvisor, E-Loan, GetSmart, LendingTree and Consumer Financial Network. We
believe a large number of Internet mortgage shoppers will be introduced to
lenders on these and other future Web sites. We believe our inclusion in these
Web sites gives us a strategic advantage because they are developing their
business processes and software in conjunction with their existing
participating lenders and, in some cases, limiting access by additional
lenders.

In July 1999, we entered into an exclusive arrangement with Real Estate
Village, an online community of realtors. We will be featured as the exclusive
mortgage lender on Real Estate Village's Web site. In July 1999, we also
established a preferred sponsor relationship with Homefair.com, an online
provider of interactive tools to aid consumers in buying and selling a home.

The following table contains descriptions of our current Web site
relationships. Except as otherwise noted, we are or will be a participating
retail lender on each of these Web sites.

<TABLE>
<CAPTION>
Start
Company Description Date*
------- ----------- -----
<C> <S> <C>
Microsoft HomeAdvisor.. HomeAdvisor.com is part of the Microsoft 5/99
Network of Internet products and services.
HomeAdvisor is an online service providing
home lists and home financial services.
E-Loan................. E-Loan.com is a leading online mortgage 9/99
company. We will be a purchaser of closed
loans.
Real Estate Village.... RealEstateVillage.com is an online community 9/99
of realtors. We will be the exclusive lender
on this site.
Homefair.com........... Homefair.com is an online provider of 9/99
interactive tools to aid consumers in buying
or selling a home or relocating.
GetSmart............... GetSmart.com is a leading online provider of 1/99
financial products and services.
LendingTree............ LendingTree.com is a leading online loan 2/99
marketplace that also offers its products and
services through the Priceline.com Web site.
</TABLE>

40
<PAGE>

<TABLE>
<CAPTION>
Start
Company Description Date*
------- ----------- -----
<C> <S> <C>
Consumer Financial
Network............................. CFN.com is an e-commerce 3/99
platform for marketing financial
services and employee benefits
over corporate intranets and the
Internet.
RealEstate.com....................... RealEstate.com is an online 4/99
provider of comprehensive real
estate services in an online
auction format.
LoanWeb.............................. LoanWeb.com is a provider of 4/99
online financial services
providing borrower leads to
lenders.
iOwn.com............................. iOwn.com is a leading Internet 8/99
mortgage broker that helps
consumers find both a home and a
low-cost mortgage online. We
accept brokered loan
applications.
America Mortgage Online.............. Amo-Mortgage.com is an online 7/99
retail mortgage loan marketplace
wholly-owned by Lenders
Interactive Online Network,
LIONInc.com, a web site for
mortgage professionals.
Bank Rate Monitor.................... Bankrate.com is an online 8/99
publication that provides the
consumer with objective
financial data, research and
editorial information.
Interest Rates Online................ InterestRatesOnline.com allows 8/99
consumers to view interest rates
and locate lenders and
appraisers in 50 states.
HSH Associates....................... HSH.com is a publisher of 6/99
consumer loan information,
lender web sites and financial
tools.
Long Island Board of
Realtors/Multiple MLSLIRealtor.com is an online 8/99
Listings Service of Long Island..... source for Long Island, New
York, real estate information
and loan products.
Genesis2000.......................... Genesis2000 is a leading 12/99
provider of mortgage automation
software for over 6,400 broker
companies with more than 30,000
users nationwide. American Home
Mortgage will be a charter
wholesale lender on the
Genesis2000 ePass network, an
online e-commerce channel for
30,000 national brokers to
submit loans to lenders.
</TABLE>
- ----------------
* Refers to actual or anticipated online commencement date.

Mortgage shoppers who visit a Web site are prompted by the site's software
to provide information about their loan needs and preferences and about their
income and financial condition. The site's software then compares the
information given by the potential customer with a database of the terms of the
loans of lenders participating on the site. The software selects those loans
for which the customer qualifies that satisfy the potential customer's loan
needs. The site's software then introduces the potential customer to one of the
lenders that participates on the site. The way in which the customer is
introduced varies from site to site, but when customers are connected to us
they are introduced on an exclusive or semi-exclusive basis.

41
<PAGE>

Once a customer is introduced to us, we communicate with that customer
online or through one of our Internet call centers. Our call centers employ
representatives who are trained to work with customers in a consultative
manner. Our consultative sales approach stresses proactive and frequent contact
with customers. For example, our representatives provide customers with written
analysis, comparing the costs of different loan products, showing closing costs
and amortization schedules. The representatives are trained to call customers
frequently, to provide them with updated information about interest rates and
to answer frequently-asked questions. The objective of our call center
representatives is to build a relationship with potential customers, and gain
the confidence and business of those customers.

Our MortgageSelect.com Web Site. In June 1999, we released a new,
technologically advanced version of our Web site. It provides our customers
with 24-hour access to a variety of products and services. In addition to
providing information about interest rates and product terms, our Web site
allows customers to perform a number of functions such as locking-in an
interest rate, filing a pre-approval request or application, checking the
status of their pending applications and obtaining their credit report. Later
this year, we intend to further expand the functionality of our Web site by
enabling our customers, in one continuous session, to apply for a loan, receive
a commitment for that loan if approved and lock-in their interest rates.
Currently, we primarily use our Web site to help us gain the business of
mortgage shoppers that have been referred to us by our Web site relationships.
As we increase the functionality of our Web site, we will seek to use and
market it in new ways. Initially, we will use our Web site to market loans
directly to Internet mortgage shoppers. We intend to commence an advertising
campaign, initially directed at selected markets, that will aim to increase
mortgage shoppers' awareness of our Web site and establish name recognition for
MortgageSelect.com. In the longer term, we intend to enter into contracts to
provide private label Internet origination services to thrifts and smaller
banks.

Our Internet Growth Strategy. The goal of our Internet marketing efforts is
to both expand our Internet reach and enhance our ability to originate
mortgages over the Internet. To continue the growth of our Internet division,
we must first increase our call center capacity to be able to service all the
referrals we receive from the popular Web sites. Continued growth depends on
our ability to increase the number of referrals from those and other Web sites.
We intend to complement our growth from increased Web site referrals with
growth from marketing our own Web site and from providing, on a contract basis,
Internet origination services to local and regional thrifts and smaller banks.
We intend to use part of the proceeds of this offering to fund the increase of
our Internet capacity and capabilities. Please see the "Use of Proceeds"
section of this prospectus.

Our Internet growth strategy focuses on the following elements:

. Increasing Our Call Center Capabilities. We recently opened our second
Internet call center, and are planning a third center. We believe we can
rapidly increase our call center capacity by transferring experienced
managers and personnel from our traditional origination channels to our
Internet division. We believe we can maximize the number of inquiries
that we convert into loans by limiting the number of sales
representatives in any one call center to 28 persons. Our experience is
that having a number of smaller call centers allows us to best manage
and motivate our sales representatives and create an atmosphere that is
most conducive to our consultative sales approach. To enable several
smaller call centers to work together efficiently, we are installing
"virtual" software so that a representative in any one call center can
service a mortgage shopper regardless of the source that referred that
shopper.

. Expanding Our Territorial Presence. All of our Internet business is
currently conducted in 34 states. We are in the process of meeting the
licensing or qualification requirements of, and otherwise expanding our
Internet business to, all 50 states so that we can accept mortgage
applications over the Internet without limitation.

. Establishing a Presence on Additional Web Sites. We employ a dedicated
e-commerce staff that seeks to establish new relationships with both
national and regional Web sites. Our e-commerce staff is headed by a
person with extensive experience in negotiating with popular Web sites
on behalf of

42
<PAGE>

lenders. We believe our e-commerce staff has been successful in
achieving our inclusion in many of the popular Web sites and will
continue to expand our Internet presence.

. Continuing to Market Our Own Web Site. In June 1999, we released a new,
technologically advanced version of our Web site. The main criteria in
designing our Web site are functionality and user-friendliness. We are
continuously looking for ways to expand the functions customers can
perform online and reduce the time it takes from initial application to
loan approval and commitment. We also seek to maintain user-
friendliness, through live interaction with loan originators and
immediate telephone assistance from a loan originator. We intend to
commence an advertising campaign, initially directed at selected
markets, that will aim to increase mortgage shoppers' awareness of our
Web site and establish name recognition for MortgageSelect.com.

. Providing Contract Internet Origination Services to Thrifts and Smaller
Banks. We have designed our Web site and call center technology so that
they can be adapted to support the brand names of other lenders. We
intend to offer, on a private label basis, our Internet capabilities and
call center technology to thrifts and smaller banks, effectively
becoming the Internet mortgage presence of those institutions so that
they can offer their loans through our Web site. We believe this
approach will assist us in defraying the cost of the development of our
Web site and call center technology over a greater number of loans.

We believe we have a number of strategic advantages that will enable us to
effectively compete on the Internet, including:

. Our Call Center Culture. Our call centers have a sales culture. Our loan
originators use a consultative sales approach that includes frequent and
repeated customer contacts and follow ups. They do not merely provide
information requested by a customer, but actively assist and guide a
client through the loan application process, furnish written
presentations, pre-approvals and updates on rates and market conditions
and otherwise ensure that a customer's questions are being answered. We
compensate our loan originators primarily on a commission basis to
encourage their responsiveness to customers. We believe our sales
culture sets us apart from many of our competitors and is an important
reason for our success in originating loans over the Internet.

. Our Competitive Adjustable Rate Mortgage Terms. We believe we are able
to offer better terms for adjustable rate mortgages than many of the
large lenders that constitute most of our competition on the popular Web
sites. The reason is that we typically sell the adjustable rate loans we
originate to thrifts while these large lenders often securitize their
adjustable rate originations. Securitizers tend to require a higher
yield for their loans than entities like thrifts that hold their loans
for investment. As a result, thrifts can profitably purchase and hold
adjustable rate mortgage loans with lower rates than securitizers, and
have historically done so. Consequently, we are typically able to offer
better terms than those large lenders that are the majority of our
competitors on the popular Web sites. Many of the mortgage brokers and
mortgage bankers that traditionally compete with us for adjustable rate
borrowers do not participate on the popular Web sites because they do
not have the requisite financial resources and information technology.

. Our Ability to Sell Servicing Rights to the Highest Bidder. We are able
to offer competitive rates for fixed rate mortgages because we can
direct the sale of servicing rights for a particular type of loan to the
servicing rights buyer that places the highest value on that type of
loan. For example, we may sell the servicing rights to a $100,000 loan
in Florida to one buyer, while we sell the servicing rights to a
$150,000 loan in Florida to another buyer and the servicing rights to a
similar loan in New Jersey to yet another buyer. In each case, we
identify and execute a sale to a servicing buyer whose servicing model
places the highest value on the type of servicing to be sold. This
selling strategy is the reason we are able to offer competitive terms in
the fixed rate mortgage market.

. Our Advanced Internet Technology. Our Internet technology is user-
friendly and designed to facilitate interaction with the client. Our
loan originators will soon be able to "share" the computer

43
<PAGE>

screen with a customer and see how a customer is completing an
application while the customer is doing so, allowing them to assist a
customer in a more meaningful manner. In addition, our technology will
enable us to give a customer a commitment letter for certain loans in
"real-time." This means that in one continuous online session, a
customer's application could be submitted to Fannie Mae's Desktop
Underwriter(R) and, if approved, a commitment letter with a set interest
rate and other terms would be returned to the customer.

Our Retail Division

Our retail division is the core of our traditional business. In 1998 and
the first 6 months of 1999, approximately 81.0% and 83.2% of the mortgage
loans we originated were made through our retail division. This division
consists of 16 offices, including our New York City headquarters. Our retail
division has 6 origination channels:

. community loan offices;

. direct-to-consumer advertising;

. realtor and builder joint ventures;

. our Corporate Affinity Program;

. telemarketing; and

. our Real Estate Direct Program.

Community Loan Offices. Our community loan offices serve the regions in
which they operate, and obtain business by developing and nurturing a referral
network of realtors, real estate attorneys, builders and accountants. Many of
our loan originators are highly experienced and, therefore, can provide an
accurate analysis of a potential borrower's options and needs. They also
facilitate the efficient processing and closing of a borrower's loan. Other
reasons customers are referred to our loan originators include our broad and
competitive product line and our high level of customer service, including
pre-approval commitments based on Fannie Mae's Desktop Underwriter(R) and
flexible rate lock-in and extension policies, a willingness to hold escrows
and other accommodations that help a borrower and facilitate a real estate
transaction. Our community loan offices provide special services to builders,
including issuing commitments to lend to buyers in their projects. We have
been selected by many leading builders as their onsite resource for mortgage
financing. For example, we were recently selected to be the sole on-site
lender for a 90-story condominium project in New York City.

We intend to further expand our community loan office originations by
opening offices in new geographic regions, recruiting experienced loan
originators for those offices and hiring additional loan originators in the
markets we currently serve. In order to attract and retain experienced loan
originators, we offer a high level of support that includes a broad product
range, technical help desk support, flexible extension policies, expenditures
on trade shows, educational seminars and other marketing initiatives and
promotional materials. We believe our experience in implementing this strategy
in our current markets will enable us to expand into additional states and
increase our market presence in our home region. In the past 6 months, we have
opened community loan offices in suburban Philadelphia and Maryland. Over the
next 12 months, we expect to open at least 4 additional community loan offices
in the eastern United States and possibly other areas.

Direct to Consumer Advertising. We advertise our products in selected local
and regional print media. Customer calls generated by advertising are handled
by our more experienced loan originators who use our consultative sales
approach. We believe an important part of our success is attributable to the
way our loan originators interact with potential customers.

We intend to expand our direct to consumer business by increasing the
number of publications in which we advertise, including adding publications in
regions into which we expand. As we open additional local

44
<PAGE>

offices and expand into new states, we will seek to build name recognition by
advertising in the regional and local print media. We often start an
advertising campaign in the regional press before, or in conjunction with, the
opening of a new community loan office. In selecting publications, we aim to
strike an efficient balance between the cost of a particular media and the
number of leads it generates. We believe our broad product line maximizes the
efficiency of our advertising budget. The follow-up provided by our loan
originators allows us to service a customer in a personal manner and provides
us, we believe, with a competitive advantage. We believe this strategy
complements our geographic expansion strategy.

Realtor and Builder Joint Ventures. Since the beginning of 1998, we have
established 3 joint ventures with mid-size real estate brokerage firms and
builders, who provide the venture with access to potential customers. We and
our partners each have a 50% interest in the venture. Our joint venture
partners are System One Partners, LLP, a marketing cooperative of many of the
leading realtors in Fairfield County, Connecticut, comprising approximately 40
offices, Spectrum Skanska Inc., a leading builder in the New York tri-state
area, and Country Living Associates, Inc., a purveyor of high-end properties in
Connecticut. Each venture makes loans, retaining the application and processing
fees, points and discounts earned in connection with the mortgages it
originates. The venture then sells the mortgage loans to us at a premium. We
then resell the loans to institutional buyers, earning a profit from those
resale efforts. We believe that this distribution channel provides an
opportunity to cross sell with local realtors and builders.

We intend to expand this part of our business by identifying and entering
into additional joint ventures, and we expect to establish at least 4
additional joint ventures in the next 18 months. We believe joint ventures of
this nature are a fairly new way of doing business. Our flexibility and
willingness to tailor an arrangement to a particular venture, rather than
adhere to a set of model terms, gives us a competitive advantage when competing
with certain larger lenders seeking to enter into a venture with a particular
realtor or builder.

Corporate Affinity Program. Under this program, we make loans to employees
of large companies and firms who are members of our Corporate Affinity Program.
The employees receive special group discounts, service guarantees and other
accommodations. Current Corporate Affinity Program members include Credit
Suisse First Boston Corporation, Deutsche Bank AG, Goldman Sachs Inc. and UBS
Corporation.

We intend to identify and sign up additional companies to participate in our
program. We believe our affinity loan programs are successful because of our
broad product line, our personal approach to dealing with customers and our
ability to be flexible to meet a customer's needs.

Telemarketing. We maintain a staff of loan originators and telemarketers who
place calls to persons identified as having high-interest rate loans due to
poor past credit history, but who have improved their credit history and would
now qualify for lower interest rate mortgages. We intend to expand this part of
our business by hiring additional loan originators and telemarketers.

Real Estate Direct. In 1998, we established our Real Estate Direct Program.
The program's goal is to reach customers at the beginning of the home-buying
process. Under this program, we place advertisements for a particular home that
not only describe the home, but also a package of available mortgage financing
terms. A typical advertisement will feature a picture of the home and will
describe in the headline the downpayment and monthly charges required to carry
that particular home. The advertisement is intended to show how financing terms
offered by us make the home readily purchasable. We believe that we benefit by
having early access to potential borrowers, many of whom, although they may not
buy the particular property advertised, will become our customers. With the
experience gained from operating this program in our traditional territory, we
believe we can expand this program as part of our overall geographic expansion.

Our Wholesale Division

We have established relationships with more than 75 mortgage brokers. Our
wholesale division actively solicits referrals of borrowers from this network
of independent mortgage brokers. While our strategy focuses primarily on
establishing direct access to borrowers, our mortgage broker channel is an
important source of mortgage loans, accounting for 19.0% of the mortgage loans
we originated in 1998 and 16.8% in the first 6 months of 1999.

45
<PAGE>

A mortgage broker deals directly with the borrower and submits the fully
processed loan application to us for an underwriting determination. We apply
our usual underwriting standards to each wholesale-originated mortgage, issue a
written commitment and, upon satisfaction of all lending conditions, close the
mortgage. We offer mortgage brokers direct access to Fannie Mae's Desktop
Underwriter(R), which enables them to give their clients immediate approvals.
We believe this gives us an advantage over lenders who do not provide that
service. Other reasons we believe we are able to attract mortgage broker
business include our broad and competitive product line, our ability to provide
approval within 24 to 48 hours of receipt of a file, our flexible lock-in and
extension policies, our personalized service, our knowledgeable and experienced
wholesale loan originators and our support of mortgage broker industry events,
such as trade shows and educational seminars.

We conduct due diligence on mortgage brokers with whom we consider doing
business. Our diligence includes verifying their financial statements and
running credit checks of principals, checking business references provided by
the brokers and verifying with the applicable regulators that a broker is in
good standing. Once approved, we require that a mortgage broker sign an
agreement that governs the mechanics of doing business with us and that sets
forth the representations and warranties the broker makes regarding each loan
submitted to us.

Through our wholesale division, we can increase our loan volume without
incurring the higher marketing, labor and other overhead costs associated with
increased retail originations because brokers conduct their own marketing and
employ their own personnel to attract customers, assist the borrower in
completing the loan application and maintain contact with borrowers.

Our Mortgage Products

We offer a broad and competitive range of mortgage products that aim to meet
the mortgage needs of all borrowers. Our product line includes Fannie Mae-
eligible loans, jumbo loans, adjustable rate mortgages, FHA-insured and VA-
guaranteed loans, alternate "A" loans, non-prime loans, home equity and second
mortgage loans, construction loans and bridge loans. Our experience and
expertise in numerous types of mortgages give us the ability to provide our
full product line through each of our 3 divisions.

Our extensive network of loan buyers allows us to identify specific loan
features, to identify a loan buyer who will purchase loans with those specific
features and to select a buyer who will accept the lowest yield for loans with
those features. As a result, we are able to offer a wide range of products that
are well priced and that have many different features to suit a customer's
needs.

The following table summarizes information with respect to the most
important categories of mortgage loans we originate.

1998 MORTGAGE LOAN ORIGINATION SUMMARY

<TABLE>
<CAPTION>
% of Total
Mortgage Type Number of Loans Dollar Volume Dollar Volume
------------- --------------- ------------- -------------
(in millions)
<S> <C> <C> <C>
Fannie Mae Eligible Fixed..... 3,560 $ 539.6 46.6%
Jumbo Fixed................... 506 171.5 14.8
Adjustable Rate (ARMs)........ 519 177.5 15.4
FHA/VA........................ 1,084 143.0 12.4
Alternate "A" Loans........... 539 82.1 7.1
Non-Prime Loans............... 240 25.8 2.2
Home Equity/Second............ 177 9.0 0.8
Construction Loans............ 20 8.4 0.7
Bridge Loans.................. 9 0.6 --
----- -------- -----
TOTAL....................... 6,654 $1,157.5 100.0%
</TABLE>

46
<PAGE>

. Conforming and Government-Insured Fixed Rate Loans. These mortgage loans
conform to the underwriting standards established by Fannie Mae or the
Federal Home Loan Mortgage Corporation (commonly referred to as Freddie
Mac). This product is limited to high quality borrowers with good credit
records and involves adequate down payments or mortgage insurance. These
loans may qualify for insurance from the Federal Housing Authority (FHA)
or guarantees from the Veterans Administration (VA). We have 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 us to offer
so-called 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
credit worthiness, 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 (currently, $240,000 for single-
family, one-unit mortgage loans in the continental United States). We
offer jumbo loans with creative financing features, such as the pledging
of security portfolios. Our jumbo loan program is geared to the more
financially sophisticated borrower.

. Adjustable Rate Mortgages (ARM). The ARM's defining feature is a
variable interest rate which 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 6 months, one year, 3 years, 5
years or 10 years. Some of our ARMs may include payment caps, which
limit the interest rate increase for each adjustment period.

. Alternate "A" Loans. 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. The non-prime mortgage loan focuses 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. By originating
mortgage loans to borrowers with higher credit risk, we are able to
charge higher interest rates than would be charged for our conventional
loans. Offering this category of mortgage loans on a limited basis
allows us to provide loan products to borrowers with a variety of
differing credit profiles.

. Home Equity and 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 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. We offer 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 5 to 10 disbursements.

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<PAGE>

. Bridge Loans. The bridge loans that we make are short-term loans and may
be used in conjunction with our 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 Funding and Borrowing Arrangements

We draw against our warehouse facility with First Union to originate
mortgage loans. We expect to replace this facility with a $60 million line of
credit that will be agented by First Union. In addition to the First Union
warehouse facility, we have 4 uncommitted purchase and sale agreements under
which we sell the loans we have originated to institutions on an interim basis.
The combined capacity available under our purchase and sale agreements is $168
million. For a more detailed description of these arrangements, please see the
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" section of this prospectus.

Sale of Loans and Servicing Rights

Our business strategy is to sell the loans we make, typically within 30 days
of origination, rather than hold them for investment. We sell our loans to
Fannie Mae, large national banks, thrifts and smaller banks, securities
dealers, real estate investment trusts and other institutional loan buyers. We
also swap loans with Fannie Mae for mortgage-backed securities, which we then
sell. We do not currently securitize our loans, although we may decide to do so
in the future if market conditions or other considerations justify doing so. In
most instances, we sell the servicing rights to our loans at the same time that
we sell those loans. When we swap loans for mortgage-backed securities, at the
time of completing the swap, we sell the servicing rights to the loans to an
independent loan servicer.

Typically, we sell or swap the loans with limited recourse to us. This means
that, with some exceptions, we reduce our exposure to default risk at the time
we sell the loan, except that we may be required to repurchase the loan if we
breach the representations or warranties we make 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 and other requirements of the ultimate
investor.

We sell or swap the loans under agreements to the buyers and institutions
described above, many of whom compete directly with us for mortgage
originations. The agreements generally do not have a limit as to the principal
amount of loans that we may sell, and establish an ongoing sale program under
which these investors and institutions stand ready to buy so long as the loans
we offer for sale meet their underwriting standards.

In the first 6 months of 1999, the 3 institutions that bought the most loans
from us were Chase Manhattan Mortgage Corporation, Norwest Funding, Inc. and
Astoria Federal Savings and Loan Association, which accounted for 38.0%, 32.8%
and 7.2%, respectively. We have brokered or sold loans to Chase Manhattan
Mortgage Corporation since 1988, to Prudential Home Mortgage or its successor
Norwest Funding, Inc. since 1991, and to Astoria Federal Savings and Loan
Association since 1994. We believe we have favorable relationships with our
buyers. The loss of any of these institutions as a buyer of our loans, or a
significant reduction in the prices those buyers are willing to pay, however,
could have a material adverse effect on our business and results of operations.

Loan Underwriting

Our primary goal in making a decision whether to extend a loan is whether
that loan conforms to the expectations and underwriting standards of the
institution which buys that type of loan. Whenever possible, we use artificial
intelligence underwriting systems to determine whether a particular loan meets
those standards and expectations. In those cases where artificial intelligence
is not available, we rely on our experienced credit officer staff to make the
determination. Our credit officers have an average of 8 years of relevant
experience.

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<PAGE>

Typically, our buyers 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 to be pledged. We
believe our credit officers have the experience and training necessary to
evaluate a potential borrower's conformance to our buyers' requirements based
on these criteria. Historically, we have not had material credit losses and
believe our credit decisions ensure that the loans we originate meet the
standards of our loan buyers and minimize the risk of default.

Compliance

Our compliance efforts are headed by our compliance officer, who is an
experienced attorney in the field. The officer is responsible for staying
current with the lending laws and regulations in each of the jurisdictions in
which we make loans. He is also responsible for assuring that our processes,
disclosures and loan products conform to all applicable federal, state and
local laws and regulations. We are subject to periodic audits by the regulators
in many of the states where we operate. To date, the audits have not found any
material violations. In addition, our "enterprise" computer application assists
us in complying with government regulations by automatically selecting the
requisite loan disclosure documents, calculating permissible fees and charges
and assuring that products offered to a particular borrower meet the
requirements of that borrower's state. Our legal compliance is reviewed as part
of our quality control process, which is performed by an independent contractor
with expertise in these matters.

Quality Control

We have hired an outside firm to perform quality control testing for us. The
firm typically samples, on a random basis, 10% of the loans we originate. It
checks 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, whether the loan complies with government regulations
and, for 1% of the loans we originate, it reappraises the underlying property.
The firm issues monthly reports to us, which we use to identify areas that need
corrective action or could use improvement. Historically, those reports have
not identified material quality control concerns.

Government Regulation

Our business is 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, Ginnie Mae and state regulatory authorities. These
rules and regulations impose obligations and restrictions on our loan
origination and credit activities, including without limitation the processing,
underwriting, making, selling, securitizing and servicing of mortgage loans.

Our 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 our activities. Our loan origination activities also are
subject to the laws and regulations of each of the states in which we conduct
our activities.

These laws, rules, regulations and guidelines limit mortgage loan amounts
and the interest rates, finance charges and other fees we may assess, mandate
extensive disclosure and notice to our customers, prohibit discrimination,
impose qualification and licensing obligations on us, 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 us 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

49
<PAGE>

compensation, demands for indemnification or mortgage loan repurchases, certain
rights of rescission for mortgage loans, class action lawsuits and
administrative enforcement actions.

Although we believe that we have systems and procedures in place to insure
compliance with these requirements and believe that we currently are 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 our 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 we originate, purchase or service, expose us to
claims by borrowers and administrative enforcement actions, or otherwise
materially and adversely affect our business, financial condition and
prospects.

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 our 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 we offer.

A multitude of class action lawsuits have been filed against companies in
the mortgage banking industry, which allege, among other things, violations of
the terms of the mortgage loan documents and certain laws, rules and
regulations (including without limitation consumer protection laws). These
lawsuits may result in similar suits being filed against us. In addition, the
publicity generated by such lawsuits may result in legislation that affects the
manner in which we conduct our business and our relationships with mortgage
brokers, correspondents and others. Any of these developments may materially
and adversely affect our business, financial condition and prospects.

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

Information Systems

In 1998, we installed an enterprise system that supports most of our
business functions. The system is a computer application from Data-Link
Systems, LLC d.b.a. Fiserv Mortgage Products Division, which our programming
staff has modified extensively to meet our specific needs. Our enterprise
system functions on a wide area network that connects all of our branches in
"real time." With our wide area network, a transaction at any one of our
locations is committed centrally and is therefore immediately available to all
personnel at all other locations. An important benefit of our enterprise system
is that it aids us in controlling our business process. For example, the system
assures that our underwriting policies are adhered to, that only loans that are
fully approved are dispersed, and that the correct disclosures and loan
documents are used based on a borrower's state and loan program. Our enterprise
system also provides our management with reports and other key data.

Our MortgageSelect.com Internet Web site is based on the latest software
technology from Microsoft Corporation and resides on high performance Microsoft
NT Servers. MortgageSelect.com has developed proprietary call center and Web
site software programs that integrate the call center, its contact management
system, Fannie Mae's automated underwriting system and the Internet Web site.
Our Internet software

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<PAGE>

programs were developed using in-house personnel and outside software
consulting companies specializing in Internet mortgage services software.

Competition

Mortgage banking on the Internet is highly competitive. A large number of
mortgage companies currently transact business over the Internet in one form or
another. The sophistication of these companies in the Internet channel varies
from simple one-page information Web sites to Web sites with extensive on-line
content and features. Many of these mortgage companies share a business
strategy and capability similar to ours. The competition includes banks such as
Chase and Bank of America, as well as mortgage originators such as Prism
Financial Corporation, E-Loan and Mortgage.com, all of which are larger and
better capitalized than us. In addition, we also compete on the Internet with
large, national mortgage companies, such as Countrywide Credit Industries, Inc.
and HomeSide Lending, which have greater origination volumes and capitalization
than us.

A large number of mortgage companies also transact business through retail
offices and other traditional channels. Our competitors include other mortgage
bankers (including those noted above), state and national commercial banks,
savings and loan associations (including, for example, Dime Savings Bank of New
York, FSB and Home Federal Savings Bank), credit unions, insurance companies
and other finance companies. Many of these competitors are substantially larger
and have considerably greater financial, technical and marketing resources than
we do.

Competition in the mortgage banking industry is based on many factors,
including convenience in obtaining a loan, customer service, marketing and
distribution channels, amount and term of the loan and interest rates. We
believe that our competitive strengths include a broad product offering, a
variety of distribution channels, providing prompt, responsive service and
flexible underwriting to borrowers as well as independent mortgage brokers. Our
underwriters apply our underwriting guidelines but have the flexibility to
deviate from such guidelines when an exception or upgrade is warranted by a
particular loan applicant's situation, such as evidence of a strong mortgage
repayment history relative to a weaker overall consumer-credit repayment
history. This provides the independent mortgage brokers working with us with
the ability to offer loan programs to a diversified class of borrowers.

No single lender or group of lenders has, on a national level, achieved a
dominant or even a significant share of the market with respect to loan
originations for first mortgages. We believe that our product offerings,
competitive pricing, advanced technology and business strategies enable us to
compete effectively with these entities.

Training

We focus on recruiting, developing and motivating talented people from
within and outside the consumer finance industry to implement our business
strategies. We are committed to our human resources. To enhance their skills,
we offer and sometimes require our employees to attend training classes.
Through our training programs, we seek to instill in all of our employees our
commitment to provide superior customer service and to be responsive to
customer needs. New sales persons are required to take training classes to
provide them with knowledge of our products and to provide them with extensive
training in sales and marketing techniques, including telephone sales
techniques and customer relations. Sales persons are also provided with
periodic ongoing training to keep their skills and product knowledge up to
date.

Employees

As of June 30, 1999, we had 370 employees, substantially all of whom were
employed full-time. Of these employees, 106 were employed at our New York City
headquarters, and 264 were employed at our other offices. None of our employees
are represented by a union. We consider our relations with our employees to be
satisfactory.

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<PAGE>

Properties

We do not own any real property, except for our mortgagee's interest in the
properties that are the subject of our mortgage loans in the ordinary course of
business. The following table sets forth the location, approximate size, annual
base rent and lease expiration date of our significant offices.
<TABLE>
<CAPTION>
Annual Lease
Square Base Expiration
Location Footage Rent Date
-------- ------- -------- ----------
<S> <C> <C> <C>
New York, NY.................................. 15,436 $355,020 09/13/99
New York, NY.................................. 4,180 175,560 12/17/07
Plainview, NY................................. 6,188 136,097 08/31/00
Jericho, NY................................... 8,907 175,156 02/27/01
Norwalk, CT................................... 4,900 120,048 08/31/04
</TABLE>

Our primary New York City sublease expires on September 13, 1999. We do not
intend to renew this lease and are currently negotiating to lease alternative
space. We cannot assure you that we will be successful in such negotiations. In
any event, however, we will not be able to vacate the premises in a timely
manner. As a result, from the expiration date of the lease until we vacate the
premises, we will be required to pay a penalty monthly rent that is two times
the amount of our current monthly rent.

We lease 13 additional offices, with lease expiration dates from 1999 to
2007. With respect to the leases expiring within the next 12 months, we believe
we will be able to renew those leases or find alternative facilities on
commercially reasonable terms. We expect to lease additional offices in
connection with our planned geographic expansion.

Legal Proceedings

In the ordinary course of our business, we are at times subject to various
legal proceedings. We do not believe that any of our current legal proceedings,
individually or in the aggregate, will have a material adverse effect on our
operations or financial condition.

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<PAGE>

MANAGEMENT

Directors, Executive Officers and Key Employees

Set forth below is certain information regarding our directors, executive
officers and key employees as of the date of this prospectus.

<TABLE>
<CAPTION>
Name Age Position
- ------------------------ --- ------------------------------------------------------------
<S> <C> <C>
Michael Strauss......... 40 Chairman of the Board, President and Chief Executive Officer
Nicholas P. Rizzetta.... 52 Chief Financial Officer
Robert E. Burke......... 33 Senior Vice President, Treasurer and a director nominee
James O'Reilly.......... 45 Senior Vice President, Secondary Marketing
Leonard Schoen, Jr...... 34 Senior Vice President, Operations and a director nominee
Leslie E. Tao........... 35 Senior Vice President, Production and Sales
Lawrence S. Jones....... 36 Vice President, Quality Control & Compliance
Scott Lare.............. 35 Vice President, M.I.S.
Ronald D. Taylor........ 51 Vice President, Internet Operations
Andrew Valentine........ 38 Vice President, Closing & Corporate Counsel
Joseph P. Bryant........ 52 Director nominee
C. Cathleen Raffaeli.... 42 Director nominee
</TABLE>

Michael Strauss. Mr. Strauss founded our company in 1988 and currently
serves as the Chairman of our board of directors and our President and Chief
Executive Officer. He is responsible for our strategic direction as well as
overseeing our day-to-day operations. Mr. Strauss is First Vice President and
Director of the Empire State Mortgage Bankers Association and a member of a
number of mortgage advisory councils. He has a B.S. in business administration
from Washington University in St. Louis, Missouri.

Nicholas P. Rizzetta. Mr. Rizzetta joined us in May 1999 as Chief Financial
Officer. He held a similar position at Homerica Mortgage Corporation, a
mortgage banker operating in the New York tri-state area, from 1997 to April
1999. From 1993 to 1997, Mr. Rizzetta was associated with L&M Consulting, a
mortgage banking consulting company founded by Mr. Rizzetta. Before that, Mr.
Rizzetta held a number of positions at various financial institutions,
including Chemical Bank and the Dime Savings Bank. He is a Certified Public
Accountant and has an M.B.A. in finance and B.B.A. in accounting from Iona
College in New Rochelle, New York.

Robert E. Burke. Mr. Burke will serve on our board of directors upon
completion of this offering and has been Senior Vice President, Treasurer since
May 1999. From April 1997 to April 1999, he also served as Chief Financial
Officer. He was a partner with Burke & Company, an independent accounting firm,
from 1995 to 1997, and a Senior Manager at Goldstein Golub Kessler & Company,
P.C., another independent accounting firm, from 1990 to 1995. Mr. Burke is a
Certified Public Accountant and has a B.S. in accounting from Duquesne
University in Pittsburgh, Pennsylvania.

James O'Reilly. Mr. O'Reilly joined us in April 1998 as Senior Vice
President, Secondary Marketing. He was Senior Vice President at Gateway
Funding, a Pennsylvania mortgage banker, from 1996 to March 1998, President of
Secondary Marketing Services, a consulting firm specializing in interest rate
risk management, from 1995 to 1996 and Senior Vice President at First Keystone
Mortgage, a Pennsylvania mortgage banker, from 1993 to 1995. Mr. O'Reilly also
was a Senior Bank Examiner for the Federal Home Loan Bank Board, where he was
responsible for the supervisory examinations of thrift institutions. He is a
Certified Public Accountant and has a B.S. in accounting from Saint Francis
College in Loretto, Pennsylvania.

Leonard Schoen, Jr. Mr. Schoen has been with us since 1988. He will serve on
our board of directors upon completion of this offering and has been the Senior
Vice President, Operations since 1995, overseeing all processing and
underwriting functions. Before that, he held various operations and management
positions with our company. Mr. Schoen has a B.S. in business administration
from Hofstra University.

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<PAGE>

Leslie E. Tao. Ms. Tao has been Senior Vice President, Production and Sales
since 1996. She was a Vice President at Sterling Mortgage Corporation, a
mortgage broker in the New York tri-state area, from 1987 to 1996, responsible
for managing operations and sales. Ms. Tao has an M.B.A. in finance from
Hofstra University in Hempstead, New York, and a B.A. from the State University
of New York at Stony Brook, New York.

Lawrence S. Jones. Mr. Jones has been Vice President, Quality Control &
Compliance since 1996. Before that, he was Assistant Vice President of
Roosevelt Savings Bank where he was responsible for the Residential Loan
Production Division, from 1986 to 1996. Mr. Jones holds a B.S. from Cortland
University in Cortland, New York.

Scott Lare. Mr. Lare has been Vice President, M.I.S. since 1997. He is
responsible for all of our computer hardware, software and systems design. Mr.
Lare was the Director of Information Systems for KBS, a circuit board
manufacturing company, from 1995 to 1997. He was Technology Manager for
Certified Vacations, Inc., a vacation package wholesaler, from 1993 to 1994.
Mr. Lare has a B.A. in computer science from the State University of New York
at Oswego, New York.

Ronald D. Taylor. Mr. Taylor joined American Home Mortgage in January 1999
as Vice President, Internet Operations. From August 1998 to January 1999, he
was the Chief Information Officer for the Consumer Direct Group at
Mortgage.com, a provider of online mortgage services, responsible for
developing products and business relationships. Mr. Taylor was the Vice
President--Electronic Commerce at Homeside Lending, a mortgage banker in
Jacksonville, Florida, from 1995 to 1998 and Vice President--Mortgage Services
Division at Alltel Corporation, a mortgage service company, from 1991 to 1995.
He has an M.S. in engineering from the University of Texas in Austin, Texas and
an M.B.A from Pepperdine University in Malibu, California.

Andrew Valentine. Mr. Valentine joined us in 1995 as Vice President, Closing
& Corporate Counsel. He was the managing attorney at the Law Firm of Howard W.
Newman from 1994 to 1995, where he directed real estate closings and provided
state and federal regulatory counseling to mortgage bankers and brokers. From
1987 to 1994, he was the managing attorney at Keenan, Powers & Andrews, P.C., a
real estate firm. Mr. Valentine holds a J.D. from Brooklyn Law School and a
B.S. from the State University of New York at Brockport, New York.

Joseph P. Bryant. Mr. Bryant will join our board of directors upon
completion of this offering. Mr. Bryant has been the chairman and chief
executive officer of The Bison Financial Group, Inc., a company involved in
buying, selling and financing distressed commercial real estate, since June
1999. Prior to that, he was Chief Executive Officer and President of Roslyn
National Mortgage Corp., a New York-based multi-state mortgage company, from
March 1998 to June 1999. He was senior vice president of Home Federal Savings
Bank, a bank based in Hagerstown, Maryland, and a subsidiary of F&M Bancorp, a
Nasdaq National Market listed bank from September 1997 to March 1998. From
November 1993 to September 1997, Mr. Bryant served in various capacities with
the Long Island Savings Bank, a New York-based savings bank that was acquired
by Astoria Federal Savings and Loan Association, a subsidiary of Astoria
Financial Corp., a Nasdaq National Market listed bank.

C. Cathleen Raffaeli. Ms. Raffaeli will join our board of directors upon
completion of this offering. Ms. Raffaeli is the president and chief operating
officer of Consumer Financial Network (CFN), an e-commerce company, majority
owned by IXL Enterprises, a Nasdaq National Market-listed Internet services
company. Prior to joining CFN in December 1998, Ms. Raffaeli was the executive
director of the commercial credit card division of Citicorp. From 1992 to 1994,
Ms. Raffaeli served as senior vice president of Chemical Bank where she was
responsible for that bank's New York retail mortgage and national tele-
marketing business.

Election of Directors and Executive Officers

Upon completion of this offering our board of directors will consist of 5
members and will be divided into 3 classes. The board has 2 Class I directors
(Ms. Raffaeli and Mr. Burke), one Class II director (Mr. Schoen),

54
<PAGE>

and 2 Class III directors (Messrs. Strauss and Bryant). Each director will
serve for a staggered 3-year term. At each annual meeting of stockholders, a
class of directors will be elected for a 3-year term to succeed the directors
of the same class whose terms are then expiring. The terms of the Class I,
Class II and Class III directors will expire upon the election and
qualification of their successors at the annual meeting of stockholders to be
held in 2000, 2001 and 2002, respectively.

Each officer serves at the discretion of the board of directors. There are
no family relationships among any of our directors and executive officers.

Board Committees

Audit Committee. As soon as practicable after the closing of this offering,
our board of directors will establish an audit committee which, among other
things, will perform the following functions:

. make recommendations to our board of directors concerning the engagement
of independent public accountants;

. monitor and review the quality and activities of our internal audit
function and those of our independent auditors; and

. monitor the adequacy of our operating and internal controls as reported
by management and the independent or internal auditors.

The initial members of the audit committee will be Mr. Bryant and Ms.
Raffaeli.

Compensation Committee. As soon as practicable after the closing of this
offering, our board of directors will establish a compensation committee which,
among other things, will perform the following functions:

. review salaries, benefits and other compensation of our officers and
other employees;

. make recommendations to our board of directors regarding salaries,
benefits and other compensation; and

. administer our employee benefit plans.

The initial members of the compensation committee will be Messrs. Strauss
and Bryant and Ms. Raffaeli.

Director Compensation

Before this offering, Mr. Strauss, our sole stockholder, received no
compensation for his service as our sole director. Upon completion of this
offering, directors who are neither our employees nor those of our subsidiary
will receive $3,000 per board meeting attended. Directors will be reimbursed
for out-of-pocket expenses incurred in connection with their service as
directors. In addition, each non-employee director is eligible to receive non-
qualified stock options and restricted stock awards under our 1999 Omnibus
Stock Incentive Plan. Directors who serve either as our officers or employees
or as officers or employees of our subsidiary will not receive any additional
compensation for their services as directors. Please see the "--Stock Option
Plan" section of this prospectus.

Upon completion of this offering, Ms. Raffaeli and Mr. Bryant, our non-
employee director nominees, will each receive, subject to the terms and
conditions of our 1999 Omnibus Stock Incentive Plan, shares of restricted stock
having a value of $100,000. The number of shares of restricted stock to be
received by each of them will be calculated by reference to the initial public
offering price (11,111 shares for each of Ms. Raffaeli and Mr. Bryant, assuming
a $9.00 initial public offering price per share). The restriction period with
respect to the shares of restricted stock shall expire, and the shares may be
sold, transferred or otherwise disposed of, subject to applicable securities
law requirements, after the second anniversary of the completion of this
offering.

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<PAGE>

Compensation Committee Interlocks and Insider Participation

Before this offering, our board of directors did not have a compensation
committee and all compensation decisions were made by the full board of
directors. In the year ended December 31, 1998, the full board of directors,
which consisted solely of Mr. Strauss, determined the compensation of all
executive officers, including Mr. Strauss in his capacity as President and
Chief Executive Officer. Upon completion of this offering, the compensation
committee will make all compensation decisions. No interlocking relationship
exists between the board of directors or compensation committee and the board
of directors or compensation committee of any other company, nor has any such
interlocking relationship existed in the past.

Executive Compensation

Summary of Compensation. The following summary compensation table sets forth
information concerning compensation earned in the fiscal year ended December
31, 1998, by our Chief Executive Officer and our other 4 most highly
compensated executive officers (the "named executive officers").

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
Annual Compensation
------------------------- All Other
Name And Principal
Position Salary(/1/) ($) Bonus ($) Compensation(/2/)($)
------------------------- --------------- --------- --------------------
<S> <C> <C> <C>
Michael Strauss.......... 131,871 -- --
President and Chief
Executive Officer
Leonard Schoen, Jr. ..... 219,711 -- 13,931
Senior Vice President,
Operations
Leslie E. Tao............ 176,779 -- 505
Senior Vice President,
Production and Sales
Robert E. Burke.......... 156,154 -- 9,010
Senior Vice President,
Treasurer
Lawrence S. Jones........ 143,117 10,000 7,458
Vice President, Post-
Funding, Quality Control
& Compliance
</TABLE>
--------

(/1/Messrs.)Schoen, Burke, Jones and Ms. Tao will receive base salaries
in 1999 of $260,000, $180,000, $157,000 and $182,500, respectively.
In 1999, Mr. Strauss will receive an annual base salary of $129,358,
pro rated for that portion of the year before the closing of this
offering, and an annual base salary of $350,000 pro rated for the
balance of the year. Mr. Rizzetta, who was hired as our Chief
Financial Officer in 1999, will receive a base salary in 1999 of
$140,000. Mr. Taylor, who became our Vice President, Internet
Operations, in January 1999, will receive a base salary in 1999 of
$180,000. Mr. Valentine, our Vice President, Closing & Corporate
Counsel, will receive a base salary in 1999 of $175,000.

(/2/Represents)commissions earned for loan applicants referred to us,
who subsequently closed a transaction.

Stock Option Plan

In August 1999, our board of directors adopted and our stockholder approved
the 1999 Omnibus Stock Incentive Plan. We have reserved an aggregate of
1,125,000 shares of common stock for issuance under this plan. The purpose of
the Omnibus Stock Plan is to promote our long-term growth and profitability by
providing individuals with incentives to improve stockholder value and
contribute to our growth and financial success, and by enabling us to attract,
retain and reward the best available persons for positions of substantial
responsibility.

The Omnibus Stock Plan provides for the grant of non-qualified stock
options, incentive stock options within the meaning of Section 422 of the
Internal Revenue Code, stock appreciation rights and restricted and non-
restricted stock awards, each of which may be granted separately or in tandem
with other awards. Participation in the Omnibus Stock Plan is open to all of
our employees, officers and directors. However, only our employees or those of
our subsidiary may receive incentive stock option awards.

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<PAGE>

To date, no options or other grants have been granted under the Omnibus
Stock Plan. However, 22,222 shares of restricted stock (assuming a $9.00
initial public offering price per share) and options to acquire shares
of common stock will be granted upon consummation of this offering. The number
of shares of restricted stock will be determined by reference to, and the
options will be exercisable at, the initial public offering price.

The compensation committee of the board of directors will administer the
Omnibus Stock Plan. In doing so, the compensation committee has the authority
to:

. determine the eligible persons to whom, and the time or times at which,
awards shall be granted;

. determine the types of awards to be granted;

. determine the number of shares to be covered by or used for reference
purposes for each award;

. impose terms, limitations, restrictions and conditions on any award as
deemed appropriate;

. modify, amend, extend or renew outstanding awards, or accept the
surrender of outstanding awards and substitute new awards (provided,
however, that except in specified circumstances, any modification that
would materially adversely affect any outstanding award shall not be
made without the consent of the grantee);

. accelerate or otherwise change the time in which an award may be
exercised or becomes payable and to waive or accelerate the lapse, in
whole or in part, of any restriction or condition with respect to such
award, including, without limitation, any restriction or condition with
respect to the vesting or exercisability of an award following
termination of any grantee's employment; and

. establish objectives and conditions, if any, for earning awards and
determining whether awards will be paid after the end of a performance
period.

As the plan's administrator, the compensation committee also is authorized
to make adjustments in the terms and conditions of, and the criteria included
in, awards in recognition of unusual or nonrecurring events affecting us, or
our financial statements or those of our subsidiary, or of changes in
applicable laws, regulations or accounting principles, whenever the
administrator determines that such adjustments are appropriate in order to
prevent dilution or enlargement of the benefits or potential benefits intended
to be made available under the Omnibus Stock Plan.

Options intended to qualify as incentive stock options under Section 422 of
the Internal Revenue Code must have an exercise price at least equal to fair
market value on the date of grant. Incentive stock options may not be
exercisable more than 10 years from the date the option is granted. If any of
our employees, or those of our subsidiary, owns or is deemed to own at the date
of grant shares of stock representing in excess of 10% of the combined voting
power of all classes of our stock, the exercise price for the incentive stock
options granted to that employee may not be less than 110% of the fair market
value of the underlying shares on that date and the option may not be
exercisable more than 5 years from the date the option is granted. The option
exercise price may be paid in cash, by tender of shares of common stock, by a
combination of cash and shares or by any other means the administrator
approves. Awards of stock appreciation rights, stock and phantom stock awards
and performance awards may be settled in cash, shares of common stock or a
combination of both, in the administrator's discretion.

Our board of directors may terminate, amend or modify the Omnibus Stock Plan
or any portion of it at any time, except that all awards made before the
termination of the plan will remain in effect until they have been satisfied or
terminated in accordance with the terms of the plan and those awards.

Employment Arrangements

We have entered into an employment agreement with Mr. Strauss, our President
and Chief Executive Officer. The employment agreement provides for an annual
base salary of $350,000 and a discretionary bonus. The employment agreement is
effective as of August , 1999 for an initial term of 3 years and is

57
<PAGE>

automatically renewable for a one-year term, provided that either party may
terminate the agreement upon 12-months prior notice. The employment agreement
generally contains confidentiality provisions and covenants not to compete
during the term of employment and for one year after termination of employment.
In the event of a merger or acquisition in which Mr. Strauss' position is
eliminated or materially altered, we must pay him up to 3 times his base
salary.

Our employment agreement with Mr. Rizzetta, our Chief Financial Officer,
provides for an annual base salary of $140,000, and an annual bonus based on
our quarterly financial performance. If the annual pretax income of American
Home Mortgage is between 90% and 120% of our business plan, Mr. Rizzetta is
entitled to a corresponding bonus of up to $30,000. Mr. Rizzetta also may
receive an additional bonus of up to $30,000 at the discretion of our President
and Chief Executive Officer. Mr. Rizzetta's employment agreement is terminable
by either party on 3 weeks' written notice to the other party.

Our employment agreement with Mr. Burke, our Senior Vice President,
Treasurer, provides for an annual base salary of $180,000, and is terminable by
either party on 2 weeks' written notice to the other party.

Our employment agreement with Mr. O'Reilly, our Senior Vice President,
Secondary Marketing, provides for an annual base salary of $135,000, and an
additional amount equal to 10% of the improvement in our margins due to his
utilizing best execution models and other tools that enable us to receive a
greater price for our loans, which additional amount shall not be less than
$15,000. In order to carry out his duties under this agreement, Mr. O'Reilly
uses software of his own design and ownership. We have a 20-year non-exclusive
licensing agreement to use this software. The employment agreement is
terminable by either party on 3 weeks' written notice to the other party.

Our employment agreement with Mr. Schoen, our Senior Vice President,
Operations, provides for an annual base salary of $260,000, and prohibits him
from disclosing certain confidential information regarding American Home
Mortgage during or after the term of his employment. The agreement also
restricts, for a period of one year after termination of employment, certain
employment with mortgage brokerage businesses. The employment agreement is
terminable by either party on 2 weeks' written notice to the other party.

Our employment agreement with Mr. Taylor, our Vice President, Internet
Operations, provides for an annual base salary of $145,000, and an annual bonus
based on annual Internet loan originations and profitability. If the annual
Internet performance is between 90% and 120% of our business plan, Mr. Taylor
is entitled to a corresponding bonus of up to 25% of his base salary. Mr.
Taylor also is entitled to an additional bonus to be determined by our
President and Chief Executive Officer of at least 10% of Mr. Taylor's base
salary based on overall performance. The employment agreement is terminable by
either party on 2 weeks' written notice to the other party.

Our employment agreement with Ms. Tao, our Senior Vice President, Production
and Sales, provides for an annual base salary of $182,500, and an annual
production override commission of 1/100 of 1% of the principal amount of all
loans closed. The agreement is terminable by either party on 2 weeks' written
notice to the other party.

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<PAGE>

CERTAIN TRANSACTIONS

Immediately before this offering, we will issue the S corporation
distribution note to Mr. Strauss, the founder of our subsidiary, American Home
Mortgage Corp. Had our S corporation status been terminated as of June 30,
1999, the amount of the S corporation distribution note would have been $7.6
million. We expect the amount of the S corporation distribution note to
increase as a result of additional S corporation income from July 1, 1999 to
the date of the closing of this offering. The S corporation distribution note
will bear interest at the same rate of interest as our warehouse facility and
will be repaid out of the proceeds of this offering. For a more detailed
description of the S corporation distribution note, please see the
"Transactions Related to the Offering" section of this prospectus.

In 1998, Mr. Strauss received distributions amounting to approximately $1.5
million from our subsidiary, American Home Mortgage Corp. These distributions
enabled Mr. Strauss to pay taxes on American Home Mortgage Corp.'s earnings
that were attributable to him based on his sole ownership of the S corporation.

Pursuant to a guaranty agreement dated December 8, 1998, Mr. Strauss has
personally guaranteed the performance of all our obligations, liabilities and
indebtedness under our warehouse facility with First Union. Mr. Strauss'
liability under this guaranty is absolute and unconditional.

In 1998, we made a $52,000 interest-free loan to Great Oak Title Agency,
Inc. in connection with its start up. In March 1999, Mr. Strauss repaid the
outstanding balance on this loan. Great Oak is a title agency, 90% owned by Mr.
Strauss, that provides services to our subsidiary's customers. We did not
advance any other funds or expenses to Great Oak in 1998. In addition, during
1998, we made aggregate payments of $503,829 to Automated Information Services,
Inc. in connection with credit reporting services in the normal course of
business. Mr. Strauss holds a 15% interest in Automated Information Services,
Inc., which is a credit agency providing credit history data on borrowers.

In consideration of his employment as Senior Vice President, Secondary
Marketing, and the payment of $100, Mr. O'Reilly has granted us a 20-year non-
exclusive license to use certain interest rate risk management software
developed by Mr. O'Reilly.

PRINCIPAL STOCKHOLDERS

The following table sets forth information known to us with respect to
beneficial ownership of our common stock as of the date of this prospectus.

<TABLE>
<CAPTION>
Shares Beneficially Shares Beneficially
Owned Prior to Offering Owned After Offering
-----------------------------------------------------
Name of Beneficial Owner Number Percent Number Percent
------------------------ ------------- ----------------------- ----------
<S> <C> <C> <C> <C>
Michael Strauss............ 5,000,000 100.0 5,000,000 66.7
Leonard Schoen, Jr. ....... -- -- -- --
Leslie E. Tao.............. -- -- -- --
Robert E. Burke............ -- -- -- --
Lawrence S. Jones.......... -- -- -- --
Joseph P. Bryant........... -- -- 11,111(/1/) *
C. Cathleen Raffaeli....... -- -- 11,111(/1/) *
All directors and executive
officers as a group (12
persons).................. 5,000,000 100.0 5,022,222 66.7
</TABLE>
- --------

*Represents less than 1%.

(1) Represents shares of restricted stock to be issued by reference to an
assumed initial public offering price of $9.00 per share.

59
<PAGE>

DESCRIPTION OF CAPITAL STOCK

The following description of our capital stock and selected provisions of
our Restated Certificate of Incorporation and Bylaws is a summary and is
qualified in its entirety by reference to our Restated Certificate of
Incorporation and Bylaws.

Common Stock

We are authorized to issue up to 19,000,000 shares of common stock, par
value $.01 per share, of which 7,500,000 shares will be outstanding upon
completion of this offering. Each stockholder is entitled to one vote for each
share of common stock held on all matters submitted to a vote of stockholders.
There is no cumulative voting for election of directors. Accordingly, the
holders of a majority of the shares voted can elect all of the nominees for
director. Subject to the preferences of any series of preferred stock that may
at times be outstanding, if any, holders of outstanding shares of common stock
are entitled to receive dividends when, as, and if declared by our Board of
Directors out of funds legally available for dividends and, if we liquidate,
dissolve or wind up, are entitled to share ratably in all assets remaining
after payment of liabilities and payment of accrued dividends and liquidation
preferences on the preferred stock, if any. Holders of common stock have no
preemptive rights and have no rights to convert their common stock into any
other securities. All shares of common stock outstanding upon completion of
this offering are validly authorized and issued, fully paid and nonassessable.

Preferred Stock

We are authorized to issue up to 1,000,000 shares of preferred stock, par
value $1.00 per share, none of which will be outstanding upon completion of
this offering. The preferred stock may be issued in one or more series, the
terms of which may be determined at the time of issuance by our board of
directors, without further action by our stockholders, and may include voting
rights, including the right to vote as a series on particular matters,
preferences as to dividends and liquidation, conversion rights, redemption
rights and sinking fund provisions. The issuance of any preferred stock could
adversely affect the rights of the holders of common stock and, therefore,
reduce the value of the common stock. The ability of our board of directors to
issue preferred stock could discourage, delay or prevent a takeover.

60
<PAGE>

Indemnification of Directors and Executive Officers and Limitation on Liability

Our Restated Certificate of Incorporation includes provisions that eliminate
the personal liability of our directors for monetary damages resulting from
breaches of their fiduciary duty (except for liability for breaches of the duty
of loyalty, acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, violations under Section 174 of the
DGCL or for any transaction from which the director derived an improper
personal benefit). We believe that these provisions are necessary to attract
and retain qualified persons as directors and officers.

Section 145 of the DGCL permits a corporation to indemnify certain of its
officers, directors, employees and agents. Our Restated Certificate of
Incorporation provides that we will indemnify, to the fullest extent permitted
under law, each of our directors and officers with respect to all liability and
loss suffered and expenses incurred by such person in any action, suit or
proceeding in which such person was or is made or threatened to be made a party
or is otherwise involved by reason of the fact that such person is or was one
of our directors or officers. We are also obligated to pay the expenses of the
directors and officers incurred in defending such proceedings, subject to
reimbursement if it is subsequently determined that such person is not entitled
to indemnification.

We intend to obtain a policy of insurance under which our directors and
officers will be insured, subject to the limits of the policy, against certain
losses arising from claims made against such directors and officers by reason
of any acts or omissions covered under such policy in their respective
capacities as directors or officers, including liabilities under the Securities
Act. Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to our directors, officers and controlling persons
pursuant to the foregoing provisions, or otherwise, we have been advised that,
in the opinion of the Commission, such indemnification is against public policy
as expressed in the Securities Act and is, therefore, unenforceable.

Delaware Anti-Takeover Law

We are subject to Section 203 of the DGCL ("Section 203"), which, subject to
certain exceptions and limitations, prohibits a Delaware corporation from
engaging in any "business combination" with any "interested stockholder" for a
period of three years following the date that such stockholder became an
interested stockholder, unless:

(i) prior to such date, the board of directors of the corporation approved
either the business combination or the transaction which resulted in
the stockholder becoming an interested stockholder;

(ii) upon consummation of the transaction which resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned
at least 85% of the voting stock of the corporation outstanding at the
time the transaction commenced (for the purposes of determining the
number of shares outstanding under the DGCL, those shares owned (x) by
persons who are directors and also officers and (y) by employee stock
plans in which employee participants do not have the right to
determine confidentially whether shares held subject to the plan will
be tendered in a tender or exchange offer are excluded from the
calculation); or

(iii) on or subsequent to such date, the business combination is approved
by the board of directors and authorized at an annual or special meeting
of stockholders, and not by written consent, by the affirmative vote of
at least 66 2/3% of the outstanding voting stock which is not owned by
the interested stockholder.

For purposes of Section 203, a "business combination" includes:

(i) any merger or consolidation involving the corporation and the
interested stockholder;

(ii) any sale, transfer, pledge or other disposition of 10% or more of the
assets of the corporation involving the interested stockholder;

(iii) subject to certain exceptions, any transaction which results in the
issuance or transfer by the corporation of any stock of the corporation
to the interested stockholder;

61
<PAGE>

(iv) any transaction involving the corporation which has the effect of
increasing the proportionate share of the stock of any class or series
of the corporation beneficially owned by the interested stockholder;
or

(v) the receipt by the interested stockholder of the benefit of any loans,
advances, guarantees, pledges or other financial benefits provided by
or through the corporation.

For purposes of Section 203, an interested stockholder is defined as any entity
or person beneficially owning 15% or more of the outstanding voting stock of
the corporation and any entity or person affiliated with or controlling or
controlled by such entity or person.

Selected Certificate and Bylaw Provisions

Our Restated Certificate of Incorporation provides that our board of
directors will be divided into 3 classes, with staggered 3-year terms. As a
result, only one class of directors will be elected at each annual meeting of
stockholders, with the other classes continuing for the remainder of their
respective terms.

Our Restated Certificate of Incorporation also provides that directors may
be removed from office only for cause and only by the affirmative vote of the
holders of at least a majority of our total outstanding voting stock. Vacancies
on our board of directors, including those resulting from an increase in the
number of directors, may be filled only by the remaining directors, not by
stockholders.

Any action required or permitted to be taken by our stockholders may be
effected only at an annual or special meeting of stockholders and will not be
permitted to be taken by written consent in lieu of a meeting. Our Restated
Certificate of Incorporation and Bylaws also provide that special meetings of
stockholders may be called by the chairman of the board or a majority of our
board of directors. Stockholders will not be permitted to call a special
meeting or to require that the board of directors call a special meeting of
stockholders.

There are provisions in our Restated Certificate of Incorporation, including
those relating to the size and classification of the board of directors, the
removal of directors, the prohibition on action by written consent and the
calling of special meetings, that may only be amended by the affirmative vote
of the holders of at least a majority of our total outstanding voting stock. In
addition, our Restated Certificate of Incorporation provides that our Bylaws
may only be amended by the affirmative vote of the holders of at least a
majority of our outstanding voting stock or by a vote of a majority of the
members of the board of directors in office.

Our Restated Certificate of Incorporation and Bylaws contain an advance
notice procedure for nominations, other than by or at the direction of the
board of directors, of candidates for election as directors, as well as for
other stockholder proposals to be considered at annual meetings of
stockholders. In general, notice of intent to nominate a director or raise
business at such meeting must be received by us not less than 60 nor more than
90 days prior to the scheduled annual meeting and must contain certain
specified information concerning the person to be nominated or the matter to be
brought before the meeting.

The preceding provisions could have the effect of discouraging, delaying or
making more difficult certain attempts to acquire us or to remove incumbent
directors even if a majority of our stockholders believe the attempt to be in
their or our best interests.

Options and Other Awards

No options are currently outstanding. Effective upon the closing of this
offering, 22,222 shares of restricted stock (assuming a $9.00 initial public
offering price per share) and options to purchase a total of shares of
common stock will be granted or issued under the 1999 Omnibus Stock Incentive
Plan.

Transfer Agent and Registrar

The transfer agent and registrar for our common stock is American Stock
Transfer & Trust Company.

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<PAGE>

SHARES ELIGIBLE FOR FUTURE SALE

Once this offering is complete, we will have a total of 7,500,000 shares of
common stock outstanding, assuming no exercise of the underwriters'
overallotment option and no exercise of the outstanding options or warrants to
purchase shares of common stock. Of these shares of common stock, the 2,500,000
shares from the offering will be freely tradable without restriction or further
registration under the Securities Act, except that any shares held by an
"affiliate," as that term is defined in Rule 144 of the Act, may generally be
sold only in compliance with the limitations of Rule 144 described below.

Rule 144

The 5,000,000 shares of common stock held by Mr. Strauss, our President and
Chief Executive Officer, are "restricted securities" as defined in Rule 144 of
the Securities Act. Restricted securities may be sold in the public market only
if they are registered or if they qualify for an exemption from registration
under the Securities Act. Subject to the lockup agreement described below,
these 5,000,000 shares of common stock will be available for sale in the public
market 90 days after the date of this prospectus. Under Rule 144, in any 3-
month period beginning 90 days after the date of this prospectus, Mr. Strauss
may sell a number of shares of common stock not to exceed the greater of:

. 1% of the then outstanding shares of common stock (75,000 shares
immediately after the offering); or

. the average weekly trading volume in the common stock during the 4
calendar weeks before the person files notice of the Rule 144 sale,
subject to various restrictions.

Lock-Up Agreements

We and Mr. Strauss, our President, Chief Executive Officer and sole existing
stockholder, have agreed not to offer, pledge, sell, contract to sell, sell any
option or contract to purchase, purchase any option or contract to sell, grant
any option, right or warrant to purchase, or otherwise transfer or dispose of
directly or indirectly, any shares of our common stock, or any securities
convertible into or exercisable or exchangeable for any of our common stock or
any right to acquire our common stock, for a period of 180 days from the
effective date of this prospectus in our case, and for a period of 540 days
from the effective date in Mr. Strauss' case. Friedman, Billings, Ramsey & Co.,
Inc. at any time and without notice, may release all or any portion of common
stock subject to the foregoing lock-up agreements.

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<PAGE>

UNDERWRITING

Subject to the terms and conditions set forth in the underwriting agreement
between us and Friedman, Billings, Ramsey & Co., Inc. and Advest, Inc. as
representatives of the several underwriters, we have agreed to sell to each of
the underwriters named below, and each of the underwriters has severally agreed
to purchase, the number of shares of common stock set forth opposite their
names below.

<TABLE>
<CAPTION>
Number of
Underwriter Shares
----------- ---------
<S> <C>
Friedman, Billings, Ramsey & Co., Inc............................
Advest, Inc......................................................

---------
Total.......................................................... 2,500,000
=========
</TABLE>

Under the terms and conditions of the underwriting agreement, the
underwriters are committed to purchase all the common stock offered by this
prospectus if any is purchased. We have agreed to indemnify the underwriters
against certain civil liabilities under the Securities Act, or to contribute to
payments the underwriters may be required to make in respect of such
liabilities.

The underwriters initially propose to offer the common stock directly to the
public at the public offering price set forth on the cover page of this
prospectus, and to certain dealers at such offering price less a concession not
to exceed $ per share. The underwriters may allow, and such dealers may
reallow, a concession not to exceed $ per share to certain other dealers.
After the common stock is released for sale to the public, the underwriters may
change the offering price and other selling terms.

We have granted the underwriters an option exercisable during the 30-day
period after the date of this prospectus to purchase, at the initial offering
price less underwriting discounts and commissions, up to an additional 375,000
shares of common stock for the sole purpose of covering over-allotments, if
any. To the extent that the underwriters exercise the option, each underwriter
will be committed, subject to certain conditions, to purchase that number of
additional shares of common stock that is proportionate to such underwriter's
initial commitment.

As described in the underwriting agreement, we have agreed to reimburse the
underwriters for certain out-of-pocket expenses up to $425,000. The following
table summarizes the compensation and estimated expenses we will pay:

<TABLE>
<CAPTION>
Total
------------------------
Without Over- With Over-
Per Share Allotment Allotment
--------- ------------- ----------
<S> <C> <C> <C>
Underwriting discounts and
commissions.........................
Expenses.............................
</TABLE>

In connection with this offering, the underwriters may engage in
transactions that stabilize, maintain or otherwise affect the price of the
common stock. Specifically, the underwriters may over-allot this offering
creating a syndicate short position. In addition, the underwriters may bid for
and purchase common stock in the open market to cover syndicate short positions
or to stabilize the price of the common stock. Finally, the underwriting
syndicate may reclaim selling concessions from syndicate members if the
syndicate repurchases previously distributed common stock in syndicate covering
transactions, in stabilization transactions or otherwise. Any of these
activities may stabilize or maintain the market price of the common stock above
independent market levels. The underwriters are not required to engage in these
activities and may end any of these activities at any time.

The underwriters have informed us that they do not intend to confirm sales
of the common stock offered by this prospectus to any accounts over which they
exercise discretionary authority.

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<PAGE>

The underwriters have reserved up to 75,000 shares of common stock for sale
to our directors, officers and employees at the public offering price. The
number of shares available for sale to the general public will be reduced to
the extent such persons purchase such reserved shares. Any reserved shares not
so purchased will be offered by the underwriters to the general public at the
public offering price on the same basis as the other shares offered hereby.

We have agreed to sell to Friedman, Billings, Ramsey & Co., Inc. or its
designees, for nominal consideration, warrants to purchase an aggregate of
250,000 shares of our common stock (the FBR Warrants). The shares of common
stock subject to the FBR Warrants will be in all respects identical to the
shares of common stock offered to the public by this prospectus. The FBR
Warrants will be exercisable for a period of 4 years, which period commences
one year after the closing date of this offering at a per share exercise price
equal to 110% of the initial public offering price. Neither the FBR Warrants
nor the underlying shares of common stock may be transferred, assigned or
hypothecated for a period of one year from the closing of the offering, except
to the extent permitted by applicable rules of the NASD. We are also
registering in this offering the shares of common stock issuable upon exercise
of the FBR Warrants. The FBR Warrants will contain anti-dilution provisions
providing for appropriate adjustment of the exercise price and number of shares
of common stock that may be purchased upon the occurrence of certain events.
The FBR Warrants may be exercised by paying the exercise price in cash, through
the surrender of shares of common stock, through a reduction in the number of
shares covered by such Warrants, or by using a combination of these methods.

We have agreed that, for a period of at least two years from the date of
this prospectus, Friedman, Billings, Ramsey & Co., Inc. will have the right to
require us to use our best efforts to elect a mutually acceptable designee to
our board of directors for at least such 2-year period.

There is no established trading market for the shares. The offering price
for the shares will be determined by negotiation between us and the
representatives. The principal factors we will consider in determining the
public offering price include:

. prevailing market and general economic conditions;

. the market capitalizations, trading histories and stages of development
of other traded companies that we and the representatives believe to be
comparable to us;

. our results of operations in recent periods;

. our current financial position;

. estimates of our business potential;

. an assessment of our management;

. the present state of our development; and

. the availability for sale in the market of a significant number of
shares of common stock.

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<PAGE>

We cannot assure you that an active trading market will develop for the
common stock or that the common stock will trade in the market subsequent to
the offering at or above the initial public offering price.

We have applied to list the shares of common stock on The Nasdaq National
Market under the symbol "AHMH".

LEGAL MATTERS

The validity of the issuance of the shares of common stock offered hereby
will be passed on for us by Cadwalader, Wickersham & Taft. Certain legal
matters will be passed on for the underwriters by Gibson, Dunn & Crutcher LLP.

EXPERTS

The consolidated financial statements as of December 31, 1997 and 1998 and
June 30, 1999 and for each of the 3 years in the period ended December 31, 1998
and for the six months ended June 30, 1999 included in this prospectus have
been audited by Deloitte & Touche LLP, independent auditors, as stated in their
report appearing herein and have been so included in reliance on the report of
such firm given on their authority as experts in accounting and auditing.

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 under the Securities Act relating to the shares of our
common stock being offered by this prospectus. This prospectus does not contain
all of the information set forth in the registration statement and the
exhibits. For further information about us and the common stock offered, see
the registration statement and the exhibits thereto. Statements contained in
this prospectus regarding the contents of any contract or any other document to
which reference is made are not necessarily complete, and, in each instance
where a copy of a contract or other document has been filed as an exhibit to
the registration statement, reference is made to the copy so filed, each of
those statements being qualified in all respects by that reference.

A copy of the registration statement and the exhibits may be inspected
without charge at the Commission's offices at Judiciary Plaza, 450 Fifth
Street, Washington, D.C. 20549, and copies of all or any part of the
registration statement may be obtained from the Public Reference Room of the
Commission, Washington, D.C. 20549 upon the payment of the fees prescribed by
the Commission. The public may obtain information on the operation of the
Public Reference Room by calling the Commission at 1-800-SEC-0330. The
Commission maintains a Web site (http://www.sec.gov) that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the Commission.

As a result of this offering, we will become subject to the information and
reporting requirements of the Securities Exchange Act of 1934, as amended, and
we will file periodic reports, proxy statements and other information with the
Commission. Upon approval of the common stock for quotation on the Nasdaq
National Market, our reports, proxy and information statements and other
information may also be inspected at the offices of Nasdaq Operations, 1735 K
Street, N.W., Washington, D.C. 20006. We intend to furnish our stockholders
with annual reports containing audited financial statements and with quarterly
reports for the first three quarters of each year containing unaudited interim
financial information.

66
<PAGE>

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
AMERICAN HOME MORTGAGE HOLDINGS, INC.
Independent Auditors' Report............................................ F-2
Consolidated Balance Sheets as of December 31, 1997 and 1998 and June
30, 1999............................................................... F-3
Consolidated Statements of Income for the years ended December 31, 1996,
1997 and 1998 and the six months ended June 30, 1998 (unaudited) and
1999................................................................... F-4
Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1996, 1997 and 1998 and the six months ended June 30,
1999................................................................... F-5
Consolidated Statements of Cash Flows for the years ended December 31,
1996, 1997 and 1998 and the six months ended June 30, 1998 (unaudited)
and 1999............................................................... F-6
Notes to Consolidated Financial Statements.............................. F-7
</TABLE>

F-1
<PAGE>

INDEPENDENT AUDITORS' REPORT

The accompanying financial statements give effect to the consummation of the
capitalization of American Home Mortgage Holdings, Inc. and the contribution of
the sole ownership interest of Michael Strauss in American Home Mortgage Corp.
in exchange for common stock ownership in American Home Mortgage Holdings, Inc.
that is expected to take place prior to the commencement of the proposed
offering of securities. The following report is in the form that will be
furnished by Deloitte & Touche LLP upon the consummation of the pending public
offering of common stock described in Note 16 to the financial statements
assuming that from August 18, 1999 to the effective date of such event no other
material events have occurred that would affect the accompanying financial
statements or require disclosure therein.

"To the Board of Directors and Stockholders of
American Home Mortgage Holdings, Inc.

We have audited the accompanying consolidated balance sheets of American
Home Mortgage Holdings, Inc. and its subsidiary (the "Company") as of
December 31, 1997 and 1998 and June 30, 1999 and the related consolidated
statements of income, changes in stockholders' equity, and cash flows for
each of the three years in the period ended December 31, 1998 and the six
months ended June 30, 1999. 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 generally accepted auditing
standards. 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 American Home Mortgage
Holdings, Inc. and its subsidiary at December 31, 1997 and 1998 and June
30, 1999 and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 1998 and the six months
ended June 30, 1999 in conformity with generally accepted accounting
principles.

Parsippany, New Jersey

, 1999

( , 1999 as to Note 16)"

Deloitte & Touche LLP
Parsippany, New Jersey

August 18, 1999

F-2
<PAGE>

AMERICAN HOME MORTGAGE HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
December 31,
-----------------------
June 30,
June 30, 1999
1997 1998 1999 Proforma
----------- ----------- ----------- -----------
(unaudited)
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents...... $ 2,057,619 $ 2,891,513 $ 2,092,431 $14,126,559
Loans held for sale, net....... 24,675,753 34,666,863 42,056,131 42,056,131
Loans held for investment,
net........................... 78,817 88,900 169,348 169,348
Accounts receivable............ 982,863 2,892,807 4,145,672 4,145,672
Mortgage servicing rights,
net........................... 26,306 39,887 37,887 37,887
Real estate owned.............. 186,000 -- -- --
Premises and equipment, net.... 690,236 1,575,154 2,099,249 2,099,249
Prepaid expenses and security
deposits...................... 216,424 236,810 318,332 318,332
----------- ----------- ----------- -----------
Total assets............... $28,914,018 $42,391,934 $50,919,050 $62,953,178
=========== =========== =========== ===========
LIABILITIES AND STOCKHOLDERS'
EQUITY
LIABILITIES:
Warehouse lines of credit.... $24,453,671 $34,069,526 $25,312,700 $25,312,700
Drafts payable............... -- -- 15,502,122 15,502,122
Accrued expenses and other... 1,886,801 2,297,542 2,463,105 2,463,105
Deferred income tax
liability................... -- -- -- 375,000
----------- ----------- ----------- -----------
Total liabilities.......... 26,340,472 36,367,068 43,277,927 43,652,927
----------- ----------- ----------- -----------
COMMITMENTS AND CONTINGENCIES
(Note 7)
MINORITY INTEREST.............. -- 100,760 70,251 70,251
STOCKHOLDERS' EQUITY:
Preferred Stock $1.00 per
share, 1,000,000 shares
authorized, none issued and
outstanding................. -- -- -- --
Common stock, .01 per share
par value, 19,000,000 shares
authorized, 5,000,000 issued
and outstanding, 7,500,000
issued and outstanding
proforma.................... 317,600 317,600 317,600 75,000
Additional paid-in capital... -- -- -- 19,155,000
Retained earnings............ 2,255,946 5,606,506 7,253,272 --
----------- ----------- ----------- -----------
Total stockholders'
equity.................... 2,573,546 5,924,106 7,570,872 19,230,000
----------- ----------- ----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY.......... $28,914,018 $42,391,934 $50,919,050 $62,953,178
=========== =========== =========== ===========
</TABLE>

See notes to consolidated financial statements.

F-3
<PAGE>

AMERICAN HOME MORTGAGE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
Six Months Ended June
Year Ended December 31, 30,
---------------------------------- ------------------------
1996 1997 1998 1998 1999
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
(unaudited)
REVENUES:
<CAPTION>
Gain on sale of mortgage
loans.................... $6,360,692 $10,596,604 $18,980,534 $ 7,689,722 $12,962,726
<S> <C> <C> <C> <C> <C>
Interest income, net...... 203,736 368,808 734,179 448,282 708,368
Other..................... 21,053 356,018 502,223 269,302 636,715
---------- ----------- ----------- ----------- -----------
Total revenues.......... 6,585,481 11,321,430 20,216,936 8,407,306 14,307,809
---------- ----------- ----------- ----------- -----------
EXPENSES:
Salaries, commissions and
benefits, net............ 2,700,541 5,186,373 9,301,023 3,571,108 7,899,027
Officer's salary.......... 757,925 129,359 129,359 65,000 65,000
Marketing and promotion... 814,180 962,475 1,236,461 598,127 868,948
Occupancy and equipment... 501,168 909,216 1,653,709 648,196 1,023,058
Data processing and
communications........... 336,813 611,699 951,508 423,478 616,662
Provision for loss........ -- 116,837 152,955 33,422 27,967
Other..................... 830,484 946,270 1,542,997 714,419 1,102,801
---------- ----------- ----------- ----------- -----------
Total expenses.......... 5,941,111 8,862,229 14,968,012 6,053,750 11,603,463
---------- ----------- ----------- ----------- -----------
INCOME BEFORE INCOME TAXES
AND MINORITY INTEREST...... 644,370 2,459,201 5,248,924 2,353,556 2,704,346
STATE INCOME TAXES.......... 38,334 139,887 328,209 118,242 131,266
---------- ----------- ----------- ----------- -----------
INCOME BEFORE MINORITY
INTEREST................... 606,036 2,319,314 4,920,715 2,235,314 2,573,080
MINORITY INTEREST IN INCOME
(LOSS) OF CONSOLIDATED
JOINT VENTURE.............. -- -- 50,760 (5,645) 44,491
---------- ----------- ----------- ----------- -----------
NET INCOME.................. $ 606,036 $ 2,319,314 $ 4,869,955 $ 2,240,959 $ 2,528,589
========== =========== =========== =========== ===========
Unaudited pro forma
information:
Provision for pro forma
income taxes............. 245,000 942,000 1,982,000 917,000 1,058,000
---------- ----------- ----------- ----------- -----------
Pro forma earnings........ $ 361,036 $ 1,377,314 $ 2,887,955 $ 1,323,959 $ 1,470,589
========== =========== =========== =========== ===========
Pro forma earnings per
share of common stock.... $ 0.39 $ 0.20
=========== ===========
Pro forma weighted average
number of shares
outstanding.............. 7,500,000 7,500,000
=========== ===========
</TABLE>

See notes to consolidated financial statements.

F-4
<PAGE>

AMERICAN HOME MORTGAGE HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998

AND THE SIX MONTHS ENDED JUNE 30, 1999

<TABLE>
<CAPTION>
Common Retained Total
Stock Earnings Equity
-------- ---------- ----------
<S> <C> <C> <C>
BALANCE, JANUARY 1, 1996....................... $317,600 $ 402,814 $ 720,414
Net income................................... -- 606,036 606,036
-------- ---------- ----------
BALANCE, DECEMBER 31, 1996..................... 317,600 1,008,850 1,326,450
Net income................................... -- 2,319,314 2,319,314
Distributions................................ -- (1,072,218) (1,072,218)
-------- ---------- ----------
BALANCE, DECEMBER 31, 1997..................... 317,600 2,255,946 2,573,546
Net income................................... -- 4,869,955 4,869,955
Distributions................................ -- (1,519,395) (1,519,395)
-------- ---------- ----------
BALANCE, DECEMBER 31, 1998..................... 317,600 5,606,506 5,924,106
Net income................................... -- 2,528,589 2,528,589
Distributions................................ -- (881,823) (881,823)
-------- ---------- ----------
BALANCE, JUNE 30, 1999......................... $317,600 $7,253,272 $7,570,872
======== ========== ==========
</TABLE>

See notes to consolidated financial statements.

F-5
<PAGE>

AMERICAN HOME MORTGAGE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
Year Ended December 31, Six Months Ended June 30,
--------------------------------------------- -------------------------
1996 1997 1998 1998 1999
---- ---- ---- ---- ----
(unaudited)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net income............ $ 606,036 $ 2,319,314 $ 4,869,955 $ 2,240,959 $ 2,528,589
Adjustments to
reconcile net income
to net cash (used in)
provided by operating
activities:
Gain on equity
securities......... -- -- (76,088) (76,088) --
Depreciation and
amortization....... 61,732 126,965 284,304 118,947 170,185
Provision for loss.. -- 116,837 152,955 33,422 27,967
Origination of
mortgage loans..... (490,822,316) (714,612,136) (1,141,240,923) (511,572,907) (600,376,762)
Proceeds on sale of
mortgage loans..... 490,713,588 698,872,291 1,131,144,305 496,825,681 592,959,527
Proceeds on sale of
equity securities,
trading............ -- -- 176,088 176,088 --
Purchases of equity
securities,
trading............ -- -- (100,000) (100,000) --
(Increase) decrease
in:
Accounts
receivable........ (424,226) (393,329) (1,909,944) (871,295) (1,252,865)
Mortgage servicing
rights............ 23,119 (16,970) (13,581) (12,332) (1,000)
Prepaid expenses
and security
deposits.......... (41,484) (117,451) (20,385) (33,930) (81,522)
Increase in accrued
expenses and other
liabilities........ 361,928 1,016,562 413,293 651,332 165,563
------------- ------------- --------------- -------------- -------------
Net cash provided
by (used in)
operating
activities....... 478,377 (12,687,917) (6,320,021) (12,620,123) (5,860,318)
------------- ------------- --------------- -------------- -------------
CASH FLOWS FROM
INVESTING ACTIVITIES:
Sale/(purchase) of
real estate owned,
net................. -- (186,000) 186,000 186,000 --
Net sale/(purchases)
of loans held for
investment.......... -- (78,817) (10,083) 16,041 (80,448)
Investment in joint
venture............. -- -- (50,000) -- --
Net purchases of
premises and
equipment........... (285,200) (520,829) (1,169,222) (812,896) (691,280)
Increase/(decrease)
in minority
interest............ -- -- 100,760 44,355 (30,509)
------------- ------------- --------------- -------------- -------------
Net cash provided
by (used in)
investing
activities....... (285,200) (785,646) (942,545) 566,500 (802,237)
------------- ------------- --------------- -------------- -------------
CASH FLOWS FROM
FINANCING ACTIVITIES:
Increase/(decrease)
in warehouse lines
of credit........... 49,537 15,377,843 9,615,855 14,163,818 (8,756,826)
Increase in drafts
payable............. -- -- -- -- 15,502,122
Capital
distribution........ -- (1,072,218) (1,519,395) (1,286,073) (881,823)
------------- ------------- --------------- -------------- -------------
Net cash provided
by financing
activities....... 49,537 14,305,625 8,096,460 12,877,745 5,863,473
------------- ------------- --------------- -------------- -------------
NET INCREASE/(DECREASE)
IN CASH............... 242,714 832,062 833,894 (308,878) (799,082)
------------- ------------- --------------- -------------- -------------
CASH AND CASH
EQUIVALENTS, BEGINNING
OF PERIOD............. 982,843 1,225,557 2,057,619 2,057,619 2,891,513
------------- ------------- --------------- -------------- -------------
CASH AND CASH
EQUIVALENTS, END OF
PERIOD................ $ 1,225,557 $ 2,057,619 $ 2,891,513 $ 1,748,741 $ 2,092,431
============= ============= =============== ============== =============
SUPPLEMENTAL
DISCLOSURE--CASH PAID
FOR:
Interest............. $ 422,732 $ 905,333 $ 1,674,266 $ 614,177 $ 1,065,132
Taxes................ 10,504 66,556 180,299 127,822 374,933
</TABLE>

See notes to consolidated financial statements.

F-6
<PAGE>

AMERICAN HOME MORTGAGE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998

AND THE SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED) AND 1999

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Ownership

American Home Mortgage Holdings, Inc. is a holding company whose principal
asset is its investment in its wholly-owned subsidiary, American Home Mortgage
Corp. (American Home Mortgage) (collectively referred to herein as the
Company). American Home Mortgage is a residential mortgage lender headquartered
in New York City with offices in New York, Connecticut, New Jersey, Florida,
Pennsylvania and Maryland. The Company is 100% owned by its President, Michael
Strauss. On April 23, 1998, the Company entered into a joint venture with a
realtor in which the Company and the realtor each own a 50% interest. The
Company entered into a second joint venture on March 31, 1999 with a realtor in
which the Company and the realtor each own a 50% interest. The Company entered
into a third joint venture on May 14, 1999 with a home builder/developer in
which the Company and home builder/developer each own a 50% interest. The
latest joint venture had no activity as of the period ended June 30, 1999. The
Company purchases many of the loans originated by the joint ventures.

Consolidation

Because the Company exercises significant influence on the operations of the
joint ventures, their balances and operations have been fully consolidated in
the accompanying consolidated financial statements and all material
intercompany accounts and transactions have been eliminated.

Basis of Presentation

The preparation of financial statements in conformity with generally
accepted accounting principles 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, 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.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, restricted cash, amounts due
from banks, and overnight deposits.

Mortgage Loans Held for Sale

Mortgage loans held for sale represent mortgage loans originated and held
pending sale to interim and permanent investors. The mortgages are carried at
the lower of cost or market as determined by outstanding commitments from
investors or current investor yield requirements calculated on the aggregate
loan basis. The Company separately evaluates for impairment the estimated fair
value of its commitments to lend. If impairment exists, the Company records a
charge to earnings in the current period. The Company generally sells whole
loans without servicing retained. Gains or losses on such sales are generally
recognized at the time the title transfers to the investor based upon the
difference between the sales proceeds from the final investor and the basis of
the loan sold, adjusted for net deferred loan fees and certain direct costs,
selling costs and any other adjustments. The Company defers net loan
origination costs as a component of the loan balance on the balance sheet. Such
costs are not amortized and are recognized into income as a component of the
gain or loss upon sale.

F-7
<PAGE>

AMERICAN HOME MORTGAGE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998

AND THE SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED) AND 1999

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Mortgage Loans Held for Investment

Periodically, the Company originates or repurchases loans which are unable
to be sold through normal investor channels. These loans are classified as held
for investment and carried at amortized cost, which represents the lower of
cost or market value at the time the loans are transferred or repurchased. The
Company has the intent and ability to hold these loans for the foreseeable
future. The Company defers net loan origination costs as a component of the
loan balance and amortizes the deferred costs into interest income over the
life of the loan using the effective interest method.

Provision for Foreclosure and Loan Losses

A provision for loss is provided based on management's periodic evaluation
of its loss exposures for loans held for sale and the applicable loan sale
agreements. The provision for loans held for sale is based on certain default
and foreclosure provisions in the applicable loan sale agreements. Management
reviews such loan sale agreement exposure on an aggregate basis to evaluate the
adequacy of the related allowance for loss. Due to the relatively small number
of loans held for investment, analysis is performed on a specific loan basis.
The pertinent factors in determining the exposures include the underlying
quality of the loans, actual loss experience, current economic conditions,
detailed analysis of individual loans for which full collectibility may not be
assured, and determination of the existence and realizable value of the
collateral and any guarantees securing such loans.

Mortgage Servicing Rights

The Company generally sells whole loans without servicing retained. Mortgage
servicing rights represent servicing retained on loans sold to one of the
Company's permanent investors who requires the Company to continue to service
the loans as a condition of sale. The Company does not have in-house servicing
capability and has a sub-servicing contract with a third party. The Company
capitalizes the cost of these mortgage servicing rights by allocating the
original cost basis in the loans based upon the relative fair value of the
underlying mortgage loans and mortgage servicing rights at the time the
servicing rights are contractually separated from the underlying loans. The
Company records amortization expense over the period of the projected net
servicing income. Impairment is recorded as a direct reduction of the asset
balance and a charge to amortization expense in the period it is determined.

Derivative Financial Instruments

The Company obtains and holds derivative financial instruments to manage
price and interest rate risk related to its mortgage loans held for sale and
commitments to fund mortgages. No derivatives are held for trading purposes.
Fair value amounts were determined based upon available market information.
Realized and unrealized gains and losses associated with these instruments are
included in the Company's lower of cost or market evaluation and the
determination of gain or loss on sale of mortgage loans. The Company is not
required to satisfy margin or collateral requirements for any of these
financial instruments.

Property, Equipment and Leasehold Improvements

Property, equipment and leasehold improvements are stated at cost less
accumulated depreciation and amortization. Depreciation is provided in amounts
sufficient to relate the cost of depreciable assets to operations over their
estimated service lives using the straight-line method. Leasehold improvements
are amortized over the lesser of the life of the lease or service lives of the
improvements using the straight-line

F-8
<PAGE>

AMERICAN HOME MORTGAGE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998

AND THE SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED) AND 1999

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

method. Depreciation and amortization are recorded within occupancy and
equipment expense within the financial statements.

Drafts Payable

Beginning in June 1999, the Company implemented a new cash management system
enabling it to draw funds against its warehouse facility upon the presentment
of borrowers' checks to the bank. This system enables the Company to minimize
its interest expense by not having to increase the outstanding warehouse
balance until the loan funding check is presented to the Company's lender.

Income Taxes

Through , 1999, American Home Mortgage elected for both federal and
state income tax purposes to be treated as an S corporation (effective April 1,
1988). As an S corporation, the net
earnings of American Home Mortgage were generally taxed directly to the
stockholder rather than American Home Mortgage.

On , 1999, the Company became a C corporation. All income earned from
that date is subject to corporate tax at statutory rates for both federal and
state income tax purposes. The Company accounts for income taxes from that date
in conformity with SFAS No. 109, "Accounting for Income Taxes', which requires
an asset and liability approach for accounting and reporting of income taxes.

Loan Origination Fees

Loan fees, discount points and certain direct origination costs are recorded
as an adjustment of the cost of the loan and are included in gain on sales of
loans when the loan is sold. Accordingly, salaries, compensation

and benefits have been reduced by approximately $2,636,000, $4,242,000 and
$6,788,000 in direct loan origination costs including commission costs incurred
for the years ended December 31, 1996, 1997 and 1998, respectively. Salaries,
compensation and benefits have been reduced by approximately $3,306,000 and
$4,261,000 for the six month periods ended June 30, 1998 and 1999.

Interest Recognition

Interest income is accrued as earned. Loans are placed on a non-accrual
status when any portion of the principal or interest is ninety 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 Fed
Funds rate. Interest expense has been netted with interest income within the
consolidated statements of income in the amounts of $430,966, $905,333,
$1,910,289, $980,615 and $962,254 for the years ended December 31, 1996, 1997
and 1998, and for the six month periods ended June 30, 1998 and 1999,
respectively.

Marketing and Promotion

The Company charges the costs of marketing and promotion to expense in the
period incurred.

Net Worth Requirements

American Home Mortgage is required to maintain certain specified levels of
minimum net worth in order to maintain its approved seller/servicer status for
Fannie Mae and HUD. At December 31, 1997 and 1998 and June 30, 1999 American
Home Mortgage was in compliance with its minimum net worth requirements.

F-9
<PAGE>

AMERICAN HOME MORTGAGE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998

AND THE SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED) AND 1999

At December 31, 1998 and June 30, 1999, the highest minimum net worth
requirement applicable to the Company was $1,000,000 and the Company's net
worth was $5,924,106 and $7,570,872, respectively. The minimum net worth
requirement is based on a percentage of originated loans with a minimum and
maximum requirement of $250,000 and $1,000,000, respectively.

2. MORTGAGE LOANS HELD FOR SALE

Mortgage loans held for sale consist of the following:

<TABLE>
<CAPTION>
December 31,
------------------------ June 30,
1997 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
Mortgage loans held for sale....... $24,684,913 $34,307,323 $41,280,445
Deferred origination costs (fees),
net............................... (9,160) 359,540 775,686
----------- ----------- -----------
Mortgage loans held for sale, net.. $24,675,753 $34,666,863 $42,056,131
=========== =========== ===========
</TABLE>

3. MORTGAGE LOANS HELD FOR INVESTMENT, net

Mortgage loans held for investment consist of the following:

<TABLE>
<CAPTION>
December 31,
----------------- June 30,
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Mortgage loans held for investment............ $117,884 $210,811 $291,259
Less: Allowance for loss...................... 39,067 121,911 121,911
-------- -------- --------
Mortgage loans held for investment, net....... $ 78,817 $ 88,900 $169,348
======== ======== ========
</TABLE>

The activity in the allowance for loss was as follows:
<TABLE>
<S> <C>
Balance at January 1, 1997...................................... $ --
Provision..................................................... 116,837
Chargeoffs.................................................... (77,770)
--------
Balance at December 31, 1997.................................... 39,067
Provision..................................................... 152,955
Chargeoffs.................................................... (70,111)
--------
Balance at December 31, 1998 121,911
Provision..................................................... 27,967
Chargeoffs.................................................... (27,967)
--------
Balance at June 30, 1999........................................ $121,911
========
</TABLE>

4. ACCOUNTS RECEIVABLE

Accounts receivable consist of the following:

<TABLE>
<CAPTION>
December 31,
------------------- June 30,
1997 1998 1999
-------- ---------- ----------
<S> <C> <C> <C>
Investor receivables...................... $821,514 $1,977,950 $3,068,892
Due from settlement agent................. -- 750,000 516,177
Mortgage payments receivable.............. 150,291 83,338 127,329
Due from related party.................... -- 52,429 75,090
Accrued interest receivable............... -- 26,588 26,147
Other..................................... 11,058 2,502 332,037
-------- ---------- ----------
Accounts receivable....................... $982,863 $2,892,807 $4,145,672
======== ========== ==========
</TABLE>

F-10
<PAGE>

AMERICAN HOME MORTGAGE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998

AND THE SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED) AND 1999

5. PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS

Property, equipment and leasehold improvements consist of the following:

<TABLE>
<CAPTION>
December 31,
--------------------- June 30,
1997 1998 1999
--------- ---------- ----------
<S> <C> <C> <C>
Furniture and fixtures............... $ 285,939 $ 659,612 $ 760,168
Office equipment..................... 692,247 1,420,390 2,000,377
Leasehold improvements............... 57,165 122,241 132,976
--------- ---------- ----------
Subtotal........................... 1,035,351 2,202,243 2,893,521
Less: Accumulated depreciation and
amortization........................ (345,115) (627,089) (794,272)
--------- ---------- ----------
Property, equipment and leasehold
improvements, net................... $ 690,236 $1,575,154 $2,099,249
========= ========== ==========
</TABLE>

Depreciation and amortization expense for the years ended December 31, 1996,
1997 and 1998 was $60,248, $124,865, and $281,974, respectively, and $117,549
and $167,185 for the six months ended June 30, 1998 and 1999.

6. WAREHOUSE FACILITIES

Warehouse lines of credit consist of the following:

<TABLE>
<CAPTION>
December 31, 1997 December 31, 1998 June 30, 1999
-------------------- -------------------- --------------------
Weighted Weighted Weighted
Outstanding Average Outstanding Average Outstanding Average
Balance Rate Balance Rate Balance Rate
----------- -------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
First Union............. $ -- $26,380,841 7.03% $24,544,246 7.52%
PNC..................... 24,453,671 7.55% 7,688,685 6.18% 768,454 8.80%
----------- ----------- -----------
Warehouse facilities.... $24,453,671 7.55% $34,069,526 6.84% $25,312,700 7.55%
=========== =========== ===========
</TABLE>

First Union extended a $50,000,000 line of credit to American Home Mortgage
on June 23, 1999. The interest rate on outstanding balances fluctuates daily
based on a spread to the Fed Funds rate and is paid monthly. This line
continues until terminated or modified by either party.

Upon extension of the line of credit by First Union, the PNC line of credit
was terminated and borrowings outstanding will be repaid upon sale of loans to
investors. Specific loans held for sale are collateral to this line of credit.
The interest rate on outstanding balances fluctuates daily based on a spread to
the Fed Funds rate and is paid monthly. This line terminates upon repayment of
the remaining outstanding borrowings.

The lines of credit are secured by mortgage loans and all other assets of
American Home Mortgage, and are guaranteed by the stockholder. The lines
contain various covenants pertaining to maintenance of net worth and working
capital. At December 31, 1997 and 1998, and June 30, 1999, American Home
Mortgage was in compliance with its loan covenants.

F-11
<PAGE>

AMERICAN HOME MORTGAGE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998

AND THE SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED) AND 1999

7. OTHER INCOME AND EXPENSE

The significant components of other income and expense are as follows:

<TABLE>
<CAPTION>
December 31, June 30,
---------------------------- ----------------------
1996 1997 1998 1998 1999
-------- -------- ---------- ----------- ----------
(unaudited)
<S> <C> <C> <C> <C> <C>
Other income:
Volume incentives..... $ -- $284,807 $ 422,760 $186,305 $ 599,017
Other................. 21,053 71,211 79,463 82,997 37,698
-------- -------- ---------- -------- ----------
Other income.......... $ 21,053 $356,018 $ 502,223 $269,302 $ 636,715
======== ======== ========== ======== ==========
Other expense
Office supplies....... $191,497 $218,031 $ 375,718 $176,497 $ 278,467
Travel................ 22,220 111,037 162,973 77,594 117,416
Legal and accounting.. 162,221 224,424 142,200 90,042 113,917
Other................. 454,546 392,778 862,106 370,286 593,001
-------- -------- ---------- -------- ----------
Other expenses........ $830,484 $946,270 $1,542,997 $714,419 $1,102,801
======== ======== ========== ======== ==========
</TABLE>

8. INCOME TAXES

As discussed in Note 1, the Company is an S corporation pursuant to the
Internal Revenue Code of 1986, as amended and New York State law, and as such
did not incur any federal or New York State income tax expense. The Company was
liable for New York City income tax and other states minimum taxes. This
provision is included within the consolidated statement of income under current
state and local provision.

Assuming the Company converts to a C corporation on July 1, 1999, the
Company would incur a deferred income tax expense of $375,000 as of June 30,
1999.

The proforma provision for income taxes is as follows:

<TABLE>
<S> <C>
Current........................................................ $1,009,336
Deferred....................................................... 179,930
----------
Total provision................................................ $1,189,266
==========
</TABLE>

A reconciliation of the statutory income tax provision to the effective
income tax provision, as applied to income for the six months ended June 30,
1999, is as follows:

<TABLE>
<S> <C>
Tax at statutory rate.......................................... $ 919,478
State and local taxes.......................................... 260,435
Other.......................................................... 9,353
----------
Total provision.............................................. $1,189,266
==========
</TABLE>

F-12
<PAGE>

AMERICAN HOME MORTGAGE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998

AND THE SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED) AND 1999

The liability for income taxes at June 30, 1999 reflected on the proforma
consolidated balance sheet includes a deferred tax liability of $375,000. This
represents the tax effect of temporary differences and differences between the
tax basis and financial statement carrying amounts of assets and liabilities.
The major sources of temporary differences and their deferred tax effect at
June 30, 1999 are as follows:

Deferred tax liabilities:

<TABLE>
<S> <C>
Capitalized cost of mortgage servicing rights................... $ 16,670
Capitalized loan origination expenses........................... 341,302
Mark to market adjustments...................................... 17,028
--------
Total deferred tax liabilities................................ $375,000
========
</TABLE>

9. 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 Commitments

At December 31, 1997 and 1998, the Company had commitments to fund loans
approximating $163 million and $333 million, respectively. At December 31, 1997
and 1998, the Company had commitments to fund loans with agreed upon rates
approximating $54 million and $122 million, respectively. The Company hedges
the interest rate risk of such commitments primarily with mandatory delivery
commitments, which totaled $80 million at December 31, 1998. 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.

At June 30, 1999, the Company had commitments to fund loans approximating
$308 million, commitments to fund loans with agreed upon rates approximating
$152 million and mandatory delivery commitments, as described above,
approximating $100 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.

10. OPERATING LEASES

Certain facilities and equipment are leased under short-term lease
agreements expiring at various dates through December 31, 2007. 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
financial statements amounted to $426,537, $728,645 and $1,253,362 for the
years ended December 31, 1996, 1997 and 1998, respectively. Total rental
expense for premises and equipment amounted to $488,411 and $790,592 for the
six months ended June 30, 1998 and 1999.

F-13
<PAGE>

AMERICAN HOME MORTGAGE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998

AND THE SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED) AND 1999

10. OPERATING LEASES (continued)

Obligations under non-cancelable operating leases which have an initial term
of more than a year are as follows:

<TABLE>
<CAPTION>
As of As of
December 31, June 30,
1998 1999
------------ ----------
<S> <C> <C>
1999.................................................... $1,159,441 $ 705,356
2000.................................................... 772,221 1,084,620
2001.................................................... 456,174 700,805
2002.................................................... 361,686 637,473
2003.................................................... 194,020 476,066
Thereafter.............................................. 752,680 942,469
---------- ----------
$3,696,222 $4,546,789
========== ==========
</TABLE>

11. OTHER RELATED PARTY TRANSACTIONS

The majority stockholder of the Company is a minority stockholder in another
company that provides credit reports in the normal course of business. Payments
to this company for the years ended December 31, 1996, 1997 and 1998 amounted
to approximately $130,000, $280,000 and $504,000, respectively. Additionally,
total amounts due to this related party as of December 31, 1997 and 1998 were
$10,400 and $25,379, respectively. Payments approximating $89,000 and $226,000
for the six months ended June 30, 1998 and 1999 were made to this related
company. Amounts outstanding to this party as of June 30, 1999 was $6,000.

The majority stockholder of the Company is a majority stockholder in another
company that provides title services in the normal course of business. It is
the borrower's option to use this company for title services. The total amount
due from this related party was $0, $52,429 and $15,000 as of December 31, 1997
and 1998 and June 30, 1999, respectively. The amounts due to the Company
represent expenses paid on behalf of the title company. Payments from this
company amounted to approximately $52,000 for the six months ended June 30,
1999. No amounts were received prior to the period ended June 30, 1999.

The activity in the Minority Interest accounts is as follows:

<TABLE>
<S> <C>
Capital contribution............................................... $ 50,000
Minority interest in income........................................ 50,760
--------
Balance at December 31, 1998....................................... 100,760
Distribution....................................................... (75,000)
Minority interest in income........................................ 44,491
--------
Balance at June 30, 1999........................................... $ 70,251
========
</TABLE>

12. CONCENTRATIONS OF CREDIT RISK

The Company originates loans predominately in northeastern states. 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, 1998
there were no significant concentrations of credit risk within loans held for
sale.

F-14
<PAGE>

AMERICAN HOME MORTGAGE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998

AND THE SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED) AND 1999

13. 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. All forward delivery
commitments and option contracts to buy securities are to be contractually
settled within six months of the balance sheet date.

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.

Certain assets and liabilities, as a matter of accounting policy, are
reflected in the accompanying consolidated financial statements at fair value
due to their short-term nature, terms of repayment or interest rate associated
with the asset or liability. Such assets or liabilities include cash, accounts
receivable, loans held for investment, accrued expenses and other liabilities,
and warehouse lines of credit.

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

Mortgage Loans Held for Sale--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.

Mortgage Servicing Rights--Fair value is estimated by discounting the
anticipated net future cash flows associated with servicing the underlying
loans using discount rates that approximate market rates, expected
subservicing costs and externally published prepayment rates.

Commitments to Fund with Agreed Upon Rates--The fair value of
commitments to fund with agreed upon rates are estimated using the fees and
rates currently charged to enter into similar agreements, taking into
account the remaining terms of the agreements and the present
creditworthiness of the counterparties. For fixed rate loan commitments,
fair value also considers the difference between current levels of interest
rates and the committed rates. These commitment obligations are considered
in conjunction with the Company's lower of cost or market valuation of its
mortgage loans held for sale.

Commitments to Deliver Mortgages and Option Contracts to Buy
Securities--The fair value of these instruments are estimated using current
market prices for dealer or investor commitments relative to the Company's
existing positions. These instruments contain an element of risk in the
event that the counterparties may be unable to meet the terms of such
agreements. In the event a counterparty to a delivery commitment was unable
to fulfill its obligation, the Company would not incur any material loss by
replacing the position at market rates in effect at December 31, 1998. The
Company minimizes its risk exposure by limiting the counterparties to those
major banks, investment bankers and private investors who meet established
credit and capital guidelines. Management does not expect any counterparty
to

F-15
<PAGE>

AMERICAN HOME MORTGAGE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998

AND THE SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED) AND 1999

13. FAIR VALUE OF FINANCIAL INSTRUMENTS (continued)

default on their obligations and, therefore, does not expect to incur any
loss due to counterparty default. These commitments and option contracts
are considered in conjunction with the Company's lower of cost or market
valuation of its mortgage loans held for sale.

No amounts were outstanding for loans held for sale related positions as
of December 31, 1997. Management believes that the fair value amounts for
loans held for sale and mortgage servicing rights approximated the carrying
amounts as of December 31, 1997.

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.

<TABLE>
<CAPTION>
December 31, 1998
------------------------------------
Estimated
Notional Carrying Fair
Amount Amount Value
------------ ----------- -----------
<S> <C> <C> <C>
Assets:
Loans held for sale...................... $ -- $34,666,863 $35,557,116
Mortgage servicing rights................ -- 39,887 39,887
Commitments and Contingencies:
Loans held for sale related positions:
Commitments to fund mortgages at
agreed-upon rates..................... 122,430,687 -- 2,075,471
Forward delivery commitments........... 79,841,139 -- (215,571)
Option contracts to buy securities..... 4,000,000 -- (15,320)
<CAPTION>
June 30, 1999
------------------------------------
Estimated
Notional Carrying Fair
Amount Amount Value
------------ ----------- -----------
<S> <C> <C> <C>
Assets:
Loans held for sale...................... $ -- $42,056,131 $42,292,675
Mortgage servicing rights................ -- 37,887 37,887
Commitments and Contingencies:
Loans held for sale related positions:
Commitments to fund mortgages at
agreed-upon rates..................... 151,910,361 -- 1,908,706
Forward delivery commitments........... 99,730,000 -- (555,781)
Option contracts to buy securities..... 18,000,000 -- (70,203)
</TABLE>

14. IMPLEMENTATION OF NEW ACCOUNTING STANDARDS

In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities ("SFAS No. 133").
SFAS 133 requires that all derivative instruments be recognized as either
assets or liabilities at fair value. If certain conditions are met, a
derivative may be specifically designated as a hedge of fair value of a
recognized asset, liability or firm commitment, a hedge of cash flows of a
forecasted transaction or a hedge of foreign currency exposure. The statement's
implementation has been delayed to be effective for all fiscal quarters of
fiscal years beginning after June 15, 2000. The Company will adopt this
statement effective January 1, 2001. The Company has not yet determined the
impact SFAS No. 133 will have on its financial position or results of
operations when such statement is adopted.

F-16
<PAGE>

AMERICAN HOME MORTGAGE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998

AND THE SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED) AND 1999

14. IMPLEMENTATION OF NEW ACCOUNTING STANDARDS (continued)

In October 1998, the Financial Accounting Standards Board issued SFAS No.
134, Accounting for Mortgage-Backed Securities Retained after the
Securitization of Mortgage Loans Held for Sale by a Mortgage Banking
Enterprise, an amendment to FASB SFAS No. 65, Accounting for Certain Mortgage
Banking Activities. SFAS No. 134 is effective for the first fiscal quarter
beginning after December 15, 1998. Management believes that the adoption of
SFAS No. 134 will not have a material impact on the Company or its results of
operations.

15. CONDENSED FINANCIAL INFORMATION OF AMERICAN HOME MORTGAGE HOLDINGS, INC.

The following provides condensed financial information for the financial
position, results of operations and cash flows of American Home Mortgage
Holdings, Inc. (parent company only):

Condensed Balance Sheet

June 30, 1999

<TABLE>
<S> <C>
ASSETS:
Cash.................................................................... $1,000
Equity in American Home Mortgage Corp. ................................. --
Other................................................................... --
------
Total Assets........................................................ $1,000
======
LIABILITIES AND STOCKHOLDERS' EQUITY:
LIABILITIES............................................................. $ --
STOCKHOLDERS' EQUITY:
Preferred stock, $1.00 par value, 1,000,000 shares authorized, no
shares issued and outstanding........................................ --
Common stock, $0.01 par value, 19,000,000 shares authorized, 100
shares issued and outstanding........................................ 1
Additional paid-in-capital............................................ 999
Retained earnings..................................................... --
------
Total stockholders' equity.......................................... 1,000
------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.............................. $1,000
======
</TABLE>

F-17
<PAGE>

AMERICAN HOME MORTGAGE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998

AND THE SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED) AND 1999

15. CONDENSED FINANCIAL INFORMATION OF AMERICAN HOME MORTGAGE HOLDINGS, INC.
(continued)

Condensed Statement of Cash Flows

For the period June 16, 1999 (date of inception) to June 30, 1999

<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................................................. $ --
Adjustments to reconcile net income to net cash provided by operating
activities:
Equity in earnings of American Home Mortgage Corp. .................. --
Cash provided by operating activities.................................. --
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of capital stock................................ 1,000
------
Cash provided by financing activities.................................. 1,000
------
NET INCREASE IN CASH..................................................... 1,000
CASH, BEGINNING OF PERIOD................................................ --
------
CASH, END OF PERIOD...................................................... $1,000
======
</TABLE>

16. PENDING PUBLIC OFFERING OF COMMON STOCK

The Company has filed a registration statement with the Securities and
Exchange Commission for an underwritten initial public offering of 2,500,000
shares of common stock (the Offering). Immediately prior to effectiveness of
the Offering Michael Strauss intends to contribute his sole ownership interest
in American Home Mortgage for 4,999,900 shares of $.01 par value Common Stock
of the Company in which:

. American Home Mortgage Holdings, Inc. will be the holding company

. American Home Mortgage Corp. will be a wholly-owned subsidiary of the
holding company

. Michael Strauss will receive 4,999,900 shares of $.01 par value Common
Stock of American Home Mortgage Holdings, Inc.

. 2,500,000 shares of $.01 par value Common Stock will be sold in the
Offering.

All shares and per share information included in the accompanying
consolidated financial statements will be adjusted to give retroactive effect
to the change in the number of shares outstanding as a result of the expected
transactions.

17. UNAUDITED PRO FORMA INFORMATION

The pro forma financial information has been presented to show what the
significant effects on the historical results of operations might have been had
the exchange of shares described in Note 14 and the termination of the
Company's S corporation status occurred as of the beginning of the earliest
period presented.

Pro forma net income represents the results of operations adjusted to
reflect the Company's income tax status for an S corporation to a C
corporation, using a pro forma income tax rate of 44%.

Pro forma net income per share has been computed by dividing pro forma net
income by the shares received in exchange for the Company's shares. The pro
forma financial information, as of June 30, 1999, reflects the sale of shares
in the initial public offering and the S corporation distribution of
approximately $7,571,000. The price per share was assumed at $9 with net
proceeds from the public offering of approximately $19,605,000.

F-18
<PAGE>

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

2,500,000 Shares

[LOGO]

American Home Mortgage Holdings, Inc.

Common Stock

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

PROSPECTUS

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

Friedman Billings Ramsey Advest, Inc.

, 1999

You should rely on the information contained in this prospectus. We have not
authorized anyone to provide you with information different from that which is
set forth in this prospectus. We are offering to sell shares of common stock
and seeking offers to buy shares of common stock only in jurisdictions where
offers and sales are permitted. The information contained in this prospectus
is accurate only as of the date of this prospectus, regardless of the time of
delivery of the prospectus or of any sale of common stock.

Until , 1999 (25 days after the date of this prospectus), all dealers
effecting transactions in the registered securities, whether or not
participating in this distribution, may be required to deliver a prospectus.
This is in addition to the obligation of dealers to deliver a prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. Other Expenses of Issuance and Distribution.

The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by us in connection with the
sale of common stock being registered. All amounts, other than SEC, NASD and
Nasdaq fees, are estimates.

<TABLE>
<S> <C>
SEC Registration fee.......................................... $ 10,508
NASD Filing fee............................................... 4,280
Nasdaq National Market listing fee............................ 69,375
Printing and engraving expenses............................... 150,000
Legal fees and expenses....................................... 275,000
Accounting fees and expenses.................................. 350,000
Underwriters' reimbursable expenses........................... 425,000
Blue sky fees and expenses.................................... 5,000
Transfer agent and registrar fees and expenses................ 5,000
Miscellaneous fees and expenses............................... 25,837
----------
Total....................................................... $1,320,000
==========
</TABLE>

American Home Mortgage will bear all of the expenses shown above.

ITEM 14. Indemnification of Directors and Officers.

Subsection (a) of Section 145 of the General Corporation Law of Delaware
(the "DGCL") empowers a corporation to indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
complete action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director, employee or agent of the
corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation and, with respect to any criminal action
or proceeding, had no cause to believe his conduct was unlawful.

Subsection (b) of Section 145 of the DGCL empowers a corporation to
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of
the corporation to procure a judgment in its favor by reason of the fact that
such person acted in any of the capacities set forth above, against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation and except that no indemnification may be
made in respect to any claim, issue or matter as to which such person shall
have been adjudged to be liable to the corporation unless and only to the
extent that the Court of Chancery or the court in which such action or suit was
brought shall determine that despite the adjudication of liability such person
is fairly and reasonably entitled to indemnity for such expenses which the
court shall deem proper.

Section 145 of the DGCL further provides that to the extent a director,
officer, employee or agent of a corporation has been successful in the defense
of any action, suit or proceeding referred to in subsections (a) and (b) or in
the defense of any claim, issue or matter therein, he shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred
by him in connection therewith; that indemnification or advancement of expenses
provided for by Section 145 shall not be deemed exclusive of any other rights
to which the indemnified party may be entitled; and empowers the corporation to
purchase and

II-1
<PAGE>

maintain insurance on behalf of a director, officer, employee or agent of the
corporation against any liability asserted against him or incurred by him in
any such capacity or arising out of his status as such whether or not the
corporation would have the power to indemnify him against such liabilities
under Section 145.

Our Restated Certificate of Incorporation provides that no director, or
person serving on a committee of the board of directors, shall be personally
liable to American Home Mortgage Holdings, Inc. or its stockholders for
monetary damages for breach of fiduciary duty as a director, except for
liability:

. for any breach of that director's duty of loyalty to American Home
Mortgage Holdings, Inc. or its stockholders;

. for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;

. under Section 174 of the DGCL; or

. for any transaction from which the director derived an improper personal
benefit.

Our Bylaws provide that we must indemnify our directors, officers and
employees against any liability incurred in connection with any proceeding in
which they may be involved as a party or otherwise, by reason of the fact that
he or she is or was a director, officer, employee, or agent of American Home
Mortgage Holdings, Inc., or is or was serving at the request of American Home
Mortgage Holdings, Inc. as a director, officer, employee, agent, fiduciary or
trustee of another corporation, partnership, joint venture, trust, employee
benefit plan, or other entity or enterprise, except:

. to the extent that such indemnification against a particular liability
is expressly prohibited by applicable law;

. for a breach of such person's duty of loyalty to American Home Mortgage
Holdings, Inc. or its stockholders;

. for acts or omission not in good faith;

. for intentional misconduct or a knowing violation of law; or

. for any transaction resulting in receipt by such person of an improper
personal benefit.

Such indemnification may include advances of expenses prior to the final
disposition of such proceeding.

ITEM 15. Recent Sales of Unregistered Securities.

The following is a list of securities sold by us over the last 3 years that
were not registered under the Securities Act:

In June 1999, we sold 100 shares of our common stock to Michael Strauss,
the president, chief executive officer and sole existing stockholder of
American Home Mortgage Corp., for an aggregate consideration of $1,000.
Immediately before the closing of this offering, he will exchange his shares
in American Home Mortgage Corp. for an aggregate of 4,999,900 shares of our
common stock.

ITEM 16. Exhibits and Financial Statement Schedules.

(A) EXHIBITS:

The following exhibits are filed as part of this Registration Statement:

II-2
<PAGE>

<TABLE>
<C> <S>
4.2* Specimen Certificate for the Registrant's Common Stock.
5.1 Opinion of Cadwalader, Wickersham & Taft, special counsel to the
Registrant.
10.1* Employment Agreement, dated as of , 1999, between American Home
Mortgage Corp. and Michael Strauss.
10.2+ Employment Agreement, dated as of January 6, 1989, between American
Home Mortgage Corp. and Leonard Schoen, Jr.
10.3+ Employment Agreement, dated as of April 14, 1999, between American Home
Mortgage Corp. and Nicholas P. Rizzetta.
10.4+ Employment Agreement, dated as of April 3, 1997, between American Home
Mortgage Corp. and Robert Burke.
10.5+ Employment Agreement, dated as of March 9, 1998, between American Home
Mortgage Corp. and James P. O'Reilly.
10.6+ Employment Agreement, dated as of December 10, 1998, between American
Home Mortgage Corp. and Ron Taylor.
10.7 1999 Omnibus Stock Incentive Plan
10.8+ Sublease, dated as of February 1996, between Credit Suisse First Boston
Corporation and Michael Strauss, Inc., d/b/a American Home Mortgage.
10.9+ Sublease, dated as of December 17, 1997, between Suntory International
Corp. and Michael Strauss, Inc., d/b/a American Home Mortgage.
10.10+ Mortgage Warehousing Loan and Security Agreement, dated as of December
8, 1998, between First Union National Bank and Michael Strauss, Inc.,
d/b/a American Home Mortgage.
10.11+ Software Licensing Agreement, dated as of July 7, 1999, between
American Home Mortgage Corp. and James P. O'Reilly.
10.12* Form of Warrant Agreement, between American Home Mortgage Holdings,
Inc., and Friedman, Billings, Ramsey & Co., Inc.
10.13* Form of Lock-up Agreement, between and Michael Strauss and Friedman,
Billings, Ramsey & Co., Inc.
10.14* Form of Lock-up Agreement, between American Home Mortgage Holdings,
Inc. and Friedman, Billings, Ramsey & Co., Inc.
10.15+ Loan Purchase Agreement, dated as of July 8, 1996, between Michael
Strauss, Inc., d/b/a American Home Mortgage, and Norwest Funding, Inc.
10.16+ Origination and Sales Agreement, dated as of July 8, 1994, between
American Home Mortgage Corp. and Chase Manhattan Mortgage Corporation.
10.17 Loan Sales Agreement, dated as of March 31, 1995, between American Home
Mortgage Corp. and Columbia Federal Savings Bank.
10.18+ Master Agreement for the Sale and Purchase of Mortgages, dated as of
April 19, 1994, between Astoria Federal Savings and Loan Association
and Michael Strauss, Inc., d/b/a American Home Mortgage.
10.19+ Mortgage Loan Purchase and Sale Operating Agreement, dated as of
February 1996, between Independence Savings Bank and American Home
Mortgage, Inc.
10.20+ Correspondent Origination and Sales Agreement, dated as of April 25,
1997, between Dime Mortgage Inc., and Michael Strauss, Inc. d/b/a
American Home Mortgage.
21.1+ Subsidiaries of American Home Mortgage Holdings, Inc.
23.1 Consent of Deloitte & Touche LLP.
23.2 Consent of Cadwalader, Wickersham & Taft (included in Exhibit 5.1).
24.1+ Power of Attorney (included on signature page).
27.1 Financial Data Schedule.
</TABLE>
- --------
* To be filed by amendment.

+ Previously filed

II-3
<PAGE>

(B) FINANCIAL STATEMENT SCHEDULES:

All schedules have been omitted because the information required to be set
forth in those schedules is not applicable or is shown in the combined
financial statements or notes thereto.

ITEM 17. Undertakings.

The undersigned Registrant hereby undertakes to provide to the underwriters
at the closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.

The undersigned Registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.

(2) For the purposes of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new Registration Statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.

II-4
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment to the Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of New
York, State of New York, on August 18, 1999.

American Home Mortgage Holdings,
Inc.

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

Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities indicated below on August 18, 1999:

<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>

/s/ Michael Strauss Chairman of the Board,
______________________________________ President and Chief Executive Officer
Michael Strauss

/s/ Nicholas P. Rizzetta Chief Financial Officer
______________________________________
Nicholas P. Rizzetta
</TABLE>

II-5
<PAGE>

EXHIBIT INDEX

<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
1.1* Form of Underwriting Agreement.
3.1* Restated Certificate of Incorporation of the Registrant.
3.2* Bylaws of the Registrant.
4.1* Reference is hereby made to Exhibits 3.1 and 3.2.
4.2* Specimen Certificate for the Registrant's Common Stock.
5.1 Opinion of Cadwalader, Wickersham & Taft, special counsel to the
Registrant.
10.1* Employment Agreement, dated as of , 1999, between American Home
Mortgage Corp. and Michael Strauss.
10.2+ Employment Agreement, dated as of January 6, 1989, between American
Home Mortgage Corp. and Leonard Schoen, Jr.
10.3+ Employment Agreement, dated as of April 14, 1999, between American
Home Mortgage Corp. and Nicholas P. Rizzetta.
10.4+ Employment Agreement, dated as of April 3, 1997, between American Home
Mortgage Corp. and Robert Burke.
10.5+ Employment Agreement, dated as of March 9, 1998, between American Home
Mortgage Corp. and James P. O'Reilly.
10.6+ Employment Agreement, dated as of December 10, 1998, between American
Home Mortgage Corp. and Ron Taylor.
10.7 1999 Omnibus Stock Incentive Option Plan
10.8+ Sublease, dated as of February 1996, between Credit Suisse First
Boston Corporation and Michael Strauss, Inc., d/b/a American Home
Mortgage.
10.9+ Sublease, dated as of December 17, 1997, between Suntory International
Corp. and Michael Strauss, Inc., d/b/a American Home Mortgage.
10.10+ Mortgage Warehousing Loan and Security Agreement, dated as of December
8, 1998, between First Union National Bank and Michael Strauss, Inc.,
d/b/a American Home Mortgage.
10.11+ Software Licensing Agreement, dated as of July 7, 1999, between
American Home Mortgage Corp. and James P. O'Reilly.
10.12* Form of Warrant Agreement, between American Home Mortgage Holdings,
Inc., and Friedman, Billings, Ramsey & Co., Inc.
10.13* Form of Lock-up Agreement, between and Michael Strauss and Friedman,
Billings, Ramsey & Co., Inc.
10.14* Form of Lock-up Agreement, between American Home Mortgage Holdings,
Inc. and Friedman, Billings, Ramsey & Co., Inc.
10.15+ Loan Purchase Agreement, dated as of July 8, 1996, between Michael
Strauss, Inc., d/b/a American Home Mortgage, and Norwest Funding, Inc.
10.16+ Origination and Sales Agreement, dated as of July 8, 1994, between
American Home Mortgage Corp. and Chase Manhattan Mortgage Corporation.
10.17 Loan Sales Agreement, dated as of March 31, 1995, between American
Home Mortgage Corp. and Columbia Federal Savings Bank.
10.18+ Master Agreement for the Sale and Purchase of Mortgages, dated as of
April 19, 1994, between Astoria Federal Savings and Loan Association
and Michael Strauss, Inc., d/b/a American Home Mortgage.
10.19+ Mortgage Loan Purchase and Sale Operating Agreement, dated as of
February 1996, between Independence Savings Bank and American Home
Mortgage, Inc.
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------

<C> <S>
10.20+ Correspondent Origination and Sales Agreement, dated as of April 25,
1997, between Dime Mortgage Inc., and Michael Strauss, Inc. d/b/a
American Home Mortgage.
21.1+ Subsidiaries of American Home Mortgage Holdings, Inc.
23.1 Consent of Deloitte & Touche LLP.
23.2 Consent of Cadwalader, Wickersham & Taft (included in Exhibit 5.1).
24.1+ Power of Attorney (included on signature page).
27.1 Financial Data Schedule.
</TABLE>
- --------
* To be filed by amendment.

Previously filed

<PAGE>

EXHIBIT 5.1
[Letterhead of Cadwalader, Wickersham & Taft]

August __, 1999

American Home Mortgage Holdings, Inc.
c/o American Home Mortgage Corp.
12 East 49th Street
New York, NY 10017

Re: Initial Public Offering of Shares of Common Stock
of American Home Mortgage Holdings, Inc.
----------------------------------------

Ladies and Gentlemen:

You have requested our opinion, as counsel to American Home Mortgage
Holdings, Inc., a Delaware corporation (the "Company"), in connection with the
preparation and filing of a Registration Statement on Form S-1 (Registration No.
333-82904), as amended (the "Registration Statement"), with the Securities and
Exchange Commission (the "Commission") under the Securities Act of 1933, as
amended (the "Act").

The Registration Statement relates to the offering by the Company of
2,500,000 shares of the Company's Common Stock, par value $0.01 per share (the
"Common Stock"), and up to 375,000 shares of Common Stock to be issued solely to
cover over-allotments (collectively, the "Shares").

We have examined such records and documents and made such examinations
of law as we have deemed relevant in connection with this opinion. Based upon
such examinations, it is our opinion that when there has been compliance with
the Act and the applicable state securities laws, the Shares to be sold by the
Company, when issued, delivered and paid for in the manner described in the form
of Underwriting Agreement filed as Exhibit 1.1 to the Registration Statement,
will be validly issued, fully paid and nonassessable.

We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to this firm under the caption
"Legal Matters" in the Registration Statement. In doing so, we do not admit
that we are in the category of persons whose consent is required under Section 7
of the Act or the rules and regulations of the Commission promulgated
thereunder.

/s/ Cadwalader, Wickersham & Taft

<PAGE>

EXHIBIT 10.7
AMERICAN HOME MORTGAGE HOLDINGS, INC.
1999 OMNIBUS STOCK INCENTIVE PLAN

Adopted on August 16, 1999
Effective as of August 16, 1999

1. Purpose. The purpose of the American Home Mortgage 1999 Omnibus
Stock Incentive Plan (the "Plan") is to maintain the ability of American Home
Mortgage Holdings, Inc. (the "Company") and its subsidiaries to attract and
retain highly qualified and experienced employees, officers and directors and to
give such employees, officers and directors a continued proprietary interest in
the success of the Company and its subsidiaries. Pursuant to the Plan, such
employees, officers and directors will be offered the opportunity to acquire the
Company's Common Stock, par value $.01 per share (the "Common Stock"), through
the grant of options, stock appreciation rights in tandem with such options, the
award of restricted stock under the Plan, bonuses payable in stock or a
combination thereof. Unless the context clearly indicates otherwise, references
herein to "option" or "options" shall include any tandem stock appreciation
right that may be granted in connection with such option or options in
accordance with Section 6(f). As used herein, the term "subsidiary" shall mean
any present or future corporation which is or would be a "subsidiary
corporation" of the Company as the term is defined in Section 424(f) of the
Internal Revenue Code of 1986, as amended from time to time (the "Code").

2. Administration of the Plan. The Plan shall be administered by a
compensation committee (the "Committee") as appointed from time to time by the
Board of Directors of the Company (the "Board"), which Committee shall consist
of not less than two members of the Board; provided, however, that with respect
to members of the Committee and any other directors who (i) are not employees of
the Company or any of its subsidiaries or affiliates and (ii) are otherwise not
eligible for selection to participate in any other plan of the Company or any of
its subsidiaries or affiliates that entitles the participant therein to acquire
securities or derivative securities of the Company ("Nonemployee Directors"),
the Plan shall be administered by the entire Board, and accordingly, with
respect to Committee members and other Nonemployee Directors, references herein
to "Committee" shall mean the entire Board. A majority of the members of the
Committee shall constitute a quorum. The vote of a majority of a quorum shall
constitute action by the Committee.

In administering the Plan, the Committee may adopt rules and
regulations for carrying out the Plan. The interpretation and decision with
regard to any question arising under the Plan made by the Committee shall be
final and conclusive on all employees and directors of the Company and its
subsidiaries participating or eligible to participate in the Plan. The
Committee may consult with counsel, who may be counsel to the Company, and shall
not incur any liability for any action taken in good faith in reliance upon the
advice of counsel. The Committee shall determine the employees and directors to
whom, and the time or times at which, grants or awards shall be made and the
number of shares to be included in the grants or awards. Within the limitations
of the Plan, the number of shares for which options will be granted from time to
time and the periods for which the options will be outstanding will be
determined by the Committee.
<PAGE>

Each option or stock or other awards granted pursuant to the Plan
shall be evidenced by an option agreement or award agreement (an "Agreement").
An Agreement shall not be a precondition to the granting of options or stock or
other awards; however, no person shall have any rights under any option or stock
or other awards granted under the Plan unless and until the person to whom such
option or stock or other award shall have been granted shall have executed and
delivered to the Company an Agreement. The Committee shall prescribe the form
of all Agreements. A fully executed original of the Agreement shall be provided
to both the Company and the recipient of the grant or award.

3. Shares of Stock Subject to the Plan. The total number of shares
that may be optioned or awarded under the Plan is 1,125,000 shares of Common
Stock except that said number of shares shall be adjusted as provided in Section
13. Any shares subject to an option which for any reason expires or is
terminated unexercised and any restricted stock which is forfeited may again be
optioned or awarded under the Plan. Shares subject to the Plan may be either
authorized and unissued shares or issued shares acquired by the Company or its
subsidiaries.

4. Eligibility. Key salaried employees, including officers, and
directors of the Company and its subsidiaries are eligible to be granted options
and awarded restricted stock under the Plan and to have their bonuses payable in
stock. The maximum number of shares of Common Stock that shall be available for
the grant of options intended to be incentive stock options, as defined in
Section 422 of the Code, shall be 1,125,000 shares (subject to adjustment as
provided in Section 13 hereof). The employees and directors who shall receive
awards or options under the Plan shall be selected from time to time by the
Committee, in its sole discretion, from among those eligible, which may be based
upon information furnished to the Committee by the Company's management, and the
Committee shall determine, in its sole discretion, the number of shares to be
covered by the award or awards and by the option or options granted to each such
employee or director selected. Such key salaried employees and directors who are
selected to participate in the Plan shall be referred to collectively herein as
"Participants." In no event shall any Participant who is a key employee be
granted stock options with respect to more than 150,000 shares of Common Stock
in any calendar year (subject to adjustment as provided in Section 13 hereof ).

5. Duration of the Plan. No award or option may be granted under the
Plan more than ten years from the date the Plan is adopted by the Board or the
date the Plan receives shareholder approval, whichever is earlier, but awards or
options theretofore granted may extend beyond that date.

6. Terms and Conditions of Stock Options. All options granted under
this Plan shall be either incentive stock options, as defined in Section 422 of
the Code, or options other than incentive stock options; provided, however, that
all options granted to Nonemployee Directors shall be nonstatutory stock options
not intended to qualify as incentive stock options entitled to special tax
treatment under Section 422 of the Code. Each such option shall be subject to
all the applicable provisions of the Plan, including the following terms and
conditions, and to such other terms and conditions not inconsistent therewith as
the Committee shall determine.

-2-
<PAGE>

(a) The option price per share shall be determined by the Committee.
However, subject to Section 6(k), the option price of incentive stock options
shall not be less than 100% of the Fair Market Value of a share of Common Stock
at the time the option is granted. For purposes of the Plan, the "Fair Market
Value" on any date, means (i) if the Common Stock is listed on a national
securities exchange or quotation system, the closing sales prices on such
exchange or quotation system on such date or, in the absence of reported sales
on such date, the closing sales price on the immediately preceding date on which
sales were reported, (ii) if the Common Stock is not listed on a national
securities exchange or quotation system, the mean between the bid and asked
prices as quoted by the National Association of Securities Dealers, Inc.
Automated Quotation System ("NASDAQ") for such date or (iii) if the Common Stock
is neither listed on a national securities exchange or quotation system nor
quoted by NASDAQ, the fair value as determined by such other method as the
Committee determines in good faith to be reasonable.

(b) Each option shall be exercisable pursuant to the attainment of
such performance goals and/or during and over such period ending not later than
ten years from the date it was granted, as may be determined by the Committee
and stated in the Agreement. In no event may an option be exercised more than
ten years from the date the option was granted.

(c) Unless otherwise provided in the Agreement, no option shall be
exercisable within six months from the date of the granting of the option. An
option shall not be exercisable with respect to a fractional share of Common
Stock or with respect to the lesser of 50 shares or the full number of shares
then subject to the option. No fractional shares of Common Stock shall be issued
upon the exercise of an option. If a fractional share of Common Stock shall
become subject to an option by reason of a stock dividend or otherwise, the
optionee shall not be entitled to exercise the option with respect to such
fractional share.

(d) Each Agreement shall state whether the option(s) evidenced
thereby will or will not be treated as incentive stock option(s).

(e) Each option may be exercised by giving written notice to the
Company specifying the number of shares to be purchased, which shall be
accompanied by payment in full including, if required by applicable law, taxes,
if any. Payment, except as provided in the Agreement, shall be made as follows:

(i) in United States dollars by [certified] check or bank
draft; or

(ii) by tendering to the Company shares of Common Stock
already owned for at least six months by the person exercising the option,
which may include shares received as the result of a prior exercise of an
option, and having a Fair Market Value on the date on which the option is
exercised equal to the cash exercise price applicable to such option; or

(iii) by a combination of United States dollars and shares of
Common Stock as aforesaid; or

(iv) in accordance with a cashless exercise program
established by the Committee in its sole discretion under which either (A)
if so instructed by the optionee,

-3-
<PAGE>

shares may be issued directly to the optionee's broker or dealer upon
receipt of the purchase price in cash from the broker or dealer, or (B)
shares may be issued by the Company to an optionee's broker or dealer in
consideration of such broker's or dealer's irrevocable commitment to pay to
the Company that portion of the proceeds from the sale of such shares that
is equal to the exercise price of the option(s) relating to such shares; or

(v) in such other manner as permitted by the Committee at
the time of grant or thereafter.

No optionee shall have any rights to dividends or other rights of a
shareholder with respect to shares of Common Stock subject to such optionee's
option until such optionee has given written notice of exercise of such
optionee's option and paid in full for such shares.

(f) Notwithstanding the foregoing, the Committee may, in its sole
discretion, grant to a grantee of an option a right (a "stock appreciation
right") to elect, in the manner described below, in lieu of exercising such
grantee's option for all or a portion of the shares of Common Stock covered by
such option, to relinquish such grantee's option with respect to any or all of
such shares and to receive from the Company a payment having a value equal to
the amount by which (a) the Fair Market Value of a share of Common Stock on the
date of such election, multiplied by the number of shares as to which the
grantee shall have made such election, exceeds (b) the total exercise price for
that number of shares of Common Stock under the terms of such option; provided,
however, that to the extent that a stock appreciation right is exercised by a
Participant who is or may be subject to Section 16 of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), during the ten-day election period
described in Rule 16b-3(e) of the Exchange Act, the amount described in clause
(a) above shall be equal to the highest Fair Market Value of the shares of
Common Stock during such ten-day election period. A stock appreciation right
shall be exercisable at the time the tandem option is exercisable, and the
"expiration date" for the stock appreciation right shall be the expiration date
for the tandem option. A grantee who makes such an election shall receive
payment in the sole discretion of the Committee (i) in cash equal to such excess
or (ii) in the nearest whole number of shares of Common Stock of the Company
having an aggregate Fair Market Value, which is not greater than the cash amount
calculated in clause (i) above; or (iii) a combination of the forms of payment
described in clauses (i) and (ii) above. A stock appreciation right may be
exercised only when the amount described in clause (a) above exceeds the amount
described in clause (b) above. An election to exercise stock appreciation rights
shall be deemed to have been made on the day written notice of such election,
addressed to the Committee, is received at the Company's offices. An option or
any portion thereof with respect to which a grantee has elected to exercise the
stock appreciation rights described above shall be surrendered to the Company
and such option shall thereafter remain exercisable according to its terms only
with respect to the number of shares as to which it would otherwise be
exercisable, less the number of shares with respect to which stock appreciation
rights have been exercised. The grant of a stock appreciation right shall be
evidenced by such form of Agreement as the Committee may prescribe. The
Agreement evidencing stock appreciation rights shall be personal and will
provide that the stock appreciation rights will not be transferable by the
grantee otherwise than by will or the laws of descent and distribution and that
they will be exercisable, during the lifetime of the grantee, only by the
grantee.

-4-
<PAGE>

(g) Except as provided in the Agreement, an option may be exercised
only if at all times during the period beginning with the date of the granting
of the option and ending on the date of such exercise, the grantee was an
employee or director of either the Company or of a subsidiary of the Company or
of another corporation referred to in Section 421(a)(2) of the Code. The
Agreement shall provide whether, and if so, to what extent, an option may be
exercised after termination of continuous employment, but any such exercise
shall in no event be later than the termination date of the option. If the
grantee should die, or become permanently disabled as determined by the
Committee in accordance with the Agreement, at any time when the option, or any
portion thereof, shall be exercisable by such grantee, the option will be
exercisable within a period provided for in the Agreement, by the optionee or
person or persons to whom such optionee's rights under the option shall have
passed by will or by the laws of descent and distribution, but in no event at a
date later than the termination of the option. The Committee may require medical
evidence of permanent disability, including medical examinations by physicians
selected by it.

(h) The option by its terms shall be personal and shall not be
transferable by the optionee otherwise than by will or by the laws of descent
and distribution as provided in Section 6(g). During the lifetime of an
optionee, the option shall be exercisable only by the optionee. In the event
any option is exercised by the executors, administrators, heirs or distributees
of the estate of a deceased optionee as provided in Section 6(g), the Company
shall be under no obligation to issue Common Stock thereunder unless and until
the Company is satisfied that the person or persons exercising the option are
the duly appointed legal representative of the deceased optionee's estate or the
proper legatees or distributees thereof.

(i) Notwithstanding any intent to grant incentive stock options, an
option granted will not be considered an incentive stock option to the extent
that it together with any earlier incentive stock options permits the exercise
for the first time in any calendar year of more than $100,000 in Fair Market
Value of Common Stock (determined at the time of grant).

(j) The Committee may, but need not, require such consideration from
an optionee at the time of granting an option as it shall determine, either in
lieu of, or in addition to, the limitations on exercisability provided in
Section 6(e).

(k) No incentive stock option shall be granted to an employee who
owns or would own immediately before the grant of such option, directly or
indirectly, stock possessing more than 10% of the total combined voting power of
all classes of stock of the Company. This restriction does not apply if, at the
time such incentive stock option is granted, the option price is at least 110%
of the Fair Market Value of one share of Common Stock, as determined in
accordance with Section 6(a), on the date of grant and the incentive stock
option by its terms is not exercisable after the expiration of five years from
the date of grant.

(l) An option and any Common Stock received upon the exercise of an
option shall be subject to such other transfer restrictions and/or legending
requirements that are specified in the Agreement.

7. Terms and Conditions of Restricted Stock Awards. All awards of
restricted stock under the Plan shall be subject to all the applicable
provisions of the Plan,

-5-
<PAGE>

including the following terms and conditions, and to such other terms and
conditions not inconsistent therewith, as the Committee shall determine.

(a) Awards of restricted stock may be in addition to or in lieu of
option grants.

(b) During a period set by, and/or until the attainment of
particular performance goals based upon criteria established by, the Committee
at the time of each award of restricted stock (the "restriction period") as
specified in the Agreement, the recipient shall not be permitted to sell,
transfer, pledge, or otherwise encumber the shares of restricted stock; except
that such shares may be used, if the Agreement permits, to pay the option price
of any option granted under the Plan, provided an equal number of shares
delivered to the recipient shall carry the same restrictions as the shares so
used.

(c) If so provided in the Agreement, shares of restricted stock
shall become free of all restrictions if (i) the recipient dies, (ii) the
recipient's employment terminates by reason of permanent disability, as
determined by the Committee, (iii) the recipient retires under specific
circumstances set forth in the Agreement, or (iv) there is a Change in Control
(as defined in Section 9 hereof) of the Company. The Committee may require
medical evidence of permanent disability, including medical examinations by
physicians selected by it. If the Committee determines that any such recipient
is not permanently disabled, the restricted stock held by such recipient shall
be forfeited and revert to the Company.

(d) Unless and to the extent otherwise provided in the Agreement in
accordance with Section 7(c), shares of restricted stock shall be forfeited and
revert to the Company upon the recipient's termination of employment or
directorship during the restriction period, except to the extent the Committee,
in its sole discretion, finds that such forfeiture might not be in the best
interest of the Company and, therefore, waives all or part of the application of
this provision to the restricted stock held by such recipient.

(e) Stock certificates for restricted stock shall be registered in
the name of the recipient but shall be appropriately legended and returned to
the Company by the recipient, together with a stock power, endorsed in blank by
the recipient. The recipient shall be entitled to vote shares of restricted
stock and shall be entitled to all dividends paid thereon, except that dividends
paid in Common Stock or other property shall also be subject to the same
restrictions.

(f) Restricted stock shall become free of the foregoing restrictions
upon expiration of the applicable restriction period, and the Company shall then
deliver Common Stock certificates evidencing such stock to the recipient.

(g) Restricted stock and any Common Stock received upon the
expiration of the restriction period shall be subject to such other transfer
restrictions and/or legending requirements that are specified in the Agreement.

8. Bonuses Payable in Stock. In lieu of cash bonuses otherwise
payable under the Company's or applicable subsidiary's compensation practices to
employees and directors eligible to participate in the Plan, the Committee, in
its sole discretion, may determine that such bonuses shall be payable in Common
Stock or partly in Common Stock and partly in cash. Such bonuses shall be in
consideration of services previously performed and as an

-6-
<PAGE>

incentive toward future services and shall consist of shares of Common Stock
subject to such terms as the Committee may determine in its sole discretion. The
number of shares of Common Stock payable in lieu of a bonus otherwise payable
shall be determined by dividing such amount by the Fair Market Value of one
share of Common Stock on the date the bonus is payable.

9. Change in Control.

(a) In the event of a Change in Control of the Company, the
Committee may, in its sole discretion, provide that any of the following
applicable actions be taken as a result, or in anticipation, of any such event
to assure fair and equitable treatment of Participants:

(i) accelerate restriction periods for purposes of vesting
in, or realizing gain from, any outstanding option or shares of restricted
stock awarded pursuant to this Plan;

(ii) offer to purchase any outstanding option or shares of
restricted stock made pursuant to this Plan from the holder for its
equivalent cash value, as determined by the Committee, as of the date of
the Change in Control; or

(iii) make adjustments or modifications to outstanding options
or with respect to restricted stock as the Committee deems appropriate to
maintain and protect the rights and interests of the Participants following
such Change in Control.

Any such action approved by the Committee shall be conclusive and
binding on the Company, its subsidiaries and all Participants; provided,
however, that notwithstanding the foregoing, under no circumstances shall the
Committee take or approve any action that would result in an "Excess Parachute
Payment," as defined in Section 280G(b) of the Code.

For purposes hereof, "Change in Control" means a change in control of
the Company of a nature that would be required to be reported in response to
Item 6(e) of Schedule 14A of Regulation 14A under the Exchange Act, whether or
not the Company is subject to the Exchange Act at such time; provided, however,
that without limiting the generality of the foregoing, such a Change in Control
shall in any event be deemed to occur if and when:

(i) any person (as such term is used in Sections 13(d) and
14(d)(2) of the Exchange Act), the Company, its subsidiaries and affiliates
(as defined in Rule 12b-2 under the Exchange Act), becomes the beneficial
owner (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing more than [20%] of
the combined voting power of the Company's then outstanding securities;

(ii) stockholders approve a merger or consolidation as a
result of which securities representing less than [51%] of the combined
voting power of the outstanding voting securities of the surviving or
resulting corporation will be beneficially owned, directly or indirectly,
in the aggregate by the former stockholders of the Company;

-7-
<PAGE>

(iii) stockholders approve either (A) an agreement for the
sale or disposition of all or substantially all of the Company's assets to
an entity which is not a subsidiary of the Company, or (B) a plan of
complete liquidation;

(iv) the persons who were members of the Board immediately
before [the completion of a tender offer] by any person other than the
Company or a subsidiary or affiliate of the Company, or before a merger,
consolidation, or contested election, or before any combination of such
transactions, cease to constitute a majority of the Board as a result of
such transaction or transactions; or

(v) [Andica to review (v) for inclusion] a change in control
of the Company occurs of a nature that would be required to be reported in
response to Item 6(e) of Schedule 14A of Regulation 14A under the Exchange
Act if the Company were subject to the provisions of the Exchange Act at
the time such change in control occurs (whether or not the Company is
subject to the Exchange Act at that time), and at the time such change in
control occurs, the Company is the beneficial owner (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of securities of the
Company representing (A) more than [30%] of the combined voting power of
the Company's then outstanding securities, and (B) more than the percentage
of the combined voting power of the Company's outstanding securities
beneficially owned, directly or indirectly, at that time by any other
person (as such term is used in Sections 13(d) and 14(d)(2) of the Exchange
Act).]

(b) In no event, however, may (i) any option be exercised prior to
the expiration of six months from the date of grant (unless otherwise provided
for in the Agreement), or (ii) any option be exercised after ten years from the
date it was granted.

10. Transfer, Leave of Absence. For the purpose of the Plan: (a) a
transfer of an employee from the Company to a subsidiary or affiliate of the
Company, whether or not incorporated, or vice versa, or from one subsidiary or
affiliate of the Company to another, and (b) a leave of absence, duly authorized
in writing by the Company or a subsidiary or affiliate of the Company, shall not
be deemed a termination of employment.

11. Rights of Employees and Directors.

(a) No person shall have any rights or claims under the Plan except
in accordance with the provisions of the Plan and the Agreement.

(b) Nothing contained in the Plan or Agreement shall be deemed to
give any employee or director the right to be retained in the service of the
Company or its subsidiaries.

12. Tax Withholding Obligations.

(a) If required by applicable law, the payment of taxes, upon the
exercise of an option pursuant to Section 6(e) or a stock appreciation right
pursuant to Section 6(f), shall be in cash at the time of exercise or on the
applicable tax date under Section 83 of the Code, if later; provided, however,
tax withholding obligations may be met by the withholding of Common

-8-
<PAGE>

Stock otherwise deliverable to the optionee pursuant to procedures approved by
the Committee; provided, further, however, the amount of Common Stock so
withheld shall not exceed the minimum required withholding obligation.

(b) If required by applicable law, recipients of restricted stock,
pursuant to Section 7, shall be required to pay taxes to the Company upon the
expiration of restriction periods or such earlier dates as elected pursuant to
Section 83 of the Code; provided, however, tax withholding obligations may be
met by the withholding of Common Stock otherwise deliverable to the recipient
pursuant to procedures approved by the Committee. If tax withholding is
required by applicable law, in no event shall Common Stock be delivered to any
awardee until such awardee has paid to the Company in cash the amount of such
tax required to be withheld by the Company or has elected to have such awardee's
withholding obligations met by the withholding of Common Stock in accordance
with the procedures approved by the Committee or otherwise entered into an
agreement satisfactory to the Company providing for payment of withholding tax.

(c) The Company shall first withhold from any cash bonus described
in Section 8, an amount of cash sufficient to meet its tax withholding
obligations before the amount of Common Stock paid in accordance with Section 8
is determined.

13. Changes in Capital; Reorganization.

(a) Upon changes in the outstanding Common Stock by reason of a
stock dividend, stock split, reverse split, subdivision, recapitalization, an
extraordinary dividend payable in cash or property, combination or exchange of
shares, separation, reorganization or liquidation, and the like, the aggregate
number and class of shares available under the Plan as to which stock options
and restricted stock may be awarded, the number and class of shares under (i)
each option and the option price per share and (ii) each award of restricted
stock shall, in each case, be correspondingly adjusted by the Committee, such
adjustments to be made in the case of outstanding options without change in the
total price applicable to such options.

(b) In the event (i) the Company is merged or consolidated with
another entity and the Company is not the surviving corporation, or the Company
shall be the surviving corporation and there shall be any change in the Common
Stock of the Company by reason of such merger or consolidation, or (ii) all or
substantially all of the assets of the Company are acquired by another
corporation, or (iii) there is a reorganization or liquidation of the Company
(each, a "Reorganization Event"), or (iv) the Board shall propose that the
Company enter into a Reorganization Event, then the Board (acting solely through
members of the Board who were members of the Board prior to the occurrence of
the Reorganization Event) may in its discretion take any or all of the following
actions:

(i) by written notice to the holders of stock options or
restricted stock awards, provide that the stock options or restricted stock
awards shall be terminated unless exercised within 30 days (or such longer
period as the Board shall determine in its discretion) after the date of
such notice; and

-9-
<PAGE>

(ii) advance the dates upon which (A) any or all outstanding
stock options and stock appreciation rights shall be exercisable or (B)
restrictions applicable to restricted stock awards shall lapse.

Whenever deemed appropriate by the Board, any action referred to in
this Section 13(b) may be made conditioned upon the consummation of the
applicable Reorganization Event.

(c) Any adjustments or other action pursuant to this Section 13
shall be made by the Board and the Board's determination as to what adjustments
shall be made or actions taken, and the extent thereof, shall be final and
binding.

14. Miscellaneous Provisions.

(a) The Plan shall be unfunded. The Company shall not be required to
establish any special or separate fund or to make any other segregation of
assets to assure the issuance of shares or the payment of cash upon exercise of
any option or stock appreciation right under the Plan. Proceeds from the sale of
shares of Common Stock pursuant to options granted under this Plan shall
constitute general funds of the Company. The expenses of the Plan shall be borne
by the Company.

(b) It is understood that the Committee may, at any time and from
time to time after the granting of an option or the award of restricted stock or
bonuses payable in Common Stock hereunder, specify such additional terms,
conditions and restrictions with respect to such option or stock as may be
deemed necessary or appropriate to ensure compliance with any and all applicable
laws, including, without limitation, terms, restrictions and conditions for
compliance with federal and state securities laws and methods of withholding or
providing for the payment of required taxes.

(c) If at any time the Committee shall determine, in its discretion,
that the listing, registration or qualification of shares of Common Stock upon
any national securities exchange or quotation system or under any state or
federal law, or the consent or approval of any governmental regulatory body, is
necessary or desirable as a condition of, or in connection with, the sale or
purchase of shares of Common Stock hereunder, no option may be exercised or
restricted stock or stock bonus may be transferred in whole or in part unless
and until such listing, registration, qualification, consent or approval shall
have been effected or obtained, or otherwise provided for, free of any
conditions not acceptable to the Committee.

(d) By accepting any benefit under the Plan, each Participant and
each person claiming under or through such Participant shall be conclusively
deemed to have indicated such Participant's or person's acceptance and
ratification, and consent to, any action taken under the Plan by the Committee,
the Company or the Board.

(e) THE PLAN SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF [NEW JERSEY] WITHOUT GIVING EFFECT TO THE PRINCIPLES OF
CONFLICTS OF LAWS THEREOF.

-10-
<PAGE>

16. Limits of Liability.

(a) Any liability of the Company or any of its subsidiaries to any
Participant with respect to any option or award shall be based solely upon
contractual obligations created by the Plan and the Agreement.

(b) None of the Company or any of its subsidiaries, or any member of
the Committee or the Board, or any other person participating in any
determination of any question under the Plan, or in the interpretation,
administration or application of the Plan, shall have any liability to any party
for any action taken or not taken in connection with the Plan, except as may
expressly be provided by statute.

16. Amendments and Termination. The Board may, at any time, amend,
alter or discontinue the Plan; provided, however, no amendment, alteration or
discontinuation shall be made which, without the approval of the stockholders,
would:

(a) except as is provided in Section 13, increase the maximum number
of shares of Common Stock reserved for the purpose of the Plan;

(b) except as is provided in Section 13, decrease the option price
of an option to less than 100% of the Fair Market Value of a share of Common
Stock on the date of the granting of the option;

(c) change the class of persons eligible to receive an award of
restricted stock, options or bonuses payable in Common Stock under the Plan; or

(d) extend the duration of the Plan.

The Committee may amend the terms of any award of restricted stock or
option theretofore granted, retroactively or prospectively, but no such
amendment shall impair the rights of any holder without such holder's written
consent.

17. Duration. The Plan shall be adopted by the Board as of the date
on which it is approved by a majority of the Company's stockholders, which
approval must occur within the period ending 12 months after the date the Plan
is adopted. The Plan shall terminate upon the earliest of the following dates or
events to occur:

(a) the adoption of a resolution of the Board, terminating the Plan;
or

(b) the date all shares of Common Stock subject to the Plan are
purchased according to the Plan's provisions; or

-11-

<PAGE>

EXHIBIT 10.17

LOAN SALES AGREEMENT

WHEREAS, ____________________________________________________________________, a
corporation duly organized and existing under the laws of NEW YORK STATE
(hereinafter the Seller), is engaged in the business of making, originating or
otherwise acquiring conventional mortgage loans in the State of NY the ("State")
on completed one-in-four family residential properties (hereinafter known as
"mortgages" or "loans") and

WHEREAS, the Seller desires to sell to Columbia Federal Savings Bank
(hereinafter the Buyer), with its office located at 93-22 Jamaica Avenue,
Woodhaven, New York 11421, and Buyer desires to purchase from Seller particular
loans as specified in our "Correspondent's Guide" as modified from time-to-time,
which is incorporated in this Agreement and made a part hereof. For the purpose
of this Agreement, the term "purchase" is defined to mean mortgage loans
originated and processed by the Seller and either taken by assignment by Buyer
or closed in the Buyer's name.

WHEREFORE, the parties agree as follows:

WITNESSETH:

1. With respect to each loan purchased by Buyer, Seller represents and
warrants to Buyer and Buyer's successors and assigns, that as of the date
of the purchase:

a. Seller is an approved conventional lender as determined by Buy, and
will retain said status as long as this Agreement shall remain in
effect.

b. All loans have been originated, processed, closed and delivered in
accordance with all terms and conditions of this Agreement and the
"Correspondent's Guide" in effect at the time the loan is purchased
by Buyer. All loans fully comply with applicable laws and
governmental regulations, including, without limitations, usury
laws, the Fair Credit Reporting Act, Equal Credit Opportunity Act,
Real Estate Settlement Procedure Act, the Consumer Credit Protection
Act, the Federal Fair-Housing Act and the National Flood Insurance
Act and Jones Amendment thereto.

c. Seller has good title to and is the sole owner of the loan; the
Seller is either the original mortgagee or holder in due course
(wherein all assignments has been duly recorded) of the loan and
there has been no prior assignment, sale or hypothecation of said
loan.

d. The full principal amount of the loan has been advanced to the
mortgagor or on his account; all cost, fees and expense, including
recording fees, documentary stamps, intangible taxes, hazard
insurance premiums and any other taxes or assessments due and
payable have been so paid.

1
<PAGE>

e. The outstanding principal balance is correctly stated; all monthly
payments, including sums attributed to escrow for mortgage
insurance, taxes and hazard insurance, are current, and there has
been no breach of the terms and conditions of the mortgage.

f. The Mortgage Loan Documents are genuine and each is the legal, valid
and binding obligation of the Mortgagor, enforceable in accordance
with its terms. All parties to the Mortgage Loan Documents and legal
capacity to execute the Mortgage Loan Documents each of which has
been duly and property executed by the Mortgagor. There are no
defenses or counterclaims, or rights of set off affecting the loan;
the loan is free and clear of all claims, encumbrances or
illegalities of any type.

g. Each Mortgage Loan is covered by an ALTA Mortgage Title Insurance
policy issued by a Title Insurer that is financially sound and
qualified to do business in the jurisdiction where the mortgage
property is located, insuring Seller, its successors and assigns, as
to the priority lien of the Mortgage in the original principal
amount of the Mortgage Loan. Seller is the named insured and the
sole insured of such Mortgage Title Insurance Policy; such Mortgage
Title Insurance Policy is in full force and effect and will be in
full force and effect upon the consummations of the transactions
contemplated by this Agreement. No claims have been made under such
Mortgage Title Insurance Policy, and no prior holder of the related
Mortgage including Seller, has engaged in any act or omission to
act, which would impair the coverage of such Mortgage Title
Insurance Policy.

h. Seller has no knowledge of any circumstances or conditions with
respect to the Mortgage, the Mortgage Property, the Mortgagor or the
Mortgagor's credit standing that can be expected reasonably to
cause the Mortgage to become delinquent, or adversely affect the
value or marketability of the Mortgage.

i. The improvements now existing or hereafter erected on the property
encumbered by the mortgage are insured at a minimum against fire
with "extended coverage" (and flood insurance where required by law
or regulations) in an amount at least equal to the outstanding
principal balance or full replacement value of the improvements.
Said insurance is without coinsurance or average clause provision
and contains a standard mortgage clause and loss payable endorsement
in favor of Buyer, including Buyer's address.

j. There is no default, breach, violation or event of acceleration
existing under the Mortgage or the related Mortgage Note and no
event which, with the passage of time or with notice with the
expiration of any grace or cure period, would constitute a default,
breach, violation or event of acceleration; and Seller has not
waived any default, breach, violation or event of acceleration.

2
<PAGE>

k. There is no proceeding pending for the total or partial condemnation
of the mortgage property and the property is undamaged by fire,
windstorm or other casualty.

l. All the improvements which are included for the purpose of
determining the appraised value of the Mortgage Property lie wholly
within the boundaries and building restriction lines of such
property, and no improvements on adjoining properties encroach upon
the Mortgage Property.

m. All improvements on the mortgaged property conform with all local
and county zoning ordinances so as to permit occupancy thereof as a
one-to-four family residence. If the mortgagor is the first user of
the property, then all permits and certificates for use and
occupancy thereof have been obtained. If required by law or
regulations, all environmental permits have been secured.

n. Seller is duly organized, existing in good standing, qualified and
authorized to do business in the same jurisdiction as the mortgaged
premises and is familiar with FNMA and FHLMC underwriting procedures
for implementing changes in FNMA and FHLMC requirements as necessary

o. Seller has taken all action, including a resolution by the Board of
Directors, if necessary, to permit Seller to enter into this
Agreement or any other agreement or transaction contemplated herein,
and same is valid and binding upon the Seller. No officer or agent
of Buyer shall be required to make any inquiry concerning the
validity of any transaction purported to be made by Seller, when
made by any officer or agent of the Seller; and Buyer may
conclusively assume that every obligation, contact, instrument, act
or thing done and executed by any person purportedly on behalf of
Seller, has been so executed or done in the official capacity as the
agent or officer for the Seller.

p. All loans sold to the Buyer by the Seller comply with all federal
and state regulatory requirements.

q. The mortgage property is located in the State of New York

r. The Seller is either a domestic corporation of the State or is
authorized to transact business in the State pursuant to the laws of
the State. No activity of Seller in the State, whether related to
the Loan Correspondent Program with Purchaser or otherwise, would be
grounds for or give rise to any defense based on the Seller's
failure to qualify in the State.

3
<PAGE>

2. Seller agrees to deliver to Buyer any and all instruments obtained or
prepared by Seller in connection with each loan. As a minimum, Seller must
deliver to Buyer all documents required at the time of purchase by Buyer.
Seller agrees to indemnify and hold harmless the Buyer from any and all
loss or liability which may now or hereinafter arise resulting from the
loss or misplacement of any document listed therein.

a. Buyer shall pay the purchase price in accordance with the terms,
conditions and procedures set forth in the "Correspondent Guide".

b. Seller may, from time-to-time, deliver to Buyer loans which do not
conform with the "Correspondent's Guide" and Buyer may review said
loans.

c. Buyer may, for any reason whatsoever, accept or reject any loan so
offered. If Buyer approves said loan, Buyer will pay the purchase
price to the Seller upon terms and conditions agreed by both
parties.

d. After Buyer has rejected any loan, Seller shall have the right to
sell, pledge, hypothecate or transfer any portion of the rejected
loan to another Buyer.

3. Within five (5) business days of Seller's receipt of written demand by
Buyer or Buyer assignee, Seller shall repurchase from Buyer, at the
repurchase price set forth herein, for the following criterion:

Any loan wherein the warranties or representations of this Agreement
are breached by the Seller as determined by Buyer, or wherein, in
Buyer's opinion, Seller or Seller's agents have committed fraud or
negligence in the origination or closing of a loan.

At Buyer's option, Seller may be given thirty (30) days to correct or cure
any deficiencies which, in the Buyer's judgement, created a breach of this
Agreement.

4. In the event Seller repurchases a loan from Buyer, the price shall be that
amount equal to the purchase price paid to Seller by Buyer less any
repayment of principal received, plus accrued interest, of one hundred
percent (100%) of par if said loan has already been pledged as collateral
plus accrued interest, if any. Upon payment of the repurchase prices as
set forth herein, the loan shall be considered to have been rejected by
the Buyer.

Commencing upon the day Seller receives written demand by Buyer or Buyer's
assignee to repurchase loan from Buyer, Seller agrees to fully indemnity
Buyer or Buyer's assignee and hold harmless against any direct or
indirect loss or damage it may suffer as a result, or any breach

4
<PAGE>

of warranty or representative which occurred prior to the date of
delivery.

5. Seller agrees to keep and maintain such books and records as to meet and
comply with all requirements or recommendations of the computer generated
reports and/or to Buyer. These books/records shall be available to buyer
at any time, without notice during business hours, for examination and
audit. Said records shall include a loan register documenting all loan
applications taken by Seller. Any reproduction shall be done at Buyer's
sole expense.

6. This Agreement may be terminated by either party upon written notice to
the other party. Buyer will continue to close and/or fund loans previously
"locked-in" in accordance with the established procedures set forth in the
"Correspondent's Guide". Seller agrees to close all loans "locked-in"
prior to the notice of termination and if not able to close, will furnish
documented proof of its inability to close. Seller covenants and agrees,
that, upon the termination of the Agreement, no further loans will
thereafter be committed by the Seller under the sponsorship of Buyer.

Should "locked-in" loans not be closed by Seller without valid reason,
Seller shall be responsible for the higher of one percent (1%) of the
principal amount or, if said loans were allocated to specific investor
commitments, the amount of loss sustained by Buyer for failure of Seller
to deliver closed loans. If Seller breaches or defaults upon any term or
condition of this Agreement, Buyer shall not be required to purchase any
loans, whether or not any have been "locked-in". Seller shall be deemed to
be in default if any of the following shall occur.

a. Any document or paper delivered hereunder shall prove to have been
incorrect in any material respect.

b. Any substantial reduction in Seller's net worth, as determined
solely by Buyer.

c. Seller is adjudged bankrupt or insolvent by a Court of competent
jurisdiction for the appointment of receiver, liquidator or trustee
of Seller, of all or substantially all of its property, or approving
any petition filed against the Seller for its reorganization, and
such adjudication or other remains in force for a period of twenty
(20) days.

d. If Seller institutes proceedings for voluntary bankruptcy, files a
petition seeking reorganization under the Federal Bankruptcy Acts,
files under any law for the relief of debtors, consents to the
appointment of a receiver of all or substantial all of its property,
makes a general assignment for the benefit of its creditors, or
admits in writing its inability to pay its debts generally as they
become due.

5
<PAGE>

e. Seller otherwise becomes incapacitated by operation of law or fact
from fully performing its duties pursuant to the terms of this
Agreement.

f. Seller without Buyer's consent, merges with or consolidates into
another corporation, sells or otherwise disposes of all or
substantially all of its property and assets, permits and change to
occur in the stock ownership of the company which would transfer
effective voting control from the persons now exercising such
control, to others.

7. Failure or delay on the part of Buyer to audit any loan or to exercise any
right provided for herein, shall not act as a waiver thereof nor shall any
single or partial exercise of any right by Buyer preclude any or further
exercise thereof. Remedies herein are to be deemed as cumulative and
nonexclusive of each other. In no event shall a term or provision of this
Agreement be deemed to have been waived, modified or amended, unless the
said waiver, modification or amendment is in writing and signed by the
parties hereto.

8. In the event Buyer desires a specific or individual bond running directly
to the benefit of Buyer, Seller will execute and secure such a bond, but
such a separate bond shall be at the expense and cost of the Buyer. At
Buyer's option, said coverage may include all employees of Seller handling
funds of the Buyer and all of the employees handling any mortgage
documents or papers, said coverage may protect the Buyer in cases
resulting from theft, embezzlement, fraud, negligent acts, error or
omissions, forgeries, dishonesty, larceny, wrongful abstraction or
misappropriation, or any other dishonest, criminal or fraudulent act,
wherever committed and whether committed alone or in connivance with
others. Any bond required hereunder shall include a provision that
coverage cannot be changed, cancelled or amended except on ten (10) days
written notice by registered mail to the Buyer.

9. In the performance of its duties or obligations under this Agreement or
any other contract, commitment, undertaking or agreement made pursuant to
this Agreement. Seller shall not be deemed to be, or permit itself to be,
the employee or servant of the Buyer and shall at all times take whatever
measures as are necessary to insure that its status shall be that of any
independent contractor, operating as a separate entity. None of the
Sellers employees, agents or servants are entitled to the benefits that
are provided to the employees of the Buyer, which may include but are not
limited to, group health insurance, any pension plan, bonuses, special
interest rate considered on the mortgages of personal residences and
profit sharing. Buyer is solely interested in the results obtained under
this contract and therefore, the manner and means of conducting the
Seller's business affairs are under the sole control of the Seller and
Seller shall be solely and entirely responsible for its acts and for the
acts of its agents, employees and servants. Seller may engage in any
activity contemplated hereunder for a Buyer other than the Buyer herein
should Buyer not have comparable loan programs available.

6
<PAGE>

10. It is a further consideration that, within ninety (90) days of the
inception of this Agreement and thereafter, Seller will be originating a
minimum acceptable monthly volume of mortgage loans. Seller understands
that one of the criteria for the continuation of this Agreement between
Seller and Buyer shall be the monthly volume of loans delivered to Buyer
by Seller, However, Seller understands and agrees that nothing herein is
intended to limit both Buyer and Seller's respective right to terminate
this Agreement pursuant to paragraph 6 herein, which may be exercised by
either Buyer or Seller in its sole and unfettered discretion.

11 In the event that the Buyer or Seller should engage in litigation
concerning any of the provisions of this Agreement, the prevailing party
shall be entitled to recover all costs and expenses, including a
reasonable attorney's fee.

12. This Agreement shall not be binding until Buyer's acceptance of same at
its offices in New York.

13. The Seller acknowledges that no representations, agreement or promises
were made to Seller by Buyer or any of its employees other than those
representations, agreements or promises specifically contained herein.
This Agreement sets forth the entire understanding between the parties
hereto and shall be binding upon all successors of both parties. However,
neither party shall have the right to assign any of its duties,
obligations or rights under this Agreement without the prior written
consent of the other.

14. This Agreement may not be modified except by a writing signed by both
parties. However, Seller acknowledges and agrees that Buyer may, from time
to time, make changes, additions, modifications to its Loan Correspondence
Seller Guide and that such changes, additions or modifications shall be
binding upon Seller immediately upon receipt of same to the same extent as
is expressly contained in this Agreement.

15. In the event of any litigation in connection with this Agreement the
parties mutual waive all rights to a trial by jury and each agrees not to
assert any counter-claim of any nature in such litigation unrelated to
this Agreement. The parties hereby consent and agree to the personal
jurisdiction and venue of the Supreme Court of the State of New York,
County of New York, in each case for and with respect to any and all
disputes and claims arising out of, under or in connection with this
Agreement and with respect to the enforcement of this Agreement and of any
rights or obligations arising hereunder, and service of process may be
made on the other party by mailing a copy of the summons to such party at
the address appearing at the top of this Agreement.

7
<PAGE>

16. It is understood and agreed that the representations and warranties set
forth in this Agreement and continuing representations and warranties
shall survive delivery and release of the Mortgage Files to Purchaser and
shall inure to the benefit of the Purchaser, or any subsequent Holder of
the Mortgage Loans, notwithstanding any restriction of qualified
endorsement on any Assignment or on any Mortgage Loan Document or any
examination of the Mortgage File and shall survive termination of this
Agreement. Seller hereby waives, to the extent lawful, the benefit of any
applicable statue of limitations with respect to the aforesaid
representations or warranties. Upon discovery by Purchaser or Holder of a
breach of any representation and warranty set forth in this Agreement or
if, following default in the payment of a Mortgage Loan Holder of the
Mortgage is, or, in the opinion of its legal counsel, will be prevented
from obtaining full payment of a Mortgage Loan by reason of a condition
(including, without limitation, a defect in title which prevents
foreclosure, or, following foreclosure, proved unacceptable to a prudent
purchaser, or damage to the Mortgaged Property not covered by any
insurance policy maintained on the Closing Date) which constitutes a
breach of one or more of the representations and warranties set forth in
this Agreement, Holder shall notify Seller of such condition, in which
case Seller shall repurchase or cure or cause to be cured, such breach,
pursuant to paragraphs 3 and 4 herein.

IN WITNESS WHEREOF the parties have interchangeably set their hands and seals
this 31st day of March 1995.

BUYER:

THE COLUMBIA FEDERAL SAVINGS BANK

BY: /s/ Ronald Pasquini
-------------------------------------
Ronald Pasquini
(SEAL)

SELLER

BY: /s/ Michael Strauss
-------------------------------------
Michael Strauss
(SEAL)

<PAGE>

EXHIBIT 23.1

INDEPENDENT AUDITORS' CONSENT

The following consent is in the form that will be furnished by Deloitte &
Touche LLP upon the consummation of the pending public offering of common stock
described in Note 16 to the financial statements assuming that from August 18,
1999 to the effective date of such event no other material events have occurred
that would affect the accompanying financial statements or require disclosure
therein.

"We consent to the use in this Registration Statement of American Home
Mortgage Holdings, Inc. on Form S-1 of our report dated , 1999 (
, 1999 as to Note 16), appearing in the Prospectus, which is part of this
Registration Statement.

We also consent to the reference to us under the headings "Selected
Financial Data" and "Experts" in such Prospectus.

Deloitte & Touche LLP
Parsippany, New Jersey
, 1999"

/s/ Deloitte & Touche LLP
Parsippany, New Jersey

August 18, 1999

<PAGE>

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<PERIOD-START> JAN-01-1998 JAN-01-1999
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<SECURITIES> 0 0
<RECEIVABLES> 2,893 4,146
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<INCOME-CONTINUING> 4,921 2,573
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 4,870 2,529
<EPS-BASIC> 0 0
<EPS-DILUTED> 0 0

</TABLE>