Exhibit 10.4


                              EMPLOYMENT AGREEMENT
     THIS EMPLOYMENT AGREEMENT (this "Agreement") is entered into as of the 1st
day of November, 2003, by and between MFA MORTGAGE INVESTMENTS, INC., a Maryland
corporation ("MFA"), and TERESA D. COVELLO, an individual residing at 12 Wincott
Drive, Melville, New York 11747 (the "Executive").

                              W I T N E S S E T H :

WHEREAS, MFA wishes to offer employment to, and secure the exclusive services
of, the Executive, and the Executive wishes to accept such offer, under the
terms and conditions described below. NOW, THEREFORE, in consideration of the
premises and the mutual agreements herein contained, the parties hereto agree as
follows:

Term of Employment.

MFA hereby employs the Executive, and the Executive hereby accepts employment
with MFA, in the positions and with the duties and responsibilities as set forth
in Paragraph 2 below for the Term of Employment, subject to the terms and
conditions of this Agreement.

The Term of Employment under this Agreement shall include the Initial Term and
each Renewal Term. The Initial Term shall commence as of November 1, 2003 and
shall continue until October 31, 2005. The Term of Employment shall
automatically renew for a one-year period (each such renewal, a "Renewal Term")
at the end of the Initial Term and each Renewal Term, unless either party shall
give notice to the other not less than 90 days prior to the end of the Initial
Term or any Renewal Term, as the case may be, of her or its intent not to renew
such Initial Term or Renewal Term, as the case may be.

Position; Duties and Responsibilities.

During the Term of Employment, the Executive shall be employed as Senior Vice
President, Chief Accounting Officer and Treasurer of MFA, reporting to the Chief
Financial Officer of MFA (the "CFO"), with such duties and day-to-day management
responsibilities as are customarily performed by persons holding such offices at
similarly situated mortgage REITs and such other duties as may be mutually
agreed upon between the Executive and the Chief Executive Officer of MFA (the
"CEO") and/or the CFO.

During the Term of Employment, the Executive shall, without additional
compensation, also serve on the board of directors of, serve as an officer of,
and/or perform such executive and consulting services for, or on behalf of, such
subsidiaries or affiliates of MFA as the CEO, the CFO and/or the Board of
Directors of MFA (the "Board of Directors") may, from time to time, request. MFA
and such subsidiaries and affiliates are hereinafter referred to, collectively,
as the "Company." For purposes of this Agreement, the term "affiliate" shall
have the meaning ascribed thereto in Rule 12b-2 under the Securities Exchange
Act of 1934, as amended (the "Act").

During the Term of Employment, the Executive shall serve MFA faithfully,
diligently and to the best of her ability and shall devote substantially all of
her time and efforts to her employment and the performance of her duties under
this Agreement. Nothing herein shall preclude the Executive from engaging in
charitable and community affairs and managing her personal financial and legal
affairs, so long as such activities do not materially interfere with her
carrying out her duties and responsibilities under this Agreement.

Compensation.

Base Salary. During the first year of the Initial Term, MFA shall pay to the
Executive a base salary (the "Base Salary") equal to $180,000 per annum. With
respect to the second year of the Initial Term and any Renewal Term thereafter,
MFA shall pay to the Executive a Base Salary of not less than $180,000 per
annum; provided, however, that such Base Salary may be adjusted by the
Compensation Committee of the Board of Directors or the Board of Directors, as
the case may be, in connection with the Executive's Annual Review pursuant to
Paragraph 3(d) below. The Base Salary shall be paid in accordance with MFA's
normal payroll practices.

Performance Bonus. The Executive shall be eligible to receive an annual
performance bonus in such amount, in such manner and at such time as shall be
recommended by the CEO and/or the CFO and approved by the Compensation Committee
of the Board of Directors or the Board of Directors, as the case may be.

Long-Term Incentive Program. The Executive shall be eligible to receive such
stock option, restricted stock or dividend equivalent rights grants as the
Compensation Committee of the Board of Directors or the Board of Directors, as
the case may be, shall deem appropriate.
<PAGE>

Annual Review. The Compensation Committee of the Board of Directors or the Board
of Directors, as the case may be, shall, at least annually, review the
Executive's entire compensation package to determine whether it continues to
meet MFA's compensation objectives.

Employee Benefit Programs and Fringe Benefits.

During the Term of Employment, the Executive shall be entitled to four weeks of
vacation each calendar year and to participate in all executive incentive and
employee benefit programs of MFA now or hereafter made available to MFA's senior
executives or salaried employees generally, as such programs may be in effect
from time to time. MFA shall reimburse the Executive for any and all necessary,
customary and usual business expenses, properly receipted in accordance with
MFA's policies, incurred by the Executive in connection with her employment.

Termination of Employment.

Termination Due to Death or Disability. If the Executive's employment is
terminated during the Term of Employment by reason of the Executive's death or
Disability, the Executive's Term of Employment shall terminate automatically
without further obligations to the Executive, her legal representative or her
estate, as the case may be, under this Agreement except for (i) any compensation
earned but not yet paid, including and without limitation, any amount of Base
Salary accrued or earned but unpaid and any other payments payable to the
Executive pursuant to Paragraph 5(e) below, which amounts shall be promptly paid
in a lump sum to the Executive, her legal representative or her estate, as the
case may be, and (ii) continued payment on a monthly basis of the Executive's
then current Base Salary for a period of six months following the date of such
termination, which shall be paid to the Executive, her legal representative or
her estate, as the case may be.

Termination Without Cause. In the event the Executive's employment is terminated
by MFA without Cause, unless such termination is preceded by the Executive's
giving notice of her determination not to renew the Initial Term or any Renewal
Term pursuant to Paragraph 1(b), the Executive shall be entitled to both
continued payments of her then current Base Salary and continued health
insurance coverage at MFA's expense, until the later to occur of (i) the
expiration of the Term of Employment or (ii) the six-month anniversary of such
termination of employment, such Base Salary being payable at the same time such
amounts would have been payable to the Executive had her employment not
terminated.

Termination by MFA for Cause or Voluntary Termination by the Executive. In the
event the Executive's employment is terminated by MFA for Cause, is terminated
by the Executive voluntarily or is terminated by MFA pursuant to Paragraph 1(b),
the Executive shall be entitled to any compensation earned but not yet paid,
including and without limitation, any amount of Base Salary accrued or earned
but unpaid and any other payments payable to the Executive pursuant to Paragraph
5(e) below, as of the date of termination.

Termination Related to Change in Control. In the event of (1) the termination of
the Executive's employment by MFA without Cause that occurs both within two
months before and in anticipation of a Change in Control, (2) the resignation of
her employment by the Executive for any reason within three months following a
Change in Control or (3) the termination of the Executive's employment by MFA
other than for Cause or the Executive's resignation of her employment for Good
Reason within twelve months following a Change in Control:

MFA shall pay to Executive in a lump sum, within 30 days following the
termination of employment, an amount equal to 200% of the sum of (a) the
Executive's then current Base Salary and (b) the Executive's bonus for the
immediately preceding year;

all of the Executive's outstanding stock options shall immediately vest in full
and become exercisable for a period of 90 days from the date of termination but
in no event beyond the date on which any such option would have expired had the
Executive's employment not terminated; and

the Executive shall continue to participate in all health, life insurance,
retirement and other benefit programs at MFA's expense for the balance of the
Term of Employment, to the same extent as though the Executive's employment had
not terminated.

The Executive, in her sole and absolute discretion, may elect to reduce any such
payment in order to avoid imposition of the excise tax under Section 4999 of the
Internal Revenue Code of 1986, as amended.

Other Payments. Upon the termination of the Executive's employment, in addition
to the amounts payable under any Paragraph above, the Executive shall be
entitled to receive the following:

     o    any annual bonus earned during one or more preceding years but not
          paid;

     o    any vested deferred compensation (including any interest accrued on
          such deferred amounts);
<PAGE>

     o    reimbursement for reasonable business expenses incurred but not yet
          reimbursed by MFA; and

     o    any other benefits to which the Executive or her legal representative
          may be entitled under applicable plans and programs of MFA, as
          provided in Paragraph 4 above.

No Mitigation; No Offset. In the event of any termination of the Executive's
employment under this Agreement, she shall be under no obligation to seek other
employment or otherwise in any way to mitigate the amount of any payment
provided for in this Paragraph 5, and there shall be no offset against amounts
due him under this Agreement on account of any remuneration attributable to any
subsequent employment that she may obtain.

Definitions. For purposes of this Agreement, the following terms shall be
defined as set forth below:

Cause. "Cause" shall mean the Executive's (i) conviction, or entry of a guilty
plea or a plea of nolo contendre with respect to, a felony, a crime of moral
turpitude or any crime committed against the Company, (ii) engagement in willful
misconduct, willful or gross negligence, or fraud, embezzlement or
misappropriation relating to significant amounts, in each case in connection
with the performance of her duties under this Agreement; (iii) failure to adhere
to the lawful directions of the CEO, the CFO and/or the Board of Directors that
are reasonably consistent with her duties and position provided for herein; (iv)
breach in any material respect of any of the provisions of Paragraph 7 of this
Agreement resulting in material and demonstrable economic injury to MFA; (v)
chronic or persistent substance abuse that materially and adversely affects her
performance of her duties under this Agreement; or (vi) breach in any material
respect of the terms and provisions of this Agreement resulting in material and
demonstrable economic injury to MFA. Notwithstanding the foregoing, (i) the
Executive shall be given written notice of any action or failure to act that is
alleged to constitute Cause (a "Default"), and an opportunity for 20 business
days from the date of such notice in which to cure such Default, such period to
be subject to extension in the discretion of the CEO or, in his absence, the
Board of Directors; and (ii) regardless of whether the Executive is able to cure
any Default, the Executive shall not be deemed to have been terminated for Cause
without (x) reasonable prior written notice to the Executive setting forth the
reasons for the decision to terminate the Executive for Cause, (y) an
opportunity for the Executive, together with her counsel, to be heard by the CEO
or, in his absence, the Board of Directors, and (z) delivery to the Executive of
a notice of termination approved by said CEO or, in his absence, the Board of
Directors, stating his or its good faith opinion that the Executive has engaged
in actions or conduct described in the preceding sentence, which notice
specifies the particulars of such action or conduct in reasonable detail;
provided, however, MFA may suspend the Executive with pay until such time as her
right to appear before the CEO or the Board of Directors, as the case may be,
has been exercised, so long as such appearance is within two weeks of the date
of suspension.

Change in Control. A "Change in Control" shall mean the occurrence of any one of
the following events:

any "person," as such term is used in Sections 13(d) and 14(d) of the Act (other
than MFA, any of its affiliates or any trustee, fiduciary or other person or
entity holding securities under any employee benefit plan or trust of MFA or any
of its affiliates) together with all affiliates and "associates" (as such term
is defined in Rule 12b-2 under the Act) of such person, shall become the
"beneficial owner" (as such term is defined in Rule 13d-3 under the Act),
directly or indirectly, of securities of MFA representing 30% or more of either
(A) the combined voting power of MFA's then outstanding securities having the
right to vote in an election of the Board of Directors ("voting securities") or
(B) the then outstanding shares of common stock of MFA ("Shares") (in either
such case other than as a result of an acquisition of securities directly from
MFA); or

persons who, as of the effective date of MFA's Second Amended and Restated 1997
Stock Option Plan, constitute MFA's Board of Directors (the "Incumbent
Directors") cease for any reason, including, without limitation, as a result of
a tender offer, proxy contest, merger or similar transaction, to constitute at
least a majority of the Board of Directors, provided that any person becoming a
Director of MFA subsequent to the effective date whose election or nomination
for election was approved by a vote of at least a majority of the Incumbent
Directors shall, for purposes of this Agreement, be considered an Incumbent
Director; or

there shall occur (A) any consolidation or merger of MFA or any subsidiary where
the stockholders of MFA, immediately prior to the consolidation or merger, would
not, immediately after the consolidation or merger, beneficially own (as such
term is defined in Rule 13d-3 under the Act), directly or indirectly, shares
representing in the aggregate 50% or more of the voting securities of the
corporation issuing cash or securities in the consolidation or merger (or of its
ultimate parent corporation, if any), (B) any sale, lease, exchange or other
transfer (in one transaction or a series of transactions contemplated or
arranged by any party as a single plan) of all or substantially all of the
assets of MFA or (C) any plan or proposal for the liquidation or dissolution of
MFA.

Notwithstanding the foregoing, a "Change in Control" shall not be deemed to have
occurred for purposes of the foregoing clause (i) solely as the result of an
acquisition of securities by MFA which, by reducing the number of
<PAGE>

Shares or other voting securities outstanding, increases (x) the proportionate
number of Shares beneficially owned by any person to 30% or more of the Shares
then outstanding or (y) the proportionate voting power represented by the voting
securities beneficially owned by any person to 30% or more of the combined
voting power of all then outstanding voting securities; provided, however, that,
if any person referred to in clause (x) or (y) of this sentence shall thereafter
become the beneficial owner of any additional Shares or other voting securities
(other than pursuant to a stock split, stock dividend, or similar transaction),
then a "Change in Control" shall be deemed to have occurred for purposes of this
Paragraph 6(b).

Disability. "Disability" shall mean the Executive's inability for a period of
six consecutive months, to render substantially the services provided for in
this Agreement by reason of mental or physical disability, whether resulting
from illness, accident or otherwise, other than by reason of chronic or
persistent abuse of any substance (such as narcotics or alcohol).

Good Reason. "Good Reason" shall mean:

     o    a material diminution in the Executive's title, duties or
          responsibilities;

     o    relocation of the Executive's place of employment without her consent
          outside the New York City metropolitan area;

     o    the failure of MFA to pay within 30 business days any payment due from
          MFA;

     o    the failure of MFA to pay within a reasonable period after the date
          when amounts are required to be paid to the Executive under any
          benefit programs or plans; or

     o    the failure by MFA to honor any of its material obligations herein.

Covenant Not To Compete.

The Executive will not, without the prior written consent of MFA, manage,
operate, control or be connected as a stockholder (other than as a holder of
shares publicly traded on a stock exchange or the NASDAQ National Market System,
provided that the Executive shall not own more than five percent of the
outstanding shares of any publicly traded company) or partner with, or as an
officer, director, employee or consultant of, any mortgage REIT for a period of
one year following termination of her employment with MFA. During such one-year
period, the Executive shall not solicit any employees of the Company to work for
any mortgage REIT. Except as otherwise required by law, the Executive shall keep
confidential all materials, files, reports, correspondence, records and other
documents (collectively, the "Company Materials") used, prepared or made
available to him in connection with her employment by MFA and which have not
otherwise been made available to the public, and upon termination of her
employment shall return such Company Materials to MFA. The Executive
acknowledges that MFA may seek injunctive relief or other specific enforcement
of its rights under this Paragraph.

Indemnification.

MFA shall indemnify the Executive to the fullest extent permitted by Maryland
law in effect as of the date hereof in connection with the Executive's duties
with the Company, against all costs, expenses, liabilities and losses
(including, without limitation, attorneys' fees, judgments, fines, penalties,
ERISA excise taxes and amounts paid in settlement) actually and reasonably
incurred by the Executive in connection with an action, suit or proceeding.

Assignability; Binding Nature.

This Agreement shall inure to the benefit of MFA and the Executive and their
respective successors, heirs (in the case of the Executive) and assigns. No
rights or obligations of MFA under this Agreement may be assigned or transferred
by MFA except that any such rights or obligations may be assigned or transferred
pursuant to a merger or consolidation in which MFA is not the continuing entity,
or the sale or liquidation of all or substantially all of the assets of MFA,
provided that the assignee or transferee is the successor to all or
substantially all of the assets of MFA and such assignee or transferee assumes
the liabilities, obligations and duties of MFA, as contained in this Agreement,
either contractually or as a matter of law. This Agreement shall not be
assignable by the Executive.

Representation.

MFA represents and warrants that it is fully authorized and empowered to enter
into this Agreement and that its entering into this Agreement and the
performance of its obligations under this Agreement will not violate any
agreement between MFA and any other person, firm or organization or any law or
governmental regulation.

Entire Agreement.

This Agreement contains the entire agreement between MFA and the Executive
concerning the subject matter hereof
<PAGE>

and supersedes all prior agreements, understandings, discussions, negotiations
and undertakings, whether written or oral, between them with respect thereto.

Amendment or Waiver.

This Agreement cannot be changed, modified or amended without the consent in
writing of both the Executive and MFA. No waiver by either MFA or the Executive
at any time of any breach by the other party of any condition or provision of
this Agreement shall be deemed a waiver of a similar or dissimilar condition or
provision at the same or at any prior or subsequent time. Any waiver must be in
writing and signed by the Executive or an authorized officer of MFA, as the case
may be.

Severability.

In the event that any provision or portion of this Agreement shall be determined
to be invalid or unenforceable for any reason, in whole or in part, the
remaining provisions of this Agreement shall be unaffected thereby and shall
remain in full force and effect to the fullest extent permitted by law.

Reasonableness.

To the extent that any provision or portion of this Agreement is determined to
be unenforceable by a court of law or equity, that provision or portion of this
Agreement shall nevertheless be enforceable to the extent that such court
determines is reasonable.

Survivorship.

The respective rights and obligations of the parties hereunder shall survive any
termination of this Agreement to the extent necessary to the intended
preservation of such rights and obligations.

Governing Law.

This Agreement and all rights thereunder, and any controversies or disputes
arising with respect thereto, shall be governed by and construed and interpreted
in accordance with the laws of the State of New York, applicable to agreements
made and to be performed entirely within such State, without regard to conflict
of laws provisions thereof that would apply the law of any other jurisdiction.

Notices.

Any notice given to either party shall be in writing and shall be deemed to have
been given when delivered personally or sent by certified or registered mail,
postage prepaid, return receipt requested, duly addressed to the party
concerned, if to MFA, at its principal office, and if to the Executive, at the
address of the Executive shown on MFA's records or at such other address as such
party may give notice of.

Headings.

The headings of the paragraphs contained in this Agreement are for convenience
only and shall not be deemed to control or affect the meaning or construction of
any provision of this Agreement.

Counterparts.

This Agreement may be executed in two or more counterparts.

IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date
first written above.

                                        MFA Mortgage Investments, Inc.


                                        By: /s/ Stewart Zimmerman
                                            ---------------------
                                                   Stewart Zimmerman
                                            Title: Chief Executive Officer
                                                   and President


                                            /s/ Teresa D. Covello
                                            ---------------------
                                                Teresa D. Covello