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 March 31, 2000

                                      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: 1-12109

                         Delta Financial Corporation
            (Exact name of registrant as specified in its charter)

            Delaware                                        11-3336165
      (State or other jurisdiction of                       (I.R.S. Employer
      incorporation or organization)                        Identification No.)

       1000 Woodbury Road, Suite 200, Woodbury, New York 11797 (Address of
          registrant's principal executive offices including ZIP Code)

                               (516) 364 - 8500
             (Registrant's telephone number, including area code)


                                   No Change
  (Former name, former address and former fiscal year, if changed since last
                                   report)


      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  and 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 [ ]

      As of March 31, 2000,  15,920,869 shares of the Registrant's common stock,
par value $.01 per share, were outstanding.


<PAGE>


                              INDEX TO FORM 10-Q

                                                                        Page No.

PART I - FINANCIAL INFORMATION


Item 1.    Financial Statements (unaudited)

           Consolidated  Balance  Sheets as of March 31, 2000 and
           December 31, 1999.............................................. 1

           Consolidated Statements of Income for the three months ended
           March 31, 2000 and March 31, 1999.............................. 2

           Consolidated  Statements  of Cash  Flows for the  three months
           ended March 31, 2000 and March 31, 1999........................ 3

           Notes to Consolidated Financial Statements..................... 4

Item 2.    Management's Discussion and Analysis of Financial Condition and
           Results of Operations.......................................... 6

Item 3.    Quantitative and Qualitative Disclosures About Market Risk.....19


PART II - OTHER INFORMATION

Item 1.    Legal Proceedings..............................................20

Item 2.    Changes in Securities and Use of Proceeds......................23

Item 3.    Defaults Upon Senior Securities................................23

Item 4.    Submission of Matters to a Vote of Security Holders............23

Item 5.    Other Information..............................................23

Item 6.    Exhibits and Current Reports on Form 8-K.......................23

Signatures................................................................24


<PAGE>



PART I - FINANCIAL INFORMATION

Item 1 - Financial Statements (unaudited)
<TABLE>
<CAPTION>

                 DELTA FINANCIAL CORPORATION AND SUBSIDIARIES
                         CONSOLIDATED BALANCE SHEETS
                                 (Unaudited)

                                                        March 31,   December 31,
(Dollars in thousands, except for share data)             2000         1999
                                                       ----------   -----------
<S>                                                 <C>              <C>
ASSETS
Cash and interest-bearing deposits                   $     49,356        55,989
Accounts receivable                                        34,835        32,367
Loans held for sale, net                                   92,426        89,036
Accrued interest  receivable                               52,406        63,309
Capitalized mortgage servicing rights                      45,144        45,927
Interest-only and residual certificates                   233,111       224,659
Equipment, net                                             20,773        21,721
Cash held for advance payments                             14,286        13,568
Prepaid and other assets                                   11,602         5,428
Goodwill                                                    4,535         4,831
                                                      -----------   -----------
   Total assets                                      $    558,474       556,835
                                                      ===========   ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Bank payable                                         $        954         1,195
Warehouse financing and other borrowings                  122,067       109,019
Senior Notes                                              149,498       149,474
Accounts payable and accrued expenses                      39,353        43,607
Investor payable                                           73,825        82,204
Advance payment by borrowers for taxes and insurance       14,130        13,784
Deferred tax liability                                      9,680        10,411
                                                      -----------    ----------
   Total liabilities                                      409,507       409,694
                                                      -----------    ----------

STOCKHOLDERS' EQUITY:
Common stock, $.01 par value. Authorized 49,000,000
   shares; 16,000,549 shares issued and
   15,883,749 shares outstanding at March 31, 2000
   and December 31, 1999                                     160            160
Additional paid-in capital                                99,472         99,472
Retained earnings                                         50,653         48,827
Treasury stock, at cost (116,800 shares)                 ( 1,318)        (1,318)
                                                     -----------     ----------
   Total stockholders' equity                            148,967        147,141
                                                     -----------     ----------
     Total liabilities and stockholders' equity      $   558,474        556,835
                                                     ===========     ==========


          See accompanying notes to consolidated financial statements.

                                       1

</TABLE>

<PAGE>
<TABLE>
<CAPTION>

                  DELTA FINANCIAL CORPORATION AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
                                   (Unaudited)


                                                  Three Months Ended
                                                       March 31,
(Dollars in thousands, except per share data)     2000           1999
                                                --------     --------
<S>                                        <C>            <C>

REVENUES:
  Net gain on sale of mortgage loans        $    14,654        25,103
  Interest                                       10,537         6,433
  Servicing fees                                  4,066         3,613
  Origination fees                                6,688         7,364
                                              ---------     ---------
     Total revenues                              35,945        42,513
                                              ---------     ---------

EXPENSES:
  Payroll and related costs                      15,561        15,842
  Interest expense                                7,803         6,172
   General and administrative                     9,456        11,057
                                             ----------    ----------
     Total expenses                              32,820        33,071
                                             ----------    ----------

Income before income taxes                        3,125         9,442
Provision for income taxes                        1,299         3,698
                                             ----------    ----------
Net income                                 $      1,826         5,744
                                            ===========    ==========

PER SHARE DATA:
   Net income per common
     share - basic and diluted             $      0 .11          0.37
                                             ==========    ==========
   Weighted-average number
     of shares outstanding                   15,920,869    15,358,749
                                             ==========    ==========


         See accompanying notes to consolidated financial statements.

                                       2

</TABLE>

<PAGE>
<TABLE>
<CAPTION>

                 DELTA FINANCIAL CORPORATION AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (Unaudited)
                                                                             Three Months Ended
                                                                                  March 31,
(Dollars in thousands)                                                        2000         1999
                                                                            -------      -------
<S>                                                                     <C>           <C>
Cash flows from operating activities:
   Net income                                                            $    1,826        5,744
   Adjustments to reconcile net income to net cash used in
    operating activities:
     Provision for loan and recourse losses                                     542           25
     Depreciation and amortization                                            1,798        1,289
     Deferred tax benefit                                                      (731)        (153)
     Capitalized mortgage servicing rights, net of amortization                 783       (2,521)
     Deferred origination costs                                                  23          170
     Interest-only and residual certificates received in
       Securitization transactions, net                                      (8,452)      (4,838)
     Changes in operating assets and liabilities:
       Increase in accounts receivable                                       (2,468)      (3,308)
       Increase in loans held for sale, net                                  (3,417)      (1,298)
       Decrease (increase) in accrued interest receivable10,                    903       (2,382)
       Increase in cash held for advance payments                              (718)        (724)
       (Increase) decrease in prepaid and other assets                       (6,700)         299
       Decrease in accounts payable and accrued expenses                     (4,266)      (1,592)
       (Decrease) increase in investor payable                               (8,379)       8,606
       Increase in advance payments by borrowers for taxes and insurance        346        1,260
                                                                         -----------  ----------
         Net cash used in operating activities                              (18,910)         577
                                                                         -----------  ----------
Cash flows from investing activities:
   Purchase of equipment                                                       (530)      (2,672)
                                                                         -----------  ----------
         Net cash used in investing activities                                 (530)      (2,672)
                                                                         -----------  ----------
Cash flows from financing activities:
   Proceeds from warehouse financing and other borrowings, net               13,048       10,199
   Decrease in bank payable, net                                               (241)        (582)
                                                                         ----------   ----------
         Net cash provided by financing activities                           12,807        9,617
                                                                         ----------   ----------
         Net increase in cash and interest-bearing deposits                  (6,633)       7,522

Cash and interest-bearing deposits at beginning of period                    55,989       49,152
                                                                         ----------   ----------
Cash and interest-bearing deposits at end of period                      $   49,356   $   56,674
                                                                         ===========  ==========
Supplemental Information:
Cash paid during the period for:
   Interest                                                              $   11,715        9,518
                                                                         ===========  ==========
   Income taxes                                                          $    2,039        3,850
                                                                         ===========  ==========

          See accompanying notes to consolidated financial statements.

                                       3
</TABLE>

<PAGE>


                 DELTA FINANCIAL CORPORATION AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1)   BASIS OF PRESENTATION

   Delta  Financial  Corporation  (the  "Company"  or  "Delta")  is  a  Delaware
corporation, which was organized in August 1996.

   The accompanying  unaudited  consolidated  financial  statements  include the
accounts of the  Company  and its wholly  owned  subsidiaries.  All  significant
inter-company accounts and transactions have been eliminated in consolidation.

   The  accompanying  unaudited  consolidated  financial  statements  have  been
prepared in accordance with generally accepted accounting principles for interim
financial information and the instructions to Form 10-Q. Certain information and
footnote  disclosures  normally  included in  financial  statements  prepared in
accordance with generally accepted accounting  principles have been condensed or
omitted  pursuant to the rules and  regulations  of the  Securities and Exchange
Commission. The accompanying unaudited consolidated financial statements and the
information included under the heading "Management's  Discussion and Analysis of
Financial  Condition and Results of  Operations"  should be read in  conjunction
with the audited  consolidated  financial  statements  and related  notes of the
Company for the year ended  December 31, 1999. The results of operations for the
three-month  period ended March 31, 2000 is not  necessarily  indicative  of the
results that will be expected for the entire year.

     All  adjustments  that  are,  in  the  opinion  of  management,  considered
necessary  for a fair  presentation  of the  financial  position  and results of
operations  for the interim  periods  presented  have been made.  Certain  prior
period amounts in the financial  statements  have been  reclassified  to conform
with the current year presentation.


(2) SUMMARY OF REGULATORY SETTLEMENTS

   In September  1999,  the Company  settled  allegations  by the New York State
Banking  Department  and a lawsuit by the New York State  Office of the Attorney
General alleging that Delta had violated various state and federal lending laws.
The global settlement was evidenced by that certain (a) Remediation Agreement by
and between Delta Funding and the NYSBD,  dated as of September 17, 1999 and (b)
Stipulated Order on Consent by and among Delta Funding,  Delta Financial and the
NYOAG,  dated as of September 17, 1999. As part of the  Settlement,  Delta will,
among other  things,  implement  agreed upon  changes to its lending  practices;
provide  reduced loan payments  aggregating  $7.25 million to certain  borrowers
identified by the NYSBD; and create a fund of approximately  $4.75 million to be
financed by the grant of 525,000 shares of Delta Financial's common stock valued
at a constant assumed priced of $9.10 per share,  which approximates book value.
The  proceeds  of the fund will be used,  for among other  things,  to pay for a
variety of consumer educational and counseling programs.

   In March 2000, the Company finalized an agreement with the U.S. Department of
Justice,

                                       4

the  Federal  Trade  Commission  and  the   Department  of   Housing  and  Urban
Development, to complete the global settlement it had reached with the NYSBD and
NYOAG. The Federal  agreement  mandates some additional  compliance  efforts for
Delta, but it does not require any additional financial commitment by Delta.

(3) IMPACT OF NEW ACCOUNTING STANDARDS

   In June 1998,  the  Financial  Accounting  Standards  Board  ("FASB")  issued
Statement of Financial  Accounting  Standards ("SFAS") No. 133,  "Accounting for
Derivative  Instruments  and  Hedging  Activities".  SFAS  No.  133  establishes
accounting and reporting  standards for derivative  instruments  and for hedging
activities.  It requires  that any entity  recognize all  derivatives  as either
assets or liabilities in the statement of financial  condition and measure those
instruments  at fair value.  The  accounting  for changes in the fair value of a
derivative  (that is,  gains and  losses)  depends  on the  intended  use of the
derivative and the resulting designation. In July 1999, the FASB issued SFAS No.
137, "Accounting for Derivative Instruments and Hedging Activities - Deferral of
the Effective Date of FASB Statement No. 133." SFAS No. 137 delays the effective
date of SFAS No. 133, for one year,  to all fiscal  quarters of all fiscal years
beginning  after  June 15,  2000.  The delay  applies  to  quarterly  and annual
financial  statements.  SFAS  No.  133  does not  require  restatement  of prior
periods. Management of the Company currently believes the implementation of SFAS
No. 133 will not have a material impact on the Company's  financial condition or
results of operations.

(4) EARNINGS PER SHARE

   The  following  is  a  reconciliation   of  the  denominators   used  in  the
computations of basic and diluted Earnings Per Share ("EPS").  The numerator for
calculating both basic and diluted EPS is net income.

For the three months ended March 31:


(Dollars in thousands, except EPS data)
                                      2000                   1999
------------------------------------------------------------------------------
Net income                   $       1,826                  5,744
Weighted-average shares         15,920,869             15,358,749
Basic EPS                    $        0.11                   0.37

Weighted-average shares         15,920,869             15,358,749
Incremental shares-options              --                 10,973
------------------------------------------------------------------------------
                                15,920,869             15,369,722
Diluted EPS                  $        0.11                   0.37
------------------------------------------------------------------------------

                                       5

<PAGE>


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

The following  discussion  should be read in conjunction  with the  Consolidated
Financial  Statements  of the Company  and  accompanying  Notes to  Consolidated
Financial Statements set forth therein.

GENERAL

   Delta  Financial   Corporation  (the  "Company"  or  "Delta"),   through  its
wholly-owned   subsidiaries,   engages  in  the  consumer  finance  business  by
originating,  acquiring, selling and servicing non-conforming home equity loans.
Throughout its 18 years of operating history, the Company has focused on lending
to individuals  who generally have impaired or limited credit profiles or higher
debt-to-income ratios for such purposes as debt consolidation, home improvement,
mortgage refinancing or education.

   Through  its  wholly-owned  subsidiary,  Delta  Funding  Corporation  ("Delta
Funding"),  the Company originates home equity loans indirectly through licensed
mortgage   brokers  and  other  real  estate   professionals   who  submit  loan
applications  on behalf of the borrower  ("Brokered  Loans") and also  purchases
loans from  mortgage  bankers and smaller  financial  institutions  that satisfy
Delta's underwriting guidelines ("Correspondent Loans"). Delta Funding currently
originates  and  purchases  the majority of its loans in 24 states,  through its
network of approximately 1,600 brokers and correspondents.

   Through its  wholly-owned  subsidiary,  Fidelity  Mortgage  Inc., the Company
develops retail loan leads ("Retail Loans")  primarily through its telemarketing
system and its network of 14 retail  offices  located in eight states.  In March
2000, the Company decided to close a loan production center in Georgia.

   In June 1999, the Company announced a settlement in principle with the Office
of the  Attorney  General  for the  State of New York  ("NYOAG"),  which  was to
provide for  retrospective  relief to certain  borrowers  in the form of reduced
monthly  obligations  aggregating $6 million and prospective  changes to some of
the  Company's  lending  practices.  The NYOAG took issue with  Delta's  lending
practices,  specifically which loans should and should not be made by Delta. The
settlement in principle was later expanded to include the New York State Banking
Department  ("NYSBD")  and the U.S.  Department  of Justice  ("DOJ"),  which had
raised similar  concerns  relating to Delta's  lending  practices.  In September
1999, the Company  finalized its settlements  with the NYSBD and the NYOAG,  but
only after the NYOAG filed suit against the Company in August 1999, as evidenced
by (1) a Remediation Agreement by and between the Company and the NYSBD, and (2)
a Stipulated Order on Consent by and among the Company and the NYOAG.

   As part of the final global  settlement (in lieu of the previously  announced
$6 million  settlement  with the  NYOAG),  the  Company  agreed to,  among other
things, implement agreed upon changes to its lending practices;  provide reduced
loan payments  aggregating $7.25 million

                                       6

to certain borrowers  identified by the  NYSBD;  and create a reversionary  fund
(the "fund"), administered by a  trustee  named  by the NYSBD, financed  by  the
grant by Delta of 525,000 shares of Delta's common  stock,  valued at an assumed
constant  price of $9.10 per share,  which approximates the  book  value  of the
shares.  All proceeds raised through the fund shall be used for restitution and/
or to pay for a variety of educational and counseling programs at the discretion
of the NYSBD.

   The Company  recorded a $6.0 million  pre-tax charge in the second quarter of
1999 when it reached a settlement in principle with the NYOAG. Subsequently,  an
additional $6.0 million pre-tax charge was recorded in the third quarter of 1999
when the Company reached a global  settlement with the NYSBD and the NYOAG.  The
Company  finalized its agreement with the DOJ in March 2000. The DOJ settlement,
which parallels the NYSBD and NYOAG  settlement  agreements,  was also signed by
the  Federal  Trade  Commission  and the U.S.  Department  of Housing  and Urban
Development.  See "Legal  Proceedings"  for a more  detailed  discussion  of the
settlement.

   For the  three  months  ended  March  31,  2000 the  Company  originated  and
purchased  $287.0 million of loans, a decrease of 29% over the $404.1 million of
loans  originated  and  purchased  in the  comparable  period in 1999.  Of these
amounts,  approximately  $173.2 million were  originated  through its network of
brokers,  $71.5  million were  originated  through its retail  network and $42.3
million  were  purchased  from its  network of  correspondents  during the three
months ended March 31, 2000 compared to $235.5 million,  $77.4 million and $91.2
million, respectively, for the same period in 1999.


   The following  table sets forth  information  relating to the delinquency and
loss experience of the mortgage loans serviced by the Company (primarily for the
securitization  trusts,  as  described  below) for the  periods  indicated.  The
Company is not the holder of the  securitization  loans,  but generally  retains
interest-only or residual  certificates issued by the securitization  trusts, as
well as the  servicing  rights,  the  value  of each of which  may be  adversely
affected by defaults.

                                       7


                                                       Three Months Ended
                                                -------------------------------
(Dollars in thousands)                            March 31,       December 31,
                                                    2000              1999
                                                ------------      ------------
Total Outstanding Principal Balance
  (at period end)......................       $   3,732,118      $  3,631,830
Average Outstanding(1).................           3,698,545         3,605,675
DELINQUENCY (at period end) 30-59 Days:
  Principal Balance....................       $     195,375      $    208,302
  Percent of Delinquency(2)............               5.24%             5.73%
60-89 Days:
  Principal Balance....................       $      81,290      $     83,000
  Percent of Delinquency(2)............               2.18%             2.28%
90 Days or More:
  Principal Balance....................       $      48,619      $     56,435
  Percent of Delinquency(2)............               1.30%             1.55%
Total Delinquencies:
  Principal Balance....................       $     325,284      $    347,737
  Percent of Delinquency(2)............               8.72%             9.56%
FORECLOSURES
  Principal Balance....................       $     192,067      $    185,843
  Percent of Foreclosures by Dollar(2).               5.15%             5.11%
REO (at period end)....................       $      44,588      $     36,663
   Percent of REO......................               1.19%             1.01%
Net Losses on Liquidated Loans.........       $      (4,544)     $     (4,282)
Percentage of Net Losses on Liquidated Loans
  (based on Average Outstanding Balance)(3)          (0.49%)           (0.47%)
---------------
(1)Calculated by summing the actual  outstanding  principal  balances at the end
   of each  month and  dividing  the total  principal  balance  by the number of
   months in the applicable period.
(2)Percentages are expressed based upon the total outstanding  principal balance
   at the end of the indicated period.
(3) Annualized.



FAIR VALUE ADJUSTMENTS

   The  fair  values  of  both  interest-only  and  residual   certificates  and
capitalized mortgage servicing rights are significantly affected by, among other
factors,  prepayments  of loans and estimates of future  prepayment  rates.  The
Company continually  reviews its prepayment  assumptions in light of company and
industry  experience  and  makes  adjustments  to those  assumptions  when  such
experience indicates.

   The Company makes assumptions  concerning prepayment rates and defaults based
upon the seasoning of its existing securitization loan portfolio.  The following
table compares the prepayment  assumptions used during the first quarter of 2000
(the "new"  assumptions),  with those used during the first quarter of 1999 (the
"old" assumptions):

                                       8
<PAGE>


Loan Type               Month 1 Speed                 Peak Speed
------------------------------------------------------------------
                         New      Old                 New     Old
------------------------------------------------------------------
Fixed Rate Loans        4.0%     4.8%                 31%     31%
Six-Mo. LIBOR ARMs     10.0%    10.0%                 50%     50%
Hybrid ARMs             4.0%     6.0%                 50%     50%
------------------------------------------------------------------

    In the  first  quarter  of 1999,  the  Company  increased  its loss  reserve
initially  established  for both  fixed- and  adjustable-rate  loans sold to the
securitizations  trusts from 2.00% to approximately 2.20% of the issuance amount
securitized.

   In the fourth  quarter of 1999,  the  Company  lowered its  prepayment  speed
assumption  along parts of the  prepayment  rate vector curve while  leaving the
peak  speeds  intact.  In  addition,  the  Company  increased  its loss  reserve
initially  established  for both  fixed- and  adjustable-rate  loans sold to the
securitizations  trusts from 2.20% to approximately 3.10% of the issuance amount
securitized.

   The prepayment rate assumption was revised primarily to reflect the Company's
actual loan performance  experience over the past several  quarters.  Management
believes that industry  consolidation and a higher interest rate environment has
and will continue to deter borrowers from refinancing  their mortgage loans. The
loan loss reserve  assumption  was revised to reflect  management's  belief that
slower prepayment speeds,  coupled with an anticipated flat to slightly moderate
rise in home  values as  compared  to the past few years and  borrowers  who had
avoided  default  through  refinancing may be readily unable to do so because of
industry  consolidation  and a higher  interest  rate  environment,  may have an
adverse effect on the Company's non-performing loans.

   These  changes  resulted in  approximately  a $3.8  million  reduction in the
Company's  value of the residual and  interest-only  certificates  for the three
months ended March 31, 1999.

   An annual  discount  rate of 12.0% was  utilized in  determining  the present
value of cash flows from residual  certificates,  using the  "cash-out"  method,
which are the predominant form of retained  interests at both March 31, 2000 and
December 31, 1999.

   The Company uses the same prepayment assumptions in estimating the fair value
of its mortgage servicing rights.


RESULTS OF OPERATIONS
THREE  MONTHS  ENDED MARCH 31, 2000  COMPARED TO THE THREE  MONTHS ENDED MARCH
31, 1999

GENERAL
   The  Company's  net income for the three months ended March 31, 2000 was $1.8
million,  or $0.11 per share,  compared to $5.7 million, or $0.37 per share, for
the three months ended March 31, 1999.  Comments regarding the components of net
income are detailed in the following paragraphs.

                                       9

REVENUES

   Total revenues decreased $6.6 million, or 16%, to $35.9 million for the three
months ended March 31, 2000,  from $42.5  million for the  comparable  period in
1999.  The decrease in revenue was primarily  attributable  to a decrease in the
net  gain  recognized  on the  sale of  mortgage  loans  and  origination  fees,
partially offset by an increase in interest income and servicing fees.

   The Company originated and purchased $287.0 million of mortgage loans for the
three  months  ended March 31, 2000,  representing  a 29%  decrease  from $404.1
million of mortgage loans originated and purchased for the comparable  period in
1999.  The Company  securitized or sold loans above par of $290.0 million during
the three months ended March 31, 2000 compared to $375.0 million  securitized or
sold above par in the corresponding period in 1999, representing a 23% decrease.
Total loans serviced increased 18% to $3.73 billion at March 31, 2000 from $3.16
billion at March 31, 1999.

   Net  Gain on Sale of  Mortgage  Loans.  Net  gain on sale of  mortgage  loans
represents (1) the sum of (a) the fair value of the  interest-only  and residual
certificates retained by the Company in a securitization for each period and the
market value of the  interest-only  certificates  sold in  connection  with each
securitization,  (b) the fair value of  capitalized  mortgage  servicing  rights
associated with loans securitized in each period, and (c) premiums earned on the
sale of whole loans on a  servicing-released  basis,  (2) less the (x)  premiums
paid  to  originate  or  acquire  mortgage  loans,  (y)  costs  associated  with
securitizations  and (z) any hedge  loss  (gain)  associated  with a  particular
securitization.

   Net gain on sale of mortgage loans decreased $10.4 million,  or 41%, to $14.7
million for the three months ended March 31,  2000,  from $25.1  million for the
comparable  period in 1999. This decrease was primarily due to a 23% decrease in
the amount of loans  securitized  or sold  above par to $290.0  million in 2000,
compared to $375.0  million of loans  securitized  or sold above par in 1999;  a
revision to the Company's loan loss reserve assumption in 1999 (see "-Fair Value
Adjustments");  a change  in the  securitization  structure  which  reduced  the
Company's  profitability  (but did,  provide the  Company  with better cash flow
dynamics),  coupled with wider spreads  demanded by  asset-backed  investors who
purchase the pass-through  certificates  issued by securitization  trusts during
the three months ended March 31, 2000  compared to the  corresponding  period in
1999.  The decrease was  partially  offset by lower  aggregate  premiums paid to
acquire  loans,  resulting  from both a  decrease  in amount of loans  purchased
through  the   correspondent   channel  and  lower  average   premiums  paid  to
correspondents.  The  weighted  average  net gain on sale ratio was 5.1% for the
three months ended March 31, 2000 compared to 6.7% for the comparable  period in
1999.

   Interest  Income.  Interest  income  primarily  represents the sum of (1) the
difference  between the  distributions the Company receives on its interest-only
and residual certificates and the adjustments recorded to reflect changes in the
fair  value  of the  interest-only  and  residual  certificates,  (2) the  gross
interest  earned on loans  held for sale  (other  than for  loans  sold into the
conduit in which case, it is the net interest spread), (3) with respect to loans
sold into the conduit, the net interest margin earned (excess servicing) between
the  weighted  average rate on the mortgage  loans less the  conduit's  variable
funding  rate  plus  administrative  fees,  and  (4)  interest  earned  on  cash
collection balances.

                                       10


   Interest  income  increased  $4.1  million,  or 64%, to $10.5 million for the
three months ended March 31, 2000,  from $6.4 million for the comparable  period
in 1999. The increase in interest  income was primarily due to (1) a higher fair
value  adjustment  during the first  quarter of 1999,  including a $3.8  million
reduction in the  Company's  value of residual and  interest-only  certificates,
related to an increase in its loan  reserve,  (2) the  accounting  of loans sold
through a mortgage loan conduit prior to  securitization in the first quarter of
1999, in which the Company earns and records the net interest margin between the
interest  rate earned on the pool of mortgage  loans sold to the  mortgage  loan
conduit and the conduit financing rate, less  administrative  expenses and (3) a
higher  mortgage  coupon rate of 10.8% from 10.2%  reflecting a higher  economic
interest rate environment.

   Servicing  Fees.  Servicing  fees  represent  all  contractual  and ancillary
servicing  revenue received by the Company less (1) the offsetting  amortization
of the capitalized  mortgage servicing rights,  and any adjustments  recorded to
reflect valuation allowances for the impairment in mortgage servicing rights and
(2) prepaid interest shortfalls.

   Servicing fees increased $0.5 million,  or 14%, to $4.1 million for the three
months ended March 31,  2000,  from $3.6  million for the  comparable  period in
1999.  This increase was  primarily due to an increase in the aggregate  size of
the Company's  servicing  portfolio.  The average  balance of the mortgage loans
serviced  by the Company  increased  20% to $3.70  billion for the three  months
ended March 31, 2000 from $3.09 billion during the comparable period in 1999.

   Origination  Fees.  Origination  fees  represent  fees earned on brokered and
retail originated loans. Origination fees decreased $0.7 million, or 9%, to $6.7
million for the three  months  ended March 31,  2000,  from $7.4 million for the
comparable  period in 1999.  The decrease was  primarily the result of (1) a 27%
decrease in broker  originated loans and (2) a 6% decrease in retail  originated
loans.


EXPENSES

   Total  expenses  decreased by $0.3  million,  or 1%, to $32.8 million for the
three months ended March 31, 2000, from $33.1 million for the comparable  period
in 1999.  The  decrease  was  primarily  the result of a decrease in general and
administrative  costs and personnel  costs,  partially  offset by an increase in
interest expense.

   Payroll  and Related  Costs.  Payroll and  related  costs  include  salaries,
benefits  and  payroll  taxes  for all  employees.  Payroll  and  related  costs
decreased by $0.3  million,  or 2%, to $15.5  million for the three months ended
March 31,  2000,  from $15.8  million  for the  comparable  period in 1999.  The
decrease was primarily due to a decline in staffing in the Company's  broker and
retail  divisions  and in  commissions  paid to these  employees,  related  to a
decrease  in loans  originated.  This was  partially  offset by an  increase  in
staffing related to growth in the Company's servicing portfolio, coupled with an
increase in employee fringe benefits. As of March 31, 2000, the Company employed
1,049 full- and  part-time  employees,  compared  to 1,237  full- and  part-time
employees as of March 31, 1999.

   Interest  Expense.  Interest  expense includes the borrowing costs to finance
loan  originations

                                       11

and  purchases  under the $150 million aggregate principal amount of 9.5% Senior
Notes due 2004 issued in July 1997 (the "Senior Notes") and the Company's credit
facilities.

   Interest expense  increased by $1.6 million,  or 26%, to $7.8 million for the
three months ended March 31, 2000 from $6.2 million for the comparable period in
1999. The decrease was primarily  attributable  to the accounting for loans sold
through a  mortgage  loan  conduit  prior to their  securitization  in the first
quarter of 1999, in which the Company earns and records the net interest  margin
between  the  interest  rate  earned on the pool of  mortgage  loans sold to the
mortgage  loan  conduit  and the conduit  financing  rate,  less  administrative
expenses.  Typically,  interest expense related to the Company's other warehouse
financing and borrowings are recorded directly to interest expense.  The Company
did not utilize its mortgage  loan conduit  during the first quarter of 2000. In
addition,  there was a  increase  in the cost of funds on the  Company's  credit
facilities,  which were tied to  one-month  LIBOR.  The  one-month  LIBOR  index
increased  to an average  interest  rate of 5.9% in the three months ended March
31, 2000, compared to an average interest rate of 5.0% for the comparable period
in 1999.

   General and  Administrative  Expenses.  General and  administrative  expenses
consist primarily of office rent, insurance, telephone,  depreciation,  goodwill
amortization, legal reserves and fees, license fees, accounting fees, travel and
entertainment  expenses,  advertising and promotional expenses and the provision
for loan losses on the inventory of loans held for sale and recourse loans.

   General and administrative  expenses decreased $1.6 million,  or 14%, to $9.5
million for the three months ended March 31,  2000,  from $11.1  million for the
comparable  period in 1999.  This decrease was primarily  attributable to higher
legal-related costs and reserves in the first quarter of 1999.

   Income Taxes. Income taxes are accounted for under SFAS No. 109,  "Accounting
for Income  Taxes."  Deferred tax assets and  liabilities  are recognized on the
income  reported in the financial  statements  regardless of when such taxes are
paid. These deferred taxes are measured by applying current enacted tax rates.

   The Company recorded a tax provision of $1.3 million and $3.7 million for the
three months ended March 31, 2000 and 1999, respectively.


FINANCIAL CONDITION

MARCH 31, 2000 COMPARED TO DECEMBER 31, 1999

   Cash and  interest-bearing  deposits decreased $6.6 million, or 12%, to $49.4
million at March 31, 2000, from $56.0 million at December 31, 1999. The decrease
was primarily the result of lower  prepayments which caused a decrease in monies
held in securitization trust accounts by the Company, acting as servicer for its
ongoing securitization program.

   Accounts receivable  increased $2.5 million, or 8%, to $34.8 million at March
31, 2000, from $32.3 million at December 31, 1999. The increase was attributable
to an increase in reimbursable servicing advances made by the Company, acting as
servicer on its securitizations,  related to a higher servicing  portfolio.  The
Company's servicing portfolio increased 3% to $3.73 billion as of March 31, 2000
from $3.63 billion as of December 31, 1999.

                                     12

   Loans held for sale, net increased  $3.4 million,  or 4%, to $92.4 million at
March 31,  2000,  from $89.0  million at December 31,  1999.  This  increase was
primarily  due to  the  net  difference  between  loan  originations  and  loans
securitized during the three months ended March 31, 2000.

   Accrued  interest and late charges  receivable  decreased $ 10.9 million,  or
17%, to $52.4  million at March 31,  2000,  from $63.3  million at December  31,
1999. This decrease was primarily due to the sale of interest receivable assets,
partially  offset by an increase in reimbursable  interest  advances made by the
Company, acting as servicer on its securitizations.

   Capitalized mortgage servicing rights decreased $0.8 million, or 2%, to $45.1
million  at March 31,  2000,  from $45.9  million at  December  31,  1999.  This
decrease was primarily due to the sale of a prepayment  penalty servicing asset,
coupled with the amortization of capitalized  mortgage  servicing rights.  These
decreases  were partially  offset by an increase  directly  attributable  to the
Company's  capitalizing  the allocated  carrying value amount of servicing fees,
totaling $4.4 million,  resulting from loans securitized in the first quarter of
2000.

   Interest-only  and residual  certificates  increased $8.4 million,  or 4%, to
$233.1 million at March 31, 2000, from $224.7 million at December 31, 1999. This
increase  is  primarily  attributable  to  the  Company's  receipt  of  residual
certificates  valued and recorded at $9.7 million from loans  securitized in the
first  quarter  of  2000,  coupled  with  an  increase  related  to  fair  value
adjustments. These increases were partially offset by normal amortization due to
cash distributions.

   Prepaid and other assets increased $6.2 million, or 114%, to $11.6 million at
March 31,  2000,  from $5.4  million at December  31,  1999.  This  increase was
primarily  attributable  to  the  Company's  investment  in  two  new  affiliate
companies (qualified special purpose entities).

   Warehouse financing and other borrowings  increased $13.1 million, or 12%, to
$122.1  million at March 31,  2000,  from  $109.0 at  December  31,  1999.  This
increase  was  primarily  attributable  to the  operating  cash deficit and to a
lesser extent, the funding of the Company's loans held for sale, net.

   The aggregate principal balance of the Senior Notes totaled $149.5 million at
March 31, 2000 and December 31, 1999,  net of  unamortized  bond  discount.  The
Senior Notes accrue interest at a rate of 9.5% per annum, payable  semi-annually
on February 1 and August 1.

   Investor  payable  decreased $8.4 million,  or 10%, to $73.8 million at March
31, 2000,  from $82.2  million at December 31, 1999.  The decrease was primarily
the result of lower  prepayments,  which caused a decrease in the amount payable
to  investors.  Investor  payable is  comprised  of all  principal  collected on
mortgage  loans and accrued  interest.  Variability in this account is primarily
due to the principal payments collected within a given collection period.


LIQUIDITY AND CAPITAL RESOURCES

   Following  three  successive  quarters of generating  positive cash flow from
operations,  the Company  had  operating  cash  deficits in the third and fourth
quarters of 1999 and in the first quarter of 2000.  The Company  anticipates  it
will  continue to have an operating  cash deficit for at least the next quarter,
due  primarily to lower  projected  aggregate  cash  inflows from the

                                       13

Company's retained  interest-only and residual certificates. The lower projected
inflows are due to expected timing differences between older deals cash flowing
less per month per deal as the  mortgage  pool  pays  down and  newer  deals not
yet cash flowing until initial  reserve  requirements are satisfied.  As initial
reserve requirements  on some newer deals are  reached,  the Company  expects to
receive greater  aggregate  cash inflows from its  retained  interest-only  and
residual  certificates   which,  coupled  with  (a)  the  Company's   continued
concentration on its less  cash-intensive  broker  and  retail originations  and
(b) its  recent history of utilizing favorable  securitization  structures  that
have allowed the Company to sell senior interest-only  certificates  for  an  up
front cash purchase price, may  offset  the  operating  cash  deficit  in future
quarters. However, market conditions and various  other possibilities identified
below under "Risk Factors" could  impact the Company's  cash  flows  potentially
resulting  in  a  more significant negative cash flow.

   For the three  months  ended  March 31,  2000,  the  Company  had a  negative
operating cash flow of $18.9 million compared to a positive  operating cash flow
of $0.6 million for the  comparable  period in 1999.  The reduction in operating
cash flow was  primarily  due to a decrease  in cash  flows  from the  Company's
retained  interest-only  and  residual  certificates  and the  Company's  use of
operating cash to fund interest  (delinquency) and servicing advance obligations
required  as  servicer  for  its  securitization  program.  These  interest  and
servicing  advances are reimbursable to the Company as the borrowers repay their
obligations over time. As such, the exact timing of these reimbursements  cannot
be  predicted  with  certainty.  This  was  partially  offset  by the  Company's
de-emphasis of the correspondent loan production channel, thereby decreasing the
amount of premiums paid to correspondents.

   Currently, the Company's primary cash requirements include the funding of (1)
loan  originations and purchases  pending their pooling and sale, (2) the points
and expenses paid in connection with the acquisition of correspondent loans, (3)
interest  expense on its Senior Notes and  warehouse and other  financings,  (4)
fees, expenses, interest (delinquency) advances,  servicing-related advances and
tax payments  incurred in connection with its  securitization  program,  and (5)
ongoing administrative and other operating expenses.

   The Company must be able to sell loans and obtain adequate credit  facilities
and other  sources of funding in order to continue  to  originate  and  purchase
loans.  Historically,  the Company has utilized various financing facilities and
an equity  financing  to offset  negative  operating  cash flows and support the
continued  growth of its loan  originations and purchases,  securitizations  and
general operating expenses.  On July 23, 1997, the Company completed an offering
of the Senior  Notes.  A portion of the Senior Notes  proceeds  were used to pay
down various financing  facilities with the remainder used to fund the Company's
growth  in  loan  originations  and  purchases  and its  ongoing  securitization
program. The Company's primary sources of liquidity continue to be warehouse and
other financing  facilities,  securitizations and, subject to market conditions,
sales of whole loans and debt and equity securities.

   To  accumulate  loans for  securitization,  the  Company  borrows  money on a
short-term basis through warehouse lines of credit.  The Company has relied upon
a few lenders to provide the primary credit facilities for its loan originations
and purchases. The Company had six warehouse facilities as of March 31, 2000 for
this purpose.  One warehouse  facility is a $200 million  committed  credit line
with a variable rate of interest and a maturity date of May 2000.

                                       14

   The  Company's  second  warehouse  facility is a  syndicated  $100  million
committed  revolving  line with a variable  rate of interest and matures in June
2000. The Company's  third  warehouse  facility is a renewal of a committed $200
million  mortgage  loan conduit with a variable  rate of interest and a maturity
date of  September  2000.  The  Company's  fourth  warehouse  facility is a $200
million  committed  credit  facility  that has a variable rate of interest and a
maturity date of May 2000.  The  Company's  fifth  warehouse  facility is a $250
million  committed  credit  facility  that has a variable rate of interest and a
maturity date of June 2000.  The Company's  sixth  warehouse  facility is a $200
million  committed  credit  line  that has a  variable  rate of  interest  and a
maturity  date of  September  2000.  As of March 31, 2000,  the first  warehouse
facility had an  outstanding  balance of $81.8 million and the second  warehouse
facility had an outstanding balance of $25.0 million. There can be no  assurance
that the Company  will be able  to  renew any of  these  warehouse facilities at
their respective maturities.

   The  Company is  required  to comply with  various  operating  and  financial
covenants as provided in the agreements  described above which are customary for
agreements of their type.  The continued  availability  of funds provided to the
Company  under these  agreements  is subject to,  among  other  conditions,  the
Company's  continued  compliance with these covenants.  Management believes that
the Company is in compliance with all such covenants  under these  agreements as
of March 31, 2000.

   The Company  purchased a total of 116,800  shares of its common  stock during
the year ended December 31, 1998, under the Company's stock repurchase  program,
at a total cost of $1.3 million. All of the repurchased shares were purchased in
open market  transactions  at then  prevailing  market prices.  During the first
three months of 2000, no additional shares were repurchased.



INTEREST RATE RISK

    The  Company's   primary   market  risk  exposure  is  interest  rate  risk.
Profitability  may be  directly  affected by the level of, and  fluctuation  in,
interest  rates,  which affect the  Company's  ability to earn a spread  between
interest  received on its loans and the costs of its borrowings,  which are tied
to various United States  Treasury  maturities,  commercial  paper rates and the
London  Inter-Bank  Offered Rate ("LIBOR").  The profitability of the Company is
likely to be adversely affected during any period of unexpected or rapid changes
in interest rates. A substantial and sustained  increase in interest rates could
adversely  affect the  Company's  ability to purchase  and  originate  loans.  A
significant  decline  in  interest  rates  could  increase  the  level  of  loan
prepayments  thereby  decreasing  the  size  of  the  Company's  loan  servicing
portfolio. To the extent servicing rights and interest-only and residual classes
of certificates  have been capitalized on the books of the Company,  higher than
anticipated  rates of loan  prepayments  or losses could  require the Company to
write down the value of such  servicing  rights and  interest-only  and residual
certificates,  adversely impacting earnings. In an effort to mitigate the effect
of interest rate risk,  the Company  periodically  reviews its various  mortgage
products and identifies and modifies  those that have proven  historically  more
susceptible  to  prepayments.  However,  there  can be no  assurance  that  such
modifications to its product line will effectively  mitigate  interest rate risk
in the future.

                                       15

   Fluctuating  interest rates also may affect the net interest income earned by
the Company  resulting from the  difference  between the yield to the Company on
loans held pending sales and the interest paid by the Company for funds borrowed
under the Company's  warehouse  facilities,  although the Company  undertakes to
hedge its  exposure to this risk by using  treasury  rate lock  contracts.  (See
"--Hedging").


HEDGING

   The  Company  originates  and  purchases  mortgage  loans and then sells them
primarily through securitizations. At the time of securitization and delivery of
the  loans,  the  Company  recognizes  gain on sale based on a number of factors
including the  difference,  or "spread,"  between the interest rate on the loans
and the interest rate paid to asset-backed  investors who purchase  pass-through
certificates issued by securitization trusts. Historically, the rate paid on the
pass-through certificates was generally related to the interest rate on treasury
securities with maturities  corresponding  to the anticipated life of the loans.
If interest rates rise between the time the Company  originates or purchases the
loans and the time the  loans  are sold at  securitization,  the  excess  spread
narrows,  resulting in a loss in value of the loans. The Company has implemented
a strategy to protect  against such losses and to reduce  interest  rate risk on
loans  originated and purchased that have not yet been  securitized  through the
use of treasury rate lock contracts with various durations (which are similar to
selling a combination of United States Treasury  securities),  which equate to a
duration  similar  to the  duration  of the  underlying  loans.  The  nature and
quantity  of hedging  transactions  are  determined  by the  Company  based upon
various  factors  including,  without  limitation,  market  conditions  and  the
expected volume of mortgage  originations and purchases.  The Company will enter
into treasury rate lock  contracts  through one of its warehouse  lenders and/or
one of the investment bankers,  which underwrite the Company's  securitizations.
These contracts are designated as hedges in the Company's records and are closed
out when the associated loans are sold through securitization.

   If the value of the hedges  decrease,  offsetting an increase in the value of
the loans, the Company,  upon settlement with its hedge  counterparty,  will pay
the hedge loss in cash and then realize the corresponding  increase in the value
of the  loans  as part  of its net  gain  on  sale  of  mortgage  loans  and its
corresponding interest-only and residual certificates.  Conversely, if the value
of the hedges  increase,  offsetting  a decrease in the value of the loans,  the
Company,  upon  settlement with its hedge  counterparty,  will receive the hedge
gain in cash and  realize the  corresponding  decrease in the value of the loans
through a reduction in the value of the corresponding interest-only and residual
certificates.

   The Company  has  continued  to review its hedging  strategy in order to best
mitigate risk pending securitization.  As the asset-backed securitization market
improved  in the first  quarter of 1999,  and  spreads  over  treasuries  became
largely more  predictable,  the Company resumed its hedging  strategy of selling
treasury  rate-lock  contracts  to  mitigate  its  interest  rate  risk  pending
securitization.  For the three months ended March 31, 1999, the Company recorded
a $1.7  million  hedge gain  which  largely  offset a  decrease  in the value of
mortgage loans being hedged,  as part of its gain on sale of loans.  The Company
did not hedge during the first quarter of 2000.

                                       16


INFLATION
   Inflation  affects  the  Company  most  significantly  in the  area  of  loan
originations and can have a substantial effect on interest rates. Interest rates
normally  increase  during periods of high inflation and decrease during periods
of low inflation. (See "--Interest Rate Risk.")


IMPACT OF NEW ACCOUNTING STANDARDS
   For  discussion  regarding the impact of new accounting  standards,  refer to
Note 3 of Notes to the Consolidated Financial Statements.

RISK FACTORS

   Except for historical information contained herein, certain matters discussed
in this Form 10-Q are  "forward-looking  statements"  as defined in the  Private
Securities  Litigation  Reform Act  ("PSLRA")  of 1995,  which  involve risk and
uncertainties that exist in the Company's  operations and business  environment,
and are subject to change on various  important  factors.  The Company wishes to
take  advantage  of the "safe  harbor"  provisions  of the  PSLRA by  cautioning
readers that numerous  important factors discussed below,  among others, in some
cases have caused, and in the future could cause the Company's actual results to
differ  materially from those expressed in any  forward-looking  statements made
by, or on behalf of, the Company.  The following  include some,  but not all, of
the  factors or  uncertainties  that could cause  actual  results to differ from
projections:

o  Costs  associated   with   litigation,  compliance with the NYSBD Remediation
   Agreement and NYOAG  Stipulated    Order on Consent,  and rapid or unforeseen
   escalation of the cost of regulatory  compliance,    generally  including but
   not  limited to,  adoption  of new, or changes in state   or federal  lending
   laws and  regulations  and the  application  of such laws   and  regulations,
   licenses,   environmental  compliance,   adoption  of  new,  or   changes  in
   accounting  policies and practices and the  application   of such polices and
   practices.  Failure  to  comply  with  various    federal,  state  and  local
   regulations,  accounting policies,  environmental  compliance, and compliance
   with the Remediation  Agreement and Stipulated Order  on Consent  can lead to
   loss of approved  status,  certain rights of  rescission for mortgage  loans,
   class action  lawsuits   and  administrative  enforcement  action against the
   Company.

o  The  Company's  ability or inability to continue to access lines of credit at
   favorable terms and conditions,  including without limitation,  warehouse and
   other credit facilities used to finance newly originated  mortgage loans held
   for sale and interest and delinquency advances.

o  The Company's ability or inability to continue its practice of securitization
   of mortgage  loans held for sale,  as well as its ability to utilize  optimal
   securitization structures at favorable terms to the Company.

o  A  general  economic   slowdown.  Periods  of  economic slowdown or recession
   may be  accompanied  by decreased  demand  for consumer  credit and declining
   real  estate  values.  Because  of the  Company's  focus on  credit -impaired
   borrowers,  the  actual rate of

                                       17

   delinquencies,  foreclosures  and  losses on loans  affected by the borrowers
   reduced  ability to  use  home  equity to support borrowings could  be higher
   than those  generally  experienced in the mortgage lending   industry.    Any
   sustained    period   of    increased   delinquencies,  foreclosure,   losses
   or  increased  costs  could  adversely   affect the  Company's   ability   to
   securitize  or sell loans in the secondary  market.

o  The  effects of  interest  rate  fluctuations  and the  Company's  ability or
   inability to hedge  effectively  against such fluctuations in interest rates;
   the effect of changes in monetary and fiscal policies,  laws and regulations,
   other activities of governments, agencies, and similar organizations,  social
   and  economic  conditions,  unforeseen  inflationary  pressures  and monetary
   fluctuation.

o  Increased  competition  within the Company's markets has taken on many forms,
   such as  convenience  in obtaining a loan,  customer  service,  marketing and
   distribution channels,  loan origination fees and interest rates. The Company
   is currently  competing with large finance companies and conforming  mortgage
   originators many of whom have greater financial,  technological and marketing
   resources.

o  Unpredictable   delays  or  difficulties   in  development  of   new  product
   programs.

o  The unanticipated expenses of assimilating newly-acquired businesses into the
   Company's  structure;  as well as the impact of unusual expenses from ongoing
   evaluations  of  business   strategies,   asset   valuations,   acquisitions,
   divestitures and organizational structures.


                                       18


Item 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

   The primary  market  risk to which the  Company is exposed is  interest  rate
risk, which is highly sensitive to many factors, including governmental monetary
and  tax   policies,   domestic  and   international   economic  and   political
considerations  and other factors beyond the control of the Company.  Changes in
the general level of interest rates between the time when the Company originates
or purchases  mortgage  loans and the time when the Company  sells such mortgage
loans at  securitization  can affect the value of the Company's  mortgage  loans
held for sale and,  consequently,  the  Company's  net gain on sale  revenue  by
affecting the "excess  spread"  between the interest rate on the mortgage  loans
and the interest rate paid to asset-backed  investors who purchase  pass-through
certificates issued by the securitization trusts. If interest rates rise between
the time the Company  originates  or purchases  the loans and the time the loans
are sold at securitization,  the excess spread generally narrows, resulting in a
loss in value of the loans and a lower net gain on sale reported by the Company.

   A hypothetical 10 basis point increase in interest rates,  which historically
has resulted in  approximately  a 10 basis point  decrease in the excess spread,
would be expected to reduce the Company's net gain on sale by  approximately  25
basis  points.  Many  factors,  however,  can  affect the  sensitivity  analysis
described  above  including,   without  limitation,  the  structure  and  credit
enhancement used in a particular securitization,  the Company's prepayment, loss
and  discount  rate  assumptions,  and the spread  over  treasuries  demanded by
asset-backed investors who purchase the Companies asset-backed securities.

   To reduce its financial  exposure to changes in interest  rates,  the Company
generally hedges its mortgage loans held for sale by entering into treasury rate
lock contracts (see "-Hedging"). The Company's hedging strategy has largely been
an effective  tool to manage the Company's  interest rate risk on loans prior to
securitization,  by providing  the Company with a cash gain (or loss) to largely
offset the reduced (increase) excess spread (and resultant lower (or higher) net
gain on sale) from an increase  (decrease) in interest  rates.  A hedge may not,
however, perform its intended purpose of offsetting changes in net gain on sale.

   Changes in interest rates could also adversely  affect the Company's  ability
to  purchase  and  originate  loans  and/or  could  affect  the  level  of  loan
prepayments thereby impacting the size of the Company's loan servicing portfolio
and the value of the  Company's  interest  only and  residual  certificates  and
capitalized mortgage servicing rights. (See "-Interest Rate Risk").

                                       19

<PAGE>

PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

   Because the nature of the  Company's  business  involves  the  collection  of
numerous  accounts,  the validity of liens and compliance with various state and
federal lending laws, the Company is subject,  in the normal course of business,
to numerous claims and legal  proceedings.  The Company's lending practices have
been  the  subject  of  several   lawsuits   styled  as  class  actions  and  of
investigations  by  various  regulatory  agencies  including  the New York State
Banking  Department  (the  "NYSBD"),  the Office of the Attorney  General of the
State of New York (the "NYOAG") and the United States Department of Justice (the
"DOJ"). The current status of these actions are summarized below.

o     In or  about November  1998, the Company  received notice that it had been
      named in a lawsuit  filed in  the United   States  District  Court for the
      Eastern  District  of New York.  In  December  1998,  plaintiffs  filed an
      amended  complaint  alleging  that   the  Company  had  violated  the Home
      Equity and Ownership   Protection Act ("HOEPA"),  the Truth in Lending Act
      ("TILA") and New  York State  General  Business Lawss.349.  The  complaint
      seeks  (a)  certification  of  a class  of  plaintiffs,   (b)  declaratory
      judgment   permitting   rescission,  (c)  unspecified  actual,  statutory,
      trebl  and  punitive  damages  (including  attorneys'  fees),  (d) certain
      injunctive  relief,   and (e)  declaratory  judgment  declaring  the  loan
      transactions   as  void  and   unconscionable.   On   December  7,   1998,
      plaintiff  filed  a motion   seeking  a  temporary  restraining  order and
      preliminary   injunction,  enjoining  Delta from   conducting  foreclosure
      sales on 11  properties.  The  District  Court  Judge ruled that  in order
      to consider  such a motion,  plaintiff   must move to interven   on behalf
      of these 11  borrowers.  Thereafter,  plaintiff   moved  to  intervene  on
      behalf of 3 of these 11  borrowers  and  sought the  injunctive  relief on
      their  behalf.  The Company   opposed the  motions.  On December 14, 1998,
      the   District  Court  Judge  granted  the  motion  to  intervene  and  on
      December  23,  1998,  the  District   Court  Judge   issued a  preliminary
      injunction  enjoining the Company from  proceeding  with  the  foreclosure
      sales of the three  intervenors'  properties.   The  Company  has filed  a
      motion for  reconsideration  of the December  23, 1998 order.  In  January
      1999,  the  Company  filed   an  answer  to   plaintiffs'   first  amended
      complaint.  In  July  1999,  plaintiffs were granted leave, on consent, to
      file a second  amended  complaint.  In August 1999,  plaintiffs   filed a
      second amended  complaint  that,  among  other  things,  added  additional
      parties but  contained  the same  causes of action  alleged  in  the first
      amended  complaint.  In September  1999,  the Company  filed  a  motion to
      dismiss  the  complaint.   Also in  September  1999,  plaintiffs  filed  a
      motion  for class  certification.  In   February  2000,   Delta  submitted
      opposition to Plaintiffs'  motion.  In or  about October 1999,  plaintiffs
      filed a motion seeking an order  preventing  the  Company,  its  attorneys
      and/or the New York  State Banking  Department (the  "NYSBD") from issuing
      notices  to  certain  of  Delta's   borrowers,   in   accordance   with  a
      settlement  agreement  entered  into by and  between the Company  and  the
      NYSBD. In or about October  1999  and November 1999,  respectively,  Delta
      and  the  NYSBD  submitted  opposition  to  plaintiffs'  motion.  In March
      2000,  the  Court issued an  order that permits

                                       20

      Delta to issue an approved form  of  the  notice.  The   Company  believes
      that  it has  meritorious  defenses and  intends to defend this suit,  but
      cannot  estimate  with  any certainty  its  ultimate   legal or  financial
      liability,  if any, with respect to the alleged claims.

o     In or about March 1999,  the  Company  received  notice that  it  had been
      named in a lawsuit  filed in the Supreme Court of  the State of New York,
      New York County,  alleging  that  Delta had   improperly  charged  certain
      borrowers   processing  fees. The  complaint seeks (a)  certification of a
      class  of    plaintiffs,   (b)   an   accounting,   and  (c)   unspecified
      compensatory and punitive   damages  (including  attorneys'  fees),  based
      upon  alleged (i)  unjust  enrichment ,  (ii) fraud,  and (iii)  deceptive
      trade  practices.  In April  1999,   the  Company  filed  an answer to the
      complaint.   In  August  1999,   plaintiffs  filed   a  motion  for  class
      certification.   The   Company's   response  to  the   motion  for   class
      certification  is not  due  until after class  discovery is completed.  In
      September  1999,   the  Company  filed a motion to dismiss the  complaint,
      which was opposed  by  plaintiffs,  and in February 2000, the Court denied
      the  motion  to  dismiss.  In April 1999,  the  Company  filed a motion to
      change  venue and  Plaintiff's   opposed  the  motion.  In July 1999,  the
      Court  denied the motion t  change  venue.  The Company  appealed  and in
      March 2000, the Appellate  Court granted  Delta's appeal to  change  venue
      from New York County to Nassau County.  The Company believes  tha   it has
      meritorious  defenses  and  intends  to  defend  this   suit,  but  cannot
      estimate with any certainty  its ultimate  legal or  financial  liability,
      if any, with respect to the alleged claims.

o     In or about July 1999,  the  Company  received  notice  that it  had  been
      named in a lawsuit  filed in the United  States  District  Court  for  the
      Western  District  of New York,   alleging   that  amounts  collected  and
      maintained  by   it  in  certain  borrowers'  tax   and  insurance  escrow
      accounts  exceeded  certain   statutory  (RESPA)  and/or  contractual (the
      respective  borrowers'   mortgage   agreements)  ceilings.  The  complaint
      seeks  (a)   certification  of a class   of  plaintiffs,  (b)  declaratory
      relief finding that the Company's  practice  violate  applicable  statutes
      and/or  the  mortgage   agreements,   (c)  injunctive  relief,   and  (d)
      unspecified  compensatory  and  punitive  damages  (including  attorneys'
      fees).  In  October  1999,  the  Company  filed a motion to  dismiss   the
      complaint.  In or about November  1999, the case was  transferred  to  the
      United States District Court for the Northern  District  of  Illinois.  In
      February  2000, the plaintiff  opposed the Company's  motion  to  dismiss.
      In March  2000,  the Court  granted  the  Company's  motion to  dismiss in
      part,  and  denied  it  in  part.  The   Company   believes  that  it  has
      meritorious  defenses  and   intends  to defend   this  suit,  but  cannot
      estimate with  any certainty  its ultimate  legal or financial  liability,
      if any, with  respect  to the alleged claims.

o     In or about  August  1999,  the Office of the   Attorney  General for the
      State of New York (the  "NYOAG")  filed  a  lawsuit  against  the  Company
      alleging violations of (a) RESPA (by paying  yield  spread premiums),  (b)
      HOEPA and TILA, (c) ECOA,  (d) New York  Executive  Lawss.296-a,  and  (e)
      New York  Executive  Lawss. 63(12).  In  September  1999,  Delta   and the
      NYOAG settled the lawsuit,  as part  of  a global  settlement by and among
      Delta,  the   NYOAG  and   the  NYSBD,   evidenced  by  that  certain  (a)
      Remediation

                                       21

      Agreement  by  and  between  Delta  and  the NYSBD,  dated as of September
      17,  1999 and (b) Stipulated Order on  Consent by  and  among Delta, Delta
      Financial and the NYOAG,  dated as  of September  17, 1999. As part of the
      Settlement,  Delta will,  among  other  things,  implement  agreed   upon
      changes  to  its  lending   practices;  provide   reduced  loan   payments
      aggregating $7.25 million  to certain  borrowers identified by the  NYSBD;
      and  create  a  fund of  approximately  $4.75  million  to be financed  by
      the grant of  525,000  share   of  Delta  Financial's  common stock valued
      at a  constant  assumed  priced of $9.1   per  share,  which  approximates
      book value.  The  proceeds  of the fund  will  be used,  for   among other
      things,  to pay for a variety  of  consumer  educational  and   counseling
      programs.  As a result, the  NYOAG  lawsuit has been dismissed  as against
      the Company.

      The Remediation  Agreement and Stipulated  Order on Consent  supersede the
      Company's  previously  announced  settlements  with the  NYOAG  and the NY
      Banking Dept. In March 2000, the Company finalized a settlement  agreement
      with the United States Department of Justice, the Federal Trade Commission
      and the  Department of Housing and Urban  Renewal,  to complete the global
      settlement it had reached with the NYSBD and NYOAG. The Federal  agreement
      mandates some  additional  compliance  efforts for Delta,  but it does not
      require any additional financial commitment.

o     In November 1999, the Company  received notice  that  it had been named in
      a lawsuit  filed in the  United  States  District  Court  for the  Eastern
      District  of  New  York,   seeking  certification  as a class  action  and
      alleging  violations  of  the federal  securities  laws in connection with
      the  Company's   initial  public   offering  in  1996   and  its   reports
      subsequently  filed  with the  Securities  and  Exchange  Commission.  The
      complaint  alleges that the scope of  the  violations  alleged recently in
      the  consumer  lawsuits  and  regulatory   actions  indicate  a  pervasive
      pattern  of action  and risk  that  should  have  been  more    thoroughly
      disclosed to investors  in the Company's  common   stock.  The Company has
      learned of several other lawsuits that  purportedly  contain  the  same or
      similar  allegations  against the Company.  The Company  believes  that it
      has meritorious  defenses and intends  to  defend these suits, but has not
      answered yet and cannot  estimate with  any certainty  its ultimate  legal
      or financial liability, if any, with respect  to the alleged claims.

o     In or about April 2000,  the  Company  received   notice that it had been
      named in a lawsuit  filed in the  Supreme  Court of the State of New York,
      Nassau  County,  alleging  that the Company  has  improperly  charged  and
      collected from borrowers  certain fees when they paid off  their  mortgage
      loans with Delta.  The   complaint seeks (a)  certification  of a class of
      plaintiffs,  (b) declaratory  relief  finding that  the payoff  statements
      used include  unauthorized  charges  and  are  deceptive  and unfair,  (c)
      injunctive   relief,  and (d)  unspecified  compensatory,  statutory   and
      punitive damages  (including  legal  fees),  based upon alleged violations
      of Real Property Law 274-a,  unfair  and  deceptive  practices,  money had
      and  received  and   unjust  enrichment,   and   conversion.  The  Company
      believes  that  it  has  meritorious  defenses  and intends to defend this
      suit,  but has not answered the complaint  yet  and  cannot  estimate with
      any certainty its  ultimate  legal or  financial  liability,  if any, with
      respect to the alleged claims.

                                       22

<PAGE>


ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS. NONE

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES.  NONE

ITEM 4.  SUBMISSION TO A VOTE OF SECURITY HOLDERS.  NONE

ITEM 5.  OTHER INFORMATION.  NONE

ITEM 6.  EXHIBITS AND CURRENT REPORTS ON FORM 8-K.

      (a)  Exhibits:          11.1  Statement re: Computation of Per
                                    Share Earnings

                              27.1  Financial  Data  Schedule  - Three  Months
                                    Ended March 31, 2000


      (b)  Reports on Form 8-K:     None.


                                       23


                                   SIGNATURES

         Pursuant to the  requirements  of the  Securities  and  Exchange Act of
      1934, as amended,  the Registrant has duly caused this Report on Form 10-Q
      to be signed on its behalf by the undersigned, thereunto duly authorized.


                                        Delta Financial Corporation
                                               (Registrant)

      Date:  May  15, 2000
                                        By:  /s/ HUGH MILLER
                                           ---------------------------
                                             Hugh Miller
                                             President & Chief Executive Officer


                                        By: /s/ RICHARD BLASS
                                           ----------------------------
                                             Richard Blass
                                             Senior Vice President and
                                             Chief Financial Officer


                                       24






                                EXHIBIT INDEX

EXHIBIT
NUMBER      DESCRIPTION
-------     -----------

10.1        Department of Justice Settlement Agreement and Order

11.1        Statement re: Computation of  Per Share Earnings.

27.1        Financial Data Schedule - Three Months Ended March 31, 2000