Edgar Filing: NEW YORK MORTGAGE TRUST INC

FILED PURSUANT TO RULE 424(b)(4)
REGISTRATION NO. 333-111668

PROSPECTUS

(NYMT LOGO)

15,000,000 SHARES OF COMMON STOCK
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We are a Maryland corporation newly formed to acquire The New York Mortgage
Company, LLC, or NYMC, a residential mortgage banking company. We expect to
qualify as a real estate investment trust, or REIT, under the Internal Revenue
Code of 1986, as amended, immediately following the closing of this offering and
will elect to be taxed as a REIT for our short taxable year beginning on the
business day before this offering closes and ending December 31, 2004.
This is our initial public offering. No public market currently exists for
our common stock. We are selling all of the common stock offered by this
prospectus. Our common stock has been approved for listing on the New York Stock
Exchange under the symbol "NTR."
---------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 11 OF THIS PROSPECTUS FOR CERTAIN RISK
FACTORS RELEVANT TO AN INVESTMENT IN OUR COMMON STOCK, INCLUDING, AMONG OTHERS:

- We may experience a decline in the market value of our assets due to rising
interest rates.
- A decrease in the demand for mortgage loans due to a period of rising interest
rates may adversely affect our earnings, which could negatively affect the
cash available for distribution to you.
- Our success will depend on our ability to obtain financing to leverage our
equity eight to 12 times.
- We intend to leverage our portfolio, which will exacerbate any losses we incur
on our planned investments and may reduce the cash available for distribution
to you.
- Interest rate fluctuations resulting in our interest expense exceeding our
interest income would result in operating losses for us and may limit or
eliminate our ability to make distributions to you.
- A prolonged economic slow down, a lengthy or severe recession or declining
real estate values could harm our operations.
- We have no operating history with respect to securitizing mortgage loans or
managing a portfolio of mortgage securities.
- Our success will partially depend on our ability to originate prime
adjustable-rate and hybrid mortgage loans for our portfolio.
- We may not be successful in qualifying as a REIT or maintaining our
qualification as a REIT for federal income tax purposes, in which case we
would be subject to federal income tax on our taxable income at regular
corporate rates, thereby reducing the amount of funds available for making
distributions to you.
- REIT distribution requirements could adversely affect our liquidity.

PER SHARE TOTAL
--------- ------------

Public offering price....................................... $9.00 $135,000,000
Underwriting discount....................................... $0.63 $ 9,450,000
Proceeds, before expenses, to us............................ $8.37 $125,550,000

We have granted the underwriters an option to purchase up to an additional
2,250,000 shares of common stock from us solely to cover over-allotments, if
any, at the initial public offering price, less the underwriting discount,
exercisable within 30 days from the date of this prospectus.
In consideration of our acquisition of all of the ownership interests in
NYMC upon completion of this offering, we will issue 1,925,000 shares and
825,000 shares, respectively, of our common stock to Steven B. Schnall and one
of his affiliates and Joseph V. Fierro and one of his affiliates. Mr. Schnall is
our co-chief executive officer and chairman of our board of directors and Mr.
Fierro is the chief operating officer of NYMC. NYMC also intends to make a cash
distribution of approximately $3,500,000 in the aggregate to Messrs. Schnall and
Fierro and their affiliates, who together comprise all of the members of NYMC,
immediately before completion of this offering. The distribution is based on the
estimated paid-in equity and retained earnings of NYMC as of the anticipated
closing date of this offering. This amount represents the estimated amount of
incremental net income of NYMC for the period from December 31, 2003 up to the
anticipated closing date of this offering. The actual amount of the distribution
may be more or less than $3,500,000, but will not exceed $4,500,000.
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.
We expect that the shares of common stock to be sold in this offering will
be delivered on or around June 29, 2004.
---------------------

FRIEDMAN BILLINGS RAMSEY JPMORGAN
RBC CAPITAL MARKETS

The date of this prospectus is June 24, 2004.

PROSPECTUS SUMMARY

This is only a summary and does not contain all of the information that you
should consider before investing in our common stock. You should read the entire
prospectus, including "Risk Factors" and our financial statements and related
notes appearing elsewhere in this prospectus, before deciding to invest in our
common stock. In this prospectus, unless the context suggests otherwise,
references to "our company," "we," "us" and "our" mean New York Mortgage Trust,
Inc., including its subsidiaries. NYMC refers to our subsidiary and predecessor,
The New York Mortgage Company, LLC. Unless indicated otherwise, the information
included in this prospectus assumes no exercise by the underwriters of the
over-allotment option to purchase up to an additional 2,250,000 shares of common
stock.

OVERVIEW

We are a Maryland corporation newly formed to acquire The New York Mortgage
Company, LLC, or NYMC, a residential mortgage banking company. Upon completion
of this offering and our acquisition of NYMC, we intend to build a leveraged
portfolio of residential mortgage loans comprised largely of prime
adjustable-rate mortgage loans that we originate, including adjustable-rate
loans that have an initial fixed-rate period, which we refer to as hybrid
mortgage loans. In addition, in the short term and from time to time in the
future, we intend to invest in mortgage-backed securities on a leveraged basis.
NYMC has originated, and we will continue to originate, mortgage loans of all
types, and although we do not have specific guidelines as to the relative
amounts of prime and non-prime mortgage loans that we can originate, we have a
particular focus on prime adjustable- and fixed-rate, first lien, residential
purchase mortgage loans. While the definition of a prime loan varies from
institution to institution, we consider prime loans to be loans to borrowers
with strong credit profiles, which we evaluate by analyzing the borrower's
credit score, employment, income and assets and related documentation, the
amount of equity in and the value of the property securing the borrower's loan,
debt to income ratio, credit history, funds available for closing and
post-closing liquidity. NYMC has historically sold or brokered all of the loans
it has originated and has therefore historically relied on the underwriting
criteria of the institutions to which NYMC has sold its loans.

Following this offering, we intend to continue to originate mortgage loans
of all types through NYMC utilizing NYMC's historical origination strategy. NYMC
will become our taxable REIT subsidiary upon completion of this offering.
Generally, we intend to continue to sell the fixed-rate loans that we originate
to third parties, and to retain in our portfolio and finance a majority of the
adjustable-rate and hybrid mortgage loans that we originate. Our portfolio loans
will be held at the REIT level or by a qualified REIT subsidiary. Any
adjustable-rate and hybrid mortgage loans we originate that do not meet our
investment criteria or portfolio requirements will be sold to third parties. We
will rely on our own underwriting criteria with respect to the mortgage loans we
intend to retain and will continue to rely on the underwriting criteria of the
institutions to which we sell our loans with respect to the loans we intend to
sell.

While we are originating and building our portfolio of adjustable-rate and
hybrid mortgage loans, we intend to use a substantial portion of the proceeds of
this offering to purchase from one or more third parties on a leveraged basis
residential mortgage-backed securities guaranteed by a government sponsored
entity or rated investment grade by a nationally recognized statistical rating
agency. While we have not established and do not expect to establish a limit on
the amount of leverage we may incur, we expect to leverage our equity eight to
12 times. Our board of directors has adopted a policy pursuant to which we may
only invest a maximum of 7.5% of our assets in mortgage-backed securities that
are not guaranteed by a government sponsored entity or rated investment grade by
a nationally recognized statistical rating agency. Mortgage-backed securities
that are guaranteed by a government sponsored entity are not guaranteed by the
United States government. Over time, we expect that these securities will be
replaced by adjustable-rate and hybrid mortgage loans that we originate,
although we may continue to purchase securities from third parties. We believe
that our ability to use primarily mortgage loans that we originate as the basis
for our portfolio will enable us to build a portfolio that generates a higher
return than the returns realized by mortgage investors that do not have their
own origination capabilities, because

mortgage investors that do not have their own origination capabilities must
purchase their mortgage loans from third parties at higher premiums than NYMC's
cost of originating the mortgage loans that we will retain.

Historically, NYMC has financed its mortgage originations on a short-term
basis through a variety of warehouse lines of credit and repurchase facilities.
Subsequent to this offering, we will continue to use warehouse lines of credit
and repurchase facilities to fund NYMC's originations, and we will finance our
portfolio of mortgage loans with a combination of equity capital, repurchase
facilities and securitizations. Once we have built a large enough portfolio
comprised mainly of retained mortgage loans, we intend to securitize our
mortgage loans. We anticipate that the securitization transactions through which
we finance the adjustable-rate and hybrid mortgage loans that we retain will be
structured as financings for both tax and financial accounting purposes.
Therefore, we do not expect to generate a gain or loss on sales from these
activities, and, following the securitizations, the loans will remain on our
consolidated balance sheet as assets with the securitization debt listed as a
liability.

We expect to qualify as a REIT under the Internal Revenue Code and will
elect to be taxed as a REIT for our short taxable year beginning on the business
day preceding the closing of this offering and ending December 31, 2004. As a
REIT, we generally will not be subject to federal income tax on the REIT taxable
income that we distribute to our stockholders, but the taxable income generated
by NYMC, our taxable REIT subsidiary following this offering, which will include
fee income on all loans we originate and gains and net interest income on all
loans we sell, will be subject to regular corporate income tax.

Currently, NYMC's core market is the tri-state area of New York, New Jersey
and Connecticut, one of the most densely populated regions in the United States,
which comprised approximately 86.5% of our loan originations, as measured by
principal balance, for the three month period ended March 31, 2004. To a lesser
extent, NYMC is presently doing business in a number of other states across the
United States, including California, Florida and Pennsylvania. NYMC is presently
licensed or authorized to do business in a total of 38 states, and license
applications are pending in several other states.

We believe that the substantial growth of NYMC's mortgage banking business
since its inception has resulted from its commitment to providing exemplary
service to its customers and its concentration on retail, referral-based,
mortgage banking to borrowers with strong credit profiles. Based on NYMC's past
experience and our knowledge of the mortgage industry, we believe that referrals
from realtors, attorneys, accountants and other professionals and business from
repeat customers tend to generate a higher percentage of purchase mortgage loan
applications than refinance applications as compared to the loan applications
generated by advertising and other mass marketing efforts. In the three month
period ended March 31, 2004, NYMC's purchase loan originations represented 59.7%
of NYMC's total residential mortgage loan originations as measured by principal
balance, as compared to an industry-wide percentage of 47% for one-to-four
family mortgage loans, according to the May 18, 2004 report of the Mortgage
Bankers Association of America, or MBAA. We believe that the market for mortgage
loans for home purchases is less susceptible than the refinance market to
downturns during periods of increasing interest rates, because borrowers seeking
to purchase a home do not generally base their decision to purchase on changes
in interest rates alone, while borrowers that refinance their mortgage loans
often make their decision as a direct result of changes in interest rates.
Consequently, while our referral-based marketing strategy may cause our overall
loan origination volume during periods of declining interest rates to lag our
competitors who rely on mass marketing and advertising and who therefore capture
a greater percentage of loan refinance applications during those periods, we
believe our strategy will enable us to sustain stronger home purchase loan
origination volumes than those same competitors during periods of flat to rising
interest rates. In addition, we believe that our referral-based business results
in relatively higher gross margins and lower advertising costs and loan
generation expenses than most other mortgage companies whose businesses are not
referral-based.

Our principal offices are located at 1301 Avenue of the Americas, New York,
New York 10019. Our telephone number is (212) 634-9400. Our web site addresses
are http://www.nymtrust.com and http://www.nymc.com. The information on our web
sites does not constitute a part of this prospectus.

OUR BUSINESS STRATEGY

Our goal is to continue to grow the residential mortgage loan origination
business of NYMC and to build and manage a leveraged portfolio of prime
adjustable-rate and hybrid residential mortgage loans. We intend to execute our
strategy by:

- continuing to focus on originating prime residential mortgage loans
through NYMC that we believe can either be retained in our portfolio or
sold at a profit;

- focusing on maximizing our lending to home buyers rather than to home
owners seeking to refinance their mortgage loans, which we believe makes
our business less vulnerable to declines in loan origination volume
resulting from increases in interest rates;

- leveraging our portfolio to increase its size with the intent to enhance
our returns while at the same time managing the increased risk of loss
associated with this leverage;

- utilizing hedge strategies that we consider appropriate to minimize
exposure to interest rate changes; and

- expanding our retail mortgage banking business through hiring additional
loan officers, the opening of new retail branch offices in new markets
and selectively pursuing strategic acquisitions in the mortgage banking
industry.

OUR COMPETITIVE ADVANTAGES

We believe we enjoy several key competitive advantages that will enable us
to implement our business strategy. These competitive advantages include:

- our ability to use mortgage loans that we originate as the basis for our
portfolio, which we believe will enable us to build a portfolio that
generates a higher return than the returns realized by other mortgage
investors that do not have their own origination capabilities, because
mortgage investors that do not have their own origination capabilities
must purchase their mortgage loans from third parties at higher premiums
than NYMC's cost of originating the mortgage loans that we will retain;

- our extensive network of sources that generates recurring purchase loan
origination referrals;

- our ability to offer a broader range of mortgage loan products than most
of our competitors, including fixed-rate, adjustable-rate and hybrid
mortgage loans with varying total terms, allows us to meet the needs of a
wider variety of customers as compared to those of our competitors that
do not offer as many loan products;

- access to real time data and trends in the residential mortgage business
from NYMC, our mortgage loan originator; and

- a management team that includes experienced mortgage bankers and other
professionals.

SUMMARY RISK FACTORS

An investment in our common stock has risks. The "Risk Factors" section of
this prospectus contains a detailed discussion of the most important risks,
including the risks summarized below.

- we may experience a decline in the market value of our assets due to
rising interest rates;

- a decrease in the demand for mortgage loans due to a period of rising
interest rates may adversely affect our earnings, which could negatively
affect the cash available for distribution to you;

- our success will depend on our ability to obtain financing to leverage
our equity;

- we intend to leverage our equity eight to 12 times, which will exacerbate
any losses we incur on our planned investments and may reduce the cash
available for distribution to you;

- interest rate fluctuations resulting in our interest expense exceeding
our interest income would result in operating losses for us and may limit
or eliminate our ability to make distributions to you;

- a prolonged economic slow down, a lengthy or severe recession or
declining real estate values could harm our operations;

- we have no operating history with respect to securitizing mortgage loans
or managing a portfolio of mortgage securities;

- our success will partially depend on our ability to originate prime
adjustable-rate and hybrid mortgage loans for our portfolio;

- we may not be successful in qualifying as a REIT or maintaining our
qualification as a REIT for federal income tax purposes, in which case we
would be subject to federal income tax on our taxable income at regular
corporate rates, thereby reducing the amount of funds available for
making distributions to you; and

- REIT distribution requirements could adversely affect our liquidity.

OUR MARKET OPPORTUNITY

The residential mortgage loan market is the largest consumer finance market
in the United States. According to the 1-to-4 Family Mortgage Originations,
1990-2002: Total, Refi Share and ARM Share, Annual, 1990 to 2002, Report of the
MBAA, lenders in the United States originated more than $2.85 trillion in one to
four family mortgage loans in 2002, while the May 18, 2004 Mortgage Finance
Forecast of the MBAA estimated that lenders originated approximately $3.81
trillion in 2003. In the May forecast, the MBAA projects mortgage loan volumes
to fall to $2.42 trillion in 2004 and $1.75 trillion in 2005, primarily
attributable to an expected continued decline in the volume of refinancings of
existing loans relative to 2003. The MBAA also projects that mortgage loan
volume to home purchasers will increase from $1.28 trillion in 2003 to $1.37
trillion in 2004 and to decrease to $1.32 trillion in 2005. In the three month
period ended March 31, 2004, NYMC's purchase loan originations represented 59.7%
of NYMC's total residential mortgage loan originations as measured by principal
balance, as compared to an industry-wide percentage of 47% for one-to-four
family mortgage loans, according to the May forecast of the MBAA. We believe
that our concentration on purchase mortgage loan originations will cause our
loan origination volume to be less susceptible to the expected industry-wide
decline in origination volume.

OUR UNDERWRITING PHILOSOPHY

The adjustable-rate and hybrid mortgage loans that we will retain will meet
underwriting criteria established by our management. Our underwriting philosophy
is to analyze the overall creditworthiness of the borrower and evaluate
carefully the value of the property securing the loan, while matching risk and
price. In the past, virtually all of the loans that NYMC originated were sold to
large institutional investors, and NYMC relied on the underwriting criteria of
those investors in originating those loans. Going forward, we intend to continue
this practice with respect to the fixed-rate and other mortgage loans that we
will originate and sell through NYMC.

OUR MANAGEMENT

We intend to be a self-administered REIT. Our senior management team has
extensive experience in mortgage banking and investing in and managing
portfolios of residential mortgage loans and residential mortgage-backed
securities. Additionally, our chief financial officer has prior experience as a
publicly traded REIT chief financial officer. We believe this experience will
contribute significantly to our ability to provide an attractive risk-adjusted
return to our stockholders. Our senior management team is discussed in more
detail under "Management" beginning on page 86.

OUR HISTORY

NYMC was formed in 1998 as the result of a combination of New York Mortgage
Corp. and First Security Financial Services, Inc. Prior to 1998, New York
Mortgage Corp. was a retail mortgage brokerage founded in 1991 by Steven B.
Schnall. Prior to 1998, First Security Financial Services was a wholesale
mortgage banker founded in 1989 by Joseph V. Fierro. Since its inception in
1998, NYMC has achieved substantial year-over-year growth in loan volume,
revenues and profitability. New York Mortgage Trust, Inc. was formed as a
Maryland corporation in September 2003.

NYMC intends to make cash distributions to Steven B. Schnall and Joseph V.
Fierro and their respective affiliates, who together comprise all of the members
of NYMC, immediately before completion of this offering in an aggregate amount
equal to the estimated paid-in equity and retained earnings of NYMC as of the
closing date of this offering. The cash distribution will be made to the members
of NYMC pro rata in accordance with their respective ownership interests. We
anticipate that this cash distribution will equal approximately $3,500,000 in
the aggregate. The actual amount of the distributions may be more or less than
this amount depending on NYMC's actual performance through closing, but it will
not exceed $4,500,000.

OUR ACQUISITION OF NYMC

Upon completion of this offering, Messrs. Schnall and Fierro and their
affiliates will contribute all of the outstanding ownership interests in NYMC to
us and NYMC will become a wholly-owned taxable REIT subsidiary of ours. As
consideration for the contribution of their ownership interests in NYMC to us,
we will issue Messrs. Schnall and Fierro and their affiliates a total of
2,750,000 shares of our common stock (70% of which, or 1,925,000 shares, will be
issued to Mr. Schnall and his affiliate and 30% of which, or 825,000 shares,
will be issued to Mr. Fierro and his affiliate), of which 100,000 shares in the
aggregate will be held in escrow through December 31, 2004 and will be available
to satisfy any indemnification claims we may have against the contributors of
the NYMC membership interests under the contribution agreement between us and
the contributors during the escrow period for losses we incur as a result of
defaults on any of the residential mortgage loans originated by NYMC and closed
prior to the completion of this offering. The shares of common stock we issue to
Messrs. Schnall and Fierro and their affiliates in exchange for their
contributed ownership interests in NYMC will have an aggregate value of
$24,750,000 based on the $9.00 per share initial public offering price in this
offering.

OUR REIT STATUS

As a REIT, we generally will not be subject to federal income tax on REIT
taxable income that we distribute to our stockholders, but taxable income
generated by NYMC, our taxable REIT subsidiary upon completion of this offering,
will be subject to regular corporate income tax. Under the Internal Revenue
Code, REITs are subject to numerous organizational and operational requirements,
including a requirement that they distribute at least 90% of their REIT taxable
income to their stockholders. If we fail to qualify for taxation as a REIT in
any year, our income will be taxed at regular corporate rates, and we may be
precluded from qualifying for treatment as a REIT for the four taxable years
following the year in which we failed to qualify. Even if we qualify as a REIT
for federal income tax purposes, we may still be subject to state and local
taxes on our income and property and to federal income and excise taxes on our
undistributed income.

DIVIDEND POLICY AND DISTRIBUTIONS

In order to qualify as a REIT, we must distribute to our stockholders at
least 90% of our REIT taxable income each year. To the extent that we distribute
at least 90%, but less than 100% of our REIT taxable income in a taxable year,
we will be subject to federal corporate income tax on our undistributed income.
In addition, if we fail to distribute an amount during each year equal to the
sum of 85% of our REIT ordinary income and 95% of our capital gain net income
for that year and any undistributed income from prior periods, we will be
subject to a 4% nondeductible excise tax on the excess of the required
distribution over the amount we actually distributed. See "Federal Income Tax
Consequences of Our Status as a REIT -- Requirements for
Qualification -- Distribution Requirements." Distributions to our stockholders
will be treated as dividends to the extent that we have current or accumulated
earnings and profits. We intend to make regular quarterly distributions to our
stockholders so that we distribute each year all or substantially all of our
REIT taxable income so as to avoid paying corporate income tax and excise tax on
our earnings and to qualify for the tax benefits accorded to REITs under the
Internal

Revenue Code. Our REIT taxable income may exceed our cash available for
distribution and the requirement to distribute a substantial portion of our net
taxable income could cause us to:

- sell assets in adverse market conditions;

- borrow on unfavorable terms; or

- distribute amounts that would otherwise be invested in future
acquisitions, capital expenditures or repayment of debt

in order to comply with the REIT distribution requirements.

We expect to pay our first dividend following the end of the first full
fiscal quarter after completion of this offering.

Our ability to pay dividends to you will depend primarily on our receipt of
interest and principal payments from our loans and mortgage-backed securities
and any distributions we receive from NYMC. As a taxable REIT subsidiary, NYMC
will be subject to regular corporate income tax on the taxable income that it
generates. We may cause NYMC to retain after-tax earnings or distribute all or a
portion of its after-tax earnings to us to the extent allowable under the REIT
provisions of the Internal Revenue Code. If NYMC distributes any of its
after-tax earnings to us, we will include that distributed amount in the
dividends we pay to our stockholders and, for domestic non-corporate taxpayers,
that portion of our dividends, unlike distributions of our REIT taxable income,
generally will be eligible to be taxed at the current 15% maximum marginal rate
for regular corporate dividends. We also have the authority to make a
distribution of capital or of assets. All distributions, however, must be
authorized by our board of directors.

If we are unable to successfully execute our business plan, we may not have
cash available to pay dividends.

STOCK EXCHANGE LISTING

Our common stock has been approved for listing on the New York Stock
Exchange under the symbol "NTR."

RESTRICTIONS ON OWNERSHIP OF OUR COMMON STOCK

In order to assist us in maintaining our qualification as a REIT under the
Internal Revenue Code, our charter contains restrictions on the number of shares
of our capital stock that a person may own. No person may acquire or hold,
directly or indirectly, in excess of 9.4% in value of the outstanding shares of
our capital stock other than Mr. Schnall, who will be permitted to hold up to
12.0% of our outstanding common stock. These ownership limits could delay, defer
or prevent a transaction or a change in control that might involve a premium
price for our common stock or otherwise be in your best interest. Our board of
directors may, in its sole discretion, waive the ownership limit with respect to
a particular stockholder if it is presented with evidence satisfactory to it
that the ownership of that stockholder will not then or in the future jeopardize
our status as a REIT. Our board of directors has granted a temporary waiver to
Mr. Schnall to allow him to own up to 12.7% of our common stock through June 30,
2005. Our charter also prohibits certain cooperatives, governmental entities and
tax-exempt organizations that are exempt from the unrelated business income tax
from owning our stock because a tax could be imposed on us if our shares are
held by such entities and we own real estate mortgage investment conduit, or
REMIC, residual interests or, although the law is unclear on the matter, an
interest in a taxable mortgage pool. See "Description of Capital
Stock -- Restrictions on Ownership and Transfer" beginning on page 108.

THE OFFERING

Common stock offered.......... 15,000,000(1)

Common stock to be outstanding
after this offering........... 18,162,125(1)(2)(3)

Use of proceeds............... We intend to use the net proceeds of this
offering, which will be approximately $122.6
million, based on the initial public offering
price of $9.00 per share, and after deducting
the underwriting discount and estimated
offering expenses payable by us, as follows:

- approximately $14.0 million to cause NYMC to
repay promissory notes in the amounts of
$11,432,550 and $2,274,352 plus accrued
interest to Messrs. Schnall and Fierro,
respectively, issued by NYMC on August 31,
2003, as amended and restated on December 23,
2003, as further amended and restated on
February 26, 2004, and as further amended and
restated on May 26, 2004 and due no later
than June 30, 2005, that bear interest at an
annual rate of 3%, as distributions equal to
NYMC's paid-in equity and retained earnings
as of August 31, 2003;

- approximately $101.8 million to purchase on a
leveraged basis (likely eight to 12 times) an
initial portfolio of residential
mortgage-backed securities that are
guaranteed by a government sponsored entity
or rated investment grade by a nationally
recognized statistical rating agency; and

- approximately $6.75 million for general
corporate purposes, including working capital
and potential future acquisitions.

Risk factors.................. See "RISK FACTORS" beginning on page 11 and
other information included in this prospectus
for a discussion of the factors you should
consider carefully before deciding whether to
purchase our common stock.

New York Stock Exchange
symbol........................ Our common stock has been approved for listing
on the New York Stock Exchange under the symbol
--------------- "NTR."
(1) Assumes that the underwriters' over-allotment option to purchase up to an
additional 2,250,000 shares will not be exercised.

(2) Includes 2,750,000 shares to be issued to Messrs. Schnall and Fierro and
their affiliates as consideration payable to them by us in our acquisition
of NYMC, including 100,000 shares to be held in escrow through December 31,
2004 which will be available to satisfy any indemnification claims we may
have against the contributors of the NYMC membership interests under the
contribution agreement between us and the contributors during the escrow
period for losses we incur as a result of defaults on any of the residential
mortgage loans originated by NYMC and closed prior to the completion of this
offering.

(3) Includes 412,125 shares of common stock to be awarded by us upon completion
of this offering pursuant to our stock incentive plan to various members of
our senior management team and our board of directors. This number may be
increased by up to 50,625 shares if and to the extent that the underwriters
exercise their over-allotment option in connection with this offering.
Excludes 1,088,125 shares of our common stock reserved for future issuance
under our stock incentive plan as restricted stock awards or upon exercise
of options. Of this amount, options to purchase a total of 626,500 shares of
our common stock will be awarded to certain key employees upon completion of
this offering. These options will have an exercise price equal to the
initial public offering price of our common stock in this offering. 176,500
of these options will be fully vested upon grant and 450,000 options will
vest in one-third increments on the first, second and third anniversaries of
the closing date of this offering. The shares reserved for future issuance
under our stock incentive plan may be increased by up to 140,625 shares if
the underwriters exercise their over-allotment option in connection with
this offering.

SELECTED HISTORICAL AND PRO FORMA
FINANCIAL DATA OF OUR COMPANY AND NYMC

You should read the following summary historical and pro forma financial
data in conjunction with our historical and unaudited pro forma consolidated
financial statements and related notes thereto and with "Management's Discussion
and Analysis of Financial Condition and Results of Operations," which are
included elsewhere in this prospectus.

The following table sets forth summary pro forma consolidated financial and
operating data on an unaudited pro forma consolidated basis for our company and
historical financial data for NYMC. The historical financial data reflects our
business strategy prior to the completion of this offering (see "Our Company"
beginning on page 62). Accordingly, our historical financial results will not be
indicative of our future performance (in part due to our expected strategy of
retaining on our balance sheet certain originated loans which will reduce the
number of loans we sell, causing our total gains on sale under generally
accepted accounting principles in the United States of America, or GAAP, to be
lower than we have historically recognized). We have not presented historical
financial information for New York Mortgage Trust because New York Mortgage
Trust was formed on September 26, 2003 and has not had any operations through
the period ended March 31, 2004, and because we believe that a discussion of the
historical results of New York Mortgage Trust would not be meaningful.

The summary historical balance sheet data as of December 31, 2003, 2002 and
2001 of NYMC and summary statement of operations data for the years ended
December 31, 2003, 2002 and 2001 of NYMC have been derived from the historical
financial statements of NYMC audited by Deloitte & Touche LLP, our independent
registered public accounting firm, whose report with respect thereto is included
elsewhere in this prospectus. The selected historical financial information as
of March 31, 2004 and 2003 and December 31, 2000 and 1999, and for the three
months ended March 31, 2004 and 2003 and the years ended December 31, 2000 and
1999, have been derived from the unaudited financial statements of NYMC.

Our unaudited summary pro forma consolidated financial statements as of and
for the three months ended March 31, 2004 and for the year ended December 31,
2003 assume, as of the beginning of the period presented for the operating data
and as of the stated date for the balance sheet data, the completion of our
acquisition of NYMC, the completion of this offering and the application of the
net proceeds, to the extent discernable, contractual or as otherwise factually
supportable, as described in "Use of Proceeds."

As the execution of our business plan is contingent upon the completion of
this offering, it is assumed that the available net proceeds from this offering
are held as cash for purposes of this pro forma presentation and not invested in
mortgage loans and mortgage-backed securities on a leveraged basis as
contemplated by our business plan. As a result, our unaudited pro forma
financial data is not indicative of what our actual financial position and
results of operations would have been as of the date and for the periods
indicated had this offering and our acquisition of NYMC actually been completed
at the beginning of the periods covered by the pro forma financial statements,
nor does it purport to represent our future financial position or results of
operations.

SELECTED FINANCIAL DATA AS OF AND FOR THE PERIODS ENDED
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

THREE MONTHS ENDED MARCH 31, YEAR ENDED DECEMBER 31,
--------------------------------- -----------------------------------
PRO PRO
FORMA(1) HISTORICAL FORMA(1) HISTORICAL
----------- ------------------- ----------- ---------------------
2004 2004 2003 2003 2003 2002
----------- -------- -------- ----------- ---------- --------

OPERATING DATA:
Revenues:
Gains on sales of
mortgage loans......... $ 3,290 $ 3,290 $ 4,758 $ 23,031 $ 23,031 $ 9,858
Interest income.......... 1,261 1,261 1,431 7,610 7,610 2,986
Revenue from brokered
loans.................. 2,049 2,049 1,286 6,682 6,682 5,241
Miscellaneous............ 366 366 34 45 45 15
----------- -------- -------- ----------- ---------- --------
Total revenues......... 6,966 6,966 7,509 37,368 37,368 18,100
----------- -------- -------- ----------- ---------- --------
Salaries, commission, and
related expenses....... 4,669 2,719 1,721 12,734 9,247 5,788
Interest expense......... 503 609 652 3,119 3,266 1,673
Cost of brokered loans... 1,284 1,284 863 3,733 3,734 2,992
General and
administrative
expenses............... 2,253 2,236 1,345 7,461 7,395 3,897
----------- -------- -------- ----------- ---------- --------
Total expenses........... 8,709 6,848 4,581 27,047 23,642 14,350
----------- -------- -------- ----------- ---------- --------
(Loss)Income before
provision for income
taxes.................. (1,743) 118 2,928 10,321 13,726 3,750
Income taxes............. (771) -- -- 4,565 -- --
----------- -------- -------- ----------- ---------- --------
Net (loss)income......... $ (972) $ 118 $ 2,928 $ 5,756 $ 13,726 $ 3,750
=========== ======== ======== =========== ========== ========
Pro forma basic
(loss)income per
share(2)............... $ (0.05) -- -- $ 0.32 -- --
Pro forma diluted
(loss)income per
share(2)............... $ (0.05) -- -- $ 0.32 -- --
Pro forma weighted
average common stock
outstanding -- basic(3)... 17,797,374 -- -- 17,797,374 -- --
Pro forma weighted
average common stock
outstanding -- diluted(3).. 18,062,125 -- -- 18,062,125 -- --
BALANCE SHEET DATA:
Cash and equivalents..... $ 112,704 $ 4,523 $ 1,612 $ 112,404 $ 3,899 $ 2,746
Loans held for sale...... 47,734 47,734 46,327 36,258 36,258 34,039
Due from loan
purchasers............. 93,851 93,851 71,297 58,862 58,862 40,621
Total assets............. 266,303 158,123 127,452 218,587 110,081 83,004
Financing arrangements... 136,134 136,134 115,349 90,425 90,425 73,016
Subordinated notes due to
members................ 0 13,707 0 0 14,707 0
Total liabilities........ 143,753 157,713 119,120 95,701 110,555 76,504
Equity(deficit).......... 122,550 409 8,332 122,886 (474) 6,500
OTHER DATA:
Purchase originations.... -- $169,305 208,511 -- $ 803,446 $469,404
Refinancing
originations........... -- 114,146 152,904 -- 796,879 407,827
----------- -------- -------- ----------- ---------- --------
Total originations..... -- $283,451 361,415 -- $1,600,325 $877,231
----------- -------- -------- ----------- ---------- --------
Fixed-rate
originations........... -- $137,960 217,284 -- $ 890,172 $518,382
Adjustable-rate
originations........... -- 145,491 144,131 -- 710,153 358,849
----------- -------- -------- ----------- ---------- --------
Total originations..... -- $283,451 361,415 -- $1,600,325 $877,231
Weighted average middle
credit score........... -- 703 717 -- 719 716
Total mortgage sales..... -- $199,358 $290,600 -- $1,234,848 $633,223
Brokered originations.... -- $ 84,093 $ 70,815 -- $ 365,477 $244,008
Weighted average whole
loan sales price over
par.................... -- 2.13% 1.89% -- 1.75% 1.52%
Operating expense as a
percent of total loans
originated(4).......... -- 2.16% 1.07% -- 1.25% 1.41%
Return on average
assets(5).............. -- 0.3% 11.1% -- 14.2% 6.4%
Number of branches at
period end............. -- 24 11 -- 15 13
Number of employees at
period end............. -- 447 235 -- 335 184

YEAR ENDED DECEMBER 31,
-----------------------------------

HISTORICAL
-----------------------------------
2001 2000 1999
---------- -------- -----------

OPERATING DATA:
Revenues:
Gains on sales of
mortgage loans......... $ 6,429 $ 3,336 $ 2,350
Interest income.......... 1,570 625 111
Revenue from brokered
loans.................. 3,749 4,317 2,936
Miscellaneous............ 48 20 1,290
-------- -------- --------
Total revenues......... 11,796 8,298 6,687
-------- -------- --------
Salaries, commission, and
related expenses....... 3,644 2,891 3,523
Interest expense......... 1,289 476 172
Cost of brokered loans... 2,174 2,235 1,266
General and
administrative
expenses............... 2,808 2,169 1,605
-------- -------- --------
Total expenses........... 9,915 7,771 6,566
-------- -------- --------
(Loss)Income before
provision for income
taxes.................. 1,881 527 121
Income taxes............. -- -- --
-------- -------- --------
Net (loss)income......... $ 1,881 $ 527 $ 121
======== ======== ========
Pro forma basic
(loss)income per
share(2)............... -- -- --
Pro forma diluted
(loss)income per
share(2)............... -- -- --
Pro forma weighted
average common stock
outstanding -- basic(3) -- -- --
Pro forma weighted
average common stock
outstanding -- diluted( -- -- --
BALANCE SHEET DATA:
Cash and equivalents..... $ 1,549 $ 52 $ 1,089
Loans held for sale...... 9,894 3,784 929
Due from loan
purchasers............. 20,707 0 0
Total assets............. 34,561 12,592 4,454
Financing arrangements... 29,705 10,050 1,734
Subordinated notes due to
members................ 0 0 0
Total liabilities........ 30,891 10,538 2,698
Equity(deficit).......... 3,670 2,054 1,757
OTHER DATA:
Purchase originations.... $374,454 $352,634 $154,057
Refinancing
originations........... 209,748 45,753 29,170
-------- -------- --------
Total originations..... $584,202 $398,387 $183,227
-------- -------- --------
Fixed-rate
originations........... $398,056 $191,981 $ 97,546
Adjustable-rate
originations........... 186,146 206,406 85,681
-------- -------- --------
Total originations..... $584,202 $398,387 $183,227
Weighted average middle
credit score........... 713 714 719
Total mortgage sales..... $404,470 $170,574 $ 44,128
Brokered originations.... $179,732 $209,345 $ 72,151
Weighted average whole
loan sales price over
par.................... 1.37% 1.27% 1.19%
Operating expense as a
percent of total loans
originated(4).......... 1.45% 1.78% 3.49%
Return on average
assets(5).............. 8.0% 6.2% --
Number of branches at
period end............. 7 3 3
Number of employees at
period end............. 147 117 90

SELECTED FINANCIAL DATA AS OF AND FOR THE PERIODS ENDED -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

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

(1) As the execution of our business plan is contingent upon the completion of
this offering, it is assumed that the available net proceeds from this
offering are held as cash for purposes of this pro forma presentation rather
than invested in mortgage loans and mortgage-backed securities on a
leveraged basis as contemplated by our business plan. Other significant
differences in our contemplated business plan versus the pro forma
presentation include the retention by us of a portion of the loans
originated by NYMC, which have historically been sold to third party
investors and are a significant source of NYMC's historical revenues. In
addition, retention of these loans by us would generate additional
qualifying interest income for purposes of the REIT gross income tests that
would not be subject to corporate income tax, but would be subject to the
REIT distribution requirements. As our contemplated business plan assumes
that NYMC will be a taxable REIT subsidiary, the pro forma analysis
indicates pro forma net income taxed at statutory federal and state
corporate tax rates. As a result, our pro forma financial data is not
indicative of what our actual financial position and results of operations
would have been as of the date and for the periods indicated had this
offering and our acquisition of NYMC actually been completed at the
beginning of the periods covered by the pro forma financial statements, nor
does it purport to represent our future financial position or results of
operations.

(2) Pro forma basic and diluted income per share are computed assuming this
offering was consummated as of the first day of the period presented.

(3) Does not include 100,000 shares of common stock that will be held in escrow
through December 31, 2004 and will be available to satisfy any
indemnification claims we may have against the contributors of the NYMC
membership interests under the contribution agreement between us and the
contributors during the escrow period for losses we incur as a result of
defaults on any of the residential mortgage loans originated by NYMC and
closed prior to the completion of this offering.

(4) Total operating expenses (total expenses excluding interest expense and
depreciation and amortization expenses) divided by total originations, as
measured by principal balance.

(5) Annualized return on average assets has been calculated by dividing net
income for each respective period by the average of beginning and ending
total assets for such period.

RISK FACTORS

You should carefully consider the risks described below, together with all
of the other information included in this prospectus, before you decide to
purchase our securities. Investing in our common stock involves a high degree of
risk. Any of the following factors could harm our business and future results of
operations and could result in a partial or complete loss of your investment.

RISKS RELATED TO OUR BUSINESS

WE MAY EXPERIENCE A DECLINE IN THE MARKET VALUE OF OUR ASSETS.

The market value of the interest-bearing assets we plan to acquire, most
notably mortgage-backed securities and originated or purchased residential
mortgage loans and any related hedging instruments, may move inversely with
changes in interest rates. We anticipate that increases in interest rates will
tend to decrease our net income. A decline in the market value of our
investments may limit our ability to borrow or result in lenders requiring
additional collateral or initiating margin calls under our reverse repurchase
agreements. As a result, we could be required to sell some of our investments
under adverse market conditions in order to maintain liquidity. If such sales
are made at prices lower than the amortized costs of such investments, we will
incur losses. A default under our reverse repurchase agreements could also
result in the liquidation of the underlying investments used as collateral and
result in a loss equal to the difference between the value of the collateral and
the amount owed under our reverse repurchase agreements.

A DECREASE IN THE DEMAND FOR MORTGAGE LOANS DUE TO A PERIOD OF RISING INTEREST
RATES MAY ADVERSELY AFFECT OUR EARNINGS, WHICH COULD NEGATIVELY AFFECT THE
CASH AVAILABLE FOR DISTRIBUTION TO YOU.

Rising interest rates generally reduce the demand for consumer credit,
including mortgage loans. Interest rates have been at relatively low levels in
recent years. The Mortgage Bankers Association of America has predicted that
residential mortgage loan originations will decrease in 2004 and 2005 primarily
due to an anticipated decrease in refinancings caused by rising interest rates.
In a period of rising interest rates, we expect to originate and sell fewer
loans. Accordingly, a period of rising interest rates would adversely affect our
business, revenues and results of operations, which could adversely affect the
amount of cash available for distribution to you.

OUR SUCCESS WILL PARTIALLY DEPEND ON OUR ABILITY TO ORIGINATE PRIME
ADJUSTABLE-RATE AND HYBRID MORTGAGE LOANS FOR OUR PORTFOLIO.

We intend to build a portfolio of prime adjustable-rate and hybrid mortgage
loans that will, over time, be comprised primarily of mortgage loans that we
originate through NYMC. This source of mortgage loans is a key part of our
strategy. During the three month period ended March 31, 2004, approximately
42.5% of our mortgage loan originations, as measured by principal balance, were
adjustable-rate and hybrid loans of a type that will be eligible to be included
in our portfolio, although a portion of these loans would not have met our
investment criteria for retention in our portfolio.

If NYMC is not able to originate prime adjustable-rate and hybrid mortgage
loans that meet our investment criteria in the volume we expect, the time
required for, and the cost associated with, building our portfolio may be
greater than expected, which could have an adverse effect on our results of
operations and our ability to make distributions to you.

OUR SUCCESS WILL DEPEND ON OUR ABILITY TO OBTAIN FINANCING TO LEVERAGE OUR
EQUITY.

If we are limited in our ability to leverage our assets, the returns on our
portfolio may be harmed. A key element of our strategy is our intention to use
leverage to increase the size of our portfolio in an attempt to enhance our
returns. We intend to leverage our equity eight to 12 times through the use of
reverse repurchase agreements and other borrowings. Our reverse repurchase
agreements are not currently committed facilities, meaning that the
counterparties to these agreements may at any time choose to restrict or
eliminate our future access to the facilities and we have no other committed
credit facilities

through which we may leverage our equity. If we are unable to leverage our
equity to the extent we currently anticipate, the returns on our portfolio could
be diminished, which may limit or eliminate our ability to pay dividends to you.

WE INTEND TO LEVERAGE OUR EQUITY EIGHT TO 12 TIMES, WHICH WILL EXACERBATE ANY
LOSSES WE INCUR ON OUR PLANNED INVESTMENTS AND MAY REDUCE CASH AVAILABLE FOR
DISTRIBUTION TO YOU.

We intend to leverage our equity through borrowings, generally through the
use of reverse repurchase agreements, bank credit facilities, securitizations,
including the issuance of collateralized debt securities, which are obligations
issued in multiple classes secured by an underlying portfolio of securities, and
other borrowings. The amount of leverage we incur will vary depending on our
ability to obtain credit facilities and our lenders' estimates of the value of
our portfolio's cash flow. The return on our investments and cash available for
distribution to you may be reduced to the extent that changes in market
conditions cause the cost of our financing to increase relative to the income
that can be derived from the assets we hold in our portfolio. Further, the
leverage on our equity may exacerbate any losses we incur.

Our debt service payments will reduce the net income available for
distributions to you. We may not be able to meet our debt service obligations
and, to the extent that we cannot, we risk the loss of some or all of our assets
to foreclosure or sale to satisfy our debt obligations. We intend to use
leverage through repurchase agreements. A decrease in the value of the assets
may lead to margin calls which we will have to satisfy. We may not have the
funds available to satisfy any such margin calls. We have a target overall
leverage amount of eight to 12 times our equity, but there is no limitation on
our leverage ratio or on the aggregate amount of our borrowings.

THE TERMS OF OUR WAREHOUSE CREDIT FACILITIES AND REVERSE REPURCHASE AGREEMENTS
RESTRICT OUR ABILITY TO PAY DIVIDENDS IN SITUATIONS WHERE WE ARE NOT CURRENTLY
IN COMPLIANCE WITH CERTAIN FINANCIAL AND OTHER COVENANTS.

The terms of our warehouse credit facilities and reverse repurchase
agreements contain a number of restrictive financial and other covenants that,
among other things, require us to maintain a minimum ratio of total liabilities
to tangible net worth, minimum levels of tangible net worth, liquidity and
stockholders' equity and maximum leverage ratios, as well as to comply with
applicable regulatory and other requirements. These facilities and agreements
may restrict our ability to pay any dividends to you if we are not in compliance
with the covenants.

OUR MORTGAGE LOAN ORIGINATIONS HISTORICALLY HAVE BEEN CONCENTRATED IN SPECIFIC
GEOGRAPHIC REGIONS AND ANY ADVERSE MARKET OR ECONOMIC CONDITIONS IN THOSE
REGIONS MAY HAVE A DISPROPORTIONATELY ADVERSE EFFECT ON THE ABILITY OF OUR
CUSTOMERS TO MAKE THEIR LOAN PAYMENTS.

Our mortgage loan originations have been and may in the future be
concentrated in specific geographic regions. For example, for the three month
period ended March 31, 2004, approximately 86.5% of our residential mortgage
loans, as measured by principal balance, were originated with borrowers located
in New York, New Jersey and Connecticut. Adverse market or economic conditions
in a particular region may disproportionately increase the risk that borrowers
in that region are unable to make their mortgage payments. In addition, the
market value of the real estate securing those mortgage loans could be adversely
affected by adverse market and economic conditions in that region. Any sustained
period of increased payment delinquencies, foreclosures or losses caused by
adverse market or economic conditions in that geographic region could adversely
affect both our net interest income from loans in our portfolio as well as our
ability to originate, sell and securitize loans, which would significantly harm
our revenues, results of operations, financial condition, business prospects and
our ability to make distributions to you.

FAILURE TO SUCCEED IN NEW GEOGRAPHIC MARKETS MAY LIMIT OUR GROWTH AND COULD
ADVERSELY AFFECT OUR PROFITABILITY.

As of March 31, 2004, NYMC operated 24 retail lending offices in 12
different states and was licensed or authorized to do business in 38 different
states. However, as of March 31, 2004, approximately 86.5% of

NYMC's residential mortgage loans, as measured by principal balance, were
originated in just three states, New York, New Jersey and Connecticut. NYMC has
historically, and we will continue to, concentrate on retail, referral-based,
mortgage loans to borrowers with strong credit profiles. As part of our business
plan, we intend to expand our loan origination network and business in
geographic areas in which we may have little or no prior operating experience,
in which our referral-based loan origination network may be insufficiently
developed and in which it may be difficult to recruit experienced loan officers.
Accordingly, we cannot assure you that we will be successful in expanding our
loan origination network in these geographic areas, the failure of which could
significantly limit our growth and cause us to incur costs greater than those
incurred in other areas, which may adversely affect our profitability.

INTEREST RATE FLUCTUATIONS MAY CAUSE LOSSES.

We expect our primary interest rate exposure to relate to our mortgage
loans, mortgage-backed securities and variable-rate debt, as well as the
interest rate swaps and caps that we intend to utilize for risk management
purposes. Changes in interest rates may affect our net interest income, which is
the difference between the interest income we earn on our interest-earning
investments and the interest expense we incur in financing these investments.
Changes in the level of interest rates also can affect our ability to originate
or acquire mortgage loans or mortgage-backed securities, the value of our assets
and our ability to realize gains from the sale of such assets. In a period of
rising interest rates, our interest expense could increase while the interest we
earn on our assets would not change as rapidly. This would adversely affect our
profitability.

Our operating results will depend in large part on differences between
income received from our assets, net of credit losses, and our financing costs.
We anticipate that in most cases, for any period during which our assets are not
match-funded, the income from such assets will adjust more slowly to interest
rate fluctuations than the cost of our borrowings. Consequently, changes in
interest rates, particularly short-term interest rates, may significantly
influence our net income. We anticipate that increases in interest rates will
tend to decrease our net income. Interest rate fluctuations resulting in our
interest expense exceeding our interest income would result in operating losses
for us and may limit or eliminate our ability to make distributions to you.

A PROLONGED ECONOMIC SLOWDOWN, A LENGTHY OR SEVERE RECESSION OR DECLINING REAL
ESTATE VALUES COULD HARM OUR OPERATIONS.

We believe the risks associated with our business will be more acute during
periods of economic slowdown or recession if these periods are accompanied by
declining real estate values. Declining real estate values will likely reduce
our level of new mortgage loan originations, since borrowers often use increases
in the value of their existing home to support the refinancing of their existing
mortgage loans or the purchase of new homes at higher levels of borrowings.
Further, declining real estate values significantly increase the likelihood that
we will incur losses on our loans in the event of default. Any sustained period
of increased payment delinquencies, foreclosures or losses could adversely
affect both our net interest income from loans in our portfolio as well as our
ability to originate, sell and securitize loans, which would significantly harm
our revenues, results of operations, financial condition, business prospects and
our ability to make distributions to you.

WE HAVE NO OPERATING HISTORY WITH RESPECT TO SECURITIZING MORTGAGE LOANS OR
MANAGING A PORTFOLIO OF MORTGAGE SECURITIES, WHICH LIMITS YOUR ABILITY TO
EVALUATE A KEY COMPONENT OF OUR BUSINESS STRATEGY AND OUR GROWTH PROSPECTS AND
INCREASES YOUR INVESTMENT RISK.

Historically, NYMC's business has consisted of the origination and sale of
mortgage loans of all types, with a particular focus on prime adjustable- and
fixed-rate, first lien, residential purchase mortgage loans. In the future, we
intend to build a leveraged portfolio of residential mortgage loans comprised
largely of prime adjustable-rate mortgage loans that we originate, including
hybrid adjustable-rate loans that have an initial fixed-rate period, while
continuing, generally, to sell the fixed-rate loans that we originate to third
parties. In addition, we intend to invest in mortgage-backed securities on a
leveraged basis. Although certain members of our senior management team have
past experience in mortgage banking and investing in and managing portfolios of
residential mortgage loans and mortgage-backed securities, we have no prior

history with respect to securitizing mortgage loans or managing a portfolio of
mortgage securities. Our ability to complete securitizations in the future on
favorable terms will depend upon a number of factors, including the experience
and ability of our management team, conditions in the securities markets
generally, conditions in the mortgage-backed securities market specifically, the
performance of our portfolio of securitized loans and our ability to obtain
leverage. In addition, poor performance of any pool of loans we do securitize
could increase the expense of any subsequent securitization we bring to market.
Accordingly, a decline in the securitization market or a change in the market's
demand for our securities could have a material adverse effect on our results of
operations, financial condition and business prospects. If we are unable to
securitize efficiently the adjustable-rate and hybrid mortgage loans that we
originate and that we may invest in from time to time, then our revenues for the
duration of our investment in those loans would decline, which would lower our
earnings for the time the loans remain in our portfolio. We cannot assure you
that we will be able to complete loan securitizations in the future on favorable
terms, or at all.

LOAN PREPAYMENT RATES MAY INCREASE, ADVERSELY AFFECTING YIELDS ON OUR PLANNED
INVESTMENTS.

The value of the assets we plan to acquire may be affected by prepayment
rates on mortgage loans. Prepayment rates on mortgage loans are influenced by
changes in current interest rates and a variety of economic, geographic and
other factors beyond our control, and consequently, such prepayment rates cannot
be predicted with certainty. In periods of declining mortgage loan interest
rates, prepayments on mortgage loans generally increase. If general interest
rates decline as well, the proceeds of such prepayments received during such
periods are likely to be reinvested by us in assets with lower yields than the
yields on the assets that were prepaid. In addition, the market value of any
mortgage assets may, because of the risk of prepayment, benefit less than other
fixed-income securities from declining interest rates. Conversely, in periods of
rising interest rates, prepayments on mortgage loans generally decrease, in
which case we would not have the prepayment proceeds available to invest in
assets with higher yields. Under certain interest rate and prepayment scenarios,
we may fail to recoup fully our cost of acquisition of certain investments.

THE MORTGAGE LOANS WE MAY INVEST IN AND THE MORTGAGE LOANS UNDERLYING THE
MORTGAGE-BACKED SECURITIES WE MAY INVEST IN ARE SUBJECT TO RISKS OF
DELINQUENCY, FORECLOSURE AND LOSS, WHICH COULD RESULT IN LOSSES TO US.

Residential mortgage loans are secured by residential properties and are
subject to risks of delinquency and foreclosure, and risks of loss. The ability
of a borrower to repay a loan secured by residential property typically is
dependent primarily upon the income or assets of the borrower. In addition, the
ability of the borrower to repay its mortgage loan may be affected by, among
other things: property location and condition, competition and demand for
comparable properties, changes in zoning laws for the property or its
surrounding area, environmental contamination at the property, the occurrence of
any uninsured casualty at the property, changes in national, regional or local
economic conditions, declines in regional or local real estate values, increases
in interest rates, real estate tax rates, changes in governmental rules,
regulations and fiscal policies, including environmental legislation, acts of
God, terrorism, social unrest and civil disturbances.

In the event of any default under a mortgage loan held directly by us, we
will bear a risk of loss of principal to the extent of any deficiency between
the value of the collateral that we can realize upon foreclosure and sale and
the principal and accrued interest of the mortgage loan, which could have a
material adverse effect on our cash flow from operations and could limit the
amount we have available for distribution to you. In the event of the bankruptcy
of a mortgage loan borrower, the mortgage loan to such borrower will be deemed
to be secured only to the extent of the value of the underlying collateral at
the time of bankruptcy (as determined by the bankruptcy court), and the lien
securing the mortgage loan will be subject to the avoidance powers of the
bankruptcy trustee or debtor-in-possession to the extent the lien is
unenforceable under state law. Foreclosure of a mortgage loan can be an
expensive and lengthy process that can have a substantial negative effect on our
originally anticipated return on the foreclosed mortgage loan. Residential
mortgage-backed securities evidence interests in or are secured by pools of
residential

mortgage loans. Accordingly, the mortgage-backed securities we plan to invest in
are subject to all of the risks of the underlying mortgage loans.

OUR SUCCESS WILL DEPEND ON OUR SELECTION OF INVESTMENTS AND A DELAY IN
INVESTING FUNDS MAY CAUSE A DELAY IN OUR ABILITY TO DELIVER RETURNS TO
INVESTORS.

We have not yet identified an initial portfolio of the residential
mortgage-backed securities to be purchased with the available net proceeds of
this offering. Therefore, there could be a delay between the time you invest in
shares and the time all of the available net proceeds are invested by us. This
could cause a substantial delay in the time it takes for your investment to
realize its full potential return or any return at all. In addition, you will
have no opportunity to evaluate the terms of investments or other economic or
financial data concerning our investments that are not described in this
prospectus. You must rely entirely on our future investment selection.

WE WERE INCORPORATED IN SEPTEMBER 2003 AND HAVE A LIMITED OPERATING HISTORY.

NYMC, our mortgage banking operation subsidiary following completion of
this offering, has a substantial operating history, but we were not formed until
September 2003 and will have had no operations prior to the completion of this
offering. We are relying on capital raised in this offering to fund our initial
investments in retained mortgage loans and residential mortgage-backed
securities. As a result, we have no history managing a portfolio of mortgage
loans or mortgage-backed securities for you to determine the likelihood of our
achieving our investment objectives. The results of our operations will depend
on many factors, including:

- the availability of opportunities for the acquisition of assets;

- our ability to originate prime adjustable-rate and hybrid mortgage loans
for our portfolio;

- the level and volatility of interest rates;

- readily accessible short- and long-term funding;

- conditions in the financial markets; and

- general economic conditions.

Our failure to invest the available net proceeds of this offering in loans and
securities meeting our investment criteria could diminish our returns and have
an adverse effect on our ability to make distributions to you.

WE RELY ON KEY PERSONNEL WITH LONG-STANDING BUSINESS RELATIONSHIPS, THE LOSS
OF ANY OF WHOM COULD IMPAIR OUR ABILITY TO SUCCESSFULLY OPERATE.

Our future success depends, to a significant extent, on the continued
services of Steven B. Schnall, our chairman of the board and co-chief executive
officer, David A. Akre, our co-chief executive officer, Raymond A.
Redlingshafer, Jr., our president and chief investment officer and other key
members of our senior management team. In particular, the extent and nature of
the relationships that these individuals have developed with financial
institutions and existing and prospective mortgage loan origination channels are
critically important to the success of our business. Although we have employment
agreements with Mr. Schnall and other key executives, these executives may not
remain employed with us. We do not maintain key person life insurance on any of
our officers. The loss of services of one or more members of our senior
management team could harm our business and our prospects.

THE VALUATION OF NYMC WAS DETERMINED BETWEEN MANAGEMENT AND THE UNDERWRITERS.

The valuation of NYMC, and, as a result, the number of shares of our common
stock to be issued and cash, if any, to be paid to the principals of NYMC,
Messrs. Schnall and Fierro, as consideration for our acquisition of NYMC, was
determined jointly by Messrs. Schnall and Fierro and the underwriters. No

third-party valuations or appraisals were obtained in determining this
valuation. As a result, the valuation of NYMC does not represent an arms-length
transaction, and may not be indicative of NYMC's actual fair market value.

OUR DIRECTORS WILL APPROVE BROAD INVESTMENT GUIDELINES FOR US AND WILL NOT
APPROVE EACH INVESTMENT WE MAKE.

We will be authorized by our board of directors to invest in accordance
with broad investment guidelines. Our board of directors will periodically
review our investment guidelines and our portfolio. However, our board of
directors will not review each proposed investment. In addition, in conducting
periodic reviews, our directors will rely primarily on information provided to
them by our executive officers. Furthermore, transactions entered into by us may
be difficult or impossible to unwind by the time they are reviewed by our
directors. We will have substantial discretion within the broad investment
guidelines in determining the types of assets we may decide are proper
investments for us.

WE MAY CHANGE OUR INVESTMENT STRATEGY WITHOUT YOUR CONSENT, WHICH MAY RESULT
IN OUR INVESTING IN RISKIER INVESTMENTS THAN OUR CURRENTLY PLANNED
INVESTMENTS.

We may change our investment strategy at any time without the consent of
our stockholders, which could result in our making investments that are
different from, and possibly riskier than, the investments described in this
prospectus. A change in our investment strategy may increase our exposure to,
among other things, credit risk, interest rate risk and real estate market
fluctuations.

OUR HEDGING TRANSACTIONS MAY LIMIT OUR GAINS OR RESULT IN LOSSES.

We intend to use derivatives, primarily interest rate swaps and caps, to
hedge our liabilities and this has certain risks, including the risk that losses
on a hedging transaction will reduce the amount of cash available for
distribution to you and that such losses may exceed the amount invested in such
instruments. Our board of directors will adopt a general policy with respect to
the use of derivatives, which will generally allow us to use derivatives when we
deem appropriate for risk management purposes, but does not set forth specific
guidelines. To the extent consistent with maintaining our status as a REIT, we
may use derivatives, including interest rate swaps and caps, options, term
repurchase contracts, forward contracts and futures contracts, in our risk
management strategy to limit the effects of changes in interest rates on our
operations. However, a hedge may not be effective in eliminating the risks
inherent in any particular position. Our profitability may be adversely affected
during any period as a result of the use of derivatives in a hedging
transaction.

WE MAY BE REQUIRED TO REPURCHASE MORTGAGE LOANS THAT WE HAVE SOLD OR TO
INDEMNIFY HOLDERS OF OUR MORTGAGE-BACKED SECURITIES.

If any of the mortgage loans that we originate and sell, or that we pledge
to secure mortgage-backed securities that we issue in our securitizations, do
not comply with the representations and warranties that we make about the
characteristics of the loans, the borrowers and the properties securing the
loans, we may be required to repurchase those loans in the case of the loans
that we have sold, or replace them with substitute loans or cash in the case of
securitized loans. If this occurs, we may have to bear any associated losses
directly. In addition, in the case of loans that we have sold, we may be
required to indemnify the purchasers of such loans for losses or expenses
incurred as a result of a breach of a representation or warranty made by us.
Repurchased loans typically require an allocation of working capital to carry on
our books, and our ability to borrow against such assets is limited, which could
limit the amount by which we can leverage our equity. Any significant
repurchases or indemnification payments could significantly harm our cash flow
and results of operations and limit our ability to make distributions to you.

WE MAY BE SUBJECT TO LOSSES DUE TO FRAUDULENT AND NEGLIGENT ACTS ON THE PART
OF LOAN APPLICANTS, MORTGAGE BROKERS, OTHER VENDORS AND OUR EMPLOYEES.

When we originate mortgage loans, we rely upon information supplied by
borrowers and other third parties, including information contained in the
applicant's loan application, property appraisal reports, title information and
employment and income documentation. If any of this information is
misrepresented or falsified and if we do not discover it prior to funding a
loan, the actual value of such loan may be significantly lower than anticipated.
As a practical matter, we generally bear the risk of loss associated with a
misrepresentation whether it is made by the loan applicant, the mortgage broker,
another third party or one of our employees. A loan subject to a material
misrepresentation is typically unsaleable or is subject to repurchase or
substitution if it is sold or securitized prior to detection of the
misrepresentation. Although we may have rights against persons and entities who
made or knew about the misrepresentation, those persons and entities may be
difficult to locate, and it is often difficult to collect any monetary losses
from them that we may have suffered.

In addition, for the three month period ended March 31, 2004, with respect
to approximately 37.0% of the mortgage loans we originated, as measured by
principal balance, we received less than full documentation of the borrower's
income and/or assets. In those cases, we base our credit decision on the
borrower's credit score and credit history, the value of the property securing
the loan and the effect of the loan on the borrower's debt service requirements.
We believe that there is a higher risk of default on loans where there is less
than full documentation of the borrower's income and/or assets.

OUR PAST OPERATING RESULTS HAVE OCCURRED DURING A PERIOD OF RAPID GROWTH FOR
THE RESIDENTIAL MORTGAGE INDUSTRY AND PRIOR TO THE IMPLEMENTATION OF OUR NEW
BUSINESS STRATEGY AND, AS A RESULT, MAY NOT BE INDICATIVE OF OUR FUTURE
OPERATING RESULTS.

NYMC's growth rate has benefited from low interest rates and a long period
of economic growth. NYMC's net income grew by more than 266.8% between the
beginning of 2000 and the end of 2002 and by 360.5% for the year ended December
31, 2003 as compared to the same period in 2002. We do not know whether these
favorable conditions will continue. Indeed, the MBAA projects that overall loan
originations will decline in 2004 compared to 2003 and will decline further in
2005. These projected declines in overall volume of closed loan originations are
likely to have a negative affect on our loan origination volume and net income.
Accordingly, NYMC's historical performance may not be indicative of results in a
rising interest rate environment, and our results of operations may be
materially adversely affected as interest rates rise. In addition, NYMC's recent
and rapid growth may distort some of its ratios and financial statistics and our
change in business strategy to include the development of a portfolio of
mortgage loans and mortgage-backed securities will make period-to-period
comparisons difficult. In light of this growth and change in business strategy,
NYMC's historical performance and operating and origination data may be of
little relevance in predicting our future performance.

IF WE DO NOT MANAGE OUR GROWTH EFFECTIVELY, OUR FINANCIAL PERFORMANCE COULD BE
HARMED.

In recent years, NYMC has experienced rapid growth which has placed
pressure on NYMC's management, administrative, operational and financial
infrastructure. If we experience rapid growth similar to NYMC, we may experience
those same pressures. As of May 1, 2004, NYMC had grown to employ approximately
460 people, many of whom have limited experience with NYMC and a limited
understanding of our systems and controls. An increase in the size of our
operations may make it more difficult for us to ensure that we originate quality
loans. We will need to attract and hire additional loan officers and management
personnel in a competitive hiring environment to expand our business and, at the
same time, continue to upgrade and expand our financial, operational and
managerial systems and controls. We cannot assure you that we will be able to
meet our capital needs, expand our systems effectively, allocate our human
resources optimally nor identify and hire qualified employees. The failure to
manage our growth effectively may significantly harm our business, financial
condition, liquidity and profitability.

WE FACE INTENSE COMPETITION THAT COULD ADVERSELY AFFECT OUR MARKET SHARE AND
OUR REVENUES.

We face intense competition from finance and mortgage banking companies,
other mortgage REITs, Internet-based lending companies where entry barriers are
relatively low, and, to a growing extent, from traditional bank and thrift
lenders that have increased their participation in the mortgage industry. As we
seek to expand our loan origination business further and expand our business
strategy to build a portfolio of mortgage loans and mortgage-backed securities,
we will face a significant number of additional competitors, many of whom will
be well established in the markets we seek to penetrate. Some of our competitors
are much larger than we are, have better name recognition than we do and have
far greater financial and other resources than we do.

We anticipate that the majority of our competition will be in the mortgage
industry. In addition to mortgage banking companies, Internet-based lending
companies, traditional banks and thrift lenders, the government sponsored
entities Fannie Mae and Freddie Mac are also expanding their participation in
the mortgage industry. While the government sponsored entities presently do not
have the legal authority to originate mortgage loans, they do have the authority
to buy loans. If as a result of their purchasing practices, these government
sponsored entities experience significantly higher-than-expected losses, the
experience could adversely affect overall investor perception of the mortgage
industry.

Competition in the industry can take many forms, including lower interest
rates and fees, less stringent underwriting standards, convenience in obtaining
a loan, customer service, amount and term of a loan and marketing and
distribution channels. The need to maintain mortgage loan volume in this
competitive environment creates a risk of price and quality competition in the
mortgage industry. Price competition could cause us to lower the interest rates
that we charge borrowers, which could lower the value of our loans we sell or
retain in our portfolio. If our competitors adopt less stringent underwriting
standards, we will be pressured to do so as well. If we do not relax
underwriting standards in response to our competitors, we may lose market share.
If we relax our underwriting standards in response to price competition, we may
be exposed to higher credit risk without receiving higher pricing to compensate
for the higher risk. Any increase in these pricing and underwriting pressures
could reduce the volume of our loan originations and sales and significantly
harm our business, financial condition, liquidity and results of operations.

WE MAY COMPLETE STRATEGIC ACQUISITIONS OF OTHER MORTGAGE BANKING BUSINESSES OR
RELATED ASSETS AT A PURCHASE PRICE THAT EXCEEDS THEIR FAIR VALUE, AND EVEN IF
WE COMPLETE THESE ACQUISITIONS AT A FAIR PRICE, WE MAY NOT BE SUCCESSFUL IN
INTEGRATING ANY ACQUIRED BUSINESS WITH OURS EFFICIENTLY.

We intend to selectively pursue strategic acquisitions in the mortgage
banking business as part of our business strategy to grow our business. We may
overvalue the business or assets we are seeking to acquire and, as a result, we
may pay a purchase price that exceeds the fair value of the acquired business or
assets. In addition, even if we pay a fair price for any acquired business, we
may not be able to integrate the acquired business with our own efficiently.
Finally, we may incur unforeseen liabilities in connection with any acquisition
we undertake. Any of the foregoing risks could have a material adverse effect on
our financial condition or results of operations and our ability to make
distributions to you.

THE SUCCESS AND GROWTH OF OUR MORTGAGE LOAN ORIGINATION BUSINESS WILL DEPEND
UPON OUR ABILITY TO ADAPT TO AND IMPLEMENT TECHNOLOGICAL CHANGES.

Our mortgage loan origination business is dependent upon our ability to
interface effectively with our borrowers and other third parties and to process
loan applications efficiently. The origination process is becoming more
dependent upon technological advancement, such as the ability to process
applications over the Internet, interface with borrowers and other third parties
through electronic means and underwrite loan applications using specialized
software. Implementing new technology and maintaining the efficiency of the
current technology used in our operations may require significant capital
expenditures. As these requirements increase in the future, we will have to
develop these technological capabilities fully to remain competitive or our
business will be significantly harmed.

AN INTERRUPTION IN SERVICE OR BREACH IN SECURITY OF OUR INFORMATION SYSTEMS
COULD IMPAIR OUR ABILITY TO ORIGINATE LOANS ON A TIMELY BASIS AND MAY RESULT
IN LOST BUSINESS.

We rely heavily upon communications and information systems to conduct our
business. Any failure or interruption in service or breach in security of our
information systems or the third-party information systems on which we rely
could cause underwriting or other delays and could result in fewer loan
applications being received and processed and reduced efficiency in loan
servicing. We cannot assure you that no material failures or interruptions will
occur or, if they do occur, that we or the third parties on whom we rely will
adequately address them. The occurrence of any failures or interruptions could
significantly harm our business.

OUR OPERATIONS ARE SUBJECT TO A BODY OF COMPLEX LAWS AND REGULATIONS AT THE
FEDERAL, STATE AND LOCAL LEVELS.

We must comply with the laws, rules and regulations, as well as judicial
and administrative decisions, of all jurisdictions in which we originate
mortgage loans, as well as an extensive body of federal laws, rules and
regulations. The volume of new or modified laws, rules and regulations
applicable to our business has increased in recent years and individual
municipalities have also begun to enact laws, rules and regulations that
restrict or otherwise affect loan origination activities, and in some cases loan
servicing activities. The laws, rules and regulations of each of these
jurisdictions are different, complex and, in some cases, in direct conflict with
each other. It may be more difficult to identify comprehensively, to interpret
accurately, to program properly our information systems and to effectively train
our personnel with respect to all of these laws, rules and regulations, thereby
potentially increasing the risks of non-compliance with these laws, rules and
regulations.

Our failure to comply with these laws, rules and regulations can lead to:

- civil and criminal liability, including potential monetary penalties;

- loss of state licenses or permits required for continued lending and
servicing operations;

- legal defenses causing delay or otherwise adversely affecting our ability
to enforce loans, or giving the borrower the right to rescind or cancel
the loan transaction;

- demands for indemnification or loan repurchases from purchasers of our
loans;

- class action lawsuits; and

- administrative enforcement actions.

Some states in which we operate may impose regulatory requirements on our
officers and directors and parties holding 10%, and in some cases 5%, of our
outstanding shares of common stock. If any officer, director or person holding
10%, and in some cases 5%, or more of our outstanding shares of common stock
fails to meet or refuses to comply with a state's applicable regulatory
requirements for mortgage lending, we could lose our authority to conduct
business in that state. The loss of our authority to conduct business in a
state, for this or any other reason, could have a material adverse effect on our
business, financial condition, liquidity and results of operations.

NEW LEGISLATION MAY RESTRICT OUR ABILITY TO MAKE MORTGAGE LOANS, NEGATIVELY
IMPEDING OUR REVENUES.

In recent years, federal and several state and local laws, rules and
regulations have been adopted, or are under consideration, that are intended to
eliminate certain lending practices, often referred to as "predatory" lending
practices, that are considered to be abusive. Many of these laws, rules and
regulations restrict commonly accepted lending activities and would impose
additional costly and burdensome compliance requirements on us. These laws,
rules and regulations impose certain restrictions on loans on which certain
points and fees or the annual percentage rate, or APR, meets or exceeds
specified thresholds. Some of these restrictions expose a lender to risks of
litigation and regulatory sanction regardless of how carefully a loan is
underwritten. In addition, an increasing number of these laws, rules and
regulations seek to impose liability for violations on the purchasers of
mortgage loans, regardless of whether a purchaser knew of or participated in the
violation. Accordingly, the third parties that buy our

loans or provide financing for our loan originations may not want, and are not
contractually required, to buy or finance loans that do not comply with these
laws, rules and regulations.

The continued enactment of these laws, rules and regulations may prevent us
from making certain loans and may cause us to reduce the APR or the points and
fees we charge on the mortgage loans that we originate. In addition, the
difficulty of managing the compliance risks presented by these laws, rules and
regulations may decrease the availability of warehouse financing and the overall
demand for the purchase of our originated loans. These laws, rules and
regulations have increased, and may continue to increase, our cost of doing
business as we have been required, and may continue to be required, to develop
systems and procedures to ensure that we do not violate any aspect of these new
requirements.

In addition, many of these state laws, rules and regulations are not
applicable to the mortgage loan operations of national banks or other financial
institutions chartered by the federal government. Therefore, the mortgage loan
operations of these institutions are at a competitive advantage to us since they
do not have to comply with many of these laws.

Our goal is to avoid originating loans that meet or exceed the APR or
"points and fees" threshold of these laws, rules and regulations except in the
relatively small number of states in which the laws, rules and regulations
relating to APR and "points and fees" thresholds allow, in our judgment, these
loans to be made within our strict legal compliance standards and without undue
risk relative to litigation or to the enforcement of the loan according to its
terms. If we elect to relax our self-imposed restrictions on originating loans
subject to these laws, rules and regulations, we will be subject to greater
risks for actual or perceived non-compliance with the laws, rules and
regulations, including demands for indemnification or loan repurchases from the
parties to whom we broker or sell loans, class action lawsuits, increased
defenses to foreclosure of individual loans in default, individual claims for
significant monetary damages and administrative enforcement actions. Any of the
foregoing could significantly harm our business, cash flow, financial condition,
liquidity and results of operations.

COMPLIANCE WITH THE SARBANES-OXLEY ACT OF 2002 AND PROPOSED AND RECENTLY
ENACTED CHANGES IN SECURITIES LAWS AND REGULATIONS ARE LIKELY TO INCREASE OUR
COSTS.

The Sarbanes-Oxley Act of 2002 and rules and regulations promulgated by the
Securities and Exchange Commission and the New York Stock Exchange have
increased the scope, complexity and cost of corporate governance, reporting and
disclosure practices. These rules and regulations could also make it more
difficult for us to attract and retain qualified executive officers and members
of our board of directors, particularly to serve on our audit committee.

WE ARE EXPOSED TO ENVIRONMENTAL LIABILITIES WITH RESPECT TO PROPERTIES TO
WHICH WE TAKE TITLE.

In the course of our business, we may foreclose and take title to
residential properties securing our mortgage loans, and, if we do take title, we
could be subject to environmental liabilities with respect to these properties.
In such a circumstance, we may be held liable to a governmental entity or to
third parties for property damage, personal injury, investigation and clean-up
costs incurred by these parties in connection with environmental contamination,
or we may be required to investigate or clean up hazardous or toxic substances
or chemical releases at a property. The costs associated with investigation or
remediation activities could be substantial. If we become subject to significant
environmental liabilities, our business, financial condition, liquidity and
results of operations could be materially and adversely affected.

RISKS RELATED TO THIS OFFERING

THERE IS CURRENTLY NO PUBLIC MARKET FOR OUR COMMON STOCK, AND AN ACTIVE TRADING
MARKET FOR OUR COMMON STOCK MAY NEVER DEVELOP FOLLOWING THIS OFFERING.

Prior to this offering, there has been no public market for our common
stock. Although our common stock has been approved for listing on the New York
Stock Exchange under the symbol "NTR," an active trading market for our common
stock may never develop or be sustained. Our common stock may have

limited trading volume, and many investors may not be interested in owning our
common stock because of the inability to acquire or sell a substantial block of
our common stock at one time. This illiquidity could have an adverse effect on
the market price of our common stock. In addition, a stockholder may not be able
to borrow funds using our common stock as collateral because lenders may be
unwilling to accept the pledge of securities having such a limited market. A
substantial sale of our common stock could have a material adverse effect on the
market price of our common stock.

OUR STOCK PRICE AND TRADING VOLUME MAY BE VOLATILE, WHICH COULD RESULT IN
SUBSTANTIAL LOSSES FOR OUR STOCKHOLDERS.

Even if an active trading market develops for our common stock after this
offering, the market price of our common stock may be highly volatile and be
subject to wide fluctuations. In addition, the trading volume in our common
stock may fluctuate and cause significant price variations to occur. Some of the
factors that could negatively affect our share price or result in fluctuations
in the price or trading volume of our common stock include:

- general economic conditions;

- actual or anticipated changes in our future financial performance;

- changes in financial estimates by securities analysts;

- changes in market interest rates;

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

- the operations and stock performance of our competitors;

- developments in the mortgage lending industry or the financial services
sector generally;

- the impact of new state or federal legislation or court decisions
restricting the activities of lenders or suppliers of credit in our
market;

- fluctuations in our quarterly operating results;

- additions or departures of senior management and key personnel;

- actions by institutional stockholders; and

- general market and economic conditions.

If the market price of our common stock declines, you may be unable to
resell your common stock at or above the initial public offering price. We
cannot assure you that the market price of our common stock will not fluctuate
or decline significantly, including a decline below the initial public offering
price, in the future. In addition, the stock market in general can experience
considerable price and volume fluctuations.

THE INITIAL PUBLIC OFFERING PRICE MAY BE HIGHER THAN THE MARKET PRICE OF OUR
COMMON STOCK AFTER THIS OFFERING.

You will pay a price for the common stock that was not established in a
competitive market. Instead, you will pay a price that we negotiated with the
representative of the underwriters. See "Underwriting" for factors considered in
determining the initial public offering price. The initial public offering price
does not necessarily bear any relationship to our book value or the fair market
value of our assets, and may be higher than the market price of our common stock
after this offering.

WE HAVE NOT ESTABLISHED A MINIMUM DIVIDEND PAYMENT LEVEL AND WE MAY NOT HAVE
THE ABILITY TO PAY DIVIDENDS TO YOU IN THE FUTURE.

We intend to pay quarterly dividends following the end of the first full
fiscal quarter after completion of this offering and to pay dividends to our
stockholders of all or substantially all of our REIT taxable
21

income in each year. We have not established a minimum dividend payment level
and our ability to pay dividends may be adversely affected by the risk factors
described in this prospectus. In addition, some of our distributions may include
a return of capital. All dividends will be made at the discretion of our board
of directors and will depend on our earnings, our financial condition,
maintenance of our REIT status and other factors as our board of directors may
deem relevant from time to time. We cannot predict our ability to pay dividends
to you in the future.

FUTURE SALES OF SHARES OF OUR COMMON STOCK, INCLUDING SALES BY OUR INSIDERS,
MAY DEPRESS THE PRICE OF OUR COMMON STOCK.

Any sales of a substantial number of shares of our common stock, or the
perception that those sales might occur, may cause the market price of our
common stock to decline. Our directors and our executive officers have agreed
with the underwriters not to sell the common stock they hold earlier than 180
days after the date of this prospectus. We are unable to predict whether
significant numbers of shares will be sold in the open market in anticipation of
or following a sale by insiders.

OUR BOARD OF DIRECTORS MAY AUTHORIZE THE ISSUANCE OF ADDITIONAL SHARES THAT
MAY CAUSE DILUTION.

Our charter authorizes our board of directors, without your approval, to:

- authorize the issuance of additional common or preferred stock in
connection with future equity offerings, acquisitions of securities or
other assets of companies; and

- classify or reclassify any unissued common stock or preferred stock and
to set the preferences, rights and other terms of the classified or
reclassified shares, including the issuance of shares of preferred stock
that have preference rights over the common stock with respect to
dividends, liquidation, voting and other matters or shares of common
stock having special voting rights.

The issuance of additional shares could be substantially dilutive to your
shares. Additionally, as permitted by the Maryland General Corporation Law, our
charter contains a provision permitting our board of directors, without any
action by our stockholders, to amend our charter to increase the aggregate
number of shares of stock or the number of shares of stock of any class or
series that we have authority to issue.

FUTURE OFFERINGS OF DEBT SECURITIES, WHICH WOULD BE SENIOR TO OUR COMMON STOCK
IN LIQUIDATION, OR EQUITY SECURITIES, WHICH WOULD DILUTE OUR EXISTING
STOCKHOLDERS AND MAY BE SENIOR TO OUR COMMON STOCK FOR THE PURPOSES OF
DISTRIBUTIONS, MAY HARM THE VALUE OF OUR COMMON STOCK.

In the future, we may attempt to increase our capital resources by making
additional offerings of debt or equity securities, including commercial paper,
medium-term notes, senior or subordinated notes, preferred stock or common
stock. If we were to liquidate, holders of our debt securities and shares of
preferred stock and lenders with respect to other borrowings would receive a
distribution of our available assets before the holders of our common stock.
Additional equity offerings by us may dilute your interest in us or reduce the
value of your shares of common stock, or both. Our preferred stock, if issued,
could have a preference on distribution payments that could limit our ability to
make a distribution to you. Because our decision to issue securities in any
future offering will depend on market conditions and other factors beyond our
control, we cannot predict or estimate the amount, timing or nature of our
future offerings. Further, market conditions could require us to accept less
favorable terms for the issuance of our securities in the future. Thus, you will
bear the risk of our future offerings reducing the value of your shares of
common stock and diluting your interest in us.

IF YOU PURCHASE SHARES IN THIS OFFERING, YOU WILL EXPERIENCE IMMEDIATE AND
SUBSTANTIAL DILUTION.

We expect the offering price of our common stock to be higher than the book
value per share of our common stock immediately following the offering and our
acquisition of NYMC. Accordingly, if you purchase common stock in this offering,
you will experience immediate dilution of approximately $2.99 in net tangible
book value per share following this offering and our acquisition of NYMC. This
means that

investors who purchase shares in this offering will likely pay a price per share
that exceeds the net book value following our acquisition of NYMC of our
tangible assets after subtracting our liabilities following our acquisition of
NYMC.

Moreover, to the extent that we issue options or warrants to purchase our
common stock in the future and those options or warrants are exercised, you may
experience further dilution.

TAX RISKS RELATED TO OUR BUSINESS AND STRUCTURE

FAILURE TO QUALIFY AS A REIT WOULD ADVERSELY AFFECT OUR OPERATIONS AND ABILITY
TO MAKE DISTRIBUTIONS.

We intend to operate so as to qualify as a REIT for federal income tax
purposes. Although we have not requested, and do not expect to request, a ruling
from the Internal Revenue Service, or IRS, that we qualify as a REIT, we will
receive at the closing of the offering an opinion of our legal counsel Hunton &
Williams LLP that, based on certain assumptions and representations, we will so
qualify. Investors should be aware, however, that opinions of counsel are not
binding on the IRS or any court. The REIT qualification opinion only represents
the view of Hunton & Williams LLP based on its review and analysis of existing
law, which includes no controlling precedent. Furthermore, both the validity of
the opinion and our qualification as a REIT will depend on our ability to meet
various requirements concerning, among other things, the ownership of our
outstanding stock, the nature of our assets, the sources of our income, and the
amount of our distributions to our stockholders. See "Federal Income Tax
Consequences of Our Status as a REIT -- Taxation of Our Company."

If we fail to qualify as a REIT in any taxable year, we would be subject to
federal income tax (including any applicable alternative minimum tax) on our
taxable income at regular corporate rates. In addition, we generally would be
disqualified from treatment as a REIT for the four taxable years following the
year in which we lost our REIT status. Failing to obtain, or losing, our REIT
status would reduce our net earnings available for investment or distribution to
stockholders because of the additional tax liability, and we would no longer be
required to make distributions to stockholders. We might be required to borrow
funds or liquidate some investments in order to pay the applicable tax.

REIT DISTRIBUTION REQUIREMENTS COULD ADVERSELY AFFECT OUR LIQUIDITY.

In order to qualify as a REIT, we generally are required each year to
distribute to our stockholders at least 90% of our REIT taxable income,
excluding any net capital gain. To the extent that we distribute at least 90%,
but less than 100% of our REIT taxable income, we will be subject to corporate
income tax on our undistributed REIT taxable income. In addition, we will be
subject to a 4% nondeductible excise tax on the amount, if any, by which certain
distributions paid by us with respect to any calendar year are less than the sum
of (i) 85% of our ordinary REIT income for that year, (ii) 95% of our REIT
capital gain net income for that year, and (iii) 100% of our undistributed REIT
taxable income from prior years.

We intend to make distributions to our stockholders to comply with the 90%
distribution requirement and to avoid corporate income tax and the nondeductible
excise tax. However, differences in timing between the recognition of REIT
taxable income and the actual receipt of cash could require us to sell assets or
to borrow funds on a short-term basis to meet the 90% distribution requirement
and to avoid corporate income tax and the nondeductible excise tax.

Certain of our assets may generate substantial mismatches between REIT
taxable income and available cash. Such assets could include mortgage-backed
securities we hold that have been issued at a discount and require the accrual
of taxable income in advance of the receipt of cash. As a result, our taxable
income may exceed our cash available for distribution and the requirement to
distribute a substantial portion of our net taxable income could cause us to:

- sell assets in adverse market conditions,

- borrow on unfavorable terms or

- distribute amounts that would otherwise be invested in future
acquisitions, capital expenditures or repayment of debt

in order to comply with the REIT distribution requirements.

Further, amounts distributed will not be available to fund investment
activities. We expect to fund our investments, initially, by raising capital in
this offering and, subsequently, through borrowings from financial institutions,
along with securitization financings. If we fail to obtain debt or equity
capital in the future, it could limit our ability to grow, which could have a
material adverse effect on the value of our common stock.

RECENT CHANGES IN TAXATION OF CORPORATE DIVIDENDS MAY ADVERSELY AFFECT THE
VALUE OF OUR COMMON STOCK.

The Jobs and Growth Tax Relief Reconciliation Act of 2003, which was signed
into law on May 28, 2003, among other things, generally reduces to 15% the
maximum marginal rate of tax payable by domestic noncorporate taxpayers on
dividends received from a regular subchapter C corporation. This reduced tax
rate, however, generally will not apply to dividends paid to domestic
noncorporate taxpayers by a REIT on its stock, except for certain limited
amounts. Although the earnings of a REIT that are distributed to its
stockholders still generally will be subject to less total federal income
taxation than earnings of a non-REIT subchapter C corporation that are
distributed to its stockholders net of corporate-level income tax, this
legislation could cause domestic noncorporate investors to view the stock of
non-REIT subchapter C corporations as more attractive relative to the stock of a
REIT than was the case prior to the enactment of the legislation, because
dividends from non-REIT subchapter C corporations generally will be taxed at a
lower rate to the investor while dividends from REITs generally will be taxed at
the same rate as the investor's other ordinary income. We cannot predict what
effect, if any, the enactment of this legislation may have on the value of the
stock of REITs in general or on our common stock in particular, either in terms
of absolute price or relative to other investments.

RISKS RELATED TO OUR COMPANY, STRUCTURE AND CHANGE IN CONTROL PROVISIONS

MAINTENANCE OF OUR INVESTMENT COMPANY ACT EXEMPTION IMPOSES LIMITS ON OUR
OPERATIONS.

We intend to conduct our operations so as not to become regulated as an
investment company under the Investment Company Act of 1940, as amended. We
believe that there are a number of exemptions under the Investment Company Act
that may be applicable to us. To maintain exemption, the assets that we may
acquire will be limited by the provisions of the Investment Company Act and the
rules and regulations promulgated under the Investment Company Act. In addition,
we could, among other things, be required either (a) to change the manner in
which we conduct our operations to avoid being required to register as an
investment company or (b) to register as an investment company, either of which
could have an adverse effect on our operations and the market price for our
common stock.

THE STOCK OWNERSHIP LIMIT IMPOSED BY OUR CHARTER MAY INHIBIT MARKET ACTIVITY
IN OUR STOCK AND MAY RESTRICT OUR BUSINESS COMBINATION OPPORTUNITIES.

In order for us to maintain our qualification as a REIT under the Internal
Revenue Code, not more than 50% in value of the issued and outstanding shares of
our stock may be owned, actually or constructively, by five or fewer individuals
(as defined in the Internal Revenue Code to include certain entities) at any
time during the last half of each taxable year after our first REIT taxable
year. Attribution rules in the Internal Revenue Code apply to determine if any
individual or entity actually or constructively owns our stock for purposes of
this requirement. Additionally, at least 100 persons must beneficially own our
stock during at least 335 days of each taxable year. To help insure that we meet
these tests, our charter restricts the acquisition and ownership of shares of
our stock. Our charter, with certain exceptions, authorizes our directors to
take such actions as are necessary and desirable to preserve our qualification
as a REIT and provides that, unless exempted by our board of directors, no
person other than Mr. Schnall may own more than 9.4% in value of the outstanding
shares of our capital stock. Our charter provides that Mr. Schnall may own up to
12.0% of our outstanding common stock. Our board of directors may grant an
24

exemption from that ownership limit in its sole discretion, subject to such
conditions, representations and undertakings as it may determine. This ownership
limit could delay or prevent a transaction or a change in our control that might
involve a premium price for our common stock or otherwise be in the best
interest of our stockholders.

OUR EXECUTIVE OFFICERS HAVE AGREEMENTS THAT PROVIDE THEM WITH BENEFITS IN THE
EVENT THEIR EMPLOYMENT IS TERMINATED FOLLOWING A CHANGE OF CONTROL.

We have entered into agreements with the members of our senior management
team, Messrs. Schnall, Akre, Redlingshafer, Fierro, Wirth and Mumma, that
provide them with severance benefits if their employment ends under specified
circumstances following a change in control. These benefits could increase the
cost to a potential acquirer of us and thereby prevent or discourage a change of
control that might involve a premium price for your shares or otherwise be in
your best interest.

CERTAIN PROVISIONS OF MARYLAND LAW AND OUR CHARTER AND BYLAWS COULD HINDER,
DELAY OR PREVENT A CHANGE IN CONTROL WHICH COULD HAVE AN ADVERSE EFFECT ON THE
VALUE OF OUR COMMON STOCK.

Certain provisions of Maryland law, our charter and our bylaws may have the
effect of discouraging, delaying or preventing transactions that involve an
actual or threatened change in control. These provisions include the following:

Removal of Directors. Under our charter, subject to the rights of one
or more classes or series of preferred stock to elect one or more
directors, a director may be removed with or without cause only by the
affirmative vote of the holders of at least two-thirds of all votes
entitled to be cast by our stockholders generally in the election of
directors.

Classified Board of Directors. Although currently all members of our
board of directors will be subject to election or re-election at each
annual meeting of stockholders, Maryland law permits our board of
directors, without stockholder approval and regardless of what is provided
in our charter or bylaws, to divide the members of our board of directors
into up to three classes with only one class standing for election in any
year.

Board Vacancies. Immediately prior to this offering, we expect to
elect to be subject to certain provisions of Maryland law that vest in the
board of directors the exclusive right, by the affirmative vote of the
majority of the remaining directors, to fill vacancies on the board
resulting from any reason, even if the remaining directors do not
constitute a quorum. A vacancy shall be filled for the remainder of the
term in which the vacancy occurred.

Limitation on Stockholder-Requested Special Meetings. Our bylaws
provide that our secretary must call a special meeting of stockholders only
upon the written request of stockholders entitled to cast not less than a
majority of all the votes entitled to be cast by the stockholders at such
meeting.

Advance Notice Provisions for Stockholder Nominations and Proposals.
Generally, our bylaws require advance written notice for stockholders to
nominate persons for election as directors at, or to bring other business
before, meetings of stockholders. This bylaw provision limits the ability
of stockholders to make nominations of persons for election as directors or
to introduce other proposals unless we are notified in a timely manner
prior to the meeting.

Preferred Stock. Under our charter, our board of directors has
authority to issue preferred stock from time to time in one or more series
and to establish the terms, preferences and rights of any such series of
preferred stock, all without the approval of our stockholders.

Maryland Business Combination Act. The Maryland Business Combination
Act provides that unless exempted, a Maryland corporation may not engage in
business combinations, including mergers, dispositions of 10% or more of
its assets, issuance of shares of stock and other specified transactions,
with an "interested stockholder" or an affiliate of an interested
stockholder for five years after the most recent date on which the
interested stockholder became an interested stockholder, and

thereafter unless specified criteria are met. An interested stockholder is
generally a person owning or controlling, directly or indirectly, 10% or
more of the voting power of the outstanding voting stock of a Maryland
corporation. Our board of directors expects to adopt a resolution
immediately prior to this offering exempting us from application of this
statute. However, our board of directors may repeal or modify this
resolution in the future, in which case the provisions of the Maryland
Business Combination Act will be applicable to business combinations
between us and other persons.

Maryland Control Share Acquisition Act. Maryland law provides that
"control shares" of a Maryland corporation acquired in a "control share
acquisition" shall have no voting rights except to the extent approved by a
vote of two-thirds of the votes eligible to be cast on the matter under the
Maryland Control Share Acquisition Act. Shares owned by the acquiror, by
officers or by directors who are employees of the corporation are excluded
from shares entitled to vote on the matter. "Control shares" means voting
shares of stock that, if aggregated with all other shares of stock
previously acquired by the acquiror or in respect of which the acquiror is
able to exercise or direct the exercise of voting power (except solely by
virtue of a revocable proxy), would entitle the acquiror to exercise voting
power in electing directors within one of the following ranges of voting
power: one-tenth or more but less than one-third, one-third or more but
less than a majority or a majority or more of all voting power. Control
shares do not include shares the acquiring person is then entitled to vote
as a result of having previously obtained stockholder approval. A "control
share acquisition" means an acquisition of control shares, subject to
certain exceptions. A person who has made or proposes to make a control
share acquisition may compel the board of directors of the corporation to
call a special meeting of stockholders to be held within 50 days of demand
to consider the voting rights of the shares. The right to compel the
calling of a special meeting is subject to the satisfaction of certain
conditions, including an undertaking to pay the expenses of the meeting. If
no request for a meeting is made, the corporation may itself present the
question at any stockholders meeting. If voting rights of control shares
acquired in a control share acquisition are not approved at a stockholders'
meeting or if the acquiring person does not deliver an acquiring person
statement as required by the statute, then subject to certain conditions
and limitations, the corporation may redeem any or all of the control
shares for fair value. If voting rights of control shares are approved at a
stockholders' meeting and the acquiror becomes entitled to vote a majority
of the shares of stock entitled to vote, all other stockholders may
exercise appraisal rights. The fair value of the shares as determined for
purposes of appraisal rights may not be less than the highest price per
share paid by the acquiror in the control share acquisition. The control
share acquisition statute does not apply (a) to shares acquired in a
merger, consolidation or share exchange if the corporation is a party to
the transaction, or (b) to acquisitions approved or exempted by the charter
or bylaws of the corporation. Our bylaws contain a provision exempting any
and all acquisitions by any person of our shares from the Maryland Control
Share Acquisition Act. However, our board of directors may amend our bylaws
in the future to repeal or modify this exemption, in which case any control
shares of our company acquired in a control share acquisition would be
subject to the Maryland Control Share Acquisition Act.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Some of the statements under "Summary," "Risk Factors," "Dividend Policy
and Distributions," "Management's Discussion and Analysis of Financial Condition
and Results of Operations," "Our Company" and elsewhere in this prospectus
constitute forward-looking statements. Forward-looking statements relate to
expectations, beliefs, projections, future plans and strategies, anticipated
events or trends and similar expressions concerning matters that are not
historical facts. In some cases, you can identify forward-looking statements by
terms such as "anticipate," "believe," "could," "estimate," "expect," "intend,"
"may," "plan," "potential," "should," "will" and "would" or the negative of
these terms or other comparable terminology.

The forward-looking statements are based on our beliefs, assumptions and
expectations of our future performance, taking into account all information
currently available to us. These beliefs, assumptions and expectations can
change as a result of many possible events or factors, not all of which are
known to us or are within our control. If a change occurs, our business,
financial condition, liquidity and results of operations may vary materially
from those expressed in our forward-looking statements. You should carefully
consider the following risks before you make an investment in our common stock:

- the factors referenced in this prospectus, including those set forth
under the sections captioned "Risk Factors," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Our
Company;"

- general volatility of the capital markets and the market price of our
common stock;

- changes in our business strategy;

- availability, terms and deployment of capital;

- availability of qualified personnel; and

- changes in our industry, interest rates or the general economy.

Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. You should not place undue reliance on
these forward-looking statements, which apply only as of the date of this
prospectus.

MARKET DATA

Market data and forecasts used in this prospectus have been obtained from
independent industry sources as well as from research reports prepared for other
purposes. We have not independently verified the data obtained from these
sources and we cannot assure you of the accuracy or completeness of the data.
Forecasts and other forward-looking information obtained from these sources are
subject to the same qualifications and uncertainties as the other
forward-looking statements in this prospectus.

USE OF PROCEEDS

We estimate that the net proceeds of this offering will be approximately
$122.6 million, based on the initial public offering price of $9.00 per share,
and after deducting the underwriting discount and estimated offering expenses
payable by us. If the underwriters exercise in full their option to purchase up
to an additional 2,250,000 shares of our common stock in this offering, our net
proceeds will be approximately $141.4 million. We intend to use the net proceeds
of this offering as follows:

- approximately $14.0 million to cause NYMC to repay promissory notes in
the amounts of $11,432,550 and $2,274,352 plus accrued interest to
Messrs. Schnall and Fierro, respectively, issued by NYMC on August 31, as
amended and restated on December 23, 2003, as further amended and
restated on February 26, 2004, and as further amended and restated on May
26, 2004 and due no later than June 30, 2005, that bear interest at an
annual rate of 3%, as distributions equal to NYMC's paid-in equity and
retained earnings as of August 31, 2003;

- approximately $101.8 million to purchase on a leveraged basis (likely
eight to 12 times) an initial portfolio of residential mortgage-backed
securities that are guaranteed by a government sponsored entity or rated
investment grade by a nationally recognized statistical rating agency;
and

- approximately $6.75 million for general corporate purposes, including
working capital and potential future acquisitions.

We may need a significant amount of time to fully invest the available net
proceeds of this offering in our intended investments and to fully implement our
leveraging strategy to increase the total amount of our investments to our
desired level. In the meantime, funds will be committed to interest-bearing
short-term investment grade securities which are consistent with our intention
to qualify as a REIT. We will not leverage our temporary investment in these
securities. These investments are expected to provide a lower net return than we
hope to achieve from our intended use of the proceeds of this offering.

A tabular presentation of our estimated use of proceeds that we will
receive in this offering, assuming that the underwriters' over-allotment option
is not exercised, follows:

DOLLAR AMOUNT PERCENTAGE
-------------- -----------
(IN THOUSANDS)

Gross offering proceeds to us............................... $135,000 100.0%
Underwriting discounts and commissions...................... 9,450 7.0
Other expenses of offering.................................. 3,000 2.2
Net offering proceeds....................................... 122,550 90.8
Estimated amount of net proceeds used to repay two
promissory notes plus accrued interest due to Messrs.
Schnall and Fierro........................................ 14,045 10.4
Estimated amount of net proceeds used to purchase initial
portfolio of residential mortgage-backed securities....... 101,755 75.4
Estimated amount of net proceeds used for general corporate
purposes, working capital and potential future
acquisitions.............................................. 6,750 5.0
Total net offering proceeds used............................ 122,550 90.8
Total underwriting discounts, commissions and other
expenses.................................................. 12,450 9.2
Total application of gross offering proceeds to us.......... $135,000 100.0%

DIVIDEND POLICY AND DISTRIBUTIONS

We intend to make regular quarterly distributions to our stockholders so
that we distribute each year all or substantially all of our REIT taxable income
so as to avoid paying corporate level income tax and excise tax on our earnings
and to qualify for the tax benefits accorded to REITs under the Internal Revenue
Code. In order to qualify as a REIT, we must distribute to our stockholders at
least 90% of our REIT taxable income. To the extent that we distribute at least
90%, but less than 100% of our REIT taxable income, we will be subject to
corporate income tax on our undistributed taxable income. In addition, we will
be subject to a 4% nondeductible excise tax on the amount, if any, by which
certain distributions paid by us with respect to any calendar year are less than
the sum of:

- 85% of our ordinary REIT income for that year;

- 95% of our capital gain net income for that year; and

- 100% of our undistributed REIT taxable income from prior years.

Our REIT taxable income may exceed our cash available for distribution and the
requirement to distribute a substantial portion of our net taxable income could
cause us to:

- sell assets in adverse market conditions;

- borrow on unfavorable terms; or

- distribute amounts that would otherwise be invested in future
acquisitions, capital expenditures or repayment of debt

in order to comply with the REIT distribution requirements.

Any distributions we make will be at the discretion of our board of
directors and will depend upon a number of factors, including:

- our results of operations;

- the timing of interest and principal we receive from our loans and
securities;

- our obligation to pay debt service on our borrowings;

- the annual distribution requirements under the REIT provisions of the
Internal Revenue Code; and

- other factors that our board of directors deems relevant.

We may, under certain circumstances, make a distribution of capital or of
assets. These distributions, if any, will be made at the discretion of our board
of directors. Distributions will be made in cash to the extent that cash is
available for distribution.

It is anticipated that distributions generally will be taxable as ordinary
income to our stockholders, although a portion of our distributions may be
designated by us as long-term capital gain or may constitute a return of
capital. Distributions to our stockholders will be treated as dividends to the
extent that we have current or accumulated earnings and profits. We will furnish
annually to each of our stockholders a statement setting forth distributions
paid during the preceding year and their federal income tax status. For a
discussion of the federal income tax treatment of distributions by us, see
"Federal Income Tax Consequences of Our Status as a REIT -- Requirements for
Qualification -- Distribution Requirements."

Our ability to pay dividends to you will depend primarily on our receipt of
interest and principal payments from our loans and mortgage-backed securities
and any distributions we receive from NYMC. As a taxable REIT subsidiary, NYMC
will be subject to regular corporate income tax on the taxable income that it
generates. We may cause NYMC to retain after-tax earnings or distribute all or a
portion of its after-tax earnings to us to the extent allowable under the REIT
provisions of the Internal Revenue Code. If NYMC distributes any of its
after-tax earnings to us, we will include that distributed amount in the
dividends we pay to our stockholders and, for domestic non-corporate taxpayers,
that portion of our dividends, unlike distributions of our REIT taxable income,
generally will be eligible to be taxed at the current 15% maximum marginal rate
for corporate dividends. See "Federal Income Tax Consequences of Our Status as a
REIT -- Taxation of Taxable U.S. Stockholders." All distributions must be
authorized by our board of directors and declared by us out of assets legally
available therefor.

If we are unable to successfully execute our business plan, we may not have
cash available to pay dividends.

In the future, our board of directors may elect to adopt a dividend
reinvestment plan.

CAPITALIZATION

The following table sets forth:

- our actual capitalization as of March 31, 2004;

- our pro forma capitalization as of March 31, 2004, reflecting the sale of
15.0 million shares of our common stock in this offering at the initial
public offering price of $9.00 per share, and after deducting the
underwriting discount and estimated expenses payable by us in connection
with this offering;

- our pro forma capitalization as of March 31, 2004, as adjusted to reflect
the issuance of 2,650,000(1) shares of our common stock in connection
with our acquisition of NYMC as described under the heading "Our
Acquisition of NYMC," the payment of a distribution to the members of
NYMC in an amount equal to the retained equity of NYMC as of March 31,
2004, or approximately $409,000, and the issuance of 412,125 shares of
restricted stock to our senior management team and directors upon
completion of this offering; and

- our pro forma as adjusted capitalization as of March 31, 2004, on a
combined basis to reflect this offering, our acquisition of NYMC, the
distribution of the accumulated equity of NYMC and the issuance of the
restricted shares of our common stock, all as described above.

This table should be read in conjunction with the section entitled
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" beginning on page 36 and the financial statements and related notes
included elsewhere in this prospectus.

MARCH 31, 2004
---------------------------------------------------------------
PRO FORMA
NYMT PRO FORMA ACQUISITION AND PRO FORMA
HISTORICAL OFFERING RESTRICTED STOCK COMBINED
-------------- ------------ ---------------- ------------

DEBT:
Financing arrangements.............. $-- $ -- $136,133,533 $136,133,533
STOCKHOLDERS' EQUITY:
Common stock, $0.01 par value per
share, 400,000,000 shares
authorized, and 18,062,125 shares
issued and outstanding as of March
31, 2004, as adjusted............. 1 150,000 30,621 180,622
Additional paid-in capital.......... 9 122,400,000 (30,621) 122,369,388
--- ------------ ------------ ------------
Total stockholders' equity.......... 10 122,550,000 -- 122,550,010
--- ------------ ------------ ------------
Total capitalization................ $10 $122,550,000 $136,133,533 $258,683,543
=== ============ ============ ============

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

(1) Does not give effect to the issuance of 100,000 shares of our common stock
to Messrs. Schnall and Fierro and their affiliates to be held in escrow
through December 31, 2004 which will be available to satisfy any
indemnification claims we may have of the NYMC membership interests under
the contribution agreement between us and the contributors during the escrow
period for losses we incur as a result of defaults on any residential
mortgage loans originated by NYMC and closed prior to completion of this
offering.

DILUTION

DILUTION AFTER THIS OFFERING

Dilution in net tangible book value per share represents the difference
between the amount per share paid by purchasers of our common stock in this
offering and the net tangible book value per share of common stock immediately
after this offering and our acquisition of NYMC. Net tangible book value per
share represents the amount of our total tangible assets less our total
liabilities, divided by the number of outstanding shares of our outstanding
common stock, after giving effect to:

(a) the issuance of 2,650,000 shares of our common stock in connection
with our acquisition of NYMC, which excludes 100,000 shares of our
common stock to be held in escrow through December 31, 2004 which
will be available to satisfy any indemnification claims we may
have under the contribution agreement against the contributors of
the NYMC membership interests under the contribution agreement
between us and the contributors during the escrow period for
losses we incur as a result of defaults on any residential
mortgage loans originated by NYMC and closed prior to completion
of this offering;

(b) The distribution of $409,323 in retained equity as of March 31,
2004 to the contributing members of NYMC;

(c) the sale of the common stock offered by this prospectus, at the
initial public offering price of $9.00 per share, and our receipt
of approximately $122.6 million in net proceeds from this
offering, after deducting the underwriting discount and estimated
offering expenses;

(d) the issuance of 412,125 shares of restricted common stock to
members of our board of directors and senior management upon the
closing of this offering (the amount of restricted stock assumes
that the underwriters' over-allotment option to purchase up to an
additional 2,250,000 shares will not be exercised and may be
greater depending on the extent to which the underwriters elect to
exercise their over-allotment option).

Our pro forma net tangible book value as of March 31, 2004 would have been
approximately $122.6 million, or $6.78 per share of common stock. This amount
represents an immediate dilution in pro forma net tangible book value of $2.22
per share of common stock to new investors. The following table illustrates this
dilution.

Initial public offering price............................... $ 9.00
Net tangible book value per share as of March 31, 2004...... $ 0.02
Payment of retained equity to contributors of NYMC
membership interests...................................... $(0.02)
Increase in net tangible book value per share to existing
stockholders attributable to new investors................ $ 6.78
Pro forma net tangible book value per share after this
offering.................................................. $ 6.78
Dilution per share to new investors......................... $ 2.22

OUR HISTORY

NYMC was formed in 1998 as the result of a combination of New York Mortgage
Corp. and First Security Financial Services, Inc. Prior to 1998, New York
Mortgage Corp. was a retail mortgage brokerage founded in 1991 by Steven B.
Schnall. Prior to 1998, First Security Financial Services was a niche, wholesale
mortgage banker founded in 1989 by Joseph Fierro. Since its inception in 1998,
and commencement of operations in the first quarter of 1999, NYMC has achieved
substantial growth in loan volume, revenues and profitability. New York Mortgage
Trust, Inc. was formed as a Maryland corporation in September 2003.

OUR ACQUISITION OF NYMC

Upon completion of this offering, Messrs. Schnall and Fierro and their
affiliates will contribute all of the outstanding ownership interests in NYMC to
us and NYMC will become a wholly-owned taxable REIT subsidiary of ours. As
consideration for the contribution of their ownership interests in NYMC to us,
we will issue to Messrs. Schnall and Fierro and their affiliates a total of
2,750,000 shares of our common stock (70% of which, or 1,925,000 shares, will be
issued to Mr. Schnall and his affiliate and 30% of which, or 825,000 shares,
will be issued to Mr. Fierro and his affiliate), of which 100,000 shares in the
aggregate will be held in escrow through December 31, 2004 and will be available
to satisfy any indemnification claims we may have against the contributors of
the NYMC membership interests under the contribution agreement between us and
the contributors during the escrow period for losses we incur as a result of
defaults on any residential mortgage loans originated by NYMC and closed prior
to completion of this offering.

The acquisition of NYMC is accounted for under generally accepted
accounting principles as a merger under common control, pursuant to which the
membership interests in NYMC are exchanged for shares of our common stock at
closing. In addition, under generally accepted accounting principles, the
consideration payable for the membership interests in NYMC does not include the
100,000 shares of our common stock issuable to Messrs. Schnall and Fierro and
their affiliates to be held in escrow through December 31, 2004 which will be
available to satisfy any indemnification claims we may have as described above.
Based on the initial public offering price of $9.00 per share and including the
shares held in escrow, the total consideration in the acquisition is valued at
$24,750,000 (2,750,000 shares of common stock valued at $9.00 per share).

In connection with this offering, we intend to elect to be taxed as a REIT
under Sections 856 through 859 of the Internal Revenue Code. Our qualification
as a REIT depends upon our ability to meet on a continuing basis, through actual
annual (or in some cases, quarterly) operating results, various complex
requirements under the Internal Revenue Code relating to, among other things,
the sources of our gross income, the composition and values of our assets, our
distribution levels and the diversity of ownership of our outstanding stock. We
believe that we will be organized in conformity with the requirements for
qualification as a REIT under the Internal Revenue Code, and that our intended
manner of operation will enable us to meet the requirements for taxation as a
REIT for federal income tax purposes.

As a REIT, we generally will not be subject to federal income tax on the
REIT taxable income that we distribute currently to our stockholders. If we fail
to qualify as a REIT in any taxable year, we will be subject to federal income
tax at regular corporate rates. Even if we qualify for taxation as a REIT, we
may be subject to some federal, state and local taxes on our income and
property. In addition, NYMC, our taxable REIT subsidiary, will be subject to
corporate income tax on its taxable income.

SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA
OF OUR COMPANY AND NYMC

You should read the following summary historical and pro forma financial
data in conjunction with our historical and unaudited pro forma consolidated
financial statements and related notes thereto and "Management's Discussion and
Analysis of Financial Condition and Results of Operations," which are included
elsewhere in this prospectus.

The following table sets forth summary pro forma consolidated financial and
operating data on an unaudited pro forma consolidated basis for our company and
historical financial data for NYMC. The historical financial data included
reflects our business strategy prior to the completion of this offering (see
"Our Company" beginning on page 61). Accordingly, our historical financial
results will not be indicative of our future performance (in part due to our
expected strategy of retaining on our balance sheet certain originated loans
which will reduce the number of loans we sell, causing our total gains on sale
under GAAP to be lower than we have historically recognized). We have not
presented historical financial information for New York Mortgage Trust because
New York Mortgage Trust was formed on September 26, 2003 and has not had any
operations through March 31, 2004, and because we believe that a discussion of
the historical results of New York Mortgage Trust would not be meaningful.

The summary historical balance sheet data as of December 31, 2003, 2002 and
2001 of NYMC and summary statement of operations data for the years ended
December 31, 2003, 2002 and 2001 of NYMC have been derived from the historical
financial statements of NYMC audited by Deloitte & Touche LLP, our independent
registered public accounting firm, whose report with respect thereto is included
elsewhere in this prospectus. The selected historical financial information as
of March 31, 2004 and 2003 and December 31, 2000 and 1999 and for the three
months ended March 31, 2004 and 2003 and the years ended December 31, 2000 and
1999, have been derived from the unaudited financial statements of NYMC.

Our unaudited summary pro forma consolidated financial statements as of and
for the three months ended March 31, 2004 and the year ended December 31, 2003
assume, as of January 1, 2003 for the operating data and as of the stated date
for the balance sheet data, the completion of our acquisition of NYMC, the
completion of this offering and the application of the net proceeds, to the
extent discernable, contractual or as otherwise factually supportable, as
described in "Use of Proceeds."

As the execution of our business plan is contingent upon the completion of
this offering, it is assumed that the available net proceeds from this offering
are held as cash for purposes of this pro forma presentation and not invested in
mortgage loans and mortgage-backed securities on a leveraged basis as
contemplated by our business plan. As a result, our unaudited pro forma
financial data is not indicative of what our actual financial position and
results of operations would have been as of the date and for the periods
indicated had this offering and our acquisition of NYMC been completed at the
beginning of the periods covered by the pro forma financial statements, nor does
it purport to represent our future financial position or results of operations.

SELECTED FINANCIAL DATA AS OF AND FOR THE PERIODS ENDED
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

OPERATING DATA:
Revenues:
Gains on sales of
mortgage loans........ $ 3,290 $ 3,290 $ 4,758 $ 23,031 $ 23,031 $ 9,858
Interest income......... 1,261 1,261 1,431 7,610 7,610 2,986
Revenue from brokered
loans................. 2,049 2,049 1,286 6,682 6,682 5,241
Miscellaneous........... 366 366 34 45 45 15
----------- -------- -------- ----------- ---------- --------
Total revenues........ 6,966 6,966 7,509 37,368 37,368 18,100
----------- -------- -------- ----------- ---------- --------
Salaries, commission,
and related
expenses.............. 4,669 2,719 1,721 12,734 9,247 5,788
Interest expense........ 503 609 652 3,119 3,266 1,673
Cost of brokered
loans................. 1,284 1,284 863 3,733 3,734 2,992
General and
administrative
expenses.............. 2,253 2,236 1,345 7,461 7,395 3,897
----------- -------- -------- ----------- ---------- --------
Total expenses........ 8,709 6,848 4,581 27,040 23,642 14,350
----------- -------- -------- ----------- ---------- --------
(Loss)Income before
provision for income
taxes................. (1,743) 118 2,928 10,321 13,726 3,750
Income taxes............ (771) -- -- 4,565 -- --
----------- -------- -------- ----------- ---------- --------
Net (loss)income...... $ (972) $ 118 $ 2,928 $ 5,756 $ 13,726 $ 3,750
=========== ======== ======== =========== ========== ========
Pro forma basic
(loss)income per
share(2).............. $ (0.05) -- -- $ 0.32 $ -- --
Pro forma diluted
(loss)income per
share(2).............. $ (0.05) -- -- $ 0.32 $ -- --
Pro forma weighted
average common stock
outstanding -- basic(3)... 17,797,374 -- -- 17,797,374 -- --
Pro forma weighted
average common stock
outstanding -- diluted(3).. 18,062,125 -- -- 18,062,125 -- --
BALANCE SHEET DATA:
Cash and equivalents.... $ 112,704 $ 4,523 $ 1,612 $ 112,404 $ 3,899 $ 2,746
Loans held for sale..... 47,734 47,734 46,327 36,258 36,258 34,039
Due from loan
purchasers............ 93,851 93,851 71,297 58,862 58,862 40,621
Total assets............ 266,303 158,123 127,452 218,587 110,081 83,004
Financing
arrangements.......... 136,134 136,134 115,349 90,425 90,425 73,016
Subordinated notes due
to members............ 0 13,707 0 0 14,707 0
Total liabilities....... 143,753 157,713 119,120 95,701 110,555 76,504
Equity(deficit)......... 122,550 409 8,332 122,886 (474) 6,500
OTHER DATA:
Purchase money
originations.......... -- $169,305 $208,511 -- $ 803,446 $469,404
Refinancing
originations.......... -- 114,146 152,904 -- 796,879 407,827
----------- -------- -------- ----------- ---------- --------
Total originations.... -- $283,451 $361,415 -- $1,600,325 $877,231
----------- -------- -------- ----------- ---------- --------
Fixed-rate
originations.......... -- $137,960 $217,284 -- $ 890,172 $518,382
Adjustable-rate
originations.......... -- 145,491 144,131 -- 710,153 358,849
----------- -------- -------- ----------- ---------- --------
Total originations.... -- $283,451 $361,415 -- $1,600,325 $877,231
Weighted average middle
credit score.......... -- 703 717 -- 719 716
Total mortgage sales.... -- $199,358 $290,600 -- $1,234,848 $633,223
Brokered originations... -- $ 84,093 $ 70,815 -- $ 365,477 $244,008
Weighted average whole
loan sales price over
par................... -- 2.13% 1.89% -- 1.75% 1.52%
Operating expense as a
percent of total loans
originated(4)......... -- 2.16% 1.07% -- 1.25% 1.41%

YEAR ENDED DECEMBER 31,
-----------------------------------

HISTORICAL
-----------------------------------
2001 2000 1999
---------- -------- -----------

OPERATING DATA:
Revenues:
Gains on sales of
mortgage loans........ $ 6,429 $ 3,336 $ 2,350
Interest income......... 1,570 625 111
Revenue from brokered
loans................. 3,749 4,317 2,936
Miscellaneous........... 48 20 1,290
-------- -------- --------
Total revenues........ 11,796 8,298 6,687
-------- -------- --------
Salaries, commission,
and related
expenses.............. 3,644 2,891 3,523
Interest expense........ 1,289 476 172
Cost of brokered
loans................. 2,174 2,235 1,266
General and
administrative
expenses.............. 2,808 2,169 1,605
-------- -------- --------
Total expenses........ 9,915 7,771 6,566
-------- -------- --------
(Loss)Income before
provision for income
taxes................. 1,881 527 121
Income taxes............ -- -- --
-------- -------- --------
Net (loss)income...... $ 1,881 $ 527 $ 121
======== ======== ========
Pro forma basic
(loss)income per
share(2).............. -- -- --
Pro forma diluted
(loss)income per
share(2).............. -- -- --
Pro forma weighted
average common stock
outstanding -- basic(3 -- --
Pro forma weighted
average common stock
outstanding -- diluted -- --
BALANCE SHEET DATA:
Cash and equivalents.... $ 1,549 $ 52 $ 1,089
Loans held for sale..... 9,894 3,784 929
Due from loan
purchasers............ 20,707 0 0
Total assets............ 34,561 12,592 4,454
Financing
arrangements.......... 29,705 10,050 1,734
Subordinated notes due
to members............ 0 0 0
Total liabilities....... 30,891 10,538 2,698
Equity(deficit)......... 3,670 2,054 1,757
OTHER DATA:
Purchase money
originations.......... $374,454 $352,634 $154,057
Refinancing
originations.......... 209,748 45,753 29,170
-------- -------- --------
Total originations.... $584,202 $398,387 $183,227
-------- -------- --------
Fixed-rate
originations.......... $398,056 $191,981 $ 97,546
Adjustable-rate
originations.......... 186,146 206,406 85,681
-------- -------- --------
Total originations.... $584,202 $398,387 $183,227
Weighted average middle
credit score.......... 713 714 719
Total mortgage sales.... $404,470 $170,574 $ 44,128
Brokered originations... $179,732 $209,345 $ 72,151
Weighted average whole
loan sales price over
par................... 1.37% 1.27% 1.19%
Operating expense as a
percent of total loans
originated(4)......... 1.45% 1.78% 3.49%

SELECTED FINANCIAL DATA AS OF AND FOR THE PERIODS ENDED -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

Return on average
assets(5)............. -- 0.3% 11.1% -- 14.2% 6.4%
Number of branches at
period end............ -- 24 11 -- 15 13
Number of employees at
period end............ -- 447 235 -- 335 184

YEAR ENDED DECEMBER 31,
-----------------------------------

HISTORICAL
-----------------------------------
2001 2000 1999
---------- -------- -----------

Return on average
assets(5)............. 8.0% 6.2% --
Number of branches at
period end............ 7 3 3
Number of employees at
period end............ 147 117 90

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

(1) As the execution of our business plan is contingent upon the completion of
this offering, it is assumed that the available net proceeds from this
offering are held as cash for purposes of this pro forma presentation rather
than invested in mortgage-backed loans and mortgage securities on a
leveraged basis as contemplated by our business plan. Other significant
differences in our contemplated business plan versus the pro forma
presentation include the retention by us of a portion of the loans
originated by NYMC, which have historically been sold to third party
investors and are a significant source of NYMC's historical revenues. In
addition, retention of these loans by us would generate additional
qualifying interest income for purposes of the REIT gross income tests that
would not be subject to corporate income tax, but would be subject to the
REIT distribution requirements. As our contemplated business plan assumes
that NYMC will be a taxable REIT subsidiary, the pro forma analysis
indicates pro forma net income taxed at statutory federal and state
corporate tax rates. As a result, our pro forma financial data is not
indicative of what our actual financial position and results of operations
would have been as of the date and for the periods indicated had this
offering and our acquisition of NYMC actually been completed at the
beginning of the periods covered by the pro forma financial statements, nor
does it purport to represent our future financial position or results of
operations.

(2) Pro forma basic and diluted income per share are computed assuming this
offering was consummated as of the first day of the period presented.

(3) Does not include 100,000 shares of common stock that will be held in escrow
through December 31, 2004 which will be available to satisfy any
indemnification claims we may have against the contributors of the NYMC
membership interests under the contribution agreement between us and the
contributors during the escrow period for losses we incur as a result of
defaults on any of the residential mortgage loans originated by NYMC and
closed prior to the completion of this offering.

(4) Total operating expenses (total expenses excluding interest expense and
depreciation and amortization expenses) divided by total originations, as
measured by original principal balance.

(5) Annualized return on average assets has been calculated by dividing net
income for each respective period by the average of beginning and ending
total assets for such period.

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

The following should be read in conjunction with our financial statements
and notes thereto contained elsewhere in this prospectus.

GENERAL

Upon completion of this offering, we will acquire NYMC. NYMC originates
mortgage loans of all types, with a particular focus on prime adjustable- and
fixed-rate, first lien, residential purchase mortgage loans. Historically, NYMC
has sold all of the loans it originates to third parties, and has also brokered
loans to other mortgage lenders prior to funding. Following completion of this
offering and our acquisition of NYMC, we intend to build a leveraged portfolio
of residential mortgage loans comprised largely of prime adjustable-rate and
hybrid mortgage loans that we originate. NYMC does not currently service any
loans. Following this offering, we will service loans that we originate and
retain in our portfolio through a subservicer. In addition, in the short term
and from time to time in the future, we intend to invest in mortgage-backed
securities on a leveraged basis. Generally, we expect to continue to sell the
fixed rate loans we originate to third parties as well as any adjustable-rate or
hybrid loans we originate that do not meet our investment criteria or portfolio
requirements. We may also include in our mortgage loan portfolio loans acquired
in bulk pools from other originators and securities dealers. We expect to
qualify, and will elect to be taxed, as a real estate investment trust, or REIT,
under the Internal Revenue Code of 1986, as amended, beginning with our short
taxable year beginning on the business day immediately preceding the closing of
this offering and ending December 31, 2004. NYMC will be a taxable REIT
subsidiary of ours after completion of our acquisition of NYMC and this
offering.

NYMC has historically generated revenues through the origination and
subsequent sale of funded loans. NYMC has typically held the loans it originates
for a relatively short period of time after they are funded (generally for 10 to
90 days after closing) before the loans are transferred to a third party. NYMC's
revenue to date has consisted primarily of:

- net gains from the sale for cash of its loans at prices in excess of
their origination costs (including overhead);

- broker fees received in connection with loans it brokers to other lenders
(22.8% of NYMC's 2003 loan volume);

- net interest income, which is the difference between the interest income
generated by its mortgage loans and its interest expense on the financing
of its lending activities through its warehouse lines of credit and
repurchase facilities during the time it holds its mortgage loans;

- origination and discount fees; and

- application fees, commitment fees and other customary ancillary fees
generated on mortgage originations.

NYMC's expenses to date have consisted primarily of:

- salaries, commissions, benefits and associated payroll costs;

- expenses directly related to brokered loans;

- occupancy and equipment costs;

- marketing, promotion and advertising costs;

- professional dues, licensing, and permit fees;

- office supplies and expenses;

- data processing and communication costs;

- travel and entertainment expenses; and

- depreciation and amortization expense.

Commissions paid to mortgage loan originators are 100% variable, meaning
commissions are paid only upon the origination of the mortgage loan, while
administrative and corporate salaries, benefits and related payroll costs may
fluctuate based on management's assessment of appropriate levels of non-loan
originator staffing, which correlates to actual and predicted future levels of
mortgage loan origination volume.

NYMC originates mortgage loans to finance both home purchases, referred to
as purchase mortgages, and refinancings of existing mortgage loans. For the
three months ended March 31, 2004 NYMC's purchase loan originations represented
59.7% of NYMC's total residential mortgage loan originations as measured by
principal balance, as compared to an industry-wide percentage of 47% for
one-to-four family mortgage loans, according to the May 18, 2004 report of the
Mortgage Bankers Association of America. NYMC's average volume of purchase
mortgage loans relative to total originations has been 50%, 54% and 64% for the
years 2003, 2002 and 2001, respectively. Refinancings generally occur in periods
of declining interest rates and/or when the borrower has substantial equity in
its home and wishes to incur additional mortgage debt and utilize the cash
proceeds elsewhere.

Although much of NYMC's growth has been generated internally, we may, from
time to time in the future, engage in the acquisition of other mortgage banking
businesses. Any acquisition may result in potentially dilutive issuances of
equity securities and the incurrence of additional debt and expenses. We may
also experience difficulties in integrating the operations, services, products
and personnel of any such acquired company or the diversion of management's
attention from ongoing business operations.

An example of externally generated growth is NYMC's recent assumption of
selected branches and personnel from SIB Mortgage Corp., or SIB. On March 1,
2004, NYMC entered into an assignment and assumption agreement with SIB with
regard to eight loan origination branches -- including the locked and unlocked
mortgage loan pipelines, meaning in-process mortgage loans with or without
locked-in interest rates, furniture, fixtures, equipment, computers, tangible
personal property and leasehold improvements (to the extent located in the
branches), and certain other assets -- in exchange for NYMC's assumption of
certain expenses and obligations in connection with the operation of these
branches from and after March 1, 2004.

The total mortgage loan pipeline for all eight branches was approximately
$73 million, including locked loans totaling approximately $24.3 million. NYMC
is required to sell the locked loans back to SIB upon closing at our cost and
deliver them to Lehman Brothers Bank FSB. As of May 28, 2004, NYMC had closed
approximately $35.1 million of the pipeline loans assumed from SIB. The
remaining pipeline of loans are in various stages of processing and are
integrated into our pipeline in the same manner as all other loans originated by
NYMC in the normal course of business. There can be no assurance that we will
close any of the remaining pipeline of loans that NYMC assumed in the SIB
transaction. NYMC also assumed from SIB the obligation to pay approximately $1.8
million in accrued compensation due to six of the eight branch managers. NYMC
received $1.8 million in cash from SIB to pay this accrued compensation.

NYMC hired 134 SIB employees who work at these eight branches, which are
located in Northfield, New Jersey; Seaville, New Jersey; Haworth, New Jersey;
Rockville, Maryland; Virginia Beach, Virginia; Fairfax, Virginia; Terre Haute,
Indiana; and Fairfield, Connecticut. SIB assigned to NYMC and NYMC assumed three
branch location office leases with respect to the Virginia Beach, Terre Haute,
and Fairfield branches. All of the leases are on a month-to-month basis other
than the Virginia Beach lease which runs through March 31, 2006. NYMC entered
into subleases for the other five branches (Northfield, Seaville, Haworth,
Rockville and Fairfax) on a month-to-month basis. The aggregate base rent for
the branches is $31,402 per month.

Following completion of this offering, we expect to retain in a qualified
REIT subsidiary substantially all of the adjustable-rate and hybrid mortgage
loans that we originate and that meet our investment objectives and portfolio
requirements, while continuing to sell the fixed-rate loans and other loans we
originate that do not meet our investment criteria or portfolio requirements. We
may also purchase whole loans from third parties either for resale or to package
for securitization with the originated mortgage loans in our portfolio to the
extent that doing so would create economies of scale or is necessary to meet one
or more REIT qualification tests. Once our portfolio of adjustable-rate and
hybrid loans has reached a

sufficient size, we intend to securitize the loans in our portfolio. In the
meantime, we intend to include in our portfolio mortgage-backed securities that
meet our investment criteria and are purchased from third parties. Although
certain members of our senior management team have experience in mortgage
banking and investing in and managing portfolios of residential mortgage loans
and mortgage-backed securities, we have no prior history with respect to
securitizing our mortgage loans or managing a portfolio of mortgage loans. This
strategy, combined with our REIT election, will result in significant changes to
certain of our accounting policies and to our financial statements as compared
to NYMC's historical accounting policies and financial statements, which changes
are discussed below under the captions "Critical Accounting Policies" and
"Forward Looking Financial Statement Effects." Because of these changes, NYMC's
historic financial results, as discussed in this section, are not necessarily
indicative of our future performance following completion of this offering.

ACQUISITION OF NYMC

On December 22, 2003, we entered into a contribution agreement with Steven
B. Schnall and Joseph V. Fierro, as amended and restated on March 23, 2004, as
further amended and restated on April 29, 2004, pursuant to which Messrs.
Schnall and Fierro and their affiliates have agreed to contribute to us, and we
have agreed to accept, all of the outstanding equity interests in NYMC in
exchange for the issuance by us to Messrs. Schnall and Fierro and their
affiliates of a total of 2,750,000 shares of our common stock (1,925,000 shares
to Mr. Schnall and his affiliate and 825,000 shares to Mr. Fierro and his
affiliate), of which 100,000 shares in the aggregate will be held in escrow
through December 31, 2004 and will be available to satisfy any indemnification
claims we may have under the contribution agreement against the contributors of
the NYMC membership interests under the contribution agreement between us and
the contributors during the escrow period for losses we incur as a result of
defaults on any residential mortgage loans originated by NYMC and closed prior
to completion of this offering.

In addition, NYMC intends to make cash distributions of approximately
$3,500,000 in the aggregate to Steven B. Schnall and Joseph V. Fierro and their
affiliates, who together comprise all of the members of NYMC, immediately before
completion of this offering. The distribution is based on the estimated paid-in
equity and retained earnings of NYMC as of the anticipated closing date of this
offering. This amount represents the estimated amount of incremental net income
for the period from December 31, 2003 up to the anticipated closing date of this
offering. The cash distribution will be made to the members of NYMC pro rata in
accordance with their respective ownership interests. The actual amount of the
distributions may be more or less than $3,500,000 depending on NYMC's actual
performance through closing, but it will not exceed $4,500,000.

CRITICAL ACCOUNTING POLICIES

Management's discussion and analysis of NYMC's financial condition and
results of operations is based on the amounts reported in NYMC's historical
financial statements included elsewhere in this prospectus. These financial
statements have been prepared in conformity with accounting principles generally
accepted in the United States of America, or GAAP, many of which require the use
of estimates, judgments and assumptions that affect reported amounts. Changes in
the estimates and assumptions could have a material effect on these financial
statements. In accordance with recent Securities and Exchange Commission
guidance, those material accounting policies that we believe are the most
critical to an investor's understanding of NYMC's financial results and
condition and require complex management judgment have been described below.
Following completion of this offering, we will continue to apply these
accounting policies except where otherwise noted in this section or below under
the caption "Forward Looking Financial Statement Effects."

Marketable Securities. At March 31, 2004, NYMC held approximately $4.1
million of marketable securities. Marketable securities are classified as
available for sale. As such, they are carried at market value with net
unrealized gains or losses reported as a component of accumulated other
comprehensive income. Market value is based primarily upon third party
quotations, which provide valuation estimates based upon reasonable market order
indications or a good faith estimate thereof. These quotations are subject to
38

significant variability based on market conditions, such as interest rates and
spreads. Changes in market conditions, as well as changes in the assumptions or
methodology used to determine market value, could result in a significant
increase or decrease in the recorded equity of the company.

NYMC also assesses whether unrealized losses on securities, if any, reflect
a decline in value which is other than temporary and, accordingly, writes the
impaired security down to its market value through earnings. Significant
judgment is required in this analysis. To date, no write-downs of that type have
been made. Realized gains and losses on securities sold are included in other
income and expenses and are determined using the specific identification method.

Income on available for sale securities is recognized using the effective
yield methodology based upon a number of assumptions that are subject to
uncertainties and contingencies. These assumptions include the expected maturity
date of the security and the rate and timing of principal and interest receipts
(which may be subject to prepayments, delinquencies and defaults). Premiums and
discounts associated with the purchase of the marketable securities are
amortized/accreted into interest income over the estimated lives of the
securities using the interest method. These uncertainties and contingencies are
difficult to predict and are subject to future events and economic and market
conditions, which may alter the assumptions.

Loans Held for Sale. At March 31, 2004, we held approximately $47.7
million of loans held for sale. Loans held for sale represent mortgage loans
originated and held pending sale to interim and permanent investors. The
mortgage loans are carried at the lower of cost or market value. Market value is
determined by examining outstanding commitments from investors or current
investor yield requirements, calculated on the aggregate loan basis, less an
estimate of the costs to complete the loan, less the deferral of fees and points
received, plus the deferral of direct origination costs. Gains or losses on
sales are recognized at the time the loan files and related documentation are
transferred to the investor and are based upon the difference between the sales
proceeds from the final investor and the adjusted book value of the loan sold.

Transfers of Assets. A transfer of mortgage loans or mortgage securities
in which NYMC surrenders control over the financial assets is accounted for as a
sale. Gains and losses on the assets transferred are recognized based on the
carrying amount of the financial assets involved in the transfer, allocated
between the assets transferred and the retained interests, if any, based on
their relative fair value at the date of transfer. To determine fair value, NYMC
estimates fair value based on the present value of future expected cash flows
using management's best estimate of the key assumptions, including credit
losses, prepayment speeds, forward yield curves, and discount rates commensurate
with the risks involved. When NYMC retains control over transferred mortgage
loans or mortgage securities (such as under a repurchase agreement), the
transaction is accounted for as a secured borrowing.

The following is a description of the methods NYMC has historically used to
transfer assets, including the related accounting treatment under each method.
Following the offering, we will continue to use these methods except where
otherwise noted in this section or under the caption "Forward Looking Financial
Statement Effects."

- Whole Loan Sales. Whole loan sales represent loans sold on a servicing
released basis, which means that the servicing rights with respect to the
loans are transferred to the purchaser concurrently with the sale of the
loan. Gains and losses on whole loan sales are recognized in the period
the sale occurs and NYMC has determined that the criteria for sale
treatment has been achieved in that they have surrendered control over
the assets transferred. NYMC generally has an obligation to repurchase
whole loans sold in circumstances in which the borrower fails to make the
first payment. Additionally, NYMC is also generally required to repay all
or a portion of the premium it receives on the sale of whole loans in the
event that the loan prepays in its entirety within a period of one year
after origination. NYMC records the fair value of recourse obligations
upon the sale of the mortgage loans. Also see "Critical Accounting
Policies -- Loans Held for Sale" above.

- Loans and Securities Sold Under Repurchase Agreements. Repurchase
agreements represent legal sales of loans or mortgage securities and an
agreement to repurchase the loans or mortgage securities at a later date.
Repurchase agreements are accounted for as secured borrowings because
NYMC has not surrendered control of the transferred assets.

RISK MANAGEMENT

NYMC has developed risk management practices and programs designed to
manage market risk associated with its normal investment and business
activities. We will continue to apply these practices and programs following
completion of this offering except where otherwise noted in this section or
under the caption "Forward Looking Financial Statement Effects."

Derivative Financial Instruments. NYMC enters into derivative transactions
solely for risk management purposes. The decision of whether or not a given
transaction (or portion thereof) is hedged is made on a case-by-case basis,
based on the risks involved and other factors as determined by senior
management, including the financial impact on income and asset valuation and the
restrictions imposed on REIT hedging activities by the Internal Revenue Code,
among others. In determining whether to hedge a risk, NYMC may consider whether
other assets, liabilities, firm commitments and anticipated transactions already
offset or reduce the risk. All transactions undertaken as a hedge are entered
into with a view towards minimizing the potential for economic losses that could
be incurred by NYMC. Generally, all derivatives entered into are intended to
qualify as hedges in accordance with GAAP, unless specifically precluded under
Financial Accounting Standards Board Statement No. 133 "Accounting for
Derivative Instruments and Hedging Activities," or FAS 133. To this end, terms
of the hedges are matched closely to the terms of hedged items.

NYMC has also developed risk management programs and processes designed to
manage market risk associated with normal mortgage origination activities.

In the normal course of its mortgage loan origination business, NYMC enters
into contractual interest rate lock commitments, or IRLCs, to extend credit to
finance residential mortgages. These commitments, which contain fixed expiration
dates, become effective when eligible borrowers lock-in a specified interest
rate within time frames established by NYMC's origination, credit and
underwriting practices. Interest rate risk arises if interest rates change
between the time of the lock-in of the rate by the borrower and the sale of the
loan. The IRLCs are considered undesignated or free-standing derivatives.
Accordingly, IRLCs are recorded at fair value with changes in fair value
recorded to current earnings. Mark to market adjustments on IRLCs are recorded
from the inception of the interest rate lock through the date the underlying
loan is funded. The fair value of the IRLCs is determined by an estimate of the
ultimate gain on sale of the loans net of estimated net costs to originate the
loan. In accordance with a proposed Staff Accounting Bulletin to be issued by
the Securities and Exchange Commission, beginning in the second quarter of 2004,
the fair value of IRLCs can only be zero or a liability, but never an asset in
our financial statements.

To mitigate the effect of the interest rate risk inherent in issuing an
IRLC from the lock-in date to the funding date of a loan, NYMC generally enters
into forward sale loan contracts, or FSLCs. Since the FSLCs are committed prior
to mortgage loan funding and thus there is no owned asset to hedge, the FSLCs in
place prior to the funding of a loan are undesignated derivatives under FAS 133
and are marked to market with changes in fair value recorded to current
earnings.

NYMC uses other derivative instruments, including treasury, agency or
mortgage-backed securities and notes forward sale contracts, which are also
classified as free-standing, undesignated derivatives and thus are recorded at
fair value with the changes in fair value recorded to current earnings.

Once a loan has been funded, NYMC's risk management objective for its
mortgage loans held for sale is to protect earnings from an unexpected charge
due to a decline in value of its mortgage loans. NYMC's strategy is to engage in
a risk management program involving the designation of FSLCs (the same FSLCs
entered into at the time of the IRLC) to hedge most of its loans held for sale.
Provided that the FSLCs have been designated as qualifying hedges for the funded
loans and the notional amount of the forward delivery contracts, along with the
underlying rate and critical terms of the contracts, are equivalent to the
unpaid principal amount of the mortgage loans being hedged, the forward delivery
contracts effectively fix the forward sales price and thereby offset interest
rate and price risk to NYMC. NYMC evaluates this relationship quarterly and
classifies and accounts for FSLCs which are deemed effective as fair value
hedges.

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

Additional accounting policies will be required to handle our business
subsequent to our acquisition of NYMC and completion of this offering.
Additional accounting policies that we will apply subsequent to our acquisition
of NYMC and completion of this offering are set forth in the following section.

FORWARD LOOKING FINANCIAL STATEMENT EFFECTS

As a result of the proposed changes in the way we will conduct our business
after this offering, we believe it is important to describe the differences that
an investor would expect to see in our financial statements.

Mortgage Loans Held for Investment. Following this offering, we will
retain in our portfolio substantially all of the adjustable-rate mortgage loans
that we originate and that meet our investment criteria and portfolio
requirements. We do not currently service any loans. Following this offering, we
will service loans that we originate and retain in our portfolio through a
subservicer. Servicing is the function primarily consisting of collecting
monthly payments from mortgage borrowers, and disbursing those funds to the
appropriate loan investors.

We may also include in our portfolio loans acquired in bulk pools from
other originators and securities dealers. Mortgage loans held for investment are
recorded net of deferred loan origination fees and associated direct costs and
are stated at amortized cost. Mortgage loan origination fees and associated
direct mortgage loan origination costs on mortgage loans held-in-portfolio are
deferred and amortized over the life of the loan as an adjustment to yield using
the level yield method. This amortization includes the effect of projected
prepayments.

Interest is recognized as revenue when earned according to the terms of the
mortgage loans and when, in the opinion of our management, it is collectible.
The accrual of interest on loans is discontinued when, in management's opinion,
the interest is not collectible in the normal course of business, but in no case
beyond when payment on a loan becomes 90 days delinquent. Interest collected on
loans is recognized as income upon receipt.

NYMC's historical operations had an insignificant amount of loan losses due
to default or non-performance on the loans primarily because mortgage loans were
sold soon after being originated. When we hold loans for investment, we will
record an allowance for probable loan losses. Our portfolio mortgage loans held
for investment will be collectively evaluated for impairment as the loans will
be homogeneous in nature. We will maintain an allowance for credit losses
inherent in the portfolio balance sheet. The allowance will be based upon the
assessment of management of various factors affecting our mortgage loan
portfolio, including current economic conditions, the makeup of the portfolio
based on credit grade, loan-to-value ratios, delinquency status, historical
credit losses, purchased mortgage insurance and other factors deemed to warrant
consideration. The allowance will be maintained through ongoing provisions
charged to operating income and will be reduced by loans that are charged off.
Determining the allowance for loan losses is subjective in nature due to the
estimation required and the potential for imprecision. This will be a critical
accounting policy and our management intends to create methodologies to assist
in the periodic and reasonable calculation of the allowance.

When we have a portfolio of loans that we hold for investment, in addition
to our portfolio of loans held for sale, the presentation of interest income and
interest expense on those two portfolios will be modified from what NYMC
currently shows in its historical consolidated financial statements. We will

separate our interest income and expense into two components: "Interest
income -- loans held for sale" and "Interest income -- loans held for
investment." Similarly, we will separate interest expense into two components:
"Interest expense -- loans held for sale" and "Interest expense -- loans held
for investment."

When we have a portfolio of loans that we hold for investment, we will also
make certain changes to our balance sheet. NYMC currently shows "Loans held for
sale" consisting of fixed-rate and adjustable-rate loans accounted for at the
lower of cost or market price. Since we intend to continue to sell all of our
fixed-rate loans, we will continue to record them as "Mortgage loans held for
sale" which will also include any adjustable-rate loans which we intend to sell.
We will show adjustable-rate loans that we retain in our portfolio as "Loans
held for investment." NYMC currently shows borrowings used to support mortgage
loans held for sale as "financing arrangements." We will record these borrowings
as "financing arrangements, loans held for sale." We will record the
mortgage-backed securities we intend to issue to finance our portfolio loans and
the warehouse financing of our portfolio loans prior to securitization as
"Beneficial interests and other borrowings, loans held for investment."

NEW ACCOUNTING POLICIES

Upon completion of this offering, we expect to apply the following critical
accounting policies, in addition to those discussed above. The first of these
policies -- accounting for transfers and servicing of financial
assets -- relates to our proposed financing strategy utilizing on-balance sheet
securitizations. The second relates to our management of interest rate risk on a
leveraged portfolio of mortgage loans and securities. The third relates to
recognition of interest income and impairment on purchased and retained
beneficial interests in securitized financial assets. The fourth, fifth and
sixth of these policies relate to our new corporate structure and planned
issuance of stock compensation:

Accounting for Transfers and Servicing of Financial Assets. We may
regularly securitize mortgage loans by transferring mortgage loans to
independent trusts which issue securities to investors. The securities are
collateralized by the mortgage loans transferred into these independent trusts.
We will generally retain interests in all or some of the securities issued by
the trusts. Certain of the securitization agreements may require us to
repurchase loans that are found to have legal deficiencies, subsequent to the
date of transfer. The accounting treatment for transfers of assets upon
securitization depends on whether or not we have retained control over the
transferred assets. We will service, through a subservicer, loans that we
originate and retain in our portfolio.

As we begin to generate and retain a portfolio of loans for securitization,
we will comply with the provisions of Financial Accounting Standards Board
Statement No. 140 "Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities," or FAS 140, related to each securitization.
Depending on the structure of the securitization, it will either be treated as a
sale or secured financing for financial statement purposes. We anticipate that
our securitizations will be treated as secured financings under FAS 140. Our
strategy of retaining on our balance sheet certain mortgage loans held for
investment and included in our securitization pools will reduce the number of
loans NYMC sells and, therefore, our total gains on sales of mortgage loans for
financial accounting purposes will be lower than NYMC has historically
recognized.

Managing Interest Rate Risk. We may hedge the aggregate risk of interest
rate fluctuations with respect to our borrowing index. We generally intend to
hedge only the risk related to changes in the benchmark interest rate used in
the variable rate index, usually a London Interbank Offered Rate, known as
LIBOR, or a U.S. Treasury rate.

In order to reduce these risks, we may enter into interest rate swap
agreements whereby we would receive floating rate payments in exchange for fixed
rate payments, effectively converting the borrowing to a fixed rate. We may also
enter into interest rate cap agreements whereby, in exchange for a fee, we would
be reimbursed for interest paid in excess of a certain capped rate.

To qualify for cash flow hedge accounting, interest rate swaps and caps
must meet certain criteria, including:

(1) that the items to be hedged expose us to interest rate risk, and

(2) that the interest rate swaps or caps are highly effective in
reducing our exposure to interest rate risk.

Correlation and effectiveness of the interest rate swaps and caps are
periodically assessed based upon a comparison of the relative changes in the
fair values or cash flows of the interest rate swaps and caps and the items
being hedged.

For derivative instruments that are designated and qualify as a cash flow
hedge (meaning hedging the exposure to variability in expected future cash flows
that is attributable to a particular risk), the effective portion of the gain or
loss, and net payments received or made, on the derivative instrument will be
reported as a component of other comprehensive income and reclassified into
earnings in the same period or periods during which the hedged transaction
affects earnings. The remaining gain or loss on the derivative instrument in
excess of the cumulative change in the present value of future cash flows of the
hedged item, if any, will be recognized in current earnings during the period of
change.

With respect to interest rate swaps and caps that have not been designated
as hedges, any net payments under, or fluctuations in the fair value of, these
swaps and caps will be recorded to current income.

Derivative financial instruments contain credit risk to the extent that the
institutional counterparties may be unable to meet the terms of the agreements.
We expect to minimize this risk by using multiple counterparties and limiting
our counterparties to major financial institutions with good credit ratings. In
addition, we plan to regularly monitor the potential risk of loss with any one
party resulting from this type of credit risk. Accordingly, we do not expect any
material losses as a result of default by other parties.

Recognition of Interest Income and Impairment on Purchased and Retained
Beneficial Interests in Securitized Financial Assets. As previously described
herein, the Company plans to regularly securitize its mortgage loans and retain
beneficial interests created. In addition, the Company may purchase such
beneficial interests from third parties. For certain of its purchased and
retained beneficial interests in securitized financial assets (other than
beneficial interests of high credit quality, sufficiently collateralized to
ensure that the possibility of credit loss is remote, or that cannot
contractually be prepaid or otherwise settled in such a way that the Company
would not recover substantially all of its recorded investment) the Company will
follow the guidance in Financial Accounting Standards Board Emerging Issues Task
Force Issue No. 99-20, "Recognition of Interest Income and Impairment on
Purchased and Retained Beneficial Interests in Securitized Financial Assets," or
EITF 99-20. Accordingly, on a quarterly basis, when significant changes in
estimated cash flows generated from the securitized asset's underlying
collateral from the cash flows previously estimated occur due to actual
prepayment and credit loss experience, the Company will calculate revised yields
based on the current amortized cost of the investment (including any
other-than-temporary impairments recognized to date) and the revised cash flows.
The revised yields are then applied prospectively to recognize interest income.

Additionally, unless our retained interest in the loan held in our
portfolio is accounted for as a secured financing under EITF 99-20, when
significant changes in estimated cash flows from the cash flows previously
estimated occur due to actual prepayment and credit loss experience, and the
present value of the revised cash flows using the current expected yield is less
than the present value of the previously estimated remaining cash flows
(adjusted for cash receipts during the intervening period), an other-than-
temporary impairment is deemed to have occurred. Accordingly, the security is
written down to the fair value with the resulting change being included in
income, and a new cost basis established. In both instances, the original
discount or premium is written off when the new cost basis is established. After
taking into account the effect of the impairment charge, income is recognized
under EITF 99-20, as applicable, using the market yield for the security used in
establishing the write-down.

Basis of Presentation and Principles of Consolidation. Following
completion of the acquisition of NYMC and this offering, our consolidated
financial statements will include the accounts of New York Mortgage Trust and
the accounts of its subsidiaries, including NYMC, which will be a taxable REIT
subsidiary. NYMC's financial statements will be consolidated with NYMT for
financial reporting purposes but not consolidated with us for tax reporting
purposes. All material intercompany accounts and transactions are eliminated in
consolidation.

Our acquisition of NYMC will be accounted for as a transfer of assets
between entities under common control. Accordingly, the Company will record the
assets and liabilities transferred from NYMC at their carrying amounts in
accounts of NYMC at the date of transfer.

Accounting for Stock-based Compensation. When we issue stock-based
compensation in conjunction with our new corporate structure, we will be
required to account for the stock-based compensation under Financial Accounting
Standards Board Statement No. 123 "Accounting for Stock-based Compensation," or
FAS 123. As allowed by FAS 123, we will account for stock-based compensation
using the intrinsic value method prescribed by the Accounting Principals Board
Opinion No. 25.

FAS 123 allows for the accounting of stock-based compensation using the
intrinsic value method or the fair value method. Under the fair value method,
compensation cost is measured at the grant date based on the value of the award
and is recognized over the service period, which is usually the vesting period.
Under the fair value method, stock option valuation is typically determined
using an option-pricing model whose calculation and assumptions may be
subjective. Under the intrinsic value method, which we will adopt, compensation
cost is the excess, if any, of the quoted market price of our common stock on
the grant date or other measurement date over the amount an employee must pay to
acquire the stock. We believe that the intrinsic value method using a market
price is a more objective evaluation.

REIT Compliance. We intend to qualify, and will elect to be taxed as a
real estate investment trust, or REIT, for federal income tax purposes. NYMC
will continue as our primary mortgage origination subsidiary and we will make an
election to treat NYMC as a taxable REIT subsidiary. In order to meet certain of
the requirements for us to qualify as a REIT, we intend to continue to conduct
all of our loan sales and loan brokerage activities, as well as certain
origination functions, through NYMC. We expect that all of our loans will be
sourced, underwritten and processed by NYMC including those that will be held
for investment. Loans held for investment will be funded or purchased by us or
by a qualified REIT subsidiary and accounted for at amortized cost for financial
accounting purposes. Interest income generated from our retained portfolio will
be recognized as income.

Federal income tax law requires that a REIT distribute to its stockholders
annually at least 90% of its taxable income, excluding the retained earnings of
any taxable REIT subsidiary it owns, but including any dividends received from a
taxable REIT subsidiary. To the extent that a REIT distributes at least 90%, but
less than 100% of its REIT taxable income, it will be subject to federal income
tax on its undistributed income. As long as we distribute all of our taxable
income to our stockholders, we will not be subject to federal income tax on our
REIT taxable income and will not record income tax (benefit) expense with
respect to that income. We expect that we will make regular quarterly
distributions of all or substantially all of our REIT taxable income to holders
of our common stock. Any taxable income generated by NYMC, however, will be
subject to regular corporate income tax. As a result, NYMC will record income
tax (benefit) expense. NYMC may retain any income it generates net of any tax
liability it incurs on that income without affecting the distribution
requirements to which we are subject as a REIT. If NYMC chooses to distribute
any of its after tax earnings to us, that distribution will be included in our
REIT taxable income and will be distributed to our stockholders accordingly. Any
distributions we make in the future will be at the discretion of our board of
directors and will depend upon, among other things, our actual results of
operations.

As described in more detail under the heading "Federal Income Tax
Consequences of Our Status as a REIT -- Requirements for Qualification -- Gross
Income Tests and -- Asset Tests" in order to qualify as a REIT, at least 75% of
our gross income must come from certain real estate related sources and at least
95% of our gross income must come from those real estate related sources and
certain other sources that

are set forth in the REIT tax laws, mainly interest and dividends. We are
subject to various limitations on our ownership of securities, including a
limitation that the value of our investment in our taxable REIT subsidiary,
NYMC, together with any other future investments in taxable REIT subsidiaries,
cannot exceed 20% of our total assets. In addition, at least 75% of our assets
must be qualified real estate assets, government securities and cash items. The
need to comply with these asset requirements may cause us to acquire other
assets that are qualified real estate assets for purposes of these requirements
(for example, interests in other mortgage loan portfolios) but are not part of
our overall business strategy and might not otherwise be the best investment
alternative for us.

The Internal Revenue Code provisions applicable to REITs provide that the
income from specified hedging transactions is qualifying income for purposes of
the 95% gross income test, but not the 75% gross income test, both of which a
REIT must satisfy on an annual basis. Income derived from hedging transactions
not specified in these provisions is not treated as qualifying income for
purposes of either of the gross income tests applicable to REITs. Because we
intend to structure our hedging transactions in a manner that does not
jeopardize our status as a REIT, we will be limited in the type and amount of
hedging transactions into which we may enter directly (although these
limitations would not apply to hedging transactions undertaken by NYMC) due to
the REIT income tests described above.

NYMC'S RESULTS OF OPERATIONS

NYMC's results of operations during a given period typically reflect the
total volume of loans originated and closed by NYMC during that period. The
volume of closed loan originations generated by NYMC in any period is impacted
by a variety of factors. These factors include:

- The demand for new mortgage loans. Reduced demand for mortgage loans
causes closed loan origination volume to decline. Demand for new mortgage
loans is directly impacted by current interest rate trends and other
economic conditions. Rising interest rates tend to reduce demand for new
mortgage loans, particularly demand for loan refinancings, and falling
interest rates tend to increase demand for new mortgage loans,
particularly loan refinancings.

- Loan refinancing and home purchase trends. As discussed above, the
volume of loan refinancings tends to increase following declines in
interest rates and to decrease when interest rates rise. The volume of
home purchases is also affected by interest rates, although to a lesser
extent than refinancing volume. Home purchase trends are also affected by
other economic changes such as inflation, improvements in the stock
market, lower unemployment rates and other similar factors.

- Seasonality. Historically, according to the MBAA, loan originations
during late November, December, January and February of each year are
typically lower than during other months in the year due, in part, to
inclement weather, fewer business days (due to holidays and the short
month of February), and the fact that home buyers tend to purchase homes
during the warmer months of the year. As a result, loan volumes tend to
be lower in the first and fourth quarters of a year than in the second
and third quarters.

- Occasional spikes in volume resulting from isolated events. Mortgage
lenders may experience spikes in loan origination volume from time to
time due to non-recurring events or transactions. For example, NYMC was
able to complete an unusually large and non-recurring mass closing of 347
condominium unit mortgage loans for which NYMC negotiated a bulk end-loan
commitment for condominium buyers in the Rupert Homes Project in the
first quarter of 2003. This one time event increased NYMC's closed loan
origination volume during the first quarter of 2003 by over 30%.

The mortgage banking industry witnessed record levels of closed loan
originations beginning in mid-2002 and continuing throughout 2003, due primarily
to the availability of historically low interest rates during that period. These
historically low interest rates caused existing home owners to refinance their
mortgages at record levels and induced many first-time home buyers to purchase
homes and many existing home owners to purchase new homes. NYMC, like most
industry participants, enjoyed a record increase in its volume of closed loan
originations during that period. During the first quarter of

2004, the Federal Reserve Bank of the United States signaled that moderate
increases in interest rates were likely to occur during and after the second
quarter of 2004. This caused many existing and would be home owners that had not
yet refinanced their mortgages or purchased homes to refinance their mortgages
or purchase homes in order to take advantage of the favorable available interest
rates.

The MBAA indicated in its May 2004 report that closed loan originations in
the industry for 2003 totaled $3.8 trillion. The MBAA forecast in the same
report that closed loan originations in 2004 will total approximately $2.42
trillion and closed loan originations in 2005 will total approximately $1.75
trillion. These projected declines in the overall volume of closed loan
originations are likely to have a negative affect on NYMC's loan origination
volume and net income.

THREE MONTHS ENDED MARCH 31, 2004 COMPARED TO THREE MONTHS ENDED MARCH 31,
2003

Net Income

NYMC's net income decreased approximately 95.9% to $118,000 for the three
months ended March 31, 2004, from $2.9 million for the comparable period in
2003. One reason for this decrease in net income in the first quarter of 2004
compared to the first quarter of 2003 was the unusually large and non-recurring
mass closing of 347 condominium unit mortgage loans at the Rupert Homes Project
in the first quarter of 2003 discussed above. Another reason for the decrease is
the increase in expenses incurred in connection with the SIB transaction
pursuant to which NYMC hired 134 new employees and assumed leases at eight new
branch offices at the end of the first quarter of 2004 as discussed below
without any immediate increase in revenue to offset the increased expenses.
Total revenue decreased 7.2% during the three months ended March 31, 2004, as
compared to the comparable period in 2003, as a result of lower loan origination
volume largely attributable to the non-recurring impact of the Rupert Homes
Project in the first quarter of 2003.

Total expenses increased 50.0% during the three months ended March 31, 2004
as compared to the comparable period in 2003. Overall general and administrative
expenses were higher for the first quarter of 2004, relative to the first
quarter of 2003, mainly as a result of increased personnel costs, occupancy and
promotional expense and the timing of an assignment and assumption agreement
with SIB Mortgage Corp., or SIB, with regard to eight loan origination branches
and our hiring of an additional 134 employees in March 2004 -- for which we
incurred expenses with little offsetting revenues due to lag time in getting the
new hires acquainted with our policies and developing originations at NYMC.

NYMC's closed loan originations in the first quarter of 2004 totaled 1,071
loans, a 20.5% decline from the 1,347 loans that NYMC closed during the first
quarter of 2003. As measured by principal balance, total closed loan
originations in the first quarter of 2004 decreased approximately 21.6% to
$283.3 million from $361.4 million during the first quarter of 2003. Adjusting
total closed loan originations during the first quarter of 2003 to exclude the
Rupert Homes Project loans, NYMC's closed loan originations in the first quarter
of 2004 exceeded closed loan originations during the first quarter of 2003 by 71
loans, or 7.1%, and by $11.6 million, or 4.3%, as measured by principal balance.
Management does not expect to benefit from historically low interest rates in
2004. Management expects to mitigate the predicted declines in loan origination
volume across the industry during the remainder of 2004 and throughout 2005 by
increasing the percentage of market share we capture. Management plans to
accomplish this increase in market share by increasing its loan origination
staff, as it did recently when it hired 134 new employees in connection with its
assumption of eight branch offices from SIB at the end of the first quarter of
2004 as described above. We cannot assure you, however, that an increase in the
number of loan origination officers we have will successfully mitigate the
decline in loan origination volume that is expected to occur as a result of
reduced demand for new loans throughout the industry.

Revenues

Gain on Sales of Mortgage Loans. Net gain on sales of mortgage loans
decreased approximately 31.3% to $3.3 million for the three months ended March
31, 2004 from $4.8 million for the comparable period in 2003. Gross gain on sale
of mortgage loans decreased approximately 22.7% to $5.1 million for the

three months ended March 31, 2004 from $6.6 million for the comparable period in
2003. These decreases in net and gross gain on sales of mortgage loans were due
to decreased sales volume of loans for the three months ended March 31, 2004
which resulted primarily from the bulk closing of 331 loans or $85.6 million on
the Rupert Homes Project during the first quarter of 2003. Adjusting the gain on
sale of mortgage loans for the three months ended March 31, 2003 to exclude the
Rupert Homes Project comparatively reduces the first quarter 2003 gain on sale
of mortgage loans by approximately $1.4 million to $3.4 million. As adjusted to
exclude the Rupert Homes Project, net gain on sales of mortgage loans
comparatively decreased approximately 2.9% to $3.3 million for the period ended
March 31, 2004 from $3.4 million for the comparable period in 2003.

The number of mortgage loans sold during the three months ended March 31,
2004 decreased 26.8% to 845 loans from 1,155 mortgage loans sold during the
comparable period in 2003. Mortgage loan volume, as measured by aggregate
principal balance of mortgage loans sold, decreased approximately 31.4% to
$199.4 million for the three months ended March 31, 2004 from $290.6 million for
the comparable period in 2003. Adjusting mortgage loans sold volume for the
three month period ended March 31, 2003 to exclude the Rupert Homes Project,
mortgage loans sold comparatively increased 4.6% to 845 loans for the three
months ended March 31, 2004 as compared to an adjusted 808 loans for the
comparable period in 2003. Mortgage loans sold volume as adjusted to exclude the
Rupert Homes Project, as measured by principal balance, comparatively decreased
approximately 2.7% to $199.4 million for the three months ended March 31, 2004
from an adjusted $205.0 million for the comparable period in 2003.

Interest Income. Interest income decreased approximately 7.1% to $1.3
million for the three month period ended March 31, 2004 from $1.4 million for
the comparable period in 2003. This decrease was due to decreased originations
of loans held for sale and thus a decreased volume of interest earning assets
and a declining average yield due to lower prevailing interest rates in the
three month period ended March 31, 2004.

The aggregate principal balance of loans sold decreased approximately 31.4%
to $199.4 million for the three month period ended March 31, 2004 from $290.6
million in the comparable period in 2003. The combination of decreased principal
balances and a decrease in the average interest rate for the mortgage loans sold
by approximately 18 basis points to 5.76% in the three month period ended March
31, 2004 from 5.94% in the comparable period in 2003 resulted in lower interest
revenue during the three month period ended March 31, 2004 as compared to the
three month period ended March 31, 2003.

Revenue from Brokered Loans. Revenue from brokered loans increased
approximately 53.8% to $2.0 million for the three month period ended March 31,
2004 from $1.3 million for the comparable period in 2003 as a result of
increased origination volume for loans brokered for other institutions. The
number of brokered loans increased approximately 17.7% to 226 loans for the
three month period ended March 31, 2004 from 192 loans in the comparable period
in 2003. The aggregate principal balance of such brokered loans increased
approximately 18.8% to $84.1 million for the three month period ended March 31,
2004 from $70.8 million for the comparable period in 2003. The percentage of
brokered loans to total originations closed during the three month period ended
March 31, 2004 increased to 29.7% from 19.6% in the comparable period of 2003.

Expenses

Total Expenses. Total expenses increased approximately 47.8% to $6.8
million for the three month period ended March 31, 2004 from $4.6 million for
the comparable period in 2003. This increase was primarily due to an increase in
salaries, commissions and associated payroll costs, occupancy and other general
and administrative expenses. These increased costs were mainly the result of
increased personnel and a relocation to more expensive principal offices in July
2003 and the timing of an assignment and assumption agreement with SIB with
regard to eight loan origination branches and our hiring of an additional 134
employees in March 2004 for which we incurred expenses with little offsetting
revenues due to lag time in getting the new hires acquainted with our policies
and developing loan originations flow at NYMC.

Salaries, Commissions and Benefits. Salaries, commissions and associated
payroll costs increased approximately 58.8% to $2.7 million for the three month
period ended March 31, 2004 from $1.7 million for the comparable period in 2003.
The increase was primarily due to an increase in employees, including 135 loan
origination officers hired in March 2004, support staff (processing,
underwriting and closing

employees) to support the new loan origination officers and additional corporate
management. Total employees increased to 447 on March 31, 2004 from 235 on March
31, 2003.

Cost of Brokered Loans. Cost of brokered loans increased approximately
50.6% to $1.3 million for the three month period ended March 31, 2004 from
$863,000 for the comparable period in 2003. This increase in cost correlates to
the increase in origination volume of brokered loans and the revenues earned
from brokered loans.

Interest Expense. Interest expense decreased approximately 6.6% to
$609,000 for the three month period ended March 31, 2004 from $652,000 for the
comparable period in 2003. This decrease was due to decreased originations of
loans held for sale and lower prevailing interest rates in the three month
period ended March 31, 2004. The average monthly outstanding balance of
financing facilities during the three month period ended March 31, 2004 was
$93.3 million at an average interest rate of 1.47% as compared to an average
monthly outstanding balance of $105.6 million at an average rate of 1.86% for
the comparable period in 2003.

Occupancy and Equipment Expense. Occupancy and equipment expense increased
approximately 101.2% to $662,000 for the three month period ended March 31, 2004
from $329,000 for the comparable period in 2003. The increase reflects the
expansion of new origination offices to 24 as of March 31, 2004 from 11 as of
March 31, 2003 and the significant expansion and relocation of NYMC's principal
offices in New York City in July 2003.

Marketing and Promotion Expense. Marketing and promotion expense increased
approximately 137.3% to $484,000 for the three month period ended March 31, 2004
from $204,000 for the comparable period in 2003. This increase was primarily due
to increased marketing and promotion expenses incurred to promote newly-opened
loan origination offices and related newly-hired loan origination personnel.

Data Processing and Communication Expense. Data processing and
communication expense increased approximately 25.4% to $168,000 for the three
month period ended March 31, 2004 from $134,000 for the comparable period in
2003. This increase was primarily due to increased personnel and expenses
related to the opening of new origination offices. In addition, since the period
ended March 31, 2003, NYMC entered into leases for its new principal office
phone system and high speed office printers.

Office Supplies and Expense. Office supplies and expense increased
approximately 38.0% to $218,000 for the three month period ended March 31, 2004
from $158,000 for the comparable period in 2003. This increase was primarily a
result of the increase in personnel and new origination offices, as well as the
supplies needed to accommodate the bulk hiring of 134 new employees formerly
with SIB.

Professional Fees Expense. Professional fees expense increased
approximately 7.7% to $253,000 for the three month period ended March 31, 2004
from $235,000 for the comparable period in 2003. This increase was primarily due
to increases in dues, licenses and permits in three states where NYMC has a new
presence as a result of the assumption of SIB branches.

Travel and Entertainment Expense. Travel and entertainment expense
increased 5.0% to $188,000 for the three month period ended March 31, 2004 from
$179,000 for the comparable period in 2003. This increase was primarily due to
increased meals and travel expense due to increased personnel levels and the
opening of new origination offices.

Depreciation and Amortization Expense. Depreciation and amortization
expense increased approximately 51.5% to $103,000 for the three month period
ended March 31, 2004 from $68,000 for the comparable period in 2003. This
increase was primarily due to opening of new origination offices and increased
investments in computer networks and systems.

YEAR ENDED DECEMBER 31, 2003 COMPARED TO YEAR ENDED DECEMBER 31, 2002

Net Income

Net income increased approximately 360.5% to $13.7 million for the year
ended December 31, 2003 from $3.8 million for the comparable period in 2002. The
increase in net income in 2003 was primarily the result of increased loan
origination production resulting in increased loan sales volume and net interest

income. Two primary factors contributed to this increase in loan origination
production: a successful effort by NYMC to increase significantly its loan
origination staff and low prevailing interest rates, which resulted in an
increase in refinance mortgage loan volume. Total revenue increased 106.5% with
a corresponding 64.8% increase in total expenses during the year ended December
31, 2003, as compared to the comparable period in 2002, indicating loan
origination efficiencies at higher production volumes.

Total loan origination volume for the year ended December 31, 2003
increased 76.0% to 5,704 loans from 3,241 for the comparable period in 2002.
Total loan origination volume, as measured by principal balance, increased
approximately 82.4% to $1.6 billion for the year ended December 31, 2003 from
$877.2 million for the comparable period in 2002.

Revenues

Gain on Sales of Mortgage Loans. Net gain on sales of mortgage loans
increased approximately 132.3% to $23.0 million for the year ended December 31,
2003 from $9.9 million for the comparable period in 2002. Gross gain on sale of
mortgage loans increased approximately 116.1% to $29.6 million for the year
ended December 31, 2003 from $13.7 million for the comparable period in 2002.
These increases in net and gross gain on sales of mortgage loans are due to
increased sales volume of loans for the year ended December 31, 2003 and an
increase in the gross margin of loans sold to 77.7% for the year ended December
31, 2003 from 72.0% for the comparable period in 2002. The increase in gross
margin was due primarily to the fact that increased mortgage loan origination
volume enabled NYMC to begin selling pools of loans, typically resulting in NYMC
receiving higher prices than it historically received selling loans on a whole
loan or flow basis.

The number of mortgage loans sold during the year ended December 31, 2003
increased 83.5% to 4,770 loans from 2,600 mortgage loans sold during the
comparable period in 2002. Mortgage loan volume, as measured by aggregate
principal balance of mortgage loans sold, increased approximately 89.5% to $1.2
billion for the year ended December 31, 2003 from $633.2 million for the
comparable period in 2002.

Interest Income. Interest income increased approximately 153.3% to $7.6
million for the year ended December 31, 2003 from $3.0 million for the
comparable period in 2002. This increase is due to increased originations of
loans held for sale and thus an increased volume of earning assets and is
partially offset by a declining average yield due to lower prevailing interest
rates in the year ended December 31, 2003.

The aggregate principal balance of loans sold increased approximately 89.5%
to $1.2 billion for the year ended December 31, 2003 from $633.2 million in the
comparable period in 2002. Additionally, NYMC's loan pool sale strategy resulted
in NYMC holding loans longer on its credit facilities. The average holding
period of mortgage loans sold (the period from the closing of the loan to the
sale to a third party) increased to 33.7 days in the year ended December 31,
2003 from 31.2 days in the comparable period in 2002. The combination of
increased principal balances and holding periods allowed for higher interest
revenue during the year ended December 31, 2003 and is offset in part by a
decrease in the average interest rate for the mortgage loans sold by
approximately 75 basis points to 5.73% in the year ended December 31, 2003 from
6.48% in the comparable period in 2002.

Revenue from Brokered Loans. Revenue from brokered loans increased
approximately 28.8% to $6.7 million for the year ended December 31, 2003 from
$5.2 million for the comparable period in 2002 as a result of increased
origination volume for loans brokered for other institutions. The number of
brokered loans increased approximately 45.7% to 934 loans for the year ended
December 31, 2003 from 641 loans in the comparable period in 2002. The aggregate
principal balance of such brokered loans increased approximately 49.8% to $365.5
million for the year ended December 31, 2003 from $244.0 million for the
comparable period in 2002. The percentage of brokered loans to total
originations closed during the year end December 31, 2003 decreased to 16.4%
from 19.8% in the comparable period of 2002. This was due to NYMC's efforts to
migrate more of its business from mortgage brokering to mortgage banking, which
typically has been significantly more profitable.

Expenses

Total Expenses. Total expenses increased approximately 65.0% to $23.6
million for the year ended December 31, 2003 from $14.3 million for the
comparable period in 2002. This increase is primarily due to the increase in
salaries, commissions and associated payroll costs, much of which is a variable
cost (commissions) and directly related to the increase in loan originations.
Occupancy and other general and administrative expenses also increased due to
higher loan origination volume and an increase in the number of branch
locations.

Salaries, Commissions and Benefits. Salaries, commissions and associated
payroll costs increased approximately 58.6% to $9.2 million for the year ended
December 31, 2003 from $5.8 million for the comparable period in 2002. The
increase was primarily due to an increase in commissions paid, which is a
variable expense, and directly correlated to increased loan origination volume,
as well as increases in support staff (processing, underwriting and closing
employees) necessary to support the increased origination volume. Total
employees increased to 335 on December 31, 2003 from 184 on December 31, 2002.

Cost of Brokered Loans. Cost of brokered loans increased approximately
23.3% to $3.7 million for the year ended December 31, 2003 from $3.0 million for
the comparable period in 2002. This increase in cost correlates to the increase
in origination volume of brokered loans and the revenues earned from brokered
loans.

Interest Expense. Interest expense increased approximately 94.1% to $3.3
million for the year ended December 31, 2003 from $1.7 million for the
comparable period in 2002. This increase is due to increased originations of
loans held for sale and the period of time NYMC elected to hold such loans prior
to their sale and thus an increase in financing costs, which is partially offset
by lower prevailing interest rates in the year ended December 31, 2003. The
average monthly outstanding balance of financing facilities during the year
ended December 31, 2003 was $119.8 million at an average interest rate of 2.36%
as compared to an average monthly outstanding balance of $48.8 million at an
average rate of 3.17% for the comparable period in 2002.

Occupancy and Equipment Expense. Occupancy and equipment expense increased
approximately 100.0% to $2.0 million for the year ended December 31, 2003 from
$1.0 million for the comparable period in 2002. The increase reflects the
expansion of new origination offices to 15 on December 31, 2003 from 13 on
December 31, 2002 and the significant expansion and relocation of NYMC's
principal offices in New York City in July 2003.

Marketing and Promotion Expense. Marketing and promotion expense increased
approximately 104.9% to $1.0 million for the year ended December 31, 2003 from
$488,000 for the comparable period in 2002. This increase was primarily due to
increased marketing and promotion expenses incurred to promote newly-opened loan
origination offices and related newly-hired loan origination personnel.

Data Processing and Communication Expense. Data processing and
communication expense increased approximately 66.1% to $608,000 for the year
ended December 31, 2003 from $366,000 for the comparable period in 2002. This
increase was primarily due to increased loan volume and expenses related to the
opening of new origination offices. In addition, during the year ended December
31, 2003, NYMC entered into leases for its new principal office phone system and
high speed office printers.

Office Supplies and Expense. Office supplies and expense increased
approximately 59.0% to $803,000 for the year ended December 31, 2003 from
$505,000 for the comparable period in 2002. This increase was primarily a result
of the increase in personnel and new origination offices, as well as the
supplies needed to service increased loan volume during the period.

Professional Fees Expense. Professional fees expense increased
approximately 88.0% to $959,000 for the year ended December 31, 2003 from
$510,000 for the comparable period in 2002. This increase was primarily due to
increases in dues, licenses and permits and placement search fees for increased
personnel

levels and the opening of new loan origination offices. In addition, NYMC
incurred certain non-recurring professional fees (consulting, technology,
architectural) for its relocation of its principal offices.

Travel and Entertainment Expense. Travel and entertainment expense
increased 58.6% to $666,000 for the year ended December 31, 2003 from $420,000
for the comparable period in 2002. This increase was primarily due to increased
meals and travel expense due to increased personnel levels and the opening of
new origination offices.

Depreciation and Amortization Expense. Depreciation and amortization
expense increased approximately 52.0% to $412,000 for the year ended December
31, 2003 from $271,000 for the comparable period in 2002. This increase was
primarily due to opening of new origination offices and increased investments in
computer networks and systems.

YEAR ENDED DECEMBER 31, 2002 COMPARED TO YEAR ENDED DECEMBER 31, 2001

Net Income

Net income increased approximately 100.0% to $3.8 million for the year
ended December 31, 2002 from $1.9 million for the comparable period in 2001. The
increase in net income in 2002 was primarily the result of increased loan
origination production resulting in increased loan sales volume and net interest
income. Two primary factors contributed to this increase in loan origination
production: a successful effort by the Company to increase significantly its
loan origination staff and low prevailing interest rates, which resulted in an
increase in refinance mortgage loan volume. Total revenue increased
approximately 53.4% with a corresponding 44.7% increase in total expenses during
the year ended December 31, 2002, as compared to the comparable period in 2001,
indicating loan origination efficiencies at higher production volumes.

Total loan origination volume for the year ended December 31, 2002
increased 36.8% to 3,241 loans from 2,369 for the comparable period in 2001.
Total loan origination volume, as measured by principal balance, increased
approximately 50.1% to $877.2 million for the year ended December 31, 2002 from
$584.2 million for the comparable period in 2001.

Revenues

Gain on Sales of Mortgage Loans. Net gain on sales of mortgage loans
increased approximately 54.7% to $9.9 million for the year ended December 31,
2002 from $6.4 million for the comparable period in 2001. Gross gain on sale of
mortgage loans increased approximately 55.7% to $13.7 million for the year ended
December 31, 2002 from $8.8 million for the comparable period in 2001. These
increases in net and gross gain on sales of mortgage loans are due to increased
sales volume of loans in the year ended December 31, 2002 offset by a slight
decrease in the gross margin of loans sold to approximately 72.0% in the year
ended December 31, 2002 from approximately 72.8% for the comparable period in
2001.

The number of mortgage loans sold during the year ended December 31, 2002
increased 42.2% to 2,600 loans from 1,828 mortgage loans sold during the
comparable period in 2001. In terms of principal loan balances of mortgage loans
sold, volume increased approximately 56.5% to $633.2 million for the year ended
December 31, 2002 from $404.5 million for the comparable period in 2001.

Interest Income. Interest income increased approximately 87.5% to $3.0
million for the year ended December 31, 2002 from $1.6 million for the
comparable period in 2001. This increase is due to increased originations of
loans held for sale and thus an increased volume of interest earning assets and
is partially offset by a declining average yield on those assets due to lower
prevailing interest rates during the year ended December 31, 2002.

The aggregate principal balance of loans sold increased approximately 56.5%
to $633.2 million for the year ended December 31, 2002 from $404.5 million in
the comparable period in 2001. Furthermore, the average holding period of
mortgage loans sold (the period from closing of the loan to the sale to a third
party) increased to 31.2 days in the year ended December 31, 2002 from 23.3 days
in the comparable period

in 2001. The combination of increased principal balances and holding periods
allowed for higher interest revenue during the year ended December 31, 2002 and
is offset in part by a decrease in the average interest rate for the mortgage
loans sold by approximately 87 basis points to 6.48% in the year ended December
31, 2002 from 7.35% in the comparable period in 2001.

Revenue from Brokered Loans. Revenue from brokered loans increased
approximately 40.5% to $5.2 million for the year ended December 31, 2002 from
$3.7 million for the comparable period in 2001 as a result of increased
aggregate principal balance and greater commissions for loans brokered for other
institutions. The number of brokered loans increased approximately 18.5% to 641
loans for the year ended December 31, 2002 from 541 loans in the comparable
period in 2001. The aggregate principal balance of such brokered loans increased
approximately 35.8% to $244.0 million for the year ended December 31, 2002 from
$179.7 million for the comparable period in 2001. Though revenues from brokered
mortgage loans grew during this period, such revenues grew at a slower pace than
revenues from sales of mortgage loans. This was due to NYMC's efforts to migrate
more of its business from mortgage loan brokering to mortgage loan banking,
which typically has been more profitable.

Expenses

Total Expenses. Total expenses increased approximately 44.4% to $14.3
million for the year ended December 31, 2002 from $9.9 million for the
comparable period in 2001. This increase is primarily due to the increase in
salaries, commissions and associated payroll costs much of which is a variable
cost (commissions) and directly related to the significant increase in loan
originations. Occupancy and other general and administrative expenses also
increased due to higher loan origination volume and an increase in branch
locations.

Salaries, Commissions and Benefits. Salaries, commissions and associated
payroll costs increased approximately 61.1% to $5.8 million for the year ended
December 31, 2002 from $3.6 million for the comparable period in 2001. The
increase was primarily due to an increase in commissions paid, which is a
variable expense, and directly correlated to increased loan origination volume,
as well as increases in support staff (processing, underwriting and closing
employees) necessary to support the increased origination volume. Total
employees increased to 184 on December 31, 2002 from 147 on December 31, 2001.

Cost of Brokered Loans. Cost of brokered loans increased approximately
36.4% to $3.0 million for the year ended December 31, 2002 from $2.2 million for
the comparable period in 2001. This increase correlates to the increase in
origination volume of brokered loans and the revenue earned from brokered loans.

Interest Expense. Interest expense increased approximately 30.8% to $1.7
million for the year ended December 31, 2002 from $1.3 million for the
comparable period in 2001. This increase was due to increased originations of
loans held for sale and thus an increase in financing costs, which is partially
offset by lower prevailing interest rates in the year ended December 31, 2002.
The average monthly outstanding balance of financing facilities during the year
ended December 31, 2002 was $48.8 million at an average interest rate of 3.17%
as compared to an average monthly outstanding balance of $21.9 million at an
average interest rate of 4.67% for the comparable period in 2001.

Occupancy and Equipment Expense. Occupancy and equipment expense increased
approximately 45.8% to $1.0 million for the year ended December 31, 2002 from
$686,000 for the comparable period in 2001. The increase reflects the expansion
of new origination offices to 13 on December 31, 2002 from seven on December 31,
2001.

Marketing and Promotion Expense. Marketing and promotion expense increased
approximately 39.4% to $488,000 for the year ended December 31, 2002 from
$350,000 for the comparable period in 2001. This increase was primarily due to
increased marketing and promotion expenses incurred to promote newly-opened loan
origination offices and related newly-hired loan origination personnel.

Data Processing and Communication Expense. Data processing and
communication expense increased approximately 70.2% to $366,000 for the year
ended December 31, 2002 from $215,000 for the

comparable period in 2001. This increase was primarily due to increased loan
volume and expenses related to the opening of new origination offices.

Office Supplies and Expense. Office supplies and expense increased
approximately 14.0% to $505,000 for the year ended December 31, 2002 from
$443,000 for the comparable period in 2001. This increase was primarily a result
of the increase in personnel and new origination offices, as well as the
supplies needed to service increased loan volume during the period.

Professional Fees Expense. Professional fee expense increased
approximately 17.8% to $510,000 for the year ended December 31, 2002 from
$433,000 for the comparable period in 2001. This increase was primarily due to
increases in dues, licenses and permits and placement search fees for increased
personnel levels and the opening of new loan origination offices.

Travel and Entertainment Expense. Travel and entertainment expense
increased approximately 24.6% to $420,000 for the year ended December 31, 2002
from $337,000 for the comparable period in 2001. This increase was primarily due
to increased meals and travel expense due to increased personnel levels and the
opening of new origination offices.

Depreciation and Amortization Expense. Depreciation and amortization
expense increased approximately 50.6% to $271,000 for the year ended December
31, 2002 from $180,000 for the comparable period in 2001. This increase was
primarily due to opening of new origination offices and increased investments in
computer networks and systems.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity is a measure of our ability to meet potential cash requirements,
including ongoing commitments to repay borrowings, fund and maintain
investments, pay dividends to you and other general business needs. We believe
our existing cash balances at the time this offering is completed, funds
available under our credit facilities and cash flows from operations will be
sufficient for our liquidity requirements for at least the next 12 months.
Unused borrowing capacity will vary as the market values of our securities vary.
Our investments and assets will also generate liquidity on an ongoing basis
through mortgage principal and interest payments, pre-payments and net earnings
held prior to payment of dividends. Should our liquidity needs ever exceed these
on-going or immediate sources of liquidity discussed above, we believe that our
securities could be sold to raise additional cash in most circumstances. We do,
however, expect to continue the expansion that NYMC has undertaken and may have
to arrange for additional sources of capital through the issuance of debt or
equity or additional bank borrowings to fund that expansion. We currently have
no commitments for any additional financings, and we cannot ensure 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, the pace of our growth could be adversely affected.

To originate a mortgage loan, we may draw against a $100 million reverse
repurchase facility with Credit Suisse First Boston Mortgage Capital, LLC, or
CSFB, and a $50 million warehouse facility led by HSBC Bank USA. We will assume
these facilities through our acquisition of NYMC. These facilities are secured
by the mortgage loans owned by us and by certain of our other assets. Advances
drawn under these facilities bear interest at rates that vary depending on the
type of mortgage loans securing the advances. These facilities are subject to
sub-limits, advance rates and terms that vary depending on the type of mortgage
loans securing these financings and the ratio of our liabilities to our tangible
net worth. As of March 31, 2004, the aggregate outstanding balance under these
facilities and predecessor facilities was $136.1 million and the aggregate
maximum amount available for additional borrowings was $13.9 million. These
agreements are not committed facilities and may be terminated at any time at the
discretion of the counterparties.

On September 1, 2003, NYMC entered into a purchase and sale agreement, also
known as a gestation facility, with Greenwich Capital Financial Products, Inc.,
or Greenwich Capital. Under this agreement, which we will assume through our
acquisition of NYMC, Greenwich Capital purchases a closed loan from NYMC prior
to the time NYMC sells the loan to a third party purchaser, and pays

down the portion of the facility used to fund the loan. The purchase price for
loans that Greenwich Capital purchases from NYMC equals 98% of the third party
purchaser's purchase price, subject to a cap equal to 98% of the loan amount.
The ultimate purchaser of the loan then purchases the loan directly from
Greenwich Capital, as opposed to NYMC, and Greenwich Capital pays NYMC a
completion fee equal to the difference between the purchase price paid by the
third party and the purchase price paid by Greenwich Capital plus a net carry
adjustment equal to the accrued interest on the loan due to NYMC less interest
due to Greenwich Capital for the number of days that Greenwich Capital owned the
loan prior to re-selling the loan to the third party purchaser. NYMC's cost
associated with the interim sale of its loans to Greenwich Capital as described
above is approximately equal to interest on the amounts funded by Greenwich
Capital at a floating rate of one-month London Interbank Offering Rate, or
LIBOR, plus 1.25% during the period Greenwich Capital holds the loans.
Typically, it takes between five and 60 days to sell a loan to a third party
purchaser. The Greenwich Capital gestation facility allows us to accelerate the
sale of our mortgage loan inventory, thereby freeing up borrowing capacity under
our credit facilities used to fund new loan originations during that interim
period from funding to sale. This excess borrowing capacity is an important
source of liquidity for us at times when we are nearing our borrowing capacity
under our credit facilities used to fund new loan originations. The combined
capacity available under NYMC's gestation facility with Greenwich Capital is $25
million, of which $23.5 million was available at March 31, 2004. This agreement
is not a committed facility and may be terminated at any time at the discretion
of Greenwich Capital.

In addition to these three facilities, on January 9, 2004, we entered into
a $100 million master loan and security agreement with Greenwich Capital, with
New York Mortgage Funding, LLC, or NYMF, which will become a qualified REIT
subsidiary of ours upon completion of this offering, as the borrower. Under this
agreement, Greenwich Capital will provide financing to NYMF for the origination
or acquisition of certain mortgage loans, which then will be sold to third
parties or contributed for future securitization to one or more trusts or other
entities to be sponsored by NYMF or an affiliate. NYMF will repay advances under
this credit facility with a portion of the proceeds from the sale of all
mortgage-backed securities issued by the trust or other entity, along with a
portion of the proceeds resulting from permitted whole loan sales. Advances
under this facility bear interest at a floating rate initially equal to the
one-month LIBOR plus 1.25%, which premium may be reduced following this offering
to 0.90% over one-month LIBOR at the discretion of Greenwich Capital. Advances
under this facility are subject to lender approval of the mortgage loans
intended for origination or acquisition, advance rates and the then ratio of our
liabilities to our tangible net worth. This facility is not a committed facility
and may be terminated at any time at the discretion of Greenwich Capital. We
have agreed to guarantee NYMF's obligations under this credit facility.

The documents governing these facilities contain a number of compensating
balance requirements and restrictive financial and other covenants that, among
other things, require us to maintain a maximum ratio of total liabilities to
tangible net worth, of 20 to 1 in the case of the CSFB facility, 15 to 1 in the
case of the HSBC facility, 20 to 1 in the case of the Greenwich Capital
gestation facility and 20 to 1 in the case of the Greenwich Capital facility
with NYMF, as well as to comply with applicable regulatory and investor
requirements. The agreements also contain covenants limiting the ability of our
subsidiaries to:

- transfer or sell assets;

- create liens on the collateral; or

- incur additional indebtedness, without obtaining the prior consent of the
lenders, which consent may not be unreasonably withheld.

These limits may in turn restrict our ability to pay cash or stock
dividends on our stock. In addition, under our warehouse facilities, NYMC cannot
continue to finance a mortgage loan that NYMC holds through the warehouse
facility if:

- the loan is rejected as "unsatisfactory for purchase" by the ultimate
investor and has exceeded its permissible warehouse period which varies
by facility;

- we fail to deliver the applicable note, mortgage 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
warehouse facility agreement).

We expect that these credit facilities will be sufficient to meet our
capital and financing needs during the next twelve months. The balances of these
facilities fluctuate based on the timing of our loan closings (at which point we
may draw upon the facilities) and the near-term subsequent sale of these loans
to third parties or the alternative financing thereof through repurchase
agreements or, in the future, securitizations for mortgage loans we intend to
retain (at which point these facilities are paid down). The current availability
under these facilities and our current and projected levels of loan origination
volume are consistent with our historic ability to manage our pipeline of
mortgage loans, the subsequent sale thereof and the related pay down of the
facilities.

As of March 31, 2004, NYMC's aggregate warehouse and reverse repurchase
facility borrowings under these facilities and their predecessors were $136.1
million, compared to $115.3 million in borrowings as of March 31, 2003. As of
December 31, 2003, NYMC's aggregate warehouse and reverse repurchase facility
borrowings under these facilities and their predecessors were $90.4 million,
compared to $73.0 million in borrowings as of December 31, 2002. The average
monthly balance of these borrowings during 2003 was $118.7 million at an average
annual interest rate of approximately 2.36%. As of December 31, 2002, NYMC's
aggregate warehouse and reverse repurchase facility borrowings under these
facilities and their predecessors were $73.0 million, compared to $29.7 million
in borrowings as of December 31, 2001. The average monthly balance of these
borrowings for 2002 was $48.8 million at an average annual interest rate of
approximately 3.17%. The average monthly balance of these borrowings for 2001
was $21.9 million at an average annual interest rate of approximately 4.67%. At
December 31, 2002, NYMC's loans held for sale were $34.0 million compared to
$9.9 million at December 31, 2001.

NYMC's financing arrangements are short-term facilities secured by the
underlying investment in residential mortgage loans, the value of which may move
inversely with changes in interest rates. A decline in the market value of our
investments in the future may limit our ability to borrow under these facilities
or result in lenders requiring additional collateral or initiating margin calls
under our repurchase agreements. As a result, we could be required to sell some
of our investments under adverse market conditions in order to maintain
liquidity. If such sales are made at prices lower than the amortized costs of
such investments, we will incur losses.

Following the offering, additional warehouse facilities and financings of
securities through reverse repurchase agreements will be required. These
arrangements, some of which are currently being negotiated subject to the
successful completion of this offering, will vary in size among multiple
providers. In particular, reverse repurchase agreements will have terms that
will vary in size, advance rates, interest spreads, duration and other
characteristics depending on the nature of the underlying collateral in the
program.

NYMC's ability to originate loans depends in large part on its ability to
sell the mortgage loans it originates at cost or for a premium in the secondary
market so that it may generate cash proceeds to repay borrowings under its
warehouse facilities, reverse repurchase agreement and gestation facility. The
value of NYMC's loans depends on a number of factors, including:

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

- the borrower credit risk classification;

- loan-to-value ratios, loan terms, underwriting and documentation; and

- general economic conditions.

NYMC makes certain representations and warranties, and is subject to
various affirmative and negative financial and other covenants, under the
agreements covering the sale of its mortgage loans regarding, among other
things, the loans' compliance with laws and regulations, their conformity with
the

ultimate investors' underwriting standards and the accuracy of information. In
the event of a breach of these representations, warranties or covenants or in
the event of an early payment default, NYMC may be required to repurchase the
loans and indemnify the loan purchaser for damages caused by that breach. NYMC
has implemented strict procedures to ensure quality control and conformity to
underwriting standards and minimize the risk of being required to repurchase
loans. NYMC has been required to repurchase loans it has sold from time to time;
however, these repurchases have not had a material impact on the results of
operations of NYMC.

We intend to make distributions to our stockholders to comply with the
various requirements to maintain our REIT status and to minimize or avoid
corporate income tax and the nondeductible excise tax. However, differences in
timing between the recognition of REIT taxable income and the actual receipt of
cash could require us to sell assets or to borrow funds on a short-term basis to
meet the REIT distribution requirements and to avoid corporate income tax and
the nondeductible excise tax.

Certain of our assets may generate substantial mismatches between REIT
taxable income and available cash. These assets could include mortgage-backed
securities we hold that have been issued at a discount and require the accrual
of taxable income in advance of the receipt of cash. As a result, our REIT
taxable income may exceed our cash available for distribution and the
requirement to distribute a substantial portion of our net taxable income could
cause us to:

- (i) sell assets in adverse market conditions;

- (ii) borrow on unfavorable terms; or

- (iii) distribute amounts that would otherwise be invested in future
acquisitions, capital expenditures or repayment of debt

in order to comply with the REIT distribution requirements.

NYMC's cash and cash equivalents increased to $4.5 million at March 31,
2004 from $3.9 million at December 31, 2003. During the three months ended March
31, 2004, net cash used by operating activities was approximately $44.3 million.
The level of cash flows used by operating activities is affected by the timing
of receipts of gains on sales of mortgage loans, the repayment of debt used to
finance mortgage loans originations and the payment of operating and interest
expenses. During the three months ended March 31, 2004, a significant driver of
the operating performance and the sources and uses of cash of NYMC was the low
interest rate environment for residential mortgage loan financing. Although the
level of increased operating activity from the low interest rate environment
cannot be quantified, we believe a close correlation exists between mortgage
loan origination activity and lower interest rates, especially for mortgage loan
refinancings. NYMC's primary sources and uses of cash and cash equivalents for
operating activities during the year ended December 31, 2003, included the
following:

- Proceeds from the sale of originated loans generated cash of $188.1
million as a result of origination activity as compared to $282.9 million
for the comparable period in 2003. The decrease in originations was due
to a bulk closing of 347 mortgages in one condominium project in the
first quarter of 2003 totaling approximately $89.5 million. Such bulk
closings are relatively infrequent.

- During the three months ended March 31, 2004, NYMC utilized cash for its
origination of loans of $199.4 million, a 32.4% decrease from $295.2
million in cash utilized for loan originations for the comparable period
in 2003. This decrease was consistent with the decrease in proceeds from
the sale of originated loans noted above.

- A $35.0 million net increase in unsettled mortgage loan sales for the
three months ended March 31, 2004 as a result of the timing of the
origination pipeline.

Net cash used by investing activities during the three months ended March
31, 2004 was approximately $98,900, including:

- The purchase of $338,400 of marketable securities and the sale of
$321,900 of marketable securities during the period.

- An expenditure of approximately $82,000 to purchase furniture, office and
computer equipment for new branch offices.

Net cash provided by financing activities of approximately $45.0 million
during the three months ended March 31, 2004 included:

- An increase in borrowings under financing arrangements of $45.7 million,
reflecting the retention of an incremental $11.5 million in loans held
for sale and an increase in the length of time such loans were held, as
well as $35.0 million in accounts receivable since December 31, 2003
financed under such financing arrangements.

NYMC's cash and cash equivalents increased to $3.9 million at December 31,
2003 from $2.7 million at December 31, 2002. During the year ended December 31,
2003, net cash used by operating activities was approximately $7.4 million. The
level of cash flows used by operating activities is affected by the timing of
receipts of gains on sales of mortgage loans, the repayment of debt used to
finance mortgage loans originations and the payment of operating and interest
expenses. During the year ended December 31, 2003, a significant driver of the
operating performance and the sources and uses of cash of NYMC was the low
interest rate environment for residential mortgage loan financing. Although the
level of increased operating activity from the low interest rate environment
cannot be quantified, we believe a close correlation exists between mortgage
loan origination activity and lower interest rates, especially for mortgage loan
refinancings. NYMC's primary sources and uses of cash and cash equivalents for
operating activities during the year ended December 31, 2003, included the
following:

- Proceeds from the sale of originated loans generated cash of $1.2 billion
as a result of increased origination activity as compared to $569 million
for the comparable period in 2002. The increase in originations was due,
in part, to the addition of 151 new employees, including loan origination
officers and the opening of two additional origination offices.

- During the year ended December 31, 2003, NYMC utilized cash for its
origination of loans of $1.2 billion, a 102.3% increase from $593.1
million in cash utilized for loan originations for the comparable period
in 2002.

- An $18.2 million net increase in unsettled mortgage loan sales at
December 31, 2003 as compared to December 31, 2002 as a result of
increased originations and the timing of the origination pipeline.

Net cash used by investing activities during the year ended December 31,
2003 was approximately $2.0 million, including:

- The purchase of $2.2 million of marketable securities and the sale of
$1.4 million of marketable securities during the year.

- An investment of approximately $1.2 million to purchase furniture, office
and computer equipment for new branch offices, including, among other
things, approximately $351,000 in new computer servers and networking
equipment related to the relocation to new principal offices and
approximately $332,000 on new computers throughout NYMC's offices.

Net cash provided by financing activities of approximately $10.6 million
during the year ended December 31, 2003 included:

- An increase in borrowings under financing arrangements of $17.4 million,
reflecting the retention of an incremental $2.2 million in loans held for
sale and an increase in the length of time such loans were held, as well
as $18.2 million in accounts receivable at December 31, 2003 financed
under such financing arrangements.

- A $6.8 million net cash distribution to NYMC equity holders representing
the distribution of retained equity in NYMC of approximately $21.5
million less $14.7 million in promissory notes to NYMC equity holders.

NYMC's cash and cash equivalents increased to $2.7 million at December 31,
2002, from $1.5 million at December 31, 2001. During the year ended December 31,
2002, net cash used by operating activities was approximately $39.8 million. The
level of cash flows used by operating activities is affected

by the timing of receipts of gains on sales of mortgage loans, the repayment of
debt used to finance mortgage loan originations and the payment of operating and
interest expenses. During the year ended December 31, 2002, a significant driver
of the operating performance and the sources and uses of cash of NYMC was a
declining interest rate environment for residential mortgage financing. Although
the level of increased operating activity from a downward trend in interest
rates cannot be quantified, we believe a close correlation exists between
mortgage loan origination and declining interest rates, especially for mortgage
loan refinancings. NYMC's primary sources and uses of cash and cash equivalents
for operating activities during the year ended December 31, 2002, included the
following:

- Proceeds from the sale of originated loans generated cash of $569.0
million as a result of increased origination activity as compared to
$384.0 million for the comparable period in 2001. The increase in
originations was due, in part, to the addition of 37 new employees,
including loan origination officers and the opening of six additional
origination offices.

- During the year ended December 31, 2002, NYMC utilized cash for its
origination of loans of $593.1 million, a 52.1% increase from $390.0
million in cash utilized for loan originations for the comparable period
in 2001.

- A $19.9 million net increase in unsettled mortgage loan sales at December
31, 2002 as compared to December 31, 2001 as a result of increased
originations and the timing of the origination pipeline.

Net cash used by investing activities during the year ended December 31,
2002 was approximately $1.3 million, including:

- The purchase of approximately $1.5 million of marketable securities and
the sale of approximately $700,000 of marketable securities during the
year.

- An investment of approximately $520,000 to purchase furniture and office
and computer equipment for new branch offices and to purchase, among
other things, new mortgage operating system upgrades and modules to
accommodate personnel growth and enhanced productivity.

Net cash provided by financing activities of approximately $42.4 million
during the year ended December 31, 2002 included:

- An increase in borrowing under financing arrangements of $43.3 million,
reflecting the retention of an incremental $24.1 million in loans held
for sale and an increase in the length of time such loans were held, as
well as $21.1 million in accounts receivable at December 31, 2002
financed under such financing arrangements.

- A $1.6 million net cash distribution to NYMC equity holders.

INFLATION

For the periods presented herein, inflation has been relatively low and we
believe that inflation has not had a material effect on NYMC's results of
operations. To the extent inflation increases in the future, interest rates will
also likely rise, which would likely reduce the number of mortgage loans we
originate. A reduction in the number of loans we originate resulting from
increased inflation would adversely affect our future results of operations.

CONTRACTUAL OBLIGATIONS

The following table outlines the timing of payment requirements related to
our commitments as of December 31, 2003:

MATURITIES DUE BY PERIOD
-----------------------------------------------------------------
LESS THAN 2-3 4-5 AFTER
1 YEAR YEARS YEARS 5 YEARS TOTAL
----------- ---------- ---------- ---------- ------------

Financing arrangements..... $90,425,133 -- -- -- $ 90,425,133
Operating leases(1)........ 2,273,896 $5,403,448 $4,988,759 $3,756,000 16,422,103
----------- ---------- ---------- ---------- ------------
Total...................... $92,699,029 $5,403,448 $4,988,759 $3,756,000 $106,847,236
=========== ========== ========== ========== ============

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

(1) Included in operating leases are leases for corporate office facilities and
office branches. NYMC took occupancy of a new corporate office facility in
June 2003. Due to a contractual rent credit, we will not pay rent until June
2004. Our annual obligation under this lease, once rent commences, is
$1,878,000 plus electricity and escalations. Additionally, we are still
liable for NYMC's former principal 16,500 square foot office located at 304
Park Avenue South, New York, New York until December 2008. The annual rent
for this space is currently $411,500. This facility is currently being
marketed for sublet.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the exposure to loss resulting from changes in interest
rates, credit spreads, foreign currency exchange rates, commodity prices and
equity prices. As we are invested solely in U.S.-dollar denominated instruments,
primarily residential mortgage instruments, and our borrowings are also domestic
and U.S. dollar denominated, we are not subject to foreign currency exchange, or
commodity and equity price risk; the primary market risk that we are exposed to
is interest rate risk and its related ancillary risks. Interest rate risk is
highly sensitive to many factors, including governmental monetary and tax
policies, domestic and international economic and political considerations and
other factors beyond our control. All of our market risk sensitive assets,
liabilities and related derivative positions are for non-trading purposes only.

INTEREST RATE RISK

Our primary interest rate exposure relates to the portfolio of
adjustable-rate mortgage loans and mortgage-backed securities we intend to
acquire, as well as our variable-rate borrowings and related interest rate swaps
and caps. Interest rate risk is defined as the sensitivity of our current and
future earnings to interest rate volatility, variability of spread
relationships, the difference in re-pricing intervals between our assets and
liabilities and the effect that interest rates may have on our cash flows,
especially prepayment speeds on our residential mortgage related assets.

Changes in the general level of interest rates can affect our net interest
income, which is the difference between the interest income earned on interest
earning assets and our interest expense incurred in connection with our interest
bearing debt and liabilities. Changes in interest rates can also affect, among
other things, our ability to originate and acquire loans and securities, the
value of our loans, mortgage pools and mortgage-backed securities, and our
ability to realize gains from the resale and settlement of such originated
loans.

As of March 31, 2004, a 100 basis point change in short-term interest rates
would affect our annual earnings and cash flows by no more than $1.3 million.

While we have not experienced any significant credit losses, in the event
of a significant rising interest rate environment and/or economic downturn,
mortgage and loan defaults may increase and result in credit losses that would
adversely affect our liquidity and operating results. This risk will be
magnified following the offering as we build our portfolio of adjustable-rate
mortgage loans.

Interest rate changes may also impact our net book value as our securities,
certain mortgage loans and related hedge derivatives are marked-to-market each
quarter. Generally, as interest rates increase, the

value of our fixed income investments, such as mortgage loans and
mortgage-backed securities, decreases and as interest rates decrease, the value
of such investments will increase. We seek to hedge to some degree changes in
value attributable to changes in interest rates by entering into interest rate
swaps and other derivative instruments. In general, we would expect that, over
time, decreases in value of our portfolio attributable to interest rate changes
will be offset to some degree by increases in value of our interest rate swaps,
and vice versa. However, the relationship between spreads on securities and
spreads on swaps may vary from time to time, resulting in a net aggregate book
value increase or decline. However, unless there is a material impairment in
value that would result in a payment not being received on a security or loan,
changes in the book value of our portfolio will not directly affect our
recurring earnings or our ability to make a distribution to you.

In order to minimize the negative impacts of changes in interest rates on
earnings and capital, we intend to closely monitor our asset and liability mix
and utilize interest rate swaps and caps, subject to the limitations imposed by
the REIT qualification tests.

Movements in interest rates can pose a major risk to us in either a rising
or declining interest rate environment. We depend on substantial borrowings to
conduct our business. These borrowings are all made at variable interest rate
terms that will increase as short term interest rates rise. Additionally, when
interest rates rise, loans held for sale and any applications in process with
interest rate lock commitments, or IRLCs, decrease in value. To preserve the
value of such loans or applications in process with IRLCs, we may enter into
forward sale loan contracts, or FSLCs, to be settled at future dates with fixed
prices.

When interest rates decline, loan applicants may withdraw their open
applications on which we have issued an IRLC. In those instances, we may be
required to purchase loans at current market prices to fulfill existing FSLCs,
thereby incurring losses upon sale. We monitor our mortgage loan pipeline
closely and on occasion may choose to renegotiate locked loan terms with a
borrower to prevent withdrawal of open applications and mitigate the associated
losses.

In the event that we do not deliver into the FSLCs or exercise our option
contracts, the instruments can be settled on a net basis. Net settlement entails
paying or receiving cash based upon the change in market value of the existing
instrument. All FSLCs and option contracts to buy securities are to be
contractually settled within six months of the balance sheet date. FSLCs and
options contracts for individual loans generally must be settled within 60 days.

Our hedging transactions using derivative instruments also involve certain
additional risks such as counterparty credit risk, the enforceability of hedging
contracts and the risk that unanticipated and significant changes in interest
rates will cause a significant loss of basis in the contract. The counterparties
to our derivative arrangements are major financial institutions and securities
dealers that are well capitalized with high credit ratings and with which we may
also have other financial relationships. 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 value of the
contract and the current market price. There can be no assurance that we will be
able to adequately protect against the foregoing risks and will ultimately
realize an economic benefit that exceeds the related expenses incurred in
connection with engaging in such hedging strategies.

CREDIT SPREAD EXPOSURE

The mortgage-backed securities we will own are also subject to spread risk.
The majority of these securities will be adjustable-rate securities valued based
on a market credit spread to U.S. Treasury security yields. In other words,
their value is dependent on the yield demanded on such securities by the market
based on their credit relative to U.S. Treasury securities. Excessive supply of
such securities combined with reduced demand will generally cause the market to
require a higher yield on such securities, resulting in the use of a higher or
wider spread over the benchmark rate (usually the applicable U.S. Treasury
security yield) to value such securities. Under such conditions, the value of
our securities portfolio would tend to decline. Conversely, if the spread used
to value such securities were to decrease or

tighten, the value of our securities portfolio would tend to increase. Such
changes in the market value of our portfolio may affect our net equity, net
income or cash flow directly through their impact on unrealized gains or losses
on available-for-sale securities, and therefore our ability to realize gains on
such securities, or indirectly through their impact on our ability to borrow and
access capital.

Furthermore, shifts in the U.S. Treasury yield curve, which represents the
market's expectations of future interest rates, would also affect the yield
required on our securities and therefore their value. This would have similar
effects on our portfolio and our financial position and results of operations as
a change in spreads would.

FAIR VALUES

For certain of the financial instruments that we will own, fair values will
not be readily available since there are no active trading markets for these
instruments as characterized by current exchanges between willing parties.
Accordingly, fair values can only be derived or estimated for these investments
using various valuation techniques, such as computing the present value of
estimated future cash flows using discount rates commensurate with the risks
involved. However, the determination of estimated future cash flows is
inherently subjective and imprecise. Minor changes in assumptions or estimation
methodologies can have a material effect on these derived or estimated fair
values. These estimates and assumptions are indicative of the interest rate
environments as of December 31, 2003 and do not take into consideration the
effects of subsequent interest rate fluctuations.

We note that the values of our investments in mortgage-backed securities,
and in derivative instruments, primarily interest rate hedges on our debt, will
be sensitive to changes in market interest rates, interest rate spreads, credit
spreads and other market factors. The value of these investments can vary, and
with regard to NYMC has varied, materially from period to period. Historically,
the values of NYMC's mortgage loan portfolio have tended to vary inversely with
those of its derivative instruments.

The following describes the methods and assumptions we use in estimating
fair values of our 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 fair values used
by us 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 commitments to deliver mortgages is estimated using
current market prices for dealer or investor commitments relative to our
existing positions.

OUR COMPANY

OVERVIEW

We are a Maryland corporation newly formed to acquire The New York Mortgage
Company, LLC, or NYMC, a residential mortgage banking company. Upon completion
of this offering, and our acquisition of NYMC, we intend to build a leveraged
portfolio of residential mortgage loans comprised largely of prime
adjustable-rate mortgage loans that we originate including adjustable-rate loans
that have an initial fixed-rate period, which we refer to as hybrid mortgage
loans. In addition, in the short term and from time to time in the future, we
intend to invest in mortgage-backed securities on a leveraged basis. NYMC has
originated, and we will continue to originate, mortgage loans of all types, and
although we do not have specific guidelines as to the relative amounts of prime
and non-prime mortgage loans that we can originate, we have a particular focus
on prime adjustable- and fixed-rate, first lien, residential purchase mortgage
loans. While the definition of a prime loan varies from institution to
institution, we consider prime loans to be loans to borrowers with strong credit
profiles, which we evaluate by analyzing the borrower's credit score,
employment, income and assets and related documentation, the amount of equity in
and value of the property securing the borrower's loan, debt to income ratio,
credit history, funds available for closing and post-closing liquidity. NYMC has
historically sold or brokered all of the loans it originates and has therefore
historically relied on the underwriting criteria of the institutions to which
NYMC has sold its loans. Some of the loans that NYMC originates are sold on an
individual, or whole loan, basis, generally within 60 days after funding, and
the remainder are aggregated into mortgage pools, which are sold on a servicing
released basis, typically within 90 days after funding. Prior to the transfer of
servicing responsibilities to a third party buyer, which generally occurs within
30 days after the sale of the loan, NYMC services the loans through a
sub-servicer.

Following this offering, we intend to continue to originate mortgage loans
of all types through NYMC utilizing NYMC's historical origination strategy. NYMC
will become our taxable REIT subsidiary upon completion of this offering.
Generally, we intend to continue to sell the fixed-rate loans that we originate
to third parties, and to retain in our portfolio and finance a majority of the
adjustable-rate and hybrid loans that we originate. Our portfolio loans will be
held at the REIT level or by a qualified REIT subsidiary. Any adjustable-rate or
hybrid loans we originate that do not meet our investment criteria or portfolio
requirements will be sold to third parties. We will rely on our own underwriting
criteria with respect to the mortgage loans we intend to retain and will
continue to rely on the underwriting criteria of the institutions to which we
sell our loans with respect to the loans we intend to sell.

While we are originating and building our portfolio of adjustable-rate and
hybrid mortgage loans, we intend to use a substantial portion of the proceeds of
this offering to purchase from one or more third parties on a leveraged basis
residential mortgage-backed securities guaranteed by a government sponsored
entity or rated investment grade by a nationally recognized statistical rating
agency. While we have not established and do not expect to establish a limit on
the amount of leverage we may incur, we expect to leverage our equity at eight
to 12 times. Our board of directors has adopted a policy pursuant to which we
may only invest a maximum of 7.5% of our assets in mortgage-backed securities
that are not guaranteed by a government sponsored entity or rated investment
grade by a nationally recognized statistical rating agency. Mortgage-backed
securities that are guaranteed by a government sponsored entity are not
guaranteed by the United States government. Over time, we expect that these
securities will be replaced by adjustable-rate and hybrid mortgage loans that we
originate, although we may continue to purchase securities from third parties.
We believe that our ability to use primarily mortgage loans that we originate as
the basis for our portfolio will enable us to build a portfolio that generates a
higher return than the returns realized by mortgage investors that do not have
their own origination capabilities, because mortgage investors that do not have
their own origination capabilities must purchase their mortgage loans from third
parties at higher premiums than NYMC's cost of originating the mortgage loans
that we will retain.

Historically, NYMC has financed its mortgage originations on a short-term
basis through a variety of warehouse lines of credit and repurchase facilities.
Subsequent to the offering, we will continue to use

warehouse lines of credit and repurchase facilities to fund NYMC's originations,
and we will finance our portfolio of mortgage loans with a combination of equity
capital, repurchase facilities and securitizations. From time to time, we may
also purchase whole loans individually or in bulk pools from third parties,
either for resale or to package for securitization with mortgage loans we
originate. Once we have built a large enough portfolio comprised mainly of
retained mortgage loans, we intend to securitize our mortgage loans.

We expect to qualify as a real estate investment trust, or REIT, under the
Internal Revenue Code, immediately following the closing of this offering and
will elect to be taxed as a REIT for our short taxable year beginning on the
business day immediately preceding the closing of this offering and ending
December 31, 2004. As a REIT, we generally will not be subject to federal income
tax on the REIT taxable income that we distribute to our stockholders, but the
taxable income generated by NYMC, our taxable REIT subsidiary following this
offering, which will include fee income on all loans we originate, including
fees that we will pay NYMC to compensate for the origination services that it
will provide with respect to the loans that we will retain, and gains and net
interest income on all loans we sell, will be subject to regular corporate
income tax.

Currently, NYMC's core market is the tri-state area of New York, New Jersey
and Connecticut, one of the most densely populated regions in the United States.
This market accounted for approximately 86.5% of NYMC's loan originations, as
measured by principal balance, for the three month period ended March 31, 2004.
To a lesser extent, NYMC is presently doing business in a number of other
geographic markets across the United States, including California, Florida and
Pennsylvania. NYMC is presently licensed or authorized to do business in 38
states, and license applications are pending in several other states.

We believe that the substantial growth of NYMC's mortgage banking business
since its inception has resulted from its commitment to providing exemplary
service to its customers and its concentration on retail, referral-based,
mortgage banking to borrowers with strong credit profiles. Based on NYMC's past
experience and our knowledge of the mortgage industry, we believe that referrals
from realtors, attorneys, accountants and other professionals and business from
repeat customers tend to generate a higher percentage of purchase mortgage loan
applications than refinance applications as compared to the loan applications
generated by advertising and other mass marketing efforts. For the three month
period ended March 31, 2004, NYMC's purchase loan originations represented 59.7%
of NYMC's total residential mortgage loan originations as measured by principal
balance, as compared to an industry-wide percentage of 47% for one-to-four
family mortgage loans, according to the May 18, 2004 report of the Mortgage
Bankers Association of America, or MBAA. We believe that the market for mortgage
loans for home purchases is less susceptible than the refinance market to
downturns during periods of increasing interest rates, because borrowers seeking
to purchase a home do not generally base their decision to purchase on changes
in interest rates alone, while borrowers that refinance their mortgage loans
often make their decision as a direct result of changes in interest rates.
Consequently, while our referral-based marketing strategy may cause our overall
loan origination volume during periods of declining interest rates to lag our
competitors who rely on mass marketing and advertising and who therefore capture
a greater percentage of loan refinance applications during those periods, we
believe our strategy will enable us to sustain stronger home purchase loan
origination volumes than those same competitors during periods of flat to rising
interest rates. In addition, we believe that our referral-based business results
in relatively higher gross margins and lower advertising costs and loan
generation expenses than most other mortgage companies whose business is not
referral-based.

On March 1, 2004, NYMC entered into an assignment and assumption agreement
with SIB Mortgage Corp., or SIB, with regard to the assignment of eight SIB loan
origination branches -- including the locked and unlocked mortgage loan
pipelines, meaning in process mortgage loans with or without locked-in interest
rates, furniture, fixtures, equipment, computers, tangible personal property and
leasehold improvements (to the extent located in the branches), and certain
other assets -- to NYMC in exchange for NYMC's assumption of certain expenses
and obligations in connection with the operation of these branches from and
after March 1, 2004.

The total mortgage loan pipeline for all eight branches was approximately
$73.0 million, including loan applications with locked-in interest rates, or
locked loans, totaling approximately $24.3 million. NYMC is required to sell the
locked loans back to SIB upon closing at our cost and deliver them to Lehman
Brothers Bank FSB. As of May 28, 2004, NYMC had closed approximately $35.1
million of the pipeline of loans assured from SIB. The remaining pipeline loans
are in various stages of processing and are integrated into our pipeline in the
same manner as all other loans originated by NYMC in the ordinary course of
business. There can be no assurance that we will close any of the remaining
pipeline of loans that NYMC assumed in the SIB transaction. NYMC also assumed
from SIB its obligation to pay approximately $1.8 million in accrued
compensation due to six of the eight branch managers. NYMC received $1.8 million
in cash from SIB to pay this accrued compensation.

NYMC hired 134 SIB employees who work at these eight branches, which are
located in Northfield, New Jersey; Seaville, New Jersey; Haworth, New Jersey;
Rockville, Maryland; Virginia Beach, Virginia; Fairfax, Virginia; Terre Haute,
Indiana; and Fairfield, Connecticut. NYMC assumed three branch office leases
with respect to the Virginia Beach, Virginia; Terre Haute, Indiana; and
Fairfield, Connecticut branches. All of these leases are on a month-to-month
basis other than the Virginia Beach lease which runs through March 31, 2006.
NYMC entered into subleases for the other five branches (Northfield, Seaville,
Haworth, Rockville and Fairfax) on a month-to-month basis. The aggregate base
rent for the eight branches is $31,402 per month.

We anticipate that the securitization transactions through which we intend
to finance the adjustable-rate and hybrid mortgage loans that we retain will be
structured as financings for both tax and financial accounting purposes.
Therefore, we do not expect to generate a gain or loss on sale from these
activities. Following the securitizations, the loans will remain on our
consolidated balance sheet as an asset with the securitization debt listed as a
liability. We will record interest income generated by the mortgage loans and
recognize interest expense on the collateralized debt securities that we issue
over the life of the loans. Therefore, we expect to generate earnings and cash
flow from the loans we securitize primarily through net interest income, which
is the difference between the interest income we earn from the mortgage loans
and the interest paid on the collateralized debt securities that we issue plus
the cost of financing our retained interest in the securitized loans, losses due
to defaults and delinquencies on the loans, servicing fees and securitization
program expenses. Our net interest income will depend upon, among other things,
the spread between interest income and interest expense, the performance of the
underlying mortgage loans and the amount and timing of borrower prepayments on
the underlying mortgage loans.

OUR INDUSTRY

Generally, the residential mortgage industry is segmented by the size of
the mortgage loans and credit characteristics of the borrowers. Mortgage loans
that conform to the guidelines of government sponsored entities such as Fannie
Mae, Freddie Mac or Ginnie Mae, for both size and credit characteristics, are
often referred to as conforming mortgage loans. All other mortgage loans are
often referred to as non-conforming loans either because the size of the loan
exceeds the guideline limit or the credit profiles of the borrowers do not meet
the guideline requirements. Our strategy is to focus on adjustable- and
fixed-rate and hybrid first lien mortgage loans to borrowers with strong credit
profiles, which we refer to as prime mortgage loans. We believe the
adjustable-rate and hybrid segment of the prime residential mortgage loan
industry and our ability to originate such loans provides an opportunity for us
to build a portfolio of our own well originated and well serviced prime
adjustable-rate and hybrid loans with a goal of generating higher risk-adjusted
returns on investment than would be available from a portfolio based either on
purchased loans or on fixed-rate or non-prime loans. We believe that our
experience as a mortgage loan originator with a comprehensive and sophisticated
process for credit evaluation, risk-based pricing and loss mitigation will, over
time, provide us with a significant advantage over other portfolio investors who
do not have comparable origination capabilities.

We believe fundamental changes are occurring in the U.S. mortgage industry,
resulting in the shifting of investment capital and mortgage assets out of
traditional lending and savings institutions and into new forms of mortgage
banking and mortgage investment firms, including those that qualify as REITs
under

the Internal Revenue Code. We believe that, while traditional mortgage
investment companies, such as banks, thrifts and insurance companies, generally
have greater diversification in their investments than we will have as a REIT,
they provide less attractive investment structures for investing in mortgage
assets because of the costs associated with regulation, infrastructure and
corporate level taxation. As a REIT, we will generally be able to pass through
our REIT earnings to our stockholders without incurring entity-level federal
income tax, thereby allowing us to make relatively larger distributions than
institutions with similar investments because they are subject to federal income
tax on their earnings.

Additionally, with the development of highly competitive national mortgage
markets (which we believe is partly due to expansion of government sponsored
entities such as Fannie Mae, Freddie Mac and Ginnie Mae), local and regional
mortgage originators have lost market share to more efficient mortgage
originators who compete nationally. The growth of the secondary mortgage market,
including new securitization techniques, has also resulted in financing
structures that can be utilized efficiently to fund leveraged mortgage
portfolios and better manage interest rate risk.

OUR BUSINESS STRATEGY

- continuing to focus on originating prime residential mortgage loans
through NYMC that we believe can either be retained in our portfolio or
sold at a profit;

- leveraging our portfolio to increase its size with the intent to enhance
our returns while at the same time managing the increased risk of loss
associated with this leverage;

- utilizing hedge strategies as we consider appropriate to minimize
exposure to interest rate changes;

- aggressively recruiting additional experienced loan officers and hiring
new loan officers for our training program;

- expanding our retail mortgage banking business through the opening of new
retail branch offices in new markets; and

- selectively pursuing strategic acquisitions in the mortgage banking
industry.

OUR COMPETITIVE ADVANTAGES

We believe we enjoy several key competitive advantages that will enable us
to implement our business strategy. These competitive advantages include:

- our extensive network of referral sources that generates recurring
purchase loan originations;

- our ability to offer a broader range of mortgage loan products than most
of our competitors, including fixed-rate, adjustable-rate and hybrid
mortgage loans with varying total terms, which allows us to meet the
needs of a wider variety of customers as compared to those of our
competitors that do not offer as many loan products;

- access to real time data and trends in the residential mortgage business
from NYMC, our mortgage loan originator, that we believe will enable us
to better manage our origination strategy and investment decisions and
risks with respect to our portfolio; and

- a management team that includes experienced mortgage bankers and other
professionals with experience investing in and managing portfolios of
residential mortgage loans and residential mortgage-backed securities.

OUR MARKET OPPORTUNITY

The residential mortgage loan market is the largest consumer finance market
in the United States. According to the 1-to-4 Family Mortgage Originations,
1990-2002: Total, Refi Share, and ARM Share, Annual, 1990 to 2002, Report of the
MBAA, lenders in the United States originated more than $2.85 trillion in one to
four family mortgage loans in 2002, while the May 18, 2004 Mortgage Finance
Forecast of the MBAA estimated that lenders originated approximately $3.81
trillion in 2003. In the May forecast, the MBAA projects mortgage loan volumes
will fall to $2.42 trillion in 2004 and $1.75 trillion in 2005, respectively,
primarily attributable to an expected continued decline in the volume of
refinancing of existing loans relative to 2003. The MBAA also projects that
mortgage loan volume to home purchasers will increase from $1.28 trillion in
2003 to $1.37 trillion in 2004 and to decrease to $1.32 trillion in 2005. In the
three month period ended March 31, 2004, NYMC's purchase loan originations
represented 59.7% of NYMC's total residential mortgage loan originations as
measured by principal balance, as compared to an industry-wide percentage of 47%
for one-to-four family mortgage loans, according to the May forecast of the
MBAA. We believe that our concentration on purchase loan originations will cause
our loan origination volume to be less susceptible to the expected industry-wide
decline in origination volume.

The U.S. residential mortgage market has experienced considerable growth
during the past eight years, with total outstanding U.S. mortgage debt growing
from approximately $3.36 trillion in 1994 to approximately $6.64 trillion as of
March 31, 2003, according to The Bond Market Association. According to the same
source, the total amount of U.S. residential mortgage debt securitized annually
into mortgage-backed securities has grown from approximately $358 billion in
1994 to $1.46 trillion in 2002 and approximately $1.74 trillion through the
first nine months of 2003.

OUR LOAN PRODUCTS

NYMC primarily originates prime first lien residential mortgage loans.
Approximately 94.4% of the loans that we originated and sold in the three month
period ended March 31, 2004 were considered to be prime loans by the purchasers
of those loans according to the underwriting criteria of those purchasers. While
the definition of prime loan varies from purchaser to purchaser, we believe that
the vast majority of those loans would have been considered prime loans under
the underwriting criteria that we expect to utilize following the completion of
this offering. See "-- Our Loan Underwriting Guidelines and Practices." NYMC
also originates a lesser amount of second mortgage loans, bridge loans, home
equity lines of credit and commercial loans.

The following table details the mortgage loan types originated by NYMC, as
measured by principal balance, during the three month period ended March 31,
2004 and the years ended December 31, 2003, 2002 and 2001:

THREE MONTHS
ENDED
LOAN TYPE MARCH 31, 2004 2003 2002 2001
--------- -------------- ----- ----- -----

1 month adjustable-rate (various total terms)........... 9.6% 4.9% 8.5% 0.8%
6 month adjustable-rate (various total terms)........... 2.2 2.0 0.9 0.0
1 year adjustable-rate (various total terms)............ 0.0 0.6 0.1 0.1
2 year fixed-rate, adjustable-rate hybrid (various total
terms)................................................ 6.8 3.3 1.5 0.5
3 year fixed-rate, adjustable-rate hybrid (various total
terms)................................................ 7.2 5.4 2.9 3.8
5 year fixed-rate, adjustable-rate hybrid (various total
terms)................................................ 16.7 17.0 20.3 16.5
7 year fixed-rate, adjustable-rate hybrid (various total
terms)................................................ 4.4 4.7 3.1 4.0
10 year fixed-rate, adjustable-rate hybrid (various
total terms).......................................... 1.3 4.1 1.0 3.5
10 year term fixed-rate................................. 0.0 0.1 0.1 0.2
15 year term fixed-rate................................. 7.6 8.8 8.3 7.8
20 year term fixed-rate................................. 0.4 0.8 0.6 0.5
30 year term fixed-rate................................. 36.6 42.3 46.6 56.3
Federal Housing Authority (various total terms and
rates)................................................ 2.5 0.7 0.7 1.5
Other................................................... 4.7 5.3 5.4 4.3
----- ----- ----- -----
Total................................................... 100.0% 100.0% 100.0% 100.0%

The loans that fall into the "Other" category are comprised of second
mortgage loans, bridge loans, home equity lines of credit and commercial loans.
"Other" loans can be either fixed- or adjustable-rate loans and have a variety
of terms to maturity.

Loan types can also be classified according to the investor that will
ultimately purchase, securitize or guaranty the repayment of the loan. The main
differentiation for a first lien mortgage loan is whether the loan is a
conventional or a government loan. Conventional loans are loans without a
guaranty by a U.S. government agency and government loans are those that have a
guaranty by either the Federal Housing Administration or the Veterans
Administration. Conventional loans are typically securitized with a guaranty
from or purchased by Fannie Mae, Freddie Mac or a large mortgage conduit,
broker-dealer or depository institution depending on the loan's principal
balance. During the three month period ended March 31, 2004, approximately 97.5%
of NYMC's loan origination volume, as measured by principal balance, was
conventional. The remaining 2.5% was Federal Housing Administration insured
loans. During the year ended December 31, 2003, approximately 99.3% of NYMC's
loan origination volume, as measured by principal balance, was conventional. The
remaining 0.7% was Federal Housing Administration insured loans.

The original principal balance of a conventional loan will determine if it
is eligible for purchase or guaranty by either Fannie Mae or Freddie Mac.
Mortgage loans with balances at or below the Fannie Mae and Freddie Mac loan
size limit are eligible for such purchase or guaranty and are often referred to
as conforming mortgage loans. Jumbo mortgage loans are those loans with
principal amounts above the limit. For the three month period ended March 31,
2004, approximately 52.7% of NYMC's loan origination volume, as measured by
principal balance, was conforming, and 47.3% was jumbo. For the year ended
December 31, 2003, approximately 52.8% of NYMC's loan origination volume, as
measured by principal balance, was conforming, and 47.2% was jumbo.

Loan types also may be categorized by the amount of credit verification
documentation provided by the borrower. The level of documentation provided by
the borrower is just one factor that will be taken into account under our
underwriting guidelines when determining which loans constitute prime loans. For
the three month period ended March 31, 2004, approximately 63.0% of NYMC's first
lien loan origination volume, as measured by principal balance, was to borrowers
who provided full documentation of their

income and assets, 15.3% was to borrowers who provided reduced documentation of
their income and assets, 8.1% was asset only where the borrowers chose not to
disclose their income but did disclose their assets, 5.5% was no documentation
where the borrowers chose not to disclose either their income or assets, and
8.1% was to borrowers who stated their income and assets but the income and
assets were not verified. For the year ended December 31, 2003, approximately
63.8% of NYMC's first lien loan origination volume, as measured by principal
balance, was to borrowers who provided full documentation of their income and
assets, 15.9% was to borrowers who provided reduced documentation of their
income and assets, 6.6% was asset only where the borrowers chose not to disclose
their income but did disclose their assets, 4.2% was no documentation where the
borrowers chose not to disclose either their income or assets, and 9.6% was to
borrowers who stated their income and assets but the income and assets were not
verified. See "Our Loan Underwriting Guidelines and Practices" below beginning
on page 71 for a full discussion on underwriting.

It is anticipated that only the following residential first lien mortgage
loan types will be retained in our portfolio going forward:

- 1 month adjustable-rate (various total terms)

- 6 month adjustable-rate (various total terms)

- 1 year adjustable-rate (various total terms)

- 2 year fixed-rate, adjustable-rate hybrid (various total terms)

- 3 year fixed-rate, adjustable-rate hybrid (various total terms)

- 5 year fixed-rate, adjustable-rate hybrid (various total terms)

During the three month period ended March 31, 2004 and for the year ended
December 31, 2003, approximately 42.5%, and 33.3%, respectively, of our mortgage
loan origination volume, as measured by principal balance, was comprised of
loans of the types described above, although we anticipate that in the future
some of these types of loans will, nevertheless, not meet our investment
guidelines or our portfolio requirements. The balance of our mortgage loan
production consisted primarily of fixed-rate mortgage loans, all of which type
will continue to be sold to third party investors.

ANALYSIS OF OUR LOAN ORIGINATIONS

GEOGRAPHIC CONCENTRATION

NYMC originates loans in states where NYMC is approved to do so. As of
March 31, 2004, NYMC was either licensed or qualified to do business in 38
states. On that same date, NYMC had approximately 460 employees located in
twenty-four retail lending offices in twelve different states and one wholesale
origination office. During the three month period ended March 31, 2004 and the
years ended December 31, 2003, 2002 and 2001, NYMC's loan origination volume, as
measured by principal balance, came from the following states:

PERCENTAGE OF LOAN ORIGINATION VOLUME
----------------------------------------
THREE MONTHS
ENDED
MARCH 31,
STATE 2004 2003 2002 2001
----- ------------- ------ ------ ------

New York......................................... 72.7% 82.3% 89.0% 92.0%
New Jersey....................................... 9.2 6.9 6.0 4.4
Connecticut...................................... 4.6 3.4 3.1 2.3
California....................................... 2.2 1.6 0.0 0.0
Florida.......................................... 2.9 1.9 0.5 0.6
Pennsylvania..................................... 1.1 0.8 0.2 0.2
Others........................................... 7.3 3.1 1.1 0.5
----- ----- ----- -----
Total............................................ 100.0% 100.0% 100.0% 100.0%

LOAN-TO-VALUE RATIOS

A loan's loan-to-value ratio, or LTV, is an important way for many loan
originators and loan investors to discern risk within a loan. An LTV is
calculated by using the loan principal balance as the numerator and the lower of
the home's sales price or appraised value as the denominator. A loan is said to
have an 80 LTV if, for example, the home was purchased for $100,000 and the loan
amount is $80,000. This assumes the appraised value of the home is at least
$100,000.

During the three month period ended March 31, 2004 and the years ended
December 31, 2003, 2002 and 2001, NYMC's first lien mortgage loan origination
volume, as measured by principal balance, contained loans within the following
LTV ranges:

PERCENTAGE OF FIRST LIEN
LOAN ORIGINATION VOLUME
------------------------------------
THREE MONTHS
ENDED
MARCH 31,
STATE 2004 2003 2002 2001
----- ------------ ----- ----- -----

50 or less....................................... 13.5% 16.9% 17.4% 11.7%
50.01 -- 60...................................... 9.9 10.5 11.8 10.6
60.01 -- 70...................................... 18.3 20.1 22.7 20.2
70.01 -- 75...................................... 13.5 13.2 13.3 15.3
75.01 -- 80...................................... 36.2 30.0 27.7 29.5
80.01 -- 85...................................... 1.0 1.5 0.7 1.4
85.01 -- 90...................................... 2.5 5.2 4.0 7.7
90.01 -- 95...................................... 2.4 1.8 1.9 2.6
95.01 or more.................................... 2.7 0.8 0.5 1.0
----- ----- ----- -----
Total first lien mortgage loans.................. 100.0% 100.0% 100.0% 100.0%
===== ===== ===== =====
Weighted average first lien LTV.................. 70.1 67.7 66.8 70.2

First lien mortgage loan originations represented 93.9%, 96.2%, 96.5% and
96.2% of NYMC's total mortgage loan originations, as measured by principal
balance, for the three month period ended March 31, 2004 and the years ended
2003, 2002 and 2001, respectively.

CREDIT SCORES

Borrower credit scores are also a very important tool in determining
quality of loans produced by a lender. In underwriting a potential mortgage
loan, we will obtain credit scores from the borrower's credit report. A credit
report contains information on credit history, including existing and previously
repaid debt, and payment history on each obligation. There are three primary
credit repositories that keep historical data and provide credit reports on
potential borrowers. Each has a scoring model, the most common of which is
referred to as a FICO score. The FICO score is a 3-digit number that can range
from 300 to 850 and is based on payment histories, amounts owed, length of
credit history, new credit and types of credit use.

Higher scores are considered better scores. That is, the higher the score,
the more favorably lenders look upon the borrower as a credit risk. Each of the
primary credit repositories produce their own score based on the data they have
on a potential borrower. We compare the scores from the three repositories and
generally will use the middle of the three in rating the risk profile of a
proposed mortgage loan. We generally consider loans to borrowers with FICO
scores below the 600-650 range to have higher repayment risk than loans to
borrowers with higher FICO scores, although FICO scores alone do not always
accurately reflect repayment risk or a lack thereof. For example, a borrower may
have a FICO score below 600 because of a historical pattern of late payments on
other loans, but that same borrower's mortgage loan with us may have a low LTV
and the borrower may have a high net worth, together indicating a very low
repayment risk despite the low FICO score. Similarly, a borrower may have a very
high FICO score, but may still be a poor credit risk because of a volatile
employment situation or other factors. Consequently, in addition to evaluating a
borrower's FICO score, we assess a borrower's employment, income and assets and
related documentation, the amount of equity in and the value of the property
securing a borrower's loan, the borrower's debt to income ratio, credit history,
funds available for closing and post-closing liquidity and other factors when we
evaluate credit risk.

The table below shows, for the three month period ended March 31, 2004 and
the years ended December 31, 2003, 2002 and 2001, the percentage of loans, as
measured by principal balance, we originated in each specific middle FICO score
range:

PERCENTAGE OF LOAN ORIGINATION VOLUME
----------------------------------------
THREE MONTHS
ENDED
MARCH 31,
MIDDLE FICO SCORE 2004 2003 2002 2001
----------------- ------------ ----- ----- -----

800+......................................... 0.8% 2.4% 1.5% 1.1%
775-799...................................... 9.5 15.2 12.2 10.1
750-774...................................... 15.3 17.0 16.1 17.0
725-749...................................... 15.0 13.7 15.3 16.6
700-724...................................... 14.3 13.8 15.4 14.5
675-699...................................... 14.4 13.3 13.0 13.2
650-674...................................... 10.6 8.8 10.0 11.1
625-649...................................... 9.1 7.1 6.4 6.3
600-624...................................... 4.6 2.3 2.6 3.2
575-599...................................... 2.2 1.3 1.1 1.5
550-574...................................... 1.2 0.5 0.7 0.6
Below 550.................................... 1.4 0.8 0.6 0.6
No score available........................... 1.6 3.8 5.1 4.2
----- ----- ----- -----
Total........................................ 100.0% 100.0% 100.0% 100.0%
===== ===== ===== =====
Weighted average available middle FICO
score...................................... 703 719 716 713

PROPERTY TYPES

During the three month period ended March 31, 2004 and the year ended
December 31, 2003, approximately 99.4% and 99.2%, respectively, of NYMC's loan
origination volume, as measured by principal balance, was collateralized by
residential property or cooperative apartments. The remaining loan volume was
collateralized by commercial properties. The following table shows, for the
three month period ended March 31, 2004 and the years ended December 31, 2003,
2002 and 2001, the percentage of loans originated by property type:

PERCENTAGE OF LOAN ORIGINATION VOLUME
----------------------------------------
THREE MONTHS
ENDED
MARCH 31,
PROPERTY TYPE 2004 2003 2002 2001
------------- ------------ ----- ----- -----

Single family................................ 50.1% 48.1% 50.3% 47.5%
2-4 family................................... 21.7 18.4 14.7 15.0
Condominium.................................. 12.5 15.7 13.4 15.7
Co-op apartment.............................. 12.1 15.2 19.7 21.0
Planned urban development.................... 3.1 1.8 0.8 0.7
Other........................................ 0.5 0.8 1.1 0.1
----- ----- ----- -----
Total........................................ 100.0% 100.0% 100.0% 100.0%

Although they account for a small percentage of NYMC's loan production,
NYMC does offer commercial loans on a wide variety of commercial property types.
These loans are generally either brokered or pre-approved for sale to a third
party investor and are directly funded by that investor at the loan closing.

LOAN BALANCES

PERCENTAGE OF LOAN ORIGINATION VOLUME
---------------------------------------------
THREE MONTHS
ENDED
MARCH 31,
2004 2003 2002 2001
------------ -------- -------- --------

$100,000 or less........................ 1.8% 1.4% 2.2% 2.9%
$100,001 to $150,000.................... 5.2 4.9 5.3 7.0
$150,001 to $200,000.................... 7.4 7.4 7.1 11.1
$200,001 to $300,000.................... 20.0 22.8 26.0 32.1
$300,001 to $400,000.................... 18.6 19.9 17.6 13.9
$400,001 to $500,000.................... 14.3 13.6 10.0 8.4
$500,001 to $600,000.................... 11.0 7.8 7.9 6.4
$600,001 to $700,000.................... 5.4 5.3 6.1 4.8
$700,001 to $800,000.................... 3.7 3.2 3.2 3.0
$800,001 to $900,000.................... 2.3 1.8 2.6 2.0
$900,001 to $1,000,000.................. 4.1 4.4 3.5 2.8
$1,000,001 to $1,500,000................ 3.6 2.9 3.2 3.3
$1,500,001 to $2,000,000................ 0.8 1.4 3.6 0.6
$2,000,001 to $2,500,000................ 0.8 1.5 1.4 0.7
$2,500,001 to $3,000,000................ 1.0 0.2 0.3 1.0
$3,000,001 or higher.................... 0.0 1.5 0.0 0.0
-------- -------- -------- --------
Total................................... 100.0% 100.0% 100.0% 100.0%
======== ======== ======== ========
Weighted average principal balance...... $314,831 $317,051 $304,900 $265,533

First lien mortgage loan originations represented 93.9%, 96.2%, 96.5% and
96.2% of NYMC's total loan originations, as measured by principal balance, for
the three month period ended March 31, 2004 and the years ended 2003, 2002 and
2001, respectively.

OUR LOAN UNDERWRITING GUIDELINES AND PRACTICES

As a mortgage banker, NYMC has not, up to now, retained any of its funded
loans on a long-term basis. Thus, NYMC's underwriting philosophy has
historically been to underwrite loans according to the guidelines established by
the available purchasers of its loans.

Typically, mortgage underwriting guidelines provide a framework for
determining whether a proposed mortgage loan to a potential borrower will be
approved. The key points in this framework are the borrower's credit scores and
other indicia of the borrower's ability and willingness to repay the loan, such
as the borrower's employment and income, the amount of the borrower's equity in
and the value of the borrower's property securing the loan, the borrower's debt
to income and other debt ratios, the LTV of the loan, the amount of funds
available to the borrower for closing and the borrower's post-closing liquidity.

Going forward, we will follow our own investment guidelines in determining
which NYMC originated loans will be eligible for us to retain in our portfolio
and we will continue to follow the underwriting guidelines established by
available purchasers with respect to the loans we intend to sell.

For mortgage loans we intend to retain, we will follow a specific
underwriting methodology based on the following philosophy -- first evaluate the
borrower's ability to repay the loan, and then evaluate the value of the
property securing the loan. We will seek only to retain mortgage loans that we
believe have

low risk of default and resulting loss. As underwriting basically seeks to
predict future borrower payment patterns and ability based on the borrower's
history and current financial information and the lender's ability to be made
whole in the future through foreclosure in the event a default does occur, no
assurance can be made that every loan originated or purchased will perform as
anticipated.

We are in the process of developing, and expect to adopt prior to
completion of this offering, underwriting guidelines and practices that
establish clear parameters for our loan underwriters and credit officers to make
loan approval decisions with respect to the loans we intend to retain. As stated
above, these parameters will focus first on the borrower's ability and
willingness to repay the loan, and then on the value of the underlying
collateral. We anticipate that our underwriting guidelines will be similar to
the guidelines of those to whom NYMC has historically sold prime loans. The key
aspects of our guidelines will be as follows.

BORROWER

In evaluating the borrower's ability and willingness to repay a loan, we
will review and analyze the following aspects of the borrower: credit score,
income and its source, employment history, debt levels in revolving, installment
and other mortgage loans, credit history and use of credit in the past, and
finally the ability and/or willingness to provide verification for the above.
Credit scores, credit history, use of credit in the past and information as to
debt levels can be typically obtained from a third party credit report through a
credit repository. Those sources will be used in all cases, as available. In
certain cases, borrowers have little or no credit history that can be tracked by
one of the primary credit repositories. In these cases, the reason for the lack
of history will be considered and taken into account. In our experience, more
than 95% of prospective borrowers have accessible credit histories.

PROPERTY

In evaluating a potential property to be used as collateral for a mortgage
loan, we will consider all of the following aspects of the property: the loan
balance versus the property value, or LTV, the property type, how the property
will be occupied (a primary residence, second home or investment property), if
the property's apparent value is supported by recent sales of similar properties
in the same or a nearby area, any unique characteristics of the property and our
confidence in the above data and their sources.

OTHER CONSIDERATIONS

Other considerations that will impact our decision regarding a borrower's
loan application are the borrower's purpose in requesting the loan (purchase of
a home as opposed to cashing equity out of the home through a refinancing for
example), the loan type (adjustable-rate, including adjustment periods and loan
life rate caps, or fixed-rate), and any items unique to a loan that we believe
could affect credit performance.

OUR LOAN ORIGINATION FINANCING STRATEGY

We intend to continue to finance our loan originations utilizing the
warehouse facility, gestation facility and reverse repurchase agreement that
NYMC currently utilizes to fund its loan originations, as well as other similar
financing arrangements. The agreements are each renewable annually, but are not
committed, meaning that the counterparties to the agreements may withdraw access
to the credit facilities at any time.

We plan on continuing the use of these facilities going forward. We believe
that we may be able to negotiate more favorable terms under these facilities in
the future as the result of the increase in our equity from the available net
proceeds of this offering. Converting some or all of these facilities to
committed facilities following this offering will strongly be considered, but we
do not have a unilateral right to convert these facilities. Committed facilities
are expected to involve the paying of up-front fees by us to the credit
facilities provider, who in turn must make the facility available at all times
during the

term of the agreement. We believe that the financial ratios that we will need to
satisfy under these facilities will remain the same whether the facilities are
committed or uncommitted.

NYMC'S WAREHOUSE FACILITY

Non-depository mortgage lenders, such as NYMC, typically rely on credit
facilities for capital needed to fund new mortgage loans. These facilities are
typically lines of credit from other financial institutions that the mortgage
banker can draw from in order to fund new mortgage loans. These facilities are
referred to as warehouse lines or warehouse facilities.

Warehouse lines are typically collateralized loans made to mortgage bankers
that in turn pledge the resulting loans to the warehouse lender. Third-party
mortgage custodians, usually large banks, typically hold the mortgage loans,
including the notes, mortgages and other important loan documentation, for the
benefit of the mortgage lender who is deemed to own the loan and, if there is a
default under the warehouse line, for the benefit of the warehouse lender.

NYMC currently has a $50 million syndicated line of credit with HSBC Bank
USA. NYMF, which will be our qualified REIT subsidiary following this offering,
has a $100 million warehouse facility with Greenwich Capital Financial Products,
Inc.

The Greenwich Capital facility matures on January 8, 2005. As of March 31,
2004, nothing was outstanding under the Greenwich Capital facility. We have
agreed to guarantee NYMF's obligations under the Greenwich Capital facility. The
HSBC warehouse facility matures on June 30, 2004. As of March 31, 2004, $48.5
million was outstanding under the HSBC facility.

NYMC'S MASTER REPURCHASE AGREEMENT

Mortgage bankers use repurchase agreements or reverse repurchase agreements
to finance the mortgage loans they originate. Under those agreements, the
mortgage banker sells a mortgage loan to a counterparty and agrees to repurchase
the loan from the counterparty at a price equal to the original sale price plus
an interest factor.

NYMC currently has one master repurchase agreement, also referred to as a
reverse repurchase agreement, with Credit Suisse First Boston Mortgage Capital,
LLC, pursuant to which NYMC may enter into up to $100 million in aggregate loan
repurchase arrangements. This master repurchase agreement matures on April 15,
2004. As of March 31, 2004, $87.7 million was outstanding under the agreement.
NYMC currently utilizes this master repurchase agreement essentially like a
warehouse line to finance mortgage loans originations.

NYMC'S GESTATION FACILITY

Mortgage lenders use gestation facilities primarily to free up borrowing
capacity under their warehouse lines. Under a gestation facility, the gestation
lender actually purchases a closed mortgage loan from the mortgage banker
shortly after funding and the proceeds are used to pay down the debt incurred
under the warehouse line with respect to the loan. The gestation lender holds
the loan until the mortgage banker arranges the sale of the loan to a third
party purchaser. When the third party purchaser purchases the loan, the
gestation lender transfers the loan directly to the purchaser in exchange for
payment, and the gestation lender pays the mortgage lender, such as NYMC, a
completion fee.

NYMC currently has one $25 million gestation facility with Greenwich
Capital Financial Products, Inc. This facility matures on August 31, 2004. As of
March 31, 2004, $1.5 million was outstanding under this facility.

LOAN SERVICING

Loan servicing is the administration function of a mortgage loan whereby an
entity collects monthly payments from a mortgage borrower and disburses those
funds to the appropriate parties. The servicer has

to account for all payments, maintain balances in certain accounts for each
loan, maintain escrow accounts for real estate taxes, remit the correct amount
of principal and interest monthly to the holder of the loan and handle
foreclosures as required.

NYMC has, up until now, sold the servicing rights on all loans that NYMC
has originated upon sale of its loans. However, NYMC has the ability to service
loans through third party subservicers. Certain loans have recently been held on
NYMC's balance sheet for a period of time in order to increase earnings. In
these cases, we believe there is a large enough spread between the mortgage loan
interest rate and the interest rate paid on the applicable warehouse line to
make any additional risk in carrying those loans on our balance sheet
worthwhile. In these cases, NYMC services the loans through a third party
subservicer for the time period that it holds the loans.

We are currently negotiating an agreement with Cenlar Federal Savings Bank
whereby Cenlar will subservice loans for us following this offering. Cenlar is a
wholesale bank specializing in mortgage sub-servicing nationwide. According to
Cenlar, it is currently the third largest subservicer in the United States with
a total servicing portfolio of over 400,000 loans with $30 billion in aggregate
principal balance. Cenlar states that it is an approved loan servicer for Fannie
Mae, Freddie Mac, Ginnie Mae and others.

We expect that loans originated by NYMC that will be retained by us for our
portfolio will have their servicing handled by Cenlar. Under this arrangement,
Cenlar will act as an intermediary between us and the borrower. It will collect
payments from borrowers, handle accounting and remittance of the payments,
handle escrow accounts and do certain tax reporting for us. As our retained
loans are securitized, Cenlar will continue to service those loans and report to
the securities trustee or master servicer, as appropriate.

We also expect that loans originated and funded by NYMC that will be sold
to third parties will be serviced in the interim for NYMC by Cenlar, as needed.

OUR INVESTMENT GUIDELINES AND POLICIES

We will seek to have a portfolio consisting of high quality mortgage-backed
securities and loans. We believe that retaining high quality assets in our
portfolio helps us mitigate risks associated with market disruptions.

In defining our investment guidelines, we will use the following
classifications for securities we intend to own:

- Category I investments are mortgage-backed securities that are either
rated within one of the two highest rating categories by at least one of
either Standard & Poor's Corporation or Moody's Investors Service, or
have their repayment guaranteed by Fannie Mae, Freddie Mac, or Ginnie
Mae.

- Category II investments are mortgage-backed securities with an investment
grade rating of BBB or better by at least one of Standard & Poor's or
Moody's.

- Category III investments are mortgage-backed securities that have no
rating from, or are rated below investment grade by at least one of
Standard & Poor's or Moody's.

Further, we intend to retain on our balance sheet a majority of the
residential first lien adjustable-rate and hybrid mortgage loans originated by
NYMC that we believe have a low risk of default and resulting loss and are of
the following types:

- 1 month adjustable-rate (various total terms)

- 6 month adjustable-rate (various total terms)

- 1 year adjustable-rate (various total terms)

- 2 year fixed-rate, adjustable-rate hybrid (various total terms)

- 3 year fixed-rate, adjustable-rate hybrid (various total terms)

- 5 year fixed-rate, adjustable-rate hybrid (various total terms)

We will initially fund these loans through warehouse facilities and reverse
repurchase agreements. We intend to finance the loans that we retain in our
portfolio through securitization transactions. Upon securitization, we expect
that a vast majority of the resulting mortgage-backed securities will become
eligible for inclusion in Category I.

The only subordinate classes of mortgage-backed securities that we
anticipate acquiring and holding, which will generally be Category III
investments, are subordinate classes that result from securitizations of the
mortgage loans in our portfolio. We will not seek to acquire subordinated
mortgage-backed securities as investments but instead will acquire them only in
connection with our mortgage loan securitizations or in order to help us meet
our asset tests as a REIT.

Our board of directors has adopted an investment policy that provides,
among other things, that:

- No investment shall be made which would cause us to fail to qualify as a
REIT;

- No investment shall be made which would cause us to be regulated as an
investment company;

- At least 70% of our assets will be Category I investments or loans that
back or will back such investments; and

- No more than 7.5% of our assets will be Category III investments or loans
that back or will back such investments.

Our board of directors may amend or waive compliance with this investment
policy at any time without the consent of our stockholders.

Our board of directors has established an investment and leverage committee
for the purpose of approving certain investment transactions and the incurrence
of indebtedness that is comprised of our co-chief executive officers, our
president and chief investment officer, our chief financial officer and our
chief operating officer. The committee will have the authority to approve,
without the need of further approval of our board of directors, the following
transactions from time to time, any of which may be entered into by us or any of
our subsidiaries:

- the purchase and sale of agency and private label mortgage-backed
securities, subject to the limitations described above;

- securitizations of our mortgage loan portfolio;

- the purchase and sale of agency debt;

- the purchase and sale of U.S. Treasury securities;

- the purchase and sale of overnight investments;

- the purchase and sale of money market funds;

- hedging arrangements using:

- interest rate swaps and Eurodollar contracts;

- caps, floors and collars;

- financial futures; and

- options on any of the above; and

- the incurrence of indebtedness using:

- repurchase and reverse repurchase agreements;

- bank loans, up to an aggregate of $100 million; and

- term repurchase agreements

Our board of directors may change the members of the committee, the powers of
the committee, and the scope of the committee or may disband the committee at
any time without the consent of our stockholders.

OUR TARGETED INVESTMENTS

Our primary strategy, and a strategy that differentiates us from most other
residential mortgage REITs, is to continue the residential mortgage banking
operations of NYMC and to retain in our portfolio adjustable-rate and hybrid
mortgage loans originated by NYMC, as opposed to purchasing comparable
securities or mortgage loans on the open market at what we believe would be
higher premiums. We believe that, as a result of this strategy, we will be able
to build a portfolio of mortgage loans at lower costs, which we expect will give
us a competitive advantage over other mortgage loan investors, most of whom do
not possess retail loan origination capabilities.

Initially, given our desire to timely and safely deploy the capital raised
in this offering, we intend to use the net available proceeds to purchase an
initial portfolio of adjustable-rate and hybrid mortgage loans and/or
mortgage-backed securities in the open market. Concurrently, we intend to enter
into financing agreements enabling us to leverage our equity by approximately
eight to 12 times, which will provide us with capital to purchase additional
mortgage loans and/or mortgage-backed securities. This initial portfolio of
assets will be replaced over time with adjustable-rate and hybrid mortgage loans
that we originate, as described above. We or NYMF, our qualified REIT
subsidiary, will purchase the loans we intend to retain in our portfolio from
NYMC. Neither we nor NYMF is currently licensed to purchase loans from NYMC in
any jurisdiction where a purchase license is required, but we intend to cause
NYMF to obtain any required licenses to purchase loans from NYMC in the near
future.

Mortgage Loans. In addition to the loans we will retain in our portfolio,
we will originate and sell to third parties individual loans or portfolios of
mortgage loans. We may also invest in portfolios of mortgage loans secured by
residential properties in the U.S. from various sellers, including mortgage
bankers, life insurance companies, banks and other owners. For the mortgage
loans we originate and that we intend to retain, we will follow our loan
underwriting guidelines and practices described above under "Our Loan
Underwriting Guidelines and Practices," beginning on page 72.

Residential Mortgage-Backed Securities. The residential mortgage-backed
securities that we will invest in will be secured by or evidence ownership
interests in pools of mortgage loans secured by one to four family residential
properties. Subject to our investment guidelines, these securities may be
senior, subordinate, investment grade or non-investment grade securities. We
anticipate only holding or acquiring subordinate classes that result from
securitizations of the mortgage loans in our portfolio. We expect the majority
of our residential mortgage-backed securities investments to be rated by at
least one nationally recognized statistical rating agency. The majority of our
investments in residential mortgage-backed securities will consist of securities
that are part of a capital structure or securitization where the rights of such
class to receive principal and interest are senior to the rights of subordinate
or lower classes of securities. We intend to invest in residential
mortgage-backed securities that will yield current interest income and where we
consider the return of principal to be likely. We intend to acquire residential
mortgage-backed securities from originators of, or investors in, mortgage loans,
including savings and loan associations, mortgage bankers, commercial banks,
finance companies, investment banks and other entities.

The yield on residential mortgage-backed securities depends on the timely
payment of interest and principal due on the underlying mortgage loans by the
borrowers under such mortgage loans. Accelerated prepayments due to refinancing
and defaults by such borrowers may ultimately result in deficiencies and
defaults on the residential mortgage-backed securities. In the event of a
default, the trustee for the benefit of the holders of residential
mortgage-backed securities generally has recourse only to the underlying pool of
mortgage loans and, if a loan is in default, to the mortgaged property securing
such mortgage loan. After the trustee has exercised all of the rights of a
lender under a defaulted mortgage loan and the related mortgaged property has
been liquidated, no further remedy generally will be available. However, holders
of relatively senior classes of residential mortgage-backed securities will be
protected to a certain degree by the structural features of the securitization
transaction within which such residential mortgage-backed securities were
issued, such as the subordination of the relatively more junior classes of the
residential mortgage-backed securities.

Generally, in considering whether to acquire a residential mortgage-backed
security, we will perform due diligence, to the extent possible, to assess the
credit quality of the mortgage loans, as well as assess:

- the likelihood of prepayment, which residential borrowers are generally
permitted to do without penalty,

- the extent of any guarantee of the mortgage loans securing the
mortgage-backed securities by the federal government or a government
sponsored entity,

- the capabilities of the servicer of the mortgage loans,

- the structure of the residential mortgage-backed security,

- the prepayment and default history of the other mortgage loans previously
originated by the applicable lenders,

- our cash flow analyses under various prepayment and interest rate
scenarios, and

- our analyses of various borrower default scenarios.

RISK EVALUATION

We expect to review credit risk associated with each of our potential
investments. We may reduce risk with respect to our mortgage-related assets
acquired from sellers and servicers by obtaining representations and warranties
with respect to such assets. We intend to monitor the overall portfolio in order
to determine appropriate levels of provision for losses we may experience.

We intend to determine, at the time of purchase, whether or not a mortgage
asset complies with our investment guidelines, based upon the most recent
valuation utilized by us. Such compliance is not expected to be affected by
events subsequent to such purchase, such as changes in characterization, value
or rating of any specific mortgage assets or economic conditions or events
generally affecting any mortgage-related assets of the type held by us.

OUR PORTFOLIO FINANCING STRATEGY

As is the case with many mortgage REITs, we intend to leverage our equity
through borrowings with the intent to enhance our returns. With leverage we will
be able to expand the size of our portfolio, which we believe will enable us to
increase our returns on equity and earnings. Although leverage increases
business risk, we will operate within board of directors approved asset to
equity ratio guidelines, which our board of directors has initially determined
to set at 8 to twelve times, and with a set minimum of assets we deem to be high
quality in an attempt to mitigate those risks.

Our financing strategy may also focus on the use of match-funded financing
structures. This means that we seek to match the maturities of our financial
obligations with the maturities of our investments to minimize the risk that we
have to refinance our liabilities prior to the maturities of our assets, and to
reduce the impact of changing interest rates on earnings. We may match fund
interest rates with like-kind debt (for example, fixed-rate assets will be
financed with fixed-rate debt, and adjustable-rate assets will be financed with
adjustable-rate debt), through the use of hedges such as interest rate swaps,
interest rate caps, or through a combination of these strategies. In addition,
we may finance our mortgage loans and securities investments through the
issuance of collateralized debt securities. We believe these strategies allow us
to match-fund our assets and thereby reduce the impact of changing interest
rates on our earnings.

REVERSE REPURCHASE AGREEMENTS AND OTHER SHORT TERM FINANCINGS

We will leverage our equity with the use of reverse repurchase agreements,
warehouse lines of credit and other short term financings. With reverse
repurchase agreements, we will be able to borrow against the mortgage loans and
mortgage-backed securities we own. Under these agreements, we sell our mortgage
assets to a counterparty and agree to repurchase the assets from the
counterparty at a price equal to the

original sales price plus an interest factor. During the period of a reverse
repurchase agreement, we earn the principal and interest on the related mortgage
assets and pay interest to the counterparty.

We expect that our reverse repurchase agreement counterparties will be well
capitalized commercial and investment banks with whom we will have agreements in
place that cover the terms of our transactions. All our reverse repurchase
agreement counterparties will be formally approved by our board of directors and
will be monitored for changes in their financial condition.

We anticipate that reverse repurchase agreements will be one of the primary
vehicles we will use to achieve our desired amount of leverage. We intend to
maintain formal relationships with approximately ten counterparties, as needed,
for the purpose of maintaining financing relationships on favorable terms.

LOAN SECURITIZATIONS

Because we intend to retain some or all of the adjustable-rate mortgage and
hybrid loans originated by NYMC on a long-term basis, we will use securitization
structures in an effort to enhance our performance. Securitizations can be
multiple class, rated debt securities, or bonds, secured by a pool of assets
such as a group of individual loans. Structuring involves segmenting cash flows
from like-kind loan collateral into different investment horizons or maturity
classes. Nationally recognized statistical rating agencies, such as Standard and
Poor's, Moody's Investor Service, or Fitch Inc., typically provide ratings on
classes of these securitizations. The securities provide liquidity as they can
be bought or sold quickly, as any commonly traded bond, whereas trading a
portfolio of loans is more expensive and time-consuming. Financing these
securities can be done at lower costs relative to financing whole loans on a
warehouse line. We believe that this cost savings will result in relatively
higher net income because we expect it to reduce our interest expense.

In order to securitize a portfolio of mortgage loans, we will have to enter
into an agreement with an underwriter. The underwriter, typically a Wall Street
broker-dealer active in the mortgage sector, will facilitate the transaction.
The underwriter will structure the bonds issued in the securitization and their
subordination levels, review some of the loans for credit evaluation reasons,
interact with the rating agencies to get the transaction rated, create a
prospectus, and place the offering with investors, should that be needed.

There are fixed and variable fees associated with securitizations. Fixed
fees are incurred regardless of the transaction size and variable fees are based
on the number of loans or size of the transaction. The outside parties involved
in the creation of the securities charge the fees. For example, a trustee must
be engaged to administer the cash flows of the securities. The logical course of
action when faced with these expenses is to try and maximize the size of the
securitizations in order to minimize the effect of the fixed costs on the
securities' yield. Thus, we will try to ensure that there is a sufficient number
and dollar amount of mortgage loans in our portfolio before an underwriter is
engaged and any securitization is undertaken. As liquidity at times will be of
paramount importance to us, and as the events that trigger the need for
liquidity cannot be readily foreseen, there could be times when we may be forced
to securitize a smaller number of loans and lose some or all of the cost
advantages of our loan securitizations.

Our resulting securities will either be financed with reverse repurchase
agreements on an indefinite basis or sold to third party investors in a
transaction that is treated as a financing for tax and financial accounting
purposes. These securities often will be financed on a non-recourse basis to us.
Under these situations, risks associated with margin calls and illiquidity in
the market place can be mitigated. Because our securitizations will be treated
as financings for both tax and financial accounting purposes, we do not expect
to generate a gain or loss on sale as a result of those transactions. Following
the securitizations, the loans will remain on our consolidated balance sheet as
an asset and the securitization debt will be listed as a liability. We generally
will retain the most subordinated interests in loans we securitize. These
interests are in a "first loss" position relative to the credit risk of the more
senior securities sold to third parties, and accordingly, carry a greater risk
with respect to the nonpayment of the mortgage loans backing the securities.

We expect to generate earnings and cash flow from the loans we securitize
primarily through net interest income, which is the difference between the
interest income we earn from the mortgage loans and the sum of the interest paid
by us to holders of our mortgage-backed securities, credit losses on the loans,
servicing fees and securitization expenses.

OUR HEDGING ACTIVITIES

Anticipating the direction of interest rates will generally not be a part
of our business strategy. We will seek to maintain hedge positions that avoid
the effects of severe interest rate movements, which might otherwise curtail our
ability to earn net interest income. Accordingly, we will generally seek to
match cash flows of our assets with similar offsetting liabilities. Generally,
adjustable-rate assets will be matched with adjustable-rate liabilities and
fixed-rate assets will be matched with fixed-rate liabilities.

Subject to the limitations imposed by the REIT qualification tests, some or
all of the following financial instruments may be used for hedging interest rate
risk: interest rate swaps and Eurodollar contracts, interest rate caps, term
repurchase agreements and other instruments that may be determined to be
advantageous and are permitted under the hedging policy that is adopted by our
board of directors. Examples of other possible hedging instruments include
interest rate collars, interest rate floors, or options on any of these named
instruments.

Instruments may be used to hedge as much interest rate risk as our
management determines to be in the best interest of our stockholders, given the
cost of such hedges and the need to maintain our status as a REIT. We may elect
to bear a level of interest rate risk that could otherwise be hedged when we
believe, based on all relevant facts, that bearing such risks is advisable.
Members of our management have extensive experience in hedging mortgage assets
with these types of instruments. We will engage in hedging for the sole purpose
of protecting against interest rate risk and not for the purpose of speculating
on changes in interest rates.

The following describes common instruments that we are likely to use:

INTEREST RATE SWAPS AGREEMENTS AND EURODOLLAR CONTRACTS

Interest rate swaps agreements, or swaps, are contracts entered into
between two parties whereby each party agrees, for the term of the agreement, to
pay the other a certain interest rate. Typically, one party will pay a fixed
rate of interest, and the other will pay an adjustable rate. Thus, the party
that pays a fixed rate will receive an adjustable rate, and the party that pays
an adjustable rate will receive a fixed rate. In most instances, we will pay a
fixed rate and receive an adjustable rate in order to hedge interest rate risk
inherent in some of the adjustable-rate and hybrid mortgage loans and
mortgage-backed securities in which we plan to invest. Eurodollar contracts are
different financial futures that closely replicate the desired effects of swaps.

We will own adjustable-rate and hybrid mortgage loans that have an initial
fixed-rate period. In order to hedge the interest rate risk associated with
owing hybrid adjustable-rate mortgage loans and mortgage securities, we will
enter into swap agreements to attempt to fix the liability funding period to the
expected duration of the hybrid adjustable-rate mortgage loan interest rate
reset periods.

INTEREST RATE CAPS

Interest rate cap agreements, or caps, are agreements entered into between
two parties whereby one party agrees, for the term of the agreement, to pay the
other in the event the current value of an interest rate index exceeds a
specified level. The party agreeing to make cap payments is paid an up front
fee. For example, a cap can be entered into with a specified notional amount and
a trigger set at 6.00% based on the one month London Interbank Offered Rate,
known as LIBOR. In that example, if the one month LIBOR rises above the 6.00%
trigger during the five-year term of the cap, the owner of the cap will receive
from the counterparty periodic payments equal to the product of (i) the excess
of the current value

of the one-month LIBOR over the threshold rate and (ii) the notional amount of
the cap. A cap agreement typically will be in place for a period of three to
five years.

A cap agreement can offset risks inherent in adjustable-rate and hybrid
mortgage loans with what are known as life caps. Life caps limit, for the life
of the loan, the maximum rate of interest the borrower will be obligated to pay.
Typically, the life cap of adjustable-rate and hybrid mortgage loans is equal to
the initial interest rate on the loan plus 5.00% or 6.00%. Thus if an
adjustable-rate or hybrid mortgage loan has an initial rate of 6.00%, the life
cap would most likely be either 11.00% or 12.00%.

In the event that we are faced with the life caps described above, we may
purchase a cap agreement with a trigger, or threshold rate, of 11.00%. Thus, if
the one month LIBOR were to increase above 11.00%, we would receive from the
counterparty periodic payments equal to the product of (i) the excess of the
current value of the one-month LIBOR over the threshold rate and (ii) the
notional amount of the cap. This sort of instrument can eliminate the risk of
our liabilities costing more than the rate received on the mortgage assets. In
the example above, we would hold an asset paying us a capped rate of 11.00%
while potentially paying a corresponding liability set at the one month LIBOR
with an interest rate above 11.00%. If we also held an interest rate cap with a
trigger of 11.00%, the interest rate mismatch would be bridged.

FINANCIAL FUTURES

We may use financial futures, which are agreements between two parties to
transact a set of financial instruments on a future date at an agreed upon
price. Financial futures are used as a hedge for our assets against fluctuating
interest rates.

TERM REPURCHASE AGREEMENTS

Because we will use reverse repurchase agreements to finance some of our
assets, we may also, at times, use term repurchase agreements. Reverse
repurchase agreements are typically limited to 30 days. After the term, the
interest rate we pay is reset at the current market interest rate. Term
repurchase agreements, on the other hand, are agreements with terms of 60, 90 or
more days. Some terms can be as long as a year or more. Term reverse repurchase
agreements are financing arrangements that are also used to attempt to fix the
liability funding period to the expected duration of an adjustable-rate
mortgage-backed security or loan of less than one year we hold.

In addition to using the above described financial instruments, we will
seek to issue long-term securitized debt collateralized by some of our mortgage
assets. This will serve as long-term financing of our pledged assets. We expect
that long-term debt issuance will aid us to more efficiently match-up assets
with liabilities and reduce liquidity risk, margin call risk, interest rate risk
and prepayment risk. To issue long-term debt, a portion of our assets would be
pledged to a securitization trust that would, in turn, issue long-term
collateralized debt securities. The pledged mortgage assets would continue to be
listed on our balance sheet as assets and the long-term debt would be listed on
our balance sheet as a liability.

POLICIES WITH RESPECT TO CERTAIN OTHER ACTIVITIES

If our board of directors determines that we require additional funding, we
may raise such funds through additional equity offerings, debt financings,
retention of cash flow (subject to provisions in the Internal Revenue Code
concerning taxability of undistributed REIT taxable income) or a combination of
these methods.

In the event that our board of directors determines to raise additional
equity capital, it has the authority, without stockholder approval, to issue
additional authorized common and preferred stock in any manner and on such terms
and for such consideration our board of directors deems appropriate, including
in exchange for property or other non-cash consideration.

Debt financings may be in the form of traditional bank borrowings, publicly
or privately placed debt instruments, purchase money obligations to the sellers
of assets to us, long-term bonds or other publicly or

privately placed debt instruments, financing from banks, institutional investors
or other lenders, or securitizations, including collateralized debt securities,
any of which indebtedness may be unsecured or may be secured by mortgage loans
or other interests in our assets. Such indebtedness may have recourse to all or
any part of our assets or may be limited to a particular asset to which the
indebtedness relates.

We have authority to offer our common stock or other equity or debt
securities in exchange for property or other non-cash consideration and to
repurchase or otherwise reacquire our shares or any other securities and may
engage in such activities in the future. Similarly, we may offer additional
interests that are exchangeable into common stock or, at our option, cash, in
exchange for property or other non-cash consideration. We also may make loans to
our subsidiaries.

Subject to our ownership limitations and the gross income and asset tests
necessary for REIT qualification, we may invest in other entities engaged in
mortgage-related activities or in the securities of other issuers, including for
the purpose of exercising control over such entities. We also may engage in the
purchase and sale of investments. We do not intend to underwrite the securities
of other issuers.

Our board of directors may change any of these policies without a vote of
our stockholders.

COMPETITION

We anticipate that the majority of our competition will be in the mortgage
lending industry. In addition to mortgage banking companies, Internet-based
lending companies, traditional banks and thrift lenders, the government
sponsored entities Fannie Mae and Freddie Mac are also expanding their
participation in the mortgage lending industry. While the government sponsored
entities presently do not have the legal authority to originate mortgage loans,
they do have the authority to buy loans. If as a result of their purchasing
practices, these government sponsored entities experience significantly
higher-than-expected losses, the experience could adversely affect overall
investor perception of the mortgage lending industry.

Competition in the industry can take many forms, including lower interest
rates and fees, less stringent underwriting standards, convenience in obtaining
a loan, customer service, amount and term of a loan and marketing and
distribution channels. The need to maintain mortgage loan volume in this
competitive environment creates a risk of price and quality competition in the
mortgage industry. Price competition could cause us to lower the interest rates
that we charge borrowers, which could lower the value of our loans we sell or
retain in our portfolio. If our competitors adopt less stringent underwriting
standards, we will be pressured to do so as well. If we do not relax
underwriting standards in response to our competitors, we may lose market share.
If we relax our underwriting standards in response to price competition, we may
be exposed to higher credit risk without compensating pricing. Any increase in
these pricing and underwriting pressures could reduce the volume of our loan
originations and sales and significantly harm our business, financial condition,
liquidity and results of operations.

GOVERNMENT REGULATION

that restrict or otherwise affect loan origination activities, and in some cases
loan servicing activities. The laws, rules and regulations of each of these
jurisdictions are different, complex and, in some cases, in direct conflict with
each other. It may become increasingly difficult to identify comprehensively, to
interpret accurately, to program properly our information systems and to
effectively train our personnel with respect to all of these laws, rules and
regulations, thereby potentially increasing the risks of non-compliance with
these laws, rules and regulations.

Our failure to comply with these laws, rules and regulations can lead to:

- civil and criminal liability, including potential monetary penalties;

- loss of state licenses or permits required for continued lending and
servicing operations;

- legal defenses causing delay or otherwise adversely affecting our ability
to enforce loans, or giving the borrower the right to rescind or cancel
the loan transaction;

- demands for indemnification or loan repurchases from purchasers of our
loans;

- class action lawsuits; and

- administrative enforcement actions.

The continued enactment of these laws, rules and regulations may prevent us
from making certain loans and may cause us to reduce the APR or the points and
fees we charge on the mortgage loans that we originate. In addition, the
difficulty of managing the compliance risks presented by these laws, rules and
regulations may decrease the availability of warehouse financing and the overall
demand for the purchase of our originated loans. These laws, rules and
regulations have increased, and may continue to increase, our cost of doing
business as we have been, and may continue to be, required to develop systems
and procedures to ensure that we do not violate any aspect of these new
requirements.

In addition, many of these state laws, rules and regulations are not
applicable to the mortgage loan operations of national banks, or other financial
institutions chartered by the federal government. Therefore, the mortgage loan
operations of these institutions are at a competitive advantage to us since they
do not have to comply with many of these laws.

made within our strict legal compliance standards and without undue risk
relative to litigation or to the enforcement of the loan according to its terms.
If we decide to relax our self-imposed restrictions on originating loans subject
to these laws, rules and regulations, we will be subject to greater risks for
actual or perceived non-compliance with the laws, rules and regulations,
including demands for indemnification or loan repurchases from the parties to
whom we broker or sell loans, class action lawsuits, increased defenses to
foreclosure of individual loans in default, individual claims for significant
monetary damages and administrative enforcement actions. Any of the foregoing
could significantly harm our business, cash flow, financial condition, liquidity
and results of operations.

USA PATRIOT ACT

The President of the United States signed the USA PATRIOT Act into law on
October 26, 2001. The USA PATRIOT Act establishes a wide variety of new and
enhanced ways of combating international terrorism. The provisions that affect
national banks and other financial institutions most directly are contained in
Title III of the act. In general, Title III amends current law -- primarily the
Bank Secrecy Act -- to provide the Secretary of Treasury and other departments
and agencies of the federal government with enhanced authority to identify,
deter and punish international money laundering and other crimes.

Among other things, the USA PATRIOT Act prohibits financial institutions
from doing business with foreign "shell" banks and requires increased due
diligence for private banking transactions and correspondent accounts for
foreign banks. In addition, financial institutions will have to follow new
minimum verification of identity standards for all new accounts and will be
permitted to share information with law enforcement authorities under
circumstances that were not previously permitted. These and other provisions of
the USA PATRIOT Act became effective at varying times and the Secretary of
Treasury and various federal banking agencies are responsible for issuing
regulations to implement the new law. To the extent the USA PATRIOT Act applies
to our mortgage banking operations, we may be subject to additional burdens of
compliance and potential liability for failure to comply.

ENVIRONMENTAL EXPOSURE

In the course of our business, we may foreclose and take title to
residential properties securing our mortgage loans, and if we do take title, we
could be subject to environmental liabilities with respect to these properties.
In such a circumstance, we may be held liable to a governmental entity or to
third parties for property damage, personal injury, 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 investigation or
remediation activities could be substantial. If we become subject to significant
environmental liabilities, our business, financial condition, liquidity and
results of operations could be materially and adversely affected.

EMPLOYEES

As of April 30, 2004, NYMC had 460 full-time employees. None of our
employees are represented by a union or covered by a collective bargaining
agreement. We believe that our compensation and benefits offered to our
employees are competitive and that our relations with our employees are good.

FACILITIES

Our principal offices are located at 1301 Avenue of the Americas, New York,
New York, where we sub-lease approximately 62,600 square feet of space from an
unaffiliated party. Additionally, we lease 22 branch office facilities, the
largest of which is 7,900 square feet, and none of which, individually,

represent a material expense to our operations. Our principal New York City
office rent expense is material to our operations. We took occupancy of this new
facility in June 2003 and due to a contractual rent credit, will not pay any
rent until June 2004. We are still liable under the lease for our former
principal offices covering 16,500 square feet at 304 Park Avenue South, New
York, New York until December 2008. This space is currently being marketed for
sub-lease. If we are forced to vacate any of our facilities due to lease
expirations or any other reason, we believe that equally suitable alternative
locations are available in all areas where we currently do business.

LEGAL PROCEEDINGS

Neither NYMC nor we are involved in any material litigation. Because the
nature of our business involves the collection of numerous accounts, the
validity of liens and compliance with various state and federal lending laws, we
are subject to various legal proceedings in the ordinary course of our business
related to foreclosures, bankruptcies, condemnation and quiet title actions, and
alleged statutory and regulatory violations. We are also subject to legal
proceedings in the ordinary course of business related to employment matters. We
believe all of these proceedings, taken as a whole, will not have a material
adverse effect on our business, financial position or our results of operations.

MANAGEMENT

DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES

Upon completion of this offering, our board of directors will consist of
nine directors, including the six director nominees named below, each of whom
has been nominated for election and consented to serve as a director upon
completion of this offering. Of these nine directors, we believe the six
director nominees will be considered "independent" in accordance with the
requirements of the Securities and Exchange Commission and the New York Stock
Exchange. Our directors, executive officers and certain key employees and their
ages as of May 31, 2004, and their anticipated positions with us upon completion
of this offering, are as follows:

NAME AGE TITLE
---- ---- -----

Steven B. Schnall......................... 37 Chairman of the Board and Co-Chief
Executive Officer
David A. Akre............................. 46 Director and Co-Chief Executive Officer
Raymond A. Redlingshafer, Jr. ............ 48 Director, President and Chief Investment
Officer
David R. Bock............................. 61 Director nominee
Alan L. Hainey............................ 57 Director nominee
Steven G. Norcutt......................... 44 Director nominee
Mary Dwyer Pembroke....................... 46 Director nominee
Jerome F. Sherman......................... 64 Director nominee
Thomas W. White........................... 66 Director nominee
Michael I. Wirth.......................... 46 Chief Financial Officer, Executive Vice
President, Secretary and Treasurer
Steven R. Mumma........................... 45 Chief Operating Officer and Vice President
Joseph V. Fierro.......................... 43 Chief Operating Officer of NYMC

EXECUTIVE OFFICERS

STEVEN B. SCHNALL is our Chairman and Co-Chief Executive Officer. Prior to
co-founding New York Mortgage Trust, Mr. Schnall co-founded NYMC in 1998, where
he has served since inception as President and Chief Executive Officer. From
1992 until 1998, Mr. Schnall founded and served as the President of New York
Mortgage Corp., one of the predecessors of NYMC. Prior to forming New York
Mortgage Corp. in 1992, Mr. Schnall worked for Price Waterhouse, a big eight
public accounting firm. Mr. Schnall received a B.S. cum laude in accounting from
the University of Florida.

DAVID A. AKRE is our Co-Chief Executive Officer. Prior to co-founding New
York Mortgage Trust, Mr. Akre served as Vice President in Capital Markets at
Thornburg Mortgage Corporation, a publicly traded residential mortgage REIT,
from 1997 to 2003. From 1995 to 1997, Mr. Akre was a whole loan trader at
Principal Asset Markets, a subsidiary of Principal Life, a boutique whole loan
broker-dealer located in New Jersey. From 1988 to 1995, Mr. Akre served in a
variety of positions, including Vice President, with GE Capital Mortgage
Corporation. These positions included responsibility for mortgage pipeline
hedging, bidding bulk fixed-rate loan pools, securitization of specific mortgage
portfolios for public pension funds, and brokering loans between mortgage
insurance clients. From 1985 to 1988, Mr. Akre worked in institutional taxable
fixed income sales for Security Pacific Merchant Bank in New York, and prior to
that, Mr. Akre worked in mortgage origination for three mortgage banking
companies in New York. Mr. Akre received a B.S. in nautical science from the
United States Merchant Marine Academy.

RAYMOND A. REDLINGSHAFER, JR. is our President and Chief Investment
Officer. Prior to co-founding New York Mortgage Trust, Mr. Redlingshafer served
as the Managing Director of Pedestal Capital, an Internet-based trading platform
used by institutional investors and dealers to transact in mortgage-backed
securities, from 2000 to 2001. From 1998 to 2000, Mr. Redlingshafer served as
Vice President of Mortgage

Capital Markets for Salomon Smith Barney in mortgage trading. From 1995 to 1998,
Mr. Redlingshafer served as National Director of Securities Marketing for
Freddie Mac. Prior to joining Freddie Mac, Mr. Redlingshafer was with
UBS-PaineWebber from 1988 to 1995, where he started the ARMS trading desk and
held a variety of mortgage trading positions before being promoted to Mortgage
Sales & Product Manager. Mr. Redlingshafer began his career in 1983 with Goldman
Sachs & Co. as a whole loan mortgage trader and was one of the original members
of Goldman's mortgage department. Mr. Redlingshafer received a B.S. in business
administration, as well as a J.D. and an M.B.A., from Creighton University.

MICHAEL I. WIRTH is our Chief Financial Officer. Prior to co-founding New
York Mortgage Trust, Mr. Wirth served from 2002 to 2003 as Chief Financial
Officer of Newcastle Investment Corp., a publicly traded mortgage REIT. Mr.
Wirth also served as a Senior Vice President of Fortress Investment Group, the
external advisor of Newcastle, from 2002 to 2003. From 2000 to 2002, Mr. Wirth
served as the Senior Vice President and Chief Financial Officer of the following
three publicly traded companies: Charter Municipal Mortgage Acceptance Company,
a residential finance company; American Mortgage Acceptance Company, a mortgage
REIT; and Aegis Realty Inc., a retail property REIT. Mr. Wirth also served as a
Senior Vice President of Related Capital Company, which externally managed each
of the foregoing companies from 2000 to 2002. From 1997 to 2000, Mr. Wirth
served as a Vice President at CGA Investment Management, a monoline insurer of
structured debt and an investor in real estate and asset-backed securities. From
1988 to 1997, Mr. Wirth was a Senior Manager with the Real Estate Consulting
Practice of Deloitte & Touche where he specialized in real estate capital
markets and the financial services industry. From 1986 to 1988, Mr. Wirth was
the Chief Financial Officer of Cochran Properties, Inc., a commercial real
estate development company based in Atlanta, Georgia. Mr. Wirth was a Senior
Accountant with Deloitte Haskins & Sells specializing in real estate and banking
from 1983 to 1986. Mr. Wirth received a B.B.A. from Georgia State University and
is a member of the American Institute of Certified Public Accountants.

STEVEN R. MUMMA is our Chief Operating Officer. From September 2000 to
September 2003, Mr. Mumma was a Vice President of Natexis ABM Corp, a
wholly-owned subsidiary of Natexis Banques Populaires. From 1997 to 2000, Mr.
Mumma served as a Vice President of Mortgage-Backed Securities trading for
Credit Agricole. Prior to joining Credit Agricole, from 1988 to 1997, Mr. Mumma
was a Vice President of Natexis ABM Corp. Prior to joining Natexis ABM Corp,
from 1986 to 1988, Mr. Mumma was a Controller for PaineWebber Real Estate
Securities Inc., the mortgage-backed trading subsidiary of PaineWebber Inc.
Prior to joining PaineWebber, from 1984 to 1985, Mr. Mumma worked for Citibank
in its Capital Markets Group, as well as for Ernst & Young. Mr. Mumma is a
certified public accountant, and received a B.B.A. cum laude from Texas A&M
University.

JOSEPH V. FIERRO is NYMC's Chief Operating Officer. He co-founded NYMC,
where he has served as the Chief Operating Officer since 1998. Prior to
co-founding NYMC, Mr. Fierro was the founder in 1989 and President of First
Security Financial Services, Inc, a wholesale mortgage banker providing niche
mortgage products to mortgage brokers nationwide. During this time, Mr. Fierro
served on the advisory committees for Shearson-Lehman Mortgage and Household
Mortgage Services. Prior to founding First Security Financial Services, from
1984 to 1989, Mr. Fierro was employed as Senior Vice President at Resource
Mortgage Banking Ltd., one of the first mortgage banking firms licensed by the
State of New York. Mr. Fierro attended Newburgh Free Academy and Mount St.
Mary's College, where he studied Computer Science and Business Management.

DIRECTORS

DAVID R. BOCK has agreed to become a member of our board of directors upon
completion of this offering. Mr. Bock is a Managing Partner of Federal City
Capital Advisors, a strategic consulting and advisory firm, which is the
successor firm to Maitland Ruick and Company, where he has served since 1995.
Prior to joining Federal City Capital Advisors, Mr. Bock served as Executive
Vice President and Chief Financial Officer of Pedestal Inc., an online
mortgage-backed securities trading platform from 2000 until 2002. From 1992 to
1995, Mr. Bock served as a Managing Director at Lehman Brothers. Prior to
joining Lehman Brothers, Mr. Bock served as Director, Operations Staff at The
World Bank, where he

was responsible for integrating policy, strategy and budget across four
geographic regions and where he served as a member of the bank's senior
management investment committee. Mr. Bock also served in a number of other
management positions at The World Bank from 1974 to 1979 and 1982 to 1989
including Director, Bank Group Financial Policy, Director, Country Debt
Restructuring and Liability Management and Division Chief, Funding Strategy.
From 1979 to 1982, Mr. Bock was a partner of Atlantic Resources, a merchant bank
focused on energy, agriculture and transportation projects in the Mid-Atlantic
region of the U.S. Prior to this, Mr. Bock was an associate at McKinsey &
Company. Mr. Bock received a B.A. in Philosophy from the University of
Washington and M.Phil. in Economics from Oxford University, where he was a
Rhodes Scholar.

ALAN L. HAINEY has agreed to become a member of our board of directors upon
completion of this offering. Mr. Hainey is the owner and manager of Carolina
Dominion, LLC, a real estate brokerage development and investment firm that he
founded in 2004. In 2001, Mr. Hainey incorporated and funded the Merrill L.
Hainey Family Foundation, a not-for-profit charitable organization dedicated to
academic achievement through scholarships, where he continues to serve as
President. From 1996 to 2000, Mr. Hainey operated an independent consulting
practice providing advisory and marketing services to clients engaged in
insurance, mortgage finance and investment management. From 1990 to 1996, Mr.
Hainey served as President and Chief Operating Officer of GE Capital's mortgage
banking businesses and was a member of the GE Capital corporate executive
council. From 1983 to 1990, Mr. Hainey served as President of GE Capital
Mortgage Securities. Mr. Hainey received a B.A. with honors and a J.D. from the
University of Missouri and a Master of Management with distinction from the
Kellogg School of Northwestern University.

STEVEN G. NORCUTT has agreed to become a member of our board of directors
upon completion of this offering. Since May 2001, Mr. Norcutt has served as
Executive Vice President and Chief Operating Officer of Centennial Mortgage and
Funding, Inc., a residential mortgage banking company based in Minnesota. Mr.
Norcutt's responsibilities at Centennial Mortgage and Funding, Inc., include
oversight of firm profitability, diversification of product mix, recruiting,
technology, production management, financial management and financial reporting.
Prior to joining Centennial Mortgage and Funding, Inc., Mr. Norcutt served as
Senior Vice President and Portfolio Manager of Structured Finance for Reliastar
Investment Research, Inc. from 1993 through 2001. Mr. Norcutt joined Reliastar
Investment Research, Inc. in 1988 as Vice President and Portfolio Manager of
Residential Mortgage Loans. Mr. Norcutt received a M.B.A. in Finance from the
University of Minnesota and a B.S. in Finance from St. Cloud State University.

MARY DWYER PEMBROKE has agreed to become a member of our board of directors
upon completion of this offering. Ms. Pembroke has served as a government
relations strategist for the Student Loan Marketing Association from 2003 to
2004 and served as Counsel, Government Relations for BlackBird Technologies from
2001 to 2003. From 2001 to 2002, Ms. Pembroke served as a government relations
consultant for Freddie Mac and from 1994 to 2001 Ms. Pembroke served as the
Director, Government Relations for Freddie Mac. Prior to her service with
Freddie Mac, Ms. Pembroke served as a Manager, International Risk Assessment
with FMC Corporation, a Manager, Government Relations and Community Development
with Citibank, counsel to the Housing and Urban Affairs Subcommittee of the
United States Senate Banking Committee and as a legislative assistant to a
United States Congressman. Ms. Pembroke is currently Campaign Director for
Special Olympics International. Ms. Pembroke received a B.A. in History,
Political Science and French from Marquette University and a J.D. from Marquette
University.

JEROME F. SHERMAN has agreed to become a member of our board of directors
upon completion of this offering. Dr. Sherman is a recently retired Finance
Professor from Creighton University. Since May 1999, Dr. Sherman has worked as a
financial consultant to various corporations and as an economic and financial
expert in litigation matters. Prior to that time, Dr. Sherman spent 29 years
teaching both undergraduate and graduate finance courses at Creighton University
and the University of Nebraska-Lincoln. Prior to that time, Dr. Sherman spent
five years as a registered representative and owner of a small brokerage firm
and five years in the research and corporate finance departments of two regional
brokerage firms. Dr. Sherman has served on a variety of corporate and civic
boards in Omaha and other locations in the Midwest.

Dr. Sherman has served as an economic and financial expert in more than 1,500
legal proceedings during the past thirty years. Dr. Sherman received a B.S. in
Mathematics from Regis College, a M.A. in Finance and Economics from Memphis
State University and a Ph.D. in Finance from the University of Mississippi.

THOMAS W. WHITE has agreed to become a member of our board of directors
upon completion of this offering. Since 2003, Mr. White has served as Senior
Advisor to Beekman Advisors, a strategic financial advisory and investment
management firm focused on the affordable housing sector. Since 2001, Mr. White
has served as a member of the board of trustees of Charter Mac where he also
serves as a member of the board's investment committee. Mr. White also serves on
the board of directors of the Enterprise Social Investment Company, a for-profit
subsidiary of the Enterprise Foundation. In 2001, Mr. White retired as a Senior
Vice President of Fannie Mae where he has, served in a variety of positions
since 1987. From 1986 to 1987, Mr. White served as an investment banker with
Bear Stearns, Inc. From 1979 to 1986, Mr. White was the executive vice president
of the National Council of State Housing Agencies. Mr. White received a B.A. in
History from Wayne State University.

OUR BOARD OF DIRECTORS

Our board of directors currently consists of three directors. Immediately
following the completion of this offering, we will increase the size of our
board of directors to nine directors and elect the six director nominees named
above, all of whom we believe will be considered independent directors under the
standards imposed by the Securities and Exchange Commission and the New York
Stock Exchange.

Our board of directors is not divided into classes; therefore, our entire
board of directors will be elected each year to serve until the next annual
meeting of stockholders and until a successor is duly elected and qualifies. Our
authorized number of directors may be changed only by resolution of the board of
directors.

BOARD COMMITTEES

Audit Committee. Following completion of this offering, our audit
committee will consist of three independent directors, one of whom will serve as
the chairperson and one of whom will be an audit committee financial expert as
defined in applicable Securities and Exchange Commission and New York Stock
Exchange regulations. The audit committee assists the board of directors in its
general oversight of our financial reporting, internal controls and audit
functions. Following completion of this offering, we expect our audit committee
to adopt an audit committee charter, that will define the audit committee's
primary duties to include:

- serving as an independent and objective body to monitor and assess our
compliance with legal and regulatory requirements, our financial
reporting process and related internal contract systems and the
performance generally of our internal audit function;

- overseeing the audit and other services of our outside auditors and being
directly responsible for the appointment, independence, qualifications,
compensation and oversight of our outside auditors, who will report
directly to the audit committee;

- providing an open means of communication among our outside auditors,
accountants, financial and senior management, our internal audit
department, our corporate compliance department and our board of
directors;

- resolving any disagreements between our management and our independent
auditors regarding our financial reporting;

- meeting at least quarterly with our senior executives, internal audit
staff and independent auditors; and

- preparing the audit committee report for inclusion in our annual proxy
statements for our annual stockholder meeting.

Our audit committee charter will also mandate that our audit committee
approve all audit, audit-related, tax and other services conducted by our
independent auditors.

Compensation Committee. Following completion of this offering, our
compensation committee will consist of three independent directors. Following
completion of this offering, we expect our compensation committee to adopt a
compensation committee charter that will define the compensation committee's
primary duties to include:

- establishing guidelines and standards for determining the compensation of
our executive officers;

- evaluating the performance of our senior executives;

- reviewing our executive compensation policies;

- recommending to our board of directors compensation levels for our
executive officers;

- administering and implementing our equity incentive plans;

- determining the number of shares underlying, and the terms of, restricted
common stock, and stock options to be granted to our directors, executive
officers and other employees pursuant to our equity incentive plans; and

- preparing a report on executive compensation for inclusion in our annual
proxy statement for our annual stockholder meeting.

Nominating and Corporate Governance Committee. Upon completion of this
offering, our nominating and corporate governance committee will consist of
three independent directors. We expect that the members of our nominating and
corporate governance committee, following completion of this offering, will
adopt a nominating and corporate governance committee charter that will define
the nominating and corporate governance committee's primary duties to include:

- establishing standards for service on our board of directors;

- identifying individuals qualified to become members of our board of
directors and recommending director candidates for election or
re-election to our board;

- considering and making recommendations to our board of directors
regarding board size and composition, committee composition and structure
and procedures affecting directors; and

- monitoring our corporate governance principles and practices, our human
resource practices and our fulfillment of our obligations of fairness in
internal and external matters.

DIRECTOR COMPENSATION

Any member of our board of directors who is also our employee will not
receive additional compensation for serving on our board of directors. Our
non-employee directors will receive an annual retainer of $25,000 and a fee of
$1,000 for each full board meeting attended in person, a fee of $750 for each
committee meeting attended in person and that occurs on a date different from a
full board meeting date and a fee of $500 for each full board or committee
meeting attended telephonically. In addition, each non-employee director who is
a committee chairman will receive an annual retainer of $7,500 for the audit
committee chairman, $6,000 for the compensation committee chairman and $5,000
for the chairmen of other committees. We will also reimburse our directors for
their reasonable travel expenses, if any, incurred in connection with their
attendance at full board and committee meetings.

Our non-employee directors will be eligible to receive restricted stock and
option awards under our stock incentive plan. Our non-employee directors will
receive annual stock awards valued at $15,000 and an initial one-time award of
2,500 shares.

EXECUTIVE COMPENSATION

The following table sets forth (i) the total compensation paid by NYMC to
Mr. Schnall, as chief executive officer and member, and Mr. Fierro, as chief
operating officer and member, for the year ended December 31, 2003 and (ii) the
total annual compensation we expect to pay our co-chief executive officers, our
next three most highly compensated executive officers and Mr. Fierro, who will
continue to serve as chief operating officer of NYMC, for 2004 following
completion of this offering. We were organized in September 2003, did not
conduct any prior operations and, accordingly, did not pay any compensation to
Messrs. Akre, Redlingshafer, Wirth or Mumma during the year ended December 31,
2003.

LONG-TERM COMPENSATION
ANNUAL COMPENSATION --------------------------
-------------------------------------- RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING ALL OTHER
NAME AND POSITION YEAR SALARY(1) BONUS COMPENSATION(2) AWARDS OPTIONS(#)(5) COMPENSATION
----------------- ---- --------- -------- --------------- ---------- ------------- ------------

Steven B. Schnall,................... 2004 $390,000 (3) $ -- $ 713,520(4) 123,550 --
Chairman and Co-Chief 2003 221,250 -- -- -- -- 16,275,447(6)
Executive Officer
David A. Akre,....................... 2004 $390,000 (3) $ -- 955,830(4) -- --
Co-Chief Executive Officer
Raymond A. Redlingshafer, Jr., ...... 2004 $390,000 (3) $ -- 955,830(4) -- --
President and Chief
Investment Officer
Michael I. Wirth,.................... 2004 $320,000 (3) $ -- 744,300(4) -- --
Chief Financial Officer
Steven R. Mumma...................... 2004 $212,000 $100,000 -- 295,970(4) -- --
Chief Operating Officer
Joseph V. Fierro,.................... 2004 $315,000 (3) $ -- 305,800(4) 52,950 --
Chief Operating Officer, 2003 221,250 -- -- -- -- 4,253,025(7)
NYMC

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

(1) Amounts for 2004 are annualized. The officers will only receive a pro rated
portion of the amounts shown based on the number of days between the closing
of this offering and the end of 2004.

(2) Under the employment agreements for these individuals, we will reimburse the
premiums payable for life insurance policies in the amount of $3.0 million
per person (the amount with respect to Mr. Mumma will be $1.5 million) and
supplemental long-term disability insurance policies for these individuals
during the terms of the agreements. The premium amounts have not yet been
determined, but we do not expect the premiums for these policies to exceed
$15,000 per person.

(3) The employment agreements for these individuals include provisions for a
performance based bonus ranging from a multiple of between zero and two
times the executive's annual base salary as determined at the discretion of
the compensation committee of our board of directors.

(4) Based on an initial public offering price of $9.00 per share.

(5) These options to purchase shares of our common stock to be granted upon
completion of this offering will be fully vested upon grant and will have an
exercise price equal to the initial public offering price of our common
stock in this offering.

(6) Represents $4,842,897 in cash distributions paid and the issuance of a
promissory note in the original principal amount of $12,132,550, which was
subsequently reduced to $11,432,550. The note will be repaid out of the
proceeds of this offering.

(7) Represents $1,978,673 in cash distributions paid and the issuance of a
promissory note in the original principal amount of $2,574,352, which was
subsequently reduced to $2,274,352. The note will be repaid out of the
proceeds of this offering.

RESTRICTED STOCK AWARDS

Our stock incentive plan will allow for the grant of stock awards to our
officers, directors, employees and other persons who provide services to us. See
"Stock and Benefit Plans -- 2004 Stock Incentive Plan" below. Upon the closing
of this offering, we will grant an aggregate of 412,125 stock awards to the
executive officers, directors and key employees set forth in the table below.
These stock awards will have voting and dividend rights. One-third of the awards
shown below to Messrs. Schnall, Akre, Redlingshafer, Wirth, Fierro and Mumma
will be unrestricted upon the date of grant and two-thirds will be subject to
forfeiture restrictions that will terminate ratably over the three-year period
from the date of grant. The awards shown below to our directors will not be
subject to any forfeiture restrictions:

INITIAL AWARD OF
RESTRICTED
NAME STOCK(1)
---- ----------------

Executive Officers
Steven B. Schnall........................................... 71,352
David A. Akre............................................... 95,583
Raymond A. Redlingshafer, Jr. .............................. 95,583
Michael I. Wirth............................................ 74,430
Steven R. Mumma............................................. 29,597
Joseph V. Fierro............................................ 30,580
Directors
David R. Bock............................................... 2,500
Alan L. Hainey.............................................. 2,500
Steven G. Norcutt........................................... 2,500
Mary Dwyer Pembroke......................................... 2,500
Jerome F. Sherman........................................... 2,500
Thomas W. White............................................. 2,500

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

(1) Amounts shown assume no exercise by the underwriters of their option to
purchase up to an additional 2,250,000 shares of our common stock to cover
over-allotments. If the over-allotment option is exercised, each of the
awards to our executive officers will be increased proportionately with the
increase in the number of shares sold in this offering.

EMPLOYMENT AGREEMENTS

We have entered into employment agreements with each of the executive
officers named in the executive compensation table above. The employment
agreements provide that these executive officers are eligible to participate in
the 2004 Stock Incentive Plan, as described above in the section entitled
"Restricted Stock Awards" and below in the section entitled "Stock and Benefit
Plans -- 2004 Stock Incentive Plan." For a list of the initial awards of
restricted stock under the 2004 Stock Incentive Plan to each of these executive
officers during the fiscal year 2004, see the section entitled "Restricted Stock
Awards" above. The employment agreements also provide that these executive
officers are eligible to receive annual cash incentive bonuses under our
approved bonus plans. See "Management -- Executive Compensation" above.

These employment agreements will expire on December 31, 2007, unless
further extended or sooner terminated. Commencing on January 1, 2005, and on
each January 1 thereafter, the term of each of these employment agreements will
be automatically extended for one additional calendar year, unless we or the
executive provides the other with a notice of non-renewal by no later than the
October 31 immediately preceding such January 1. These agreements provide the
following annual base salaries for the fiscal year 2004: Steven B. Schnall,
$390,000; David A Akre, $390,000; Raymond A. Redlingshafer, Jr., $390,000;
Michael I. Wirth, $320,000; Joseph V. Fierro, $315,000; and Steven R. Mumma,
$212,000. Each of these base salaries will increase by 5% on January 1, 2005 and
effective each January 1 thereafter will receive a

minimum percentage increase equal to the increase in the Consumer Price Index
for the preceding year. Mr. Mumma's base salary will increase to $250,000 on
January 1, 2005 and thereafter will increase at a minimum by a percentage equal
to the increase in the Consumer Price Index for the preceding year. These
agreements also provide that the executives will be eligible to participate in
our annual cash incentive bonus plan adopted by our compensation committee for
each fiscal year during the term providing for cash bonuses of up to two times
the executive's base salary. Mr. Mumma will receive a guaranteed bonus for 2004
of $100,000 and thereafter will participate in our annual cash incentive bonus
plan.

These agreements provide that the executive officers agree to devote
substantially all of their business time to our operations (except as we
otherwise agree, including on behalf of any of our subsidiaries); provided
however that the executives named above are not precluded from serving as a
director or trustee in any other firm or from pursuing real estate investments
and other personal investments, as long as those activities do not interfere
with the performance of the executive's duties or violate the non-competition
provisions in the agreements. These employment agreements permit us to terminate
the executives' employment with appropriate notice for or without "cause."
"Cause" is generally defined to mean:

- committing fraud or misappropriating, stealing or embezzling funds or
property from us or our affiliates, or attempting to secure personally
any profit in connection with any transaction entered into or on our
behalf or on behalf of our affiliates;

- knowingly violating or breaching any material law or regulation to the
material detriment of us or our affiliates;

- conviction of, or the entry of a plea of guilty or nolo contendere to, a
felony which in the reasonable opinion of the board of directors brings
the executive into disrepute or is likely to cause material harm to our
business, customer or suppliers relations, financial condition or
prospects;

- a willful failure by the executive to perform his material duties under
the employment agreement that continues for a period of 30 days after
written notice to the executive; or

- the breach of any non-competition, non-disclosure or non-solicitation
agreement between the executive and us that causes or is reasonably
likely to cause material harm to us.

In addition, each of the executives named above has the right under his
employment agreement to resign for "good reason" in the event of (a) an
assignment to the executive of any material duties inconsistent with the
executive's position with us or a substantial adverse alteration in the nature
or status of the executive's responsibilities without the consent of the
executive; (b) a material reduction in employee benefits other than a reduction
generally applicable to similarly situated executives of our company without the
consent of the executive; (c) a failure on our part to comply with any material
provision of the employment that is not cured within 30 days after written
notice to us; (d) any failure on our part to pay the executive's base salary or
any incentive bonus to which the executive is entitled under our bonus plan
that, in either case, is not cured within ten days after written notice to us,
or any failure of our compensation committee to approve a bonus plan for any
fiscal year; and (e) the relocation of our principal place of business outside
of a fifty mile radius of Midtown Manhattan without the consent of the
executive. In addition, for Mr. Schnall only, for so long as he beneficially
owns at least 1,000,000 shares of our common stock, "good reason" shall also
include (i) a failure on the part of our board of directors to nominate Mr.
Schnall for re-election to our board of directors, (ii) a failure on the part of
our shareholders to re-elect Mr. Schnall as a member of our board of directors
or (iii) any removal by our board of directors or shareholders of Mr. Schnall
from our board of directors, other than a removal for "cause."

Pursuant to their employment agreement, the executives named above will
receive four weeks of paid vacation annually and various other customary
benefits. In addition, we will purchase a term life insurance policy for each of
the executives named above, with a death benefit of $3.0 million (except for

Mr. Mumma, whose death benefit is $1.5 million), and will also reimburse each of
the named executives for the income tax they incur with respect to our payment
of the premiums on these policies.

We have the right to obtain a key man life insurance policy for our benefit
on the life of each of our executives.

The employment agreements referred to above also provide that the named
executives will be eligible to receive the same benefits, including medical
insurance coverage and retirement plan benefits in a 401(k) plan to the same
extent as other similarly situated employees, and such other benefits as are
commensurate with their position. Participation in employee benefit plans will
be subject to the terms of such benefit plans as in effect from time to time.

If the executives' employment is terminated for "cause" or the executive
resigns other than for "good reason," we will pay the executive his full base
salary through to the date of termination and reimburse the executive for all
reasonable and customary expenses associated with his employment by us through
the date of termination. If however, we terminate the executive without cause
(other than for death or disability) or the executive terminates his employment
for good reason, we will be obligated to pay (a) any earned and accrued but
unpaid installment of base salary through the date of termination and all other
unpaid and pro rata amounts to which the executive is entitled as of the date of
termination under any compensation plan or program of ours, including the annual
bonus plan and all accrued but unused vacation time; (b) a lump sum payment of
an amount equal to (i) the sum of the executive's base salary in effect as of
the date of termination plus the executive's highest annual bonus earned in the
last three fiscal years multiplied by (ii) the lesser of (A) three or (B) the
number of whole months remaining under the employment agreement divided by 12;
(c) the payment of premiums for group health coverage for 18 months following
the date of termination; and (d) other benefits as provided for in such
employment agreement.

In the event we deliver to the executive a notice of non-renewal of his
employment agreement, the executive will have the right to resign at any time
during the remainder of his employment term and we will be obligated to pay (a)
any earned and accrued but unpaid installment of base salary through the date of
termination and all other unpaid and pro rata amounts to which the executive is
entitled as of the date of termination under any compensation plan or program of
ours, including the annual bonus plan and all accrued but unused vacation time;
(b) a lump sum payment of an amount equal to the sum of the executive's base
salary in effect as of the date of termination plus the executive's highest
annual bonus earned in the last three fiscal years; (c) the payment of premiums
for group health coverage for 18 months following the date of termination; and
(d) other benefits as provided for in such employment agreement.

In addition, in the event of a termination of an executive's employment by
us for any reason other than for cause, or any resignation by an executive
following receipt from us of a notice of non-renewal, all of the options,
restricted stock awards and any other equity awards granted to such executive
shall become fully vested, unrestricted and exercisable as of the date of
termination.

Our obligation to make payments to an executive as described above is
conditioned on the executive's delivery to us of a general release of all claims
against us.

Upon a change in control of us, all of the options, restricted stock awards
and any other equity awards granted to such executive shall become fully vested,
unrestricted and exercisable as of the date of termination. In general terms, a
change of control of us will be deemed to occur:

- if a person or entity, acting alone or as part of a "group" within the
meaning of Section 13(d) of the Securities Exchange Act of 1934, as
amended, acquires more than 50% of our then outstanding voting
securities;

- if the holders of our outstanding voting securities approve the transfer
of all or substantially all of our total assets on a consolidated basis;

- if the holders of our outstanding voting securities approve a transaction
pursuant to which we will undergo a merger, consolidation, or statutory
share exchange (unless the holders of our voting shares immediately prior
to the transaction have at least 50% of the combined voting power of the
securities in the surviving entity resulting from the transaction or its
parent);

- if the holder of our outstanding voting securities approve a plan of
complete liquidation or upon the liquidation, dissolution, sale or
disposition of all or substantially all of our assets;

- if a majority of the members of our board of directors votes in favor of
a resolution stating that a change in control of us has occurred; or

- if our continuing directors cease for any reason to constitute a majority
of the members of our board of directors.

During an executive's employment with us and for a 24 month period after
termination of an executive's employment for any reason (other than a
resignation following receipt by the executive of a notice of non-renewal, in
which case the period shall be 12 months after termination), each executive
under these employment agreements has agreed not to compete with us by working
with or investing in (subject to certain limited exceptions) any enterprise
engaged in our principal line of business, or a line of business that we plan on
entering, in any state where we presently conduct or intend to conduct business.
In addition, each executive under these employment agreements has agreed to not
solicit, induce or attempt to induce any person who has been employed by us or
our affiliates, suppliers, licensees or consultants within six months prior to
the date of termination.

STOCK AND BENEFIT PLANS

In connection with our reorganization as a REIT, we intend to adopt a new
stock incentive plan immediately before the closing of this offering.

2004 STOCK INCENTIVE PLAN

This summary is qualified in its entirety by the detailed provisions of our
stock incentive plan. You may refer to the exhibits that are a part of the
registration statement of which this prospectus is part for a copy of our stock
incentive plan.

Our board of directors and stockholders approved our stock incentive plan
on April 16, 2004. The purpose of our stock incentive plan is to provide
incentives to our employees, non-employee directors and other service providers
to stimulate their efforts toward our continued success, long-term growth and
profitability and to attract, reward and retain key personnel.

There will be 412,125 shares of common stock outstanding under our stock
incentive plan following completion of this offering and the grant of stock
awards described above in "-- Restricted Stock Awards." The number of shares of
common stock reserved for future issuance under our stock incentive plan either
as restricted stock awards or pursuant to the exercise of stock options will be
1,088,125. Of this amount, options to purchase a total of 626,500 shares of our
common stock will be awarded to Messrs. Schnall and Fierro and certain other key
employees upon completion of this offering. The number of restricted shares of
common stock to be granted upon completion of this offering and the number of
shares of common stock available for future grant is subject to proportional
increase in the event that the underwriters exercise their option to purchase up
to an additional 2,250,000 shares to our common stock to cover over-allotments.

The individual limits on the number of shares of common stock issuable
under our stock incentive plan, which are described in the following paragraph,
become effective at the expiration of a grace period which expires on the
earlier to occur of:

- the first stockholders meeting at which directors are to be elected held
after the close of the third calendar year following the calendar year in
which this offering occurs; or

- the time at which our stock incentive plan is materially amended.

The maximum number of shares of common stock subject to options, share
appreciation rights or time-vested shares of restricted stock that can be issued
under our stock incentive plan to any person is 175,000 shares in any single
calendar year. The maximum number of shares that can be issued under our stock
incentive plan to any person other than pursuant to options, share appreciation
rights or time-vested shares of restricted stock is 60,000 shares in any single
calendar year. The maximum amount that may be earned as an annual incentive
award or other cash award in any fiscal year by any one person is $3,000,000 and
the maximum amount that may be earned as a performance award or other cash award
in respect of a performance period by any one person is $3,000,000.

Section 162(m) of the Internal Revenue Code limits publicly traded
companies to an annual deduction for federal income tax purposes of $1,000,000
for compensation paid to each of their chief executive officers and the four
highest compensated executive officers other than the chief executive officer
determined at the end of each year, referred to as covered employees. However,
performance-based compensation is excluded from this limitation. Our stock
incentive plan is designed to permit the compensation committee to grant awards
that qualify as performance-based for purposes of satisfying the conditions of
Section 162(m).

Administration. Upon completion of this offering, our stock incentive plan
will be administered by the compensation committee of our board of directors.
Subject to the terms of our stock incentive plan, the compensation committee may
select participants to receive awards, determine the types of awards and terms
and conditions of awards and interpret provisions of our stock incentive plan.

Source of Shares. The shares of common stock issued or to be issued under
our stock incentive plan consist of authorized but unissued shares. If any
shares covered by an award are not purchased or are forfeited, if an award is
settled in cash or if an award otherwise terminates without issuance and
delivery of any shares of common stock, then the number of shares of common
stock counted against the aggregate number of shares available under the plan
with respect to the award will, to the extent of any such forfeiture or
termination, again be available for making awards under our stock incentive
plan, but will be deducted from the maximum individual limits described above.

If the option price, a withholding obligation or any other payment is
satisfied by tendering shares or by withholding shares, only the number of
shares issued net of the shares tendered or withheld will be deemed delivered
for purposes of determining the maximum number of shares available for delivery
under our stock incentive plan.

Eligibility. Awards may be made under our stock incentive plan to our or
our affiliates' employees, outside directors and consultants and to any other
individual whose participation in our stock incentive plan is determined to be
in our best interests by our board of directors.

Amendment or Termination of the Plan. While our board of directors may
terminate or amend our stock incentive plan at any time, no amendment may
adversely impair the rights of grantees with respect to outstanding awards. In
addition, an amendment will be contingent on approval of our stockholders to the
extent required by law, the rules of the New York Stock Exchange or if the
amendment would increase the benefits accruing to participants under our stock
incentive plan, materially increase the aggregate number of shares of common
stock that may be issued under our stock incentive plan, or materially modify
the requirements as to eligibility for participation in our stock incentive
plan.

Unless terminated earlier, our stock incentive plan will terminate in 2014,
but will continue to govern unexpired awards.

Options. Our stock incentive plan permits the granting of options to
purchase shares of common stock intended to qualify as incentive stock options
under the Internal Revenue Code, and stock options that do not qualify as
incentive stock options, referred to as nonqualified stock options. The maximum
number of shares of common stock that can be issued to any participant pursuant
to options that are earned solely on account of the passage of time or continued
employment or service is 175,000 shares in any calendar year. The exercise price
of each stock option may not be less than 100% of the fair market value of our
shares of common stock on the date of grant. If we were to grant incentive stock
options to any 10% stockholder, the exercise price may not be less than 110% of
the fair market value of our common stock on the date of grant. We may grant
options in substitution for options held by employees of companies that we may
acquire. In this case, the exercise price would be adjusted to preserve the
economic value of the employee's stock option from his or her former employer.
Such options granted in substitution shall not count against the shares
available for issuance under the stock incentive plan.

The term of each stock option will be fixed by the compensation committee
and may not exceed 10 years from the date of grant. The compensation committee
will determine at what time or times each option may be exercised and the period
of time, if any, after retirement, death, disability or termination of
employment during which options may be exercised. Options may be made
exercisable in installments. The exercisability of options may be accelerated by
the compensation committee. The exercise price of an option may not be amended
or modified after the grant of the option, and an option may not be surrendered
in consideration of or exchanged for a grant of a new option having an exercise
price below that of the option which was surrendered or exchanged.

In general, an optionee may pay the exercise price of an option by cash,
certified check, by tendering shares of common stock (which, if acquired from
us, have been held by the optionee for at least six months) or by means of a
broker-assisted cashless exercise. Stock options granted under the stock
incentive plan may not be sold, transferred, pledged or assigned other than by
will or under applicable laws of descent and distribution. However, we may
permit limited transfers of non-qualified options for the benefit of immediate
family members of grantees to help with estate planning concerns.

Options to purchase a total of 450,000 shares of our common stock will be
awarded to certain key employees upon completion of the offering. These options
will have an exercise price equal to the initial public offering price of our
common stock in this offering and will vest in one-third increments on the
first, second and third anniversaries of the closing date. In addition, options
to purchase a total of 176,500 shares of our common stock will be awarded to
Messrs. Schnall and Fierro (123,550 shares to Mr. Schnall and 52,950 shares to
Mr. Fierro) upon completion of the offering. These options will have an exercise
price equal to the initial public offering price of our common stock in this
offering and will be fully vested upon grant.

Stock Awards. Our stock incentive plan also permits the grant of shares of
our common stock in the form of stock awards. The maximum number of shares of
common stock that can be issued to any participant pursuant to stock awards that
are earned solely on account of the passage of time or continued employment or
service is 175,000 shares in any calendar year. A participant's rights in the
stock award may be nontransferable or forfeitable or both for a period of time
or subject to the attainment of certain performance goals tied to the business
criteria described below. These performance goals may include, for example, a
requirement that we or any of our affiliates or the participant achieve stated
objectives or any of the performance criteria listed below. Unrestricted shares
of common stock, which are shares of common stock awarded at no cost to the
participant or for a purchase price determined by the compensation committee,
may also be issued under our stock incentive plan.

Incentive Awards. Incentive awards entitle the participant to receive
shares of common stock or, in the discretion of the compensation committee, a
cash payment, subject to the attainment of performance criteria described below.
All incentive awards shall be finally determined exclusively by the compensation
committee under the procedures established by the compensation committee,
provided however, that no participant may receive an incentive award payment in
any calendar year that exceeds $3,000,000. Incentive awards shall be
nontransferable; provided however, the compensation committee may provide

that an incentive award may be transferred by a participant to the participant's
children, grandchildren, spouse or one or more trusts for the benefit of such
family members or to a partnership in which such family members are the only
partners, on such terms and conditions as may be permitted by Rule 16b-5 under
the Securities Exchange Act of 1934, as amended.

Performance Shares. Our stock incentive plan also allows the grant of
performance share awards, meaning the right to receive common stock, cash or a
combination of common stock and cash in the future. The maximum number of shares
of common stock that can be issued to any participant pursuant to a performance
share award is 150,000 shares in any calendar year. The participant will be
entitled to receive payment pursuant to the performance shares only upon the
satisfaction of performance objectives and other criteria prescribed by the
compensation committee. The performance measurement period will be at least
three years from the date of the award; provided, however, that the performance
measurement period shall be at least one year from the date of the award if the
payment is contingent on the attainment of the objectives stated with respect to
performance criteria listed below. To the extent the performance shares are
earned, our payment obligation may be settled in cash, by shares of our common
stock or a combination of the two.

Stock Appreciation Rights. Stock appreciation rights may be awarded under
our stock incentive plan. Stock appreciation rights entitle the participant to
receive a number of shares of common stock or, in the discretion of the
compensation committee, an amount in cash or a combination of shares and cash,
based on the increase in the fair market value of the shares underlying the
stock appreciation right during a stated period specified by the compensation
committee.

Performance Criteria. The compensation committee will use one or more of
the following business criteria, on a consolidated basis, and/or with respect to
specified subsidiaries or lending groups (except with respect to the total
shareholder return and earnings per share criteria), in establishing performance
goals for awards (other than options and stock appreciation rights) intended to
comply with Section 162(m) of the Internal Revenue Code:

- total stockholder return;

- total stockholder return as compared to total return (on a comparable
basis) of a publicly available index such as, but not limited to, the
Standard & Poor's 500 Stock Index;

- net income;

- pretax earnings;

- funds from operations;

- earnings before interest expense and taxes;

- earnings before interest, taxes, depreciation and amortization;

- operating margin;

- earnings per share;

- return on equity;

- return on capital;

- return on assets;

- return on investment;

- operating earnings;

- working capital;

- ratio of debt to stockholders' equity; and

- revenue.

Adjustments for Stock Dividends and Similar Events. The compensation
committee will make appropriate adjustments in outstanding awards and the number
of shares of common stock available for issuance under our stock incentive plan,
including the individual limitations on awards, to reflect common stock
dividends, stock splits, spin-off and other similar events.

Change in Control. Our stock incentive plan provides that the compensation
committee of our board of directors has the discretion to provide that all or
any outstanding options and stock appreciation rights will become fully
exercisable, all or any outstanding stock awards will become vested and
transferable and all or any outstanding performance shares and incentive awards
will be earned if there is a change in control of us.

Under our stock incentive plan, a change in control is generally defined to
include (i) the acquisition of at least 50% of our voting securities by any
person; (ii) the transfer of all or substantially all of our assets; (iii) a
merger, consolidation or statutory share exchange where our stockholders hold
less than 50% of the voting power of the surviving or resulting entity; (iv) our
directors, including subsequent directors recommended or approved by our
directors, cease to constitute a majority of our board of directors; (v)
stockholder approval of our liquidation or dissolution; or (vi) our board of
directors adopts a resolution to the effect that, in its judgment, as a
consequence of any transaction or event, a change in control has effectively
occurred.

401(k) PLAN

Following completion of this offering, we intend to amend the existing
401(k) plan of NYMC to permit our officers and employees to participate in this
401(k) plan. For some of our and NYMC's employees, we may make matching
contributions with respect to a portion of the contributions made by those
employees.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Following completion of this offering, our board of directors will
establish a compensation committee. We expect that none of our executive
officers will serve on the compensation or similar committee of any other
entity.

LIMITATION ON LIABILITY AND INDEMNIFICATION

Our charter limits, to the maximum extent permitted by Maryland law, the
liability of our directors and officers for money damages, except for liability
resulting from:

- actual receipt of an improper benefit or profit in money, property or
services; or

- a final judgment based upon a finding of active and deliberate dishonesty
by the director or officer that was material to the cause of action
adjudicated.

Our charter authorizes us, and our bylaws obligate us, to the maximum
extent permitted by Maryland law to indemnify, and to pay or reimburse
reasonable expenses in advance of final disposition of a final proceeding to,
any of our present or former directors or officers or any individual who, while
a director or officer and at our request, serves or has served another
corporation, real estate investment trust, partnership, joint venture, trust,
employee benefit plan or any other enterprise as a director, officer, partner or
trustee. The indemnification covers any claim or liability arising from such
status against the person.

Maryland law requires a corporation (unless its charter provides otherwise,
which our charter does not) to indemnify a director or officer who has been
successful in the defense of any proceeding to which he is made a party by
reason of his service in that capacity.

Maryland law permits us to indemnify our present and former directors and
officers against judgments, penalties, fines, settlements and reasonable
expenses actually incurred by them in any proceeding to which they may be made a
party by reason of their service in those or other capacities unless it is
established that:

- the act or omission of the director or officer was material to the matter
giving rise to the proceeding and (i) was committed in bad faith or (ii)
was the result of active and deliberate dishonesty;

- the director or officer actually received an improper personal benefit of
money, property or services; or

- in the case of a criminal proceeding, the director or officer had
reasonable cause to believe that the act or omission was unlawful.

However, Maryland law prohibits us from indemnifying our present and former
directors and officers for an adverse judgment in a suit by or in the right of
the corporation or if the director or officer was adjudged to be liable for an
improper personal benefit unless in either case a court orders indemnification
and then only for expenses. Maryland law requires us, as a condition to
advancing expenses in certain circumstances, to obtain:

- a written affirmation by the director or officer of his or her good faith
belief that he or she has met the standard of conduct necessary for
indemnification; and

- a written undertaking by him or her, or on his or her behalf, to repay
the amount paid or reimbursed by us if it is ultimately determined that
the standard of conduct is not met.

In addition, indemnification could reduce the legal remedies available to
us and our stockholders against our officers and directors. The Securities and
Exchange Commission takes the position that indemnification against liabilities
arising under the Securities Act of 1933 is against public policy and
unenforceable. Indemnification of our directors and officers will not be allowed
for liabilities arising from or out of a violation of state or federal
securities laws, unless one or more of the following conditions are met:

- there has been a adjudication on the merits in favor of the director or
officer on each count involving alleged securities law violations;

- all claims against the director or officer have been dismissed with
prejudice on the merits by a court of competent jurisdiction; or

- a court of competent jurisdiction approves a settlement of the claims
against the director or officer and finds that indemnification with
respect to the settlement and the related costs should be allowed after
being advised of the position of the Securities and Exchange Commission
and of the published position of any state securities regulatory
authority in which the securities were offered as to indemnification for
violations of securities laws.

100

PRINCIPAL STOCKHOLDERS

The following table sets forth the total number and percentage of our
shares of common stock that will be beneficially owned immediately following the
completion of this offering and our acquisition of NYMC by (i) each of our
directors, director nominees and executive officers, (ii) all directors,
director nominees and executive officers as a group, and (iii) all persons known
to us to be the beneficial owner of 5% or more of our outstanding shares of
common stock. As of May 31, 2004, 100 shares of our common stock were issued and
outstanding and all of these shares were held by Steven B. Schnall. These shares
will be cancelled upon completion of the offering. The persons as to whom
information is given in the table below have sole voting and investment power
over the shares beneficially owned, unless otherwise noted in the footnotes
following the table.

SHARES BENEFICIALLY OWNED
AFTER THE OFFERING(1)
--------------------------
NUMBER PERCENT
---------- --------

Steven B. Schnall(2)........................................ 2,259,352 12.4%
Joseph V. Fierro(3)......................................... 968,530 5.3%
David A. Akre(4)............................................ 95,583 *
Raymond A. Redlingshafer, Jr.(5)............................ 95,583 *
Michael I. Wirth(6)......................................... 74,430 *
Steven R. Mumma(7).......................................... 29,597 *
David R. Bock(8)............................................ 2,500 *
Alan L. Hainey(8)........................................... 2,500 *
Steven G. Norcutt(8)........................................ 2,500 *
Mary Dwyer Pembroke(8)...................................... 2,500 *
Jerome F. Sherman(8)........................................ 2,500 *
Thomas W. White(8).......................................... 2,500 *
Executive officers, directors and director nominees as a
group (12 persons)........................................ 3,538,075 19.5%

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

* Less than 1%.

(1) All shares not outstanding but which may be acquired by the stockholder
within 60 days by the exercise of any stock option or any other right are
deemed to be outstanding for the purposes of calculating beneficial
ownership and computing the percentage of the class beneficially owned by
the stockholder, but not by any other stockholder. Amounts shown assume no
exercise by the underwriters of their option to purchase up to an additional
2,250,000 shares of our common stock to cover over-allotments.

(2) Includes 1,855,000 shares to be issued to Mr. Schnall and his affiliate in
connection with our acquisition of the outstanding membership interests in
NYMC. Includes 71,352 shares of restricted stock to be granted to Mr.
Schnall upon completion of this offering. Includes 123,500 options to
purchase shares of our common stock to be granted to Mr. Schnall upon
completion of this offering that will be fully vested upon grant and will
have an exercise price equal to the initial public offering price of our
common stock in this offering. Includes 70,000 shares of our common stock to
be held in escrow through December 31, 2004 and that will be available to
satisfy any indemnification claims we may have against the contributors of
the NYMC membership interests under the contribution agreement between us
and the contributors during the escrow period for losses we incur as a
result of defaults on any residential mortgage loans originated by NYMC and
closed prior to completion of this offering. Includes 140,000 shares of our
common stock purchased by Mr. Schnall in this offering through the directed
share program described on page 135.

(3) Includes 795,000 shares to be issued to Mr. Fierro and his affiliate in
connection with our acquisition of the outstanding membership interests in
NYMC. Includes 30,580 shares of restricted stock to be granted to Mr. Fierro
upon completion of this offering. Includes 52,950 options to purchase shares
of our common stock to be granted to Mr. Fierro upon completion of this
offering that will be fully vested upon grant and will have an exercise
price equal to the initial public offering price of our

101

common stock in this offering. Includes 30,000 shares of our common stock to
be held in escrow through December 31, 2004 and that will be available to
satisfy any indemnification claims we may have against the contributors of
the NYMC membership interests under the contribution agreement between us
and the contributors during the escrow period for losses we incur as a
result of defaults on any residential mortgage loans originated by NYMC and
closed prior to completion of this offering. Includes 60,000 shares of our
common stock purchased by Mr. Fierro in this offering through the directed
share program described on page 135.

(4) Includes 95,583 shares of restricted stock to be granted to Mr. Akre upon
completion of this offering.

(5) Includes 95,583 shares of restricted stock to be granted to Mr.
Redlingshafer upon completion of this offering.

(6) Includes 74,430 shares of restricted stock to be granted to Mr. Wirth upon
completion of this offering.

(7) Includes 29,597 shares of restricted stock to be granted to Mr. Mumma upon
completion of this offering.

(8) Includes 2,500 shares of restricted stock to be granted to each of Mr. Bock,
Mr. Hainey, Mr. Norcutt, Ms. Pembroke, Mr. Sherman and Mr. White,
respectively, upon completion of this offering.

102

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

ACQUISITION OF MEMBERSHIP INTERESTS IN THE NEW YORK MORTGAGE COMPANY, LLC

We have entered into a contribution agreement, dated as of December 22,
2003, with Steven B. Schnall, our chairman and co-chief executive officer, and
Joseph V. Fierro, the chief operating officer of NYMC, as amended and restated
on March 25, 2004, as further amended and restated on April 29, 2004, pursuant
to which we will, upon completion of this offering, acquire from Messrs. Schnall
and Fierro and their affiliates all of the outstanding membership interests in
NYMC. The terms of this contribution agreement were not negotiated between the
parties on an arms-length basis. We will issue a total of 2,750,000 shares of
our common stock for these interests, seventy percent of which, or 1,925,000
shares, will be issued to Mr. Schnall and his affiliate and thirty percent of
which, or 825,000 shares, will be issued to Mr. Fierro and his affiliate.

In addition, 70,000 of the shares of common stock issuable to Mr. Schnall
and his affiliate and 30,000 of the shares of common stock issuable to Mr.
Fierro and his affiliate as consideration for their interests in NYMC will be
placed in escrow through December 31, 2004 and will be available to satisfy any
indemnification claims we may have against the contributors of the NYMC
membership interests under the contribution agreement between us and the
contributors during the escrow period for losses we incur as a result of
defaults on any residential mortgage loans originated by NYMC and closed prior
to completion of this offering.

Finally, we have agreed under the contribution agreement to indemnify each
of Messrs. Schnall and Fierro and their affiliates against all liabilities,
losses, damages, costs, claims, obligations and expenses (including reasonable
attorneys' fees) that either or both of them may suffer or incur by reason of
(i) any breach of our representations, warranties, covenants or agreements
contained in the contribution agreement, (ii) any act or cause of action
occurring or accruing on or after the closing date and arising from our
ownership or operation of NYMC on or after the closing date and (iii) any
personal guarantee of NYMC's obligations by either or both of Messrs. Schnall or
Fierro in existence prior to or as of the closing date of our acquisition of
NYMC of or relating to any liability or obligation of NYMC. In addition, we have
agreed in the contribution agreement to take all actions necessary to cause all
of these guarantees by Messrs. Schnall and Fierro to be terminated or released
in full without any continuing liability or obligation on their part as soon as
reasonably practicable following the completion of our acquisition of NYMC.

NOTES PAYABLE TO STEVEN B. SCHNALL AND JOSEPH V. FIERRO

NYMC has issued notes in the amounts of $11,432,550 and $2,274,352 to
Messrs. Schnall and Fierro, respectively, issued by NYMC on August 31, 2003, as
amended and restated on December 23, 2003, as further amended and restated on
February 26, 2004, and as further amended and restated on May 26, 2004, and due
no later than June 30, 2005, that bear interest at 3% per annum, as
distributions equal to NYMC's paid-in equity and retained earnings as of August
31, 2003. These notes may be prepaid without penalty with the approval of our
senior creditors or following any recapitalization of NYMC if the
recapitalization amount equals or exceeds the amount of principal and accrued
but unpaid interest outstanding under the notes.

We have entered into an agreement with NYMC and Messrs. Schnall and Fierro
dated December 23, 2003, as amended and restated on April 29, 2004 to cause NYMC
to repay these promissory notes following completion of this offering.

DISTRIBUTIONS TO STEVEN B. SCHNALL AND JOSEPH V. FIERRO

NYMC intends to make a cash distribution of approximately $3,500,000 in the
aggregate to Messrs. Schnall and Fierro and their affiliates, who together
comprise all the members of NYMC, immediately before completion of this
offering. The distribution is based on the estimated paid-in equity and retained
earnings of NYMC as of the anticipated closing date of this offering. This
amount represents the estimated amount of incremental net income for the period
from December 31, 2003 up to the anticipated closing date of this offering. The
cash distribution will be made to the members of NYMC pro rata in accordance
with their respective ownership interests. The actual amount of the
distributions may be more

103

or less than $3,500,000 depending on NYMC's actual performance through closing,
but it will not exceed $4,500,000.

INVESTMENT BY STEVEN B. SCHNALL AND JOSEPH V. FIERRO IN CENTURION ABSTRACT, LLC

Steven B. Schnall owns a 48% membership interest and Joseph V. Fierro owns
a 12% membership interest in Centurion Abstract, LLC, which provides title
insurance brokerage services for certain title insurance providers. From time to
time, NYMC refers its mortgage loan borrowers to Centurion Abstract, LLC for
assistance in obtaining title insurance in connection with their mortgage loans,
although the borrowers have no obligation to utilize Centurion's services. When
NYMC's borrowers elect to utilize Centurion's services to obtain title
insurance, Centurion collects various fees and a portion of the title insurance
premium paid by the borrower for its title insurance. Centurion Abstract
received $128,360 and $983,256 in fees and other amounts from NYMC borrowers for
the three month period ended March 31, 2004 and the year ended December 31,
2003, respectively.

AFFILIATION WITH NYMC CAPITAL CORPORATION

Steven B. Schnall owns a 74% equity interest in, and serves as the
president of, NYMC Capital Corp., a commercial mortgage brokerage company.
Another employee of NYMC owns the other 26% interest and serves as the vice
president. NYMC Capital brokers commercial mortgage loans to third party
lenders. From time to time, loan officers at NYMC refer customers who are
seeking commercial mortgage loans to NYMC Capital and receive commissions for
these referrals directly from NYMC Capital, typically 30% of the earned fees.
NYMC receives no fees or commissions from these referrals. NYMC has no
obligation to refer such customers to NYMC Capital, but makes such referrals
when an NYMC loan officer has a prospective client seeking commercial mortgage
financing and NYMC is unable to serve that client. To date, the volume of loans
that NYMC loan officers have referred to NYMC Capital has been immaterial;
however, if the volume increases significantly in the future we will formalize
our relationship with NYMC Capital so that we share in any commissions payable
by NYMC Capital for referrals by our loan officers or we will acquire NYMC
Capital.

OTHER RELATIONSHIPS

Several of our executive officers, directors and their friends and family
members have obtained residential mortgage loans from NYMC and may obtain
residential mortgage loans from NYMC again in the future. During the fiscal year
ended December 31, 2003, immediate family members of Mr. Schnall have obtained
an aggregate of $1,194,000 in residential mortgage loans, with interest rates
ranging from 2.5% to 5.5%, for which NYMC waived an aggregate of $2,765 in fees.
In providing these loans, NYMC has on occasion waived some of the fees that it
customarily charges for mortgage loan originations and has on occasion charged
interest rates that, while within the range of what NYMC considered to be market
rates, were lower than what NYMC would typically charge for loans to
unaffiliated borrowers with similar credit profiles. NYMC has to date sold all
of these loans for a profit. During the three month period ended March 31, 2004,
no family members obtained any residential mortgage loans from NYMC.

PURCHASES OF OUR COMMON STOCK IN THIS OFFERING BY STEVEN B. SCHNALL AND JOSEPH
V. FIERRO

Mr. Schnall has agreed to purchase 140,000 shares of our common stock in
this offering and Mr. Fierro has agreed to purchase 60,000 shares of our common
stock in this offering through the directed share program described on page 135.

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SHARES ELIGIBLE FOR FUTURE SALE

Upon the completion of this offering and our acquisition of NYMC, we will
have 18,162,125 shares of common stock outstanding. As of May 31, 2004, we had
one stockholder who held all 100 shares of our outstanding common stock. These
100 shares will be canceled upon completion of the offering. Following
completion of this offering, Messrs. Schnall and Fierro and their affiliates
will contribute all of the outstanding ownership interests in NYMC to us in
exchange for our issuance to the contributors of a total of 2,750,000 shares of
our common stock, 100,000 of which will be held in escrow through December 31,
2004 and will be available to satisfy any indemnification claims we may have
against the contributors of the NYMC membership interests under the contribution
agreement between us and the contributors during the escrow period for losses we
incur as a result of defaults on any residential mortgage loans originated by
NYMC and closed prior to the completion of this offering, as described above
under the heading "Our Acquisition of NYMC" beginning on page 32. As of March
31, 2004, NYMC had four equity owners.

Of the shares of our common stock that will be outstanding upon completion
of this offering and our acquisition of NYMC, the 15,000,000 shares sold in this
offering will be freely transferable without restriction or further registration
under the Securities Act, except for any shares held by our "affiliates," as
that term is defined by Rule 144 under the Securities Act. The remaining shares
and any shares purchased by affiliates in this offering or as a result of our
acquisition of NYMC, will be "restricted shares" as defined in Rule 144.

In addition, each of our executive officers and each of our directors who
beneficially owns our common stock as of the date of this prospectus have agreed
under written "lock-up" agreements not to sell any common stock for 180 days
after the date of this prospectus without the prior written consent of Friedman,
Billings, Ramsey & Co., Inc. See "Underwriting" beginning on page 134.

RULE 144

In general, under Rule 144 as currently in effect, beginning 90 days after
this offering, a person who owns shares that were purchased from us or any
affiliate of ours at least one year previously, including a person who may be
deemed an affiliate, is entitled to sell within any three-month period a number
of shares that does not exceed the greater of:

- 1% of our then outstanding common stock, or approximately 181,621 shares
following the completion of this offering and our acquisition of NYMC; or

- the average weekly trading volume of our common stock of the New York
Stock Exchange during the four calendar weeks preceding the date on which
notice of the sale is filed with the Securities and Exchange Commission.

Sales under Rule 144 are also subject to manner of sale provisions, notice
requirements and the availability of current public information about us.

Any person who is not deemed to have been our affiliate at any time during
the 90 days preceding a sale, and who owns shares within the definition of
"restricted securities" under Rule 144 that were purchased from us or any of our
affiliates at least two years previously, would be entitled to sell those shares
under Rule 144(k) without regard to the volume limitations, manner of sale
provisions, public information requirements or notice requirements.

RULE 701

Rule 701 may be relied upon with respect to the resale of securities
originally purchased from us by our employees, directors or officers prior to
this offering. In addition, the Securities and Exchange Commission has indicated
that Rule 701 will apply to the typical stock options granted by an issuer
before it becomes a public company, along with the shares acquired upon exercise
of those options, including exercises after the date of this offering.
Securities issued in reliance on Rule 701 are restricted securities

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and, subject to the "lock-up" agreements described above, beginning 90 days
after the date of this prospectus, may be sold by:

- persons other than affiliates, in ordinary brokerage transactions; and

- affiliates under Rule 144 without compliance with the one-year holding
requirement.

SALE OF RESTRICTED SHARES

As a result of Rules 144 and 701, beginning 90 days after the closing of
this offering, we expect that:

- no shares of common stock will be eligible for resale without restriction
under Rule 144(k) other than the shares sold in this offering to
non-affiliates;

- upon the expiration of the lock-up agreements 180 days after this
offering, no additional shares of common stock will become eligible for
sale under Rule 144.

Beginning one year after the closing of this offering, the 2,650,000 shares
of common stock issued to Messrs. Schnall and Fierro and their affiliates in
connection with our acquisition of NYMC will be eligible for sale under Rule 144
subject to the volume and other resale restrictions of that rule. In addition,
if the 100,000 shares of common stock held in escrow are released to Messrs.
Schnall and Fierro and their affiliates, such 100,000 shares of common stock
also will be eligible for sale under Rule 144 subject to the volume and other
resale restrictions of that rule.

We have agreed not to offer, sell or otherwise dispose of any common stock
or any securities convertible into or exercisable or exchangeable for common
stock or any rights to acquire common stock for a period of 180 days after the
date of this prospectus, without the prior written consent of Friedman,
Billings, Ramsey & Co., Inc., subject to specific limited exceptions. See
"Underwriting" beginning on page 134.

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DESCRIPTION OF CAPITAL STOCK

The following summary description of our capital stock does not purport to
be complete and is subject to and qualified in its entirety by reference to
Maryland law, our charter and our bylaws, copies of which are filed as exhibits
to the registration statement of which this prospectus is a part. See "Where You
Can Find More Information" on page 138.

GENERAL

Our charter provides that we may issue up to 400,000,000 shares of common
stock, par value $0.01 per share, and 200,000,000 shares of preferred stock, par
value $0.01 per share. Following completion of this offering and our acquisition
of NYMC, 18,162,125 shares of common stock will be issued and outstanding, which
includes 100,000 shares of our common stock to be held in escrow through
December 31, 2004 and will be available to satisfy any indemnification claims we
may have against the contributors of the NYMC membership interests under the
contribution agreement between us and the contributors during the escrow period
for losses we incur as a result of defaults on any residential mortgage loans
originated by NYMC and closed prior to completion of this offering. No shares of
preferred stock will be issued and outstanding. Under Maryland law, our
stockholders are not generally liable for our debts or obligations. Our charter
authorizes our board of directors to amend our charter to increase or decrease
the aggregate number of shares of capital stock of any class or series that we
have the authority to issue, without your approval.

VOTING RIGHTS OF COMMON STOCK

Subject to the provisions of our charter regarding restrictions on the
transfer and ownership of shares of common stock, each outstanding share of
common stock will entitle the holder to one vote on all matters submitted to a
vote of stockholders, including the election of directors, and, except as
provided with respect to any other class or series of shares of our stock, the
holders of our common stock will possess the exclusive voting power. There will
be no cumulative voting in the election of directors, which means that the
holders of a majority of the outstanding shares of common stock, voting as a
single class, can elect all of the directors then standing for election. Under
Maryland law, a Maryland corporation generally cannot dissolve, amend its
charter, merge, sell all or substantially all of its assets, or engage in a
share exchange or engage in similar transactions outside the ordinary course of
business unless approved by the affirmative vote of stockholders holding at
least two-thirds of the shares entitled to vote on the matter, unless a lesser
percentage (but not less than a majority of all the votes entitled to be cast on
the matter) is set forth in the corporation's charter. Our charter provides for
approval by a majority of all the votes entitled to be cast on the matter for
the matters described in the preceding sentence.

DIVIDENDS, LIQUIDATION AND OTHER RIGHTS

All shares of common stock offered by this prospectus will be duly
authorized, fully paid and nonassessable. Holders of our shares of common stock
will be entitled to receive dividends when authorized by our board of directors
and declared by us out of assets legally available for the payment of dividends.
They also will be entitled to share ratably in our assets legally available for
distribution to our stockholders in the event of our liquidation, dissolution or
winding up, after payment of or adequate provision for all of our known debts
and liabilities. These rights will be subject to the preferential rights of any
other class or series of our stock and to the provisions of our charter
regarding restrictions on transfer and ownership of our stock.

Holders of our shares of common stock have no appraisal, preference,
conversion, exchange, sinking fund or redemption rights and have no preemptive
rights to subscribe for any of our securities. Subject to the restrictions on
transfer of capital stock contained in our charter and to the ability of the
board of directors to create shares of common stock with differing voting
rights, all shares of common stock will have equal dividend, liquidation and
other rights.

Our charter also authorizes our board of directors to classify and
reclassify any unissued shares of our common stock and preferred stock into any
other classes or series of classes of our stock, as discussed

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below, to establish the number of shares in each class or series and to set the
terms, preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends or other distributions, qualifications and terms or
conditions of redemption for each such class or series. Thus, our board of
directors could authorize the issuance of shares of preferred stock with terms
and conditions that could have the effect of delaying, deferring or preventing a
transaction or a change of control that might involve a premium price for you or
otherwise be in your best interest.

PREFERRED STOCK

Our charter authorizes our board of directors to reclassify any unissued
shares of common stock into preferred stock, to classify any unissued shares of
preferred stock and to reclassify any previously classified but unissued shares
of any series of preferred stock previously authorized by our board of
directors. Prior to issuance of shares of each class or series of preferred
stock, our board of directors is required by Maryland law and our charter to
fix, subject to our charter restrictions on transfer and ownership, the terms,
preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends or other distributions, qualifications and terms or
conditions of redemption for each class or series. Thus, our board could
authorize the issuance of shares of preferred stock with terms and conditions
that could have the effect of delaying, deferring or preventing a transaction or
a change of control that might involve a premium price for you or otherwise be
in your best interest. As of the completion of this offering, no shares of our
preferred stock will be outstanding and we have no present plans to issue any
preferred stock.

POWER TO ISSUE ADDITIONAL SHARES OF COMMON STOCK AND PREFERRED STOCK

We believe that the power of our board of directors to issue additional
authorized but unissued shares of our common stock or preferred stock and to
classify or reclassify unissued shares of our common stock or preferred stock
and thereafter to cause us to issue such classified or reclassified shares of
stock provides us with increased flexibility in structuring possible future
financings and acquisitions and in meeting other needs which might arise. The
additional classes or series, as well as our common stock, are available for
issuance without further action by our stockholders, unless stockholder action
is required by applicable law or the rules of any stock exchange or automated
quotation system on which our securities may be listed or traded. Although our
board of directors has no intention at the present time of doing so, it could
authorize us to issue a class or series that could, depending upon the terms of
such class or series, delay, defer or prevent a transaction or a change in
control of us that might involve a premium price for holders of our common stock
or otherwise be in your best interest.

RESTRICTIONS ON OWNERSHIP AND TRANSFER

In order to qualify as a REIT under the Internal Revenue Code, our shares
of stock must be beneficially owned by 100 or more persons during at least 335
days of a taxable year of 12 months or during a proportionate part of a shorter
taxable year. Also, no more than 50% of the value of our outstanding shares of
capital stock may be owned, directly or constructively, by five or fewer
individuals (as defined in the Internal Revenue Code to include certain
entities) during the last half of any taxable year. In addition, if certain
"disqualified organizations" hold our stock, although the law on the matter is
unclear, a tax might be imposed on us if a portion of our assets is treated as a
taxable mortgage pool. In addition, a tax will be imposed on us if certain
disqualified organizations hold our stock and we hold a residual interest in a
real estate mortgage investment conduit, or REMIC.

To help us to qualify as a REIT, our charter, subject to certain
exceptions, contains restrictions on the number of shares of our capital stock
that a person may own and prohibits certain entities from owning our stock. Our
charter provides that generally no person may own, or be deemed to own by virtue
of the attribution provisions of the Internal Revenue Code, either (i) more than
9.4% in value of our outstanding shares of capital stock or (ii) more than 9.4%
in value or in number of shares, whichever is more restrictive, of our
outstanding common stock. Our charter provides that Steven B. Schnall, our
chairman of the board of directors and co-chief executive officer, may own up to
12.0% in value or in number of our common stock. Our board of directors is
permitted under our charter to waive these ownership limits on a case by case
basis so long as the waiver will not cause us to fail to comply with applicable
REIT
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ownership requirements under the Code. Our board of directors has granted a
temporary waiver to Mr. Schnall to allow him to own up to 12.7% of our common
stock through June 30, 2005. In addition, our charter provides that if Mr.
Schnall's ownership of our common stock falls to or below 9.9% in value and in
number of the outstanding shares of such stock, then, at all times after such
decrease in Mr. Schnall's ownership, the ownership limit for Mr. Schnall will
decrease to 9.9% and the ownership limit for all other shareholders will
increase to 9.9%. Our charter prohibits the following "disqualified
organizations" from owning our stock: the United States; any state or political
subdivision of the United States; any foreign government; any international
organization; any agency or instrumentality of any of the foregoing; any other
tax-exempt organization, other than a farmer's cooperative described in Section
521 of the Internal Revenue Code, that is exempt from both income taxation and
from taxation under the unrelated business taxable income provisions of the
Internal Revenue Code; and any rural electrical or telephone cooperative.

Our charter also prohibits any person from (a) beneficially or
constructively owning shares of our capital stock that would result in us being
"closely held" under Section 856(h) of the Internal Revenue Code, and (b)
transferring shares of our capital stock if such transfer would result in our
capital stock being beneficially owned by fewer than 100 persons. Any person who
acquires or attempts or intends to acquire beneficial ownership of shares of our
capital stock that will or may violate any of the foregoing restrictions on
transferability and ownership will be required to give notice immediately to us
and provide us with such other information as we may request in order to
determine the effect of such transfer on our status as a REIT. The foregoing
restrictions on transferability and ownership will not apply if our board of
directors determines that it is no longer in our best interests to attempt to
qualify, or to continue to qualify, as a REIT.

Our board of directors, in its sole discretion, may exempt a person from
the above ownership limits and any of the restrictions described in the first
sentence of the paragraph directly above. However, the board of directors may
not grant an exemption to any person unless the board of directors obtains such
representations, covenants and undertakings as the board of directors may deem
appropriate in order to determine that granting the exemption would not result
in our losing our status as a REIT. As a condition of granting the exemption,
our board of directors may require a ruling from the Internal Revenue Service or
an opinion of counsel, in either case in form and substance satisfactory to the
board of directors, in its sole discretion, in order to determine or ensure our
status as a REIT.

Any transfer that results in our shares of stock being owned by fewer than
100 persons will be void. However, if any transfer of our shares of stock occurs
which, if effective, would result in any person beneficially or constructively
owning shares of stock in excess or in violation of the above transfer or
ownership limitations, known as a prohibited owner, then that number of shares
of stock, the beneficial or constructive ownership of which otherwise would
cause such person to violate the transfer or ownership limitations (rounded up
to the nearest whole share), will be automatically transferred to a charitable
trust for the exclusive benefit of a charitable beneficiary, and the prohibited
owner will not acquire any rights in such shares. This automatic transfer will
be considered effective as of the close of business on the business day before
the violative transfer. If the transfer to the charitable trust would not be
effective for any reason to prevent the violation of the above transfer or
ownership limitations, then the transfer of that number of shares of stock that
otherwise would cause any person to violate the above limitations will be void.
Shares of stock held in the charitable trust will continue to constitute issued
and outstanding shares of our stock. The prohibited owner will not benefit
economically from ownership of any shares of stock held in the charitable trust,
will have no rights to dividends or other distributions and will not possess any
rights to vote or other rights attributable to the shares of stock held in the
charitable trust. The trustee of the charitable trust will be designated by us
and must be unaffiliated with us or any prohibited owner and will have all
voting rights and rights to dividends or other distributions with respect to
shares of stock held in the charitable trust, and these rights will be exercised
for the exclusive benefit of the trust's charitable beneficiary. Any dividend or
other distribution paid before our discovery that shares of stock have been
transferred to the trustee will be paid by the recipient of such dividend or
distribution to the trustee upon demand, and any dividend or other distribution
authorized but unpaid will be paid when due to the trustee. Any dividend or
distribution so paid to the trustee will be held in trust for the trust's
charitable

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beneficiary. Subject to Maryland law, effective as of the date that such shares
of stock have been transferred to the trustee, the trustee, in its sole
discretion, will have the authority to:

- rescind as void any vote cast by a prohibited owner prior to our
discovery that such shares have been transferred to the trustee; and

- recast such vote in accordance with the desires of the trustee acting for
the benefit of the trust's beneficiary.

However, if we have already taken irreversible corporate action, then the
trustee will not have the authority to rescind and recast such vote.

Within 20 days of receiving notice from us that shares of stock have been
transferred to the charitable trust, and unless we buy the shares first as
described below, the trustee will sell the shares of stock held in the
charitable trust to a person, designated by the trustee, whose ownership of the
shares will not violate the ownership limitations in our charter. Upon the sale,
the interest of the charitable beneficiary in the shares sold will terminate and
the trustee will distribute the net proceeds of the sale to the prohibited owner
and to the charitable beneficiary. The prohibited owner will receive the lesser
of:

- the price paid by the prohibited owner for the shares or, if the
prohibited owner did not give value for the shares in connection with the
event causing the shares to be held in the charitable trust (for example,
in the case of a gift or devise), the market price of the shares on the
day of the event causing the shares to be held in the charitable trust;
and

- the price per share received by the trustee from the sale or other
disposition of the shares held in the charitable trust (less any
commission and other expenses of a sale).

The trustee may reduce the amount payable to the prohibited owner by the amount
of dividends and distributions paid to the prohibited owner that are owed by the
prohibited owner to the trustee. Any net sale proceeds in excess of the amount
payable to the prohibited owner will be paid immediately to the charitable
beneficiary. If, before our discovery that shares of stock have been transferred
to the charitable trust, such shares are sold by a prohibited owner, then:

- such shares will be deemed to have been sold on behalf of the charitable
trust; and

- to the extent that the prohibited owner received an amount for such
shares that exceeds the amount that the prohibited owner was entitled to
receive as described above, the excess must be paid to the trustee upon
demand.

In addition, shares of stock held in the charitable trust will be deemed to
have been offered for sale to us, or our designee, at a price per share equal to
the lesser of:

- the price per share in the transaction that resulted in such transfer to
the charitable trust (or, in the case of a gift or devise, the market
price at the time of the gift or devise); and

- the market price on the date we, or our designee, accept such offer.

We may reduce the amount payable to the prohibited owner by the amount of
dividends and distributions paid to the prohibited owner that are owed by the
prohibited owner to the trustee. We may pay the amount of such reduction to the
trustee for the benefit of the charitable beneficiary. We will have the right to
accept the offer until the trustee has sold the shares of stock held in the
charitable trust. Upon such a sale to us, the interest of the charitable
beneficiary in the shares sold will terminate and the trustee will distribute
the net proceeds of the sale to the prohibited owner and any dividends or other
distributions held by the trustee will be paid to the charitable beneficiary.

All certificates representing shares of our capital stock will bear a
legend referring to the restrictions described above.

Every holder of more than 5% (or such lower percentage as required by the
Internal Revenue Code or the regulations promulgated thereunder) in value of all
classes or series of our capital stock, including shares of common stock, within
30 days after the end of each taxable year, will be required to give written
notice to us stating the name and address of such holder, the number of shares
of each class and series of shares of our stock that the holder beneficially
owns and a description of the manner in which the shares are held. Each holder
shall provide to us such additional information as we may request in order to

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determine the effect, if any, of the holder's beneficial ownership on our status
as a REIT and to ensure compliance with our ownership limitations. In addition,
each stockholder shall upon demand be required to provide to us such information
as we may request, in good faith, in order to determine our status as a REIT and
to comply with the requirements of any taxing authority or governmental
authority or to determine such compliance.

Our ownership limitations could delay, defer or prevent a transaction or a
change in control of us that might involve a premium price for holders of our
common stock or might otherwise be in the best interest of our stockholders.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for our shares of common stock will be
American Stock Transfer & Trust Company.

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CERTAIN PROVISIONS OF MARYLAND LAW AND
OUR CHARTER AND BYLAWS

The following description of certain provisions of Maryland law and of our
charter and bylaws is only a summary. For a complete description, we refer you
to the applicable Maryland law, our charter and our bylaws. Copies of our
charter and bylaws are filed as exhibits to the registration statement of which
this prospectus is a part.

NUMBER OF DIRECTORS; VACANCIES

Our charter and bylaws provide that the number of our directors shall be
nine upon completion of this offering and may only be increased or decreased by
a vote of a majority of the members of our board of directors. Our charter
provides that any vacancy, including a vacancy created by an increase in the
number of directors, may be filled only by a majority of the remaining
directors, even if the remaining directors do not constitute a quorum.

REMOVAL OF DIRECTORS

Our charter provides that a director may be removed with or without cause
upon the affirmative vote of at least two-thirds of the votes entitled to be
cast in the election of directors. Absent removal of all of our directors, this
provision, when coupled with the provision in our bylaws authorizing our board
of directors to fill vacant directorships, may preclude stockholders from
removing incumbent directors and filling the vacancies created by such removal
with their own nominees.

AMENDMENT TO THE CHARTER

Generally, our charter may be amended only by the affirmative vote of the
holders of not less than a majority of all of the votes entitled to be cast on
the matter. However, provisions in our charter related to (1) removal of
directors, (2) blank check stock and (3) the restrictions on transfer and
ownership may only be amended by the affirmative vote of the holders of not less
than two-thirds of all of the votes entitled to be cast on the matter.

DISSOLUTION

Our dissolution must be approved by the affirmative vote of the holders of
not less than a majority of all of the votes entitled to be cast on the matter.

BUSINESS COMBINATIONS

Maryland law prohibits "business combinations" between us and an interested
stockholder or an affiliate of an interested stockholder for five years after
the most recent date on which the interested stockholder becomes an interested
stockholder. These business combinations include a merger, consolidation, share
exchange, or, in circumstances specified in the statute, an asset transfer or
issuance or reclassification of equity securities. Maryland law defines an
interested stockholder as:

- any person or entity who beneficially owns 10% or more of the voting
power of our stock; or

- an affiliate or associate of ours who, at any time within the two year
period prior to the date in question, was the beneficial owner of 10% or
more of the voting power of our then outstanding voting stock.

A person is not an interested stockholder if our board of directors
approves in advance the transaction by which the person otherwise would have
become an interested stockholder. However, in approving a transaction, our board
of directors may provide that its approval is subject to compliance, at or after
the time of approval, with any terms and conditions determined by our board of
directors.

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After the five-year prohibition, any business combination between us and an
interested stockholder generally must be recommended by our board of directors
and approved by the affirmative vote of at least:

- 80% of the votes entitled to be cast by holders of our then outstanding
shares of voting stock; and

- two-thirds of the votes entitled to be cast by holders of our voting
stock other than stock held by the interested stockholder with whom or
with whose affiliate the business combination is to be effected or stock
held by an affiliate or associate of the interested stockholder.

These super-majority vote requirements do not apply if our common
stockholders receive a minimum price, as defined under Maryland law, for their
shares in the form of cash or other consideration in the same form as previously
paid by the interested stockholder for its stock.

The statute permits various exemptions from its provisions, including
business combinations that are approved by our board of directors before the
time that the interested stockholder becomes an interested stockholder.

As permitted by the Maryland General Corporation Law, our board of
directors expects to adopt a resolution immediately prior to this offering that
the business combination provisions of the Maryland General Corporation Law will
not apply to us.

CONTROL SHARE ACQUISITIONS

Maryland law provides that "control shares" of a Maryland corporation
acquired in a "control share acquisition" have no voting rights unless approved
by a vote of two-thirds of the votes entitled to be cast on the matter. Shares
owned by the acquiror or by officers or directors who are our employees are
excluded from the shares entitled to vote on the matter. "Control shares" are
voting shares that, if aggregated with all other shares currently owned by the
acquiring person, or in respect of which the acquiring person is able to
exercise or direct the exercise of voting power (except solely by virtue of a
revocable proxy), would entitle the acquiring person to exercise voting power in
electing directors within one of the following ranges of voting power:

- one-tenth or more but less than one-third;

- one-third or more but less than a majority; or

- a majority or more of all voting power.

Control shares do not include shares the acquiring person is then entitled
to vote as a result of having previously obtained stockholder approval. A
"control share acquisition" means the acquisition of control shares, subject to
certain exceptions.

A person who has made or proposes to make a control share acquisition may
compel our board of directors to call a special meeting of stockholders to be
held within 50 days of demand to consider the voting rights of the shares. The
right to compel the calling of a special meeting is subject to the satisfaction
of certain conditions, including an undertaking to pay the expenses of the
meeting. If no request for a meeting is made, we may present the question at any
stockholders meeting.

If voting rights are not approved at the stockholders meeting or if the
acquiring person does not deliver the statement required by Maryland law, then,
subject to certain conditions and limitations, we may redeem any or all of the
control shares, except those for which voting rights have previously been
approved, for fair value. Fair value is determined, without regard to the
absence of voting rights for the control shares, as of the date of the last
control share acquisition by the acquiror or of any meeting of stockholders at
which the voting rights of the shares were considered and not approved. If
voting rights for control shares are approved at a stockholders meeting and the
acquiror becomes entitled to vote a majority of the shares entitled to vote, all
other stockholders may exercise appraisal rights. The fair value of the shares
for purposes of these appraisal rights may not be less than the highest price
per share paid by the acquiror in the control share acquisition. The control
share acquisition statute does not apply to shares

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acquired in a merger, consolidation or share exchange if we are a party to the
transaction, nor does it apply to acquisitions approved by or exempted by our
charter or bylaws.

Our bylaws contain a provision exempting any and all acquisitions of our
shares of stock from the control shares provisions of Maryland law. Nothing
prevents our board of directors from amending or repealing this provision in the
future.

LIMITATION OF LIABILITY AND INDEMNIFICATION

Our charter limits, to the maximum extent permitted by Maryland law, the
liability of our directors and officers for money damages, except for liability
resulting from:

- actual receipt of an improper benefit or profit in money, property or
services; or

- a final judgment based upon a finding of active and deliberate dishonesty
by the director or officer that was material to the cause of action
adjudicated.

- the director or officer actually received an improper personal benefit of
money, property or services; or

- in the case of a criminal proceeding, the director or officer had
reasonable cause to believe that the act or omission was unlawful.

- a written affirmation by the director or officer of his or her good faith
belief that he or she has met the standard of conduct necessary for
indemnification; and

- a written undertaking by him or her, or on his or her behalf, to repay
the amount paid or reimbursed by us if it is ultimately determined that
the standard of conduct is not met.

MEETINGS OF STOCKHOLDERS

Special meetings of stockholders may be called only by our directors, by
the chairman of our board of directors, our co-chief executive officers, our
president or our secretary upon the written request of the holders of common
stock entitled to cast not less than a majority of all votes entitled to be cast
at such

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meeting. Only matters set forth in the notice of the special meeting may be
considered and acted upon at such a meeting.

ADVANCE NOTICE OF DIRECTOR NOMINATIONS AND NEW BUSINESS

Our bylaws will provide that, with respect to an annual meeting of
stockholders, nominations of individuals for election to our board of directors
and the proposal of business to be considered by stockholders at the annual
meeting may be made only:

- pursuant to our notice of the meeting;

- by or at the direction of our board of directors; or

- by a stockholder who was a stockholder of record both at the time of the
giving of notice by the stockholder and at the time of the meeting, who
is entitled to vote at the meeting and has complied with the advance
notice procedures set forth in our bylaws.

With respect to special meetings of stockholders, only the business
specified in our notice of meeting may be brought before the meeting of
stockholders and nominations of individuals for election to our board of
directors may be made only:

- pursuant to our notice of the meeting;

- by our board of directors; or

- provided that our board of directors has determined that directors shall
be elected at such meeting, by a stockholder who was a stockholder of
record both at the time of the provision of notice and at the time of the
meeting who is entitled to vote at the meeting and has complied with the
advance notice provisions set forth in our bylaws.

The purpose of requiring stockholders to give advance notice of nominations
and other proposals is to afford our board of directors the opportunity to
consider the qualifications of the proposed nominees or the advisability of the
other proposals and, to the extent considered necessary by our board of
directors, to inform stockholders and make recommendations regarding the
nominations or other proposals. The advance notice procedures also permit a more
orderly procedure for conducting our stockholder meetings. Although our bylaws
will not give our board of directors the power to disapprove timely stockholder
nominations and proposals, they may have the effect of precluding a contest for
the election of directors or proposals for other action if the proper procedures
are not followed, and of discouraging or deterring a third party from conducting
a solicitation of proxies to elect its own slate of directors to our board of
directors or to approve its own proposal.

POSSIBLE ANTI-TAKEOVER EFFECT OF CERTAIN PROVISIONS OF MARYLAND LAW AND OF OUR
CHARTER AND BYLAWS

Subtitle 8 of Title 3 of the Maryland General Corporation Law permits a
Maryland corporation with a class of equity securities registered under the
Securities Exchange Act of 1934, as amended, and at least three independent
directors to elect to be subject, by provision in its charter or bylaws or a
resolution of its board of directors and notwithstanding any contrary provision
in its charter or bylaws, to any or all of five of the following provisions:

- a classified board of directors, meaning that the directors may be
divided into up to three classes with only one class standing for
election in any year,

- a director may be removed only by a two-thirds vote of the stockholders,

- a requirement that the number of directors be fixed only by vote of the
directors,

- a requirement that a vacancy on the board of directors be filled only by
the remaining directors and for the new director to serve the remainder
of the full term of the class of directors in which the vacancy occurred,
and

- a requirement that stockholder-called special meetings of stockholders
may only be called by stockholders holding a majority of the outstanding
stock.

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Through provisions in our charter and bylaws unrelated to Subtitle 8, we
already (a) require a two-thirds vote for the removal of any director from our
board, (b) vest in our board of directors the exclusive power to fix the number
of directorships, (c) require vacancies on the board of directors to be filled
only by the remaining directors and (d) require that stockholder-called special
meetings of stockholders may only be called by stockholders holding a majority
of our outstanding stock. Further, although we do not currently have a
classified board of directors, Subtitle 8 permits our board of directors,
without stockholder approval and regardless of what is provided in our charter
or bylaws, to implement takeover defenses that we may not yet have, such as
dividing the members of our board of directors into up to three classes with
only one class standing for election in any year.

The business combination and control share acquisition provisions of
Maryland law (if the applicable provisions in our bylaws are rescinded), the
provisions of our charter on the removal of directors, the ownership limitations
required to protect our REIT status, the board of directors' ability to increase
the aggregate number of shares of capital stock and issue shares of preferred
stock with differing terms and conditions, and the advance notice provisions of
our bylaws could have the effect of delaying, deterring or preventing a
transaction or a change in control that might involve a premium price for you or
might otherwise be in your best interest.

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FEDERAL INCOME TAX CONSEQUENCES OF OUR STATUS AS A REIT

This section summarizes the federal income tax issues that you, as a
stockholder, may consider relevant. Because this section is a summary, it does
not address all aspects of taxation that may be relevant to particular
stockholders in light of their personal investment or tax circumstances, or to
certain types of stockholders that are subject to special treatment under the
federal income tax laws, such as insurance companies, tax-exempt organizations
(except to the extent discussed in "-- Taxation of Tax-Exempt Stockholders"
below), financial institutions or broker-dealers, and non-U.S. individuals and
foreign corporations (except to the extent discussed in "-- Taxation of Non-U.S.
Stockholders" below).

The statements in this section are based on the current federal income tax
laws governing qualification as a REIT. We cannot assure you that new laws,
interpretations of law, or court decisions, any of which may take effect
retroactively, will not cause any statement in this section to be inaccurate.

WE URGE YOU TO CONSULT YOUR OWN TAX ADVISOR REGARDING THE SPECIFIC TAX
CONSEQUENCES TO YOU OF THE PURCHASE, OWNERSHIP AND SALE OF OUR COMMON STOCK AND
OF OUR ELECTION TO BE TAXED AS A REIT. SPECIFICALLY, YOU SHOULD CONSULT YOUR OWN
TAX ADVISOR REGARDING THE FEDERAL, STATE, LOCAL, FOREIGN, AND OTHER TAX
CONSEQUENCES OF SUCH PURCHASE, OWNERSHIP, SALE AND ELECTION, AND REGARDING
POTENTIAL CHANGES IN APPLICABLE TAX LAWS.

TAXATION OF OUR COMPANY

We currently have in effect an election to be taxed as a pass-through
entity under subchapter S of the Internal Revenue Code of 1986, as amended,
referred to as the Code, but intend to revoke our S election on the business day
prior to the closing of this offering. We plan to make an election to be taxed
as a REIT under the federal income tax laws effective for our short taxable year
beginning on the date of revocation of our S election and ending on December 31,
2004. We believe that, commencing with such short taxable year, we will be
organized and will operate in such a manner as to qualify for taxation as a REIT
under the federal income tax laws, and we intend to continue to operate in such
a manner, but no assurance can be given that we will operate in a manner so as
to qualify or remain qualified as a REIT. This section discusses the laws
governing the federal income tax treatment of a REIT and its stockholders. These
laws are highly technical and complex.

In connection with this offering of our common stock, Hunton & Williams LLP
is rendering an opinion that, commencing with our short taxable year beginning
on the day prior to the closing of this offering and ending December 31, 2004,
we will be organized in conformity with the requirements for qualification as a
REIT under the federal income tax laws, and our proposed method of operation
will enable us to meet the requirements for qualification and taxation as a REIT
under the federal income tax laws. Investors should be aware that Hunton &
Williams LLP's opinion is based upon customary assumptions, is conditioned upon
certain representations made by us as to factual matters, including
representations regarding the nature of our assets and the conduct of our
business, and is not binding upon the Internal Revenue Service, or IRS, or any
court. In addition, Hunton & Williams LLP's opinion is based on existing federal
income tax law governing qualification as a REIT, which is subject to change
either prospectively or retroactively. Moreover, our qualification and taxation
as a REIT depend upon our ability to meet on a continuing basis, through actual
annual operating results, certain qualification tests set forth in the federal
tax laws. Those qualification tests involve the percentage of income that we
earn from specified sources, the percentage of our assets that falls within
specified categories, the diversity of our stock ownership, and the percentage
of our earnings that we distribute. Hunton & Williams LLP will not review our
compliance with those tests on a continuing basis. Accordingly, no assurance can
be given that our actual results of operations for any particular taxable year
will satisfy such requirements. For a discussion of the tax consequences of our
failure to qualify as a REIT, see "-- Failure to Qualify."

If we qualify as a REIT, we generally will not be subject to federal income
tax on the REIT taxable income that we distribute to our stockholders, but
taxable income generated by NYMC, our taxable REIT

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subsidiary following completion of this offering, will be subject to regular
corporate income tax. The benefit of that tax treatment is that it avoids the
"double taxation," or taxation at both the corporate and stockholder levels,
that generally applies to distributions by a corporation to its stockholders.
However, we will be subject to federal tax in the following circumstances:

- We will pay federal income tax on taxable income, including net capital
gain, that we do not distribute to stockholders during, or within a
specified time period after, the calendar year in which the income is
earned.

- We may be subject to the "alternative minimum tax" on any items of tax
preference that we do not distribute or allocate to stockholders.

- We will pay income tax at the highest corporate rate on:

- net income from the sale or other disposition of property acquired
through foreclosure, or foreclosure property, that we hold primarily for
sale to customers in the ordinary course of business, and

- other non-qualifying income from foreclosure property.

- We will pay a 100% tax on net income earned by the REIT from sales or
other dispositions of property, other than foreclosure property, that we
hold primarily for sale to customers in the ordinary course of business.

- If we fail to satisfy the 75% gross income test or the 95% gross income
test, as described below under "-- Requirements for
Qualification -- Gross Income Tests," and nonetheless continue to qualify
as a REIT because we meet other requirements, we will pay a 100% tax on:

- the greater of (i) the amount by which we fail the 75% gross income test
or (ii) the amount by which 90% of our gross income exceeds the amount
of our income qualifying under the 95% gross income test, multiplied by

- a fraction intended to reflect our profitability.

- If we fail to distribute during a calendar year at least the sum of:

- 85% of our REIT ordinary income for the year,

- 95% of our REIT capital gain net income for the year, and

- any undistributed taxable income from earlier periods,

we will pay a 4% nondeductible excise tax on the excess of the required
distribution over the amount we actually distributed.

- We may elect to retain and pay income tax on our net long-term capital
gain. In that case, a U.S. stockholder would be taxed on its
proportionate share of our undistributed long-term capital gain (to the
extent that we make a timely designation of such gain to the stockholder)
and would receive a credit or refund for its proportionate share of the
tax we paid.

- We will be subject to a 100% excise tax on transactions with a taxable
REIT subsidiary that are not conducted on an arm's-length basis.

- If we acquire any asset from a C corporation, or a corporation that
generally is subject to full corporate-level tax, in a merger or other
transaction in which we acquire a basis in the asset that is determined
by reference either to the C corporation's basis in the asset or to
another asset, we will pay tax at the highest regular corporate rate
applicable if we recognize gain on the sale or disposition of the asset
during the 10-year period after we acquire the asset. The amount of gain
on which we will pay tax is the lesser of:

- the amount of gain that we recognize at the time of the sale or
disposition, and

- the amount of gain that we would have recognized if we had sold the
asset at the time we acquired it.

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- We will pay tax at the highest corporate rate on the portion of any
excess inclusion, or phantom taxable income, that we derive from REMIC
residual interests equal to the percentage of our stock that is held by
"disqualified organizations." A "disqualified organization" includes:

- the United States;

- any state or political subdivision of the United States;

- any foreign government;

- any international organization;

- any agency or instrumentality of any of the foregoing;

- any other tax-exempt organization, other than a farmer's cooperative
described in section 521 of the Code, that is exempt both from income
taxation and from taxation under the unrelated business taxable income
provisions of the Code; and

- any rural electrical or telephone cooperative.

For this reason, our charter prohibits disqualified organizations from
owning our stock.

REQUIREMENTS FOR QUALIFICATION

ORGANIZATIONAL REQUIREMENTS

A REIT is a corporation, trust, or association that meets each of the
following requirements:

(i) It is managed by one or more trustees or directors.

(ii) Its beneficial ownership is evidenced by transferable shares, or
by transferable certificates of beneficial interest.

(iii) It would be taxable as a domestic corporation, but for the REIT
provisions of the federal income tax laws.

(iv) It is neither a financial institution nor an insurance company
subject to special provisions of the federal income tax laws.

(v) At least 100 persons are beneficial owners of its shares or
ownership certificates.

(vi) Not more than 50% in value of its outstanding shares or ownership
certificates is owned, directly or indirectly, by five or fewer
individuals, which the federal income tax laws define to include certain
entities, during the last half of any taxable year.

(vii) It elects to be a REIT, or has made such election for a previous
taxable year, and satisfies all relevant filing and other administrative
requirements established by the IRS that must be met to elect and maintain
REIT status.

(viii) It meets certain other qualification tests, described below,
regarding the nature of its income and assets.

We must meet requirements 1 through 4 during our entire taxable year and
must meet requirement 5 during at least 335 days of a taxable year of 12 months,
or during a proportionate part of a taxable year of less than 12 months.
Requirements 5 and 6 will apply to us beginning with our 2005 taxable year. If
we comply with all the requirements for ascertaining the ownership of our
outstanding stock in a taxable year and have no reason to know that we violated
requirement 6, we will be deemed to have satisfied requirement 6 for that
taxable year. For purposes of determining share ownership under requirement 6,
an "individual" generally includes a supplemental unemployment compensation
benefits plan, a private foundation, or a portion of a trust permanently set
aside or used exclusively for charitable purposes. An "individual," however,
generally does not include a trust that is a qualified employee pension or
profit

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sharing trust under the federal income tax laws, and beneficiaries of such a
trust will be treated as holding our stock in proportion to their actuarial
interests in the trust for purposes of requirement 6.

We believe that we are issuing sufficient common stock with sufficient
diversity of ownership to satisfy requirements 5 and 6. In addition, our charter
restricts the ownership and transfer of our stock so that we should continue to
satisfy these requirements. The provisions of our charter restricting the
ownership and transfer of the common stock are described in "Description of
Capital Stock -- Restrictions on Ownership and Transfer."

Qualified REIT Subsidiaries. A corporation that is a "qualified REIT
subsidiary" is not treated as a corporation separate from its parent REIT. All
assets, liabilities, and items of income, deduction, and credit of a "qualified
REIT subsidiary" are treated as assets, liabilities, and items of income,
deduction, and credit of the REIT. A "qualified REIT subsidiary" is a
corporation, all of the capital stock of which is owned by the REIT. Thus, in
applying the requirements described herein, any "qualified REIT subsidiary" that
we own will be ignored, and all assets, liabilities, and items of income,
deduction, and credit of such subsidiary will be treated as our assets,
liabilities, and items of income, deduction, and credit.

Other Disregarded Entities and Partnerships. An unincorporated domestic
entity, such as a partnership or limited liability company, that has a single
owner, generally is not treated as an entity separate from its parent for
federal income tax purposes. An unincorporated domestic entity with two or more
owners generally is treated as a partnership for federal income tax purposes. In
the case of a REIT that is a partner in a partnership that has other partners,
the REIT is treated as owning its proportionate share of the assets of the
partnership and as earning its allocable share of the gross income of the
partnership for purposes of the applicable REIT qualification tests. Thus, our
proportionate share of the assets, liabilities, and items of income of any
partnership, joint venture, or limited liability company that is treated as a
partnership for federal income tax purposes in which we acquire an interest,
directly or indirectly, will be treated as our assets and gross income for
purposes of applying the various REIT qualification requirements.

Taxable REIT Subsidiaries. A REIT is permitted to own up to 100% of the
stock of one or more "taxable REIT subsidiaries," or TRSs. A TRS is a fully
taxable corporation that may earn income that would not be qualifying income if
earned directly by the parent REIT. The subsidiary and the REIT must jointly
elect to treat the subsidiary as a TRS. A corporation of which a TRS directly or
indirectly owns more than 35% of the voting power or value of the stock will
automatically be treated as a TRS. Overall, no more than 20% of the value of a
REIT's assets may consist of stock or securities of one or more TRSs.

A TRS will pay income tax at regular corporate rates on any income that it
earns. In addition, the TRS rules limit the deductibility of interest paid or
accrued by a TRS to its parent REIT to assure that the TRS is subject to an
appropriate level of corporate taxation. Further, the rules impose a 100% excise
tax on transactions between a TRS and its parent REIT or the REIT's tenants that
are not conducted on an arm's-length basis. We will make an election for NYMC to
be treated as a TRS. NYMC will be subject to corporate income tax on its taxable
income, which will be its net income from loan originations and sales. See
"-- Taxable REIT Subsidiaries."

Taxable Mortgage Pools. An entity, or a portion of an entity, may be
classified as a taxable mortgage pool under the Code if:

- substantially all of its assets consist of debt obligations or interests
in debt obligations;

- more than 50% of those debt obligations are real estate mortgage loans or
interests in real estate mortgage loans as of specified testing dates;

- the entity has issued debt obligations that have two or more maturities;
and

- the payments required to be made by the entity on its debt obligations
"bear a relationship" to the payments to be received by the entity on the
debt obligations that it holds as assets.

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Under U.S. Treasury regulations, if less than 80% of the assets of an
entity (or a portion of an entity) consist of debt obligations, these debt
obligations are considered not to comprise "substantially all" of its assets,
and therefore the entity would not be treated as a taxable mortgage pool.

We may make investments or enter into financing and securitization
transactions that give rise to us being considered to be, or to own an interest
in, one or more taxable mortgage pools. Where an entity, or a portion of an
entity, is classified as a taxable mortgage pool, it is generally treated as a
taxable corporation for federal income tax purposes. However, special rules
apply to a REIT, a portion of a REIT, or a qualified REIT subsidiary that is a
taxable mortgage pool. The portion of the REIT's assets, held directly or
through a qualified REIT subsidiary that qualifies as a taxable mortgage pool is
treated as a qualified REIT subsidiary that is not subject to corporate income
tax, and the taxable mortgage pool classification does not affect the tax status
of the REIT. Rather, the consequences of the taxable mortgage pool
classification would generally, except as described below, be limited to the
REIT's stockholders. The Treasury Department has yet to issue regulations
governing the tax treatment of the stockholders of a REIT that owns an interest
in a taxable mortgage pool.

A portion of our income from a taxable mortgage pool arrangement, which
might be non-cash accrued income, or "phantom" taxable income, could be treated
as "excess inclusion income." Excess inclusion income is an amount, with respect
to any calendar quarter, equal to the excess, if any, of (i) income allocable to
the holder of a REMIC residual interest or taxable mortgage pool interest over
(ii) the sum of an amount for each day in the calendar quarter equal to the
product of (a) the adjusted issue price at the beginning of the quarter
multiplied by (b) 120% of the long-term federal rate (determined on the basis of
compounding at the close of each calendar quarter and properly adjusted for the
length of such quarter). This non-cash or "phantom" income would be subject to
the distribution requirements that apply to us and could therefore adversely
affect our liquidity. See "-- Distribution Requirements."

Our excess inclusion income would be allocated among our stockholders. A
stockholder's share of excess inclusion income (i) would not be allowed to be
offset by any net operating losses otherwise available to the stockholder, (ii)
would be subject to tax as unrelated business taxable income in the hands of
most types of stockholders that are otherwise generally exempt from federal
income tax, and (iii) would result in the application of U.S. federal income tax
withholding at the maximum rate (30%), without reduction for any otherwise
applicable income tax treaty, to the extent allocable to most types of foreign
stockholders. See "-- Taxation of Taxable U.S. Stockholders," "-- Taxation of
Tax-Exempt Stockholders," and "-- Taxation of Non-U.S. Stockholders." The manner
in which excess inclusion income would be allocated among shares of different
classes of our stock or how such income is to be reported to stockholders is not
clear under current law. Tax-exempt investors, foreign investors, and taxpayers
with net operating losses should carefully consider the tax consequences
described above and are urged to consult their tax advisors in connection with
their decision to invest in our common stock.

If we own less than 100% of the ownership interests in a subsidiary that is
a taxable mortgage pool, the foregoing rules would not apply. Rather, the
subsidiary would be treated as a corporation for federal income tax purposes,
and would potentially be subject to corporate income tax. In addition, this
characterization would alter our REIT income and asset test calculations and
could adversely affect our compliance with those requirements. We currently do
not have, and currently do not intend to form, any subsidiary in which we own
some, but less than all, of the ownership interests that are or will become
taxable mortgage pools, and we intend to monitor the structure of any taxable
mortgage pools in which we have an interest to ensure that they will not
adversely affect our status as a REIT.

GROSS INCOME TESTS

We must satisfy two gross income tests annually to maintain our
qualification as a REIT. First, at least 75% of our gross income for each
taxable year must consist of defined types of income that we derive, directly or
indirectly, from investments relating to real property or mortgage loans on real
property

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or qualified temporary investment income. Qualifying income for purposes of the
75% gross income test generally includes:

- rents from real property;

- interest on debt secured by a mortgage on real property, or on interests
in real property;

- dividends or other distributions on, and gain from the sale of, shares in
other REITs;

- gain from the sale of real estate assets;

- amounts, such as commitment fees, received in consideration for entering
into an agreement to make a loan secured by real property, unless such
amounts are determined by income and profits; and

- income derived from the temporary investment of new capital that is
attributable to the issuance of our stock or a public offering of our
debt with a maturity date of at least five years and that we receive
during the one-year period beginning on the date on which we received
such new capital.

Second, in general, at least 95% of our gross income for each taxable year
must consist of income that is qualifying income for purposes of the 75% gross
income test, other types of interest and dividends, gain from the sale or
disposition of stock or securities, income from certain hedging instruments or
any combination of these. Gross income from servicing and loan origination fees
is not qualifying income for purposes of either gross income test. In addition,
gross income from our sale of property that we hold primarily for sale to
customers in the ordinary course of business is excluded from both the numerator
and the denominator in both income tests. We will monitor the amount of our
non-qualifying income and we will manage our portfolio to comply at all times
with the gross income tests. The following paragraphs discuss the specific
application of the gross income tests to us.

Interest. The term "interest," as defined for purposes of both gross
income tests, generally excludes any amount that is based in whole or in part on
the income or profits of any person. However, interest generally includes the
following:

- an amount that is based on a fixed percentage or percentages of receipts
or sales; and

- an amount that is based on the income or profits of a debtor, as long as
the debtor derives substantially all of its income from the real property
securing the debt from leasing substantially all of its interest in the
property, and only to the extent that the amounts received by the debtor
would be qualifying "rents from real property" if received directly by a
REIT.

If a loan contains a provision that entitles a REIT to a percentage of the
borrower's gain upon the sale of the real property securing the loan or a
percentage of the appreciation in the property's value as of a specific date,
income attributable to that loan provision will be treated as gain from the sale
of the property securing the loan, which generally is qualifying income for
purposes of both gross income tests.

Interest on debt secured by a mortgage on real property or on interests in
real property, including, for this purpose, discount points, prepayment
penalties, loan assumption fees, and late payment charges that are not
compensation for services, generally is qualifying income for purposes of the
75% gross income test. However, if the highest principal amount of a loan
outstanding during a taxable year exceeds the fair market value of the real
property securing the loan as of the date the REIT agreed to originate or
acquire the loan, a portion of the interest income from such loan will not be
qualifying income for purposes of the 75% gross income test, but will be
qualifying income for purposes of the 95% gross income test. The portion of the
interest income that will not be qualifying income for purposes of the 75% gross
income test will be equal to the portion of the principal amount of the loan
that is not secured by real property -- that is, the amount by which the loan
exceeds the value of the real estate that is security for the loan.

The interest, original issue discount, and market discount income that we
receive from our mortgage loans and mortgage-backed securities generally will be
qualifying income for purposes of both gross income tests. However, as discussed
above, if the fair market value of the real estate securing any of our loans is

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less than the principal amount of the loan, a portion of the income from that
loan will be qualifying income for purposes of the 95% gross income test but not
the 75% gross income test.

Fee Income. We may receive various fees in connection with the mortgage
loans. The fees will be qualifying income for purposes of both the 75% and 95%
income tests if they are received in consideration for entering into an
agreement to make a loan secured by real property, and the fees are not
determined by income or profits. Therefore, commitment fees will generally be
qualifying income for purposes of the income tests. Other fees, such as fees
received for servicing loans for third parties and origination fees, are not
qualifying income for purposes of either income test. NYMC will conduct
servicing and origination functions that generate fee income that is not
qualifying income. The income earned by NYMC from these services will not be
included for purposes of our income tests.

Dividends. Our share of any dividends received from any corporation
(including NYMC and any other TRS, but excluding any REIT) in which we own an
equity interest will qualify for purposes of the 95% gross income test but not
for purposes of the 75% gross income test. Our share of any dividends received
from any other REIT in which we own an equity interest will be qualifying income
for purposes of both gross income tests.

Rents from Real Property. We do not intend to acquire any real property
with the proceeds of this offering, but we may acquire real property or an
interest therein in the future. To the extent that we acquire real property or
an interest therein, rents we receive will qualify as "rents from real property"
in satisfying the gross income requirements for a REIT described above only if
the following conditions are met:

- First, the amount of rent must not be based in whole or in part on the
income or profits of any person. However, an amount received or accrued
generally will not be excluded from rents from real property solely by
reason of being based on fixed percentages of receipts or sales.

- Second, rents we receive from a "related party tenant" will not qualify
as rents from real property in satisfying the gross income tests unless
the tenant is a taxable REIT subsidiary, at least 90% of the property is
leased to unrelated tenants and the rent paid by the taxable REIT
subsidiary is substantially comparable to the rent paid by the unrelated
tenants for comparable space. A tenant is a related party tenant if the
REIT, or an actual or constructive owner of 10% or more of the REIT,
actually or constructively owns 10% or more of the tenant.

- Third, if rent attributable to personal property, leased in connection
with a lease of real property, is greater than 15% of the total rent
received under the lease, then the portion of rent attributable to the
personal property will not qualify as rents from real property.

- Fourth, we generally must not operate or manage our real property or
furnish or render services to our tenants, other than through an
"independent contractor" who is adequately compensated and from whom we
do not derive revenue. However, we may provide services directly to
tenants if the services are "usually or customarily rendered" in
connection with the rental of space for occupancy only and are not
considered to be provided for the tenants' convenience. In addition, we
may provide a minimal amount of "non-customary" services to the tenants
of a property, other than through an independent contractor, as long as
our income from the services does not exceed 1% of our income from the
related property. Furthermore, we may own up to 100% of the stock of a
TRS, which may provide customary and non-customary services to tenants
without tainting its rental income from the related properties.

Hedging Transactions. From time to time, we enter into hedging
transactions with respect to one or more of our assets or liabilities. Our
hedging activities may include entering into interest rate swaps, caps, and
floors, options to purchase these items, and futures and forward contracts. To
the extent that we enter into an interest rate swap or cap contract, option,
futures contract, forward rate agreement, or any similar financial instrument to
hedge our indebtedness incurred or to be incurred to acquire or carry "real
estate assets," including mortgage loans, any periodic income or gain from the
disposition of that contract attributable to the carrying or acquisition of the
real estate assets should be qualifying income for purposes

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of the 95% gross income test, but not the 75% gross income test. To the extent
that we hedge with other types of financial instruments or for other purposes,
or to the extent that a portion of our mortgage loans is not secured by "real
estate assets" (as described below under "-- Asset Tests") or in other
situations, the income from those transactions is not likely to be treated as
qualifying income for purposes of the gross income tests. We intend to structure
any hedging transactions in a manner that does not jeopardize our status as a
REIT.

Prohibited Transactions. A REIT will incur a 100% tax on the net income
derived from any sale or other disposition of property, other than foreclosure
property, that the REIT holds primarily for sale to customers in the ordinary
course of a trade or business. We believe that none of our assets will be held
primarily for sale to customers and that a sale of any of our assets will not be
in the ordinary course of our business. Whether a REIT holds an asset "primarily
for sale to customers in the ordinary course of a trade or business" depends,
however, on the facts and circumstances in effect from time to time, including
those related to a particular asset. Nevertheless, we will attempt to comply
with the terms of safe-harbor provisions in the federal income tax laws
prescribing when an asset sale will not be characterized as a prohibited
transaction. We cannot assure you, however, that we can comply with the
safe-harbor provisions or that we will avoid owning property that may be
characterized as property that we hold "primarily for sale to customers in the
ordinary course of a trade or business." To the extent necessary to avoid the
prohibited transactions tax, we will conduct sales of our loans through NYMC or
one of our other taxable REIT subsidiaries.

It is our current intention that our securitizations of our mortgage loans
will not be treated as sales for tax purposes. If we were to transfer a mortgage
loan to a REMIC, this transfer would be treated as a sale for tax purposes and
the sale may be subject to the prohibited transactions tax. As a result, we
intend to securitize our mortgage loans only in non-REMIC transactions.

Foreclosure Property. We will be subject to tax at the maximum corporate
rate on any income from foreclosure property, other than income that otherwise
would be qualifying income for purposes of the 75% gross income test, less
expenses directly connected with the production of that income. However, gross
income from foreclosure property will qualify under the 75% and 95% gross income
tests. Foreclosure property is any real property, including interests in real
property, and any personal property incident to such real property:

- that is acquired by a REIT as the result of the REIT having bid on such
property at foreclosure, or having otherwise reduced such property to
ownership or possession by agreement or process of law, after there was a
default or default was imminent on a lease of such property or on
indebtedness that such property secured;

- for which the related loan or lease was acquired by the REIT at a time
when the default was not imminent or anticipated; and

- for which the REIT makes a proper election to treat the property as
foreclosure property.

However, a REIT will not be considered to have foreclosed on a property
where the REIT takes control of the property as a mortgagee-in-possession and
cannot receive any profit or sustain any loss except as a creditor of the
mortgagor. Property generally ceases to be foreclosure property at the end of
the third taxable year following the taxable year in which the REIT acquired the
property, or longer if an extension is granted by the Secretary of the Treasury.
This grace period terminates and foreclosure property ceases to be foreclosure
property on the first day:

- on which a lease is entered into for the property that, by its terms,
will give rise to income that does not qualify for purposes of the 75%
gross income test, or any amount is received or accrued, directly or
indirectly, pursuant to a lease entered into on or after such day that
will give rise to income that does not qualify for purposes of the 75%
gross income test;

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- on which any construction takes place on the property, other than
completion of a building or any other improvement, where more than 10% of
the construction was completed before default became imminent; or

- which is more than 90 days after the day on which the REIT acquired the
property and the property is used in a trade or business which is
conducted by the REIT, other than through an independent contractor from
whom the REIT itself does not derive or receive any income.

Failure to Satisfy Gross Income Tests. If we fail to satisfy one or both
of the gross income tests for any taxable year, we nevertheless may qualify as a
REIT for that year if we qualify for relief under certain provisions of the
federal income tax laws. Those relief provisions generally will be available if:

- our failure to meet such tests is due to reasonable cause and not due to
willful neglect;

- we attach a schedule of the sources of our income to our tax return; and

- any incorrect information on the schedule was not due to fraud with
intent to evade tax.

We cannot predict, however, whether in all circumstances we would qualify
for the relief provisions. In addition, as discussed above in "-- Taxation of
Our Company," even if the relief provisions apply, we would incur a 100% tax on
the gross income attributable to the greater of (i) the amount by which we fail
the 75% gross income test or (ii) the amount by which 90% of our gross income
exceeds the amount of our income qualifying under the 95% gross income test,
multiplied by a fraction intended to reflect our profitability.

ASSET TESTS

To qualify as a REIT, we also must satisfy the following asset tests at the
end of each quarter of each taxable year. First, at least 75% of the value of
our total assets must consist of:

- cash or cash items, including certain receivables;

- government securities;

- interests in real property, including leaseholds and options to acquire
real property and leaseholds;

- interests in mortgage loans secured by real property;

- stock in other REITs;

- investments in stock or debt instruments during the one-year period
following our receipt of new capital that we raise through equity
offerings or offerings of debt with at least a five-year term; and

- regular or residual interests in a REMIC. However, if less than 95% of
the assets of a REMIC consists of assets that are qualifying real
estate-related assets under the federal income tax laws, determined as if
we held such assets, we will be treated as holding directly our
proportionate share of the assets of such REMIC.

Second, of our investments not included in the 75% asset class, the value
of our interest in any one issuer's securities may not exceed 5% of the value of
our total assets.

Third, we may not own more than 10% of the voting power or value of any one
issuer's outstanding securities.

Fourth, no more than 20% of the value of our total assets may consist of
the securities of one or more TRSs.

Fifth, no more than 25% of the value of our total assets may consist of the
securities of TRSs and other non-TRS taxable subsidiaries and other assets that
are not qualifying assets for purposes of the 75% asset test.

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For purposes of the second and third asset tests, the term "securities"
does not include stock in another REIT, equity or debt securities of a qualified
REIT subsidiary or TRS, mortgage loans that constitute real estate assets, or
equity interests in a partnership. The term "securities," however, generally
includes debt securities issued by a partnership or another REIT, except that
certain "straight debt" securities are not treated as "securities" for purposes
of the 10% value test (for example, qualifying debt securities of a corporation
of which we own no equity interest or of a partnership if we own at least a 20%
profits interest in the partnership). For this purpose, "straight debt" means a
written unconditional promise to pay on demand on a specified date a sum certain
in money if (i) the debt is not convertible, directly or indirectly, into stock
and (ii) the interest rate and interest payment dates are not contingent on
profits, the borrower's discretion, or similar factors.

The asset tests described above are based on our gross assets. For federal
income tax purposes, we will be treated as owning both the loans we hold
directly and the loans that we have securitized through non-REMIC debt
securitizations. Although we will have a partially offsetting obligation with
respect to the securities issued pursuant to the securitizations, these
offsetting obligations will not reduce the gross assets we are considered to own
for purposes of the asset tests.

We believe that all or substantially all of the mortgage loans and
mortgage-backed securities that we will own will be qualifying assets for
purposes of the 75% asset test. For purposes of these rules, however, if the
outstanding principal balance of a mortgage loan exceeds the fair market value
of the real property securing the loan, a portion of such loan likely will not
be a qualifying real estate asset under the federal income tax laws. Although
the law on the matter is not entirely clear, it appears that the non-qualifying
portion of that mortgage loan will be equal to the portion of the loan amount
that exceeds the value of the associated real property that is security for that
loan. To the extent that we own debt securities issued by other REITs or C
corporations that are not secured by a mortgage on real property, those debt
securities will not be qualifying assets for purposes of the 75% asset test.
Instead, we would be subject to the second and third asset tests with respect to
those debt securities.

We will monitor the status of our assets for purposes of the various asset
tests and will seek to manage our portfolio to comply at all times with such
tests. There can be no assurance, however, that we will be successful in this
effort. In this regard, to determine our compliance with these requirements, we
will need to estimate the value of the real estate securing our mortgage loans
at various times. Although we will seek to be prudent in making these estimates,
there can be no assurances that the IRS might not disagree with these
determinations and assert that a lower value is applicable. If we fail to
satisfy the asset tests at the end of a calendar quarter, we will not lose our
REIT status if:

- we satisfied the asset tests at the end of the preceding calendar
quarter; and

- the discrepancy between the value of our assets and the asset test
requirements arose from changes in the market values of our assets and
was not wholly or partly caused by the acquisition of one or more
non-qualifying assets.

If we did not satisfy the condition described in the second item, above, we
still could avoid disqualification by eliminating any discrepancy within 30 days
after the close of the calendar quarter in which it arose.

We currently believe that the loans, securities and other assets that we
expect to hold will satisfy the foregoing asset test requirements. However, no
independent appraisals will be obtained to support our conclusions as to the
value of our assets and securities, or in many cases, the real estate collateral
for the mortgage loans that we hold. Moreover, the values of some assets may not
be susceptible to a precise determination. As a result, there can be no
assurance that the IRS will not contend that our ownership of securities and
other assets violates one or more of the asset tests applicable to REITs.

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DISTRIBUTION REQUIREMENTS

Each taxable year, we must distribute dividends, other than capital gain
dividends and deemed distributions of retained capital gain, to our stockholders
in an aggregate amount at least equal to:

- the sum of

- 90% of our "REIT taxable income," computed without regard to the
dividends paid deduction and our net capital gain or loss, and

- 90% of our after-tax net income, if any, from foreclosure property,
minus

- the sum of certain items of non-cash income.

We must pay such distributions in the taxable year to which they relate, or
in the following taxable year if we declare the distribution before we timely
file our federal income tax return for the year and pay the distribution on or
before the first regular dividend payment date after such declaration.

We will pay federal income tax on taxable income, including net capital
gain, that we do not distribute to stockholders. Furthermore, if we fail to
distribute during a calendar year, or by the end of January following the
calendar year in the case of distributions with declaration and record dates
falling in the last three months of the calendar year, at least the sum of:

- 85% of our REIT ordinary income for such year,

- 95% of our REIT capital gain income for such year, and

- any undistributed taxable income from prior periods,

we will incur a 4% nondeductible excise tax on the excess of such required
distribution over the amounts we actually distribute. We may elect to retain and
pay income tax on the net long-term capital gain we receive in a taxable year.
See "-- Taxation of Taxable U.S. Stockholders." If we so elect, we will be
treated as having distributed any such retained amount for purposes of the 4%
nondeductible excise tax described above. We intend to make timely distributions
sufficient to satisfy the annual distribution requirements and to avoid
corporate income tax and the 4% nondeductible excise tax.

It is possible that, from time to time, we may experience timing
differences between the actual receipt of income and actual payment of
deductible expenses and the inclusion of that income and deduction of such
expenses in arriving at our REIT taxable income. Possible examples of those
timing differences include the following:

- Because we may deduct capital losses only to the extent of our capital
gains, we may have taxable income that exceeds our economic income.

- We will recognize taxable income in advance of the related cash flow if
any of our mortgage loans or mortgage-backed securities are deemed to
have original issue discount. We generally must accrue original issue
discount based on a constant yield method that takes into account
projected prepayments but that defers taking into account credit losses
until they are actually incurred.

- We may recognize taxable market discount income when we receive the
proceeds from the disposition of, or principal payments on, loans that
have a stated redemption price at maturity that is greater than our tax
basis in those loans, although such proceeds often will be used to make
non-deductible principal payments on related borrowings.

- We may recognize taxable income without receiving a corresponding cash
distribution if we foreclose on or make a significant modification to a
loan, to the extent that the fair market value of the underlying property
or the principal amount of the modified loan, as applicable, exceeds our
basis in the original loan.

- We may recognize phantom taxable income from any residual interests in
REMICs or retained ownership interests in mortgage loans subject to
collateralized mortgage obligation debt.

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Although several types of non-cash income are excluded in determining the
annual distribution requirement, we will incur corporate income tax and the 4%
excise tax with respect to those non-cash income items if we do not distribute
those items on a current basis. As a result of the foregoing, we may have less
cash than is necessary to distribute all of our taxable income and thereby avoid
corporate income tax and the excise tax imposed on certain undistributed income.
In such a situation, we may need to borrow funds or issue additional common or
preferred stock.

Under certain circumstances, we may be able to correct a failure to meet
the distribution requirement for a year by paying "deficiency dividends" to our
stockholders in a later year. We may include such deficiency dividends in our
deduction for dividends paid for the earlier year. Although we may be able to
avoid income tax on amounts distributed as deficiency dividends, we will be
required to pay interest to the IRS based upon the amount of any deduction we
take for deficiency dividends.

RECORDKEEPING REQUIREMENTS

We must maintain certain records in order to qualify as a REIT. In
addition, to avoid a monetary penalty, we must request on an annual basis
information from our stockholders designed to disclose the actual ownership of
our outstanding stock. We intend to comply with these requirements.

FAILURE TO QUALIFY

If we fail to qualify as a REIT in any taxable year, and no relief
provision applies, we would be subject to federal income tax and any applicable
alternative minimum tax on our taxable income at regular corporate rates. In
calculating our taxable income in a year in which we fail to qualify as a REIT,
we would not be able to deduct amounts paid out to stockholders. In fact, we
would not be required to distribute any amounts to stockholders in that year. In
such event, to the extent of our current and accumulated earnings and profits,
all distributions to stockholders would be taxable as ordinary income. Subject
to certain limitations of the federal income tax laws, corporate stockholders
might be eligible for the dividends received deduction. Unless we qualified for
relief under specific statutory provisions, we also would be disqualified from
taxation as a REIT for the four taxable years following the year during which we
ceased to qualify as a REIT. We cannot predict whether in all circumstances we
would qualify for such statutory relief.

TAXABLE REIT SUBSIDIARIES

As described above, we may own up to 100% of the stock of one or more TRSs.
A TRS is a fully taxable corporation that may earn income that would not be
qualifying income if earned directly by us. A corporation will not qualify as a
TRS if it directly or indirectly operates or manages any hotels or health care
facilities or provides rights to any brand name under which any hotel or health
care facility is operated.

We and our corporate subsidiary must elect for the subsidiary to be treated
as a TRS. A corporation of which a qualifying TRS directly or indirectly owns
more than 35% of the voting power or value of the stock will automatically be
treated as a TRS. Overall, no more than 20% of the value of our assets may
consist of securities of one or more TRSs, and no more than 25% of the value of
our assets may consist of the securities of TRSs and other non-TRS taxable
subsidiaries and other assets that are not qualifying assets for purposes of the
75% asset test.

The TRS rules limit the deductibility of interest paid or accrued by a TRS
to us to assure that the TRS is subject to an appropriate level of corporate
taxation. Further, the rules impose a 100% excise tax on transactions between a
TRS and us or our tenants that are not conducted on an arm's-length basis.

We will make an election to treat NYMC as a TRS. NYMC will originate our
loans and will be subject to corporate income tax on its taxable income. We
believe that all transactions between us and NYMC and any other TRS that we form
or acquire (including sales of loans from NYMC to us or a qualified REIT
subsidiary) will be conducted on an arm's-length basis.

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TAXATION OF TAXABLE U.S. STOCKHOLDERS

As long as we qualify as a REIT, a taxable "U.S. stockholder" must take
into account as ordinary income distributions made out of our current or
accumulated earnings and profits that we do not designate as capital gain
dividends or retained long-term capital gain. A U.S. stockholder will not
qualify for the dividends received deduction generally available to
corporations. The term "U.S. stockholder" means a holder of our common stock
that, for United States federal income tax purposes, is:

- a citizen or resident of the United States;

- a corporation or partnership (including an entity treated as a
corporation or partnership for U.S. federal income tax purposes) created
or organized under the laws of the United States or of a political
subdivision of the United States;

- an estate whose income is subject to U.S. federal income taxation
regardless of its source; or

- any trust if (i) a U.S. court is able to exercise primary supervision
over the administration of such trust and one or more U.S. persons have
the authority to control all substantial decisions of the trust or (ii)
it has a valid election in place to be treated as a U.S. person.

A U.S. stockholder generally will recognize distributions that we designate
as capital gain dividends as long-term capital gain without regard to the period
for which the U.S. stockholder has held its common stock. We generally will
designate our capital gain dividends as either 15%, 20% or 25% rate
distributions. See "-- Capital Gains and Losses." A corporate U.S. stockholder,
however, may be required to treat up to 20% of certain capital gain dividends as
ordinary income.

We may elect to retain and pay income tax on the net long-term capital gain
that we receive in a taxable year. In that case, a U.S. stockholder would be
taxed on its proportionate share of our undistributed long-term capital gain.
The U.S. stockholder would receive a credit or refund for its proportionate
share of the tax we paid. The U.S. stockholder would increase the basis in its
common stock by the amount of its proportionate share of our undistributed
long-term capital gain, minus its share of the tax we paid.

A U.S. stockholder will not incur tax on a distribution in excess of our
current and accumulated earnings and profits if the distribution does not exceed
the adjusted basis of the U.S. stockholder's common stock. Instead, the
distribution will reduce the adjusted basis of such common stock. A U.S.
stockholder will recognize a distribution in excess of both our current and
accumulated earnings and profits and the U.S. stockholder's adjusted basis in
his or her common stock as long-term capital gain, or short-term capital gain if
the common stock has been held for one year or less, assuming the common stock
is a capital asset in the hands of the U.S. stockholder. In addition, if we
declare a distribution in October, November, or December of any year that is
payable to a U.S. stockholder of record on a specified date in any such month,
such distribution shall be treated as both paid by us and received by the U.S.
stockholder on December 31 of such year, provided that we actually pay the
distribution during January of the following calendar year.

Dividends paid to a U.S. stockholder generally will not qualify for the new
15% tax rate for "qualified dividend income." The Jobs and Growth Tax Relief
Reconciliation Act of 2003 reduced the maximum tax rate for qualified dividend
income from 38.6% to 15% for tax years 2003 through 2008. Without future
congressional action, the maximum tax rate on qualified dividend income will
move to 35% in 2009 and 39.6% in 2011. Qualified dividend income generally
includes dividends paid by domestic C corporations and certain qualified foreign
corporations to most U.S. noncorporate stockholders. Because we are not
generally subject to federal income tax on the portion of our REIT taxable
income distributed to our stockholders, our dividends generally will not be
eligible for the new 15% rate on qualified dividend income. As a result, our
ordinary REIT dividends will continue to be taxed at the higher tax rate
applicable to ordinary income. Currently, the highest marginal individual income
tax rate on ordinary income is 35%. However, the 15% tax rate for qualified
dividend income will apply to our ordinary REIT dividends, if any, that are (i)
attributable to dividends received by us from non-REIT corporations, such

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as our TRSs, and (ii) attributable to income upon which we have paid corporate
income tax (e.g., to the extent that we distribute less than 100% of our taxable
income). In general, to qualify for the reduced tax rate on qualified dividend
income, a stockholder must hold our common stock for more than 60 days during
the 120-day period beginning on the date that is 60 days before the date on
which our common stock becomes ex-dividend.

Stockholders may not include in their individual income tax returns any of
our net operating losses or capital losses. Instead, these losses are generally
carried over by us for potential offset against our future income. Taxable
distributions from us and gain from the disposition of the common stock will not
be treated as passive activity income and, therefore, stockholders generally
will not be able to apply any "passive activity losses," such as losses from
certain types of limited partnerships in which the stockholder is a limited
partner, against such income. In addition, taxable distributions from us and
gain from the disposition of our common stock generally will be treated as
investment income for purposes of the investment interest limitations. We will
notify stockholders after the close of our taxable year as to the portions of
the distributions attributable to that year that constitute ordinary income,
return of capital, and capital gain.

We may recognize taxable income in excess of our economic income, known as
phantom income, in the first years that we hold certain investments, and
experience an offsetting excess of economic income over our taxable income in
later years. As a result, stockholders at times may be required to pay federal
income tax on distributions that economically represent a return of capital
rather than a dividend. These distributions would be offset in later years by
distributions representing economic income that would be treated as returns of
capital for federal income tax purposes. Taking into account the time value of
money, this acceleration of federal income tax liabilities may reduce a
stockholder's after-tax return on his or her investment to an amount less than
the after-tax return on an investment with an identical before-tax rate of
return that did not generate phantom income. For example, if an investor with a
30% tax rate purchases a taxable bond with an annual interest rate of 10% on its
face value, the investor's before-tax return on the investment would be 10% and
the investor's after-tax return would be 7%. However, if the same investor
purchased our common stock at a time when the before-tax rate of return was 10%,
the investor's after-tax rate of return on such stock might be somewhat less
than 7% as a result of our phantom income. In general, as the ratio of our
phantom income to our total income increases, the after-tax rate of return
received by a taxable stockholder will decrease. We will consider the potential
effects of phantom income on our taxable stockholders in managing our
investments.

Any excess inclusion income that we recognize generally will be allocated
among our stockholders to the extent that it exceeds our undistributed REIT
taxable income in a particular year. A stockholder's share of excess inclusion
income would not be allowed to be offset by any net operating losses otherwise
available to the stockholder.

TAXATION OF U.S. STOCKHOLDERS ON THE DISPOSITION OF COMMON STOCK

In general, a U.S. stockholder who is not a dealer in securities must treat
any gain or loss realized upon a taxable disposition of our common stock as
long-term capital gain or loss if the U.S. stockholder has held the common stock
for more than one year and otherwise as short-term capital gain or loss.
However, a U.S. stockholder must treat any loss upon a sale or exchange of
common stock held by such stockholder for six months or less as a long-term
capital loss to the extent of capital gain dividends and any other actual or
deemed distributions from us that such U.S. stockholder treats as long-term
capital gain. All or a portion of any loss that a U.S. stockholder realizes upon
a taxable disposition of the common stock may be disallowed if the U.S.
stockholder purchases other common stock within 30 days before or after the
disposition.

CAPITAL GAINS AND LOSSES

A taxpayer generally must hold a capital asset for more than one year for
gain or loss derived from its sale or exchange to be treated as long-term
capital gain or loss. The highest marginal individual income

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tax rate currently is 35% (which rate will apply for the period from January 1,
2003 to December 31, 2010). The maximum tax rate on long-term capital gain
applicable to non-corporate taxpayers is 15% for sales and exchanges of assets
held for more than one year occurring from May 7, 2003 through December 31,
2008. The maximum tax rate on long-term capital gain from the sale or exchange
of "section 1250 property," or depreciable real property, is 25% to the extent
that such gain would have been treated as ordinary income if the property were
"section 1245 property." With respect to distributions that we designate as
capital gain dividends and any retained capital gain that we are deemed to
distribute, we generally may designate whether such a distribution is taxable to
our non-corporate stockholders at a 15%, 20% or 25% rate. Thus, the tax rate
differential between capital gain and ordinary income for non-corporate
taxpayers may be significant. In addition, the characterization of income as
capital gain or ordinary income may affect the deductibility of capital losses.
A non-corporate taxpayer may deduct capital losses not offset by capital gains
against its ordinary income only up to a maximum annual amount of $3,000. A
non-corporate taxpayer may carry forward unused capital losses indefinitely. A
corporate taxpayer must pay tax on its net capital gain at ordinary corporate
rates. A corporate taxpayer may deduct capital losses only to the extent of
capital gains, with unused losses being carried back three years and forward
five years.

INFORMATION REPORTING REQUIREMENTS AND BACKUP WITHHOLDING

We will report to our stockholders and to the IRS the amount of
distributions we pay during each calendar year, and the amount of tax we
withhold, if any. Under the backup withholding rules, a stockholder may be
subject to backup withholding at a rate of 28% with respect to distributions
unless the holder:

- is a corporation or comes within certain other exempt categories and,
when required, demonstrates this fact; or

- provides a taxpayer identification number, certifies as to no loss of
exemption from backup withholding, and otherwise complies with the
applicable requirements of the backup withholding rules.

A stockholder who does not provide us with its correct taxpayer
identification number also may be subject to penalties imposed by the IRS. Any
amount paid as backup withholding will be creditable against the stockholder's
income tax liability. In addition, we may be required to withhold a portion of
capital gain distributions to any stockholders who fail to certify their
non-foreign status to us. For a discussion of the backup withholding rules as
applied to non-U.S. stockholders. See " -- Taxation of Non-U.S. Stockholders."

TAXATION OF TAX-EXEMPT STOCKHOLDERS

Tax-exempt entities, including qualified employee pension and profit
sharing trusts and individual retirement accounts, generally are exempt from
federal income taxation. However, they are subject to taxation on their
unrelated business taxable income, or UBTI. While many investments in real
estate generate UBTI, the IRS has issued a ruling that dividend distributions
from a REIT to an exempt employee pension trust do not constitute UBTI so long
as the exempt employee pension trust does not otherwise use the shares of the
REIT in an unrelated trade or business of the pension trust. Based on that
ruling, amounts that we distribute to tax-exempt stockholders generally should
not constitute UBTI. However, if a tax-exempt stockholder were to finance its
acquisition of common stock with debt, a portion of the income that it receives
from us would constitute UBTI pursuant to the "debt-financed property" rules.
Moreover, social clubs, voluntary employee benefit associations, supplemental
unemployment benefit trusts and qualified group legal services plans that are
exempt from taxation under special provisions of the federal income tax laws are
subject to different UBTI rules, which generally will require them to
characterize distributions that they receive from us as UBTI. Furthermore, a
tax-exempt stockholder's share of any excess inclusion income that we recognize
would be subject to tax as UBTI. Finally, in certain circumstances, a qualified
employee pension or profit sharing trust that owns more than 10% of our

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stock must treat a percentage of the dividends that it receives from us as UBTI.
Such percentage is equal to the gross income we derive from an unrelated trade
or business, determined as if we were a pension trust, divided by our total
gross income for the year in which we pay the dividends. That rule applies to a
pension trust holding more than 10% of our stock only if:

- the percentage of our dividends that the tax-exempt trust must treat as
UBTI is at least 5%;

- we qualify as a REIT by reason of the modification of the rule requiring
that no more than 50% of our stock be owned by five or fewer individuals
that allows the beneficiaries of the pension trust to be treated as
holding our stock in proportion to their actuarial interests in the
pension trust; and

- either

- one pension trust owns more than 25% of the value of our stock; or

- a group of pension trusts individually holding more than 10% of the
value of our stock collectively owns more than 50% of the value of our
stock.

TAXATION OF NON-U.S. STOCKHOLDERS

The rules governing U.S. federal income taxation of nonresident alien
individuals, foreign corporations, foreign partnerships, and other foreign
stockholders are complex. This section is only a summary of such rules. WE URGE
NON-U.S. STOCKHOLDERS TO CONSULT THEIR OWN TAX ADVISORS TO DETERMINE THE IMPACT
OF FEDERAL, STATE, AND LOCAL INCOME TAX LAWS ON OWNERSHIP OF THE COMMON STOCK,
INCLUDING ANY REPORTING REQUIREMENTS.

A non-U.S. stockholder that receives a distribution that is not
attributable to gain from our sale or exchange of U.S. real property interests,
as defined below, and that we do not designate as a capital gain dividend or
retained capital gain will recognize ordinary income to the extent that we pay
the distribution out of our current or accumulated earnings and profits. A
withholding tax equal to 30% of the gross amount of the distribution ordinarily
will apply unless an applicable tax treaty reduces or eliminates the tax.
However, if a distribution is treated as effectively connected with the non-U.S.
stockholder's conduct of a U.S. trade or business, the non-U.S. stockholder
generally will be subject to federal income tax on the distribution at graduated
rates, in the same manner as U.S. stockholders are taxed on distributions and
also may be subject to the 30% branch profits tax in the case of a corporate
non-U.S. stockholder. We plan to withhold U.S. income tax at the rate of 30% on
the gross amount of any distribution paid to a non-U.S. stockholder unless
either:

- a lower treaty rate applies and the non-U.S. stockholder files an IRS
Form W-8BEN evidencing eligibility for that reduced rate with us, or

- the non-U.S. stockholder files an IRS Form W-8ECI with us claiming that
the distribution is effectively connected income.

However, reduced treaty rates are not available to the extent that the
income allocated to the foreign stockholder is excess inclusion income. Our
excess inclusion income generally will be allocated among our stockholders to
the extent that it exceeds our undistributed REIT taxable income in a particular
year.

A non-U.S. stockholder will not incur tax on a distribution in excess of
our current and accumulated earnings and profits if the excess portion of the
distribution does not exceed the adjusted basis of its common stock. Instead,
the excess portion of the distribution will reduce the adjusted basis of that
common stock. A non-U.S. stockholder will be subject to tax on a distribution
that exceeds both our current and accumulated earnings and profits and the
adjusted basis of the common stock, if the non-U.S. stockholder otherwise would
be subject to tax on gain from the sale or disposition of its common stock, as
described below. Because we generally cannot determine at the time we make a
distribution whether or not the distribution will exceed our current and
accumulated earnings and profits, we normally will withhold tax on the entire
amount of any distribution at the same rate as we would withhold on a

132

dividend. However, a non-U.S. stockholder may obtain a refund of amounts that we
withhold if we later determine that a distribution in fact exceeded our current
and accumulated earnings and profits.

We must withhold 10% of any distribution that exceeds our current and
accumulated earnings and profits. Consequently, although we intend to withhold
at a rate of 30% on the entire amount of any distribution, to the extent that we
do not do so, we will withhold at a rate of 10% on any portion of a distribution
not subject to withholding at a rate of 30%.

For any year in which we qualify as a REIT, a non-U.S. stockholder will
incur tax on distributions that are attributable to gain from our sale or
exchange of "U.S. real property interests" under special provisions of the
federal income tax laws known as "FIRPTA." The term "U.S. real property
interests" includes interests in real property and shares in corporations at
least 50% of whose assets consists of interests in real property. The term "U.S.
real property interests" does not include mortgage loans or mortgage-backed
securities. As a result, we do not anticipate that we will generate material
amounts of gain that would be subject to FIRPTA. Under the FIRPTA rules, a
non-U.S. stockholder is taxed on distributions attributable to gain from sales
of U.S. real property interests as if the gain were effectively connected with a
U.S. business of the non-U.S. stockholder. A non-U.S. stockholder thus would be
taxed on such a distribution at the normal capital gain rates applicable to U.S.
stockholders, subject to applicable alternative minimum tax and a special
alternative minimum tax in the case of a nonresident alien individual. A
non-U.S. corporate stockholder not entitled to treaty relief or exemption also
may be subject to the 30% branch profits tax on such a distribution. We must
withhold 35% of any such distribution that we could designate as a capital gain
dividend. A non-U.S. stockholder may receive a credit against our tax liability
for the amount we withhold.

In the unlikely event that at least 50% of the assets we hold were
determined to be U.S. real property interests, gains from the sale of our common
stock by a non-U.S. stockholder could be subject to a FIRPTA tax. However, even
if that event were to occur, a non-U.S. stockholder generally would not incur
tax under FIRPTA on gain from the sale of our common stock as long as at all
times non-U.S. persons hold, directly or indirectly, less than 50% in value of
our stock. We cannot assure you that this test will be met. In addition, a
non-U.S. stockholder that owned, actually or constructively, 5% or less of our
common stock at all times during a specified testing period will not incur tax
under FIRPTA on gain from the sale of our common stock if the common stock is
"regularly traded" on an established securities market. Because our common stock
is expected to be regularly traded on an established securities market, a non-
U.S. stockholder that owns 5% or less of our common stock would not incur tax
under FIRPTA on the gain from the sale of its common stock. If the gain on the
sale of the common stock were taxed under FIRPTA, a non-U.S. stockholder would
be taxed on that gain in the same manner as U.S. stockholders, subject to
applicable alternative minimum tax and a special alternative minimum tax in the
case of nonresident alien individuals. Furthermore, a non-U.S. stockholder
generally will incur tax on gain not subject to FIRPTA if:

- the gain is effectively connected with the non-U.S. stockholder's U.S.
trade or business, in which case the non-U.S. stockholder will be subject
to the same treatment as U.S. stockholders with respect to such gain, or

- the non-U.S. stockholder is a nonresident alien individual who was
present in the U.S. for 183 days or more during the taxable year and has
a "tax home" in the United States, in which case the non-U.S. stockholder
will incur a 30% tax on his or her capital gains.

STATE AND LOCAL TAXES

We and/or our stockholders may be subject to taxation by various states and
localities, including those in which we or a stockholder transacts business,
owns property or resides. The state and local tax treatment may differ from the
federal income tax treatment described above. Consequently, stockholders should
consult their own tax advisors regarding the effect of state and local tax laws
upon an investment in the common stock.

133

UNDERWRITING

We are offering our common stock described in this prospectus through a
number of underwriters. Friedman, Billings, Ramsey & Co., Inc. is acting as the
representative of the underwriters. Subject to the terms and conditions
contained in the underwriting agreement, we have agreed to sell to the
underwriters, and each of the underwriters has severally agreed to purchase from
us, on a firm commitment basis, the number of shares of common stock listed next
to its name in the following table:

UNDERWRITERS NUMBER OF SHARES
------------ ----------------

Friedman, Billings, Ramsey & Co., Inc. ..................... 7,920,000
J.P. Morgan Securities Inc. ................................ 4,320,000
RBC Capital Markets Corporation............................. 2,160,000
Advest, Inc. ............................................... 100,000
Roth Capital Partners LLC................................... 100,000
Jefferies & Co. Inc. ....................................... 100,000
JMP Securities LLC.......................................... 100,000
Piper Jaffray & Co. ........................................ 100,000
Stifel, Nicolaus & Company, Incorporated.................... 100,000
Total..................................................... 15,000,000
==========

The underwriters are obligated to take and pay for all of the common stock
offered if any of the shares of common stock are taken.

The underwriters will initially offer the shares to the public at the price
specified on the cover page of this prospectus. The underwriters may allow to
selected dealers a concession of not more than $0.38 per share. The underwriters
may also allow, and any dealers may reallow, a concession of not more than $0.10
per share to selected other dealers. If all the shares are not sold at the
public offering price, the underwriters may change the public offering price and
the other selling terms. Our shares of common stock are offered subject to a
number of conditions, including:

- receipt and acceptance of our common stock by the underwriters; and

- the underwriters' right to reject orders in whole or in part.

We have granted the underwriters an option, exercisable in one or more
installments for 30 days after the date of this prospectus, to purchase up to
2,250,000 additional shares of common stock to cover over-allotments, if any, at
the public offering price less the underwriting discount set forth on the cover
page of this prospectus.

The following table shows the amount per share and total underwriting
discount we will pay to the underwriters assuming both no exercise and full
exercise of the underwriters' option to purchase up to 2,250,000 additional
shares to cover over-allotments.

NO EXERCISE FULL EXERCISE
----------- -------------

Per share................................................... $ 0.63 $ 0.63
Total..................................................... $9,450,000 $10,867,500

We estimate that the total expenses of this offering to be paid by us, not
including the underwriting discount, will be approximately $3,000,000.

On January 13, 2004, we entered into an engagement letter agreement with
Friedman, Billings, Ramsey & Co., Inc. pursuant to which Friedman Billings
Ramsey agreed to act as financial advisor and lead underwriter and bookrunner
for this offering. We have agreed to reimburse the underwriters for certain
expenses in connection with this offering, estimated to be approximately
$400,000, which are included in the $3,000,000 of estimated offering expenses
described above.

134

Each of our officers and directors has agreed with the underwriters, for a
period of 180 days after the date of this prospectus, subject to certain
exceptions, not to sell any shares of common stock or any securities convertible
into or exchangeable for shares of common stock owned by them without the prior
written consent of the lead underwriter. A total of 3,338,575 shares of our
common stock will be subject to these lock-up agreements. We have also agreed
with the underwriters, for a period of 180 days after the date of this
prospectus, subject to certain exceptions, not to sell or issue any shares of
common stock or any securities convertible into or exchangeable for shares of
common stock, or file any registration statement with the Securities and
Exchange Commission (except a registration statement on Form S-8 relating to our
stock incentive plan), without the prior written consent of the lead
underwriter, except that we may make grants of options or shares of restricted
common stock under our equity incentive plan and issue shares upon exercise of
those options. However, the lead underwriter may, in its sole discretion and at
any time without notice, release all or any portion of the securities subject to
these agreements.

We will indemnify the underwriters against various liabilities, including
liabilities under the Securities Act of 1933, as amended. If we are unable to
provide this indemnification, we will contribute to payments the underwriters
may be required to make in respect of those liabilities.

Our common stock has been approved for listing on the New York Stock
Exchange under the symbol "NTR." In connection with the listing of our common
stock on The New York Stock Exchange, the underwriters will undertake to sell
round lots of 100 shares or more to a minimum of 2,000 beneficial owners.

At our request, the underwriters have reserved up to 2.5% of the common
stock being offered by this prospectus for sale to our directors, employees,
business associates and related persons at the public offering price, less an
amount equal to the underwriting discount. The sales will be made by the
underwriters through a directed share program. We do not know if these persons
will choose to purchase all or any portion of this reserved common stock, but
any purchases they do make will reduce the number of shares available to the
general public. To the extent the allocated shares are not purchased in the
directed share program, we will offer these shares to the public. These persons
must commit to purchase no later than the close of business on the day following
the date of this prospectus. Any directors, employees or other persons
purchasing such reserved common stock will be prohibited from selling such stock
for a period of 180 days after the date of this prospectus. The common stock
issued in connection with the directed share program will be issued as part of
the underwritten offer.

In connection with this offering, the underwriters may engage in activities
that stabilize, maintain or otherwise affect the price of our common stock,
including:

- stabilizing transactions;

- short sales;

- syndicate covering transactions;

- imposition of penalty bids; and

- purchases to cover positions created by short sales.

Stabilizing transactions consist of bids or purchases made for the purpose
of preventing or retarding a decline in the market price of our common stock
while this offering is in progress. Stabilizing transactions may include making
short sales of our common stock, which involves the sale by the underwriters of
a greater number of shares of common stock than it is required to purchase in
this offering, and purchasing common stock from us or in the open market to
cover positions created by short sales. Short sales may be "covered" shorts,
which are short positions in an amount not greater than the underwriters'
over-allotment option referred to above, or may be "naked" shorts, which are
short positions in excess of that amount.

The underwriters may close out any covered short position either by
exercising their over-allotment option, in whole or in part, or by purchasing
shares in the open market. In making this determination, the underwriters will
consider, among other things, the price of shares available for purchase in the
open

135

market compared to the price at which the underwriters may purchase shares
pursuant to the over-allotment option.

A naked short position is more likely to be created if the underwriters are
concerned that there may be downward pressure on the price of our common stock
in the open market that could adversely affect investors who purchased in this
offering. To the extent that the underwriters create a naked short position, the
underwriters will purchase shares in the open market to cover the position.

The underwriters also may impose a penalty bid on selling group members.
This means that if the underwriters purchase shares in the open market in
stabilizing transactions or to cover short sales, the underwriters can require
the selling group members that sold those shares as part of this offering to
repay the selling concession received by them.

As a result of these activities, the price of our common stock may be
higher than the price that otherwise might exist in the open market. If the
underwriters commence these activities, they may discontinue them at any time.
The underwriters may carry out these transactions on The New York Stock
Exchange, in the over-the-counter market or otherwise.

The lead underwriter has advised us that the underwriters do not confirm
sales to accounts over which they exercise discretionary authority.

Prior to this offering, there has been no public market for our common
stock. The initial public offering price was determined by negotiations among us
and the underwriters. The primary factors considered in determining the initial
public offering price include:

- the economic conditions in and future prospects for the industry in which
we compete;

- our past and present operating performance and financial condition;

- our prospects for future earnings;

- an assessment of our management;

- the present state of our development;

- the prevailing conditions of the equity securities markets at the time of
this offering; and

- current market valuations of publicly traded companies considered
comparable to our company.

The underwriters or their affiliates may provide us with certain commercial
banking, financial advisory and investment banking services in the future, for
which they would receive customary compensation.

A prospectus in electronic format may be available on the Internet sites of
or through other online services maintained by the underwriters and selling
group members participating in this offering, or by their affiliates. In those
cases, prospective investors may view offering terms online and, depending upon
the underwriter or the selling group member, prospective investors may be
allowed to place orders online. The underwriters may agree with us to allocate a
specific number of shares for sale to online brokerage account holders. Any such
allocation for online distributions will be made by the underwriters on the same
basis as other allocations.

Other than the prospectus in electronic format, the information on the
underwriters' or any selling group member's web site and any information
contained in any other web site maintained by the underwriters or any selling
group member is not part of the prospectus or the registration statement of
which this prospectus forms a part, has not been approved or endorsed by us or
the underwriters or any selling group member in its capacity as underwriter or
selling group member and should not be relied upon by investors.

136

LEGAL MATTERS

Certain legal matters will be passed upon for us by our counsel, Hunton &
Williams LLP. Venable LLP, Baltimore, Maryland will issue an opinion to us
regarding certain matters of Maryland law including the validity of the common
stock offered hereby. Certain legal matters related to the offering will be
passed upon for the underwriters by McDermott Will & Emery LLP.

EXPERTS

The financial statements of New York Mortgage Company, LLC as of December
31, 2003 and 2002 and for each of the three years in the period ended December
31, 2003, and the balance sheet of New York Mortgage Trust, Inc. as of December
31, 2003, both of which are included in this prospectus, have been audited by
Deloitte & Touche LLP, independent registered public accounting firm, as stated
in their reports appearing herein and have been so included in reliance upon the
reports of such firm given upon their authority as experts in accounting and
auditing.

137

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the Securities and Exchange Commission a registration
statement on Form S-11, including exhibits and schedules filed with the
registration statement of which this prospectus is a part, under the Securities
Act with respect to the common stock we propose to sell in this offering. This
prospectus does not contain all of the information set forth in the registration
statement and exhibits and schedules to the registration statement. For further
information with respect to our company and the common stock we propose to sell
in this offering, we refer you to the registration statement, including the
exhibits and schedules to the registration statement. Copies of the registration
statement, including the exhibits and schedules to the registration statement,
may be examined without charge at the public reference room of the Securities
and Exchange Commission 450 Fifth Street, N.W., Washington, DC 20549. The
Securities and Exchange Commission's toll-free number is 1-800-SEC-0330. In
addition, the Securities and Exchange Commission maintains a web site,
http://www.sec.gov, which contains reports, proxy and information statements and
other information regarding registrants, including us, that file electronically
with the Securities and Exchange Commission.

AS A RESULT OF THIS OFFERING, WE WILL BECOME SUBJECT TO THE INFORMATION AND
REPORTING REQUIREMENTS OF THE SECURITIES EXCHANGE ACT, AND WILL FILE PERIODIC
REPORTS, PROXY STATEMENTS AND WILL MAKE AVAILABLE TO OUR STOCKHOLDERS ANNUAL
REPORTS CONTAINING AUDITED FINANCIAL INFORMATION FOR EACH YEAR AND QUARTERLY
REPORTS FOR THE FIRST THREE QUARTERS OF EACH FISCAL YEAR CONTAINING UNAUDITED
INTERIM FINANCIAL INFORMATION.

138

INDEX TO FINANCIAL STATEMENTS

PAGE
----

NEW YORK MORTGAGE TRUST, INC.:
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM..... F-2
Balance Sheets as of March 31, 2004 (unaudited) and
December 31, 2003...................................... F-3
Notes to Financial Statement.............................. F-4
UNAUDITED PRO FORMA FINANCIAL INFORMATION:
Introduction................................................ F-6
Unaudited Pro Forma Condensed Consolidated Balance Sheet as
of March 31, 2004......................................... F-7
Notes to Unaudited Pro Forma Condensed Consolidated Balance
Sheet..................................................... F-8
Unaudited Pro Forma Condensed Consolidated Statement of
Operations for the three months ended March 31, 2004...... F-10
Unaudited Pro Forma Condensed Consolidated Statement of
Operations for the year ended December 31, 2003........... F-11
Notes to Unaudited Pro Forma Condensed Consolidated
Statements of Operations.................................. F-12
THE NEW YORK MORTGAGE COMPANY, LLC:
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM..... F-14
FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31,
2004 AND 2003 (UNAUDITED) AND THE YEARS ENDED DECEMBER 31,
2003, 2002 AND 2001:
Balance Sheets............................................ F-15
Statements of Income...................................... F-16
Statements of Members' Equity............................. F-17
Statements of Cash Flows.................................. F-18
Notes to Financial Statements............................. F-19

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors
New York Mortgage Trust, Inc.:

We have audited the accompanying balance sheet of New York Mortgage Trust,
Inc. (the "Company") as of December 31, 2003. This balance sheet is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this balance sheet based on our audit.

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

In our opinion, such balance sheet presents fairly, in all material
respects, the financial position of New York Mortgage Trust, Inc. as of December
31, 2003, in conformity with accounting principles generally accepted in the
United States of America.

/s/ Deloitte & Touche LLP
New York, New York
March 19, 2004

F-2

NEW YORK MORTGAGE TRUST, INC.

BALANCE SHEETS

MARCH 31, DECEMBER 31,
2004 2003
--------- ------------
(UNAUDITED)

ASSETS:
Cash...................................................... $275,010 $10
-------- ---
TOTAL..................................................... $275,010 $10
======== ===
LIABILITIES AND STOCKHOLDERS' EQUITY:
Liabilities:
Due to related party...................................... $275,000 --
-------- ---
Stockholders' Equity:
Common stock (par value $0.01, 100 shares authorized, 100
shares issued and outstanding)............................ $ 1 $ 1
Additional paid in capital.................................. 9 9
-------- ---
Total stockholders' equity............................. $ 10 $10
-------- ---
TOTAL..................................................... $275,010 $10
======== ===

See notes to financial statement.
F-3

NEW YORK MORTGAGE TRUST, INC.

NOTES TO FINANCIAL STATEMENTS
AT MARCH 31, 2004 (UNAUDITED) AND DECEMBER 31, 2003

1. ORGANIZATION

New York Mortgage Trust, Inc. (the "Company") is a newly organized, fully
integrated, self-advised residential mortgage finance company formed as a
Maryland corporation on September 26, 2003. The Company was formed to initiate a
residential mortgage securitization business through the merger with the
residential mortgage banking operations of The New York Mortgage Company, LLC
("NYMC"). NYMC originates all types of mortgage loans, with a primary focus on
prime, residential mortgage loans. The Company plans to raise common equity in
an initial public offering ("IPO") which is anticipated to be finalized in the
second quarter of 2004. Following completion of the IPO, the Company intends to
purchase 100% of the equity interests of NYMC from its owners, and invest any
remaining proceeds in residential mortgage-backed securities on a leveraged
basis.

On December 23, 2003, the Company entered into an agreement with NYMC and
its owners, Messrs. Schnall and Fierro, to cause NYMC to repay promissory notes
totaling $14,706,902 due to Messrs. Schnall and Fierro following completion of
the IPO. On February 26, 2004 the promissory notes of $14,706,902 to Messrs.
Schnall and Fierro were modified to reduce the outstanding balance to
$13,706,902 and extend the maturity to April 30, 2004. The $1,000,000 reduction
in the notes will be treated as an equity contribution by the members. On May
26, 2004 these notes were further modified to extend their maturity to June 30,
2005, although they may be prepaid without penalty with the approval of our
senior creditors or following the recapitalization of NYMC if the
recapitalization amount equals or exceeds the outstanding amount of the notes.

On January 9, 2004, the Company capitalized New York Mortgage Funding, LLC
("NYMF") as a wholly owned, subsidiary of the Company. NYMF is a newly organized
Delaware limited liability company formed on October 30, 2003. The
capitalization of NYMF by the Company was funded by a non-interest bearing loan
for $275,000 from NYMC. The capitalization of NYMF allows for NYMF to pursue
certain state licenses related to its business upon completion of the Company's
IPO. Other than the capitalization of NYMF by the Company and the license
applications for certain states, the Company has not commenced operations. Once
the Company becomes a real estate investment trust (REIT) upon completion of the
merger, NYMF will be classified as a disregarded entity for federal income tax
purposes.

NYMF will own and retain certain adjustable rate and hybrid adjustable rate
mortgages ("ARMs") originated by NYMC. NYMF may also own ARM securities;
predominately agency paper (issued by Freddie Mac or Fannie Mae) and non-agency
investment grade ARM securities. NYMF will also enter into various arrangements
to finance its investments in ARMs through the use of repurchase agreements, the
securitization of its loan investments, or by other means. In order to mitigate
interest rate and term financing risk, NYMF may enter into various hedging
transactions, including interest rate swaps and caps. NYMF has not yet commenced
operations.

F-4

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION -- The preparation of a balance sheet in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statement. Actual results could differ
from those estimates.

F-5

UNAUDITED PRO FORMA FINANCIAL INFORMATION

INTRODUCTION

The following unaudited pro forma condensed consolidated balance sheet of
the Company has been prepared as if it had successfully completed its IPO, and
had completed the merger with NYMC, both on March 31, 2004. The pro forma
condensed consolidated statement of operations for the year ended December 31,
2003 and the three months ended March 31, 2004 have been prepared as if the
Company had successfully completed its IPO, and had completed the merger with
NYMC both at the beginning of the period presented. The combination of NYMC and
NYMT assumes a merger of entities under common control.

The pro forma financial statements are based upon available information and
assumptions, as set forth in the notes to the pro forma financial statements
that we believe are reasonable in the circumstances.

The unaudited pro forma statements are presented for comparative purposes
only and are not necessarily indicative of the future financial position or
results of operations of the Company or of the financial position or the results
of operations that would have been realized had the Company's acquisition of
NYMC been consummated during the period or as of the date for which the pro
forma statement is presented.

These statements do not purport to represent what the Company's financial
position and results of operations (a) would actually have been had its merger
with NYMC occurred on those dates or at the beginning of the period or (b) any
future date or period.

The unaudited pro forma financial information should be read in conjunction
with the historical consolidated financial statements and notes thereto for NYMC
and NYMT, which are both included herein.

F-6

NEW YORK MORTGAGE TRUST, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

AS OF MARCH 31, 2004
PRO FORMA ADJUSTMENTS
------------------------------------------------------------------------
NYMC
NYMC NYMT OFFERING MERGER PRO FORMA
HISTORICAL HISTORICAL (A) (B) NYMT
-------------- ---------- ------------ ------------ ------------

ASSETS
Cash and equivalents....... $ 4,523,463 $ 10 $122,550,000 $(14,369,693) $112,703,780
Restricted cash............ 255,785 -- -- -- 255,785
Marketable securities...... 4,067,687 -- -- -- 4,067,687
Due from loan purchasers... 93,850,942 -- -- -- 93,850,942
Loans held for sale........ 47,733,852 -- -- -- 47,733,852
Prepaid and other assets... 5,679,959 -- -- -- 5,679,959
Property and equipment,
net..................... 2,011,079 -- -- -- 2,011,079
-------------- ---- ------------ ------------ ------------
Total Assets............ $ 158,122,767 $ 10 $122,550,000 $(14,369,693) $266,303,084
============== ==== ============ ============ ============

LIABILITIES
Financing arrangements..... $ 136,133,533 $ -- $ -- $ -- $136,133,533
Due to loan purchasers..... 961,414 -- -- -- 961,414
Accounts payable and
accrued expenses........ 6,527,743 -- -- (253,468) 6,274,275
Subordinate notes due to
members................. 13,706,902 -- -- (13,706,902) 0
Other liabilities.......... 383,852 -- -- 383,852
-------------- ---- ------------ ------------ ------------
Total Liabilities....... 157,713,444 -- -- (13,960,370) 143,753,074
-------------- ---- ------------ ------------ ------------
MEMBERS'/SHAREHOLDERS'
EQUITY..................... 409,323 10 122,550,000 (409,323) 122,550,010
-------------- ---- ------------ ------------ ------------
Total Liabilities and
Equity..................... $ 158,122,767 $ 10 $122,550,000 $(14,369,693) $266,303,804
============== ==== ============ ============ ============

See notes to financial statement.
F-7

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

PRESENTATION

The accompanying unaudited pro forma condensed consolidated balance sheet
of New York Mortgage Trust, Inc. (the "Company") as of March 31, 2004 is based
on the historical balance sheet of New York Mortgage Company, LLC ("NYMC"),
assumes the completion of this offering and the application of the net proceeds,
to the extent discernable, contractual or as otherwise factually supportable, as
described in "Use of Proceeds" and the resultant merger of NYMC and the Company.

The Pro Forma Condensed Consolidated Balance Sheet assumes all of the
following occurred on March 31, 2004:

- The exchange of 2,650,000 shares of common stock of the Company for the
contribution of 100% of the ownership interests in NYMC to the Company;

- the initial public offering of shares of common stock at $9.00 per share,
with net proceeds of $122.6 million;

- the retirement of approximately $13.7 million of promissory notes
outstanding and related accrued interest.

The pro forma condensed consolidated balance sheet represents the
consolidated balance sheet of the Company, and its subsidiaries, including NYMC
which will become a taxable REIT subsidiary of the Company upon completion of
the merger of NYMC with the Company.

ACCOUNTING TREATMENT

The combination of NYMC and the Company will be accounted for as a transfer
of assets between entities under common control. Accordingly, the Company will
record the assets and liabilities transferred from NYMC at their carrying
amounts in accounts of NYMC at the date of transfer.

In the opinion of the Company's management, all material adjustments
necessary to reflect the effects of the preceding transactions have been made.
The unaudited pro forma condensed consolidated balance sheet is presented for
illustrative purposes only and is not indicative of what the actual financial
position would have been had the common stock offering and other transactions
described above occurred on March 31, 2004, nor does it purport to represent the
future financial position of the Company.

NOTES AND MANAGEMENT ASSUMPTIONS:

(A) Represents proceeds from the initial public offering of 15,000,000
shares of common stock at $9.00 per share, net of underwriting discounts
and estimated transaction costs of $12,450,000.

(B) Reflects the exchange of 2,650,000 shares of common stock of the
Company representing the consideration for the contribution of membership
equity interests in NYMC to the Company (see "Our Acquisition of NYMC" on
page 32). The value of the consideration for the contribution of ownership
interest does not include an additional aggregate 100,000 shares of common
stock that will be held in escrow through December 31, 2004 and will be
available to satisfy any indemnification claims the Company may have
against the contributors of the NYMC membership interests under the
contribution agreement between the Company and the contributors during the
escrow period for losses the Company incurs as a result of defaults on any
residential mortgage loans originated by NYMC and closed prior to
completion of this offering. The conversion of membership equity interests
into shares of common stock changes the computation of shares outstanding
but does not change NYMC's historical equity balance as a result of the
merger.

Reflects the payment by NYMC of approximately $13.7 million, net of a
contribution of $1,000,000 to equity by Messrs. Schnall and Fierro as a
result of a modification to the promissory notes on February 26, 2004 (see
"Our Acquisition of NYMC" on page 32), to retire promissory notes

F-8

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
BALANCE SHEET -- (CONTINUED)

outstanding. The payment also includes the elimination of $147,472 in
accrued interest payable on such notes for the period such notes were
outstanding and reflected in the financial statements of NYMC during the
year and the payment of $105,996 of accrued interest on these notes during
2004 through the estimated date of the closing for this offering.

Subsequent Equity Distribution. NYMC intends to make cash distributions to
Messrs. Schnall and Fierro and their respective affiliates, who together
comprise all of the members of NYMC, immediately prior to completion of
this offering in an aggregate amount equal to the estimated paid-in equity
and retained earnings of NYMC as of the closing date of this offering. Such
amount will include the incremental net income for the period from December
31, 2003 up to the offering. The cash distribution will be made to the
members of NYMC pro rata in accordance with their respective ownership
interests. NYMC anticipates that this cash distribution will equal
approximately $3,500,000 and in any event will not exceed $4,500,000 in the
aggregate, although the actual amount of the distributions, which are
currently undeterminable, may be more or less than this amount depending on
NYMC's actual performance through closing. The effects of this distribution
on the pro forma balance sheet are limited to the retained equity of
$409,323 as of March 31, 2004. No further effects of this distribution
subsequent to March 31, 2004 have been used to adjust the pro forma balance
sheet as such subsequent amount has not been determined and is not
considered significant relative to pro forma equity at closing.

As the execution of the Company's business plan is contingent upon the
completion of this offering, it is assumed that the available net proceeds
from this offering are held as cash for purposes of this pro forma
presentation rather than invested in mortgage loans or mortgage-backed
securities on a leveraged basis as contemplated by our business plan. Other
significant differences in the Company's contemplated business plan versus
the pro forma presentation include the retention in the Company of a
portion of loans originated by NYMC, which have historically been sold to
third party investors and are a significant source of historical revenues.

In addition, retention of such loans would generate additional qualifying
interest income for purposes of the REIT income tests and would not be
subject to corporate income tax, but would be subject to the REIT
distribution requirements. As the Company's contemplated business plan
assumes the acquisition of NYMC as a taxable REIT subsidiary, the pro forma
analysis indicates pro forma net income taxed at statutory federal and
state corporate tax rates. As a result, the Company's pro forma financial
data is not necessarily indicative of what its actual financial position
would have been as of the date and for the periods indicated, nor does it
purport to represent its future financial position.

F-9

NEW YORK MORTGAGE TRUST, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE THREE MONTHS ENDED
MARCH 31, 2004
--------------------------------------------
NYMC PRO FORMA PRO FORMA
HISTORICAL ADJUSTMENTS(A) NYMT
------------- -------------- -----------

Revenues
Gains on sales of mortgage loans.................. $ 3,290,383 $ -- $ 3,290,383
Interest income................................... 1,261,068 -- 1,261,068
Revenue from brokered loans....................... 2,048,486 -- 2,048,486
Miscellaneous income.............................. 365,769 -- 365,769
----------- ----------- -----------
Total Revenue.................................. 6,965,706 -- 6,965,706
Expenses
Salaries, commissions and benefits................ 2,719,178 1,949,896 4,669,074
Interest expense.................................. 608,611 (105,996) 502,615
Costs of brokered loans........................... 1,284,219 -- 1,284,219
Occupancy and equipment........................... 661,530 -- 661,530
Marketing and promotion........................... 484,286 -- 484,286
Data processing and communications................ 168,043 16,475 184,518
Offices supplies and expenses..................... 217,871 -- 217,871
Professional fees................................. 253,088 -- 253,088
Travel and entertainment.......................... 188,348 -- 188,348
Depreciation and amortization..................... 102,953 -- 102,953
Other expenses.................................... 160,075 -- 160,075
----------- ----------- -----------
Total Expenses................................. 6,848,202 1,860,375 8,708,577
----------- ----------- -----------
Income before income tax benefit............... 117,504 (1,860,375) (1,742,871)
Income tax benefit............................. -- (770,872) (770,872)
----------- ----------- -----------
Net income (loss).............................. $ 117,504 (1,089,503) (971,999)
=========== =========== ===========
Pro forma basic and diluted income per share........ -- -- $ (0.05)
Weighted average shares outstanding -- basic and
diluted........................................... -- 2,650,000 17,797,374

SUPPLEMENTAL DISCLOSURE BASIC AND DILUTED
----------------------- -----------------

Weighted Average Shares:
Shares issued as consideration for NYMC................ 2,650,000
Shares issued by this offering......................... 15,000,000
Non-dilutive restricted shares granted on completion of
this offering......................................... 147,374
----------
Weighted average shares outstanding.................... 17,797,374
==========

See notes to financial statements.
F-10

NEW YORK MORTGAGE TRUST, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED
DECEMBER 31, 2003
--------------------------------------------
NYMC PRO FORMA PRO FORMA
HISTORICAL ADJUSTMENTS(A) NYMT
------------- -------------- -----------

Revenue
Gains on sale of mortgage loans................... $23,030,669 -- $23,030,669
Interest income................................... 7,609,631 -- 7,609,631
Revenue from brokered loans....................... 6,682,571 -- 6,682,571
Miscellaneous income.............................. 45,579 -- 45,579
----------- ----------- -----------
Total revenue.................................. 37,368,450 -- 37,368,450
Expenses
Salaries, commissions and benefits................ 9,246,869 $ 3,466,396 12,713,265
Interest expense.................................. 3,266,438 (147,472) 3,118,966
Costs of brokered loans........................... 3,733,666 -- 3,733,666
Occupancy and equipment........................... 2,017,804 -- 2,017,804
Marketing and promotion........................... 1,008,418 -- 1,008,418
Data processing and communications................ 607,897 65,901 673,798
Office supplies and expenses...................... 802,954 -- 802,954
Professional fees................................. 958,922 -- 958,922
Travel and entertainment.......................... 666,213 -- 666,213
Depreciation and amortization..................... 411,812 -- 411,812
Other expenses.................................... 921,381 -- 921,381
----------- ----------- -----------
Total Expenses................................. 23,642,374 3,384,825 27,027,199
----------- ----------- -----------
Income before provision for income taxes....... 13,726,076 (3,384,825) 10,341,251
Provision for income taxes..................... -- 4,573,935 4,573,935
----------- ----------- -----------
Net income..................................... $13,726,076 $(7,958,760) $ 5,767,316
=========== =========== ===========
Pro forma basic income per share(B)................. -- -- $ 0.32
Pro forma diluted income per share(B)............... -- -- $ 0.32
Weighted average shares outstanding -- basic........ -- 2,650,000 17,797,374
Weighted average shares outstanding -- diluted...... -- 2,650,000 18,062,125

SUPPLEMENTAL DISCLOSURE BASIC DILUTED
----------------------- ---------- ----------

Weighted Average Shares:
Shares issued as consideration for NYMC................ 2,650,000 2,650,000
Shares issued by this offering......................... 15,000,000 15,000,000
Restricted shares granted on completion of this
offering.............................................. 147,374 412,125
---------- ----------
Weighted average shares outstanding.................... 17,797,374 18,062,125
========== ==========

See notes to financial statements.
F-11

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS

PRESENTATION

The accompanying unaudited pro forma condensed consolidated statements of
operations of New York Mortgage Trust, Inc. (the "Company") for the three months
ended March 31, 2004 and the year ended December 31, 2003 are based on the
historical statements of operations of New York Mortgage Company, LLC ("NYMC"),
assume the completion of this offering and the application of the net proceeds,
to the extent discernable, contractual or as otherwise factually supportable, as
described in "Use of Proceeds" and the resultant merger of NYMC with the
Company.

The Pro Forma Condensed Consolidated Statements of Operations of the
Company assume all of the following occurred at the beginning of the period
presented:

- The exchange of 2,650,000 shares of common stock of the Company, for the
contribution of 100% of the ownership interests in NYMC to the Company;

- the initial public offering of 15.0 million shares of common stock at
$9.00 per share, with net proceeds of $122.6 million;

- the retirement of approximately $13.7 million of notes outstanding.

The pro forma condensed consolidated statements of operations represent the
consolidated statements of operations of the Company, and its subsidiaries,
including NYMC which will become a taxable REIT subsidiary of the Company upon
completion of the merger of NYMC and the Company.

ACCOUNTING TREATMENT

In the opinion of the Company's management, all material adjustments
necessary to reflect the effects of the preceding transactions have been made.
The unaudited pro forma condensed consolidated statements of operations are
presented for illustrative purposes only and are not indicative of what the
actual results of operations would have been had the common stock offering and
other transactions described above occurred on January 1, 2003, nor do they
purport to represent the future results of operations of the Company.

NOTES AND MANAGEMENT ASSUMPTIONS:

(A) The pro forma adjustments represent (1) an increase in personnel
currently contracted for and related salaries (cash salary and restricted
stock vesting over three years), director compensation (including issuance
of 15,000 shares for director compensation) and the related income tax
impact of acquiring NYMC as a taxable REIT subsidiary, (2) the cost of
certain acquired or contracted software and related systems (amortized over
three years) to accommodate the Company's business plan and (3) the payment
of $147,472 for the year ended December 31, 2003 and $105,996 for the three
months ended March 31, 2004 in interest expense on notes outstanding to
NYMC's former owners for the period such notes were outstanding and
reflected in the financial statements of NYMC during the year. The
resulting pro forma income is taxed at the applicable federal and state
statutory income tax rates.

Weighted average shares reflect the conversion of membership equity
interests in NYMC into 2,650,000 shares of common stock, representing the
consideration for the contribution of membership equity interests in NYMC
to the Company (see "Our Acquisition of NYMC" on page 32). The weighted
average shares do not include an additional aggregate 100,000 shares of
common stock that will be held in escrow through December 31, 2004 and will
be available to satisfy any indemnification
F-12

NOTES TO UNAUDITED PRO FORMA CONSOLIDATED
STATEMENTS OF OPERATIONS -- (CONTINUED)

claims the Company may have against the contributors of the NYMC membership
interests under the contribution agreement between the Company and the
contributors during the escrow period for losses the Company incurs as a
result of defaults on any of the residential mortgage loans originated by
NYMC and closed prior to the completion of the offering. The impact of
these additional shares, including an incremental additional issuance of
2.25% of restricted shares of common stock, if currently issued and not
contingent on future performance, would result in pro forma net loss per
basic and diluted share of $(0.05) for the three months ended March 31,
2004 with weighted average shares outstanding -- basic and diluted of
17,798,124. The impact of these additional shares, including an incremental
additional issuance of 2.25% of restricted shares of common stock, if
currently issued and not contingent on future performance, would result in
pro forma net income per basic share of $0.32 for the year ended December
31, 2003 with weighted average shares outstanding -- basic of 17,798,124
and pro forma net income per diluted share of $0.32 with weighted average
shares outstanding -- diluted of 18,164,375.

As the execution of the Company's business plan is contingent upon the
completion of this offering, it is assumed that the net available proceeds
from this offering are held as cash for purposes of this pro forma
presentation rather than invested in mortgage loans and mortgage securities
on a leveraged basis as contemplated by its business plan. Other
significant differences in the Company's contemplated business plan versus
the pro forma presentation include the retention in the Company of a
portion of loans originated by NYMC, which have historically been sold to
third party investors and are a significant source of historical revenues.

In addition, retention of such loans in the Company would generate
additional qualifying interest income for purposes of the REIT gross income
tests and would not be otherwise subject to corporate income tax, but would
be subject to the REIT distribution requirements. As the Company's
contemplated business plan assumes the merger of NYMC as a taxable REIT
subsidiary, the pro forma analysis indicates pro forma net income taxed at
statutory federal and state corporate tax rates. As a result, our pro forma
financial data is not necessarily indicative of what its actual financial
position and results of operations would have been for the periods
indicated, nor does it purport to represent its future results of
operations.

(B) Pro forma basic income per share and pro forma diluted income per
share are calculated by dividing net income by the weighted average basic
and diluted shares outstanding, respectively.

F-13

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Members of
New York Mortgage Company, LLC
New York, NY

We have audited the accompanying balance sheets of New York Mortgage
Company, LLC (the "Company") as of December 31, 2003 and 2002, and the related
statements of income, changes in members' equity (deficit), and cash flows for
each of the three years in the period ended December 31, 2003. 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 standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, such financial statements present fairly, in all material
respects, the financial position of New York Mortgage Company, LLC at December
31, 2003 and 2002, and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 2003 in conformity with
accounting principles generally accepted in the United States of America.

/s/ Deloitte & Touche LLP
New York, New York
March 19, 2004

F-14

NEW YORK MORTGAGE COMPANY, LLC

BALANCE SHEETS

DECEMBER 31,
MARCH 31, ---------------------------
2004 2003 2002
------------ ------------- -----------
(UNAUDITED)

ASSETS
Cash and equivalents................................ $ 4,523,463 $ 3,898,688 $ 2,746,477
Restricted cash..................................... 255,785 217,330 202,131
Marketable securities............................... 4,067,687 3,737,134 2,152,399
Due from loan purchasers............................ 93,850,942 58,862,433 40,620,772
Loans held for sale................................. 47,733,852 36,258,229 34,039,252
Prepaid and other assets............................ 5,679,959 5,075,937 2,271,336
Property and equipment, net......................... 2,011,079 2,031,697 971,804
------------ ------------ -----------
TOTAL............................................... $158,122,767 $110,081,448 $83,004,171
============ ============ ===========

LIABILITIES AND MEMBERS' EQUITY
LIABILITIES:
Financing arrangements.............................. $136,133,533 $ 90,425,133 $73,016,168
Due to loan purchasers.............................. 961,414 753,720 1,110,325
Accounts payable and accrued expenses............... 6,527,743 4,277,241 1,539,851
Subordinated notes due to members................... 13,706,902 14,706,902 --
Other liabilities................................... 383,852 392,077 837,572
------------ ------------ -----------
Total liabilities................................. 157,713,444 110,555,073 76,503,916
------------ ------------ -----------
COMMITMENTS AND CONTINGENCIES (Note 6)
MEMBERS' EQUITY (DEFICIT)........................... 409,323 (473,625) 6,500,255
------------ ------------ -----------
TOTAL............................................... $158,122,767 $110,081,448 $83,004,171
============ ============ ===========

See notes to financial statements.
F-15

NEW YORK MORTGAGE COMPANY, LLC

STATEMENTS OF INCOME

THREE MONTHS ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
------------------------- ---------------------------------------
2004 2003 2003 2002 2001
----------- ----------- ----------- ----------- -----------
(UNAUDITED)

REVENUE:
Gain on sales of mortgage
loans.................. $ 3,290,383 $ 4,757,862 $23,030,669 $ 9,858,183 $ 6,429,233
Interest income........... 1,261,068 1,430,998 7,609,631 2,986,248 1,569,928
Revenue from brokered
loans.................. 2,048,486 1,285,767 6,682,571 5,241,070 3,748,581
Miscellaneous income...... 365,769 34,192 45,579 14,417 48,360
----------- ----------- ----------- ----------- -----------
Total revenue.......... 6,965,706 7,508,819 37,368,450 18,099,918 11,796,102
----------- ----------- ----------- ----------- -----------
EXPENSES:
Salaries, commissions and
benefits............... 2,719,178 1,721,318 9,246,869 5,787,834 3,644,465
Interest expense.......... 608,611 651,504 3,266,438 1,673,108 1,288,780
Costs of brokered loans... 1,284,219 863,115 3,733,666 2,992,231 2,173,598
Occupancy and equipment... 661,530 329,207 2,017,804 1,013,102 686,486
Marketing and promotion... 484,286 204,058 1,008,418 488,339 349,702
Data processing and
communications......... 168,043 133,841 607,897 366,182 214,602
Office supplies and
expenses............... 217,871 157,854 802,954 505,119 442,692
Professional fees......... 253,088 234,502 958,922 509,980 433,198
Travel and
entertainment.......... 188,348 178,944 666,213 419,758 336,525
Depreciation and
amortization........... 102,953 67,753 411,812 271,011 179,970
Other..................... 160,075 38,282 921,381 322,975 164,766
----------- ----------- ----------- ----------- -----------
Total expenses......... 6,848,202 4,580,378 23,642,374 14,349,639 9,914,784
----------- ----------- ----------- ----------- -----------
NET INCOME.................. $ 117,504 $ 2,928,441 $13,726,076 $ 3,750,279 $ 1,881,318
=========== =========== =========== =========== ===========

See notes to financial statements.
F-16

NEW YORK MORTGAGE COMPANY, LLC

STATEMENTS OF MEMBERS' EQUITY (DEFICIT)
FOR THE THREE MONTH PERIOD ENDING MARCH 31, 2004 (UNAUDITED) AND THE
YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001

ACCUMULATED
MEMBERS' OTHER
EQUITY COMPREHENSIVE COMPREHENSIVE
(DEFICIT) INCOME (LOSS) INCOME (LOSS) TOTAL
------------ ------------- ------------- ------------

BALANCE, JANUARY 1, 2001.............. $ 1,872,603 $ 181,113 $ 2,053,716
Net income.......................... 1,881,318 -- $ 1,881,318 1,881,318
Contributions....................... 708,140 -- -- 708,140
Distributions....................... (790,352) -- -- (790,352)
Decrease in net unrealized gain on
available for sale securities.... -- (183,093) (183,093) (183,093)
-----------
Comprehensive income................ -- -- $ 1,698,225 --
------------ ---------- =========== ------------
BALANCE, DECEMBER 31, 2001............ 3,671,709 (1,980) 3,669,729
Net income.......................... 3,750,279 -- $ 3,750,279 3,750,279
Contributions....................... 635,758 -- -- 635,758
Distributions....................... (1,588,765) -- -- (1,588,765)
Increase in net unrealized gain on
available for sale securities.... -- 33,254 33,254 33,254
-----------
Comprehensive income................ -- -- $ 3,783,533 --
------------ ---------- =========== ------------
BALANCE, DECEMBER 31, 2002............ 6,468,981 31,274 6,500,255
Net income.......................... 13,726,076 -- $13,726,076 13,726,076
Distributions....................... (21,564,956) -- -- (21,564,956)
Increase associated with cash flow
hedges........................... -- 82,343 82,343 82,343
Increase in net unrealized gain on
available for sale securities.... -- 782,657 782,657 782,657
-----------
Comprehensive income................ -- -- $14,591,076 --
------------ ---------- =========== ------------
BALANCE, DECEMBER 31, 2003............ $ (1,369,899) $ 896,274 $ (473,625)
Net income (unaudited).............. 117,504 -- $ 117,504 117,504
Contributions (unaudited)........... 1,000,000 -- -- 1,000,000
Distributions (unaudited)........... (663,165) -- -- (663,165)
Increase associated with cash flow
hedges (unaudited)............... -- 114,604 114,604 114,604
Increase in net unrealized gain on
available for sale securities
(unaudited)...................... -- 314,005 314,005 314,005
-----------
Comprehensive income (unaudited).... -- -- $ 546,113 --
------------ ---------- =========== ------------
BALANCE, MARCH 31, 2004 (unaudited)... $ (915,560) $1,324,883 $ 409,323
============ ========== ============

See notes to financial statements.
F-17

NEW YORK MORTGAGE COMPANY, LLC

STATEMENTS OF CASH FLOWS

THREE MONTHS ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
----------------------------- -----------------------------------------------
2004 2003 2003 2002 2001
------------- ------------- --------------- ------------- -------------
(UNAUDITED)

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................... $ 117,504 $ 2,928,441 $ 13,726,076 $ 3,750,279 $ 1,881,318
Adjustments to reconcile net income to
net cash used in operating activities:
Depreciation and amortization............ 102,953 67,752 123,571 271,011 179,970
Loss on sale of securities............... -- -- -- 20,374 93,711
Origination of mortgage loans held for
sale................................... (199,471,383) (295,196,087) (1,234,847,453) (593,146,346) (390,020,666)
Proceeds from sales of mortgage loans.... 188,110,364 282,908,327 1,232,710,820 569,001,035 383,911,059
Derivatives.............................. 55,460 (94,236) (107,431) 135,320 6,109
(Increase) decrease in operating assets:
Restricted cash........................ (38,455) (853) (15,199) (114,370) (76,796)
Due from loan purchasers............... (34,988,509) (30,675,964) (18,241,661) (19,913,973) (14,271,959)
Due from affiliate..................... (428,029) -- (153,171) -- 763,294
Prepaid expenses and other assets...... (369,994) (1,874,868) (2,614,708) (2,044,797) (150,726)
Increase (decrease) in operating
liabilities:
Due to loan purchasers................. 207,694 8,468 (356,605) 944,556 60,041
Accounts payable and accrued
expenses............................. 2,250,502 571,684 2,737,390 798,684 399,981
Other.................................. 130,315 (210,413) (374,787) 463,162 85,425
------------- ------------- --------------- ------------- -------------
Net cash used in operating
activities........................... (44,321,578) (41,567,749) (7,413,158) (39,835,065) (17,139,239)
------------- ------------- --------------- ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of securities................... (338,442) (672,481) (2,155,147) (1,520,576) (1,841,398)
Sale of securities....................... 321,894 164,498 1,353,069 713,912 1,141,252
Purchases of property and equipment...... (82,335) (182,981) (1,183,464) (519,015) (384,396)
------------- ------------- --------------- ------------- -------------
Net cash used in investing
activities........................... (98,883) (690,964) (1,985,542) (1,325,679) (1,084,542)
------------- ------------- --------------- ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in financing arrangements,
net.................................... 45,708,401 42,332,906 17,408,965 43,311,688 19,801,792
Contributions from members............... -- -- -- 635,758 708,140
Cash distributions to members............ (663,165) (1,208,768) (6,858,054) (1,588,765) (790,352)
------------- ------------- --------------- ------------- -------------
Net cash provided by financing
activities........................... 45,045,236 41,124,138 10,550,911 42,358,681 19,719,580
------------- ------------- --------------- ------------- -------------
NET INCREASE IN CASH....................... 624,775 (1,134,575) 1,152,211 1,197,937 1,495,799
CASH AND CASH EQUIVALENTS -- Beginning of
year..................................... 3,898,688 2,746,477 2,746,477 1,548,540 52,741
------------- ------------- --------------- ------------- -------------
CASH AND CASH EQUIVALENTS -- End of year... $ 4,523,463 $ 1,611,902 $ 3,898,688 $ 2,746,477 $ 1,548,540
============= ============= =============== ============= =============
SUPPLEMENTAL DISCLOSURE --
Cash paid for interest..................... $ 607,554 $ 360,444 $ 2,987,853 $ 1,619,715 $ 1,325,293
============= ============= =============== ============= =============
NONCASH FINANCING ACTIVITY:
(Contribution) Distribution to members in
the form of subordinated notes........... $ (1,000,000) -- $ 14,706,902 -- --
============= ============= =============== ============= =============

See notes to financial statements.
F-18

NEW YORK MORTGAGE COMPANY, LLC

NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2004 (UNAUDITED) AND 2003 (UNAUDITED) AND
THE
YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION -- The New York Mortgage Company, LLC (the "Company") was
organized under the laws of the State of New York on June 12, 1998 and obtained
its mortgage banking licenses to broker, fund, acquire and sell mortgages on
residential properties in states where the Company has a mortgage banking and/or
a mortgage broker license. The Company is licensed, exempt from licensing or
authorized to do business in 38 states and has retail branches in California,
Connecticut, Florida, Indiana, Maryland, New Jersey, New York, New Hampshire,
Pennsylvania, South Carolina, Utah, Virginia and a wholesale branch in Amherst,
New York. The Company is owned by Messrs. Steven B. Schnall and Joseph V.
Fierro, each with a 70% and 30% ownership interest, respectively.

On December 22, 2003, the members of the Company executed an agreement to
contribute their ownership interests in the Company to New York Mortgage Trust,
Inc. ("NYMT"), a newly formed Maryland corporation that intends to elect to be
taxed as a real estate investment trust. The contribution of the ownership
interests in the Company to NYMT will be made in consideration of the issuance
of 2.75 million shares of NYMT common stock to the owners of the Company, of
which 100,000 shares will be held in escrow through December 31, 2004 and will
be available to satisfy any indemnification claims NYMT may have against the
contributors of their membership interests in the Company under the contribution
agreement between NYMT and the contributors during the escrow period for losses
NYMT incurs as a result of defaults on any of the residential mortgage loans
originated by the Company and closed prior to the completion of this offering.
Steven B. Schnall, the majority owner of the Company is the co-chief executive
officer of NYMT. The other four senior executives of NYMT, including the other
co-chief executive officer, president, chief financial officer and chief
operating officer, have no past or current financial interests in the Company.

INTERIM FINANCIAL STATEMENTS -- The accompanying interim financial
statements of the Company have been prepared in conformity with accounting
principles generally accepted in the United States consistent in all material
respects with those applied in the December 31, 2003 audited financial
statements. The interim financial information is unaudited, but reflects all
normal adjustments which are, in the opinion of management necessary to provide
a fair statement of results for the interim period presented. The interim
financial statements should be read in conjunction with the financial statements
of the Company for the year ended December 31, 2003.

USE OF ESTIMATES -- The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. The Company's estimates and assumptions
primarily arise from risks and uncertainties associated with interest rate
volatility, 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 conditions may occur
which could cause actual results to differ materially.

CASH AND CASH EQUIVALENTS -- Cash and cash equivalents include cash on
hand, amounts due from banks and overnight deposits. Restricted cash represents
amounts held in escrow on behalf of borrowers.

AVAILABLE FOR SALE SECURITIES -- Marketable securities include investment
grade mortgage-backed securities classified as available for sale and consist of
debt and equity securities neither classified as trading securities nor as
securities to be held to maturity. Securities available for sale are carried at
fair value with unrealized gains and losses reported in other comprehensive
income. Realized gains and losses on available for sale securities occurring
from sales of such investments are included in miscellaneous income and expense
and determined using the specific identification method.

F-19

NEW YORK MORTGAGE COMPANY, LLC

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

LOANS HELD FOR SALE -- Loans held for sale represent originated mortgage
loans held for sale to permanent investors. The loans are initially recorded at
cost based on the principal amount outstanding net of deferred direct
origination costs and fees. The loans are subsequently carried at the lower of
cost or market value. Market value is determined by examining outstanding
commitments from investors or current investor yield requirements calculated on
the aggregate loan basis.

PROPERTY AND EQUIPMENT -- Property and equipment has lives ranging from
three to seven years, and is 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 method. Depreciation and amortization are recorded within
occupancy and equipment expense within the financial statements.

DERIVATIVE FINANCIAL INSTRUMENTS -- The Company has developed risk
management programs and processes designed to manage market risk associated with
its mortgage banking activities.

On January 1, 2001, the Company adopted Financial Accounting Standards
Board Statement of Financial Accounting Standards No. 133, Accounting for
Derivative Instruments and Hedging Activities, as amended and interpreted ("SFAS
133"), which requires the recognition of all derivative financial instruments at
fair value and reported as either assets or liabilities in the balance sheet.
The gains and losses associated with changes in the fair value of derivatives
not designated as hedges are reported in current earnings. If the derivative is
designated as a fair value hedge and is highly effective in achieving offsetting
changes in the fair value of the asset or liability hedged, the recorded value
of the hedged item is adjusted by its change in fair value attributable to the
hedged risk. If the derivative is designated as a cash flow hedge, the effective
portion of change in the fair value of the derivative is recorded in other
comprehensive income ("OCI") and is recognized in the income statement when the
hedged item affects earnings. Ineffective portions of changes in the fair value
of cash flow hedges are recognized in earnings. Under the provisions of SFAS
133, the method used for assessing the effectiveness of a hedging derivative, as
well as the measurement approach for determining the ineffective aspects of the
hedge, is established at the inception of the hedge. Those methods are
consistent with the Company's approach to managing risk.

SFAS 133 may cause an increase or decrease to reported net income in
certain periods depending on changes in interest rates and other variables
affecting the fair values of derivative instruments and hedged items.

The net effect of adopting FAS 133 was not material to the Company's
financial statements at the date of adoption.

The Financial Accounting Standards Board ("FASB") is considering a number
of mortgage banking industry-related issues concerning the implementation of
SFAS No. 133. Specifically, the FASB has agreed to address the valuation of loan
commitments (including interest rate lock commitments ("IRLCs")) accounted for
as derivatives under FAS 133 and whether a loan commitment should ever be
reported as an asset by the issuer of that commitment. In accordance with a
proposed Staff Accounting Bulletin to be issued by the Securities and Exchange
Commission, beginning in the second quarter of 2004, the fair value of IRLCs can
only be zero or a liability, but never an asset.

RISK MANAGEMENT -- Derivative transactions are entered into by the Company
solely for risk management purposes. The decision of whether or not an economic
risk within a given transaction (or portion thereof) should be hedged for risk
management purposes is made on a case-by-case basis, based on the risks involved
and other factors as determined by senior management, including the financial
impact on income, asset valuation and restrictions imposed by the Internal
Revenue Code among others. In determining whether to hedge a risk, the Company
may consider whether other assets, liabilities, firm commitments and anticipated
transactions already offset or reduce the risk. All transactions undertaken to
hedge certain market risks are entered into with a view towards minimizing the
potential for economic

F-20

NEW YORK MORTGAGE COMPANY, LLC

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

losses that could be incurred by the Company. Under SFAS No. 133, the Company is
required to formally document its hedging strategy before it may elect to
implement hedge accounting for qualifying derivatives. This documentation was
completed in the third quarter of 2003. Accordingly, all qualifying derivatives
entered into after July 1, 2003 are intended to qualify as fair value, or cash
flow hedges, or free standing derivatives intended to act as economic hedges
under FAS 133. To this end, terms of the hedges are matched closely to the terms
of hedged items with the intention of minimizing ineffectiveness. Prior to July
1, 2003, all derivatives entered into by the Company were treated as
free-standing derivatives, with changes in fair value charged to interest
expense.

The Company has developed risk management programs and processes designed
to manage market risk associated with normal mortgage origination activities.

In the normal course of its origination business, the Company enters into
contractual interest rate lock commitments to extend credit to finance
residential mortgages. These commitments, which contain fixed expiration dates,
become effective when eligible borrowers lock-in a specified interest rate
within time frames established by the Company's origination, credit and
underwriting practices. Interest rate risk arises if interest rates move between
the time of the lock-in of the rate by the borrower and the sale of the loan.
Under SFAS No. 133, the interest rate locks are considered undesignated or
free-standing derivatives. Accordingly, IRLCs are recorded at fair value with
changes in fair value recorded to current earnings. Mark to market adjustments
on IRLCs are recorded from the inception of the interest rate lock through the
date the underlying loan is funded. The fair value of the IRLCs is determined by
the interest rate differential between the contracted loan rate and the
currently available market rates as of the reporting date.

To mitigate the effect of the interest rate risk inherent in providing
IRLCs from the lock-in date to the funding date of a loan, the Company generally
enters into forward sale loan contracts ("FSLC"). Because the FSLCs are
committed prior to loan funding and thus there is no owned asset to hedge, the
FSLCs in place prior to the funding of a loan are undesignated derivatives under
FAS 133 and are marked to market through current earnings.

The Company uses other derivative instruments, including treasury, agency
or mortgage-backed securities/notes forward sale contracts which are also
classified as free-standing, undesignated derivatives and thus are recorded at
fair value with the changes in fair value recorded to current earnings.

Once a loan has been funded, the Company's risk management objective for
its mortgage loans held for sale is to protect earnings from an unexpected
charge due to a decline in value. The Company's strategy is to engage in a risk
management program involving the designation of FSLCs (the same FSLCs entered
into at the time of rate lock) to hedge most of its loans held for sale.
Provided that the FSLCs were entered into after July 1, 2003, and have been
designated as qualifying hedges for the funded loans and the notional amount of
the forward delivery contracts, along with the underlying rate and critical
terms of the contracts, are equivalent to the unpaid principal amount of the
mortgage loan being hedged, the forward delivery contracts effectively fix the
forward sales price and thereby offset interest rate and price risk to the
Company. Accordingly, the Company evaluates this relationship quarterly and
classifies and accounts for the FSLCs as fair value hedges.

INTEREST RATE RISK -- The Company may hedge the aggregate risk of interest
rate fluctuations with respect to its borrowings, regardless of the form of such
borrowing, which require payments based on a variable interest rate index. The
Company generally intends to hedge only the risk related to changes in the
benchmark interest rate (LIBOR or a Treasury rate).

In order to reduce such risks, the Company may enter into swap agreements
whereby the Company would receive floating rate payments in exchange for fixed
rate payments, effectively converting the borrowing to a fixed rate. The Company
may also enter into cap agreements whereby, in exchange for a fee, the Company
would be reimbursed for interest paid in excess of a certain capped rate.

F-21

NEW YORK MORTGAGE COMPANY, LLC

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

To qualify for cash flow hedge accounting, interest rate swaps and caps
must meet certain criteria, including:

- The items to be hedged expose the Company to interest rate risk;

- The interest rate swaps or caps are expected to be and continue to be
highly effective in reducing the Company's exposure to interest rate
risk.

Correlation and effectiveness are periodically assessed at least quarterly
based upon a comparison of the relative changes in the fair values or cash flows
of the interest rate swaps and caps and the items being hedged.

For derivative instruments that are designated and qualify as a cash flow
hedge (i.e. hedging the exposure to variability in expected future cash flows
that is attributable to a particular risk), the effective portion of the gain or
loss, and net payments received or made, on the derivative instrument are
reported as a component of other comprehensive income and reclassified into
earnings in the same period or periods during which the hedged transaction
affects earnings. The remaining gain or loss on the derivative instrument in
excess of the cumulative change in the present value of future cash flows of the
hedged item, if any, is recognized in current earnings during the period of
change.

With respect to interest rate swaps and caps that have not been designated
as hedges, any net payments under, or fluctuations in the fair value of, such
swaps and caps will be recognized currently in income.

Derivative financial instruments contain credit risk to the extent that the
issuing counterparties may be unable to meet the terms of the agreements. The
Company minimizes such risk by using multiple counterparties and limiting its
counterparties to major financial institutions with investment grade credit
ratings. In addition, the potential risk of loss with any one party resulting
from this type of credit risk is constantly monitored. Management does not
expect any material losses as a result of default by other parties.

TERMINATION OF HEDGING RELATIONSHIPS -- The Company employs a number of
risk management monitoring procedures to ensure that the designated hedging
relationships are demonstrating, and are expected to continue to demonstrate, a
high level of effectiveness. Hedge accounting is discontinued on a prospective
basis if it is determined that the hedging relationship is no longer highly
effective or expected to be highly effective in offsetting changes in fair value
of the hedged item.

Additionally, the Company may elect to de-designate a hedge relationship
during an interim period and re-designate upon the rebalancing of a hedge
profile and the corresponding hedge relationship. When hedge accounting is
discontinued, the Company continues to carry the derivative instruments at fair
value with changes in their value recorded in earnings.

GAIN ON SALE OF LOANS -- The Company recognizes gain on sale of loans for
the difference between the sales price and the adjusted cost basis of the loans
when the title transfers. The adjusted cost basis of the loans includes the
original principal amount adjusted for deferrals of origination and commitment
fees received, net of direct loan origination costs paid.

LOAN ORIGINATION FEES AND DIRECT ORIGINATION COST -- The Company records
loan fees, discount points and certain incremental direct origination costs as
an adjustment of the cost of the loan and such amounts are included in gain on
sales of loans when the loan is sold. Accordingly, salaries, compensation and
benefits and commission costs have been reduced due to incremental direct loan
origination costs, by approximately $3,747,192 and $3,664,644 for the
three-month periods ended March 31, 2004 (unaudited) and 2003 (unaudited),
respectively, and $13,699,761, $7,953,000 and $5,505,000 for the years ended
December 31, 2003, 2002 and 2001, respectively.

F-22

NEW YORK MORTGAGE COMPANY, LLC

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

LOAN COMMITMENT FEES -- Fees received for guaranteeing the funding of
mortgage loans to borrowers at pre-set conditions are deferred and recognized at
the earlier of the date at which the commitment expires or the loan is sold.

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

EMPLOYEE BENEFITS PLANS -- The Company sponsors a defined contribution plan
(the "Plan") for all eligible domestic employees. The Plan qualifies as a
deferred salary arrangement under Section 401(k) of the Internal Revenue Code.
Under the Plan, participating employees may defer up to 25% of their pre-tax
earnings, subject to the annual Internal Revenue Code contribution limit. The
Company matches contributions up to a maximum of 25% of the first 5% of salary.
Employees vest immediately in their contribution and vest in the Company's
contribution at a rate of 25% after two full years and then an incremental 25%
per full year of service until fully vested at 100% after five full years of
service. The Company's total contributions to the Plan were $32,475 and $35,165
for the three months ended March 31, 2004 (unaudited) and 2003 (unaudited),
respectively and $121,931, $74,686 and $59,387 for the years ended December 31,
2003, 2002 and 2001, respectively.

MARKETING AND PROMOTION -- The Company charges the costs of marketing,
promotion and advertising to expense in the period incurred.

INCOME TAXES -- The Company is not a taxpaying entity for Federal or state
income tax purposes, and accordingly, no provision is made for income taxes. The
Members' allocable shares of taxable income or loss of the Company are
reportable on the Members' individual tax returns.

2. LOANS HELD FOR SALE

Mortgage loans held for sale consist of the following as of March 31, 2004,
December 31, 2003 and 2002:

MARCH 31, DECEMBER 31,
----------- -------------------------
2004 2003 2002
----------- ----------- -----------
(UNAUDITED)

Mortgage loans principal amount................ $47,252,479 $36,168,003 $33,747,301
Deferred origination costs/(fees) -- net....... 430,475 1,304 291,951
Hedging basis adjustments...................... 50,898 88,922 --
----------- ----------- -----------
Loans held for sale............................ $47,733,852 $36,258,229 $34,039,252
=========== =========== ===========

3. PROPERTY AND EQUIPMENT -- NET

Property and equipment consist of the following as of March 31, 2004,
December 31, 2003 and 2002:

MARCH 31, DECEMBER 31,
----------- -----------------------
2004 2003 2002
----------- ---------- ----------
(UNAUDITED)

Office and computer equipment.................... $ 1,491,059 $1,433,700 $ 856,107
Furniture and fixtures........................... 738,196 721,966 511,963
Leasehold improvements........................... 798,471 789,725 393,857
----------- ---------- ----------
Total premises and equipment..................... 3,027,726 2,945,391 1,761,927
Less: accumulated depreciation and
amortization................................... (1,016,647) (913,694) (790,123)
----------- ---------- ----------
Property and equipment -- net.................... $ 2,011,079 $2,031,697 $ 971,804
=========== ========== ==========

F-23

NEW YORK MORTGAGE COMPANY, LLC

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

4. DERIVATIVE ASSETS AND LIABILITIES

The following table summarizes derivative assets and liabilities as of
March 31, 2004, December 31, 2003 and 2002.

MARCH 31, DECEMBER 31,
----------- ---------------------
2004 2003 2002
----------- --------- ---------
(UNAUDITED)

Derivative Assets:
Interest rate lock commitments (included in
other assets)............................... $ 33,511 $ 227,513 $ 190,789
======== ========= =========
Derivative Liabilities:
Forward loan sale contracts -- loan
commitments................................. $(66,362) $(133,682) $ (97,769)
Forward loan sale contracts -- loans held for
sale........................................ (18,637) (6,579) (158,348)
Forward loan sale contracts -- TBA
Securities.................................. (37,971) (121,250) (76,101)
-------- --------- ---------
Total derivative liabilities..................... $122,970 $(261,511) $(332,218)
======== ========= =========

Derivative liabilities of $88,922 are included in the balance sheets in
loans held for sale. The remaining liabilities related to derivatives are
included in other liabilities.

5. FINANCING ARRANGEMENTS

Financing arrangements consist of the following as of March 31, 2004,
December 31, 2003 and 2002:

MARCH 31, DECEMBER 31,
------------ -------------------------
2004 2003 2002
------------ ----------- -----------
(UNAUDITED)

$100 million master repurchase agreement
initially expiring April 15, 2004 bearing
interest at LIBOR plus spreads from 1.125%
to 2.000% depending on collateral (2.39% at
March 31, 2004). Principal repayments are
required 90 days from the funding
date(a).................................... $ 87,679,437 $72,461,446 $53,221,764
$50 million revolving line of credit which
expires on June 30, 2004 bearing interest
at LIBOR plus 1.50% (2.3475% at March 31,
2004)...................................... 48,454,096 14,966,814 13,809,710
$15 million revolving line of credit
(terminated and syndicated into $50 million
revolving line above) bearing interest at
the lesser of LIBOR plus 1.5% or the prime
rate....................................... -0- 2,996,873 5,984,694
------------ ----------- -----------
$136,133,533 $90,425,133 $73,016,168
============ =========== ===========

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

(a) The credit facility requires the Company to transfer specific collateral to
the lender under repurchase agreements; however, due to the rate of turnover
of the collateral by the Company, the counterparty has not taken title to or
recorded their interest in any of the collateral transferred. Interest is
paid to the counterparty based on the amount of outstanding borrowings based
on the terms provided.

The lines of credit are secured by mortgage loans and all other assets of
the Company, and are guaranteed by the members of the Company. The lines
contain various covenants pertaining to maintenance of net worth and working
capital and certain restrictions on distributions to members.

F-24

NEW YORK MORTGAGE COMPANY, LLC

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

6. 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 its long-term contractual investor channels.
Historically the repurchase percentage has been less than 0.02% of loans sold.
Such loans are then repackaged and sold to non-traditional investors.

LOANS FUNDING AND DELIVERY COMMITMENTS -- At March 31, 2004 (unaudited) and
at December 31, 2003 and 2002, the Company had commitments to fund loans with
agreed-upon rates totaling $218,827,681, $71,375,732 and $42,701,043,
respectively. The Company hedges the interest rate risk of such commitments and
the recorded loans held for sale balances primarily with mandatory delivery
commitments, which totaled $130,611,194, $54,522,057 and $96,434,918 at March
31, 2004 (unaudited), December 31, 2003 and 2002, respectively. The remaining
commitments to fund loans with agreed-upon rates are anticipated to be sold
through optional delivery contracts investor programs. The Company does not
anticipate any material losses from such sales.

NET WORTH REQUIREMENTS -- The Company is required to maintain certain
specified levels of minimum net worth to maintain its approved status with
Fannie Mae, Freddie Mac, HUD and other investors. At December 31, 2003, the
highest minimum net worth requirement applicable to the Company was $250,000. As
of December 31, 2003, the Company had a equity deficit of $473,625. Certain
parties provided waivers to their minimum net worth requirements as they
considered the distribution the Company made to its members in the form of
subordinate promissory notes of $14,706,902 as a form of equity. In order to
more clearly maintain minimum net worth requirements, on February 26, 2004,
these promissory notes were reduced by $1,000,000 with a corresponding increase
to members' equity. In the opinion of management, the Company's noncompliance
with minimum net worth requirements will not have a material impact on the
financial statements. As of March 31, 2004 (unaudited), the Company had an
equity balance of $409,323.

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
financial statements.

7. RELATED PARTY TRANSACTIONS

On August 31, 2003, the Company made distributions to its members in the
form of promissory notes to its members totaling $14,706,902. As of March 31,
2004 (unaudited), the Company recorded $253,468 of accrued interest on these
notes. On February 26, 2004 these notes were modified reducing the outstanding
balance to $13,706,902 and extending the maturity date to June 30, 2004. The
$1,000,000 reduction in the notes is treated as an equity contribution by the
members. The notes bear interest at 3% per annum.

Steven B. Schnall owns a 48% membership interest and Joseph V. Fierro owns
a 12% membership interest in Centurion Abstract, LLC, which provides title
insurance brokerage services for certain title insurance providers. From time to
time, NYMC refers its mortgage loan borrowers to Centurion Abstract, LLC for
assistance in obtaining title insurance in connection with their mortgage loans,
although the borrowers have no obligation to utilize Centurion's services. When
NYMC's borrowers elect to utilize Centurion's services to obtain title
insurance, Centurion collects various fees and a portion of the title insurance
premium paid by the borrower for its title insurance. Centurion Abstract
received $128,360 in fees and other amounts from NYMC borrowers for the three
months ended March 31, 2004 (unaudited).

F-25

NEW YORK MORTGAGE COMPANY, LLC

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Steven B. Schnall owns 4.25% of Restaurant.com, and holds no active
interest. Two employees from Restaurant.com currently rent space from NYMC and
pay rent on a month to month basis. For the three months ended March 31, 2004
(unaudited), the Company has collected $5,250 in rental income.

8. OPERATING LEASES

Certain retail facilities and equipment are leased under short-term lease
agreements expiring at various dates through 2010. All such leases are accounted
for as operating leases. Total rental expense for property and equipment, which
is included in occupancy and equipment expense within the financial statements,
amounted to $634,583, and $295,547 for the three months ended March 31, 2004
(unaudited) and March 31, 2003 (unaudited), respectively, $2,099,496, $1,086,495
and $719,887 for years ended December 31, 2003, 2002 and 2001, respectively.

As of December 31, 2003 obligations under non-cancelable operating leases
that have an initial term of more than one year are as follows:

YEAR ENDING
DECEMBER 31,
------------

2004........................................................ $ 2,273,896
2005........................................................ 2,691,075
2006........................................................ 2,712,373
2007........................................................ 2,644,482
2008........................................................ 2,344,277
Thereafter.................................................. 3,756,000
-----------
$16,422,103
===========

9. CONCENTRATIONS OF CREDIT RISK

The Company has originated loans predominantly in the eastern United
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. At March 31, 2004 (unaudited) and
December 31, 2003 and 2002, there were geographic concentrations of credit risk
exceeding 5% of the total loan balances within loans held for sale as follows:

MARCH 31,
-----------
2004 2003 2002
----------- ----------- -----------
(UNAUDITED)

New York......................................... 72.7 82.3 89.0%
New Jersey....................................... 9.2 6.9 6.0%

10. FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair value estimates are made as of a specific point in time based on
estimates using market quotes, 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 necessarily
substantiated by comparison to independent markets and, in many cases, could not
be necessarily 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.

F-26

NEW YORK MORTGAGE COMPANY, LLC

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

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 and do not
attempt 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 below do not represent
the underlying value of the Company.

The fair value of certain assets and liabilities approximate cost due to
their short-term nature, terms of repayment or interest rate associated with the
asset or liability. Such assets or liabilities include cash and cash
equivalents, unsettled mortgage loan sales accrued expenses and other
liabilities, and financing arrangements.

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

a. 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.

b. Commitments to Fund with Agreed Upon Rates -- The fair value of
commitments to fund with agreed upon rates is estimated using the fees and
rates currently charged to enter into similar agreements, taking into
account the remaining terms of the agreements and the 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.

c. Commitments to Deliver Mortgages -- The fair value of these
instruments is 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. 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 default on its
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.

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

MARCH 31, 2004 (UNAUDITED)
----------------------------------------
NOTIONAL CARRYING ESTIMATED
AMOUNT AMOUNT FAIR VALUE
------------ ----------- -----------

Assets:
Mortgage loans held for sale............... $ 47,252,479 $47,733,852 $47,599,761
Commitments and contingencies:
Interest rate lock commitments............. 218,827,681 33,511 33,511
Forward loan sales commitments............. 101,804,002 (122,970) (122,970)

F-27

NEW YORK MORTGAGE COMPANY, LLC

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

DECEMBER 31, 2003
----------------------------------------
NOTIONAL CARRYING ESTIMATED
AMOUNT AMOUNT FAIR VALUE
------------ ----------- -----------

Assets:
Mortgage loans held for sale............... $ 36,168,003 $36,258,229 $38,020,465
Commitments and contingencies:
Interest rate lock commitments............. 71,375,732 227,513 227,513
Forward loan sales commitments............. 54,522,057 (261,511) (261,511)

DECEMBER 31, 2002
---------------------------------------
NOTIONAL CARRYING ESTIMATED
AMOUNT AMOUNT FAIR VALUE
----------- ----------- -----------

Assets:
Mortgage loans held for sale................ $33,747,301 $34,039,252 $34,380,737
Commitments and contingencies:
Interest rate lock commitments........... 42,701,043 190,789 190,789
Forward loan sales commitments........... 96,434,918 (332,218) (332,218)

11. RECENTLY ISSUED ACCOUNTING STANDARDS

In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities. SFAS 149 amends and clarifies the
accounting for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities under SFAS 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS 149 is
generally effective for contracts entered into or modified after June 30, 2003
and for hedging relationships designated after June 30, 2003. The adoption of
SFAS No. 149 on July 1, 2003, as required, had no impact on the Company's
consolidated financial statements.

In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity. SFAS No 150
establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity. SFAS
No. 150 requires that certain financial instruments be classified as liabilities
that were previously considered equity. Certain of the requirements regarding
mandatory redeemable instruments have been deferred until January 1, 2005, other
provisions have been deferred indefinitely. The adoption of SFAS No. 150 did not
have a material effect on the Company's financial statements.

The FASB issued FASB Interpretation (FIN) No. 45, Guarantor's Accounting
and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others, which expands on the accounting guidance of SFAS No. 5,
Accounting for Contingencies, SFAS No. 57, Related Party Disclosures, and SFAS
No. 107, Disclosures about Fair Value of Financial Instruments. FIN No. 45
elaborates on the disclosures to be made by a guarantor about its obligations
under certain guarantees issued. FIN No. 45 also clarifies that a guarantor is
required to recognize, at the inception of a guarantee, a liability for the fair
value of the obligation undertaken in issuing the guarantee. The initial
recognition and measurement provisions of this interpretation are applicable on
a prospective basis to guarantees issued or modified after December 31, 2002.
The disclosure requirements of FIN No. 45 are effective for financial statements
of interim or annual periods ending after December 15, 2002. The adoption of FIN
No. 45 did not have a material effect on the Company's financial statements.

NEW ACCOUNTING PRONOUNCEMENTS -- In January 2003, the FASB issued
Interpretation No. 46, as amended by FIN 46(R) "Consolidation of Variable
Interest Entities" and revised this interpretation in December 2003. This
interpretation clarifies the application of existing accounting pronouncements
to certain entities in which equity investors do not have the characteristics of
a controlling financial interest

F-28

NEW YORK MORTGAGE COMPANY, LLC

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

or do not have sufficient equity at risk for the entity to finance its
activities without additional subordinated financial support from other parties.
The provisions of Interpretation No. 46(R) will be immediately effective for all
variable interests in variable interest entities created after December 31,
2003, and the Company will need to apply its provisions to any existing variable
interests in variable interest entities for financial statements issued after
March 31, 2004. The Company has applied the provisions of FIN 46(R) as of March
31, 2004 and the application of this interpretation did not have an impact on
the Company's financial statements.

12. SUBSEQUENT EVENTS (UNAUDITED)

The promissory notes referred to in Note 7 were further modified on May 26,
2004 to extend their maturity to June 30, 2005.

F-29

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NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY US OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH
THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO
ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN OUR
AFFAIRS OR THAT INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.

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TABLE OF CONTENTS

PAGE
----

PROSPECTUS SUMMARY.............................. 1
RISK FACTORS.................................... 11
SPECIAL NOTE REGARDING FORWARD-LOOKING
STATEMENTS.................................... 27
MARKET DATA..................................... 27
USE OF PROCEEDS................................. 28
DIVIDEND POLICY AND DISTRIBUTIONS............... 29
CAPITALIZATION.................................. 30
DILUTION........................................ 31
OUR HISTORY..................................... 32
OUR ACQUISITION OF NYMC......................... 32
SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA
OF OUR COMPANY AND NYMC....................... 33
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULT OF
OPERATIONS.................................... 36
OUR COMPANY..................................... 62
MANAGEMENT...................................... 86
PRINCIPAL STOCKHOLDERS.......................... 101
CERTAIN RELATIONSHIPS AND RELATED PARTY
TRANSACTIONS.................................. 103
SHARES ELIGIBLE FOR FUTURE SALE................. 105
DESCRIPTION OF CAPITAL STOCK.................... 107
CERTAIN PROVISIONS OF MARYLAND LAW AND OUR
CHARTER AND BYLAWS............................ 112
FEDERAL INCOME TAX CONSEQUENCES OF OUR STATUS AS
A REIT........................................ 117
UNDERWRITING.................................... 134
LEGAL MATTERS................................... 137
EXPERTS......................................... 137
WHERE YOU CAN FIND MORE INFORMATION............. 138
INDEX TO FINANCIAL STATEMENTS................... F-1

Until July 19, 2004 (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.
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15,000,000 SHARES OF
COMMON STOCK

(NYMT LOGO)
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PROSPECTUS
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FRIEDMAN BILLINGS RAMSEY
Sole Bookrunning and Joint-Lead Manager

JPMORGAN
Joint-Lead Manager

RBC CAPITAL MARKETS
June 24, 2004
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