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UNITEDSTATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TOSECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Forthe quarterly period ended: March 31, 2005

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934

For the transition periodfrom                to

Commission File Number:001-32213

MORTGAGEIT HOLDINGS,INC.

(Exact name of registrant as specified in itscharter)

|                                                             |  |                                   |  |  |  |  |
|-------------------------------------------------------------|--|-----------------------------------|--|--|--|--|
| Maryland                                                    |  | 20-0404134                        |
| (Stateor other jurisdiction ofincorporation ororganization) |  | (IRSEmployerIdentificationNumber) |
|                                                        |  |                              |
| 33Maiden LaneNew York, NewYork                              |  | 10038                             |
| (Address ofprincipal executive offices)                     |  | (ZipCode)                         |
|                                                             |

Registrant's telephone number,including area code:    **(212) 651-7700**

(Formername, former address and former fiscal year, if changed since lastreport)**Not applicable**

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

Yes            No

            

Indicate by check mark whether the Registrant is anaccelerated filer (as defined in rule 12b-2 of the Securities ExchangeAct of 1934)

Yes            No

            

Indicate the number of shares outstanding of each of theissuer's classes of common stock, as of the latest practicabledate:

COMMON STOCK, $0.01 PAR VALUE PER SHARE: 19,405,706SHARES OUTSTANDING AS OF MAY 12,2005.

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TABLE OFCONTENTS

|                           |  |                                                                                      |    |        |    |        |  |        |        |        |
|---------------------------|--|--------------------------------------------------------------------------------------|----|--------|----|--------|--|--------|--------|--------|
| Forward-LookingStatements |  |                                                                                 | 3  |   |
| PartI.                    |  | FinancialInformation                                                                 |    |   | 4  |   |
| Item1.                    |  | FinancialStatements                                                                  |    |   | 4  |   |
|                      |  | Consolidated BalanceSheets                                                           |    |   | 4  |   |
|                      |  | Consolidated Statements ofOperations(Unaudited)                                      |    |   | 5  |   |
|                      |  | ConsolidatedStatements of Comprehensive Income(Unaudited)                            |    |   | 6  |   |
|                      |  | ConsolidatedStatements of Changes in Stockholders' Equity (Deficit)(Unaudited)       |    |   | 7  |   |
|                      |  | ConsolidatedStatements of Cash Flows(Unaudited)                                      |    |   | 8  |   |
|                      |  | Notes to ConsolidatedFinancial Statements                                            |    |   | 9  |   |
| Item2.                    |  | Management's Discussion and Analysis of FinancialCondition and Results of Operations |    |   | 28 |   |
| Item3.                    |  | Quantitative and Qualitative Disclosures About MarketRisk                            |    |   | 44 |   |
| Item 4.                   |  | Controls AndProcedures                                                               |    |   | 49 |   |
| PartII.                   |  | OtherInformation                                                                     |    |   | 51 |   |  |   |   |   |
| Item1.                    |  | Legal Proceedings                                                                    |    |   | 51 |   |
| Item2.                    |  | Unregistered Sales of Equity Securities and Use ofProceeds                           |    |   | 51 |   |
| Item 3.                   |  | Defaults UponSenior Securities                                                       |    |   | 51 |   |
| Item4.                    |  | Submission of Matters to a Vote of SecurityHolders                                   |    |   | 51 |   |
| Item 5.                   |  | OtherInformation                                                                     |    |   | 51 |   |
| Item6.                    |  | Exhibits                                                                             |    |   | 51 |   |
| Signatures                |  |                                                                                 | 53 |   |
|                           |

2

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FORWARD-LOOKINGSTATEMENTS

The information contained in this quarterly reporton Form 10-Q is not a complete description of our business or the risksassociated with an investment in our Company. We urge you to carefullyreview and consider the various disclosures made by us in this reportand in our other filings with the Securities and Exchange Commission("SEC"), including our annual report on Form10-K, which discuss our business in greater detail.

This reportcontains certain "forward-looking statements"within the meaning of Section 27A of the Securities Act of 1933 andSection 21E of the Securities Exchange Act of 1934. Suchforward-looking statements relate to, among other things, the operatingperformance of our investments and financing needs. Forward-lookingstatements are generally identifiable by use of forward-lookingterminology such as "may,""will," "should,""potential,""intend," "expect,""endeavor," "seek,""anticipate,""estimate,""overestimate,""underestimate,""believe," "could,""project,""predict,""continue" or other similar words orexpressions. Forward-looking statements are based on certainassumptions, discuss future expectations, describe future plans andstrategies, contain projections of results of operations or offinancial condition or state other forward-looking information. Ourability to predict results or the actual effect of future plans orstrategies is inherently uncertain. Although we believe that theexpectations reflected in such forward-looking statements are based onreasonable assumptions, our actual results and performance in thefuture could differ materially from forecasted results. Factors thatcould have a material adverse effect on our financial condition orresults of operations include, but are not limitedto:

|              |                                                                                            |
|--------------|--------------------------------------------------------------------------------------------|
| •  | changes in economic conditionsgenerally and the real estate and bond markets specifically; |

|              |                                                                                                                |
|--------------|----------------------------------------------------------------------------------------------------------------|
| •  | our ability to originate a portfolio ofhigh quality prime adjustable-rate mortgage("ARM") and hybrid ARMloans; |

|              |                                                                                                                            |
|--------------|----------------------------------------------------------------------------------------------------------------------------|
| •  | changes in interest rates and/orcredit spreads, as well as the success of our hedging strategy inrelation to such changes; |

|              |                                                                                             |
|--------------|---------------------------------------------------------------------------------------------|
| •  | the qualityand size of the investment pipeline and the rate at which we can investour cash; |

|              |                                                      |
|--------------|------------------------------------------------------|
| •  | adverse federal and statelegislation and regulation; |

|              |                                               |
|--------------|-----------------------------------------------|
| •  | ourability to consummate pending investments; |

|              |                                                             |
|--------------|-------------------------------------------------------------|
| •  | the availability and cost of capital forfuture investments; |

|              |                                                                                  |
|--------------|----------------------------------------------------------------------------------|
| •  | our ability tocompete effectively within the finance and real estate industries; |

|              |                                                                                                                          |
|--------------|--------------------------------------------------------------------------------------------------------------------------|
| •  | the Company's primary reliance, as aholding company, on dividends from its subsidiaries to meet debtservice obligations; |

|              |                                             |
|--------------|---------------------------------------------|
| •  | changes in ourcritical accounting policies; |

|              |                                                                               |
|--------------|-------------------------------------------------------------------------------|
| •  | adverseresults or resolutions of litigation, arbitration or investigation;and |

|              |                                                           |
|--------------|-----------------------------------------------------------|
| •  | other risks detailed from time totime in our SEC reports. |

Readers are cautioned not to placeundue reliance on any of these forward-looking statements, whichreflect our management's views as of the date of this report. Thefactors noted above could cause our actual results to differsignificantly from those contained in any forward-looking statement.For a discussion of the critical accounting policies that we currentlybelieve are important to our business, see"Management's Discussion and Analysis of FinancialCondition and Results of Operations—Critical Accounting Policiesand Estimates."

Although we believe that theexpectations reflected in the forward-looking statements arereasonable, we cannot guarantee future results, levels of activity,performance or achievements. We are under no duty to update any of theforward-looking statements after the date of this report to conformthese statements to actual results.

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PART I. FINANCIAL INFORMATION

ITEM 1.    FINANCIAL STATEMENTS

MortgageIT Holdings,Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEETS(Dollars inthousands)

|                                                                                              |  |              |           |                 |  |        |           |         |  |  |
|----------------------------------------------------------------------------------------------|--|--------------|-----------|-----------------|--|--------|-----------|---------|--|--|
|                                                                                         |  | March31,2005 |           | December31,2004 |
|                                                                                         |  | (Unaudited)  |           |            |
| **ASSETS**                                                                                   |  |         |      |            |  |   |      |    |
| Cashand cashequivalents                                                                      |  | $            | 40,315    |            |  | $      | 70,224    |    |
| Restrictedcash                                                                               |  |         | 246       |            |  |   | 1,679     |    |
| Marketable securitiesheld tomaturity                                                         |  |         | 4,066     |            |  |   | 7,546     |    |
| Portfolio ARMLoans                                                                           |  |         |      |            |  |   |      |    |
| ARM loanscollateralizing debt obligations,net                                                |  |         | 2,379,556 |            |  |   | 1,432,692 |    |
| ARMloans held for securitization,net                                                         |  |         | 684,918   |            |  |   | 1,166,961 |    |
| TotalPortfolio ARMLoans                                                                      |  |         | 3,064,474 |            |  |   | 2,599,653 |    |
| Mortgageloans held forsale                                                                   |  |         | 1,404,982 |            |  |   | 784,592   |    |
| Hedginginstruments                                                                           |  |         | 44,151    |            |  |   | 19,526    |    |
| Accountsreceivable, net ofallowance                                                          |  |         | 35,408    |            |  |   | 28,731    |    |
| Prepaids andotherassets                                                                      |  |         | 6,415     |            |  |   | 7,803     |    |
| Goodwill                                                                                     |  |         | 11,639    |            |  |   | 11,639    |    |
| Propertyand equipment,net                                                                    |  |         | 5,630     |            |  |   | 5,567     |    |
| **Totalassets**                                                                              |  | $            | 4,617,326 |            |  | $      | 3,536,960 |    |
| **LIABILITIESAND STOCKHOLDERS'EQUITY**                                                       |  |         |      |            |  |   |      |    |
| Liabilities:                                                                                 |  |         |      |            |  |   |      |    |
| Collateralizeddebt obligations,net                                                           |  | $            | 2,229,829 |            |  | $      | 1,328,096 |    |
| Warehouselinespayable                                                                        |  |         | 2,005,546 |            |  |   | 1,869,385 |    |
| Repurchaseagreements                                                                         |  |         | 83,475    |            |  |   | 67,674    |    |
| Hedginginstruments                                                                           |  |         | 3,151     |            |  |   | 1,145     |    |
| Notespayable and otherdebt                                                                   |  |         | 15,000    |            |  |   | 15,000    |    |
| Accounts payable,accrued expenses and otherliabilities                                       |  |         | 67,009    |            |  |   | 63,993    |    |
| **Totalliabilities**                                                                         |  |         | 4,404,010 |            |  |   | 3,345,293 |    |
| **STOCKHOLDERS'EQUITY:**                                                                     |  |         |      |            |  |   |      |    |
| Common stock, $.01 parvalue: 125,000,000 shares authorized; 19,405,706 issued andoutstanding |  |         | 194       |            |  |   | 194       |    |
| Additionalpaid-incapital                                                                     |  |         | 240,477   |            |  |   | 238,405   |    |
| Unearnedcompensation — restrictedstock                                                 |  |         | (7,477    | )          |  |   | (6,196    | )  |
| Accumulatedother comprehensive income(loss)                                                  |  |         | 14,058    |            |  |   | (387      | )  |
| Accumulateddeficit                                                                           |  |         | (33,936   | )          |  |   | (40,349   | )  |
| **Totalstockholders'equity**                                                                 |  |         | 213,316   |            |  |   | 191,667   |    |
| **Totalliabilities and stockholders'equity**                                                 |  | $            | 4,617,326 |            |  | $      | 3,536,960 |    |
|                                                                                              |

Theaccompanying notes are an integral part of the consolidated financialstatements.

4

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MortgageIT Holdings, Inc. andSubsidiaries

CONSOLIDATED STATEMENTS OF OPERATIONS(Unaudited) (Dollars and shares in thousands, except per sharedata)

|                                                         |  |                            |         |              |  |        |         |         |  |  |
|---------------------------------------------------------|--|----------------------------|---------|--------------|--|--------|---------|---------|--|--|
|                                                    |  | Threemonths ended March31, |
|                                                    |  | 2005                       |         | 2004         |
|                                                    |  |                       |         | (Asrestated) |
| **Revenues:**                                           |  |                       |    |         |  |   |    |    |
| Gainon sale of mortgageloans                            |  | $                          | 32,107  |         |  | $      | 14,354  |    |
| Brokeragerevenues                                       |  |                       | 6,398   |         |  |   | 8,745   |    |
| Interestincome                                          |  |                       | 53,752  |         |  |   | 5,317   |    |
| Interestexpense                                         |  |                       | (31,486 | )       |  |   | (2,546  | )  |
| Netinterestincome                                       |  |                       | 22,266  |         |  |   | 2,771   |    |
| Realizedand unrealized gain on hedginginstruments       |  |                       | 8,922   |         |  |   | — |    |
| Other                                                   |  |                       | 263     |         |  |   | 7       |    |
| **Totalrevenues**                                       |  |                       | 69,956  |         |  |   | 25,877  |    |
| **Operatingexpenses:**                                  |  |                       |    |         |  |   |    |    |
| Compensation andemployeebenefits                        |  |                       | 27,789  |         |  |   | 16,531  |    |
| Processingexpenses                                      |  |                       | 10,363  |         |  |   | 3,446   |    |
| General andadministrativeexpenses                       |  |                       | 6,818   |         |  |   | 2,317   |    |
| Rent                                                    |  |                       | 2,275   |         |  |   | 1,814   |    |
| Marketing,loan acquisition and businessdevelopment      |  |                       | 895     |         |  |   | 1,050   |    |
| Professionalfees                                        |  |                       | 2,310   |         |  |   | 587     |    |
| Depreciation andamortization                            |  |                       | 796     |         |  |   | 626     |    |
| Totaloperatingexpenses                                  |  |                       | 51,246  |         |  |   | 26,371  |    |
| **Income(loss) before incometaxes**                     |  |                       | 18,710  |         |  |   | (494    | )  |
| **Incometaxes**                                         |  |                       | 2,982   |         |  |   | (223    | )  |
| **Netincome(loss)**                                     |  |                       | 15,728  |         |  |   | (271    | )  |
| **Dividendson convertible redeemable preferredstock**   |  |                       | — |         |  |   | 1,661   |    |
| **Netincome (loss) attributable to commonstockholders** |  | $                          | 15,728  |         |  | $      | (1,932  | )  |
| **Persharedata:**                                       |  |                       |    |         |  |   |    |    |
| Basic                                                   |  | $                          | 0.81    |         |  | $      | (3.73   | )  |
| Diluted                                                 |  | $                          | 0.79    |         |  | $      | (3.73   | )  |
| Weightedaverage number of shares — basic(1)       |  |                       | 19,405  |         |  |   | 518     |    |
| Weighted averagenumber of shares — diluted(1)     |  |                       | 19,846  |         |  |   | 518     |    |
|                                                         |

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|     |                                                                                                                                                                                                                                                                                                   |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (1) | Reflects,on a retroactive basis, for all periods presented, the exchange ofapproximately 12.80 shares of MortgageIT, Inc. common stock for eachshare of MortgageIT Holdings, Inc. common stock and the retention andretirement of common shares pursuant to the reorganization ofMortgageIT, Inc. |

The accompanying notes are anintegral part of the consolidated financial statements.

5

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MortgageIT Holdings, Inc. andSubsidiaries

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(LOSS) (Unaudited) (Dollars inthousands)

|                                      |  |                           |        |        |  |        |         |         |  |  |
|--------------------------------------|--|---------------------------|--------|--------|--|--------|---------|---------|--|--|
|                                 |  | Threemonthsended March31, |
|                                 |  | 2005                      |        | 2004   |
| Netincome (loss)                     |  | $                         | 15,728 |   |  | $      | (271    | )  |
| Othercomprehensive income:           |  |                      |   |   |  |   |    |    |
| Unrealizedgain on hedginginstruments |  |                      | 14,058 |   |  |   | — |    |
| Comprehensiveincome(loss)            |  | $                         | 29,786 |   |  | $      | (271    | )  |
|                                      |

Theaccompanying notes are an integral part of the consolidated financialstatements.

6

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MortgageIT Holdings, Inc. andSubsidiaries

CONSOLIDATED STATEMENTS OF CHANGES INSTOCKHOLDERS' EQUITY (DEFICIT) (Unaudited)Three months endedMarch 31, 2005 (Dollars and shares inthousands)

|                                            |  |               |         |                          |  |                    |         |                                  |  |                                   |         |                                   |  |        |         |        |  |        |         |        |  |        |         |         |  |        |         |         |  |        |         |         |  |        |         |         |  |  |
|--------------------------------------------|--|---------------|---------|--------------------------|--|--------------------|---------|----------------------------------|--|-----------------------------------|---------|-----------------------------------|--|--------|---------|--------|--|--------|---------|--------|--|--------|---------|---------|--|--------|---------|---------|--|--------|---------|---------|--|--------|---------|---------|--|--|
|                                       |  | CapitalStock  |         | AdditionalPaid-InCapital |  | AccumulatedDeficit |         | UnamortizedCostofRestrictedStock |  | AccumulatedOtherComprehensiveLoss |         | TotalStockholders'Equity(Deficit) |
|                                       |  | Common-ClassA |         | Common                   |  |
|                                       |  | Shares        |         | Amount                   |  | Shares             |         | Amount                           |  |
| Balanceat December 31,2004                 |  |          | — |                     |  |               | — |                             |  |                              | 19,405  |                              |  |   | 194     |   |  |   | 238,405 |   |  |   | (40,349 | )  |  |   | (6,196  | )  |  |   | (387    | )  |  |   | 191,667 |    |
| Issuanceof commonstock                     |  |          | — |                     |  |               | — |                             |  |                              | — |                              |  |   | — |   |  |   | 4       |   |  |   | — |    |  |   | — |    |  |   | — |    |  |   | 4       |    |
| Restrictedstockgrant                       |  |          | — |                     |  |               | — |                             |  |                              | — |                              |  |   | — |   |  |   | 2,068   |   |  |   | — |    |  |   | (2,068  | )  |  |   | — |    |  |   | — |    |
| Amortizationof the cost of restrictedstock |  |          | — |                     |  |               | — |                             |  |                              | — |                              |  |   | — |   |  |   | — |   |  |   | — |    |  |   | 787     |    |  |   | — |    |  |   | 787     |    |
| Othercomprehensive income(loss)            |  |          | — |                     |  |               | — |                             |  |                              | — |                              |  |   | — |   |  |   | — |   |  |   | — |    |  |   | — |    |  |   | 14,445  |    |  |   | 14,445  |    |
| Dividendsdeclaredon                        |  |          |    |                     |  |               |    |                             |  |                              |    |                              |  |   |    |   |  |   |    |   |  |   |    |    |  |   |    |    |  |   |    |    |  |   |    |    |
| commonstock—                         |  |          |    |                     |  |               |    |                             |  |                              |    |                              |  |   |    |   |  |   |    |   |  |   |    |    |  |   |    |    |  |   |    |    |  |   |    |    |
| $0.48pershare                              |  |          | — |                     |  |               | — |                             |  |                              | — |                              |  |   | — |   |  |   | — |   |  |   | (9,315  | )  |  |   | — |    |  |   | — |    |  |   | (9,315  | )  |
| Netincome                                  |  |          | — |                     |  |               | — |                             |  |                              | — |                              |  |   | — |   |  |   | — |   |  |   | 15,728  |    |  |   | — |    |  |   | — |    |  |   | 15,728  |    |
| Balanceat March 31,2005                    |  |          | — |                     |  | $                  | — |                             |  |                              | 19,405  |                              |  | $      | 194     |   |  | $      | 240,477 |   |  | $      | (33,936 | )  |  | $      | (7,477  | )  |  | $      | 14,058  |    |  | $      | 213,316 |    |
|                                            |

Theaccompanying notes are an integral part of the consolidated financialstatements.

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MortgageIT Holdings, Inc. andSubsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)(Dollars inthousands)

|                                                                                                  |  |                            |           |              |  |        |          |         |  |  |
|--------------------------------------------------------------------------------------------------|--|----------------------------|-----------|--------------|--|--------|----------|---------|--|--|
|                                                                                             |  | Threemonths ended March31, |
|                                                                                             |  | 2005                       |           | 2004         |
|                                                                                             |  |                       |           | (Asrestated) |
| **Cash flows from operatingactivities:**                                                         |  |                       |      |         |  |   |     |    |
| Net income(loss)                                                                                 |  | $                          | 15,728    |         |  | $      | (271     | )  |
| Adjustments toreconcile net income (loss) to net cash provided by (used in) operatingactivities: |  |                       |      |         |  |   |     |    |
| Depreciation andamortization                                                                     |  |                       | 796       |         |  |   | 626      |    |
| Amortization ofrestricted stockcosts                                                             |  |                       | 787       |         |  |   | —  |    |
| Realized andunrealized gain on hedginginstruments                                                |  |                       | (2,097    | )       |  |   | (1,705   | )  |
| Changesin operating assets:                                                                      |  |                       |      |         |  |   |     |    |
| Decrease(increase) in restrictedcash                                                             |  |                       | 1,433     |         |  |   | (82      | )  |
| Increase in mortgageloans held forsale                                                           |  |                       | (620,390  | )       |  |   | (102,454 | )  |
| Increase inaccountsreceivable                                                                    |  |                       | (6,677    | )       |  |   | (5,773   | )  |
| Decrease(increase) in prepaids and otherassets                                                   |  |                       | 1,388     |         |  |   | (1,560   | )  |
| Changes inoperating liabilities:                                                                 |  |                       |      |         |  |   |     |    |
| Increase(decrease) in accounts payable, accrued expenses and otherliabilities                    |  |                       | 2,239     |         |  |   | (6,476   | )  |
| **Netcash used in operatingactivities**                                                          |  |                       | (606,793  | )       |  |   | (117,695 | )  |
| **Cashflows from investingactivities:**                                                          |  |                       |      |         |  |   |     |    |
| Increase in ARMloans                                                                             |  |                       | (464,821  | )       |  |   | —  |    |
| Purchases ofproperty andequipment                                                                |  |                       | (859      | )       |  |   | (299     | )  |
| Proceeds frommaturities of marketablesecurities                                                  |  |                       | 6,331     |         |  |   | 1,420    |    |
| Purchases ofmarketablesecurities                                                                 |  |                       | (2,852    | )       |  |   | (1,420   | )  |
| **Netcash used in investingactivities**                                                          |  |                       | (462,201  | )       |  |   | (299     | )  |
| **Cashflows from financingactivities:**                                                          |  |                       |      |         |  |   |     |    |
| Proceeds fromissuance of commonstock                                                             |  |                       | 4         |         |  |   | —  |    |
| Net proceeds fromcollateralized debtobligations                                                  |  |                       | 901,733   |         |  |   | —  |    |
| Netborrowings from repurchaseagreements                                                          |  |                       | 15,801    |         |  |   | —  |    |
| Purchaseof interest rate cap and swapagreements                                                  |  |                       | (6,076    | )       |  |   | —  |    |
| Dividendspaid                                                                                    |  |                       | (8,538    | )       |  |   | —  |    |
| Proceeds fromnotes payable and otherdebt                                                         |  |                       | —   |         |  |   | 15,000   |    |
| Repayment ofnotes payable and otherdebt                                                          |  |                       | —   |         |  |   | (1,125   | )  |
| Net proceedsfrom warehouse linespayable                                                          |  |                       | 136,161   |         |  |   | 102,517  |    |
| **Netcash provided by financingactivities**                                                      |  |                       | 1,039,085 |         |  |   | 116,392  |    |
| **Netdecrease in cash and cashequivalents**                                                      |  |                       | (29,909   | )       |  |   | (1,602   | )  |
| **Cashand cash equivalents at beginning ofperiod**                                               |  |                       | 70,224    |         |  |   | 22,261   |    |
| **Cashand cash equivalents at end ofperiod**                                                     |  | $                          | 40,315    |         |  | $      | 20,659   |    |
|                                                                                                  |

Theaccompanying notes are an integral part of the consolidated financialstatements.

8

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NOTESTO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1—ORGANIZATIONAND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanyingunaudited consolidated financial statements have been prepared inaccordance with generally accepted accounting principles for interimfinancial information.

In the opinion of management, allmaterial adjustments, consisting of normal recurring adjustments,considered necessary for a fair presentation have been included. Theoperating results for the three months ended March  31, 2005 arenot necessarily indicative of the results that may be expected for theyear ending December  31, 2005. The interim financial informationshould be read in conjunction with MortgageIT Holdings, Inc.'s2004 Annual Report on Form 10-K.

Basis of Presentation

MortgageIT Holdings, Inc. ("Holdings" orthe "Company") is a residential mortgagelender that was formed in March 2004 to continue and expand thebusiness of MortgageIT, Inc. ("MortgageIT" orthe "TRS"). Holdings is organized andconducts its operations to qualify as a REIT for federal income taxpurposes and is focused on earning net interest income from mortgageloans originated by its subsidiary, MortgageIT. Holdings' taxableREIT subsidiary, MortgageIT, was incorporated in New York on February1, 1999 and began marketing mortgage loan services on May 4, 1999.MortgageIT originates, sells and brokers residential mortgage loans in50 states and the District of Columbia, and is an approved U.S.Department of Housing and Urban Development("HUD") Title II Nonsupervised DelegatedMortgagee.

As discussed further in Note 10, the Company operatesits business in two primary segments, mortgage investment operationsand mortgage banking operations. Mortgage investment operations aredriven by the net interest income generated on our investment loanportfolio. Mortgage banking operations include loan origination,underwriting, funding, secondary marketing and loan brokerageactivities.

All shares of common stock and common stockequivalents have been retroactively restated, for all periodspresented, to reflect the exchange of approximately 12.80 shares ofMortgageIT common stock for each share of Holdings common stock and theretention and retirement of common stock pursuant to the reorganizationof MortgageIT.

The consolidated financial statements includedherein contain results for Holdings and its wholly owned subsidiary,MortgageIT and its wholly owned subsidiaries, IPI Skyscraper MortgageCorporation ("IPI") and Home Closer LLC("Home Closer"), for the period from August4, 2004 (the date REIT operations commenced) to December 31, 2004, andexclusively for MortgageIT and its wholly owned subsidiaries, IPI andHome Closer for the preceding periods. IPI, which provides residentialmortgage banking and brokerage services in the New York, New Jersey andConnecticut tri-state area, was a wholly owned subsidiary of MortgageITuntil it was merged with and into MortgageIT effective December 31,2004. Home Closer provides title, settlement and other mortgage relatedservices to the Company and its customers. All material intercompanyaccount balances and transactions have been eliminated inconsolidation.

Use of Estimates

The preparation offinancial statements in conformity with accounting principles generallyaccepted in the United States requires management to make estimates andassumptions that affect the amounts reported in the financialstatements and the accompanying notes. Management bases its estimateson certain assumptions, which they believe are reasonable under thecircumstances, and does not believe that any change in thoseassumptions would have a significant effect on the financial positionor results of operations of the Company. Actual results could differmaterially from those estimates.

Adjustable Rate Mortgage("ARM") Loan Investment Portfolio

TheCompany's ARM loan investment portfolio is comprised of ARM loanscollateralizing debt obligations and ARM loans held for securitization(collectively referred to as "Portfolio ARMLoans" 

9

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or "ARM Loans").All of the Company's Portfolio ARM Loans are either traditionalARM Loans, meaning they have interest rates that reprice in one year orless ("Traditional ARMs" or"Traditional ARM loans"), or hybrid ARM Loansthat have a fixed interest rate for an initial period of not more thanfive years and then convert to Traditional ARMs for their remainingterms to maturity ("Hybrid ARMs" or"Hybrid ARM loans").

Portfolio ARMLoans are designated as held to maturity because the Company has theintent and ability to hold them for the foreseeable future, and untilmaturity or payoff. Portfolio ARM Loans are carried at cost whichincludes unpaid principal balances, net of unamortized loan originationcosts, fees and the allowance for loan losses.

ARM loanscollateralizing debt obligations are mortgage loans the Company hassecuritized into rated classes with the lower rated classes providingcredit support for higher rated certificates issued to third partyinvestors or retained by the Company in structured financingarrangements.

ARM loans held for securitization are mortgageloans the Company has originated and intends to securitize andretain.

The Company does not intend to sell any of thesecurities created from its securitizations to generate gain on saleincome. The loan securitization process benefits the Company bycreating highly liquid securitized assets that can be readily financedin the capital markets.

Mortgage Loans Held for Sale

Unallocated Mortgage Loans Held For Sale

Unallocatedmortgage loans held for sale represent hedged loans that have not yetbeen allocated to a forward sales contract. At March 31, 2005 andDecember 31, 2004, unallocated mortgage loans held for sale are carriedat market value. Determining market value requires management judgmentin determining how the market would value a particular mortgage loanbased on characteristics of the loan and available marketinformation.

Allocated Mortgage Loans Held For Sale

Allocated mortgage loans held for sale represent hedged loans thathave been allocated to a forward sales commitment. For the three monthsended March 31, 2005, the Company qualified and elected to apply SFASNo. 133 fair value hedge accounting for allocated loans held for sale.At March 31, 2005, allocated mortgage loans held for sale are carriedat market value. Determining market value requires management judgmentin determining how the market would value a particular mortgage loanbased on characteristics of the loan and available market information.At December 31, 2004, allocated mortgage loans held for sale werecarried at the lower of adjusted cost or market value. Adjusted costincludes the loan principal amount outstanding, net of deferred directorigination costs and fees.

Loan Securitizations

TheCompany securitizes mortgage loans by transferring them to independenttrusts that issue securities collateralized by the transferred mortgageloans. The Company generally retains interests in all or some of thesecurities issued by the trusts. Certain of the securitizationagreements may require the Company to repurchase loans that are foundto have legal deficiencies, after the date of transfer. The accountingtreatment for transfers of assets upon securitization depends onwhether or not the Company has retained control over the transferredassets. The Company's accounting policy for ARM loansecuritizations complies with the provisions of Statement of FinancialAccounting Standards No. 140 ("SFAS No.140"), "Accounting for Transfers andServicing of Financial Assets and Extinguishments ofLiabilities." Depending on the structure of thesecuritization, the accounting for securitizations is treated as eithera sale or secured financing for financial statement purposes. Thesecuritization transactions in the Company's mortgage investmentoperations segment are treated as secured financings under SFAS No. 140as the Company has retained control over the transferred assets.

10

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Derivative Instruments and HedgingActivities

The Company manages its interest rate risk exposurethrough the use of derivatives, including interest rate swaps,Eurodollar futures, forwards and interest rate caps. In accordance withSFAS No. 133, all derivative instruments are recorded on the balancesheet at fair value.

If certain conditions are met, the Companymay designate a derivative as a fair value hedge (the hedge of theexposure to changes in the fair value of a recognized asset, liabilityor commitment), or a cash flow hedge (a hedge of the exposure tovariability in the cash flows related to a forecasted or recognizedliability).

Certain derivatives used in conjunction withinterest rate risk management activities qualify for hedge accountingunder SFAS No. 133. For derivative hedging activities to qualify forhedge accounting, the Company formally documents, at the inception ofeach hedge, the hedging relationship and its risk-management objectiveand strategy for undertaking the hedge, the hedging instrument, theitem or, the nature of the risk being hedged, how the hedginginstrument's effectiveness in offsetting the hedged risk will beassessed, and a description of the method of measuring ineffectiveness.The Company also formally assesses, both at the hedge's inceptionand on an ongoing basis, whether the derivatives that are used inhedging transactions are highly effective in offsetting changes in fairvalues or cash flows of hedged items.

The Company's fairvalue hedges are primarily for mortgage loans held for sale. Changes inthe fair value of a derivative that is highly effective and that isdesignated and qualifies as a fair value hedge, along with the changein fair value of the hedged asset, are recorded in earnings.Derivatives that are utilized as fair value hedges and that qualify forhedge accounting are carried at fair value with changes in valueincluded in gain on sale of mortgage loans in the accompanyingconsolidated statements of operations.

The Company's cashflow hedges, which are used for LIBOR based borrowings, have the effectof fixing the interest rate on LIBOR based liabilities in the eventthat LIBOR based funding costs change. Changes in the fair value of aderivative that is highly effective and that is designated andqualifies as a cash flow hedge are recorded in other comprehensiveincome to the extent that the derivative is effective as a hedge, untilearnings are affected by the variability in cash flows of thedesignated hedged item. The ineffective portion of the change in fairvalue of a derivative instrument that qualifies as either a fair valuehedge or a cash flow hedge, and the change in value of a derivativeinstrument that does not qualify for hedge accounting, are reported inearnings.

The Company employs a number of risk managementmonitoring procedures that are designed to ensure that its hedgingarrangements are demonstrating, and are expected to continue todemonstrate, a high level of effectiveness. Hedge accounting isdiscontinued on a prospective basis if it is determined that thehedging relationship is no longer highly effective or expected to behighly effective in offsetting changes in fair value or cash flows ofthe hedged item. Additionally, the Company may elect, pursuant to SFASNo. 133, to re-designate a hedge relationship during an interim periodand re-designate upon the rebalancing of a hedge relationship.

Interest Rate Lock Commitments

The Company's mortgagecommitted pipeline includes interest rate lock commitments("IRLCs") that have been extended toborrowers who have applied for loan funding and meet certain definedcredit and underwriting criteria. The Company classifies and accountsfor the IRLCs associated with loans expected to be sold asfree-standing derivatives. Accordingly, such IRLCs are recorded at fairvalue with changes in fair value recorded to current earnings.

Repurchase Agreements

Repurchase agreements represent legalsales of the Company's mortgage assets and an agreement torepurchase the assets at a future date. Repurchase agreements areaccounted for as collateralized financing transactions since theCompany still has control of the transferred assets and is bothentitled and obligated to repurchase the transferred assets prior tomaturity. They are carried at the amount at which the assets will berepurchased, including accrued interest.

11

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Other Comprehensive Income

The Financial Accounting Standard Board's("FASB") SFAS No. 130,"Reporting Comprehensive Income," dividescomprehensive income into net income and other comprehensive income(loss), which includes unrealized gains and losses on derivativefinancial instruments that qualify for cash flow hedge accounting underSFAS No. 133.

Revenue Recognition

Mortgage InvestmentOperations

Interest income is accrued based on the outstandingprincipal amount and contractual terms of the loans. Direct loanorigination costs and fees associated with the loans are amortized intointerest income over the lives of the loans using the effective yieldmethod, adjusted for the effects of estimated prepayments. Estimatingprepayments and estimating the remaining lives of the loans requiresmanagement judgment, which involves consideration of possible futureinterest rate environments. The actual lives could be more or less thanthe amount estimated by management.

Mortgage BankingOperations

Gain on sale of loans represents the differencebetween the net sales proceeds and the carrying values of the mortgageloans sold, and are recognized at the time of sale. Direct loanorigination costs and fees associated with the loans are initiallyrecorded as an adjustment of the cost of the loans held for sale andare recognized in earnings when the loans are sold.

Brokeragefees represent revenues earned for the brokering of mortgage loans tothird party lenders and are earned and recognized at the time the loanis closed by the third party lender. Revenues are primarily comprisedof borrower application and/or administrative fees and brokerage feespaid to the Company by third party lenders.

Interest income isaccrued as earned. Interest on mortgage loans held for sale accrues onloans from the date of funding through the date of sale. Interest onloans is computed based on the contractual loan rate.

Generally,the Company is not exposed to significant credit risk on its loans soldto investors. In the normal course of business, the Company isobligated to repurchase loans from investors consistent with the termsof its investor contracts. At the time of loan sale, the Companyrecords a repurchase reserve for potential future losses applicable toloans sold. The repurchase reserve is included in accrued expenses onour balance sheet.

Loan Loss Reserves

The Companymaintains an allowance for loan losses based on management'sestimate of credit losses inherent in the Company's Portfolio ARMLoans. The estimation of the allowance is based on a variety of factorsincluding, but not limited to, industry statistics, current economicconditions, loan portfolio composition, delinquency trends, creditlosses to date on underlying loans and remaining credit protection. Ifthe credit performance of the Company's Portfolio ARM Loans isdifferent than expected, the Company adjusts the allowance for loanlosses to a level deemed appropriate by management to provide forestimated losses inherent in the Company's ARM loan portfolio.Two critical assumptions used in estimating the loan loss reserves arean assumed rate of default, which is the expected rate at which loansgo into foreclosure over the life of the loans, and an assumed rate ofloss severity, which represents the expected rate of realized loss upondisposition of the properties that have gone into foreclosure. Inaddition, once a loan is 90 days or more delinquent or a borrowerdeclares bankruptcy, the Company adjusts the value of its accruedinterest receivable to what it believes to be collectible and stopsaccruing interest on that loan.

Stock Compensation

Asof March 31, 2005, the Company had one stock-based employeecompensation plan in effect, the 2004 Long-Term Incentive Plan (the"2004 Plan"), which is described more fullyin Note 7. 

12

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MortgageIT had previously adopted the 2001Stock Option Plan, which was terminated on August 4, 2004, pursuant tothe reorganization of MortgageIT. The Company accounts for alltransactions under which employees receive shares of stock or otherequity instruments in the Company based on the price of its stock inaccordance with the provisions of Accounting Principles Board OpinionNo. 25, "Accounting for Stock Issued toEmployees." Pursuant to these accounting standards, theCompany records deferred compensation for stock awards at the date ofgrant based on the estimated values of the shares on that date. Thereis no stock option-based employee compensation cost reflected in netincome because all options granted had an exercise price equal to themarket value of the underlying common stock on the date of grant. Thefollowing table illustrates the effect on net income (loss) if theCompany had applied the fair value recognition provisions of SFAS No.123, "Accounting for Stock-Based Compensation-Transitionand Disclosure" ("SFAS No.123")(Dollars in thousands, except per sharedata):

|                                                                                                           |  |                            |        |              |  |        |         |         |  |  |
|-----------------------------------------------------------------------------------------------------------|--|----------------------------|--------|--------------|--|--------|---------|---------|--|--|
|                                                                                                      |  | (unaudited)                |
|                                                                                                      |  | Threemonths ended March31, |
|                                                                                                      |  | 2005                       |        | 2004         |
|                                                                                                      |  |                       |        | (Asrestated) |
| Net income (loss) attributable to commonstockholders                                                      |  | $                          | 15,728 |         |  | $      | (1,932  | )  |
| Amortizationof restricted stock, including forfeitures, net of related taxeffects                         |  |                       | 554    |         |  |   | — |    |
| Stock-basedemployee compensation expense determined under the fair value method,net of related taxeffects |  |                       | (610   | )       |  |   | (114    | )  |
| Proforma net income(loss)                                                                                 |  | $                          | 15,672 |         |  | $      | (2,046  | )  |
| Netincome (loss) per share attributable to commonstock:                                                   |  |
| Basic—Asreported                                                                                    |  | $                          | 0.81   |         |  | $      | (3.73   | )  |
| Basic—Proforma                                                                                      |  | $                          | 0.81   |         |  | $      | (3.95   | )  |
| Netincome (loss) per share for diluted earnings pershare:                                                 |  |
| Diluted—Asreported                                                                                  |  | $                          | 0.79   |         |  | $      | (3.73   | )  |
| Diluted—Proforma                                                                                    |  | $                          | 0.79   |         |  | $      | (3.95   | )  |
|                                                                                                           |

Underthe 2001 Stock Option Plan, which was terminated pursuant to ourreorganization, the fair value for each option granted was estimated atthe date of grant using the minimum value, option-pricing model, anallowable valuation method under SFAS No.123 with the followingassumptions: risk-free interest rate of 4.25%, expected optionlives of eight years, and no dividends.

Under the 2004 Long-TermIncentive Plan, which replaced the 2001 Stock Option Plan, the fairvalue for each option granted was estimated at the date of grant usingthe Black-Scholes option-pricing model, an allowable valuation methodunder SFAS No.123 with the following assumptions: risk-free interestrate of 3.75%, expected option lives of five years, 26%volatility and 9% dividend rate.

Restricted stock awardsgranted to employees under the 2004 Plan are subject to certain saleand transfer restrictions. Unvested awards are also subject toforfeiture if employment terminates prior to the end of the prescribedrestriction period. The value of restricted stock awards is expensedover the vesting period, generally three years.

IncomeTaxes

Income taxes are determined using the liability methodunder SFAS No. 109, "Accounting for IncomeTaxes." Under this method, deferred income taxes reflectthe net tax effect of temporary differences between the carryingamounts of assets and liabilities for financial reporting purposes andthe amounts reported for federal and state income tax purposes.

The Company will elect to be taxed as a REIT and believes itcomplies with the provisions of the Internal Revenue Code of 1986, asamended (the "Code"), with respect thereto.Accordingly, the Company will not be subject to federal income tax onthat portion of its income that is distributed to stockholders, as longas certain asset, income and stock ownership tests are met. To maintainour REIT status, the Company is required to distribute a minimum of90% of its annual taxable income to its stockholders.

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MortgageIT made the election to be treatedas a taxable REIT subsidiary and therefore is subject to both federaland state corporate income taxes. Accordingly, the Company records atax provision based primarily on the taxable income of the TRS.

Fair Value of Financial Instruments

Cash and cashequivalents, marketable securities and accounts receivable are carriedat amounts approximating fair value. Unallocated mortgage loans heldfor sale are carried at market value. Allocated mortgage loans held forsale are carried at market value at March 31, 2005 and at the lower ofadjusted cost or market value at December 31, 2004.

Derivativeinstruments related to the hedging of our financing costs, includinginterest rate swap agreements, Eurodollar futures or options contractsand interest rate cap agreements (collectively "HybridHedging Instruments") are carried at fair value and areclassified as hedging instruments on the balance sheet.

Derivative instruments including IRLCs and those related to thehedging of our locked pipeline loans and mortgage loans held for sale,including to be announced ("TBA") securities,options, Eurodollar futures, and forward sales contracts are carried atfair value and are classified as hedging instruments on the balancesheet.

Liabilities, including warehouse lines payable,collateralized debt obligations, notes payable and other debt, arecarried at their contractual notional amounts which approximate fairvalue. Portfolio ARM Loans are carried at cost, as more fully describedin Note 2.

The following table presents information as to thecarrying amount and estimated fair value of certain of our market risksensitive assets, liabilities and hedging instruments at March 31, 2005and December 31, 2004:

|                                               |  |                       |           |                    |  |        |           |        |  |  |
|-----------------------------------------------|--|-----------------------|-----------|--------------------|--|--------|-----------|--------|--|--|
|                                          |  | March31,2005          |
|                                          |  | CarryingAmount        |           | EstimatedFairValue |
|                                          |  | (Dollars inthousands) |
|                                          |  | (unaudited)           |
| Assets:                                       |  |
| Mortgageloans held forsale                    |  | $                     | 1,402,487 |               |  | $      | 1,402,487 |   |
| Forwarddeliverycommitments                    |  |                  | 2,495     |               |  |   | 2,495     |   |
| Mortgageloans held for sale,net               |  |                  | 1,404,982 |               |  |   | 1,404,982 |   |
|                                          |  |
| ARMloans held for securitization,net          |  |                  | 684,918   |               |  |   | 683,738   |   |
| ARM loanscollateralizing debt obligations,net |  |                  | 2,379,556 |               |  |   | 2,373,585 |   |
| Hedginginstruments                            |  |                  | 44,151    |               |  |   | 44,151    |   |
|                                          |  |
| Liabilities:                                  |  |
| Warehouselinespayable                         |  | $                     | 2,005,546 |               |  | $      | 2,005,546 |   |
| Collateralizeddebt obligations,net            |  |                  | 2,229,829 |               |  |   | 2,236,303 |   |
| Repurchaseagreements                          |  |                  | 83,475    |               |  |   | 83,475    |   |
| Hedginginstruments                            |  |                  | 3,151     |               |  |   | 3,151     |   |
|                                               |

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|                                               |  |                       |           |                    |  |        |           |        |  |  |
|-----------------------------------------------|--|-----------------------|-----------|--------------------|--|--------|-----------|--------|--|--|
|                                          |  | December31,2004       |
|                                          |  | CarryingAmount        |           | EstimatedFairValue |
|                                          |  | (Dollars inthousands) |
|                                          |  |
| Assets:                                       |  |
| Mortgageloans held forsale                    |  | $                     | 784,592   |               |  | $      | 787,234   |   |
| ARM loansheld for securitization,net          |  |                  | 1,166,961 |               |  |   | 1,167,824 |   |
| ARM loanscollateralizing debt obligations,net |  |                  | 1,432,692 |               |  |   | 1,434,534 |   |
| Hedginginstruments                            |  |                  | 19,526    |               |  |   | 19,526    |   |
|                                          |  |
| Liabilities:                                  |  |
| Warehouselinespayable                         |  | $                     | 1,869,385 |               |  | $      | 1,869,385 |   |
| Collateralizeddebt obligations,net            |  |                  | 1,328,096 |               |  |   | 1,331,986 |   |
| Repurchaseagreements                          |  |                  | 67,674    |               |  |   | 67,674    |   |
| Hedginginstruments                            |  |                  | 1,145     |               |  |   | 1,145     |   |
|                                               |

RecentlyIssued Accounting Standards

In June 2004, the FASB issuedEmerging Issues Task Force Abstract 03-01, "The Meaning ofOther-Than-Temporary Impairment and its Application to CertainInvestments" ("EITF 03-01").EITF 03-01 requires an investor to determine when an investment isconsidered impaired, evaluate whether that impairment is other thantemporary, and, if the impairment is other than temporary, recognize animpairment loss equal to the difference between the investment'scost and its fair value. The guidance also includes accountingconsiderations subsequent to the recognition of an other than temporaryimpairment and requires certain disclosures about unrealized lossesthat have not been recognized as other than temporary impairments. Theimpairment loss recognition and measurement guidance was to beapplicable to other than temporary impairment evaluations in reportingperiods beginning after June 15, 2004. In September 2004, the FASBproposed additional guidance related to debt securities that areimpaired because of interest rate and/or sector spread increases, anddelayed the effective date of EITF 03-01. We do not expect the adoptionof EITF 03-01 to have a material effect on our financial condition,results of operations, or liquidity.

In January 2003, the FASBissued FASB Interpretation No. 46 ("FIN 46"),"Consolidation of Variable InterestEntities." This interpretation clarifies the applicationof Accounting Research Bullentin No. 51, "ConsolidatedFinancial Statements," to certain entities in which equityinvestors do not have the characteristics of a controlling financialinterest or do not have sufficient equity at risk for the entity tofinance its activities without additional subordinated financialsupport from other parties. FIN 46 requires an enterprise toconsolidate a variable interest entity if that enterprise will absorb amajority of the entity's expected losses, is entitled to receivea majority of the entity's expected residual returns, or both.FIN 46 also requires disclosure about unconsolidated variable interestentities in which an enterprise holds a significant variable interest.Application of FIN 46, as revised, in December 2003("FIN46R"), is required for periods ending after December 15,2003. During 2004 and 2005, the Company created various trusts whichwere utilized in connection with the securitization of mortgage loansand other financial activities. These trusts are deemed to be variableinterest entities for which we have determined that the Company is theprimary beneficiary. Accordingly, the assets, liabilities andoperations of these trusts are included in its consolidated financialstatements.

Accounting for stock based compensation

Historically the Company has accounted for stock based compensationin accordance with the provisions of Accounting Principles BoardOpinion No. 25, "Accounting for Stock Issued toEmployees." The Company has not reflected stockoption-based employee compensation cost in net income because alloptions granted had an exercise price equal to the market value of theunderlying common stock on the date of the grant.

Under theprovisions of SFAS No. 123R "Accounting for Stock-BasedCompensation," effective in the period ending March 31,2006, the Company will be required to measure the cost of employeeservices 

15

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received in exchange for an award of equityinstruments based on the grant date fair value of the award. That costwill be recognized over the vesting period during which an employee isrequired to provide service in exchange for the award.

The grantdate fair value of employee stock options will be measured using the anappropriate option pricing model. See "StockCompensation" of this Note 1 to the consolidated financialstatements for an illustration of the effects on net income (loss) hadthe Company applied the fair value recognition provisions of SFAS No.123R as of January 1, 2004. The Company will adopt this statement wheneffective and is currently evaluating the impact.

1A—Restatement of Consolidated Financial Statements

The Company has determined that it could not support the use ofhedge accounting for derivative contracts entered into prior toNovember 24, 2004. As a result, the Company's consolidatedstatements of operations and cash flows for the three months endedMarch 31, 2004 have been restated.

Fair Value Hedge AccountingRestatement

The Company now believes that the documentation offair value hedge accounting relationships and the assessment of hedgeeffectiveness was inadequate as required by the applicable accountingstandards contained in SFAS No. 133. As such, the Company made thedetermination that it was not appropriate to apply hedge accounting forpurposes of the Company's financial statements for the threemonths ended March 31, 2004 and, as such, loans held for sale wererecorded at the lower of cost or market. The Company has corrected itsaccounting for mortgage loans held for sale and interest rate riskmanagement activities related to fair value hedging activities (a"fair value" hedge). Commencing with thequarter ended December 31, 2004, the Company qualified for and haselected to apply SFAS No. 133 fair value hedge accounting for loansheld for sale, exclusive of loans allocated to forward salescommitments. As of March 31, 2005, the Company qualified for and haselected to apply SFAS No. 133 fair value hedge accounting for loansallocated to forward sales commitments as well. For loans held for salethat are designated as allocated to a forward sales commitment, themark to market price is equivalent to the forward commitment price onthe date that the loans are allocated to a trade. Changes in the marketvalue of these loans and the market value of the related forwardcommitments can be expected to offset each other from allocation dateto date of settlement.

Cash Flow Hedge AccountingRestatement

The Company now believes that, prior to November24, 2004, the documentation of its cash flow hedge accountingrelationships and the assessment of hedge effectiveness was inadequateas required by the applicable accounting standards contained in SFASNo. 133. Any change in value associated with such cash flow hedgederivatives was previously recorded as an increase or decrease in othercomprehensive income ("OCI"). The Company hasmade the determination that it was not appropriate to apply cash flowhedge accounting prior to November 24, 2004. The Company has correctedits accounting for interest rate risk management activities related tothe variability in expected future cash flows associated with afinancing obligation or future liabilities (a "cashflow" hedge). Effective November 24, 2004, theCompany's documentation was deemed sufficient with respect tointerest rate cap and swap agreements, and thus the Company has electedto apply cash flow hedge accounting for these derivatives.

Asummary of the impact of the restatements on net earnings follows(Dollars inthousands):

|                                                                   |  |                   |      |         |  |  |
|-------------------------------------------------------------------|--|-------------------|------|---------|--|--|
|                                                              |  | Threemonths ended |
|                                                              |  | March 31,2004     |
| Net income, aspreviously reported                                 |  | $                 | 545  |    |
| Restatement forderivative financial instruments, net of taxeffect |  |              | (816 | )  |
| Net(loss), asrestated                                             |  | $                 | (271 | )  |
|                                                                   |

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The aforementioned restatement adjustmentshave been tax affected to the extent attributable to activities of thetaxable REIT subsidiary. Note 1- "StockCompensation," and Note 8- "Earnings PerShare," have been amended for the impact of theaforementioned restatements. The following tables present the accountson the consolidated statement of operations and the consolidatedstatement of cash flows for the three months ended March 31, 2004 thatwere affected by the restatement. (Dollars in thousands, except pershare data):

|                                            |  |                  |        |            |  |        |        |         |  |  |
|--------------------------------------------|--|------------------|--------|------------|--|--------|--------|---------|--|--|
|                                       |  | Threemonthsended |
|                                       |  | March 31,2004    |
|                                       |  | Asrestated       |        | Asreported |
| **Consolidated Statement ofOperations**    |  |
| Gain on sale of mortgageloans              |  | $                | 14,354 |       |  | $      | 15,768 |    |
| Totalrevenues                              |  |             | 25,877 |       |  |   | 27,291 |    |
| Income (loss)before income taxes           |  |             | (494   | )     |  |   | 920    |    |
| Incometaxes                                |  |             | (223   | )     |  |   | 375    |    |
| Net income(loss)                           |  |             | (271   | )     |  |   | 545    |    |
| Net lossattributable to commonstockholders |  |             | (1,932 | )     |  |   | (1,116 | )  |
| Persharedata:                              |  |
| Basic                                      |  |             | (3.73  | )     |  |   | (2.16  | )  |
| Diluted                                    |  |             | (3.73  | )     |  |   | (2.16  | )  |
|                                            |

|                                                   |  |                  |          |            |  |        |          |         |  |  |
|---------------------------------------------------|--|------------------|----------|------------|--|--------|----------|---------|--|--|
|                                              |  | Threemonthsended |
|                                              |  | March 31,2004    |
|                                              |  | Asrestated       |          | Asreported |
| **Consolidated Statement of CashFlows**           |  |
| Net income(loss)                                  |  | $                | (271     | )     |  | $      | 545      |    |
| Realized andunrealized loss on hedginginstruments |  |             | (1,705   | )     |  |   | —  |    |
| Increasein mortgage loans held forsale            |  |             | (102,454 | )     |  |   | (105,572 | )  |
| Increase inprepaids and otherassets               |  |             | (1,560   | )     |  |   | (963     | )  |
|                                                   |

NOTE2—PORTFOLIO ARM LOANS

The following table presents theCompany's Portfolio ARM Loans as of March 31, 2005 and December31, 2004 (Dollars inthousands):

|                                               |  |                                         |           |                                 |  |        |         |         |  |        |           |         |  |  |
|-----------------------------------------------|--|-----------------------------------------|-----------|---------------------------------|--|--------|---------|---------|--|--------|-----------|---------|--|--|
| March31, 2005 (unaudited)                     |  | ARM loanscollateralizingdebtobligations |           | ARM loans heldforsecuritization |  | Total  |
| Principalbalanceoutstanding                   |  | $                                       | 2,355,993 |                            |  | $      | 678,379 |    |  | $      | 3,034,372 |    |
| Netunamortized loan origination costs andfees |  |                                    | 24,596    |                            |  |   | 6,821   |    |  |   | 31,417    |    |
| Loanlossreserves                              |  |                                    | (1,033    | )                          |  |   | (282    | )  |  |   | (1,315    | )  |
| Amortizedcost,net                             |  |                                    | 2,379,556 |                            |  |   | 684,918 |    |  |   | 3,064,474 |    |
| Grossunrealizedloss                           |  |                                    | (5,971    | )                          |  |   | (1,180  | )  |  |   | (7,151    | )  |
| Fairvalue                                     |  | $                                       | 2,373,585 |                            |  | $      | 683,738 |    |  | $      | 3,057,323 |    |
| Carryingvalue                                 |  | $                                       | 2,379,556 |                            |  | $      | 684,918 |    |  | $      | 3,064,474 |    |
|                                               |

|                                               |  |                                         |           |                                 |  |        |           |         |  |        |           |         |  |  |
|-----------------------------------------------|--|-----------------------------------------|-----------|---------------------------------|--|--------|-----------|---------|--|--------|-----------|---------|--|--|
| December31, 2004                              |  | ARM loanscollateralizingdebtobligations |           | ARM loans heldforsecuritization |  | Total  |
| Principalbalanceoutstanding                   |  | $                                       | 1,418,323 |                            |  | $      | 1,157,188 |    |  | $      | 2,575,511 |    |
| Netunamortized loan origination costs andfees |  |                                    | 14,866    |                            |  |   | 9,950     |    |  |   | 24,816    |    |
| Loanlossreserves                              |  |                                    | (497      | )                          |  |   | (177      | )  |  |   | (674      | )  |
| Amortizedcost,net                             |  |                                    | 1,432,692 |                            |  |   | 1,166,961 |    |  |   | 2,599,653 |    |
| Grossunrealizedgain                           |  |                                    | 1,842     |                            |  |   | 863       |    |  |   | 2,705     |    |
| Fairvalue                                     |  | $                                       | 1,434,534 |                            |  | $      | 1,167,824 |    |  | $      | 2,602,358 |    |
| Carryingvalue                                 |  | $                                       | 1,432,692 |                            |  | $      | 1,166,961 |    |  | $      | 2,599,653 |    |
|                                               |

17

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Since the completion of theCompany's initial public offering, the primary focus of itsbusiness has been to build a leveraged portfolio of single-familyresidential mortgage loans comprised largely of prime Traditional andHybrid ARM loans. The Company's portfolio of ARM loans is100% self-originated through the loan production channels of itsTRS. The loans that the Company retains in its portfolio are servicedthrough a subservicing arrangement. The TRS sells all of its fixed rateloan production to third parties, as well as any ARM loans that theCompany does not retain in its portfolio.

The Company does notaccount for mortgage-backed securities placed with third partyinvestors as sales and, therefore, does not record any gain or loss inconnection with securitization transactions. Instead, the Companyaccounts for the mortgage-backed securities it sells as a long-termcollateralized financing. As of March 31, 2005, the Company heldapproximately $2.4 billion of ARM loans that collateralize thesecurities resulting from its securitization activities, and areclassified on its balance sheet as ARM loans collateralizing debtobligations.

The Company has credit exposure on its ARM loaninvestment portfolio. During the three months ended March 31, 2005, theCompany recorded loan loss provisions totaling $642,000 to reserve forestimated future credit losses on Portfolio ARM Loans, and there wereno credit losses charged against the allowance for losses during theperiod.

The following table summarizes Portfolio ARM Loandelinquency information as of March 31, 2005 and December 31, 2004(Dollars in thousands):

March 31, 2005(unaudited)

|                             |  |           |         |             |  |                             |         |                      |  |        |         |         |  |        |         |         |  |  |
|-----------------------------|--|-----------|---------|-------------|--|-----------------------------|---------|----------------------|--|--------|---------|---------|--|--------|---------|---------|--|--|
| DelinquencyStatus           |  | LoanCount |         | LoanBalance |  | PercentofPortfolio ARMLoans |         | PercentofTotalAssets |
| 60 to 89days                |  |      | 6       |        |  | $                           | 1,715   |                 |  |   | 0.06    | %  |  |   | 0.04    | %  |
| 90days ormore               |  |      | — |        |  |                        | — |                 |  |   | — |    |  |   | — |    |
| Inbankruptcy andforeclosure |  |      | 4       |        |  |                        | 1,312   |                 |  |   | 0.04    |    |  |   | 0.03    |    |
|                        |  |      | 10      |        |  | $                           | 3,027   |                 |  |   | 0.10    | %  |  |   | 0.07    | %  |
|                             |

December31,2004

|                             |  |           |         |             |  |                             |         |                      |  |        |         |         |  |        |         |         |  |  |
|-----------------------------|--|-----------|---------|-------------|--|-----------------------------|---------|----------------------|--|--------|---------|---------|--|--------|---------|---------|--|--|
| DelinquencyStatus           |  | LoanCount |         | LoanBalance |  | PercentofPortfolio ARMLoans |         | PercentofTotalAssets |
| 60 to 89days                |  |      | 6       |        |  | $                           | 1,619   |                 |  |   | 0.06    | %  |  |   | 0.05    | %  |
| 90days ormore               |  |      | 1       |        |  |                        | 560     |                 |  |   | 0.02    |    |  |   | 0.01    |    |
| Inbankruptcy andforeclosure |  |      | — |        |  |                        | — |                 |  |   | — |    |  |   | — |    |
|                        |  |      | 7       |        |  | $                           | 2,179   |                 |  |   | 0.08    | %  |  |   | 0.06    | %  |
|                             |

NOTE3—MORTGAGE LOANS HELD FOR SALE

Mortgage loans held forsale consist of the following components (Dollars inthousands):

|                                               |  |               |           |                  |  |        |         |        |  |  |
|-----------------------------------------------|--|---------------|-----------|------------------|--|--------|---------|--------|--|--|
|                                          |  | March31, 2005 |           | December 31,2004 |
|                                          |  | (unaudited)   |           |
| Mortgageloans held forsale                    |  | $             | 1,392,228 |             |  | $      | 774,656 |   |
| Deferredorigination costs andfees             |  |          | 12,754    |             |  |   | 9,936   |   |
| Carryingamount of mortgage loans held forsale |  | $             | 1,404,982 |             |  | $      | 784,592 |   |
|                                               |

Mortgageloans are residential mortgages on properties located throughout theUnited States having maturities of up to 30 years, and include ARMloans that are not Portfolio ARM Loans. Pursuant to the terms of themortgage loans, the borrowers have pledged the underlying real estateas collateral for the loans. It is the Company's practice to sellto third party investors any loans that do not constitute Portfolio ARMLoans shortly after they are funded, generally within 30 to 60days.

18

----

As of March 31, 2005 and December 31,2004, the Company had loan purchase commitments from third partyinvestors for approximately $752.3 million and $384.5 million,respectively. Substantially all loans held for sale at March 31, 2005and December 31, 2004 were subsequently sold to third party investors.All mortgage loans held for sale are pledged as collateral forwarehouse lines payable (See Note 5).

As of March 31, 2005 andDecember 31, 2004, the Company had aggregate locked pipelinecommitments to fund mortgage loans held for sale of $1.5 billion and$638.3 million, respectively.

NOTE 4—DERIVATIVES ANDHEDGING ACTIVITIES

The Company is exposed to interest rate riskin conjunction with the origination, funding, sale and investment inmortgage loan assets. The Company manages the risk of interest ratechanges primarily through the use of derivative instruments asfollows:

|              |                                                                                                                                         |
|--------------|-----------------------------------------------------------------------------------------------------------------------------------------|
| •  | Fair value hedges, which areintended to manage the risks associated with potential changes in thefair value of loans held for sale; and |

|              |                                                                                                                            |
|--------------|----------------------------------------------------------------------------------------------------------------------------|
| •  | Cash flow hedges, which are intended tomanage the risks associated with potential changes in theCompany's financing costs. |

In connection with its mortgageloan origination activities, MortgageIT issues IRLCs to loan applicantsand financial intermediaries. The IRLCs guarantee the loan terms,subject to credit approval, for a specified period while theapplication is in process, typically between 15 and 60 days.MortgageIT's risk management objective is to protect earningsfrom an unexpected change in the fair value of IRLCs by economicallyhedging the estimated closed loan volume from the IRLC pipeline.MortgageIT's pipeline hedging strategy primarily utilizes forwarddelivery contracts on mortgage-backed securities ("TBASecurities") to protect the value of its IRLCs. The TBASecurities, options on TBA Securities, forward sales commitments andIRLCs relating to mortgage loans held for sale, are free-standingderivative instruments and have been classified as such by the Company.Accordingly, these derivatives have been recorded at fair value withchanges in fair value reflected in gain on sale of loans.

AtMarch 31, 2005 and December 31, 2004, the notional amount of theCompany's IRLCs relating to mortgage loans held for sale, wasapproximately $943.2 million and $414.9 million, respectively. The fairvalue of the IRLCs at March 31, 2005 and December 31, 2004 reflected aloss of approximately $1.9 million and $384,000, respectively.

At March 31, 2005 and December 31, 2004 the notional amount of TBASecurities and options on TBA Securities outstanding was approximately$526.5 million and $610.0 million with a fair value loss ofapproximately $638,000 and $743,000, respectively.

At March 31,2005 and December 31, 2004, the notional amount of the Company'sforward sales commitments from third party investors was approximately$936.1 million and $399.4 million with a fair value gain ofapproximately $1.8 million and $236,000, respectively.

FairValue Hedges

The Company is exposed to interest rate risk inconjunction with the sale of mortgage loans. The Company manages therisk of interest rate changes associated with its loans held for salethrough use of TBA Securities, options on TBA Securities, forward salecommitments and Eurodollar futures. These derivative instruments aredesigned to hedge potential changes in the value of loans held forsale. The Company's risk management policy is to hedge100% of it's prime first mortgage loans held for sale.

The fair value adjustments for IRLCs, TBA Securities, options,forward sales commitments and Eurodollar futures are included in gainon sale mortgage of loans.

Unallocated Loans

Unallocated loans represent hedged loans held for sale that have notyet been allocated to a forward sales contract. At March 31, 2005 andDecember 31, 2004, derivative instruments related to the 

19

----

Company's unallocated loans held forsale were classified and accounted for as fair value hedges. Thesederivatives, and the related hedged loans held for sale, are carried atfair value with the changes in fair value recorded in earnings.

Allocated Loans

Allocated loans represent hedged loans heldfor sale that have been allocated to a forward sales contract. At March31, 2005, the related allocated loans held for sale are carried marketvalue. At December 31, 2004, the forward sales contracts related to theCompany's allocated loans held for sale, were classified andaccounted for as free-standing derivatives. These derivatives arecarried at fair value with the changes in fair value recorded inearnings. The related allocated loans held for sale were carried at thelower of cost or market at December 31, 2004.

Cash FlowHedges

The Company primarily utilizes Eurodollar futures,interest rate cap agreements ("CapAgreements") and interest rate swap agreements("Swap Agreements") in order to managepotential changes in future LIBOR-based financing costs. The Companygenerally borrows funds based on short-term LIBOR-based interest ratesto finance its Portfolio ARM Loans. However its Portfolio ARM Loanshave an initial fixed interest rate period up to five years. As aresult, the Company's existing and forecasted borrowings repriceto a new rate on a more frequent basis than does its Portfolio ARMLoans. Therefore, the purpose of these hedges is to better match theaverage repricing of the variable rate debt with the average repricingof the Portfolio ARM Loans.

All changes in the fair value of CapAgreements and Swap Agreements for the period are recorded in OCI onthe consolidated balance sheets and will be recognized as interestexpense when the forecasted financing transactions occur. If it becomesprobable that the forecasted transaction, which is the future interestpayments on the Company's collateralized debt obligations, willnot occur as specified at the inception of the hedging relationship,then the related gain or loss in OCI would be reclassified out of OCIand recognized in interest expense. The carrying value of thesederivative instruments is included in hedging instruments on theaccompanying consolidated balance sheets.

The Company purchasesCap Agreements by incurring a one-time fee or premium. Pursuant to theterms of the Cap Agreements, the Company will receive cash payments ifthe interest rate index specified in the Cap Agreements increases abovecontractually specified levels. Therefore, such Cap Agreements have theeffect of capping the interest rate on a portion of the Company'sborrowings above a level specified by the Cap Agreement. The notionalbalances of the Caps generally decline over the life of theseinstruments approximating the declining balance of the Company'scollateralized debt obligations.

Under the Company'sexisting Cap Agreements, the Company will receive cash payments shouldone-month LIBOR increase above the contract rates of the Caps, whichrange from 2.50% to 4.70%. The Cap Agreements had anaverage maturity of 3.9 years as of March 31, 2005 and will expirebetween August 2007 and January 2010.

The Company enters intoSwap Agreements to fix the interest rate on a portion of theCompany's borrowings as specified in the Swap Agreement. When theCompany enters into a Swap Agreement, it agrees to pay a fixed interestrate as specificed in the agreement, typically based on LIBOR. SwapAgreements have the effect of converting the Company'svariable-rate debt into fixed-rate debt over the life of the SwapAgreements.

Both Cap and Swap Agreements represent a means tolengthen the average repricing period of the Company'svariable-rate collateralized debt obligations such that the averagerepricing duration of the borrowings more closely matches the averagerepricing duration of the Company's Portfolio ARM Loans.

The Company uses Eurodollar futures to hedge both forecasted andrecognized LIBOR-based borrowings. When LIBOR-based interest rateschange, the change in the value of Eurodollar futures 

20

----

can be expected to approximately offset thechange in the value of the hedged LIBOR-based funding costs. TheCompany classifies and accounts for Eurodollar futures as free-standingderivatives. Accordingly, all realized net gains aggregatingapproximately $8.9 million have been recognized and included inrealized and unrealized gain on hedging instruments for the threemonths ended March 31, 2005.

The following table presentsnotional amount, carrying amount and unrealized gains and (losses)recorded in OCI for the Company's cash flow hedges at March 31,2005 and December 31, 2004. The carrying amount of the cash flowderivative instruments is included in hedging instruments in theaccompanying balancesheets.

|                             |  |                          |           |                |  |                      |        |        |  |        |         |        |  |  |
|-----------------------------|--|--------------------------|-----------|----------------|--|----------------------|--------|--------|--|--------|---------|--------|--|--|
|                        |  | March31, 2005(unaudited) |
|                        |  | NotionalAmount           |           | CarryingAmount |  | UnrealizedGain(Loss) |
|                        |  | (Dollars inthousands)    |
| Eurodollar futurescontracts |  | $                        | 2,275,500 |           |  | $                    | 5,510  |   |  | $      | — |   |
| Capagreements               |  |                     | 2,762,254 |           |  |                 | 30,612 |   |  |   | 6,526   |   |
| Swapagreements              |  |                     | 515,462   |           |  |                 | 8,029  |   |  |   | 7,532   |   |
| Totalcash flowhedges        |  | $                        | 5,553,216 |           |  | $                    | 44,151 |   |  | $      | 14,058  |   |
|                             |

|                             |  |                       |           |                |  |                      |        |        |  |        |         |         |  |  |
|-----------------------------|--|-----------------------|-----------|----------------|--|----------------------|--------|--------|--|--------|---------|---------|--|--|
|                        |  | December31,2004       |
|                        |  | NotionalAmount        |           | CarryingAmount |  | UnrealizedGain(Loss) |
|                        |  | (Dollars inthousands) |
| Eurodollar futurescontracts |  | $                     | 3,136,250 |           |  | $                    | 710    |   |  | $      | — |    |
| Capagreements               |  |                  | 2,310,392 |           |  |                 | 18,280 |   |  |   | (574    | )  |
| Swapagreements              |  |                  | 186,328   |           |  |                 | 283    |   |  |   | 187     |    |
| Totalcash flowhedges        |  | $                     | 5,632,970 |           |  | $                    | 19,273 |   |  | $      | (387    | )  |
|                             |

NOTE5—BORROWINGS

Collateralized DebtObligations

Through March 31, 2005, the Company had issuedAAA/AA-rated floating-rate pass-through certificates totaling $2.3billion to third party investors and retained $101.4 million ofsubordinated certificates, which provide credit support to thehigher-rated certificates that were placed with third party investors.All of the securities retained by the Company were rated investmentgrade. The interest rates on the floating-rate pass-throughcertificates reset monthly and are indexed to one-month LIBOR. Inconnection with the issuance of these mortgage-backed securities whichare also referred to as collateralized debt obligations, the Companyincurred costs of $7.2 million through March 31, 2005. These costs arebeing amortized over the expected life of the securities using thelevel yield method. These transactions were accounted for as financingsof loans and represent permanent financing that is not subject tomargin calls. The Company's collateralized debt obligations areissued by trusts and are secured by ARM loans deposited into the trust.For financial reporting and tax purposes, the trusts' ARM loansheld as collateral are recorded as assets of the Company and the issuedmortgage-backed securities recorded as collateralized debt obligations.As of March 31, 2005 and December 31, 2004, collateralized debt of $2.2billion and $1.3 billion, respectively, net of debt issuance costs, isclassified as collateralized debt obligations, net on the accompanyingconsolidated balance sheets.

As of March 31, 2005 and December31, 2004, the mortgage-backed securities were collateralized by ARMloans with a principal balance of $2.4 billion and $1.4 billion,respectively. The debt matures between 2033 and 2035 and is callable bythe Company at par anytime after the total balance of the loanscollateralizing the debt is amortized down to 20% of theoriginal unpaid balance. The balance of this debt is reduced as theunderlying loan collateral is paid down by borrowers and is expected tohave an average life of approximately four years.

21

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Repurchase Agreements

TheCompany had outstanding $83.5 million and $67.7 million of repurchaseagreements with a weighted average borrowing rate of approximately2.8% and 2.2% and a weighted average remaining maturityof 51 days and 144 days as of March 31, 2005 and December 31, 2004,respectively.

Warehouse Lines Payable

The Company hasvarious warehouse credit facilities with major lenders that are used tofund mortgage loans. During the three months ended March 31, 2005, theCompany negotiated two new credit facilities, which, when added to theCompany's three existing credit facilities, brings to five thetotal number of facilities it may draw upon.

In March 2005, theCompany entered into warehouse credit facility with Credit Suisse FirstBoston Mortgage Capital LLC ("CFSB") for apartially comitted credit limit of $400 million. Under the line,outstanding advances are secured by the specific mortgage loans funded,and bear interest at LIBOR plus a spread based on the types of loansbeing funded. As of March 31, 2005, the Company had no outstandingborrowings on the line. This credit facility expires in February2006.

In February 2005, the Company entered into warehousecredit facility with Greenwich Capital Financial Products Inc.("Greenwich") for a comitted credit limit of$250 million. Under the line, outstanding advances are secured by thespecific mortgage loans funded, and bear interest at LIBOR plus aspread based on the types of loans being funded. As of March 31, 2005,the Company had $145.8 million outstanding on this facility.This creditfacility expires in February 2006.

The Company maintains acredit facility (the "UBS WarehouseFacility"), with UBS Real Estate Securities, Inc.("UBS"), which has an uncommitted creditlimit of $1.25 billion, which includes a mortgage loan sale conduitfacility. This credit facility may be terminated at the discretion ofthe lender. The facility provides for temporary increases in the lineamount on an as-requested basis. Under the line, outstanding advancesare secured by the specific mortgage loans funded, and bear interest atLIBOR plus a spread based on the types of loans being funded. Interestis payable at the time the outstanding principal amount of the advanceis due, generally within 30 days. All advances under this agreement areevidenced by a note, which is secured by all of the loans fundedthrough this facility. As of March 31, 2005 and December 31, 2004, theCompany had outstanding on the line $634.0 million and $798.8 million,respectively. Under the conduit facility, the Company sells mortgageloans to UBS at a price equal to the committed purchase price from athird party investor, and records the transaction as a sale inaccordance with SFAS No. 140. UBS, in turn, sells the loan to a thirdparty investor. The Company facilitates the sale to the third partyinvestor on behalf of UBS and receives a performance fee that variesdepending on the time required by UBS to complete the transfer of theloans to the third party investor. The performance fee of $1.1 millionand $1.6 million for the three months ended March 31, 2005 and 2004,respectively, is included in brokerage revenue on the statement ofoperations. Loans on the conduit line, which totaled approximately$394.0 million and $435.1 million at March 31, 2005 and December 31,2004, respectively, reduce availability under the facility until theyare transferred to the third party investor by UBS. The mortgage loanssold to UBS are subject to repurchase under certain limited conditions,primarily if UBS determines that a mortgage loan was not properlyunderwritten. This credit facility expires in August 2005.

TheCompany maintains a credit facility with Merrill Lynch MortgageCapital, Inc. ("Merrill Lynch"), which has apartially committed credit limit of $1.0 billion collateralized by thespecific mortgage loans funded, and bears interest at LIBOR plus aspread based on the types of loans being funded. As of March 31, 2005and December 31, 2004, the Company had $907.0 million and $906.3million, respectively, outstanding on this facility. This creditfacility expires in August 2005.

The Company maintains a creditfacility with Residential Funding Corporation("RFC"), which has a committed credit limitof $400 million collateralized by the specific mortgage loans funded,and bears interest at LIBOR plus a spread based on the types of loansbeing funded. As of March 31, 2005 and December 31, 2004, the Companyhad outstanding approximately $318.8 million and $164.3 million,respectively, on this facility. This credit facility expires in April2006.

22

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The weighted average effective rate ofinterest for borrowings under all warehouse lines of credit wasapproximately 3.3% and 2.6% for the three months endedMarch 31, 2005 and the year ended December 31, 2004, respectively.

All mortgage loans held for sale have been pledged as collateralunder the warehouse credit facilities described above. In addition, thefacilities contain various financial covenants and restrictions,including a requirement that the Company maintain specified leverageratios and net worth amounts. As of March 31, 2005, the Company was notin compliance with certain covenants contained in certain of its creditfacilities. Although waivers from the lenders with respect to thesecovenant violations have been obtained, no assurance can be made thatthe lenders will continue to waive future covenent violations, to theextent they occur.

Maturities of borrowings are as follows atMarch 31, 2005 (Dollars inthousands):

|                                       |  |                      |           |                |  |           |           |           |  |                 |         |        |  |        |         |        |  |        |           |        |  |  |
|---------------------------------------|--|----------------------|-----------|----------------|--|-----------|-----------|-----------|--|-----------------|---------|--------|--|--------|---------|--------|--|--------|-----------|--------|--|--|
|                                  |  | Paymentsdue byPeriod |
|                                  |  | (unaudited))         |
|                                  |  | Total                |           | Lessthan1 year |  | 1-3 years |           | 3-5 years |  | Morethan5 years |
| Collateralized debt obligations(1)(2) |  | $                    | 2,236,303 |           |  | $         | 46,703    |      |  | $               | 16,908  |   |  | $      | 26,783  |   |  | $      | 2,145,909 |   |
| Warehouselinespayable                 |  |                 | 2,005,546 |           |  |      | 2,005,546 |      |  |            | — |   |  |   | — |   |  |   | —   |   |
| Repurchaseagreements                  |  |                 | 83,475    |           |  |      | 83,475    |      |  |            | — |   |  |   | — |   |  |   | —   |   |
|                                       |

|  |
|--|
|  |  |
|  |

|     |                               |
|-----|-------------------------------|
| (1) | Excludingdebt issuance costs. |

|     |                                                                                                                                                                                                                                                                                                                                               |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) | Maturities of ourcollateralized debt obligations are dependent upon cash flows receivedfrom underlying loans receivable. Our estimate of their repayment isbased on scheduled principal payments on the underlying loansreceivable. This estimate will differ from actual amounts to the extentwe experience pre-payments and/or loan losses. |

Special-Purpose Warehouse Finance Subsidiary

TheCompany's UBS Warehouse Facility, described above under"—Warehouse Lines Payable," isadministered by an agent on behalf of an institutionally managed mediumterm note conduit. Under the funding agreements governing the UBSWarehouse Facility, the Company transfers finance receivables toMortgageIT SPV I, a Delaware statutory trust (the"Trust") that has been established by theCompany as a special purpose warehouse finance subsidiary of theCompany. The Trust, in turn, issues notes (the"Notes") to the agent, collateralized by suchfinance receivables and cash. These transactions are treated as securedfinancing arrangements for financial reporting purposes. The agentprovides funding under the Notes to the Trust pursuant to an advanceformula, and the Trust forwards the funds to the Company inconsideration for the transfer of finance receivables. Advances underthe funding agreements bear interest at LIBOR plus specified feesdepending upon the source of funds provided by the agent. The Companyis required to hold certain funds in restricted cash accounts toprovide additional collateral for borrowings under the facility.Additionally, the funding agreements contain various covenantsrequiring certain minimum financial ratios, asset quality, andportfolio performance ratios (cumulative net loss, delinquency andrepossession ratios) as well as deferment levels. Failure to meet anyof these covenants, financial ratios or financial tests could result inan event of default under these agreements. If an event of defaultoccurs under these agreements, the lenders could elect to declare allamounts outstanding under these agreements to be immediately due andpayable, enforce their interests against collateral pledged under theseagreements or restrict the Company's ability to obtain additionalborrowings under these agreements.

In addition, under the legalagreements that document the issuance and sale of the Notes:

|              |                                                                                                                |
|--------------|----------------------------------------------------------------------------------------------------------------|
| •  | all assets which are from time to timeowned by the Trust are legally owned by the Trust and not by theCompany. |

|              |                                                                                                           |
|--------------|-----------------------------------------------------------------------------------------------------------|
| •  | the Trust is a legal entityseparate and distinct from the Company and all other affiliates of theCompany. |

|              |                                                                                                                                                                                                                                                          |
|--------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | the assets of the Trust arelegally assets only of the Trust, and are not legally available to theCompany and all other affiliates of the Company or their respectivecreditors, for pledge to other creditors or to satisfy the claims ofother creditors. |

23

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|              |                                                                                                                                                                                                                                                                                                                                                                                                                    |
|--------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | none of theCompany or any other affiliate of the Company is legally liable on thedebts of the Trust, except for an amount limited to 10% of thegreater of (i) the total principal amount of Notes then outstandingunder the Note Purchase Agreement plus the aggregate outstandingprincipal of all Mortgage Loans sold under the Loan RepurchaseAgreement and the Loan Sale Agreement and (ii) the Facility Limit. |

|              |                                                                                |
|--------------|--------------------------------------------------------------------------------|
| •  | assets of the Company which result fromthe issuance and sale of the Notes are: |

|          |                                                                                                                                                   |
|----------|---------------------------------------------------------------------------------------------------------------------------------------------------|
| 1)  | any cash portion of the purchase price paid from time to time by theTrust in consideration of Mortgage Loans sold to the Trust by theCompany; and |

|          |                                                               |
|----------|---------------------------------------------------------------|
| 2)  | the value ofthe Company's net equity investment in the Trust. |

|              |                                                                         |
|--------------|-------------------------------------------------------------------------|
| •  | As of March 31, 2005, the Trust had thefollowing assets (in thousands): |

|          |                           |
|----------|---------------------------|
| a)  | whole loans: $639,024 and |

|          |                                    |
|----------|------------------------------------|
| b)  | cash and cash equivalents:$32,808. |

|              |                                                                                         |
|--------------|-----------------------------------------------------------------------------------------|
| •  | As of March 31, 2005, theTrust had the following liabilities and equity (in thousands): |

|          |                                          |
|----------|------------------------------------------|
| a)  | short-term debt due to UBS: $633,954;and |

|          |                                       |
|----------|---------------------------------------|
| b)  | $37,878 inmembers' equity investment. |

As of March 31, 2005, theCompany included in its consolidated financial statements the assets,liabilities and operations of the Trust pursuant to FIN 46R.

NOTE 6—NOTES PAYABLE

Senior Secured Notes due 2007with an aggregate principal amount of $15 million were issued in March2004. The Notes bear interest at a rate of 10% per annum,payable in quarterly installments beginning June 30, 2004. The notesare secured by a first priority security interest in all ofMortgageIT's assets with the exception of its mortgage loans heldfor sale and ARM loans held for securitization. The Notes containvarious restrictions and covenants. As of March 31, 2005, MortgageITwas in compliance with all of the restrictions and covenants containedin the Note Purchase Agreement, except the warehouse line ratio forwhich a waiver has been obtained. However, no assurance can be madethat waivers will be granted in the future, to the extent such waiversare necessary. In November 2004, MortgageIT entered into an amendmentthat reduced the interest rate on the outstanding principal balance ofeach Note from 10% per annum to 71⁄2%per annum for the period beginning October 1, 2004 and ending March 31,2005. In addition, the amendment prohibited MortgageIT from prepayingthe Notes prior to April 14, 2005.

NOTE 7—STOCKHOLDERSEQUITY

Stock Options — 2001 Stock OptionPlan

In 2001, MortgageIT established the 2001 Stock Option Plan("2001 Plan"). The 2001 Plan provided for thegranting of stock options to employees, directors and consultants ofMortgageIT to purchase up to 776,000 shares of Class B Common Stock.The exercise price of the options was not to be less than the fairmarket value on the date of grant with a maximum term of ten years, orin the case of 10% stockholders, at 110% of the fairmarket value on the date of grant with a maximum term of five years.MortgageIT awarded options to purchase 241,000 shares during 2004, allof which had a ten-year life and vested at the rate of one-third eachyear on the first three anniversaries of the respective grant date. The2001 Plan terminated in August 2004.

In August 2004, options topurchase 45,000 shares of common stock were exercised at an exerciseprice of $4.96 per share. Proceeds to MortgageIT approximated $224,000.As a result of the reorganization of MortgageIT and Holdings'initial public offering, options to purchase 56,000 shares of commonstock were exchanged for approximately $390,000 and options to purchase535,000 shares were cancelled.

2004 Long-Term IncentivePlan

In August 2004, the Company adopted the MortgageITHoldings, Inc. 2004 Long-Term Incentive Plan (the "2004Plan"). A total of 1,725,000 shares of common stock havebeen reserved for issuance under 

24

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the 2004 Plan, which terminates in 2014. The2004 Plan provides for the grant of incentive stock options,non-qualified stock options, stock appreciation rights and restrictedstock. During the three months ended March 31, 2005, options topurchase 31,700 shares of common stock at $12.00 per share and 9,167shares of restricted stock were forfeited and the Company grantedoptions to purchase 2,500 shares of common stock, at an averageexercise price of $12.98 per share, and 123,935 shares of restrictedstock. The options and restricted stock will vest over a three-yearperiod.

There were approximately 87,000 shares available forfuture grant under the 2004 Plan at March 31, 2005.

The weightedaverage fair value of options issued under the 2004 Plan, for the threemonths ended March 31, 2005, under the Black-Scholes option-pricingmodel, was $1.01 per option.

The weighted average fair value ofoptions issued under the 2001 Plan, for the three months ended March31, 2004, under the minimum value method, was $3.61 per option.

In April 2005, the board of directors adopted the MortgageITHoldings, Inc. Amended Long-Term Incentive Plan (the"Amended Plan"), subject to the approval ofthe Company's stockholders. Under the Amended Plan, an additional1,000,000 shares of the Company's common stock will be reservedfor issuance; this addition of shares is the only material differencebetween the 2004 Plan and the Amended Plan. The Amended Plan willprovide for the grant of incentive stock options, non-qualified stockoptions, stock appreciation rights and restricted stock, and willterminate in 2015.

NOTE 8—EARNINGS PER SHARE

Basic and diluted income per share are calculated in accordance withSFAS No. 128, "Earnings Per Share." The basicand diluted income per common share for all periods presented werecomputed based on the weighted-average number of common sharesoutstanding, as follows (Dollars and shares in thousands, except persharedata):

|                                                                            |  |                            |         |              |  |        |         |         |  |  |
|----------------------------------------------------------------------------|--|----------------------------|---------|--------------|--|--------|---------|---------|--|--|
|                                                                       |  | (unaudited)                |
|                                                                       |  | Threemonths ended March31, |
|                                                                       |  | 2005                       |         | 2004         |
|                                                                       |  |                       |         | (Asrestated) |
| Net income(loss)                                                           |  | $                          | 15,728  |         |  | $      | (271    | )  |
| Dividendson convertible redeemable preferredstock:                         |  |
| SeriesA                                                                    |  |                       | — |         |  |   | 180     |    |
| SeriesB                                                                    |  |                       | — |         |  |   | 1,007   |    |
| SeriesC                                                                    |  |                       | — |         |  |   | 345     |    |
| Accretionof discount on preferredstock                                     |  |                       | — |         |  |   | 129     |    |
| Totaldividends on preferredstock                                           |  |                       | — |         |  |   | 1,661   |    |
| Netincome (loss) attributable to commonstockholders                        |  | $                          | 15,728  |         |  | $      | (1,932  | )  |
| Basicearnings per share:                                                   |  |
| Net income(loss) attributable to commonstockholders                        |  | $                          | 15,728  |         |  | $      | (1,932  | )  |
| Weightedaverage common stock outstanding for basic earnings pershare       |  |                       | 19,405  |         |  |   | 518     |    |
| Basicearnings pershare                                                     |  | $                          | 0.81    |         |  | $      | (3.73   | )  |
| Dilutedearnings per share:                                                 |  |
| Net income (loss) for dilutedearnings pershare                             |  | $                          | 15,728  |         |  | $      | (1,932  | )  |
| Commonstock outstanding for basic earnings per sharecomputation            |  |                       | 19,405  |         |  |   | 518     |    |
| Assumedconversion of dilutive:                                             |  |
| Stock options and unvestedrestrictedstock                                  |  |                       | 441     |         |  |   | — |    |
| Weightedaverage common stock outstanding for diluted earnings per share(1) |  |                       | 19,846  |         |  |   | 518     |    |
| Dilutedearnings pershare                                                   |  | $                          | 0.79    |         |  | $      | (3.73   | )  |
|                                                                            |

|  |
|--|
|  |  |
|  |

|     |                                                                                                                                                                                                                                                                       |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (1) | Reflects,on a retroactive basis, for all periods presented, the exchange ofapproximately 12.80 shares of MortgageIT common stock for each share ofHoldings common stock and the retention and retirement of common sharespursuant to the reorganization ofMortgageIT. |

25

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Options, warrants and restricted stockaggregating 558,000 were excluded from the computation for the threemonths ended March 31, 2004, as their effect would have beenanti-dilutive. Potentially dilutive common shares amounting to4,524,000 relating to the conversion of Series A, Series B and Series Cpreferred stock and options were excluded from the computation for thethree months ended March 31, 2004, as their effect would have beenanti-dilutive.

NOTE 9—STATEMENT OF CASH FLOWS

Supplemental disclosure of cash flow information (Dollars inthousands)

|                              |  |                            |        |        |  |        |       |        |  |  |
|------------------------------|--|----------------------------|--------|--------|--|--------|-------|--------|--|--|
|                         |  | (unaudited)                |
|                         |  | Threemonths ended March31, |
|                         |  | 2005                       |        | 2004   |
| Cashpaid during the yearfor: |  |
| Interest                     |  | $                          | 29,579 |   |  | $      | 3,474 |   |
| Incometaxes                  |  |                       | 89     |   |  |   | 3,536 |   |
|                              |

NOTE10—SEGMENT REPORTING

The Company operates its business intwo primary segments, mortgage investment operations conducted in theREIT and mortgage banking operations conducted in the TRS. Mortgageinvestment operations are driven by the balance of Portfolio ARM Loansand the net interest income generated on those balances. Mortgagebanking operations includes loan origination, underwriting, funding,brokering and secondary marketing. Following is a summary of theCompany's segment operating results for the three months endedMarch 31, 2005 (Dollars in thousands).

Three months ended March31,2005

|                                                   |  |                                  |           |                               |  |              |           |         |  |        |         |         |  |        |           |         |  |  |
|---------------------------------------------------|--|----------------------------------|-----------|-------------------------------|--|--------------|-----------|---------|--|--------|---------|---------|--|--------|-----------|---------|--|--|
|                                              |  | MortgageInvestmentOperations (1) |           | MortgageBanking Operations(2) |  | Eliminations |           | Total   |
| Gain on saleof mortgage loans                     |  | $                                | —   |                          |  | $            | 39,166    |    |  | $      | (7,059  | )  |  | $      | 32,107    |    |
| Brokeragerevenues                                 |  |                             | —   |                          |  |         | 6,398     |    |  |   | — |    |  |   | 6,398     |    |
| Interestincome                                    |  |                             | 33,271    |                          |  |         | 19,555    |    |  |   | 926     |    |  |   | 53,752    |    |
| Interestexpense                                   |  |                             | (21,835   | )                        |  |         | (9,651    | )  |  |   | — |    |  |   | (31,486   | )  |
| Netinterestincome                                 |  |                             | 11,436    |                          |  |         | 9,904     |    |  |   | 926     |    |  |   | 22,266    |    |
| Realizedand unrealized gain on hedginginstruments |  |                             | 7,308     |                          |  |         | —   |    |  |   | 1,614   |    |  |   | 8,922     |    |
| Other                                             |  |                             | —   |                          |  |         | 263       |    |  |   | — |    |  |   | 263       |    |
| Totalrevenues                                     |  |                             | 18,744    |                          |  |         | 55,731    |    |  |   | (4,519  | )  |  |   | 69,956    |    |
| Operatingexpenses                                 |  |                             | 3,014     |                          |  |         | 48,801    |    |  |   | (569    | )  |  |   | 51,246    |    |
| Income(loss) before incometax                     |  |                             | 15,730    |                          |  |         | 6,930     |    |  |   | (3,950  | )  |  |   | 18,710    |    |
| Incometaxes                                       |  |                             | 2         |                          |  |         | 2,980     |    |  |   | — |    |  |   | 2,982     |    |
| Netincome(loss)                                   |  | $                                | 15,728    |                          |  | $            | 3,950     |    |  | $      | (3,950  | )  |  | $      | 15,728    |    |
| Segmentassets                                     |  | $                                | 3,177,849 |                          |  | $            | 1,460,037 |    |  | $      | (20,560 | )  |  | $      | 4,617,326 |    |
|                                                   |

|  |
|--|
|  |  |
|  |

|     |                                                                                                                       |
|-----|-----------------------------------------------------------------------------------------------------------------------|
| (1) | Commencedoperations on August 4, 2004. The Company operated in one segment,Mortgage Banking, prior to August 4, 2004. |

|     |                                                                 |
|-----|-----------------------------------------------------------------|
| (2) | Represents the consolidated results ofoperations for MortgageIT |

NOTE 11—COMMITMENTS ANDCONTINGENCIES

The Company is a defendant in various legalproceedings. For further information, see Part II Other Information,Item 1. Legal Proceedings of this Form 10-Q. Although it is difficultto predict the outcome of any litigation, the Company has established areserve of $2.0 million.

NOTE 12—SUBSEQUENT EVENT

During April 2005, through a trust subsidiary, MortgageIT issued andsold in a private placement $50 million of trust preferred securities("TPS"). MortgageIT issued to the trustjunior subordinated 

26

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debentures to fund the trust'sobligations on the TPS. The TPS are floating rate and bear a variableinterest rate of 375 basis points above 3-month LIBOR, paid quarterly,and mature in 2035. They are redeemable at par after five years and ata premium to par in certain limited circumstances over the first fiveyears.   Proceeds from the TPS sale will be used to grow theCompany's self-originated residential loanportfolio.

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ITEM2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIALCONDITION AND RESULTS OF OPERATIONS

Unless the context suggestsotherwise, the terms "Company,""Holdings," "we,""us," and "our"refer to MortgageIT Holdings, Inc., a Maryland corporation incorporatedin March 2004, and its subsidiaries."MortgageIT" or"TRS" refers to our wholly owned subsidiary,MortgageIT, Inc., a New York corporation.

Restatement ofConsolidated Financial Statements

The consolidated statement ofoperations, and consolidated statement of cash flows for the threemonths ended March 31, 2004 have been restated.

For a furtherdiscussion of the corrections and restatements, see "Note1A—Restatement of Consolidated Financial Statements"in the accompanying notes to the consolidated financial statements. Theeffect of the restatement of the consolidated financial statements isreflected in "Management's Discussion and Analysisof Financial Condition and Results of Operations"below.

GENERAL

MortgageIT Holdings, Inc. is aresidential mortgage lender that was formed in March 2004 to continueand expand the business of MortgageIT, Inc. Holdings is organized andconducts its operations to qualify as a real estate investment trust("REIT") for federal income tax purposes andis focused on earning net interest income from mortgage loansoriginated by its taxable REIT subsidiary, MortgageIT. MortgageIT wasincorporated in New York in February 1999, and began marketing mortgageloan services in May 1999. MortgageIT is a full-service residentialmortgage banking company that is licensed to originate loans throughoutthe United States. MortgageIT originates single-family mortgage loansof all types, including prime ARM and fixed-rate, first lienresidential mortgage loans. Prior to August 4, 2004, MortgageIT soldall of the loans it originated through both its retail and wholesaleoperations to third party investors. Home Closer LLC, a subsidiary ofMortgageIT, Inc., provides settlement, title and related services. IPISkyscraper Mortgage Corporation, which provided retail mortgage lendingoperations, was a wholly owned subsidiary of MortgageIT until it wasmerged with and into MortgageIT effective December 31, 2004.

TheCompany's business strategy is to self-originate prime ARM loansthat are held in our investment portfolio and used to collateralizedebt obligations, fund them using equity capital and borrowed funds,and generate earnings from the spread between the yield on our assetsand our cost of borrowings. Our investment strategy is designed tomitigate credit risk and interest rate risk. Our mortgage loaninvestment portfolio consists primarily of prime ARM Loans thatcollateralize multi-class pass-through securities that we issue insecuritization transactions, and prime quality ARM Loans that we intendto securitize.

The loans that we retain in our portfolio areserviced through a subservicing arrangement. Generally, we expect tocontinue to sell the fixed rate loans originated by MortgageIT to thirdparties as well as any ARM or hybrid ARM loans that we do not retain inour portfolio.

On August 4, 2004, we closed our initial publicoffering and sold 14.6 million shares of our common stock at a price tothe public of $12.00 per share, for net proceeds of approximately$163.4 million, after deducting the underwriters' discount andother offering-related expenses. Since the completion of our initialpublic offering, the primary focus of our business has been to build aleveraged portfolio of single-family residential mortgage loanscomprised largely of prime ARM and hybrid ARM loans, which have aninitial fixed-rate period followed by an adjustable-rate period. Ourportfolio of mortgage loans consists exclusively of loans originated bythe TRS. As of March 31, 2005, we had transferred to our investmentportfolio approximately $3.15 billion of single-family residentialprime ARM and hybrid ARM loans originated by MortgageIT.

InNovember 2004, MortgageIT announced its plan to expand its wholesalesubprime origination division and has established a sales leadershipteam in several key regions in order to intensify the 

28

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focus on subprime single-family residentialloan origination. As of March 31, 2005, this division had 298 employeesand generated 9.7% of MortgageIT's total originations inthe first quarter of 2005. The division is expanding organically,through the development of new branches managed by seasoned mortgageprofessionals. During the first quarter of 2005, this division added 5branches with approximately 119 staff members in locations across theU.S. All of the subprime loan production is currently sold to thirdparty investors and we do not currently anticipate holding subprimeloans in our investment portfolio.

In October 2004, the Companylaunched a national correspondent lending platform. The newly createdbusiness unit, through its centralized management and loan acquisitionteams, seeks to purchase prime first-lien closed mortgage loans fromsmall to mid-sized banks, credit unions and mortgage bankers. In thefirst quarter of 2005, the correspondent business unit accounted for4.8% of MortgageIT's total originations. These loans aresubject to the same credit review standards utilized by our other primeproduction channels and are sold by our TRS to third-partyinvestors.

DESCRIPTION OF BUSINESS

The Company operatesits business in two primary segments, mortgage investment operationsand mortgage banking operations. Mortgage investment operations aredriven by the net interest income generated on our leveraged primemortgage loan investment portfolio. Mortgage banking operations aredriven by income generated from our mortgage loan origination businessand include sales, loan processing, underwriting, funding, secondarymarketing and brokerage activities.

Financial informationregarding the Company's business segments can be found in Note 10to the consolidated financial statements.

MortgageInvestment Operations

Our mortgage investment operationsinvolve the acquisition and retention, in a leveraged portfolio, ofeither traditional ARM loans or hybrid ARM loans. Traditional ARM loansare mortgage loans that have interest rates that reprice in one year orless ("Traditional ARMs" or"Traditional ARM loans"), and hybrid ARMloans are mortgage loans that have a fixed interest rate for an initialperiod of not more than five years and then convert to Traditional ARMsfor their remaining terms to maturity ("HybridARMs" or "Hybrid ARM loans," andtogether with the Traditional ARM loans, "Portfolio ARMLoans").

All of the Portfolio ARM Loans we acquireare originated in our mortgage banking operations and must meet theunderwriting criteria and guidelines set forth in our investment andrisk management policy. For purposes of maintaining liquidity forborrowings or as collateral, we may also invest in U.S. Treasurysecurities and debentures and discount notes guaranteed by twogovernment-sponsored corporations, Federal National MortgageAssociation ("FNMA" or "FannieMae") and Federal Home Loan Mortgage Corporation("FHLMC" or "FreddieMac").

The funding of our mortgage loan portfolioprimarily consists of borrowings from our warehouse lines of credit forloans awaiting securitization, the issuance of collateralized debtobligations ("CDOs") and repurchaseagreements. We acquire ARM loans for our investment portfolio with theintention of securitizing them by transferring them to independenttrusts. In order to facilitate the securitization of our loans, wegenerally create subordinate certificates, which provide a specifiedamount of credit enhancement to the higher rated certificates. Uponsecuritization, we finance the loans through the issuance of CDOs inthe capital markets and occasionally retain certain subordinatecertificates. We service Portfolio ARM Loans through a subservicer.

We do not account for CDOs placed with third party investors assales and, therefore, do not record any gain or loss in connection withsecuritization transactions. The securitizations are accounted for aslong-term collateralized financings. Consequently, the Portfolio ARMLoans transferred to the independent trust are shown as assets on ourbalance sheet. On our balance sheet, our Portfolio ARM Loans consist ofARM loans collateralizing debt obligations and ARM loans held forsecuritization. We, therefore, generate revenue in our mortgageinvestment operations from the spread between the 

29

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interest income on our Portfolio ARM Loansand our cost of borrowings (i.e., the interest expense on ourCDOs, warehouse lines of credit, or repurchase agreements).

Theloan securitization process benefits us by creating highly liquidsecuritized assets that can be readily financed in the capitalmarkets.

Portfolio Strategy

It is our general policy tooriginate 100% of the ARM Loans we hold in our investmentportfolio. However, we retain the right to purchase mortgage-backedsecurities guaranteed by Fannie Mae or Freddie Mac or the GovernmentNational Mortgage Association ("GNMA" or"Ginnie Mae").

We select loans forinclusion in our investment portfolio based on a variety of credit riskfactors. Our Portfolio Management Committee has established specificloan investment guidelines including minimum FICO scores, maximumloan-to-value ratios, maximum loan size and other applicable creditquality criteria.

According to our investment guidelines, weinvest at least 85% of assets in high quality ARMs and HybridARMs and short-term investments including:

|              |                                                                                                                                                           |
|--------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | Prime ARM and Hybrid ARM mortgage loansthat have been deposited into trusts that issue mortgage-backedsecurities collateralized by the transferred loans; |

|              |                                     |
|--------------|-------------------------------------|
| •  | FNMA and FHLMC mortgage securities; |

|              |                                                                                                                                                                                                                                                                                                 |
|--------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | ARM securities rated within one of the twohighest rating categories by at least one of the nationally recognizedstatistical ratings agencies (Moody's Investors Service("Moody's"); Standard &Poor's, a division of The McGraw-Hill Companies, Inc.("S&P"); or Fitch Ratings("Fitch")); |

|              |                                                                                                                                           |
|--------------|-------------------------------------------------------------------------------------------------------------------------------------------|
| •  | securities and loans that are unrated butthat we determine to be of comparable quality to comparablehigh-quality mortgage securities; and |

|              |                                                                                                                |
|--------------|----------------------------------------------------------------------------------------------------------------|
| •  | cash and cash equivalents, includingshort-term investments in U.S. Treasury and agency non-mortgagesecurities. |

The portfolio also may retain certain classes of ourmortgage-backed securities that are below investment grade (below BBB).Interests in non-investment grade assets will comprise no more than25% of stockholders' equity on an historical costbasis.

At March 31, 2005, we held total assets of $4.62 billion,of which $4.47 billion consisted of both loans held for sale and loansheld for investment. That compares to $3.54 billion in total assets atDecember 31, 2004, of which $3.38 billion consisted of both loans heldfor sale and loans held for investment. At March 31, 2005, over85% of the assets we held, including cash and cash equivalents,were high quality ARM Loans and short-term investments.

Mortgage Banking Operations

Our mortgage banking operationsare conducted through our wholly owned TRS subsidiary, MortgageIT, andits subsidiaries. The TRS is a full-service residential mortgagebanking company that is licensed to originate loans throughout theUnited States

The TRS generates revenue through the origination,sale and brokering of mortgage loans sourced through its loanproduction channels. This revenue primarily consists of gain on sale ofmortgage loans, loan brokerage revenues and net interest income. Gainon sale of mortgage loans is generated from the sale of mortgage loansto investors, on a servicing released basis, generally within 30 to 60days of funding. Accordingly we do not capitalize the value of mortgageservicing rights. Gain is recognized based on the difference betweenthe net sales proceeds and the carrying value of the mortgage loanssold and is recognized in earnings at the time of sale. The carryingvalue of the mortgage loans sold includes direct loan-relatedorigination costs and fees. Brokerage revenue consists of fees andcommissions earned by brokering mortgage loans ultimately funded bythird party lenders. Interest on mortgage loans held for sale accrueson loans from the date of funding through the date of sale.

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MortgageIT's mortgage bankingoperations expenses consist primarily of:

|              |                                                              |
|--------------|--------------------------------------------------------------|
| •  | loan origination commissions, salaries andemployee benefits; |

|              |                                   |
|--------------|-----------------------------------|
| •  | mortgage loanprocessing expenses; |

|              |                                     |
|--------------|-------------------------------------|
| •  | general andadministrative expenses; |

|              |                                                                   |
|--------------|-------------------------------------------------------------------|
| •  | marketing,loan acquisition and business development expenses; and |

|              |                                                           |
|--------------|-----------------------------------------------------------|
| •  | rent expense, professional fees, anddepreciation expense. |

A substantial portion ofMortgageIT's expenses are variable in nature. Loan originationcommissions are paid to loan production officers only upon theorigination of the mortgage loan, making such commission expenses100% variable. Salaries, benefits and other related payrollcosts may fluctuate based upon management's assessment of currentand predicted future levels of mortgage loan origination volume.

Loan Underwriting

We follow a specific underwritingmethodology based on the following philosophy—first evaluate theborrower's ability to repay the loan, and then evaluate the valueof the property securing the loan. We have developed underwritingguidelines and practices that establish clear parameters for our loanunderwriters and credit officers to make loan approval decisions. Formortgage loans retained in our investment portfolio, we seek thoseloans that we believe have low risk of default and resulting loss.Although our loan underwriting procedures are structured to predictfuture borrower payment patterns and financial capability, based on theborrower's past history and current financial information, aswell as our ability to collect the remaining loan balance throughforeclosure in the event of a default, no assurance can be made thatevery loan originated will perform as anticipated.

In evaluatingthe borrower's ability and willingness to repay a loan, we reviewand analyze the following aspects of the borrower: credit score, incomeand its source, employment history, debt levels in revolving,installment and other mortgage loans, credit history and use of creditin the past, and the ability and/or willingness to provide verificationfor the above. Credit scores, credit history, use of credit in the pastand information as to debt levels can typically be obtained from athird party credit report through a credit repository. Those sourcesare used in all instances, as available. Sometimes, borrowers havelittle or no credit history that can be tracked by one of the primarycredit repositories. In these instances, the reason for the lack ofhistory is considered and taken into account. In our experience, mostprospective borrowers have accessible credit histories.

Inevaluating a potential property to be used as collateral for a mortgageloan, we consider all of the following aspects of the property: theloan balance versus the property value, i.e., the loan-to-valueratio, or LTV, the property type, how the property will be occupied (aprimary residence, second home or investment property), if theproperty's apparent value is supported by recent sales of similarproperties in the same or a nearby area, any unique characteristics ofthe property and our confidence in the data and their sources.

Other considerations that may effect our decision regarding aborrower's loan application are the borrower's purpose inrequesting the loan (purchase of a home as opposed to cashing equityout of the home through a refinancing, for example), the loan type(adjustable-rate, including adjustment periods and loan life rate caps,or fixed-rate), and any items unique to a loan that we believe couldaffect credit performance.

Business Strategy

All of theloans originated at the TRS are either transferred to our investmentloan portfolio, or sold or brokered to third party investors. Ourmortgage banking operations consist primarily of the followingactivities:

|              |                                                                                                                                                                                                                         |
|--------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | retail prime productionoperations, including both brokered loans and funded loans that areoriginated through MortgageIT's IPI Skyscraper Division of retailbranch offices and through its internet origination channel; |

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|              |                                                                                                                                                                                                            |
|--------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | wholesale primeproduction operations, including loans originated through retail loanbrokers and correspondents that are not MortgageIT employees and fundedby MortgageIT through its MIT Lending Division; |

|              |                                                                                                                                                                                               |
|--------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | subprime production operations, includingboth retail loans originated through MortgageIT's retail subprimedepartment, and wholesale loans originated through MortgageIT'sNB Lending Division; |

|              |                                                                                                                                                                                  |
|--------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | correspondentlending operations, including loans originated through banks, creditunions and mortgage bankers and funded by MortgageIT through itsCorrespondent Lending Division; |

|              |                                         |
|--------------|-----------------------------------------|
| •  | secondary loan marketing operations;and |

|              |                                                                                                                     |
|--------------|---------------------------------------------------------------------------------------------------------------------|
| •  | mortgage loan title, settlementand other mortgage related services through MortgageIT'ssubsidiary, Home Closer LLC. |

Sale of Loans

We generallysell our mortgage loans on a whole loan, non-recourse basis. However,we do have potential liability under the representations and warrantieswe make to purchasers and insurers of the loans. In the event of abreach of such representations and warranties, we may be required toeither repurchase the subject mortgage loans or indemnify the investoror insurer. In such cases, any subsequent credit loss on the mortgageloans is recognized by MortgageIT.

All of our subprime loanproduction is sold to third party investors.

Loan Products

MortgageIT originates both mortgage loans to finance home purchases,referred to as purchase mortgage loans, and loans to refinance existingmortgage loans. For the quarter ended March 31, 2005,MortgageIT's purchase loan originations represented approximately51% of its total residential mortgage loan originations measuredby principal balance.

MortgageIT originates prime first lienconventional and non-conventional, conforming single-family residentialmortgage loans. In addition, MortgageIT also originates a lesser amountof non-conforming first lien single-family residential mortgage loanssuch as jumbo loans, non-prime loans and "AltA" loans, as well as home equity and second mortgageloans. Substantially all of the loans originated by MortgageIT allowfor prepayment without penalty, and we retain loans that allow forprepayment without penalty.

Hedging Activities

We generally do not seek to anticipate the direction of interestrates as a part of our business strategy. We seek to maintain hedgepositions that avoid the effects of severe interest rate movements,which might otherwise impair our ability to earn net interest incomeand gain on sale revenues. Accordingly, we generally seek to mitigateinterest rate risk by matching the repricing durations of our PortfolioARM Loans with the repricing durations of our liabilities. We also seekto mitigate the interest rate risk associated with our mortgage loansheld for sale and interest rate lock commitments issued toborrowers.

For our mortgage investment operations, subject tothe limitations imposed by the REIT qualification tests, some or all ofthe following financial instruments are used for hedging financing costinterest rate risk: Eurodollar futures contracts, interest rate swaps,interest rate caps, collars and floors, and other instruments that maybe determined to be advantageous and are permitted under the investmentand risk management policy adopted by our board of directors.

For our mortgage banking operations, some or all of the followingfinancial instruments are used for hedging the fair value of loans heldfor sale: forward sale loan commitments and forward sales and purchasesof mortgage-backed securities and options on such securities in theforward delivery TBA market, Eurodollar futures, and other instrumentsthat may be determined to be advantageous and are permitted under theinvestment and risk management policy adopted by our board ofdirectors.

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For further information on our interestrate risk management, see Item 3 Quantitative and QualitativeDisclosures About Market Risk–Interest Rate Risk Management ofthis Form 10-Q and Note 4 – Derivatives and Hedging Activities inthe accompanying notes to the consolidated financial statements.

RESULTS OF OPERATIONS

The following table sets forthcertain financial data as a percentage of total revenues for the threemonths ended March 31, 2005 and2004.

|                                                    |  |                            |        |              |  |        |         |          |  |  |
|----------------------------------------------------|--|----------------------------|--------|--------------|--|--------|---------|----------|--|--|
|                                               |  | Threemonths ended March31, |
|                                               |  | 2005                       |        | 2004         |
|                                               |  |                       |        | (Asrestated) |
| Revenues:                                          |  |
| Gainon sale of mortgageloans                       |  |                       | 45.9   | %       |  |   | 55.5    | %   |
| Brokeragerevenues                                  |  |                       | 9.1    | %       |  |   | 33.8    | %   |
| Netinterestincome                                  |  |                       | 31.8   | %       |  |   | 10.7    | %   |
| Realizedand unrealized gain on hedginginstruments  |  |                       | 12.8   | %       |  |   | — |     |
| Other                                              |  |                       | 0.4    | %       |  |   | 0.0     | %   |
| Totalrevenues                                      |  |                       | 100.0  | %       |  |   | 100.0   | %   |
| Operatingexpenses:                                 |  |                       |   |         |  |   |    |     |
| Compensation andemployeebenefits                   |  |                       | 39.8   | %       |  |   | 63.8    | %   |
| Processingexpenses                                 |  |                       | 14.8   | %       |  |   | 13.3    | %   |
| Generaland administrativeexpenses                  |  |                       | 9.7    | %       |  |   | 9.0     | %   |
| Marketing,loan acquisition and businessdevelopment |  |                       | 1.3    | %       |  |   | 4.1     | %   |
| Rent                                               |  |                       | 3.3    | %       |  |   | 7.0     | %   |
| Professionalfees                                   |  |                       | 3.3    | %       |  |   | 2.3     | %   |
| Depreciationandamortization                        |  |                       | 1.1    | %       |  |   | 2.4     | %   |
| Totaloperatingexpenses                             |  |                       | 73.3   | %       |  |   | 101.9   | %   |
| Income(loss) before incometaxes                    |  |                       | 26.7   | %       |  |   | (1.9    | )%  |
| Incometaxes                                        |  |                       | 4.2    | %       |  |   | (0.9    | )%  |
| Netincome (loss)                                   |  |                       | 22.5   | %       |  |   | (1.0    | )%  |
|                                                    |

Threemonths ended March 31, 2005 compared to three months ended March 31,2004

Net income (loss)

Consolidated net incomeincreased from a net loss of $(271,000) for the three months endedMarch 31, 2004 to a net gain of $15.7 million for the three monthsended March 31, 2005. The increase is attributable to higher netinterest income, higher gain on sale of mortgage loans, and gains onderivatives instruments used in our investment portfolio hedge program.Total revenues increased by approximately 170% to $70.0 millionfor the quarter ended March 31, 2005 from $25.9 million for thecomparable period in 2004, while total expenses increased byapproximately 94% to $51.2 million from $26.4 million. Our loanbrokerage volume and revenue decreased by 20.8% and26.8%, respectively, from the first quarter of 2004. Gain onsale of mortgage loans increased by 123.7% in the first quarterof 2005 compared to the comparable period in 2004 and we recorded a$8.9 million gain on derivatives used in our investment portfoliohedging program. In addition, net interest income increased by703.5% to $22.3 million in the first quarter of 2005 from $2.8million in the comparable period in 2004.

Mortgage InvestmentOperations

Our mortgage investment operations segment, or"REIT," began operations on August 4, 2004following our reorganization and initial public offering. This businesssegment generates revenue from net interest income earned on ourPortfolio ARM Loans.

33

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Revenues

**Net interestincome**.    REIT net interest income was $11.4 million on averageearning assets of $2.8 billion for the three months ended March 31,2005. The following table presents the average balance for eachcategory of our interest-earning assets and interest-bearingliabilities, with the corresponding annualized effective rate ofinterest and the related interest income or expense for the sameperiod:

Average Balance, Rate and Interest Income/ExpenseTable(Dollars inthousands)

|                                      |  |                                     |           |               |  |                          |        |         |  |        |        |        |  |  |
|--------------------------------------|--|-------------------------------------|-----------|---------------|--|--------------------------|--------|---------|--|--------|--------|--------|--|--|
|                                 |  | For the three months ended March31, |
|                                 |  | 2005                                |
|                                 |  | AverageBalance                      |           | EffectiveRate |  | InterestIncomeandExpense |
| Interest-earningassets:              |  |                                |      |          |  |                     |   |    |  |   |   |   |
| PortfolioARMLoans                    |  | $                                   | 2,785,694 |          |  |                     | 4.84   | %  |  | $      | 33,135 |   |
| Cashand cashequivalents              |  |                                | 30,014    |          |  |                     | 1.84   |    |  |   | 136    |   |
|                                 |  |                                | 2,815,708 |          |  |                     | 4.80   |    |  |   | 33,271 |   |
| Interest-bearingliabilities:         |  |                                |      |          |  |                     |   |    |  |   |   |   |
| Collateralizeddebtobligations        |  |                                | 2,154,269 |          |  |                     | 3.22   |    |  |   | 4,242  |   |
| Warehouselinespayable                |  |                                | 510,651   |          |  |                     | 3.38   |    |  |   | 17,039 |   |
| Repurchaseagreements                 |  |                                | 81,983    |          |  |                     | 2.75   |    |  |   | 554    |   |
|                                 |  |                                | 2,746,903 |          |  |                     | 3.23   |    |  |   | 21,835 |   |
| Netinterest-earning assets andspread |  | $                                   | 68,805    |          |  |                     | 1.57   | %  |  | $      | 11,436 |   |
| Netinterest margin(1)                |  |                                |      |          |  |                     | 1.65   | %  |  |   |   |   |
|                                      |

|  |
|--|
|  |  |
|  |

|     |                                                                                                                                   |
|-----|-----------------------------------------------------------------------------------------------------------------------------------|
| (1) | Netinterest margin is computed by dividing annualized net interest incomeby the average daily balance of interest-earning assets. |

Expenses

REIT operating expenses totaled $3.0 million forthe three months ended March 31, 2005, primarily consisting of:

|              |                                     |
|--------------|-------------------------------------|
| •  | compensation and employee benefits; |

|              |                                        |
|--------------|----------------------------------------|
| •  | mortgage loan processing expenses; and |

|              |                                                           |
|--------------|-----------------------------------------------------------|
| •  | professional fees and general andadministrative expenses. |

A substantial portion of REIT expensesare generally fixed in nature. The variable expenses are primarilyprocessing expenses including subservicing costs, provision for creditlosses and brokerage commission expenses paid on Eurodollarcontracts.

Mortgage Banking Operations

Revenues

**Gain on sale of mortgageloans**.    Gain on sale of mortgage loans increased approximately173% to $39.2 million for the three months ended March 31, 2005from $14.4 million for the three months ended March 31, 2004. On astandalone basis, whole loan sales increased by 178% to$3.6  billion for the three months ended March 31, 2005 from$1.3  billion for the three months ended March 31, 2004. On aconsolidated basis, mortgage whole loan sales to third partiesincreased by 114.2 % to $2.8 billion, after the elimination of$814 million in intercompany loan sales, for the three months endedMarch 31, 2005 from $1.3 billion for the three months ended March 31,2004.

34

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**Brokerage Revenue**.    Brokeragerevenue decreased by approximately 26.8% to $6.4 million for thethree months ended March 31, 2005 from $8.7 million for the threemonths ended March 31, 2004. The decrease was attributable to a20.8% decrease in the volume of loans brokered to third parties,resulting from a general industry decline in volume during the threemonths ended March 31, 2005, as well as by our strategy to increaseretail funded loan volume and reduce retail brokered loan volume.

**Net interest income**.    Net interest income increased byapproximately 257% to $9.9 million for the three months endedMarch 31, 2005 from $2.8 million for the three months ended March 31,2004. The increase is primarily attributable to a higher averagebalance of loans held for sale due to a higher volume of originations,as well as greater net interest spreads due to reduced borrowing costs.The following table presents the average balance for each category ofour interest-earning assets and interest-bearing liabilities, with thecorresponding annualized effective rate of interest and the relatedinterest income or expense.

Average Balance, Rate and InterestIncome/Expense Table(Dollars inthousands)

|                                      |  |                                    |           |               |  |                          |                  |                |  |               |        |                          |  |        |         |        |  |        |        |         |  |        |        |        |  |  |
|--------------------------------------|--|------------------------------------|-----------|---------------|--|--------------------------|------------------|----------------|--|---------------|--------|--------------------------|--|--------|---------|--------|--|--------|--------|---------|--|--------|--------|--------|--|--|
|                                 |  | Forthe three months ended March31, |
|                                 |  | 2005                               |           | 2004          |
|                                 |  | AverageBalance                     |           | EffectiveRate |  | InterestIncomeandExpense |                  | AverageBalance |  | EffectiveRate |        | InterestIncomeandExpense |
| Interest-earningassets:              |  |                               |      |          |  |                     |             |           |  |          |   |                     |  |   |    |   |  |   |   |    |  |   |   |   |
| Mortgageloans held forsale           |  | $                                  | 1,224,643 |          |  |                     | 6.48             | %         |  | $             | 19,525 |                     |  | $      | 388,328 |   |  |   | 5.54   | %  |  | $      | 5,289  |   |
| Cashand cashequivalents              |  |                               | 7,436     |          |  |                     | 1.63             |           |  |          | 30     |                     |  |   | 14,256  |   |  |   | 0.80   |    |  |   | 28     |   |
|                                 |  |                               | 1,232,079 |          |  |                     | 6.45             |           |  |          | 19,555 |                     |  |   | 402,584 |   |  |   | 5.37   |    |  |   | 5,317  |   |
| Interest-bearingliabilities:         |  |                               |      |          |  |                     |             |           |  |          |   |                     |  |   |    |   |  |   |   |    |  |   |   |   |
| Warehouselinespayable                |  |                               | 1,185,117 |          |  |                     | 3.21             |           |  |          | 9,370  |                     |  |   | 376,678 |   |  |   | 2.74   |    |  |   | 2,534  |   |
| Notepayable and otherdebt            |  |                               | 15,000    |          |  |                     | 7.63             |           |  |          | 281    |                     |  |   | 501     |   |  |   | 10.00  |    |  |   | 12     |   |
|                                 |  |                               | 1,200,117 |          |  |                     | 3.27             |           |  |          | 9,651  |                     |  |   | 377,179 |   |  |   | 2.74   |    |  |   | 2,546  |   |
| Netinterest-earning assets andspread |  | $                                  | 31,962    |          |  |                     | 3.18             | %         |  | $             | 9,904  |                     |  | $      | 25,405  |   |  |   | 2.63   | %  |  | $      | 2,771  |   |
| Netinterest margin(1)                |  |                               |      |          |  |                     |   3.27 | %         |  |          |   |                     |  |   |    |   |  |   | 2.80   | %  |  |   |   |   |
|                                      |

|  |
|--|
|  |  |
|  |

|     |                                                                                                                                   |
|-----|-----------------------------------------------------------------------------------------------------------------------------------|
| (1) | Netinterest margin is computed by dividing annualized net interest incomeby the average daily balance of interest-earning assets. |

Expenses

**Compensation and employeebenefits**.    Compensation and employee benefits expensesincreased approximately 63% to $26.9 million for the threemonths ended March 31, 2005 from $16.5 million for the three monthsended March 31, 2004. The increase was primarily due to a 99.4%increase in the volume of funded loans to $4.3 billion in the threemonths ended March 31, 2005 from $2.2 billion in the three months endedMarch 31, 2004, as well as the addition of 17 branches opened betweenMarch 31, 2004 and March 31, 2005.

**Processingexpenses**.    Mortgage loan processing expenses increasedapproximately 186% to $9.8 million for the three months endedMarch 31, 2005, from $3.4 million for the three months ended March 31,2004. The increase was primarily due to an increase in the number ofunits and a higher repurchase reserve due to increased prime andsubprime origination volume.

**General and administrativeexpenses**.    General and administrative expenses increased by169% to $6.2 million for the three months ended March 31, 2005from $2.3 million for the three months ended March 31, 2004. Thisincrease was primarily due to a 99.4% increase in the volume offunded loans to 

35

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$4.3 billion in the three months ended March31, 2005 from $2.2 billion in the three months ended March 31, 2004, aswell as an increase in the number of branches to 51 during the firstquarter of 2005 from 34 in the comparable period in 2004. In addition,the results include the impact of special legal charges and reserves inthe amount of $2.5  million associated with the Company'sSFAS NO. 133 review and restatement and other legal matters.

**Marketing, loan acquisition and business developmentexpenses**.    Marketing, loan acquisition and business developmentexpenses decreased approximately 15% to $895,000 for the threemonths ended March 31, 2005 from $1.0 million for the three monthsended March 31, 2004. The decline was primarily due to decreased use ofinternet loan production leads by the retail loan productiondivision.

**Rent expense**.    Rent expense increasedapproximately 25.4% to $2.3 million for the three months endedMarch 31, 2005 from $1.8 million for the three months ended March 31,2004. This increase was primarily due to an increase in the number ofbranches to 51 operating during the first quarter of 2005 from 34 inthe comparable period in 2004.

**Professionalfees**.    Professional fees increased approximately 209% to$1.8 million for the three months ended March 31, 2005 from $587,000for the three months ended March 31, 2004. This increase was primarilydue to legal and audit expenses related to the Company'srestatement of its financials in connection with SFAS No.133 accountingstandards, as well as outstanding litigation and regulatorymatters.

**Depreciation and amortizationexpenses**.    Depreciation and amortization increased 27.2%to $796,000 for the three months ended March 31, 2005 from $626,000 forthe three months ended March 31, 2004. The increase was primarily dueto increased capital expenditures related to 17 new branches openedbetween March 31, 2004 and March 31, 2005.

**Income taxexpense**.    MortgageIT made the election to be treated as ataxable REIT subsidiary and, therefore, is subject to federal and statecorporate income taxes. Accordingly, the Company records a taxprovision on the taxable income of the TRS, which includes intercompanyincome that is eliminated in our consolidated statements ofoperations.

FINANCIAL CONDITION

Prior to ourreorganization as a REIT, our assets consisted primarily of mortgageloans held for sale. At March 31, 2005 and December 31, 2004, ourassets consisted of both Portfolio ARM Loans and mortgage loans heldfor sale, representing 66% and 30% of total assets atMarch 31, 2005, and 73% and 22% of total assets atDecember 31, 2004.

Total assets increased $1.08 billion fromDecember 31, 2004 to March 31, 2005. The increase primarily reflects anincrease in Portfolio ARM Loans in the amount of $464.8 million and anincrease in mortgage loans held for sale in the amount of $620.4million. Portfolio ARM Loans consists of $2.38 billion and $1.43billion of ARM loans that collateralize debt obligations, and $684.9million and $1.17 billion of ARM loans held for securitization at March31, 2005 and December 31, 2004, respectively. The growth of ARM loansthat collateralize debt obligations was primarily funded by an increasein securitizations of $901.7 million and $1.33 billion and the growthin ARM loans held for securitization and mortgages held for sale wasprimarily funded by an increase in warehouse lines payable of $136.2million and $1.57 billion at March 31, 2005 and December 31, 2004,respectively.

The following table presents variouscharacteristics of our Portfolio ARM Loans as of March 31, 2005. Theaggregate unpaid principal balance of the loans included in this tableis approximately $3.0 billion.

36

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|                                       |  |         |         |         |  |        |           |         |  |        |        |         |  |  |
|---------------------------------------|--|---------|---------|---------|--|--------|-----------|---------|--|--------|--------|---------|--|--|
|                                  |  | Average |         | High    |  | Low    |
| Originalloanbalance                   |  | $       | 295,345 |    |  | $      | 1,000,000 |    |  | $      | 35,621 |    |
| Couponrate onloans                    |  |    | 5.25    | %  |  |   | 7.00      | %  |  |   | 3.38   | %  |
| %Grossmargin                          |  |    | 2.36    | %  |  |   | 3.00      | %  |  |   | 1.75   | %  |
| Lifetimecap                           |  |    | 11.02   | %  |  |   | 18.00     | %  |  |   | 3.88   | %  |
| Originalterm(months)                  |  |    | 360     |    |  |   | 360       |    |  |   | 360    |    |
| Remainingterm(months)                 |  |    | 355     |    |  |   | 360       |    |  |   | 346    |    |
| Geographicdistribution (top 5states): |  |    |    |    |  |   |      |    |  |   |   |    |
| California                            |  |    |    |    |  |   |      |    |  |   | 63.9   | %  |
| Arizona                               |  |    |    |    |  |   |      |    |  |   | 6.2    |    |
| Washington                            |  |    |    |    |  |   |      |    |  |   | 4.5    |    |
| Florida                               |  |    |    |    |  |   |      |    |  |   | 3.9    |    |
| Illinois                              |  |    |    |    |  |   |      |    |  |   | 2.8    |    |
| Other                                 |  |    |    |    |  |   |      |    |  |   | 18.7   |    |
| Occupancystatus:                      |  |    |    |    |  |   |      |    |  |   |   |    |
| Owneroccupied                         |  |    |    |    |  |   |      |    |  |   | 89.6   | %  |
| Secondhome                            |  |    |    |    |  |   |      |    |  |   | 8.2    |    |
| Investor                              |  |    |    |    |  |   |      |    |  |   | 2.2    |    |
| Documentationtype:                    |  |    |    |    |  |   |      |    |  |   |   |    |
| Full/Alternative                      |  |    |    |    |  |   |      |    |  |   | 51.6   | %  |
| Other                                 |  |    |    |    |  |   |      |    |  |   | 48.4   |    |
| Loanpurpose:                          |  |    |    |    |  |   |      |    |  |   |   |    |
| Purchase                              |  |    |    |    |  |   |      |    |  |   | 52.9   | %  |
| Cash-outrefinance                     |  |    |    |    |  |   |      |    |  |   | 28.1   |    |
| Rate &termrefinance               |  |    |    |    |  |   |      |    |  |   | 19.0   |    |
| Originalloan-to-value:                |  |    |    |    |  |   |      |    |  |   |   |    |
| 80.01%andover                         |  |    |    |    |  |   |      |    |  |   | 2.6    | %  |
| 70.01%-80.00%                         |  |    |    |    |  |   |      |    |  |   | 68.6   |    |
| 60.01%-70.00%                         |  |    |    |    |  |   |      |    |  |   | 17.5   |    |
| 50.01%-60.00%                         |  |    |    |    |  |   |      |    |  |   | 6.4    |    |
| 50.00%orless                          |  |    |    |    |  |   |      |    |  |   | 4.9    |    |
| Weightedaverage originalloan-to-value |  |    |    |    |  |   |      |    |  |   | 73.5   | %  |
| Propertytype:                         |  |    |    |    |  |   |      |    |  |   |   |    |
| Singlefamily                          |  |    |    |    |  |   |      |    |  |   | 62.4   | %  |
| Condominium                           |  |    |    |    |  |   |      |    |  |   | 22.2   |    |
| PUD                                   |  |    |    |    |  |   |      |    |  |   | 10.7   |    |
| Otherresidential                      |  |    |    |    |  |   |      |    |  |   | 4.7    |    |
| ARMloan type:                         |  |    |    |    |  |   |      |    |  |   |   |    |
| 3-yearhybrid                          |  |    |    |    |  |   |      |    |  |   | 37.9   | %  |
| 5-yearhybrid                          |  |    |    |    |  |   |      |    |  |   | 60.9   |    |
| Other                                 |  |    |    |    |  |   |      |    |  |   | 1.2    |    |
| ARMinterest ratecaps:                 |  |    |    |    |  |   |      |    |  |   |   |    |
| Initialcap:                           |  |    |    |    |  |   |      |    |  |   |   |    |
| Under3.00                             |  |    |    |    |  |   |      |    |  |   | 9.7    | %  |
| 3.01-4.00                             |  |    |    |    |  |   |      |    |  |   | 0.0    |    |
| 4.01-5.00                             |  |    |    |    |  |   |      |    |  |   | 24.8   |    |
| 5.01-6.00                             |  |    |    |    |  |   |      |    |  |   | 65.5   |    |
| Periodiccap:                          |  |    |    |    |  |   |      |    |  |   |   |    |
| None                                  |  |    |    |    |  |   |      |    |  |   | 0.9    | %  |
| Under1.00%                            |  |    |    |    |  |   |      |    |  |   | 0.3    |    |
| Over1.00%                             |  |    |    |    |  |   |      |    |  |   | 98.8   |    |
|                                  |  |    |    |    |  |   |      |    |  |   |   |    |
| Percentof interest-only loanbalances  |  |    |    |    |  |   |      |    |  |   | 78.0   | %  |
|                                  |  |    |    |    |  |   |      |    |  |   |   |    |
| Weightedaverage FICO (1)score:        |  |    |    |    |  |   |      |    |  |   | 733    |    |
|                                       |

|  |
|--|
|  |  |
|  |

|     |                                                                                                                                                                                                                                     |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (1) | FICOis a credit score, ranging from 300 to 850, with 850 being the bestscore, based upon the credit evaluation methodology developed by Fair,Isaac and Company, a consulting firm specializing in creating creditevaluation models. |

37

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CRITICAL ACCOUNTING POLICIES ANDESTIMATES

Management's discussion and analysis offinancial condition and results of operations is based on the amountsreported in our consolidated financial statements. These consolidatedfinancial statements have been prepared in conformity with accountingprinciples generally accepted in the United States of America("GAAP"), many of which require the use ofestimates, judgments and assumptions that affect reported amounts.Changes in the estimates and assumptions could have a material effecton these consolidated financial statements. In accordance with recentSEC guidance, those material accounting policies that we believe arethe most critical to an investor's understanding of our financialresults and condition and require complex management judgment have beendescribed below. Additional information regarding our accountingpolicies is contained in Note 1 to the consolidated financialstatements.

Derivatives and Hedging Activities

Weutilize derivatives to manage interest rate risk exposure. Inaccordance with SFAS No. 133, "Accounting for DerivativeInvestments and Hedging Activities," all derivativeinstruments are recorded at fair value. We designate every derivativeinstrument as either (1) a hedge of the fair value of a recognizedasset or liability or of an unrecognized firm commitment, (2) a hedgeof the variability of cash flows to be paid related to either aforecasted or recognized liability, or (3) a free-standing derivativeinstrument.

To qualify for hedge accounting under SFAS No. 133,we must demonstrate, on an ongoing basis, that our interest rate riskmanagement activity is highly effective. We determine the effectivenessof our interest rate risk management activities using standardstatistical measures. If we are unable to qualify certain of ourinterest rate risk management activities for hedge accounting, then thechange in fair value of the associated derivative financial instrumentswould be reflected in current period earnings. See Note 4 of ourconsolidated financial statements for further information pertaining toour accounting for derivatives and hedging activities.

Changesin the fair value of a derivative that is highly effective and that isdesignated and qualifies as a fair value hedge, along with the changein the fair value of the hedged asset or liability, are recorded inearnings. Our fair value hedges are used primarily for mortgage loansheld for sale.

Changes in the fair value of a derivative that ishighly effective and that is designated and qualifies as a cash flowhedge are recorded in OCI to the extent that the derivative iseffective as a hedge, until earnings are affected by the variability incash flows of the designated hedged item. Our cash flow hedges are usedprimarily to hedge the financing cost for forecasted or recognizedmortgage-backed collateralized debt obligations.

We obtain thefair value of Eurodollar futures, TBA securities, options on TBAsecurities and interest rate swaps and caps from quoted marketprices.

The fair value of forward sale commitments to delivermortgages is estimated using current quoted market prices for dealer orinvestor commitments as applies to our existing positions.

Thefair value of an IRLC is based on an estimate of the fair value of theunderlying mortgage loan, and given the probability that the loan willfund within the terms of the IRLC. After issuance, the value of an IRLCcan change and be either positive or negative, depending on the changein value of the underlying mortgage loan. The probability that theunderlying loan will fund is driven by a number of factors, inparticular, the change, if any, in mortgage rates after the lock date.In general, the probability of funding increases if mortgage rates riseand decreases if mortgage rates fall. The probability that a loan willfund within the terms of the IRLC also is influenced by the source ofthe applicant, purpose for the loan (purchase or refinance) and theapplication approval rate.

Fair value estimates are made as of aspecific point in time based on estimates using present value or othervaluation techniques. These techniques may involve uncertainties andare significantly affected by the assumptions used and the judgmentsmade regarding risk characteristics of various financial instruments,discount rates, estimates of future cash flows, future expected lossexperience and other factors. Changes in assumptions couldsignificantly affect these estimates and the resulting fair values.

38

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Interest Income on Portfolio ARMLoans

Interest income is accrued based on the outstandingprincipal amount and contractual terms of our loans. Direct loanorigination fees and costs are deferred and amortized as an interestincome yield adjustment over the life of the related loans using theeffective yield method. Estimating prepayments and estimating theremaining lives of the loans requires management judgment, whichinvolves consideration of possible future interest rate environments.The actual lives could be more or less than the amount estimated bymanagement. See Item 3 – Quantitative and Qualitative DisclosuresAbout Market Risk – Interest Rate Risk Management in this reporton Form 10-Q for further details.

Loan Loss Reserves

MortgageIT's historical operations had an insignificant amountof loan losses due to default or non-performance on the loans primarilybecause mortgage loans were sold soon after being originated. Becausewe now hold loans for investment, we record an allowance for loanlosses reflecting our estimate of future loan default losses. OurPortfolio ARM Loans are collectively evaluated for impairment, as theloans are homogeneous in nature. The allowance is based uponmanagement's assessment of the various risk factors affecting ourinvestment loan portfolio, including current economic conditions, themakeup of the portfolio based on credit grade, loan-to-value ratios,delinquency status, historical credit losses, purchased mortgageinsurance and other factors deemed to warrant consideration. Theallowance is maintained through ongoing loss provisions charged tooperating income and are reduced by loans that are charged off.Determining the allowance for loan losses is subjective in nature dueto the estimates required and the potential for imprecision. Twocritical assumptions used in estimating the loan loss reserves are anassumed rate of default, which is the expected rate at which loans gointo foreclosure over the life of the loans, and an assumed rate ofloss severity, which represents the expected rate of realized loss upondisposition of the properties that have gone into foreclosure.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity is a measure ofour ability to meet potential cash requirements, including ongoingcommitments to repay borrowings, fund and maintain investments, paydividends to our stockholders and other general business needs. It isour policy to have adequate liquidity available at all times. As aresult of our initial public offering, which was completed on August 4,2004, we believe our existing cash balances, funds available under ourcredit facilities and cash flows from operations are sufficient to fundour current level of operations for at least the next 12 months. Wemanage liquidity to ensure that we have the continuing ability tomaintain cash flows that are adequate to fund operations and meetcommitments on a timely and cost-effective basis.

Liquidityfrom Mortgage Investment Operations

The principal sources ofliquidity for our mortgage investment operations are the issuance ofmortgage-backed securities, repurchase agreements, and principalpayments and net interest earned from our Portfolio ARM Loans. The netinterest income earned from our Portfolio ARM Loans is the primarysource of income and liquidity for the payment of dividends to ourstockholders. We believe that our liquidity level is in excess of thatnecessary to pay dividends to our stockholders and to satisfy ouroperating requirements.

Loan securitizations are the primaryfunding source for our Portfolio ARM Loans.

We securitizemortgage loans by transferring them to independent trusts that issuesecurities collateralized by the transferred mortgage loans. The loansecuritization process benefits us by creating highly liquidsecuritized assets that can be readily financed in the capital markets.We believe there is a reliable and stable market for term financing ofinvestment grade mortgage-backed securities that we issue.

Through March 31, 2005, we completed three securitizationtransactions in which we securitized ARM loans into a series of prorata pay, floating-rate securities. The securitization process benefitsus by 

39

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enabling us to issue permanent financingthat is not subject to rollover risk or margin calls, and by creatinghighly liquid assets that can be readily financed in the reverserepurchase agreement market.

In these transactions, we issuedAAA and AA-rated floating-rate pass-through certificates totaling $2.34billion to third party investors, and retained $101.4 million ofsubordinated certificates, which provide credit support to thehigher-rated certificates. The interest rates on the floating-ratepass-through certificates reset monthly and are indexed to theone-month LIBOR rate. In connection with the issuance of thesemortgage-backed securities we incurred securitization costs of $7.2million, including investment banking fees, legal fees and otherrelated costs. The securitization costs are amortized over the expectedlife of the mortgage-backed securities.

As of March 31, 2005 andDecember 31, 2004, outstanding mortgage-backed securities werecollateralized by ARM loans with a remaining principal balance ofapproximately $2.4 billion and $1.4 billion, respectively. Thesemortgage-backed securities mature between 2033 and 2035 and arecallable at par by us after the total remaining balance of the loanscollateralizing the debt is paid down to 20% of their originalbalance. The balance of our debt is also reduced as the underlying loancollateral is paid down, and is expected to have an average life ofapproximately four years.

In April 2005, we completed our fourthsecuritization in which we issued AAA and AA-rated floating ratesecurities totaling $649.1 million and A+/A subordinated floating ratesecurities totaling $16.3 million to third party investors.

Wealso utilize repurchase agreements as a source of financing for ourmortgage investment operations. These arrangements vary in size andother characteristics among multiple providers. In particular,repurchase agreements have terms that will vary with respect to advancerates, interest spreads, size, duration and other characteristicsdepending on the nature of the underlying collateral in theprogram.

Under these agreements, we sell some or all of theretained interest in our mortgage-backed securities to a counterpartyand we agree to repurchase those assets at a future date. At maturity,we purchase the assets back from the counterparty at an amount equal tothe original sales price plus interest. During the term of a repurchaseagreement, we continue to earn principal and interest on the underlyingmortgage assets. As of March 31, 2005 and December 31, 2004, we had$83.5 million and $67.7 million of repurchase agreements outstanding,respectively.

These financing arrangements are short-durationfacilities, generally 30 days, secured by the retained interest in ourresidential mortgage-backed securities, the value of which may moveinversely with changes in interest rates. A decline in the market valueof our investments may limit our ability to borrow or result in lendersrequiring additional collateral. As a result, we could be required tosell some of our investments under adverse market conditions in orderto maintain liquidity. If such sales are made at prices lower than theamortized costs of such investments, we will incur losses.

Inaddition, we draw down on all of our warehouse facilities, except forthe facility with RFC, to finance loans that are held forsecuritization by the REIT.

Liquidity from Mortgage BankingOperations

For our mortgage banking operations, our principalsources of liquidity are our warehouse facilities and our principal useof liquidity is the origination of new mortgage loans.

Tooriginate a mortgage loan, MortgageIT utilizes its short-term warehousecredit facilities that are available to fund mortgage loans held forsale. These facilities are secured by the mortgage loans owned byMortgageIT and by certain other assets, including cash deposited ininterest-bearing collateral accounts. Advances drawn under thesefacilities bear interest at rates that vary depending on the type ofmortgage loans securing the advances. These facilities are subject tosub-limits, advance rates and terms that vary depending on the type ofmortgage loans securing these financings and the ratio ofMortgageIT's liabilities to its tangible net worth. As of March31, 2005, the aggregate warehouse facilities aggregated $ 3.3 billionand the maximum amount available for additional borrowings under thesefacilities was approximately $900.4 million.

40

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These facilities bear interest at LIBORplus a spread based on the types of loans being funded. The documentsgoverning MortgageIT's warehouse facilities contain a number ofcompensating balance requirements and restrictive financial and othercovenants that, among other things, require it to maintain a minimumratio of total liabilities to tangible net worth, minimum levels oftangible net worth, liquidity and stockholders' equity andmaximum leverage ratios, as well as to comply with applicableregulatory and investor requirements.

During the three monthsended March 31, 2005, the Company negotiated two new credit facilities,which when added to the Company's three existing creditfacilities, bring to five, the total number of facilities it may drawupon.

The weighted average effective rate of interest forborrowings under all warehouse lines of credit, was approximately3.3% and 2.6% for the three months ended March 31, 2005and the year ended December 31, 2004, respectively.

All mortgageloans held for sale have been pledged as collateral under the abovewarehouse credit facilities. In addition, the facilities containvarious financial covenants and restrictions, including a requirementthat we maintain specified leverage ratios and net worth amounts. As ofMarch 31, 2005, we were not in compliance with certain covenantscontained in certain of our credit facilities. Although waivers fromthe lenders with respect to these covenant violations have beenobtained, no assurance can be made that the lenders will continue towaive future covenent violations, to the extent they occur. Theagreements also contain covenants limiting our ability to:

|              |                                                       |
|--------------|-------------------------------------------------------|
| •  | consolidate, merge or enter into similartransactions; |

|              |                         |
|--------------|-------------------------|
| •  | transfer or sellassets; |

|              |                                   |
|--------------|-----------------------------------|
| •  | create liens on thecollateral; or |

|              |                                                                                                                                      |
|--------------|--------------------------------------------------------------------------------------------------------------------------------------|
| •  | change the nature ofits business, without obtaining the prior consent of the lenders, whichconsent may not be unreasonably withheld. |

These limits may inturn restrict our ability to pay cash or stock dividends on our commonstock. In addition, under the warehouse facilities, we cannot continueto finance a mortgage loan that we hold through the warehouse facilityif:

|              |                                                                                                                                                          |
|--------------|----------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | the loan is rejected as"unsatisfactory for purchase" by the ultimateinvestor and has exceeded its permissible warehouse period, whichvaries by facility; |

|              |                                                                                                                         |
|--------------|-------------------------------------------------------------------------------------------------------------------------|
| •  | we fail to deliverthe applicable note, mortgage or other documents evidencing the loanwithin the requisite time period; |

|              |                                                                                                                      |
|--------------|----------------------------------------------------------------------------------------------------------------------|
| •  | theunderlying property that secures the loan has sustained a casualty lossin excess of 5% of its appraised value; or |

|              |                                                                                                     |
|--------------|-----------------------------------------------------------------------------------------------------|
| •  | the loan ceases to be an eligible loan (asdetermined pursuant to the warehouse facility agreement). |

Inaddition to the warehouse facilities, MortgageIT has entered into amortgage loan purchase agreement with UBS, which we refer to as aconduit facility. Under this agreement, UBS purchases a loan fromMortgageIT, which enables MortgageIT to record the sale and recognizethe gain on sale. Upon sale, MortgageIT removes both the loans and thecorresponding warehouse liability from its balance sheet. A third partysubsequently purchases the loan directly from UBS. MortgageITfacilitates the final settlement of the loan sale between UBS and thethird party, and receives a performance fee for services provided toUBS. MortgageIT classifies the performance fee as brokerage revenue.The capacity available under the conduit facility is included in the$1.25 billion warehouse facility. The overall facility capacity at anygiven time is reduced by the outstanding balance on the warehousefacility plus the outstanding balance of the conduit facility. Theconduit facility is not a committed facility and may be terminated atthe discretion of UBS.

In addition to the warehouse facilities,and the UBS conduit facility, MortgageIT has entered into a $15 millionNote Purchase Agreement with Technology Investment Capital Corp.("TICC"), whereby 

41

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MortgageIT sold an aggregate principalamount of $15 million of senior secured promissory notes (the"Notes") to TICC. The proceeds from the saleof the Notes provide working capital for MortgageIT. The Notes boreinterest at a rate of 10% per annum through September 30, 2004,and bear interest at the rate of 7.5% per annum for the periodfrom October 1, 2004 through March 31, 2005. Beginning on April 1,2005, the Notes bear interest at the rate of 10% per annum.Interest on the Notes is payable quarterly in arrears.The Notes providefor a single payment of the entire amount of the unpaid principal andany unpaid accrued interest on the Notes on March 29, 2007. As of March31, 2005, MortgageIT was in compliance with all of the restrictions andcovenants contained in the Note Purchase Agreement, except thewarehouse line ratio, for which a waiver has been obtained. However, noassurance can be made that waivers will be granted in the future, tothe extent such waivers are necessary.

MortgageIT makes certainrepresentations and warranties, and is subject to various affirmativeand negative financial and other covenants, under the terms of both thewarehouse credit facilities and certain investor loan sale agreementsregarding, among other things, the loans' compliance with lawsand regulations, their conformity with the investors'underwriting standards and the accuracy of information. In the event ofa breach of these representations, warranties or covenants or in theevent of an early payment default, these loans may become ineligiblecollateral for the warehouse credit facilities or may become ineligiblefor sale to an investor, and MortgageIT may be required to repurchasethe loans from the warehouse lender or the investor. MortgageIT hasimplemented procedures to help ensure quality control and conformity tounderwriting standards and to minimize the risk of being required torepurchase loans. MortgageIT has been required to repurchase loans ithas sold from time to time; however, these repurchases have not had amaterial impact on the results of operations of MortgageIT.

MortgageIT's ability to originate and fund loans hashistorically depended in large part on its ability to sell the mortgageloans it originates at a premium in the secondary market so that it maygenerate cash proceeds to repay borrowings under its warehousefacilities. The value of MortgageIT's loans is relevant indetermining the overall amount of borrowings that will be available toit under its financing facilities. The value of our loans depends on anumber of factors, including:

|              |                                                               |
|--------------|---------------------------------------------------------------|
| •  | interestrates on our loans compared to market interest rates; |

|              |                                         |
|--------------|-----------------------------------------|
| •  | the borrower credit riskclassification; |

|              |                                                                      |
|--------------|----------------------------------------------------------------------|
| •  | loan-to-value ratios,loan terms, underwriting and documentation; and |

|              |                              |
|--------------|------------------------------|
| •  | general economic conditions. |

Cashand Cash Equivalents

Our cash and cash equivalents decreased to$40.3 million at March 31, 2005 from $70.2 million at December 31,2004. Our primary sources of cash and cash equivalents during the threemonths ended March 31, 2005 were as follows:

|              |                                                              |
|--------------|--------------------------------------------------------------|
| •  | a $901.2 million increase incollateralized debt obligations; |

|              |                                                          |
|--------------|----------------------------------------------------------|
| •  | a$136.2 million increase in warehouse lines payable; and |

|              |                                                   |
|--------------|---------------------------------------------------|
| •  | a $15.8 million increase in repurchaseagreements. |

Our primary uses of cash and cash equivalents duringthe three months ended March 31, 2005 were as follows:

|              |                                                                                     |
|--------------|-------------------------------------------------------------------------------------|
| •  | a $1.1 billion increase in Portfolio ARMLoans and mortgage loans held for sale; and |

|              |                                  |
|--------------|----------------------------------|
| •  | a $8.5 million dividend payment. |

Payment of Dividends

On December 16, 2004, we declared ourinitial common stock dividend of $0.44 per share. The dividend wasdistributed in January 2005 and was generated from our operatingactivities. The total cash dividend of approximately $8.5 millionexceeded the minimum taxable income distribution requirements for theyear.

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On March 16, 2005, we declared our secondcommon stock dividend of $0.48 per share. The dividend was distributedin April 2005 and was generated from our operating activities. Thetotal cash dividend of approximately $9.3 million exceeded the minimumtaxable income distribution requirements for the quarter.

We arerequired to make annual distributions of our income to our stockholdersin order to maintain our REIT status and to avoid corporate income taxand the nondeductible excise tax. However, differences in timingbetween the recognition of REIT taxable income and the actual receiptof cash could require us to sell assets or to borrow funds on ashort-term basis to meet the REIT distribution requirements and toavoid corporate income tax and the nondeductible excise tax. Further,certain of our assets may generate substantial mismatches between REITtaxable income and available cash. Such assets could, for exampleinclude mortgage-backed securities we hold that have been issued at adiscount and require the accrual of taxable income in advance of thereceipt of cash. As a result, our taxable income may exceed our cashavailable for distribution and the requirement to distribute asubstantial portion of our net taxable income could cause us to: (1)sell assets under adverse market conditions, (2) borrow on unfavorableterms or (3) distribute amounts that would otherwise be invested infuture acquisitions, capital expenditures or repayment of debt in orderto comply with the REIT distribution requirements.

INFLATION

For the periods presented herein, inflation hasbeen relatively low and we believe that inflation has not had amaterial effect on our results of operations. To the extent inflationincreases in the future at a rate that is faster than the marketcurrently anticipates, interest rates are also likely rise, which wouldlikely reduce the number of mortgage loans we originate. A reduction inthe number of loans we originate resulting from increased inflationwould adversely affect our future results of operations. Additionally,to the extent that the investment portfolio earnings are sensitive torising interest rates, unanticipated increases in inflation mayadversely affect our results of operations.

OFF-BALANCE SHEETARRANGEMENTS

None.

CONTRACTUAL OBLIGATIONS

Wehad the following commitments (excluding derivative financialinstruments) at March 31, 2005 (inthousands):

|                                       |  |                       |           |                |  |           |           |           |  |                 |         |        |  |        |         |        |  |        |           |        |  |  |
|---------------------------------------|--|-----------------------|-----------|----------------|--|-----------|-----------|-----------|--|-----------------|---------|--------|--|--------|---------|--------|--|--------|-----------|--------|--|--|
|                                  |  | Paymentsdue by Period |
|                                  |  | (Dollars inthousands) |
|                                  |  | Total                 |           | Lessthan1 year |  | 1-3 years |           | 3-5 years |  | Morethan5 years |
| Collateralized debt obligations(1)(2) |  | $                     | 2,236,303 |           |  | $         | 46,703    |      |  | $               | 16,908  |   |  | $      | 26,783  |   |  | $      | 2,145,909 |   |
| Warehouselinespayable                 |  |                  | 2,005,546 |           |  |      | 2,005,546 |      |  |            | — |   |  |   | — |   |  |   | —   |   |
| Repurchaseagreements                  |  |                  | 83,475    |           |  |      | 83,475    |      |  |            | — |   |  |   | — |   |  |   | —   |   |
| Operatingleases(3)                    |  |                  | 31,229    |           |  |      | 8,040     |      |  |            | 13,498  |   |  |   | 8,657   |   |  |   | 1,034     |   |
| Notespayable                          |  |                  | 15,000    |           |  |      | —   |      |  |            | 15,000  |   |  |   | — |   |  |   | —   |   |
|                                       |

|  |
|--|
|  |  |
|  |

|     |                               |
|-----|-------------------------------|
| (1) | Excludingdebt issuance costs. |

|     |                                                                                                                                                                                                                                                                                                                                               |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) | Maturities of ourcollateralized debt obligations are dependent upon cash flows receivedfrom underlying loans receivable. Our estimate of their repayment isbased on scheduled principal payments on the underlying loansreceivable. This estimate will differ from actual amounts to the extentwe experience pre-payments and/or loan losses. |

|     |                 |
|-----|-----------------|
| (3) | Net ofsublease. |

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ITEM3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the exposure to losses resulting from changes ininterest rates, credit spreads, foreign currency exchange rates,commodity prices and equity prices. As we are invested solely in U.S.dollar-denominated instruments, primarily single-family residentialmortgage instruments, and our borrowings are also domestic and U.S.dollar denominated, we are not subject to foreign currency exchange, orcommodity and equity price risk. The primary market risk that we areexposed to is interest rate risk and its related ancillary risks.Interest rate risk is highly sensitive to many factors, includinggovernmental monetary and tax policies, domestic and internationaleconomic and political considerations and other factors beyond ourcontrol. Our interest bearing assets, liabilities and relatedderivative instruments used for hedging purposes are market risksensitive and may change in value if interest rates fluctuate. Thefollowing table presents information as to the notional amount,carrying amount and estimated fair value of certain of our market risksensitive assets, liabilities and hedging instruments at March 31, 2005and December 31, 2004:

|                                               |  |                       |           |                |  |                    |           |        |  |        |           |        |  |  |
|-----------------------------------------------|--|-----------------------|-----------|----------------|--|--------------------|-----------|--------|--|--------|-----------|--------|--|--|
|                                          |  | March31,2005          |
|                                          |  | NotionalAmount        |           | CarryingAmount |  | EstimatedFairValue |
|                                          |  | (Dollars inthousands) |
| Assets:                                       |  |                  |      |           |  |               |      |   |  |   |      |   |
| Mortgageloans held forsale                    |  | $                     | 1,395,133 |           |  | $                  | 1,402,487 |   |  | $      | 1,402,487 |   |
| Forwarddeliverycommitments                    |  |                  | 770,797   |           |  |               | 2,495     |   |  |   | 2,495     |   |
| Mortgageloans held for sale,net               |  |                  |      |           |  |               | 1,404,982 |   |  |   | 1,404,982 |   |
|                                          |  |                  |      |           |  |               |      |   |  |   |      |   |
| ARMloans held for securitization,net          |  |                  | 678,379   |           |  |               | 684,918   |   |  |   | 683,738   |   |
| ARMloans collateralizing debt obligations,net |  |                  | 2,355,993 |           |  |               | 2,379,556 |   |  |   | 2,373,585 |   |
| Hedginginstruments                            |  |                  | 5,553,216 |           |  |               | 44,151    |   |  |   | 44,151    |   |
|                                          |  |                  |      |           |  |               |      |   |  |   |      |   |
| Liabilities:                                  |  |                  |      |           |  |               |      |   |  |   |      |   |
| Warehouselinespayable                         |  | $                     | 2,005,546 |           |  | $                  | 2,005,546 |   |  | $      | 2,005,546 |   |
| Collateralizeddebt obligations,net            |  |                  | 2,236,303 |           |  |               | 2,229,829 |   |  |   | 2,236,303 |   |
| Repurchaseagreements                          |  |                  | 83,475    |           |  |               | 83,475    |   |  |   | 83,475    |   |
| Hedginginstruments                            |  |                  | 2,562,085 |           |  |               | 3,151     |   |  |   | 3,151     |   |
|                                               |

|                                               |  |                       |           |                |  |                    |           |        |  |        |           |        |  |  |
|-----------------------------------------------|--|-----------------------|-----------|----------------|--|--------------------|-----------|--------|--|--------|-----------|--------|--|--|
|                                          |  | December31,2004       |
|                                          |  | NotionalAmount        |           | CarryingAmount |  | EstimatedFairValue |
|                                          |  | (Dollars inthousands) |
| Assets:                                       |  |                  |      |           |  |               |      |   |  |   |      |   |
| Mortgageloans held forsale                    |  | $                     | 774,194   |           |  | $                  | 784,592   |   |  | $      | 787,234   |   |
| ARMloans held for securitization,net          |  |                  | 1,157,188 |           |  |               | 1,166,961 |   |  |   | 1,167,824 |   |
| ARMloans collateralizing debt obligations,net |  |                  | 1,418,323 |           |  |               | 1,432,692 |   |  |   | 1,434,534 |   |
| Hedginginstruments                            |  |                  | 6,428,399 |           |  |               | 19,526    |   |  |   | 19,526    |   |
|                                          |  |                  |      |           |  |               |      |   |  |   |      |   |
| Liabilities:                                  |  |                  |      |           |  |               |      |   |  |   |      |   |
| Warehouselinespayable                         |  | $                     | 1,869,385 |           |  | $                  | 1,869,385 |   |  | $      | 1,869,385 |   |
| Collateralizeddebt obligations,net            |  |                  | 1,331,986 |           |  |               | 1,328,096 |   |  |   | 1,331,986 |   |
| Repurchaseagreements                          |  |                  | 67,674    |           |  |               | 67,674    |   |  |   | 67,674    |   |
| Hedginginstruments                            |  |                  | 1,039,790 |           |  |               | 1,145     |   |  |   | 1,145     |   |
|                                               |

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INTEREST RATE RISK MANAGEMENT

Weutilize a variety of derivative instruments in order to hedge ourinterest rate risk. Our hedging transactions using derivativeinstruments involve certain risks such as counterparty credit risk, theenforceability of hedging contracts and the risk that unanticipated andsignificant changes in interest rates will cause a significant loss ofbasis in the contract. The counterparties to our derivativearrangements are major financial institutions and securities dealersthat are well capitalized with high credit ratings and with which wemay also have other financial relationships. While we do not anticipatenonperformance by any counterparty, we are exposed to potential creditlosses in the event the counterparty fails to perform. Our exposure tocredit risk in the event of default by a counterparty can be measuredas the difference between the value of the contract and the currentmarket price. We manage this risk by using multiple counterparties andlimiting our counterparties to major financial institutions with goodcredit ratings, and in some cases, establishing rights to collateralposted by the derivative counterparty. In addition, we monitor thecredit quality of our derivative counterparties. Accordingly, we do notexpect any material losses as a result of default by suchcounterparties. However, there can be no assurance that we will be ableto adequately manage the foregoing risks, or ultimately realize aneconomic benefit that exceeds the costs related to these hedgingstrategies.

Mortgage Investment Operations

Ourinvestment risk exposure is largely due to interest rate risk. Interestrate risk is defined as the sensitivity of our current and futureearnings to interest rate volatility, variability of spreadrelationships, the difference in repricing intervals between our assetsand liabilities and the effect that interest rates may have on our cashflows, especially Portfolio ARM Loan prepayments. Interest rate riskmay affect our interest income, interest expense and the market valueof our interest rate risk-sensitive assets and liabilities. Ourpolicies to manage interest rate risk aim to produce earnings stabilityand preserve capital by minimizing the negative effects of changingmarket interest rates and the impact of prepayment risk.

We aresubject to interest rate exposure with respect to our financing costsrelating to our Portfolio ARM Loans. Changes in interest rates impactour earnings in various ways. While we invest primarily in ARM Loans,rising short-term interest rates may temporarily negatively affect ourearnings, and, conversely, falling short-term interest rates maytemporarily increase our earnings. This impact can occur for severalreasons and is affected by portfolio prepayment activity as discussedbelow. First, our borrowings may react to changes in interest ratessooner than our ARM Loans because the weighted average next repricingdates of the borrowings are likely to be shorter time periods thanthose of the ARM Loans. Second, interest rates on ARM Loans may becapped per adjustment period (commonly referred to as the periodiccap), and our borrowings may not have similar limitations. Third,changes in interest rates on ARM Loans typically lag behind changes inapplicable interest rate indices due to the required notice periodprovided to ARM Loan borrowers when the interest rates on their loansare scheduled to change.

Interest rates can also affect our netreturn on Hybrid ARM loans. During a declining interest rateenvironment, the prepayment of Hybrid ARM loans may accelerate,possibly resulting in a decline in our net return on Hybrid ARM loans,as replacement Hybrid ARM loans may have a lower yield than the olderones paying off. In contrast, during an increasing interest rateenvironment, Hybrid ARM loans may prepay slower than expected,requiring us to finance a greater amount of Hybrid ARM loans thanoriginally anticipated at a time when interest rates may be higher,resulting in a decline in our net return on Hybrid ARM loans.

The rate of prepayment on mortgage loans may increase if interestrates decline or if the difference between long-term and short-terminterest rates diminishes. Increased prepayments would cause us toamortize the deferred origination costs and fees for our mortgage loansover a shorter period, resulting in a reduced yield on our mortgageloans. Additionally, to the extent proceeds of prepayments cannot bereinvested at a rate of interest at least equal to the rate previouslyearned on such mortgage loans, our portfolio yield could be adverselyaffected.

Conversely, the rate of prepayment on mortgage loansmay decrease if interest rates rise or if the difference betweenlong-term and short-term interest rates increases. Decreasedprepayments would 

45

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cause us to amortize the deferred originationcosts and fees for our mortgage loans over a longer period. Therefore,in rising interest rate environments where prepayments are declining,the yield on our ARM Loan portfolio could be expected to increase dueto higher interest rates and decreased amortization expenseattributable to slower prepayments.

The positions we take tohedge our net interest income recognize the effect of prepayments onthe size and composition of the portfolio. We manage prepayment risk byregularly recalculating the notional amount of the required hedgepositions through the application of a prepayment model and implementhedge adjustments, as required. While we have not experienced anysignificant credit losses, a rising interest rate environment oreconomic downturn could cause our mortgage loan default rate and creditlosses to increase, which would adversely affect our liquidity andoperating results.

The following table summarizes the repricingcharacteristics of our Portfolio ARM Loans:

RepricingCharacteristics of Portfolio ARMLoans

|                                   |  |                         |           |              |  |        |         |         |  |  |
|-----------------------------------|--|-------------------------|-----------|--------------|--|--------|---------|---------|--|--|
|                              |  | March31, 2005           |
|                              |  | UnpaidPrincipal Balance |           | PortfolioMix |
|                              |  | (Dollars inthousands)   |
| Traditional ARMAssets:            |  |                    |      |         |  |   |    |    |
| Index:                            |  |                    |      |         |  |   |    |    |
| Six-monthLIBOR                    |  | $                       | 36,032    |         |  |   | 1.2     | %  |
| One-yearconstant maturitytreasury |  |                    | 422       |         |  |   | — |    |
|                              |  |                    | 36,454    |         |  |   | 1.2     | %  |
| HybridARMAssets:                  |  |                    |      |         |  |   |    |    |
| Index:                            |  |                    |      |         |  |   |    |    |
| 3years orless                     |  |                    | 1,151,064 |         |  |   | 37.9    | %  |
| Over 3years to 5years             |  |                    | 1,846,854 |         |  |   | 60.9    | %  |
|                              |  |                    | 2,997,918 |         |  |   | 98.8    | %  |
|                              |  | $                       | 3,034,372 |         |  |   | 100.0   | %  |
|                                   |

Aswe build our investment portfolio of mortgage loans, our riskmanagement is focused on protecting against possible"compression" in the net interest marginearned on our investment portfolio. The "yieldcurve" creates this risk because of different repricingdurations for instruments with different maturities. In substance, thehedging objective is to protect the net interest margin by matchingrepricing durations for the ARM and Hybrid ARM loan portfolio and thecorresponding funding sources. As discussed below, Hybrid ARM loans arethe primary loans requiring hedging of the corresponding fundingsources.

Traditional ARM loans have shorter repricing periods(one year or less) than do Hybrids. The interest rate on TraditionalARM loans will reset monthly, semi-annually or annually at acontractual margin over a U.S. Treasury index or a LIBOR index. Thecorresponding funding liabilities will similarly have shortercontractual repricing frequencies. Additionally, when Hybrid ARM loansreach the end of their fixed rate period and become"rolled Hybrids," they reprice based onsemi-annual or annual LIBOR or U.S. Treasury indices and behave muchlike Traditional ARMs. While there exists some "basisrisk" between the repricing of both the Traditional ARMsand rolled Hybrids versus the typical one month funding costs of theportfolio, management believes this basis risk is manageable. HybridARM loans initially have longer repricing periods than TraditionalARMs. We may not be able to obtain matched repricing features for thecorresponding funding sources since our borrowings generally haveshorter repricing contractual terms than most of our Hybrid ARM loanswhere the initial rate is fixed for up to five years.

Tomitigate the effect of interest rate fluctuations on our net interestincome, including the effect of prepayment rates, we hedge thefinancing costs of our issued mortgage-backed securities with interestrate swap agreements, Eurodollar futures or options contracts andinterest rate cap agreements (collectively "Hybrid HedgingInstruments") in order to better match the repricingdurations of our Portfolio ARM Loans and our issued mortgage-backedsecurities.

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We may also use other instruments that maybe determined to be advantageous and are permitted under the hedgingpolicy adopted by our board of directors.

We use Eurodollarfutures to hedge for forecasted and recognized LIBOR-based borrowings.Eurodollar futures have the effect of fixing the interest rate onLIBOR-based liabilities in the event that LIBOR-based funding costschange.

We enter into Cap Agreements by incurring a one-time feeor premium. Pursuant to the terms of the Cap Agreements, we willreceive cash payments if the LIBOR-based interest rate index specifiedin any such Cap Agreement increases above contractually specifiedlevels. Therefore, such Cap Agreements have the effect of capping theinterest rate expense on a portion of our borrowings above a levelspecified by the Cap Agreement. The purchase price of these CapAgreements is amortized over the life of the Cap Agreements, and theamortization expense generally increases as the Cap Agreements approachmaturity. Therefore, the cap premium amortization expense in futureperiods can be expected to increase from the current amortizationrate.

We enter into Swap Agreements to fix the interest rate ona portion of our borrowings as specified in the Swap Agreement. When weenter into a Swap Agreement, we generally agree to pay a fixed interestrate, generally based on LIBOR. These Swap Agreements have the effectof converting our variable-rate debt into fixed-rate debt over the lifeof the Swap Agrements.

Both Cap Agreements and Swap Agreementsrepresent a way to lengthen the average repricing period of ourvariable-rate borrowings such that the average repricing of theborrowings more closely matches the average repricing of our PortfolioARM Loans.

Management relies on a variety of tools to assess theinterest rate risk exposure of the investment portfolio under variousinterest rate scenarios. Using financial modeling, the fair value andinterest rate sensitivity of financial instruments, or groups ofsimilar instruments, is estimated and then aggregated to form acomprehensive picture of the risk characteristics of the investmentportfolio.

The table below presents the sensitivity of themarket value of our portfolio using a discounted cash flow simulationmodel. Application of this method results in an estimation of thechange in the market value of our assets and hedged liabilities per 50basis point ("bp") incremental instantaneousparallel shifts in the LIBOR yield curve as of March 31, 2005 — ameasure commonly referred to as sensitivity of equity. Positivesensitivity of equity indicates an increase in the market value of ourassets relative to the market value of our hedged liabilitiescorresponding to the indicated shift in the yield curve.

As ofMarch 31,2005

|                                                     |  |                                                |         |         |  |        |         |         |  |        |         |          |  |        |         |          |  |  |
|-----------------------------------------------------|--|------------------------------------------------|---------|---------|--|--------|---------|---------|--|--------|---------|----------|--|--------|---------|----------|--|--|
|                                                |  | BasisPoint Increase (Decrease) in InterestRate |
|                                                |  | (100)                                          |         | (50)    |  | +50    |         | +100    |
|                                                |  | (Dollarsin thousands)                          |
| Change in market valuesof:                          |  |                                           |    |    |  |   |    |    |  |   |    |     |  |   |    |     |
| Assets                                              |  | $                                              | 61,097  |    |  | $      | 32,932  |    |  | $      | (35,550 | )   |  | $      | (72,372 | )   |
| Hedgedliabilities                                   |  |                                           | (55,793 | )  |  |   | (28,900 | )  |  |   | 31,296  |     |  |   | 65,341  |     |
| Netchange in market value of portfolioequity        |  | $                                              | 5,304   |    |  | $      | 4,032   |    |  | $      | (4,254  | )   |  | $      | (7,031  | )   |
| Percentagechange in market value of portfolioequity |  |                                           | 2.78    | %  |  |   | 2.11    | %  |  |   | (2.23   | )%  |  |   | (3.69   | )%  |
|                                                     |

Theuse of Hybrid Hedging Instruments is a critical part of our interestrate risk management strategies, and the effects of these HybridHedging Instruments on the market value of the investment portfolio arereflected in the model's output. This analysis also takes intoconsideration the value of options embedded in our mortgage assetsincluding constraints on the repricing of the interest rate of ARMassets resulting from periodic and lifetime cap features, as well asprepayment options. Assets and liabilities that are not interestrate-sensitive such as cash, payment receivables, prepaid expenses,payables and accrued expenses are excluded. The sensitivity of equitycalculated from this model is a key measure of the effectiveness of ourinterest rate risk management strategies.

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Changes in assumptions including, but notlimited to, volatility, mortgage and financing spreads, prepaymentbehavior, defaults, as well as the timing and level of interest ratechanges will affect the results of the model. Therefore, actual resultsare likely to vary from modeled results.

The table belowpresents the duration of our assets and liabilities as of March 31,2005, under the then prevailing yield curve, as well as withinstantaneous parallel 50bps shifts in the curve. Positive portfolioduration indicates that the market value of the investment portfolio,net of borrowings and hedges, will decline if our interest rates riseand increase if interest rates decline. The closer duration is to zero,the less interest rate changes are expected to affectearnings.

|                                 |  |                                                |       |         |  |        |       |         |  |        |      |        |  |        |      |        |  |        |       |         |  |  |
|---------------------------------|--|------------------------------------------------|-------|---------|--|--------|-------|---------|--|--------|------|--------|--|--------|------|--------|--|--------|-------|---------|--|--|
|                            |  | BasisPoint Increase (Decrease) in InterestRate |
|                            |  | (100)                                          |       | (50)    |  | Base   |       | +50     |  | +100   |
|                            |  | (Years)                                        |
| DurationofAssets                |  |                                           | 1.42  |    |  |   | 1.79  |    |  |   | 2.07 |   |  |   | 2.24 |   |  |   | 2.34  |    |
| Durationof Borrowings andHedges |  |                                           | 1.67  |    |  |   | 1.83  |    |  |   | 2.00 |   |  |   | 2.18 |   |  |   | 2.37  |    |
| NetPortfolioDuration            |  |                                           | (0.25 | )  |  |   | (0.04 | )  |  |   | 0.07 |   |  |   | 0.06 |   |  |   | (0.03 | )  |
|                                 |

Althoughmarket value sensitivity analysis is widely accepted in identifyinginterest rate risk, it does not take into consideration changes thatmay occur such as, but not limited to, changes in investment andfinancing strategies, changes in market spreads, and changes inbusiness volumes.

Mortgage Banking Operations

Movementsin interest rates can pose a major risk to our mortgage bankingoperations in either a rising or declining interest rate environment.MortgageIT utilizes warehouse lines of credit to fund its originationactivity. The cost of these borrowings is at variable interest rateterms that increase or decrease as short term interest rates increaseor decrease. In addition we are exposed to price risk from the time aninterest rate lock commitment is made to a mortgage applicant (orfinancial intermediary) to the time the related mortgage loan is sold.During this period, we are exposed to losses if mortgage rates rise,because the value of the IRLC or mortgage declines.

Thecommitted pipeline consists of loan applications in process where wehave issued IRLCs to the applicants (or financial intermediaries).IRLCs guarantee the rate and points on the underlying mortgage for aspecified period, generally from seven to sixty days. Managing theprice risk related to the committed pipeline is complicated by the factthat the ultimate percentage of applications that close within theterms of the IRLC is variable. The primary factor that drives thevariability of the closing percentage is change in mortgage rates. Ingeneral, the percentage of applications in the committed pipeline thatultimately close within the terms of the IRLC increases if mortgagerates rise and decreases if mortgage rates fall. This is due primarilyto the relative attractiveness of current mortgage rates compared tothe applicants' committed rates. The closing percentage is alsoinfluenced by the source of the applications, age of the applications,purpose for the loans (purchase or refinance) and the applicationapproval rate. We have developed closing ratio estimates for thecommitted pipeline using empirical data taking into account all ofthese variables. To mitigate the effect of the interest rate riskinherent in issuing an IRLC from the lock-in date to the funding dateof a loan, MortgageIT uses various derivative instruments, includingforward sale loan commitments and forward sales and purchases ofmortgage-backed securities and options on such securities in theforward delivery TBA market to economically hedge the IRLCs.

IfMortgageIT does not deliver into forward sale loan or TBA commitments,such instruments can be settled on a net basis. Net settlement entailspaying or receiving cash based upon the change in market value of theexisting instrument. All forward sale loan commitments and forwardsales and purchases of TBA commitments are typically settled within 90days of the contract date.

MortgageIT also hedges the economicvalue of funded loans that are held for sale but not yet allocated toan investor sale commitment. Once a loan has been funded,MortgageIT's risk management objective for its mortgage loansheld for sale is to protect earnings from an unexpected decline invalue of its mortgage loans. Similar to IRLCs, MortgageIT'sstrategy is to use forward sale loan commitments and TBAs to hedge itsmortgage loans held for sale. The notional amount of the 

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derivative contracts, along with theunderlying rate and terms of such contracts, are equivalent to theunpaid principal amount of the mortgage inventory being hedged; hence,the derivative contracts effectively fix the forward sales price andthereby substantially mitigate interest rate and price risk toMortgageIT.

The following further describes the derivativeinstruments we may use in our risk management activities related to thecommitted pipeline and mortgage loan inventory. The value of thesederivative instruments generally moves in the opposite direction to thevalue of the mortgage loan inventory. We review our committed pipelineand mortgage inventory risk profiles on a dailybasis.

|              |                                                                                                                                                                                                 |
|--------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | Forward sales of mortgage-backedsecurities: represents an obligation to sell a mortgage-backed securityat a specific price in the future; therefore, its value increases asmortgage rates rise. |

|              |                                                                                                                                                                                                   |
|--------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | Forward purchasesof mortgage-backed securities: represents an obligation to buy amortgage-backed security at a specific price in the future; therefore,its value increases as mortgage ratesfall. |

|              |                                                                                                                                                                                              |
|--------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | Long call options onmortgage-backed securities: represents a right to buy a mortgage-backedsecurity at a specific price in the future; therefore, its valueincreases as mortgage rates fall. |

|              |                                                                                                                                                                                             |
|--------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | Longput options on mortgage-backed securities: represents a right to sell amortgage-backed security at a specific price in the future; therefore,its value increases as mortgage ratesrise. |

|              |                                                                                                                                                                                                       |
|--------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | Long call options on Treasuryfutures: represents a right to acquire a Treasury futures contract at aspecific price in the future; therefore, its value increases as thebenchmark Treasury rate falls. |

|              |                                                                                                                                                                                                  |
|--------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | Long putoptions on Treasury futures: represents a right to sell a Treasuryfutures contract at a specific price in the future; therefore, itsvalue increases as the benchmark Treasury raterises. |

|              |                                                                                                                                                                                                                                |
|--------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | Short Eurodollar futurescontracts: represents a standardized exchange-traded contract, thevalue of which is tied to spot Eurodollar rates at specified futuredates; therefore, its value increases when Eurodollar rates rise. |

Finally, the mortgage banking industry is generally subject toseasonal trends. These seasonal trends reflect the pattern in thenational housing market. Home sales typically rise during the springand summer seasons and decline during the fall and winter seasons.Seasonality has less of an effect on mortgage refinancing activity,which is primarily driven by prevailing mortgage rates.

ITEM4.    CONTROLS AND PROCEDURES

(a) Evaluation of disclosurecontrols and procedures

We carried out an evaluation, with theparticipation of management, including our Chief Executive Officer andChief Financial Officer, of the effectiveness of our disclosurecontrols and procedures (pursuant to Rule 13a-15(e) under theSecurities Exchange Act of 1934) as of the end of the period covered bythis report. Based upon that evaluation, our Chief Executive Officerand Chief Financial Officer concluded that our disclosure controls andprocedures are effective to ensure that we are able to record, process,summarize and report the information we are required to disclose in thereports we file with the SEC within the time periods required.

(b) Internal control over financial reporting

As describedin Note 1A to the consolidated financial statements, during the thirdand fourth quarters of 2004, we evaluated the effectiveness of ourfinancial reporting controls with respect to the documentationrequirements for hedge accounting as prescribed in SFAS No. 133. Duringthis period, we implemented changes to enhance our accounting policiesand documentation processes.

Effective November 24, 2004, webelieve our financial reporting controls are sufficient with respect tointerest rate cap and swap agreements for cash flow hedge accounting,and for fair value hedge accounting for our unallocated loans held forsale. Accordingly, commencing November 24, 2004, we 

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have elected to apply SFAS No. 133 cash flowhedge accounting to our caps and swaps, and fair value hedge accountingfor our unallocated loans held for sale. However, we did not qualifyfor cash flow hedge accounting with respect to Eurodollar futurescontracts relating to investment portfolio hedging activities for suchperiod due to our inability to fully satisfy the documentationrequirements of SFAS No. 133. In addition, we did not qualify for fairvalue hedge accounting with respect to forward sales commitments. As ofMarch 31, 2005, we qualified for and elected to apply SFAS No. 133 fairvalue hedge accounting for forward sales commitments.

We expectthat we will continue to comply with the documentation requirements ofSFAS No. 133 for all hedged loans held for sale, and for interest ratecaps and swaps. We expect to be in compliance with SFAS No. 133 for ourEurodollar futures contracts relating to investment portfolio cash flowhedging activities in the second quarter of2005.

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PARTII. OTHER INFORMATION

Item 1.    Legal Proceedings

On September 29, 2004, and amended on October 12, 2004, an actionwas filed in the U.S. District Court for the Southern District of NewYork against our subsidiary, MortgageIT and IPI Skyscraper Mortgagewhich was, at the time, a subsidiary of, and has now been merged withand into, MortgageIT. The case was filed by four former loan officersof a MortgageIT branch in Newburgh, New York, and seeks to recoverallegedly unpaid minimum wage and overtime under both federal and NewYork labor laws. The case was filed as a putative class action; amotion for certification of a class under New York law and forcollective action under federal law was filed on March 11, 2005. We arevigorously asserting our defenses in this action.

In addition tothis case, we are a defendant in various other legal proceedingsinvolving matters generally incidental to our business. Although it isdifficult to predict the outcome of these other proceedings, managementbelieves, based on discussions with counsel, that any ultimateliability will not materially affect our consolidated financialposition or results of operations.

Item 2.    UnregisteredSales of Equity Securities and Use of Proceeds

None.

Item 3.    Defaults Upon Senior Securities

None.

Item 4.    Submission of Matters to a Vote of SecurityHolders

None.

Item 5.    Other Information

None.

Item 6.    Exhibits

Exhibits filed with thisForm10-Q:

|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |  |  |  |
|------|--|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|--|--|
| No.  |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| 31.1 |  | Certificationof Chief Executive Officer pursuant to Rule 13a - 14(a)/15d-14(a) ofthe Securities Exchange Act of 1934, as adopted pursuant to Section 302of the Sarbanes-Oxley Act of2002.                                                                                                                                                                                                                                                                                                                               |
| 31.2 |  | Certification of Chief FinancialOfficer pursuant to Rule 13a - 14(a)/15d-14(a) of the SecuritiesExchange Act of 1934, as adopted pursuant to Section 302 of theSarbanes-Oxley Act of2002.                                                                                                                                                                                                                                                                                                                               |
| 32.1 |  | Certification of Chief ExecutiveOfficer pursuant to 18 U.S.C. Section 1350, as adopted pursuant toSection 906 of the Sarbanes-Oxley Act of 2002 (This exhibit shall notbe deemed "filed" for purposes of Section 18of the Securities Exchange Act of 1934, as amended, or otherwisesubject to the liability of that section. Further, this exhibit shallnot be deemed to be incorporated by reference into any filing under theSecurities Act of 1933, as amended, or the Securities Exchange Act of1934, as amended.). |
|      |

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|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |  |  |  |
|------|--|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|--|--|
| No.  |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 32.2 |  | Certification of ChiefFinancial Officer pursuant to 18 U.S.C. Section 1350, as adoptedpursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (This exhibitshall not be deemed "filed" for purposes ofSection 18 of the Securities Exchange Act of 1934, as amended, orotherwise subject to the liability of that section. Further, thisexhibit shall not be deemed to be incorporated by reference into anyfiling under the Securities Act of 1933, as amended, or the SecuritiesExchange Act of 1934, asamended.). |
|      |

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Pursuant to the requirements of theSecurities Exchange Act of 1934, the registrant has duly caused thisreport to be signed on its behalf by the undersigned thereunto dulyauthorized:

|  | MORTGAGEIT HOLDINGS,INC. |
|--|--------------------------|

|  | **By:**    /s/ DOUG W.NAIDUS                                   |
|--|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | **Name:**Doug W. Naidus**Title:** Chairman and Chief ExecutiveOfficer**Date:**   May 12,2005 |
|--|-------------------------------------------------------------------------------------------------------------|

|  | **By:**    /s/ GLENN J.MOURIDY                             |
|--|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | **Name:**   GlennJ. Mouridy**Title:** President and Chief FinancialOfficer**Date:**    May 12,2005 |
|--|----------------------------------------------------------------------------------------------------------------------------------|

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