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, 1998                                           333-64451

                         Mortgage Capital Funding, Inc.
                   (Issuer in respect of Mortgage Pass-Through
                         Certificates, Series 1998-MC3)
             (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) 793-5880
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. [X]

      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, 1998,
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") and
Salomon Brothers Realty Corp., as mortgage loan sellers, Amresco Services, L.P.,
as master servicer (the "Master Servicer"), Allied Capital Corporation
("Allied"), as special servicer (the "Special Servicer") or the trust (the
"Trust") evidenced by the registrant's Mortgage Pass-Through Certificates,
Series 1998-MC3 (the "Certificates"), or LaSalle National Bank, as trustee (the
"Trustee") or REMIC administrator (the "REMIC Administrator"), or ABN AMRO Bank
N.V. as fiscal agent (the "Fiscal Agent") for the Certificates, other than
routine litigation incidental to the duties of the Sponsor, CREI, 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, 1998, between the Sponsor, the mortgage loan sellers,
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.

                                      -2-
<PAGE>


                                     PART II

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

        (a)

              (1) 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.

              (2) As of December 31, 1998, the number of record holders of the
registrant's Mortgage Pass-Through Certificates, Series 1998-MC3 was 43.

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

        (b) Not applicable.

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 7A. Quantitive and Qualitive Disclosure re Market Risk

         Not applicable.

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.

                                      -3-
<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, 1998, 100% of all the publicly offered Mortgage
Pass-Through Certificates, Series 1998-MC3 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, 1998,
Allied was the beneficial owner of Certificates issued by the Trust with an
outstanding principal amount of $102,169,000 (representing 11.25% of the
Certificates and 100% of the Private Certificates). Allied serves as Special
Servicer under the Pooling Agreement for which it 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. In 1998, Allied did not receive any fees for
its services as 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.

                                      -4-
<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.

                Not applicable since not required under the Pooling Agreement
to be delivered for 1998.

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

                Not applicable since not required under the Pooling Agreement
to be delivered for 1998.

         (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 December 15, 1998, December 28, 1998, and December 29, 1998 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.

         (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, 1998
among the Sponsor, the Mortgage Loan Sellers, 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 30, 1998.

         (d) No distribution date occurred in 1998; therefore this information
is not supplied.


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.

                                      -5-
<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
                                             1998-MC3)
                                            (Registrant)


                                            By: /s/ Richard L. Jarocki, Jr.
                                                ---------------------------
                                                    Richard L. Jarocki, Jr.
                                                    President


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 30, 1998.

         Signature                                    Capacity



/s/ Richard L. Jarocki, Jr.                     President and Director
--------------------------                  (Principal Executive Officer)
    Richard L. Jarocki, Jr.



/s/ Joseph Cutolo                           Vice President and Treasurer
-----------------                             (Principal Financial and
    Joseph Cutolo                                Accounting Officer)



/s/ Thomas Lavin                            Vice President and Director
----------------
    Thomas Lavin

                                      -6-