SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K


(Mark One)

              [X] Annual Report Pursuant to Section 13 or 15(d) of
                       the Securities Exchange Act of 1934

              [ ] Transition Report Pursuant to Section 13 or 15(d)
                     of the Securities Exchange Act of 1934

For the fiscal year ended                                Commission File Number
   December 31, 1996                                            33-63924

                         Mortgage Capital Funding, Inc.
                   (Issuer in respect of Mortgage Pass-Through
                         Certificates, Series 1996-MC2)
             (Exact name of registrant as specified in its charter)

             Delaware                                          13-3408716
  (State or other jurisdiction                             (I.R.S. Employer
of incorporation or organization)                         Identification No.)

   399 Park Avenue, 3rd Floor
       New York, New York                                       10043
     (Address of principal                                    (Zip Code)
       executive offices)

Registrant's telephone number, including area code: (212) 559-6893.
Securities registered pursuant to Section 12(b) of the Act:  NONE
Securities registered pursuant to Section 12(g) of the Act:  NONE

      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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained, and will not be contained, to the best
of the registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. Yes  X  . No      .
              -----     -----

      State the aggregate market value of the voting stock held by
non-affiliates of the registrant. The aggregate market value shall be computed
by reference to the price at which the stock was sold, or the average bid and
asked prices of such stock, as of a specified date within 60 days prior to the
date of filing.

      NOT APPLICABLE


<PAGE>

                                     PART I

Item 1. Business.

        Omitted pursuant to a request to the Securities and Exchange Commission
for an exemption of Mortgage Capital Funding, Inc. ("MCFI" or the "registrant")
pursuant to Section 12(h) of the Securities Exchange Act of 1934 (the "12(h)
Exemption"), filed by Thacher Proffitt & Wood on behalf of the registrant on
October 17, 1995.

Item 2. Properties.

        The Trust did not acquire any mortgaged property in connection with the
foreclosure of a defaulted Mortgage Asset or otherwise. As of December 31, 1996,
no mortgage loan had a principal balance greater than 10% of the aggregate
principal balance of the Mortgage Pool.

Item 3. Legal Proceedings.

        The registrant knows of no material pending legal proceeding involving
the Mortgage Properties, or, to the extent related to the Trust Fund, any of
MCFI, the sponsor (the "Sponsor"), Citicorp Real Estate, Inc. ("CREI"), as
mortgage loan seller, NationsBanc Mortgage Capital Corporation ("NMCC"), as
Additional Warranting Party, GMAC Commercial Mortgage Corporation ("GMAC") as
master servicer (the "Master Servicer") and as special servicer (the "Special
Servicer") or the trust (the "Trust") evidenced by the registrant's Mortgage
Pass-Through Certificates, Series 1996-MC2 (the "Certificates"), or LaSalle
National Bank, as trustee (the "Trustee") or REMIC administrator (the "REMIC
Administrator") or ABN AMRO Bank N.V. (the "Fiscal Agent"), as Fiscal Agent, for
the Certificates, other than routine litigation incidental to the duties of the
Sponsor, CREI, NMCC, the Master Servicer, the Special Servicer, the Trustee, the
REMIC Administrator or the Fiscal Agent under the Pooling and Servicing
Agreement (the "Pooling Agreement") dated as of December 1, 1996 between the
Sponsor, CREI, as mortgage loan seller, NMCC, as Additional Warranting Party,
the Master Servicer, the Special Servicer, the Trustee, the REMIC Administrator
and the Fiscal Agent.

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

        None.


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<PAGE>

                                     PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder's Matters.

        (a) There is no established public trading market for the Certificates.
To the best of the registrant's knowledge, there are no reported high and low
bid quotations for any of the Certificates.

        (b) As of December 31, 1996, the number of record holders of the
registrant's Mortgage Pass- Through Certificates, Series 1996-MC2 was 5.

        (c) Omitted pursuant to the 12(h) Exemption.

Item 6. Selected Financial Data.

        Omitted pursuant to the 12(h) Exemption.

Item 7. Management's Discussion and Analysis of Financial Condition and
        Results of Operation.

        Omitted pursuant to the 12(h) Exemption.

Item 8. Financial Statements and Supplementary Data.

        Omitted pursuant to the 12(h) Exemption.

Item 9. Changes in and Disagreements with Accountants on Accounting and
        Financial Disclosure.

        None.


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<PAGE>

                                    PART III


Item 10. Directors and Executive Officers of the Registrant.

        Omitted pursuant to the 12(h) Exemption.

Item 11. Executive Compensation.

        Omitted pursuant to the 12(h) Exemption.

Item 12. Security Ownership of Certain Beneficial Owners and Management.

        (a) As of December 31, 1996, 100% of all the publicly offered Mortgage
Pass-Through Certificates, Series 1996-MC2 were held of record by Cede & Co., 55
Water Street, New York, NY 10041.

        (b) Omitted pursuant to the 12(h) Exemption.

        (c) Omitted pursuant to the 12(h) Exemption.

Item 13. Certain Relationships and Related Transactions.

        (a)(1) Omitted pursuant to the 12(h) Exemption.

        (a)(2) Omitted pursuant to the 12(h) Exemption.

        (a)(3) The registrant has been informed that as of December 31, 1996,
GMAC Commercial Mortgage Corporation was the beneficial owner of Certificates
issued by the Trust with an outstanding principal amount of $29,773,614
(representing 6.5% of the Certificates and 100% of the registrant's Class G and
Class H Certificates) and a Notional Amount of $84,518,420 (representing 18% of
the registrant's Class X Certificates). GMAC Commercial Mortgage Corporation
serves as Master Servicer and Special Servicer under the Pooling Agreement for
which it receives a master servicing fee, equal, on a per annum basis, to 0.210%
to 0.380% per annum of the outstanding principal balance of each Mortgage Loan
(with an initial weighted average rate applicable to such Mortgage Loans of
0.263% per annum). GMAC as Master Servicer is also entitled to receive certain
other fees as specified in the Pooling Agreement. GMAC as Special Servicer will
be entitled to certain Standby Fees, Special Servicing Fees, Workout Fees and
Liquidation Fees and all assumption and modification fees, late payment charges
and penalty interest in excess of interest at the related Mortgage Rate received
on or with respect to Mortgage Loans serviced thereby. The Standby Fee accrues
as to each Mortgage Loan at a rate of .005% per annum which will be payable out
of the Master Servicing Fee. In 1996, GMAC did not receive any fees for its
services as Master Servicer or Special Servicer.

        (a)(4) None.

        (b) Omitted pursuant to the 12(h) Exemption.

        (c) Omitted pursuant to the 12(h) Exemption.

        (d) Omitted pursuant to the 12(h) Exemption.


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<PAGE>

                                     PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.

        (a)    (1) Annual Statement of Compliance, pursuant to Pooling Agreement
and participation agreements referred to therein.

               Delivered by GMAC Commercial Mortgage Corporation as Master
Servicer and Special Servicer.

               (2) Annual Servicing Report from independent public accountants,
pursuant to Pooling Agreement and participation agreements referred to therein.

                    (i)  Delivered by Master Servicer.

                    (ii) Omitted with respect to Special Servicer as no Mortgage
Loans became Specially Serviced Mortgage Loans or REO Properties during the time
period covered by this 10-K.

        (b) Reports on Form 8-K. During the last quarter of the prior calendar
year, Reports on Form 8-K were filed by the registrant as follows: Reports on
Form 8-K dated November 25, 1996 and December 11, 1996 were filed in response to
Item 5 (Other Events) of Form 8-K with respect to certain information that may
be considered to be computational materials and ABS term sheets furnished to
prospective investors in connection with the offering of the Certificates; and a
Report on Form 8-K dated December 19, 1996 was filed in response to Item 2
(Acquisition or Disposition of Assets) of Form 8-K with respect to the issuance
of the Certificates and the acquisition by the Trust Fund of the Trust Fund
assets.

        (c)    (1) Articles of incorporation of MCFI have been previously filed
with the Securities and Exchange Commission.

               (2) By-laws of MCFI have been previously filed with the
Securities and Exchange Commission.

               (3) Pooling and Servicing Agreement dated as of December 1, 1996
among the Sponsor, CREI, as Mortgage Loan Seller, NMCC, as Additional Warranting
Party, the Master Servicer, the Special Servicer, LaSalle National Bank, as
Trustee and REMIC Administrator, and ABN AMRO Bank N.V., as Fiscal Agent, has
been previously filed in a Report on Form 8-K dated December 19, 1996.

        (d) As required pursuant to the 12(h) Exemption, information aggregating
certain data reported with respect to each distribution date will be set forth
as Exhibit 99(d) hereto.

SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO
SECTION 15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES
PURSUANT TO SECTION 12 OF THE ACT.

No annual report covering the registrant's last fiscal year or proxy material
with respect to any annual or other meeting of security holders has been sent to
security holders.


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<PAGE>

                                   SIGNATURES

        Pursuant to the requirements of Section 13 and 15(d) 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.

                                     MORTGAGE CAPITAL FUNDING, INC.
                                        (Issuer in respect of Mortgage
                                     Pass-Through Certificates, Series 1996-MC2)
                                                   (Registrant)


                                     By: /s/ Robert E. Woods
                                        ----------------------------
                                             Robert E. Woods
                                             Chief Executive Officer


Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant in
the capacities indicated on March 28, 1997.

        Signature                                  Capacity
        ---------                                  --------


/s/ Robert E. Woods                 Chairman and Chief Executive Officer
---------------------------                 (Principal Executive Officer)
Robert E. Woods                             


/s/Theresa D. DeGuisto              Vice President and Treasurer
---------------------------                 (Principal Financial and
Theresa D. DeGuisto                         Accounting Officer)


                                    Director
---------------------------
Carol Ann Arvon


/s/ J. Theodore Borter              Director
---------------------------
J. Theodore Borter


/s/ Frank Forelle                   Director
---------------------------
Frank Forelle


/s/ Richard L. Jarocki, Jr.         Director
---------------------------         
 Richard L. Jarocki, Jr.


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<PAGE>

                                  EXHIBIT INDEX


Exhibit No.

99(a)(1)    Annual Statement of Compliance, pursuant to Pooling Agreement and
            participation agreements referred to therein.

            Delivered by GMAC Commercial Mortgage Corporation as Master Servicer
            and Special Servicer.

99(a)(2)    Annual Servicing Report from independent public accountants,
            pursuant to Pooling Agreement and participation agreements referred
            to therein.

            Delivered by Master Servicer.

99(d)       Aggregate data with respect to distributions made in 1996.


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