<PAGE>

                                                                    EXHIBIT 10.1

        THE                                          Distribution Date: 12/25/99
      BANK OF
        NEW
        YORK
101 Barclay Street - 12E
New York, NY 10286
                         Headlands Mortgage Securities Inc.
Attn: Anna Felt      Mortgage Pass-Through Certificates, Series 1998-3
      212-815-7166   Headlands Mortgage Company, Seller and Master Servicer

                Certificateholder Monthly Distribution Summary

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------------
                                   Certificate                    Pass                                                Current
                         Class        Rate        Beginning     Through      Principal      Interest       Total      Realized
Class        Cusip    Description     Type         Balance      Rate (%)    Distribution  Distribution  Distribution   Losses
--------------------------------------------------------------------------------------------------------------------------------
<S>        <C>        <C>          <C>          <C>             <C>         <C>           <C>           <C>           <C>
A-1        42209EGD6   Senior      Fix-30/360   207,900,491.18  6.650000      961,046.69  1,152,115.22  2,113,161.91      0.00
PO         42209EGE4  Strip PO     Fix-30/360       971,549.47  0.000000        1,178.08          0.00      1,178.08      0.00
R          42209EGF1   Senior      Fix-30/360             0.00  6.650000            0.00          0.00          0.00      0.00
------------------------------------------------------------------------------------------------------------------------------------
B-1        42209EGG9   Junior      Fix-30/360     4,511,772.43  6.650000        4,252.30     25,002.74     29,255.04      0.00
B-2        42209EGH7   Junior      Fix-30/360     2,030,262.93  6.650000        1,913.50     11,251.04     13,164.54      0.00
B-3        42209EGJ3   Junior      Fix-30/360     1,353,541.63  6.650000        1,275.70      7,500.88      8,776.58      0.00
B-4        42209EGK0   Junior      Fix-30/360       789,607.21  6.650000          744.20      4,375.74      5,119.94      0.00
B-5        42209EGL8   Junior      Fix-30/360       676,721.30  6.650000          637.80      3,750.16      4,387.97      0.00
B-6        42209EGM6   Junior      Fix-30/360       789,658.30  6.650000          744.25      4,376.02      5,120.27      0.00
------------------------------------------------------------------------------------------------------------------------------------
Totals                                          219,023,604.45                971,792.52  1,208,371.80  2,180,164.33      0.00
------------------------------------------------------------------------------------------------------------------------------------

<CAPTION>
----------------------------------------------
                                Cumulative
                    Ending       Realized
Class              Balance        Losses
----------------------------------------------
<S>             <C>             <C>
A-1             206,939,444.48        0.00
PO                  970,371.40        0.00
R                         0.00        0.00
----------------------------------------------
B-1               4,507,520.12        0.00
B-2               2,028,349.43        0.00
B-3               1,352,265.93        0.00
B-4                 788,863.01        0.00
B-5                 676,083.50        0.00
B-6                 788,914.05        0.00
----------------------------------------------
Totals          218,051,811.92        0.00
----------------------------------------------
</TABLE>

                                     Page 1
<PAGE>

        THE                                          Distribution Date: 12/25/99
      BANK OF
        NEW
       YORK

101 Barclay Street - 12E
New York, NY 10286
                                Headlands Mortgage Securities Inc.
Attn: Anna Felt        Mortgage Pass-Through Certificates, Series 1998-3
      212-815-7166   Headlands Mortgage Company, Seller and Master Servicer

                         Principal Distribution Detail

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                        Original       Beginning      Scheduled               Unscheduled      Net       Current       Ending
                      Certificate     Certificate     Principal    Accretion   Principal    Principal    Realized   Certificate
Class       Cusip       Balance         Balance      Distribution  Principal  Adjustments  Distribution   Losses      Balance
------------------------------------------------------------------------------------------------------------------------------------
<S>       <C>        <C>             <C>             <C>           <C>        <C>          <C>           <C>       <C>
A-1       42209EGD6  216,562,200.00  207,900,491.18    961,046.69       0.00         0.00    961,046.69      0.00  206,939,444.48
PO        42209EGE4    1,002,393.00      971,549.47      1,178.08       0.00         0.00      1,178.08      0.00      970,371.40
R         42209EGF1          100.00            0.00          0.00       0.00         0.00          0.00      0.00            0.00
------------------------------------------------------------------------------------------------------------------------------------
B-1       42209EGG9    4,556,300.00    4,511,772.43      4,252.30       0.00         0.00      4,252.30      0.00    4,507,520.12
B-2       42209EGH7    2,050,300.00    2,030,262.93      1,913.50       0.00         0.00      1,913.50      0.00    2,028,349.43
B-3       42209EGJ3    1,366,900.00    1,353,541.63      1,275.70       0.00         0.00      1,275.70      0.00    1,352,265.93
B-4       42209EGK0      797,400.00      789,607.21        744.20       0.00         0.00        744.20      0.00      788,863.01
B-5       42209EGL8      683,400.00      676,721.30        637.80       0.00         0.00        637.80      0.00      676,083.50
B-6       42209EGM6      797,452.00      789,658.30        744.25       0.00         0.00        744.25      0.00      788,914.05
------------------------------------------------------------------------------------------------------------------------------------
Totals               227,816,445.00  219,023,604.45    971,792.52       0.00         0.00    971,792.52      0.00  218,051,811.92
------------------------------------------------------------------------------------------------------------------------------------

<CAPTION>
------------------------------------------
                        Ending
                      Certificate
Class                   Factor
------------------------------------------
<S>                  <C>
A-1                  0.95556585814
PO                   0.96805484158
R                    0.00000000000
------------------------------------------
B-1                  0.98929397184
B-2                  0.98929397184
B-3                  0.98929397184
B-4                  0.98929397184
B-5                  0.98929397184
B-6                  0.98929346321
------------------------------------------
Totals
------------------------------------------
</TABLE>

                                     Page 2
<PAGE>

         THE                                         Distribution Date: 12/25/99
        BANK OF
         NEW
         YORK

101 Barclay Street - 12E
New York, NY 10286

Attn: Anna Felt             Headlands Mortgage Securities Inc.
      212-815-7166   Mortgage Pass-Through Certificates, Series 1998-3
                 Headlands Mortgage Company, Seller and Master Servicer

                         Interest Distribution Detail

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
           Beginning         Pass      Accrued     Cumulative                     Total           Net       Unscheduled
          Certificate      Through     Optimal       Unpaid      Deferred        Interest     Prepayment     Interest     Interest
  Class     Balance        Rate (%)    Interest     Interest     Interest          Due       Int Shortfall  Adjustment      Paid
------------------------------------------------------------------------------------------------------------------------------------
<S>      <C>              <C>        <C>           <C>           <C>           <C>           <C>            <C>         <C>
   A-1   207,900,491.18   6.650000   1,152,115.22        0.00          0.00    1,152,115.22           0.00        0.00  1,152,115.22
   PO        971,549.47   0.000000           0.00        0.00          0.00            0.00           0.00        0.00          0.00
   R               0.00   6.650000           0.00        0.00          0.00            0.00           0.00        0.00          0.00
------------------------------------------------------------------------------------------------------------------------------------
   B-1     4,511,772.43   6.650000      25,002.74        0.00          0.00       25,002.74           0.00        0.00     25,002.74
   B-2     2,030,262.93   6.650000      11,251.04        0.00          0.00       11,251.04           0.00        0.00     11,251.04
   B-3     1,353,541.63   6.650000       7,500.88        0.00          0.00        7,500.88           0.00        0.00      7,500.88
   B-4       789,607.21   6.650000       4,375.74        0.00          0.00        4,375.74           0.00        0.00      4,375.74
   B-5       676,721.30   6.650000       3,750.16        0.00          0.00        3,750.16           0.00        0.00      3,750.16
   B-6       789,658.30   6.650000       4,376.02        0.00          0.00        4,376.02           0.00        0.00      4,376.02
------------------------------------------------------------------------------------------------------------------------------------
 Totals  219,023,604.45              1,208,371.80        0.00          0.00    1,208,371.80           0.00        0.00  1,208,371.80
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                    Page 3
<PAGE>

         THE                                         Distribution Date: 12/25/99
        BANK OF
         NEW
         YORK

101 Barclay Street - 12E
New York, NY 10286

Attn: Anna Felt           Headlands Mortgage Securities Inc.
      212-815-7166   Mortgage Pass-Through Certificates, Series 1998-3
                   Headlands Mortgage Company, Seller and Master Servicer

                         Current Payment Information
                              Factors per $1,000

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------
                            Original           Beginning Cert.                                      Ending Cert.        Pass
                          Certificate             Notional        Principal          Interest         Notional        Through
   Class      Cusip         Balance               Balance       Distribution       Distribution       Balance          Rate (%)
----------------------------------------------------------------------------------------------------------------------------------
<S>         <C>           <C>                  <C>              <C>                <C>              <C>               <C>
    A-1     42209EGD6      216,562,200.00       960.003597931      4.437739788        5.320019939      955.565858143      6.650000
     PO     42209EGE4        1,002,393.00       969.230106226      1.175264644        0.000000000      968.054841582      0.000000
      R     42209EGF1              100.00         0.000000000      0.000000000        0.000000000        0.000000000      6.650000
----------------------------------------------------------------------------------------------------------------------------------
    B-1     42209EGG9        4,556,300.00       990.227251515      0.933279673        5.487509352      989.293971842      6.650000
    B-2     42209EGH7        2,050,300.00       990.227251515      0.933279673        5.487509352      989.293971842      6.650000
    B-3     42209EGJ3        1,366,900.00       990.227251515      0.933279673        5.487509352      989.293971842      6.650000
    B-4     42209EGK0          797,400.00       990.227251515      0.933279673        5.487509352      989.293971842      6.650000
    B-5     42209EGL8          683,400.00       990.227251515      0.933279673        5.487509352      989.293971842      6.650000
    B-6     42209EGM6          797,452.00       990.226742402      0.933279193        5.487506531      989.293463209      6.650000
----------------------------------------------------------------------------------------------------------------------------------
Totals                     227,816,445.00       961.403837418      4.265682049        5.304146503      957.138155325
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                    Page 4
<PAGE>

          THE
        BANK OF
       NEW YORK

101 Barclay Street - 12E
New York, NY 10286


Attn: Anna Felt             Headlands Mortgage Securities Inc.
      212-815-7166    Mortgage Pass-Through Certificates, Series 1998-3
                   Headlands Mortgage Company, Seller and Master Servicer

<TABLE>
<CAPTION>
Pool Level Data
<S>                                         <C>                                         <C>
Distrbution Date                                                                              12/25/99
Cut-off Date                                                                                  12/ 1/98
Determination Date                                                                            12/ 1/99
Accrual Period                              Begin                                             11/ 1/99
                                            End                                               12/ 1/99
Number of Days in Accrual Period                                                                    30

---------------------------------------------------------------------
                         Collateral Information
---------------------------------------------------------------------
Group 1
-------
Cut-Off Date Balance                                                                    227,816,444.00

Beginning Aggregate Pool Stated Principal Balance                                       219,023,604.87
Ending Aggregate Pool Stated Principal Balance                                          218,051,812.35

Beginning Aggregate Certificate Stated Principal Balance                                219,023,604.45
Ending Aggregate Certificate Stated Principal Balance                                   218,051,811.93

Beginning Aggregate Loan Count                                                                     827
Loans Paid Off or Otherwise Removed Pursuant to Pooling and Servicing                                1
 Agreement
Ending Aggregate Loan Count                                                                        826

Beginning Weighted Average Loan Rate (WAC)                                                    7.154515%
Ending Weighted Average Loan Rate (WAC)                                                       7.153951%

Beginning Net Weighted Average Loan Rate                                                      6.896013%
Ending Net Weighted Average Loan Rate                                                         6.895450%

Aggregate Pool Prepayment                                                                   765,327.73
Pool Prepayment Rate                                                                        4.1135 CPR

---------------------------------------------------------------------
                         Certificate Information
---------------------------------------------------------------------
Group 1
-------
Senior Percentage                                                                        95.3444310345%
Senior Prepayment Percentage                                                            100.0000000000%

Subordinate Percentage                                                                    4.6555689655%
Subordinate Prepayment Percentage                                                         0.0000000000%


Prepayment Compensation
Total Gross Prepayment Interest Shortfall                                                     2,834.78
Compensation for Gross PPIS from Servicing Fees                                               2,834.78
Other Gross PPIS Compensation                                                                     0.00
</TABLE>

                                    Page 1

<PAGE>

          THE
        BANK OF
       NEW YORK

101 Barclay Street - 12E
New York, NY 10286


Attn: Anna Felt             Headlands Mortgage Securities Inc.
      212-815-7166    Mortgage Pass-Through Certificates, Series 1998-3
                   Headlands Mortgage Company, Seller and Master Servicer


<TABLE>
<S>                                                                <C>              <C>              <C>            <C>
                                                                                                                       -------
Total Net PPIS (Non-Supported PPIS)                                                                                       0.00


Master Servicing Fees Paid                                                                                           93,081.44
Sub Servicing Fees Paid                                                                                                   0.31
Trustee Fees Paid                                                                                                     1,551.42
                                                                                                                     ---------
Total Fees                                                                                                           94,633.16

---------------------------------------------------------------
                           Delinquency Information
---------------------------------------------------------------
Group 1
-------

Delinquency                                                        30 - 59 Days     60 - 89 Days      90+ Days          Totals
-----------                                                        ------------     ------------      --------          ------

Scheduled Principal Balance                                         264,859.62             0.00      58,772.74      323,632.36
Percentage of Total Pool Balance                                      0.121466%        0.000000%      0.026954%       0.148420%
Number of Loans                                                              1                0              1               2
Percentage of Total Loans                                             0.121065%        0.000000%      0.121065%       0.242131%

Foreclosure
-----------

Scheduled Principal Balance                                               0.00             0.00           0.00            0.00
Percentage of Total Pool Balance                                      0.000000%        0.000000%      0.000000%       0.000000%
Number of Loans                                                              0                0              0               0
Percentage of Total Loans                                             0.000000%        0.000000%      0.000000%       0.000000%

Bankruptcy
----------

Scheduled Principal Balance                                               0.00             0.00           0.00            0.00
Percentage of Total Pool Balance                                      0.000000%        0.000000%      0.000000%       0.000000%
Number of Loans                                                              0                0              0               0
Percentage of Total Loans                                             0.000000%        0.000000%      0.000000%       0.000000%

REO
---

Scheduled Principal Balance                                               0.00             0.00           0.00            0.00
Percentage of Total Pool Balance                                      0.000000%        0.000000%      0.000000%       0.000000%
Number of Loans                                                              0                0              0               0
Percentage of Total Loans                                             0.000000%        0.000000%      0.000000%       0.000000%

Book Value of all REO Loans                                                                                               0.00
Percentage of Total Pool Balance                                                                                      0.000000%

Current Realized Losses                                                                                                   0.00
</TABLE>

                                    Page 2
<PAGE>

     THE BANK OF
     NEW YORK
101 Barclay Street - 12E
New York, NY 10286



Attn: Anna Felt                 Headlands Mortgage Securities Inc.
      212-815-7166          Mortage Pass-Through Certificates, Series 1998-3
                         Headlands Mortgage Company, Seller and Master Servicer

<TABLE>
<CAPTION>

<S>                                                                                                 <C>              <C>
Additional Gains (Recoveries)/Losses                                                                                           0.00
Total Realized Losses                                                                                                          0.00

 -------------------------------------------------------------------
                 Subordination/Credit Enhancement Information
 -------------------------------------------------------------------

Protection                                                                                                Original          Current
----------                                                                                                --------          -------
Bankruptcy Loss                                                                                         100,000.00             0.00
Bankruptcy Percentage                                                                                     0.043895%        0.000000%
Credit/Fraud Loss                                                                                     2,278,164.00     2,278,164.00
Credit/Fraud Loss Percentage                                                                              1.000000%        1.044781%
Special Hazard Loss                                                                                   3,919,310.00     3,880,135.71
Special Hazard Loss Percentage                                                                            1.720381%        1.779456%

Credit Support                                                                                            Original          Current
--------------                                                                                            --------          -------
Class A                                                                                             217,564,693.00   207,909,815.88
Class A Percentage                                                                                       95.499995%       95.348814%

Class B-1                                                                                             4,556,300.00     4,507,520.12
Class B-1 Percentage                                                                                      1.999987%        2.067178%

Class B-2                                                                                             2,050,300.00     2,028,349.43
Class B-2 Percentage                                                                                      0.899979%        0.930214%

Class B-3                                                                                             1,366,900.00     1,352,265.93
Class B-3 Percentage                                                                                      0.600001%        0.620158%

Class B-4                                                                                               797,400.00       788,863.01
Class B-4 Percentage                                                                                      0.350019%        0.361778%

Class B-5                                                                                               683,400.00       676,083.50
Class B-5 Percentage                                                                                      0.299978%        0.310056%

Class B-6                                                                                               797,452.00       788,914.05
Class B-6 Percentage                                                                                      0.350041%        0.361801%
</TABLE>

                                    Page 3