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                                                                    EXHIBIT 10.7

                          Accredited Home Lenders, Inc.
                       EXECUTIVE MANAGEMENT INCENTIVE PLAN
                               Effective for 2002

Statement of Intention:

     It is the intention of Accredited Home Lenders, Inc. (Accredited), to
     provide a cash distribution to its Executive Management as a reward for
     their individual performance and contribution to the achievement of
     established corporate goals.

     The Executive Management Incentive Plan (the "Incentive Plan") will:

         A.   Create a reward and recognition program that is timely and
              consistent with business plan objectives.

         B.   Reward individual performance.

         All distributions made under the Executive Management Incentive Plan
              are a form of profit sharing. As such, they are dependent upon
              Accredited achieving certain levels of profitability, which will
              enable the company to make these distributions.

         Executive Management (the Chairman, President and Executive Vice
              President of Accredited) will make recommendations to the
              Compensation Committee of Board of Directors regarding total
              dollars to be made available for the Incentive Plan Pool. The
              Incentive Plan Pool will be stated as both a dollar pool and as a
              percentage of Incentive Plan participants' eligible salary.

         The decision of Executive Management and the Compensation Committee
              will be final in respect to these amounts so allocated. Nothing in
              the Plan is intended to make a commitment of pay-out, only the
              possibility of pay-out, should certain levels of corporate
              achievement be reached and individual performance support a given
              level of individual pay-out.

Participation:

     To be eligible, an individual must meet the following criteria:

          .    Employed as the Chairman, President or Executive Vice President.
          .    The Chairman, President or Executive Vice President must approve
               any additional participants.
          .    Participants must be hired or promoted to a position in which
               they would be eligible to participate in the Incentive Plan by
               September 1st in order to participate in current calendar year
               award.

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Criteria:

     Executive Management will present to the Compensation Committee the
     corporate business plan goals and recommend Executive Management Incentive
     Pool percentages based upon various levels of corporate goal achievement.

Executive Management Incentive Payment Procedure

          A.   The total Executive Management Incentive Plan Cash payout will be
               approved by the Compensation Committee once the financial data
               are available to measure results against corporate goals for the
               Plan year.

          B.   The amount of the individual award will be based upon general
               performance appraisal criteria and individual contribution to
               achieving overall corporate goals and objectives.

          C.   Participant must be employed prior to September 1/st/ of the Plan
               year, and be employed at the time of payout in order to receive
               an award.

          D.   The amount of payout is calculated by the participant's
               year-to-date earnings at the end of the Plan year. This will
               automatically prorate the award for any individuals who become
               employed after January 1/st/.

          E.   The payout will be made as soon as accurate financial data and
               measurements are available for the Plan year, but in no case
               later than March 15/th/ of the following year.

          F.   The award will be part of the employee's taxable income during
               the calendar year in which the payout is made.

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Accredited Home Lenders, Inc.
         EXECUTIVE MANAGEMENT INCENTIVE PLAN
         EFFECTIVE JANUARY 1, 2002

     The Incentive Plan is administered by the Human Resources Department in
     coordination with Executive Management. Final authority in all matters
     pertaining to the development of the Plan, its approval or modification and
     the granting of awards rests with Executive Management and the Compensation
     Committee of the Board of Directors. Participation in the Incentive Plan
     does not, in any way, imply a contractual relationship for employment or
     for receipt of an incentive award by any employee. Accredited reserves the
     right to alter, amend or abolish this Incentive Plan at any time.

     I have read and understand the Incentive Plan. I understand this plan
     supersedes all previous plans.

         __________________________________           ___________________
         (Signature)                                        (Date)



         __________________________________
         (Print Name)

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                             Accredited Home Lenders

                                      2002

                       Executive Management Incentive Plan

 The 2002 Operating Plan provides a substantial increase in production and
profitability over 2001. A Executive Management Incentive Plan, which emphasizes
this growth in income, has been approved for 2002. Individual bonuses will be
based on individual performance and achievement of certain objectives as well as
Accredited's overall performance. Bonuses will be based on a percentage of
salary earned during 2002.

We will have progressively higher net after tax income targets, which in turn
result in increasing maximum bonus amounts, expressed as a percentage of base
salary earned during the year. The targets are as follows:

<TABLE>
<CAPTION>
----------------------------------------------------------------------
                                      Maximum Bonus Percentage
        Net Income After Tax      ------------------------------------
               Targets                   Executive Managers
----------------------------------------------------------------------
<S>                                     <C>
 $ 12.2 million                                   25%
----------------------------------------------------------------------
 $ 15.2 million                                   67%
----------------------------------------------------------------------
 $ 20.3 million-a)                               100%
----------------------------------------------------------------------
 $ 22.3 million                                  125%
----------------------------------------------------------------------
</TABLE>

(a-Operating Plan Level

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