**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      DC 20549**




**FORM
        10-Q**


x
                QUARTERLY
                    REPORT PURSUANT TO SECTION 13 OR
                    15(d)OF
                    THE SECURITIES EXCHANGE ACT OF 1934For
                    the quarterly period ended March 31, 2008ORo
                TRANSITION
                    REPORT PURSUANT TO SECTION 13 OR
                    15(d)OF
                    THE SECURITIES EXCHANGE ACT OF 1934


For
      the
      transition period from  to




Commission
      file number **001-32216**




**NEW
      YORK MORTGAGE TRUST, INC.**


(Exact
      Name of Registrant as Specified in Its Charter)




**Maryland**
            **47-0934168**(State
                or Other Jurisdiction of
              Incorporation
                or Organization)
            (I.R.S.
                Employer
              Identification
                No.)




**1301
      Avenue of the Americas, New York, New York 10019**


(Address
      of Principal Executive Office) (Zip Code)




**(212)
      792-0107**


(Registrant's
      Telephone Number, Including Area Code)




Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 12 months (or for such shorter period that the registrant was required
      to file such reports), and (2) has been subject to such filing requirements
      for
      the past 90 days.


Yes x No o




Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, a non-accelerated filer, or a smaller reporting company.
      See
      definitions of  “large accelerated filers” “accelerated filer” and “smaller
      reporting company” in Rule 12b-2 of the Exchange Act. (Check
      one.):




Large
                Accelerated Filero
            Accelerated
                Filero
            Non-Accelerated
                Filerx
            Smaller
              Reporting Company o




Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).


Yes o No x




The
      number of shares of the registrant's common stock, par value $.01 per share,
      outstanding on May 7, 2008 was 18,640,209










**NEW
      YORK MORTGAGE TRUST, INC.**


**FORM
      10-Q**





**Page****Part
                I. Financial Information**Item
                1. Condensed Consolidated Financial Statements
                (unaudited):Condensed
                Consolidated Balance Sheets
            
            
            3Condensed
                Consolidated Statements of Operations
            
            
            4Condensed
                Consolidated Statement of Stockholders' Equity
            
            
            5Condensed
                Consolidated Statements of Cash Flows
            
            
            6Notes
                to Condensed Consolidated Financial Statements
            
            
            8Item
                2. Management's Discussion and Analysis of Financial Condition and
                Results
                of Operations
            
            
            32Item
                3. Quantitative and Qualitative Disclosures about Market
                Risk
            
            
            57Item
                4. Controls and Procedures
            
            
            62**Part
                II. Other Information**
            
            
            63Item
                1. Legal Proceedings
            
            
            63Item
                1A. Risk Factors
            
            
            63Item
                6. Exhibits
            
            
            63Signatures
            
            
            64




2





**NEW
      YORK MORTGAGE TRUST, INC. AND SUBSIDIARIES**


**CONDENSED
      CONSOLIDATED BALANCE SHEETS**


(dollar
      amounts in thousands, except per share data)


(unaudited)




**March
                31,**
              **2008**
            
            
            **December 31,**
              **2007****ASSETS**Cash
                and cash equivalents
            
            $
            8,012
            
            $
            5,508Restricted
                cash
            
            
            1,369
            
            
            7,515Investment
                securities - available for sale
            
            
            512,550
            
            
            350,484Accounts
                and accrued interest receivable
            
            
            2,778
            
            
            3,485Mortgage
                loans held in securitization trusts
            
            
            398,323
            
            
            430,715Derivative
                assets
            
            
            104
            
            
            416Property
                and equipment (net)
            
            
            55
            
            
            62Prepaid
                and other assets
            
            
            1,828
            
            
            2,200Assets
                related to discontinued operation
            
            
            6,755
            
            
            8,876**Total
                Assets**
            
            $
            931,774
            
            $
            809,261**LIABILITIES
                AND STOCKHOLDERS' EQUITY****Liabilities:**Financing
                arrangements, portfolio investments
            
            $
            431,648
            
            $
            315,714Collateralized
                debt obligations
            
            
            386,535
            
            
            417,027Derivative
                liabilities
            
            
            1,169
            
            
            3,517Accounts
                payable and accrued expenses
            
            
            1,809
            
            
            3,752Subordinated
                debentures
            
            
            45,000
            
            
            45,000Convertible
                preferred debentures
            
            
            19,590
            
            
            -Liabilities
                related to discontinued operation
            
            
            4,912
            
            
            5,833Total
                liabilities
            
            
            890,663
            
            
            790,843**Commitments
                and Contingencies****Stockholders'
                Equity:**Common
                stock, $0.01 par value, 400,000,000 shares authorized, 18,640,209
                shares
                issued and outstanding at March 31, 2008 and 3,635,854 shares issued
                and
                outstanding at December 31, 2007
            
            
            186
            
            
            36Additional
                paid-in capital
            
            
            155,817
            
            
            99,339Accumulated
                other comprehensive loss
            
            
            (14,627
            )
            
            (1,950
            )Accumulated
                deficit
            
            
            (100,265
            )
            
            (79,007
            )Total
                stockholders' equity
            
            
            41,111
            
            
            18,418**Total
                Liabilities and Stockholders' Equity**
            
            $
            931,774
            
            $
            809,261




*See
      notes to condensed consolidated financial statements.*


3




**NEW
      YORK MORTGAGE TRUST, INC. AND SUBSIDIARIES**




**CONDENSED
      CONSOLIDATED STATEMENTS OF OPERATIONS**


(amounts
      in thousands, except per share data)


(unaudited)


**For
                  the Three Months**
                **Ended
                  March 31,****2008**
              
              **2007**REVENUES:Interest
                  income on investment securities and loans held in securitization
                  trusts
              
              $
              13,253
              
              $
              13,713Interest
                  expense on investment securities and loans held in securitization
                  trusts
              
              
              10,514
              
              
              13,084Net
                  interest income on investment securities and loans held in
                  securitization trusts
              
              
              2,739
              
              
              629Interest
                  expense - subordinated debentures
              
              
              959
              
              
              882Interest
                  expense - convertible preferred debentures
              
              
              506
              
              
              —Net
                  interest income (loss)
              
              
              1,274
              
              
              (253
              )OTHER
                  EXPENSE:Loan
                  losses
              
              
              (1,433
              )
              
              —Loss
                  on securities and related hedges
              
              
              (19,848
              )
              
              —Total
                  other expense
              
              
              (21,281
              )
              
              —EXPENSES:Salaries
                  and benefits
              
              
              313
              
              
              345Marketing
                  and promotion
              
              
              39
              
              
              23Data
                  processing and communications
              
              
              63
              
              
              37Professional
                  fees
              
              
              352
              
              
              100Depreciation
                  and amortization
              
              
              75
              
              
              68Other
              
              
              589
              
              
              74Total
                  expenses
              
              
              1,431
              
              
              647Loss
                  from continuing operations
              
              
              (21,438
              )
              
              (900
              )Income
                  (loss) from discontinued operation - net of tax
              
              
              180
              
              
              (3,841
              )NET
                    LOSS
              
              $
              (21,258
              )
              $
              (4,741
              )Basic
                  and diluted loss per share
              
              $
              (2.10
              )
              $
              (1.31
              )Weighted
                  average shares outstanding-basic and diluted
              
              
              10,140
              
              
              3,616




*See
      notes to condensed consolidated financial statements.*


4





**NEW
      YORK MORTGAGE TRUST, INC. AND SUBSIDIARIES**




**CONDENSED
      CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY**




**For
                    the Three Months Ended March 31, 2008****Common
                    Stock**
                
                
                **Additional
                    Paid-In Capital**
                
                
                **Accumulated
                    Other Comprehensive Loss**
                
                
                **Accumulated
                    Deficit**
                
                
                **Total**(dollar
                    amounts in thousands)(unaudited)**Balance, January
                    1, 2008 -**Stockholders' Equity
                
                
                
                
                $
                36
                
                $
                99,339
                
                $
                (1,950
                )
                $
                (79,007
                )
                $
                18,418Comprehensive
                    Income:Net
                    loss
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (21,258
                )
                
                (21,258
                )Other
                    comprehensive loss:Increase
                    in net unrealized loss on available for sale
                    securities
                
                
                
                
                
                
                
                
                
                
                
                (11,454
                )
                
                
                
                
                (11,454
                )Increase in
                    net unrealized loss on derivative instruments
                
                
                
                
                
                
                
                
                
                
                
                (1,223
                )
                
                
                
                
                (1,223
                )Common
                    Stock Issuance
                
                
                
                
                
                150
                
                
                56,478
                
                
                
                
                
                
                
                
                56,628**Balance,
                    March 31, 2008 -**Stockholders' Equity
                
                
                
                
                $
                186
                
                $
                155,817
                
                $
                (14,627
                )
                $
                (100,265
                )
                $
                41,111




*See
      notes to condensed consolidated financial statements.*


5


**NEW
      YORK MORTGAGE TRUST, INC. AND SUBSIDIARIES**




**CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS**




(unaudited)




**For
                  the Three Months Ended**
                **March
                  31,****2008**
              
              
              **2007**(dollar
                  amounts in thousands)**Cash
                Flows from Operating Activities:**Net
                  loss
              
              $
              (21,258
              )
              $
              (4,741
              )Adjustments
                  to reconcile net loss to net cash (used in) provided by
                  operating activities:Depreciation
                  and amortization
              
              
              332
              
              
              490Amortization
                  of premium on investment securities and mortgage loans held in
                  securitization trusts
              
              
              224
              
              
              564Origination
                  of mortgage loans held for sale
              
              
              —
              
              
              (300,863
              )Proceeds
                  from sales or repayments of mortgage loans
              
              
              1,782
              
              
              345,205Restricted
                  stock compensation expense
              
              
              —
              
              
              287Loss
                  of securities and related hedges
              
              
              19,848
              
              
              —Gain
                  on sale of retail lending segment
              
              
              —
              
              
              (5,585
              )Loan
                  losses
              
              
              1,195
              
              
              2,971Change
                  in value of derivatives
              
              
              —
              
              
              119Changes
                  in operating assets and liabilities:Due
                  from loan purchasers
              
              
              —
              
              
              26,948Escrow
                  deposits - pending loan closings
              
              
              —
              
              
              3,303Accounts
                  and accrued interest receivable
              
              
              724
              
              
              199Prepaid
                  and other assets
              
              
              540
              
              
              2,044Due
                  to loan purchasers
              
              
              500
              
              
              (4,656
              )Accounts
                  payable and accrued expenses
              
              
              (3,039
              )
              
              (74
              )Other
                  liabilities
              
              
              —
              
              
              (103
              )Net
                  cash provided by operating activities:
              
              
              848
              
              
              65,989**Cash
                  Flows from Investing Activities:**Restricted
                  cash
              
              
              6,146
              
              
              172Purchases
                  of investment securities
              
              
              (801,746
              )
              
              —Proceeds
                  from sale of investment securities
              
              
              587,704
              
              
              —Principal
                  repayments received on mortgage loans held in securitization
                  trusts
              
              
              30,754
              
              
              43,809Principal
                  paydown on investment securities - available for sale
              
              
              25,602
              
              
              41,945Purchases
                  of property and equipment
              
              
              —
              
              
              (369
              )Disposal
                  of fixed assets
              
              
              —
              
              
              485Net
                  cash (used in) provided by investing activities
              
              
              (151,540
              )
              
              86,042**Cash
                  Flows from Financing Activities:**Proceeds
                  from common stock issued (net)
              
              
              56,628
              
              
              —Proceeds
                  from convertible preferred debentures
 (net)
              
              
              19,590
              
              
              —Payments
                  made for termination of swaps
              
              
              (8,333
              )
              
              —Increase
                  (decrease) in financing arrangements
              
              
              115,934
              
              
              (454,756
              )Collateralized
                  debt obligation borrowings
              
              
              —
              
              
              315,908Collateralized
                  debt obligation paydowns
              
              
              (30,623
              )
              
              (11,501
              )Common
                  stock dividends paid
              
              
              —
              
              
              (917
              )Net
                  cash provided by (used in) financing activities
              
              
              153,196
              
              
              (151,266
              )




*See
      notes to condensed consolidated financial statements.*


6




**NEW
      YORK MORTGAGE TRUST, INC. AND SUBSIDIARIES**




**CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS - (continued)**


(unaudited)


**For
                the Three Months**
              **Ended
                March 31,****2008**
            
            **2007**(dollar
                amounts in thousands)**Net
                Increase in Cash and Cash Equivalents**
            
            
            2,504
            
            
            765**Cash
                and Cash Equivalents - Beginning of Period**
            
            
            5,508
            
            
            969**Cash
                and Cash Equivalents - End of Period**
            
            $
            8,012
            
            $
            1,734**Supplemental
                Disclosure**Cash
                paid for interest
            
            $
            11,689
            
            $
            16,171**Non
                Cash Financing Activities**Dividends
                declared to be paid in subsequent period
            
            $
            —
            
            $
            909




*See
      notes to condensed consolidated financial statements.*




7




**NEW
      YORK MORTGAGE TRUST, INC. AND SUBSIDIARIES**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**March
      31, 2008**


**(unaudited)**





**1.**
            **Summary
                of Significant Accounting
                Policies**





*Organization* - New
      York Mortgage Trust, Inc. together with its consolidated subsidiaries (“NYMT”,
      the “Company”, “we”, “our”, and “us”) is a self-advised real estate investment
      trust, or REIT, in the business of investing in residential adjustable rate
      mortgage-backed securities issued by a United States government-sponsored
      enterprise (“GSE” or “Agency”), such as the Federal National Mortgage
      Association (“Fannie Mae”), or the Federal Home Loan Mortgage Corporation
      (“Freddie Mac”), prime credit quality residential adjustable-rate mortgage
      (“ARM”) loans, or prime ARM loans, and non-agency mortgage-backed securities. We
      refer to residential adjustable rate mortgage-backed securities throughout
      this Quarterly Report on Form 10-Q as “MBS” and MBS issued by a GSE as
“Agency MBS”. We seek attractive long-term investment returns by investing our
      equity capital and borrowed funds in such securities. Our principal business
      objective is to generate net income for distribution to our stockholders
      resulting from the spread between the interest and other income we earn on
      our
      interest-earning assets and the interest expense we pay on the borrowings that
      we use to finance these assets, which we refer to as our net interest
      income.




The
      Company is organized and conducts its operations to qualify as a REIT for
      federal income tax purposes. As such, the Company will generally not be subject
      to federal income tax on that portion of its income that is distributed to
      stockholders if it distributes at least 90% of its REIT taxable income to its
      stockholders by the due date of its federal income tax return and complies
      with
      various other requirements.




Until
      March 31, 2007, the Company operated a mortgage lending business through its
      wholly-owned subsidiary, Hypotheca Capital, LLC (“HC”) (formerly known as The
      New York Mortgage Company, LLC).




On
      March
      31, 2007, we completed the sale of substantially all of the operating assets
      related to HC's retail mortgage lending platform to IndyMac Bank, F.S.B.
      (“Indymac”), a wholly-owned subsidiary of Indymac Bancorp, Inc. On February 22,
      2007, we completed the sale of substantially all of the operating assets related
      to HC's wholesale mortgage lending platform to Tribeca Lending Corp.
      (“Tribeca Lending”), a wholly-owned subsidiary of Franklin Credit Management
      Corporation.




In
      connection with the sale of the assets of our wholesale mortgage origination
      platform assets on February 22, 2007 and the sale of the assets of our retail
      mortgage lending platform on March 31, 2007, we classified our mortgage lending
      business as a discontinued operation in accordance with the provisions of
      Statement of Financial Accounting Standards (“SFAS”) No. 144 *Accounting
      for the Impairment or Disposal of Long-Lived Assets* .
      As a
      result, we have reported revenues and expenses related to the mortgage lending
      business as a discontinued operation and the related assets and liabilities
      as
      assets and liabilities related to the discontinued operation for all periods
      presented in the accompanying condensed consolidated financial statements,
      except for the condensed consolidated statements of cash flows. Certain assets
      and liabilities, not assigned to Indymac or Tribeca Lending will become part
      of
      the ongoing operations of NYMT and accordingly, have not been classified as
      a
      discontinued operation in accordance with the provisions of SFAS No. 144 (See
      note 7).




While
      the
      Company sold substantially all of the assets of its wholesale and retail
      mortgage lending platforms and exited the mortgage lending business as of March
      31, 2007, it retains certain assets and liabilities associated with the
      former line of business. Among the assets are mortgage loans held for sale
      and
      the related principal and interest receivable balances.
      The liabilities include costs associated with the disposal of the
      mortgage loans held for sale, potential repurchase and indemnification
      obligations on previously sold mortgage loans and remaining lease payment
      obligations on real and personal property not assigned as part of these
      transactions.




*Basis
      of Presentation* - The
      condensed consolidated financial statements include the accounts of the Company
      and its subsidiaries. All intercompany accounts and transactions are eliminated
      in consolidation. In
      the
      opinion of the Company’s management, all adjustments, consisting of only normal
      recurring accruals, necessary for a fair presentation of the Company’s financial
      position, results of operations and cash flows have been included. The nature
      of
      the Company’s business is such that the results of any interim period
      information are not necessarily indicative of results for a full
      year.





8


**NEW
        YORK MORTGAGE TRUST, INC. AND SUBSIDIARIES**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**March
      31, 2008**


**(unaudited)**





As
      used
      herein, references to the “Company,” “NYMT,” “we,” “our” and “us” refer to New
      York Mortgage Trust, Inc., collectively with its subsidiaries.




The
      Board
      of Directors declared a one for five reverse stock split of our common stock,
      as
      of October 9, 2007, decreasing the number of common shares then outstanding
      to approximately 3.6 million. Prior period share amounts and earnings per share
      disclosures have been restated to reflect the reverse stock split.




*Use
      of Estimates* - The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States of America (“GAAP”) requires management
      to make estimates and assumptions that affect the reported amounts of assets
      and
      liabilities and disclosure of contingent liabilities at the date of the
      financial statements and the reported amounts of revenues and expenses during
      the reporting period. The Company’s estimates and assumptions primarily arise
      from risks and uncertainties associated with interest rate volatility,
      prepayment volatility and credit exposure on our loan losses, available for
      sale
      investments and derivative assets and liabilities. Although management is not
      currently aware of any factors that would significantly change its estimates
      and
      assumptions in the near term, future changes in market conditions may occur
      which could cause actual results to differ materially.




*Cash
      and Cash Equivalents* - Cash
      and cash equivalents include cash on hand, amounts due from banks and overnight
      deposits. The Company maintains its cash and cash equivalents in highly rated
      financial institutions, and at times these balances exceed insurable
      amounts.




*Restricted
      Cash* -
      Restricted cash is held by counterparties as collateral for hedging instruments,
      amounts held as collateral for two letters of credit related to the Company’s
      lease of office space, including its corporate headquarters and amounts held
      in
      an escrow account to support warranties and indemnifications related to the
      sale
      of the retail mortgage lending platform to Indymac.




*Investment
      Securities Available for Sale* - The
      Company's investment securities are residential mortgage-backed securities
      comprised of  Fannie Mae, Freddie Mac and “AAA”- rated adjustable-rate
      securities, including adjustable-rate loans that have an initial fixed-rate
      period. Investment securities are classified as available for sale securities
      and are reported at fair value with unrealized gains and losses reported in
      other comprehensive income (“OCI”). The fair values for all securities in this
      classification are based on unadjusted price quotes for similar securities
      in
      active markets. Realized gains and losses recorded on the sale of investment
      securities available for sale are based on the specific identification method
      and included in gain (loss) on sale of securities and related hedges. Purchase
      premiums or discounts on investment securities are accreted or amortized to
      interest income over the estimated life of the investment securities using
      the
      interest method. Investment securities may be subject to interest rate, credit
      and/or prepayment risk.




When
      the
      fair value of an available for sale security is less than amortized cost,
      management considers whether there is an other-than-temporary impairment in
      the
      value of the security (e.g., whether the security will be sold prior to the
      recovery of fair value). Management considers at a minimum the following factors
      that, both individually or in combination, could indicate the decline is
“other-than-temporary:” 1) the length of time and extent to which the fair value
      has been less than book value; 2) the financial condition and near-term
      prospects of the issuer; or 3) the intent and ability of the Company to
      retain the investment for a period of time sufficient to allow for any
      anticipated recovery in market value. If, in management's judgment, an
      other-than-temporary impairment exists, the cost basis of the security is
      written down to the then-current fair value, and the unrealized loss is
      transferred from accumulated other comprehensive income as an immediate
      reduction of current earnings (i.e., as if the loss had been realized in the
      period of impairment). Even though no credit concerns exist with respect to
      an
      available for sale security, an other-than-temporary impairment may be evident
      if management determines that the Company does not have the intent and ability
      to hold an investment until a forecasted recovery of the value of the
      investment.


9




**NEW
      YORK MORTGAGE TRUST, INC. AND SUBSIDIARIES**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**March
      31, 2008**


**(unaudited)**





*Accounts
      and Accrued Interest Receivable* -
      Accounts and accrued receivable includes interest receivable for investment
      securities and mortgage loans held in securitization trusts.




*Mortgage
      Loans Held in Securitization Trusts* -
      Mortgage loans held in securitization trusts are certain ARM loans
      transferred to New York Mortgage Trust 2005-1, New York Mortgage Trust 2005-2
      and New York Mortgage Trust 2005-3 that have been securitized into sequentially
      rated classes of beneficial interests. Mortgage loans held in securitization
      trusts are carried at their unpaid principal balances, including
      unamortized premium or discount, unamortized loan origination costs and
      allowance for loan losses. In
      accordance with SFAS 140, *Accounting for Transfers and Servicing of
      Financial Assets and Extinguishment of Liabilities-a replacement of FASB
      statement No. 125*, Securitized ARM loans and ARM loans collateralizing debt
      are accounted for as loans and are not considered investments subject to
      classification under SFAS 115, *Accounting
      for Certain Investments in Debt and Equity Securities* .
      See
      Collateralized Debt Obligations below for further description.




Interest
      income is accrued and recognized as revenue when earned according to the terms
      of the mortgage loans and when, in the opinion of management, it is collectible.
      The accrual of interest on loans is discontinued when, in management’s opinion,
      the interest is not collectible in the normal course of business, but in no
      case
      when payment becomes greater than 90 days delinquent. Loans return to accrual
      status when principal and interest become current and are anticipated to be
      fully collectible.




*Loan
      Loss Reserves on Mortgage Loans Held in Securitization Trusts-* We establish
      a reserve for loan losses based on management's judgment and estimate of credit
      losses inherent in our portfolio of mortgage loans held in securitization
      trusts.




Estimation
      involves the consideration of various credit-related factors including but
      not
      limited to, macro-economic conditions, the current housing market conditions,
      loan-to-value ratios, delinquency status, historical credit loss severity rates,
      purchased mortgage insurance, the borrower's credit and other factors deemed
      to
      warrant consideration. Additionally, we look at the balance of any delinquent
      loan and compare that to the current value of the property. We utilize various
      internet-based property data services to review comparable properties in the
      same area or consult with a realtor in the property's area.


Comparing
        the current loan balance to the property’s current value determines the current
        loan-to-value (“LTV”) ratio of the loan. Generally, we estimate that the a first
        lien on a property that goes into a foreclosure process, resulting in real
        estate owned (“REO”), results in the property being disposed of at approximately
        68% of the property’s current value, after expenses. This estimate is based on
        management's long term experience. It is possible we may realize less or
        more
        than that given today’s difficult real estate market conditions. Thus, for a
        first lien loan that is 60 or more days delinquent, we will adjust the property
        value down to approximately 68% of the property’s current value and compare that
        to the current balance of the loan. The difference determines the base reserve
        taken for that loan. This base reserve for a particular loan may be adjusted
        if
        we are aware of specific circumstances that may affect the outcome of the
        loss
        mitigation process for that loan. Predominately, however, we use the base
        reserve number for our reserve.




The
      loan
      loss reserves will be maintained through ongoing provisions charged to operating
      income and will be reduced by loans that are charged off. As of March 31, 2008
      the allowance for loan losses held in securitization trusts totaled $3.1
      million. The allowance for loan losses was $1.6 million at December 31, 2007.
      Determining the allowance for loan losses is subjective in nature due to the
      estimation required.




*Property
      and Equipment, (Net)* -
      Property and equipment have lives ranging from three to ten years, and are
      stated at cost less accumulated depreciation and amortization. Depreciation
      is
      determined in amounts sufficient to charge the cost of depreciable assets to
      operations over their estimated service lives using the straight-line method.
      Leasehold improvements are amortized over the lesser of the life of the lease
      or
      service lives of the improvements using the straight-line method.


10
  **NEW
      YORK MORTGAGE TRUST, INC. AND SUBSIDIARIES**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**March
      31, 2008**


**(unaudited)**





*Financing
      Arrangements, Portfolio Investments-* Portfolio investments are typically financed with repurchase agreements, a
      form
      of collateralized borrowing which is secured by portfolio securities on the
      balance sheet.  Such financings are recorded at their outstanding principal
      balance with any accrued interest due recorded as an accrued expense (see
      note 5).




*Collateralized
      Debt Obligations (“CDO”) -* We use
      CDOs to permanently finance our loans held in securitization trusts.  For
      financial reporting purposes, the ARM loans and restricted cash held as
      collateral are recorded as assets of the Company and the CDO is recorded as
      the
      Company’s debt. The transaction includes interest rate caps which are held by
      the securitization trust and recorded as an asset or liability of the
      Company.




The
      Company, as transferor, securitizes mortgage loans and securities by
      transferring the loans or securities to entities (“Transferees”) which generally
      qualify under GAAP as “qualifying special purpose entities” (“QSPE's”) as
      defined under SFAS No. 140, *Accounting
      for Transfers and Servicing of Financial Assets and Extinguishment of
      Liabilities-a replacement of SFAS No. 125* (“Off Balance Sheet
      Securitizations”) .
      The
      QSPEs issue investment grade and non-investment grade securities. Generally,
      the
      investment grade securities are sold to third party investors, and the Company
      retains the non-investment grade securities. If a transaction meets the
      requirements for sale recognition under GAAP, and the Transferee meets the
      requirements to be a QSPE, the assets transferred to the QSPE are considered
      sold, and gain or loss is recognized. The gain or loss is based on the price
      of
      the securities sold and the estimated fair value of any securities and servicing
      rights retained over the cost basis of the assets transferred net of transaction
      costs. If subsequently the Transferee fails to continue to qualify as a QSPE,
      or
      the Company obtains the right to purchase assets out of the Transferee, then
      the
      Company may have to include in its financial statements such assets, or
      potentially, all the assets of such Transferee (see note 6).




*Subordinated
      Debentures -* Subordinated debentures are trust preferred securities that are fully guaranteed
      by the Company with respect to distributions and amounts payable upon
      liquidation, redemption or repayment.  These securities are classified as
      subordinated debentures in the liability section of the Company’s condensed
      consolidated balance sheet.


*Convertible
        Preferred Debentures* - As
        of
        March 31, 2008, there were 1.0 million shares of our Series A Preferred Stock
        outstanding, with an aggregate redemption value of $20.0 million. On
        January 18, 2008, the Company issued 1.0 million shares of its Series A
        Cumulative Redeemable Convertible Preferred Stock, which we refer to as our
        Series A Preferred Stock, to JMP Group Inc. and certain of its affiliates
        for an
        aggregate purchase price of $20.0 million. The Series A Preferred
        Stock entitles the holders to receive a cumulative dividend of 10% per
        year, subject to an increase to the extent any future quarterly common stock
        dividends exceed $0.10 per share. The Series A Preferred Stock is
        convertible into shares of the Company's common stock based on a conversion
        price of $4.00 per share of common stock, which represents a conversion rate
        of
        five shares of common stock for each Series A Preferred Stock. The Series A
        Preferred Stock matures on December 31, 2010, at which time
        any outstanding shares must be redeemed by the Company at the $20.00
        per share liquidation preference. Pursuant to SFAS 150, *Accounting* *for
        Certain Financial Instruments with Characteristics of both Liabilities and
        Equity*, because of this mandatory redemption feature, the
        Company classifies these securities as  a liability on its
        balance sheet.




*Derivative
      Financial Instruments* - The
      Company has developed risk management programs and processes, which include
      investments in derivative financial instruments designed to manage market risk
      associated with its mortgage banking and its mortgage-backed securities
      investment activities.




Derivative
      instruments contain an element of risk in the event that the counterparties
      may
      be unable to meet the terms of such agreements. The Company minimizes its risk
      exposure by limiting the counterparties with which it enters into contracts
      to
      banks, investment banks and certain private investors who meet established
      credit and capital guidelines.




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


11





**NEW
      YORK MORTGAGE TRUST, INC. AND SUBSIDIARIES**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**March
      31, 2008**


**(unaudited)**





*Interest
      Rate Risk* - The
      Company hedges the aggregate risk of interest rate fluctuations with respect
      to
      its borrowings, regardless of the form of such borrowings, which require
      payments based on a variable interest rate index. The Company generally intends
      to hedge only the risk related to changes in the benchmark interest rate either
      the (London Interbank Offered Rate (“LIBOR”) or a Treasury
      rate).




In
      order
      to reduce such risks, the Company enters into swap agreements whereby the
      Company receives floating rate payments in exchange for fixed rate payments,
      effectively converting the borrowing to a fixed rate. The Company also enters
      into cap agreements whereby, in exchange for a fee, the Company is reimbursed
      for interest paid in excess of a certain capped rate.




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




·
            the
                items to be hedged expose the Company to interest rate risk;
                and




·
            the
                interest rate swaps or caps are expected to be and continue to be
                highly
                effective in reducing the Company's exposure to interest rate
                risk.




The
      fair
      values of the Company's interest rate swap agreements and interest rate cap
      agreements are based on values provided by dealers who are familiar with the
      terms of these instruments. Correlation and effectiveness are periodically
      assessed at least quarterly based upon a comparison of the relative changes
      in
      the fair values or cash flows of the interest rate swaps and caps and the items
      being hedged.





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





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




*Termination
      of Hedging Relationships* - The
      Company employs a number of risk management monitoring procedures to ensure
      that
      the designated hedging relationships are demonstrating, and are expected to
      continue to demonstrate, a high level of effectiveness. Hedge accounting is
      discontinued on a prospective basis if it is determined that the hedging
      relationship is no longer highly effective or expected to be highly effective
      in
      offsetting changes in fair value of the hedged item.





Additionally,
      the Company may elect to un-designate a hedge relationship during an interim
      period and re-designate upon the rebalancing of a hedge profile and the
      corresponding hedge relationship. When hedge accounting is discontinued, the
      Company continues to carry the derivative instruments at fair value with changes
      recorded in current earnings.





*Other
      Comprehensive Income (Loss)* - Other
      comprehensive income (loss) is comprised primarily of income (loss) from
      changes in value of the Company’s available for sale securities, and the impact
      of deferred gains or losses on changes in the fair value of derivative contracts
      hedging future cash flows.




*Employee
      Benefits Plans* - The
      Company sponsors a defined contribution plan (the “Plan”) for all eligible
      domestic employees. The Plan qualifies as a deferred salary arrangement under
      Section 401(k) of the Internal Revenue Code. Under the Plan, participating
      employees may defer up to 15% of their pre-tax earnings, subject to the annual
      Internal Revenue Code contribution limit. The Company may match contributions
      up
      to a maximum of 25% of the first 5% of salary. Employees vest immediately in
      their contribution and vest in the Company’s contribution at a rate of 25% after
      two full years and then an incremental 25% per full year of service until fully
      vested at 100% after five full years of service. The Company’s total
      contributions to the Plan were $0 for the three months ended March 31, 2008
      and
      $18,495 for the three months ended March 31, 2007.


12


**NEW
      YORK MORTGAGE TRUST, INC. AND SUBSIDIARIES**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**March
      31, 2008**


**(unaudited)**





*Stock
      Based Compensation -* The
      Company accounts for its stock options and restricted stock grants in accordance
      with the SFAS No. 123 R, *Share-Based
      Payment* , (“SFAS
      No. 123 R”) which requires all companies to measure compensation for all
      share-based payments, including employee stock options, at fair value (see
      note 13).





*Income
      Taxes* - The
      Company operates so as to qualify as a REIT under the requirements of the
      Internal Revenue Code. Requirements for qualification as a REIT include various
      restrictions on ownership of the Company’s stock, requirements concerning
      distribution of taxable income and certain restrictions on the nature of assets
      and sources of income. A REIT must distribute at least 90% of its taxable income
      to its stockholders of which 85% plus any undistributed amounts from the prior
      year must be distributed within the taxable year in order to avoid the
      imposition of an excise tax. The remaining balance may extend until timely
      filing of the Company’s tax return in the subsequent taxable year. Qualifying
      distributions of taxable income are deductible by a REIT in computing taxable
      income.




HC
      is a
      taxable REIT subsidiary and therefore subject to corporate Federal income taxes.
      Accordingly, deferred tax assets and liabilities are recognized for the future
      tax consequences attributable to differences between the financial statement
      carrying amounts of existing assets and liabilities and their respective tax
      base upon the change in tax status. Deferred tax assets and liabilities are
      measured using enacted tax rates expected to apply to taxable income in the
      years in which those temporary differences are expected to be recovered or
      settled. The effect on deferred tax assets and liabilities of a change in tax
      rates is recognized in income in the period that includes the enactment date
      (see note 11).




*Earnings
      Per Share* - Basic
      earnings per share excludes dilution and is computed by dividing net income
      available to common stockholders by the weighted-average number of shares of
      common stock outstanding for the period. Diluted earnings per share reflects
      the
      potential dilution that could occur if securities or other contracts to issue
      common stock were exercised or converted into common stock or resulted in the
      issuance of common stock that then shared in the earnings of the
      Company.




*Loan
      Loss Reserves on Repurchase Requests and Mortgage Under Indemnification
      Agreements-* We
      establish reserves for loans we have been requested to repurchase from investors
      and for loans subject to indemnification agreements. Generally loans wherein
      the
      borrowers do not make each of all the first three payments to the new investor
      once the loan has been sold, require us, under the terms of purchase and sale
      agreement entered into with the investor, to repurchase the
      loan.





For
      the
      three months ended March 31, 2008, we repurchased no mortgage loans and received
      $0.3 million of new repurchase requests. As of March 31, 2008, we had pending
      repurchase requests totaling approximately $4.7 million in unpaid principal
      balances, against which the Company has taken a reserve of approximately $0.7
      million. The reserve is based on historical settlement rates, property value
      securing the loan in question and specific settlement discussion with third
      parties. The Company intends to address the approximately $4.7 million in
      outstanding repurchase requests by attempting to enter into settlement
      agreements.




13




**NEW
      YORK MORTGAGE TRUST, INC. AND SUBSIDIARIES**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**March
      31, 2008**


**(unaudited)**





*New
      Accounting Pronouncements -*On
      January 1, 2008, the Company adopted SFAS 157,*Fair
      Value Measurements*,
      which
      defines fair value, establishes a framework for measuring fair value in
      accordance with GAAP and expands disclosures about fair value
      measurements.  The
        changes to previous practice resulting from the application of SFAS 157 relate
        to the definition of fair value, the methods used to measure fair value,
        and the
        expanded disclosures about fair value measurements.  The definition of
        fair value retains the exchange price notion used in earlier definitions
        of fair
        value.  SFAS 157 clarifies that the exchange price is the price in an
        orderly transaction between market participants to sell the asset or transfer
        the liability in the market in which the reporting entity would transact
        for the
        asset or liability, that is, the principal or most advantageous market for
        the
        asset or liability.  The transaction to sell the asset or transfer the
        liability is a hypothetical transaction at the measurement date, considered
        from
        the perspective of a market participant that holds the asset or owes the
        liability.  SFAS 157 provides a consistent definition of fair value
        which focuses on exit price and prioritizes, within a measurement of fair
        value,
        the use of market-based inputs over entity-specific inputs.  In
        addition, SFAS 157 provides a framework for measuring fair value, and
        establishes a three-level hierarchy for fair value measurements based upon
        the
        transparency of inputs to the valuation of an asset or liability as of the
        measurement date (see note 10).
 
 On
        January 1, 2008, the Company adopted SFAS 159, *The
        Fair Value Option for Financial Assets and Financial
        Liabilities* ,
        which
        provides companies with an option to report selected financial assets and
        liabilities at fair value.
 
 The
        objective of SFAS No. 159 is to reduce both complexity in accounting for
        financial instruments and the volatility in earnings caused by measuring
        related
        assets and liabilities differently. SFAS No. 159 establishes presentation
        and
        disclosure requirements and requires companies to provide additional information
        that will help investors and other users of financial statements to more
        easily
        understand the effect of the company's choice to use fair value on its earnings.
        SFAS No. 159 also requires entities to display the fair value of those assets
        and liabilities for which the Company has chosen to use fair value on the
        face
        of the balance sheet. The Company’s adoption of SFAS 159 did not have a material
        impact on the condensed consolidated financial statements as the Company
        did not
        elect the fair value option for any of its existing financial assets or
        liabilities as of January 1, 2008.
  n
      June
      2007, the EITF reached consensus on Issue No. 06-11, *Accounting
      for Income Tax Benefits of Dividends on Share-Based Payment
      Awards* .
      EITF
      Issue No. 06-11 requires that the tax benefit related to dividend
      equivalents paid on restricted stock units, which are expected to vest, be
      recorded as an increase to additional paid-in capital. The Company
      currently accounts for this tax benefit as a reduction to income tax expense.
      EITF Issue No. 06-11 is to be applied prospectively for tax benefits on
      dividends declared in fiscal years beginning after December 15, 2008, and
      the Company expects to adopt the provisions of EITF Issue No. 06-11
      beginning in the first quarter of 2009. The Company does not expect the adoption
      of EITF Issue No. 06-11 to have a material effect on its financial
      condition, results of operations or cash flows.




In
      February 2008, the FASB issued SFAS No. 140-3, *Accounting
      for Transfers of Financial Assets and Repurchase Financing
      Transactions* .
      SFAS
      No. 140-3 requires an initial transfer of a financial asset and a
      repurchase financing that was entered into contemporaneously or in contemplation
      of the initial transfer to be evaluated as a linked transaction under
      SFAS No. 140 unless certain criteria are met, including that the
      transferred asset must be readily obtainable in the marketplace. FSP
      No. 140-3 is effective for fiscal years beginning after November 15,
      2008, and will be applied to new transactions entered into after the date of
      adoption. Early adoption is prohibited. The Company is currently evaluating
      the impact of adopting FSP No. 140-3 on its financial condition and cash
      flows. Adoption of FSP No. 140-3 will have no effect on the Company’s
      results of operations.




In
      March 2008, the FASB issued SFAS No. 161, *Disclosures
      about Derivative Instruments and Hedging Activities — an amendment of FASB
      Statement No. 133.* SFAS No. 161 requires enhanced disclosures about an entity’s
      derivative and hedging activities, and is effective for financial statements
      issued for fiscal years beginning after November 15, 2008, with early
      application encouraged. The Company will adopt SFAS No. 161 in the
      first quarter of 2009. Because SFAS No. 161 requires only
      additional disclosures concerning derivatives and hedging activities, adoption
      of SFAS No. 161 will not affect the Company’s financial condition,
      results of operations or cash flows.





**2.
      Investment Securities - Available for Sale**




Investment
      securities available for sale consist of the following as of March 31, 2008
      and
      December 31, 2007 (dollar amounts in thousands):




**March
                31,**
              **2008**
            
            
            **December 31,**
              **2007**Amortized
                cost
            
            $
            524,004
            
            $
            350,484Gross
                unrealized losses
            
            
            (11,454
            )
            
            —Fair
                value
            
            $
            512,550
            
            $
            350,484






14




**NEW
      YORK MORTGAGE TRUST, INC. AND SUBSIDIARIES**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**March
      31, 2008**


**(unaudited)**




During
            March 2008, news of security liquidations increased the volatility of
            many
            financial assets, including those held in our portfolio. Specifically,
            the
            significant liquidation of MBS by several large financial institutions
            in early
            March 2008 caused a significant decline in the fair market value of our
            MBS
            portfolio. Specifically, the fair market value of the Agency MBS in our
            portfolio, including Agency ARM MBS and CMO Floaters that we pledge as
            collateral for borrowings under our repurchase agreements, declined during
            the
            March 2008 market disruption. As a result of the significant decline
            in the fair
            value of our Agency securities, as determined by the lenders under our
            repurchase agreements, the haircut required by our lenders to obtain
            new or
            additional financing on these securities experienced, in some cases, a
            significant increase. For example, as of March 31, 2008, the average
            haircut on
            the CMO Floaters in our portfolio was 12% , as compared to 5% at December
            31, 2007. As a result of the combination of lower fair values on our Agency
            securities and rising haircut requirements to finance those securities,
            we
            elected to improve our liquidity position by selling approximately $592.8
            million of Agency MBS securities, including $516.4 million of Agency ARM
            MBS and $76.4 million of CMO Floaters from our portfolio in March 2008. The
            sales resulted in a realized loss of $15.0 million.
 
 As
            result
            of the timing of these sales occurring prior to the release of our December
            31,
            2007 results, the Company determined that the unrealized losses on our
            entire
            MBS securities portfolio were considered to be other than temporarily
            impaired
            as of December 31, 2007 and incurred an $8.5 million impaired
            charge for the quarter ending December 31,
            2007.
  As
          of
          March 31, 2008 and the date of this filing, we have the intent, and believe
          we
          have the ability, to hold our portfolio of securities which are currently
          in
          unrealized loss positions until recovery of their amortized cost,
          which  may be until maturity.  Given the uncertain state of the market
          for such securities, should conditions change that would require us to
          sell
          securities at a loss, we may no longer be able to assert that we have the
          ability to hold our remaining securities until recovery, and we would then
          be
          required to record impairment charges related to these securities. Substantially
          all of the Company's investment securities available for sale are pledged
          as
          collateral for borrowings under financing arrangements (see note
          5).
 All
        securities held in Investment Securities Available for Sale, including Agency,
        investment and non-investment grade securities, are based on unadjusted price
        quotes for similar securities in active markets and are categorized as level
        2
        per SFAS 157 (see note 10).


The
      following tables set forth the stated reset periods and weighted average yields
      of our investment securities at March 31, 2008: (dollar amounts in
      thousands):


**Less than 6 Months**
            
            
            
            **More than 6****Months**
              **to 24 Months**
            
            
            
            **More than 24****Months**
              **to 60 Months**
            
            
            
            **Total****Carrying**
              **Value**
            
            
            **Weighted**
              **Average**
              **Yield**
            
            
            
            **Carrying**
              **Value**
            
            
            **Weighted**
              **Average**
              **Yield**
            
            
            
            **Carrying**
              **Value**
            
            
            **Weighted**
              **Average**
              **Yield**
            
            
            
            **Carrying**
              **Value**
            
            
            **Weighted**
              **Average**
              **Yield**Agency
                REMIC CMO floaters
            
            $
            224,262
            
            
            4.12
            %
            
            $
            —
            
            
            —
            
            
            $
            —
            
            
            —
            
            
            $
            224,262
            
            
            4.12
            %Agency
                Hybrid ARM securities
            
            
            —
            
            
            —
            
            
            
            —
            
            
            —
            
            
            
            261,778
            
            
            4.22
            %
            
            
            261,778
            
            
            4.22
            %Non-Agency
                floaters
            
            
            23,683
            
            
            7.44
            %
            
            
            —
            
            
            —
            
            
            
            —
            
            
            —
            
            
            
            23,683
            
            
            7.44
            %NYMT
                Retained Securities
            
            
            —
            
            
            —
            
            
            
            2,154
            
            
            5.27
            %
            
            
            673
            
            
            12.75
            %
            
            
            2,827
            
            
            9.45
            %Total/Weighted
                average
            
            $
            247,945
            
            
            4.50
            %
            
            $
            2,154
            
            
            5.27
            %
            
            $
            262,451
            
            
            4.31
            %
            
            $
            512,550
            
            
            4.41
            %




The
      NYMT
      retained securities includes $0.7 million of residual interests related to
      the
      NYMT 2006-1 transaction.




The
      following table sets forth the stated reset periods and weighted average yields
      of our investment securities at December 31, 2007 (dollar amounts in
      thousands):




**Less than 6 Months**
            
            
            **More than 6 Months**
              **to 24 Months**
            
            **More than 24 Months**
              **to 60 Months**
            
            
            **Total****Carrying
                Value**
            
            **Weighted
                Average Yield**
            
            
            **Carrying
                Value**
            
            **Weighted
                Average Yield**
            
            **Carrying
                Value**
            
            **Weighted
                Average Yield**
            
            
            **Carrying
                Value**
            
            **Weighted
                Average Yield**Agency
                REMIC CMO Floating Rate
            
            $
            318,689
            
            
            5.55
            %
            
            $
            —
            
            
            —
            
            $
            —
            
            
            —
            
            
            $
            318,689
            
            
            5.55
            %Non-Agency
                Floaters
            
            
            28,401
            
            
            5.50
            %
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            
            28,401
            
            
            5.50
            %NYMT
                Retained Securities
            
            
            2,165
            
            
            6.28
            %
            
            
            —
            
            
            —
            
            
            1,229
            
            
            12.99
            %
            
            
            3,394
            
            
            10.03
            %Total/Weighted
                Average
            
            $
            349,255
            
            
            5.55
            %
            
            $
            —
            
            
            —
            
            $
            1,229
            
            
            12.99
            %
            
            $
            350,484
            
            
            5.61
            %




The
      NYMT
      retained securities includes $1.2 million of residual interests related to
      the
      NYMT 2006-1 transaction.


15




**NEW
      YORK MORTGAGE TRUST, INC. AND SUBSIDIARIES**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**March
      31, 2008**


**(unaudited)**





The
      following table presents the Company's investment securities available for
      sale
      in an unrealized loss position, aggregated by investment category and length
      of
      time that individual securities have been in a continuous unrealized loss
      position at March 31, 2008. There were no unrealized positions as of December
      31, 2007 as the Company incurred an $8.5 million impairment charge (dollar
      amounts in thousands):





**March
                31, 2008****Less
                than 12 Months**
            
            **12
                Months or More**
            
            **Total****Fair**
              **Value**
            
            **Gross**
              **Unrealized**
              **Losses**
            
            **Fair**
              **Value**
            
            **Gross**
              **Unrealized**
              **Losses**
            
            **Fair**
              **Value**
            
            **Gross**
              **Unrealized**
              **Losses**Agency
                REMIC CMO floaters
            
            $
            224,262
            
            $
            5,170
            
            $
            —
            
            $
            —
            
            $
            224,262
            
            $
            5,170Agency
                Hybrid ARM securities
            
            
            261,778
            
            
            1,197
            
            
            —
            
            
            —
            
            
            261,778
            
            
            1,197Non-Agency
                floaters
            
            
            23,683
            
            
            4,520
            
            
            —
            
            
            —
            
            
            23,683
            
            
            4,520NYMT
                retained securities
            
            
            2,827
            
            
            567
            
            
            —
            
            
            —
            
            
            2,827
            
            
            567Total
            
            $
            512,550
            
            $
            11,454
            
            $
            —
            
            $
            —
            
            $
            512,550
            
            $
            11,454





**3** . **Mortgage
      Loans Held in Securitization Trusts**




Mortgage
      loans held in securitization trusts consist of the following as of March 31,
      2008 and December 31, 2007 (dollar amounts in thousands):




**March 31,**
              **2008**
            
            **December
                31,**
              **2007**Mortgage
                loans principal amount
            
            $
            398,875
            
            $
            429,629Deferred
                origination costs - net
            
            
            2,528
            
            
            2,733Reserve
                for loan
                losses
            
            
            (3,080
            )
            
            (1,647
            )Total
                mortgage loans held in securitization
                trusts
            
            $
            398,323
            
            $
            430,715




*Reserve
      for Loan losses -* The
      following table presents the activity in the Company's reserve for loan losses
      on mortgage loans held in securitization trusts for the three months
      ended March 31, 2008 and 2007 (dollar amounts in
      thousands).




**March
                31,****2008**
            
            **2007**Balance at
                beginning of period
            
            $
            1,647
            
            $
            —Provisions
                for loan losses
            
            
            1,433
            
            
            —Charge-offs
            
            
            —
            
            
            —Balance
                of the end of period
            
            $
            3,080
            
            $
            —




The
      increase in loan loss provisions were due to $0.8 million of new delinquent
      loans and $0.6 million related to an increase in existing loan provisions.
      The
      reserves were adjusted higher for certain existing loans as a result of further
      real estate valuation deterioration.


16




**NEW
      YORK MORTGAGE TRUST, INC. AND SUBSIDIARIES**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**March
      31, 2008**


**(unaudited)**





All
      of
      the Company's mortgage loans held in securitization trusts are pledged as
      collateral for the CDO (see note 6). The Company’s net investment in the loans
      held in securitization trusts, or the difference between the purchase cost
      of
      the loans and the amount of CDO outstanding, was $14.9 million, of which the
      Company had a $3.1 million reserve or a net investment of $11.8
      million.




The
      following tables set forth delinquent loans in our portfolio as of March 31,
      2008 and December 31, 2007 (dollar amounts in thousands):




**March
              31, 2008****Days
              Late**
            
            
            **Number
                of**
              **Delinquent**
              **Loans**
            
            
            **Total**
              **Dollar
                Amount**
            
            
            **%
                of Loan**
              **Portfolio**30-60
            
            
            2
            
            $
            1,052
            
            
            0.26
            %61-90
            
            
            1
            
            
            397
            
            
            0.10
            %90+
            
            
            11
            
            
            7,653
            
            
            1.92
            %Real
              estate owned through foreclosure
            
            
            6
            
            $
            4,807
            
            
            1.21
            %




**December
                31, 2007**


**Days
              Late**
            
            **Number
                of**
              **Delinquent**
              **Loans**
            
            **Total**
              **Dollar
                Amount**
            
            **%
                of Loan**
              **Portfolio**30-60
            
            
            —
            
            $
            —
            
            
            —
            %61-90
            
            
            2
            
            
            1,859
            
            
            0.43
            %90+
            
            
            12
            
            
            6,910
            
            
            1.61
            %Real
                estate owned through foreclosure
            
            
            4
            
            $
            4,145
            
            
            0.96
            %


17




**NEW
      YORK MORTGAGE TRUST, INC. AND SUBSIDIARIES**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**March
      31, 2008**


**(unaudited)**




4
      .Derivative
      Instruments and Hedging Activities





The
      Company enters into derivatives to manage its interest rate and market risk
      exposure associated with its MBS investment activities and its subordinated
      debentures. These derivatives include interest rate swaps and caps to mitigate
      the effects of major interest rate changes on net investment
      spread.




During
      the three months ended March 31, 2008, the
      Company terminated a total of $517.7 million notional intrest rate swaps
      resulting in a realized loss of $4.8 million.





The
      following table summarizes the estimated fair value of derivative assets and
      liabilities as of March 31, 2008 and December 31, 2007 (see Note 10) (dollar
      amounts in thousands):




**March
                31,**
              **2008**
            
            **December
                31,**
              **2007****Derivative
              Assets:**Interest
                rate caps
            
            $
            104
            
            $
            416**Total
                derivative assets**
            
            $
            104
            
            $
            416**Derivative
                Liabilities:**Interest
                rate swaps
            
            $
            1,169
            
            $
            3,517**Total
                derivative liabilities**
            
            $
            1,169
            
            $
            3,517




The
      notional amounts of the Company's interest rate swaps and interest rate caps
      as
      of March 31, 2008 were $168.1 million and $717.7 million,
      respectively.




The
      notional amounts of the Company's interest rate swaps and interest rate caps
      as
      of December 31, 2007 were $220.0 million and $749.6 million,
      respectively.




The
      Company estimates that over the next 12 months, approximately $0.7 million
      of the net unrealized losses on the interest rate swaps will be
      reclassified from accumulated OCI into earnings.





The
      Company had pledged $1.6 million of Agency ARM MBS as margin for
      interest rate swaps as of March 31, 2008 and had $4.7 million of restricted
      cash
      related to margin posted for interest rate swaps as of December 31, 2007. The
      Company is required to post margin in the form of either cash or Agency ARM
      MBS
      to cover fair value deficits from our interest rate swap
      counterparties.




18




**NEW
      YORK MORTGAGE TRUST, INC. AND SUBSIDIARIES**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**March
      31, 2008**


**(unaudited)**





**5
      .** **Financing
      Arrangements, Portfolio Investments**





The
      Company has entered into repurchase agreements with third party financial
      institutions to finance its mortgage-backed securities portfolio. The repurchase
      agreements are short-term borrowings that bear interest rates based on a spread
      to LIBOR, and are secured by the mortgage-backed securities which they finance.
      At March 31, 2008, the Company had repurchase agreements with an outstanding
      balance of $431.6 million and a weighted average interest rate of 3.00%. As
      of
      December 31, 2007, the Company had repurchase agreements with an outstanding
      balance of $315.7 million and a weighted average interest rate of 5.02%. At
      March 31, 2008 and December 31, 2007, securities pledged as collateral for
      repurchase agreements had estimated fair values of $481.7 million and $337.4
      million, respectively. All outstanding borrowings under our repurchase
      agreements mature within 30 days. As of March 31, 2008, the average
      days to maturity for all repurchase agreements are 25 days. The Company had
      outstanding repurchase agreements with six different financial institutions
      as
      of March 31, 2008 as compared to four as of December 31, 2007. In the event
      we
      are unable to obtain sufficient short-term financing through repurchase
      agreements or otherwise, or our lenders start to require additional collateral,
      we may have to liquidate our investment securities at a disadvantageous time,
      which could result in losses. Any losses resulting from the disposition of
      our investment securities in this manner could have a material adverse effect
      on
      our operating results and net profitability.





As
      of
      March 31, 2008, our Agency ARM MBS are financed with $230.2 million of
      repurchase agreement funding equating to an advance rate of 94% that
      implies a haircut of 6%, our Agency CMO floaters are financed with $180.7
      million of repurchase agreement financing equating to an advance rate of 88%
      that implies a haircut of 12% and the non-Agency CMO floater was financed with
      $20.8 million of repurchase agreements funding equating to an advance rate
      of
      90% or a 10% haircut. As
      discussed in Note 2 above, we experienced a combination of declining fair market
      value for the securities in our portfolio and increasing haircut requirement
      in
      March 2008 that resulted in our selling approximately $592.8 million of Agency
      MBS in our portfolio during March 2008. We undertook thse actions to reduce
      our
      leverage and improve our liquidity position. We
      cannot
      assure you that the haircuts on the securities in our MBS portfolio will not
      increase from their current haircut average. A material increase in haircuts
      on
      these securities may result in securities sales similar to those in March 2008
      that would likely negatively affect our profitability, liquidity and the results
      of operations.




As
      of
      March 31, 2008, the Company had $8.0 million in cash and $29.9 million in
      unencumbered securities including $24.6 million in Agency MBS to meet additional
      haircut or market valuation requirements.


19




**NEW
      YORK MORTGAGE TRUST, INC. AND SUBSIDIARIES**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**March
      31, 2008**


**(unaudited)**





**6** . **Collateralized
      Debt Obligations**




The
      Company’s CDOs are secured by ARM loans pledged as collateral. The ARM loans are
      recorded as an asset of the Company and the CDOs are recorded as the Company’s
      debt. The CDO transaction includes an amortizing interest rate cap contract
      with
      a notional amount of $271.0 million as of March 31, 2008 and a notional amount
      of $286.9 million as of December 31, 2007, which is recorded as an asset of
      the
      Company. The interest rate caps are carried at fair value and totaled $0.1
      million as of March 31, 2008 and $0.1 million as of December 31, 2007,
      respectively. The interest rate cap reduces interest rate exposure on these
      transactions. As of March 31, 2008 and December 31, 2007, the Company had CDOs
      outstanding of $386.5 million and $417.0 million, respectively. As of March
      31,
      2008 and December 31, 2007, the current weighted average interest rate on these
      CDOs was 2.98% and 5.25%, respectively. The CDOs are collateralized by ARM
      loans
      with a principal balance of $398.9 million and $429.6 million at March 31,
      2008
      and December 31, 2007, respectively. The Company retained the owner trust
      certificates, or residual interest for the three securitizations, and, as of
      March 31, 2008 and December 31, 2007, had net investment after loan loss
      reserves of $11.8 million and $13.7 million, respectively.




**7.
      Discontinued Operation**




In
      connection with the sale of our wholesale mortgage origination platform assets
      on February 22, 2007 and the sale of our retail mortgage lending platform on
      March 31, 2007, during the fourth quarter of 2006, we classified our mortgage
      lending segment as a discontinued operation in accordance with the provisions
      of
      SFAS No. 144. As a result, we have reported revenues and expenses related to
      the
      segment as a discontinued operation and the related assets and liabilities
      as
      assets and liabilities related to a discontinued operation for all periods
      presented in the accompanying condensed consolidated financial statements.
      Certain assets, such as the deferred tax asset, and certain liabilities, such
      as
      subordinated debt and liabilities related to leased facilities not assigned
      to
      Indymac, will become part of our ongoing operations and accordingly, we have
      not
      included these items as part of the discontinued operation in accordance with
      the provisions of SFAS No. 144.




20




**NEW
      YORK MORTGAGE TRUST, INC. AND SUBSIDIARIES**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**March
      31, 2008**


**(unaudited)**





***Balance
      Sheet Data***





The
      components of Assets related to the discontinued operation as of March 31,
      2008
      and December 31, 2007 are as follows (dollar amounts in thousands):




**March
                31,**
              **2008**
            
            **December
                31,**
              **2007**Accounts
                and accrued interest receivable
            
            $
            34
            
            $
            51Mortgage
                loans held for sale (net)
            
            
            6,209
            
            
            8,077Prepaid
                and other assets
            
            
            501
            
            
            737Property
                and equipment, net
            
            
            11
            
            
            11Total assets
            
            $
            6,755
            
            $
            8,876




The
      components of Liabilities related to the discontinued operation as of March
      31,
      2008 and December 31, 2007 are as follows (dollar amounts in
      thousands):




**March
                31,**
              **2008**
            
            **December
                31,****2007**Due
                to loan purchasers
            
            $
            1,070
            
            $
            894Accounts
                payable and accrued expenses
            
            
            3,842
            
            
            4,939Total liabilities
            
            $
            4,912
            
            $
            5,833




21




**NEW
      YORK MORTGAGE TRUST, INC. AND SUBSIDIARIES**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**March
      31, 2008**


**(unaudited)**





***Statements
      of Operations Data***




The
      statements of operations of the discontinued operation for the three months
      ended March 31, 2008 and 2007 are as follows (dollar amounts in
      thousands):




**For
                the Three Months Ended****March
                31,****2008**
            
            **2007****Revenues:**Net
                interest income
            
            $
            153
            
            $
            596Gain
                on sale of mortgage loans
            
            
            —
            
            
            2,337Loan
                losses
            
            
            (398
            )
            
            (3,161
            )Brokered
                loan fees
            
            
            —
            
            
            2,135Gain
                on sale of retail lending segment
            
            
            —
            
            
            5,160Other
                income
            
            
            416
            
            
            27Total
                net revenues
            
            
            171
            
            
            7,094**Expenses:**Salaries,
                commissions and benefits
            
            
            50
            
            
            5,006Brokered
                loan expenses
            
            
            —
            
            
            1,723Occupancy
                and equipment
            
            
            (136
            )
            
            1,312General
                and administrative
            
            
            77
            
            
            2,894Total
                expenses
            
            
            (9
            )
            
            10,935**Income
                (loss) before income tax (provision) benefit**
            
            
            180
            
            
            (3,841
            )Income
                tax (provision) benefit
            
            
            —
            
            
            —**Income
                (loss) from discontinued operations - net of tax**
            
            $
            180
            
            $
            (3,841
            )





*Gain
      on Sale of Mortgage Loans* - The
      Company recognizes gain on sale of loans sold to third parties as the difference
      between the sales price and the adjusted cost basis of the loans when title
      transfers. The adjusted cost basis of the loans includes the original principal
      amount adjusted for deferrals of origination and commitment fees received,
      net
      of direct loan origination costs paid.


22




**NEW
      YORK MORTGAGE TRUST, INC. AND SUBSIDIARIES**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**March
      31, 2008**


**(unaudited)**





*Loan
      Origination Fees and Direct Origination Costs* - The
      Company records loan fees, discount points and certain incremental direct
      origination costs as an adjustment of the cost of the loan and such amounts
      are
      included in gain on sales of loans when the loan is sold.





*Brokered
      Loan Fees and Expenses* - The
      Company records commissions associated with brokered loans when such loans
      are
      closed with the borrower. Costs associated with brokered loans are expensed
      when
      incurred.





*Loan
      Commitment Fees* - Fees
      received for the funding of mortgage loans to borrowers at pre-set conditions
      are deferred and recognized at the date at which the loan is sold.


*Other
        Income (Expense) -* Includes ** $0.4
        million of penalty payments related to the corporate headquarters moving
        delays
        (see note 8 - Leases).


*Income
        tax (provision) benefit -* During
        the quarter ended September 30, 2007 management determined that the Company
        would likely not be able to utilize the deferred tax asset and accordingly
        recorded a 100% valuation allowance. The Company continued to reserve 100%
        of
        deferred tax benefit in the quarter ended March 31, 2008 as the facts continue
        to support the Company's inability to utilize the deferred tax
        asset.




**8** . **Commitments
      and Contingencies**




*Loans
      Sold to Investors*  *-* For
      loans originated and sold by our discontinued mortgage lending business, the
      Company is not exposed to long term credit risk.  In the normal course of
      business however, the Company is obligated to repurchase loans based on
      violations of representations and warranties in the sale agreement, or early
      payment defaults.  The Company repurchased no loans for the three months
      ended March 31, 2008.





As
      of
      March 31, 2008 we had a total of $4.7 million of unresolved repurchase requests,
      against which the Company has a reserve of approximately $0.7 million. The
      reserve is based on one or more of the following factors, including historical
      settlement rates, property value securing the loan in question and specific
      settlement discussion with third parties. The
      Company has entered into a preliminary settlement agreement pertaining to
      approximately $4.0 million of these outstanding loan repurchase requests. The
      settlement is subject to final approval by the counterparty’s creditor
      committee.




*Outstanding
      Litigation* - The
      Company is at times subject to various legal proceedings arising in the ordinary
      course of business other than as described below, the Company does not believe
      that any of its current legal proceedings, individually or in the aggregate,
      will have a material adverse effect on its operations, financial condition
      or cash flows.




On
      December 13, 2006, Steven B. Yang and Christopher Daubiere (“Plaintiffs”), filed
      suit in the United States District Court for the Southern District of New York
      against HC and us, alleging that we failed to pay them, and similarly situated
      employees, overtime in violation of the Fair Labor Standards Act (“FLSA”) and
      New York State law.  The Plaintiffs, each of whom were former employees in
      our discontinued mortgage lending business, purported to bring a FLSA
“collective action” on behalf of similarly situated loan officers in our now
      discontinued mortgage lending business and sought unspecified amounts for
      alleged unpaid overtime wages, liquidated damages, attorney’s fee and
      costs.





On
      December 30, 2007 we entered into an agreement in principle with the Plaintiffs
      to settle this suit. The terms of the settlement remain subject to court
      approval. We anticipate closing of the settlement during the 2008
      second quarter. The Company has reserved $1.4 million for the proposed
      settlement. As of March 31, 2008, there have been no material developments
      or changes in the settlement terms.




*Leases* - The
      Company leases its corporate offices and certain office space related to our
      discontinued mortgage lending operation not assumed by IndyMac and equipment
      under short-term lease agreements expiring at various dates through 2010. All
      such leases are accounted for as operating leases. Total rental (income) expense
      for property and equipment amounted to $(0.1) million and $1.1 million for
      the
      three months ended March 31, 2008 and 2007, respectively. As
      of
      March 31, 2008, the Company had been reimbursed for $0.4 million by Indymac
      representing the reduction in escrow from the non performance of vacating the
      premise as described below.




Pursuant
      to an Assignment and Assumption of Sublease and an Escrow Agreement, each with
      Lehman Brothers Holdings Inc. (“Lehman”) (collectively, the “Agreements”), the
      Company assigned and Lehman has assumed the sublease for the Company's corporate
      headquarters at 1301 Avenue of the Americas. Pursuant to the Agreements,
      Lehman funded an escrow account, containing $3.2 million for the
      benefit of HC. The escrow amount is reduced by $0.2 million for each month
      the
      Company remains in the leased space beginning February 1, 2008. As of March
      31,
      2008, the escrow has been reduced by $0.4 million due to penalties. The entire
      remaining amount held in the escrow account will be released to the Company
      when
      it vacates the leased space. Pursuant to the provisions of the sale transaction
      with IndyMac, IndyMac pays rent equal to the Company’s cost, including any
      penalties and foregone bonuses resulting from the delayed vacation of the leased
      premises for as long as IndyMac continues to occupy and use the leased space
      at
      the Company's corporate headquarters. The Company anticipates that IndyMac
      will
      vacate the space by July 2008.





23





**NEW
      YORK MORTGAGE TRUST, INC. AND SUBSIDIARIES**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**March
      31, 2008**


**(unaudited)**





*Letters
      of Credit* - HC
      maintains a letter of credit in the amount of $100,000 in lieu of a cash
      security deposit for an office lease dated June 1998 for the Company's former
      headquarters located at 304 Park Avenue South in New York City. The sole
      beneficiary of this letter of credit is the owner of the building, 304 Park
      Avenue South LLC. This letter of credit is secured by cash deposited in a bank
      account maintained at JP Morgan Chase bank.




HC
      maintains a letter of credit in the amount of $313,000 in lieu of a cash
      security deposit for its current corporate headquarters located at 1301 Avenue
      of the Amercias in New York City for its sub landlord, PricewaterhouseCoopers,
      LLP, as beneficiary. This letter of credit is secured by cash deposited in
      a
      bank account maintained at JP Morgan Chase bank.


*Registration
        Rights Agreement -*On February 21, 2008, the Company completed the issuance
        and sale of 15.0 million shares of its common stock in
        a
        private placement at a price of $4.00 per share. In connection with this
        private
        offering of our common stock, we entered into a registration rights agreement,
        which we refer to as the Common Stock Registration Rights Agreement, pursuant
        to
        which we were required, among other things, to file
        with
        the Securities and Exchange Commission, or SEC, a resale shelf registration
        statement registering for resale the 15.0 million shares sold in this
        private offering on or before March 12, 2008 and obtain listing for our common
        stock on the NASDAQ Stock Market on or before the effective date
        of
        the resale shelf registration statement. In the event we fail to satisfy
        these requirements, we may be subject to payment of liquidated damages to
        the investors in the transaction. The Company filed
        the
        resale shelf registration statement on April 4, 2008 and it became effective
        on
        April 18, 2008. As a result, we incurred a penalty fee (liquidated damages)
        of approximately $0.2 million which was paid on May 2, 2008 and remain subject
        to the penalty until we obtain NASDAQ Stock Market listing
        for our common stock.




**9.**  **Concentrations
      of Credit Risk**




At
      March
      31, 2008 and December 31, 2007, there were geographic concentrations of credit
      risk exceeding 5% of the total loan balances within mortgage loans held in
      the
      securitization trusts and retained interests in our REMIC securitization, NYMT
      2006-1, as follows:




**March
                31,**
              **2008**
            
            
            **December
                31,**
              **2007**New
                York
            
            
            30.5
            %
            
            31.2
            %Massachusetts
            
            
            17.7
            %
            
            17.4
            %Florida
            
            
            8.2
            %
            
            8.3
            %California
            
            
            7.0
            %
            
            7.2
            %New
                Jersey
            
            
            5.9
            %
            
            5.7
            %





**10** . **Fair
      Value of Financial Instruments**





The
      Company adopted SFAS 157 effective January 1, 2008, and accordingly all assets
      and liabilities measured at fair value will utilize valuation methodologies
      in
      accordance with the statement.  The Company has established and
      documented processes for determining fair values.  Fair value is based
      upon quoted market prices, where available.  If listed prices or
      quotes are not available, then fair value is based upon internally developed
      models that primarily use inputs that are market-based or independently-sourced
      market parameters, including interest rate yield curves.




A
      financial instrument’s categorization within the valuation hierarchy is based
      upon the lowest level of input that is significant to the fair value
      measurement.  The three levels of valuation hierarchy established by
      FAS 157 are defined as follows:




*Level
      1* - inputs
      to the valuation methodology are quoted prices (unadjusted) for identical assets
      or liabilities in active markets.




*Level
      2* - inputs
      to the valuation methodology include quoted prices for similar assets and
      liabilities in active markets, and inputs that are observable for the asset
      or
      liability, either directly or indirectly, for substantially the full term of
      the
      financial instrument.




*Level
      3* - inputs
      to the valuation methodology are unobservable and significant to the fair value
      measurement.




The
      following describes the valuation methodologies used for the Company’s financial
      instruments measured at fair value, as well as the general classification of
      such instruments pursuant to the valuation hierarchy.




*a.
      Investment Securities Available for Sale* - Fair
      value is generally based on market prices provided by five to seven dealers
      who
      make markets in these financial instruments. The dealers will incorporate common
      market pricing methods, including a spread measurement to the Treasury curve
      or
      Interest Rate Swap Cure as well as underlying characteristics of the particular
      security including coupon, periodic and life caps, collateral type, rate reset
      period and seasoning or age of the security. If the fair value of a security
      is
      not reasonably available from a dealer, management estimates the fair value
      based on characteristics of the security that the Company receives from the
      issuer and based on available market information. Management reviews all prices
      used in determining valuation to ensure they represent current market
      conditions. This review includes surveying similar market transactions,
      comparisons to interest pricing models as well as offerings of like securities
      by dealers. The Company’s investment securities are valued based upon readily
      observable market parameters and are classified as Level 2 fair
      values.


24


**NEW
      YORK MORTGAGE TRUST, INC. AND SUBSIDIARIES**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**March
      31, 2008**


**(unaudited)**


b. *Interest
        Rate Swaps and Caps*- The
        fair value of interest rate swaps and caps are based on using market accepted
        financial models as well as dealer quotes. The model utilizes readily observable
        market parameters, including treasury rates, interest rate swap spreads and
        swaption volatility curves. The Company’s interest rate caps and swaps are
        classified as Level 2 fair values.


The
      following table presents the Company’s financial instruments carried at fair
      value, at the dates indicated below as of March 31, 2008, on the condensed
      consolidated balance sheet by SFAS 157 valuation hierarchy, as previously
      described.





**Fair
                Value at March 31, 2008***(In
                Thousands)*
            
            **Level 1**
            
            **Level 2**
            
            **Level 3**
            
            **Total**Assets:Investment
                securities - available for sale
            
            $
            —
            
            $
            512,550
            
            $
            —
            
            $
            512,550Mortgage
              loans held
              for sale (net)
            
            
            —
            
            
            —
            
            
            6,209
            
            
            6,209Interest
                Rate Caps
            
            
            —
            
            
            104
            
            
            —
            
            
            104Total
                assets carried at fair value
            
            $
            —
            
            $
            512,654
            
            $
            6,209
            
            $
            518,863Liabilities:Interest
                Rate Swaps
            
            $
            —
            
            $
            1,169
            
            $
            —
            
            $
            1,169Total
                liabilities carried at fair value
            
            $
            —
            
            $
            1,169
            
            $
            —
            
            $
            1,169




The
      fair
      value of our mortgage loans held for sale (net) decreased by $0.4 million during
      the period that commenced on January 1, 2008 and ended on March 31, 2008. This
      decrease in fair value of our mortgage loans held for sale (net) is included
      in
      loan loss in our discontinued operations.




Any
      changes to the valuation methodology are reviewed by management to ensure the
      changes are appropriate.  As markets and products develop and the
      pricing for certain products becomes more transparent, the Company continues
      to
      refine its valuation methodologies.  The methods described above may
      produce a fair value calculation that may not be indicative of net realizable
      value or reflective of future fair values.  Furthermore, while the
      Company believes its valuation methods are appropriate and consistent with
      other
      market participants, the use of different methodologies, or assumptions, to
      determine the fair value of certain financial instruments could result in a
      different estimate of fair value at the reporting date.  The Company
      uses inputs that are current as of the measurement date, which may include
      periods of market dislocation, during which price transparency may be
      reduced.  This condition could cause the Company’s financial
      instruments to be reclassified from Level 2 to Level 3 in future
      periods.








25




**NEW
      YORK MORTGAGE TRUST, INC. AND SUBSIDIARIES**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**March
      31, 2008**


**(unaudited)**




**11** . **Income
          Taxes**
  All
          income tax benefits relate to HC and are included in the results of operations
          of the discontinued operation (see note 7).




Deferred
      taxes at March 31, 2008 include a deferred tax asset of $0.1 million and a
      deferred tax liability of $0.1 million which represents the tax effect of
      differences between tax basis and financial statement carrying amounts of assets
      and liabilities. The major sources of temporary differences and their deferred
      tax effect at March 31, 2008 are as follows (dollar amounts in
      thousands):





Deferred
                tax asset:Net
                operating loss carryover
            
            $
            27,920Restricted
                stock, performance shares and stock option expense
            
            
            489Mark
                to market adjustment
            
            
            117Sec.
                267 disallowance
            
            
            268Charitable
                contribution carryforward
            
            
            1GAAP
                reserves
            
            
            939Rent
                expense
            
            
            186Loss
                on sublease
            
            
            31Gross
                deferred tax asset
            
            
            29,951Valuation
                allowance
            
            
            (29,886
            )Net
                deferred tax asset
            
            $
            65Deferred
                tax liability:Depreciation
            
            $
            65Total
                deferred tax liability
            
            $
            65




26





**NEW
      YORK MORTGAGE TRUST, INC. AND SUBSIDIARIES**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**March
      31, 2008**


**(unaudited)**





Deferred
      taxes at December 31, 2007 include a deferred tax asset of $0.1 million and
      a
      deferred tax liability of $0.1 million which represents the tax effect of
      differences between tax basis and financial statement carrying amounts of assets
      and liabilities. The major sources of temporary differences and their deferred
      tax effect at December 31, 2007 are as follows (dollar amounts in
      thousands):





Deferred
                tax asset:Net
                operating loss carryover
            
            $
            27,434Restricted
                stock, performance shares and stock option expense
            
            
            489Mark
                to market adjustment
            
            
            86Sec.
                267 disallowance
            
            
            268Charitable
                contribution carryforward
            
            
            1GAAP
                reserves
            
            
            994Rent
                expense
            
            
            252Loss
                on sublease
            
            
            50Gross
                deferred tax asset
            
            
            29,574Valuation
                allowance
            
            
            (29,509
            )Net
                deferred tax asset
            
            $
            65Deferred
                tax liability:Depreciation
            
            $
            65Total
                deferred tax liability
            
            $
            65





The
      $63.1
      million operating loss carry-forward expires at various intervals between 2024
      and 2028. The charitable contribution carry-forward will expire in
      2011.




During
      the quarter ended September 30, 2007 management determined that the Company
      would likely not be able to utilize the deferred tax asset and accordingly
      recorded a 100% valuation allowance. The Company continued to reserve 100%
      of
      deferred tax benefit in the quarter ended March 31, 2008 as the facts continue
      to support the Company's inability to utilize the deferred tax
      asset.




27




**NEW
      YORK MORTGAGE TRUST, INC. AND SUBSIDIARIES**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**March
      31, 2007**


**(unaudited)**






**12.**  **Segment
      Reporting**




Until
      March 31, 2007, the Company operated two reportable segments, the mortgage
      portfolio management segment and the mortgage lending segment. Upon the sale
      of
      substantially all the mortgage lending operating assets on March 31, 2007,
      the
      Company exited the mortgage lending business and accordingly will no longer
      report segment information.


28




**NEW
      YORK MORTGAGE TRUST, INC. AND SUBSIDIARIES**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**March
      31, 2008**


**(unaudited)**




**13** . **Stock
      Incentive Plans**




A
      summary
      of the status of the Company's options as of December 31, 2007 and changes
      during the twelve months then ended is presented below:




**Number
                of**
              **Options**
            
            **Weighted**
              **Average**
              **Exercise**
              **Price**Outstanding
                at January 1, 2007
            
            
            93,300
            
            $
            47.60Granted
            
            
            —
            
            
            —Cancelled
            
            
            (93,300
            )
            
            47.60Exercised
            
            
            —
            
            
            —Outstanding
                at December 31, 2007
            
            
            —
            
            $
            —Options
                exercisable at December 31, 2007
            
            
            —
            
            $
            —




There were
      no stock options outstanding at March 31, 2008 or December 31,
      2007.




***Restricted
      Stock***




The
      Company has awarded 136,867 shares of restricted stock under the 2005 Plan,
      of
      which 100,380 shares have fully vested and 36,487 were cancelled or forfeited.
      As of March 31, 2008 and December 31, 2007 there were no outstanding restricted
      stock awards under the 2005 Plan. During the year ended December 31, 2007 the
      Company recognized non-cash compensation expense of $0.6 million relating to
      the
      vested portion of restricted stock grants. Dividends are paid on all restricted
      stock issued, whether those shares are vested or not. In general, unvested
      restricted stock is forfeited upon the recipient’s termination of
      employment.




A
      summary
      of the status of the Company's non-vested restricted stock as of December 31,
      2007 and changes during the year then ended is presented below:




**Number
                of**
              **Non-vested**
              **Restricted**
              **Shares**
            
            
            **Weighted**
              **Average**
              **Grant
                Date**
              **Fair
                Value**Non-vested
                shares at beginning of year, January 1, 2007
            
            
            42,701
            
            $
            31.80Granted
            
            
            -
            
            
            -Forfeited
            
            
            (31,178
            )
            
            27.90Vested
            
            
            (11,523
            )
            
            43.15Non-vested
                shares as of December 31, 2007
            
            
            —
            
            $
            —Weighted-average
                fair value of restricted stock granted during the period
            
            
            —
            
            $
            —




29




**NEW
      YORK MORTGAGE TRUST, INC. AND SUBSIDIARIES**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**March
      31, 2008**


**(unaudited)**




**14.
      Capital Stock and Earnings per Share**




The
      Company had 400,000,000 shares of common stock, par value $0.01 per share,
      authorized with 18,640,209 shares issued and outstanding as of March 31, 2008
      and 3,640,209 shares issued and outstanding as of December 31, 2007. The Company
      had 200,000,000 shares of preferred stock, par value $0.01 per share,
      authorized, including 2,000,000 shares of Series A Cummulative Convertible
      Redeemable Preferred Stock (“Series
      A Preferred
      Stock”)
      authorized. As of March 31, 2008 and December 31, 2007, the Company had
      issued and outstanding 1,000,000 and 0 shares, respectively, of Series A
      Preferred Stock. Of the common stock authorized, 206,222 shares (plus
      forfeited shares of 65,665 previously granted) were reserved for issuance as
      restricted stock awards to employees, officers and directors pursuant to the
      2005 Stock Incentive Plan. As of March 31, 2008, 271,887 shares remain reserved
      for issuance under the 2005 Plan.





On
      February 21, 2008, the Company completed the issuance and sale of 15.0 million
      shares of its common stock in a private placement at a price of $4.00 per
      share.  This private offering of the Company's common stock generated net
      proceeds to the Company of $56.6 million after payment of private placement
      fees
      and expenses.  In connection with this private offering of our common
      stock, we entered into a registration rights agreement, which we refer to as
      the
      Common Stock Registration Rights Agreement, pursuant to which we are required
      to
      file with the Securities and Exchange Commission, or SEC, a resale shelf
      registration statement registering for resale the 15.0 million shares sold
      in
      this private offering. The Company filed a resale shelf registration
      statement on Form S-3 on April 4, 2008 which became effective on April 18,
      2008.


On
        March
        31, 2008 the Company paid a $0.50 per share cash dividend, or an
        aggregate of $0.5 million to holders of record of our Series A Preferred
        Stock
        as of March 31, 2008.
 
 The
        Board
        of Directors declared a one for five reverse stock split of the Company's
        common
        stock, as of October 9, 2007, decreasing the number of common shares outstanding
        to approximately 3.6 million. All per share and share amounts provided in
        the quarterly report have been restated to give effect to the reverse stock
        split.
  The
          Company calculates basic net income (loss) per share by dividing net income
          (loss) for the period by weighted-average shares of common stock outstanding
          for
          that period. Diluted net income (loss) per share takes into account the
          effect
          of dilutive instruments, such as convertible preferred stock, stock options
          and unvested restricted or performance stock, but uses the average share
          price
          for the period in determining the number of incremental shares that are
          to be
          added to the weighted-average number of shares outstanding. Since the Company
          is
          in a loss position for the three months ended March 31, 2008 and 2007,
          the
          calculation of basic and diluted net loss per share is the same since the
          effect
          of common stock equivalents would be anti-dilutive.
  The
          following table presents the computation of basic and diluted net loss
          per share
          for the periods indicated (in thousands, except  per share
          amounts):
  **For Three
                    Months Ended**
                  **March
                    31,****2008**
                
                
                **2007**Numerator:Net
                    loss
                
                $
                (21,258
                )
                $
                (4,741
                )Denominator:Weighted
                    average number of common shares outstanding - basic and
                    diluted
                
                
                10,140
                
                
                3,616Net
                    loss per share - basic and diluted
                
                $
                (2.10
                )
                $
                (1.31
                )




**15.**
              **Convertible
                  Preferred Debentures**
 
 As
        of
        March 31, 2008, there were 1.0 million shares of our Series A Preferred Stock
        outstanding, with an aggregate redemption value of $20.0 million and current
        dividend payment rate of 10% per year. The Series A Preferred Stock
        matures on December 31, 2010, at which time any outstanding shares
        must be redeemed by the Company at the $20.00 per share liquidation
        preference. Pursuant to SFAS 150, *Accounting* *for
        Certain Financial Instruments with Characteristics of both Liabilities and
        Equity*, because of this mandatory redemption
        feature,** the
        Company classifies these securities as  a liability on its
        balance sheet.
 
 We
        issued
        these shares of its Series A Cumulative Redeemable Convertible Preferred
        Stock,
        which we refer to as our Series A Preferred Stock, to JMP Group Inc. and
        certain
        of its affiliates for an aggregate purchase price of $20.0 million. The Series
        A
        Preferred Stock entitles the holders to receive a cumulative dividend
        of 10% per year, subject to an increase to the extent any future quarterly
        common stock dividends exceed $0.10 per share. The Series A Preferred
        Stock is convertible into shares of the Company's common stock based on a
        conversion price of $4.00 per share of common stock, which represents a
        conversion rate of five shares of common stock for each Series A Preferred
        Stock. Pursuant to a registration rights agreement between the Company and
        the investors in the private offering for the Series A Preferred Stock, in
        the
        event the Company fails to file a resale registration statement with the
        SEC on
        or before June 30, 2008, holders of our Series A Preferred Stock may be entitled
        to receive an additional cash dividend at the rate of $0.10 per quarter per
        share for each calendar quarter after June 30, 2008 until we file such resale
        registration statement.


30




**NEW
      YORK MORTGAGE TRUST, INC. AND SUBSIDIARIES**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**March
      31, 2008**


**(unaudited)**




16.
      Related Party Transactions


Concurrent
        and in connection with the issuance of our Series A Preferred Stock on January
        18, 2008, we entered into an advisory agreement with JMPAM, which is an
        affiliate of JMP Group, Inc. and JMP Realty Trust, Inc. As of April 23, 2008,
        JMPAM and JMP Group, Inc. beneficially owned approximately 16.8% and 12.2%
        of
        our common stock. Under the agreement, JMPAM advises two of our wholly-owned
        subsidiaries, Hypotheca Capital, LLC (formerly known as The New York Mortgage
        Company, LLC) and New York Mortgage Funding, LLC, as well as any additional
        subsidiaries acquired or formed in the future to hold investments made on
        our
        behalf by JMPAM. We refer to these subsidiaries in our periodic reports filed
        with the Securities and Exchange Commission as the “Managed Subsidiaries.” As
        previously disclosed, we have an approximately $63.1 million net operating
        loss
        carry-forward that remains with us after the sale of our mortgage lending
        business. As an advisor to the Managed Subsidiaries, we expect that JMPAM
        will,
        at some point in the future, focus on the acquisition of alternative mortgage
        related investments on behalf of the Managed Subsidiaries. Some of those
        investments may allow us to utilize all or a portion of the net operating
        loss
        carry-forward to the extent available by law. Because we intend to focus
        our
        investment efforts on Agency MBS, we currently have no plans to acquire
        alternative mortgage related investments to be held in the Managed Subsidiaries.
        The commencement of any activity by JMPAM must be approved by the Board of
        Directors and any subsequent investment on behalf of Managed Subsidiaries
        must
        adhere to investment guidelines adopted by our board of directors. JMPAM
        will
        earn a base advisory fee of 1.5% of the “equity capital” (as defined in the
        advisory agreement) of the Managed Subsidiaries and is also eligible to earn
        incentive compensation if the Managed Subsidiaries achieve certain performance
        thresholds. As of March 31, 2008, JMPAM was not managing any assets in the
        Managed Subsidiaries, but was earning a base advisory fee on the net proceeds
        to
        our Company from our private offerings in each of January 2008 and February
        2008. For the three months ended March 31, 2008, we paid JMPAM $0.1 million
        in
        advisory fees. As of the date of this report, we expect to pay approximately
        $0.7 million in advisory fees to JMPAM during the 2008 fiscal year.
 
 In
        addition, pursuant to the stock purchase agreement providing for the sale
        of the
        Series A Preferred Stock to JMP Group, Inc. and certain of its affiliates,
        James
        J. Fowler and Steven M. Abreu were appointed to our Board of Directors, with
        Mr.
        Fowler being appointed the non-executive chairman of our Board of Directors.
        In
        addition, concurrent with the completion of the issuance and sale of the
        Series
        A Preferred Stock and pursuant to the stock purchase agreement, four of our
        then-existing directors resigned from the Board. Pursuant to the stock purchase
        agreement providing for the sale of the Series A Preferred Stock, the holders
        of
        our Series A Preferred Stock also have the right to appoint one additional
        “independent” director, as such term is defined under the rules of the NASDAQ
        Stock Market, to stand for election to our Board of Directors at our 2008
        Annual Meeting of Stockholders. Pursuant to the stock purchase agreement,
        the
        additional director would replace one of our independent directors.
 
 James
        J.
        Fowler, the Non-Executive Chairman of our Board of Directors and also the
        non-compensated Chief Investment Officer of Hypotheca Capital, LLC and New
        York
        Mortgage Funding, LLC, is a managing director of JMPAM and the president
        of JMP
        Realty Trust, Inc., a private REIT that is externally managed by JMPAM and
        which
        is one of the investors in our Series A Preferred Stock. JMPAM and JMP Realty
        Trust, Inc. are affiliates of JMP Group, Inc.
 
 On
        February 21, 2008, we completed the issuance of 15.0 million shares of our
        common stock in a private placement to certain accredited investors, resulting
        in $56.6 million in net proceeds to the Company. JMP Securities LLC, an
        affiliate of JMPAM, JMP Group, Inc. and JMP Realty Trust, Inc., served as
        the
        sole placement agent for the transaction and was paid a $3.0 million placement
        fee from the gross proceeds.
 
 **17.
        Subsequent Events.**




On
        April
        21, 2008, the Company declared a $0.06 per share cash dividend on its common
        stock. The dividend is payable on May 15, 2008 to common stock of record
        as of
        April 30, 2008.
  On
        May 6, 2008, the Company entered into a five year
        lease agreement for office space in Midtown Manhattan in connection with
        the relocation of its corporate headquarters from 1301 Avenue of the Americas.
        The lease period will commence on June 1, 2008 and provides for annual rent
        of
        approximately $178,000. As discussed in Note 8 above, pursuant to the Assignment
        and Assumption of Sublease and the Escrow Agreement, the Company is not eligible
        to receive the escrow amount from Lehman unitl IndyMac vacates the Company's
        leased space at 1301 Avenue of the Americas; however, the Company will continue
        to be reimbursed by IndyMac for rent and any penalties and foregone bonuses
        under the Assignment and Assumption of Sublease and the Escrow
        Agreement.




On
        May
        13, 2008, the Company declared a one-for-two reverse stock split of its common
        stock by filing Articles of Amendment to its Charter with the State of Maryland.
        The one-for-two reverse stock split will become effective at 12:01 a.m. on
        May
        27, 2008 (the “Effective Time”) and will provide shareholders of record as of
        the Effective Time with one share of common stock for every two shares owned
        as
        of the Effective Time. Pursuant to the Articles of Amendment providing for
        the
        reverse stock split, fractional shares will be eliminated and stockholders
        entitled to fractional shares will be entitled to receive in lieu thereof
        cash
        in an amount equal to the product of the fraction of a share multiplied by
        the
“market price” (as defined in Section 7.1 of the Company’s Charter) on the date
        of the Effective Time.


31





**Item
      2. Management's Discussion and Analysis of Financial Condition and Results
      of
      Operations**




**CAUTIONARY
      NOTE REGARDING FORWARD-LOOKING STATEMENTS**




This
      Quarterly Report on Form 10-Q contains certain forward-looking statements.
      Forward-looking statements are those which are not historical in nature. They
      can often be identified by their inclusion of words such as “will,”
“anticipate,” “estimate,” “should,” “expect,” “believe,” “intend” and similar
      expressions. Any projection of revenues, earnings or losses, capital
      expenditures, distributions, capital structure or other financial terms is
      a
      forward-looking statement. Certain statements regarding the following
      particularly are forward-looking in nature:




·
            our
                business strategy;




·
            future
                performance, developments, market forecasts or projected
                dividends;




·
            projected
                acquisitions or joint ventures; and




·
            projected
                capital expenditures.




It
      is
      important to note that the description of our business in general and our
      investment in mortgage loans and mortgage-backed securities holdings in
      particular, is a statement about our operations as of a specific point in time
      and is not meant to be construed as an investment policy. The types of
      assets we hold, the amount of leverage we use or the liabilities we incur and
      other characteristics of our assets and liabilities disclosed in this report
      as
      of a specified period of time are subject to reevaluation and change without
      notice.




Our
      forward-looking statements are based upon our management's beliefs, assumptions
      and expectations of our future operations and economic performance, taking
      into
      account the information currently available to us. Forward-looking statements
      involve risks and uncertainties, some of which are not currently known to us
      and
      many of which are beyond our control and that might cause our actual results,
      performance or financial condition to be materially different from the
      expectations of future results, performance or financial condition we express
      or
      imply in any forward-looking statements. Some of the important factors that
      could cause our actual results, performance or financial condition to differ
      materially from expectations are:


·
              our
                    proposed portfolio strategy may be changed or modified by our
                    management
                    without advance notice to stockholders and we may suffer losses
                    as a
                    result of such modifications or
                    changes;
  ·
              market
                    changes in the terms and availability of repurchase agreements
                    used to
                    finance our investment portfolio
                    activities;
  ·
              reduced
                    demand for our securities in the mortgage securitization and
                    secondary
                    markets;
  ·
              interest
                    rate mismatches between our mortgage-backed securities and our
                    borrowings
                    used to fund such purchases;


·
              changes
                    in interest rates and mortgage prepayment
                    rates;
  ·
              effects
                    of interest rate caps on our adjustable-rate mortgage-backed
                    securities;
  ·
              the
                    degree to which our hedging strategies may or may not protect
                    us from
                    interest rate volatility;
  ·
              potential
                    impacts of our leveraging policies on our net income and cash
                    available
                    for distribution;
 ·
                our
                      board's ability to change our operating policies and strategies
                      without
                      notice to you or stockholder
                      approval;
  ·
                our
                      ability to manage, minimize or eliminate liabilities stemming
                      from the
                      discontinued operations including, among other things, litigation,
                      repurchase obligations on the sales of mortgage loans and property
                      leases;
                      and
  ·
                the
                      other important factors identified, or incorporated by reference
                      into this
                      report, including, but not limited to those under the captions
                      “Management's Discussion and Analysis of Financial Condition
                      and Results
                      of Operations” and “Quantitative and Qualitative Disclosures about Market
                      Risk”, and those described under the caption “Part I. Item 1A. Risk
                      Factors” in our Annual Report on Form 10-K filed with the Securities
                      and
                      Exchange Commission on March 31,
                      2008.


32




We
      undertake no obligation to publicly update or revise any forward-looking
      statements, whether as a result of new information, future events or otherwise.
      In light of these risks, uncertainties and assumptions, the events described
      by
      our forward-looking events might not occur. We qualify any and all of our
      forward-looking statements by these cautionary factors. In addition, you should
      carefully review the risk factors described in other documents we file from
      time
      to time with the Securities and Exchange Commission.




**General**





New
      York
      Mortgage Trust, Inc. together with its consolidated subsidiaries (“NYMT”, the
“Company”, “we”, “our”, and “us”) is a self-advised real estate investment
      trust, or REIT, in the business of investing in residential adjustable rate
      mortgage-backed securities issued by a United States government-sponsored
      enterprise (“GSE” or “Agency”), such as the Federal National Mortgage
      Association (“Fannie Mae”), or the Federal Home Loan Mortgage Corporation
      (“Freddie Mac”), prime credit quality residential adjustable-rate mortgage
      (“ARM”) loans, or prime ARM loans, and non-agency mortgage-backed securities. We
      refer to residential adjustable rate mortgage-backed securities throughout
      this Quarterly Report on Form 10-Q as “MBS” and MBS issued by a GSE as “
Agency MBS”. We seek attractive long-term investment returns by investing our
      equity capital and borrowed funds in such securities. Our principal business
      objective is to generate net income for distribution to our stockholders
      resulting from the spread between the interest and other income we earn on
      our
      interest-earning assets and the interest expense we pay on the borrowings that
      we use to finance these assets, which we refer to as our net interest income.
      We
      believe that the best approach to generating a positive net interest income
      is
      to manage our liabilities, principally in the form of short-term indebtedness
      (maturities of one year or less), in relation to the interest rate risks of
      our
      investments. To help achieve this result, we employ repurchase
      agreement financing, generally short-term, and over time will combine our
      financings with hedging techniques, primarily interest rate swaps. We may,
      subject to maintaining our REIT qualification, also employ other hedging
      techniques from time to time, including interest rate caps, floors and swap
      options to protect against adverse interest rate movements.


As
        of
        March 31, 2008, our investment portfolio was comprised of $512.6 million
        in MBS,
        including $261.8 of Agency MBS, $224.3 million of Agency CMO floaters and
        $26.5
        million of non-Agency MBS, of which $25.8 million are rated in the highest
        category by two rating agencies (either Moody's Investor Service, Inc. or
        Standard & Poor's, Inc.), and $398.3 million of prime ARM
        loans held in securitization trusts.As of March 31, 2008, we had
        approximately $931.8 million of total assets as compared to $809.3 million
        at December 31, 2007.


***Implementation
        of Alternative Investment Strategy Under Our Advisory
        Agreement***
 
 Since
        inception, our investment portfolio strategy has focused on the acquisition
        of
        high-credit quality ARM loans and securities. Moreover, since our exit from
        the
        mortgage lending business on March 31, 2007, we have exclusively focused
        our
        resources and efforts on investing, on a leveraged basis, in MBS and, since
        August 2007, we have employed a portfolio strategy that focuses on
        investments in Agency MBS. In connection with our exit from the mortgage
        lending
        business, we have an approximately $63.1 million net operating loss
        carry-forward from one of our wholly-owned subsidiaries. As previously disclosed
        in our Annual Report on Form 10-K for the year ended December 31, 2007,
        concurrent with the issuance of our Series A Preferred Stock on January 18,
        2008, we entered into an advisory agreement with JMP Asset Management LLC
        (“JMPAM”), an affiliate of JMP Group, Inc. Under the advisory agreement, JMPAM
        advises two of our wholly-owned subsidiaries, Hypotheca Capital, LLC, or
        HC
        (formerly known as The New York Mortgage Company, LLC), and New York Mortgage
        Funding, LLC, as well as any additional subsidiaries acquired or formed in
        the
        future to hold investments made on our behalf by JMPAM. We refer to these
        subsidiaries in our periodic reports filed with the Securities and Exchange
        Commission as the “Managed Subsidiaries.” As an advisor to the Managed
        Subsidiaries, we expect that JMPAM will focus on the acquisition of alternative
        mortgage related investments on behalf of the Managed Subsidiaries. We
        expect
        this alternative mortgage-related investment strategy to primarily take the
        form
        of equity investments in unaffiliatedthird
        party entities, or Funds, thatacquire
        or manage a portfolio of non-Agency MBS, some or all of which may be classified
        as non-investment grade securities. Some
        of
        those investments may allow us to utilize all or a portion of the net
        operating loss carry-forward, to the extent available by law.  Although our
        investment strategy thus far in 2008 has focused on the acquisition of Agency
        MBS, JMPAM may commence investments under this alternative mortgage related
        investment strategy in the near future; *provided,
        however,* that
        the
        commencement of investments by JMPAM under this strategy must first be approved
        by our board of directors and any subsequent investment on behalf of Managed
        Subsidiaries must adhere to investment guidelines adopted by our board of
        directors. This strategy, if and when implemented, will vary from our core
        strategy and we can provide no assurance that we or JMPAM will be successful
        at
        implementing any alternative investment strategy.




**Significant
      Events During 2008 First Quarter**




***Recent
      Market Volatility***





Commencing
      mid-year 2007, the residential mortgage market in the United States began
      experiencing a variety of significant difficulties and changed economic
      conditions, including defaults, credit losses and liquidity concerns, many
      of
      which continue to exist as of the date of this report. In
      January and February 2008, however, mortgage-backed security industry
      fundamentals began to stabilize as compared to fundamentals in the third and
      fourth quarter of 2007. As discussed below, we received net proceeds of
      approximately $76.2 million from equity offerings in January and February 2008
      and used substantially all of the net proceeds, in combination with borrowings
      under our repurchase agreements, to acquire approximately $714.1 million of
      Agency ARM MBS.




During
      March 2008, news of potential and actual security liquidations increased the
      price volatility and liquidity of many financial assets, including Agency MBS
      and other high-quality mortgage securities and loans. As a result, market values
      for, and available liquidity to finance, certain mortgage securities, including
      some of our Agency MBS and AAA-rated non-Agency MBS, were negatively impacted.
      As a response to these changed conditions, which impacted a relatively broad
      range of leveraged public and private companies with investment and financing
      strategies similar to ours, the Company undertook a number of strategic actions
      during March 2008 to reduce leverage and raise liquidity in the portfolio of
      Agency MBS. Commencing March 7, 2008 through March 17, 2008, the Company sold,
      in aggregate, approximately $592.8 million of Agency MBS from its investment
      portfolio that was comprised of $516.4 million of Agency hybrid ARM MBS and
      $76.4 million of Agency CMO floating rate MBS (“CMO Floaters”).
      These sales resulted in a loss of $15.0 million. Additionally, as a result
      of
      these sales of MBS, we terminated associated interest rate swaps that were
      used
      to hedge our liability costs with a notional balance of $297.7 million at a
      cost
      of $2.0 million. As of March 31, 2008, our MBS portfolio totaled $512.6 million
      and was comprised of $261.8 million of Agency hybrid ARM MBS, $224.3 million
      of  CMO Floaters and $25.8 million of AAA-rated non-Agency MBS. As of March
      31, 2008, in aggregate, our Agency MBS portfolio was financed with $431.6
      million of reverse repurchase agreement borrowings (referred to as “repo”
borrowings) with an average advance rate of 91% that implies an average haircut
      of 9% for the entire portfolio. Within our Agency MBS portfolio, our Agency
      hybrid ARM MBS is financed with $230.2 million of repurchase agreements funding
      equating to an advance rate of 94% that implies a haircut of 6% and our Agency
      CMO Floaters are financed with $180.7 million of repurchase agreement financing
      equating to an advance rate of 88% that implies a haircut of 12%. The Company
      also owns $398.3 million of adjustable rate mortgages that were deemed to be
      of
“prime” or high quality at the time of origination. These loans are permanently
      financed with approximately $386.5 million of collateralized debt obligations
      and are held in securitization trusts.





We
      generally finance our portfolio of Agency MBS and non-Agency MBS through
      repurchase agreements. In connection with the 2008 market disruption,
      repurchase agreement lenders have tightened their lending standards and have
      done so in a manner that now distinguishes between “type” of Agency MBS. For
      example, during the month of March 2008, lenders generally increased haircuts
      on
      Agency Hybrid ARMs from 3% to 5% and in some cases up to 10%. Also, haircuts
      on
      Agency CMO Floaters increased from 5% to a range of 10% to 20%, largely
      dependent upon cash flow structure.


33


***Private
        Placemen*** **t** ***of
        Common Stock***
  On
        February 21, 2008, we completed the issuance and sale of 15.0 million shares
        of
        our common stock to certain accredited investors (as such term is defined
        in
        Rule 501 of Regulation D of the Securities Act of 1933, as amended, or
        Securities Act) at a price of $4.00 per share. This private offering of our
        common stock generated net proceeds to us of approximately $56.6 million
        after
        payment of private placement fees and expenses. Prior to this issuance of
        common stock, we had 3,640,209 shares of common stock outstanding. In connection
        with this transaction, we entered into a registration rights agreement (
        the
“Common
        Stock
        Registration Right Agreement”), pursuant
        to
        which we were required to, among other things, file a resale shelf registration
        statement providing for the resale of these shares.




***Private
      Placement of Convertible Preferred Stock*** ** ***to
      JMP Group Inc. and Certain of its Affiliates***




On
      January 18, 2008, we issued 1.0 million shares of our Series A Cumulative
      Redeemable Convertible Preferred Stock, which we refer to as the Series A
      Preferred Stock, to JMP Group, Inc. and certain of its affiliates for an
      aggregate purchase price of $20.0 million. The Series A Preferred Stock entitles
      the holders to receive a cumulative dividend of 10% per year, subject to an
      increase to the extent any future quarterly common stock dividends exceed $0.10
      per share. The shares of Series A Preferred Stock mature on December 31,
      2010, and are convertible into shares of our common stock based on a
      conversion price of $4.00 per share of common stock, which represents a
      conversion rate of five shares of common stock for each share of Series A
      Preferred Stock. Under certain circumstances, the Series A Preferred Stock
      will
      automatically convert into shares of our common stock. In addition, under the
      terms of the Series A Preferred Stock, holders have the option to convert,
      at
      any time, their shares of Series A Preferred Stock into shares of our common
      stock. The Series A Preferred Stock may also be redeemed by the Company in
      connection with certain change of control events. The Series A Preferred Stock
      has voting rights that allow the holders to vote with the common stock, voting
      together as a single class on an “as converted” basis, and the holders have the
      right to appoint one additional “independent” director, as such term is defined
      under the rules of the NASDAQ Stock Market, to stand for election to our board
      of directors at our 2008 Annual Meeting of Stockholders in June 2008.
      At their option, the holders had the option to purchase up to an additional
      $20.0 million of Series A Preferred Stock, on identical terms, through April
      4,
      2008. The holders of the Series A Preferred Stock did not exercise the
      option.





***Advisory
      Agreement with JMPAM***




As
      described above, concurrent with the issuance of the Series A Preferred Stock,
      we entered into an advisory agreement with JMPAM. For
      more
      information on our relationship with JMPAM and the risks and conflicts related
      thereto, see “Our Relationship with JMPAM and the Advisory Agreement” under Item
      1 and “Risks Related to the Advisory Agreement with JMPAM — There are
      conflicts of interest in our relationship with JMPAM, which could result in
      decisions that are not in the best interests of shareholders” under Item 1A of
      our Annual Report on Form 10-K for the year ended December 31,
      2007.


***Changes
      in the Composition of the Board of Directors***




Upon
      completion of the issuance and sale of the Series A Preferred Stock on January
      18, 2008 and pursuant to the stock purchase agreement providing for the sale
      of
      the Series A Preferred Stock, James J. Fowler and Steven M. Abreu were appointed
      to our board of directors, with Mr. Fowler being appointed the non-executive
      chairman of our board of directors. Mr. Fowler also serves as the Chief
      Investment Officer of the Managed Subsidiaries. Mr. Fowler is a managing
      director of JMPAM and president of JMP Realty Trust, Inc., a private REIT that
      is externally managed by JMPAM and an investor in our Series A Preferred Stock.
      In addition, concurrent with the completion of the issuance and sale of the
      Series A Preferred Stock and pursuant to the stock purchase agreement, Steven
      B.
      Schnall, Mary Dwyer Pembroke, Jerome F. Sherman and Thomas W. White resigned
      as
      members of our board of directors, thereby reducing the size of our board of
      directors to seven directors. Pursuant to the stock purchase agreement providing
      for the sale of the Series A Preferred Stock, the holders of our Series A
      Preferred Stock also have the right to appoint one additional "independent"
      director, as such term is defined under the rules of NASDAQ Stock Market, to
      stand for election to our board of directors at our 2008 Annual Meeting of
      Stockholders to be held in June 2008.  34




**Known
      M****aterial
      Trends and Commentary**


*Declines
        in the prices of mortgage assets* -
        Investors’ appetite for U.S. mortgage assets continued to be weak in the first
        quarter of 2008. In addition, the market disruption of March 2008 and related
        de-leveraging in the mortgage asset industry involved the liquidation or
        sale of
        a significant amount of Agency securities. This selling, along with decreased
        demand for these assets among investors, caused mortgage asset prices to
        decline
        in the quarter ended March 31, 2008.
 
 *Tightening
        in the financing markets and reduced liquidity -* As
        prices of mortgage assets decreased, many lenders that finance mortgage assets
        took measures to insure their liquidity needs would not be compromised.
        Principally, many financial institutions withdrew financing and liquidity
        that
        they typically offered clients as part of their daily business operations.
        The
        most common forms of liquidity provided to the mortgage market are in the
        form
        of repurchase agreements for MBS. This reduced availability of financing
        led to
        de-leveraging by many in the industry and, in some cases, forced liquidations,
        all of which exacerbated the problem.
 
 *Volatility
        in financing costs* .
        The
        dislocations in the mortgage market led to increased volatility in the cost
        of
        financing. The relationships between certain short-term interest rates, normally
        very consistent, became less so in the second half of 2007 and continued
        to
        widen during the first quarter of 2008. The Federal Funds rate, an interest
        rate
        used by banks for overnight loans to each other and determined by the Federal
        Reserve Board, is a benchmark used by others to determine similar short term
        rates. The London Inter Bank Offered Rate (“LIBOR”), a market determined rate
        for short term loans, is typically 10 basis points higher than the
        Federal Funds rate. As of May 1, 2008 the LIBOR index is approximately 70
        basis
        points higher than the Fed Funds rate of 2.00%. Because our repurchase
        agreements rates generally move with one month LIBOR, our costs have
        not decreased on a relative basis as would be expected given the 225 basis
        points reduction in the Fed Funds rate.
 
 *Hedging* .
        We
        generally seek to reduce the volatility of our net income by entering into
        interest rate swap agreements. As of March 31, 2008, we had entered into
        interest rate swap agreements with an aggregate notional amount of $168 million.
        The Company discontinued hedge accounting treatment for the interest rate
        swap
        positions during the fourth quarter of 2007 as part of a strategic portfolio
        realignment related to the Series A Preferred Stock offering by the Company.
        Accordingly, the unrealized loss was recorded as an unrealized loss in the
        Statement of Operations and no longer reflected as part of other comprehensive
        income in the Balance Sheet. During the quarter ended March 31, 2008 the
        Company
        terminated certain swaps resulting in a realized loss of $4.8
        million.
 
 *Changes
        in the U.S. economy* .
        Changes
        in the U.S. economy have also affected us. The U.S. economy continued to
        soften
        in the first quarter of 2008. Adverse trends in the housing market and increased
        stress on borrowers, including in particular, residential mortgage borrowers,
        has had a ripple effect throughout the U.S. economy. The Federal Reserve
        continued to reduce short term interest rates resulting in an overall reduction
        of 200 basis points during the first quarter of 2008 with another 25 basis
        points reduction on May 1, 2008. Recently, increased concern regarding inflation
        has arisen principally due to increases in global commodity prices. We believe
        the inflation concerns have kept longer term interest rates high relative
        to
        short term rates. This so called steep yield curve generally results in
        increased returns on equity for companies that employ an Agency MBS strategy
        similar to ours. The possibility of rising inflation, however, increases
        the possibility of interest rates moving higher to slow inflationary
        stresses.
  35
 
 *Loan
        repurchase requests -* As of
        March 31, 2008, we had $4.7 million of outstanding repurchase requests, against
        which the Company has a reserve of $0.7 million. The Company repurchased
        no
        loans during the first quarter of 2008 and anticipates settling the majority
        of
        the outstanding requests during the second quarter.




**Presentation
      Format**




In
      connection with the sale of substantially all of our wholesale and retail
      mortgage lending platform assets during the first quarter of 2007, we classified
      certain assets and liabilities related to our mortgage lending segment as a
      discontinued operation in accordance with the provisions of Statement of
      Financial Accounting Standards No. 144. As a result, we have reported revenues
      and expenses related to the segment as a discontinued operation and the related
      assets and liabilities as assets and liabilities related to a discontinued
      operation for all periods presented in the accompanying condensed consolidated
      financial statements. Our continuing operations are primarily comprised of
      what
      had been our portfolio management operations. In addition, certain assets such
      as the deferred tax asset, and certain liabilities, such as subordinated debt
      and liabilities related to leased facilities not assigned to Indymac, have
      become part of the ongoing operations of NYMT and accordingly, we have not
      classified as a discontinued operation in accordance with the provisions of
      Statement of Financial Accounting Standards No. 144.




The
      Board
      of Directors declared a one for five reverse stock split of our common
      stock, providing shareholders of record as of October 9, 2007, with one share
      of
      common stock for each five shares owned of record as of October 9, 2007 (the
      "Reverse Stock Split"). The reduction in shares resulting from the reverse
      stock
      split was effective on October 9, 2007, decreasing the number of common shares
      outstanding to approximately 3.6 million. Prior period share amounts and
      earnings per share disclosures have been restated to reflect the reverse stock
      split.




**Significance
      of Estimates and Critical Accounting Policies**




We
      prepare our condensed consolidated financial statements in conformity with
      accounting principles generally accepted in the United States of America, or
      GAAP, many of which require the use of estimates, judgments and assumptions
      that
      affect reported amounts. These estimates are based, in part, on our judgment
      and
      assumptions regarding various economic conditions that we believe are reasonable
      based on facts and circumstances existing at the time of reporting. The results
      of these estimates affect reported amounts of assets, liabilities and
      accumulated other comprehensive income at the date of the condensed consolidated
      financial statements and the reported amounts of income, expenses and other
      comprehensive income during the periods presented.




Changes
      in the estimates and assumptions could have a material effect on these financial
      statements. Accounting policies and estimates related to specific components
      of
      our condensed consolidated financial statements are disclosed in the notes
      to
      our condensed consolidated financial statements. In accordance with SEC
      guidance, those material accounting policies and estimates that we believe
      are
      most critical to an investor's understanding of our financial results and
      condition and which require complex management judgment are discussed
      below.





*Revenue
      Recognition* .
      Interest income on our residential mortgage loans and mortgage-backed securities
      is a combination of the interest earned based on the outstanding principal
      balance of the underlying loan/security, the contractual terms of the assets
      and
      the amortization of yield adjustments, principally premiums and discounts,
      using
      generally accepted interest methods. The net GAAP cost over the par balance
      of
      self-originated mortgage loans held for investment and the premium and discount
      associated with the purchase of mortgage-backed securities and loans are
      amortized into interest income over the lives of the underlying assets using
      the
      effective yield method as adjusted for the effects of estimated prepayments.
      Estimating prepayments and the remaining term of our interest yield investments
      require management judgment, which involves, among other things, consideration
      of possible future interest rate environments and an estimate of how borrowers
      will react to those environments, historical trends and performance of those
      interest yield investments. The actual prepayment speed and actual lives could
      be more or less than the amount estimated by management at the time of
      origination or purchase of the assets or at each financial reporting
      period.


36


*Fair
      Value* .
On
      January 1, 2008, we adopted SFAS 157, which defines fair value, establishes
      a
      framework for measuring fair value in accordance with GAAP and expands
      disclosures about fair value measurements.  SFAS
        157
        clarifies that the exchange price is the price in an orderly transaction
        between
        market participants to sell the asset or transfer the liability in the market
        in
        which the reporting entity would transact for the asset or liability, that
        is,
        the principal or most advantageous market for the asset or
        liability.  The transaction to sell the asset or transfer the
        liability is a hypothetical transaction at the measurement date, considered
        from
        the perspective of a market participant that holds the asset or owes the
        liability.  SFAS 157 provides a consistent definition of fair value
        which focuses on exit price and prioritizes, within a measurement of fair
        value,
        the use of market-based inputs over entity-specific inputs.  In
        addition, SFAS 157 provides a framework for measuring fair value, and
        establishes a three-level hierarchy for fair value measurements based upon
        the
        transparency of inputs to the valuation of an asset or liability as of the
        measurement date.
  The
        three
        levels of valuation hierarchy established by SFAS 157 are defined as
        follows:
  *Level
        1* - inputs
        to the valuation methodology are quoted prices (unadjusted) for identical
        assets
        or liabilities in active markets.
  *Level
        2* - inputs
        to the valuation methodology include quoted prices for similar assets and
        liabilities in active markets, and inputs that are observable for the asset
        or
        liability, either directly or indirectly, for substantially the full term
        of the
        financial instrument.
  *Level
        3* - inputs
        to the valuation methodology are unobservable and significant to the fair
        value
        measurement.
  A
        financial instrument’s categorization within the valuation hierarchy is based
        upon the lowest level of input that is significant to the fair value
        measurement.  Our investment securities, which are primarily comprised
        of Agency ARM-MBS, are valued by a third party pricing service primarily
        based
        upon readily observable market parameters and are classified within Level
        2 of
        the valuation hierarchy.  Our interest rate swaps are valued
        using external third party bid quotes and internally developed models that
        apply
        readily observable market parameters and are classified within Level 2 of
        the
        valuation hierarchy.
  We
        have
        established and documented processes for determining our fair values and
        base
        fair value on quoted market prices, when available.  If listed prices
        or quotes are not available, then fair value is based upon internally developed
        models that primarily use inputs that are market-based or independently-sourced
        market parameters, including interest rate yield curves.
  Any
        changes to the valuation methodology are reviewed by management to ensure
        the
        changes are appropriate.  As markets and products develop and the
        pricing for certain products becomes more transparent, we continue to refine
        our
        valuation methodologies.  The methods used by us may produce a fair
        value calculation that may not be indicative of net realizable value or
        reflective of future fair values.  Furthermore, while we believe our
        valuation methods are appropriate and consistent with other market participants,
        the use of different methodologies, or assumptions, to determine the fair
        value
        of certain financial instruments could result in a different estimate of
        fair
        value at the reporting date.  We use inputs that are current as of the
        measurement date, which may include periods of market dislocation, during
        which
        price transparency may be reduced.  This condition could cause our
        financial instruments to be reclassified from Level 2 to Level 3 in the
        future.




*Securitizations* .
      We have
      created securitization entities as a means of either:




·
            creating
                securities backed by mortgage loans which we continue to hold and
                finance
                that are more liquid than holding whole loan assets;
                or




·
            securing
                long-term collateralized financing for our residential mortgage loan
                portfolio and matching the income earned on residential mortgage
                loans
                with the cost of related liabilities, otherwise referred to as match
                funding our balance sheet.




37




Residential
      mortgage loans are transferred to a separate bankruptcy-remote legal entity
      from
      which private-label multi-class mortgage-backed notes are issued. On a
      consolidated basis, securitizations are accounted for as secured financings
      as
      defined by SFAS No. 140, *Accounting for Transfers and Servicing of Financial
      Assets and Extinguishments of Liabilities* (“SFAS No. 140”), and, therefore,
      no gain or loss is recorded in connection with the securitizations. Each
      securitization entity is evaluated in accordance with Financial Accounting
      Standards Board Interpretation (“FIN”) 46(R), “Consolidation of Variable
      Interest Entities”, and we have determined that we are the primary beneficiary
      of the securitization entities. As such, the securitization entities are
      consolidated into our consolidated balance sheet subsequent to securitization.
      Residential mortgage loans transferred to securitization entities collateralize
      the mortgage-backed notes issued, and, as a result, those investments are not
      available to us, our creditors or stockholders. All discussions relating to
      securitizations are on a consolidated basis and do not necessarily reflect
      the
      separate legal ownership of the loans by the related bankruptcy-remote legal
      entity.





*Derivative
      Financial Instruments* - The
      Company has developed risk management programs and processes, which include
      investments in derivative financial instruments designed to manage market risk
      associated with its mortgage-backed securities investment
      activities.




All
      derivative financial instruments are reported as either assets or liabilities
      in
      the consolidated balance sheet at fair value. The gains and losses associated
      with changes in the fair value of derivatives not designated as hedges are
      reported in current earnings. If the derivative is designated as a fair value
      hedge and is highly effective in achieving offsetting changes in the fair value
      of the asset or liability hedged, the recorded value of the hedged item is
      adjusted by its change in fair value attributable to the hedged risk. If the
      derivative is designated as a cash flow hedge, the effective portion of change
      in the fair value of the derivative is recorded in OCI and is recognized in
      the
      income statement when the hedged item affects earnings. The Company calculates
      the effectiveness of these hedges on an ongoing basis, and, to date, has
      calculated effectiveness of approximately 100% of these hedges. Ineffective
      portions, if any, of changes in the fair value or cash flow hedges are
      recognized in earnings.




*New
        Accounting Pronouncements -*On
        January 1, 2008, the Company adopted SFAS 157,*Fair
        Value Measurements*,
        which
        defines fair value, establishes a framework for measuring fair value in
        accordance with GAAP and expands disclosures about fair value
        measurements.  The
          changes to previous practice resulting from the application of SFAS 157
          relate
          to the definition of fair value, the methods used to measure fair value,
          and the
          expanded disclosures about fair value measurements.  The definition of
          fair value retains the exchange price notion used in earlier definitions
          of fair
          value.  SFAS 157 clarifies that the exchange price is the price in an
          orderly transaction between market participants to sell the asset or transfer
          the liability in the market in which the reporting entity would transact
          for the
          asset or liability, that is, the principal or most advantageous market
          for the
          asset or liability.  The transaction to sell the asset or transfer the
          liability is a hypothetical transaction at the measurement date, considered
          from
          the perspective of a market participant that holds the asset or owes the
          liability.  SFAS 157 provides a consistent definition of fair value
          which focuses on exit price and prioritizes, within a measurement of fair
          value,
          the use of market-based inputs over entity-specific inputs.  In
          addition, SFAS 157 provides a framework for measuring fair value, and
          establishes a three-level hierarchy for fair value measurements based upon
          the
          transparency of inputs to the valuation of an asset or liability as of
          the
          measurement date (see note 10).
 
 On
          January 1, 2008, the Company adopted SFAS 159, *The
          Fair Value Option for Financial Assets and Financial
          Liabilities* ,
          which
          provides companies with an option to report selected financial assets and
          liabilities at fair value.
 
 The
          objective of SFAS No. 159 is to reduce both complexity in accounting for
          financial instruments and the volatility in earnings caused by measuring
          related
          assets and liabilities differently. SFAS No. 159 establishes presentation
          and
          disclosure requirements and requires companies to provide additional information
          that will help investors and other users of financial statements to more
          easily
          understand the effect of the Company's choice to use fair value on its
          earnings.
          SFAS No. 159 also requires entities to display the fair value of those
          assets
          and liabilities for which the Company has chosen to use fair value on the
          face
          of the balance sheet. The Company’s adoption of SFAS 159 did not have a material
          impact on the condensed consolidated financial statements as the Company
          did not
          elect the fair value option for any of its existing financial assets or
          liabilities as of January 1, 2008.
  n
        June
        2007, the EITF reached consensus on Issue No. 06-11, *Accounting
        for Income Tax Benefits of Dividends on Share-Based Payment
        Awards* .
        EITF
        Issue No. 06-11 requires that the tax benefit related to dividend
        equivalents paid on restricted stock units, which are expected to vest, be
        recorded as an increase to additional paid-in capital. The Company
        currently accounts for this tax benefit as a reduction to income tax expense.
        EITF Issue No. 06-11 is to be applied prospectively for tax benefits on
        dividends declared in fiscal years beginning after December 15, 2008, and
        the Company expects to adopt the provisions of EITF Issue No. 06-11
        beginning in the first quarter of 2009. The Company does not expect the adoption
        of EITF Issue No. 06-11 to have a material effect on its financial
        condition, results of operations or cash flows.
  In
        February 2008, the FASB issued SFAS No. 140-3, *Accounting
        for Transfers of Financial Assets and Repurchase Financing
        Transactions* .
        SFAS
        No. 140-3 requires an initial transfer of a financial asset and a
        repurchase financing that was entered into contemporaneously or in contemplation
        of the initial transfer to be evaluated as a linked transaction under
        SFAS No. 140 unless certain criteria are met, including that the
        transferred asset must be readily obtainable in the marketplace. FSP
        No. 140-3 is effective for fiscal years beginning after November 15,
        2008, and will be applied to new transactions entered into after the date
        of
        adoption. Early adoption is prohibited. The Company is currently evaluating
        the impact of adopting FSP No. 140-3 on its financial condition and cash
        flows. Adoption of FSP No. 140-3 will have no effect on the Company’s
        results of operations.
  38
  In
        March 2008, the FASB issued SFAS No. 161, *Disclosures
        about Derivative Instruments and Hedging Activities — an amendment of FASB
        Statement No. 133.* SFAS No. 161 requires enhanced disclosures about an entity’s
        derivative and hedging activities, and is effective for financial statements
        issued for fiscal years beginning after November 15, 2008, with early
        application encouraged. The Company will adopt SFAS No. 161 in the
        first quarter of 2009. Because SFAS No. 161 requires only
        additional disclosures concerning derivatives and hedging activities, adoption
        of SFAS No. 161 will not affect the Company’s financial condition,
        results of operations or cash flows.




*Loan
      Loss Reserves on Mortgage Loans* —
We
      evaluate a reserve for loan losses based on management's judgment and estimate
      of credit losses inherent in our portfolio of mortgage loans held for sale
      and
      mortgage loans held in securitization trusts.


Estimation
          involves the consideration of various credit-related factors including
          but not
          limited to, the current housing market conditions, loan-to-value ratios,
          delinquency status, historical credit loss severity rates, purchased mortgage
          insurance, the borrower's credit and other factors deemed to warrant
          consideration. Additionally,
          we look at the balance of any delinquent loan and compare that to the value
          of
          the property. Using the lower of the original purchase price or appraised value
          as
          a benchmark, we either utilize various internet based property data services
          to
          look at comparable properties in the same area, or consult with a realtor
          in the property's
          area, to determine the property’s current value.
  Comparing
        the current loan balance to the current property value determines the current
        loan-to-value (“LTV”) ratio of the loan. Generally, for mortgage loans held in
        securitization trusts, all of which are first liens, we estimate that if
        a loan
        goes into the foreclosure process, resulting in real estate owned (“REO”), it
        will be disposed of at approximately 68% of the property’s current value, after
        expenses. With respect to our portfolio of mortgage loans held for sale,
        which
        generally consists of mortgage loans originated in 2006 and 2007, we assume
        a
        first lien on a property that goes into a foreclosure process and becomes
        REO
        will result in the property being disposed of at approximately 65% of the
        property’s current value, net of expenses. This estimate is based on
        management’s experience in similar market conditions. Thus, for a first lien
        loan that is 60 or more days delinquent, we will adjust the property value
        down
        to approximately 68% or 65% of the original property’s current value, as
        applicable depending on the loan classification, and compare that to the
        current
        balance of the loan. The difference determines the base reserve taken for
        that
        loan. This base reserve for a particular loan may be adjusted if we are aware
        of
        specific circumstances that may affect the outcome of the loss mitigation
        process for that loan. Predominately, however, we use the base reserve number
        for our reserve.




Reserves
      for second liens, all of which are mortgage loans held for sale, are larger
      than
      that for first liens as second liens are in a junior position and only receive
      proceeds after the claims of the first lien holder are satisfied. Given the
      softness in the housing market due to the increased properties listed for sale,
      we currently assume that second mortgages will return approximately 5% or less
      of their original balance for loans that go through foreclosure. As with first
      liens, we may occasionally alter the base reserve calculation but that is in
      a
      minority of the cases and only if we are aware of specific circumstances that
      pertain to that specific loan.




At
      March
      31, 2008, we had a loan loss reserve of $1.2 million on mortgage loans held
      for
      sale, $0.7 million in reserves for indemnifications and repurchase requests
      and
      a $3.1 million loan loss reserve for mortgage loans held in securitization
      trusts. The Company incurred $1.8 million of total loan losses during the three
      months ended March 31, 2008, including $1.4 million from loans held in
      securitization trusts and $0.4 million from loans held for sale in the
      discontinued operations.





**Overview
      of Performance**




For
      the
      three months ended March 31, 2008, we reported a net loss of $21.3 million
      as
      compared to a net loss of $4.7 million for the three months ended March 31,
      2007.




The
      main
      components of the increase in loss for the three months ended March 31, 2008
      as
      compared to the same period for the previous period are detailed in the
      following table:




**Detailed
              Components of increase in loss**
            
            **for
                the three months ended March 31,****2008**
            
            **2007**
            
            **Change**Net
                interest income on investment portfolio
            
            $
            2,739
            
            $
            629
            
            $
            2,110Loss
                on investment securities and related hedges
            
            
            (19,848
            )
            
            -
            
            
            (19,848
            )Loan
                loss reserve on loans held in securitization trust
            
            
            (1,433
            )
            
            -
            
            
            (1,433
            )Total
                Expenses
            
            
            1,431
            
            
            647
            
            
            784Income
                (loss) from discontinued operations - net of tax
            
            $
            180
            
            $
            (3,841
            )
            $
            4,021




39




**Summary
      of Operations and Key Performance Measurements**




For
      the
      three months ended March 31, 2008, our income was dependent upon the net
      interest (interest income on portfolio assets net of the interest expense and
      hedging costs associated with the financing of such assets) generated from
      our
      portfolio of mortgage-backed securities and mortgage loans held in the
      securitization trusts.




The
      key
      performance measures for our portfolio management activities are:




·
            net
                interest spread on the portfolio;





·
            characteristics
                of the investments and the underlying pool of mortgage loans including
                but
                not limited to credit quality, coupon and prepayment rates;
                and




·
            return
                on our mortgage asset investments and the related management of interest
                rate risk.





**Financial
      Condition**





As
      of
      March 31, 2008, we had approximately $931.8 million of total assets, as compared
      to approximately $809.3 million of total assets as of December 31, 2007. The
      increase in total assets results primarily from an increase in mortgage-backed
      securities of $162.1 million and a decrease of $32.4 million in mortgage loans
      held in securitization trust.




The
      Company received net proceeds of approximately $19.6 million from
      our Series A Preferred Stock offering and $56.6 million from
      our common stock offering during the first quarter of 2008. The Company
      used substantially all of the net proceeds to purchase approximately $714.1
      million of Agency MBS during January and February 2008. As discussed above
      under
“–Significant Events During 2008 First Quarter –
      Recent Market
      Volatility,”
      the Company sold an aggregate of $592.8 million of Agency MBS in its portfolio
      during March 2008 in an effort to reduce its leverage and improve its liquidity
      position in response to the market disruption of March 2008.





**Balance
      Sheet Analysis - Asset Quality**




*Investment
      Securities - Available for Sale* - Our
      securities portfolio consists of Agency securities or AAA-rated residential
      mortgage-backed securities. At March 31, 2008 and December 31, 2007, we had
      no
      investment securities in a single issuer or entity (other than a government
      sponsored agency of the U.S. Government) that had an aggregate book value in
      excess of 10% of our total assets. The following tables set forth the credit
      characteristics of our securities portfolio as of March 31, 2008 and December
      31, 2007 (dollar amounts in thousands):





**Credit
      Characteristics of Our Investment Securities**




**March
                31, 2008****Sponsor
                or
                Rating**
            
            
            **Par**
              **Value**
            
            
            **Carrying**
              **Value**
            
            
            **%
                of**
              **Portfolio**
            
            
            **Coupon**
            
            
            **Yield**Agency
                REMIC CMO floaters
            
            
            FNMA/FHLMC
            
            $
            232,435
            
            $
            224,262
            
            
            44
            %
            
            3.60
            %
            
            4.12
            %Agency
                Hybrid Arms
            
            
            FNMA/FHLMC
            
            
            257,746
            
            
            261,778
            
            
            51
            %
            
            5.15
            %
            
            4.22
            %Non-Agency
                floaters
            
            
            AAA
            
            
            29,558
            
            
            23,683
            
            
            5
            %
            
            3.41
            %
            
            7.44
            %NYMT
                retained securities
            
            
            AAA-BBB
            
            
            2,169
            
            
            2,154
            
            
            0
            %
            
            6.93
            %
            
            5.27
            %NYMT
                retained securities
            
            
            Below
                BBB
            
            
            2,753
            
            
            673
            
            
            0
            %
            
            5.69
            %
            
            12.75
            %Total/Weighted
                average
            
            
            
            
            $
            524,661
            
            $
            512,550
            
            
            100
            %
            
            4.38
            %
            
            4.41
            %




**December
                31, 2007****Sponsor
                or
                Rating**
            
            **Par**
              **Value**
            
            **Carrying**
              **Value**
            
            **%
                of**
              **Portfolio**
            
            **Coupon**
            
            **Yield**Agency
                REMIC CMO floaters
            
            
            FNMA/FHLMC
            
            $
            324,676
            
            $
            318,689
            
            
            91
            %
            
            5.98
            %
            
            5.55
            %Non-Agency
                floaters
            
            
            AAA
            
            
            29,764
            
            
            28,401
            
            
            8
            %
            
            5.66
            %
            
            5.50
            %NYMT
                retained securities
            
            
            AAA-BBB
            
            
            2,169
            
            
            2,165
            
            
            1
            %
            
            6.31
            %
            
            6.28
            %NYMT
                retained securities
            
            
            Below
                BBB
            
            
            2,756
            
            
            1,229
            
            
            0
            %
            
            5.68
            %
            
            12.99
            %Total/Weighted
                average
            
            
            
            
            $
            359,365
            
            $
            350,484
            
            
            100
            %
            
            5.95
            %
            
            5.61
            %




40




The
      following table sets forth the stated reset periods and weighted average yields
      of our investment securities at March 31, 2008 and December 31, 2007 (dollar
      amounts in thousands):





**Reset/
      Yield of our Investment Securities**




**Less than**
              **6 Months**
            
            
            
            **More than 6**
              **Months**
              **To 24 Months**
            
            
            **More than 24**
              **Months**
              **To 60 Months**
            
            
            
            **Total****March
                31, 2008**
            
            
            **Carrying
                Value**
            
            
            **Weighted
                Average Yield**
            
            
            
            **Carrying
                  Value**
            
            
            **Weighted
                  Average Yield**
            
            
            **Carrying
                  Value**
            
            
            **Weighted
                Average Yield**
            
            
            
            **Carrying
              Value**
            
            
            **Weighted
                Average Yield**Agency
                REMIC CMO floaters
            
            $
            224,262
            
            
            4.12
            %
            
            $
            —
            
            
            —
            
            $
            —
            
            
            —
            
            
            $
            224,262
            
            
            4.12
            %Agency
                Hybrid Arms
            
            
            —
            
            
            —
            
            
            
            —
            
            
            —
            
            
            261,778
            
            
            4.22
            %
            
            
            261,778
            
            
            4.22
            %Non-Agency
                floaters
            
            
            23,683
            
            
            7.44
            %
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            
            23,683
            
            
            7.44
            %NYMT
                retained securities
            
            
            —
            
            
            —
            
            
            
            2,154
            
            
            5.27
            
            
            673
            
            
            12.75
            %
            
            
            2,827
            
            
            9.45
            %Total/Weighted
                average
            
            $
            247,945
            
            
            4.50
            %
            
            $
            2,154
            
            
            5.27
            
            $
            262,451
            
            
            4.31
            %
            
            $
            512,550
            
            
            4.41
            %




**Less
                than**
              **6
                Months**
            
            
            **More than 6 Months**
              **To 24 Months**
            
            
            **More than 24 Months**
              **To 60 Months**
            
            
            **Total****December
                31, 2007**
            
            **Carrying**
              **Value**
            
            **Weighted**
              **Average**
              **Yield**
            
            
            **Carrying**
              **Value**
            
            **Weighted**
              **Average**
              **Yield**
            
            
            **Carrying**
              **Value**
            
            **Weighted**
              **Average**
              **Yield**
            
            
            **Carrying**
              **Value**
            
            **Weighted**
              **Average**
              **Yield**Agency
                REMIC CMO Floating Rate
            
            $
            318,689
            
            
            5.55
            %
            
            $
            —
            
            
            —
            %
            
            $
            —
            
            
            —
            %
            
            $
            318,689
            
            
            5.55
            %Non-Agency floaters
            
            
            28,401
            
            
            5.50
            %
            
            
            —
            
            
            —
            %
            
            
            —
            
            
            —
            %
            
            
            28,401
            
            
            5.50
            %NYMT
                Retained Securities
            
            
            2,165
            
            
            6.28
            %
            
            
            —
            
            
            —
            %
            
            
            1,229
            
            
            12.99
            %
            
            
            3,394
            
            
            10.03
            %Total/Weighted
                Average
            
            $
            349,255
            
            
            5.55
            %
            
            $
            —
            
            
            —
            %
            
            $
            1,229
            
            
            12.99
            %
            
            $
            350,484
            
            
            5.61
            %




*Mortgage
      Loans Held in Securitization Trusts* -
      Included in our portfolio are ARM loans that we originated or purchased in
      bulk from third parties that met our investment criteria and portfolio
      requirements. These loans are classified as “mortgage loans held for investment”
during a period of aggregation and until the portfolio reaches a size sufficient
      for us to securitize such loans. If the securitization qualifies as a
      financing for SFAS No. 140 purposes, the loans are then re-classified as
“mortgage loans held in securitization trusts.”




New
      York
      Mortgage Trust 2006-1, our most recent securitization, qualified as a
      sale under SFAS No. 140, which resulted in the recording of residual assets
      and
      mortgage servicing rights. As of March 31, 2008 the residual assets totaled
      $0.7
      million and are included in investment securities available for
      sale.




41




Except
      for the loans in securitization trusts, there were no mortgage loans held for
      investment at March 31, 2008 or December 31, 2007.




The
      following table details mortgage loans held in securitization trusts at March
      31, 2008 and December 31, 2007 (dollar amounts in thousands):




**Par Value**
            
            **Coupon**
            
            **Carrying Value**
            
            **Yield**March
                31, 2008
            
            $
            398,875
            
            
            5.73
            %
            $
            398,323
            
            
            5.02
            %December
                31, 2007
            
            $
            429,629
            
            
            5.74
            %
            $
            430,715
            
            
            5.36
            %




At
      March
      31, 2008 mortgage loans held in securitization trusts totaled approximately
      $398.3 million, or 43% of our total assets. Of this mortgage loan investment
      portfolio, 100% are traditional ARMs or hybrid ARMs and 78% are ARM loans that
      are interest only. On our hybrid ARMs, interest rate reset periods are
      predominately five years or less and the interest-only/amortization period
      is
      typically 10 years, which mitigates the “payment shock” at the time of interest
      rate reset. No loans in our investment portfolio of mortgage loans are
      option-ARMs or ARMs with negative amortization.





**Characteristics
      of Our Mortgage Loans Held in Securitization Trusts and Retained Interests
      in
      Securitization:**




The
      following table sets forth the composition of our portfolio of
      mortgage loans held in securitization trusts and retained interests in our
      REMIC securitization, NYMT 2006-1 as of March 31, 2008 (dollar amounts in
      thousands):




**#
                of Loans**
            
            **Par
                Value**
            
            **Carrying**
              **Value****Loan
                Characteristics:**Mortgage
                loans held in securitization trusts
            
            
            907
            
            $
            398,875
            
            $
            398,323Retained
                interest in securitization (included in Investment securities
                available for sale)
            
            
            378
            
            
            202,449
            
            
            2,826Total
                Loans Held
            
            
            1,285
            
            $
            601,324
            
            $
            401,149




**Average**
            
            
            
            **High**
            
            
            
            **Low****General
              Loan Characteristics:**Original
                Loan Balance
            
            $
            490
            
            
            $
            3,500
            
            
            $
            48Coupon
                Rate
            
            
            5.80
            %
            
            
            9.93
            %
            
            
            4.00
            %Gross
                Margin
            
            
            2.35
            %
            
            
            6.50
            %
            
            
            1.13
            %Lifetime
                Cap
            
            
            11.20
            %
            
            
            13.75
            %
            
            
            9.13
            %Original
                Term (Months)
            
            
            360
            
            
            
            360
            
            
            
            360Remaining
                Term (Months)
            
            
            328
            
            
            
            336
            
            
            
            292




42




The
      following table sets forth the composition of our portfolio mortgage loans
      held
      in securitization trusts and retained interests in our REMIC securitization,
      NYMT 2006-1 as of December 31, 2007:




**#
                of Loans**
            
            **Par
                Value**
            
            **Carrying**
              **Value****Loan
                Characteristics:**Mortgage
                loans held in securitization trusts
            
            
            972
            
            $
            429,629
            
            $
            430,715Retained
                interest in securitization (included in Investment securities
                available for sale)
            
            
            391
            
            
            209,455
            
            
            3,394Total
                Loans Held
            
            
            1,363
            
            $
            639,084
            
            $
            434,109




**General
              Loan Characteristics:**
            
            **Average**
            
            
            **High**
            
            
            **Low**Original
                Loan Balance
            
            $
            490
            
            
            $
            3,500
            
            
            $
            48Coupon
                Rate
            
            
            5.79
            %
            
            
            9.93
            %
            
            
            4.00
            %Gross
                Margin
            
            
            2.34
            %
            
            
            6.50
            %
            
            
            1.13
            %Lifetime
                Cap
            
            
            11.19
            %
            
            
            13.75
            %
            
            
            9.00
            %Original
                Term (Months)
            
            
            360
            
            
            
            360
            
            
            
            360Remaining
                Term (Months)
            
            
            330
            
            
            
            339
            
            
            
            295




The
      following tables provide additional characteristics of the mortgage loans held
      in securitization trusts and retained interests in securitization as of March
      31, 2008 and December 31, 2007:




**Arm
              Loan Type:**
            
            
            **March
                31,**
              **2008**
              **Percentage**
            
            
            **December 31,**
              **2007**
              **Percentage**Traditional
                ARMs
            
            
            2.2
            %
            
            2.3
            %2/1
                Hybrid ARMs
            
            
            1.3
            %
            
            1.6
            %3/1
                Hybrid ARMs
            
            
            8.6
            %
            
            10.2
            %5/1
                Hybrid ARMs
            
            
            85.3
            %
            
            83.4
            %7/1
                Hybrid ARMs
            
            
            2.6
            %
            
            2.5
            %Total
            
            
            100.0
            %
            
            100.0
            %Percent
                of ARM loans that are Interest Only
            
            
            77.8
            %
            
            77.3
            %Weighted
                average length of interest only period
            
            
            8.3
                years
            
            
            8.3
                years




**Traditional
              ARMs - Periodic Cap(1):**
            
            
            **March
                31,**
              **2008**
              **Percentage**
            
            
            **December 31,**
              **2007**
              **Percentage**None
            
            
            79.2
            %
            
            72.9
            %1%
            
            
            1.6
            %
            
            1.4
            %Over
                1%
            
            
            19.2
            %
            
            25.7
            %Total
            
            
            100.0
            %
            
            100.0
            %




(1)
            Periodic
                caps refer to the maximum amount by which the mortgage rate on any
                mortgage loan may increase or decrease on a periodic adjustment date
                set forth in the loan
                agreement.


43




**Hybrid
              ARMs - Initial Cap(2):**
            
            
            **March
                31,**
              **2008**
              **Percentage**
            
            
            **December  31,**
              **2007**
              **Percentage**3.00%
                or less
            
            
            7.3
            %
            
            8.3
            %3.01%-4.00%
            
            
            4.4
            %
            
            5.1
            %4.01%-5.00%
            
            
            87.3
            %
            
            85.6
            %5.01%-6.00%
            
            
            1.0
            %
            
            1.0
            %Total
            
            
            100.0
            %
            
            100.0
            %




(2)
            Initial
                caps refer to a fixed percentage specified in the related mortgage
                note by
                which the related mortgage rate generally will not increase or decrease
                on
                the first adjustment date more than such fixed
                percentage.




**FICO
              Scores:**
            
            
            **March
                31,**
              **2008**
              **Percentage**
            
            
            **December  31,**
              **2007**
              **Percentage**650
                or less
            
            
            4.1
            %
            
            3.9
            %651
                to 700
            
            
            17.6
            %
            
            17.0
            %701
                to 750
            
            
            32.7
            %
            
            32.4
            %751
                to 800
            
            
            41.4
            %
            
            42.5
            %801
                and over
            
            
            4.2
            %
            
            4.2
            %Total
            
            
            100.0
            %
            
            100.0
            %Average
                FICO Score
            
            
            737
            
            
            738




**Loan
                to Value (LTV)**:
            
            **March
                31,**
              **2008**
              **Percentage**
            
            **December  31,**
              **2007**
              **Percentage**50%
                or less
            
            
            9.6
            %
            
            9.5
            %50.01%
                - 60.00%
            
            
            8.6
            %
            
            8.9
            %60.01%
                - 70.00%
            
            
            27.1
            %
            
            27.3
            %70.01%
                - 80.00%
            
            
            52.9
            %
            
            52.2
            %80.01%
                and over
            
            
            1.8
            %
            
            2.1
            %Total
            
            
            100.0
            %
            
            100.0
            %Average
                LTV
            
            
            69.7
            %
            
            69.7
            %




**Property
              Type**:
            
            
            **March
                31,**
              **2008**
              **Percentage**
            
            
            **December  31,**
              **2007**
              **Percentage**Single
                Family
            
            
            50.8
            %
            
            51.3
            %Condominium
            
            
            22.7
            %
            
            22.8
            %Cooperative
            
            
            10.2
            %
            
            9.8
            %Planned
                Unit Development
            
            
            13.3
            %
            
            13.0
            %Two
                to Four Family
            
            
            3.0
            %
            
            3.1
            %Total
            
            
            100.0
            %
            
            100.0
            %




44




**Occupancy
              Status:**
            
            
            **March
                31,**
              **2008**
              **Percentage**
            
            
            **December  31,**
              **2007**
              **Percentage**Primary
            
            
            84.8
            %
            
            84.4
            %Secondary
            
            
            11.6
            %
            
            12.0
            %Investor
            
            
            3.6
            %
            
            3.6
            %Total
            
            
            100.0
            %
            
            100.0
            %




**Documentation
              Type:**
            
            
            **March
                31,**
              **2008**
              **Percentage**
            
            
            **December  31,**
              **2007**
              **Percentage**Full
                Documentation
            
            
            71.9
            %
            
            72.0
            %Stated
                Income
            
            
            20.0
            %
            
            19.7
            %Stated
                Income/ Stated Assets
            
            
            6.6
            %
            
            6.8
            %No
                Documentation
            
            
            1.0
            %
            
            1.0
            %No
                Ratio
            
            
            0.5
            %
            
            0.5
            %Total
            
            
            100.0
            %
            
            100.0
            %




**Loan
              Purpose:**
            
            **March
                31,**
              **2008**
              **Percentage**
            
            **December  31,**
              **2007**
              **Percentage**Purchase
            
            
            57.4
            %
            
            57.8
            %Rate
                and term refinance
            
            
            15.9
            %
            
            15.9
            %Cash
                out refinance
            
            
            26.7
            %
            
            26.3
            %Total
            
            
            100.0
            %
            
            100.0
            %




**Geographic
              Distribution: (5% or more in any one state)**
            
            **March
                31,**
              **2008**
              **Percentage**
            
            **December  31,**
              **2007**
              **Percentage**NY
            
            
            30.5
            %
            
            31.2
            %MA
            
            
            17.7
            %
            
            17.4
            %FL
            
            
            8.2
            %
            
            8.3
            %CA
            
            
            7.0
            %
            
            7.2
            %NJ
            
            
            5.9
            %
            
            5.7
            %Other
                (less than 5% individually)
            
            
            30.7
            %
            
            30.2
            %Total
            
            
            100.0
            %
            
            100.0
            %




45




*Delinquency
      Status -* As of
      March 31, 2008 and December 31, 2007, we had 14 delinquent loans totaling $9.1
      million and 14 delinquent loans totaling $8.8 million, respectively, categorized
      as mortgage loans held in securitization trusts.




The
      following tables set forth delinquent loans in our portfolio as of March 31,
      2008 and December 31, 2007 (dollar amounts in thousands):




**March
              31, 2008****Days
              Late**
            
            
            **Number
                of**
              **Delinquent**
              **Loans**
            
            
            **Total**
              **Dollar
                Amount**
            
            
            **%
                of Loan**
              **Portfolio**30-60
            
            
            2
            
            $
            1,052
            
            
            0.26
            %61-90
            
            
            1
            
            $
            397
            
            
            0.10
            %90+
            
            
            11
            
            $
            7,653
            
            
            1.92
            %Real
              estate owned through foreclosure (REO)
            
            
            6
            
            $
            4,807
            
            
            1.21
            %




**December
              31, 2007****Days
              Late**
            
            
            **Number
                of**
              **Delinquent**
              **Loans**
            
            
            **Total**
              **Dollar
                Amount**
            
            
            **%
                of Loan**
              **Portfolio**30-60
            
            
            —
            
            $
            —
            
            
            —
            %61-90
            
            
            2
            
            
            1,859
            
            
            0.43
            %90+
            
            
            12
            
            
            6,910
            
            
            1.61
            %REO
            
            
            4
            
            $
            4,145
            
            
            0.96
            %




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





The
      Company had a loan loss reserve for delinquent mortgage loans held in
      securitization trusts of $3.1 million as of March 31, 2008 and $1.6 million
      as of December 31, 2007.





46




The
      following table details loan summary information for loans held in
      securitization trust at March 31, 2008 (all amounts in thousands)


**Principal****amount
                  of****loans****subject
                  to****Periodic**
              
              
              
              
              
              **Face**
              
              
              **Carrying**
              
              
              **delinquent****Description**
              
              
              **Interest
                  Rate %**
              
              **Final
                  Maturity**
              
              
              **Payment**
              
              
              
              
              
              **Amount**
              
              
              **Amount**
              
              
              **principal****Property**
              
              
              
              
              
              **Loan**
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              **Term**
              
              
              **Prior**
              
              
              **of**
              
              
              **of**
              
              
              **or****Type**
              
              
              **Balance**
              
              
              **Count**
              
              
              **Max**
              
              
              **Min**
              
              **Avg**
              
              **Min**
              
              
              **Max**
              
              
              **(months)**
              
              
              **Liens**
              
              
              **Mortgage**
              
              
              **Mortgage**
              
              
              **interest****Single**
              
              
              <=
                  $100
              
              
              14
              
              
              7.75
              
              
              4.75
              
              5.79
              
              07/01/33
              
              
              11/01/35
              
              
              360
              
              
              NA
              
              $
              2,134
              
              $
              947
              
              $
              69**Family**
              
              
              <=$250
              
              
              103
              
              
              9.50
              
              
              4.75
              
              5.76
              
              09/01/32
              
              
              12/01/35
              
              
              360
              
              
              NA
              
              
              19,537
              
              
              18,489
              
              
              246<=$500
              
              
              160
              
              
              7.63
              
              
              4.25
              
              5.67
              
              09/01/32
              
              
              01/01/36
              
              
              360
              
              
              NA
              
              
              58,600
              
              
              55,912
              
              
              500<=$1,000
              
              
              74
              
              
              9.93
              
              
              4.38
              
              5.98
              
              07/01/33
              
              
              01/01/36
              
              
              360
              
              
              NA
              
              
              53,496
              
              
              51,689
              
              
              3,417>$1,000
              
              
              37
              
              
              7.75
              
              
              5.00
              
              5.79
              
              06/01/34
              
              
              01/01/36
              
              
              360
              
              
              NA
              
              
              65,127
              
              
              64,503
              
              
              -**Summary**
              
              
              **388**
              
              
              **9.93**
              
              
              **4.25**
              
              **5.77**
              
              **09/01/32**
              
              
              **01/01/36**
              
              
              **360**
              
              
              NA
              
              **$**
              **198,894**
              
              **$**
              **191,540**
              
              **$**
              **4,232****2-4**
              
              
              <=
                  $100
              
              
              1
              
              
              6.63
              
              
              6.63
              
              6.63
              
              02/01/35
              
              
              02/01/35
              
              
              360
              
              
              NA
              
              $
              80
              
              $
              77
              
              $
              -**FAMILY**
              
              
              <=$250
              
              
              7
              
              
              6.75
              
              
              4.38
              
              5.73
              
              12/01/34
              
              
              11/01/35
              
              
              360
              
              
              NA
              
              
              1,365
              
              
              1,288
              
              
              -<=$500
              
              
              25
              
              
              7.63
              
              
              5.13
              
              5.98
              
              09/01/34
              
              
              01/01/36
              
              
              360
              
              
              NA
              
              
              9,181
              
              
              8,987
              
              
              -<=$1,000
              
              
              4
              
              
              7.25
              
              
              5.38
              
              6.31
              
              10/01/35
              
              
              10/01/35
              
              
              360
              
              
              NA
              
              
              3,068
              
              
              3,052
              
              
              517>$1,000
              
              
              1
              
              
              5.63
              
              
              5.63
              
              5.63
              
              12/01/34
              
              
              08/01/35
              
              
              360
              
              
              NA
              
              
              2,600
              
              
              2,600
              
              
              -**Summary**
              
              
              **38**
              
              
              **7.63**
              
              
              **4.38**
              
              **5.97**
              
              **09/01/34**
              
              
              **01/01/36**
              
              
              **360**
              
              
              NA
              
              **$**
              **16,294**
              
              **$**
              **16,004**
              
              **$**
              **517****Condo**
              
              
              <=
                  $100
              
              
              18
              
              
              7.13
              
              
              4.38
              
              5.95
              
              01/01/35
              
              
              12/01/35
              
              
              360
              
              
              NA
              
              $
              2,648
              
              $
              1,184
              
              $
              -<=$250
              
              
              97
              
              
              7.88
              
              
              4.50
              
              5.75
              
              08/01/32
              
              
              01/01/36
              
              
              360
              
              
              NA
              
              
              18,477
              
              
              17,666
              
              
              230<=$500
              
              
              112
              
              
              8.13
              
              
              4.50
              
              5.59
              
              09/01/32
              
              
              01/01/36
              
              
              360
              
              
              NA
              
              
              39,556
              
              
              38,271
              
              
              775<=$1,000
              
              
              41
              
              
              7.88
              
              
              4.50
              
              5.54
              
              08/01/33
              
              
              11/01/35
              
              
              360
              
              
              NA
              
              
              30,413
              
              
              28,164
              
              
              ->$1,000
              
              
              16
              
              
              7.25
              
              
              4.63
              
              5.60
              
              07/01/34
              
              
              09/01/35
              
              
              360
              
              
              NA
              
              
              25,728
              
              
              23,322
              
              
              1,149**Summary**
              
              
              **284**
              
              
              **8.13**
              
              
              **4.38**
              
              **5.66**
              
              **08/01/32**
              
              
              **01/01/36**
              
              
              **360**
              
              
              NA
              
              **$**
              **116,822**
              
              **$**
              **108,607**
              
              **$**
              **2,154****CO-OP**
              
              
              <=
                  $100
              
              
              7
              
              
              7.25
              
              
              4.75
              
              5.73
              
              09/01/34
              
              
              06/01/35
              
              
              360
              
              
              NA
              
              $
              986
              
              $
              399
              
              $
              -<=$250
              
              
              26
              
              
              7.25
              
              
              4.00
              
              5.61
              
              10/01/34
              
              
              12/01/35
              
              
              360
              
              
              NA
              
              
              4,829
              
              
              4,522
              
              
              -<=$500
              
              
              55
              
              
              7.75
              
              
              4.50
              
              5.61
              
              08/01/34
              
              
              12/01/35
              
              
              360
              
              
              NA
              
              
              21,592
              
              
              20,062
              
              
              -<=$1,000
              
              
              32
              
              
              6.75
              
              
              4.75
              
              5.35
              
              11/01/34
              
              
              11/01/35
              
              
              360
              
              
              NA
              
              
              23,282
              
              
              22,435
              
              
              ->$1,000
              
              
              7
              
              
              6.63
              
              
              4.88
              
              5.50
              
              11/01/34
              
              
              12/01/35
              
              
              360
              
              
              NA
              
              
              9,814
              
              
              9,595
              
              
              -**Summary**
              
              
              **127**
              
              
              **7.75**
              
              
              **4.00**
              
              **5.50**
              
              **08/01/34**
              
              
              **12/01/35**
              
              
              **360**
              
              
              NA
              
              **$**
              **60,503**
              
              **$**
              **57,013**
              
              **$**
              **-****PUD**
              
              
              <=
                  $100
              
              
              2
              
              
              5.63
              
              
              5.25
              
              5.44
              
              07/01/35
              
              
              07/01/35
              
              
              360
              
              
              NA
              
              $
              438
              
              $
              196
              
              $
              -<=$250
              
              
              29
              
              
              7.75
              
              
              4.63
              
              5.84
              
              07/01/33
              
              
              12/01/35
              
              
              360
              
              
              NA
              
              
              5,692
              
              
              5,308
              
              
              -<=$500
              
              
              26
              
              
              9.88
              
              
              4.63
              
              6.36
              
              08/01/32
              
              
              12/01/35
              
              
              360
              
              
              NA
              
              
              9,426
              
              
              8,878
              
              
              -<=$1,000
              
              
              9
              
              
              7.50
              
              
              4.75
              
              5.84
              
              09/01/33
              
              
              12/01/35
              
              
              360
              
              
              NA
              
              
              6,196
              
              
              6,111
              
              
              856>$1,000
              
              
              4
              
              
              7.22
              
              
              5.63
              
              6.21
              
              04/01/34
              
              
              12/01/35
              
              
              360
              
              
              NA
              
              
              5,233
              
              
              5,218
              
              
              1,343**Summary**
              
              
              **70**
              
              
              **9.88**
              
              
              **4.63**
              
              **6.04**
              
              **08/01/32**
              
              
              **01/01/36**
              
              
              **360**
              
              
              NA
              
              **$**
              **26,985**
              
              **$**
              **25,711**
              
              **$**
              **2,199****Summary**
              
              
              <=
                  $100
              
              
              42
              
              
              7.75
              
              
              4.38
              
              5.85
              
              07/01/33
              
              
              12/01/35
              
              
              360
              
              
              NA
              
              $
              6,286
              
              $
              2,803
              
              $
              69<=$250
              
              
              262
              
              
              9.50
              
              
              4.00
              
              5.75
              
              08/01/32
              
              
              01/01/36
              
              
              360
              
              
              NA
              
              
              49,900
              
              
              47,273
              
              
              476<=$500
              
              
              378
              
              
              9.88
              
              
              4.25
              
              5.67
              
              08/01/32
              
              
              01/01/36
              
              
              360
              
              
              NA
              
              
              138,355
              
              
              132,110
              
              
              1,275<=$1,000
              
              
              160
              
              
              9.93
              
              
              4.38
              
              5.74
              
              07/01/33
              
              
              01/01/36
              
              
              360
              
              
              NA
              
              
              116,455
              
              
              111,451
              
              
              4,790>$1,000
              
              
              65
              
              
              7.75
              
              
              4.63
              
              5.74
              
              04/01/34
              
              
              01/01/36
              
              
              360
              
              
              NA
              
              
              108,502
              
              
              105,238
              
              
              2,492**Grand
                  Total**
              
              
              **907**
              
              
              **9.93**
              
              
              **4.00**
              
              **5.73**
              
              **08/01/32**
              
              
              **01/01/36**
              
              
              **360**
              
              
              NA
              
              **$**
              **419,498**
              
              **$**
              **398,875**
              
              **$**
              **9,102**




The
      following table details activity for loans held in securitization trust for
      the
      three months ended March 31, 2008.





**Principal**
            
            **Premium**
            
            **Loan
                Reserve**
            
            **Net
                Carrying Value****Balance,
                January 1, 2008**
            
            **$**
            429,629
            
            $
            2,733
            
            $
            (1,647
            )
            **$**
            430,715Additions
            
            
            -
            
            
            -
            
            
            -
            
            
            -principal
                repayments
            
            
            (30,754
            )
            
            -
            
            
            -
            
            
            (30,754
            )Reserve
                for loan loss
            
            
            -
            
            
            -
            
            
            (1,433
            )
            
            (1,433
            )Amortization
                for premium
            
            
            -
            
            
            (205
            )
            
            -
            
            
            (205
            )**Balance,
                March 31, 2008**
            
            $
            398,875
            
            $
            2,528
            
            $
            ($3,080
            )
            $
            398,323




47




*Cash
      and cash equivalents -* We had
      unrestricted cash and cash equivalents of $8.0 million at March 31, 2008 versus
      $5.5 million at December 31, 2007.




*Restricted
      Cash* -
      Restricted cash includes amounts held by counterparties as collateral for
      hedging instruments, amounts held as collateral for two letters of credit
      related to the Company's lease of office space, including its corporate
      headquarters, and amounts held in an escrow account to support warranties and
      indemnifications related to the sale of the retail mortgage lending platform
      to
      IndyMac.




*Accounts
      and accrued interest receivable* -
      Accounts and accrued interest receivable includes accrued interest receivable
      for investment securities and mortgage loans held in securitization trusts
      are
      also included.




*Prepaid
      and other assets* -
      Prepaid and other assets totaled $1.8 million as of March 31, 2008. Prepaid
      and
      other assets consist mainly of $1.3 million of capitalization expenses related
      to equity and bond issuance cost. These costs are being amortized into earnings
      over time related to the maturity of the underlying issuance. In addition,
      $0.3
      million of capitalization servicing costs related to our fourth securitization
      accounted for as a sale.





*Property
      and Equipment, Net -* Property
      and equipment approximated $0.1 million as of March 31, 2008 and $0.1
      million as of December 31, 2007 and have estimated lives ranging from three
      to
      ten years, and are stated at cost less accumulated depreciation and
      amortization. Depreciation is determined in amounts sufficient to charge the
      cost of depreciable assets to operations over their estimated service lives
      using the straight-line method.





*Assets
      Related to Discontinued Operations:*




*Mortgage
      Loans Held for Sale* -
      Mortgage loans that we have originated but do not intend to hold for investment
      and are held pending sale to investors are classified as “mortgage loans held
      for sale.” We had mortgage loans held for sale (net) of $6.2 million at March
      31, 2008 as compared to $8.1 million at December 31, 2007.




**Balance
      Sheet Analysis - Financing Arrangements**




*Financing
      Arrangements, Portfolio Investments* - As of
      March 31, 2008, there were approximately $431.6 million of repurchase
      borrowings outstanding. Our repurchase agreements typically have terms of 30
      days. As of March 31, 2008, the current weighted average borrowing rate on
      these
      financing facilities is 3.00%.




*Collateralized
      Debt Obligations* - As of
      March 31, 2008 we have Collateralized Debt Obligations outstanding of
      approximately $386.5 million with an average interest rate of
      2.98%.




*Subordinated
      Debentures* - As of
      December 31, 2007, we have trust preferred securities outstanding of $45.0
      million. The securities are fully guaranteed by the Company with respect to
      distributions and amounts payable upon liquidation, redemption or repayment.
      These securities are classified as subordinated debentures in the liability
      section of the Company’s condensed consolidated balance sheet.


*Convertible
        Preferred Debentures -* As
        of
        March 31, 2008, there were 1.0 million shares of our Series A Preferred Stock
        outstanding, with an aggregate redemption value of $20.0 million. We issued
        these shares on January 18, 2008 to JMP Group, Inc. and certain of its
        affiliates for an aggregate purchase price of $20.0 million. The Series A
        Preferred Stock entitles the holders to receive a cumulative dividend of
        10% per
        year, subject to an increase to the extent any future quarterly common stock
        dividends exceed $0.10 per share. The Series A Preferred Stock is convertible
        into shares of our common stock based on a conversion price of $4.00 per
        share
        of common stock, which represents a conversion rate of five shares of common
        stock for each share of Series A Preferred Stock. The Series A Preferred
        Stock
        matures on December 31, 2010, at which time any outstanding shares
        must be redeemed by us at the $20.00 per share liquidation preference.
        Pursuant to SFAS 150, because of this mandatory redemption feature, we classify
        these securities as convertible preferred debentures in the liability section
        of
        our balance sheet.


48




*Derivative
      Assets and Liabilities* - We
      generally hedge only the risk related to changes in the benchmark interest
      rate
      used in the variable rate index, usually a London Interbank Offered Rate, known
      as LIBOR, or a U.S. Treasury rate.




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




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




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


During
        the three months ended March 31, 2008, the
        Company terminated a total of $517.7 million notional intrest rate swaps
        resulting in a realized loss of $4.8 million.




The
      following table summarizes the estimated fair value of derivative assets as
      of
      March 31, 2008 and December 31, 2007 (dollar amounts in thousands):





**March
                31,**
              **2008**
            
            **December
                31,**
              **2007****Derivative
                Assets:**Interest
                rate caps
            
            $
            104
            
            $
            416**Total
                derivative assets**
            
            $
            104
            
            $
            416**Derivative
                Liabilities:**Interest
                rate swaps
            
            $
            1,169
            
            $
            3,517**Total
                derivative liabilities**
            
            $
            1,169
            
            $
            3,517





49




**Balance
      Sheet Analysis - Stockholders' Equity**




Stockholders'
      equity at March 31, 2008 was $41.1 million and included $14.6 million of net
      unrealized losses on available for sale securities and cash flow hedges
      presented as accumulated other comprehensive loss.




On
      February 21, 2008, the Company completed the issuance and sale of 15.0 million
      shares of its common stock in a private placement at a price of $4.00 per
      share.  This private offering of the Company's common stock generated net
      proceeds to the Company of $56.6 million after payment of private placement
      fees
      and expenses. In connection with the private offering of our common stock,
      we entered into the Common Stock Registration Rights Agreement, pursuant to
      which we were required, among other things, to file with the SEC a
      resale shelf registration statement registering for resale the 15.0 million
      shares sold in this private offering on or before March 12, 2008 and obtain
      listing for our common stock on the NASDAQ Stock Market on or before the
      effective date of the resale shelf registration statement. In the event we
      fail
      to satisfy these requirements, we may be subject to payment of liquidated
      damages to the investors in the transaction. The Company filed the resale shelf
      registration statement on April 4, 2008 and became effective on April 18,
      2008. As a result, we incurred a penalty fee (liquidated
      damages) of approximately $0.2 million which was paid on May 2,
      2008 and remain subject to the penalty until we obtain NASDAQ Stock Market
      listing for our common stock.




**Prepayment
      Experience**




The
      cumulative prepayment rate (“CPR”) on our mortgage portfolio averaged
      approximately 13% during the three months ended March 31, 2008 as compared
      to
      19% for the three months ended March 31, 2007. CPRs on our purchased portfolio
      of investment securities averaged approximately 7% while the CPRs on mortgage
      loans held for investment or held in our securitization trusts averaged
      approximately 24% during the three months ended March 31, 2008. The CPR on
      our
      mortgage portfolio averaged 15% for the three months ended December
      31, 2007. When prepayment expectations over the remaining life of assets
      increase, we have to amortize premiums over a shorter time period resulting
      in a
      reduced yield to maturity on our investment assets. Conversely, if prepayment
      expectations decrease, the premium would be amortized over a longer period
      resulting in a higher yield to maturity. We monitor our prepayment experience
      on
      a monthly basis and adjust the amortization of our net premiums
      accordingly.




**Results
      of Operations**




Our
      results of operations for our mortgage portfolio during a given period typically
      reflect the net interest spread earned on our investment portfolio of
      residential mortgage loans and mortgage-backed securities. The net interest
      spread is impacted by factors such as our cost of financing, the interest rate
      our investments are earning and our interest hedging strategies. Furthermore,
      the amount of premium or discount paid on purchased portfolio investments and
      the prepayment rates on portfolio investments will impact the net interest
      spread as such factors will be amortized over the expected term of such
      investments.





50





***Other
      Operational Information*** **








**March
                31****2008**
            
            **2007(1)**
            
            **%
                Change****Total**
            
            **Total**Loan
                officers
            
            
            —
            
            
            —
            
            
            (100.0
            )%Other
                employees
            
            
            8
            
            
            35
            
            
            (95.6
            )%Total
                employees
            
            
            8
            
            
            35
            
            
            (98.3
            )%Number
                of sales locations
            
            
            —
            
            
            —
            
            
            0
            %




(1) The
      Company exited the mortgage lending business on March 31, 2007, which
      significantly reduced its staffing needs.




***Comparative
      Net Loss (dollars in thousands)***




**For the Three Months Ended**
              **March
                31,****2008**
            
            
            **2007**
            
            
            **%
                Change**Net
                interest income (loss)
            
            $
            1,274
            
            $
            (253
            )
            
            603.6
            %Other
                Expense:Loan
                losses
            
            
            (1,433
            )
            
            —
            
            
            (100.0
            )%Loss
                on securities and related hedges
            
            
            (19,848
            )
            
            —
            
            
            (100.0
            )%Total
                expenses
            
            
            1,431
            
            
            647
            
            
            121.2
            %Loss
                for continuing operations
            
            
            (21,438
            )
            
            (900
            )
            
            2,282.0
            %Income
                (loss) from discontinued operations
            
            
            180
            
            
            (3,841
            )
            
            104.7
            %Net
                loss
            
            
            (21,258
            )
            
            (4,741
            )
            
            348.4
            %Earnings
                (loss) per share
            
            $
            (2.10
            )
            $
            (1.31
            )
            
            60.3
            %




For
      the
      three months ended March 31, 2008, we reported a net loss of $21.3 million,
      as
      compared to a net loss of $4.7 million. The increase in net loss of $16.6
      million is primarily due to the $19.8 million realized loss on the sale of
      Agency securities and termination of related interest rate hedges and the $1.4
      million increase in loan loss reserves incurred during the three months ended
      March 31, 2008. These losses were partially offset by a $2.0 million increase
      in
      net interest income for the quarter ended March 31, 2008 as compared to net
      interest income generated in the quarter ended March 31, 2007. The improvement
      in net interest income is primarily a result of improved margins for our
      investment portfolio.


51





***Comparative
      Net Interest Income***




The
      following table sets forth the changes in net interest income, yields earned
      on
      mortgage loans and securities and rates on financial arrangements for the three
      months ended March 31, 2008 and 2007 (dollar amounts in thousands, except as
      noted):





**For the Three Months Ended
                 March 31,****2008**
            
            **2007****Average**
              **Balance**
            
            **Amount**
            
            **Yield/**
              **Rate**
            
            **Average**
              **Balance**
            
            **Amount**
            
            **Yield/**
              **Rate**($
                Millions)
            
            ($
                Millions)**Interest
                income:**Investment
                securities and loans held in the securitization
                trusts
            
            $
            1,019.5
            
            $
            13,346
            
            
            5.24
            %
            $
            1,017.9
            
            $
            14,214
            
            
            5.59
            %Amortization
                of net premium
            
            
            (0.3
            )
            
            (93
            )
            
            (0.04
            )%
            
            4.8
            
            
            (501
            )
            
            (0.23
            )%Interest
                income/weighted average
            
            $
            1,019.2
            
            $
            13,253
            
            
            5.20
            %
            $
            1,022.7
            
            $
            13,713
            
            
            5.36
            %**Interest
                expense:**Investment
                securities and loans held in the securitization trusts
            
            $
            957.2
            
            $
            10,514
            
            
            4.35
            %
            $
            980.3
            
            $
            13,084
            
            
            5.34
            %Subordinated
                debentures
            
            
            45.0
            
            
            959
            
            
            8.43
            %
            
            45.0
            
            
            882
            
            
            7.84
            %Convertible
                preferred debentures
            
            
            20.0
            
            
            506
            
            
            10%
            
            
            —
            
            
            —
            
            
            —Interest
                expense/weighted average
            
            $
            1,022.2
            
            $
            11,979
            
            
            4.64
            %
            $
            1,025.3
            
            $
            13,966
            
            
            5.45
            %Net
                interest income (expense)/weighted average
            
            
            
            
            $
            1,274
            
            
            0.56
            %
            
            
            
            $
            (253
            )
            
            (0.09
            )%








The
      increase in net interest income is due to a more favorable interest rate
      environment and also results from the significant
      restructuring of our portfolio since
      the quarter ended March 31, 2007.





52




The
      following table sets forth the net interest spread since inception for our
      portfolio of investment securities available for sale, mortgage loans held
      for investment and mortgage loans held in securitization trusts, excluding
      the costs of our subordinated debentures.





**Quarter
                Ended**
            
            **Average**
              **Interest**
              **Earning**
              **Assets**
              **($ millions)**
            
            **Weighted**
              **Average**
              **Coupon**
            
            **Weighted**
              **Average**
              **Cash**
              **Yield on**
              **Interest**
              **Earning**
              **Assets**
            
            **Cost
                of**
              **Funds**
            
            **Net**
              **Interest**
              **Spread**March
                31, 2008
            
            $
            1,019.2
            
            
            5.24
            %
            
            5.20
            %
            
            4.35
            %
            
            0.85
            %December
                31, 2007
            
            $
            799.2
            
            
            5.90
            %
            
            5.79
            %
            
            5.33
            %
            
            0.46
            %September
                30, 2007
            
            $
            865.7
            
            
            5.93
            %
            
            5.72
            %
            
            5.38
            %
            
            0.34
            %June
                30, 2007
            
            $
            948.6
            
            
            5.66
            %
            
            5.55
            %
            
            5.43
            %
            
            0.12
            %March
                31, 2007
            
            $
            1,022.7
            
            
            5.59
            %
            
            5.36
            %
            
            5.34
            %
            
            0.02
            %December
                31, 2006
            
            $
            1,111.0
            
            
            5.53
            %
            
            5.35
            %
            
            5.26
            %
            
            0.09
            %September
                30, 2006
            
            $
            1,287.6
            
            
            5.50
            %
            
            5.28
            %
            
            5.12
            %
            
            0.16
            %June
                30, 2006
            
            $
            1,217.9
            
            
            5.29
            %
            
            5.08
            %
            
            4.30
            %
            
            0.78
            %March
                31, 2006
            
            $
            1,478.6
            
            
            4.85
            %
            
            4.75
            %
            
            4.04
            %
            
            0.71
            %December
                31, 2005
            
            $
            1,499.0
            
            
            4.84
            %
            
            4.43
            %
            
            3.81
            %
            
            0.62
            %September
                30, 2005
            
            $
            1,494.0
            
            
            4.69
            %
            
            4.08
            %
            
            3.38
            %
            
            0.70
            %June
                30, 2005
            
            $
            1,590.0
            
            
            4.50
            %
            
            4.06
            %
            
            3.06
            %
            
            1.00
            %March
                31, 2005
            
            $
            1,447.9
            
            
            4.39
            %
            
            4.01
            %
            
            2.86
            %
            
            1.15
            %December
                31, 2004
            
            $
            1,325.7
            
            
            4.29
            %
            
            3.84
            %
            
            2.58
            %
            
            1.26
            %September
                30, 2004
            
            $
            776.5
            
            
            4.04
            %
            
            3.86
            %
            
            2.45
            %
            
            1.41
            %




***Comparative
      Expenses***




**For the Three
                Months Ended**
              **March
                31,****2008**
            
            
            **2007**
            
            
            **% Change**Salaries
                and benefits
            
            $
            313
            
            $
            345
            
            
            (9.3
            )%Marketing
                and promotion
            
            
            39
            
            
            23
            
            
            69.6
            %Data
                processing and communications
            
            
            63
            
            
            37
            
            
            70.3
            %Professional
                fees
            
            
            352
            
            
            100
            
            
            252.0
            %Depreciation
                and amortization
            
            
            75
            
            
            68
            
            
            10.3
            %Other
            
            
            589
            
            
            74
            
            
            695.9
            %Total
                Expenses
            
            $
            1,431
            
            $
            647
            
            
            121.2
            %





The
      increase in professional fees of $0.3 million for the three months ended March
      31, 2008 as compared to the three months ended March 31, 2007 is due mainly
      to
      100% allocation of accounting fees to our continuing operation. Previously
      costs were allocated to both our continuing operations and discontinued mortgage
      operation. The increase in other expenses of $0.5 million for the three months
      ended March 31, 2008 as compared to the three months ended March 31, 2007 is
      due
      primarily to $0.1 million in management fees paid to JMPAM pursuant to the
      advisory agreement, $0.2 million in penalty fees owed to certain holders of
      our common stock pursuant to the Common Stock Registration Rights
      Agreement and a change in allocation of certain expenses previously
      allocated to the discontinued mortgage lending operation including D&O
      insurance premiums of $0.2 million.





53





***Discontinued
      Operation***




**For the Three Months Ended**
              **March
                31,****2008**
            
            
            **2007**
            
            
            **%
                Change****Revenues:**Net
                interest income
            
            $
            153
            
            $
            596
            
            
            (74.3
            )%Gain
                on sale of mortgage loans
            
            
            —
            
            
            2,337
            
            
            (100.0
            )%Loan
                loss
            
            
            (398
            )
            
            (3,161
            )
            
            (87.4
            )%Brokered
                loan fees
            
            
            —
            
            
            2,135
            
            
            (100.0
            )%Gain
                on sale of retail lending segment
            
            
            —
            
            
            5,160
            
            
            (100.0
            )%Other income
            
            
            416
            
            
            27
            
            
            1,440.7
            %Total
                net revenues
            
            $
            171
            
            $
            7,094
            
            
            (97.6
            )%**Expenses:**Salaries,
                commissions and benefits
            
            $
            50
            
            $
            5,006
            
            
            (99.0
            )%Brokered
                loan expenses
            
            
            —
            
            
            1,723
            
            
            (100.0
            )%Occupancy
                and equipment
            
            
            (136
            )
            
            1,312
            
            
            (110.4
            )%General
                and administrative
            
            
            77
            
            
            2,894
            
            
            (97.3
            )%Total
                expenses
            
            
            (9
            )
            
            10,935
            
            
            (100.1
            )%**Income
                (loss) before income tax benefit**
            
            
            180
            
            
            (3,841
            )
            
            104.7
            %Income
                tax benefit
            
            
            —
            
            
            —
            
            
            0
            %**Income
                (loss) from discontinued operations - net of
                tax**
            
            $
            180
            
            $
            (3,841
            )
            
            104.7
            %




Substantially
      all of the decreases in revenues and expenses in the discontinued operation
      are
      due to the Company's exit from the mortgage lending business in the first
      quarter of 2007.





54




**Off-Balance
      Sheet Arrangements**




Since
      inception, we have not maintained any relationships with unconsolidated entities
      or financial partnerships, such as entities often referred to as structured
      finance or special purpose entities, established for the purpose of facilitating
      off-balance sheet arrangements or other contractually narrow or limited
      purposes. Further, we have not guaranteed any obligations of unconsolidated
      entities nor do we have any commitment or intent to provide funding to any
      such
      entities. Accordingly, we are not materially exposed to any market, credit,
      liquidity or financing risk that could arise if we had engaged in such
      relationships.





**Liquidity
      and Capital Resources**


Liquidity
        is a measure of our ability to meet potential cash requirements, including
        ongoing commitments to repay borrowings, fund and maintain investments, fund
        our
        operations, pay dividends to our stockholders and other general business
        needs.
        We recognize the need to have funds available for our operating businesses
        and
        meet these potential cash requirements. Our investments and assets generate
        liquidity on an ongoing basis through mortgage principal and interest payments,
        prepayments and net earnings held prior to payment of dividends. In addition,
        depending on market conditions, the sale of investment securities or capital
        market transactions may provide additional liquidity. We intend to meet our
        liquidity needs through normal operations with the goal of avoiding unplanned
        sales of assets or emergency borrowing of funds. However, in March 2008,
        news of
        potential security liquidations by certain of our competitors negatively
        impacted the market value of certain of the investment securities in our
        portfolio. In connection with this market disruption and the anticipated
        increase in collateral requirements by our lenders as a result of such decrease
        in the market value of such securities, we elected to increase our liquidity
        by
        reducing our leverage through the sale of an aggregate of approximately $592.8
        million of Agency MBS, which resulted in an aggregate loss of approximately
        $17.1 million, including losses related to the termination of interest rate
        swaps. At March 31, 2008, we had cash balances of $8.0 million, $29.9 million
        in
        unencumbered securities and borrowings of $431.6 million under outstanding
        repurchase agreements. At March 31, 2008, we also had longer-term capital
        resources, including CDOs outstanding of $386.5 million and subordinated
        debt of $45.0 million. In addition, the Company received net proceeds of
        $19.6
        million and $56.6 million from private offerings of its Series A Preferred
        Stock
        and common stock, respectively, in January and February 2008. The
        Series A Preferred Stock is convertible into shares of our common stock based
        on
        a conversion price of $4.00 per share of common stock, which represents a
        conversion rate of five shares of common stock for each share of Series A
        Preferred Stock, and matures on December 31, 2010, at which time
        any outstanding shares must be redeemed by us at the $20.00 per share
        liquidation preference.As of the date of this report, we believe
        our existing cash balances, funds available under our current repurchase
        agreements and cash flows from operations will meet our liquidity
        requirements for at least the next 12 months, absent any
        significant decline in financing availability or significant increase in
        cost to obtain financing. However, should further volatility and
        deterioration in the broader residential mortgage and MBS markets occur in
        the
        future, we cannot assure you that our existing sources of liquidity will
        be
        sufficient to meet our liquidity requirements during the next 12
        months.
 
 We
        had
        outstanding repurchase agreements, a form of collateralized short-term
        borrowing, with six different financial institutions as of March 31, 2008.
        These
        agreements are secured by our mortgage-backed securities and bear interest
        rates
        that have historically moved in close relationship to LIBOR. Our borrowings
        under repurchase agreements are based on the fair value of our mortgage backed
        securities portfolio.  Interest rate changes can have a negative impact on
        the valuation of these securities, reducing the amount we can borrow under
        these
        agreements.   Our repurchase agreements allow the counterparties to
        determine a new market value of the collateral to reflect current market
        conditions. If a counterparty determines that the value of the collateral
        has
        decreased, whether as a result of interest rate changes, concern regarding
        the
        fair value of our mortgage-backed securities portfolio, or other
        liquidity concerns in the credit markets, it may initiate a margin call and
        require us to either post additional collateral to cover such decrease or
        repay
        a portion of the outstanding borrowing, on minimal notice. Moreover because
        these lines of financing are not committed, the counterparty can call the
        loan
        at any time. In the event an existing counterparty elected to not reset the
        outstanding balance at its maturity into a new repurchase agreement, we would
        be
        required to repay the outstanding balance with proceeds received from a new
        counterparty or to surrender the mortgage-backed securities that serve as
        collateral for the outstanding balance. If we are unable to secure financing
        from a new counterparty and had to surrender the collateral, we would expect
        to
        incur a significant loss.  External disruptions to credit markets might
        also impair access to additional liquidity.
 
 In
        addition, in response to the March 2008 market disruption, investors and
        financial institutions that lend in the mortgage securities repurchase market,
        including the lenders under our repurchase agreements, have further tightened
        lending standards in an effort to reduce the leverage of their borrowers.
        While
        the haircut required by our lenders increased in 2007, primarily on non-Agency
        MBS, during March 2008, we have experienced further increases in the amount
        of
        haircut required to obtain financing for both our Agency MBS and non-Agency
        MBS.
        As of March 31, 2008, our MBS securities portfolio consisted of approximately
        of
        $486.0 million of Agency MBS and $26.5 million of non-Agency MBS, which was
        financed with approximately $431.6 million of repurchase agreement borrowing
        with an average haircut of 9%. Although average haircuts have stabilized in
        the second quarter, if the haircuts required by our lenders increase again,
        our profitability and liquidity will be materially adversely
        affected.
 To
          finance our MBS investment portfolio, we generally seek to borrow between
          eight
          and 12 times the amount of our equity, however given the current disruptions
          in
          the credit markets we have lowered our target leverage to seven to 10 times.
          At
          March 31, 2008 our leverage ratio for our MBS investment portfolio, which
          we
          define as our outstanding indebtedness under repurchase agreements divided
          by
          the sum of total stockholders’ equity and the convertible preferred debentures,
          was 7:1. This definition of the leverage ratio is consistent with the manner
          in
          which the credit providers under our repurchase agreements calculate our
          leverage.


55


We
        enter
        into interest rate swap agreements to extend the maturity of our repurchase
        agreements as a mechanism to reduce the interest rate risk of the securities
        portfolio. At March 31, 2008, we had $168.1 million in interest rate swaps
        outstanding. Should market rates for similar term interest rate swaps drop
        below
        the rates we have entered into on our interest rate swaps, we will be required
        to post additional margin to the swap counterparty, reducing available
        liquidity. The weighted average maturity of the swaps was 4.4 years at March
        31,
        2008.
  Our
        ability to sell approximately $6.2 million, net of loan loss reserve, of
        mortgage loans we own could adversely affect our profitability as any sale
        for
        less than the current reserved balance would result in a loss. Currently
        these
        loans are not financed or pledged.
 
 As
        it
        relates to loans sold previously under certain loan sale agreements by our
        discontinued mortgage lending business, we may be required to repurchase
        some of
        those loans or indemnify the loan purchaser for damages caused by that breach
        in
        the loan sale agreement. While in the past we complied with the repurchase
        demands by repurchasing the loan with cash and reselling it at a loss, thus
        reducing our cash position; more recently we have addressed these requests
        by
        negotiating a net cash settlement based on the actual or assumed loss on
        the
        loan in lieu of repurchasing the loans. As
        of
        March 31, 2008 the amount of repurchase requests outstanding was approximately
        $4.7 million, against which we had a reserve of approximately $0.7 million.
        We
        cannot assure you that we will be successful in settling the remaining
        repurchase demands on favorable terms, or at all. If we are unable to continue
        to resolve our current repurchase demands through negotiated net cash
        settlements, our liquidity could be adversely affected. In addition, we may
        be
        subject to new repurchase requests from investors with whom we have not
        settled or with respect to repurchase obligations not covered under the
        settlement.
 On
          March
          31, 2008, we paid a $0.50 per share cash dividend, or approximately $0.5
          million
          in the aggregate, on shares of our Series A Preferred Stock to holders
          of record
          as of March 31, 2008. The Series A Preferred Stock entitles the holders
          to
          receive a cumulative dividend of 10% per year (or $0.50 per share per quarter),
          subject to increase to the extent any future quarterly common stock dividends
          exceed $0.10 per share.
  The
          Company declared in April 2008 a first quarter cash dividend of $0.06 per
          share
          on our common stock to holders of record of April 30, 2008. The dividend is
          payable on May 15, 2008, and will be paid out of the Company’s current
          working capital.This dividend represents the first dividend paid on shares
          of
          the Company’s common stock since the Board of Directors elected to suspend the
          dividend in July 2007. Our board of directors will continue to evaluate
          our
          dividend policy each quarter and will make adjustments as necessary, based
          on a
          variety of factors, including, among other things, the need to maintain
          our REIT
          status, our financial condition, liquidity, earnings projections and business
          prospects. Our dividend policy does not constitute an obligation to pay
          dividends, which only occurs when the board of directors declares a dividend.
  We
          intend
          to make distributions to our stockholders to comply with the various
          requirements to maintain our REIT status and to minimize or avoid corporate
          income tax and the nondeductible excise tax. However, differences in timing
          between the recognition of REIT taxable income and the actual receipt of
          cash
          could require us to sell assets or to borrow funds on a short-term basis
          to meet
          the REIT distribution requirements and to avoid corporate income tax and
          the
          nondeductible excise tax.
  Certain
          of our assets may generate substantial mismatches between REIT taxable
          income
          and available cash. These assets could include mortgage-backed securities
          we
          hold that have been issued at a discount and require the accrual of taxable
          income in advance of the receipt of cash. As a result, our REIT taxable
          income
          may exceed our cash available for distribution and the requirement to distribute
          a substantial portion of our net taxable income could cause us to:
 
 ·
                sell
                    assets in adverse market
                    conditions;
 
 ·
                borrow
                    on unfavorable terms;
 
 ·
                distribute
                    amounts that would otherwise be invested in assets or repayment
                    of debt,
                    in order to comply with the REIT distribution
                    requirements.
 56


**Inflation**




For
      the
      periods presented herein, inflation has been relatively low and we believe
      that
      inflation has not had a material effect on our results of operations.




**Item
      3. Quantitative and Qualitative Disclosures about Market
      Risk**




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




Management
      recognizes the following primary risks associated with our business and the
      industry in which we conduct business:




·
            Interest
                rate risk




·
            Market
                (fair value) risk




·
            Credit
                spread risk




·
            Liquidity
                and funding risk




·
            Prepayment
                risk




·
            Credit
                risk




***Interest
      Rate Risk***


Interest
        rates are sensitive to many factors, including governmental, monetary, tax
        policies, domestic and international economic conditions, and political or
        regulatory matters beyond our control. Changes in interest rates affect the
        value of our MBS and ARM loans we manage and hold in our investment portfolio,
        the variable-rate borrowings we use to finance our portfolio, and the interest
        rate swaps and caps we use to hedge our portfolio. All of our interest rate
        related market risk sensitive assets, liabilities and related derivative
        positions are managed with a long term perspective and are not for trading
        purposes.
  Interest
        rate risk is measured by the sensitivity of our current and future earnings
        to
        interest rate volatility, variability of spread relationships, the difference
        in
        re-pricing intervals between our assets and liabilities and the effect that
        interest rates may have on our cash flows, especially the speed at which
        prepayments occur on our residential mortgage related assets. Changes in
        interest rates can affect our net interest income, which is the difference
        between the interest income earned on assets and our interest expense incurred
        in connection with our borrowings.
 
 Our
        CMO
        Floaters have interest rates that adjust monthly, at a margin over LIBOR,
        as do
        the repurchase agreement liabilities that we use to finance those
        Floaters.
 
 Our hybrid
        ARM assets reset on various dates that are not matched to the reset dates
        on our
        repurchase agreements.  In general, the repricing of our repurchase
        agreements occurs more quickly than the repricing of our assets. First, our
        floating rate borrowings may react to changes in interest rates before our
        adjustable rate assets because the weighted average next re-pricing dates
        on the
        related borrowings may have shorter time periods than that of the ARM assets.
        Second, interest rates on ARM assets may be limited to a “periodic cap” or
        an increase of typically 1% or 2% per adjustment period, while our borrowings
        do
        not have comparable limitations. Third, our adjustable rate assets typically
        lag
        changes in the applicable interest rate indices by 45 days due to the notice
        period provided to ARM borrowers when the interest rates on their loans are
        scheduled to change.


We
        seek
        to manage interest rate risk in the portfolio by utilizing interest rate
        swaps,
        caps and Eurodollar futures, with the goal of optimizing the earnings potential
        while seeking to maintain long term stable portfolio values. We continually
        monitor the duration of our mortgage assets and have a policy to hedge the
        financing such that the net duration of the assets, our borrowed funds related
        to such assets, and related hedging instruments, are less than one
        year.
  57
  Interest
        rates can also affect our net return on hybrid ARM securities and loans net
        of
        the cost of financing hybrid ARMs. We continually monitor and estimate the
        duration of our hybrid ARMs and have a policy to hedge the financing of the
        hybrid ARMs such that the net duration of the hybrid ARMs, our borrowed funds
        related to such assets, and related hedging instruments are less than one
        year.
        During a declining interest rate environment, the prepayment of hybrid ARMs
        may
        accelerate (as borrowers may opt to refinance at a lower rate) causing the
        amount of liabilities that have been extended by the use of interest rate
        swaps
        to increase relative to the amount of hybrid ARMs, possibly resulting in
        a
        decline in our net return on hybrid ARMs as replacement hybrid ARMs may have
        a
        lower yield than those being prepaid. Conversely, during an increasing interest
        rate environment, hybrid ARMs may prepay slower than expected, requiring
        us to
        finance a higher amount of hybrid ARMs than originally forecast and at a
        time
        when interest rates may be higher, resulting in a decline in our net return
        on
        hybrid ARMs. Our exposure to changes in the prepayment speed of hybrid ARMs
        is mitigated by regular monitoring of the outstanding balance of hybrid ARMs,
        and adjusting the amounts anticipated to be outstanding in future periods
        and,
        on a regular basis, making adjustments to the amount of our fixed-rate borrowing
        obligations for future periods.
 
 We
        utilize a model based risk analysis system to assist in projecting portfolio
        performances over a scenario of different interest rates. The model incorporates
        shifts in interest rates, changes in prepayments and other factors impacting
        the
        valuations of our financial securities, including mortgage-backed securities,
        repurchase agreements, interest rate swaps and interest rate caps.
 
 Based
        on
        the results of the model, as of March 31, 2008, changes in interest rates
        would
        have the following effect on net interest income: (Dollar amounts in
        thousands)
 
 **Changes
                  in Net Interest Income****Changes
                  in Interest Rates**
              
              **Changes
                  in Net Interest Income**+200
              $
              (6,561)+100
              $
              (4,148)-100
              $
              4,453
 
 Interest
        rate changes may also impact our net book value as our mortgage assets and
        related hedge derivatives are marked-to-market each quarter. Generally, as
        interest rates increase, the value of our mortgage assets decreases and as
        interest rates decrease, the value of such investments will increase. In
        general, we would expect however that, over time, decreases in the value
        of our
        portfolio attributable to interest rate changes will be offset, to the degree
        we
        are hedged, by increases in value of our interest rate swaps, and vice versa.
        However, the relationship between spreads on securities and spreads on swaps
        may
        vary from time to time, resulting in a net aggregate book value increase
        or
        decline. Unless there is a material impairment in value that would result
        in a
        payment not being received on a security or loan, changes in the book value
        of
        our portfolio will not directly affect our recurring earnings or our ability
        to
        make a distribution to our stockholders.





58


***Market
        (Fair Value) Risk***
  Changes
        in interest rates also expose us to market risk that the market (fair) value
        on
        our assets may decline. For certain of the financial instruments that we
        own,
        fair values will not be readily available since there are no active trading
        markets for these instruments as characterized by current exchanges between
        willing parties. Accordingly, fair values can only be derived or estimated
        for
        these investments using various valuation techniques, such as computing the
        present value of estimated future cash flows using discount rates commensurate
        with the risks involved. However, the determination of estimated future cash
        flows is inherently subjective and imprecise. Minor changes in assumptions
        or
        estimation methodologies can have a material effect on these derived or
        estimated fair values. These estimates and assumptions are indicative of
        the
        interest rate environments as of March 31, 2008, and do not take into
        consideration the effects of subsequent interest rate fluctuations.
  We
        note
        that the values of our investments in mortgage-backed securities and in
        derivative instruments, primarily interest rate hedges on our debt, will
        be
        sensitive to changes in market interest rates, interest rate spreads, credit
        spreads and other market factors. The value of these investments can vary
        and
        has varied materially from period to period. Historically, the values of
        our
        mortgage loan portfolio have tended to vary inversely with those of its
        derivative instruments.
  The
        Company adopted SFAS 157 effective January 1, 2008, and accordingly, all
        assets
        and liabilities measured at fair value will utilize valuation methodologies
        in
        accordance with the statement.  The Company has established and
        documented processes for determining fair values.  Fair value is based
        upon quoted market prices, where available.  If listed prices or
        quotes are not available, then fair value is based upon internally developed
        models that primarily use inputs that are market-based or independently-sourced
        market parameters, including interest rate yield curves.
  A
        financial instrument’s categorization within the valuation hierarchy is based
        upon the lowest level of input that is significant to the fair value
        measurement.  The three levels of valuation hierarchy established by
        SFAS 157 are defined as follows:
  *Level
        1* - inputs
        to the valuation methodology are quoted prices (unadjusted) for identical
        assets
        or liabilities in active markets.
  *Level
        2* - inputs
        to the valuation methodology include quoted prices for similar assets and
        liabilities in active markets, and inputs that are observable for the asset
        or
        liability, either directly or indirectly, for substantially the full term
        of the
        financial instrument.
  *Level
        3* - inputs
        to the valuation methodology are unobservable and significant to the fair
        value
        measurement.
  The
        following describes the valuation methodologies used for the Company’s financial
        instruments measured at fair value, as well as the general classification
        of
        such instruments pursuant to the valuation hierarchy.
  *a.
        Investment Securities Available for Sale* - Fair
        value is generally based on market prices provided by five to seven dealers
        who
        make markets in these financial instruments. The dealers will incorporate
        common
        market pricing methods, including a spread measurement to the Treasury curve
        or
        Interest Rate Swap Cure as well as underlying characteristics of the particular
        security including coupon, periodic and life caps, collateral type, rate
        reset
        period and seasoning or age of the security. If the fair value of a security
        is
        not reasonably available from a dealer, management estimates the fair value
        based on characteristics of the security that the Company receives from the
        issuer and based on available market information. Management reviews all
        prices
        used in determining valuation to ensure they represent current market
        conditions. This review includes surveying similar market transactions,
        comparisons to interest pricing models as well as offerings of like securities
        by dealers. The Company’s investment securities are primarily valued based upon
        readily observable market parameters and are classified as Level 2 fair
        values.





59


b. *Interest
        Rate Swaps and Caps* - The
        fair value of interest rate swaps and caps are based on using market accepted
        financial models as well as dealer quotes. The model utilized readily observable
        market parameters, including treasury rates, interest rate swap spreads and
        swaption volatility curves. The Company’s interest rate caps and swaps are
        classified as Level 2 fair values.
 
 The
        following table presents the Company’s financial instruments carried at fair
        value as of March 31, 2008, on the condensed consolidated balance sheet by
        the
        applicable FAS 157 valuation hierarchy.
 
 **Fair
                  Value at March 31, 2008***(In
                  Thousands)*
              
              **Level 1**
              
              **Level 2**
              
              **Level 3**
              
              **Total**Assets:Investment
                  securities
              
              $
              —
              
              $
              512,550
              
              $
              —
              
              $
              512,550Mortgage
                loans held
                for sale (net)
              
              
              —
              
              
              —
              
              
              6,209
              
              
              6,209Interest
                  rate caps
              
              
              —
              
              
              104
              
              
              —
              
              
              104Total
                  assets carried at fair value
              
              $
              —
              
              $
              512,654
              
              $
              6,209
              
              $
              518,863Liabilities:Interest
                  rate swaps
              
              $
              —
              
              $
              1,169
              
              $
              —
              
              $
              1,169Total
                  liabilities carried at fair value
              
              $
              —
              
              $
              1,169
              
              $
              —
              
              $
              1,169
 
 The
          fair
          value of our mortgage loans held for sale (net) decreased by $0.4 million
          during
          the period that commenced on January 1, 2008 and ended on March 31, 2008.
          This
          decrease in fair value of our mortgage loans held for sale (net) is included
          in
          loan loss in our discontinued operations.
  Any
        changes to the valuation methodology are reviewed by management to ensure
        the
        changes are appropriate. There has been no change in valuation
        methodology since the previous period. As
        markets and products develop and the pricing for certain products becomes
        more
        transparent, the Company continues to refine its valuation
        methodologies.  The methods described above may produce a fair value
        calculation that may not be indicative of net realizable value or reflective
        of
        future fair values.  Furthermore, while the Company believes its
        valuation methods are appropriate and consistent with other market participants,
        the use of different methodologies or assumptions to determine the fair value
        of
        certain financial instruments could result in a different estimate of fair
        value
        at the reporting date.  The Company uses inputs that are current as of
        the measurement date, which may include periods of market dislocation, during
        which price transparency may be reduced.  This condition could cause
        the Company’s financial instruments to be reclassified from Level 2 to Level 3
        in the future.
  The
        market risk management discussion and the amounts estimated from the analysis
        that follows are forward-looking statements that assume that certain market
        conditions occur. Actual results may differ materially from these projected
        results due to changes in our portfolio assets and borrowings mix and due
        to
        developments in the domestic and global financial and real estate markets.
        Developments in the financial markets include the likelihood of changing
        interest rates and the relationship of various interest rates and their impact
        on our portfolio yield, cost of funds and cash flows. The analytical methods
        that we use to assess and mitigate these market risks should not be considered
        projections of future events or operating performance.
  As
        a
        financial institution that has only invested in U.S.-dollar denominated
        instruments, primarily residential mortgage instruments, and has only borrowed
        money in the domestic market, we are not subject to foreign currency exchange
        or
        commodity price risk. Rather, our market risk exposure is largely due to
        interest rate risk. Interest rate risk impacts our interest income, interest
        expense and the market value on a large portion of our assets and
        liabilities. In managing interest rate risk, we attempt to maximize
        earnings and to preserve capital by minimizing the negative impacts of changing
        market rates, asset and liability mix, and prepayment activity.
  The
        table
        below presents the sensitivity of the market value changes of our portfolio
        using a discounted cash flow simulation model. Application of this method
        results in an estimation of the fair market value change of our assets,
        liabilities and hedging instruments per 100 basis point (“bp”) shift in interest
        rates, as well as this same value expressed in years - a measure commonly
        referred to as duration. Positive
        portfolio duration indicates that the market value of the total portfolio
        will
        decline if interest rates rise and increase if interest rates decline. The
        closer duration is to zero, the less interest rate changes are expected to
        affect earnings.





60


The
        use
        of hedging instruments is a critical part of our interest rate risk management
        strategies, and the effects of these hedging instruments on the market value
        of
        the portfolio are reflected in the model's output. This analysis also takes
        into
        consideration the value of options embedded in our mortgage assets including
        constraints on the re-pricing of the interest rate of assets resulting from
        periodic and lifetime cap features, as well as prepayment options. Assets
        and
        liabilities that are not interest rate-sensitive such as cash, payment
        receivables, prepaid expenses, payables and accrued expenses are
        excluded.
  Changes
        in assumptions including, but not limited to, volatility, mortgage and financing
        spreads, prepayment behavior, defaults, as well as the timing and level of
        interest rate changes will affect the results of the model. Therefore, actual
        results are likely to vary from modeled results.
 
 **Market
                  Value Changes**(Dollar amount in thousands)**Changes
                  in**
                **Interest
                  Rates**
              
              **Changes
                  in**
                **Market
                  Value**
              
              **Net**
                **Duration**+200
              
              (16,955)
              
              0.66
                  years+100
              
              (7,349)
              
              0.36
                  years**Base**
              
              **—**
              
              **0.32
                  years**-100
              
              5,563
              
              (0.03)
                  years
  It
        should
        be noted that the model is used as a tool to identify potential risk in a
        changing interest rate environment but does not include any changes in portfolio
        composition, financing strategies, market spreads or changes in overall market
        liquidity.
  Based
        on
        the assumptions used, the model output suggests a very low degree of portfolio
        price change given increases in interest rates, which implies that our cash
        flow
        and earning characteristics should be relatively stable for comparable changes
        in interest rates.
  Although
        market value sensitivity analysis is widely accepted in identifying interest
        rate risk, it does not take into consideration changes that may occur such
        as,
        but not limited to, changes in investment and financing strategies, changes
        in
        market spreads and changes in business volumes. Accordingly, we make extensive
        use of an earnings simulation model to further analyze our level of interest
        rate risk.
  There
        are
        a number of key assumptions in our earnings simulation model. These key
        assumptions include changes in market conditions that affect interest rates,
        the
        pricing of ARM products, the availability of investment assets and the
        availability and the cost of financing for portfolio assets. Other key
        assumptions made in using the simulation model include prepayment speeds
        and
        management's investment, financing and hedging strategies, and the issuance
        of
        new equity. We typically run the simulation model under a variety of
        hypothetical business scenarios that may include different interest rate
        scenarios, different investment strategies, different prepayment possibilities
        and other scenarios that provide us with a range of possible earnings outcomes
        in order to assess potential interest rate risk. The assumptions used represent
        our estimate of the likely effect of changes in interest rates and do not
        necessarily reflect actual results. The earnings simulation model takes into
        account periodic and lifetime caps embedded in our assets in determining
        the
        earnings at risk.




***Credit
      Spread Risk***




The
      mortgage-backed securities we currently, and will in the future, own are also
      subject to spread risk. The majority of these securities will be adjustable-rate
      securities that are valued based on a market credit spread to U.S. Treasury
      security yields. In other words, their value is dependent on the yield demanded
      on such securities by the market based on their credit relative to U.S. Treasury
      securities. Excessive supply of such securities combined with reduced demand
      will generally cause the market to require a higher yield on such securities,
      resulting in the use of a higher or wider spread over the benchmark rate
      (usually the applicable U.S. Treasury security yield) to value such securities.
      Under such conditions, the value of our securities portfolio would tend to
      decline. Conversely, if the spread used to value such securities were to
      decrease or tighten, the value of our securities portfolio would tend to
      increase. Such changes in the market value of our portfolio may affect our
      net
      equity, net income or cash flow directly through their impact on unrealized
      gains or losses on available-for-sale securities, and therefore our ability
      to
      realize gains on such securities, or indirectly through their impact on our
      ability to borrow and access capital.




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




***Liquidity
      and Funding Risk***




Liquidity
      is a measure of our ability to meet potential cash requirements, including
      ongoing commitments to repay borrowings, meet margin requirements, fund and
      maintain investments, pay dividends to our stockholders and meet other general
      business needs. We recognize the need to have funds available for our operating.
      It is our policy to have adequate liquidity at all times. We plan to meet
      liquidity through normal operations with the goal of avoiding unplanned sales
      of
      assets or emergency borrowing of funds.





As
      it
      relates to our investment portfolio, derivative financial instruments we use
      also subject us to “margin call” risk based on their market values. Under our
      interest rate swaps, we pay a fixed rate to the counterparties while they pay
      us
      a floating rate. When floating rates are low, on a net basis we pay the
      counterparty and visa-versa. In a declining interest rate environment, we would
      be subject to additional exposure for cash margin calls due to accelerating
      prepayments of mortgage assets. However, the asset side of the balance sheet
      should increase in value in a further declining interest rate scenario. Most
      of
      our interest rate swap agreements provide for a bi-lateral posting of margin,
      the effect being that either swap party must post margin, depending on the
      change in value of the swap over time. Unlike typical unilateral posting of
      margin only in the direction of the swap counterparty, this provides us with
      additional flexibility in meeting our liquidity requirements as we can call
      margin on our counterparty as swap values increase.





61




Incoming
      cash on our mortgage loans and securities is a principal source of cash. The
      volume of cash depends on, among other things, interest rates. The volume and
      quality of such incoming cash flows can be impacted by severe and immediate
      changes in interest rates. If rates increase dramatically, our short-term
      funding costs will increase quickly. While many of our Agency securities are
      hybrid ARMs, they typically will not reset as quickly as our funding costs
      creating a reduction in incoming cash flow. Our derivative financial instruments
      are used to mitigate the effect of interest rate volatility.




We
      manage
      liquidity to ensure that we have the continuing ability to maintain cash flows
      that are adequate to meet commitments on a timely and cost-effective basis.
      Our
      principal sources of liquidity are the repurchase agreement market, the issuance
      of CDOs, loan warehouse facilities, principal and interest payments from
      portfolio assets and, when market conditions permit, the issuance of common
      or
      preferred equity.




***Prepayment
      Risk***




When
      borrowers repay the principal on their mortgage loans before maturity or faster
      than their scheduled amortization, the effect is to shorten the period over
      which interest is earned, and therefore, reduce the cash flow and yield on
      our
      ARM assets. Furthermore, prepayment speeds exceeding or lower than our
      reasonable estimates for similar assets, impact the effectiveness of any hedges
      we have in place to mitigate financing and/or fair value risk. Generally, when
      market interest rates decline, borrowers have a tendency to refinance their
      mortgages. The higher the interest rate a borrower currently has on his or
      her
      mortgage the more incentive he or she has to refinance the mortgage when rates
      decline. Additionally, when a borrower has a low loan-to-value ratio, he or
      she
      is more likely to do a “cash-out” refinance. Each of these factors increases the
      chance for higher prepayment speeds during the term of the loan.




We
      mitigate prepayment risk by constantly evaluating our ARM portfolio at a range
      of reasonable market prepayment speeds observed at the time for assets with
      a
      similar structure, quality and characteristics. Furthermore, we stress-test
      the
      portfolio as to prepayment speeds and interest rate risk in order to develop
      an
      effective hedging strategy.




For
      the
      three months ended March 31, 2008, our mortgage assets paid down at an
      approximate average annualized constant paydown rate (“CPR”) of 13%, compared to
      19% for the comparable period in 2007 and 15% for the quarter ended December
      31,
      2007. When prepayment experience increases, we have to amortize our premiums
      over a shorter time period, resulting in a reduced yield to maturity on our
      ARM
      assets. Conversely, if actual prepayment experience decreases, we would amortize
      the premium over a longer time period, resulting in a higher yield to maturity.
      We monitor our prepayment experience on a monthly basis and adjust the
      amortization of the net premium, as appropriate.




***Credit
      Risk***


Credit
        risk is the risk that we will not fully collect the principal we have invested
        in our MBS or mortgage loans held in securitization trusts. The Company
        minimizes the principal risk related to MBS securities by focusing its
        investment strategy on Agency MBS as well as the highest rated securities
        for
        non-Agency securities. As of March 31, 2008 the Company had $512.6 million
        in
        MBS securities of which 94.8% were Agency MBS and 5.0% were rated AAA.
  With
        regard to loans included in our securitization trusts, factors such as FICO
        score, LTV, debt-to-income ratio, and other borrower and collateral factors
        were
        evaluated. Credit enhancement features, such as mortgage insurance were
        also factored into the credit decision. In some instances, when the borrower
        exhibited strong compensating factors, exceptions to the underwriting
        guidelines were approved.




Our
      mortgage loans held in securitization trusts are concentrated in geographic
      markets that are generally supply constrained. We believe that these markets
      have less exposure to sudden declines in housing values than those markets
      which
      have an oversupply of housing.





**Item
      4. Controls and Procedures**




*Evaluation
      of Disclosure Controls and Procedures* - We
      maintain disclosure controls and procedures that are designed to ensure that
      information required to be disclosed in the reports that we file or submit
      under
      the Securities Exchange Act of 1934, as amended, is recorded, processed,
      summarized and reported within the time periods specified in the rules and
      forms
      of the SEC, and that such information is accumulated and communicated to our
      management timely. An evaluation was performed under the supervision and with
      the participation of our management, including our Co-Chief Executive Officers
      and our Chief Financial Officer, of the effectiveness of our disclosure controls
      and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities
      Exchange Act of 1934, as amended) as of March 31, 2008. Based upon that
      evaluation, our management, including our Co-Chief Executive Officers and our
      Chief Financial Officer, concluded that our disclosure controls and procedures
      were effective as of March 31, 2008.




*Changes
      in Internal Control over Financial Reporting* .
      There
      has been no change in our internal control over financial reporting during
      the
      quarter ended March 31, 2008 that has materially affected, or is reasonably
      likely to materially affect, our internal control over financial
      reporting.





62




**PART
      II: OTHER INFORMATION**




Item
        1.Legal
        Proceedings.
 
 As
        of
        March 31, 2008, there have been no material developments or changes to the
        information contained in Item 3 (“Legal Proceedings”) of Part I of the Company’s
        Annual Report on Form 10-K for the year ended December 31,
        2007.




**Item
      1A. Risk Factors**




We
        previously disclosed risk factors under "Item 1A. Risk Factors" in our Annual
        Report on Form 10-K for the year ended December 31, 2007. In addition to
        those
        risk factors and the other information included elsewhere in this report,
        you
        should also carefully consider the risk factors discussed below. The risks
        described below and in our Annual Report on Form 10-K for the year ended
        December 31, 2007 are not the only risks facing our company. Additional risks
        and uncertainties not currently known to us or that we deem to be immaterial
        also may materially adversely affect our business, financial condition and/or
        results of operations.
 
 ***Under
        the Common Stock Registration Rights Agreement we entered in connection with
        our private placement of common stock in February 2008, we have paid, and
        may be required to pay in the future, liquidated damages to the holders of
        the
        shares of common stock purchased in that private placement if we breach certain
        provisions.***
  Under
        the
        registration rights agreement we entered in connection with our private
        placement of common stock in February 2008, we will pay liquidated damages
        if
        any of the following events occur: (i) we fail to file a registration
        statement covering all of the shares sold in that private
        placement before
        the filing deadline; (ii) a registration statement covering all of the shares
        sold in that private placement is not declared effective prior to the
        effectiveness deadline; (iii) the registration statement is not continuously
        kept effective, except during an allowable grace period; (iv) a grace period
        exceeds the allowable grace period under the registration rights agreement;
        (v)
        the shares sold in that private placement may not be sold pursuant to Rule
        144 under the Securities Act due to our failure to satisfy the adequate public
        information condition of Rule 144(c) under the Securities Act; or (vi) we
        fail
        to obtain NASDAQ Stock Market listing for our common stock on or before first
        date the registration statement covering all of the shares sold in that
        private placement is declared effective. The liquidated damages are payable
        in
        an amount equal to the product of one-thirtieth of (i) 0.5% multiplied by
        $4.00
        for each day that such events shall occur and be continuing during the first
        90
        days of such non-compliance, and (ii) 1.0% multiplied by $4.00 for each day
        after the 90 th day of
        such non-compliance for each share sold in the February 2008 private placement
        which is then held by the investors from that offering.
 
 We
        filed
        a resale shelf registration statement registering for resale the 15.0 million
        shares of common stock sold in our February 2008 private placement on April
        4,
        2008, approximately 23 days after the filing deadline, and paid liquidated
        damages of approximately $0.2 million in the aggregate on May 2, 2008 to
        the
        holders of these shares. The resale shelf registration statement was declared
        effective by the SEC on April 18, 2008. Because the market price for our
        common
        stock is substantially below the minimum listing price required for listing
        on
        the NASDAQ Stock Market, we have not yet obtained NASDAQ Stock Market listing
        for our common stock, and as a result, have been subject to the liquidated
        damages penalty since April 19, 2008. Although we intend to request from
        these
        stockholders a waiver of the damages for this breach and expect to effect
        a
        one-for-two reverse stock split during May 2008 to satisfy the minimum price
        requirement to obtain NASDAQ Stock Market listing, we cannot assure you that
        we
        will be successful obtaining the waiver or NASDAQ Stock Market listing. In
        the
        event we fail to obtain NASDAQ Stock Market listing, we will continue to
        be
        subject to the liquidated damages penalty, the continuance of which could
        have a
        material adverse effect on our financial condition and results of
        operations.




***Our
          alternative mortgage-related investment strategy to be managed by JMPAM
          may be
          subject to losses.***
 
 Upon
          commencement of our alternative mortgage-related investment strategy, we
          intend
          to invest capital from the Managed Subsidiaries by acquiring equity interests
          in
          unaffiliated third party entities, or Funds, that acquire or manage a portfolio
          of non-Agency MBS, some or all of which may be classified as non-investment
          grade. Pursuant to the advisory agreement between JMPAM and us, JMPAM will
          manage this alternative mortgage-related investment strategy. Non-Agency
          MBS are
          generally subject to a higher risk of default than Agency or investment
          grade
          MBS. In addition, n on-Agency
          MBS have been more susceptible to downgrades from the Ratings Agencies
          due to a
          number of factors, including greater than expected delinquencies, defaults
          or
          credit losses, any of which may reduce the market value of such securities. As
          a
          result, we may invest in Funds that overestimate the potential credit worthiness
          of the mortgage loans underlying the non-Agency MBS they manage or seek
          to
          invest in. Greater
          than expected delinquencies, defaults or credit losses on such
          securities may result in substantial losses to and possible liquidation
          of the
          Funds that manage and invest in such securities. Because we intend our
          alternative mortgage-related investments to take the form of an equity
          investment in these Funds, in the event one or more of these Funds becomes
          distressed, thereby resulting in a liquidation of such Fund’s assets, holders of
          debt and senior preferred securities and lenders with respect to other
          borrowings of such Fund will receive a distribution of the Fund’s available
          assets prior to us. If one or more of the Funds in which we invest incur
          significant losses, we may lose some or all of our investment in these
          Funds and
          this could have a material adverse effect on our liquidity, financial condition
          and ability to make distributions to our
          stockholders.


**Item
      6. Exhibits**




The
      information set forth under “Exhibit Index” below is incorporated herein by
      reference.





63




**SIGNATURES**




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




NEW
                YORK MORTGAGE TRUST, INC.Date:
                May 14, 2008
            By:
            /s/ David
                A. AkreDavid
                A. Akre
              Co-Chief
                Executive Officer




Date:
                May 14, 2008
            By:
            /s/
                Steven R. MummaSteven
                R. Mumma
              Chief
                Financial Officer





64





**EXHIBIT
      INDEX**





**No.**
            
            **Description**3.1(a)
            
            Articles
                of Amendment and Restatement of the Registrant (incorporated by reference
                to Exhibit 3.01 to our Registration Statement on Form S-11/A filed
                on
                June 18, 2004 (Registration No. 333-111668)).3.1(b)
            
            Articles
                of Amendment of the Registrant (incorporated by reference to Exhibit
                3.1
                to our Current Report on Form 8-K filed on October 4,
                2007.)3.1(c)
            
            Articles
                of Amendment of the Registrant (incorporated by reference to Exhibit
                3.2
                to our Current Report on Form 8-K filed on October 4,
                2007.)3.2(a)
            
            Bylaws
                of the Registrant (incorporated by reference to Exhibit 3.02 to our
                Registration Statement on Form S-11/ A filed on June 18, 2004
                (Registration No. 333-111668)).3.2(b)
            
            Amendment
                No. 1 to Bylaws of Registrant (incorporated by reference to Exhibit
                3.2(b)
                to Registrant's Annual Report on Form 10-K filed on March 16,
                2006)4.1
            
            Form
                of Common Stock Certificate (incorporated by reference to Exhibit
                4.01 to
                our Registration Statement on Form S-11/ A filed on June 18, 2004
                (Registration No. 333-111668)).4.2(a)
            
            Junior
                Subordinated Indenture between The New York Mortgage Company, LLC
                and
                JPMorgan Chase Bank, National Association, as trustee, dated
                September 1, 2005 (incorporated by reference to Exhibit 4.1 to our
                Current Report on Form 8-K filed on September 6,
                2005).4.2(b)
            
            Amended
                and Restated Trust Agreement among The New York Mortgage Company,
                LLC,
                JPMorgan Chase Bank, National Association, Chase Bank USA, National
                Association and the Administrative Trustees named therein, dated
                September 1, 2005 (incorporated by reference to Exhibit 4.2 to our
                Current Report on Form 8-K filed on September 6,
                2005).


4.3(a)
              
              Articles
                  Supplementary Establishing and Fixing the Rights and Preferences
                  of
                  Series A Cumulative Redeemable Convertible Preferred Stock of the
                  Company (Incorporated by reference to Exhibit 4.1 to the Company’s
                  Current Report on Form 8-K filed on January 25, 2008).4.3(b)
              
              Form
                  of Series A Cumulative Redeemable Convertible Preferred Stock Certificate
                  (Incorporated by reference to Exhibit 4.2 to the Company’s Current Report
                  on Form 8-K filed on January 25,
                  2008).
 10.1
                
                Amendment
                    No. 5 to Stock Purchase Agreement, by and among New York Mortgage
                    Trust,
                    Inc. and the Investors listed on Schedule I to the Stock Purchase
                    Agreement, dated as of January 18, 2008 (Incorporated by reference
                    to
                    Exhibit 10.1(b) to the Company’s Current Report on Form 8-K filed on
                    January 25, 2008).10.2
                
                Registration
                    Rights Agreement, by and among New York Mortgage Trust, Inc.
                    and the
                    Investors listed on Schedule I to the Stock Purchase Agreement,
                    dated as
                    of January 18, 2008 (Incorporated by reference to Exhibit 10.2
                    to the
                    Company’s Current Report on Form 8-K filed on January 25,
                    2008).10.3
                
                Advisory
                    Agreement, by and among New York Mortgage Trust, Inc., Hypotheca
                    Capital,
                    LLC, New York Mortgage Funding, LLC and JMP Asset Management
                    LLC, dated as
                    of January 18, 2008 (Incorporated by reference to Exhibit 10.3
                    to the
                    Company’s Current Report on Form 8-K filed on January 25,
                    2008).10.4
                
                Employment
                    Agreement, by and between New York Mortgage Trust, Inc. and David
                    A. Akre,
                    dated as of January 18, 2008 (Incorporated by reference to Exhibit
                    10.4 to
                    the Company’s Current Report on Form 8-K filed on January 25,
                    2008).10.5
                
                Employment
                    Agreement, by and between New York Mortgage Trust, Inc. and Steven
                    R.
                    Mumma, dated as of January 18, 2008 (Incorporated by reference
                    to Exhibit
                    10.5 to the Company’s Current Report on Form 8-K filed on January 25,
                    2008).10.6
                
                Form
                    of Purchase Agreement, by and among New York Mortgage Trust,
                    Inc. and the
                    Investors listed on Schedule A thereto, dated as of February 14, 2008
                    (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report
                    on Form 8-K filed on February 19, 2008).10.7
                
                Form
                    of Registration Rights Agreement, by and among New York Mortgage
                    Trust,
                    Inc. and the Investors listed on Schedule A thereto, dated as of
                    February 14, 2008 (Incorporated by reference to Exhibit 10.2
                    to the
                    Company’s Current Report on Form 8-K filed on February 19,
                    2008).


31.1
            
            Certification
                of Co-Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a)
                of the
                Securities Exchange Act of 1934, as adopted pursuant to Section 302
                of the
                Sarbanes-Oxley Act of 2002.*31.2
            
            Certification
                of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of
                the
                Securities Exchange Act of 1934, as adopted pursuant to Section 302
                of the
                Sarbanes-Oxley Act of 2002.*32.1
            
            Certification
                of Co-Chief Executive Officer pursuant to 18 U.S.C. Section 1350,
                as
                adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
                2002.*32.2
            
            Certification
                of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as
                adopted
                pursuant to Section 906 of the Sarbanes-Oxley Act of
                2002.*




*
            Filed
                herewith




65