UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                    FORM 10-Q


(Mark One)


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


                FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2007


                                       OR


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



                         Commission File Number 0-23972



                      AMERICAN MORTGAGE ACCEPTANCE COMPANY
             (Exact name of Registrant as specified in its charter)



             MASSACHUSETTS                               13-6972380
   (State or other jurisdiction of          (I.R.S. Employer Identification No.)
    incorporation or organization)

 625 MADISON AVENUE, NEW YORK, NEW YORK                     10022
(Address of principal executive offices)                  (Zip Code)



                                 (212) 317-5700
               Registrant's telephone number, including area code


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

Indicate by check mark whether the registrant is a large  accelerated  filer, an
accelerated  filer or a  non-accelerated  filer (as defined in Rule 12b-2 of the
Exchange Act).Large  Accelerated filer [ ] Accelerated filer [X] Non-accelerated
filer [ ]

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

As of October 31, 2007,  there were 8,406,028  outstanding  common shares of the
registrant's shares of beneficial interest, $0.10 par value.


<PAGE>

                                TABLE OF CONTENTS

                      AMERICAN MORTGAGE ACCEPTANCE COMPANY

                                    FORM 10-Q




                                                                            PAGE

PART I - FINANCIAL INFORMATION
Item 1.    Financial Statements                                                3
Item 2.    Management's Discussion and Analysis of Financial Condition
             and Results of Operations                                        19
Item 3.    Quantitative and Qualitative Disclosures about Market Risk         30
Item 4.    Controls and Procedures                                            30


PART II - OTHER INFORMATION
Item 1.    Legal Proceedings                                                  31
Item 1A.   Risk Factors                                                       31
Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds        32
Item 3.    Defaults Upon Senior Securities                                    32
Item 4.    Submission of Matters to a Vote of Security Holders                32
Item 5.    Other Information                                                  32
Item 6.    Exhibits                                                           32

SIGNATURES                                                                    33


                                       2
<PAGE>

                          PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

              AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
                                                                      September 30,   December 31,
                                                                          2007            2006
                                                                      ------------    ------------
                                                                      (Unaudited)
<S>                                                                   <C>             <C>
                                     ASSETS

Cash and cash equivalents                                             $     11,528    $      7,553
Restricted cash                                                              2,507          14,951
Investments:
  Mortgage loans receivable, net (Note 2)                                  710,733         545,898
  Available-for-sale investments, at fair value (Note 3):
    Debt securities                                                         71,528          82,582
    CMBS                                                                   108,621              --
    CDO securities                                                           8,672              --
    Mortgage revenue bonds                                                   4,860           4,967
  Real estate owned - discontinued operations (Note 4)                          --          48,692
Accounts receivable                                                         11,165           7,670
Deferred charges and other assets, net (Note 5)                              7,456           8,671
                                                                      ------------    ------------

Total assets                                                          $    937,070    $    720,984
                                                                      ============    ============

                      LIABILITIES AND SHAREHOLDERS' EQUITY


Liabilities:
  CDO notes payable                                                   $    362,000    $    362,000
  Repurchase facilities (Note 6)                                           399,780         163,576
  Line of credit - related party (Note 13)                                  39,300          15,000
  Preferred shares of subsidiary (subject to mandatory repurchase)          25,000          25,000
  Mortgages payable on real estate owned - discontinued operations
    (Note 4)                                                                    --          39,944
  Accounts payable and accrued expenses (Notes 7 and 9)                     27,024          13,666
  Due to Advisor and affiliates (Note 13)                                    1,607           1,670
  Dividends payable                                                          2,110          15,120
                                                                      ------------    ------------

Total liabilities                                                          856,821         635,976
                                                                      ------------    ------------

Commitments and contingencies (Note 14)

Shareholders' equity (Note 10):
  7.25% Series A Cumulative Convertible Preferred Shares, no par
    value; 680 shares issued and outstanding in 2007                        16,237              --
  Common shares of beneficial interest; $0.10 par value; 25,000
    shares authorized; 8,821 issued and 8,406 outstanding in 2007
    and 8,815 issued and 8,400 outstanding in 2006                             882             881
  Treasury shares of beneficial interest at par; 415 shares in 2007
    and 2006                                                                   (42)            (42)
  Additional paid-in capital                                               128,048         127,971
  Accumulated deficit                                                      (37,612)        (40,174)
  Accumulated other comprehensive loss (Note 11)                           (27,264)         (3,628)
                                                                      ------------    ------------

Total shareholders' equity                                                  80,249          85,008
                                                                      ------------    ------------

Total liabilities and shareholders' equity                            $    937,070    $    720,984
                                                                      ============    ============
</TABLE>

     See accompanying notes to condensed consolidated financial statements.

                                       3
<PAGE>

              AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
                   CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                        Three Months Ended          Nine Months Ended
                                                           September 30,               September 30,
                                                     ------------------------    ------------------------
                                                        2007          2006          2007          2006
                                                     ----------    ----------    ----------    ----------
<S>                                                  <C>           <C>           <C>           <C>
Revenues:
  Interest income                                    $   16,868    $    8,486    $   43,753    $   21,244
  Other revenues                                             80            23         1,008           185
                                                     ----------    ----------    ----------    ----------
    Total revenues                                       16,948         8,509        44,761        21,429
                                                     ----------    ----------    ----------    ----------

Expenses:
  Interest                                               11,757         5,669        30,890        12,255
  Interest - distributions to preferred shares of
    subsidiary                                              554           591         1,677         1,665
  General and administrative                              1,548         1,267         2,696         2,245
  Impairment of investments                               1,276         4,632         1,276         4,632
  Fees to Advisor and affiliates (Note 13)                1,044         3,092         2,929         4,895
  Amortization and other                                    208            13           609            43
                                                     ----------    ----------    ----------    ----------
    Total expenses                                       16,387        15,264        40,077        25,735
                                                     ----------    ----------    ----------    ----------

Other income (loss):
  Gain on sale of ARCap                                      --        19,223           337        19,223
  Change in fair value of derivative instruments           (689)      (10,439)          (39)       (8,416)
  Equity in earnings of ARCap                                --           (76)           --         3,000
  Loss on repayment or sale of investments                  (59)         (755)          (59)         (908)
                                                     ----------    ----------    ----------    ----------
  Total other income (loss)                                (748)        7,953           239        12,899
                                                     ----------    ----------    ----------    ----------

  Income (loss) from continuing operations                 (187)        1,198         4,923         8,593

  Income from discontinued operations, including
    gain on sale of real estate owned                        --            36         3,531            25
                                                     ----------    ----------    ----------    ----------

Net income (loss)                                          (187)        1,234         8,454         8,618
                                                     ----------    ----------    ----------    ----------

7.25% Convertible Preferred dividend requirements          (219)           --          (219)           --
                                                     ----------    ----------    ----------    ----------

Net income (loss) available to common shareholders   $     (406)   $    1,234    $    8,235    $    8,618
                                                     ==========    ==========    ==========    ==========

Earnings per share (Note 12):

  Basic
  -----
  Income (loss) from continuing operations           $    (0.05)   $     0.14    $     0.56    $     1.03
  Income from discontinued operations                        --          0.01          0.42          0.01
                                                     ----------    ----------    ----------    ----------

  Net income (loss)                                  $    (0.05)   $     0.15    $     0.98    $     1.04
                                                     ==========    ==========    ==========    ==========

  Diluted
  -------
  Income (loss) from continuing operations           $    (0.05)   $     0.14    $     0.56    $     1.03
  Income from discontinued operations                        --          0.01          0.40          0.01
                                                     ----------    ----------    ----------    ----------

  Net income (loss)                                  $    (0.05)   $     0.15    $     0.96    $     1.04
                                                     ==========    ==========    ==========    ==========

  Dividends per share                                $    0.225    $    0.400    $    0.675    $    1.200
                                                     ==========    ==========    ==========    ==========

Weighted average shares outstanding:
  Basic                                                   8,406         8,307         8,404         8,305
                                                     ==========    ==========    ==========    ==========
  Diluted                                                 8,406         8,315         8,794         8,308
                                                     ==========    ==========    ==========    ==========
</TABLE>


     See accompanying notes to condensed consolidated financial statements.

                                       4
<PAGE>

              AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                                 Nine Months Ended
                                                                   September 30,
                                                              ----------------------
                                                                 2007         2006
                                                              ---------    ---------
<S>                                                           <C>          <C>
Cash flows from operating activities:
  Net income                                                  $   8,454    $   8,618

Adjustments to reconcile net income to net cash provided by
  operating activities:
  Depreciation expense                                              336        1,334
  Gain on sale of ARCap                                            (337)     (19,223)
  Equity in earnings of ARCap                                        --       (3,000)
  Distributions received from ARCap                                  --        4,037
  (Gain) sale on sale of real state owned                        (3,611)          98
  Loss on impairment or disposal of investments                   1,335        5,510
  Change in fair value of derivative instruments                     39        8,416
  Amortization and accretion                                        194         (212)
  Other non-cash (income) expense                                  (565)          89
  Changes in operating assets and liabilities:
    Accounts receivable                                          (3,495)        (611)
    Other assets                                                     (1)         126
    Due to Advisor and affiliates                                   (63)         836
    Accounts payable and accrued expenses                         8,277        2,916
                                                              ---------    ---------

Net cash provided by operating activities                        10,563        8,934
                                                              ---------    ---------

Cash flows from investing activities:
  Funding and purchase of mortgage loans                       (246,589)    (294,976)
  Principal repayments of mortgage loans                         81,199        9,993
  Investment in CMBS                                           (123,052)          --
  Investment in CDO securities                                  (10,061)          --
  Principal repayments or sale of debt securities                 9,352       56,785
  Prepayment penalty from debt security refinancing                  --        3,200
  Return of capital and proceeds from the sale of ARCap             337       37,181
  Decrease (increase) in restricted cash                         12,444       (5,580)
  Proceeds from sale of real estate owned                        11,987           --
  Principal repayments on real estate owned                          36           --
  Principal repayments of mortgage revenue bonds                    137        1,622
                                                              ---------    ---------

Net cash used in investing activities                          (264,210)    (191,775)
                                                              ---------    ---------
</TABLE>

                                   (CONTINUED)
                                        5

<PAGE>

              AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                            Nine Months Ended
                                                              September 30,
                                                         ----------------------
                                                            2007         2006
                                                         ---------    ---------
<S>                                                      <C>          <C>
Cash flows from financing activities:
  Proceeds from repurchase facilities                    $ 357,223    $ 270,418
  Repayments of repurchase facilities                     (121,019)     (70,875)
  Proceeds from line of credit - related party             189,715      123,442
  Repayments of line of credit - related party            (165,415)    (123,442)
  Repayments of warehouse facility                              --       (4,070)
  Deferred financing costs                                    (217)      (1,953)
  Dividends paid to shareholders                           (18,902)      (9,966)
  Stock options exercised                                       --          316
  Issuance of preferred shares                              17,000           --
  Equity offering costs                                       (763)          --
                                                         ---------    ---------

Net cash provided by financing activities                  257,622      183,870
                                                         ---------    ---------

Net increase in cash and cash equivalents                    3,975        1,029

Cash and cash equivalents at the beginning of the year       7,553       11,214
                                                         ---------    ---------

Cash and cash equivalents at the end of the period       $  11,528    $  12,243
                                                         =========    =========
</TABLE>


     See accompanying notes to condensed consolidated financial statements.

                                       6
<PAGE>

                      AMERICAN MORTGAGE ACCEPTANCE COMPANY
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - BASIS OF PRESENTATION

The condensed consolidated financial statements include the accounts of American
Mortgage Acceptance Company and its wholly owned subsidiaries.  All intercompany
accounts  and  transactions  have  been  eliminated  in  consolidation.   Unless
otherwise indicated, we herein refer to American Mortgage Acceptance Company and
its  subsidiaries  as "AMAC",  "we",  "us",  "our",  and "our  Company".  We are
externally  managed by  Centerline/AMAC  Manager Inc. (the  "Advisor",  formerly
CharterMac AMI Associates,  Inc.),  which acts as our Advisor and is an indirect
subsidiary of Centerline Holding Company  ("Centerline",  formerly  CharterMac).
Centerline also owns 5.9% of our common shares of beneficial  interest  ("Common
Shares") and 41.2% of our 7.25% Series A cumulative convertible preferred shares
("Preferred  Shares") at September 30, 2007 (see Notes 10 and 13). We operate in
one business segment.

The condensed  consolidated  financial  statements  have been  prepared  without
audit.  In the  opinion of  management,  the  financial  statements  contain all
adjustments  (consisting  of only normal  recurring  adjustments)  necessary  to
present fairly our financial  position as of September 30, 2007, and the results
of our  operations and our cash flows for the periods then ended.  However,  the
operating  results for interim  periods may not be indicative of the results for
the full year.

Certain  information  and  footnote  disclosures  normally  included  in  annual
consolidated   financial  statements  prepared  in  accordance  with  accounting
principles generally accepted in the United States of America ("GAAP") have been
condensed or omitted.  These financial  statements should be read in conjunction
with the  consolidated  financial  statements and notes thereto  included in our
Annual Report on Form 10-K for the year ended December 31, 2006.

Our Annual Report on Form 10-K for the year ended December 31, 2006,  contains a
summary of our  significant  accounting  policies.  There have been no  material
changes to these items since December 31, 2006.

The preparation of the condensed consolidated financial statements in conformity
with GAAP requires us to make estimates and assumptions that affect the reported
amounts of assets and  liabilities  and the disclosure of contingent  assets and
liabilities  as of the date of the financial  statements as well as the reported
amounts of revenues and expenses  during the reporting  periods.  Actual results
could differ from those estimates.

We have  reclassified  certain prior year amounts to conform to the current year
presentation,  in particular the  reclassification  of operating results for our
real estate owned portfolio to discontinued operations (see Note 4).

NEW ACCOUNTING PRONOUNCEMENTS

In September  2006, the Financial  Accounting  Standards  Board ("FASB")  issued
Statement No. 157, FAIR VALUE  MEASUREMENTS,  which  established a framework for
measuring the fair value of assets and liabilities as required by numerous other
accounting pronouncements and expands disclosure requirements of the fair values
of  certain  assets  and  liabilities.  The  statement  is  effective  as of the
beginning of our 2008 fiscal year. We are currently  evaluating  the impact,  if
any,  that  the  adoption  of this  statement  would  have  on our  consolidated
financial statements.

In February 2007,  the FASB issued  Statement No. 159, THE FAIR VALUE OPTION FOR
FINANCIAL ASSETS AND FINANCIAL  LIABILITIES.  This statement was issued with the
intent to provide an  alternative  measurement  treatment for certain  financial
assets and liabilities.  The alternative  measurement would permit fair value to
be used for both initial and subsequent measurement,  with changes in fair value
recognized in earnings as those changes occur. This "Fair Value Option" would be
available on a contract by contract basis. The effective date for this statement
is the beginning of our 2008 fiscal year. We do not plan to adopt the provisions
of this statement.

In June 2007, the American Institute of Certified Public  Accountants  ("AICPA")
issued  Statement of Position  ("SOP") 07-1,  CLARIFICATION  OF THE SCOPE OF THE
AUDIT AND  ACCOUNTING  GUIDE  INVESTMENT  COMPANIES  AND  ACCOUNTING  FOR PARENT
COMPANIES AND EQUITY METHOD  INVESTORS FOR INVESTMENTS IN INVESTMENT  COMPANIES.
This SOP provides guidance for determining whether an entity is within the scope
of the AICPA AUDIT AND  ACCOUNTING  GUIDE  INVESTMENT  COMPANIES  (the "Guide").
Entities  that are  within  the  scope of the Guide are  required,  among  other
things,  to carry their  investments  at fair value,  with changes in fair value
included in earnings.  The  provisions  of this SOP were to become  effective on
January 1, 2008. In October 2007, the FASB proposed an indefinite  delay of this
standard.  We continue to assess the impact that the  adoption of this SOP would
have on our consolidated financial statements and have not determined whether we
will be  required  to  apply  the  provisions  of the  Guide in  presenting  our
financial statements.

                                       7
<PAGE>

                      AMERICAN MORTGAGE ACCEPTANCE COMPANY
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

NOTE 2 - MORTGAGE LOANS RECEIVABLE, NET

We partially or fully funded 21 first  mortgage,  bridge and mezzanine loans and
subordinated  notes,  totaling  $250.1  million  during  the nine  months  ended
September  30, 2007,  including  two to a related party (see Note 13). The loans
bear interest at a weighted  average  interest rate of 7.97% and mature on dates
ranging from October 2008 to August 2017.  Included in these  originations is an
$84.0 million participation  interest in a mezzanine loan of which $77.6 million
was repaid as of September 30, 2007, and the remainder was repaid  subsequent to
September 30, 2007 (see Note 15).

During  February  2007,  one of our  mortgage  loans was repaid,  resulting in a
one-time participation fee payment of $0.7 million. This payment was recorded in
other income in our condensed consolidated statements of income.

At  September  30,  2007,  $661.9  million  of our first  mortgage,  bridge  and
mezzanine  loans and  subordinated  notes  were  partially  or fully  pledged as
collateral under our repurchase facilities or CDO notes payable.

During  October  2007,  one of our  mortgage  loans  in our  specially  serviced
portfolio  was repaid at par with  accrued  interest,  resulting  in proceeds of
$10.1  million.  In addition,  in connection  with the pending  termination of a
repurchase  facility,  we plan to sell  certain of these  assets  (see Note 15).
Accordingly, we reclassified these assets as held for sale and recognized a $1.3
million  impairment  to reflect the market value of these assets as of September
30, 2007.


NOTE 3 -AVAILABLE-FOR-SALE INVESTMENTS, AT FAIR VALUE

We carry  all of our  available-for-sale  investments  at their  estimated  fair
values. We record the change in fair value as a component of other comprehensive
income within shareholders'  equity. If the fair value of an investment is lower
than  our  cost,   and  we   determine   that  the  decline  in  fair  value  is
other-than-temporary,   we  record  an   impairment   charge  in  our  Condensed
Consolidated Statement of Income.

At  September  30,  2007,  we  had  the  following  investments   classified  as
available-for-sale:

     o debt securities;
     o commercial mortgage-backed securities ("CMBS");
     o collateralized debt obligation ("CDO") securities; and
     o mortgage revenue bonds.

During March 2007,  we purchased a $10.1 million  investment  in CDO  securities
(class J, K, L, M, N, O and preferred shares),  issued by Nomura CRE CDO 2007-2,
LTD ("Nomura").  These  securities bear interest at a weighted  average interest
rate of 9.00% and mature in May 2042.

During 2007, we purchased $135.3 million of CMBS, at discounts aggregating $12.2
million,  for a net cost of $123.1 million.  These securities bear interest at a
weighted  average  interest  rate of 5.92% and mature on dates ranging from June
2022 through June 2049.

CMBS  investments  we hold were  comprised of the  following as of September 30,
2007:
<TABLE>
<CAPTION>
                             Face                                        Unrealized     Percentage of
(DOLLARS IN THOUSANDS)      amount      Accreted cost    Fair Value        losses        fair value
                        -------------   -------------   -------------   -------------   -------------
<S>                     <C>             <C>             <C>             <C>                     <C>
Security rating:
   BBB+                 $       4,750   $       4,775   $       4,306   $        (469)            4.0%
   BBB                         69,556          64,685          55,926          (8,759)           51.5
   BBB-                        60,995          53,744          48,389          (5,355)           44.5
                        -------------   -------------   -------------   -------------   -------------
                        $     135,301   $     123,204   $     108,621   $     (14,583)          100.0%
                        =============   =============   =============   =============   =============
</TABLE>

                                       8
<PAGE>

                      AMERICAN MORTGAGE ACCEPTANCE COMPANY
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

Information regarding our available-for-sale investments is as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)                                                                    Mortgage
                                  Debt                             CDO            revenue
September 30, 2007             securities         CMBS          securities          bonds           Total
------------------           -------------    -------------    -------------    -------------   -------------
<S>                          <C>              <C>              <C>              <C>             <C>
Amortized cost               $      73,994    $     123,204    $      10,063    $       4,710   $     211,971

Unrealized gains                       255               --               --              150             405
Unrealized losses                   (2,721)         (14,583)          (1,391)              --         (18,695)
                             -------------    -------------    -------------    -------------   -------------
Net unrealized gain (loss)          (2,466)         (14,583)          (1,391)             150         (18,290)
                             -------------    -------------    -------------    -------------   -------------

Fair value                   $      71,528    $     108,621    $       8,672    $       4,860   $     193,681
                             =============    =============    =============    =============   =============
<CAPTION>

December 31, 2006
-----------------
<S>                          <C>               <C>              <C>             <C>             <C>
Amortized cost               $      83,496     $         --     $         --    $       4,846   $      88,342

Unrealized gains                       359               --               --              121             480
Unrealized losses                   (1,273)              --               --               --          (1,273)
                             -------------    -------------    -------------    -------------   -------------
Net unrealized gain (loss)            (914)              --               --              121            (793)
                             -------------    -------------    -------------    -------------   -------------

Fair value                   $      82,582     $         --     $         --    $       4,967   $      87,549
                             =============    =============    =============    =============   =============
</TABLE>


The fair value and gross unrealized losses of our available for sale investments
aggregated  by length of time that these  individual  securities  have been in a
continuous  unrealized  loss  position at September  30, 2007,  and December 31,
2006, is summarized in the table below:
<TABLE>
<CAPTION>
                                    September 30, 2007                         December 31, 2006
                          ---------------------------------------   ---------------------------------------
                           Less than     12 months                   Less than     12 months
(DOLLARS IN THOUSANDS)     12 months      or more        Total       12 months      or more        Total
                          -----------   -----------   -----------   -----------   -----------   -----------
<S>                       <C>           <C>           <C>           <C>           <C>           <C>
Number of securities:
  Debt securities                   2            11            13             3             9            12
  CMBS                             12            --            12            --            --            --
  CDO securities                    6            --             6            --            --            --
                          -----------   -----------   -----------   -----------   -----------   -----------
Total                              20            11            31             3             9            12

Fair value                $   136,075   $    43,245   $   179,320   $    35,799   $    37,579   $    73,378
Gross unrealized losses   $    16,412   $     2,283   $    18,695   $       246   $     1,027   $     1,273
</TABLE>


The unrealized  losses shown above are as a result of  fluctuations  in interest
rates  and  interest  rate  spreads   subsequent  to  the   acquisition  of  the
investments. All of the available-for-sale  investments are performing according
to their  terms.  Furthermore,  we have the  intent  and  ability  to hold these
investments  to  maturity,  or at least until  interest  rates or interest  rate
spreads  change  such  that the fair  value is no longer  less than book  value.
Accordingly, we have concluded that these declines in value are temporary.

At  September  30, 2007,  $185.7  million of our debt  securities,  CMBS and CDO
securities were pledged as collateral under our repurchase facilities (see Notes
6 and 15).

                                       9
<PAGE>

                      AMERICAN MORTGAGE ACCEPTANCE COMPANY
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)


NOTE 4 - REAL ESTATE OWNED - DISCONTINUED OPERATIONS

During  2007,  we sold our  economic  interest  in the Concord  portfolio  to an
affiliated  party (see Note 13),  resulting  in proceeds of $12.0  million and a
gain of $3.6 million.  During 2006, we sold the Reserve at Autumn Creek Property
for proceeds of $4.2  million,  and recorded a loss of $0.1 million in the third
quarter of 2006.  During the fourth  quarter  of 2006,  we  received  additional
proceeds,  resulting in a net gain of $0.2 million.  As a result of these sales,
we have  reclassified  real estate  owned  property  operations  for the current
period and all comparable prior periods as discontinued operations,  as provided
in the table below.
<TABLE>
<CAPTION>
                                             Three months ended         Nine months ended
                                                 September 30,             September 30,
                                           -----------------------   -----------------------
(IN THOUSANDS)                                2007         2006         2007         2006
                                           ----------   ----------   ----------   ----------
<S>                                        <C>          <C>          <C>          <C>
Revenues                                   $       --   $    2,303   $    1,815   $    7,034
                                           ==========   ==========   ==========   ==========
Gain (loss) on sale of real estate owned   $       --   $      (98)  $    3,611   $      (98)
                                           ==========   ==========   ==========   ==========
Net income                                 $       --   $       36   $    3,531   $       25
                                           ==========   ==========   ==========   ==========
</TABLE>


NOTE 5 - DEFERRED CHARGES AND OTHER ASSETS, NET

Detail of deferred charges and other assets, net is provided in the table below:
<TABLE>
<CAPTION>
                                                  September 30,   December 31,
(IN THOUSANDS)                                         2007            2006
                                                  -------------   -------------
<S>                                               <C>             <C>
Deferred financing charges, net of accumulated
  amortization of $758 in 2007 and $151 in 2006   $       7,076   $       7,467
Interest rate derivatives (see Note 9)                      318           1,143
Other assets                                                 62              61
                                                  -------------   -------------

Total                                             $       7,456   $       8,671
                                                  =============   =============
</TABLE>


NOTE 6 - REPURCHASE FACILITIES

Our repurchase  facilities consisted of financing  collateralized by investments
in mortgage loans, CMBS, bridge notes,  mezzanine loans,  subordinated notes and
CDO securities. They are categorized in the table below by lending institution:
<TABLE>
<CAPTION>
                                                  September 30,   December 31,
(IN THOUSANDS)                                         2007            2006
                                                  -------------   -------------
<S>                                               <C>             <C>
Citigroup                                         $     290,365   $      84,149
Bear Stearns                                             95,251              --
UBS                                                      14,164          48,928
RBC                                                          --          30,499
                                                  -------------   -------------

Total                                             $     399,780   $     163,576
                                                  =============   =============
</TABLE>


Citigroup Facility
------------------

During  December 2006, we executed a repurchase  facility with Citigroup  Global
Markets, Inc. ("Citigroup") for the purpose of funding investment activity for a
planned CDO  securitization.  Borrowings on this facility had interest  rates of
6.49% at September 30, 2007, as compared to 6.13% at December 31, 2006. See Note
15 regarding the pending termination of this facility on February 28, 2008.

                                       10
<PAGE>

                      AMERICAN MORTGAGE ACCEPTANCE COMPANY
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

Bear Stearns Facility
---------------------

During 2007, we executed a repurchase  facility with Bear Stearns  International
Limited ("Bear  Stearns") for the purposes of financing  investments in CMBS and
CDO  securities.  During the third  quarter of 2007,  we also began to finance a
portion of our debt  securities  portfolio  previously  financed  through  other
facilities (mentioned below). This facility had borrowings at a weighted average
interest  rate of 5.57% at September  30, 2007.  The  borrowings  are subject to
30-day settlement terms. See Note 15 regarding the refinancing of certain assets
utilizing this facility.

UBS and RBC Facilities
----------------------

We had two  repurchase  facilities  with RBC  Capital  Markets  ("RBC")  and UBS
Financial Services ("UBS") for the purposes of financing our investments in debt
securities.  During  August of 2007,  we obtained new  financing  for the entire
outstanding  balance on our RBC repurchase  facility along with a portion of the
outstanding  balance on our UBS repurchase  facility  utilizing our Bear Stearns
facility  described  above.  At  September  30,  2007,  borrowings  on  our  UBS
repurchase  facility  had an  interest  rate of  5.18% as  compared  to 5.39% at
December  31,  2006.  The  borrowings  are subject to 30-day  settlement  terms.
Borrowings  on our RBC  repurchase  facility  had an  interest  rate of 5.45% at
December 31, 2006.  Subsequent to September 30, 2007,  the remaining  balance on
our UBS repurchase  facility was refinanced  utilizing the Bear Stearns facility
(see Note 15). Both of these  facilities  have been terminated and are no longer
available.

Banc of America Facility
------------------------

During the third quarter of 2007, we executed a repurchase  agreement  with Banc
of  America  Securities,  LLC  ("Banc of  America")  to  provide  financing  for
investments in mezzanine loans and subordinated  notes. There are no outstanding
amounts on this facility as of September 30, 2007.  Advance rates on borrowings,
which will be determined on an  asset-by-asset  basis, will be subject to 30-day
settlement terms. Interest rates on the borrowings will also be determined on an
asset-by-asset basis.


NOTE 7 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Detail of accounts payable and accrued expenses is provided in the table below:
<TABLE>
<CAPTION>
                                                  September 30,   December 31,
(IN THOUSANDS)                                         2007            2006
                                                  -------------   -------------
<S>                                               <C>             <C>
Accrued interest payable                          $      10,416   $       3,078
Interest rate derivatives (see Note 9)                   13,854           8,673
Refundable deposits (1)                                     162           1,161
Other                                                     2,592             754
                                                  -------------   -------------

                                                  $      27,024   $      13,666
                                                  =============   =============
</TABLE>

(1)  Refundable  deposits  collected  during the due diligence  period of a loan
     transaction that are payable to other parties.


NOTE 8 - INCOME TAXES

We have elected to be treated as a Real Estate  Investment  Trust ("REIT") under
Sections 856 through 860 of the Internal  Revenue Code of 1986, as amended ("the
Code").  In order to maintain our  qualification  as a REIT, we are required to,
among other things,  distribute  at least 90% of our REIT taxable  income to our
shareholders  and meet  certain  tests  regarding  the  nature of our income and
assets.  As a REIT, we are not subject to federal income tax with respect to the
portion of our income that meets certain criteria and is distributed annually to
shareholders.  Accordingly, no provision for federal income taxes is included in
the  condensed   consolidated   financial   statements  with  respect  to  these
operations.  We believe we have and  intend to  continue  to operate in a manner
that allows us to continue to meet the requirements for taxation as a REIT. Many
of these requirements,  however, are highly technical and complex. If we were to
fail to meet these requirements, we could be subject to federal income tax.

                                       11
<PAGE>

                      AMERICAN MORTGAGE ACCEPTANCE COMPANY
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

NOTE 9 - DERIVATIVE INSTRUMENTS

Our  derivative  instruments  are  comprised  of cash  flow  hedges  of debt and
free-standing  derivatives  related to  investments.  While we carry  derivative
instruments in both  categories at their  estimated fair values on our condensed
consolidated  balance  sheet,  the  changes  in those fair  values are  recorded
differently. To the extent that the cash flow hedges are effectively hedging the
associated  debt, we record changes in their fair values as a component of other
comprehensive  income  within  shareholders'  equity.  If a cash  flow  hedge is
ineffective,  we  include  a  portion  of the  change  in its fair  value in our
condensed  consolidated  statement of income.  With respect to the free-standing
derivatives,  we always  include the change in their fair value in our condensed
consolidated statement of income.

CASH FLOW HEDGES OF DEBT

Our borrowings under  repurchase  facilities,  CDO notes payable,  related party
line of credit and our  preferred  shares of a subsidiary  (subject to mandatory
repurchase) incur interest at variable rates, exposing us to interest rate risk.
We have  established a policy for risk  management  outlining our objectives and
strategies for use of derivative instruments to potentially mitigate such risks.

Effective  March 30, 2007,  we entered into a three-year  interest  rate swap to
reduce our exposure to possible  increases in the variable  interest rate on our
subsidiary's preferred shares (subject to mandatory repurchase).  Under the swap
agreement,  we are  required  to pay  Bear  Stearns  a fixed  rate of 4.97% on a
notional  amount of $25.0 million and will receive a floating rate equivalent to
three-month LIBOR.

As of September 30, 2007, including the above mentioned swap, we had 50 interest
rate swaps  with an  aggregate  notional  amount of $656.0  million,  which will
expire on dates ranging from March 2008 through March 2022 and are designated as
cash flow  hedges,  with the hedged  item  being the  interest  payments  on our
variable-rate  repurchase  facilities,  CDO notes  payable and our  subsidiary's
preferred shares (subject to mandatory repurchase). Amounts in accumulated other
comprehensive  income (as described above) will be reclassified into earnings in
the same period during which the hedged forecasted transaction affects earnings.
Since we are  hedging  the  interest  payments on our  variable-rate  debt,  the
forecasted transactions are the interest payments.

At inception and on an ongoing basis,  we assess whether the swaps are effective
in offsetting  changes in the variable cash flows of the hedged item. We measure
ineffectiveness  of our cash flow  hedges on a  quarterly  basis and  record any
ineffectiveness in interest expense on the condensed consolidated  statements of
income. With the exception of one, all of our swaps have been effective,  and we
expect they will  continue to be  effective in the future.  We have  recorded an
expense  of $0.3  million  related  to  ineffectiveness  on one swap.  This swap
includes an embedded financing component,  which has caused and will continue to
cause some ineffectiveness,  within the limits allowed by Statement of Financial
Accounting Standards ("SFAS") No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND
HEDGING ACTIVITIES, to maintain hedge accounting.

In connection  with the  disposition and refinancing of certain assets (see Note
15), we expect to terminate 44 of these swaps in the fourth  quarter of 2007 and
the first quarter of 2008. Of the agreements to be terminated in connection with
the disposition of 24 assets (with $0.9 million of aggregate  unrealized  losses
included in accumulated other comprehensive income as of September 30, 2007), we
will  record a charge  to  expense  upon  termination.  In  connection  with the
refinancing of certain  assets,  we terminated  seven of these swaps in November
2007 (with $2.0 million of aggregated  unrealized losses included in accumulated
other comprehensive  income as of September 30, 2007) resulting in a termination
fee of $2.6  million.  This  termination  fee will be recorded as expense on the
date of termination in the fourth quarter of 2007, incorporating the realization
of these previously unrealized losses. For the other agreements to be terminated
(with $1.2 million of aggregate  unrealized losses included in accumulated other
comprehensive  income as of September  30,  2007),  we plan to  redesignate  the
hedges upon refinancing of the debt. The termination costs associated with those
swaps  will be  amortized  into  expense  over  the  lives  of the  new  hedging
relationships.

For swap  agreements  that we do not plan to  terminate,  we estimate  that $2.3
million of the net unrealized losses included in accumulated other comprehensive
loss will be reclassified into interest expense within the next 12 months.

FREE-STANDING DERIVATIVES RELATED TO INVESTMENTS

We have three  interest  rate swaps with an aggregate  notional  amount of $20.1
million,  which expire on dates  ranging from  February  2017 through July 2017,
that are hedging  changes in the fair value of certain  investments.  We did not
elect to apply hedge accounting to these swaps.


                                       12
<PAGE>

                      AMERICAN MORTGAGE ACCEPTANCE COMPANY
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

We are required to maintain a minimum balance of collateral with Banc of America
in connection with these interest rate swaps. From time to time, as market rates
fluctuate, we may be called upon to post additional cash collateral with Banc of
America.  These  payments are held as deposits  with Bank of America and will be
used to settle the swap at termination date if market rates fall below the fixed
rates on the swaps.  At September 30, 2007, we had $0.6 million of deposits held
by Banc of America.

As with certain of the cash flow hedges  described  above,  we expect that these
swaps will be terminated in the fourth quarter of 2007 (see Note 15).

FINANCIAL STATEMENT IMPACT

Interest rate swaps in a net liability position are recorded in accounts payable
and accrued expenses (see Note 7) and those in a net asset position are recorded
in deferred  charges and other  assets  (see Note 5). The amounts  recorded  are
provided in the table below:
<TABLE>
<CAPTION>
                         September 30,    December 31,
(IN THOUSANDS)                2007            2006       Dollar Change   Percent Change
                         -------------   -------------   -------------   --------------
<S>                      <C>             <C>             <C>                      <C>
Net asset position       $         318   $       1,143   $        (825)          (72.2)%
Net liability position         (13,854)         (8,673)         (5,181)          (59.7)
                         -------------   -------------   -------------   -------------

Net                      $     (13,536)  $      (7,530)  $      (6,006)          (79.8)%
                         =============   =============   =============   =============
</TABLE>


Net income included the following related to our  free-standing  derivatives and
interest rate hedges:
<TABLE>
<CAPTION>
                                       Three Months Ended            Nine Months Ended
                                          September 30,                 September 30,
                                   --------------------------    --------------------------
(IN THOUSANDS)                         2007           2006           2007           2006
                                   -----------    -----------    -----------    -----------
<S>                                <C>            <C>            <C>            <C>
Included in interest expense:
  Interest receipts                $       403    $       187    $     1,143    $       378
  Interest payments                       (125)           (32)           (32)           (87)
Change in fair value included in
  other income                            (689)       (10,439)           (39)        (8,416)
                                   -----------    -----------    -----------    -----------

  Net                              $      (411)   $   (10,284)   $     1,072    $    (8,125)
                                   ===========    ===========    ===========    ===========
</TABLE>


NOTE 10 - SHAREHOLDERS' EQUITY

In July 2007, we issued  680,000  Preferred  Shares for gross  proceeds of $17.0
million.  Net of  underwriters  fees and  expenses,  our net proceeds were $16.2
million.  The shares  carry a cumulative  preferred  7.25% return based upon the
liquidation  amount of $25.00 per share and have no stated maturity.  Holders of
the shares may convert  them into 1.5  million  common  shares,  and we may also
redeem the shares at our option  after July 2012.  These  shares  have no voting
rights. Centerline purchased 280,000 Preferred Shares (see Note 13).

                                       13
<PAGE>

                      AMERICAN MORTGAGE ACCEPTANCE COMPANY
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

NOTE 11 - COMPREHENSIVE INCOME (LOSS)

Comprehensive  income  (loss) for the nine months ended  September  30, 2007 and
2006 was as follows:
<TABLE>
<CAPTION>
                                                      Nine Months Ended
                                                         September 30,
                                                   ------------------------
(IN THOUSANDS)                                        2007          2006
                                                   ----------    ----------
<S>                                                <C>           <C>
Net income                                         $    8,454    $    8,618
Net unrealized loss on derivative instruments          (6,140)         (382)
Net unrealized holding loss on investments            (17,497)       (6,753)
Reclassification adjustment for realized loss on
  investments                                              --         2,224
                                                   ----------    ----------

Comprehensive income (loss)                        $  (15,183)   $    3,707
                                                   ==========    ==========
</TABLE>


NOTE 12 - EARNINGS PER SHARE ("EPS")

Diluted  earnings per share is calculated  using the weighted  average number of
shares  outstanding  during the period plus the  additional  dilutive  effect of
common share  equivalents.  The dilutive effect of outstanding  share options is
calculated using the treasury stock method. The dilutive effect of the preferred
shares is  calculated  on the  if-converted  method.  For the three months ended
September 30, 2007, the effect of the assumed conversion of our preferred shares
is not included as the effect would be antidilutive.
<TABLE>
<CAPTION>
                                                        Three Months Ended                     Nine months Ended
                                                        September 30, 2007                     September 30, 2007
                                              -------------------------------------   ------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)        Income        Shares     Per Share      Income       Shares     Per Share
-------------------------------------------   -----------   ----------   ----------   ----------   ----------   ----------
<S>                                           <C>                <C>     <C>          <C>               <C>     <C>
Income (loss) from continuing operations      $      (187)                            $    4,923
Preferred dividends                                  (219)                                  (219)
                                              -----------                             ----------
Income (loss) from continuing operations
  available to shareholders (Basic EPS)              (406)       8,406   $    (0.05)       4,704        8,404   $     0.56
                                                                                                   ==========   ==========
Effect of dilutive securities                          --           --                       219          390
                                              -----------   ----------                ----------   ----------
Diluted EPS from continuing operations        $      (406)       8,406   $    (0.05)  $    4,923        8,794   $     0.56
                                              ===========   ==========   ==========   ==========   ==========   ==========

<CAPTION>
                                                        Three Months Ended                     Nine months Ended
                                                        September 30, 2007                     September 30, 2007
                                              -------------------------------------   ------------------------------------
                                                Income        Shares     Per Share      Income       Shares     Per Share
-------------------------------------------   -----------   ----------   ----------   ----------   ----------   ----------
<S>                                           <C>                <C>     <C>          <C>               <C>     <C>
Income from continuing operations             $     1,198                             $    8,593
Preferred dividends                                    --                                     --
                                              -----------                             ----------
Income from continuing operations available
  to shareholders (Basic EPS)                       1,198        8,307   $     0.14        8,593        8,305   $     1.03
                                                                         ==========                             ==========
Effect of dilutive securities                          --            8                        --            3
                                              -----------   ----------                ----------   ----------
Diluted EPS from continuing operations        $     1,198        8,315   $     0.14   $    8,593        8,308   $     1.03
                                              ===========   ==========   ==========   ==========   ==========   ==========
</TABLE>

                                       14
<PAGE>

                      AMERICAN MORTGAGE ACCEPTANCE COMPANY
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

NOTE 13 - RELATED PARTY TRANSACTIONS

The  following  summarizes  all costs  paid or payable  to our  Advisor  and its
affiliates:
<TABLE>
<CAPTION>
                                                     Three months ended        Nine months ended
(IN THOUSANDS)                                          September 30,             September 30,
                                                  -----------------------   -----------------------
                                                     2007         2006         2007         2006
                                                  ----------   ----------   ----------   ----------
<S>                                               <C>          <C>          <C>          <C>
Fees to Advisor and affiliates:
  Shared services expenses                        $      474   $      450   $    1,267   $    1,149
  Asset management fees                                  421          486        1,240        1,402
  Servicing fees                                         149           --          422           --
  Incentive management fee(1)                             --        2,156           --        2,344
                                                  ----------   ----------   ----------   ----------

Total fees to Advisor and affiliates              $    1,044   $    3,092   $    2,929   $    4,895
                                                  ==========   ==========   ==========   ==========

Other costs:
  Interest paid on related party line of credit   $      856   $      360   $    1,758   $    1,105
                                                  ==========   ==========   ==========   ==========
</TABLE>

(1)  Accrual based on the proportion of actual earnings as compared to estimates
     of full-year  results at September  30,  2006.  Later in 2006,  when it was
     determined that certain  financial  thresholds  would not be achieved,  the
     accrual was reversed and no incentive fees were paid. In 2007, no incentive
     fees are accrued,  as we do not  anticipate  current year earnings to reach
     incentive fee payment hurdles.

Fees to Advisor and Affiliates
------------------------------

ADVISORY AGREEMENT

Under our amended  Advisory  Services  Agreement with our Advisor (the "Advisory
Agreement"),  which was amended in March 2007,  we pay certain fees, in addition
to  reimbursements  of certain  administrative  and other costs that our Advisor
incurs on our behalf for its ongoing management and operations of our Company:

Fees/Compensation               Annual Amount
-----------------               -------------
I.   Asset management fees      Our  Advisor  receives  an  asset management fee
                                equal  to  1.75%  per  year for the first $300.0
                                million of our  adjusted   equity   balance  (as
                                defined  in  the  Advisory  Agreement) and 1.50%
                                per  year  of  our  adjusted  equity  balance in
                                excess of $300.0 million.

II.  Loan origination fees      Our Advisor is entitled to receive, with respect
                                to   each  investment  originated  by  us,   the
                                origination points,  if any,  paid by borrowers.
                                In   connection   with   the   acquisition    of
                                investments  for us, our Advisor also may act as
                                an advisor to third  parties  which  participate
                                with  us  in  such  investments  and may receive
                                origination points,  if any,  from  such   third
                                parties  or  their  borrowers.  In the event our
                                Advisor  is  not  entitled   to  an  origination
                                fee from a  borrower  for a  loan  the   Advisor
                                originated  for  investment  by us,  we will pay
                                an origination  fee or a referral fee consistent
                                with industry practice, amount and terms.

III. Annual incentive           Our  Advisor  is  entitled  to receive incentive
     management fees            compensation for  each fiscal year in  an amount
                                equal to the product of:


                                (A)   25% of the dollar amount by which

                                      (1)   Adjusted   Funds   from   Operations
                                            ("AFFO")   before   this   incentive
                                            management  fee per share  (based on
                                            the  weighted   average   number  of
                                            shares  outstanding)  and  excluding
                                            non-cash  gains or losses due to the
                                            recording of fair value hedges

                                      exceeds

                                      (2)   the weighted average per share value
                                            of (x) $20 and  (y) the  prices  per
                                            share of any secondary  offerings by
                                            the   Company   multiplied   by  the
                                            greater of:

                                       15
<PAGE>

                      AMERICAN MORTGAGE ACCEPTANCE COMPANY
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

                                            (a) 9.00%; and

                                            (b) the Ten-Year U.S.  Treasury Rate
                                                plus 2.00% per annum

                                multiplied by

                                (B)   the  weighted  average  number  of  shares
                                      outstanding during such year.

                                AFFO means net income  (computed  in  accordance
                                with GAAP) including  realized gains (or losses)
                                from debt  restructuring  and sales of  non-real
                                estate    assets,    plus    depreciation    and
                                amortization   on  real   property,   and  after
                                adjustments for unconsolidated  partnerships and
                                joint ventures.

                                A  minimum  of 10% and a  maximum  of 50% of the
                                annual incentive management fee is to be paid in
                                common shares, at the discretion of our Board of
                                Trustees.

IV.  Shared services expenses   Our   Advisor  is  reimbursed by  us for (i) the
                                actual costs to the Advisor of goods,  materials
                                and  services  used  for  and   by  us  obtained
                                from  unaffiliated  parties,  (ii) the  costs of
                                certain  personnel   employed by the Advisor and
                                directly  involved  in   the   organization  and
                                business  of  our   Company   and   for   legal,
                                accounting,  transfer  agent,  reinvestment  and
                                redemption plan administration, data processing,
                                duplication and investor communications services
                                performed  by  employees  or  officers  of   the
                                Advisor.

V.   Termination Fees           The Advisory agreement will be subject to  early
                                termination  for  "cause", without payment of  a
                                termination fee. However, if termination  occurs
                                without cause, or is not renewed  after its one-
                                year  term,  the  Advisor  will  be  entitled to
                                receive a  termination  fee  based on historical
                                Asset Management and Annual Incentive Management
                                fees or a market rate.

Prior to the March 2007 amendment to the Advisory Agreement,  the following fees
were paid to the Advisor differently than they are currently paid:

     o    ASSET  MANAGEMENT FEES - We paid asset  management fees equal to 1.75%
          of our total equity  balance,  adjusted by certain  costs and one-time
          events.

     o    INCENTIVE MANAGEMENT FEES - We paid incentive management fees based on
          a calculation that used an AFFO and specified  yield-based  threshold.
          Payment of this fee was made in cash only.

Other fees as described above are consistent  with the Advisory  Agreement prior
to the March 2007 amendment.

SERVICING FEES

We pay Centerline  Servicing Inc ("CSI"), an affiliate of Centerline,  a fee for
servicing and special  servicing our mortgage loans and other  investments equal
to the  Advisor's  actual costs of  performing  such  services but not less than
0.08% per year of the  principal  balance of the related  mortgage loan or other
investment.

Other Related Party Transactions
--------------------------------

During 2006, we entered into a  co-investment  agreement  with  Centerline  Real
Estate  Special  Situations  Mortgage Fund LLC  ("CRESS"),  whereby we and CRESS
participate  in investment  opportunities  that are originated by affiliates and
which meet the  investment  criteria  of both  companies.  A portion of our 2007
investments was made pursuant to this agreement,  and we will continue to pursue
investment opportunities with CRESS in the future.

During March 2007,  we sold our economic  interest in the Concord  properties to
CRESS (see Note 4).

During April 2007, we amended our revolving  credit  facility with Centerline to
increase  our  borrowing  capacity  from  $50.0  million to $80.0  million.  The
maturity  date of the  facility  was also  extended to June 2008 with a one-year
optional  extension.  In the opinion of our Advisor,  the terms of this facility
are consistent with those of transactions  with  independent  third parties.  At
September  30,  2007,  and December  31,  2006,  we had $39.3  million and $15.0
million, respectively, in borrowings outstanding,  bearing interest at a rate of
8.12% and 8.35%, respectively.

                                       16
<PAGE>

                      AMERICAN MORTGAGE ACCEPTANCE COMPANY
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

During  2007,  we  partially  or fully  funded  21 first  mortgage,  bridge  and
mezzanine loans and  subordinated  notes,  totaling $250.1 million (see Note 2),
originated by  Centerline  Mortgage  Capital Inc.  ("CMC",  formerly  CharterMac
Mortgage Capital  Corporation),  an affiliate of our Advisor.  CMC received $0.9
million in loan  origination  fees related to these  originations,  all of which
were paid by the borrowers.

During  2007,  we funded  two  mezzanine  loans  aggregating  $50.7  million  to
properties  developed by a company  partly owned by the chairman of  Centerline.
Those  transactions  were  approved by the  independent  members of our Board of
Trustees  and,  in the  opinion  of  management,  the  terms of these  mezzanine
transactions were consistent with independent third-party transactions.

During March 2007, Centerline entered into a 10b5-1 Plan whereby it may purchase
our common shares in open market purchases based on  pre-determined  parameters,
up to the 9.8% share ownership limit in our trust agreement.  Through  September
30, 2007, it has purchased  494,000 common shares under this plan,  amounting to
5.9% of our outstanding common shares at September 30, 2007. Centerline has also
purchased  280,000 of our preferred shares that we issued in July 2007 (see Note
10), which amounts to an aggregate  economic  ownership  percentage of over 10%,
assuming all preferred shares were converted to common shares.


NOTE 14 - COMMITMENTS AND CONTINGENCIES

Guarantees
----------

Prior to 2000,  we entered into a loan  program with Fannie Mae,  under which we
agreed to guarantee a first-loss  position on certain loans. In June and October
of 2000, we  originated  two loans  totaling $3.3 million under the program.  In
September 2003, we transferred and assigned all of our obligations  with respect
to these two  loans to CMC.  Pursuant  to the  agreement  with  CMC,  Centerline
guaranteed CMC's obligations, and we agreed to indemnify both CMC and Centerline
for any  losses  incurred  in  exchange  for  retaining  all  fees  that we were
otherwise  entitled to receive  from Fannie Mae under the  program.  The maximum
exposure at September  30, 2007,  was $3.1  million,  although we expect that we
will not be called upon to fund these guarantees.

In the first quarter of 2003, we  discontinued  our loan program with Fannie Mae
and will issue no further guarantees pursuant to such program.

We monitor the status of the  underlying  properties  and  evaluate our exposure
under the  guarantees.  To date, we have  concluded that no accrual for probable
losses is required under SFAS No. 5, ACCOUNTING FOR CONTINGENCIES.

Future Funding Commitments
--------------------------

We are committed to additionally fund the following first mortgage and mezzanine
loans at September 30, 2007:
<TABLE>
<CAPTION>
                                                                     (IN THOUSANDS)
                                                              Maximum Amount of Commitment
                                                       ------------------------------------------
                                                                       Less than
Issue Date          Project             Location           Total         1 Year       1-3 Years
----------   --------------------   ----------------   ------------   ------------   ------------
<S>          <C>                    <C>                <C>            <C>            <C>
Apr-05       Atlantic Hearthstone   Hillsborough, NJ   $        431   $        431   $         --
Nov-06       12 Atlantic Station    Atlanta, GA               1,000          1,000             --
Feb-07       Aberdeen Apartments    Houston, TX                 245            245             --
Jun-07       122 Greenwich Ave      New York, NY              4,968          4,968             --
                                                       ------------   ------------   ------------

Total Future Funding Commitments                       $      6,644   $      6,644   $         --
                                                       ============   ============   ============
</TABLE>


NOTE 15 - Market Conditions and Subsequent Events

Beginning  in July 2007,  developments  in the market for many types of mortgage
products  (including  mortgage-backed   securities)  have  resulted  in  reduced
liquidity for these assets.  Although this  reduction in liquidity has been most
acute with regard to single-family subprime mortgage assets, to which we are not
exposed,  there has been an overall  reduction  in  liquidity  across the credit
spectrum of mortgage  products.  Nonetheless,  Management  believes  our current
financing  sources  and cash  flows from  operations  are  adequate  to meet our
ongoing liquidity needs for the near term.

                                       17
<PAGE>

                      AMERICAN MORTGAGE ACCEPTANCE COMPANY
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

Due to these market factors,  in October 2007, we decided not to pursue a second
CDO securitization.  In connection with that  determination,  we entered into an
agreement that will terminate our Citigroup  repurchase facility on February 28,
2008,  and we  recorded a charge to general and  administrative  expense of $1.1
million in the third quarter of 2007 to accrue  estimated costs incurred through
September 30, 2007,  that we would have paid at closing of the CDO. With respect
to assets  pledged as collateral  for the  Citigroup  facility and in accordance
with the  termination  agreement,  we plan to  refinance  our  mezzanine  loans,
subordinated notes and CMBS utilizing our other repurchase  facilities.  We also
plan to sell all of the first mortgages  pledged as collateral for the Citigroup
line to a third party and  recognized an  impairment  loss of $1.3 million as of
September  30, 2007,  reflecting  the market value of the loans as of that date.
Any  difference  between  proceeds of the sale and the  refinancing of the other
assets and the amount  needed to repay the  Citigroup  facility will be obtained
from our available cash or related party line of credit.  To the extent that any
of these  assets  remain on the  facility  after  January 1, 2008,  interest  on
borrowings will be increased to a range of LIBOR plus 0.75% to LIBOR plus 1.40%.
To the extent that any of these assets remain on the facility  after February 1,
2008,  the rate will  increase  to a range  from  LIBOR plus 0.95% to LIBOR plus
1.60%.

During the November 2007, we refinanced our CMBS investments  (with an aggregate
carrying  amount of $62.2 million as of September  30, 2007)  utilizing our Bear
Stearns  repurchase  facility.  Advance  rates on this  transaction  were 70% of
market value as of the refinancing  date and the interest rate on the borrowings
is LIBOR plus 1.00%.  The  refinancing  resulted in a net cash  payment of $27.3
million.

In connection with terminating the Citigroup repurchase  facility,  we will also
terminate all of the associated  interest rate swap derivatives (see Note 9). In
November 2007,  when we refinanced the CMBS  investments,  we paid a termination
fee of $2.6  million  for  seven  of the  swaps.  This  termination  fee will be
recorded as expense in the fourth  quarter of 2007, on the date of  termination,
incorporating the realization of those previously unrealized losses.

During  October 2007,  the remaining  balance ($6.4 million) of an $84.0 million
participation interest in a mezzanine loan was repaid (see Note 2).

During  October 2007, we obtained new financing for the remaining  $14.2 million
balance on our UBS  repurchase  facility  utilizing our Bear Stearns  repurchase
facility (see Note 6).

During October 2007, one mortgage loan in our specially  serviced  portfolio was
repaid at par plus accrued interest, resulting in proceeds of $10.1 million (see
Note 2).

For the period  from  October 1, 2007  through  November  7, 2007,  we paid $0.5
million due to margin calls on our repurchase facilities.

                                       18
<PAGE>

ITEM 2.  MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF  FINANCIAL  CONDITION  AND
RESULTS OF OPERATIONS.

Overview
--------

During  2006 and 2007,  as we have  revised  our  investment  strategy,  we have
recorded  gains and losses  that are not  comparable  between  periods  and have
experienced  growth in numerous other income statement accounts in line with our
increased investment portfolio. Given current market conditions, there have been
revisions  to our  current  investment  strategy.  See  "LIQUIDITY  AND  CAPITAL
RESOURCES" for further discussion.

The non-comparable  gains and losses and the changes in our investment portfolio
are detailed in the following sections of this discussion.

Factors Affecting Comparability
-------------------------------

During August 2006, we sold our membership interests in ARCap, which resulted in
a significant gain on the sale, as well as additional  equity income  recognized
from a special  distribution  prior to the sale,  while  eliminating any further
equity  income from ARCap.  We received  additional  proceeds from the sale (and
recorded an additional  gain) upon release of an escrow during the third quarter
of 2007.

During  2006,  we entered into fair value swaps for which we did not apply hedge
accounting.  As a result,  changes in the market value of these derivatives have
been recorded as gains and losses in other income in our condensed  consolidated
statements  of income.  In 2007,  there were fewer of these swaps,  resulting in
less of a negative change in the fair value as compared to 2006.

During  the third  quarter of 2006,  we  recognized  impairment  losses on three
mortgage loans and the anticipated sale of debt securities.  As a result,  these
charges were recorded in impairment of investments in our condensed consolidated
statements of income. During the third quarter of 2007, we recognized impairment
of $1.3 million related to the planned sale of mortgage loans in connection with
the  termination  of a credit  facility.  We also  accrued $1.1 million of costs
associated  with a CDO  securitization  into which we decided  not to go forward
(see Note 15 to the consolidated  condensed financial  statements and "LIQUIDITY
AND CAPITAL RESOURCES").

During  March 2007,  we sold our  economic  interest  in the Concord  portfolio,
resulting  in a gain of $3.6  million.  This amount is recorded in  discontinued
operations along with rental income, property operations,  mortgage interest and
depreciation for the period up to the sale.

Investment Activity
-------------------

During the three months ended September 30, 2007 and 2006, we funded  (partially
or in full) or purchased the following investments, not reflecting any discounts
or premiums:
<TABLE>
<CAPTION>
                                                 Three Months Ended
                         ------------------------------------------------------------------
                                September 30, 2007                  September 30, 2006
                         -------------------------------    -------------------------------
                                             Weighted                           Weighted
                                             Average                            Average
(DOLLARS IN THOUSANDS)       Amount       Interest Rate         Amount       Interest Rate
                         --------------   --------------    --------------   --------------
<S>                      <C>                        <C>     <C>                        <C>
Mortgage loans:
  First mortgage loans   $        4,150             6.62%   $      124,050             6.01%
  Mezzanine loans                 1,100             9.74            16,500            10.00
CMBS                             20,000             5.82                --               --
                         --------------   --------------    --------------   --------------

Total                    $       25,250             6.12%   $      140,550             6.48%
                         ==============   ==============    ==============   ==============
</TABLE>

                                       19
<PAGE>

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                                   (CONTINUED)

During the nine months ended  September 30, 2007 and 2006, we funded  (partially
or in full) or purchased the following investments, not reflecting any discounts
or premiums:
<TABLE>
<CAPTION>
                                                 Nine Months Ended
                         ------------------------------------------------------------------
                                September 30, 2007                  September 30, 2006
                         -------------------------------    -------------------------------
                                             Weighted                           Weighted
                                             Average                            Average
(DOLLARS IN THOUSANDS)       Amount       Interest Rate         Amount       Interest Rate
                         --------------   --------------    --------------   --------------
<S>                      <C>                        <C>     <C>                        <C>
Mortgage loans:
  First mortgage loans   $       47,050             5.83%   $      244,250             6.16%
  Bridge loans                   19,660             6.51                --               --
  Mezzanine loans               156,924             8.74            22,000             9.76
  Subordinated notes             26,490             8.30                --               --
CMBS                            135,301             5.92                --               --
CDO securities                   10,084             9.00                --               --
                         --------------   --------------    --------------   --------------

Total                    $      395,509             7.28%   $      266,250             6.45%
                         ==============   ==============    ==============   ==============
</TABLE>

Results of Operations
---------------------

The following is a summary of our operations for the periods ended September 30,
2007 and 2006:
<TABLE>
<CAPTION>
                                        Three Months Ended               Nine Months Ended
                                           September 30,                    September 30,
                                 -------------------------------   ------------------------------
(DOLLARS IN THOUSANDS)             2007        2006      Change      2007       2006      Change
                                 --------    --------   --------   --------   --------   --------
<S>                              <C>         <C>            <C>    <C>                      <C>
Total revenues                   $ 16,948    $  8,509       99.2%  $ 44,761   $ 21,429        NM%
Total expenses                     16,387      15,264        7.4     40,077     25,735       55.7
Total other income (loss)            (748)      7,953         NM        239     12,899      (98.1)
Income from discontinued
 operations, including gain on
 sale                                  --          36         NM      3,531         25         NM
                                 --------    --------   --------   --------   --------   --------

Net (loss) income                $   (187)   $  1,234        NM%   $  8,454   $  8,618       (1.9)%
                                 ========    ========   ========   ========   ========   ========
</TABLE>

NM = Not meaningful as change is 100% or greater


The  growth  in our  revenues  during  the three and nine  month  periods  ended
September 30, 2007, as compared to the same periods in 2006,  resulted primarily
from increases in investment volume, as well as participation income received in
connection with a paydown of one of our mortgage loans.

Expenses increased during the nine months ended September 30, 2007, particularly
due to higher  financing  costs  mainly from higher debt  balances  and a slight
increase in interest rates from the comparable  period,  as well as from certain
costs incurred in association with a securitization  program that will no longer
be executed (see Note 15). These  increases were partially  offset by a decrease
in  impairment  losses,  advisory  fees (due to the  absence  of an  accrual  of
incentive  management fees in the 2007 period,  as we do not anticipate  current
year  earnings  to  reach  incentive  fee  payment   hurdles)  and  general  and
administrative  costs (particularly lower legal fees in the 2007 period compared
to the settlement of a lawsuit in the third quarter of 2006).

Expenses  decreased during the three months ended September 30, 2007, due to the
reasons  mentioned  above;  however,  the decrease in impairment  losses and the
absence of an incentive  management fee accrual has a more significant impact in
the three-month period as compared to the nine-month period.

Other income  decreased for the three and nine months ended  September 30, 2007,
as compared to 2006,  primarily  due to the sale of our  investment  in ARCap in
2006 and the resulting absence of equity income we had earned in the 2006 period
prior to the sale.  This was  offset by a sharp  drop in fair  value  changes of
derivatives that we terminated in the fourth quarter of 2006.

                                       20
<PAGE>

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                                   (CONTINUED)

Income from discontinued  operations  includes operations from real estate owned
that was sold  during 2007 and 2006.  The  increase  for the nine  months  ended
September 30, 2007, as compared to 2006, is due to the  recognition of a gain on
sale of a portfolio of properties in the first quarter of 2007.

REVENUES
<TABLE>
<CAPTION>
                                Three Months Ended
                           -----------------------------
                                                                             % of 2007       % of 2006
                           September 30,   September 30,   Change from         Total           Total
(DOLLARS IN THOUSANDS)          2007            2006       Prior Period      Revenues        Revenues
                           -------------   -------------   -------------   -------------   -------------
<S>                        <C>             <C>                     <C>             <C>             <C>
Interest income:
  Mortgage loans           $      12,942   $       5,563             NM%            76.4%           65.4%
  Debt securities                  1,104           2,717           (59.4)            6.5            31.9
  CMBS                             2,036              --              NM            12.0              --
  Mortgage revenue bonds             104             112            (7.1)            0.6             1.3
  Temporary investments              163              94            73.4             1.0             1.1
  CDO securities                     519              --              NM             3.1              --
Total interest income             16,868           8,486            98.8            99.5            99.7
                           -------------   -------------   -------------   -------------   -------------
Other revenues                        80              23              NM             0.5             0.3
                           -------------   -------------   -------------   -------------   -------------

Total revenues             $      16,948   $       8,509            99.2%          100.0%          100.0%
                           =============   =============   =============   =============   =============
</TABLE>
NM = Not meaningful as change is 100% or greater.


<TABLE>
<CAPTION>
                                Nine Months Ended
                           -----------------------------
                                                                             % of 2007       % of 2006
                           September 30,   September 30,   Change from         Total           Total
(DOLLARS IN THOUSANDS)          2007            2006       Prior Period      Revenues        Revenues
                           -------------   -------------   -------------   -------------   -------------
<S>                        <C>             <C>                     <C>             <C>             <C>
Interest income:
  Mortgage loans           $      35,870   $      11,687             NM%            80.1%            54.5%
  Debt securities                  3,539           8,932           (60.4)            7.9             41.7
  CMBS                             2,898              --              NM             6.5               --
  Mortgage revenue bonds             315             396           (20.5)            0.7              1.8
  Temporary investments              422             229            84.3             0.9              1.1
  CDO securities                     709              --              NM             1.6               --
Total interest income             43,753          21,244              NM            97.7             99.1
                           -------------   -------------   -------------   -------------    -------------
Other revenues                     1,008             185              NM             2.3              0.9
                           -------------   -------------   -------------   -------------    -------------

Total revenues             $      44,761   $      21,429             NM%           100.0%           100.0%
                           =============   =============   =============   =============    =============
</TABLE>
NM = Not meaningful as change is 100% or greater.

                                       21
<PAGE>

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                                   (CONTINUED)

At September  30, we had the  following  investments  (exclusive  of Real Estate
Owned and temporary investments):
<TABLE>
<CAPTION>
                                              2007                                              2006
                        -----------------------------------------------    -----------------------------------------------
                                                             Weighted                                          Weighted
                           Carrying                           Average          Carrying                         Average
(DOLLARS IN THOUSANDS)      Amount        % of Total      Interest Rate        Amount        % of Total      Interest Rate
                        -------------    -------------    -------------    -------------    -------------    -------------
<S>                     <C>              <C>                       <C>     <C>                      <C>               <C>
Mortgage loans          $     710,733             78.6%            6.27%   $     345,033             67.9%            7.70%
Debt securities                71,528              7.9             6.49          157,982             31.1             6.02
CMBS                          108,621             12.0             5.06               --               --               --
CDO securities                  8,672              1.0             8.80               --               --               --
Mortgage revenue
  bonds                         4,860              0.5             8.70            4,972              1.0             8.70
                        -------------    -------------    -------------    -------------    -------------    -------------

                        $     904,414            100.0%            6.18%   $     507,987            100.0%            7.19%
                        =============    =============    =============    =============    =============    =============
</TABLE>


Interest income from mortgage loans increased significantly for the 2007 periods
as compared to 2006,  primarily due to the funding and purchase of a significant
amount of first mortgage loans,  bridge notes,  mezzanine loans and subordinated
notes  throughout  2006 and 2007 and the  partial  funding of  several  existing
mezzanine loans during 2006. The decrease in the weighted average interest rates
on mortgage  loans as of September  30, 2007, as compared to September 30, 2006,
was  primarily  due to the  funding and  purchase of a greater  amount of higher
credit  quality  loans,  as opposed to riskier,  higher  coupon  loans as we had
funded in the past.

Interest  income from debt  securities  decreased  for the three and nine months
ended September 30, 2007,  primarily due to the sale of 20 FNMA  certificates in
November 2006, as well as the payoff of four GNMA  certificates  during 2007 and
2006.  The increase in the weighted  average  interest  rate on debt  securities
during 2007 is due to the lower yields of the FNMA certificates sold relative to
the yields of those retained.

Interest  income from CMBS and CDO securities in 2007 relates to the purchase of
a portion of 12 classes of CMBS  investments  and various  classes of Nomura CDO
securities  during 2007.  There were no  investments  in CMBS or CDO  securities
prior to 2007.

Interest income from mortgage  revenue bonds for the three and nine months ended
September 30, 2007 was lower than the comparable prior year period primarily due
to the payoff of two revenue bonds during 2006.

Interest income from temporary  investments  increased for the 2007 periods,  as
compared  to  2006,  primarily  due to the  investment  of  excess  cash on hand
resulting from the payoff of several mortgage loans and debt securities, as well
as interest earned on restricted cash balances held with custodians.

Other revenues  increased for the nine months ended  September 30, 2007 due to a
one-time  payment  received from an early  repayment one of a debt security,  as
well as a one-time payment received pursuant to a participating  arrangement for
a mortgage loan that was repaid in the first quarter of 2007. There were no such
fees received during 2006.

EXPENSES
<TABLE>
<CAPTION>
                                            Three Months Ended
                                       -----------------------------                    % of 2007        % of 2006
                                       September 30,   September 30,   Change from        Total            Total
(DOLLARS IN THOUSANDS)                     2007            2006        Prior Period      Revenues         Revenues
                                       -------------   -------------   -------------   -------------   -------------
<S>                                    <C>             <C>                     <C>              <C>            <C>
Interest                               $      11,757   $       5,669             NM%            69.4%           66.6%
Interest-subsidiary preferred shares             554             591            (6.3)            3.3             7.0
General and administrative                     1,548           1,267            22.2             9.1            14.9
Impairment of investments                      1,276           4,632           (72.5)            7.5            54.4
Fees to Advisor and affiliates                 1,044           3,092           (66.2)            6.2            36.3
Amortization and other                           208              13              NM             1.2             0.1
                                       -------------   -------------   -------------   -------------   -------------

Total expenses                         $      16,387   $      15,264             7.4%           96.7%          179.3%
                                       =============   =============   =============   =============   =============
</TABLE>
NM = Not meaningful as change is 100% or greater.

                                       22
<PAGE>

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                                   (CONTINUED)

<TABLE>
<CAPTION>
                                             Nine Months Ended
                                       -----------------------------                    % of 2007        % of 2006
                                       September 30,   September 30,   Change from        Total            Total
(DOLLARS IN THOUSANDS)                     2007            2006        Prior Period      Revenues         Revenues
                                       -------------   -------------   -------------   -------------   -------------
<S>                                    <C>             <C>                     <C>              <C>            <C>
Interest                               $      30,890   $      12,255             NM%            69.0%           57.2%
Interest-subsidiary preferred shares           1,677           1,665             0.7             3.8             7.8
General and administrative                     2,696           2,245            20.1             6.0            10.5
Impairment of investments                      1,276           4,632           (72.5)            2.9            21.6
Fees to Advisor and affiliates                 2,929           4,895           (40.2)            6.5            22.8
Amortization and other                           609              43              NM             1.4             0.2
                                       -------------   -------------   -------------   -------------   -------------

Total expenses                         $      40,077   $      25,735            55.7%           89.5%          120.1%
                                       =============   =============   =============   =============   =============
</TABLE>
NM = Not meaningful as change is 100% or greater.


Interest  expense  increased  for the three and nine months ended  September 30,
2007,  as compared  to 2006,  primarily  due to the  increased  borrowings  made
through 2007 and 2006 to fund  origination  activity and the slight  increase in
market  interest  rates  during the nine  months  ended  September  30,  2007 as
compared to 2006. Excluding mortgages on real estate owned (in the 2006 period),
information related to our debt is as follows:
<TABLE>
<CAPTION>
                                                    Three Months Ended           Nine Months Ended
                                                       September 30,               September 30,
                                                 -----------------------     -----------------------
(DOLLARS IN THOUSANDS)                              2007         2006           2007           2006
                                                 ----------   ----------     ----------     ---------
<S>                                              <C>          <C>            <C>            <C>
Average outstanding                              $  833,026   $  419,647     $  762,038     $ 330,857
Weighted average interest rate
  (including effect of interest rate swaps)            5.92%        5.97%          5.70%         5.61%
Average notional amount of interest rate swaps   $  676,120   $  270,829     $  613,855     $ 152,410
Weighted average rate of interest rate swaps           5.21%        5.14%          5.19%         4.96%
</TABLE>


General  and  administrative  expenses  increased  for the three and nine months
ended  September 30, 2007, as compared to 2006 due to certain costs  incurred in
association  with a CDO  securitization  program that will no longer be executed
(see Note 15) and recurring CDO  administrative  costs incurred  during the 2007
period  as a  result  of our  2006  CDO  securitization.  These  increases  were
partially  offset by fewer  legal  costs  incurred  during 2007 (as costs in the
third  quarter of 2006  included  defending  and  settling a lawsuit)  decreased
insurance costs,  share option costs (all of which were fully amortized in April
2006) and excise taxes (as none are anticipated for 2007).

Impairment of investments  during 2006 relates to impairments  recognized on two
mortgage loans due to  deteriorating  operating  performance and on certain debt
securities that no longer met our investment  return criteria and were sold. The
impairment  losses  in 2007  relate to the  planned  sale of  mortgage  loans in
connection with the termination of the associated credit facility.

Fees to Advisor and  affiliates  decreased for the 2007 periods,  as compared to
2006, due to the absence of an accrual of incentive  management fees in the 2007
period,  as we do not  anticipate  current year earnings to reach  incentive fee
payment  hurdles.  Offsetting  this decrease is a higher level of servicing fees
due to growth of our investment portfolio.

Amortization and other costs increased for the 2007 periods,  as compared to the
same periods in 2006, due to higher  amortization of higher  deferred  financing
costs as a result of our 2006 CDO securitization.

OTHER INCOME (LOSS)

Other income (loss)  decreased  during 2007 primarily as a result of the gain on
sale of our investment in ARCap during 2006 and the resulting  absence of equity
income afterward. These 2006 income amounts were partially offset by significant
fair value  changes with respect to  free-standing  derivatives.  The balance in
2007 relates to the change in the fair value of  free-standing  derivatives,  as
well as an additional  gain  recognized from the sale of our investment in ARCap
resulting  from the  release  of escrow  funds  upon the  expiration  of certain
holdback requirements.

                                       23
<PAGE>

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                                   (CONTINUED)

Funds from Operations
---------------------

Funds  from  operations  ("FFO")  represents  net  income or loss  (computed  in
accordance  with  GAAP),  excluding  gains or  losses  from  sales of  property,
excluding  depreciation and amortization  related to real property and including
funds from operations for unconsolidated  joint ventures  calculated on the same
basis.  FFO is calculated in accordance  with the National  Association  of Real
Estate  Investment  Trusts  ("NAREIT")  definition.  FFO does not represent cash
generated  from  operating  activities  in  accordance  with  GAAP  and  is  not
necessarily  indicative of cash available to fund cash needs.  FFO should not be
considered  as an  alternative  to net income as an indicator  of our  operating
performance or as an  alternative  to cash flows as a measure of liquidity.  Our
management considers FFO a supplemental measure of operating  performance,  and,
along  with cash flows  from  operating  activities,  financing  activities  and
investing  activities  because it  provides  management  and  investors  with an
indication of our ability to incur and service debt,  make capital  expenditures
and fund other cash needs.  Since not all  companies  calculate FFO in a similar
fashion,  our  calculation  presented  above may not be  comparable to similarly
titled measures reported by other companies.

The following  table  reconciles net income to FFO for the three and nine months
ended September 30, 2007 and 2006:
<TABLE>
<CAPTION>
                                                    Three Months Ended           Nine Months Ended
                                                       September 30,               September 30,
                                                 -----------------------     ------------------------
(DOLLARS IN THOUSANDS)                              2007         2006           2007           2006
                                                 ----------   ----------     ----------     ---------
<S>                                              <C>          <C>            <C>            <C>
Net (loss) income                                $     (187)  $    1,234     $    8,454     $   8,618

Adjustments:
  Depreciation of real property (1)                      --          435            336         1,334
  Loss (gain) on sale of real property (1)               --           98         (3,611)           98
                                                 ----------   ----------     ----------     ---------

FFO                                              $     (187)  $    1,767     $    5,179     $  10,050
                                                 ==========   ==========     ==========     =========

Cash flows from:
  Operating activities                           $    5,288   $    3,702     $   10,563     $   8,934
                                                 ==========   ==========     ==========     =========
  Investing activities                           $    6,737   $  (61,501)    $ (264,210)    $(191,775)
                                                 ==========   ==========     ==========     =========
  Financing activities                           $    7,330   $   66,350     $  257,622     $ 183,870
                                                 ==========   ==========     ==========     =========

Weighted average shares outstanding:
  Basic                                               8,406        8,307          8,404         8,305
                                                 ==========   ==========     ==========     =========
  Diluted                                             8,406        8,315          8,794         8,308
                                                 ==========   ==========     ==========     =========
</TABLE>

(1)  Related  to   properties   sold  during  2007  and  2006  and  included  in
     discontinued operations in our condensed consolidated statements of income.


LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

SOURCES OF FUNDS


During 2007, developments in the market for many types of mortgage products have
resulted in reduced  liquidity  for these  assets.  Although  this  reduction in
liquidity  has been most acute with regard to single  family  subprime  mortgage
assets,  to which we are not  exposed,  there has been an overall  reduction  in
liquidity  across the credit spectrum of mortgage  products.  Because of this we
have suspended most investment activity. The impact on the financial results has
been included, where appropriate, in our discussion of the results of operations
for the third quarter of 2007.

If current market conditions  persist,  we believe our current financing sources
and cash flows from operations  would be adequate to meet our ongoing  liquidity
needs  for the  near  term,  while  limiting  our  ability  to  pursue  previous
investment levels. If market conditions continue to decline, we will explore and
evaluate investment  strategies and alternative financing for our existing asset
base.  If  current  market  conditions  improve,  we  believe  we have  adequate
financing to actively pursue our investment strategies.

We expect that cash generated,  principally  interest from our  investments,  as
well as our borrowing capacity, will meet our needs for short-term liquidity and
will be sufficient to pay all expenses and  distributions to our shareholders in

                                       24
<PAGE>

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                                   (CONTINUED)

amounts sufficient to retain our REIT status in the foreseeable future. In order
to qualify as a REIT under the Internal  Revenue  Code, as amended ("the Code"),
we must, among other things,  distribute at least 90% of our taxable income (see
Note 8). We believe that we are in compliance with the  REIT-related  provisions
of the Code.

As of September 30, 2007, our credit facilities consisted of:

     o repurchase facilities; and
     o a related party line of credit.

At September 30, 2007, we had $40.7  million  available to borrow,  all of which
capacity is the unused portion of our related party line of credit.

Repurchase Facilities
---------------------

Under our repurchase agreements we pledge additional assets as collateral to our
repurchase agreement  counterparties  (lenders) when the estimated fair value of
the existing pledged collateral under such agreements  declines and such lenders
demand additional  collateral (i.e., a margin call).  Margin calls result from a
decline  in  the  value  of  our  investments   collateralizing  our  repurchase
agreements,  generally  due to  changes  in the  estimated  fair  value  of such
investments.  This could result from principal reduction of such investments due
to scheduled  amortization  payments or unscheduled principal prepayments on the
mortgages underlying our investments, changes in market interest rates and other
market factors.  To cover a margin call, we may pledge additional  securities or
cash.

Through September 30, 2007, there were net cash payments of $21.0 million due to
margin calls/margin  receipts on our repurchase  facilities.  We believe we have
adequate financial resources to meet our obligations, including margin calls, as
they come due and to fund dividends we declare.  However, should market interest
rates and/or  prepayment  speeds on our investments  suddenly  increase,  margin
calls on our repurchase  agreements  could result,  causing an adverse change in
our liquidity position.

At September  30,  2007,  the  following  repurchase  facilities  were in place,
categorized by lending institution:

     o    CITIGROUP FACILITY

          During  2006,   we  began   financing  our  growth  by  utilizing  CDO
          securitizations.  Prior to a  securitization,  we finance  investments
          through  a  repurchase  facility,  which is repaid  from the  proceeds
          received when the CDO securitization is complete.

          During  December  2006,  we  executed  a  repurchase   agreement  with
          Citigroup  for the  purpose of funding  investment  activity.  Advance
          rates on the borrowings from this facility, ranging from 80% to 90% of
          collateral value, are determined on an asset-by-asset  basis. Interest
          on the  borrowings,  which  ranges from LIBOR plus 0.40% to LIBOR plus
          1.25%, is also determined on an  asset-by-asset  basis..  At September
          30, 2007, we had $290.4 million of borrowings  outstanding  under this
          facility at a weighted average  interest rate of 5.24%,  including the
          effect of interest rate hedges.

          In October  2007,  for the reasons  mentioned  above we decided not to
          pursue  a  second  CDO   securitization.   In  connection   with  that
          determination,  we entered into an agreement  that will  terminate our
          Citigroup  repurchase facility on February 28, 2008, and we recorded a
          charge to general and  administrative  expense of $1.1  million in the
          third  quarter  of 2007 to record  estimated  costs  incurred  through
          September  30,  2007,  that we would  have paid at closing of the CDO.
          With  respect  to  assets  pledged  as  collateral  for the  Citigroup
          facility and in accordance with the termination agreement,  we plan to
          sell or refinance our first mortgage and mezzanine loans, subordinated
          notes and CMBS  utilizing our other  repurchase  facilities  (see Note
          15).

     o    BEAR STEARNS FACILITY

          During the second quarter of 2007, we executed a repurchase  agreement
          with Bear  Stearns  for the  purpose of  providing  financing  for our
          investments  in CMBS and CDO  securities.  We also  began to finance a
          portion of our debt securities  portfolio  previously financed through
          other facilities. Advance rates on borrowings from this facility range
          from  58%  to  80%  of  the  collateral  value,  and  interest  on the
          borrowings  ranged from 30-day  LIBOR plus 0.55% to 30-day  LIBOR plus
          0.85%, both as determined on an  asset-by-asset  basis. The borrowings
          are subject to 30-day  settlement terms. At September 30, 2007, we had
          $95.3  million of  borrowings  outstanding  under this  facility  at a
          weighted  average  interest  rate of 4.93%,  including  the  effect of
          interest rate hedges.  During  November  2007, we refinanced  our CMBS
          investments utilizing this facility (see Note 15).

                                       25
<PAGE>

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                                   (CONTINUED)

     o    UBS FACILITY

          As a vehicle to leverage our investments in debt securities,  we had a
          repurchase  agreement with UBS. During August of 2007, we obtained new
          financing  for a portion of the  outstanding  balance on this facility
          with the Bear Stearns  facility.  The remaining balance was refinanced
          in October 2007,  also utilizing the Bear Stearns  facility,  and this
          facility was  terminated  and is no longer  available.  This  facility
          offered  advance rates between 94% and 97% of  collateral  value,  and
          borrowings  between  30-day  LIBOR minus  0.03% and 30-day  LIBOR plus
          0.10%, both as determined on an  asset-by-asset  basis. The borrowings
          were subject to 30-day settlement terms. As of September 30, 2007, the
          amount  outstanding  under this  facility  was $14.2  million,  with a
          weighted average interest rate of 5.18%.

     o    BANC OF AMERICA FACILITY

          During the third quarter of 2007,  we executed a repurchase  agreement
          with Banc of America  Securities,  LLC ("Banc of  America") to provide
          financing for  investments  in mezzanine  loans,  subordinated  notes.
          There are no outstanding  amounts on this facility as of September 30,
          2007.  Advance  rates on  borrowings,  which will be  determined on an
          asset-by-asset  basis,  will be  subject to 30-day  settlement  terms.
          Interest  rates  on the  borrowings  will  also  be  determined  on an
          asset-by-asset basis.

Following  is a summary  of our  investment  assets as of  September  30,  2007,
illustrating the amount of leverage and the amounts of hedged debt:
<TABLE>
<CAPTION>
                                                                                                                Interest rate
                                                  Carrying                         Amount                         hedges on
                                                   amount          Amount         securing       Associated      associated
                                   Carrying      pledged as       securing       repurchase      repurchase      repurchase
       (in thousands)               amount       collateral     CDO Dect (1)        debt            debt            debt
-----------------------------   -------------   -------------   -------------   -------------   -------------   -------------
<S>                             <C>             <C>             <C>             <C>             <C>             <C>
Mortgage loans:
  First mortgages               $     478,025   $     478,025   $     352,550   $     125,475   $     113,584   $     116,733
  Fixed rate bridge loans              56,574          56,574              --          56,574          50,343          51,496
  Variable rate bridge loans            9,356              --              --              --              --              --
  Fixed rate mezzanine loans           25,041          16,031          13,588           2,443           1,954           2,443
  Variable rate mezzanine loans        84,719          59,713           4,746          54,967          43,903              --
  Subordinated notes                   57,018          51,518          24,278          27,240          23,154          12,314
                                -------------   -------------   -------------   -------------   -------------   -------------

Total mortgage loans                  710,733         661,861         395,162         266,699         232,938         182,986
                                -------------   -------------   -------------   -------------   -------------   -------------

Debt securities                        71,528          71,528              --          71,528          66,819          30,000

CMBS                                  108,621         108,621              --         108,621          96,437          51,985

CDO securities                          8,672           5,554              --           5,554           3,586              --

Mortgage revenue bonds                  4,860              --              --              --              --              --
                                -------------   -------------   -------------   -------------   -------------   -------------

Totals                          $     904,414   $     847,564   $     395,162   $     452,402   $     399,780   $     264,971
                                =============   =============   =============   =============   =============   =============
</TABLE>

(1)  Of the $362.0 million of CDO notes payable, we have hedged $346.4 million.


Related Party Line of Credit
----------------------------
We finance our remaining  investing activity primarily through borrowings from a
credit facility we maintain with Centerline,  which was amended in April 2007 to
increase our borrowing  capacity and extend the maturity date of the facility to
June 2008.  This $80.0 million  facility  offers  borrowing  rates of LIBOR plus
3.00%.  As of September 30, 2007, the amount  outstanding was $39.3 million with
an interest rate of 8.12%.

                                       26
<PAGE>

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                                   (CONTINUED)


Other Financing
---------------
As noted  above,  in 2006,  we began  financing  our  growth  by  utilizing  CDO
securitizations.  At September 30, 2007, we had outstanding  CDO  securitization
certificates  totaling  $362.0  million  at a  weighted  average  rate of 5.45%,
including  the effect of interest  rate  hedges.  Due to current  securitization
market conditions,  we are not pursuing a second CDO  securitization.  If market
conditions improve, we may pursue other securitization strategies.

We have capacity to raise $153.0  million of additional  funds by issuing either
common or preferred shares pursuant to a shelf registration statement filed with
the SEC. If market conditions warrant, we may seek to raise additional funds for
investment  through  further  offerings,  although the timing and amount of such
offerings cannot be determined at this time.

SUMMARY OF CASH FLOWS
<TABLE>
<CAPTION>
                                                                  Nine Months Ended
                                                                     September 30,
                                            ----------------------------------------------------------------
                                                                                                  Percent
                                                 2007             2006        Dollar Change       Change
                                            -------------    -------------    -------------    -------------
<S>                                         <C>              <C>              <C>                       <C>
Cash flows provided by (used in):
   Operating activities                     $      10,563    $       8,934    $       1,629             18.2%
   Investing activities                          (264,210)        (191,775)         (72,435)            37.8
   Financing activities                           257,622          183,870           73,752             40.1
                                            -------------    -------------    -------------    -------------
Net increase in cash and cash equivalents   $       3,975    $       1,029    $       2,946               NM%
                                            =============    =============    =============    =============
</TABLE>

NM = Not meaningful


The increase in operating cash flows was caused  primarily by an increase in net
income when  adjusted to exclude  non-cash  items.  This  increase  was aided by
increased liability balances,  particularly  interest accruals,  which more that
offset higher receivable balances related to accrued income.

The increase in net cash used in  investing  activities  was due to  investments
made in mortgage loans, CMBS and CDO securities during 2007 as compared to lower
origination  activity  in the 2006  period.  The higher  origination  volume was
partially  offset by proceeds  received  from the sale of real estate  owned,  a
decrease in restricted cash balances and a higher amount of principal repayments
received on our mortgage loan investments.

The increase in net cash provided by financing  activities  can be attributed to
the higher level of investing  activity  during the 2007 period,  as well as net
proceeds received from a preferred stock offering,  offset by partial repayments
of the repurchase facilities and our related party line of credit.

LIQUIDITY REQUIREMENTS AFTER SEPTEMBER 30, 2007

For the period  from  October 1, 2007  through  November  7, 2007,  we paid $0.5
million due to margin calls on our repurchase facilities.

During  November 2007,  common  dividends of $1.9 million ($0.225 per share) and
preferred  dividends  of $0.2 million  (0.322 per share),  declared in September
2007, will be paid to shareholders.


As we  sell  or  refinance  assets  pledged  as  collateral  for  our  Citigroup
repurchase  facility (see Sources of Funds - Repurchase  Facilities  above),  we
expect to draw upon our  related  party  line of credit to cover the  difference
between the outstanding balance of that facility and the proceeds of assets sold
or refinanced. During November 2007 we refinanced all of our CMBS investments on
our Bear Stearns  facility,  resulting in a cash payment of $27.3 due to tighter
borrowing margins. Additionally, we will terminate all swaps associated with the
Citigroup  line and  redesignate  the  hedges  to the  extent  possible.  During
November 2007, in connection with the CMBS  refinancing,  we paid a $2.6 million
fee due to the termination of related swaps.

OTHER MATTERS

We are not aware of any  trends or events,  commitments  or  uncertainties,  not
otherwise  been  disclosed,  that will or are  likely to impact  liquidity  in a
material way.

                                       27
<PAGE>


                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                                   (CONTINUED)

Dividends
---------

The following table outlines our total dividends and return of capital  amounts,
determined in accordance with GAAP, for the nine months ended September 30:
<TABLE>
<CAPTION>
(IN THOUSANDS)                     2007         2006
                               -----------   -----------
<S>                            <C>           <C>
Total preferred dividends      $       219   $        --
                               ===========   ===========
Total common dividends         $     5,673   $     9,966
                               ===========   ===========

Return of capital:
  Amount                       $        --   $     1,348
  Per share                    $        --   $      0.16
  Percent of total dividends            --%        13.53%
</TABLE>


Commitments, Contingencies and Off-Balance Sheet Arrangements
-------------------------------------------------------------

See Note 14 to our condensed  consolidated financial statements for a summary of
our guarantees and commitments and contingencies.

We  have no  unconsolidated  subsidiaries,  special  purpose  off-balance  sheet
financing entities, or other off-balance sheet arrangements.

CONTRACTUAL OBLIGATIONS

In conducting business, we enter into various contractual  obligations.  Details
of these obligations,  including expected settlement periods as of September 30,
2007, are contained below.
<TABLE>
<CAPTION>
                                                                         Payments Due by Period
                                              -----------------------------------------------------------------------------
                                                               Less than                                        More than
(IN THOUSANDS)                                    Total          1 Year        1 - 3 Years     3 - 5 Years       5 Years
                                              -------------   -------------   -------------   -------------   -------------
<S>                                           <C>             <C>             <C>             <C>             <C>
Debt:
  CDO notes payable (1)(2)                    $     362,000   $          --   $          --   $          --   $     362,000
  Repurchase facilities (1)(2)(3)                   399,780         399,780              --              --              --
  Line of credit - related party (1)(2)              39,300          39,300              --              --              --
  Preferred shares of subsidiary
    (subject to mandatory repurchase)(1)(2)          25,000              --              --              --          25,000

Funding Commitments:
  Future funding loan commitments                     6,644           6,644              --              --              --
                                              -------------   -------------   -------------   -------------   -------------

Total                                         $     832,724   $     445,724   $          --   $          --   $     387,000
                                              =============   =============   =============   =============   =============
</TABLE>


(1) The amounts included in each category reflect the current expiration,  reset
    or  renewal  date of  each  facility  or  security  certificate.  Management
    believes we have the ability  and it has the intent to renew,  refinance  or
    remarket the borrowings beyond their current due dates.
(2) Includes principal amounts only. At September 30, 2007, the weighted average
    interest rate on our debt was 5.54%.
(3) $290.4 million of this debt is related to a repurchase facility that will be
    terminated in the fourth quarter of 2007. See discussion in SOURCES OF FUNDS
    - REPURCHASE FACILITIES above.

                                       28
<PAGE>

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                                   (CONTINUED)

Forward-Looking Statements
--------------------------

Certain   statements  made  in  this  report  may  constitute   "forward-looking
statements"  within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities and Exchange Act of 1934, as amended.
Such forward-looking  statements include statements regarding the intent, belief
or current  expectations  of us and our management  (which includes our Advisor)
and involve known and unknown risks,  uncertainties  and other factors which may
cause the actual results, performance or achievements to be materially different
from any future  results,  performance or  achievements  expressed or implied by
such  forward-looking  statements.  These factors,  which are outlined in detail
under the heading  "Item 1A. Risk Factors" in our Annual Report on Form 10-K for
the  year  ended  December  31,  2006,  include,  but are not  limited  to,  the
following:

     o    Risks of  investing in  non-investment  grade  commercial  real estate
          investments;

     o    Competition in acquiring desirable investments;

     o    Interest rate fluctuations;

     o    Risks  associated  with  investments in real estate  generally and the
          properties which secure many of our investments;

     o    General economic conditions and economic conditions in the real estate
          markets  specifically,  particularly  as they  affect the value of our
          assets and the credit status of our borrowers;

     o    Dependence  on  our  Advisor  for  all  services   necessary  for  our
          operations;

     o    Conflicts which may arise among us and other entities  affiliated with
          our Advisor that have similar investment policies to ours;

     o    Risks associated with the repurchase  agreements we utilize to finance
          our investments and our ability to raise capital;

     o    Risks associated with the failure to qualify as a REIT; and

     o    Risks associated with CDO securitization transactions,  which include,
          but are not limited to:

          o    The inability to acquire eligible investments for a CDO issuance;

          o    Interest rate fluctuations on variable-rate swaps entered into to
               hedge fixed-rate loans;

          o    The inability to find  suitable  replacement  investments  within
               reinvestment periods; and

          o    The negative impact on our cash flow that may result from the use
               of  CDO  financings  with   over-collateralization  and  interest
               coverage requirements.

Readers  are  cautioned  not to place undue  reliance  on these  forward-looking
statements,  which  speak  only  as of the  date of this  quarterly  report.  We
expressly  disclaim  any  obligations  or  undertaking  to release  publicly any
updates or  revisions  to any  forward-looking  statements  contained  herein to
reflect any change in our expectations  with regard thereto or change in events,
conditions, or circumstances on which such statement is based.

                                       29
<PAGE>

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Market risk is the exposure to loss resulting from changes in interest rates and
equity prices.  The primary market risk to which we are exposed is interest rate
risk, which 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.

INTEREST RATE RISK

Interest  rate  fluctuations  can  adversely  affect our income in many ways and
present a variety of risks,  including the risk of mismatch between asset yields
and borrowing rates.

Our operating  results  depend in large part on  differences  between the income
from our assets (net of credit losses) and our borrowing costs. Although we have
originated  variable-rate  loans,  most of our assets generate fixed returns and
have terms in excess of five years. We fund the origination and acquisition of a
significant  portion of our assets with borrowings  that have variable  interest
rates that reset relatively rapidly,  such as weekly,  monthly or quarterly.  In
most cases,  the income from assets will  respond  more slowly to interest  rate
fluctuations  than the cost of  borrowings,  creating a mismatch  between  asset
yields  and  borrowing   rates.   Consequently,   changes  in  interest   rates,
particularly  short-term  interest  rates,  may  influence  our net income.  Our
borrowings under our related party line of credit, repurchase facilities and our
subsidiary's  preferred securities subject to mandatory redemption bear interest
at rates that fluctuate with LIBOR.

Various  financial  vehicles  exist which would allow our management to mitigate
the impact of interest  rate  fluctuations  on our cash flows and  earnings.  We
enter into certain  hedging  transactions to protect our positions from interest
rate  fluctuations and other changes in market  conditions.  These  transactions
include  interest  rate swaps and fair  value  hedges.  Interest  rate swaps are
entered  into in order to  hedge  against  increases  in  floating  rates on our
repurchase  facilities.  Fair  value  hedges  are  entered  into for some of our
investments  to hedge our risk that interest  rates may affect the fair value of
these investments, prior to securitization.

Based on the $826.1 million of borrowings  outstanding at September 30, 2007, of
which $122.5  million  remains  unhedged,  a 1% change in LIBOR would impact our
annual  net  income  and cash  flows by $0.1  million,  including  the impact on
variable  rate  assets.  In  addition,  a change in LIBOR  could also impede the
collections  of  interest  on our  variable-rate  loans,  as there  might not be
sufficient cash flow at the properties  securing such loans to pay the increased
debt service.  Because the value of our debt securities  fluctuates with changes
in interest rates,  rate  fluctuations  will also affect the market value of our
net assets.

ITEM 4.  CONTROLS AND PROCEDURES.

(a)      EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

         Our Chief Executive  Officer and Chief Financial Officer have evaluated
         the effectiveness of our disclosure controls and procedures (as defined
         in Rule 13a-15(e) or Rule  15a-15(e) of the Securities  Exchange Act of
         1934,  as  amended  (the  "Exchange  Act")) as of the end of the period
         covered  by this  quarterly  report.  Based  on such  evaluation,  such
         officers have concluded that our disclosure  controls and procedures as
         of the  end  of the  period  covered  by  this  quarterly  report  were
         effective to ensure that information  required to be disclosed by us in
         the reports  that we file or submit under the Exchange Act is recorded,
         processed, summarized and reported within the time periods specified in
         the SEC  rules  and  forms,  and to ensure  that  such  information  is
         accumulated and  communicated  to our  management,  including the Chief
         Executive Officer and Chief Financial Officer, as appropriate, to allow
         timely decisions regarding required disclosure.

(b)      INTERNAL CONTROL OVER FINANCIAL REPORTING

         There were no changes in our internal control over financial  reporting
         (as defined in Rules  13a-15(f) and  15d-15(f)  under the Exchange Act)
         that occurred  during the quarter ended  September 30, 2007,  that have
         materially affected, or are reasonably likely to materially affect, our
         internal control over financial reporting.

                                       30
<PAGE>

                           PART II. OTHER INFORMATION


ITEM 1.    LEGAL PROCEEDINGS.

           We are not party to any pending material legal proceedings.

ITEM 1A.   RISK FACTORS.

           In addition  to those risk  factors  disclosed  in our filing on Form
           10-K for the year ended December 31, 2006,  the following  additional
           risk  factors were  included in the  registration  statement  for our
           preferred share offering:

                    OUR  INVESTMENT  PORTFOLIO  INCLUDES   UNDER-PERFORMING  AND
                    IMPAIRED  LOANS,  WHICH MAY BE IN  DEFAULT  OR SUBJECT TO AN
                    INCREASED  RISK OF  DELINQUENCY,  FORECLOSURE  OR LOSS.  THE
                    OCCURRENCE  OF SUCH EVENTS  COULD  REDUCE OUR  EARNINGS  AND
                    NEGATIVELY AFFECT THE CASH AVAILABLE FOR DISTRIBUTION TO OUR
                    SHAREHOLDERS.

                    We have  under-performing and impaired mortgage loans in our
                    investment  portfolio  and we  could  experience  additional
                    under-performing  and impaired mortgage loans in the future.
                    We classify  mortgage loans as being impaired when we do not
                    expect full  repayment  of all  principal  and  interest and
                    classify  mortgage  loans  as  under-performing   when  debt
                    service  payments on such loans are not  current.  We accrue
                    interest  on  under-performing  mortgage  loans only when we
                    expect to receive all principal and accrued interest.

                    We held  under-performing and impaired mortgage loans in our
                    investment  portfolio  in  the  carrying  amount  (including
                    principal  and all accrued and unpaid  interest and fees) of
                    $18.4  million  respectively,   as  of  September  30,  2007
                    representing  1.3% of our total assets as of that date.  The
                    aggregate carrying amount of our  under-performing  mortgage
                    loans  represented  2.0% of our total assets as of September
                    30, 2007.  We  recognized  no interest  income or impairment
                    losses  from  impaired  loans  for  the  nine  months  ended
                    September  30,  2007.  We  accrued   interest   income  from
                    under-performing  loans in the amount of $2.9 million during
                    the nine months ended September 30, 2007, which  represented
                    4.6% of our interest  income (net of amounts  written off as
                    unrecoverable).  During  October 2007, one asset included in
                    the under-performing asset portfolio repaid. We received our
                    full  principal  amount as well as all  unpaid  and  accrued
                    interest.  Also in October  2007,  we recorded an impairment
                    charge of $1.3  million  relating to an asset class that was
                    reclassified  as held for sale and  carried  at the lower of
                    cost or market.

                    In the event of a default  under a mortgage loan we hold, we
                    bear a risk of loss to the extent of any deficiency  between
                    the value of the collateral  (net of our  collection  costs)
                    and the principal and accrued interest of the mortgage loan,
                    which could have a material  adverse effect on our cash flow
                    from operations. In cases where we have mortgage loans where
                    we do have  recourse  to the  borrower,  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,  which could have a negative  effect on our
                    anticipated   return  on  the  foreclosed   loan.   Further,
                    foreclosing upon a loan can be very expensive, could subject
                    us  to  environmental   liabilities  and  may  distract  our
                    management from our other operations.

                    Management makes various assumptions and judgments about the
                    collectibility of our investment  portfolio loans, which may
                    prove to be inaccurate. With respect to individual loans, we
                    write  down the  value of  impaired  loans in our  financial
                    statements based upon our assessment of the probability that
                    we will recover our principal and interest.  Our  assessment
                    is based upon our  evaluation of the nature of the borrower,
                    the value of the  underlying  collateral,  whether we have a
                    senior or subordinated position and many other objective and
                    subjective  factors.  As a  result,  our  assessment  of the
                    carrying  value  of  an  impaired  loan  could  prove  to be
                    inaccurate.

                    DIVIDENDS  PAYABLE BY REITS DO NOT  QUALIFY  FOR THE REDUCED
                    TAX RATES.

                    Tax  legislation  enacted in 2004  reduced the maximum  U.S.
                    federal  tax rate on  certain  corporate  dividends  paid to
                    individuals  and  other   non-corporate   taxpayers  to  15%
                    (through   2010).   Dividends   paid  by   REITs   to  these
                    shareholders  are  generally  not eligible for these reduced
                    rates.  Although this  legislation does not adversely affect
                    the taxation of REITs or dividends  paid by REITs , the more
                    favorable rates applicable to non-REIT  corporate  dividends
                    could  cause  investors  who  are  individuals,  trusts  and

                                       31
<PAGE>

                    estates to perceive  investments  in REITs to be  relatively
                    less attractive  than  investments in the shares of non-REIT
                    corporations  that  pay  dividends,  which  could  adversely
                    affect  the  value of the  shares of  REITs,  including  our
                    preferred and common shares.


ITEM 2.    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.  None

ITEM 3.    DEFAULTS UPON SENIOR SECURITIES.  None

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.  None

ITEM 5.    OTHER INFORMATION.  None

ITEM 6.    EXHIBITS.

           31.1     Certification  of  the  Chief Executive Officer  pursuant to
                    Section 302 of the Sarbanes-Oxley Act of 2002.*

           31.2     Certification  of  the  Chief Financial Officer  pursuant to
                    Section 302 of the Sarbanes-Oxley Act of 2002.*

           32.1     Certification  of the Chief Executive Officer  and the Chief
                    Financial Officer pursuant  to  Section 906 of the Sarbanes-
                    Oxley Act of 2002.*

           *        Filed herewith.

                                       32
<PAGE>

                                   SIGNATURES



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



                      AMERICAN MORTGAGE ACCEPTANCE COMPANY
                                  (Registrant)



Date:  November 9, 2007                    By:  /s/ James L. Duggins
                                                --------------------
                                                James L. Duggins
                                                Chief Executive Officer
                                                (Principal Executive Officer)



Date:  November 9, 2007                    By:  /s/ Robert L. Levy
                                                ------------------
                                                Robert L. Levy
                                                Chief Financial Officer
                                                (Principal Financial Officer and
                                                 Principal Accounting Officer)

                                       33
<PAGE>

                                                                    Exhibit 31.1


      CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302
                       OF THE SARBANES-OXLEY ACT OF 2002.


I, James L. Duggins, hereby certify that:

     1.  I have reviewed this quarterly report on Form 10-Q for the period ended
         September 30, 2007, of American Mortgage Acceptance Company;

     2.  Based  on my  knowledge,  this  report  does  not  contain  any  untrue
         statement of a material fact or omit to state a material fact necessary
         to make the statements made, in light of the circumstances  under which
         such  statements  were made, not misleading  with respect to the period
         covered by this report;

     3.  Based on my knowledge,  the financial  statements,  and other financial
         information  included in this  report,  fairly  present in all material
         respects the financial condition,  results of operations and cash flows
         of the registrant as of, and for, the periods presented in this report;

     4.  The  registrant's  other  certifying  officer and I are responsible for
         establishing  and  maintaining  disclosure  controls and procedures (as
         defined in Exchange Act Rules  13a-15(e)  and  15d-15(e))  and internal
         control  over  financial  reporting  (as defined in Exchange  Act Rules
         13a-15(f) and 15d-15(f)) for the registrant and have:

         a) Designed such  disclosure  controls and  procedures,  or caused such
         disclosure   controls  and   procedures   to  be  designed   under  our
         supervision,  to  ensure  that  material  information  relating  to the
         registrant,  including its consolidated subsidiaries,  is made known to
         us by others within those entities,  particularly  during the period in
         which this report is being prepared;

         b) Designed such internal control over financial  reporting,  or caused
         such internal control over financial reporting to be designed under our
         supervision,  to provide reasonable assurance regarding the reliability
         of financial reporting and the preparation of financial  statements for
         external  purposes in accordance  with  generally  accepted  accounting
         principles;

         c) Evaluated the effectiveness of the registrant's  disclosure controls
         and procedures and presented in this quarterly  report our  conclusions
         about the effectiveness of the disclosure  controls and procedures,  as
         of the  end of  the  period  covered  by  this  report  based  on  such
         evaluation; and

         d)  Disclosed  in this report any change in the  registrant's  internal
         control over financial  reporting that occurred during the registrant's
         most  recent  fiscal  quarter  that  has  materially  affected,  or  is
         reasonably  likely to  materially  affect,  the  registrant's  internal
         control over financial reporting; and

     5.  The registrant's other certifying  officer and I have disclosed,  based
         on our most  recent  evaluation  of  internal  control  over  financial
         reporting,  to the registrant's auditors and the audit committee of the
         registrant's  board of trustees (or persons  performing  the equivalent
         functions):

         a) All significant  deficiencies and material  weaknesses in the design
         or operation of internal  control over  financial  reporting  which are
         reasonably  likely to  adversely  affect  the  registrant's  ability to
         record, process, summarize and report financial information; and

         b) Any fraud,  whether or not  material,  that  involves  management or
         other  employees  who  have a  significant  role  in  the  registrant's
         internal control over financial reporting.


         Date: November 9, 2007               By:  /s/ James L. Duggins
                                                   --------------------
                                                   James L. Duggins
                                                   Chief Executive Officer
                                                   (Principal Executive Officer)

                                       34
<PAGE>

                                                                    Exhibit 31.2


      CERTIFICATION OF THE CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302
                       OF THE SARBANES-OXLEY ACT OF 2002.


I, Robert L. Levy, hereby certify that:

     1.  I have reviewed this quarterly report on Form 10-Q for the period ended
         September 30, 2007, of American Mortgage Acceptance Company;

     2.  Based  on my  knowledge,  this  report  does  not  contain  any  untrue
         statement of a material fact or omit to state a material fact necessary
         to make the statements made, in light of the circumstances  under which
         such  statements  were made, not misleading  with respect to the period
         covered by this report;

     3.  Based on my knowledge,  the financial  statements,  and other financial
         information  included in this  report,  fairly  present in all material
         respects the financial condition,  results of operations and cash flows
         of the registrant as of, and for, the periods presented in this report;

     4.  The  registrant's  other  certifying  officer and I are responsible for
         establishing  and  maintaining  disclosure  controls and procedures (as
         defined in Exchange Act Rules  13a-15(e)  and  15d-15(e))  and internal
         control  over  financial  reporting  (as defined in Exchange  Act Rules
         13a-15(f) and 15d-15(f)) for the registrant and have:

         a) Designed such  disclosure  controls and  procedures,  or caused such
         disclosure   controls  and   procedures   to  be  designed   under  our
         supervision,  to  ensure  that  material  information  relating  to the
         registrant,  including its consolidated subsidiaries,  is made known to
         us by others within those entities,  particularly  during the period in
         which this report is being prepared;

         b) Designed such internal control over financial  reporting,  or caused
         such internal control over financial reporting to be designed under our
         supervision,  to provide reasonable assurance regarding the reliability
         of financial reporting and the preparation of financial  statements for
         external  purposes in accordance  with  generally  accepted  accounting
         principles;

         c) Evaluated the effectiveness of the registrant's  disclosure controls
         and procedures and presented in this quarterly  report our  conclusions
         about the effectiveness of the disclosure  controls and procedures,  as
         of the  end of  the  period  covered  by  this  report  based  on  such
         evaluation; and

         d)  Disclosed  in this report any change in the  registrant's  internal
         control over financial  reporting that occurred during the registrant's
         most  recent  fiscal  quarter  that  has  materially  affected,  or  is
         reasonably  likely to  materially  affect,  the  registrant's  internal
         control over financial reporting; and

     5.  The registrant's other certifying  officer and I have disclosed,  based
         on our most  recent  evaluation  of  internal  control  over  financial
         reporting,  to the registrant's auditors and the audit committee of the
         registrant's  board of trustees (or persons  performing  the equivalent
         functions):

         a) All significant  deficiencies and material  weaknesses in the design
         or operation of internal  control over  financial  reporting  which are
         reasonably  likely to  adversely  affect  the  registrant's  ability to
         record, process, summarize and report financial information; and

         b) Any fraud,  whether or not  material,  that  involves  management or
         other  employees  who  have a  significant  role  in  the  registrant's
         internal control over financial reporting.


         Date:  November 9, 2007           By:  /s/ Robert L. Levy
                                                ------------------
                                                Robert L. Levy
                                                Chief Financial Officer
                                                (Principal Financial Officer and
                                                 Principal Accounting Officer)

                                       35
<PAGE>

                                                                    Exhibit 32.1


                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


In connection with the Quarterly Report of American Mortgage  Acceptance Company
(the  "Company") on Form 10-Q for the period ending  September 30, 2007 as filed
with the Securities and Exchange  Commission on the date hereof (the  "Report"),
James L. Duggins, as Chief Executive Officer of the Company, and Robert L. Levy,
as Chief Financial Officer of the Company each hereby certifies,  pursuant to 18
U.S.C.  Section 1350, as adopted  pursuant to Section 906 of the  Sarbanes-Oxley
Act of 2002, that:


       (1) The Report fully complies with the  requirements  of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and


       (2) The  information  contained  in the Report  fairly  presents,  in all
material  respects,  the  financial  condition  and results of operations of the
Company.



 By:  /s/ James L. Duggins                          By:  /s/ Robert L. Levy
      --------------------                               ------------------
      James L. Duggins                                   Robert L. Levy
      Chief Executive Officer                            Chief Financial Officer
      November 9, 2007                                   November 9, 2007


A signed  original of this  written  statement  required by Section 906 has been
provided to the Company and will be retained by the Company and furnished to the
Securities and Exchange Commission or its staff upon request.


                                       36