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, 2006


                                       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
  incorporation or organization)                             Identification No.)

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


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


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, 2006,  there were 8,361,879  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

<TABLE>
<CAPTION>

                                                                                             PAGE
<S>           <C>         <C>                                                                 <C>
PART I
              Item 1.     Condensed Consolidated 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          27
              Item 4.     Controls and Procedures                                             27

PART II
              Item 1.     Legal Proceedings                                                   29
              Item 1A.    Risk Factors                                                        29
              Item 2.     Unregistered Sales of Equity Securities and Use of Proceeds         29
              Item 3.     Defaults Upon Senior Securities                                     29
              Item 4.     Submission of Matters to a Vote of Security Holders                 29
              Item 5.     Other Information                                                   29
              Item 6.     Exhibits                                                            29

SIGNATURES                                                                                    30

</TABLE>


                                       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)


                                     ASSETS

<TABLE>
<CAPTION>
                                                                              September 30,  December 31,
                                                                                  2006           2005
                                                                              ------------   -----------
                                                                               (Unaudited)
<S>                                                                             <C>           <C>
Cash and cash equivalents                                                       $  12,243     $  11,214
 Restricted cash                                                                    5,580            --
 Investments
   Debt securities at fair value                                                  157,982       222,723
   Mortgage loans receivable, net                                                 335,820        51,981
   Notes receivable, net                                                            9,213        13,725
   Revenue bonds                                                                    4,972         6,626
   ARCap                                                                               --        20,678
   Real estate owned - held and used, net                                          48,988        50,345
   Real estate owned - held for sale, net                                          18,004        18,448
Accounts receivable                                                                 5,228         3,079
Other assets                                                                        3,716         1,904
                                                                                ---------     ---------

Total assets                                                                    $ 601,746     $ 400,723
                                                                                =========     =========

                      LIABILITIES AND SHAREHOLDERS' EQUITY

Liabilities:
  Debt securities repurchase facilities                                         $ 150,150     $ 209,101
  Mortgage loan repurchase facility                                               258,492            --
  Warehouse facility                                                                   --         4,070
  Mortgages payable on real estate owned                                           40,083        40,487
  Preferred shares of subsidiary (subject to mandatory repurchase)                 25,000        25,000
  Accounts payable and accrued expenses                                            12,575         1,599
  Due to Advisor and affiliates                                                     3,797         2,961
  Distributions payable                                                             3,322         3,322
                                                                                ---------     ---------

Total liabilities                                                                 493,419       286,540
                                                                                ---------     ---------

Commitments and contingencies

Shareholders' equity:
  Shares of beneficial interest; $.10 par value; 25,000 shares authorized;
   8,742 and 8,719 issued and 8,327 and 8,304 outstanding in 2006 and 2005,
   respectively                                                                       874           871
  Treasury shares of beneficial interest at par; 415 shares in 2006 and 2005          (42)          (42)
  Additional paid-in capital                                                      126,738       126,357
  Share-based compensation                                                             --           (20)
  Accumulated deficit                                                             (19,115)      (17,766)
  Accumulated other comprehensive (loss) income                                      (128)        4,783
                                                                                ---------     ---------

Total shareholders' equity                                                        108,327       114,183
                                                                                ---------     ---------

Total liabilities and shareholders' equity                                      $ 601,746     $ 400,723
                                                                                =========     =========

</TABLE>


     See accompanying notes to condensed condolidated 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,
                                                      ---------------------    ---------------------

                                                        2006         2005        2006         2005
                                                      --------     --------    --------     --------
<S>                                                   <C>          <C>         <C>          <C>
Revenues:
   Interest income:
     Debt securities                                  $  2,718     $  3,351    $  8,932     $  9,722
     Mortgage loans                                      5,522        1,734      11,197        3,497
     Notes receivable                                       41          365         490        1,222
     Revenue bonds                                         112          145         396          438
     Temporary investments                                  94           48         229          132
   Rental income of real estate owned -
    held and used                                        1,702        1,654       5,194        5,017
   Fees related to prepayment of investments                --        5,314          --        5,314
   Other revenues                                           24          155         185          883
                                                      --------     --------    --------     --------
     Total revenues                                     10,213       12,766      26,623       26,225
                                                      --------     --------    --------     --------

Expenses:
   Interest                                              5,669        1,937      12,255        4,854
   Interest - distributions to preferred
    shareholders of subsidiary (subject to
    mandatory repurchase)                                  591          461       1,665          961
  Mortgage interest for real estate owned
    - held and used                                        593          601       1,785        1,808
   Property operations of real estate owned
    - held and used                                        852          794       2,636        2,357
   General and administrative                            1,272          608       2,245        1,513
   Impairment loss on investments                        4,632           --       4,632           --
   Fees to Advisor                                       3,092        1,906       4,895        3,280
   Depreciation                                            336          336       1,008        1,009
   Amortization and other                                    9           68          43          292
                                                      --------     --------    --------     --------
     Total expenses                                     17,046        6,711      31,164       16,074
                                                      --------     --------    --------     --------

Other income:
   Gain on sale of ARCap                                19,223           --      19,223           --
   Change in fair value of derivative instruments      (10,439)          --      (8,416)          --
   Equity in earnings of ARCap                             (76)         600       3,000        1,800
   Gain (loss) on repayment or sale of investments        (755)         254        (908)         183
   Income from discontinued operations                     114          403         260        1,074
                                                      --------     --------    --------     --------
     Total other income                                  8,067        1,257      13,159        3,057
                                                      --------     --------    --------     --------

   Net income                                         $  1,234     $  7,312    $  8,618     $ 13,208
                                                      ========     ========    ========     ========

   Net income from continuing operations
     per share (basic and diluted)                    $   0.14     $   0.83    $   1.01     $   1.46
                                                      ========     ========    ========     ========

   Net income from discontinued operations
     per share (basic and diluted)                    $   0.01     $   0.05    $   0.03     $   0.13
                                                      ========     ========    ========     ========

   Net income per share (basic and diluted) $             0.15     $   0.88    $   1.04     $   1.59
                                                      ========     ========    ========     ========

   Dividends per share                                $   0.40     $   0.40    $   1.20     $   1.20
                                                      ========     ========    ========     ========

   Weighted average shares outstanding:
     Basic                                               8,307        8,311       8,305        8,320
                                                      ========     ========    ========     ========
     Diluted                                             8,315        8,314       8,308        8,323
                                                      ========     ========    ========     ========

</TABLE>


     See accompanying notes to condensed condolidated 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,
                                                                         -----------------------

                                                                            2006          2005
                                                                         ----------    ---------
<S>                                                                      <C>           <C>
Cash flows from operating activities:
   Net income                                                            $   8,618     $  13,208

   Adjustments  to  reconcile  net  income  to net cash  provided  by
     operating activities:
     Depreciation expense                                                    1,334         1,038
     Gain on sale of ARCap                                                 (19,223)           --
     Loss (gain) on impairment or disposal of assets                         5,608          (183)
     Change in fair value of derivative instruments                          8,416            --
     Equity in earnings of ARCap                                            (3,000)       (1,800)
     Amortization and accretion                                               (212)          121
     Other non-cash expense                                                     89            20
     Distributions received from ARCap                                       4,037         1,800
     Changes in operating assets and liabilities:
       Accounts receivable                                                    (611)         (923)
       Other assets                                                            126          (445)
       Due to Advisor and affiliates                                           836         1,659
       Accounts payable and accrued expenses                                 2,916           556
                                                                         ---------     ---------
Net cash provided by operating activities                                    8,934        15,051
                                                                         ---------     ---------

Cash flows from investing activities:
   Funding and purchase of mortgage loans                                 (294,902)      (36,872)
   Principal repayments of mortgage loans                                    6,871         2,874
   Investment in debt securities                                                --       (40,503)
   Principal repayments of debt securities                                  56,785         6,872
   Prepayment penalty from debt security refinancing                         3,200            --
   Purchase of mortgage loans on real estate owned                              --       (17,150)
   Return of capital and proceeds from the sale of ARCap                    37,181            --
   Increase in restricted cash                                              (5,580)           --
   Proceeds from sale of real estate owned                                      --         7,474
   Principal repayment on real estate owned                                     --           480
   Funding of notes receivable                                                 (74)         (472)
   Repayment of notes receivable                                             3,122         9,883
   Principal repayment of revenue bonds                                      1,622           157
                                                                         ---------     ---------
Net cash used in investing activities                                     (191,775)      (67,257)
                                                                         ---------     ---------

</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,
                                                                 -----------------------

                                                                   2006          2005
                                                                 ---------     ---------
<S>                                                              <C>           <C>
Cash flows from financing activities:
   Proceeds from mortgage loan repurchase facility                 258,492            --
   Proceeds from debt securities repurchase facilities              11,926        80,659
   Repayments of debt securities repurchase facilities             (70,875)      (23,647)
   Proceeds from line of credit - related party                    123,442        14,761
   Repayments of line of credit - related party                   (123,442)      (19,361)
   Proceeds from warehouse facility                                     --           243
   Repayments of warehouse facility                                 (4,070)           --
   Deferred financing costs                                         (1,953)         (802)
   Distributions paid to shareholders                               (9,966)       (9,994)
   Treasury stock purchases                                             --          (368)
   Stock options exercised                                             316            --
   Issuance of preferred shares of subsidiary                           --        25,000
                                                                 ---------     ---------

Net cash provided by financing activities                          183,870        66,491
                                                                 ---------     ---------

Net increase in cash and cash equivalents                            1,029        14,285

Cash and cash equivalents at the beginning of the year              11,214         2,674
                                                                 ---------     ---------

Cash and cash equivalents at the end of the period               $  12,243     $  16,959
                                                                 =========     =========

Non-cash investing activities:
   Accounts receivable from repayment and sale of investments    $   1,683     $  22,910
                                                                 =========     =========

</TABLE>


     See accompanying notes to condensed condolidated financial statements.

                                       6
<PAGE>



              AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
              Notes to Condensed Consolidated Financial Statements
                               September 30, 2006
                                   (Unaudited)



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 CharterMac  AMI  Associates,  Inc.,  (the  "Advisor"),  a
subsidiary of CharterMac,  a publicly traded company. We operate in one business
segment, which focuses on investing in mortgage loans secured by multifamily and
commercial property throughout the United States.

In March  2006,  we formed our AMAC CDO  Funding I ("AMAC  CDO")  subsidiary  to
accumulate  assets for the purposes of executing our first  collateralized  debt
obligation  ("CDO")  securitization  (see Note 6). In April 2006, we dissolved a
subsidiary  that we had  formed  for  the  purposes  of  managing  a  repurchase
facility, which expired in March 2004.

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, 2006, 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. It is suggested that 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, 2005.

Our annual report on Form 10-K for the year ended December 31, 2005,  contains a
summary of our  significant  accounting  policies.  There have been no  material
changes to these items since December 31, 2005, except as noted below.

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  period.  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 results of operations of our
real estate owned - held for sale portfolio to discontinued operations (see Note
12).

UPDATE TO SIGNIFICANT ACCOUNTING POLICIES

As  previously  disclosed,  prior to  December  2005,  our  investment  in ARCap
Investors,  L.L.C.  ("ARCap") consisted of preferred  membership  interests.  In
December  2005,  we  converted a portion of our  preferred  interests  to common
interests.  While we continued to account for this  investment  under the equity
method until we sold it in August 2006, a portion of the equity income  recorded
was  based  on the  preferred  dividend,  while  the  balance  was  based on our
proportionate share of common interests outstanding.

NEW ACCOUNTING PRONOUNCEMENTS

In September 2006, the FASB issued  Statement No. 157, FAIR VALUE  MEASUREMENTS,
which  established  a  framework  for  calculating  the fair value of assets and
liabilities as required by numerous other accounting pronouncements, and expands


                                       7
<PAGE>



              AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
              Notes to Condensed Consolidated Financial Statements
                               September 30, 2006
                                   (Unaudited)



disclosure  requirements  of the fair values of certain assets and  liabilities.
The  statement  is  effective  as of our  2008  fiscal  year.  We are  currently
evaluating the impact,  if any, that the adoption of this statement will have on
our financial statements.

During the first quarter of 2006, we adopted  Statement of Financial  Accounting
Standards No. 123(R),  SHARE-BASED  PAYMENT  ("SFAS No.  123(R)") which replaces
Statement of Financial Accounting Statements No. 123, ACCOUNTING FOR STOCK-BASED
COMPENSATION ("SFAS No. 123"). Among other things, SFAS No. 123(R) requires that
companies record the value of stock option grants as compensation expense, while
SFAS No. 123 allowed  disclosure of the impact instead of recording the expense.
As we had been accounting for share-based  payments as an expense  following the
fair value  provisions  of SFAS No. 123, the impact of adopting  SFAS No. 123(R)
was not material to us. See also Note 10.

In June 2006, the FASB issued  Interpretation  48, ACCOUNTING FOR UNCERTAINTY IN
INCOME TAXES. The Interpretation sets a standard for recognizing tax benefits in
a company's  income  statement based on a determination  whether it is likely or
not that the position would withstand  audit,  without regard for the likelihood
of an audit taking place.  Assuming a position meets the  "more-likely-than-not"
threshold,  the Interpretation also prescribes  measurement  standards requiring
determination  of how much of the tax position  would  ultimately  be allowed if
challenged.  The Interpretation  will be effective in the first quarter of 2007.
We are currently  determining the impact of the  Interpretation on our financial
statements.

In November  2005,  the FASB issued Staff Position 115 / 124 - 1, THE MEANING OF
OTHER-THAN-TEMPORARY  IMPAIRMENT AND ITS APPLICATION TO CERTAIN INVESTMENTS. The
Staff Position clarified,  among other matters,  the determination as to when an
unrealized loss on debt securities  should be reflected in the income  statement
as opposed to accumulated other comprehensive income and was effective as of the
first quarter of 2006. Initial application of the Staff Position had no material
impact on our results of operations.

NOTE 2 - INVESTMENTS IN DEBT SECURITIES - AVAILABLE FOR PLACECITYSALE

Information regarding our investments in debt securities is as follows:

<TABLE>
<CAPTION>

(In thousands)
                                         September 30,      December 31,
                                             2006               2005
                                         ------------       ------------
<S>                                        <C>                <C>
Amortized cost                             $ 161,616          $ 218,891
                                           ---------          ---------
Unrealized gains                                 483              5,707
Unrealized losses                             (1,134)            (1,875)
                                           ---------          ---------
Net unrealized (loss) gain                      (651)             3,832
                                           ---------          ---------
Impairment losses                             (2,224)              --
Net realized losses                             (759)              --
                                           ---------          ---------
Fair value                                 $ 157,982          $ 222,723
                                           =========          =========

</TABLE>


                                       8
<PAGE>



              AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
              Notes to Condensed Consolidated Financial Statements
                               September 30, 2006
                                   (Unaudited)



The fair value and gross unrealized losses of our investments in debt securities
aggregated by length of time that these  individual debt securities have been in
a continuous  unrealized  loss position at September 30, 2006,  and December 31,
2005, is summarized in the table below:

<TABLE>
<CAPTION>

(Dollars in thousands)
                              September 30, 2006               December 31, 2005
                       ------------------------------   -------------------------------
                       Less than  12 Months             Less than  12 Months
                       12 Months   or More     Total    12 Months   or More     Total
                       ---------  ---------  ---------  ---------  ---------  ---------
<S>                     <C>        <C>        <C>        <C>        <C>        <C>
Number of securities          6          3          9          8         16         24
Fair value              $29,456    $17,951    $47,407    $25,905    $56,281    $82,186
Gross unrealized
loss                    $   414    $   720    $ 1,134    $   197    $ 1,678    $ 1,875

</TABLE>

Subsequent to September 30, 2006, our board of trustees  approved a plan to sell
22 securities  with a total  carrying  amount of  approximately  $82.1  million.
Twenty of these  securities  were  sold in  November  2006 and we are  currently
pursuing the sale of the two remaining debt  securities.  As we no longer intend
to hold these  securities,  we have concluded that unrealized  losses associated
with these assets were other-than  temporary and we have  recognized  impairment
losses of  approximately  $2.2 million in the third  quarter of 2006 and accrued
the loss on sale associated with the write off of unamortized  premiums  related
to the  securities,  which  was  approximately  $759,000.  The data in the table
immediately  above as of September 30, 2006, does not include the securities for
which we recognized a charge for  other-than-temporary  impairment as there were
no longer  unrealized  losses  associated with them. The unrealized losses shown
above  are  as a  result  of  increases  in  interest  rates  subsequent  to the
acquisition  of the  securities.  All  of the  debt  securities  are  performing
according  to their terms.  Furthermore,  we have the intent and ability to hold
these securities to maturity,  or at least until interest rates change such that
the fair value is no longer less than book value. Accordingly, we have concluded
that these declines in value are temporary.

During April 2006, we sold a debt security and a related mortgage loan (see Note
3).

During  September  2006,  we  refinanced a loan with an existing  borrower.  The
refinancing  resulted in the payoff of an existing debt security and the funding
of a first mortgage and subordinated note (see Note 3).

At September  30, 2006,  all of our debt  securities  were pledged as collateral
under our repurchase facilities.

NOTE 3 - MORTGAGE LOANS AND NOTES RECEIVABLE

During  April 2006,  we purchased a first  mortgage  loan from  CharterMac,  the
parent of our Advisor,  at approximately  its $26.0 million face value (see Note
13). This note, along with an existing $5.0 million  subordinated  participation
we already owned,  were assigned to AMAC CDO and pledged as collateral under the
mortgage loan repurchase facility.

Including the first  mortgage loan purchased  from  CharterMac,  we partially or
fully  funded  26  first  mortgage  loans  and  subordinated   notes,   totaling
approximately  $292.3  million in 2006.  The loans bear  interest  at a weighted
average fixed interest rate of 6.43%.

During April 2006, we sold a debt security and a mortgage loan,  both pertaining
to one property,  for approximately  $15.5 million.  As a result of the sale, we
recognized  a  loss  of  approximately  $138,000  due  to  the  write-off  of an
unamortized  premium  on  the  debt  security.  We  also  recognized  income  of
approximately $131,000 due to the accelerated amortization of a loan origination
fee on the mortgage  loan,  which is included in other revenues on our condensed
consolidated  statements  of income for the three-and  nine-month  periods ended
September 30, 2006.


                                       9
<PAGE>



              AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
              Notes to Condensed Consolidated Financial Statements
                               September 30, 2006
                                   (Unaudited)



During September 2006, we refinanced a loan with an existing borrower, resulting
in  the  early  payoff  of one  debt  security  certificate  in  the  amount  of
approximately  $37.2  million,  and the funding of a first  mortgage loan in the
amount of approximately $13.5 million,  and a subordinated loan in the amount of
approximately  $16.5  million.  A remaining  first  mortgage  loan was made by a
subsidiary of CharterMac in the amount of approximately  $27.3 million (see Note
13).  The  early  payoff  of the debt  security  resulted  in the  receipt  of a
prepayment  penalty in the amount of $3.2 million,  which was  deferred,  net of
unamortized  costs and  fees,  and is being  amortized  over the life of the new
loan.

During 2006, three of our mortgage loans and notes receivable  defaulted,  which
caused us to stop  accruing  interest on these  loans.  In the third  quarter of
2006, as information  regarding these loans  materialized,  we recognized two of
the three loans as impaired due to  deteriorating  operating  performance of the
underlying  properties and recorded a charge of $2.4 million.  We determined the
impairment  amounts by analyzing the real estate markets in the locations of the
properties and determining a fair value based on the types of the properties. As
a result,  the carrying  amounts  have been  written down to reflect  these fair
values.

At September 30, 2006,  approximately  $290.3 million of our mortgage loans were
pledged as collateral under our mortgage loan repurchase facility (see Note 6).

NOTE 4 - INVESTMENT IN ARCAP

During August 2006, we sold our membership interests in ARCap to CharterMac (see
also Note 13).  In  connection  with the sale,  we  received  proceeds  of $38.8
million, consisting of $24.5 million for the purchase of the interests and $14.3
million of special  distributions for income earned prior to consummation of the
sale. Of the distributions,  we recorded approximately $12.6 million as a return
of capital and the sales proceeds yielded a gain of approximately $19.2 million.
We expect to receive an  additional  $1.7 million of proceeds in September  2007
which is included in the gain recognized and is recorded in accounts  receivable
in the condensed  consolidated balance sheet.  Contingent upon future events, we
may  receive an  additional  $791,000  of  proceeds in 2007 and 2008 which would
result in additional gain when received.


                                       10
<PAGE>



              AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
              Notes to Condensed Consolidated Financial Statements
                               September 30, 2006
                                   (Unaudited)



NOTE 5 - REAL ESTATE OWNED

Real estate owned consisted of the following:

<TABLE>
<CAPTION>

(Dollars in thousands)
                                                                              Carrying       Carrying
                                                                                Value          Value
                                                                                as of          as of
                                               Number of                     September 30,  December 31,
                                                 Units         Location          2006           2005
                                               ---------    ---------------  ------------   -----------
<S>                                                 <C>     <C>                <C>           <C>
Real Estate Owned - Held and Used, net
--------------------------------------

Concord Portfolio                                   852         Houston, TX    $ 53,059      $ 53,407
                                                  =====
Less: accumulated depreciation                                                   (4,071)       (3,062)
                                                                               --------      --------
Total                                                                          $ 48,988      $ 50,345
                                                                               ========      ========

Mortgages Payable on Real Estate Owned
--------------------------------------

Concord Portfolio                                                              $ 40,083       $ 40,487
                                                                               ========      ========

Real Estate Owned - Held for Sale,  net (1)
-------------------------------------------

Reserve at Autumn Creek                             212     Friendswood, TX    $ 19,344,     $ 19,462
                                                  =====
Less: accumulated depreciation                                                   (1,340)       (1,014)
                                                                               --------      --------
Total                                                                          $ 18,004      $ 18,448
                                                                               ========      ========

</TABLE>

(1) During  September  2006, we entered into a contract to sell the Autumn Creek
property in October 2006. As such, the carrying  amount of the property has been
reclassified as "Held for Sale" property and we stopped  depreciating the asset.
We have  also  reclassified  results  of  property  operations  as  income  from
discontinued  operations on our consolidated  statements of income.  Income from
discontinued  operations  in  the  2006  period  includes  an  accrued  loss  of
approximately $98,000 related to the sale.

NOTE 6 - MORTGAGE LOAN REPURCHASE FACILITY

In addition to our existing repurchase facilities,  we executed a new repurchase
agreement  during March 2006 with Bank of America  ("BOA").  The purpose of this
facility  is to fund  investments  that  are to be  placed  into our  first  CDO
securitization. Advance rates on the borrowings from this facility, ranging from
50% to 95% of collateral value, are determined on a loan-by-loan basis. Interest
on the  borrowings,  which range from LIBOR plus 0.50% to LIBOR plus 2.25%,  are
also determined on a loan-by-loan  basis.  The repurchase  facility expires upon
inception of the CDO  securitization,  or six months after the  inception of the
repurchase  facility,  whichever comes first.  During September 2006, we amended
the agreement with BOA, extending the funding limit of this facility from $250.0
million to $350.0  million and  extending  the term to  November  30,  2006.  At
September  30,  2006,  we  had   approximately   $258.5  million  of  borrowings
outstanding  under this facility,  at a weighted average interest rate of 6.39%.
In connection with the CDO  securitization,  we have prepaid  approximately $1.8
million of a 1% fee of the expected  securitization amount, due in full when the
CDO is securitized. These fees, which are non-refundable, have been deferred and
will be amortized over the life of the CDO securitization.

We are expecting to utilize CDO securitizations as a financing tool to lower our
cost  of  capital  and  thereby   enhance  our   investment   capabilities   and
opportunities.  Tapping these securitization markets should enable us to compete
for lending opportunities which we have not competed effectively in the past and
to originate a wide variety of debt products,  including floating- or fixed-rate
assets, first mortgages,  subordinate participations in first mortgages,  bridge


                                       11
<PAGE>



              AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
              Notes to Condensed Consolidated Financial Statements
                               September 30, 2006
                                   (Unaudited)



loans,  mezzanine  loans,  etc. We intend for the assets to be aggregated on our
balance  sheet  and  later   securitized.   We  have  originated  and  purchased
approximately  $297.3  million in first mortgage  loans and  subordinated  notes
through  September 30, 2006,  that we are using as collateral  for our first CDO
securitization.  Subsequent to September  30, 2006, we originated  approximately
$111.8  million in additional  first  mortgages,  of which $77.2 million will be
used as collateral in our first CDO  transaction  and the remainder will be used
as collateral in future CDO transactions. We priced our first CDO transaction in
October 2006 and plan to close this  transaction  in the fourth  quarter of 2006
(see Note 15). This proposed offering was priced at approximately $362.0 million
aggregate  principal of  non-recourse  CDO notes.  AMAC CDO will issue the notes
secured by a portfolio consisting of approximately $400.0 million of multifamily
and commercial real estate assets.

NOTE 7 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consisted of the following:

<TABLE>
<CAPTION>

                                                        September 30,  December 31,
 (In thousands)                                             2006           2005
                                                        ------------   -----------
<S>                                                       <C>            <C>
Interest rate derivatives (see Note 8)                    $ 8,099        $    39
CDO - related loan fees (1)                                 1,379             --
Preferred distribution payable                                591             --
Accrued interest payable                                      229            385
Other                                                       2,277          1,175
                                                          -------        -------

                                                          $12,575        $ 1,599
                                                          =======        =======

</TABLE>

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

NOTE 8 - DERIVATIVE INSTRUMENTS

CASH FLOW HEDGE OF DEBT

As of  September  30,  2006,  we had eight  interest  rate swaps with a notional
amount of $81.2  million,  which are  designated  as cash flow  hedges  with the
hedged  item  being  the  interest  payments  on  our  variable-rate  repurchase
facilities.  These swaps are recorded at fair value,  with changes in fair value
recorded  in  comprehensive  income  to the  extent  the hedge is  effective  in
achieving  offsetting cash flows.  There was no  ineffectiveness  in the hedging
relationships  during  the  periods  reported.   Amounts  in  accumulated  other
comprehensive  income  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.

We  expect  that the swaps  will be highly  effective  in  achieving  offsetting
changes in cash flows throughout its term.

FREE-STANDING DERIVATIVES RELATED TO INVESTMENTS

We also  have 31  interest  rate  swaps  with an  aggregate  notional  amount of
approximately  $322.2  million  that are  hedging  changes  in the fair value of
certain  investments.  We did not elect to apply hedge accounting to these swaps
and, therefore, the changes in the fair value of these swaps are included in net
income.

We are  required  to  maintain  a  minimum  balance  of  collateral  with BOA 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 BOA to
maintain the fair value of the swaps.  These  payments are held as deposits with
BOA 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, 2006, we had  approximately


                                       12
<PAGE>



              AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
              Notes to Condensed Consolidated Financial Statements
                               September 30, 2006
                                   (Unaudited)



$5.6 million in deposits held by BOA, which we classified as restricted  cash on
our condensed consolidated balance sheets.

We will terminate  these swaps when we issue the CDO,  which we anticipate  will
occur in the  fourth  quarter  of 2006 (see Note 15).  When we  terminate  these
swaps, we will enter into a total return swap,  which we anticipate will convert
the variable cash flows from the CDO to fixed cash flows.

FINANCIAL STATEMENT IMPACT

Interest rate swaps for which we were in a net settlement liability position are
recorded in accounts  payable and accrued expenses and those for which we are in
a net  settlement  asset  position  are  recorded in other  assets.  The amounts
recorded were as follows:

<TABLE>
<CAPTION>

(In thousands)                               September 30,      December 31,
                                                 2006               2005
                                             ------------       -----------
<S>                                             <C>               <C>
Net asset position                              $  863            $  808
Net liability position                          $8,099            $   39

</TABLE>

Interest expense included the following related to our free standing derivatives
and interest rate hedges:

<TABLE>
<CAPTION>

                                 Three months ended     Nine months ended
(In thousands)                      September 30,         September 30,
                                 ------------------    -------------------
                                  2006        2005      2006         2005
                                 ------      ------    ------       ------
<S>                              <C>         <C>        <C>         <C>
Interest income                  $(187)      $  --      $(378)      $  --
Interest expense                    32          --         87         107
                                 -----       -----      -----       -----

Net                              $(155)      $  --      $(291)      $ 107
                                 =====       =====      =====       =====

</TABLE>

The  decrease in the fair value of our  free-standing  derivatives  for the nine
months ended September 30, 2006, was $8.4 million and is recorded as a reduction
of other income on our condensed consolidated statements of income.

We estimate  that  approximately  all of the net  unrealized  gains  included in
accumulated other comprehensive income will decrease interest expense within the
next 12 months.

NOTE 9 - COMPREHENSIVE INCOME

Comprehensive  income for the nine months ended September 30, 2006 and 2005, was
as follows:

<TABLE>
<CAPTION>

(In thousands)                                                           Nine months ended
                                                                            September 30,
                                                                       ---------------------
                                                                         2006         2005
                                                                       --------     --------
<S>                                                                    <C>          <C>
Net income                                                             $  8,618     $ 13,208
Net unrealized (loss) gain on derivative instruments                       (382)         589
Net unrealized holding loss on investments                               (6,753)        (483)
Reclassification adjustment for realized loss (gain) on investments       2,224       (3,137)
                                                                       --------     --------
Comprehensive income                                                   $  3,707     $ 10,177
                                                                       ========     ========

</TABLE>


                                       13
<PAGE>



              AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
              Notes to Condensed Consolidated Financial Statements
                               September 30, 2006
                                   (Unaudited)



NOTE 10 - SHARE-BASED COMPENSATION

In  accordance  with our Amended and Restated  Incentive  Share Option Plan (the
"Plan"),  our board of trustees can award share  options to trustees,  officers,
and  employees of AMAC and  employees of our Advisor and its  affiliates.  As of
September  30,  2006, a maximum of 666,636  options can be granted,  with annual
limits  based upon  formulas  specified  in the Plan.  Option  terms and vesting
requirements  are determined at the time of grant,  provided that the term is no
longer than ten years.

On January 1, 2006,  we adopted SFAS No.  123(R) under the modified  prospective
method.  Since we  previously  accounted  for our  share-based  compensation  as
expense  under the fair value  provisions  of SFAS No. 123, our adoption did not
significantly impact our financial position or our results of operations.

In accordance  with SFAS No. 123(R),  we accrue  compensation  cost based on the
estimated  fair value of the options  issued and  amortize  those costs over the
vesting period.  Because the grant  recipients are not our employees and vesting
of the options is contingent upon the recipient  continuing to provide  services
to us, we estimate  the fair value of the options at each  period-end  up to the
vesting date and adjust recorded amounts accordingly.

As of September  30, 2006,  all of our share options were fully  amortized,  and
there was no unrecognized  compensation  cost related to non-vested  share-based
compensation grants.

The following  table  summarizes  share option activity in the Plan for the nine
months ended September 30, 2006:

<TABLE>
<CAPTION>

                                                               Weighted
                                                                Average
                                                    Weighted   Remaining
                                                     Average  Contractual   Aggregate
                                                    Exercise   Term (in     Intrinsic
                                        Options       Price      years)       Value
                                       ----------------------------------------------
<S>                                    <C>           <C>         <C>        <C>
Outstanding at beginning of year         187,052     $15.78      4.91

Granted                                       --         --        --
Forfeited/expired                             --         --        --
Exercised                                (21,000)     15.03        --
                                       ---------------------------------------------
Outstanding at end of period             166,052     $15.88      3.90       $356,993
                                       =============================================

Exercisable at end of period             166,052     $15.88      3.90       $356,993
                                       =============================================

Compensation cost recorded             $  59,000
                                       =========

</TABLE>

The aggregate  intrinsic value at September 30, 2006,  represents the difference
between our closing share price on the last trading day of the third quarter and
the exercise prices of the outstanding options. This amount will change based on
the fair market value of our shares.


                                       14
<PAGE>



              AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
              Notes to Condensed Consolidated Financial Statements
                               September 30, 2006
                                   (Unaudited)



NOTE 11 - EARNINGS PER SHARE

Diluted net income 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.

<TABLE>
<CAPTION>

(In thousands, except per share amounts)

Three Months Ended September 30, 2006:             Income      Shares    Per Share
                                                  --------    --------   ---------
<S>                                                <C>           <C>       <C>
   Basic EPS                                       $ 1,234       8,307     $ 0.15
   Effect of dilutive securities                        --           8         --
                                                   -------     -------     ------
   Diluted EPS                                     $ 1,234       8,315     $ 0.15
                                                   =======     =======     ======

Three Months Ended September 30, 2005:

   Basic EPS                                       $ 7,312       8,311     $ 0.88
   Effect of dilutive securities                        --           3         --
                                                   -------     -------     ------
   Diluted EPS                                     $ 7,312       8,314     $ 0.88
                                                   =======     =======     ======

Nine Months Ended September 30, 2006:

   Basic EPS                                       $ 8,618       8,305     $ 1.04
   Effect of dilutive securities                        --           3         --
                                                   -------     -------     ------
   Diluted EPS                                     $ 8,618       8,308     $ 1.04
                                                   =======     =======     ======

Nine Months Ended September 30, 2005:

   Basic EPS                                       $13,208       8,320     $ 1.59
   Effect of dilutive securities                        --           3         --
                                                   -------     -------     ------
   Diluted EPS                                     $13,208       8,323     $ 1.59
                                                   =======     =======     ======

</TABLE>

NOTE 12 - DISCONTINUED OPERATIONS

Income  from  discontinued  operations  included  the  following  related to the
Reserve at Autumn  Creek  (which we sold from our Real  Estate  Owned  portfolio
subsequent  to September  30, 2006) and the Plaza at San Jacinto  (which we sold
from our Real Estate Owned portfolio in 2005):

<TABLE>
<CAPTION>

                   Three Months Ended September 30,  Nine Months Ended September 30,
                   -------------------------------   ------------------------------
                         2006          2005                2006          2005
                        ------        ------              ------        ------
<S>                     <C>           <C>                 <C>           <C>
Revenues                $  601        $  587              $1,840        $1,688
                        ======        ======              ======        ======
Net income              $  114        $  403              $  260        $1,074
                        ======        ======              ======        ======

</TABLE>


                                       15
<PAGE>



              AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
              Notes to Condensed Consolidated Financial Statements
                               September 30, 2006
                                   (Unaudited)



NOTE 13 - RELATED PARTY TRANSACTIONS

The costs paid or payable to our Advisor were as follows:

<TABLE>
<CAPTION>

(In thousands)
                                                Three Months Ended   Nine Months Ended
                                                   September 30,       September 30,
                                                ------------------   -----------------

                                                  2006      2005      2006      2005
                                                 ------    ------    ------    ------
<S>                                              <C>       <C>       <C>       <C>
Shared services expenses                         $  450    $  235    $1,149    $  691
Asset management fees                               486       433     1,402     1,143
Incentive management fee (1)                      2,156     1,238     2,344     1,446
                                                 ------    ------    ------    ------

                                                 $3,092    $1,906    $4,895    $3,280
                                                 ======    ======    ======    ======

Interest paid on related party line of credit    $  360    $   --    $1,105    $   11
                                                 ======    ======    ======    ======

</TABLE>

((1)) Accrual  based on the  proportion  of actual  earnings  as compared to our
     estimates  of  full-year  results.  Due to an  amendment to our Amended and
     Restated Advisory Services Agreement in 2006, the calculation of the annual
     incentive  management  fee  payable to our  Advisor  excludes  any gains or
     losses   resulting  from  the  change  in  fair  value  of  our  derivative
     instruments.

During April 2006, we purchased a first mortgage loan from  CharterMac (see Note
3).  Including  this loan,  during 2006 we  partially  or fully  funded 26 first
mortgage loans and subordinated notes,  totaling  approximately  $292.3 million,
originated by CharterMac Mortgage Capital  Corporation  ("CMC"), an affiliate of
our Advisor.  CMC received  approximately  $1.4 million in loan origination fees
related  to  these  originations,  all of  which  were  paid  by the  borrowers.
Additionally,  CharterMac  subsidiaries  may act as a broker on our behalf  from
time to time in origination transactions.

During April 2006, we amended our loan agreement with CharterMac to increase our
borrowing capacity to $50.0 million and extend the maturity date of the facility
to June 2007.

During 2006, we funded:

     o    two first  mortgage  loans  aggregating  $39.7 million  (including one
          funded  subsequent  to  September  30 - see  Note  15)  to  properties
          developed by a company controlled by the chairman of CharterMac;
     o    a first  mortgage  loan ($31.0  million) to a property of which a fund
          managed by a subsidiary of CharterMac is the 99.98% limited partner of
          the borrower; and
     o    a first  mortgage  loan  ($22.0  million)  to a  property  that  has a
          preferred  equity interest in it made by CharterMac Urban Capital Fund
          I LLC, a fund managed by a subsidiary of CharterMac.

In the opinion of  management,  the terms of these  transactions  are consistent
with those transactions with independent third parties.

During  September 2006, a subsidiary of CharterMac  funded a first mortgage note
in the amount of approximately  $27.3 million as part of a refinancing of one of
our loans (see Note 3).

During August 2006, we entered into a  co-investment  agreement  with ARCap Real
Estate Special Situations Mortgage Fund, L.L.C.  ("ARESS");  a fund managed by a
subsidiary  of  CharterMac,  whereby  we and ARESS will  participate  equally in
investment  opportunities  that are  originated by affiliates and which meet the
investment criteria of both companies.


                                       16
<PAGE>



              AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
              Notes to Condensed Consolidated Financial Statements
                               September 30, 2006
                                   (Unaudited)



During August 2006, we sold our membership interests in ARCap to CharterMac (see
Note 4).

NOTE 14 - COMMITMENTS AND CONTINGENCIES

a)   Legal

On October 27, 2003,  prior to taking  possession of the real estate  collateral
supporting a loan investment, we were named in a lawsuit, Concord Gulfgate, Ltd.
vs. Robert  Parker,  Sunrise  Housing  Ltd.,  and American  Mortgage  Acceptance
Company,  Cause No.  2003-59290 in the 133rd  Judicial  District Court of Harris
County,  Texas.  The suit  alleged  that the loan  transaction  was not properly
authorized by the borrower and was not for a legitimate  borrower  purpose.  The
suit claimed,  among other causes of action against the  respective  defendants,
wrongful foreclosure of the real estate collateral,  tortious  interference with
contract and civil  conspiracy.  The suit sought,  among other  relief,  actual,
consequential,  and exemplary damages, and a declaration that the loan documents
were  unenforceable  and  constituted a cloud on title.  The basic claim of this
suit was for $1.5  million.  The case  went to trial in  September  2006 and was
settled for $150,000.  This amount is  recognized in general and  administrative
expenses in our consolidated statements of income.

See  Note  15  regarding  an  additional   lawsuit  which  arose  subsequent  to
September 30, 2006.

b)   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,  which could have
potentially  resulted  in an  aggregate  exposure of $7.5  million.  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, a  subsidiary  of  CharterMac,  both of
which  are  affiliates  of the  Advisor.  Pursuant  to the  agreement  with CMC,
CharterMac guaranteed CMC's obligations, and we agreed to indemnify both CMC and
CharterMac  for any losses  incurred in exchange for retaining all fees which we
were  otherwise  entitled  to receive  from  Fannie Mae under the  program.  The
maximum  exposure at September 30, 2006,  was $3.2  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.

For these  guarantees,  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.

(c)  Future Funding Commitments

We are committed to additionally fund the following first mortgage and mezzanine
loans at September 30, 2006:

<TABLE>
<CAPTION>

                                                                             (In thousands)
                                                                      MAXIMUM AMOUNT OF COMMITMENT
                                                                     -------------------------------
                                                        NO. OF APT.           LESS THAN 1
ISSUE DATE          PROJECT               LOCATION         UNITS      TOTAL       YEAR     1-3 YEARS
----------    --------------------    ----------------  -----------  -------  -----------  ---------
<S>           <C>                     <C>                     <C>    <C>        <C>              <C>
 Apr-05       Atlantic Hearthstone    Hillsborough, NJ        198    $   757    $   757          --
 Sept-06      Tiburon at Buckhead     Atlanta, GA              --     21,500     21,500          --
                                                          -------    -------    -------     -------

TOTAL FUTURE FUNDING COMMITMENTS                              198    $22,257    $22,257     $    --
                                                          =======    =======    =======     =======

</TABLE>


                                       17
<PAGE>



              AMERICAN MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARIES
              Notes to Condensed Consolidated Financial Statements
                               September 30, 2006
                                   (Unaudited)



NOTE 15 - SUBSEQUENT EVENTS

During October 2006, we funded a $12.7 million first mortgage loan to a property
developed by a company  controlled by the chairman of CharterMac  (see Note 13).
In the opinion of management,  the terms of the  transaction are consistent with
those of transactions with independent third parties.

During  October  2006,  we were  named as a party  in a  lawsuit  involving  the
foreclosure upon a property which serves as secondary collateral for a mezzanine
loan  investment.  As the loan is currently  performing in  accordance  with its
terms,  we do not consider  such  foreclosure  to reflect an  impairment  of our
investment and expect no loss with regard to this action.

In  October  2006,  we  entered  into  a  forward-starting   swap  agreement  in
conjunction with the pricing of our planned CDO  transaction.  The interest rate
swap will become  effective on November 16, 2006 and will terminate on September
18, 2016.  As determined by the swap  agreement,  we will receive  interest at a
fixed rate of 5.425% on variable rate debt of approximately  $333.4 million.  As
described  in Note 8, the swap will serve to hedge our debt  obligations  in the
CDO.

In October  2006,  we completed  the sale of the Autumn Creek  property from our
real estate owned portfolio (see Note 5).

In October 2006, we priced our first CDO transaction,  which we plan to close in
the fourth quarter of 2006 (see Note 3).

In November 2006, we completed the sale of 20 debt  securities  with a September
30, 2006, carrying amount of $74.2 million (see Note 2).

In November  2006,  our Board of Trustees  approved the  nomination of George P.
Jahn as an independent trustee and James L. Duggins as a non-independent trustee
for election to the Board of Trustees for a one year term.

During November 2006, our Board of Trustees  approved a special  distribution of
$1.40 per share to common shareholders of record at November 30, 2006.


                                       18
<PAGE>



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

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 in
our annual report on Form 10-K for the year ended December 31, 2005, include the
following:

     o    Risks of investing  in uninsured  and  non-investment  grade  mortgage
          assets  and   subordinated   commercial   mortgage-backed   securities
          ("CMBS");

     o    Competition in acquiring desirable investments;

     o    Interest rate fluctuations;

     o    Risks associated with hedging transactions,  which can limit gains and
          increase exposure to loss;

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

     o    General economic conditions,  particularly as they affect the value of
          our assets and the credit status of our borrowers;

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

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

     o    Risks associated with the repurchase  agreements we utilize to finance
          our investments and the availability of financing generally; and

     o    Risks  associated  with  our  contemplated  CDO  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.

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

During  2006,  we entered  into fair value  swaps to which we do 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 on our consolidated statements
of income.


                                       19
<PAGE>



During August 2006, we sold our  membership  interests in ARCap,  resulting 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.

During  September  2005, the GNMA  certificate  and mezzanine  loan  investments
relating to one property were paid off prior to the maturity  date.  This payoff
resulted in significantly higher levels of fees earned and a gain on redemption.
There were no such fees recognized in subsequent comparable periods.

During  the  third  quarter  of 2006,  we  recognized  impairment  losses on two
mortgage  loans  and notes  receivable.  As a result,  these  charges  have been
recorded in impairment  loss on  investments on our  consolidated  statements of
income. There were no such losses recognized in the 2005 periods.

Results of Operations

The following is a summary of our operations for the three and nine months ended
September 30, 2006 and 2005:

<TABLE>
<CAPTION>

(In thousands)

                     Three Months Ended September 30,  Nine Months Ended September 30,
                     -------------------------------   ------------------------------
                        2006       2005     Change       2006       2005     Change
                      -------    -------   --------    -------    -------   --------
<S>                   <C>        <C>        <C>        <C>        <C>        <C>
Total revenues        $10,213    $12,766    (20.0)%    $26,623    $26,225      1.5 %
Total expenses         17,046      6,711    154.0       31,164     16,074     93.9
Total other income      8,067      1,257    541.8       13,159      3,057    330.5
                      -------    -------    -----      -------    -------    -----
Net income            $ 1,234    $ 7,312    (83.1)%    $ 8,618    $13,208    (34.8)%
                      =======    =======    =====      =======    =======    =====

</TABLE>

During the three and nine month periods ended September 30, 2006, as compared to
the same periods in 2005,  revenues have fluctuated  mainly due to a significant
non-recurring  prepayment  fee recognized in the third quarter of 2005 (as noted
above) and the  shifting of investing  activities  from debt  securities  toward
mortgage loans coupled with a sharply  higher level of  origination  activity in
2006.  Expenses have increased for both the three and nine month periods in 2006
primarily due to higher  financing costs,  advisory costs,  property level costs
for real estate owned and impairment  losses. In addition,  other income in 2006
includes a gain on the sale of our ARCap investment and a significant unrealized
loss related to interest rate swaps.

<TABLE>
<CAPTION>

REVENUES

                               Three Months Ended
                          ----------------------------
                                                          % Change   % of 2006  % of 2005
                          September 30,   September 30,  from prior    Total      Total
(In thousands)                2006            2005         Period    Revenues   Revenues
                          ------------    ------------   ----------  ---------  ---------
<S>                         <C>             <C>           <C>         <C>        <C>
Interest income:
   Debt securities          $ 2,718         $ 3,351        (18.9)%     26.6 %     26.2 %
   Mortgage loans             5,522           1,734        218.5       54.1       13.6
   Notes receivable              41             365        (88.8)       0.4        2.9
   Revenue bonds                112             145        (22.8)       1.1        1.1
   Temporary investments         94              48         95.8        0.9        0.4
Other revenues                   24             155        (84.5)       0.2        1.2
                            -------         -------       ------      -----      -----
  Subtotal                    8,511           5,798         46.8       83.3       45.4

Fees related to the
  prepayment of assets           --           5,314       (100.0)        --       41.6

Rental income                 1,702           1,654          2.9       16.7       13.0
                            -------         -------       ------      -----      -----

Total revenues              $10,213         $12,766        (20.0)%    100.0 %    100.0 %
                            =======         =======       ======      =====      =====

</TABLE>


                                       20
<PAGE>



<TABLE>
<CAPTION>

                               Nine Months Ended
                          ----------------------------
                                                          % Change   % of 2006  % of 2005
                          September 30,   September 30,  from prior    Total      Total
(In thousands)                2006            2005         Period    Revenues   Revenues
                          ------------    ------------   ----------  ---------  ---------
<S>                         <C>             <C>           <C>          <C>        <C>
Interest income:
   Debt securities          $ 8,932         $ 9,722        (8.1)%      33.5%      37.1%
   Mortgage loans            11,197           3,497       220.2        42.1       13.3
   Notes receivable             490           1,222       (59.9)        1.8        4.6
   Revenue bonds                396             438        (9.6)        1.5        1.7
   Temporary investments        229             132        73.5         0.9        0.5
Other revenues                  185             883       (79.0)        0.7        3.4
                            -------         -------      ------       -----      -----
  Subtotal                   21,429          15,894        34.8        80.5       60.6

Fees related to the
  prepayment of assets         --             5,314      (100.0)         --       20.3

Rental income                 5,194           5,017         3.5        19.5       19.1
                            -------         -------      ------       -----      -----

Total revenues              $26,623         $26,225         1.5 %     100.0%     100.0%
                            =======         =======      ======       =====      =====

</TABLE>

Revenues were generated by the following  investments  (exclusive of Real Estate
Owned and ARCap):

<TABLE>
<CAPTION>

(In thousands)
                                   As of                             As of
                            September 30, 2006                September 30, 2005
                    ---------------------------------- ----------------------------------
                                           Weighted                           Weighted
                    Carrying      % of      Average    Carrying      % of      Average
                     Amount       Total  Interest Rate  Amount       Total  Interest Rate
                    ---------------------------------------------------------------------
<S>                 <C>           <C>         <C>      <C>           <C>        <C>
Debt securities     $157,982       31.1%      6.02%    $202,938       73.2%      6.16%
Mortgage loans       335,820       66.1       7.65       54,052       19.5      14.46
Notes receivable       9,213        1.8       9.67       13,725        4.9       9.49
Revenue bonds          4,972        1.0       8.70        6,559        2.4       8.69
                    --------     ------       ----     --------     ------      -----
                    $507,987      100.0%      7.19%    $277,274      100.0%      7.63%
                    ========     ======       ====     ========     ======      =====

</TABLE>

Interest  income from debt  securities  decreased  for the three and nine months
ended  September 30, 2006  primarily  due to the payoff of four debt  securities
during  2006 and the second  half of 2005,  offset by the  funding of four lower
yielding debt securities in 2006.

Interest  income from mortgage loans  increased for the 2006 periods as compared
to  2005,  primarily  due  to  the  funding  of  26  first  mortgage  loans  and
subordinated  notes 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, 2006, as compared to September 30, 2005, was primarily
due to the funding of a greater amount of fixed-rate  first mortgage  loans,  as
opposed to variable-rate mezzanine loans as we had done in the past.

Interest  income  from  notes  receivable  decreased  in  2006  as  compared  to
comparable  2005  periods,  primarily  due to the payoff of several notes during
2005 and 2006,  as well as three loans which  defaulted  in 2006,  whereupon  we
discontinued accruing interest.

Interest income from revenue bonds for the three and nine months ended September
30, 2006, was lower than the comparable prior year periods, primarily due to the
payoff of two of the six revenue bonds we had held in the third quarter of 2006.


                                       21
<PAGE>



Interest income from temporary  investments  increased for the 2006 periods,  as
compared  to  2005,  primarily  due to the  investment  of  excess  cash on hand
resulting from the payoff of several mortgage loans and debt securities, as well
as the funds received from the sale of our investment in ARCap in August 2006.

Fees related to the  prepayment of assets in 2005  represent fees relating to an
early payoff of a debt  security and a mezzanine  loan.  There were no such fees
recognized  in  2006  as the  prepayment  fee on a  comparable  transaction  was
deferred  and  will  be  recognized  over  the  life  of a  refinanced  loan  we
originated.

Other revenues decreased for the nine months ended September 30, 2006, primarily
due to the 2005  recognition  of  income  from a  commitment  fee for  which the
commitment had expired unused,  and a non-refundable due diligence fee resulting
from a non-executed deal. There were no comparable transactions in 2006.

<TABLE>
<CAPTION>

EXPENSES

                                       Three Months Ended
                                  ----------------------------
                                                                  % Change   % of 2006  % of 2005
                                  September 30,   September 30,  from prior    Total      Total
(In thousands)                        2006            2005         Period    Revenues   Revenues
                                  ------------    ------------   ----------  ---------  ---------
<S>                                 <C>             <C>            <C>         <C>        <C>

Interest                            $ 5,669         $ 1,937        192.7 %     55.5 %     15.2 %
Interest-preferred shares               591             461         28.2        5.8        3.6
General and administrative            1,272             608        109.2       12.4        4.8
Impairment loss on investments        4,632              --        100.0       45.4         --
Fees to Advisor                       3,092           1,906         62.2       30.3       14.9
Amortization and other                    9              68        (86.8)       0.1        0.5
                                    -------         -------        -----      -----       ----
Subtotal                             15,265           4,980        206.5      149.5       39.0

Property operations                     852             794          7.3        8.3        6.2
Depreciation                            336             336          0.0        3.3        2.7
Mortgage interest on real
  estate owned                          593             601         (1.3)       5.8        4.7
                                    -------         -------        -----      -----       ----

Total expenses                      $17,046         $ 6,711        154.0 %    166.9 %     52.6 %
                                    =======         =======        =====      =====       ====

</TABLE>
<TABLE>
<CAPTION>

                                        Nine Months Ended
                                  ----------------------------
                                                                  % Change   % of 2006  % of 2005
                                  September 30,   September 30,  from prior    Total      Total
(In thousands)                        2006            2005         Period    Revenues   Revenues
                                  ------------    ------------   ----------  ---------  ---------
<S>                                  <C>             <C>           <C>          <C>        <C>
   Interest                          $12,255         $ 4,854       152.5 %       46.0 %    18.5 %
   Interest-preferred shares           1,665             961        73.3          6.2       3.7
   General and administrative          2,245           1,513        48.4          8.4       5.8
   Impairment loss on investments      4,632              --       100.0         17.4        --
   Fees to Advisor                     4,895           3,280        49.2         18.4      12.5
   Amortization and other                 43             292       (85.3)         0.2       1.1
                                     -------         -------       -----        -----      ----
   Subtotal                           25,735          10,900       136.1         96.6      41.6

   Property operations                 2,636           2,357        11.8          9.9       9.0
   Depreciation                        1,008           1,009        (0.1)         3.8       3.8
   Mortgage interest on real
     estate owned                      1,785           1,808        (1.3)         6.7       6.9
                                     -------         -------       -----        -----      ----

Total expenses                        31,164         $16,074        93.9 %      117.0 %    61.3 %
                                     =======         =======       =====        =====      ====

</TABLE>

At September 30, 2006, excluding the non-recourse mortgage on real estate owned,
we had total  debt of  approximately  $433.6  million  with a  weighted  average
interest rate of 6.05% per year, including the effect of our swap agreements. At
September 30, 2005, we had a comparable balance of approximately  $243.7 million


                                       22
<PAGE>



with a weighted  average  interest  rate of 4.14% per year.  The increase in the
weighted  average  interest rate is due to steady  increases in market  interest
rates during 2005 and 2006.

Interest  expense  increased  for the three and nine months ended  September 30,
2006, as compared to 2005, primarily due to the increased borrowings made during
2006 to fund loan  originations  and the increase in interest  rates during 2005
and 2006, as mentioned above.

Due to  specific  accounting  requirements,  we classify  distributions  made on
preferred  shares of our  wholly  owned  subsidiary  (issued  in March  2005) as
interest  expense.  Distributions  to preferred  shareholders  increased for the
three and nine months ended  September  30, 2006, as compared to 2005 due to the
2006 period included nine months preferred  distributions compared to six months
in 2005.  The increase is also due to the increase in interest rates during 2005
and 2006, as the distributions are at a variable rate, based on LIBOR.

General  and  administrative  expenses  increased  for the  three  months  ended
September 30, 2006, as compared to 2005,  primarily due to increased  accounting
and legal fees,  excise taxes,  insurance and a $150,000 legal  settlement  (see
Note 14 to the condensed  consolidated  financial  statements).  The  nine-month
period in 2006 also includes  higher share based  compensation  costs due to the
accelerated  vesting  of  certain  options  in the  first  half of  2006.  These
increases were partially  offset by decreased  investor  services  expenses,  as
compared to 2005 (due to costs in 2005 related to changes in our trust agreement
for which we needed shareholder approval).

Impairment  losses on assets  relate to certain debt  securities  that no longer
meet our investment  return  criteria and which we contracted to sell in October
2006 (see Notes 2 and 15 to the condensed consolidated financial statements) and
impairments  recognized  on two mortgage  loans due to  deteriorating  operating
performance (see Note 3 to the condensed consolidated financial statements). The
sale of many of the impaired debt securities was completed in November 2006.

Fees to Advisor  increased  for the 2006  periods,  as compared to 2005,  due to
higher shared  services  costs because of expansion of our business and a higher
incentive  management fee accrual mainly due to the sale of the ARCap investment
in 2006.  Incentive  management  fees are accrued  based on projected  earnings,
excluding  non-cash  gains or losses from  changes in the fair value of our free
standing derivatives.

Amortization and other costs decreased for the 2006 periods,  as compared to the
same  periods  in 2005,  due to the  deferred  financing  costs  related  to our
warehouse facility being fully amortized in August 2005.

Property  operations  represent all non-interest  costs at the property level on
all of our Real Estate  Owned - Held and Used  properties.  The increase for the
2006 periods,  as compared to the prior year, was mainly due to higher  property
tax costs.

OTHER INCOME

Other income  increased for the three and nine months ended  September 30, 2006,
as  compared to 2005,  primarily  due to a gain  resulting  from the sale of our
ARCap  membership  interests  offset  by  the  lower  amount  of  equity  income
recognized  due to the sale.  The negative  amount of equity income in the third
quarter of 2006  resulted  from a correction  to second  quarter 2006  estimates
provided by ARCap which we had previously recorded.

In the third  quarter of 2006,  we  recorded a  substantial  expense  related to
changes in the fair value of certain  interest rate swaps in 2006 to which we do
not apply hedge accounting.  At September 30, 2006, we had 31 such swaps with an
aggregate  notional  amount of  approximately  $322.2 million used to manage the
fair value risk of loans we originated for the planned CDO  execution,  while we
had none in place in 2005. We expect that a portion of the unrealized  losses on
these  swaps  will  reverse  in the  fourth  quarter  of  2006  prior  to  their
termination.

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


                                       23
<PAGE>



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, it provides investors with an indication of our ability to
incur and service debt, make capital expenditures, and fund other cash needs.

The following  table  reconciles net income to FFO for the three and nine months
ended September 30, 2006 and 2005:

<TABLE>
<CAPTION>

(In thousands)

                                           Three Months Ended          Nine Months Ended
                                              September 30,               September 30,
                                        -----------------------     -----------------------

                                           2006          2005          2006          2005
                                        ---------     ---------     ---------     ---------
<S>                                     <C>           <C>           <C>           <C>
Net income                              $   1,234     $   7,312     $   8,618     $  13,208

Add back:
Depreciation of real property (1)             435           336         1,334         1,038
Accrued loss on sale (1)                       98            --            98            --
                                        ---------     ---------     ---------     ---------

FFO                                     $   1,767     $   7,648     $  10,050     $  14,246
                                        =========     =========     =========     =========

Cash flows from:
Operating activities                    $   3,702     $   8,547     $   8,934     $  15,051
                                        =========     =========     =========     =========
Investing activities                    $ (61,501)    $ (10,619)    $(191,775)    $ (67,257)
                                        =========     =========     =========     =========
Financing activities                    $  66,350     $  10,182     $ 183,870     $  66,491
                                        =========     =========     =========     =========

Weighted average shares outstanding:
Basic                                       8,307         8,311         8,305         8,320
                                        =========     =========     =========     =========
Diluted                                     8,315         8,314         8,308         8,323
                                        =========     =========     =========     =========

</TABLE>

(1) Includes a property classified as held for sale and included in discontinued
operations in our consolidated statements of income.

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.

Liquidity and Capital Resources
-------------------------------

SOURCES OF FUNDS

We expect that cash  generated  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 amounts  sufficient to
retain our Real  Estate  Investment  Trust  ("REIT")  status in the  foreseeable
future.  In order to  qualify  as a REIT under the  Internal  Revenue  Code (the
"Code"), as amended, we must, among other things, distribute at least 90% of our
taxable  income  and  100%  of any  capital  gain.  We  believe  that  we are in
compliance with the  REIT-related  provisions of the Code. As described below in
LIQUIDITY  REQUIREMENTS  AFTER  SEPTEMBER 30, 2006, we expect that we will pay a
special  distribution  in  association  with the  gain on the sale of our  ARCap
investment,  and may have  additional  capital gains to distribute in connection
with a property  carried as Real Estate  Owned at September  30, 2006,  which we
sold in October 2006 which may both be offset by losses on debt  securities that
we sold in November 2006.

We finance our  investing  activity  primarily  through  borrowing  from various
facilities at  short-term  rates.  At September  30, 2006, we had  approximately
$141.5 million  available to borrow,  contractually,  under our debt  facilities
without  exceeding limits imposed by debt covenants and our by-laws.  Subsequent
to September 30, 2006, we borrowed $61.7 million through our debt facilities.


                                       24
<PAGE>



From time to time,  we may also  issue  common  shares  or other  equity to fund
investing  activity.  During  2005,  our  subsidiary  issued  $25.0  million  of
variable-rate preferred securities.  The proceeds received were used to purchase
debt securities.

We have the capacity to raise  approximately  $170.0 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.

We are expecting to utilize CDO securitizations as a financing tool to lower our
cost  of  capital  and  thereby   enhance  our   investment   capabilities   and
opportunities.  Tapping these securitization markets should enable us to compete
for lending opportunities which we have not competed effectively in the past and
to originate a wide variety of debt products,  including floating- or fixed-rate
assets, first mortgages,  subordinate participations in first mortgages,  bridge
loans,  mezzanine  loans,  etc. We intend for the assets to be aggregated on our
balance  sheet  and  later   securitized.   We  have  originated  and  purchased
approximately  $297.3  million in first mortgage  loans and  subordinated  notes
through  September 30, 2006,  that we are using as collateral  for our first CDO
securitization.  Subsequent to September  30, 2006, we originated  approximately
$111.8  million in additional  first  mortgages,  of which $77.2 million will be
used as collateral in our first CDO  transaction  and the remainder will be used
as collateral in future CDO transactions. We priced our first CDO transaction in
October 2006 and plan to close this  transaction  in the fourth quarter of 2006.
This proposed  offering was priced at  approximately  $362.0  million  aggregate
principal of non-recourse CDO notes.  AMAC CDO will issue the notes secured by a
portfolio   consisting  of  approximately  $400.0  million  of  multifamily  and
commercial real estate assets.  We expect to continue using CDO  securitizations
on an ongoing basis.

SUMMARY OF CASH FLOWS

During the nine months ended  September 30, 2006, as compared to the same period
in 2005, the net change in cash and cash equivalents  decreased by approximately
$13.3 million.

Net income in 2006 included net non-cash  income of  approximately  $4.0 million
(including gains and losses on the sale of assets, expense related to the change
in  the  fair  value  of  derivatives,   impairment  losses,   depreciation  and
amortization)  compared to net costs of  approximately  $1.0 million for similar
items in the 2005 period.  Excluding these items, net income in 2006 declined by
approximately  $9.6 million,  leading to the decline in operating  cash flows of
approximately $6.1 million.  Partially offsetting the decline was a higher level
of ARCap  distributions  prior to the sale,  as well as the timing of  liability
payments.

An  increase  in net cash used in  investing  activities  (approximately  $124.5
million) was due to the increase in investments  made during 2006 as compared to
2005,  offset by the  proceeds of selling our ARCap  investment.  The  increased
origination  activity was due to shifting our focus to originating loans for our
first CDO  securitization.  In  addition,  we were  required to fund  restricted
collateral  deposits  in the 2006 period due to the decline in the fair value of
our free standing derivatives.

The increase in net cash provided by financing activities  (approximately $117.4
million) can be attributed to the higher level of investing  activity during the
2006 period,  offset by partial repayments made to the repurchase facilities and
the full repayment of the warehouse facility.

LIQUIDITY REQUIREMENTS AFTER SEPTEMBER 30, 2006

Subsequent  to September  30, 2006, we closed  approximately  $111.8  million of
first  mortgage  loans of which $77.2  million will be used as collateral in our
first CDO. In addition to these loans, we anticipate approximately another $25.5
million in additional  acquisition  volume for the CDO  securitization  to close
during 2006.  Financing for the anticipated  acquisitions is expected to be made
through  our  mortgage  loan  repurchase  facility  with BOA (see  Note 6 to our
condensed consolidated  financial  statements).  Following the completion of our
planned CDO issuance, which we expect to occur in the fourth quarter of 2006, we
expect to enter  into  another  repurchase  facility  to allow for a second  CDO
program.

During November 2006,  distributions  of  approximately  $3.3 million ($0.40 per
share),  which  were  declared  in  September  2006,  will  be  paid  to  common
shareholders.  Additionally,  due to the proceeds  received from the sale of our


                                       25
<PAGE>



ARCap  investment,  we  declared  a special  distribution  of $1.40 per share to
common  shareholders of record at November 30, 2006.  This special  distribution
will be paid in December 2006.

OTHER MATTERS

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

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)
                                               2006             2005
                                              ------           ------
<S>                                           <C>              <C>
Total dividends                               $9,966           $9,994
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, 2006, are contained below.

<TABLE>
<CAPTION>

                                                              Payments Due by Period
                                                                   (In thousands)
                                             ----------------------------------------------------------
                                                         Less than                            More than
                                               Total       1 Year   1 - 3 Years  3 - 5 Years   5 Years
                                             --------    ---------  -----------  -----------  ---------
<S>                                          <C>         <C>         <C>          <C>         <C>
Debt:
  Debt securities repurchase facilities (1)  $150,150    $150,150    $     --     $     --    $     --
  Mortgage loan repurchase facility (1)       258,492     258,492          --           --          --
  Mortgage loan on real estate owned (2)       40,083         471       1,230        1,383      36,999
  Preferred shares of subsidiary
    (subject to mandatory repurchase) (1)      25,000          --          --           --      25,000
Funding Commitments:
  Future funding loan commitments              22,257      22,257          --           --          --
                                             --------    --------    --------     --------    --------

Total                                        $495,982    $431,370    $  1,230     $  1,383    $ 61,999
                                             ========    ========    ========     ========    ========

</TABLE>

(1)  Includes  principal  amounts  only.  At September  30,  2006,  the weighted
     average interest rate on debt that was recourse to us was 6.04%.
(2)  Represents a first  mortgage on properties we report as Real Estate Owned -
     Held and Used (Concord  Portfolio) as a sale of the properties did not meet
     the  criteria  for sale  recognition  in  accordance  with GAAP.  The first
     mortgage  loan is  non-recourse  with respect to AMAC,  the debt service is
     paid from the cash flows of the properties,  and we will not be required to
     satisfy the obligation.

Recently Issued Accounting Standards
------------------------------------

See  NEW  ACCOUNTING  PRONOUNCEMENTS  in  Note 1 to the  condensed  consolidated
financial statements.


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<PAGE>



Inflation
---------

Inflation  did not  have a  material  effect  on our  results  for  the  periods
presented.

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 which 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 repurchase  facilities and our trust preferred  securities 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 $145.2 million unhedged portion of the $433.6 million of borrowings
outstanding  at September 30, 2006, a 1% change in LIBOR would impact our annual
net  income  and cash  flows by  approximately  $1.5  million.  However,  as the
interest  income  from some of our loans is also based on LIBOR,  a 1% change in
LIBOR  would  impact  our  annual  net  income and cash flows from such loans by
approximately  $337,000.  The net effect of a 1% change in LIBOR would therefore
result in a change of our annual net income by  approximately  $1.1 million.  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  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.

Upon the  completion of our planned CDO  transaction,  substantially  all of our
debt will be fixed through interest rate swaps on the CDO debt.

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 the Company in the reports  that the Company  files or submits
     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 the Company's
     management,  including  the Chief  Executive  Officer  and Chief  Financial
     Officer,  as  appropriate,  to allow timely  decisions  regarding  required
     disclosure.


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<PAGE>



(b)  INTERNAL  CONTROL  OVER  FINANCIAL  REPORTING.  There  have  not  been  any
     significant changes in our internal control over financial reporting during
     the fiscal  quarter  to which  this  report  relates  that have  materially
     affected,  or are  reasonably  likely to  materially  affect,  our internal
     control over financial reporting.


                                       28
<PAGE>



                           PART II. OTHER INFORMATION


ITEM 1.   LEGAL PROCEEDINGS

          On October 27,  2003,  prior to taking  possession  of the real estate
          collateral  supporting a loan investment,  we were named in a lawsuit,
          Concord  Gulfgate,  Ltd. vs. Robert Parker,  Sunrise Housing Ltd., and
          American  Mortgage  Acceptance  Company,  Cause No.  2003-59290 in the
          133rd  Judicial  District  Court of  Harris  County,  Texas.  The suit
          alleged that the loan  transaction was not properly  authorized by the
          borrower  and was not for a  legitimate  borrower  purpose.  The  suit
          claimed,   among  other  causes  of  action   against  the  respective
          defendants,  wrongful  foreclosure  of  the  real  estate  collateral,
          tortious  interference  with contract and civil  conspiracy.  The suit
          sought,  among other  relief,  actual,  consequential,  and  exemplary
          damages,  and a declaration that the loan documents were unenforceable
          and constituted a cloud on title. The basic claim of this suit was for
          $1.5 million. The case went to trial in September 2006 and was settled
          for $150,000.  This amount is recognized in general and administrative
          expenses in our consolidated statements of income.

          See  Note  15  of  our  condensed  consolidated  financial  statements
          regarding an additional  lawsuit  which arose  subsequent to September
          30, 2006.

ITEM 1A.  RISK FACTORS

          There have been no material  changes to the risk  factors as disclosed
          in our  annual  report on Form 10-K for the year  ended  December  31,
          2005.

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

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

          32.1 Certification  pursuant to Section 906 of the  Sarbanes-Oxley Act
               of 2002.*

          *    Filed herewith.


                                       29
<PAGE>



                                   SIGNATURES



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



                      AMERICAN MORTGAGE ACCEPTANCE COMPANY
                                  (Registrant)



Date: November 8, 2006          By: /s/ James L. Duggins
                                    --------------------
                                    James L. Duggins
                                    Chief Executive Officer


Date: November 8, 2006          By: /s/ Alan P. Hirmes
                                    ------------------
                                    Alan P. Hirmes
                                    Managing Trustee and Chief Financial Officer


                                       30