UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

[X]	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the quarterly period ended September 30, 2001
	or
[   ]	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the transition period from _______ to _______ .

Commission File Number: 1-8029

THE RYLAND GROUP, INC.
(Exact name of registrant as specified in its charter)

Maryland
(State of incorporation) 52-0849948
(I.R.S. Employer Identification Number)

24025 Park Sorrento, Suite 400
Calabasas, California 91302
818.223.7500
(Address and telephone number of principal executive offices)

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

[X]  Yes     [   ]  No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

The number of shares of common stock of The Ryland Group, Inc., outstanding on November 5, 2001, was 13,259,523.

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION
	Item 1. Financial Statements
		CONSOLIDATED BALANCE SHEETS
		CONSOLIDATED STATEMENTS OF EARNINGS (unaudited)
		CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
		NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
	Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
	Item 3. Quantitative and Qualitative Disclosures About Market Risk
PART II. OTHER INFORMATION
	Item 1. Legal Proceedings
	Item 4. Submission of Matters to a Vote of Security Holders
	Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
INDEX OF EXHIBITS
EXHIBIT 10.12
EXHIBIT 11
EXHIBIT 12.1

THE RYLAND GROUP, INC.
FORM 10-Q
INDEX

			PAGE NO.
PART I. FINANCIAL INFORMATION
	Item 1. Financial Statements
		Consolidated Balance Sheets at September 30, 2001, (unaudited) and December 31, 2000		1-2
		Consolidated Statements of Earnings for the Three and Nine Months Ended September 30, 2001 and 2000 (unaudited)		3
		Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2001 and 2000 (unaudited)		4
		Notes to Consolidated Financial Statements (unaudited)		5-8
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			9-13
	Item 3. Quantitative and Qualitative Disclosures About Market Risk			14
PART II. OTHER INFORMATION
	Item 1. Legal Proceedings			15
	Item 4. Submission of Matters to a Vote of Security Holders			15
	Item 6. Exhibits and Reports on Form 8-K			15
SIGNATURES				16
INDEX OF EXHIBITS				17

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

THE RYLAND GROUP, INC. & SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(amounts in thousands, except share data)

				September 30,		December 31,
				2001		2000
				(unaudited)
ASSETS
	Homebuilding
		Cash and cash equivalents		$	201,381	$	135,371
		Housing inventories:
			Homes under construction		599,295		451,723
			Land under development and improved lots		368,545		436,682
			Total inventories		967,840		888,405
		Property, plant and equipment			36,086		35,577
		Purchase price in excess of net assets acquired			18,625		19,947
		Other			77,016		71,932
					1,300,948		1,151,232
	Financial Services
		Cash and cash equivalents			6,504		6,830
		Mortgage loans, held-for-sale			11,784		11,217
		Mortgage-backed securities and notes receivable			67,328		84,600
		Other			13,344		11,843
					98,960		114,490
	Other Assets
		Collateral for bonds payable of limited-purpose subsidiaries			19,350		23,005
		Net deferred taxes			29,677		34,858
		Other			35,366		37,756
		TOTAL ASSETS		$	1,484,301	$	1,361,341

See Notes to Consolidated Financial Statements.

1

THE RYLAND GROUP, INC. & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except share data)

			September 30,		December 31,
			2001		2000
			(unaudited)
LIABILITIES
	Homebuilding
		Accounts payable and other liabilities	$	267,267	$	254,949
		Long-term debt		496,500		450,000
				763,767		704,949
	Financial Services
		Accounts payable and other liabilities		25,040		22,600
		Short-term notes payable		67,199		82,563
				92,239		105,163
	Other Liabilities
		Bonds payable of limited-purpose subsidiaries		17,086		21,250
		Other		89,162		76,350
		TOTAL LIABILITIES		962,254		907,712
STOCKHOLDERS’ EQUITY
		Convertible preferred stock, $1 par value: Authorized — 1,400,000 shares Issued — 0 shares (295,018 for 2000)		—		295
		Common stock, $1 par value: Authorized — 78,600,000 shares Issued — 13,243,226 shares (13,248,948 for 2000)		13,243		13,249
		Paid-in capital		42,991		60,535
		Retained earnings		464,244		379,006
		Accumulated other comprehensive income		1,569		544
		TOTAL STOCKHOLDERS’ EQUITY		522,047		453,629
		TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	1,484,301	$	1,361,341
Stockholders’ Equity Per Common Share			$	39.42	$	33.49

See Notes to Consolidated Financial Statements.

2

THE RYLAND GROUP, INC. & SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS (unaudited)

(amounts in thousands, except share data)

					Three months ended September 30,					Nine months ended September 30,
					2001			2000		2001			2000
REVENUES
		Homebuilding			$	695,247			616,459	$	1,872,916		$	1,550,403
		Financial services				16,394			11,868		40,397			31,686
				Total revenues		711,641			628,327		1,913,313			1,582,089
EXPENSES
		Homebuilding:
			Cost of sales			555,576			516,101		1,523,278			1,297,936
			Selling, general and administrative			68,723			55,145		186,702			147,927
			Interest			5,962			4,834		14,575			11,579
			Total homebuilding expenses			630,261			576,080		1,724,555			1,457,442
		Financial services:
			General and administrative			3,261			4,302		11,948			15,323
			Interest			1,240			2,991		4,561			8,804
			Total financial services expenses			4,501			7,293		16,509			24,127
		Corporate expenses				7,916			7,513		20,706			17,392
				Total expenses		642,678			590,886		1,761,770			1,498,961
EARNINGS BEFORE TAXES AND EXTRAORDINARY ITEM						68,963			37,441		151,543			83,128
Tax expense						27,241			14,602		59,860			32,420
Net earnings before extraordinary item						41,722			22,839		91,683			50,708
Extraordinary item — loss on early extinguishment of debt (net of taxes of $2,956)						(4,527	)		—		(4,527	)		—
NET EARNINGS					$	37,195		$	22,839	$	87,156		$	50,708
NET EARNINGS PER COMMON SHARE
	Basic
			Net earnings before extraordinary item		$	3.11		$	1.74	$	6.83		$	3.81
			Extraordinary item			(0.34	)		—		(0.34	)		—
			Net earnings per common share		$	2.77		$	1.74	$	6.49		$	3.81
	Diluted
			Net earnings before extraordinary item		$	2.91		$	1.67	$	6.40		$	3.68
			Extraordinary item			(0.32	)		—		(0.32	)		—
			Net earnings per common share		$	2.59		$	1.67	$	6.08		$	3.68
AVERAGE COMMON SHARES OUTSTANDING
	Basic					13,415,978			12,992,492		13,380,127			13,156,245
	Diluted					14,354,722			13,691,616		14,317,201			13,785,868

See Notes to Consolidated Financial Statements.

3

THE RYLAND GROUP, INC. & SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(amounts in thousands)

				Nine months ended September 30,
				2001			2000
CASH FLOWS FROM OPERATING ACTIVITIES
	Net earnings			$	87,156		$	50,708
	Adjustments to reconcile net earnings to net cash provided by operating activities:
		Depreciation and amortization			24,875			20,036
		Loss on early extinguishment of debt			7,483			—
		Changes in assets and liabilities:
			Increase in inventories		(79,435	)		(135,957	)
			Net change in other assets, payables and other liabilities		32,991			11,907
			Increase in mortgage loans, held-for-sale		(567	)		(19,157	)
		Other operating activities, net			(7,143	)		2,339
	Net cash provided by (used for) operating activities				65,360			(70,124	)
CASH FLOWS FROM INVESTING ACTIVITIES
	Net additions to property, plant and equipment				(22,609	)		(24,964	)
	Principal reduction of mortgage collateral				8,612			11,948
	Principal reduction of mortgage-backed securities, available-for-sale				14,147			7,958
	Principal reduction of mortgage-backed securities, held-to-maturity				—			7,414
	Decrease in funds held by trustee				3,443			1,236
	Net cash provided by investing activities				3,593			3,592
CASH FLOWS FROM FINANCING ACTIVITIES
	Cash proceeds of long-term debt				250,000			150,000
	Reduction of long-term debt				(208,756	)		(28,000	)
	Decrease in short-term notes payable				(15,364	)		(3,852	)
	Bond principal payments				(7,911	)		(15,127	)
	Common and preferred stock dividends				(2,075	)		(2,161	)
	Common stock repurchases				(37,288	)		(18,021	)
	Other financing activities, net				18,125			3,166
	Net cash (used for) provided by financing activities				(3,269	)		86,005
	Net increase in cash and cash equivalents				65,684			19,473
	Cash and cash equivalents at beginning of period				142,201			69,926
CASH AND CASH EQUIVALENTS AT END OF PERIOD				$	207,885		$	89,399
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
	Cash paid for interest (net of capitalized interest)			$	25,886		$	17,997
	Cash paid for income taxes (net of refunds)			$	29,621		$	32,263

See Notes to Consolidated Financial Statements.

4

THE RYLAND GROUP, INC. & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(amounts in thousands, except share data)

Note 1.  Consolidated Financial Statements

The consolidated financial statements include the accounts of The Ryland Group, Inc. and its wholly owned subsidiaries (“the Company”). Intercompany transactions have been eliminated in consolidation.

The consolidated balance sheet as of September 30, 2001, the consolidated statements of earnings for the three and nine months ended September 30, 2001 and 2000, and the consolidated statements of cash flows for the nine months ended September 30, 2001 and 2000, have been prepared by the Company without audit. In the opinion of management, all adjustments, which include normal recurring adjustments necessary to present fairly the Company’s financial position, results of operations and cash flows at September 30, 2001, and for all periods presented, have been made. The consolidated balance sheet at December 31, 2000, is taken from the audited financial statements as of that date. Certain amounts in the consolidated statements have been reclassified to conform to the 2001 presentation.

Certain information and footnote disclosures normally included in the financial statements have been condensed or omitted. These financial statements should be read in conjunction with the financial statements and related notes included in the Company’s 2000 annual report to its shareholders.

The results of operations for the nine months ended September 30, 2001, are not necessarily indicative of the operating results for the full year.

Assets presented in the financial statements are net of any valuation allowances.

The following table is a summary of capitalized interest:

	2001			2000
Capitalized interest as of January 1	$	33,494		$	26,970
Interest capitalized		23,318			25,972
Interest amortized to cost of sales		(22,154	)		(19,037	)
Capitalized interest as of September 30	$	34,658		$	33,905

Note 2.  New Accounting Pronouncements

FAS 141 and 142

In June 2001, the FASB issued Statements of Financial Accounting Standards (SFAS) No. 141, “Business Combinations” and No. 142, “Goodwill and Other Intangible Assets.” Under the new rules, goodwill and indefinite lived intangible assets are no longer amortized but are reviewed annually for impairment. Separable intangible assets that are not deemed to have an indefinite life will continue to be amortized over their useful lives. The amortization provisions of SFAS No. 142 apply to goodwill and intangible assets acquired after June 30, 2001. With respect to goodwill and intangible assets acquired prior to July 1, 2001, the Company will apply the new accounting rules beginning January 1, 2002.

We are currently evaluating our intangible assets in relation to the provisions of SFAS No. 142 to determine the impact, if any, the adoption of SFAS No. 142 will have on our results of operations or financial position.

5

THE RYLAND GROUP, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(amounts in thousands, except share data)

Note 3.  Segment Information

Operations of the Company consist of two business segments: homebuilding and financial services. The Company’s homebuilding segment specializes in the sale and construction of single-family attached and detached housing in 21 markets. The financial services segment provides mortgage-related products and services for Ryland Homes’ customers and also conducts investment activities. Corporate expenses represent the costs of corporate functions, which support the business segments.

		Three months ended September 30,						Nine months ended September 30,
		2001			2000			2001			2000
Earnings before taxes
	Homebuilding	$	64,986		$	40,379		$	148,361		$	92,961
	Financial services		11,893			4,575			23,888			7,559
	Corporate and other		(7,916	)		(7,513	)		(20,706	)		(17,392	)
	Total	$	68,963		$	37,441		$	151,543		$	83,128

Note 4.  Earnings Per Share Reconciliation

The following table sets forth the computation of basic and diluted earnings per share.

		Three months ended September 30,					Nine months ended September 30,
		2001		2000			2001			2000
Numerator
	Net earnings before extraordinary item	$	41,722	$	22,839		$	91,683		$	50,708
	Preferred stock dividends		—		(170	)		(308	)		(531	)
	Numerator for basic earnings per share, earnings before extraordinary item available to common stockholders		41,722		22,669			91,375			50,177
	Effect of dilutive securities, preferred stock dividends		—		170			308			531
	Numerator for diluted earnings per share, earnings before extraordinary item available to common stockholders	$	41,722	$	22,839		$	91,683		$	50,708
Denominator
	Denominator for basic earnings per share, weighted-average shares		13,415,978		12,992,492			13,380,127			13,156,245
	Effect of dilutive securities:
	Stock options		630,367		305,741			598,884			223,598
	Equity incentive plan		81,196		79,891			72,198			78,384
	Conversion of preferred shares		227,181		313,492			265,992			327,641
	Dilutive potential of common shares		938,744		699,124			937,074			629,623
	Denominator for diluted earnings per share, adjusted weighted-average shares and assumed conversions		14,354,722		13,691,616			14,317,201			13,785,868
	Basic earnings per share before extraordinary item	$	3.11	$	1.74		$	6.83		$	3.81
	Diluted earnings per share before extraordinary item	$	2.91	$	1.67		$	6.40		$	3.68

6

THE RYLAND GROUP, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(amounts in thousands, except share data)

Note 5.  Commitments and Contingencies

Refer to Part II, Other Information, Item 1, Legal Proceedings, of this document for updated information regarding the Company’s commitments and contingencies.

Note 6.  Comprehensive Income

Comprehensive income consists of net income and the increase or decrease in unrealized gains or losses on the Company’s available-for-sale securities. Comprehensive income totaled $37.4 million and $22.8 million for the three months ended September 30, 2001 and 2000, respectively. For the nine months ended September 30, 2001 and 2000, comprehensive income was $88.2 million and $50.2 million, respectively.

Note 7.  Financial Services Short-term Notes Payable

In March 2001, the Company amended a revolving credit facility used to finance investment securities in the financial services segment. The agreement was extended through March 2002, bears interest at market rates and is collateralized by investment portfolio securities. Borrowings outstanding under this facility were $35.7 million and $44.9 million at September 30, 2001, and December 31, 2000, respectively.

Effective July 31, 2001, the Company terminated another credit facility, which provided up to $150 million for mortgage warehouse funding. As a result of recent procedural changes in loan deliveries and sales, the Company no longer had a need for this facility.

Note 8.  Long-term Debt

In June 2001, the Company issued $150 million of 9 1/8 percent senior subordinated notes, which will mature on June 15, 2011. The net proceeds from this offering were used to redeem all of the $100 million aggregate principal from the Company’s 9 5/8 percent senior subordinated notes due 2004, which were called in June 2001; the remaining proceeds from this offering will be used for general corporate purposes.

In August 2001, the Company issued $100 million of 8 percent senior notes, which will mature on August 15, 2006. The net proceeds from this offering were used to redeem all of the $100 million aggregate principal from the Company’s 10 1/2 percent senior notes due 2006, which were called in August 2001.

Note 9.  Preferred Stock

During September 2001, Ryland called and redeemed all of its outstanding Preferred Stock, which was held within the Ryland Savings Opportunity Plan. At the election of each individual Preferred Stockholder, each share of Preferred Stock was either purchased at a per share price of $31.5625 or converted into one share of Ryland Common Stock in accordance with the terms of the Preferred Stock Plan. A total of 252,787 shares of Preferred Stock was converted into an equivalent number of shares of Common Stock.

7

THE RYLAND GROUP, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(amounts in thousands, except share data)

Note 10.  Extraordinary Item

In the third quarter of 2001, the Company recognized an extraordinary loss of $4.5 million (net of taxes of $3 million), or $0.32 per diluted share, in connection with the redemption on July 20, 2001, of $100 million of 9 5/8 percent senior subordinated notes due 2004, and the redemption on Sept. 14, 2001, of $100 million of 10 1/2 percent senior notes due 2006. The redemption of the senior subordinated notes was at par, and the redemption of the senior notes was at the stated call price of 105.25 percent of par. The redemptions were funded by the issuance of $150 million of 9 1/8 percent senior subordinated notes due 2011 and $100 million of 8 percent senior notes due 2006.

8

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

CONSOLIDATED

For the third quarter of 2001, the Company reported consolidated net earnings before extraordinary item of $41.7 million, or $3.11 per share ($2.91 per diluted share). This compares with consolidated net earnings from operations of $22.8 million, or $1.74 per share ($1.67 per diluted share), for the third quarter of 2000.

Consolidated net earnings before extraordinary item for the nine months ended September 30, 2001, were $91.7 million, or $6.83 per share ($6.40 per diluted share), compared to $50.7 million, or $3.81 per share ($3.68 per diluted share), for the same period in the prior year.

The homebuilding segment reported pretax earnings of $65 million for the third quarter of 2001, a $24.6 million increase over the $40.4 million reported for the third quarter of 2000. The increase over the prior year was attributable to a higher closing volume, an 8.9 percent increase in average sales price and a 260- basis-point increase in gross profit margins. For the nine months ended September 30, 2001, the homebuilding segment reported pretax earnings of $148.4 million, compared to $93 million for the same period in the prior year.

Pretax homebuilding margins were 9.3 percent and 7.9 percent for the three and nine months ended September 30, 2001, respectively, compared to 6.6 percent and 6.0 percent for the same periods in 2000.

The financial services segment reported pretax earnings from operations of $11.9 million and $23.9 million for the three and nine months ended September 30, 2001, compared to $4.6 million and $7.6 million for the same periods in 2000. The increase for the third quarter over the same period in the prior year was primarily attributable to a 37 percent increase in the number of originations and a 55.7 percent increase in loan-sales volume. The number of units from homebuilder originations that were financed by the financial services segment increased to 82 percent in the third quarter of 2001 from 71 percent in the third quarter of 2000.

Although the Company’s limited-purpose subsidiaries no longer issue mortgage-backed securities and mortgage-participation securities, they continue to hold collateral for previously issued mortgage-backed bonds in which the Company maintains a residual interest. Revenues, expenses and portfolio balances continue to decline as the mortgage collateral pledged to secure the bonds decreases due to scheduled payments, prepayments and exercises of early-redemption provisions. Revenues have approximated expenses for the last two years.

Corporate expenses represent the cost of corporate functions, which support the business segments. Corporate expenses were $7.9 million for the third quarter of 2001, compared to $7.5 million for the third quarter of 2000, and $20.7 million for the first nine months of 2001, versus $17.4 million for the first nine months of 2000. Corporate expenses, as a percentage of revenue, were approximately one percent for the three- and nine-month periods ended September 30, 2001 and 2000.

9

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

HOMEBUILDING SEGMENT

Results of operations from the homebuilding segment are summarized as follows:
($ amounts in thousands, except average closing price)

			Three months ended September 30,				Nine months ended September 30,
			2001		2000		2001		2000
Revenues
	Residential		$	689,857	$	574,335	$	1,832,082	$	1,496,174
	Other			5,390		42,124		40,834		54,229
	Total			695,247		616,459		1,872,916		1,550,403
Gross profit				139,671		100,358		349,638		252,467
Selling, general and administrative expenses				68,723		55,145		186,702		147,927
Interest expense				5,962		4,834		14,575		11,579
Homebuilding pretax earnings			$	64,986	$	40,379	$	148,361	$	92,961
Operational unit data
	New orders (units)			2,735		2,912		10,484		9,318
	Closings (units)			3,334		3,017		8,852		7,858
Outstanding contracts at September 30:
		Units						5,800		5,127
		Dollar value					$	1,194,276	$	1,052,024
Average closing price			$	207,000	$	190,000	$	207,000	$	190,000

Homebuilding revenues increased 12.8 percent for the third quarter of 2001, compared with the same period last year, primarily due to a 10.5 percent increase in closings (3,334 homes closed in the third quarter of 2001, compared to 3,017 homes in the third quarter of 2000) as well as an 8.9 percent increase in average closing price. For the nine months ended September 30, 2001, homebuilding revenues were $1.9 billion, an increase of $0.3 billion, or 20.8 percent, compared to the nine months ended September 30, 2000.

Gross profit margins from home sales averaged 20.2 percent for the third quarter of 2001, an increase from 17.6 percent for the third quarter of 2000. Gross profit margins from home sales averaged 19 percent for the first nine months of 2001, versus 17.1 percent for the same period in 2000. The increase is attributable to the composition of closings for the period, an increase in average closing price and reduced costs.

New orders for the third quarter of 2001 declined 6.1 percent from the third quarter of the prior year to 2,735 homes. Sales per community were down five percent from the third quarter of 2000, while the company operated in three fewer active communities than in the third quarter of last year. At a record 10,484 homes sold for the nine months ended September 30, 2001, new orders were up 12.5 percent from the first nine months of 2000.

10

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Outstanding contracts as of September 30, 2001, were 5,800 versus 5,127 at September 30, 2000, and 4,168 at December 31, 2000. Outstanding contracts represent the Company’s backlog of homes sold but not yet closed, which are generally built and closed, subject to cancellation, over the subsequent two quarters. The value of outstanding contracts at September 30, 2001, was $1.2 billion, an increase of 13.5 percent from September 30, 2000, and an increase of 37.7 percent from December 31, 2000.

Selling, general and administrative expenses, as a percentage of revenue, were 9.9 percent and 10 percent for the three and nine months ended September 30, 2001, respectively, compared to 8.9 percent and 9.5 percent for the same periods in the prior year. The increase in S,G&A for the third quarter was primarily due to increased incentive compensation costs as a result of the Company’s improved performance and the costs associated with the termination of land contracts in Northern California. Compared with the third quarter of 2000, interest expense increased $1.1 million to $6 million in the third quarter of 2001. This was partially attributable to the issuance of new senior debt prior to redemptions of preexisting debt during 2001. This increase was partially offset by declining interest rates and reduced borrowings against the revolving credit facility. For the first nine months of 2001, interest expense was $14.6 million, an increase of $3 million from the prior year.

FINANCIAL SERVICES

Results of operations of the Company’s financial services segment are summarized as follows:

(amounts in thousands)

			Three months ended September 30,				Nine months ended September 30,
			2001		2000		2001		2000
Retail revenues
	Net gains on sales of mortgages and servicing rights		$	11,072	$	5,216	$	24,462	$	12,658
	Title/escrow/insurance			2,979		2,473		8,367		6,771
	Interest			259		1,067		857		2,664
	Other			4		80		39		360
		Total retail revenue		14,314		8,836		33,725		22,453
Revenue from investment operations and limited-purpose subsidiaries				2,080		3,032		6,672		9,233
Total revenues			$	16,394	$	11,868	$	40,397	$	31,686
Expenses
	General and administrative			3,261		4,302		11,948		15,323
	Interest			1,240		2,991		4,561		8,804
	Total expenses			4,501		7,293		16,509		24,127
Pretax earnings			$	11,893	$	4,575	$	23,888	$	7,559

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Pretax earnings by line of business were as follows:
(amounts in thousands)

	Three months ended September 30,				Nine months ended September 30,
	2001		2000		2001		2000
Retail	$	11,369	$	4,010	$	22,603	$	5,998
Investments		524		565		1,285		1,561
Total	$	11,893	$	4,575	$	23,888	$	7,559

OPERATIONAL DATA

		Three months ended September 30,						Nine months ended September 30,
		2001			2000			2001			2000
Retail operations:
	Originations		2,631			1,920			6,792			5,001
	Percent of Ryland Homes closings		97	%		97	%		97	%		96	%
	Ryland Homes capture rate		82	%		71	%		81	%		69	%
Investment operations:
	Portfolio average balance (in millions)	$	68.6		$	89.2		$	73.6		$	95.5

Revenues for the financial services segment increased $4.5 million, or 38.1 percent, for the quarter ended September 30, 2001, compared to the same period in 2000. The increase from the prior year was attributable primarily to a 37 percent increase in the number of originations and a 55.7 percent increase in loan-sales volume. The capture rate increased to 82 percent in the third quarter of 2001, compared to 71 percent in the third quarter of 2000. For the first nine months of 2001, revenues for the financial services segment were $40.4 million, up $8.7 million from the same period in the prior year.

General and administrative expenses were $3.3 million and $11.9 million for the three and nine months ended September 30, 2001, respectively, compared to $4.3 million and $15.3 million for the three and nine months ended September 30, 2000, respectively. The decreases were primarily attributable to lower net origination costs per loan, partially offset by increased incentive compensation expense as a result of increased earnings. Interest expense was $1.2 million and $4.6 million for the three and nine months ended September 30, 2001, respectively, versus $3 million and $8.8 million for the same periods in 2000. The decreases were primarily due to reduced average warehouse borrowings and a decline in average borrowing rates.

FINANCIAL CONDITION AND LIQUIDITY

Cash requirements for the Company’s homebuilding and financial services segments are generally provided from outside borrowings and internally generated funds. The Company believes that its current sources of cash are sufficient to finance its current requirements.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The homebuilding segment’s borrowings include senior notes, senior subordinated notes, an unsecured revolving credit facility and nonrecourse secured notes payable. Senior and senior subordinated notes outstanding totaled $496.5 million as of September 30, 2001, and $450 million as of December 31, 2000.

The Company uses its unsecured revolving credit facility to finance increases in its homebuilding inventory and working capital. This facility matures in October 2003 and provides for borrowings up to $400 million. There were no borrowings under this facility as of September 30, 2001, and December 31, 2000. The Company had letters of credit outstanding under this facility totaling $93.3 million at September 30, 2001, and $55.7 million at December 31, 2000. To finance land purchases, the Company also uses seller-financed nonrecourse secured notes payable. At September 30, 2001, such notes payable outstanding amounted to $5.6 million, compared with $1.9 million at December 31, 2000.

Housing inventories increased to $967.8 million as of September 30, 2001, from $888.4 million at December 31, 2000. This increase reflects higher sold-inventory levels, related to a significant increase in quarter-end backlog. The increase was primarily funded with internally generated funds.

The financial services segment uses cash generated from operations and borrowing arrangements to finance its operations. The financial services segment has borrowing arrangements that include repurchase agreement facilities aggregating $80 million and a $45 million revolving credit facility, which are used to finance investment portfolio securities. At September 30, 2001, and December 31, 2000, the combined borrowings of the financial services segment outstanding under all agreements totaled $67.2 million and $82.6 million, respectively.

Mortgage loans, notes receivable and mortgage-backed securities held by the financial services subsidiaries were pledged as collateral for previously issued mortgage-backed bonds, the terms of which provided for the retirement of all bonds from the proceeds of the collateral. The source of cash for the bond payments was received from the mortgage loans, notes receivable and mortgage-backed securities.

The Company has not guaranteed the debt of either its financial services segment or limited-purpose subsidiaries.

During the three months ended September 30, 2001, the Company repurchased approximately 513,000 shares of its outstanding common stock at a cost of approximately $22.8 million. As of September 30, 2001, the Company had Board authorization to repurchase up to an additional 775,000 shares of its common stock. The Company’s repurchase program has been funded primarily through internally generated funds.

Note: Certain statements in the Management’s Discussion and Analysis of Financial Condition and Results of Operations may be “forward-looking statements” within the meaning of the Private Securities Litigation Act of 1995. Forward-looking statements are based on various factors and assumptions that include risks and uncertainties, such as the completion and profitability of sales reported; the market for homes generally and in areas where the Company operates; the availability and cost of land; changes in economic conditions and interest rates; the availability and increases in raw material and labor costs; consumer confidence; government regulations; and general competitive factors, all or each of which may cause actual results to differ materially.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no other material changes in the Company’s market risk from December 31, 2000. For information regarding the Company’s market risk, refer to Form 10-K for the fiscal year ended December 31, 2000, of The Ryland Group, Inc.

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PART II.  OTHER INFORMATION

Item 1.  Legal Proceedings

Contingent liabilities may arise from obligations incurred in the ordinary course of business or from the usual obligations of on-site housing producers for the completion of contracts.

Ryland Mortgage Company (RMC) received information from the Federal Deposit Insurance Corporation (FDIC) regarding outstanding claims related to mortgage servicing contracts that it entered into with the Resolution Trust Company during 1991 and 1992. RMC is investigating these claims. No prediction can be made, at this time, regarding either the results of this investigation or whether the FDIC will initiate a civil action against RMC in connection with these claims.

The Company is party to various legal proceedings generally incidental to its businesses. Based on evaluations of these other matters and discussions with counsel, management believes that liabilities to the Company arising from these other matters will not have a material adverse effect on its financial condition.

Item 4.  Submission of Matters to a Vote of Security Holders

There were no matters submitted to a vote of security holders during the third quarter of 2001.

Item 6.  Exhibits and Reports on Form 8-K

A. Exhibits

10.12	Amended Credit Agreement dated as of September 27, 2001, between Ryland Mortgage Company; Associates Funding Corporation and The Chase Manhattan Bank.
11	Statement re Computation of Per Share Earnings
12.1	Computation of Ratio of Earnings to Fixed Charges

B. Reports on Form 8-K

On August 13, 2001, the Company filed a Current Report on Form 8-K with respect to its offering of 8 percent senior notes due 2006.

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SIGNATURES

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

		THE RYLAND GROUP, INC. Registrant
November 13, 2001 Date	By:	/s/   Gordon A. Milne Gordon A. Milne Senior Vice President and Chief Financial Officer (Principal Financial Officer)
November 13, 2001 Date	By:	/s/   David L. Fristoe David L. Fristoe Senior Vice President, Chief Information Officer, Controller, and Chief Accounting Officer (Principal Accounting Officer)

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INDEX OF EXHIBITS

A. Exhibits

Exhibit No.			Page No.
	10.12	Amended Credit Agreement dated as of September 27, 2001, between Ryland Mortgage Company; Associates Funding Corporation and The Chase Manhattan Bank. (filed herewith)	18-23
	11	Statement re Computation of Per Share Earnings (filed herewith)	24
	12.1	Computation of Ratio of Earnings to Fixed Charges (filed herewith)	25

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