UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                       WASHINGTON, D.C.  20549
                              FORM 10-Q
  
  
 [X]   QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
       ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998
  
                                    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 Nos.: 33-73748
  
  
                  FUND AMERICA INVESTORS CORPORATION II         
         (Exact name of registrant as specified in its charter)
  
  
            Delaware                              84-1218906
  (State or other jurisdiction of             (I.R.S. Employer
  incorporation or organization)           identification number)
  


  6400 S. Fiddler's Green Circle, Suite 1200B, Englewood, Colorado 80111
                (Address of principal executive offices)
  

    Registrant's telephone number including area code: (303) 290-6025
  

  Indicate by check mark whether the registrant (1) has filed all reports
  required to be filed by Section 13 or 15(d) of the Securities Exchange
  Act of 1934 during the preceding 12 months (or for such shorter period
  that the registrant was required to file such reports), and (2) has been
  subject to such filing requirements for the past 90 days.  YES [X]  NO [ ] 
      
  Indicate the number of shares outstanding of each of the issuer's classes
  of common stock as of November 13, 1998 -- 349,000 shares
    


</PAGE>





                FUND AMERICA INVESTORS CORPORATION II
                          FORM 10-Q FOR THE
                  NINE MONTHS ENDED SEPTEMBER 30, 1998
  
  
                                INDEX
  
  
  
  PART I.  FINANCIAL INFORMATION                         PAGE NO.   
  
       Item 1.   Financial Statements                       3
  
       Item 2.   Management's Discussion and
                 Analysis of Financial Condition
                 and Results of Operations                   7
  
  PART II.  OTHER INFORMATION
  
       Item 1.   Legal Proceedings                          10
  
       Item 2.   Changes in Securities                      10
  
       Item 3.   Defaults upon Senior Securities            10
  
       Item 4.   Submission of Matters to a Vote
                 of Security Holders                        10
  
       Item 5.   Other Information                          10
  
       Item 6.   Exhibits and Reports                       10
  
       SIGNATURES                                           11



                                 Page 2

</PAGE>
<PAGE>
<TABLE>



                        PART I.  FINANCIAL INFORMATION
  
  Item 1.  Financial Statements
  
                   FUND AMERICA INVESTORS CORPORATION II
                              BALANCE SHEETS
  


<CAPTION>
                                       (Unaudited)
                                      September 30,      December 31,
                                          1998               1997
                                      ____________       ___________
<S>                                  <C>                <C>
  Assets
    Cash                                 $352,466           $110,311
    Deferred offering costs               239,645            364,797
    Prepaid expenses                            -                172 
                                         ________           ________

       Total assets                      $592,111           $475,280
                                         ========           ========


  Liabilities - accounts payable         $ 10,240           $  8,801
                                         ________           ________

  Shareholder's equity
    Common stock, par value $.01 per share;
      10,000 shares authorized; 349,000
      shares issued and outstanding         3,490              3,490
    Retained earnings                     578,381            462,989 
                                         ________           ________

    Total shareholder's equity            581,871            466,479 
                                         ________           ________
    Total liabilities and
      shareholder's equity               $592,111           $475,280 
                                         ========           ========
  
  
  See notes to financial statements
    

</TABLE>

                                   Page 3


</PAGE>
<PAGE>
<TABLE>

                   FUND AMERICA INVESTORS CORPORATION II
                          Statement of Operations
                                (Unaudited)


<CAPTION>  
                              Three months ended           Nine months ended
                                 September 30,               September 30,    
                              __________________           _________________
                               1998        1997             1998       1997  
                             _______      _______         _______     _______
<S>                        <C>          <C>             <C>         <C>
 
 Revenue
   Issuance fee income      $      -     $125,995        $360,418    $125,995 
   Interest income             4,464        1,490           7,556       4,629 
                            ________     ________        ________    ________

    Total revenue              4,464      127,485         367,974     130,624 
                            ________     ________        ________    ________

  Expenses
   Deferred offering
      costs                        -       50,995         135,418      50,995 
   General and
      administrative           2,308        1,543          11,566      10,130 
   Amortization of
      organization costs           -          159               -         477
   Management fees             6,000        6,000          18,000      18,000
                            ________     ________        ________    ________

    Total expenses             8,308       58,697         164,984      79,602
                            ________     ________        ________    ________

    Net income/(loss)       $ (3,844)    $ 68,788        $202,990    $ 51,022
                            ========     ========        ========    ========
  
    See notes to financial statements


</TABLE>

                                       Page 4

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<PAGE>
<TABLE>



                   FUND AMERICA INVESTORS CORPORATION II
                          Statement of Cash Flows
                                (Unaudited)
  
  
<CAPTION>                                                                    
                                               Nine months ended           
                                                  September 30,             
                                              ___________________
                                              1998           1997  
                                             ______         ______

<S>                                        <C>            <C>  
  Net cash flow from operating activities:                                  
    Net income                              $202,990       $ 51,022         
  Adjustments to reconcile net income
    to net cash flow from operating
    activities:
        Amortization of organizational
          costs                                    -            477
        Deferred offering costs              135,418         50,995 
  Changes in operating assets and
    liabilities:   
        Prepaid expenses                         172            163
        Accounts payable                       1,439             10
                                            ________       ________
  Net cash flow provided by operating
    activities                               340,019        102,667
                     

  Net cash used in investing activities:                                    
    Increase in deferred offering costs     ( 10,266)         ( 303)
                                            ________       ________   
  Net cash flow used in investing
    activities                              ( 10,266)         ( 303)
                   

  Net cash used in financing activities:
    Shareholder distributions               ( 87,598)             -
                                            ________       ________
  Net cash flow used in financing
    activities                              ( 87,598)             -
                                            ________       ________


  Net increase in cash                       242,155        102,364
  
  Cash at beginning of period                110,311        190,574
                                            ________       ________

  Cash at end of period                     $352,466       $292,938
                                            ========       ========
  
  See notes to financial statements
  

</TABLE>
                                 Page 5

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<PAGE>



                   FUND AMERICA INVESTIORS CORPORATION II
                       NOTES TO FINANCIAL STATEMENTS
                                (Unaudited)
               Nine months ended September 30, 1998 and 1997
  
  1.  Basis of Presentation
  
  Organization
  ------------

  Fund America Investors Corporation II (the "Company") was incorporated in
  the State of Delaware on December 14, 1992 as a limited purpose finance
  corporation.  The Company was established to engage in the issuance and
  administration of Collateralized Mortgage Obligations (the "Bonds") and
  Asset-Backed Certificates (the "Certificates", and together with the
  Bonds, the "Securities").  The Securities are issuable in one or more
  series, from time to time, by the Company in accordance with the
  provisions in the prospectus and series-related prospectus supplement of
  the Company's latest effective registration statement. 
  
  The Securities of each series can be issued by the Company, but typically
  the Company forms a separate trust to act as the issuer solely for the
  purpose of issuing one series.  Series of Securities which include Bonds
  will be issued pursuant to an indenture and will represent indebtedness
  of the trust or issuer.  Series of Securities which include Certificates
  will represent beneficial ownership in the related trust or issuer.  The
  sole source of payments to Bondholders or Certificateholders within
  each series of Securities are produced from the related trust property. 
  The property or assets within each trust are comprised of
  mortgage-related assets as defined in each of the series' related
  prospectus supplements.  
  
  The Company may not, either directly or indirectly through a beneficially
  owned trust, engage in any business or investment activity other than (1)
  issuing and selling the Securities; (2) purchasing, owning, holding,
  pledging or selling the Collateral or other mortgage-related assets; (3)
  investing and maintaining cash balances on an interim basis in high
  quality short-term securities; and (4) engaging in other activities which
  are necessary or convenient to accomplish the foregoing and are
  incidental thereto.

  
  Issuance of Securities 
  ----------------------
  
  The Company did not issue any Securities during the third quarter ended
  September 30, 1998.  The total Securities issued year-to-date remained at
  $348 million.  These Securities were issued under the Company's combined
  Registration Statement No. 333-33823 in three separate series and were
  issued pursuant to separate prospectus supplements, listed below.  
    
  Prospectus Supplement Information
  
                                                    Amount         Type of
  Date        Issuer/Series                      of Offering     Securities
 ______       ____________________________       ___________     __________ 
 04-28-98     Fund America Investors Corp. II/
              Pass-Through Certificates,
              Series 1998-A                      $ 60,373,853    Certificates
      
 06-24-98     Fund America Investors Trust
              1998-NMC1/ Collateralized 
              Mortgage Obligations,
              Series 1998-NMC1                   $236,526,000    Bonds
          
 06-28-98     Fund America Investors Corp. II/
              Pass-Through Certificates,
              Series 1998-B                      $ 50,703,106    Certificates
  


                                   Page 6
</PAGE>
<PAGE>


  
  The Certificates in both Series 1998-A and Series 1998-B represent the
  entire beneficial ownership in trusts specifically formed for each
  series.  Each trust holds underlying securities which are the sole source
  of distribution payments to the certificateholders.  These Certificates
  do not represent an interest in or obligation of the Issuer or the
  Company.   
  
  The Bonds in Series 1998-NMC1 represent non-recourse obligations of the
  Issuer, Fund America Investors Trust 1998-NMC1 (the "Trust"), and do not
  represent interests in or obligations of the Company.  The assets that
  were pledged to the Trust are the sole source of payments on the Bonds. 
  The pledged assets consist of adjustable rate, fully amortized mortgage
  loans that are secured by residential properties.
  
  The mortgage loans in Series 1998-NMC1 were originated or acquired by
  National Mortgage Corporation ("NMC"), an affiliate of the Company.  In
  addition to NMC's participation as the seller of these mortgage loans,
  NMC is servicing the mortgage loans and is the holder of the residual
  interest that represents all of the beneficial ownership interest in Fund
  America Investors Trust 1998-NMC1.

      
  Activity on Registration of Securities
  --------------------------------------

  On September 30, 1998, the Company submitted its fifth Registration
  Statement on Form S-3 to the Securities and Exchange Commission.  The
  purpose of this new Registration Statement is to register an additional
  amount of Securities and to merge the Company's Effective Registration
  Statement No. 333-33823, which will increase the total amount of
  Securities that can be issued by the Company.  As of September 30, 1998,
  this new Registration Statement was not effective and was subject to
  completion or amendment.    

  
  2. Unaudited Financial Statements
     ------------------------------

  The accompanying unaudited financial statements have been prepared in
  accordance with generally accepted accounting principles for interim
  reporting periods and in accordance with the instructions to Form 10-Q.
  Therefore, in complying with these guidelines, these financial statements
  do no include all of the information and footnotes that are required for
  the year-end or annual reporting period.   
  
  In the opinion of management, the accompanying unaudited financial
  statements contain all adjustments (consisting only of normally recurring
  accruals) necessary to present fairly the financial position of the
  Company at September 30, 1998, and the results of its operations and
  cash flows for the periods ended September 30, 1998 and 1997.  Operating
  results for the nine month period ended September 30, 1998, or for the
  quarter ended September 30, 1998, are not necessarily indicative of the
  results that may be expected for the year ending December 31, 1998.
  

  3.  Market Risk Disclosure     Not applicable.
      ----------------------


  Item 2.  Management's Discussion and Analysis of Financial Condition and 
           Results of Operations
  
  Year 2000 Issue
  ---------------

  The Company recognizes the Year 2000 ("Y2K") issue as a highly sensitive
  and important matter.  The Company's goal is to continue to provide 
  uninterrupted service as business enters into the next millennium.
    
  The Y2K issue addresses potential problems that may be encountered with
  date-related transactions on systems that have historically recognized
  years using two digits versus four digits.  For example, these systems
  will potentially recognize "00" as the year 1900 instead of 2000.  On the
  surface, the Y2K issue may seem to be a simple problem, however, the
  implications may be far reaching and could impact a full range of
  business services and activities.

                               Page 7

</PAGE>
<PAGE>

  
  The Company is taking a systematic approach to addressing its own Y2K
  compliance issues by using the following three-step remediation process: 
  
      1.   Diagnostic phase
           a.  Recognition and acknowledgment of the problem
           b.  Inventory all business systems
           c.  Inspect and assess systems
  
      2.   Planning phase
           a.  Categorize problems by critical and non-critical systems
           b.  Prioritize 
           c.  Define solutions for remediation
  
      3.   Execute remediation solutions
           a.  Implement defined solutions
           b.  Define testing procedures
           b.  Test and verify systems
  
  The Company in conjunction with its facilities service provider, The
  Chotin Group Corporation, a related party by common control, is
  identifying and is assessing its internal systems that are subject to Y2K
  risk.  Additionally as part of the Company's compliance efforts,
  significant third parties' Y2K preparedness is being confirmed.  
  
  The Company believes that it is taking all necessary and reasonable steps
  to get its systems and operations Y2K compliant. As the Year 2000
  approaches, previously unidentified problems may surface.  The Company
  recognizes that it can not prepare for unknown problems but will make
  every reasonable effort to minimize these problems should they occur.  
  
  Without a complete assessment and testing of systems that could be
  vulnerable to problems, the Company does not have reasonable basis to
  conclude that the Year 2000 compliance issue will not likely have an
  operational impact on the Company. In addition, without a reasonable
  conclusive basis, reported financial information will not necessarily be
  a indication of future operating results or future financial condition. 
  However, due to the fact that most systems are out-sourced to third
  parties, the Company does not expect to incur any direct cost that would
  affect its financial condition.

  
  Financial Condition and Liquidity
  ---------------------------------  

  The Company expects to fund its ongoing operations from its cash balances
  and additional revenues generated from the issuance of Securities.  As of
  September 30, 1998, the Company's cash position increased by $242,155
  from its position of $110,311 at December 31, 1997.  The increase is
  attributable to revenues earned from the issuance of Securities during
  the second quarter of 1998.    
   
  In the event that additional capital resources may be required, the
  Company maintains an open line of credit for $1,000,000 with its sole
  shareholder.  The line of credit was established on April 3, 1995, and
  the borrowing provisions under the initial agreement have continued in
  each subsequent year.  As of September 30, 1998, the available balance
  was $1,000,000.  Any balance due will be subordinate and junior to any
  issued Securities.
  

  Results of Operations 
  ---------------------

  Fluctuations in net income between periods are generally the result of
  fees earned from the issuance of Securities. General and
  administrative costs are typically fixed from period to period with only
  slight variances.  Periods reporting net income are a direct result of
  income earned from issuance activity.  Conversely, in periods which no
  issuance fees have been earned, net losses are attributed to fixed
  general and administrative costs for that period.     
  
  For the three months ended September 30, 1998, the Company reported a net
  loss of $3,844 compared to a net income of $68,788 for the three months
  ended September 30, 1997  The issuance fees that were earned during third
  quarter in 1997 is the primary difference between the two reporting
  periods.

                               Page 8

</PAGE>
<PAGE>

  
  For the nine months ended September 30, 1998, the Company reported a net
  income of $202,990 compared to a net income of $51,022 reported for the
  nine months ended September 30, 1997. The primary difference between the
  two reporting periods is due to the fees earned on the issuance of three
  series of Securities in 1998 versus only one series in 1997.
  

  Forward Looking Statements
  --------------------------
  
  The statements contained in this Item 2 that are not historical facts,
  including, but not limited to, statements that can be identified by the
  use of forward-looking terminology such as "may," "will," "expect,"
  "anticipate," "estimate" or "continue" or the negative thereof or other
  variations thereon or comparable terminology, are forward-looking
  statements within the meaning of the Private Securities Litigation Reform
  Act of 1995, and involve a number of risks and uncertainties.  The actual
  results of the future events described in such forward-looking statements
  could differ materially from those stated in such forward-looking
  statements.  Among the factors that could cause actual results to differ
  materially are: the Y2K preparedness of the Company's third party
  information service providers, the market for mortgage-backed securities,
  competition, government regulation and possible future litigation.
  


                                Page 9

</PAGE>
<PAGE>

  
  
  PART II. OTHER INFORMATION
  
  
  
  Item 1.  Legal Proceedings
  
           None.
  
  Item 2.  Changes in Securities
  
           None.
  
  Item 3.  Defaults Upon Senior Securities
  
           None.
  
  Item 4.  Submission of Matters to a Vote of Security Holders
  
           None.
  
  Item 5.  Other Information
  
           None. 
  
  Item 6.  Exhibits and Reports on Form 8-K
  
          (a) Exhibits
  
              Exhibit 27. Financial Data Schedule
  
          (b) Form 8-K 
  
              -   Form 8-K filed on July 14, 1998 submitted the
                  Underwriting Agreement and the Pooling and Servicing
                  Agreement as exhibits to the prospectus supplement on
                  Fund America Investors II/Pass-Through Certificates,
                  Series 1998-B
  
              -   Form 8-K filed on July 14, 1998 submitted the
                  Underwriting Agreement, the Pooling and
                  Servicing Agreement, the Deposit Trust Agreement, and the
                  Servicing Agreement as exhibits to the prospectus
                  supplement for Fund America Investors Trust
                  1998-NMC1/Collateralized Mortgage Obligations,
                  Series 1998-NMC1.<PAGE>
            
  




                                  Page 10

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<PAGE>





                             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.
  
  
  
                                  FUND AMERICA INVESTORS CORPORATION II
                                  -------------------------------------
                                 (Registrant)
     
  
  Date:   November 13, 1998        By: /s/ Helen M. Dickens                 
        ---------------------         ---------------------------------        
                                           Helen M. Dickens
                                           Vice President,                  
                                           Secretary/Treasurer
                                               





                                Page 11

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