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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                               ------------------

                                    FORM 10-K
                ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934
                               ------------------

For the fiscal year ended December 31, 2001       Commission file number 1-10360

                                 CRIIMI MAE INC.
             (Exact name of registrant as specified in its charter)

Maryland                                                        52-1622022
(State or other jurisdiction of                              (I.R.S. Employer
Incorporation or organization)                               Identification No.)

                              11200 Rockville Pike
                            Rockville, Maryland 20852
                                 (301) 816-2300
                 (Address, including zip code, and telephone number,
         including area code, of registrant's principal executive offices)
                               ------------------

           Securities Registered Pursuant to Section 12(b) of the Act:

                                                  Name of each exchange on
Title of each class                                  which registered
-------------------                        -------------------------------------
Common Stock                               New York Stock Exchange, Inc.
Series B Cumulative Convertible            New York Stock Exchange, Inc.
  Preferred Stock
Series F Redeemable Cumulative Dividend    New York Stock Exchange, Inc.
  Preferred Stock
Series G Redeemable Cumulative Dividend    New York Stock Exchange, Inc.
  Preferred Stock

           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 herein, and will not be contained, to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated  by reference in Part III of this Form 10K or any amendment to this
Form 10K. [ ]


     Indicate by check mark whether the  registrant  has filed all documents and
reports  required to be filed by Section 12, 13 or 15(d) of the  Securities  and
Exchange Act of 1934 subsequent to the  distribution of securities  under a plan
confirmed by a court. Yes [X] No [ ]


     As of March 22,  2002,  12,969,841  shares of CRIIMI MAE Inc.  common stock
with a par value of $0.01 were  outstanding.  The aggregate  market value (based
upon the last  reported  sale price on the New York Stock  Exchange on March 22,
2002) of the shares of CRIIMI MAE Inc. common stock held by  non-affiliates  was
approximately  $43,179,256.  (For purposes of  calculating  the previous  amount
only,  all directors and executive  officers of the registrant are assumed to be
affiliates.)
                              ------------------

                       Documents Incorporated By Reference

<PAGE>
The information required by Part III (Items 10, 11, 12 and 13) is incorporated
by reference to the Registrant's definitive proxy statement to be filed pursuant
to Regulation 14A relating to the Registrant's 2002 annual meeting of
stockholders.

================================================================================


<PAGE>


                                 CRIIMI MAE INC.

                          2001 ANNUAL REPORT ON FORM 10-K


                                TABLE OF CONTENTS


<TABLE>
<CAPTION>
                                                                                                   Page

                                                       PART I
<S>          <C>                                                                                   <C>
Item 1.           Business  ......................................................................... 4
Item 2.           Properties.........................................................................21
Item 3.           Legal Proceedings..................................................................22
Item 4.           Submission of Matters to a Vote of Security Holders................................22

                                                       PART II

Item 5.           Market for the Registrant's Common Stock and Related Stockholder Matters...........23
Item 6.           Selected Financial Data............................................................25
Item 7.           Management's Discussion and Analysis of Financial Condition and
                    Results of Operations............................................................28
Item 7A.          Quantitative and Qualitative Disclosures About Market Risks........................54
Item 8.           Financial Statements and Supplementary Data........................................56
Item 9.           Changes in and Disagreements with Accountants on Accounting and
                    Financial Disclosure.............................................................56

                                                      PART III

Item 10.          Directors and Executive Officers of the Registrant.................................57
Item 11.          Executive Compensation.............................................................57
Item 12.          Security Ownership of Certain Beneficial Owners and Management.....................57
Item 13.          Certain Relationships and Related Transactions.....................................57

                                                       PART IV

Item 14.          Exhibits, Financial Statement Schedules, and Reports on Form 8-K...................57

Signatures

Exhibit Index

</TABLE>

<PAGE>


                                     PART I

ITEM 1.  BUSINESS

FORWARD-LOOKING STATEMENTS. When used in this Annual Report on Form 10-K, the
words "believes," "anticipates," "expects," "contemplates" and similar
expressions are intended to identify forward-looking statements. Statements
looking forward in time are included in this Annual Report on Form 10-K pursuant
to the "safe harbor" provision of the Private Securities Litigation Reform Act
of 1995. Such statements are subject to certain risks and uncertainties, which
could cause actual results to differ materially, including, but not limited to
the risk factors contained or referenced under the headings "Business," "Risk
Factors" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" set forth below. Readers are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of the date
hereof. The Company undertakes no obligation to publicly revise these
forward-looking statements to reflect events or circumstances occurring after
the date hereof or to reflect the occurrence of unanticipated events.

General

     CRIIMI MAE Inc.  (together with its consolidated  subsidiaries,  unless the
context  otherwise  indicates,  "CRIIMI MAE" or the  "Company")  is a commercial
mortgage company structured as a self-administered  real estate investment trust
("REIT").

     On April 17, 2001, the Company and certain of its subsidiaries emerged from
Chapter 11 of the U.S. Bankruptcy Code.

     The  Company's  current  primary   activities  include  the  ownership  and
management, in large part through the Company's servicing subsidiary, CRIIMI MAE
Services  Limited  Partnership   ("CMSLP"),   of  a  significant   portfolio  of
mortgage-related  assets.  See "The Portfolio".  Prior to the Chapter 11 filing,
CRIIMI MAE's  primary  activities  included (a) acquiring  non-investment  grade
securities (rated below BBB- or unrated) backed by pools of commercial  mortgage
loans on multifamily,  retail and other  commercial  real estate  ("Subordinated
CMBS"),  (b)  originating  and  underwriting   commercial  mortgage  loans,  (c)
securitizing  pools of commercial  mortgage  loans and  resecuritizing  pools of
Subordinated  CMBS,  and  (d)  primarily  through  CMSLP,  performing  servicing
functions  with  respect  principally  to  the  mortgage  loans  underlying  the
Company's Subordinated CMBS.

     Virtually all of the Company's cash flows relating to existing  assets are,
and are currently  expected to be, used to satisfy  principal,  interest and fee
obligations under the new secured debt incurred in connection with its emergence
from  Chapter  11 and to pay  general  and  administrative  and other  operating
expenses of the Company.  Therefore,  although the Company continues to pay down
its debt  obligations,  the  utilization  of cash  flows  for debt  service  and
operating expenses results in virtually no remaining net cash flow available for
other  activities,  to  the  extent  permitted  under  the  operative  documents
evidencing  the new debt  incurred  upon  emergence  from  Chapter  11. See "The
Reorganization  Plan",   "Certain  Risk  Factors  -  Substantial   Indebtedness;
Leverage",   "Certain  Risk  Factors  -  Borrowing   Risks,"  and  "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL  CONDITION AND RESULTS OF OPERATIONS".  The
Company is exploring possible ways of achieving improved financial  flexibility,
such as refinancing  all or a substantial  portion of the new debt incurred upon
emergence from Chapter 11;  however,  there can be no assurance that the Company
will be able to  refinance  such new debt or  otherwise  improve  its  financial
flexibility.

     On March 21,  2002,  the Company  redeemed in cash all 173,000  outstanding
shares of its Series E  Cumulative  Convertible  Preferred  Stock (the "Series E
Preferred  Stock") at the stated redemption price of $106 per share plus accrued
and unpaid  dividends  through and including the date of  redemption.  The total
redemption  price was  $18,734,107  ($396,107 of which  represented  accrued and
unpaid  dividends).  The Series E  Preferred  Stock  were held by the  Company's
principal creditor.

     The Company was incorporated in Delaware in 1989 under the name CRI Insured
Mortgage  Association,  Inc. ("CRI Insured").  In July 1993, CRI Insured changed
its name to CRIIMI  MAE Inc.  and  reincorporated  in  Maryland.  In June  1995,
certain  mortgage  businesses  affiliated with C.R.I.,  Inc. ("CRI") were merged
into CRIIMI

<PAGE>

MAE (the "Merger"). The Company is not a government sponsored entity
or in any way affiliated with the United States  government or any United States
government agency.

The Reorganization Plan

     On October 5, 1998 (the "Petition Date"), CRIIMI MAE Inc.  (unconsolidated)
and  two of  its  operating  subsidiaries,  CRIIMI  MAE  Management,  Inc.  ("CM
Management"), and CRIIMI MAE Holdings II, L.P. ("Holdings II" and, together with
CRIIMI MAE and CM Management,  the "Debtors")  filed for relief under Chapter 11
of the U.S.  Bankruptcy  Code in the  United  States  Bankruptcy  Court  for the
District of Maryland, Southern Division, in Greenbelt, Maryland (the "Bankruptcy
Court").  On November  22,  2000,  the United  States  Bankruptcy  Court for the
District of Maryland,  entered an order  confirming the Debtors'  reorganization
plan (the "Reorganization Plan"). As previously stated, the Company emerged from
Chapter 11 on April 17, 2001.

     The  Reorganization  Plan  provided  for the  payment in full of all of the
allowed  claims of the  Debtors  primarily  through  recapitalization  financing
(including  proceeds  from certain  asset sales)  aggregating  $847 million (the
"Recapitalization  Financing").  The sales of select CMBS (the "CMBS  Sale") and
the  Company's  interest  in CMO-IV  (the  "CMO-IV  Sale")  generated  aggregate
proceeds of approximately $418.3 million toward the  Recapitalization  Financing
of which  approximately  $342.3 million of such proceeds was used to pay related
borrowings  and  approximately  $76.0  million of such  proceeds was used on the
Effective Date to help fund the Reorganization  Plan. Included in the balance of
the  Recapitalization  Financing was  approximately  $262.4 million  provided by
affiliates of Merrill Lynch Mortgage Capital,  Inc. (such affiliate  referred to
as "Merrill Lynch" or "Merrill") and German American Capital  Corporation  (such
affiliate referred to as "GACC") through a new,  variable-rate secured financing
facility (in the form of a repurchase  transaction) (the "Variable-Rate  Secured
Borrowing"), and approximately $166.8 million provided through two new series of
secured   notes  issued  to  certain  of  the  Company's   unsecured   creditors
(collectively,  the "New Debt").  Effective  as of June 5, 2001,  all rights and
obligations  of Merrill and GACC under the operative  agreements  evidencing the
Variable-Rate  Secured  Borrowing  were  assigned  by  Merrill  and GACC to ORIX
Capital Markets, LLC ("ORIX").  ORIX also owns a significant aggregate principal
amount of each of the  respective  two new  series of secured  notes  referenced
above as part of the New Debt. ORIX is an affiliate of a publicly-traded company
and is an  investor  in CMBS  and  servicer  of  commercial  real  estate  loans
underlying CMBS.  Substantially  all cash flows relating to existing assets are,
and are currently  expected to be, used to satisfy  principal,  interest and fee
obligations  under the New Debt.  See "Risk Factors -  Substantial  Indebtedness
Leverage." The New Debt is directly or indirectly  secured by substantially  all
of  the  Company's  assets.  See  Note  7 to  Notes  to  Consolidated  Financial
Statements for further discussion regarding the New Debt.

     The Company's litigation with First Union National Bank ("First Union") was
not  settled  or  resolved  prior to the  Effective  Date;  and  therefore,  the
classification  and allowance of First  Union's  claim under the  Reorganization
Plan was not  determined on such date. On March 5, 2002,  the  Bankruptcy  Court
entered an order  approving a settlement  agreement  among the Company and First
Union.  See Note 15 to Notes to  Consolidated  Financial  Statements for further
information regarding the settlement of the First Union litigation.

     Under the Reorganization Plan, the holders of the Company's equity retained
their stock. The terms of the New Debt significantly restrict the amount of cash
dividends that can be paid to shareholders.  One such restriction  provides that
any cash  dividends  required to maintain REIT status  (assuming the Company has
the cash to make  such  distributions  and  that it is  permitted  to make  such
distributions under the terms of the New Debt) would be paid first to holders of
certain  of the New Debt who  convert  their  secured  notes into one or two new
series of preferred  stock,  which new series of preferred stock would be senior
to all other series of preferred stock of the Company, in the form of redemption
payments.  Another such restriction provides that if realized losses (as defined
in the  New  Debt  documents,  and  including  appraisal  reduction  amounts  on
properties  underlying  the CMBS) on CMBS exceed  certain  thresholds,  then the
Company  is  prohibited   from  paying  cash  dividends  or  making  other  cash
distributions  or payments to its  shareholders,  except as required to maintain
REIT status with any such cash  distributions  to be paid in accordance with the
terms set forth in the preceding sentence.  As of December 31, 2001, the Company
had  exceeded  the  loss  threshold  amounts  under  the  respective  applicable
operative  documents  evidencing the New Debt. See "MANAGEMENT'S  DISCUSSION AND
ANALYSIS  OF  FINANCIAL  CONDITION  AND  RESULTS  OF  OPERATIONS"  for a further
discussion of the  restrictions  resulting  from  exceeding  the loss  threshold
amounts.  The  Reorganization  Plan also provided for certain  amendments to the
Company's articles of incorporation,  including an increase in authorized shares
from 145 million  (consisting  of 120 million of common shares and 25 million of
preferred shares) to 375 million (consisting of 300

<PAGE>

million of common shares and 75 million of preferred shares).  These amendments
to the articles of incorporation became effective on the Effective Date.

     Although there can be no assurance,  the Company believes that it will have
sufficient  cash  resources to pay interest,  scheduled  principal and any other
required   payments  on  the  New  Debt  through  the  remainder  of  2002.  See
"MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF FINANCIAL  CONDITION  AND RESULTS OF
OPERATIONS".  The Company's ability to meet its debt service obligations through
the remainder of 2002 will depend on a number of factors, including management's
ability to maintain  cash flow (which is impacted  by, among other  things,  the
credit  performance  of the underlying  mortgage  loans and short-term  interest
rates)  and  to  generate  capital   internally  from  operating  and  investing
activities  and  expected  reductions  in  REIT  distribution   requirements  to
shareholders due to expected net operating losses for tax purposes, in each case
consistent  with the terms  agreed to pursuant to the New Debt.  There can be no
assurance  that  targeted  levels of cash flow will  actually be achieved,  that
reductions  in REIT  distribution  requirements  will be realized,  or that,  if
required, new capital will be available to the Company. The Company's ability to
maintain or increase  cash flow and access new capital will depend  upon,  among
other things,  interest rates, prevailing economic conditions and other factors,
many of which are beyond the control of the Company. The Company's high level of
debt limits its ability to obtain additional capital, significantly reduces cash
flow available for other  activities,  restricts the Company's  ability to react
quickly to changes in its  business,  limits its ability to hedge its assets and
liabilities, and makes the Company more vulnerable to economic downturns.

The CMBS Market

     Historically,  traditional lenders,  including commercial banks,  insurance
companies  and  savings and loans have been the  primary  holders of  commercial
mortgages.  The real  estate  market of the late 1980s and early  1990s  created
business and  regulatory  pressure to reduce the real estate  assets held on the
books of these institutions. As a result, there has been significant movement of
commercial  real estate debt from  private  institutional  holders to the public
markets.  According to Commercial  Mortgage  Alert,  CMBS  issuances in the U.S.
equaled  approximately  $74.3 billion in 2001,  $48.9 billion in 2000, and $58.5
billion in 1999.

     CMBS are  generally  created  by  pooling  commercial  mortgage  loans  and
directing  the cash  flow  from  such  mortgage  loans to  various  tranches  of
securities.   The  tranches   consist  of   investment   grade  (AAA  to  BBB-),
non-investment grade (BB+ to CCC) and unrated securities.  The first step in the
process of creating CMBS is loan  origination.  Loan  origination  occurs when a
financial  institution  lends money to a borrower to  refinance or to purchase a
commercial  real  estate  property,  and secures the loan with a mortgage on the
property  that the borrower  owns or purchases.  Commercial  mortgage  loans are
typically   non-recourse   to  the   borrower.   A  pool  of  these   commercial
mortgage-backed  loans is then accumulated,  often by a large commercial bank or
other financial institution.  One or more rating agencies then analyze the loans
and the underlying real estate to determine  their credit quality.  The mortgage
loans are then deposited into an entity that is not subject to taxation, often a
real estate mortgage  investment conduit ("REMIC").  The investment vehicle then
issues securities backed by the commercial mortgage loans, CMBS.

     The CMBS are divided into  tranches,  which are afforded  certain  priority
rights to the cash flow from the underlying  mortgage loans.  Interest  payments
typically  flow first to the most senior  tranche  until it receives  all of its
accrued  interest  and  then to the  junior  tranches  in  order  of  seniority.
Principal  payments  typically  flow to the  most  senior  tranche  until  it is
retired.  Tranches  are then retired in order of  seniority,  based on available
principal.  Losses,  if any, are generally  first applied  against the principal
balance  of the  lowest  rated or unrated  tranche.  Losses are then  applied in
reverse order of  seniority.  Each tranche is assigned a credit rating by one or
more rating agencies based on the agencies'  assessment of the likelihood of the
tranche  receiving its stated  payment of  principal.  The CMBS are then sold to
investors through either a public offering or a private  placement.  The Company
has primarily focused on acquiring or retaining non-investment grade and unrated
tranches,  issued by mortgage  conduits,  where the Company  believed its market
knowledge and real estate expertise allowed it to earn attractive  risk-adjusted
returns.

     At the time of a  securitization,  one or more  entities  are  appointed as
"servicers" for the pool of mortgage  loans,  and are responsible for performing
servicing duties which include collecting payments (master or direct servicing),
monitoring  performance  (loan  management)  and working out or  foreclosing  on
defaulted loans (special

<PAGE>

servicing).  Each servicer typically receives a fee and other financial
incentives based on the type and extent of servicing duties.

     The CMBS market was adversely affected by the turmoil which occurred in the
capital  markets  commencing in late summer of 1998 that caused spreads  between
CMBS  yields  and  the  yields  on  U.S.  Treasury  securities  with  comparable
maturities to widen,  resulting in a decrease in the value of CMBS. As a result,
the  creation  of new CMBS  and the  trading  of  existing  CMBS  came to a near
standstill.  Buying  and  trading  activity  in  investment  grade  CMBS and new
issuances of CMBS have  recovered  over the last several  years.  The market for
Subordinated CMBS has, however, been slower to recover. It is difficult,  if not
impossible,  to predict when or if the Subordinated  CMBS market will recover to
spring 1998  levels.  Even if the market for  Subordinated  CMBS  recovers,  the
liquidity of such market has  historically  been limited.  Additionally,  during
adverse  market  conditions,  the  liquidity  of such  market has been  severely
limited.  Therefore,  management's  estimate  of  the  value  of  the  Company's
Subordinated CMBS could vary significantly from the value that could be realized
in a current  transaction  between a willing buyer and a willing seller in other
than a forced sale or liquidation.

Subordinated CMBS Acquisitions

     As of December 31, 2001,  the  Company's  $1.3 billion  portfolio of assets
included $824 million of Subordinated  CMBS  (representing  approximately 63% of
the Company's total consolidated assets). As of December 31, 2001, approximately
33% of the  Company's  CMBS (based on fair value) were rated BB+, BB or BB-, 23%
were B+,  B, B- or CCC and 8% were  unrated.  The  remaining  approximately  36%
represents  investment grade securities that the Company reflects on its balance
sheet as a result of CBO-2. See  "BUSINESS-Resecuritizations"  and "BUSINESS-The
Portfolio-CMBS."

     CRIIMI MAE Inc.  did not acquire  any  Subordinated  CMBS in 2001,  2000 or
1999.  Prior to the Fall of 1998, the Company  generally  acquired  Subordinated
CMBS in  privately  negotiated  transactions,  which  allowed it to perform  due
diligence  on a  substantial  portion  of  the  mortgage  loans  underlying  the
Subordinated  CMBS as well as the underlying  real estate prior to  consummating
the purchase. In connection with its Subordinated CMBS acquisitions, the Company
targeted  diversified  mortgage  loan  pools  with  a  mix  of  property  types,
geographic locations and borrowers. CRIIMI MAE financed a substantial portion of
its Subordinated  CMBS  acquisitions  with short-term,  variable-rate  financing
facilities secured by the Company's CMBS. The Company's business strategy was to
periodically refinance a substantial portion of its variable-rate debt through a
resecuritization  of its Subordinated CMBS primarily to attain a better matching
of the maturities of its assets and liabilities  through the refinancing of such
short-term,   variable-rate,  recourse  financing  with  long-term,  fixed-rate,
non-recourse financing. See "BUSINESS-Resecuritizations."

     The Company  generally  enters into interest rate protection  agreements to
partially  limit the adverse  effects of potential  rising interest rates on its
variable-rate financing facilities.  The Company follows an investment policy to
hedge at least 75% of its  variable-rate  debt  with  interest  rate  protection
agreements.  Interest rate caps provide  protection to the Company to the extent
interest rates, based on a readily  determinable  interest rate index,  increase
above the stated  interest  rate cap,  in which case the Company  would  receive
payments based on the  difference  between the index and the cap. These payments
would  serve to  reduce  the  interest  payments  due  under  the  variable-rate
financing  facilities.  As of December  31,  2001,  the  remaining  term for the
Company's interest rate protection  agreement was approximately 15 months with a
strike  price of  5.25%,  and  one-month  LIBOR  was  1.87%.  See  "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL  CONDITION AND RESULTS OF  OPERATIONS"  and
Notes 7 and 8 to the Notes to  Consolidated  Financial  Statements for a further
discussion of the Company's  variable-rate  secured financing facilities and its
interest rate protection agreement.  The Company has not hedged against interest
rate risks,  including  increases  in interest  rate  spreads and  increases  in
Treasury rates, which adversely affect the value of its CMBS.

Resecuritizations

     The Company initially funded a substantial portion of its Subordinated CMBS
acquisitions with short-term,  variable-rate  secured financing  facilities.  To
further  mitigate the Company's  exposure to interest  rate risk,  the Company's
business  strategy was to periodically  refinance a significant  portion of this
short-term,   variable-rate  debt

<PAGE>

with fixed-rate,  non-recourse debt having maturities that matched those of
the Company's mortgage assets securing such debt  ("match-funded").  The Company
effected such refinancing by pooling  Subordinated  CMBS, once a sufficient pool
of Subordinated CMBS had been accumulated, and issuing newly created CMBS backed
by the pooled Subordinated CMBS. The CMBS issued in such  resecuritizations were
fixed-rate  obligations  with  maturities  that  matched the  maturities  of the
Subordinated CMBS backing the new CMBS. These  resecuritizations  also increased
the  amount  of  borrowings  available  to the  Company  due  to  the  increased
collateral value of the new CMBS relative to the pooled  Subordinated  CMBS. The
increase in collateral  value was  principally  attributable to the seasoning of
the underlying  mortgage loans and the  diversification  that occurred when such
Subordinated CMBS were pooled. The Company generally used the cash proceeds from
the investment grade CMBS that were sold in the  resecuritization  to reduce the
amount of its short-term,  variable-rate  secured  borrowings.  The Company then
used the net excess borrowing capacity created by the resecuritization to obtain
new short-term, variable-rate secured borrowings which were used with additional
new  short-term,  variable-rate  secured  borrowings  typically  provided by the
Subordinated CMBS seller and, to a lesser extent,  cash, to purchase  additional
Subordinated  CMBS.  Although  the  Company's  resecuritizations  mitigated  the
Company's  exposure to interest rate risk through  match-funding,  the Company's
short-term, variable-rate secured borrowings increased from December 31, 1996 to
December  31,  1998,  as a result of the  Company's  continued  acquisitions  of
Subordinated CMBS during that period.

     In December  1996,  the Company  completed  its first  resecuritization  of
Subordinated  CMBS  ("CBO-1") with a combined face value of  approximately  $449
million  involving  35  individual  securities  collateralized  by  12  mortgage
securitization pools. The Company sold, in a private placement,  securities with
a face amount of $142  million  and  retained  securities  with a face amount of
approximately $307 million.  Through CBO-1, the Company refinanced approximately
$142 million of short-term,  variable-rate,  secured borrowings with fixed-rate,
non-recourse,  match-funded  debt. CBO-1 generated excess borrowing  capacity of
approximately  $22 million  primarily as a result of a higher  overall  weighted
average  credit  rating for the new CMBS,  as compared to the  weighted  average
credit rating on the related CMBS collateral.

     In  May  1998,  the  Company  completed  its  second   resecuritization  of
Subordinated  CMBS  ("CBO-2") with a combined face value of  approximately  $1.8
billion  involving  75  individual  securities  collateralized  by  19  mortgage
securitization  pools and three of the retained securities from CBO-1. In CBO-2,
the Company sold, in private  transactions,  securities  with an aggregate  face
amount  of  $673  million  and  retained   securities  with  a  face  amount  of
approximately  $1.1 billion.  CBO-2 generated net excess  borrowing  capacity of
approximately  $160 million  primarily as a result of a higher overall  weighted
average  credit  rating for the new CMBS,  as compared to the  weighted  average
credit rating on the related CMBS collateral.

     As of December 31, 2001, the Company's  total debt was  approximately  $1.0
billion, of which approximately 60% was fixed-rate,  match-funded,  non-recourse
debt and  approximately  40% was  variable-rate  or fixed-rate debt that was not
match-funded.  See "MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND  RESULTS  OF  OPERATIONS"  and  Notes 5 and 7 to the  Notes to  Consolidated
Financial   Statements   for  further   information   regarding   the  Company's
resecuritizations and variable-rate secured financings.

Loan Originations and Securitizations

     Prior  to  the  Petition  Date,  the  Company  originated   mortgage  loans
principally   through  mortgage  loan  conduit  programs  with  major  financial
institutions  for the primary purpose of pooling such loans for  securitization.
The Company viewed a  securitization  as a means of extracting the maximum value
from the mortgage loans  originated.  A portion of the mortgage loans originated
was financed  through the creation  and sale of  investment  grade CMBS to third
parties in connection  with the  securitization.  The Company  received net cash
flow on the CMBS not sold to third  parties  after  payment  of  amounts  due to
secured  creditors who had provided  acquisition  financing.  Additionally,  the
Company  received  origination  and servicing  fees related to the mortgage loan
conduit programs.

     Also prior to the  Petition  Date,  the  Company had  originated  over $900
million  in  aggregate  principal  amount of loans.  In June 1998,  the  Company
securitized   approximately  $496  million  of  the  commercial  mortgage  loans
originated  or acquired  through a mortgage  loan conduit  program with Citicorp
Real  Estate,  Inc.  ("Citibank")  and,  through  CRIIMI MAE CMBS Corp.,  issued
Commercial  Mortgage  Loan Trust  Certificates,  Series  1998-1

<PAGE>

("CMO-IV").  In  CMO-IV,  CRIIMI  MAE sold  $397  million  face  amount  of
fixed-rate,  investment grade CMBS. The Company originally  intended to sell all
of the  investment  grade  tranches of CMO-IV;  however,  two  investment  grade
tranches  were not sold until  1999.  CRIIMI MAE had call  rights on each of the
issued  securities and therefore had not surrendered  control of the bonds, thus
requiring  the  transaction  to be accounted  for as a financing of the mortgage
loans collateralizing the investment grade CMBS sold in the securitization.  The
Company  sold  its  remaining   interest  in  CMO-IV  in  November   2000.   See
"MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF FINANCIAL  CONDITION  AND RESULTS OF
OPERATIONS-Financial  Condition,  Liquidity and Capital Resources" and Note 5 to
the  Notes to  Consolidated  Financial  Statements  for  additional  information
regarding  this  securitization,  including  the 1999 sales of the two remaining
investment  grade  tranches,  the sale of the  Company's  interest in CMO-IV and
certain financial and accounting effects of such sales.

     At the time it filed for  protection  under  Chapter  11, the Company had a
second  mortgage  loan conduit  program with  Citicorp  Real Estate,  Inc.  (the
"Citibank  Program")  and a loan  conduit  program  with  Prudential  Securities
Incorporated  and  Prudential   Securities  Credit  Corporation   (collectively,
"Prudential") (the "Prudential Program").

     The  Citibank  Program  provided for CRIIMI MAE to pay to Citibank the face
value of the loans originated through the Program, which were funded by Citibank
and not  otherwise  securitized,  plus or minus  any  hedging  loss or gain,  on
December 31, 1998. To secure this obligation, CRIIMI MAE was required to deposit
a portion of the principal  amount of each originated loan in a reserve account.
On April 5, 1999, the Bankruptcy  Court entered a Stipulation  and Consent Order
(the "Order"),  negotiated by the Company and Citibank. The negotiations were in
response to a letter  Citibank sent to the Company on the Petition Date alleging
that the  Company  was in default  under the  Citibank  Program  and that it was
terminating the Citibank  Program.  The Order provided that Citibank would, with
CRIIMI MAE's  cooperation,  sell the loans originated under the Citibank Program
pursuant to certain  specified terms and conditions.  On August 5, 1999, all but
three of the commercial loans originated under the Citibank Program were sold at
a loss to the Company.  See  "MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS".

     Under  the  Prudential  Program,  the  Company  had  an  option  to  pay to
Prudential the face value of the loan plus or minus any hedging loss or gain, at
the earlier of June 30,  1999,  or the date by which a stated  quantity of loans
for securitization had been made. Under the Prudential Program,  the Company was
required to fund a reserve account of approximately $2 million for the sole loan
originated  under this  Program.  Since  CRIIMI MAE was unable to  exercise  its
option under the  Prudential  Program,  the Company  forfeited the amount of the
reserve  account.  During the year ended December 31, 1998, the Company recorded
an  unrealized  loss of $2 million for its loss  exposure  under the  Prudential
Program.  The Company  calculated the Prudential  loss based upon the assumption
that the Company would not exercise its option with Prudential.

Underwriting Procedures

     Since the Company  generally  acquired  CMBS through  privately  negotiated
transactions  and  originated  commercial  mortgage  loans  through its regional
offices,  it was able to perform  extensive  due  diligence on a majority of the
mortgage loans as well as the underlying real estate prior to  consummating  any
purchase or  origination.  The Company  underwrote  every loan it originated and
re-underwrote  a substantial  portion of the loans  underlying the  Subordinated
CMBS it acquired.  Furthermore,  the  Company's  credit  committee,  composed of
members of senior  management,  reviewed  originated loans and Subordinated CMBS
acquisitions.

     CRIIMI MAE's  underwriting  guidelines were designed to assess the adequacy
of  the  real   property  as  collateral   for  the  loan  and  the   borrower's
creditworthiness. The underwriting process entailed a full independent review of
the operating records,  appraisals,  environmental  studies,  market studies and
architectural  and  engineering  reports,  as well as site visits to  properties
representing  a majority  of the CMBS  portfolio.  The  Company  then tested the
historical  and projected  financial  performance of the properties to determine
their resiliency to a market downturn and applied varying  capitalization  rates
to assess  collateral  value.  To assess the  borrower's  creditworthiness,  the
Company  reviewed the borrower's  financial  statements,  credit  history,  bank
references and managerial  experience.  The Company purchased  Subordinated CMBS
when the  loans  it  believed  to be  problematic  (i.e.,  that did not meet its
underwriting  criteria) were excluded from the CMBS pool, and when  satisfactory

<PAGE>

arrangements  existed that enabled the Company to closely monitor the underlying
mortgage loans and provided the Company with appropriate workout and foreclosure
rights.

Servicing

     CRIIMI MAE conducts its mortgage loan servicing  operations  through CMSLP.
CMSLP was formed under a limited  partnership  agreement in which CM  Management
was the sole limited partner and CRIIMI MAE Services, Inc. ("CMSI") was the sole
general partner. As of December 31, 2000, the limited  partnership  interest and
the  general  partnership  interest  in CMSLP  were  73% and 27%,  respectively.
Effective July 2001, CRIIMI MAE, which had previously  accounted for CMSLP under
the equity  method,  acquired  voting control of CMSLP and is now accounting for
this subsidiary on a consolidated basis. CMSLP's assets,  liabilities,  revenues
and expenses are labeled as "servicing" on the Company's  consolidated financial
statements.

     Although  CMSLP did not file for  protection  under  Chapter 11, it and the
bonds it serviced  were under a high degree of scrutiny  from  servicing  rating
agencies  because of CMSLP's  relationship  with  CRIIMI  MAE. In order to allay
rating agency concerns stemming from CRIIMI MAE's Chapter 11 filing, in November
1998 CRIIMI MAE  designated  ORIX as special  servicer  on CMBS  securitizations
totaling approximately $29 billion, subject to certain requirements contained in
the  respective  servicing  agreements.   CMSLP  continued  to  perform  special
servicing as sub-servicer for ORIX on all but four of these securitizations.  In
conjunction with the Company's emergence from Chapter 11, CMSLP was redesignated
as special servicer on the Company's  remaining CMBS  securitizations  effective
August 27, 2001.

     On October  8,  2001,  Standard & Poor's  ("S&P")  affirmed  its  "average"
overall  mortgage  servicing  rankings for CMSLP and, in its report,  S&P ranked
CMSLP's outlook as "positive" as a commercial loan servicer,  commercial  master
servicer and commercial special servicer.  On October 24, 2001, Fitch issued two
ratings upgrades and one ratings  affirmation for CMSLP.  Fitch upgraded CMSLP's
special  servicer  rating to "CSS2+" and upgraded the servicer rating to "CPS2".
Fitch's reasons for the primary  servicer  upgrade  include  CMSLP's  "continued
attention to improving  technology and the experienced,  well-tenured  servicing
team." In addition, CMSLP's master servicer rating of "CMS3" was affirmed.

     On December  17, 2001,  CMSLP  announced  its  intention to sell all of its
rights and  obligations  under its CMBS master and primary  servicing  contracts
because the contracts were not profitable,  given the relatively small volume of
master and primary CMBS servicing that CMSLP was performing.  In connection with
this  determination,  34 employees were  terminated.  A restructuring  charge of
approximately $438,000 was recorded during the fourth quarter of 2001 to account
for  employee  severance  costs,  noncancellable  lease  costs,  and other costs
related to the  restructuring.  All rights and obligations under these servicing
contracts were sold in February 2002. CMSLP received approximately $11.3 million
in cash, which included reimbursement of advances. This is expected to result in
a gain on sale of approximately $4.3 million,  subject to adjustment for certain
post-closing  contingencies,  in the second quarter of 2002. In addition,  CMSLP
may receive up to an additional  $0.9 million from the sale in the third quarter
of 2002,  which would be reflected as an additional gain on sale,  following the
completion  of a  post-closing  contingency  period.  See Note 3 to Notes to the
Consolidated Financial Statements.

     CMSLP's principal  servicing  activities are described below. For a summary
and discussion of the financial results of CMSLP, see  "MANAGEMENT'S  DISCUSSION
AND ANALYSIS OF FINANCIAL  CONDITION  AND RESULTS OF  OPERATIONS"  and Note 3 to
Notes to the Consolidated Financial Statements.

     Special Servicing

     A special  servicer  typically  provides  asset  management  and resolution
services with respect to nonperforming or underperforming loans within a pool of
mortgage loans. When acquiring  Subordinated CMBS, CRIIMI MAE typically required
that it  retain  the right to  appoint  the  special  servicer  for the  related
mortgage pools.  When serving as special  servicer of a CMBS pool, CMSLP has the
authority to deal directly with any borrower that fails to perform under certain
terms of its  mortgage  loan,  including  the failure to make  payments,  and to
manage any loan workouts and foreclosures.  As special servicer, CMSLP earns fee
income on  services  provided in  connection  with any loan  servicing  function
transferred to it from the master servicer.  CRIIMI MAE believes that because it
owns the first loss unrated or lowest rated bond of all but one CMBS,  CMSLP has
an  incentive  to quickly  resolve any loan  workouts.  As of December 31, 2001,
CMSLP was  designated  as the special  servicer  for 3,459  commercial  mortgage
loans,  representing an aggregate principal amount of approximately $19 billion,
or 91% of its servicing  portfolio.  See "The  Portfolio-CMBS and Other MBS" and
Note 5 to the Notes to  Consolidated  Financial  Statements  regarding  mortgage
loans included in the special servicing portfolio.

     As of December 31, 2001,  CMSLP had a special  servicer rating of "average"
from S&P and "CSS2+" from Fitch.

     Loan Management

     In certain  cases,  CMSLP acts as loan  manager  and  monitors  the ongoing
performance   of  properties   securing  the  mortgage   loans   underlying  its
Subordinated  CMBS  portfolio  by  continuously  reviewing  the  property  level
operating data and regular site  inspections.  For  approximately  half of these
loans,  CMSLP  performs these duties on a contractual  basis;  for the remaining
loans, as part of its routine asset monitoring  process, it reviews the analyses
performed  by other  servicers.  This  allows  CMSLP  to  identify  and  resolve
potential  issues that could result in losses.  As of December  31, 2001,  CMSLP
served  as  contractual  loan  manager  for  1,739  commercial   mortgage  loans
representing an aggregate  principal amount of approximately $8.1 billion. As of
December 31, 2001,  CMSLP  reviewed  analyses  performed by other  servicers for
1,585 commercial  mortgage loans,  representing an aggregate principal amount of
$10.4 billion.

     Master Servicing

     A master servicer typically provides  administrative and reporting services
to  the  trustee  with  respect  to a  particular  issuance  of  CMBS  or  other
securitized  pools of mortgages.  Mortgage loans  underlying  securitized  pools
generally  are  serviced  by a number of primary  servicers.  Under most  master
servicing arrangements,  the primary servicers retain primary responsibility for
administering the mortgage loans and the master servicer acts as an intermediary
in overseeing the work of the primary  servicers,  monitoring  their  compliance
with the  standards  of the issuer of the  related  CMBS and  consolidating  the
servicers'  respective  periodic  accounting  reports  for  transmission  to the
trustee.  As master  servicer,  CMSLP was  usually  paid a fee and earned  float
income on the deposits  held.  As of December 31, 2001,  CMSLP  remained  master
servicer on one CMBS portfolio  representing  commercial  mortgage loans with an
aggregate principal amount of approximately $711 million. As discussed above, in
February 2002,  CMSLP sold all rights and obligations  under its CMBS master and
primary servicing contracts.

     Direct (or Primary) Servicing

     Direct (or primary)  servicers  typically perform certain functions for the
master servicer. Direct serviced loans are those loans for which CMSLP collected
loan payments  directly from the borrower  (including tax and insurance  escrows
and replacement reserves). The loan payments are remitted to the master servicer
for the loan (which may be the same entity as the direct servicer), usually on a
fixed date each  month.  The direct  servicer  is usually  paid a fee to perform
these services, and is eligible to earn float income on the deposits held. As of
December 31, 2001, CMSLP was designated  direct servicer for  approximately  280
commercial  mortgage  loans,  representing  an  aggregate  principal  amount  of
approximately  $1.4 billion.  This number of loans excludes loans that were both
direct and master serviced by CMSLP,  which are included in the master servicing
figure above. As discussed  above,  in February 2002,  CMSLP sold all rights and
obligations under its CMBS master and primary servicing contracts.

Employees

     As of March  1,  2002,  the  Company  had 112  employees,  75 of which  are
employed by CMSLP.

The Portfolio

     CMBS and Other MBS

     As of December  31,  2001,  the Company  owned,  for  purposes of generally
accepted accounting  principles ("GAAP"),  CMBS rated from A+ to CCC and unrated
with a total fair  value  amount of  approximately  $824  million

<PAGE>

(representing   approximately  63%  of  the  Company's  total  consolidated
assets),  an aggregate  amortized  cost of  approximately  $822 million,  and an
aggregate  face  amount of  approximately  $1.6  billion.  Such  CMBS  represent
investments in CBO-1,  CBO-2 and Nomura Asset  Securities  Corp.  Series 1998-D6
("Nomura").  The weighted average pass through rate of these CMBS as of December
31, 2001 was 6.3% and the weighted average life was 13 years.

     The  Company's  unrated bonds from CBO-1,  CBO-2 and Nomura,  respectively,
experienced  cumulative principal  write-downs due to realized losses related to
certain underlying  mortgage loans, from inception through December 31, 2001, of
approximately $4.5 million, $9.5 million and $0.2 million,  respectively. Of the
$19.3 billion and $20.2 billion,  respectively,  of underlying mortgage loans as
of December 31, 2001 and 2000, $791.7 million and $310.6 million,  respectively,
were included in special  servicing.  For additional  information  regarding the
Company's CMBS portfolio and the  performance of the underlying  mortgage loans,
refer to  "MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF  FINANCIAL  CONDITION  AND
RESULTS OF OPERATIONS" and Note 5 to Notes to Consolidated Financial Statements.

     In addition to the CMBS discussed  above,  the Company owns $8.5 million of
Other MBS,  which are held for trading  purposes,  as of December  31, 2001 (see
also "REIT Status/Net Operating Loss for Tax Purposes").

     Servicing Portfolio

     As discussed under the heading  "Servicing",  CMSLP conducts  mortgage loan
servicing  operations.  As of December 31, 2001 and 2000,  CMSLP was  performing
certain  servicing  functions on commercial  mortgage loans of $19.3 billion and
$20.2  billion,  respectively.  See  "MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS" for a discussion of the servicing
operations.

     Insured Mortgage Securities

     As of December 31, 2001 and 2000, the Company had $343.1 million and $385.8
million at fair value (representing approximately 26% and 25%, respectively,  of
the Company's total  consolidated  assets) and $351.0 million and $390.8 million
at amortized cost, respectively,  invested in mortgage securities, consisting of
GNMA Mortgage-Backed Securities and FHA-Insured Certificates, as well as Freddie
Mac participation  certificates that are collateralized by GNMA  Mortgage-Backed
Securities.  As of December 31, 2001, 87% were GNMA  Mortgage-Backed  Securities
(including   certificates   that   collateralize   Freddie   Mac   participation
certificates)  and  approximately  13% of CRIIMI  MAE's  investment  in mortgage
securities  were  FHA-Insured  Certificates.  See  Notes 3 and 6 to the Notes to
Consolidated Financial Statements for further discussion.

     Equity Investments

     As of December  31,  2001 and 2000,  the  Company  had  approximately  $9.3
million and $33.8 million,  respectively, in investments accounted for under the
equity method of accounting.  Included in equity  investments as of December 31,
2000  are  (a)  the  general  partnership  interests  (2.9%  to  4.9%  ownership
interests) in American  Insured  Mortgage  Investors,  American Insured Mortgage
Investors-Series  85, L.P.,  American Insured Mortgage Investors  L.P.-Series 86
and American Insured Mortgage  Investors  L.P.-Series 88 (collectively  the "AIM
Funds"),  owned by CRIIMI,  Inc., a wholly owned subsidiary of CRIIMI MAE, (b) a
20% limited  partnership  interest in the adviser to the AIM Funds, 50% of which
is owned by CRIIMI  MAE and 50% of which is owned by CM  Management,  (c) CRIIMI
MAE's  interest in CRIIMI MAE Services,  Inc.,  and (d) CRIIMI MAE's interest in
CMSLP. Effective July 2001, CRIIMI MAE, which had previously accounted for CMSLP
under the equity method,  acquired voting control of CMSLP and began  accounting
for this  subsidiary  on a  consolidated  basis.  CMSLP's  assets,  liabilities,
revenues and expenses are labeled as "servicing"  on the Company's  Consolidated
Financial  Statements.  See  Note  3 to  the  Notes  to  Consolidated  Financial
Statements for further discussion.

     Real Estate Owned ("REO")

     As of December  31,  2001 and 2000,  the  Company  had  approximately  $8.3
million and $0,  respectively,  of real estate being held for  investment.  This
real  estate  consists  of a shopping  center in  Orlando,  Florida.  See "Other

<PAGE>

Income" and "Summary of Other Assets" in  "MANAGEMENT'S  DISCUSSION AND ANALYSIS
OF FINANCIAL  CONDITION AND RESULTS OF OPERATIONS"  for a further  discussion of
this REO.

Certain Risk Factors

     In addition to the risk factors set forth below, please see those set forth
in "BUSINESS" and "MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL  CONDITION
AND RESULTS OF OPERATIONS."

     Substantial Indebtedness; Leverage

     The Company is highly  leveraged.  As of December 31, 2001,  the  Company's
total  consolidated  indebtedness  was $1.0  billion (of which $408  million was
recourse  debt  to  the  Company).  As  of  December  31,  2001,  the  Company's
shareholders'   equity  was  approximately   $261  million.   See  "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL  CONDITION AND RESULTS OF  OPERATIONS"  and
the Consolidated  Financial Statements of the Company and the accompanying notes
thereto.  Virtually  all cash flows  relating  to existing  assets are,  and are
currently  expected  to  be,  used  to  satisfy  principal,   interest  and  fee
obligations under the New Debt, and to pay general and  administrative and other
operating expenses of the Company.

     Although there can be no assurance,  the Company believes that it will have
sufficient  cash  resources to pay interest,  scheduled  principal and any other
required  payments on the New Debt through the remainder of 2002.  The Company's
ability to meet its debt service  obligations through the remainder of 2002 will
depend on a number of factors,  including  management's ability to maintain cash
flow (which is impacted by, among other things,  the credit  performance  of the
underlying mortgage loans) and to generate capital internally from operating and
investing  activities and expected reductions in REIT distribution  requirements
to stockholders due to expected net operating  losses for tax purposes,  in each
case consistent with the terms of the New Debt. See "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF  FINANCIAL  CONDITION  AND RESULTS OF  OPERATIONS".  There can be no
assurance  that  targeted  levels of cash flow will  actually be achieved,  that
reductions  in REIT  distribution  requirements  will be realized,  or that,  if
required, new capital will be available to the Company. The Company's ability to
maintain or increase  cash flow and access new capital will depend  upon,  among
other things,  interest rates, prevailing economic conditions and other factors,
many of which are beyond the control of the Company.

     The  Company's  high level of debt limits its ability to obtain  additional
capital,  significantly  reduces  cash  flow  available  for  other  activities,
restricts  the  Company's  ability to react  quickly to changes in its business,
limits its  ability to hedge its assets and  liabilities,  and makes the Company
more vulnerable to economic downturns. In addition, the documents evidencing the
New Debt impose significant operating and financial restrictions on the Company.
See "MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS" and Notes 1 and 7 to the Notes to Consolidated Financial Statements.

     Additionally,  there can be no  assurance  that the Company will be able to
refinance  all or any  portion of the New Debt at or prior to  maturity on terms
favorable to it, or on any terms at all.

     Borrowing Risks

     Substantially all of the Company's borrowings, including the New Debt, are,
and are  expected to continue to be, in the form of  collateralized  borrowings.
The Variable-Rate  Secured Borrowing is collateralized by first, second or third
priority  direct or indirect (in  connection  with an  affiliate  reorganization
discussed in Note 7 to Notes to  Consolidated  Financial  Statements)  liens and
security  interests on or in substantially all of the Company's assets (although
the   Variable-Rate   Secured   Borrowing  is  not   collateralized  by  certain
miscellaneous  assets  which,  in addition to the  collateral  that  secures the
Variable-Rate  Secured  Borrowing,  collateralizes the balance of the New Debt),
and is  subject to a number of terms,  conditions  and  restrictions  including,
without  limitation,  scheduled  principal  and interest  payments,  accelerated
principal   payments,   restrictions  and  requirements   with  respect  to  the
collection, management, use and application of funds. Certain events, including,
without  limitation,  the failure to satisfy  certain payment  obligations  will
result in further  restrictions  on the ability of the  Company to take  certain
actions. The balance of the New Debt, represented by the Series A Senior Secured
Notes and  Series B Senior  Secured  Notes  (collectively  the  "Senior  Secured
Notes"), is collateralized by first, second or third priority direct or

<PAGE>

indirect  liens or security  interests  on or in  substantially  all of the
Company's assets  (although in some cases with respect to certain  miscellaneous
assets,  the  lien  and  security  interest  is only on or in  proceeds  of such
assets),  and is  subject  to a number of  terms,  conditions  and  restrictions
including,  without limitation,  scheduled principal and interest payments,  and
restrictions and requirements  with respect to the use of funds. The Company has
exceeded certain loss threshold amounts under the operative documents related to
the  Variable-Rate  Secured  Borrowing and the Senior Secured  Notes,  which has
resulted in certain additional  restrictions.  See "MANAGEMENT'S  DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS."

     A limited  portion  of the  Company's  borrowings  in the  future,  if CMBS
acquisitions  are  resumed,  may be, in the form of  collateralized,  short-term
floating-rate  secured borrowings.  The amount borrowed under such agreements is
typically  based on the  market  value of the CMBS  pledged  to secure  specific
borrowings.  Under adverse  market  conditions,  the value of pledged CMBS would
decline,  and lenders  could  initiate  margin  calls (in which case the Company
could be required to post additional collateral or to reduce the amount borrowed
to  restore  the  ratio  of the  amount  of the  borrowing  to the  value of the
collateral).  The  Company  may be  required  to sell CMBS to reduce  the amount
borrowed.  If these sales were made at prices lower than the  carrying  value of
the CMBS,  the Company  would  experience  losses.  CRIIMI MAE Inc. is currently
prohibited  from  acquiring  CMBS  rated "B" or lower or unrated  under  certain
documents evidencing the New Debt.

     A default by the Company under its  collateralized  borrowings could result
in a liquidation of the  collateral.  If the Company is forced to liquidate CMBS
that qualify as qualified  real estate assets (under the REIT  Provisions of the
Internal  Revenue Code) to repay  borrowings,  there can be no assurance that it
will be able to maintain  compliance  with the REIT  Provisions  of the Internal
Revenue Code regarding asset and source of income requirements.  The liquidation
of Subordinated  CMBS could also result in the loss of the Company's  Investment
Company Act exclusion. See "Investment Company Act."

     Limited Protection from Hedging Transactions

     To minimize the risk of interest rate  increases on interest  expense as it
relates to its  variable-rate  debt,  the  Company  follows a policy to hedge at
least 75% of the principal amount of its  variable-rate  debt with interest rate
protection  agreements  in order to provide a ceiling on the amount of  interest
expense payable by the Company.  As of December 31, 2001,  approximately  77% of
the Company's  Variable-Rate  Secured Borrowing was hedged with an interest rate
protection  agreement that partially  limits the impact of rising interest rates
above a certain  defined  threshold,  or strike  price.  When this interest rate
protection agreement expires, the Company will have increased interest rate risk
unless it is able to enter into replacement interest rate protection agreements.
As of December 31, 2001,  the remaining  term for the interest  rate  protection
agreement  was  approximately  15 months  with a strike  price of  5.25%.  As of
December 31, 2001, one-month LIBOR was 1.87%. There can be no assurance that the
Company will be able to maintain interest rate protection agreements to meet its
hedge policy on  satisfactory  terms or to  adequately  protect  against  rising
interest rates on the Company's  variable-rate debt. During 2001, 2000 and 1999,
the Company did not hedge against  interest rate risks,  including  increases in
interest rate spreads and increases in Treasury rates,  which  adversely  affect
the value of its CMBS.  Moreover,  hedging involves risk and typically  involves
costs,  including  transaction  costs.  Such costs increase  dramatically as the
period  covered  by the  hedging  increases  and  during  periods  of rising and
volatile interest rates.

     CRIIMI MAE is exposed to credit loss in the event of non-performance by the
counterparty  to the interest rate  protection  agreement  should interest rates
exceed the cap. However,  management does not anticipate  non-performance by the
counterparty.  The counterparty has long-term debt ratings of A+ or above by S&P
and A1 or above by Moody's.  Although  CRIIMI MAE's cap is not  exchange-traded,
there are a number of  financial  institutions  which  enter into these types of
transactions as part of their day-to-day activities.

     Risks of Owning Subordinated CMBS

     As an owner of the most  subordinate  tranches of CMBS, the Company will be
the  first to bear any  loss and the last to have a  priority  right to the cash
flow of the related  mortgage  pool.  For  example,  if the  Company  owns a $10
million subordinated  interest in an issuance of CMBS consisting of $100 million
of mortgage loan  collateral,  a 7% loss on the  underlying  mortgage loans will
result in a 70% loss on the subordinated interest.

<PAGE>

     The  Company's  Subordinated  CMBS can  change  in value due to a number of
economic  factors.  These factors include changes in the underlying real estate,
fluctuations in Treasury rates, and supply/demand mismatches which are reflected
in CMBS pricing  spreads.  For  instance,  changes in the credit  quality of the
properties securing the underlying mortgage loans can result in interest payment
shortfalls,  to  the  extent  there  are  mortgage  payment  delinquencies,  and
principal  losses, to the extent that there are payment defaults and the amounts
are not fully recovered.  These losses may result in a permanent  decline in the
value of the CMBS, and the losses may change the Company's  anticipated yield to
maturity  if the losses are in excess of those  previously  estimated.  CMBS are
priced at a spread above the current Treasury security with a maturity that most
closely  matches  the  CMBS'  weighted  average  life.  The value of CMBS can be
affected by changes in Treasury  rates, as well as changes in the spread between
such CMBS and the Treasury security with a comparable maturity. For example, the
spread to Treasury  of a CMBS may have  increased  from 400 basis  points to 500
basis points. If the Treasury security with a comparable maturity had a constant
yield of 5% then, in this example, the yield on the CMBS would have changed from
9% to 10%  and,  accordingly,  the  value  of such  CMBS  would  have  declined.
Generally, increases and decreases in both Treasury rates or spreads will result
in temporary  changes in the value of the  Subordinated  CMBS  assuming that the
Company has the ability and intent to hold its CMBS investments  until maturity.
However,  such  temporary  changes  in the  value of  Subordinated  CMBS  become
permanent  changes  realized  through the income  statement  when the Company no
longer  intends or fails to have the ability to hold such  Subordinated  CMBS to
maturity or expected credit losses are greater than originally anticipated.  See
"MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF FINANCIAL  CONDITION  AND RESULTS OF
OPERATIONS - Results of Operations  for 2001 versus 2000  (Impairment  on CMBS);
Results of Operations for 2000 versus 1999  (Impairment on CMBS),  and Financial
Condition,  Liquidity and Capital Resources (Summary of Subordinated  CMBS)" and
Note 5 to Notes to Consolidated Financial Statements.

     The Company has historically been unable to obtain financing at the time of
acquisition that matches the maturity of the related investments, resulting in a
periodic need to obtain short-term financing secured by certain of the Company's
CMBS. The inability to refinance this  short-term  floating-rate  financing with
long-term  fixed-rate  financing  or a decline  in the  value of the  collateral
securing such short-term floating-rate  indebtedness could result in a situation
where the  Company is required  to sell CMBS or provide  additional  collateral,
which  could  have,  and has had,  an  adverse  effect  on the  Company  and its
financial  position and results of operations.  The Company's  ability to borrow
amounts  in the  future may be  impacted  by,  among  other  things,  the credit
performance  of the  underlying  pools of  commercial  mortgage  loans and other
factors affecting the Subordinated CMBS that it owns, and restrictions under the
operative agreements evidencing the New Debt.

     Limited Liquidity of Subordinated CMBS Market

     There is  currently no active  secondary  trading  market for  Subordinated
CMBS.  This limited  liquidity  results in  uncertainty  in the valuation of the
Company's  portfolio of Subordinated  CMBS. In addition,  even if the market for
Subordinated  CMBS recovers to spring 1998 levels,  the liquidity of such market
has historically been limited; and furthermore, during adverse market conditions
the liquidity of such market has been severely  limited,  which would impair the
amount the Company  could  realize if it were  required to sell a portion of its
Subordinated CMBS.

     Possible Effects of Terrorist  Attacks,  Economic Slowdown and/or Recession
on Losses and Defaults

     The economic  slowdown,  recession and terrorist  attacks have been factors
contributing  to  defaults on and may  continue to increase  the risk of further
defaults on commercial  mortgage loans and  correspondingly  increase losses and
the risk of further losses on the Subordinated  CMBS backed by such loans.  Such
factors may continue to negatively  impact the values of commercial  real estate
securing the mortgage loans,  weakening  collateral  coverage and increasing the
possibility of defaults and losses in the event of defaults,  and the demand for
commercial real estate  securing the mortgage loans.  See Note 5 to the Notes to
Consolidated  Financial Statements and "Management's  Discussion and Analysis of
Financial  Condition and Results of Operations"  for  information  regarding the
performance of the underlying commercial loans.

     Failure to Manage Mismatch Between Long-Term Assets and Short-Term Funding

     The Company's  operating  results will depend in large part on  differences
between the income from its CMBS and its borrowing costs. If the Company resumes
the acquisition of Subordinated  CMBS, the Company

<PAGE>

intends to fund a significant  portion of its CMBS with  borrowings  having
interest  rates  (i.e.,  borrowing  rates) that reset more  frequently,  usually
monthly or quarterly.  If interest  rates rise,  borrowing  rates (and borrowing
costs) of the Company are  expected to rise more  quickly than coupon rates (and
investment income) on the Company's CMBS. This would decrease both the Company's
net income, potentially resulting in a net loss, and the mark-to-market value of
the Company's net assets,  and would be expected to decrease the market price of
the Company's common stock and to slow future  acquisitions of assets.  Although
the Company intends to invest primarily in fixed-rate CMBS, the Company also may
own  adjustable  rate CMBS.  The coupon rates of  adjustable  rate CMBS normally
fluctuate  with  reference to specific rate indices.  The Company may fund these
adjustable rate CMBS with borrowings  having borrowing rates which reset monthly
or quarterly.  To the extent that there is a difference between (i) the interest
rate index used to determine the coupon rate of the adjustable  rate CMBS (asset
index) and (ii) the interest rate index used to determine the borrowing rate for
the  Company's  related  financing  (borrowing  index),  the Company will bear a
"basis"  interest rate risk.  Typically,  if the borrowing index rises more than
the asset  index,  the net income of the Company  would be  decreased  all other
things being constant.  Additionally,  the Company's adjustable rate CMBS may be
subject to periodic rate  adjustment  limitations and periodic and lifetime rate
caps which  limit the amount  that the coupon  rate can change  during any given
period.  No  assurance  can be given as to the  amount or timing of  changes  in
interest rates or their effect on the Company's CMBS,  their valuation or income
derived  therefrom.  During periods of changing interest rates,  coupon rate and
borrowing  rate  mismatches  could  negatively  impact the Company's net income,
distributions  and the market  price of the  common  stock.  CRIIMI MAE Inc.  is
currently  prohibited  from  acquiring  CMBS rated "B" or lower or unrated under
certain documents evidencing the New Debt.

     Risks  Associated  with Trader  Election and  Limitation  of Net  Operating
Losses for Tax Purposes

     On March 15, 2000, the Company determined to elect mark-to-market treatment
as a securities  trader effective  January 1, 2000. As a result of the election,
the Company  recognized  a  mark-to-market  tax loss on its Trading  Assets,  on
January 1, 2000 of  approximately  $478 million (the "January  2000 Loss").  See
"MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF FINANCIAL  CONDITION  AND RESULTS OF
OPERATIONS  - REIT  Status/Net  Operating  Loss for Tax  Purposes"  for  further
discussion, including a definition of Trading Assets. There is no assurance that
the  Company's  position  with respect to its election as a trader in securities
will  not be  challenged  by the  IRS,  and,  if  challenged,  will be  defended
successfully by the Company. As such, there is a risk that the January 2000 Loss
will be  limited  or  disallowed,  resulting  in higher  tax basis  income and a
corresponding  increase in REIT distribution  requirements.  It is possible that
the amount of any  under-distribution for a taxable year could be corrected with
a  "deficiency  dividend"  as defined in  Internal  Revenue  Code  Section  860,
however,  interest may also be due to the Internal Revenue Service on the amount
of this under-distribution.

     If CRIIMI MAE is  required  to make  taxable  income  distributions  to its
shareholders  to  satisfy  required  REIT  distributions,  all or a  substantial
portion of these distributions, if any, are currently expected to be in the form
of non-cash dividends.  There is no assurance that such non-cash dividends would
satisfy the REIT distribution  requirements and, as such, the Company could lose
its  REIT  status  or may not be able  to  satisfy  its  obligations  under  the
operative documents evidencing the New Debt.

     For the year 2000 and subsequent years,  taxable income (loss) is, and will
likely be different  from the net income (loss) as calculated  according to GAAP
as a result of, among other things,  differing treatment of the unrealized gains
and losses on securities  transactions as well as other timing differences.  For
the Company's tax purposes,  unrealized gains (losses) on Trading Assets will be
recognized at the end of the year and will be aggregated  with  operating  gains
(losses) to produce total taxable income (loss) for the year.

     The election to be treated as a trader will result in net operating  losses
that generally may be carried forward for 20 years.  The Company's future use of
net  operating  losses for tax  purposes  (collectively,  the  "NOLs")  could be
substantially  limited in the event of an  "ownership  change" as defined  under
Section  382 of the  Internal  Revenue  Code.  As a result of these  limitations
imposed  by  Section  382 of the  Internal  Revenue  Code,  in the  event  of an
ownership  change,  the Company's ability to use its NOL carryforwards in future
years may be limited  and, to the extent the NOL  carryforwards  cannot be fully
utilized under these limitations within the carryforward  periods, the NOL carry
forwards would expire unutilized.  Accordingly,  after any ownership change, the
Company's  ability

<PAGE>

to use its NOLs to reduce or offset taxable  income would be  substantially
limited or not available  under Section 382. In general,  a company  reaches the
"ownership  change" threshold if the "5% shareholders"  increase their aggregate
ownership  interest in the company over a three-year testing period by more than
50  percentage  points.  The  ownership  interest is measured in terms of market
value of the company's capital stock.

     The  Company  is not aware of any  acquisition  of shares of the  Company's
capital  stock that has created an  "ownership  change"  under  Section 382, but
believes that it may be close to approaching the 50% threshold for an "ownership
change" under Section 382. The Company is concerned that future  acquisitions of
common  stock,  preferred  stock or a  combination  of both by an  existing  "5%
shareholder" or a new "5% shareholder" could cause an "ownership  change". If an
"ownership  change" occurs,  the Company's  ability to use its NOLs to reduce or
offset its taxable income would be substantially  limited or not available under
Section 382 of the Internal  Revenue Code on a  prospective  basis.  The Company
would then have REIT distribution  requirements based upon its taxable income at
the beginning of the year such  ownership  change occurs.  As stated above,  any
such distributions are expected to be in the form of non-cash taxable dividends.

     Currently,  the Company does not know of any  acquisition  of shares of its
capital stock that would create an "ownership  change" of its common stock under
Section 382 of the Internal  Revenue Code. The Company has adopted a shareholder
rights plan to deter an  ownership  change  within the meaning of Section 382 of
the Internal  Revenue Code,  however there can be no assurance that an ownership
change will not occur. See "MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER  MATTERS" for a discussion of a recently adopted  shareholder rights
plan.

     Effect of Rate Compression on Market Price of Stock

     The  Company's  actual  earnings   performance  as  well  as  the  market's
perception of the Company's  ability to achieve  earnings  growth may affect the
market price of the Company's  common stock. In the Company's case, the level of
earnings  (or  losses)  depends  to a  significant  extent  upon the  width  and
direction  of the spread  between  the net yield  received by the Company on its
income-earning assets (principally,  the long term, fixed-rate assets comprising
its CMBS  portfolio)  and its  variable-rate  cost of  borrowing.  In periods of
narrowing  or  compressing  spreads,  the  resulting  pressure on the  Company's
earnings  may  adversely  affect the market  value of its common  stock.  Spread
compression  can occur in high or low interest rate  environments  and typically
results when net yield on the long term assets adjusts less  frequently than the
current rate on debt used to finance their purchase. For example, if the Company
relies on short term,  variable-rate  borrowings to finance the purchase of long
term fixed-rate CMBS assets, the Company may experience rate compression,  and a
resulting  diminution of earnings,  if the interest  rate on the debt  increases
while the coupon and yield  measure for the financed  CMBS remain  constant.  In
such an event,  the market  price of the common stock may decline to reflect the
actual or perceived  decrease in value of the Company  resulting from the spread
compression.

     Shape of the Yield Curve Adversely Affects Income

     The relationship  between  short-term and long-term interest rates is often
referred to as the "yield  curve."  Ordinarily,  short-term  interest  rates are
lower  than  long-term  interest  rates.  If  short-term   interest  rates  rise
disproportionately  relative to long-term  interest  rates (a  flattening of the
yield curve),  the borrowing costs of the Company may increase more rapidly than
the interest  income earned on its assets.  Because  borrowings will likely bear
interest at short-term  rates (such as LIBOR) and CMBS will likely bear interest
at  medium-term  to  long-term  rates  (such  as those  calculated  based on the
ten-year  U.S.  Treasury  rate),  a  flattening  of the yield curve will tend to
decrease the Company's net income,  assuming the Company's  short-term borrowing
rates bear a strong relationship to short-term Treasury rates. Additionally,  to
the extent cash flows from long-term  assets are  reinvested in other  long-term
assets,  the spread between the coupon rates of long-term  assets and short-term
borrowing  rates may decline  and also may tend to  decrease  the net income and
mark-to-market  value of the  Company's  net assets.  It is also  possible  that
short-term  interest rates may adjust relative to long-term  interest rates such
that the level of short-term rates exceeds the level of long-term rates (a yield
curve  inversion).  In this case,  as well as in a flat or  slightly  positively
sloped yield curve environment, borrowing costs could exceed the interest income
and operating losses would be incurred.


<PAGE>

     Results  of  Operations  Adversely  Affected  by Factors  Beyond  Company's
Control

     The Company's  results of operations  can be adversely  affected by various
factors,  many of which are beyond the control of the  Company,  and will depend
on, among other things,  the level of net interest income  generated by, and the
market value of, the Company's CMBS portfolio. The Company's net interest income
and results of operations  will vary  primarily as a result of  fluctuations  in
interest rates,  CMBS pricing,  and borrowing  costs.  The Company's  results of
operations  also will depend upon the Company's  ability to protect  against the
adverse effects of such  fluctuations  as well as credit risks.  Interest rates,
credit risks, borrowing costs and credit losses depend upon the nature and terms
of the CMBS,  conditions in financial markets,  the fiscal and monetary policies
of the  U.S.  government,  effects  of  terrorism,  international  economic  and
financial  conditions and  competition,  none of which can be predicted with any
certainty.  Because  changes  in  interest  rates may  significantly  affect the
Company's  CMBS and other  assets,  the  operating  results of the Company  will
depend,  in large part,  upon the ability of the Company to manage its  interest
rate and credit risks  effectively  while  maintaining its status as a REIT. See
"BUSINESS-Risk Factors-Limited Protection from Hedging Transactions" for further
discussion.

     While  the   Company  may  resume  more   significant   Subordinated   CMBS
acquisitions and, possibly, its mortgage origination and securitization programs
at some time in the future  based on the  Company's  ability to access  capital,
prevailing industry conditions and the general business climate,  and subject to
applicable   restrictions  contained  in  financing  agreements  (including  the
operative documents  evidencing the New Debt), there can be no assurance of such
resumption.  All decisions concerning  resumption of business activities will be
made by the Board of Directors of the Company,  as  determined to be in the best
interests  of the  Company.  Consequently,  there can be no  certainty as to the
business  decisions  that will be made by the Board of Directors of the Company.
Failure to resume Subordinated CMBS acquisitions,  mortgage  originations and/or
securitizations  could  adversely  impact the Company's  results of  operations.
CRIIMI MAE Inc. is currently  prohibited  from acquiring CMBS rated "B" or lower
or unrated under certain documents evidencing the New Debt.

     Competition

     If the Company resumes the  acquisition of  Subordinated  CMBS, the Company
would compete with mortgage REITs,  specialty finance  companies,  banks,  hedge
funds,  investment banking firms, other lenders,  and other entities  purchasing
Subordinated  CMBS. Many of these competitors may have greater access to capital
and other  resources (or the ability to obtain  capital at a lower cost) and may
have other advantages over the Company.

     There  can be no  assurance  that  the  Company  would  be able  to  obtain
financing at borrowing rates below the asset yields of its Subordinated CMBS. In
such event,  the Company may incur losses or may be forced to further reduce the
size of its Subordinated CMBS portfolio.  The Company would face competition for
financing  sources which may limit the  availability of, and affect the cost of,
funds to the Company.

     CRIIMI MAE Inc. is currently  prohibited  from  acquiring CMBS rated "B" or
lower or unrated under certain documents evidencing the New Debt.

     Investment Company Act

     Under the  Investment  Company  Act of 1940,  as amended  (the  "Investment
Company Act"), an investment company is required to register with the SEC and is
subject to extensive restrictive and potentially adverse regulation relating to,
among other things, operating methods, management,  capital structure, dividends
and transactions with affiliates.  However,  as described below,  companies that
are primarily engaged in the business of acquiring  mortgages and other liens on
and  interests in real estate  ("Qualifying  Interests")  are excluded  from the
requirements of the Investment Company Act.

     To qualify for the  Investment  Company Act  exclusion,  CRIIMI MAE,  among
other things,  must maintain at least 55% of its assets in Qualifying  Interests
(the "55%  Requirement")  and is also required to maintain an additional  25% in
Qualifying  Interests or other real  estate-related  assets  ("Other Real Estate
Interests" and such requirement,  the "25%  Requirement").  According to current
SEC  staff  interpretations,  CRIIMI  MAE  believes  that all of its  government
insured mortgage securities  constitute  Qualifying Interests with the exception
of one such  security  which  constitutes  an Other  Real  Estate  Interest.  In
accordance with current SEC staff interpretations, the Company believes that all
of its Subordinated CMBS constitute Other Real Estate Interests and

<PAGE>

that certain of its Subordinated CMBS also constitute Qualifying Interests.
On certain of the Company's  Subordinated  CMBS,  the Company,  along with other
rights,  has the  unilateral  right to direct  foreclosure  with  respect to the
underlying mortgage loans. Based on such rights and its economic interest in the
underlying  mortgage loans, the Company  believes that the related  Subordinated
CMBS  constitute  Qualifying  Interests.  As of December 31,  2001,  the Company
believes that it was in  compliance  with both the 55%  Requirement  and the 25%
Requirement.

     If the SEC or its staff were to take a different  position  with respect to
whether such  Subordinated  CMBS constitute  Qualifying  Interests,  the Company
could,  among other things, be required either (i) to change the manner in which
it conducts its  operations to avoid being required to register as an investment
company or (ii) to register as an investment company, either of which could have
a material adverse effect on the Company. If the Company were required to change
the manner in which it conducts its business, it would likely have to dispose of
a significant portion of its Subordinated CMBS or acquire significant additional
assets  that  are  Qualifying  Interests.  Alternatively,  if the  Company  were
required to register as an  investment  company,  it expects that its  operating
expenses would significantly  increase and that the Company would have to reduce
significantly  its  indebtedness,   which  could  also  require  it  to  sell  a
significant  portion of its  assets.  No  assurances  can be given that any such
dispositions or acquisitions of assets,  or deleveraging,  could be accomplished
on favorable  terms,  or at all.  There are  restrictions  under  certain of the
operative  documents  evidencing the New Debt which could limit possible actions
the  Company may take in  response  to any need to modify its  business  plan in
order to  register  as an  investment  company  or avoid  the need to  register.
Certain dispositions or acquisitions of assets could require approval or consent
of  certain  holders  of the New Debt.  Any such  results  could have a material
adverse effect on the Company.

     Further, if the Company were deemed an unregistered investment company, the
Company  could be subject to  monetary  penalties  and  injunctive  relief.  The
Company  would be unable to  enforce  contracts  with  third  parties  and third
parties could seek to obtain  rescission of transactions  undertaken  during the
period the Company was deemed an  unregistered  investment  company,  unless the
court found under the circumstances  enforcement (or denial of rescission) would
produce a more equitable result than nonenforcement (or grant of rescission) and
would not be inconsistent with the Investment Company Act.

     Phantom Income May Result in Tax Liability

     The Company's  investment in  Subordinated  CMBS and certain other types of
mortgage related assets may cause it, under certain circumstances,  to recognize
taxable  income in excess  of its  economic  income  ("phantom  income")  and to
experience an offsetting  excess of economic  income over its taxable  income in
later years.  As a result,  stockholders,  from time to time, may be required to
treat  distributions that economically  represent a return of capital as taxable
dividends.  Such  distributions  would be offset in later years by distributions
representing  economic  income  that would be treated as returns of capital  for
federal  income tax purposes.  Accordingly,  if the Company  recognizes  phantom
income,  its stockholders may be required to pay federal income tax with respect
to such income on an accelerated basis (i.e.,  before such income is realized by
the  stockholders in an economic  sense).  Taking into account the time value of
money,  such an  acceleration  of federal  income tax  liabilities  would  cause
stockholders  to receive an  after-tax  rate of return on an  investment  in the
Company that would be less than the  after-tax  rate of return on an  investment
with an  identical  before-tax  rate of  return  that did not  generate  phantom
income.  As the  ratio of the  Company's  phantom  income  to its  total  income
increases, the after-tax rate of return received by a taxable stockholder of the
Company will decrease.

     Pending Litigation

     See "LEGAL PROCEEDINGS" for a description of material litigation.

     Risk of New York Stock Exchange Delisting

     The  Company  recently   implemented  a  one-for-ten  reverse  stock  split
designed,  in part, to satisfy the New York Stock Exchange ("NYSE") market price
listing  requirement.  There can be no assurance  that such market price listing
requirement or that all other NYSE listing requirements will continue to be met.

     Taxable Mortgage Pool Risks

<PAGE>

     An entity  that  constitutes  a "taxable  mortgage  pool" as defined in the
Internal Revenue Code ("TMP") is treated as a separate  corporate level taxpayer
for federal  income tax purposes.  In general,  for an entity to be treated as a
TMP (i)  substantially  all of the assets must consist of debt obligations and a
majority of those debt  obligations  must consist of mortgages;  (ii) the entity
must  have  more than one class of debt  securities  outstanding  with  separate
maturities,  and  (iii)  the  payments  on  the  debt  securities  must  bear  a
relationship  to the payments  received from the  mortgages.  As of December 31,
2001,  the  Company  owned  all of the  equity  interests  in  two  trusts  that
constitute   TMPs   (CBO-1   and  CBO-2,   collectively   the   "Trusts").   See
"BUSINESS-Resecuritizations"  and Note 5 to the Notes to Consolidated  Financial
Statements for  descriptions  of CBO-1 and CBO-2.  The statutory  provisions and
regulations  governing  the tax  treatment of TMPs (the "TMP Rules")  provide an
exemption  for TMPs that  constitute  "qualified  REIT  subsidiaries"  (that is,
entities  whose equity  interests are wholly owned by a REIT or a qualified REIT
subsidiary).  As a result of this exemption and the fact that as of December 31,
2001 the Company owned all of the equity interests in each Trust, the Trusts, as
of December 31, 2001, were not required to pay a separate corporate level tax on
income they derive from their underlying mortgage assets.

     As of  December  31,  2001,  the  Company  also  owned  certain  securities
structured as bonds (the "Bonds")  issued by each of the Trusts.  As of December
31, 2001,  certain of the Bonds owned by the Company  served as collateral  (the
"Pledged  Bonds") for the New Debt. If the  creditors  holding the Pledged Bonds
were to seize or sell this  collateral  (unless seized by or sold to a REIT or a
qualified  REIT  subsidiary)  and the Pledged  Bonds were  deemed to  constitute
equity  interests  (rather  than debt) in the Trusts,  then the Trusts  would no
longer qualify for the exemption under the TMP Rules provided for qualified REIT
subsidiaries. The Trusts would then be required to pay a corporate level federal
income tax. As a result,  available  funds from the underlying  mortgage  assets
that  would  ordinarily  be  used by the  Trusts  to make  payments  on  certain
securities  issued by the Trusts (including the equity interests and the Pledged
Bonds) would instead be applied to tax payments.  Since the equity interests and
Bonds owned by the Company are the most subordinated  securities and, therefore,
would absorb payment  shortfalls  first, the loss of the exemption under the TMP
rules  could  have a material  adverse  effect on their  value and the  payments
received thereon.

     In  addition to causing the loss of the  exemption  under the TMP Rules,  a
seizure or sale of the Pledged  Bonds and a  characterization  of them as equity
for tax purposes could also jeopardize the Company's REIT status if the value of
the remaining  ownership interests in any Trust held by the Company (i) exceeded
5% of the total value of the Company's  assets or (ii) constituted more than 10%
of the Trust's  voting  interests.  Although it is possible that the election by
the TMPs to be treated as taxable REIT  subsidiaries  could  prevent the loss of
CRIIMI MAE's REIT status,  there can be no assurance that a valid election could
be made given the timing of a seizure or sale of the Pledged Bonds.

     On the Effective Date of the  Reorganization  Plan, the Company effected an
affiliate  reorganization  in order to  indirectly  secure the New Debt with the
equity interests in CBO-1 and CBO-2.  Pursuant to the affiliate  reorganization,
CRIIMI MAE Inc. formed a new REIT subsidiary  ("CBO REIT"),  all shares of which
were initially issued to CRIIMI MAE Inc.,  pledged the previously  Pledged Bonds
and all  outstanding  shares of two qualified REIT  subsidiaries  (which own the
equity  interests in CBO-1 and CBO-2) (the "QRS Shares") to secure the New Debt,
pledged the shares held by CRIIMI MAE in CBO REIT (the "REIT  Shares") to secure
the New Debt represented by the two new series of secured notes, contributed the
Pledged Bonds and the QRS Shares to CBO REIT, and  transferred  the REIT Shares,
in a repurchase transaction, to an affiliate of Merrill, as agent for affiliates
of Merrill and GACC.  Subject to the terms of the documents  evidencing  the New
Debt,  CRIIMI MAE Inc.  has  retained the right to exercise all voting and other
corporate rights and powers of ownership with respect to the REIT Shares. CRIIMI
MAE  believes  that the  taxable  mortgage  pool  risks set forth  above  remain
applicable  as of the  Effective  Date with respect to CBO REIT,  which owns all
equity  interests in the Trusts (through its ownership of the two qualified REIT
subsidiaries  referenced above) and the Pledged Bonds;  provided,  however, that
the risks  referenced in the two immediately  preceding  paragraphs  should only
apply if the creditors  were to seize or sell  collateral  which  constituted or
represented only a portion of the equity interests in a Trust.

<PAGE>

     REIT Status and Other Tax Matters

     See  "MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF  FINANCIAL  CONDITION  AND
RESULTS OF OPERATIONS - REIT  Status/Net  Operating Loss for Tax Purposes" for a
discussion of REIT status and other tax matters.

Executive Officers

     The  following  table  sets  forth  information  concerning  the  executive
officers of the Company as of February 28, 2002:

<TABLE>
<CAPTION>

Name                                        Age                  Position
<S>                                         <C>                  <C>
William B. Dockser                          64                   Chairman of the Board

H. William Willoughby                       55                   President, Secretary and Director

David B. Iannarone                          41                   Executive Vice President

Cynthia O. Azzara                           42                   Senior Vice President,
                                                                   Chief Financial Officer and
                                                                   Treasurer

Brian L. Hanson                             40                   Senior Vice President

</TABLE>

     William B.  Dockser has served as Chairman of the Board of CRIIMI MAE since
1989. Mr. Dockser is also the founder of C.R.I.,  Inc.  ("CRI"),  serving as its
Chairman of the Board since 1974.

     H. William  Willoughby has served as President of CRIIMI MAE since 1990 and
a Director and  Secretary of CRIIMI MAE since 1989.  Mr.  Willoughby  has been a
director of CRI since 1974,  Secretary of CRI from 1974 to 1990 and President of
CRI since 1990.

     David B.  Iannarone  has served as Executive  Vice  President of CRIIMI MAE
since December 2000; as Senior Vice President and General  Counsel of CRIIMI MAE
from March 1998 to December 2000;  and as Vice President and General  Counsel of
CRIIMI MAE from July 1996 to March 1998.

     Cynthia O. Azzara has served as Chief Financial Officer of CRIIMI MAE since
1994.  She has also served as Senior Vice President of CRIIMI MAE since 1995 and
Treasurer of CRIIMI MAE since 1997.

     Brian L.  Hanson has served as Senior  Vice  President  of CRIIMI MAE since
March 1998; Group Vice President of CRIIMI MAE from March 1996 to March 1998.

ITEM 2.  PROPERTIES

     CRIIMI MAE leases its corporate offices at 11200 Rockville Pike, Rockville,
Maryland.  As of December 31, 2001,  these offices occupy  approximately  67,600
square feet.  As of February 28, 2002,  approximately  5,100 square feet of this
office space was sublet to third parties.

<PAGE>


ITEM 3.  LEGAL PROCEEDINGS

Bankruptcy Proceedings and Other Litigation

     The Company  emerged from  Chapter 11 on April 17, 2001,  at which date all
material  litigation  matters existing  subsequent to the Petition Date had been
settled or resolved except for the First Union litigation referenced below.

     First Union

     First Union and the Company entered into a settlement agreement dated as of
February 6, 2002 (the "Settlement Agreement").  On March 5, 2002, the Bankruptcy
Court  entered an order  approving  the  Settlement  Agreement.  The  Settlement
Agreement became effective on March 20, 2002 (the "Settlement  Effective Date").
The dispute concerned whether First Union was a secured or unsecured creditor in
connection with certain credit and custodian  agreements  between CRIIMI MAE and
First Union. First Union's claim amount was approximately $18.6 million.

     On the  Settlement  Effective  Date,  a previously  issued  Series A Senior
Secured Note having a December 31, 2001 face amount of $7,484,650 and previously
issued Series B Senior  Secured Notes having a December 31, 2001  aggregate face
amount of  $4,809,273  (collectively,  the "Notes") were released from escrow to
First Union.  On the Settlement  Effective  Date,  First Union sold the Notes to
ORIX. The proceeds from the sale of the Notes,  combined with the escrowed cash,
resulted in total proceeds of approximately  $18.8 million.  CRIIMI MAE retained
the  approximate  $238,000 of cash in excess of the First Union claim  amount of
$18.6  million.  In  addition,   approximately   $22,938,260  of  the  Company's
restricted cash became unrestricted.

     Reference is made to the Settlement  Agreement,  previously  filed with the
Bankruptcy Court (and with the Securities and Exchange  Commission as an exhibit
to a Current Report on Form 8-K filed on February 13, 2002), for a more detailed
description of the terms and conditions of the Settlement Agreement.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     No matters were  submitted to a vote of security  holders during the fourth
quarter of 2001.

<PAGE>

                                     PART II


ITEM 5.  MARKET FOR THE  REGISTRANT'S  COMMON STOCK AND RELATED  STOCKHOLDER
MATTERS

Market Data

     CRIIMI MAE's common stock is listed on the New York Stock Exchange  (symbol
CMM). On October 17, 2001, the Company  implemented a one-for-ten  reverse stock
split designed,  in part, to satisfy the New York Stock Exchange ("NYSE") market
price  listing  requirement.  There can be no  assurance  that such market price
listing requirement or that all other NYSE requirements will continue to be met.
All share and per share  information in this Annual Report on Form 10-K has been
retroactively  adjusted to reflect the reverse  stock split.  Share  information
adjustments  include,  without  limitation,  adjustments to the number of common
shares  issued and  outstanding,  issued as dividends on and upon  conversion of
shares of preferred stock and issuable under outstanding options.

     As of February 28, 2002, there were  approximately  2,500 holders of record
of the Company's  common stock.  The following table sets forth the high and low
closing sales prices for CRIIMI MAE's common stock during the periods indicated.

<TABLE>
<CAPTION>
                                            2001                                2000
                               --------------------------------    -------------------------------
                                         Sales Price                       Sales Price
                               --------------------------------    -------------------------------

     Quarter Ended                 High               Low              High               Low
     ----------------------    --------------    --------------    --------------     ------------
     <S>                       <C>               <C>               <C>                <C>
     March 31                          $9.00             $6.90            $16.25           $10.00
     June 30                            7.90              5.70             18.75            12.50
     September 30                       7.00              3.90             18.13            13.13
     December 31                        4.25              2.53             17.50             6.10

</TABLE>

     The  terms  of the New  Debt  significantly  restrict  the  amount  of cash
dividends that can be paid to shareholders.  One such restriction  provides that
any cash  dividends  required to maintain REIT status  (assuming the Company has
the cash to make  such  distributions  and  that it is  permitted  to make  such
distributions under the terms of the New Debt) would be paid first to holders of
certain  of the New Debt who  convert  their  secured  notes into one or two new
series of preferred  stock,  which new series of preferred stock would be senior
to all other series of preferred stock of the Company, in the form of redemption
payments.  Another such restriction provides that if realized losses (as defined
in the  New  Debt  documents,  and  including  appraisal  reduction  amounts  on
properties  underlying  the CMBS) on CMBS exceed  certain  thresholds,  then the
Company is prohibited from paying cash dividends to its shareholders,  except as
required to maintain  REIT  status  with any such cash  dividends  to be paid in
accordance  with the terms set forth in the preceding  sentence.  As of December
31,  2001,  the  Company  had  exceeded  the loss  threshold  amounts  under the
applicable  operative  documents  evidencing  the New  Debt.  See  "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL  CONDITION AND RESULTS OF  OPERATIONS"  for
further  discussion  of the  restrictions  resulting  from  exceeding  the  loss
threshold  amounts.  No cash dividends were paid to common  shareholders  during
2001 or 2000. During 2001, dividends were paid to preferred  shareholders in the
form of shares of common  stock.  During 2000 and 1999,  dividends  were paid to
common  shareholders in the form of shares of preferred  stock. See Notes 10 and
11 to Notes to Consolidated  Financial  Statements for a detailed  discussion of
the non-cash  dividends that were paid to common and preferred  shareholders and
changes in the  conversion  price for one of the  Company's  series of preferred
stock.

     On December 3, 2001, the Company's Board of Directors  decided to defer the
payment of dividends on CRIIMI MAE's Series B Cumulative  Convertible  Preferred
Stock,  Series E Cumulative  Convertible  Preferred  Stock,  Series F Redeemable
Cumulative Dividend Preferred Stock, and Series G Redeemable Cumulative Dividend
Preferred  Stock  for the  fourth  quarter  of  2001.  In  connection  with  the
redemption of the Series E Preferred Stock on March 21, 2002, the Board declared
dividends on shares of Series B Preferred  Stock,  Series F Preferred  Stock and

<PAGE>

Series G Preferred  Stock  for the fourth quarter of 2001 and the first quarter
of 2002,  such  dividends  payable  in  shares  of  common  stock.  For  further
information on the  redemption of the Series E Preferred  Stock and the dividend
declarations,  see "BUSINESS - The Reorganization  Plan" and Note 11 to Notes to
Consolidated Financial Statements.

Shareholder Rights Plan

     On January 23, 2002, the Company's Board of Directors adopted a Shareholder
Rights Plan (the "Rights  Plan") to preserve the Company's net operating  losses
for tax purposes.  As discussed in "Risk Factors - Risk  Associated  with Trader
Election and Limitation of Net Operating Losses for Tax Purposes", "Management's
Discussion and Analysis of Financial  Condition and Results of Operations - REIT
Status/Net Operating Loss for Tax Purposes", and Note 1 to Notes to Consolidated
Financial   Statements,   the  Company's   future  use  of  its  NOLs  could  be
substantially  limited in the event of an "ownership  change" within the meaning
of Section  382 of the  Internal  Revenue  Code.  The Rights Plan is designed to
deter an  "ownership  change"  within the meaning of Section 382 of the Internal
Revenue Code by discouraging  any person or group from acquiring five percent or
more of the Company's outstanding common shares.

     Under the  Rights  Plan,  one right was  distributed  for each share of the
Company's  common stock to  shareholders  of record as of February 4, 2002.  The
rights trade with the underlying  shares of CRIIMI MAE common stock.  The rights
will become exercisable if a person or group acquires beneficial ownership of 5%
of CRIIMI MAE's  outstanding  common stock or announces a tender offer for 5% or
more of the common  stock (an  "Acquiring  Person").  An  Acquiring  Person also
includes  a  person  or group  that  held 5% or more of the  common  stock as of
January 23, 2002, and that acquires additional common shares. An exception could
be made if the transaction is approved by CRIIMI MAE's board of directors.

     If the rights  become  exercisable,  each right will  entitle its holder to
purchase  one  one-thousandth  of a  share  of a new  series  of  the  Company's
preferred  stock at an  exercise  price of $23 per  share.  If a person or group
becomes an Acquiring  Person in a transaction  that has not been approved by the
board of  directors,  then each right,  other than those owned by the  Acquiring
Person,  would entitle the holder to purchase  $46.00 worth of CRIIMI MAE common
stock for the $23.00 exercise price.

     The Company  generally  will be entitled to redeem the rights at $0.001 per
right. The rights will expire 10 years after the date of issuance.  However, the
Board of  Directors  may amend the Rights  Plan to provide  that the rights will
expire at an earlier  date.  The Rights Plan was filed with the  Securities  and
Exchange Commission as an exhibit to a Current Report on Form 8-K on January 25,
2002.

Other Stockholder Matters

     For adjustments to the conversion  price for the Series B Preferred  Stock,
see Note 11 to Notes to Consolidated Financial Statements.

     For  information  pertaining  to the  exchange  of  Series  C and  Series D
Preferred  Stock  for  Series  E  Preferred  Stock,  see  Note  11 to  Notes  to
Consolidated Financial Statements.

<PAGE>

ITEM 6.  SELECTED FINANCIAL DATA

Selected Consolidated Financial Data

Accounting Under Accounting Principles Generally Accepted in the United States

<TABLE>
<CAPTION>
                                                                          For the years ended December 31,
                                                              2001         2000          1999          1998         1997
                                                           -----------  -----------  -------------  -----------  -----------
                                                                      (in thousands, except per share amounts)
<S>                                                        <C>          <C>          <C>            <C>
Statement of Income Data:

   Interest income                                           $134,376     $195,251       $222,323     $207,307     $129,095

   Interest and related expense                                97,788      139,366        151,337      136,268       77,919
                                                           -----------  -----------  -------------  -----------  -----------
   Net interest margin                                         36,588       55,885         70,986       71,039       51,176
                                                           -----------  -----------  -------------  -----------  -----------
   General and administrative expenses                        (11,548)     (11,301)       (12,049)     (14,623)      (9,610)
   Amortization of assets acquired in the Merger               (2,878)      (2,878)        (2,878)      (2,878)      (2,878)
   Other, net                                                   3,071        2,940          5,555        5,475       19,953
   Equity in (losses) earnings from investments                (1,632)       1,512         (1,243)       2,618        3,612
   Servicing income                                             6,886            -              -            -            -
   Servicing expenses                                          (8,019)           -              -            -            -
   Impairment on CMBS                                         (34,655)    (143,478)             -            -            -
   Reorganization items                                        (1,813)     (66,073)      (178,900)      (9,857)
   Emergence loan origination fee                              (3,937)           -              -            -            -
   Unrealized loss on warehouse obligation                          -            -         (8,000)     (30,378)           -
   Realized loss on reverse repurchase obligation                   -            -              -       (4,503)           -
   Gain on sale of CBO-2                                            -            -              -       28,800            -
   Write-off of capitalized origination costs                       -            -              -       (3,284)           -
                                                           -----------  -----------  -------------  -----------  -----------
                                                              (54,525)    (219,278)      (197,515)     (28,630)      11,077
                                                           -----------  -----------  -------------  -----------  -----------
   Net (loss) income before minority interest                 (17,937)    (163,393)      (126,529)      42,409       62,253

   Minority interest in net income of consolidated subsidiary       -            -              -          (40)      (8,065)
                                                           -----------  -----------  -------------  -----------  -----------

   Net (loss) income before extraordinary item and before
       cumulative effect of changes in accounting principles  (17,937)    (163,393)      (126,529)      42,369       54,188

   Extraordinary item-gain on debt extinguishment                   -       14,809              -            -            -

   Cumulative effect of adoption of SFAS 133                     (135)           -              -            -            -

   Cumulative effect of change in accounting principle
       related to servicing revenue                             1,995            -              -            -            -
                                                           -----------  -----------  -------------  -----------  -----------
   Net (loss) income before dividends accrued
            or paid on preferred shares                       (16,077)    (148,584)      (126,529)      42,369       54,188

   Dividends accrued or paid on preferred shares               (8,146)      (6,912)        (5,840)      (6,998)      (6,473)
                                                           -----------  -----------  -------------  -----------  -----------
   Net (loss) income to common shareholders                  $(24,223)   $(155,496)    $ (132,369)    $ 35,371     $ 47,715
                                                           ===========  ===========  =============  ===========  ===========

   Net (loss) income available to common shareholders per common share:
       Basic - before extraordinary item and cumulative
               effect of changes in accounting principles    $  (2.35)    $ (27.40)    $   (24.51)    $   7.48      $ 12.90
                                                           ===========  ===========  =============  ===========  ===========

       Basic - after extraordinary item and cumulative effect of
               changes in accounting principles              $  (2.18)    $ (25.02)    $   (24.51)    $   7.48      $ 12.90
                                                           ===========  ===========  =============  ===========  ===========

   Weighted average shares outstanding                         11,088        6,214          5,400        4,728        3,699
                                                           ===========  ===========  =============  ===========  ===========

   Pro forma disclosures for change in accounting for servicing revenue:
   Pro forma net (loss) income to common shareholders
           before extraordinary item and cumulative
           effect of changes in accounting principles        $(26,083)   $(169,925)    $ (131,836)    $ 35,850     $ 48,216
                                                           ===========  ===========  =============  ===========  ===========
   Pro forma basic (loss) earnings per share - before
           extraordinary item and cumulative effect of
           changes in accounting principles                  $  (2.35)    $ (27.34)    $   (24.41)      $ 7.58      $ 13.03
                                                           ===========  ===========  =============  ===========  ===========
   Pro forma net (loss) income to common shareholders        $(26,218)   $(155,116)    $ (131,836)    $ 35,850     $ 48,216
                                                           ===========  ===========  =============  ===========  ===========
   Pro forma basic (loss) earnings per share                 $  (2.36)    $ (24.96)    $   (24.41)    $   7.58      $ 13.03
                                                           ===========  ===========  =============  ===========  ===========

</TABLE>

<PAGE>

<TABLE>
<CAPTION>
                                                                              As of December 31,
                                                  2001            2000            1999            1998            1997
                                              --------------  --------------  --------------  --------------  --------------
                                                                               (in thousands)
<S>                                           <C>             <C>             <C>             <C>             <C>
Balance Sheet Data:
  Mortgage Assets:
   Subordinated CMBS and Other MBS                $ 832,682       $ 856,846     $ 1,179,363     $ 1,274,186     $ 1,114,480
   Insured mortgage securities                      343,091         385,751         394,857         488,095         605,114
   Investment in originated loans                         -               -         470,205         499,076               -
  Restricted and unrestricted cash                   48,998         202,416          91,547          24,180           2,109
  Total assets                                    1,315,004       1,557,840       2,293,661       2,437,918       1,873,305
  Debt:
   Total recourse debt                              407,637         558,585         925,704       1,125,036         718,507
   Total nonrecourse debt                           616,715         645,170       1,056,646         960,686         696,425
  Total liabilities                               1,053,959       1,289,582       2,074,313       2,130,041       1,427,392
  Shareholders' equity                              261,045         268,258         219,349         307,877         444,981

</TABLE>

     The selected consolidated  statement of income data presented above for the
years ended  December 31,  2001,  2000 and 1999,  and the selected  consolidated
balance sheet data as of December 31, 2001 and 2000,  were derived from, and are
qualified by, reference to CRIIMI MAE's consolidated financial statements, which
are  included  elsewhere  in this  Annual  Report  on Form  10-K.  The  selected
consolidated  statement of income data for the years ended December 31, 1998 and
1997, and the selected  consolidated balance sheet data as of December 31, 1999,
1998 and 1997,  were derived from audited  financial  statements not included as
part of this Annual Report on Form 10-K. This data should be read in conjunction
with the consolidated financial statements and the notes thereto.

<PAGE>

Tax Basis Accounting

<TABLE>
<CAPTION>
                                                                       For the years ended December 31,
                                                      2001         2000         1999         1998         1997
                                                   -----------  -----------  -----------  -----------  -----------
                                                                  (in thousands, except per share amounts)
   <S>                                             <C>          <C>          <C>          <C>          <C>
   Interest income                                  $ 187,079    $ 246,576    $ 278,450    $ 248,598    $ 135,508

   Interest and related expense                       135,470      171,282      186,766      161,860       79,574
                                                   -----------  -----------  -----------  -----------  -----------
   Net interest margin                                 51,609       75,294       91,684       86,738       55,934
                                                   -----------  -----------  -----------  -----------  -----------
   Other operating and administrative expenses        (11,803)     (11,648)     (12,117)     (14,445)      (9,464)
   Other, net                                           6,460        2,415        3,024        4,238        2,152
   Equity in earnings from investments                    244        2,980        1,577        8,031        4,104
   Reorganization items                               (10,159)     (35,604)     (12,950)      (4,819)           -
   Emergence loan origination fee                        (937)           -            -            -            -
   Net capital gains                                      224          572        3,276        1,746        7,815
   Credit losses                                       (4,370)      (1,287)        (621)           -            -
   January 2000 Loss recognized                      (119,542)    (119,600)           -            -            -
   Mark-to-market loss on trading assets as of
        04/17/01                                       (8,573)           -            -            -            -
   Mark-to-market (loss) gain on trading assets          (135)      49,933            -            -            -
   Dividends accrued or paid on preferred shares       (8,145)      (6,912)      (5,840)      (6,998)      (6,473)
   Dividends not deductible due to net operating loss   8,145        6,912            -            -            -
   Loss on warehouse obligation                             -            -      (36,328)           -            -
   Realized loss on reverse repurchase obligation           -            -            -       (4,503)           -
   Write-off of capitalized origination costs               -            -            -       (3,284)           -
   Loss on sale of trading assets                           -      (12,607)           -            -            -
                                                   -----------  -----------  -----------  -----------  -----------
   (Net operating loss)/Taxable income               $(96,982)    $(49,552)    $ 31,705     $ 66,704     $ 54,068
                                                   ===========  ===========  ===========  ===========  ===========

</TABLE>

<PAGE>


ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS


Introduction

     The  following  discussion  and analysis  contains  statements  that may be
considered  forward-looking.  These  statements  contain  a number  of risks and
uncertainties  as  discussed  herein  and in Item 1 of this Form 10-K that could
cause actual results to differ materially.

     All  information  set  forth in this  Annual  Report  on Form 10-K has been
retroactively  adjusted to reflect a one-for-ten reverse stock split effected on
October 17, 2001.

Results of Operations

2001 versus 2000

     Financial  statement  net loss to common  shareholders  for the years ended
December  31,  2001  and  2000  was  $(24.2)   million  and  $(155.5)   million,
respectively.  Net loss to common  shareholders  for the year ended December 31,
2001 includes $34.7 million in non-cash accounting impairment charges related to
certain of the  Company's  Subordinated  CMBS,  reorganization  expenses of $1.8
million, a one-time emergence financing  origination fee expense of $3.9 million
related to the Company's emergence from Chapter 11 in April 2001, a $0.1 million
charge related to the adoption of Statement of Financial Accounting Standard No.
133, and $2.0 million of revenue related to a change in accounting principle for
servicing revenue.  Excluding the impairment charges,  reorganization  expenses,
loss emergence financing fee and the changes in accounting principles, pro forma
net income to common  shareholders  would have been $14.3  million  for the year
ended December 31, 2001,  representing net earnings from the Company's  retained
mortgage assets, as discussed more fully below.

     The primary  factors  resulting in the net loss for the year ended December
31, 2000 were the  recognition  of a non-cash  accounting  impairment  charge of
$143.5 million related to certain of the Company's  retained  Subordinated  CMBS
and  expenses  related  to the  Company's  Reorganization  Plan  and the sale of
certain mortgage assets during 2000, as discussed below.

     Interest Income - Subordinated CMBS

     Income from Subordinated CMBS decreased by approximately  $31.5 million, or
23%, to $105.5  million  during 2001 as compared to $137.1  million during 2000.
This overall decrease in interest income was primarily the result of the sale of
certain CMBS during 2000 as part of the Company's Reorganization Plan.

     Generally  accepted  accounting  principles  ("GAAP") require that interest
income earned on Subordinated  CMBS be recorded based on the effective  interest
method using the  anticipated  yield over the expected life of the  Subordinated
CMBS. Based upon the timing and amount of future credit losses and certain other
assumptions  estimated by management,  as discussed  below, the weighted average
anticipated  unleveraged yield for CRIIMI MAE's  Subordinated CMBS for financial
statement purposes as of January 1, 2001 was approximately 12.4%, as compared to
the anticipated  weighted  average yield used to recognize  income from April 1,
2000 to December  31,  2000 of 11.1% and 10.1% from  December  31, 1999  through
March 31, 2000. These yields were determined based on the anticipated yield over
the expected life of the Subordinated CMBS, which considers, among other things,
anticipated  losses  and any other  than  temporary  impairment.  The  effective
interest method of recognizing  interest income on Subordinated  CMBS results in
income recognition that differs from cash received. For the years ended December
31, 2001 and 2000,  the amount of income  recognized  in excess of cash received
due to the effective  interest rate method was  approximately  $10.2 million and
$15.2 million, respectively.

     The U.S. economy began to slow during the latter part of 2000. Accordingly,
the  Company  began  to see the  impact  of the  slowing  U.S.  economy  through
increased  defaults on mortgage loans underlying its CMBS portfolio.  This trend
continued  during 2001, and as of December 31, 2001,  approximately  4.1% of the
mortgage loans  underlying  the Company's  CMBS portfolio were in default.  This
compares to 1.5% as of December 31, 2000.

<PAGE>

     Primarily as a result of the continued  slowing U.S.  economy and recession
during 2001,  which were  exacerbated by the terrorist  attacks on September 11,
2001 and subsequent terrorist actions and threats, the Company recognized a $3.9
million  non-cash  accounting  impairment  charge  related to certain CMBS as of
September 30, 2001 due to a change in estimates of expected losses. In addition,
the Company  recognized  an additional  non-cash  impairment  charge  related to
certain  CMBS of $30.8  million  as of  December  31,  2001.  As a result of the
combined  severity of the 2001 economic and  terrorist  events,  the  underlying
mortgage loans have had a greater than previously anticipated number of monetary
defaults.  These were  primarily  defaults  related to  mortgage  loans on hotel
properties.  Additionally,  recent  appraisal  amounts on properties  underlying
certain defaulted loans were  significantly  lower than previously  anticipated,
thereby  increasing the estimated  principal loss on the commercial  loans. As a
result of the change in  expected  future  cash flows,  expected  future  credit
losses and the  recognition of impairment,  the Company  revised its anticipated
yields as of  October  1, 2001 and again as of  January  1,  2002.  The  revised
weighted  average  yield  of 12.4%  will be used to  recognize  interest  income
prospectively, beginning January 1, 2002.

     Interest Income - Insured Mortgage Securities

     Interest income from insured mortgage securities decreased by approximately
$1.8 million or 6% to $28.9 million for 2001 from $30.7  million for 2000.  This
decrease was principally  due to the prepayment of nine mortgage  securities and
the  assignment  to HUD of two  mortgage  securities  held by CRIIMI MAE and its
wholly owned  subsidiaries  for net  proceeds  aggregating  approximately  $35.2
million during the year ended 2001. These prepayments represented  approximately
9% of the total insured mortgage portfolio.

     Interest Income - Originated Loans

     Interest income from originated  loans decreased to $0 for 2001 as compared
to $27.5 million for 2000.  Interest  income from  originated  loans was derived
from originated loans included in the CMO-IV securitization, a securitization of
$496 million face value of conduit  loans in June 1998.  The decrease was due to
the sale of the Company's  interest in CMO-IV in November 2000, which eliminated
interest income for 2001 versus 2000.

     Interest Expense

     Total interest expense  decreased by approximately  $41.6 million or 30% to
approximately $97.8 million for 2001 from approximately $139.4 million for 2000.
This decrease was primarily  attributable to the sale of the Company's  interest
in CMO-IV and certain CMBS during 2000 and the  reduction  of the related  debt.
These  decreases  were  partially  offset by higher  rates of interest  incurred
subsequent to April 17, 2001 on the Company's New Debt and the  amortization  of
the related  extension fees on the New Debt under the effective  interest method
beginning in April 2001, as compared to the interest rates incurred  during 2000
on the recourse debt existing prior to emergence from Chapter 11.

     The overall  weighted average  effective  interest rate on the New Debt was
11.1% for the period April 17, 2001 to December 31, 2001;  the weighted  average
coupon  rate on the New Debt was 8.9% for the period  April 17 to  December  31,
2001. The difference in the New Debt's weighted average effective  interest rate
and the New Debt's weighted  average coupon (pay) rate primarily  relates to the
amortization of estimated extension fees and the accrued interest related to the
7% per annum,  accreting  interest on the Series B Secured Notes,  both of which
are included in the weighted average  effective  interest rate, but not included
in the weighted average coupon (pay) rate.

     The weighted  average  effective and coupon  interest rates on the recourse
debt was 7.8% for the year ended December 31, 2000.


<PAGE>

     General and Administrative Expenses

     General and administrative expenses increased slightly to $11.5 million for
2001 as  compared  to $11.3  million  for 2000  primarily  due to an increase in
professional  fees,  partially  offset  by lower  employment  costs due to fewer
employees and no CMO-IV mortgage servicing fees in 2001.

     Amortization of Assets Acquired in the Merger

     Amortization  of assets acquired in the Merger was $2.9 million in 2001 and
2000.  In June of 2001,  the  FASB  issued  SFAS No.  142  "Goodwill  and  Other
Intangible  Assets"  ("FAS 142").  FAS 142,  among other  things,  prohibits the
amortization  of  existing  goodwill  and  establishes  a new  method of testing
goodwill for impairment. FAS 142 became effective for the Company on January 1,
2002.  Effective  upon  adoption on January 1, 2002,  the Company wrote off $9.8
million of goodwill and other  intangible  assets,  and recorded a resulting one
time,  non-cash  impairment charge of approximately $9.8 million for this change
in accounting principle.  In addition,  this change in accounting principle will
reduce the  Company's  annual  amortization  expense  related to such  assets by
approximately $2.8 million.

     Equity in (Losses) Income from Investments/CMSLP Operations

     Beginning  July 1,  2001,  CRIIMI  MAE  began  accounting  for  CMSLP  on a
consolidated  basis as opposed to accounting  for CMSLP using the equity method.
This change in accounting  method was a result of a reorganization  in which the
partnership  interests of CMSLP are now held by two  wholly-owned and controlled
taxable REIT subsidiaries  ("TRSs") of CRIIMI MAE. Prior to July 1, 2001, CRIIMI
MAE  accounted  for CMSLP under the equity method as the Company did not control
the  voting  common  stock of the  general  partner  of CMSLP.  CMSLP's  assets,
liabilities,  revenues and expenses are labeled as  "servicing" on the Company's
consolidated financial statements.

     The following information  summarizes the financial statement  presentation
of the Company's Equity in (Losses) Income from Investments and the consolidated
results of operations of CMSLP:

<TABLE>
<CAPTION>
                                                               Year ended December 31,
                      Description                            2001               2000
                      -----------                        -------------     --------------
<S>                   <C>                                <C>               <C>
Equity in (Losses) Income from Investments (as presented
on income statements):
  The AIM Funds - net equity in income                    $   647,096         $   701,403

  CMSLP/CMSI - net equity in (losses) income               (2,279,138) (b)        810,602
                                                         -------------      -------------
Total Equity in (Losses) Income from Investments         $ (1,632,042) (a)    $ 1,512,005 (a)
                                                         =============      =============

</TABLE>

(a) Total Equity in (Losses)  Income from  Investments  for the years ended
December  31, 2001 and 2000  include  CRIIMI MAE's net equity from the AIM Funds
during these  periods,  and include net equity from  CMSLP/CRIIMI  MAE Services,
Inc.  ("CMSI") for six of the twelve  months  (January - June) in the year ended
December 31, 2001 (since  CMSLP's  operations are  consolidated  into CRIIMI MAE
effective  July 1, 2001) and for the full year ended  December  31,  2000.  On a
comparative basis, the net equity from the AIM Funds decreased  primarily due to
a reduction in the AIM Funds' mortgage assets.

The net equity in income of $810,602 from  CMSLP/CMSI  for 2000 compares to
the aggregate of the net equity in losses from  CMSLP/CMSI of  $(2,279,138)  for
2001 and the net  loss  from  CMSLP of  $(1,133,741)  for the six  months  ended
December 31, 2001 (as  summarized  below).  CMSLP/CMSI's  aggregate  net loss of
$(3,412,879) during 2001 includes  amortization,  depreciation and impairment of
$3.4 million in 2001 as compared to $2.9 million in 2000. CMSLP's total revenues
decreased by  approximately  $2.0  million,  or 13.5%,  to $12.7 million in 2001
compared to $14.7 million in 2000,  primarily due to lower  interest  income and
assumption  fees resulting  from low current  interest rates and the decrease in
mortgage loans serviced.  General and administrative expenses were $12.2 million
and $11.3 million in 2001 and 2000, respectively. The increase was due primarily
to an increase in information  technology expenses.  In addition,  2001 includes
restructuring expenses of $0.4 million related to CMSLP's sale of its rights and
obligations under its master and primary servicing contracts.

(b) Includes  $474,850 of special  servicing  fee revenue  recognized  on a
current basis and included in Equity from Investments.


<PAGE>

<TABLE>
<CAPTION>
                                                                 Year ended December 31,
                      Description                               2001                 2000
                      -----------                         ----------------     --------------
<S>                   <C>                                 <C>                  <C>
CMSLP's results of operations (reflected in consolidated
income statements effective July 1, 2001):

  Servicing revenue                                         $   6,886,057 (c)       N/A
  Servicing general and administrative expenses                (5,882,889)          N/A
  Servicing amortization, depreciation and impairment          (1,699,186)          N/A
  Servicing restructuring expense                                (437,723)          N/A
                                                         -----------------     -------------
Net loss from CMSLP                                         $  (1,133,741)         $ --
                                                         =================     =============

</TABLE>

(c) Includes $681,709 of special servicing fee revenue recognized on a current
basis and reflected in consolidated income statements.

     On December  17, 2001,  CMSLP  announced  its  intention to sell all of its
rights and  obligations  under its CMBS master and primary  servicing  contracts
because the contracts were not profitable,  given the relatively small volume of
master and primary CMBS servicing that CMSLP was performing.  In connection with
this  determination,  34 employees were  terminated.  A restructuring  charge of
approximately $438,000 was recorded during the fourth quarter of 2001 to account
for  employee  severance  costs,  noncancellable  lease  costs,  and other costs
related to the  restructuring.  All rights and obligations under these servicing
contracts were sold in February 2002. CMSLP received approximately $11.3 million
in cash, which included reimbursement of advances. This is expected to result in
a gain on sale of approximately $4.3 million,  subject to adjustment for certain
post-closing  contingencies,  in the second quarter of 2002. In addition,  CMSLP
may receive up to an additional  $0.9 million from the sale in the third quarter
of 2002,  which would be reflected as an additional gain on sale,  following the
completion  of a  post-closing  contingency  period.  See Note 3 to Notes to the
Consolidated Financial Statements.

     Other Income

     Other income decreased by approximately $0.7 million or 15% to $4.2 million
during 2001 as compared to $4.9 million during 2000. This decrease was partially
attributable to lower interest rates earned on fewer temporary investments. Also
included in other income is  approximately  $43,700 in realized gains related to
the Company's trading of other MBS.

     In October 2001, a wholly-owned  subsidiary of CRIIMI MAE acquired  certain
partnership  interests in a partnership that was the obligor on a mezzanine loan
payable to CRIIMI  MAE in  exchange  for curing a default on the first  mortgage
loan through a cash payment of  approximately  $276,000.  This  partnership  and
another  wholly-owned  subsidiary  of  CRIIMI  MAE own  100% of the  partnership
interests in the  partnership  which is the obligor on the first  mortgage loan.
The first mortgage loan is secured by a shopping center in Orlando,  Florida. As
a result of this acquisition,  the Company,  through certain of its wholly-owned
subsidiaries,  owns 100% of the partnership  interests in the partnership  which
owns the real estate ("REO") and is consolidating  its accounts as of October 1,
2001. At the date of  acquisition,  the Company  adjusted the book values of the
assets acquired and the assumed  mortgage payable to fair value. The discount on
the debt of $1.7 million will be amortized  into interest  expense over the life
of the mortgage, or approximately 6.5 years. During the period October 1 through
December 31, 2001, the Company  recognized a net loss of approximately  $266,000
from the operations of REO, which  includes  approximately  $166,000 of interest
expense. The remainder of the net loss of approximately  $100,000 is included in
other income, net, in the consolidated statement of income. The property is also
projected to have a net loss of  approximately  $0.9 million in 2002, which will
be included in the Company's consolidated statement of income. The Company hopes
to  reposition  and  stabilize  this  property and then sell it when the Company
believes that it can sell it at a price that more accurately reflects its value,
although there can be no assurance the Company will be able to do so.  Currently
the Company expects that it will hold the property for more than one year.

     Net (Losses) Gains on Mortgage Security and Originated Loan Dispositions

     During   2001,   net  losses  on  mortgage   security   dispositions   were
approximately  $(42,000) as a result of nine  prepayments and two assignments to
HUD of mortgage  securities  held by certain of CRIIMI  MAE's  subsidiaries,  or
approximately  9% of its  related  portfolio.  There  were no gains or losses on
originated loan  dispositions in 2001

<PAGE>

since the Company's  originated  loans were sold in 2000.  During 2000, net
gains on mortgage security and originated loan  dispositions were  approximately
$524,000,  which was comprised of net gains on mortgage security dispositions of
approximately  $280,000  and  net  gains  on  originated  loan  dispositions  of
$244,000. During 2000, there were six prepayments of mortgage securities and two
prepayments  of  originated  loans.  For any year,  gains or losses on  mortgage
dispositions are based on the number, carrying amounts and proceeds of mortgages
disposed of during the period.  The proceeds  realized from the  disposition  of
mortgage  assets are based on the net  coupon  rates of the  specific  mortgages
disposed of in relation to prevailing  long-term  interest  rates at the date of
disposition.

     Impairment on CMBS

     As of September  30, 2001,  the Company  revised its overall  expected loss
estimate related to its CMBS portfolio from $298 million to $307 million.  As of
December 31, 2001, the Company again revised its overall  expected loss estimate
related to its CMBS portfolio from $307 million to $335 million over the life of
the CMBS.  These  revisions to loss  estimates  were primarily the result of the
continued  slowing U.S.  economy and  recession,  which were  exacerbated by the
terrorist  attacks on September 11, 2001 and  subsequent  terrorist  actions and
threats. As previously discussed, principally as a result of the slowing economy
and terrorist  actions and threats,  the  underlying  mortgage  loans have had a
greater than previously  anticipated number of monetary defaults.  Additionally,
recent appraisal amounts on properties  underlying  certain defaulted loans have
been  significantly  lower than previously  anticipated,  thereby increasing the
estimated  principal  loss on the  commercial  loans.  At February 28, 2002, and
December 31,  2001,  $902 million and $792  million,  respectively,  or 4.8% and
4.1%,  respectively,  in mortgage loans  underlying the Company's CMBS portfolio
were in default.  As of December 31, 2000,  $311  million,  or 1.5%, in mortgage
loans  underlying the Company's  CMBS portfolio were in default.  As the Company
determined  that there had been an adverse change in expected future cash flows,
the Company  believed certain of the CMBS had been impaired under EITF 99-20 and
Statement of Financial  Accounting  Standard  ("SFAS") No. 115,  "Accounting for
Certain Investments in Debt and Equity Securities," ("SFAS 115") as of September
30, 2001 and  December  31,  2001.  As the fair value of the  impaired  CMBS was
approximately  $3.9 million and $30.8  million  below the  amortized  cost as of
September  30, 2001 and December 31, 2001,  respectively,  the Company  recorded
other than temporary,  non-cash  impairment charges through the income statement
of these amounts during the third and fourth  quarters of 2001 (see also Summary
of  Subordinated  CMBS,  which  follows).   The  aggregate  non-cash  accounting
impairment  charges of $34.7  million in 2001  compare to a non-cash  impairment
charge of $143.5  million in the fourth quarter of 2000 related to the Company's
CMBS portfolio.

     These impairment charges do not reflect actual cash losses as of September
30, 2001 or December 31,  2001.  There can be no  assurance  that the  Company's
revised  estimate  of  expected  losses  will not be  exceeded  as a  result  of
additional or continuing  adverse events or circumstances,  such as a continuing
economic slowdown or recession.

     Hedging Loss and Cumulative Effect of Adoption of FAS 133

     During  the  year  ended  December  31,  2001,  the  Company  recognized  a
mark-to-market  loss  through  earnings  of  approximately  $1.1  million on its
interest  rate cap and a $135,000  loss through  earnings due to the adoption of
SFAS No. 133  "Accounting  for Derivative  Instruments  and Hedging  Activities"
("FAS 133").  See Note 3 of the Notes to Consolidated  Financial  Statements for
further  discussion  of FAS 133.  The fair  value of the  interest  rate cap has
decreased  significantly  due to a decline in  interest  rates since the cap was
purchased in April 2001. The cap is set at a one-month London Interbank  Offered
Rate ("LIBOR") rate of 5.25%.  As of December 31, 2001, the one-month LIBOR rate
was 1.87%.

     Litigation Expense

     During  2000,  the Company  recorded a $2.5  million  expense  based on the
settlement  of the  Capital  Company of America,  LLC  ("CCA")  Chapter 11 claim
related to a letter of intent in 1998 for the purchase of subordinated  CMBS. No
such expense was recorded during 2001.


<PAGE>

     Reorganization Items

     During 2001 and 2000, the Company recorded  reorganization items due to the
Chapter 11 filings of CRIIMI MAE, CM Management and Holdings II, as follows:

<TABLE>
<CAPTION>

 Reorganization Items                                        2001                     2000
 --------------------                                  -----------------       -------------------
 <S>                                                   <C>                     <C>
 Short-term interest income                              $ 2,491,311              $ 6,850,362
 Professional fees                                        (3,870,185)              (9,317,772)
 Employee Retention Program                                       --                 (851,948)
 Other                                                      (800,875)              (1,136,319)
 Excise tax accrued                                               --                 (495,000)
                                                       -----------------       -------------------
     Subtotal                                             (2,179,749)              (4,950,677)
 Impairment on CMBS regarding Reorganization (2)                  --              (15,832,817)
 Net recovery (loss) on real estate owned (1)                366,529                 (924,283)
 Net gain on sale of CMBS                                         --                1,481,029
 Loss on originated loans                                         --              (45,845,712)
                                                       ----------------        -------------------
 Total Reorganization Expense, net                      $ (1,813,220)           $ (66,072,460)
                                                       ================        ===================

</TABLE>

(1) The Company  recognized  impairment  on its  investment  in real estate
owned in 2000. This asset was sold in July 2000.

(2) The Company recognized  impairment on the CMBS subject to the sales of
select CMBS (the "CMBS Sale") in 2000. The final bonds subject to the CMBS Sale
were sold in November 2000.

     Emergence Financing Origination Fee

     In connection with the emergence from Chapter 11, in April 2001 the Company
paid a one-time,  emergence  financing  origination  fee of  approximately  $3.9
million related to its new Variable-Rate  Secured Borrowing.  GAAP requires such
fee to be expensed immediately.

     Cumulative effect of change in accounting principle

     As  discussed  below,  the  cumulative  effect of the change in  accounting
principle  of $2.0  million  related to  servicing  revenue is  reflected  as of
January 1, 2001 as an adjustment to net income and therefore is reflected in the
year ended December 31, 2001 net income.

     As of July 1, 2001,  CMSLP  changed its  accounting  policy  related to the
recognition of special servicing fee revenue. Special servicing fees are paid to
CMSLP when  mortgage  loans  collateralizing  CMBS owned by the  Company  are in
default.  Typically,  CMSLP  is paid 25 basis  points  of the  unpaid  principal
balance of the defaulted mortgage loans for as long as the loans are in default.
The fees are paid to compensate the special  servicer for managing and resolving
the  defaulted  loan.  Historically,  CMSLP had deferred  special  servicing fee
revenue and recorded that revenue into earnings using the method consistent with
the Company's  policy of recognizing  interest  income over the life of the CMBS
owned by CRIIMI  MAE on the level  yield  basis.  CMSLP is now  recording  these
special  servicing fees in earnings on a current basis.  This change was made to
better match revenues and expenses  related to the actual  special  servicing of
the defaulted loans.  The special  servicing fees are paid on a current basis by
the Trusts  holding the mortgage loans and those  payments  directly  reduce the
cashflow paid on the Company's CMBS. Therefore,  the special servicing fees paid
are built into the GAAP yields the Company uses to record interest income on its
CMBS. CMSLP has changed its accounting policy to recognize the special servicing
fees in earnings on a current  basis as the Company  believes this policy better
matches the special  servicing  fees it earns with the direct costs expended for
performing its special  servicing  obligations.  The CMBS and special  servicing
contracts are separate legal instruments or contracts.

     The Company is required to reflect this change in accounting principle as a
cumulative  catch-up  as of  January  1,  2001.  As of January 1, 2001 CMSLP had
approximately  $2.0 million in deferred revenue related to the special servicing
fee revenue. As a result, this amount was recorded in income and is reflected as
a cumulative  change in  accounting  principle  for the year ended  December 31,
2001. The results of operations for the year ended

<PAGE>

December 31, 2001 reflect the recognition of special  servicing fee revenue
on a current basis. As previously  discussed,  prior to July 1, 2001,  CMSLP was
accounted  for using the equity  method and, as a result,  the impact of the new
accounting principle (except for the cumulative catch-up) is reflected in equity
in (losses) income from  investments for the six months ended June 30, 2001 and
on a consolidated basis for the six months ended December 31, 2001. The proforma
net income  disclosures on the income  statement and proforma EPS disclosures in
Note 12 of the Notes to Consolidated Financial Statements related to this change
in accounting principle reflect what the Company's net income and EPS would have
been had this new accounting  principle been applied to those periods presented.
Net income  would have been $2.8  million  less for the year ended  December 31,
2001 had this new accounting principle not been adopted.

REIT Status/Net Operating Loss for Tax Purposes

     REIT Status.  CRIIMI MAE is required to meet income,  asset,  ownership and
distribution tests to maintain its REIT status. The Company believes that it has
satisfied  the REIT  requirements  for all years  through  and  including  2001,
although  there can be no assurance.  There can also be no assurance that CRIIMI
MAE will maintain its REIT status for 2002 or subsequent  years.  If the Company
fails to maintain  its REIT status for any taxable  year,  it will be taxed as a
regular domestic corporation subject to federal and state income tax in the year
of disqualification and for at least the four subsequent years. Depending on the
amount  of any  such  federal  and  state  income  tax,  the  Company  may  have
insufficient funds to pay any such tax and also may be unable to comply with its
obligations under the New Debt.

     The Company and two of its  subsidiaries  incorporated in 2001 have jointly
elected to treat such two  subsidiaries  as TRSs effective  January 1, 2001. The
TRSs allow the Company to earn non-qualifying REIT income while maintaining REIT
status.  For tax and other reasons,  a reorganization of CMSLP was effected such
that the partnership interests of CMSLP are held by these two subsidiaries.

     The Company's 2001 and 2000 Net Operating Loss for Tax Purposes/Shareholder
Rights Plan

     During 2001 and 2000, the Company traded in both short and longer  duration
fixed income  securities,  including  non-investment  grade and investment grade
CMBS  and  investment  grade   residential   mortgage  backed  securities  (such
securities  traded and all other  securities of the type described  constituting
the  "Trading  Assets" to the extent  owned by CRIIMI MAE Inc. or any  qualified
REIT subsidiary,  meaning  generally any  wholly-owned  subsidiary that is not a
taxable  REIT  subsidiary),   which,  for  financial  reporting  purposes,   are
classified as Subordinated  CMBS and Other MBS on the balance sheet. The Company
seeks maximum total return through short term trading,  consistent  with prudent
investment   management.   Returns   from  such   activities   include   capital
appreciation/depreciation  resulting from changes in interest rates and spreads,
if any, and other arbitrage opportunities.

     Internal  Revenue Service Revenue  Procedure 99-17 provides  securities and
commodities traders with the ability to elect  mark-to-market  treatment for the
2000 tax year and for all future tax years,  unless the election is revoked with
the consent of the  Internal  Revenue  Service.  On March 15,  2000,  CRIIMI MAE
elected for tax purposes to be classified  as a trader in  securities  effective
January 1, 2000.

     As a result of its trader election,  CRIIMI MAE recognized a mark-to-market
tax loss in its income tax  return on its  Trading  Assets on January 1, 2000 of
approximately $478 million (the "January 2000 Loss").  This loss is not recorded
on the GAAP financial statements.  Such loss is expected to be recognized evenly
for  tax  purposes  over  four  years   beginning  with  the  year  2000  (i.e.,
approximately  $120  million  per year).  The  Company  expects  such loss to be
ordinary.  Additionally,  as a result of its  trader  election,  the  Company is
required to mark-to-market  its Trading Assets on a tax basis at the end of each
tax year.  Any  increase or  decrease  in the value of the  Trading  Assets as a
result of the  year-end  mark-to-market  requirement  will  generally  result in
either a tax gain (if an  increase  in  value) or a tax loss (if a  decrease  in
value).  Such tax gains or losses,  as well as any realized gains or losses from
the  disposition  of Trading  Assets  during each year,  are also expected to be
ordinary  gains  or  losses.  Assets  transferred  to  CBO  REIT,  Inc.,  a REIT
subsidiary of the Company formed as part of the Company's  Reorganization  Plan,
are no longer required to be  marked-to-market  on a tax basis since CBO REIT is
not a trader in securities for tax purposes.  As a result, the mark-to-market of
such assets ceased as of April 17, 2001.

<PAGE>

     Since gains and losses  associated with trading  activities are expected to
be ordinary,  any gains will  generally  increase  taxable income and any losses
will generally  decrease  taxable  income.  Since the Company is a REIT which is
generally  required to distribute 95% of its taxable income to shareholders  for
years  ending  on or before  December  31,  2000 and is  generally  required  to
distribute 90% for years  beginning  after 2000, any increases in taxable income
from  trading   activities  will  generally   result  in  an  increase  in  REIT
distribution  requirements  and any  decreases  in taxable  income from  trading
activities will generally result in a decrease in REIT distribution requirements
(or, if taxable  income is reduced to zero  because of a net  operating  loss or
loss carryforward, eliminate REIT distribution requirements).

     Gains and losses from the mark-to-market requirement (including the January
2000 Loss) are  unrealized.  This creates a mismatch  between REIT  distribution
requirements  and cash  flow  since  the  REIT  distribution  requirements  will
generally  fluctuate due to the  mark-to-market  adjustments,  but the cash flow
from the  Company's  Trading  Assets  will  not  fluctuate  as a  result  of the
mark-to-market adjustments.

     The  Company   generated  a  net   operating   loss  for  tax  purposes  of
approximately  $(96.9)  million and $(49.6)  million for the year ended December
31, 2001 and 2000,  respectively.  As such,  the  Company's  taxable  income was
reduced to zero and, accordingly,  the Company's REIT distribution  requirements
were  eliminated  for 2001 and  2000.  As of  December  31,  2001 the  Company's
accumulated  and unused net  operating  loss  ("NOL") was $(146.5)  million,  as
further discussed below.

     Any  accumulated  and  unused  net  operating  losses,  subject  to certain
limitations,  generally  may be  carried  forward  for up to 20 years to  offset
taxable income until fully utilized. Accumulated and unused net operating losses
cannot be  carried  back  because  CRIIMI MAE is a REIT.  If a Trading  Asset is
marked down  because of an increase in interest  rates,  rather than from credit
losses,  such  mark-to-market  losses may be recovered over time through taxable
income.  Any  recovered  mark-to-market  losses will  generally be recognized as
taxable income,  although there is expected to be no  corresponding  increase in
cash flow.

     There is no  assurance  that the  Company's  position  with  respect to its
election as a trader in  securities  will not be  challenged by the IRS, and, if
challenged,  will be defended  successfully by the Company.  As such, there is a
risk that the  January  2000 Loss will be limited or  disallowed,  resulting  in
higher  tax basis  income  and a  corresponding  increase  in REIT  distribution
requirements.  It is possible  that the amount of any  under-distribution  for a
taxable  year could be  corrected  with a  "deficiency  dividend"  as defined in
Section 860 of the Internal Revenue Code,  however,  interest may also be due to
the Internal Revenue Service on the amount of this under-distribution.

     If CRIIMI MAE is  required  to make  taxable  income  distributions  to its
shareholders  to  satisfy  required  REIT  distributions,  all or a  substantial
portion of these distributions, if any, are currently expected to be in the form
of non-cash dividends.  There is no assurance that such non-cash dividends would
satisfy the REIT distribution  requirements and, as such, the Company could lose
its  REIT  status  or may not be able  to  satisfy  its  obligations  under  the
operative documents evidencing the New Debt.

     The Company's  future use of NOLs for tax purposes  could be  substantially
limited in the event of an  "ownership  change" as defined  under Section 382 of
the Internal Revenue Code. As a result of these  limitations  imposed by Section
382 of the  Internal  Revenue  Code,  in the event of an ownership  change,  the
Company's  ability to use its NOL  carryforwards  in future years may be limited
and, to the extent the NOL  carryforwards  cannot be fully  utilized under these
limitations within the carryforward periods, the NOL carry forwards would expire
unutilized.  Accordingly,  after any ownership change,  the Company's ability to
use its NOLs to reduce or offset taxable income would be  substantially  limited
or not available under Section 382. In general, a company reaches the "ownership
change"  threshold if the "5% shareholders"  increase their aggregate  ownership
interest  in the  company  over a  three-year  testing  period  by more  than 50
percentage  points.  The ownership interest is measured in terms of total market
value of the company's capital stock.

     The  Company  is not aware of any  acquisition  of shares of the  Company's
capital  stock that has created an  "ownership  change"  under  Section 382, but
believes that it may be close to approaching the 50% threshold for an "ownership
change" under Section 382. The Company is concerned that future  acquisitions of
common  stock,  preferred  stock or a  combination  of both by an  existing  "5%
shareholder" or a new "5% shareholder" could cause an

<PAGE>

"ownership  change." If an "ownership change" occurs, the Company's ability
to use its NOLs to reduce or offset its taxable  income  would be  substantially
limited or not  available  under  Section 382 of the Internal  Revenue Code on a
prospective  basis.  This would mean the  Company  would have REIT  distribution
requirements   based  upon  its  taxable  income.  As  stated  above,  any  such
distributions are expected to be in the form of non-cash taxable dividends.

     If an "ownership  change" occurs under Section 382 of the Internal  Revenue
Code, the Company's  prospective  use of its  accumulated  NOL and the remaining
January 2000 Loss of a combined total amount of approximately  $(385) million as
of December 31, 2001 will be limited. If the Company had lost its ability to use
its  accumulated  NOL as of January 1, 2001, the Company's  taxable income would
have been $22.6  million.  This increase in taxable  income would have created a
100 percent  distribution  requirement.  If the Company was unable to distribute
the taxable income to its shareholders,  it would have been subject to corporate
Federal and state income taxes of up to approximately $9.3 million in 2001.

     Currently,  the Company does not know of any  acquisition  of shares of its
capital stock that would create an  "ownership  change" under Section 382 of the
Internal  Revenue  Code.  The Company has adopted a  shareholder  rights plan to
deter an  ownership  change  within the meaning of Section  382 of the  Internal
Revenue Code,  however there can be no assurance  that an ownership  change will
not occur. See "MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS" for a discussion of a recently adopted shareholder rights plan.

     Net Operating  Loss for Tax Purposes.  CRIIMI MAE generated a net operating
loss for tax  purposes  of  approximately  $(96.9)  million  for the year  ended
December 31, 2001  compared to a net  operating  loss of  approximately  $(49.6)
million in 2000.

     As previously discussed,  as a result of its trader election in early 2000,
CRIIMI MAE recognized a mark-to-market tax loss of approximately $478 million on
certain  Trading Assets on January 1, 2000. The January 2000 Loss is expected to
be  recognized  evenly  over four years  (2000,  2001,  2002,  and 2003) for tax
purposes  (i.e.,  approximately  $120 million per year)  beginning with the year
2000.

     A summary  of the  Company's  2001 and 2000 net  operating  losses  for tax
purposes is as follows:

<TABLE>
<CAPTION>
                                                                                           2001                 2000
                                                                                           ----                 ----
  <S>                                                                                      <C>                  <C>
  January 2000 Loss                                                                   $478.2 million        $478.2 million
  LESS:   Portion recognized in 2000                                                  (119.6) million       (119.6) million
  LESS:   Portion recognized in 2001                                                  (119.5) million           --
                                                                                     ------------------    -----------------
  Balance Remaining of January 2000 Loss to be Recognized in Future Periods           $239.1 million        $358.6 million
                                                                                     ==================    =================

  Taxable Income for the year before recognition of January 2000 Loss (1)             $ 22.7 million        $ 20.1 million
  LESS:   January 2000 loss recognized                                                (119.5) million       (119.6) million
  PLUS:  Mark-to-market unrealized (loss) gain on Trading Assets                        (0.1) million         49.9 million
                                                                                     ------------------    -----------------
  Net Operating Loss for the year ended December 31                                  $( 96.9) million      $ (49.6) million
                                                                                     ==================    =================

  Accumulated Net Operating Loss through December 31                                 $(146.5) million      $ (49.6) million
  Net Operating Loss Utilization                                                           0 million             0 million
                                                                                     ------------------    -----------------
  Net Operating Loss Carried Forward for Use in Future Periods                       $(146.5) million      $ (49.6) million
                                                                                     ==================    =================

</TABLE>

(1)  Taxable  income for the year  ended  December  31,  2001  includes  an
approximate  $8.6 million loss on certain  Trading Assets in connection with the
transfer of certain Trading Assets on April 17, 2001 to CBO REIT, Inc. following
the reorganization  effected to facilitate the collateral  structure for the New
Debt.  Assets  transferred  to CBO  REIT,  Inc.  are no  longer  required  to be
marked-to-market on a tax basis.


<PAGE>

Results of Operations

2000 versus 1999

     For the year ended December 31, 2000,  the Company  reported a net loss for
consolidated  financial statement purposes of approximately  $(155.5) million as
compared  to a net loss of  approximately  $(132.4)  million  for the year ended
December  31,  1999.  On a basic and  diluted  per share  basis,  the  financial
statement  loss increased to $(25.02) per share for 2000 from $(24.51) per share
for 1999.

     The primary  factors  resulting in the net loss for the year ended December
31, 2000 were the recognition of a non-cash  accounting charge of $143.5 million
related to the  impairment of retained  CMBS,  the  recognition of a net loss of
approximately  $31.0 million  related to the sale of the  Company's  interest in
CMO-IV, and the recognition of approximately $15.8 million of impairment related
to certain sold CMBS, as discussed  further  below.  Despite the  recognition of
$143.5  million  in  impairment  and the  loss of $15.8  million  on the sale of
certain CMBS during 2000,  the impact on book equity of these two events was not
material since the Company had accounted for these assets at fair value with the
related fair value  adjustment to the cost basis of the bonds already  reflected
in equity. The segment  discussion  pertaining to the mortgage servicing (CMSLP)
segment is reflected below in Equity in Earnings (Losses) from Investments.

     Interest Income - Subordinated CMBS

     Income from Subordinated CMBS decreased by approximately  $17.1 million, or
11%, to $137.1  million  during 2000 as compared to $154.2  million during 1999.
This overall decrease in interest income was primarily the result of the sale of
certain CMBS:  the Morgan bonds in February 2000, the First Union bonds in April
2000, the Chase bonds in August 2000, and the DLJ and Citicorp bonds in November
2000.  This decrease in interest  income was  partially  offset by the following
factors:  1) the  impairment  on certain  CMBS  resulting  in an increase in the
subsequent income yields due to a lower cost basis, and 2) an increase in income
yields on CMBS due to a change in methodology in determining such yields.  Other
than  temporary  impairment  was  recognized  as of  December  31,  1999  on the
Subordinated  CMBS that  were  sold in 2000 as part of the CMBS  Sale  under the
Reorganization  Plan.  The  impairment  resulted  in the CMBS cost  basis  being
written  down to fair value as of  December  31,  1999.  As a result of this new
basis, these CMBS had revised higher yields effective the first quarter of 2000.
These higher  yields  resulted in more income  being  recognized  for  financial
statement  purposes.  Further,  yields on CMBS increased effective April 1, 2000
due to a change in the  allocation  and timing of loss  estimates  (as discussed
further below),  which resulted in additional  income recognized during the last
nine months of 2000.

     The weighted  average yield used to recognize  income from April 1, 2000 to
December  31, 2000 was 11.1% and 10.1% as of December 31,  1999.  As  previously
discussed,  effective  April 1, 2000,  the Company  changed the  allocation  and
timing of the  estimated  future  credit  losses  related to the mortgage  loans
underlying the CMBS. As a result of the strong U.S. economy,  the performance of
the  mortgage  loans  underlying  the CMBS had been better than  management  had
originally anticipated,  and credit losses were lower than originally estimated.
Therefore, the Company revised its estimated credit losses to occur later in the
weighted average life of the CMBS than originally  projected.  However,  at that
time,  the Company did not lower the total  amount of  estimated  future  credit
losses  related  to the  mortgage  loans  underlying  the  CMBS.  The  change in
allocation  and  timing of  estimated  future  credit  losses to reflect a later
occurrence  of  such  losses  resulted  in  increases  in  projected  cash  flow
(primarily  in the form of interest  income) as of April 1, 2000,  which in turn
resulted in increases in  anticipated  yields to maturity.  These revised yields
were used to recognize  interest income from April 1, 2000 through  December 31,
2000. As a result of the revised later  projected  occurrence of credit  losses,
the yields used to determine CMBS income  increased.  Through December 31, 2000,
the overall impact of this allocation and timing revision resulted in a 29 basis
point  increase in total CMBS  anticipated  yields to  maturity  (24 basis point
increase  related  to the then  remaining  CMBS  subject to the CMBS Sale and 30
basis point increase related to the Company's retained  portfolio).  These yield
increases  resulted in  approximately  $2.1  million in  additional  CMBS income
during the year ended December 31, 2000, compared to income that would have been
recognized using prior unrevised yields related to the retained CMBS portfolio.

     The U.S. economy began to slow during the later part of 2000.  Accordingly,
the  Company  began  to see the  impact  of the  slowing  U.S.  economy  through
increased defaults in its loan portfolio.  This trend continued

<PAGE>

during the first quarter of 2001,  and as of March 31, 2001,  approximately
2.2% of the  underlying  loans in the Company's  CMBS  portfolio were in special
servicing.  This  compared  to 1.5% and 1.0% as of  December  31, 2000 and 1999,
respectively,  and 1.3% as of April 1, 2000 when the Company  revised its yields
upward as discussed above. Primarily as a result of the slowing U.S. economy and
the resulting increased defaults,  and management's  expectation of ensuing loan
losses thereon,  the Company  recognized an accounting  charge of $143.5 million
for  impairment in the fourth quarter 2000 related to its CMBS  portfolio.  This
charge  through  the income  statement  did not have a  material  impact on book
equity as the Company had carried its CMBS assets at fair value with  changes in
fair value recorded through equity prior to the impairment charge.

     Interest Income - Insured Mortgage Securities

     Interest income from insured mortgage securities decreased by approximately
$2.7 million or 8% to $30.7 million for 2000 from $33.4  million for 1999.  This
decrease was principally  due to the prepayment of six mortgage  securities held
by CRIIMI MAE and its wholly owned  subsidiaries  for net  proceeds  aggregating
approximately  $12.6  million  during the year  ended  2000.  These  prepayments
represented approximately 2.6% of the total insured mortgage portfolio.

     Interest Income - Originated Loans

     Interest  income from  originated  loans  decreased by  approximately  $7.2
million or 21% to  approximately  $27.5  million  for 2000 as  compared to $34.7
million  for 1999.  Interest  income  from  originated  loans was  derived  from
originated loans included in the CMO-IV securitization, a securitization of $496
million face value of conduit loans in June 1998. The decrease was primarily due
to the sale of the Company's  interest in CMO-IV in November 2000, which reduced
interest  income for 2000 versus  1999.  In  addition,  the decrease in interest
income  was due to the  prepayment  of two  originated  loans  aggregating  $6.0
million during the year ended 2000.

     Interest Expense

     Total interest expense  decreased by  approximately  $11.9 million or 8% to
approximately  $139.4  million for 2000 from  approximately  $151.3  million for
1999. This decrease was primarily  attributable to decreases in interest expense
on variable-rate secured borrowings, reflecting the repayment of such debt after
the sale of certain CMBS and the Company's  interest in CMO-IV during 2000. Also
contributing  to the  decrease  was a decrease in interest  expense on the fixed
rate debt related to the insured securities and on the fixed-rate debt issued in
the CMO-IV  securitization.  The Company sold its interest in CMO-IV  during the
fourth quarter 2000 and, as such, no longer  recognizes the interest  expense on
the  original  securitization.  These  decreases  were  partially  offset by the
following:  (1) a discount amortization adjustment of approximately $1.5 million
related to the insured securities  fixed-rate obligation debt due to an increase
in the estimate of future  prepayment  speeds during the second quarter of 2000
(This increase in the estimate of future prepayment speeds was a result of these
obligations   paying  down  faster  than  originally   anticipated.);   (2)  the
replacement  during 1999 of a portion of the  Company's  variable rate debt with
higher fixed rate debt. (The original sales of such  fixed-rate  securities were
treated as a financing for accounting purposes. As such, the Company records the
securities as  liabilities  and recognizes  the related  interest  expense on an
ongoing basis.  The fixed rate  obligations  sold typically  carry a higher cost
than does the  variable-rate  secured  borrowing that it replaces.); and (3) an
increase in variable rate borrowing  costs due to higher  interest rates in 2000
than in 1999.

     General and Administrative Expenses

     General and administrative expenses decreased by approximately $748,000, or
6%, to $11.3  million  for 2000 as  compared  to $12.0  million  for  1999.  The
decrease in general and administrative  expenses was primarily due to a decrease
in employment costs from a reduced work force in 2000 as compared to 1999, along
with a reduction in certain professional costs.

<PAGE>

     Equity in (Losses) Earnings from Investments

     Equity in (losses)  earnings  from  investments  reflects  the  activity of
certain of the Company's  equity  investments  including CMSLP and the Company's
investment in the AIM funds.  Equity in earnings increased by approximately $2.7
million during 2000 due to equity in earnings of  approximately  $1.5 million as
compared  to equity in losses of $1.2  million in 1999.  The equity in  (losses)
earnings is primarily  comprised of $524,000 and ($1.7 million) related to CMSLP
and  $747,000  and  $972,000  related  to  the  AIM  Funds  in  2000  and  1999,
respectively.

     For the year  ended  December  31,  2000,  CMSLP  reported  net  income  of
approximately  $531,000 as compared to a net loss of approximately  $2.4 million
for the year ended December 31, 1999.

     CMSLP total  revenues  remain  relatively  unchanged in 2000 as compared to
1999, at $14.7 million for both years. The total servicing  portfolio  decreased
primarily  due to CRIIMI MAE's sale of certain CMBS where CMSLP  previously  had
the  special  servicing  rights,  and  because  CMSLP sold two master  servicing
contracts during 2000. Servicing fee income decreased by approximately $858,000,
or 13%, to $5.8  million for 2000 as compared to $6.7 million in 1999 due to the
reduced size of the servicing portfolio. This reduced income from servicing fees
was offset by an increase in assumption fees and other fee income.

     CMSLP general and  administrative  expenses  decreased by  approximately $1
million,  or 8%, to $11 million  during 2000 as compared to $12 million in 1999.
The  decrease in general and  administrative  expenses was  primarily  due to an
approximate $821,000 prepayment loss in 1999.

     CMSLP other expenses  decreased by approximately $2 million,  or 40%, to $3
million in 2000 as compared to $5 million in 1999.  This decrease was attributed
to the amortization of purchased  mortgage  servicing  rights.  These assets are
amortized in  proportion  to, and over the period,  of the  estimated net income
(servicing  revenue in excess of  servicing  costs) from the  servicing  rights.
Amortization  expense also reflects the sale of certain  servicing rights during
2000.

     Other Income

     Other income increased by approximately $1.9 million or 63% to $4.9 million
during 2000 as compared to $3.0 million during 1999. This increase was primarily
attributable  to the timing of  temporary  investments.  Also  included in other
income is  approximately  $6,000 in  realized  gains  related  to the  Company's
trading of other MBS.

     Net Gains on Mortgage Security and Originated Loan Dispositions

     During 2000, net gains on mortgage security dispositions were approximately
$280,000 as a result of six  prepayments of mortgage  securities  held by CRIIMI
MAE's  subsidiaries,  or approximately  2.6% of its portfolio.  During 1999, net
gains on mortgage  dispositions were approximately  $2.1 million.  For any year,
gains or losses on  mortgage  dispositions  are  based on the  number,  carrying
amounts and  proceeds of mortgages  disposed of during the period.  The proceeds
realized  from the  disposition  of mortgage  assets are based on the net coupon
rates of the specific mortgages disposed of in relation to prevailing  long-term
interest rates at the date of disposition.

     During 2000,  gains on  originated  loan  dispositions  were  approximately
$244,000,  as a result of two prepayments in the originated  loan portfolio.  As
previously  stated, the Company sold all of its interest in the originated loans
during late 2000. In 1999, there were five prepayments that resulted in gains on
originated loan dispositions of approximately $403,000.

     Impairment on CMBS

     As  discussed  earlier,  as of December  31,  2000 the Company  revised its
overall  expected loss estimate  related to its CMBS portfolio from $225 million
to $298  million,  over the life of the  investment.  In  addition,  the Company
expected such revised losses to occur sooner than originally expected because of
the slowing U.S. economy. This revised loss estimate was a result of an increase
in the number of loans that were placed in special

<PAGE>

servicing due primarily to loan defaults.  As of December 31, 2000,  $310.6
million of mortgage  loans  underlying  the  Company's  CMBS  portfolio  were in
special  servicing as compared to $283.1  million as of December 31, 1999. As of
March  31,  2001,  this  amount  had  grown to  $443.5  million  or 2.20% of the
underlying  loans in the CMBS  portfolio an increase  from 1.3% when the Company
revised its yields as of April 1, 2000. During 2001 and 2002, respectively,  the
Company expected that aggregate losses on the underlying mortgage loans would be
approximately  $3 million and $21 million in excess of that  anticipated when it
revised its yields as of April 1, 2000. As the Company had  determined  that the
current  estimate of expected credit losses exceeded credit losses as previously
projected,  the Company believed its CMBS portfolio had been impaired under SFAS
115. As the fair value of the CMBS was $143.5  million below the amortized  cost
basis as of December  31,  2000,  the Company  recorded an other than  temporary
impairment  charge  through the income  statement of $143.5  million  during the
fourth quarter of 2000 (except for the A and BBB rated bonds). Unrealized losses
related to these CMBS were  previously  recognized  through other  comprehensive
income in the equity  section of the balance sheet and as a result the impact of
the impairment charge is not material to book equity.

     Unrealized Loss on Warehouse Obligations

     During  2000,  the  Company   recorded  no  unrealized  loss  on  warehouse
obligations.  This compares to 1999, when the Company recorded unrealized losses
of approximately $8.0 million in connection with the Citibank Program.

     Litigation Expense

     During  2000,  the Company  recorded a $2.5  million  expense  based on the
settlement of the CCA claim.

     Reorganization   Items.   During  2000  and  1999,  the  Company   recorded
reorganization  items due to the Chapter 11 filings of CRIIMI MAE, CM Management
and Holdings II, as follows:

<TABLE>
<CAPTION>

 Reorganization Items                                                2000                 1999
 --------------------                                        -------------------   ------------------
 <S>                                                         <C>                   <C>
 Short-term interest income                                      $ 6,850,362           $ 1,518,667
 Professional fees                                                (9,317,772)          (17,822,154)
 Employee Retention Program                                         (851,948)           (1,589,236)
 Other                                                            (1,136,319)           (3,005,405)
 Excise tax accrued                                                 (495,000)           (1,105,000)
                                                             -------------------   -----------------
      Subtotal                                                    (4,950,677)          (22,003,128)
 Impairment on CMBS regarding Reorganization (2)                 (15,832,817)         (156,896,831)
 Net loss on real estate owned (1)                                  (924,283)                   --
 Net gain on sale of CMBS                                          1,481,029                    --
 Loss on originated loans                                        (45,845,712)                   --
                                                             ------------------    -----------------
 Total Reorganization Expense, net                             $ (66,072,460)        $(178,899,959)
                                                             ==================    =================

</TABLE>

(1) The Company  recognized  impairment  on its  investment  in real estate
owned in 2000. This asset was sold in July 2000.

(2)  The Company  recognized  impairment  on the CMBS  subject to the CMBS
Sale in 1999 and additional impairment on the remaining CMBS subject to the CMBS
Sale in 2000.  The final  bonds  subject to the CMBS Sale were sold in  November
2000.

     Impairment on CMBS  (regarding  Reorganization).  As discussed in Note 1 to
the Notes to Consolidated Financial Statements, under the Reorganization Plan, a
portion of the Recapitalization Financing resulted from the sale of certain CMBS
subject to the CMBS Sale, which sale was completed in November 2000. The Company
first filed a plan with the  Bankruptcy  Court in the fourth quarter of 1999 and
during that same quarter CRIIMI MAE began marketing for sale the CMBS subject to
the CMBS Sale.  The Company also sold its interest in CMO-IV in November 2000 as
part of the Reorganization Plan.

     As the  Company  decided  in the  fourth  quarter  of 1999 to sell the CMBS
subject  to the CMBS  Sale and it did not  expect  the  value of these  bonds to
significantly  recover  before the future  sale dates,  the  Company  recognized
approximately  $173 million of other than temporary  impairment related to these
CMBS, cumulatively, through the third quarter of 2000. Unrealized losses related
to the CMBS subject to the CMBS Sale were  previously  recognized

<PAGE>

through  other  comprehensive  income in the equity  section of the balance
sheet. The other than temporary impairment loss on CMBS is a reorganization item
on the  income  statement  as the  impairment  was  recognized  as  part  of the
Reorganization Plan.

     Extraordinary Item-Gain on Debt Extinguishment

     As previously discussed, the Company's interest in CMO-IV was sold in 2000.
In  accordance  with EITF  96-19  "Debtor's  Accounting  for a  Modification  or
Exchange  of Debt  Instruments",  the  net  loss  on the  sale of the  Company's
interest in CMO-IV is required to be presented as two  components  consisting of
the loss on the sale of the originated  loans and the subsequent gain related to
the  extinguishment of debt. Because the Company decided in the third quarter of
2000 to sell all of its interest in CMO-IV,  the investment in originated  loans
was adjusted from amortized cost to fair value resulting in a $45.8 million loss
in the third quarter which was  classified as a  reorganization  item.  The gain
related to the  extinguishment of debt was  approximately  $14.8 million and was
recognized in November 2000 as an extraordinary  item.  Therefore,  the net loss
related to the sale of the Company's interest in CMO-IV was approximately  $31.0
million.

Net Operating Loss for Tax Purposes-2000 versus 1999

     CRIIMI MAE realized a net operating loss for tax purposes of  approximately
$(49.6)  million for the year ended  December 31, 2000 as compared to net income
of approximately $31.7 million in 1999. See also "REIT Status/Net Operating Loss
for Tax Purposes."

Cash Flow

2001 versus 2000

     Net cash provided by operating activities increased for 2001 as compared to
2000.  The increase was primarily due to a decrease in restricted  cash and cash
equivalents and a decrease in receivables and other assets,  partially offset by
a decrease in payables and accrued expenses.  Receivables decreased primarily as
a result  of the  receipt  in  January  2001 of funds  withheld  related  to the
Company's  interest  in  CMO-IV.  The  decrease  in  restricted  cash  and  cash
equivalents  and the decrease in payables and accrued  expenses  were  primarily
caused by cash outflows on the Effective  Date,  including  approximately  $44.7
million to payoff  accrued  interest  on debt  incurred  prior to the Chapter 11
filing, $3.9 million to pay an emergence financing  origination fee related to a
portion of the New Debt and $7.4 million to pay accrued  payables related to the
Chapter 11  filing.  The  foregoing  payoffs of  accrued  interest  and  accrued
expenses are included within the net (decrease) increase in payables and accrued
expenses line on the consolidated statements of cash flows.

     Net cash provided by investing activities decreased for 2001 as compared to
2000. The decrease was primarily  attributable  to net proceeds of $72.6 million
received   from  the  sale  of  CMBS  during  2000  as  part  of  the  Company's
Reorganization  Plan, as compared to no sales of CMBS during 2001. This decrease
was  partially  offset by an  increase in the  proceeds  from  insured  mortgage
securities dispositions during 2001 as compared to 2000.

     Net cash used in  financing  activities  increased  for 2001 as compared to
2000. The increase in cash used in 2001 was primarily attributable to an outflow
of cash of approximately $127.2 million on the Effective Date, which was used to
payoff a portion of the aggregate  principal  relating to debt incurred prior to
the Chapter 11 filing.

     Included  in CRIIMI  MAE's net  operating  cash flows for the three  months
ended September 30, 2001 and three months ended December 31, 2001 (the first two
full fiscal quarters since emerging from Chapter 11) are the following items (in
millions):

<PAGE>

<TABLE>
<CAPTION>
                                                                       Three months           Three months
                                                                       ended 09/30/01        ended 12/31/01
                                                                       --------------        --------------
         <S>                                                           <C>                   <C>
         Net operating cash flows (1):
                  CMBS cash inflows (BB+ through unrated) (2)               $  18.7              $18.7
                  Other cash, net                                               2.2                1.8
                  Interest expense paid on Variable-Rate
                     Secured Borrowing                                         (4.6)              (3.8)
                  Interest expense paid on Series A Senior Secured Notes       (3.0)              (3.0)
                  Interest expense accrued for Series B Senior Secured
                      Notes' semi-annual payment                               (2.0)              (2.1)
                  General and administrative expenses                          (2.8)              (3.0)
                                                                          ----------           --------
                  Net operating cash flows during third and fourth
                    quarters 2001                                          $    8.5             $   8.6
                                                                          ==========           ========

         Principal payments on New Debt:
                  Variable-Rate Secured Borrowing                          $    6.8             $   6.8 (3)
                  Series A Senior Secured Notes                                 1.7                 1.8
                                                                         -----------           ---------
                  Total principal payments on New Debt during
                    third and fourth quarters 2001                         $    8.5             $   8.6
                                                                         ===========           ========

         REO cash inflow (outflow), net                                    $     --             $  (0.2) (4)
                                                                         ===========           ========
</TABLE>

(1)  Virtually  all cash flows  relating  to existing  assets are,  and are
currently  expected  to  be,  used  to  satisfy  principal,   interest  and  fee
obligations under the New Debt, and to pay general and  administrative and other
operating expenses of the Company. Therefore,  although the Company continues to
pay  down its New Debt  obligations,  the  utilization  of cash  flows  for debt
service and operating  expenses  currently results in virtually no remaining net
cash flow available for other activities.

(2) The CMBS cash inflows  include  one-time  recoveries of prior  interest
shortfalls related to certain  underlying  defaulted mortgage loans. The Company
believes  total CMBS cash  inflows  will  decline in 2002 due  primarily  to the
increase in appraisal  reduction amounts on properties  underlying the CMBS, and
realized losses on CMBS.

(3) For the three  months ended  December  31, 2001,  the Company paid $6.8
million in principal  payments on the  Variable-Rate  Secured  Borrowing,  which
is in excess of the  minimum  principal  requirement  of $2.7  million  based
upon a 15-year amortization schedule for the same three month period.

(4) The  Company  expects  to pay  approximately  $1.1  million  in 2002 to
service the mortgage debt on its REO and to fund capital  improvements,  because
the REO is not  projected  to generate  sufficient  operating  income in 2002 to
service its mortgage debt or fund its capital improvements.

2000 versus 1999

     Net cash provided by operating  activities decreased in 2000 as compared to
1999.  The  decrease  was  primarily  due to an increase in  restricted  cash as
compared to 1999,  representing  cash that was  restricted  due to  stipulations
entered into in connection  with the Chapter 11 proceedings or due to agreements
that required certain CMBS interest income payments and/or CMBS sale proceeds to
be held in  segregated  accounts,  and an increase in non-cash  interest  income
related to discount amortization.

     Net cash provided by investing activities decreased for 2000 as compared to
1999  primarily  due  to  a  decrease  in  proceeds  from  mortgage   securities
dispositions  and originated loan  dispositions.  These decreases were partially
offset  by an  increase  in  proceeds  from the sale of CMBS and the sale of the
Company's interest in CMO-IV, net of associated debt.

     Net cash used in financing activities decreased in 2000 as compared to 1999
due to a decrease in principal payments on debt obligations.

<PAGE>

Financial Condition, Liquidity and Capital Resources

     Limited Summary of Reorganization Plan Including New Debt

     The  Reorganization  Plan  provided  for the  payment in full of all of the
allowed  claims of the  Debtors  primarily  through  recapitalization  financing
(including  proceeds  from certain  asset sales)  aggregating  $847 million (the
"Recapitalization  Financing").  The sales of select CMBS (the "CMBS  Sale") and
the  Company's  interest  in CMO-IV  (the  "CMO-IV  Sale")  generated  aggregate
proceeds of approximately $418.3 million toward the  Recapitalization  Financing
of which  approximately  $342.3 million of such proceeds was used to pay related
borrowings  and  approximately  $76.0  million of such  proceeds was used on the
Effective Date to help fund the Reorganization  Plan. Included in the balance of
the  Recapitalization  Financing was  approximately  $262.4 million  provided by
affiliates of Merrill Lynch Mortgage Capital,  Inc. (such affiliate  referred to
as "Merrill Lynch" or "Merrill") and German American Capital  Corporation  (such
affiliate referred to as "GACC") through a new,  variable-rate secured financing
facility (in the form of a repurchase  transaction) (the "Variable-Rate  Secured
Borrowing"), and approximately $166.8 million provided through two new series of
secured   notes  issued  to  certain  of  the  Company's   unsecured   creditors
(collectively,  the "New Debt").  Effective  as of June 5, 2001,  all rights and
obligations  of Merrill and GACC under the operative  agreements  evidencing the
Variable-Rate  Secured  Borrowing were assigned by Merrill and GACC to ORIX Real
Estate  Capital  Markets,  LLC,  presently  known as ORIX Capital  Markets,  LLC
("ORIX"). ORIX also owns a significant aggregate principal amount of each of the
respective two new series of secured notes  referenced  above as part of the New
Debt.  ORIX is an affiliate of a  publicly-traded  company and is an investor in
CMBS and servicer of commercial real estate loans underlying CMBS.

     Substantially  all cash flows  relating  to existing  assets  are,  and are
currently  expected  to  be,  used  to  satisfy  principal,   interest  and  fee
obligations  under  the New  Debt.  The  approximate  $262.4  million  (original
principal amount) Variable-Rate Secured Borrowing provides for (i) interest at a
rate of one month London  Interbank  Offered Rate  ("LIBOR")  plus 3.25% payable
monthly, (ii) principal repayment/amortization  obligations,  including, without
limitation,  a requirement  to pay down an aggregate $50 million in principal by
April 16, 2003 (the failure to pay down this amount will not constitute an event
of default  but will  result in the  continuation  or  reinstatement  of certain
restrictions and additional  restrictions),  (iii) extension fees of 1.5% of the
unpaid  principal  balance  payable at the end of 24, 30, 36 and 42 months after
the  Effective  Date and (iv)  maturity on April 16, 2005  assuming  the Company
exercises its options to extend the maturity date of the debt.  The  approximate
$166.8 million fixed-rate secured financing was effected through the issuance of
two series of secured notes under two separate  indentures.  The Series A Senior
Secured  Notes,  representing  an aggregate  original  principal  amount of $105
million,  provides  for (i)  interest  at a rate of  11.75%  per  annum  payable
monthly, (ii) principal repayment/amortization  obligations,  including, without
limitation, a principal payment obligation of $5 million due April 15, 2003 (the
failure to make this  payment will not  constitute  an event of default but will
result  in a 200  basis  point  increase  in the  interest  rate  on the  unpaid
principal  amount if certain  miscellaneous  collateral is not sold or otherwise
disposed  of),  (iii)  extension  fees of 1.5% of the unpaid  principal  balance
payable  at the end of 48, 54 and 60 months  after the  Effective  Date and (iv)
maturity on April 15, 2006. The Series B Senior Secured Notes,  representing  an
aggregate original principal amount of approximately $61.8 million, provides for
(i) interest at a rate of 13% per annum payable  semi-annually  with  additional
interest  at the  rate of 7% per  annum  accreting  over  the  debt  term,  (ii)
extension fees of 1.5% of the unpaid principal balance payable at the end of 48,
54 and 60 months after the Effective  Date (with the payment 60 months after the
Effective Date also including an amount based on the unpaid principal balance 66
months after the Effective  Date) and (iii)  maturity on April 15, 2007. The New
Debt described above is secured directly or indirectly by  substantially  all of
the Company's  assets.  There are  restrictive  covenants,  including  financial
covenants  and  certain  restrictions  and  requirements  with  respect  to cash
accounts  and the  collection,  management,  use and  application  of  funds  in
connection  with the New  Debt.  See Note 7 to Notes to  Consolidated  Financial
Statements  for  additional  information  regarding the New Debt.  Additionally,
reference  is made to the New Debt  operative  documents  filed as exhibits to a
Current Report on Form 8-K in June 2001, for a more detailed  description of the
New Debt including payment terms,  restrictive covenants,  events of default and
collateral.

     The Company is  exploring  possible  ways of achieving  improved  financial
flexibility,  such as refinancing all or a substantial  portion of the New Debt;
however,  there can be no  assurance  that the Company will be able to refinance
such New Debt or otherwise improve its financial flexibility.

<PAGE>

     The Company's litigation with First Union National Bank ("First Union") was
not  settled  or  resolved  prior to the  Effective  Date;  and  therefore,  the
classification  and allowance of First  Union's  claim under the  Reorganization
Plan was not  determined on such date. On March 5, 2002,  the  Bankruptcy  Court
entered an order  approving a settlement  agreement  among the Company and First
Union. See "LEGAL  PROCEEDINGS"  and Note 15 to Notes to Consolidated  Financial
Statements for further  information  regarding the settlement of the First Union
litigation.

     Under the Reorganization Plan, the holders of the Company's equity retained
their stock. The terms of the New Debt significantly restrict the amount of cash
dividends that can be paid to shareholders.  One such restriction  provides that
any cash  dividends  required to maintain REIT status  (assuming the Company has
the cash to make  such  distributions  and  that it is  permitted  to make  such
distributions under the terms of the New Debt) would be paid first to holders of
certain  of the New Debt who  convert  their  secured  notes into one or two new
series of preferred  stock,  which new series of preferred stock would be senior
to all other series of preferred stock of the Company, in the form of redemption
payments.  Another such restriction provides that if realized losses (as defined
in the  New  Debt  documents,  and  including  appraisal  reduction  amounts  on
properties  underlying the CMBS  collateral) on CMBS exceed certain  thresholds,
then the Company is prohibited  from paying cash  dividends or making other cash
distributions  or payments to its  shareholders,  except as required to maintain
REIT status,  with any such cash distributions to be paid in accordance with the
terms set forth in the preceding sentence.  As of December 31, 2001, the Company
had exceeded the loss threshold amounts under the applicable operative documents
evidencing the New Debt. Exceeding such loss threshold amounts has also resulted
in  restrictions  on the  acquisition  of CMBS  rated  "B" or lower or  unrated.
Additional  restrictions include restrictions on the use of proceeds from equity
investments in the Company and specified cash flows from certain assets acquired
after the Effective Date. The restrictions  implemented as a result of exceeding
the loss threshold amounts cease to apply after realized losses no longer exceed
the loss threshold amounts under the applicable  operative documents  evidencing
the New Debt. The  Reorganization  Plan also provided for certain  amendments to
the  Company's  articles of  incorporation,  including an increase in authorized
shares  from 145  million  (consisting  of 120  million of common  shares and 25
million of preferred shares) to 375 million (consisting of 300 million of common
shares and 75 million of preferred shares).  These amendments to the articles of
incorporation became effective on the Effective Date.

     On March 21, 2002, the Company redeemed all 173,000  outstanding  shares of
its Series E Preferred  Stock at the stated  redemption  price of $106 per share
plus accrued and unpaid dividends  through and including the date of redemption.
The  total  redemption  price was  $18,734,107  ($396,107  of which  represented
accrued and unpaid dividends). The $1.0 million difference between the aggregate
liquidation  value and the  redemption  price will be reflected as a dividend on
preferred stock in the first quarter of 2002.

     Although there can be no assurance,  the Company believes that it will have
sufficient  cash  resources to pay interest,  scheduled  principal and any other
required  payments on the New Debt through the remainder of 2002.  The Company's
ability to meet its debt service  obligations through the remainder of 2002 will
depend on a number of factors,  including  management's ability to maintain cash
flow (which is impacted by, among other things,  the credit  performance  of the
underlying mortgage loans) and to generate capital internally from operating and
investing  activities and expected reductions in REIT distribution  requirements
to shareholders due to expected net operating  losses for tax purposes,  in each
case consistent with the terms agreed to pursuant to the New Debt.  There can be
no assurance that targeted  levels of cash flow will actually be achieved,  that
reductions  in REIT  distribution  requirements  will be realized,  or that,  if
required, new capital will be available to the Company. The Company's ability to
maintain or increase  cash flow and access new capital will depend  upon,  among
other things,  interest rates,  prevailing  economic  conditions,  covenants and
restrictions under the operative documents evidencing the Company's New Debt and
any debt incurred to refinance the New Debt,  and other  factors,  many of which
are beyond the control of the Company.  The Company's  high level of debt limits
its ability to obtain additional capital, significantly reduces income available
for other  activities,  restricts  the  Company's  ability  to react  quickly to
changes  in  its  business,  limits  its  ability  to  hedge  its  assets  and
liabilities,  and makes the  Company  more  vulnerable  to  economic  downturns.
Additionally,  there  can be no  assurance  that  the  Company  will  be able to
refinance  all or any  portion of the New Debt at or prior to  maturity on terms
favorable to it, or on any terms at all.

<PAGE>

     The Company's  ability to resume the acquisition of  Subordinated  CMBS, as
well as its securitization  programs (if it determines to do so) depends,  among
other things,  on its ability to engage in such  activities  under the terms and
conditions of the operative  documents  evidencing  the New Debt and/or any debt
incurred  to  refinance  all or any  portion of the New Debt and its  ability to
access additional  capital  (including for the purpose of refinancing all or any
portion of the New Debt).  Factors which could affect the  Company's  ability to
access additional capital include, among other things, the cost and availability
of such capital, changes in interest rates and interest rate spreads, changes in
the  commercial  mortgage  industry and the commercial  real estate market,  the
effects of terrorism,  general economic  conditions,  perceptions in the capital
markets  of  the  Company's  business,  covenants  and  restrictions  under  the
operative  documents  evidencing the Company's New Debt,  results of operations,
leverage,  financial condition,  and business prospects. The Company can give no
assurance as to whether it will be able to resume its prior activities or obtain
additional  capital  or the  terms  of any such  capital.  CRIIMI  MAE  Inc.  is
currently  prohibited  from  acquiring  CMBS rated "B" or lower or unrated under
certain documents evidencing the New Debt.

     Summary of Cash Position and Shareholders' Equity

     As of December 31, 2001,  CRIIMI MAE's restricted and unrestricted cash and
cash equivalents aggregated approximately $49.0 million,  including $6.8 million
escrowed in connection with the First Union  litigation.  Additionally,  CMSLP's
cash and cash equivalents approximated $6.5 million as of December 31, 2001.

     As previously  discussed,  in March 2002, the Company redeemed the Series E
Preferred Stock for a total  redemption  price of  approximately  $18.7 million.
After giving  effect to the  settlement  of the First Union  litigation  and the
redemption of Series E Preferred  Stock,  CRIIMI MAE's cash and cash equivalents
aggregated approximately $24.6 million,  including approximately $7.6 million of
restricted  cash,  as of March 21,  2002.  In  addition,  CMSLP's  cash and cash
equivalents approximated $15.5 million as of March 21, 2002.

     As of December 31, 2001 and 2000,  shareholders'  equity was  approximately
$261.0  million or $11.54 per diluted  share.  After giving  effect to the First
Union  settlement  and the  redemption  of the  Series E  Preferred  Stock,  the
Company's  pro forma book value per diluted  share as of December 31, 2001 would
have been $14.18.

     Summary of Subordinated CMBS

     As of December  31, 2001,  the Company  owned,  for purposes of GAAP,  CMBS
rated from A to CCC and unrated with a total fair value amount of  approximately
$824 million (representing approximately 63% of the Company's total consolidated
assets),  an aggregate  amortized  cost of  approximately  $822 million,  and an
aggregate  face  amount of  approximately  $1.6  billion.  Such  CMBS  represent
investments in CBO-1,  CBO-2 and Nomura.  The December 31, 2001 total fair value
includes  approximately  33% of the  Company's  CMBS which are rated BB+, BB, or
BB-,  23%  which  are  rated  B+,  B, B- or CCC and 8% which  are  unrated.  The
remaining  approximately  36% represents  investment  grade  securities that the
Company reflects on its balance sheet as a result of CBO-2. The weighted average
interest  rate of these CMBS as of December  31, 2001 was 6.3% and the  weighted
average life was 13 years.

<PAGE>

     The  aggregate  investment  by the  rating of the  Subordinated  CMBS is as
follows:
<TABLE>
<CAPTION>
                                   Weighted                                     Discount Rate or     Amortized Cost   Amortized Cost
             Face Amount as of  Average Pass-    Weighted    Fair Value as of   Range of Discount     as of 12/31/01  as of 12/31/00
Security        12/31/01 (in    Through Rate   Average Life    12/31/01 (in       Rated Used to       (in millions)   (in millions)
 Rating          millions)       12/31/01          (1)           millions)     Calculate Fair Value        (3)              (4)
---------   ------------------  -------------  ------------  ----------------  --------------------  ---------------  --------------
<S>         <C>                 <C>            <C>           <C>               <C>                   <C>              <C>

A+ (2)(7)         $   62.6         7.0%          4 years        $ 61.8                    7.3%           $  58.7           $  58.0

BBB+ (2)(7)          150.6         7.0%         10 years         135.6                    8.6%             131.1             130.1

BBB (2)(7)           115.2         7.0%         10 years          99.1                    9.2%              94.2              93.2

BB+                  319.0         7.0%         11 years         209.8             12.8%-13.1%             219.0             215.5

BB                    70.9         7.0%         12 years          44.2                   13.6%              46.0              45.4

BB-                   35.5         7.0%         12 years          20.5                   14.6%              20.5              21.3

B+                    88.6         7.0%         13 years          45.2                   16.4%              45.2              48.6

B                    177.2         7.0%         14 years          83.7             17.1%-17.4%              83.7              87.9

B-                   118.3         7.1%         15 years          48.0             19.7%-20.1%              48.1              51.3

CCC                   70.9         7.0%         16 years          13.1                   40.0%              13.1              17.0

Unrated/Issuer's     362.8         4.0%         18 years          63.2             35.0%-53.7%              62.8              82.2
Equity
                 ----------                                    --------                                  --------         ---------
Total (5)         $1,571.6         6.3%         13 years       $ 824.2 (6)                                $822.4 (5)       $ 850.5
                 ==========                                    ========                                  ========         =========

</TABLE>

(1) Weighted  average life represents the weighted average expected life of
the  Subordinated   CMBS  prior  to  consideration  of  losses,   extensions  or
prepayments.

(2) In connection with a  resecuritization  of CMBS effected by the Company
in 1998 ("CBO-2"),  $62.6 million  (originally A rated,  currently A+ rated) and
$60.0  million  (originally  BBB rated,  currently  BBB+  rated)  face amount of
investment  grade  securities  were  sold  with call  options  and $345  million
(originally  A rated,  currently  A+ rated) face amount were sold  without  call
options.  Also in  connection  with CBO-2,  in May 1998,  the Company  initially
retained $90.6 million  (originally BBB rated,  currently BBB+ rated) and $115.2
million (originally BBB- rated,  currently BBB rated) face amount of securities,
both with call  options,  with the  intention to sell the  securities at a later
date. Such sale occurred March 5, 1999.  Since the Company retained call options
on  certain  sold  bonds  (the A+,  BBB+ and BBB  bonds),  the  Company  did not
surrender  control of these assets  pursuant to the  requirements of FAS 125 and
thus these securities are accounted for as a financing and not a sale. Since the
transaction  is recorded as a partial  financing and a partial sale,  CRIIMI MAE
has retained the securities with call options in its Subordinated CMBS portfolio
reflected on its balance sheet.

<PAGE>

(3)  Amortized  cost  reflects  approximately  $30.8  million of impairment
charges  related to certain  CMBS (the CBO-1 B- and unrated  bonds and the CBO-2
BB- through  unrated bonds) which were  recognized in the fourth quarter of 2001
and  approximately  $3.9 million of impairment  charges  related to certain CMBS
(the  CBO-1 B- and  unrated  bonds  and the  Nomura  unrated  bond)  which  were
recognized in the third quarter of 2001, in addition to the losses  discussed in
(4) below.  These  impairment  charges are discussed  further in "Results of
Operations".

(4) Amortized cost reflects $143.5 million of non-cash  impairment  charges
related to the retained CMBS  (excluding the A+ and BBB+ rated  tranches)  which
were recognized in the fourth quarter of 2000. At December 31, 2000, the Company
revised its overall  expected loss estimate  related to its CMBS  portfolio from
$225 million to $298  million with such total losses  expected to occur over the
expected life of the investment.  In addition, the Company expected such revised
losses to occur  sooner than  originally  expected  because of the slowing  U.S.
economy and recession. This revised loss estimate was a result of an increase in
the  number of loans that were  placed in special  servicing  due  primarily  to
monetary  loan  defaults.  As of December 31, 2000,  $310.6  million in mortgage
loans underlying the Company's CMBS portfolio were in special  servicing.  As of
March 31, 2001, this amount had grown to $443.5 million, or 2.2% of the mortgage
loans  underlying  the CMBS  portfolio,  an increase  from 1.3% when the Company
revised its yields as of April 1, 2000.

(5) See Notes 1 and 9 to Notes to  Consolidated  Financial  Statements  for
information regarding the Subordinated CMBS for tax purposes.

(6) As of December 31, 2001, the aggregate fair values of the CBO-1,  CBO-2
and Nomura  bonds were  approximately  $37.7  million,  $777.8  million and $8.7
million, respectively.

(7) In June 2001,  Standard & Poor's  upgraded its ratings on the following
CMBS:  The Company's  CBO-2 CMBS with  original  ratings of A, BBB and BBB- were
upgraded to A+, BBB+ and BBB, respectively.

     Mortgage Loan Pool

     CRIIMI MAE, through CMSLP, performs servicing functions on total commercial
mortgage  loans of $19.3  billion and $20.2  billion as of December 31, 2001 and
2000, respectively. The mortgage loans underlying CRIIMI MAE's Subordinated CMBS
portfolio  were  secured  by  properties  of the  types  and  in the  geographic
locations identified below:

<TABLE>
<CAPTION>
                             12/31/01          12/31/00                                        12/31/01          12/31/00
       Property Type      Percentage(i)     Percentage(i)          Geographic Location (ii)  Percentage(i)     Percentage(i)
       -------------      -------------     -------------          ------------------------  -------------     -------------
       <S>                <C>               <C>                    <C>                       <C>               <C>
       Retail...........        30%               30%              California..............        16%               17%
       Multifamily......        29%               30%              Texas...................        13%               13%
       Hotel............        14%               14%              Florida.................         8%                8%
       Office...........        13%               13%              New York................         5%                5%
       Other (iv).......        14%               13%              Pennsylvania............         5%                5%
                               ----              ----              Other(iii)..............        53%               52%
           Total........       100%              100%                                             ----              ----
                               ====              ====                 Total................       100%              100%
                                                                                                  ====              ====


</TABLE>

(i) Based on a  percentage  of the total  unpaid  principal  balance of the
underlying  loans.
(ii) No significant  concentration by region.
(iii) No other individual  state  makes  up  more  than 5% of the  total.
(iv) The Company's  ownership  interest in one of the 20 CMBS  transactions
underlying CBO-2 includes  subordinated CMBS in which the Company's  exposure to
losses  arising from certain  healthcare  and senior  housing  mortgage loans is
limited by other  subordinated  CMBS  (referred  to herein as the  "Subordinated
Healthcare/Senior-Housing  CMBS").  The  Subordinated  Healthcare/Senior-Housing
CMBS are not owned by and are  subordinate  to CRIIMI  MAE's CMBS.  As a result,
CRIIMI  MAE's  investment  in such  underlying  CMBS  will only be  affected  if
interest shortfalls and/or realized losses on such healthcare and senior housing
mortgage loans are in excess of the Subordinated Healthcare/Senior-Housing CMBS.
As of  February  28,  2002,  the  Company  reviewed  the loans  currently  under
surveillance by the healthcare and senior housing mortgage loans servicer. Based
on its  review,  the  Company  does not  believe  that the  aggregate  remaining
shortfalls and/or realized losses on such healthcare and senior housing mortgage
loans  currently in special  servicing  is greater than the current  outstanding
Subordinated  Healthcare/Senior-Housing CMBS. As a result, the Company's current
estimate of future  credit  losses as of December  31, 2001 does not include any
provision for shortfalls  and/or realized losses arising from the healthcare and
senior housing mortgage loans in this CMBS transaction.  It should be noted that
changes in the future  performance of the healthcare and senior housing mortgage
loans  that  result in  greater  shortfalls  and/or  losses may result in future
losses and/or possible impairment to CRIIMI MAE's CMBS.

<PAGE>

     Specially Serviced Mortgage Loans

     CMSLP performs special  servicing  services on the loans underlying  CRIIMI
MAE's  Subordinated CMBS portfolio.  A special servicer typically provides asset
management   and   resolution   services  with  respect  to   nonperforming   or
underperforming  loans within a pool of mortgage loans.  When serving as special
servicer of a mortgage loan pool,  CMSLP has the  authority,  subject to certain
restrictions in the CMBS pool documents, to deal directly with any borrower that
fails to perform under certain terms of its mortgage loan, including the failure
to make payments,  and to manage any loan workouts and foreclosures.  As special
servicer,  CMSLP earns fee income on services  provided in  connection  with any
loan servicing function  transferred to it from the master servicer.  CRIIMI MAE
believes that because it owns the first loss unrated or lowest rated bond of all
but one CMBS, CMSLP has an incentive to quickly resolve any loan workouts. As of
December 31, 2001 and 2000,  specially  serviced  mortgage loans included in the
commercial mortgage loans described above are as follows:

<TABLE>
<CAPTION>
                                                                                         12/31/01                    12/31/00
                                                                                         --------                    --------
                          <S>                                                            <C>                         <C>
                          Specially serviced loans due to monetary default (a)       $701.7 million              $259.1 million

                          Specially serviced loans due to covenant default/other       90.0 million                51.5 million
                                                                                     ---------------             ---------------
                          Total specially serviced loans (b)                         $791.7 million              $310.6 million
                                                                                     ===============             ===============
                          Percentage of total mortgage loans (b)                         4.1%                         1.5%
                                                                                     ===============             ===============
</TABLE>

(a) Includes $94.5 million and $48.3 million,  respectively, of real estate
owned by underlying trusts.

(b)  As  of  February  28,  2002,  total  specially   serviced  loans  were
approximately  $902 million,  or 4.8% of the total  mortgage loans (as discussed
further below).

     The specially  serviced mortgage loans as of December 31, 2001 were secured
by properties of the types and located in the states identified below:

<TABLE>
<CAPTION>

                 Property Type      $ (in millions)   Percentage             Geographic Location     $ (in millions)   Percentage
                 -------------      ---------------   ----------             -------------------     ---------------   ----------
                 <S>                <C>               <C>                    <C>                     <C>               <C>

                 Hotel..............     $  407.8          51%               Florida..............      $ 109.8            14%
                 Retail.............        241.0          30%               Texas................        103.6            13%
                 Multifamily........         44.9           6%               Oregon...............         94.8            12%
                 Office.............         44.7           6%               Georgia..............         41.4             5%
                 Healthcare.........         31.7           4%               California...........         41.2             5%
                 Industrial.........         14.1           2%               New York.............         40.4             5%
                 Other..............          7.5           1%               Other................        360.5            46%
                                           ------         ----                                          -------        -------
                     Total..........       $791.7         100%                 Total.............      $ 791.7           100%
                                           ======         ====                                          =======        =======

</TABLE>

     As reflected above, as of December 31, 2001,  approximately $407.8 million,
or 51%, of the specially  serviced  mortgage loans represent  mortgages on hotel
properties. The hotel properties are geographically diverse, with a mix of hotel
property types and franchise affiliations.  Of the mortgage loans underlying the
Company's  CMBS,  there are loans  representing  a total  outstanding  principal
amount of $1.3  billion  secured  by limited  service  hotels,  of which  $278.2
million,  or 21.5%,  are in special  servicing as of December 31, 2001.  Limited
service  hotels are generally  hotels with  room-only  operations or hotels that
offer a bedroom and bathroom for the night, but limited other amenities, and are
often in the budget or economy  group.  Of the  mortgage  loans  underlying  the
Company's  CMBS,  there are loans  representing  a total  outstanding  principal
amount of $1.51 billion secured by full service hotels, of which $129.6 million,
or 8.6%, are in special  servicing as of December 31, 2001.  Full service hotels
are generally  mid-price,  upscale or luxury hotels with  restaurant  and lounge
facilities and other amenities.

     Also,  as of December  31,  2001,  of the  mortgage  loans  underlying  the
Company's  CMBS,  there are loans  representing  a total  outstanding  principal
amount of $5.7  billion  secured by retail  properties,  of which  approximately
$241.0 million are in special servicing. The retail loans comprise approximately
30% of the  specially  serviced  loans as of December 31,  2001.  The Company is
monitoring its exposure to certain retailers that are currently in bankruptcy or
are otherwise experiencing financial difficulties.

     A more detailed listing of the hotel,  retail and other specially  serviced
loans as of December 31, 2001 is included in Exhibit 99(o) to this Annual Report
on Form 10-K.

     As of February 28, 2002,  specially  serviced loans totaled $902.0 million.
During the period September 30, 2001 (the date the Company last revised the loss
estimates)  through  February  28,  2002,  there was a $292.7  million,  or 48%,
increase in specially  serviced  loans due to additional  defaults on underlying
mortgage  loans  secured by a variety of property  types,  but  primarily  hotel
properties.  The properties that secure these loans have been adversely impacted
by a variety of factors,  including the economic  slowdown and recession  which,
especially for hotel properties, has been exacerbated by the

<PAGE>

terrorist  attacks of September 11, 2001.  Of the monetary  defaults on the
mortgage  loans  underlying the Company's  CMBS which  transferred  into special
servicing  between  September  30, 2001 and February 28,  2002,  an  approximate
$358.9 million, or 76%, are loans secured by hotel properties.  During this same
period,  approximately  $132.3  million  of loans in  special  servicing  due to
monetary default and real estate owned  transferred out of special servicing due
to  correction,  dispositions  or sale,  resulting in a total special  servicing
portfolio of $902.0  million as of February 28,  2002,  of which $834.1  million
reflect monetary defaults and real estate owned.

     Of the  transfers  into  special  servicing  due to monetary  default  from
September 30, 2001 through February 28, 2002, $255 million were comprised of six
different borrowing relationships more fully described as follows:

         o    25 hotel loans totaling $98.3 million spread across three
              CMBS transactions. In one of these CMBS transactions, which
              contains 10 loans totaling $38.8 million, the Company holds only a
              25% ownership interest in the non-rated class. The 25 loans were
              transferred into special servicing due to the bankruptcy filing of
              each special purpose borrowing entity and their parent company in
              December 2001. The parent company was able to obtain
              debtor-in-possession financing that is expected to pay
              post-petition interest on $71 million of these loans through
              December 2002. The remaining $27 million of loans were deemed by
              the borrower to be highly leveraged, and therefore, not able to
              support additional debt. Interest will not be paid current on
              these loans.
         o    Ten loans totaling $65.0 million spread across two CMBS
              transactions secured by hotel properties in the Pacific west and
              northwest states. These loans are past due for the October 2001
              payment. The borrower has indicated that the properties have
              experienced reduced operating performance due to new competition,
              the economic recession, and reduced travel resulting from the
              September 11, 2001 terrorist attacks.  These loans are related to
              17 other loans, secured by similar properties, totaling
              approximately $78 million that transferred into special servicing
              in January 2001.
         o    Five loans totaling $46.5 million secured by hotel
              properties in Florida and Texas. The loans are past due for the
              September 2001 payment.
         o    Nine loans totaling $19.8 million secured by limited service
              hotels in the midwest. The loans are past due for the December
              2001 payment. The borrower cites reduced occupancy related to the
              recent downturn in travel as the cause for a drop in operating
              performance at the properties. CMSLP is attempting to negotiate a
              workout with the borrower.
         o    Two loans totaling $15.6 million secured by hotels in Texas.
              The loans were transferred to special servicing in December 2001
              for imminent payment default. Since that time, the borrower has
              made a payment and the loans are now due for the February 2002
              payment.
         o    Eight loans totaling $10.0 million secured by free-standing
              retail stores in Maryland and Virginia. Each property is occupied
              by a national retailer. The loans are past due for the December
              2001 payment. CMSLP has entered into a workout with the borrower
              whereby rents are being deposited directly into a lockbox.
              Additional payments are being collected to bring the loans current
              during 2002.

     For  all of  its  existing  and  recent  transfers  to  special  servicing,
including  these  large  borrower  relationships,  CMSLP  is  pursuing  remedies
available to it in order to maximize the recovery of the outstanding debt.

Appraisal Reductions and Losses on CMBS

     The effect of an appraisal  reduction  generally is that the servicer stops
advancing  interest  payments  on the  amount  by which the  aggregate  of debt,
advances and other expenses exceeds the appraisal amount, thus reducing the cash
flows to CRIIMI  MAE as the holder of the first  loss  unrated  or lowest  rated
bonds,  as if such  appraisal  reduction  was a realized  loss.  As an  example,
assuming a weighted average coupon of 6%, a $1 million appraisal reduction would
reduce net cash flows to the  Company  by $60,000 on an annual  basis.  See also
"Cash Flow" for additional  discussion of the effect of appraisal  reductions on
cash flows. An appraisal reduction may result in a higher or lower realized loss
based on the ultimate  disposition or work-out of the mortgage  loan.  Appraisal
reductions for the CMBS  transactions  in which the Company retains an ownership
interest as reported by the underlying  trustees or as calculated by CMSLP* were
as follows:

<PAGE>
<TABLE>
<CAPTION>
                                                                 CBO-1           CBO-2           Nomura         Total
                                                                 -----           -----           ------         -----
<S>                                                              <C>             <C>
Year 1999                                                      $    --          $   --          $    --        $   --
Year 2000                                                        1,872,000       18,871,000          --         20,743,000
Year 2001                                                       15,599,000       31,962,000       874,000       48,435,000
                                                               -----------     ------------     ---------      ------------
Cumulative Appraisal Reductions through December 31, 2001 (a)  $17,471,000      $50,833,000     $ 874,000      $69,178,000
                                                               ===========      ===========     =========      ============

</TABLE>

         * Not all underlying CMBS transactions require the calculation of an
           appraisal reduction; however, where CMSLP obtains a third party
           appraisal, it calculates one.

         (a) During the period January 1, 2002 through February 28, 2002,
             there were an additional $15.7 million of appraisal reductions.

     The Company's unrated  bonds/issuer's  equity from CBO-1,  CBO-2 and Nomura
are expected to experience principal write-downs. The following table summarizes
the actual  realized  losses on CMBS through  December 31, 2001 and the expected
future losses through the life of the CMBS:
<TABLE>
<CAPTION>

                                                             CBO 1          CBO 2        Nomura        Total
                                                             -----          -----        ------        -----
<S>                                                          <C>            <C>          <C>           <C>
Year 1999 actual realized losses                         $    738,000    $       --    $      --     $   738,000
Year 2000 actual realized losses                            3,201,000     1,087,000           --       4,288,000
Year 2001 actual realized losses                              545,000     8,397,000      238,000       9,180,000
                                                        -------------   -----------    ---------     -----------
Cumulative actual realized losses through the year 2001     4,484,000     9,484,000      238,000      14,206,000
Expected loss estimates for the year 2002                  29,878,000    31,915,000    1,032,000      62,825,000
Expected loss estimates for the year 2003                  18,058,000    51,619,000    1,077,000      70,754,000
Expected loss estimates for the years 2004-2006            27,676,000    94,095,000   12,896,000     134,667,000
Expected loss estimates for the year 2007-2009              5,606,000    15,508,000    7,028,000      28,142,000
Expected loss estimates for the remaining life of
   investment (for the years 2010-2027)                     7,386,000    12,794,000    3,904,000      24,084,000
                                                        -------------   -----------   ----------    ------------

Cumulative actual and expected loss estimates through
   life of CMBS                                          $ 93,088,000  $215,415,000  $26,175,000    $334,678,000
                                                        =============  ============  ===========    ============
 </TABLE>

     As previously discussed in "Impairment on CMBS", at September 30, 2001, the
Company revised its overall expected loss estimate related to its CMBS portfolio
from $298 million to $307 million.  As of December 31, 2001, the Company further
revised its overall  expected loss estimate  related to its CMBS  portfolio from
$307 million to $335  million,  with such total losses  occurring or expected to
occur over the life of the CMBS  investment.  In addition,  the Company  expects
such revised  losses to generally  occur sooner than  previously  expected.  The
Company's overall expected loss estimate of $335 million through the life of its
CMBS portfolio represents the Company's estimate of total principal  write-downs
to its CMBS due to realized losses related to underlying  mortgage loans, and is
included in the calculation of the current weighted average anticipated yield to
maturity, as previously discussed.

     As the  Company  had  determined  that there had been an adverse  change in
expected  future  cash flows and that its current  estimate  of expected  credit
losses  exceeded  credit losses as previously  projected,  the Company  believed
certain  of the  CMBS had  been  impaired  under  EITF  99-20  and FAS 115 as of
September  30, 2001 and again as of December 31, 2001.  As the fair value of the
impaired  CMBS was  approximately  $3.9  million  and  $30.8  million  below the
amortized   cost  basis  as  of  September  30,  2001  and  December  31,  2001,
respectively,  the Company  recorded  other than temporary  non-cash  impairment
charges through the income  statement of those same amounts during the third and
fourth  quarters of 2001.  There can be no assurance that the Company's  revised
estimate of expected  losses will not be exceeded as a result of  additional  or
continuing  adverse  events  or  circumstances,  such as a  continuing  economic
slowdown and recession.

     The  anticipated  yield to maturity  related to the Company's  Subordinated
CMBS on an aggregate pool basis was 12.4% at January 1, 2001 and 2002.

     Summary of Other Assets

     As of December 31, 2001 and 2000,  the  Company's  other  assets  consisted
primarily   of  insured   mortgage   securities,   equity   investments,   other
mortgage-backed securities, cash and cash equivalents (as previously

<PAGE>

discussed),  principal and interest receivables on its various assets, real
estate owned ("REO"), and intangible assets associated with the 1995 Merger.

     The Company had $343.1 million and $385.8 million (at fair value)  invested
in insured mortgage  securities as of December 31, 2001 and 2000,  respectively.
As  of  December  31,  2001,  87%  were  GNMA  Mortgage-Backed   Securities  and
approximately 13% of CRIIMI MAE's investment in insured mortgage securities were
FHA-Insured  Certificates.  The total  mortgage  securities  of  $343.1  million
includes an  unencumbered  insured  mortgage  security with a fair value of $5.3
million.  The remaining  $337.8  million of mortgage  securities  are pledged to
secure  certain  collateralized  mortgage  obligations  or securities  issued in
connection with three securitization  transactions aggregating $326.6 million as
of December 31, 2001. CRIIMI MAE receives the net cash flows after debt service,
generally excess interest and prepayment penalties,  from the three wholly-owned
subsidiaries  that  pledged  these  insured  mortgage  securities  to secure the
related obligations, along with the cash flow from the one unencumbered mortgage
security,  which  represent the total cash flows that the Company  receives from
these mortgage securities.  The net cash flows after debt service are applied as
principal  amortization  payments  (in  connection  with cash  flow  from  other
miscellaneous assets) on Series A Senior Secured Notes.

     As of December  31,  2001 and 2000,  the  Company  had  approximately  $9.3
million and $33.8 million,  respectively, in investments accounted for under the
equity method of accounting.  Included in equity  investments as of December 31,
2001  are  (a)  the  general  partnership  interests  (2.9%  to  4.9%  ownership
interests) in the AIM Funds owned by CRIIMI,  Inc., a wholly owned subsidiary of
CRIIMI MAE, and (b) a 20% limited partnership interest in the adviser to the AIM
Funds,  50% of  which is  owned  by  CRIIMI  MAE and 50% of which is owned by CM
Management.  The foregoing and (a) CRIIMI MAE's  interest in CMSI and (b) CRIIMI
MAE's  interest in CMSLP were included in equity  investments as of December 31,
2000.  Effective July 2001, CRIIMI MAE, which had previously accounted for CMSLP
under the equity method,  acquired voting control of CMSLP and began  accounting
for this  subsidiary  on a  consolidated  basis.  CMSLP's  assets,  liabilities,
revenues and expenses are labeled as "servicing"  on the Company's  consolidated
financial  statements  (see  "Summary of Servicing  Other  Assets and  Servicing
Liabilities" below).

     The  Company's  Other   Mortgage-Backed   Securities   includes   primarily
investment   grade  CMBS  and  investment  grade   residential   mortgage-backed
securities.   As  of  December   31,  2001  and  2000,   the   Company's   Other
Mortgage-Backed  Securities  were  approximately  $8.5 million and $4.3 million,
respectively.

     In October 2001, a wholly-owned  subsidiary of CRIIMI MAE acquired  certain
partnership  interests in a partnership that was the obligor on a mezzanine loan
payable to CRIIMI  MAE in  exchange  for curing a default on the first  mortgage
loan through a cash payment of  approximately  $276,000.  This  partnership  and
another  wholly-owned  subsidiary  of  CRIIMI  MAE own  100% of the  partnership
interests in the  partnership  which is the obligor on the first  mortgage loan.
The first mortgage loan is secured by a shopping center in Orlando,  Florida. As
a result of this acquisition,  the Company,  through certain of its wholly-owned
subsidiaries,  owns 100% of the partnership  interests and is consolidating  its
accounts as of October 1, 2001.  The Company  accounts  for these assets as REO,
and the REO will be held for  investment.  As of December 31, 2001,  the Company
has $8.6 million in REO assets  included in other assets ($8.3 million  relating
to the actual  building  and land),  $7.1  million of mortgage  payable  (net of
discount),  and $0.1 million in liabilities included in other liabilities on its
balance  sheet.  The Company hopes to reposition and stabilize this property and
then sell it when the Company  believes that it can sell it at a price that more
accurately  reflects its value,  although  there can be no assurance the Company
will be able to do so.  Currently,  the  Company  expects  that it will hold the
property for more than one year.

     As  discussed  previously,  $9.8  million  of the  Company's  goodwill  and
intangible assets related to the 1995 Merger were written-off on January 1, 2002
upon the adoption of FAS 142.

     Summary of Servicing Other Assets and Servicing Liabilities

     The Company  conducts its mortgage loan  servicing  operations  through its
subsidiary,  CMSLP.  As of December 31,  2001,  CMSLP was  performing  servicing
functions on commercial  mortgage loans  totaling  $19.3  billion.  As discussed
previously in "Equity in (Losses) Income from Investments/CMSLP Operations," the
Company began accounting for CMSLP on a consolidated basis as of July 1, 2001.

     At December 31, 2001, the following  comprised  servicing  other assets and
servicing liabilities:


<PAGE>

<TABLE>
<CAPTION>

         <S>                                                           <C>
         Acquired mortgage servicing rights                              $ 4,096,333 (1)
         AIM Fund subadvisory contracts                                    1,906,542
         Investment in interest-only certificates and CMBS                 2,395,576
         Receivables and other assets                                      7,612,446
         Fixed assets, net                                                 2,239,927
                                                                       -------------
         Total servicing other assets                                    $18,250,824
                                                                       =============
         Accounts and notes payable                                      $ 3,660,173
                                                                       =============
</TABLE>

         (1) As previously discussed, CMSLP sold all of its rights and
         obligations under its CMBS master and primary contracts in February
         2002. CMSLP received approximately $11.3 million in cash, which
         includes reimbursement of advances. The Company expects to recognize a
         gain on sale of approximately $4.3 million, subject to adjustment of
         post-closing contingencies in 2002. This gain will be recognized during
         the second quarter of 2002. In addition, although there can be no
         assurance, CMSLP may receive up to an additional $0.9 million from the
         sale in the third quarter of 2002, which would be reflected as an
         additional gain on sale, following the completion of a post-closing
         contingency period.

     Dividends

     The  terms  of the New  Debt  significantly  restrict  the  amount  of cash
dividends  that can be paid.  Among the other  factors which impact CRIIMI MAE's
dividends,  if any,  are (i) the level of income  earned on  uninsured  mortgage
assets, such as Subordinated CMBS (including,  but not limited to, the amount of
OID income,  interest  shortfalls and losses,  on Subordinated  CMBS),  (ii) net
operating losses, (iii) the fluctuating yields on short-term, variable-rate debt
and the rate at which CRIIMI MAE's  LIBOR-based  debt is priced,  as well as the
rate  CRIIMI  MAE  pays on its  other  borrowings,  (iv)  changes  in  operating
expenses,  (v) the level of income  earned on CRIIMI MAE's or its  subsidiaries'
insured mortgage security collateral depending on prepayments,  defaults,  etc.,
(vi) the rate at which cash flows from mortgage assets,  mortgage  dispositions,
and,  to the  extent  applicable,  distributions  from its  subsidiaries  can be
reinvested,  (vii) to the extent  applicable,  cash  dividends paid on preferred
shares, (viii) to the extent applicable,  whether the Company's taxable mortgage
pools continue to be exempt from corporate level taxes,  (ix) realized losses on
certain transactions,  and (x) the timing and amounts of cash flows attributable
to its other lines of business - mortgage  servicing  and other fee income.  See
"BUSINESS - Risk Factors - Substantial Indebtedness;  Leverage," "MARKET FOR THE
REGISTRANT'S  COMMON  STOCK  AND  RELATED  STOCKHOLDER  MATTERS,"  "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL  CONDITION AND RESULTS OF  OPERATIONS"  and
Notes 10 and 11 of the Notes to Consolidated  Financial Statements for a further
discussion of dividends.

     Taxable Mortgage Pool Risks

     See "BUSINESS  - Risk  Factors  -  Taxable  Mortgage  Pool  Risks"  for a
discussion of taxable mortgage pool risks.

     Investment Company Act

     For a discussion of the Investment  Company Act and the risk to the Company
if it were required to register as an  Investment  Company,  see  "BUSINESS-Risk
Factors-Investment Company Act Risk".

     Critical Accounting Policies

     The Company's  significant  accounting  policies are described in Note 3 to
Notes to  Consolidated  Financial  Statements.  The  Company  believes  its most
critical  accounting  policies (a critical  accounting  policy being one that is
both very  important to the portrayal of the Company's  financial  condition and
results of operations and requires  management's  most difficult,  subjective or
complex  judgments)  include the  determination  of fair value of the  Company's
Subordinated  CMBS and interest income  recognition  related to the Subordinated
CMBS.

             o     Fair Value of Subordinated CMBS - Due to the limited
             liquidity of the subordinated CMBS market and the resulting lack of
             a secondary market, the Company estimates the values of its
             Subordinated CMBS internally. These estimates require significant
             judgment regarding assumptions for defaults on the underlying
             commercial mortgage loan collateral, resultant loss severity and
             discount rates. Note 5 to Notes

<PAGE>

             to Consolidated Financial Statements contains a detailed discussion
             of the methodology used to determine the fair value of the
             Company's Subordinated CMBS as well as a sensitivity analysis
             related to the fair value of these Subordinated CMBS due to changes
             in assumptions related to losses on the underlying commercial
             mortgage loan collateral and discount rates.
             o     Interest Income recognition related to Subordinated CMBS -
             Interest income recognition under EITF 99-20 requires the Company
             to make estimates regarding expected prepayment speeds as well as
             expected losses on the underlying commercial mortgage loan
             collateral (which directly impact the cash flows on the Company's
             Subordinated CMBS in the form of interest shortfalls and loss of
             principal) and the impact these factors would have on future cash
             flow. Note 5 to Notes to Consolidated Financial Statements details
             the expected realized losses by year the Company expects to incur
             related to its Subordinated CMBS.  The cash flows the Company
             projects to arrive at the effective interest rate to recognize
             interest income are adjusted for these expected losses.  The
             judgment regarding future expected credit losses is subjective as
             credit performance is particular to an individual deal's specific
             underlying commercial mortgage loan collateral.  In general, if the
             Company increases its expected losses or determines such losses
             will occur sooner than previously projected and the CMBS's fair
             value is below cost, then the CMBS will be considered impaired and
             adjusted to fair value with the impairment charge recorded through
             earnings.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The  Company's  principal  market  risk is  exposure to changes in interest
rates  related  to the U.S.  Treasury  market as well as the LIBOR  market.  The
Company  will have  fluctuations  in the amount of interest  expense paid on its
Variable-Rate Secured Borrowing primarily due to changes in one-month LIBOR. The
Company  will also  experience  fluctuations  in the market  value of its assets
related to  changes  in the  interest  rates of U.S.  Treasury  bonds as well as
changes in the spread  between U.S.  Treasury bonds and CMBS. As of December 31,
2001,  the average  treasury rate used to price the Company's CMBS had decreased
by  approximately 6 basis points and credit spreads had widened by approximately
84 basis points compared to December 31, 2000.

     CRIIMI MAE has  entered  into an  interest  rate  protection  agreement  to
mitigate the adverse  effects of rising interest rates on the amount of interest
expense  payable under its  Variable-Rate  Secured  Borrowing.  The cap provides
protection to CRIIMI MAE to the extent the one-month  LIBOR rate increases above
the stated  interest rate cap, in which case,  CRIIMI MAE will receive  payments
based on the difference  between the one-month  LIBOR rate and the cap rate. The
term of the cap as  well as the  stated  interest  rate  of the  cap,  which  is
currently  above the  current  one-month  LIBOR  rate,  will limit the amount of
protection that the cap offers. The average LIBOR index was 3.89%  during 2001.
As of December 31, 2001,  one-month  LIBOR was 1.87% which was a 469 basis point
decrease from December 31, 2000.

     The Company's New Debt consists of a new  Variable-Rate  Secured  Borrowing
(in the form of a repurchase  transaction),  and  indebtedness  evidenced by the
Series A Senior Secured Notes and the Series B Senior  Secured Notes.  Operative
documents  evidencing  the New Debt do not  specifically  require the Company to
maintain collateral of a specific market value.

     The table below provides information about the Company's  Subordinated CMBS
and Insured Mortgage  Securities as of December 31, 2001. For Subordinated  CMBS
and Insured Mortgage Securities,  the table presents  anticipated  principal and
interest  cash flows based upon the  assumptions  used in  determining  the fair
value of these  securities and the related  weighted  average  interest rates by
expected  maturity.  See  Notes  5  and 6 to  Notes  to  Consolidated  Financial
Statements for discussion of fair value methodologies used for Subordinated CMBS
and Insured Mortgage Securities.


<PAGE>
<TABLE>
<CAPTION>
             ESTIMATED PRINCIPAL & INTEREST CASHFLOWS
<S>                                <C>        <C>        <C>        <C>        <C>        <C>
Assets (in millions)                 2002       2003       2004       2005       2006     Thereafter      Total     Fair Value
--------------------------------   ---------  ---------  ---------  ---------  ---------- ------------  ----------- -----------

Subordinated CMBS (1)                 $84.8      $85.7      $85.9      $85.7       $85.8     $2,048.4     $2,476.3      $527.7
Average Stated Interest Rate           6.8%       6.9%       6.9%       6.9%        6.9%         6.9%         6.9%

Insured Mortgage
   Securities (2)                     $91.6      $73.3      $83.4      $64.6       $42.1        $73.9       $428.9      $343.1
Average Stated Interest Rate           7.8%       7.7%       7.6%       7.6%        7.6%         7.6%         7.7%
</TABLE>
----------------------------
(1)  These amounts represent the estimated cash flows from the retained
     Subordinated CMBS(BB+ through unrated bonds) that are used to estimate the
     fair value of the Subordinated CMBS. Actual cash flows will be less than
     these estimated cash flows due to actual realized losses, appraisal
     reduction events and defaults and anticipated further realized losses,
     appraisal reduction events and defaults.

(2)  These amounts represent the projected cash flows that were used to
     estimate the fair values of the Insured Mortgage Securities. The Company
     estimated such cash flows using an assumed constant prepayment rate ("CPR")
     of 35%, however it should be noted that there can be no assurance that this
     estimated CPR will approximate the actual CPR.  In addition, the 2002
     amount includes known prepayments, which occurred in January and February
     2002.

     The next table provides  information  about the Company's debt obligations,
including the New Debt, and  derivative  instrument as of December 31, 2001. For
debt obligations,  the table presents the contractual principal payments and the
related weighted  average interest rates (coupon) by contractual  maturity date.
For the cap, the table  presents the notional  amount of the agreement by fiscal
year of maturity and weighted average strike price.

<TABLE>
<CAPTION>
                   ESTIMATED PRINCIPAL ON DEBT OBLIGATIONS

Debt Obligations
(in millions)                      2002       2003        2004       2005      2006     Thereafter      Total      Fair Value
-------------------------------- ---------  ----------  ---------- ---------  --------  ------------  -----------  ------------
<S>                              <C>        <C>         <C>        <C>        <C>       <C>           <C>
Variable Rate Secured
   Borrowing (1)                    $25.5       $16.0       $12.1    $190.6     $  --         $  --       $244.2        $244.2
Average Stated Interest Rate (2)     5.1%        5.1%        5.1%      5.1%        --            --         5.1%

Series A Senior Secured Notes(3)     $6.0       $15.5       $20.1     $19.7     $38.2         $  --        $99.5         $95.3
Average Stated Interest Rate        11.8%       11.8%       11.8%     11.8%     11.8%            --        11.8%

Series B Senior Secured Notes (4)   $  --       $  --       $  --     $  --     $  --         $63.9(4)     $63.9 (4)     $54.8
Average Stated Interest Rate        20.0%       20.0%       20.0%     20.0%     20.0%         20.0%        20.0%

Securitized Mortgage
   Obligations - Fixed Rate (5)     $67.5       $53.9       $72.1     $54.9     $95.2        $320.4       $664.0        $648.5
Average Stated Interest Rate         7.0%        7.0%        7.0%      7.0%      7.0%          7.2%         7.0%

Mortgage Payable                     $0.1        $0.1        $0.1      $0.1      $0.1          $8.2         $8.7          $7.1
Average Stated Interest Rate         7.3%        7.3%        7.3%      7.3%      7.3%          7.3%         7.3%

Derivative Contract
(in millions)
--------------------------------

Cap Contract                        $18.0      $170.0          --        --        --            --       $188.0          $0.1
Average Strike Rate                 5.25%       5.25%          --        --        --            --        5.25%

</TABLE>

<PAGE>

----------------------------

(1)      The projected principal payments on the Variable-Rate Secured
         Borrowing are based on the applicable amortization schedule provided in
         the operative documents. In addition, the projected principal payments
         include estimated principal payments from excess cash flow required to
         be applied toward the redemption of principal under the operative
         documents until a total of $50 million of the principal has been
         repaid, which is expected to occur in 2003.  These principal payments
         are based on the Company's estimate of future cash flows as of
         March 15, 2002, which are subject to continuous change due to, without
         limitation, changes in interest rates, realized losses, appraisal
         reductions, interest shortfalls, credit performance of underlying
         loans, unanticipated expenses on foreclosed and non-performing loans,
         accumulated advances, prepayments, the Company's obligations in
         connection with REO, the Company's general and administrative expenses
         and other operating expenses, and cash dividends, if any, paid to
         shareholders.  There can be no assurance that projected cash flows will
         approximate the actual cash flows.

(2)      The stated annual interest rate on the Variable-Rate Secured
         Borrowing is LIBOR plus 3.25%.The average stated interest rate assumes
         that LIBOR is unchanged from the December 31, 2001 LIBOR rate of 1.87%
         over the remaining term of the debt. Any changes in the LIBOR rate will
         affect the actual principal payments on the Company's Variable-Rate
         Secured Borrowing in the future.

(3)      The projected principal payments on the Series A Senior Secured
         Notes are based, in part, on the Company's estimate of the cash flows
         from the collateral securing the Series A Senior Secured Notes as of
         March 15, 2002. In addition, there are principal payment obligations of
         $5 million, $15 million, and $15 million due on April 16, 2003, 2004
         and 2005, respectively. If the Company fails to make any one of these
         payments, the interest rate on the unpaid principal amount would
         increase by 200 basis points if certain miscellaneous collateral is not
         sold or otherwise disposed of by the noteholders. These projected cash
         flows are subject to continuous change due to, without limitation,
         changes in interest rates, realized losses, appraisal reductions,
         interest shortfalls, credit performance of underlying loans,
         unanticipated expenses on foreclosed and non-performing loans,
         accumulated advances, prepayments, the Company's obligations in
         connection with REO, the Company's general and administrative expenses
         and other operating expenses, and cash dividends, if any, paid to
         shareholders.  There can be no assurance that the projected cash flows
         will approximate the actual cash flows.

(4)      The Series B Senior Secured Notes have no contractual principal
         payment requirements until maturity on April 15, 2007. The Series B
         Senior Secured Notes accrete interest at an annual rate of 7%. This
         accreted interest is added to the principal balance semi-annually on
         the interest payment dates. For purposes of this disclosure, the
         Company has not included any future accreted interest in the
         contractual principal payment amount at maturity. The Company estimates
         as of March 15, 2002 that the total principal payment due at maturity,
         including accreted interest, will be approximately $93 million.

(5)      The projected principal payments on the securitized mortgage
         obligations are based on the projected cash flows that were used to
         estimate the December 31, 2001 fair values of the related securities,
         which collateralize this debt. The 2002 amounts include known
         prepayments, which occurred in January and February 2002.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The  financial  statements  and  supplementary  data are set  forth in this
Annual Report on Form 10-K commencing on page 70.


ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

         None.

<PAGE>

                                    PART III

     The  information  required  by Part III (Item  10-Directors  and  Executive
Officers, Item 11-Executive Compensation,  Item 12-Security Ownership of Certain
Beneficial  Owners and Management and Item 13-Certain  Relationships and Related
Transactions) is incorporated herein by reference to the Registrant's definitive
proxy  statement  to be  filed  pursuant  to  Regulation  14A  relating  to  the
Registrant's 2002 annual meeting of stockholders.



                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

         (a)      List of documents filed as part of this report:

                  1 and 2. Financial Statements and Financial Statement
                  Schedules
<TABLE>
<CAPTION>

Description                                                                                    Page
-----------                                                                                    ----
<S>                                                                                            <C>
Report of Independent Public Accountants........................................................70

Consolidated Balance Sheets as of December 31, 2001 and 2000....................................71

Consolidated Statements of Income for the years ended
  December 31, 2001, 2000 and 1999..............................................................72

Consolidated Statements of Changes in Shareholders' Equity and Comprehensive Income
  for the years ended December 31, 2001, 2000 and 1999..........................................73

Consolidated Statements of Cash Flows
  for the years ended December 31, 2001, 2000 and 1999..........................................74

Notes to Consolidated Financial Statements .....................................................75

</TABLE>

All other financial statements and financial statement schedules have been
omitted since the required information is included in the financial statements
or the notes thereto, or is not applicable or required.

(a) 3.   Exhibits (listed according to the number assigned in the table in Item
         601 of Regulation S-K)

Exhibit No. 2 - Plan of Acquisition, Reorganization, Arrangement, Liquidation,
or Succession.

          a.   Third  Amended Joint Plan of  Reorganization  as confirmed by the
               United  States  Bankruptcy  Court for the  District of  Maryland,
               Greenbelt   Division  on  November  22,  2000   (incorporated  by
               reference  to Exhibit  2.1 to Form 8-K filed with the  Securities
               and Exchange Commission on December 28, 2000).

Exhibit No. 3 - Articles of Incorporation and bylaws.

          a.   Articles  of  Amendment  and  Restatement  of  CRIIMI  MAE  Inc.,
               including  Exhibit A,  Exhibit B, Exhibit C and Exhibit D thereto
               pertaining  to the  preferences,  conversion  and  other  rights,
               voting  powers,  restrictions  and  limitations  as to dividends,
               qualifications  and terms and  conditions  of

<PAGE>

               redemption  of the Series  B  Cumulative   Convertible  Preferred
               Stock,  Series  E Cumulative  Convertible  Preferred Stock, the
               Series F Redeemable Cumulative  Dividend  Preferred Stock and the
               Series G Redeemable Cumulative Dividend Preferred Stock,
               respectively, filed with the Maryland State  Department of
               Assessments  and Taxation on April 17, 2001  (incorporated  by
               reference  to Exhibit 3.1 to Current Report  on Form  8-K  filed
               with  the  Securities  and  Exchange Commission ("SEC") on
               June 1, 2001).

          b.   Articles of  Amendment  to Exhibit B of the Articles of Amendment
               and  Restatement  of  CRIIMI  MAE  Inc.  which  pertains  to  the
               preferences,   conversion   and  other  rights,   voting  powers,
               restrictions and limitations as to dividends,  qualifications and
               terms and  conditions  of  redemption  of the Series E Cumulative
               Convertible Preferred Stock (incorporated by reference to Exhibit
               3 to the  Quarterly  Report  on Form 10-Q for the  quarter  ended
               September 30, 2001).

          c.   Second   Amended   and   Restated   Bylaws  of  CRIIMI  MAE  Inc.
               (incorporated  by reference  to Exhibit 3.2 to Current  Report on
               Form 8-K filed with the SEC on June 1, 2001).

          d.   Articles  of  Incorporation  of CBO  REIT,  Inc.  filed  with the
               Maryland State  Department of  Assessments  and Taxation on April
               11, 2001  (incorporated  by  reference  to Exhibit 3.3 to Current
               Report on Form 8-K filed with the SEC on June 1, 2001).

          e.   Bylaws  of  CBO  REIT,  Inc.,  effective  as of  April  17,  2001
               (incorporated  by reference  to Exhibit 3.4 to Current  Report on
               Form 8-K filed with the SEC on June 1, 2001).

          f.   Certificate   of   Incorporation   of  CRIIMI  MAE  QRS  1,  Inc.
               (incorporated  by reference  to Exhibit 3(p) to Annual  Report on
               Form 10-K for 1996.)

          g.   Bylaws of CRIIMI MAE QRS 1, Inc.  (incorporated  by  reference to
               Exhibit 3(q) to Annual Report on Form 10-K for 1996).

          h.   Certificate of Incorporation  of  CRIIMI  MAE  CMBS  Corp  (filed
               herewith).

          i.   Bylaws of CRIIMI MAE CMBS Corp (filed herewith).

          j.   Articles of  Incorporation  of CRIIMI MAE  Financial  Corporation
               (incorporated   by   reference   to  Exhibit   3.1  to  Form  S-3
               Registration  Statement  filed with the  Securities  and Exchange
               Commission on September 12, 1995).

          k.   By-laws  of CRIIMI MAE  Financial  Corporation  (incorporated  by
               reference to Exhibit 3.2 to Form S-3 Registration Statement filed
               with the  Securities  and Exchange  Commission  on September  12,
               1995).

          l.   Articles of Incorporation of CRIIMI MAE Financial  Corporation II
               (incorporated  by reference  to Exhibit 3(q) to Annual  Report on
               Form 10-K for 1995).

          m.   Bylaws of CRIIMI MAE Financial  Corporation II  (incorporated  by
               reference  to  Exhibit  3(r) to  Annual  Report  on Form 10-K for
               1995).

<PAGE>

          n.   Articles of Incorporation of CRIIMI MAE Financial Corporation III
               (incorporated  by reference  to Exhibit 3(s) to Annual  Report on
               Form 10-K for 1995).

          o.   Bylaws of CRIIMI MAE Financial  Corporation III  (incorporated by
               reference  to  Exhibit  3(t) to  Annual  Report  on Form 10-K for
               1995).

          p.   Limited  Partnership  Agreement  of CRIIMI MAE  Services  Limited
               Partnership  effective  as of June 1,  1995  between  CRIIMI  MAE
               Management,  Inc. and CRIIMI MAE Services,  Inc. (incorporated by
               reference  to  Exhibit  3(n) to  Annual  Report  on Form 10-K for
               1995).

          q.   First  Amendment to the Limited  Partnership  Agreement of CRIIMI
               MAE  Services  Limited  Partnership  effective as of December 31,
               1995 between CRIIMI MAE Management  Inc. and CRIIMI MAE Services,
               Inc.  (incorporated by reference to Exhibit 3(g) to Annual Report
               on Form 10-K for 1998).

          r.   Second Amendment to the Limited  Partnership  Agreement of CRIIMI
               MAE Services Limited Partnership  effective as of January 2, 1997
               between CRIIMI MAE Management Inc. and CRIIMI MAE Services,  Inc.
               (incorporated  by reference  to Exhibit 3(h) to Annual  Report on
               Form 10-K for 1998).

          s.   Third  Amendment to the Limited  Partnership  Agreement of CRIIMI
               MAE  Services  Limited  Partnership  effective as of December 31,
               1997 between CRIIMI MAE Management  Inc. and CRIIMI MAE Services,
               Inc.  (incorporated by reference to Exhibit 3(i) to Annual Report
               on Form 10-K for 1998).

          t.   Fourth Amendment to Limited  Partnership  Agreement of CRIIMI MAE
               Services  Limited  Partnership  effective  as of  March  9,  2001
               between CRIIMI MAE Services,  Inc.,  CRIIMI MAE Management,  Inc.
               and CMSLP Holding Company, Inc. (filed herewith).

          u.   Articles of Merger merging CRI Acquisition,  Inc., CRICO Mortgage
               Company,  Inc.  and  CRI/AIM  Management,  Inc.  into  CRIIMI MAE
               Management,  Inc.  (incorporated by reference to Exhibit 10(i) to
               Annual Report on Form 10-K for 1995).

          v.   Agreement and Articles of Merger  between CRIIMI MAE Inc. and CRI
               Insured  Mortgage  Association,  Inc. as filed with the Office of
               the Secretary of the State of Delaware (incorporated by reference
               to Exhibit 3(f) to Quarterly  Report on Form 10-Q for the quarter
               ended June 30, 1993).

          w.   Agreement and Articles of Merger  between CRIIMI MAE Inc. and CRI
               Insured  Mortgage  Association,  Inc.  as filed  with  the  State
               Department of  Assessment  and Taxation for the State of Maryland
               (incorporated by reference to Exhibit 3(g) to Quarterly Report on
               Form 10-Q for the quarter ended June 30, 1993).


Exhibit No. 4 - Instruments defining the rights of security holders, including
                indentures.

          a.   Indenture,  dated  as of April  17,  2001  and all  exhibits  and
               schedules thereto, by and between CRIIMI MAE Inc. and Wells Fargo
               Bank Minnesota,

<PAGE>

               National Association, as trustee relating to the Series A Notes
               (incorporated  by  reference  to  Exhibit  T3C to Amendment No. 2
               to Form T-3 relating to Series A Notes  Indenture filed with the
               SEC on April 13, 2001).

          b.   Indenture,  dated as of April  17,  2001,  and all  exhibits  and
               schedules thereto, by and between CRIIMI MAE Inc. and Wells Fargo
               Bank Minnesota, National Association, as trustees relating to the
               Series B Notes  (incorporated  by  reference  to  Exhibit  T3C to
               Amendment No. 2 to Form T-3 relating to Series B Notes  Indenture
               filed with the SEC on April 13, 2001).

          c.   Registrant's 2001 Stock Incentive Plan (incorporated by reference
               to Annex B to Definitive  Proxy  Statement  filed with the SEC on
               August 16, 2001).

          d.   Registrant's  Second  Amended and Restated  Stock Option Plan for
               Key Employees  (incorporated  by reference herein to Exhibit G to
               Exhibit 99.6 to the Registrant's Current Report on Form 8-K filed
               with the SEC on September 22, 2000).

          e.   Dividend  Reinvestment and Stock Purchase Plan between CRIIMI MAE
               Inc.  and  shareholders   (incorporated  by  reference  from  the
               registration statement on Form S-3A filed December 9, 1997).

          f.   Prospectus  dated July 8, 1998  whereby  CRIIMI  MAE Inc.  offers
               participation  in its Dividend  Reinvestment  and Stock  Purchase
               Plan  (incorporated  by reference  from Form S-3 filed on July 9,
               1998).


Exhibit No. 10 - Material contracts.

          a.   Master Repurchase  Agreement and Annex I to the Master Repurchase
               Agreement,  including Schedule 1-A (CBO-2  Securities),  Schedule
               1-B  (CBO-1/Nomura  Securities),  Schedule  1-D  (Loss  Threshold
               Amount)  and  Disclosure   Schedule   thereto   (incorporated  by
               reference to Exhibit 10.1 to Current  Report on Form 8-K filed on
               June 1, 2001).

          b.   Security and Pledge  Agreement,  dated as of April 17, 2001, made
               by CRIIMI MAE Inc. in favor of Merrill  Lynch,  Pierce,  Fenner &
               Smith   Incorporated,   as  collateral  agent   (incorporated  by
               reference to Exhibit 10.3 to Current  Report on Form 8-K filed on
               June 1, 2001).

          c.   Addendum to Security and Pledge Agreement,  dated as of April 17,
               2001,  executed by CBO REIT,  Inc.  and accepted and agreed to by
               Merrill  Lynch,  Pierce,   Fenner  &  Smith,   Incorporated,   as
               collateral  agent  (incorporated  by reference to Exhibit 10.5 to
               Current Report on Form 8-K filed on August 14, 2001).

          d.   Security, Pledge and Collateral Assignment Agreement, dated as of
               April 17, 2001,  among the Company,  CRIIMI MAE Management,  Inc.
               and CM  Mallers  Building,  Inc.  in favor of  Wells  Fargo  Bank
               Minnesota,    National    Association,    as   collateral   agent
               (incorporated  by reference to Exhibit 10.4 to Current  Report on
               Form 8-K filed on August 14, 2001).

          e.   Foreclosure/Transfer Agreement, dated as of April 17, 2001, among
               CRIIMI MAE Inc., Merrill Lynch International,  acting through its
               agent,  Merrill Lynch,  Pierce,  Fenner & Smith  Incorporated and
               Wells  Fargo  Bank

<PAGE>

               Minnesota,  National  Association,  acting as trustee  under  two
               Indentures  relating  to  Series A Notes and Series B Notes
               (incorporated  by  reference  to Exhibit  10.2 to Current Report
               on Form 8-K filed on June 1, 2001).

          f.   Intercreditor  Agreement,  dated  as of  April  17,  2001,  among
               Merrill Lynch  International,  acting through its agent,  Merrill
               Lynch,  Pierce,  Fenner & Smith Incorporated and Wells Fargo Bank
               Minnesota,  National  Association,  acting as  trustee  under two
               indentures  relating  to the  Series A Notes  and  Series B Notes
               (incorporated  by reference  to Exhibit 4.1 to Current  Report on
               Form 8-K filed with the SEC on June 1, 2001).

          g.   Employment  Agreement  dated and  effective  as of June 29,  2001
               between  the  Company and  William B.  Dockser  (incorporated  by
               reference to Exhibit 10.1 to Current  Report on Form 8-K filed on
               July 10, 2001).

          h.   Employment  Agreement  dated and  effective  as of June 29,  2001
               between the Company and H. William  Willoughby  (incorporated  by
               reference to Exhibit 10.2 to Current  Report on Form 8-K filed on
               July 10, 2001).

          i.   Employment  Agreement,  dated and  effective as of July 25, 2001,
               between  the  Company  and David B.  Iannarone  (incorporated  by
               reference to Exhibit 10.1 to Current  Report on Form 8-K filed on
               August 14, 2001).

          j.   Employment  Agreement,  dated and  effective as of July 25, 2001,
               between  the  Company  and  Cynthia O.  Azzara  (incorporated  by
               reference to Exhibit 10.2 to Current  Report on Form 8-K filed on
               August 14, 2001).

          k.   Employment  Agreement,  dated and  effective as of July 25, 2001,
               between  the  Company  and  Brian  L.  Hanson   (incorporated  by
               reference to Exhibit 10.3 to Current  Report on Form 8-K filed on
               August 14, 2001).

          l.   CRIIMI MAE Management, Inc. Retirement Plan's Plan Agreement #001
               dated July 7, 1997 between CRIIMI MAE Management, Inc. and Putnam
               Fiduciary Trust Company (filed herewith).

          m.   Putnam  Basic Plan  Document  #07 for the CRIIMI MAE  Management,
               Inc.  Retirement  Plan  effective  as of September 1, 1997 (filed
               herewith).

          n.   First  Amendment to the CRIIMI MAE  Management,  Inc.  Retirement
               Plan dated September 1, 1997 (filed herewith).

          o.   Second  Amendment to the CRIIMI MAE Management,  Inc.  Retirement
               Plan dated December 1, 1999 (filed herewith).

          p.   Third  Amendment to the CRIIMI MAE  Management,  Inc.  Retirement
               Plan dated December 20, 2000 (filed herewith).

          q.   Preferred Stock Exchange  Agreement entered into July 26, 2000 by
               CRIIMI  MAE  Inc.  and the  holder  of its  Series  D  Cumulative
               Convertible Preferred Stock (incorporated by reference to Exhibit
               99.8 to Current  Report on Form 8-K filed with the Securities and
               Exchange Commission on September 22, 2000).

          r.   Preferred  Stock Exchange  Agreement  between CRIIMI MAE Inc. and
               MeesPierson    Investments   Inc.   dated   February   22,   2000
               (incorporated  by

<PAGE>

               reference to Exhibit 99.1 to Current  Report on Form 8-K filed
               with the Securities and Exchange Commission on April 10, 2000).

          s.   Terms  Indenture  Agreement  dated May 8, 1998 between CRIIMI MAE
               Commercial Mortgage Trust and the trustee (filed herewith).

          t.   Standard Indenture  Provisions dated as of May 8, 1998 related to
               Terms  Indenture  Agreement  dated May 8, 1998 between CRIIMI MAE
               Commercial  Mortgage  Trust and the  trustee (filed herewith).

          u.   Indenture  Agreement  dated  December 20, 1996 between CRIIMI MAE
               QRS 1, Inc.  and the  trustee  (incorporated  by  reference  from
               Exhibit 4(sss) to Annual Report on Form 10-K for 1996).

          v.   Form of Bond to CRIIMI  MAE Trust 1  Commercial  Mortgage  Bonds,
               Class A-1  (incorporated by reference to Exhibit 4(ttt) to Annual
               Report on Form 10-K for 1996).

          w.   Form of Bond to CRIIMI  MAE Trust 1  Commercial  Mortgage  Bonds,
               Class A-2  (incorporated by reference to Exhibit 4(uuu) to Annual
               Report on Form 10-K for 1996).

          x.   Form of Bond to CRIIMI  MAE Trust 1  Commercial  Mortgage  Bonds,
               Class B  (incorporated  by reference to Exhibit  4(vvv) to Annual
               Report on Form 10-K for 1996).

          y.   Form of Bond to CRIIMI  MAE Trust 1  Commercial  Mortgage  Bonds,
               Class C  (incorporated  by reference to Exhibit  4(www) to Annual
               Report on Form 10-K for 1996).

          z.   Form of Bond to CRIIMI  MAE Trust 1  Commercial  Mortgage  Bonds,
               Class D  (incorporated  by reference to Exhibit  4(xxx) to Annual
               Report on Form 10-K for 1996).

          aa.  Form of Bond to CRIIMI  MAE Trust 1  Commercial  Mortgage  Bonds,
               Class E  (incorporated  by reference to Exhibit  4(yyy) to Annual
               Report on Form 10-K for 1996).

          bb.  Form of Bond to CRIIMI  MAE Trust 1  Commercial  Mortgage  Bonds,
               Class F  (incorporated  by reference to Exhibit  4(zzz) to Annual
               Report on Form 10-K for 1996).

          cc.  Form of Indenture  between CRIIMI MAE Financial  Corporation  and
               the  trustee  (incorporated  by  reference  to Exhibit 4.1 to S-3
               Registration  Statement  filed with the  Securities  and Exchange
               Commission on September 12, 1995).

          dd.  Form of Bond  (incorporated  by  reference  to Exhibit 4.2 to S-3
               Registration  Statement  filed with the  Securities  and Exchange
               Commission on September 12, 1995).

          ee.  Seven Percent Funding Note due September 17, 2031 dated September
               22, 1995  between  CRIIMI MAE  Financial  Corporation  II and the
               Federal Home Loan Mortgage Corporation (incorporated by reference
               to Exhibit 4(bbb) to Annual Report on Form 10-K for 1995).

<PAGE>

          ff.  Funding  Note  Purchase  and  Security   Agreement  dated  as  of
               September   22,  1995  among  the  Federal  Home  Loan   Mortgage
               Corporation, CRIIMI MAE Inc. and CRIIMI MAE Financial Corporation
               II  (incorporated by reference to Exhibit 4(ccc) to Annual Report
               on Form 10-K for 1995).

          gg.  Assignment  and Agreement  dated as of September 22, 1995 between
               CRIIMI  MAE  Inc.  and  CRIIMI  MAE  Financial   Corporation   II
               (incorporated  by reference to Exhibit 4(ddd) to Annual Report on
               Form 10-K for 1995).

          hh.  Funding Note dated December 15, 1995 between CRIIMI MAE Financial
               Corporation  III and the Federal  National  Mortgage  Association
               (incorporated  by reference to Exhibit 4(lll) to Annual Report on
               Form 10-K for 1995).

          ii.  Assignment  and  Agreement  dated as of the 15th day of December,
               1995,  by and between  CRIIMI MAE Inc.  and CRIIMI MAE  Financial
               Corporation III (incorporated by reference from Exhibit 4(mmm) to
               Annual Report on Form 10-K for 1995).

          jj.  Funding Note Issuance and Security Agreement dated as of December
               15, 1995 among Federal National Mortgage Association,  CRIIMI MAE
               Inc. and CRIIMI MAE Financial  Corporation III  (incorporated  by
               reference  to  Exhibit  4(nnn) to Annual  Report on Form 10-K for
               1995).

          kk.  Administrative  Services  Agreement  dated June 30, 1995  between
               CRIIMI MAE Inc. and C.R.I.,  Inc.  (incorporated  by reference to
               Exhibit 10(d) to Annual Report on Form 10-K for 1995).

          ll.  Asset  Purchase  Agreement  dated as of June 30, 1995 among CRICO
               Mortgage  Company,  Inc., CRIIMI MAE Services,  Inc.,  William B.
               Dockser and H. William  Willoughby  (incorporated by reference to
               Exhibit 10(e) to Annual Report on Form 10-K for 1995).

          mm.  Asset Purchase  Agreement dated as of June 30, 1995 among CRI/AIM
               Management,  Inc., CRIIMI MAE Services,  Inc., William B. Dockser
               and H. William  Willoughby  (incorporated by reference to Exhibit
               10(f) to Annual Report on Form 10-K for 1995).

          nn.  Sublease dated June 30, 1995 between C.R.I.,  Inc. and CRIIMI MAE
               Inc. (incorporated by reference to Exhibit 10(h) to Annual Report
               on Form 10-K for 1995).

          oo.  Reimbursement  Agreement dated as of June 30, 1995 between CRIIMI
               MAE Management,  Inc. and C.R.I., Inc. (incorporated by reference
               to Exhibit 10(j) to Annual Report on Form 10-K for 1995).

          pp.  Certificate  of Merger dated June 30, 1995 merging CRICO Mortgage
               Company, Inc., CRI/AIM Management, Inc. and CRI Acquisition, Inc.
               into CRIIMI MAE Management,  Inc.  (incorporated  by reference to
               Exhibit 10(k) to Annual Report on Form 10-K for 1995).

          qq.  Asset Purchase  Agreement dated as of June 30, 1995 among C.R.I.,
               Inc., CRI Acquisition, Inc. and William B. Dockser and H. William
               Willoughby

<PAGE>

              (incorporated  by reference from Exhibit 10(l) to the Annual
              Report on Form 10-K for 1995).

          rr.  Allonge to Amended and Restated  Promissory Note dated as of June
               23,  1995  between  C.R.I.,  Inc.  and CRI/AIM  Management,  Inc.
               (incorporated  by reference to Exhibit  10(c) to Annual Report on
               Form 10-K for 1995).

          ss.  Revised Form of Advisory Agreement  (incorporated by reference to
               Exhibit No. 10.2 to Registration Statement).


Exhibit No. 18 - Letter re change in accounting principles

          a.   Letter from the Company's independent public accountants,  Arthur
               Andersen LLP,  regarding the change in accounting  policy related
               to the recognition of special servicing fee revenue by CRIIMI MAE
               Services  Limited  Partnership,  a wholly owned subsidiary of the
               Company  (incorporated  by  reference  to Exhibit 18 to Quarterly
               Report on Form 10-Q for the quarter ended September 30, 2001).

Exhibit No. 21 - Subsidiaries of the Registrant.

          a.   CRIIMI, Inc., incorporated in the State of Maryland.

          b.   CRIIMI MAE Financial  Corporation,  incorporated  in the State of
               Maryland.

          c.   CRIIMI MAE Financial Corporation II, incorporated in the State of
               Maryland.

          d.   CRIIMI MAE Financial  Corporation III,  incorporated in the State
               of Maryland.

          e.   CRIIMI  MAE  Management,  Inc.,  incorporated  in  the  State  of
               Maryland.

          f.   CRIIMI MAE QRS 1, Inc., incorporated in the State of Delaware.

          g.   CRIIMI MAE Services Limited  Partnership,  formed in the State of
               Maryland.

          h.   CRIIMI MAE CMBS Corp., incorporated in the State of Delaware.

          i.   CBO REIT, Inc., incorporated in the State of Maryland.

          j.   CMSLP  Management  Company,  Inc.,  incorporated  in the State of
               Maryland.

          k.   CMSLP  Holding  Company,  Inc.,  incorporated  in  the  State  of
               Maryland.


Exhibit No. 99 - Additional Exhibits

<PAGE>

          a.   Stipulation   and  Consent  Order  selling   certain   commercial
               mortgage-backed  securities  to Lehman Ali Inc. free and clear of
               liens,   claims  and   encumbrances   entered   April  19,   2000
               (incorporated  by reference  from Exhibit  99(a) to the Quarterly
               Report on Form 10-Q for quarter ended March 31, 2000).

          b.   Motion  for Entry of an Order  Amending  Stipulation  and  Agreed
               Order Selling certain  Commercial  Mortgage-Backed  Securities to
               German  American  Capital  Corporation  Free and  Clear of Liens,
               Claims and Encumbrances  entered August 3, 2000  (incorporated by
               reference from Exhibit 99(d) to the Quarterly Report on Form 10-Q
               for quarter ended June 30, 2000).

          c.   Notice of Motion to Approve Stipulation and Consent Order Selling
               Certain Commercial Mortgage-Backed Securities to Lehman Ali, Inc.
               Free and Clear of Liens,  Claims and  Encumbrances  entered March
               21, 2000  (incorporated  by reference  from Exhibit  99(a) to the
               Quarterly  Report on Form 10-Q for quarter  ended  September  30,
               2000).

          d.   Notice of Motion to Approve Stipulation and Consent Order Selling
               Certain Commercial Mortgage-Backed Securities to ORIX Real Estate
               Capital  Markets,  LLC  Free  and  Clear  of  Liens,  Claims  and
               Encumbrances  and  Compromising  and Settling  Claims  entered on
               September 21, 2000  (incorporated by reference from Exhibit 99(b)
               to the  Quarterly  Report  on Form  10-Q  for the  quarter  ended
               September 30, 2000).

          e.   Stipulation   and  Consent  Order  selling   certain   Commercial
               Mortgage-Backed  Securities to ORIX Real Estate Capital  Markets,
               LLC  Free  and  Clear  of  Liens,  Claims  and  Encumbrances  and
               Compromising  and Settling claims entered by the Bankruptcy Court
               on October 12, 2000 (incorporated by reference from Exhibit 99(g)
               to the  Quarterly  Report  on Form  10-Q  for the  quarter  ended
               September 30, 2000).

          f.   Amendment to Agreed Proceeds in Connection  with  Stipulation and
               Consent  Order   selling   certain   Commercial   Mortgage-Backed
               Securities  to ORIX Real  Estate  Capital  Markets,  LLC Free and
               Clear of Liens,  Claims and  Encumbrances  and  Compromising  and
               Settling  Claims entered by the  Bankruptcy  Court on October 30,
               2000  (incorporated  by  reference  from  Exhibit  99(h)  to  the
               Quarterly Report on Form 10-Q for the quarter ended September 30,
               2000).

          g.   Order  confirming  Third  Amended  Joint  Plan of  Reorganization
               entered by the United States Bankruptcy Court for the District of
               Maryland,  Greenbelt  on  November  22,  2000 (the  "Confirmation
               Order")  (incorporated by reference from Exhibit 99.1 to Form 8-K
               filed with the Securities and Exchange Commission on December 28,
               2000).

          h.   Exhibit  11 in  support  of the  Confirmation  Order - CMBS  Sale
               Portfolio  Schedule filed with the  Bankruptcy  Court on November
               15, 2000  (incorporated  by reference to Exhibit 99.1 to Form 8-K
               filed with the Securities and Exchange  Commission on January 22,
               2001).

          i.   Exhibit 13 in support of the  Confirmation  Order - Definition of
               Distribution  Record filed with the Bankruptcy  Court on November
               15, 2000  (incorporated  by reference to Exhibit 99.2 to Form 8-K
               filed with the Securities and Exchange  Commission on January 22,
               2001).

<PAGE>

          j.   Exhibit 14 in support of the  Confirmation  Order - Unaudited Pro
               Forma Consolidated  Financial  Statements and Projected Financial
               Information  filed with the Bankruptcy Court on November 15, 2000
               (incorporated by reference to Exhibit 99.3 to Form 8-K filed with
               the Securities and Exchange Commission on January 22, 2001).

          k.   Exhibit  17 in support of the  Confirmation  Order -  Liquidation
               Analysis  filed with the  Bankruptcy  Court on November  15, 2000
               (incorporated by reference to Exhibit 99.4 to Form 8-K filed with
               the Securities and Exchange Commission on January 22, 2001).

          l.   Special Serviced Loan Report relating to specially serviced loans
               underlying the Company's CMBS as of March 31, 2001  (incorporated
               by  reference to Exhibit  99(a) to Quarterly  Report on Form 10-Q
               for the quarter ended March 31, 2001).

          m.   Special Serviced Loan Report relating to specially serviced loans
               underlying the Company's  CMBS as of June 30, 2001  (incorporated
               by  reference to Exhibit  99(a) to Quarterly  Report on Form 10-Q
               for the quarter ended June 30, 2001).

          n.   Special Serviced Loan Report relating to specially serviced loans
               underlying   the   Company's   CMBS  as  of  September  30,  2001
               (incorporated  by reference to Exhibit 99(a) to Quarterly  Report
               on Form 10-Q for the quarter ended September 30, 2001).

          o.   Special Serviced Loan Report relating to specially serviced loans
               underlying  the  Company's  CMBS as of  December  31, 2001 (filed
               herewith).

          p.   Letter to  Securities  and Exchange  Commission  from the Company
               dated March 27, 2002 regarding the representations  received from
               Arthur  Andersen LLP in connection with its audit of the
               Company's December 31, 2001 consolidated financial statements
               (filed herewith).

(b)      Reports on Form 8-K

              Date                                         Purpose

         December 19, 2001                      To report the Company's mortgage
                                                servicing subsidiary's, CRIIMI
                                                MAE Services Limited
                                                Partnership, plan to increase
                                                its emphasis on loan management
                                                and special servicing and its
                                                intention to sell its remaining
                                                master and primary servicing
                                                contracts.

(c)      Exhibits

         The list of Exhibits required by Item 601 of Regulation S-K is
         included in Item (a)(3) above.

<PAGE>

                                 SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 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.

                                                CRIIMI MAE INC.


March 27, 2002                                  /s/William B. Dockser
----------------------                          ---------------------------
DATE                                            William B. Dockser
                                                Chairman of the Board and
                                                Principal Executive Officer



<PAGE>


     KNOW ALL  PERSONS  BY THESE  PRESENTS,  that each  person  whose  signature
appears  below  constitutes  and  appoints  William B.  Dockser  and H.  William
Willoughby, jointly and severally, his attorney-in-fact,  each with the power of
substitution  for him in any and all capacities,  to sign any amendments to this
Annual Report on Form 10-K and to file the same with exhibits  thereto and other
documents in connection therewith,  with the Securities and Exchange Commission,
hereby  ratifying and  confirming  all that each said  attorney-in-fact,  or his
substitute or substitutes, may do or cause to be done by virtue hereof.

         Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the Registrant
and in the capacities and on the dates indicated:


March 27, 2002                             /s/William B. Dockser
--------------                             -------------------------------
DATE                                       William B. Dockser
                                           Chairman of the Board and
                                           Principal Executive Officer


March 27, 2002                             /s/H. William Willoughby
--------------                             -------------------------------
DATE                                       H. William Willoughby
                                           Director, President and
                                           Secretary


March 27, 2002                             /s/Cynthia O. Azzara
--------------                             -------------------------------
DATE                                       Cynthia O. Azzara
                                           Senior Vice President, Chief
                                           Financial Officer, Treasurer and
                                           Principal Accounting Officer


March 21, 2002                             /s/John R. Cooper
--------------                             -------------------------------
DATE                                       John R. Cooper
                                           Director


March 21, 2002                             /s/Alan M. Jacobs
--------------                             -------------------------------
DATE                                       Alan M. Jacobs
                                           Director


March 21, 2002                             /s/Donald J. MacKinnon
--------------                             -------------------------------
DATE                                       Donald J. MacKinnon
                                           Director


March 21, 2002                             /s/Robert J. Merrick
--------------                             -------------------------------
DATE                                       Robert J. Merrick
                                           Director


March 22, 2002                             /s/Donald C. Wood
--------------                             -------------------------------
DATE                                       Donald C. Wood
                                           Director


<PAGE>



March 21, 2002                             /s/Robert E. Woods
--------------                             -------------------------------
DATE                                       Robert E. Woods
                                           Director

<PAGE>


                 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To the Shareholders of CRIIMI MAE Inc.:

     We have audited the accompanying  consolidated balance sheets of CRIIMI MAE
Inc. and its subsidiaries (CRIIMI MAE) as of December 31, 2001 and 2000, and the
related consolidated  statements of income,  changes in shareholders' equity and
comprehensive  income and cash flows for the years ended December 31, 2001, 2000
and 1999.  These  financial  statements are the  responsibility  of CRIIMI MAE's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements based on our audits.

     We conducted our audits in accordance  with  auditing  standards  generally
accepted in the United States.  Those standards require that we plan and perform
the audit to obtain reasonable  assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.  An
audit also includes  assessing the accounting  principles  used and  significant
estimates  made by  management,  as well as  evaluating  the  overall  financial
statement  presentation.  We believe that our audits provide a reasonable  basis
for our opinion.

     In our opinion,  the financial statements referred to above present fairly,
in all material respects,  the consolidated  financial position of CRIIMI MAE as
of December 31, 2001 and 2000, and the consolidated  results of their operations
and their cash flows for the years ended  December 31, 2001,  2000 and 1999,  in
conformity with accounting principles generally accepted in the United States.

         As discussed in Note 3 to the consolidated financial statements,
effective January 1, 2001, CRIIMI MAE changed its method of accounting for
derivatives. In addition, as discussed in Note 3 to the consolidated financial
statements, effective January 1, 2001, CRIIMI MAE Services Limited Partnership,
a wholly-owned subsidiary of CRIIMI MAE, changed its method of accounting
related to the recognition of special servicing fee revenue.




/s/Arthur Andersen, LLP
Vienna, Virginia
March 21, 2002


<PAGE>

                         CRIIMI MAE INC.
                   CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>

                                                                                 December 31,
                                                                  -------------------------------------
                                                                         2001                2000
                                                                  -----------------   -----------------
<S>                                                               <C>                 <C>
Assets:
  Mortgage assets:
    Subordinated CMBS and Other MBS, at fair value                   $ 536,204,992       $ 109,266,975
    Subordinated CMBS pledged to Securitized Mortgage
         Obligation-CMBS, at fair value                                296,477,050         283,336,965
    Subordinated CMBS pledged to creditors, at fair value                        -         464,242,328
    Insured mortgage securities, at fair value                         343,091,303         385,751,407
  Equity investments                                                     9,312,156          33,779,658
  Other assets                                                          37,180,968          38,043,461
  Receivables                                                           18,973,680          41,003,072
  Servicing other assets                                                18,250,824                   -
  Servicing cash and cash equivalents                                    6,515,424                   -
  Restricted cash and cash equivalents                                  38,214,277          95,846,001
  Other cash and cash equivalents                                       10,783,449         106,569,778
                                                                  -----------------   -----------------
Total assets                                                       $ 1,315,004,123     $ 1,557,839,645
                                                                  =================   =================

Liabilities:
  Variable-rate secured borrowing                                    $ 244,194,590     $             -
  Series A senior secured notes                                         99,505,457                   -
  Series B senior secured notes                                         63,937,383                   -
  Payables and accrued expenses                                         25,946,959          33,415,632
  Mortgage payable                                                       7,109,252                   -
  Servicing liabilities                                                  3,660,173                   -
  Securitized mortgage obligations:
    Collateralized bond obligations-CMBS                               283,047,470         280,520,265
    Collateralized mortgage obligations-
       insured mortgage securities                                     326,558,161         364,649,925
  Liabilities subject to Chapter 11 proceedings:
      Secured:
        Variable-rate secured borrowings-CMBS                                    -         367,535,895
        Other financing facilities                                               -           1,300,000
        Payables and accrued expenses                                            -           2,166,936
      Unsecured:
        Senior unsecured notes                                                   -         100,000,000
        Other financing facilities                                               -          89,749,522
        Payables and accrued expenses                                            -          50,243,454
                                                                  -----------------   -----------------
Total liabilities                                                    1,053,959,445       1,289,581,629
                                                                  -----------------   -----------------

Shareholders' equity:
  Convertible preferred stock, $0.01 par; 75,000,000 and
    25,000,000 shares authorized; 3,597,992 and 6,124,527
    shares issued and outstanding, respectively                             35,980              61,245
  Common stock, $0.01 par; 300,000,000 and 120,000,000
    shares authorized; 12,937,341 and 6,235,317 shares
    issued and outstanding, respectively                                   129,373              62,353
  Accumulated other comprehensive income (loss):
    Unrealized losses on mortgage assets                                (6,060,398)         (3,019,679)
    Unrealized loss on interest rate cap                                  (383,200)                  -
  Additional paid-in capital                                           632,887,967         612,496,343
  Accumulated deficit                                                 (365,565,044)       (341,342,246)
                                                                  -----------------   -----------------

Total shareholders' equity                                             261,044,678         268,258,016
                                                                  -----------------   -----------------

Total liabilities and shareholders' equity                         $ 1,315,004,123     $ 1,557,839,645
                                                                  =================   =================

</TABLE>
                    The accompanying notes are an integral part of these
                              consolidated financial statements.

<PAGE>

                                 CRIIMI MAE INC.
                        CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                                                                            For the years ended December 31,
                                                                                      2001              2000             1999
                                                                                ----------------- ----------------- ----------------
<S>                                                                             <C>               <C>               <C>
Interest income:
   Subordinated CMBS                                                               $ 105,522,833     $ 137,072,372    $ 154,205,383
   Insured mortgage securities                                                        28,852,719        30,668,228       33,405,171
   Originated loans                                                                            -        27,511,041       34,712,674
                                                                                ----------------- ----------------- ----------------
   Total interest income                                                             134,375,552       195,251,641      222,323,228
                                                                                ----------------- ----------------- ----------------
Interest and related expenses:
   Variable-rate secured borrowing                                                    14,648,215                 -                -
   Series A senior secured notes                                                       8,780,576                 -                -
   Series B senior secured notes                                                       9,224,817                 -                -
   Fixed-rate collateralized bond obligations-CMBS                                    25,518,425        25,345,519       22,054,939
   Fixed-rate collateralized mortgage obligations-
        insured securities                                                            27,097,730        30,211,712       33,382,959
   Fixed-rate collateralized mortgage obligations-
        originated loans                                                                       -        22,716,109       27,479,268
   Variable-rate secured borrowings-CMBS                                               7,325,059        43,785,955       52,195,828
   Fixed-rate senior unsecured notes                                                   2,712,142         9,125,004        9,125,004
   Other interest expense                                                              2,480,604         8,182,070        7,098,832
                                                                                ----------------- ----------------- ----------------
   Total interest expense                                                             97,787,568       139,366,369      151,336,830
                                                                                ----------------- ----------------- ----------------
Net interest margin                                                                   36,587,984        55,885,272       70,986,398
                                                                                ----------------- ----------------- ----------------
   General and administrative expenses                                               (11,548,759)      (11,301,385)     (12,049,256)
   Amortization of assets acquired in the Merger                                      (2,877,576)       (2,877,576)      (2,877,576)
   Equity in (losses) earnings from investments                                       (1,632,042)        1,512,005       (1,243,562)
   Servicing revenue                                                                   6,886,057                 -                -
   Servicing general and administrative expenses                                      (5,882,889)                -                -
   Servicing amortization, depreciation and impairment                                (1,699,186)                -                -
   Servicing restructuring expense                                                      (437,723)                -                -
   Other income, net                                                                   4,186,837         4,915,320        3,024,068
   Net (losses) gains on mortgage security and originated loan dispositions              (41,982)          524,395        2,531,074
   Impairment on CMBS                                                                (34,654,930)     (143,478,085)               -
   Hedging loss                                                                       (1,073,392)                -                -
   Unrealized loss on warehouse obligation                                                     -                 -       (8,000,000)
   Litigation expense                                                                          -        (2,500,000)               -
   Reorganization items                                                               (1,813,220)      (66,072,460)    (178,899,959)
   Emergence financing origination fee                                                (3,936,616)                -                -
                                                                                ----------------- ----------------- ----------------
                                                                                     (54,525,421)     (219,277,786)    (197,515,211)
                                                                                ----------------- ----------------- ----------------
   Net loss before extraordinary item and cumulative effect
           of changes in accounting principles                                       (17,937,437)     (163,392,514)    (126,528,813)

   Extraordinary item-gain on debt extinguishment                                              -        14,808,737                -

   Cumulative effect of adoption of SFAS 133                                            (135,142)                -                -

   Cumulative effect of change in accounting principle related to
       servicing revenue                                                               1,995,262                 -                -
                                                                                ----------------- ----------------- ----------------
   Net loss before dividends accrued or paid on preferred shares                     (16,077,317)     (148,583,777)    (126,528,813)

   Dividends accrued or paid on preferred shares                                      (8,145,481)       (6,911,652)      (5,840,152)
                                                                                ----------------- ----------------- ----------------
   Net loss to common shareholders                                                 $ (24,222,798)   $ (155,495,429)  $ (132,368,965)
                                                                                ================= ================= ================
   Net loss to common shareholders per common share:
       Basic and Diluted - before extraordinary item and cumulative effect
       of changes in accounting principles                                               $ (2.35)         $ (27.40)        $ (24.51)
                                                                                ================= ================= ================
       Basic and Diluted - after extraordinary item and cumulative effect
       of changes in accounting principles                                               $ (2.18)         $ (25.02)        $ (24.51)
                                                                                ================= ================= ================
   Shares used in computing basic (loss) earnings per share                           11,087,790         6,214,479        5,399,978
                                                                                ================= ================= ================
   Pro forma net loss to common shareholders before extraordinary item and
     cumulative effect of changes in accounting principles - change in
     accounting for servicing revenue                                              $ (26,082,918)   $ (169,925,028)  $ (131,835,569)
                                                                                ================= ================= ================
   Pro forma net loss to common shareholders - Change in accounting for
     servicing revenue                                                             $ (26,218,060)   $ (155,116,291)  $ (131,835,569)
                                                                                ================= ================= ================
</TABLE>

               The accompanying notes are an integral part of these
                       consolidated financial statements.

<PAGE>

                                      CRIIMI MAE INC.
                CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY AND
                                    COMPREHENSIVE INCOME
                     For the years ended December 31, 2001, 2000 and 1999
<TABLE>
<CAPTION>
                                                                                        Accumulated
                                  Preferred    Common     Additional                       Other          Total
                                  Stock Par   Stock Par     Paid-in     Accumulated    Comprehensive   Shareholders'  Comprehensive
                                    Value       Value      Capital        Deficit      Income (Loss)     Equity       Income (Loss)
                                  ---------- ---------- -------------- -------------   -------------   -----------    -------------
<S>                               <C>        <C>        <C>            <C>             <C>             <C>            <C>
Balance at December 31, 1998       $ 18,170   $ 52,898  $ 559,061,146  $          -   $ (251,255,309)  $307,876,905

   Net loss                               -          -              -  (126,528,813)               -   (126,528,813)  $(126,528,813)
    Other comprehensive income:
     Adjustment to unrealized losses
          on mortgage assets              -          -              -             -       43,833,521     43,833,521      43,833,521
                                                                                                                      -------------
    Comprehensive loss                                                                                                $ (82,695,292)
                                                                                                                      =============

   Dividends accrued on preferred
    shares                                -          -              -    (5,840,152)               -    (5,840,152)
   Conversion of preferred shares
    into common shares               (7,765)     7,055            710             -                -             -
   Common shares issued                   -          2          7,123             -                -         7,125
   Preferred shares issued           16,066          -     16,049,884   (16,065,950)               -             -
                                  ---------- ---------- -------------- -------------   -------------   -----------
Balance at December 31, 1999         26,471     59,955    575,118,863  (148,434,915)    (207,421,788)  219,348,586

   Net loss                               -          -              -  (148,583,777)               -  (148,583,777)  $(148,583,777)
    Other comprehensive income:
     Adjustment to unrealized losses
          on mortgage assets              -          -              -             -      204,402,109   204,402,109     204,402,109
                                                                                                                     --------------
    Comprehensive income                                                                                             $  55,818,332
                                                                                                                     ==============
   Dividends accrued on preferred
    shares                                -          -              -    (6,911,652)               -    (6,911,652)
   Conversion of preferred shares
    into common shares               (2,638)     2,396            242             -                -             -
   Common shares issued                   -          2          2,748             -                -         2,750
   Preferred shares issued           37,412          -     37,374,490   (37,411,902)               -             -
                                  ---------- ---------- -------------- -------------   -------------   -----------
Balance at December 31, 2000         61,245     62,353    612,496,343  (341,342,246)      (3,019,679)  268,258,016

   Net loss                               -          -              -   (16,077,317)               -   (16,077,317)  $ (16,077,317)
    Other comprehensive income:
     Adjustment to unrealized losses
          on mortgage assets              -          -              -             -       (3,040,719)   (3,040,719)     (3,040,719)
     Adjustment to unrealized loss
         on interest rate cap             -          -              -             -         (383,200)     (383,200)       (383,200)
                                                                                                                     --------------
    Comprehensive loss                                                                                               $ (19,501,236)
                                                                                                                     ==============
   Dividends accrued or paid on
    preferred shares                      -          -              -    (8,145,481)              -     (8,145,481)
   Common shares issued related
    to preferred stock dividends          -     30,334     20,405,150             -               -     20,435,484
   Conversion of preferred shares
    into common shares              (25,265)    36,695        (11,430)            -               -              -
   Common shares issued                   -          2          1,458             -               -          1,460
   Common shares redeemed in
    reverse stock split in lieu
    of fractional shares                  -        (11)        (3,554)            -               -         (3,565)
                                  ---------  ---------- ------------- --------------   ------------   -------------
Balance at December 31, 2001       $ 35,980  $ 129,373  $ 632,887,967 $(365,565,044)  $ (6,443,598)   $261,044,678
                                  =========  ========== ============= ==============   ============   =============
</TABLE>

                   The accompanying notes are an integral part of these
                              consolidated financial statements.

<PAGE>

                             CRIIMI MAE INC.
                  CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>

                                                                                    For the years ended December 31,
                                                                          2001               2000               1999
                                                                    ----------------- ------------------- ------------------
<S>                                                                 <C>               <C>                 <C>
Cash flows from operating activities:
    Net loss                                                           $ (16,077,317)     $ (148,583,777)    $ (126,528,813)
    Adjustments to reconcile net loss to net cash
     provided by (used in) operating activities:
       Amortization of discount and deferred financing costs on debt       7,793,071           8,535,024          8,701,571
       Amortization of assets acquired in the Merger                       2,877,576           2,877,576          2,877,576
       Depreciation and other amortization                                 1,130,470           1,191,587          2,407,103
       Discount amortization on mortgage assets, net                     (10,121,136)        (14,179,631)        (1,004,995)
       Net losses (gains) on mortgage security and originated loan
         dispositions                                                         41,982            (524,395)        (2,531,074)
       Equity in losses (income) from investments                          1,632,042          (1,512,005)         1,243,562
       Servicing amortization, depreciation and impairment                 1,699,186                   -                  -
       Impairment on CMBS                                                 34,654,930         143,478,085                  -
       Hedging loss                                                        1,208,534                   -                  -
       Unrealized loss on warehouse obligation                                     -                   -          8,000,000
       Cumulative effect of change in accounting principle related to
           servicing revenue                                              (1,995,262)                  -                  -
       Changes in assets and liabilities:
          Decrease (increase) in restricted cash and cash equivalents     57,631,724         (57,809,377)       (35,683,064)
          Decrease (increase) in receivables and other assets             25,038,918          (2,990,078)       (30,194,006)
          (Decrease) increase in payables and accrued expenses           (44,468,312)         21,408,572         29,733,222
          Decrease in servicing other assets                              (1,369,229)                  -                  -
          Decrease in servicing liabilities                                  449,580                   -                  -
       Change in reorganization items accrual                             (1,755,193)           (471,568)        12,146,181
       Non-cash reorganization items                                        (366,529)         46,313,051        156,896,831
                                                                    ----------------- ------------------- ------------------
       Net cash provided by (used in) operating activities                58,005,035          (2,266,936)        26,064,094
                                                                    ----------------- ------------------- ------------------
Cash flows from investing activities:
    Proceeds from mortgage security dispositions                          35,235,975          12,572,549         74,003,394
    Distributions received from AIM Investments                            2,474,971           2,319,906          6,250,991
    Receipt of principal payments                                          7,899,959          16,034,680         12,837,554
    Purchase of other MBS, net                                            (4,244,330)         (4,208,635)           (92,793)
    Cash reflected upon consolidation of CRIIMI MAE Services L.P.          6,841,907                   -                  -
    Proceeds from originated loan dispositions                                     -           5,970,384         19,617,622
    Proceeds from sale of CMBS, net                                                -          72,591,594         18,076,047
    Proceeds from sale of CMO IV, net                                              -           3,519,468                  -
                                                                    ----------------- ------------------- ------------------
       Net cash provided by investing activities                          48,208,482         108,799,946        130,692,815
                                                                    ----------------- ------------------- ------------------
Cash flows from financing activities:
    Principal payments on securitized mortgage debt obligations          (39,386,850)        (30,136,067)      (106,543,623)
    Principal payments on New Debt                                       (23,740,992)                  -                  -
    Principal payments on secured borrowings and other debt
       obligations                                                      (132,353,015)        (23,337,476)       (18,529,487)
    Common stock redeemed                                                     (3,565)                  -                  -
                                                                    ----------------- ------------------- ------------------
Net cash used in financing activities                                   (195,484,422)        (53,473,543)      (125,073,110)
                                                                    ----------------- ------------------- ------------------
Net (decrease) increase in other cash and cash equivalents               (89,270,905)         53,059,467         31,683,799

Cash and cash equivalents, beginning of period                           106,569,778          53,510,311         21,826,512
                                                                    ----------------- ------------------- ------------------
Cash and cash equivalents, end of period (1)                            $ 17,298,873       $ 106,569,778       $ 53,510,311
                                                                    ================= =================== ==================
</TABLE>

(1) Comprised of Servicing cash and cash equivalents and Other cash and cash
equivalents.


                 The accompanying notes are an integral part of these
                          consolidated financial statements.

<PAGE>

                                 CRIIMI MAE INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.       ORGANIZATION

General

     CRIIMI MAE Inc.  (together with its consolidated  subsidiaries,  unless the
context  otherwise  indicates,  "CRIIMI MAE" or the  "Company")  is a commercial
mortgage company structured as a self-administered  real estate investment trust
("REIT").

     On April 17, 2001, the Company and certain of its subsidiaries emerged from
Chapter 11 (the "Effective Date").

     The  Company's  current  primary   activities  include  the  ownership  and
management, in large part through the Company's servicing subsidiary, CRIIMI MAE
Services  Limited  Partnership   ("CMSLP"),   of  a  significant   portfolio  of
mortgage-related  assets.  Prior to the Chapter 11 filing,  CRIIMI MAE's primary
activities included (a) acquiring  non-investment  grade securities (rated below
BBB- or unrated)  backed by pools of commercial  mortgage loans on  multifamily,
retail and other commercial real estate  ("Subordinated  CMBS"), (b) originating
and underwriting commercial mortgage loans, (c) securitizing pools of commercial
mortgage loans and resecuritizing  pools of Subordinated CMBS, and (d) primarily
through CMSLP,  performing  servicing  functions with respect principally to the
mortgage loans underlying the Company's Subordinated CMBS.

     Virtually all of the Company's cash flows relating to existing  assets are,
and are currently  expected to be, used to satisfy  principal,  interest and fee
obligations  under the new secured debt incurred by the Company on the Effective
Date (as discussed in Note 7 to the financial statements) and to pay general and
administrative and other operating expenses of the Company. Therefore,  although
the Company continues to pay down its debt obligations,  the utilization of cash
flows for debt service and operating  expenses results in virtually no remaining
net cash flow available for other activities,  to the extent permitted under the
operative documents evidencing the new debt incurred upon emergence from Chapter
11. The Company is  exploring  possible  ways of  achieving  improved  financial
flexibility,  such as refinancing  all or a substantial  portion of the new debt
incurred upon emergence from Chapter 11; however, there can be no assurance that
the Company  will be able to refinance  such new debt or  otherwise  improve its
financial flexibility.

     The  Company's  business is subject to a number of risks and  uncertainties
including,   but  not  limited  to:  (1)  risks   associated  with   substantial
indebtedness  or  leverage;  (2)  borrowing  risks;  (3) the limited  protection
provided by hedging  transactions;  (4)  inherent  risks in owning  Subordinated
CMBS; (5) the limited  liquidity of the Subordinated  CMBS market;  (6) possible
effects of terrorist  attacks,  an economic  slowdown and/or recession on losses
and defaults  related to the mortgages  underlying the Company's CMBS portfolio;
(7) risks related to the New Debt (defined below)  including the ability to meet
payment and other obligations  thereunder;  (8) risks associated with the trader
election and  limitation or loss of net operating  losses for tax purposes;  (9)
the effect of interest  rate  compression  on the market price of the  Company's
stock;  (10) the effect of the yield curve on borrowing  costs;  (11) operations
adversely  affected  by  factors  beyond  the  Company's  control;  (12) risk of
becoming subject to the requirements of the Investment Company Act of 1940; (13)
the  effect  of  phantom  (non-cash)  income  on  total  income;   (14)  pending
litigation;  (15) possible New York Stock  Exchange  delisting due to failure to
maintain certain listing criteria; (16) competition;  (17) taxable mortgage pool
risk; and (18) risk of loss of REIT status.

     On March 21, 2002, the Company redeemed all 173,000  outstanding  shares of
its Series E Cumulative  Convertible  Preferred Stock. See Note 11 for a further
discussion of this transaction.

     The Company was incorporated in Delaware in 1989 under the name CRI Insured
Mortgage  Association,  Inc. ("CRI Insured").  In July 1993, CRI Insured changed
its name to CRIIMI  MAE Inc.  and  reincorporated  in  Maryland.  In June  1995,
certain  mortgage  businesses  affiliated with C.R.I.,  Inc. ("CRI") were merged
into CRIIMI MAE (the "Merger"). The Company is not a government sponsored entity
or in any way affiliated with the United

<PAGE>

States  government or any United States government agency.

The Reorganization Plan

     On October 5, 1998 (the "Petition Date"), CRIIMI MAE Inc.  (unconsolidated)
and  two of  its  operating  subsidiaries,  CRIIMI  MAE  Management,  Inc.  ("CM
Management") and CRIIMI MAE Holdings II, L.P.  ("Holdings II" and, together with
CRIIMI MAE and CM Management, the "Debtors"),  filed for relief under Chapter 11
of the U.S.  Bankruptcy  Code in the  United  States  Bankruptcy  Court  for the
District of Maryland, Southern Division, in Greenbelt, Maryland (the "Bankruptcy
Court").  On November  22,  2000,  the United  States  Bankruptcy  Court for the
District of Maryland,  entered an order  confirming the Debtors'  reorganization
plan (the "Reorganization Plan"). As previously stated, the Company emerged from
Chapter 11 on April 17, 2001.

     The  Reorganization  Plan  provided  for the  payment in full of all of the
allowed  claims of the  Debtors  primarily  through  recapitalization  financing
(including  proceeds  from certain  asset sales)  aggregating  $847 million (the
"Recapitalization  Financing").  The sales of select CMBS (the "CMBS  Sale") and
the Company's interest in Commercial  Mortgage Loan Trust  Certificates,  Series
1998-1   ("CMO-IV")  (the  "CMO-IV  Sale")  generated   aggregate   proceeds  of
approximately  $418.3  million  toward the  Recapitalization  Financing of which
approximately $342.3 million of such proceeds was used to pay related borrowings
and approximately  $76.0 million of such proceeds was used on the Effective Date
to  help  fund  the  Reorganization   Plan.  Included  in  the  balance  of  the
Recapitalization   Financing  was  approximately   $262.4  million  provided  by
affiliates of Merrill Lynch Mortgage Capital,  Inc. (such affiliate  referred to
as "Merrill Lynch" or "Merrill") and German American Capital  Corporation  (such
affiliate referred to as "GACC") through a new,  variable-rate secured financing
facility (in the form of a repurchase  transaction) (the "Variable-Rate  Secured
Borrowing"), and approximately $166.8 million provided through two new series of
secured   notes  issued  to  certain  of  the  Company's   unsecured   creditors
(collectively,  the "New Debt").  Effective  as of June 5, 2001,  all rights and
obligations  of Merrill and GACC under the operative  agreements  evidencing the
Variable-Rate  Secured  Borrowing  were  assigned  by  Merrill  and GACC to ORIX
Capital Markets, LLC ("ORIX").  ORIX also owns a significant aggregate principal
amount of each of the  respective  two new  series of secured  notes  referenced
above as part of the New Debt. Substantially all cash flows relating to existing
assets  are,  and are  currently  expected  to be,  used to  satisfy  principal,
interest  and fee  obligations  under the New Debt.  The New Debt is directly or
indirectly  secured by substantially all of the Company's assets. See Note 7 for
further discussion regarding the New Debt.

     The Company's litigation with First Union National Bank ("First Union") was
not  settled  or  resolved  prior to the  Effective  Date;  and  therefore,  the
classification  and allowance of First  Union's  claim under the  Reorganization
Plan was not be determined on such date. On March 5, 2002, the Bankruptcy  Court
entered an order  approving a settlement  agreement  among the Company and First
Union. See Note 15 for further information regarding the settlement of the First
Union litigation.

     Under the Reorganization Plan, the holders of the Company's equity retained
their stock. The terms of the New Debt significantly restrict the amount of cash
dividends that can be paid to shareholders.  One such restriction  provides that
any cash  dividends  required to maintain REIT status  (assuming the Company has
the cash to make  such  distributions  and  that it is  permitted  to make  such
distributions under the terms of the New Debt) would be paid first to holders of
certain  of the New Debt who  convert  their  secured  notes into one or two new
series of preferred  stock,  which new series of preferred stock would be senior
to all other series of preferred stock of the Company, in the form of redemption
payments.  Another such restriction provides that if realized losses (as defined
in the  New  Debt  documents,  and  including  appraisal  reduction  amounts  on
properties  underlying  the CMBS) on CMBS exceed  certain  thresholds,  then the
Company  is  prohibited   from  paying  cash  dividends  or  making  other  cash
distributions  or payments to its  shareholders,  except as required to maintain
REIT status with any such cash  distributions  to be paid in accordance with the
terms set forth in the preceding sentence.  As of December 31, 2001, the Company
had  exceeded  the  loss  threshold  amounts  under  the  respective  applicable
operative  documents  evidencing  the New Debt.  Exceeding  such loss  threshold
amounts has also resulted in  restrictions  on the acquisition of CMBS rated "B"
or lower or unrated.  Additional restrictions include restrictions on the use of
proceeds from equity  investments  in the Company and specified  cash flows from
certain assets acquired after the Effective Date. The  restrictions  implemented
as a  result  of  exceeding  the loss  threshold  amounts  cease to apply  after
realized losses no longer exceed the loss threshold amounts under the applicable
operative  documents  evidencing  the New  Debt.  The  Reorganization  Plan also
provided for certain  amendments  to the  Company's  articles of  incorporation,
including an increase in authorized shares from 145 million (consisting of

<PAGE>

120  million of common  shares and 25 million of  preferred  shares) to 375
million  (consisting of 300 million of common shares and 75 million of preferred
shares).  These amendments to the articles of incorporation  became effective on
the Effective Date.

     As  contemplated  by the  Reorganization  Plan, on the Effective  Date, the
Company effected an affiliate  reorganization  in order to indirectly secure the
New  Debt  with the  equity  interests  in CBO-1  and  CBO-2  (representing  the
Company's  December 1996  securitization  of Subordinated CMBS and the Company's
May 1998  securitization of Subordinated  CMBS,  respectively).  Pursuant to the
affiliate  reorganization,  CRIIMI MAE Inc. formed a new REIT  subsidiary  ("CBO
REIT"),  all shares of which were initially  issued to CRIIMI MAE Inc.,  pledged
certain  previously  pledged  bonds (the  "Pledged  Bonds") and all  outstanding
shares of two qualified  REIT  subsidiaries  (which own the equity  interests in
CBO-1 and CBO-2) (the "QRS  Shares") to secure the New Debt,  pledged the shares
held by  CRIIMI  MAE in CBO REIT (the  "REIT  Shares")  to  secure  the New Debt
represented  by the two new series of secured  notes,  contributed  the  Pledged
Bonds and the QRS Shares to CBO REIT,  and  transferred  the REIT  Shares,  in a
repurchase  transaction,  to an affiliate of Merrill, as agent for affiliates of
Merrill and GACC.  Effective June 5, 2001, Merrill and GACC transferred the REIT
Shares to ORIX.  Subject to the terms of the documents  evidencing the New Debt,
CRIIMI  MAE Inc.  has  retained  the  right to  exercise  all  voting  and other
corporate rights and powers of ownership with respect to the REIT Shares.

     Although there can be no assurance,  the Company believes that it will have
sufficient  cash  resources to pay interest,  scheduled  principal and any other
required  payments on the New Debt through the remainder of 2002.  The Company's
ability to meet its debt service  obligations through the remainder of 2002 will
depend on a number of factors,  including  management's ability to maintain cash
flow (which is impacted by, among other things,  the credit  performance  of the
underlying mortgage loans and short-term interest rates) and to generate capital
internally  from operating and investing  activities and expected  reductions in
REIT  distribution  requirements to  shareholders  due to expected net operating
losses  for tax  purposes,  in each case  consistent  with the  terms  agreed to
pursuant to the New Debt. There can be no assurance that targeted levels of cash
flow  will  actually  be  achieved,   that   reductions  in  REIT   distribution
requirements  will be  realized,  or that,  if  required,  new  capital  will be
available to the Company.  The  Company's  ability to maintain or increase  cash
flow and access new capital  will depend  upon,  among  other  things,  interest
rates,  prevailing  economic  conditions  and other  factors,  many of which are
beyond the control of the Company.  The Company's  high level of debt limits its
ability to obtain additional capital,  significantly reduces cash flow available
for other  activities,  restricts  the  Company's  ability  to react  quickly to
changes in its business, limits its ability to hedge its assets and liabilities,
and makes the Company more vulnerable to economic downturns.

REIT Status/Net Operating Loss for Tax Purposes

     REIT Status.  CRIIMI MAE is required to meet income,  asset,  ownership and
distribution tests to maintain its REIT status. The Company believes that it has
satisfied the REIT  requirements  for all years  through,  and  including  2001,
although  there can be no assurance.  There can also be no assurance that CRIIMI
MAE will maintain its REIT status for 2002 or subsequent  years.  If the Company
fails to maintain  its REIT status for any taxable  year,  it will be taxed as a
regular domestic corporation subject to federal and state income tax in the year
of disqualification and for at least the four subsequent years. Depending on the
amount  of any  such  federal  and  state  income  tax,  the  Company  may  have
insufficient funds to pay any such tax and also may be unable to comply with its
obligations under the New Debt.

     The Company and two of its  subsidiaries  incorporated in 2001 have jointly
elected to treat such two  subsidiaries  as Taxable REIT  Subsidiaries  ("TRSs")
effective  January 1, 2001.  The TRSs allow the  Company to earn  non-qualifying
REIT  income  while  maintaining  REIT  status.  For tax and  other  reasons,  a
reorganization  of CMSLP was  effected  such that the  partnership  interests of
CMSLP are held by these two subsidiaries.

<PAGE>

     The Company's 2001 and 2000 Net Operating Loss for Tax Purposes/Shareholder
Rights Plan

     During 2001 and 2000, the Company traded in both short and longer  duration
fixed income  securities,  including  non-investment  grade and investment grade
CMBS  and  investment  grade   residential   mortgage  backed  securities  (such
securities  traded and all other  securities of the type described  constituting
the  "Trading  Assets" to the extent  owned by CRIIMI MAE Inc. or any  qualified
REIT subsidiary,  meaning  generally any  wholly-owned  subsidiary that is not a
taxable  REIT  subsidiary),   which,  for  financial  reporting  purposes,   are
classified as Subordinated  CMBS and Other MBS on the balance sheet. The Company
seeks maximum total return through short term trading,  consistent  with prudent
investment   management.   Returns   from  such   activities   include   capital
appreciation/depreciation  resulting from changes in interest rates and spreads,
if any, and other arbitrage opportunities.

     Internal  Revenue Service Revenue  Procedure 99-17 provides  securities and
commodities traders with the ability to elect  mark-to-market  treatment for the
2000 tax year and for all future tax years,  unless the election is revoked with
the consent of the  Internal  Revenue  Service.  On March 15,  2000,  CRIIMI MAE
elected for tax purposes to be classified  as a trader in  securities  effective
January 1, 2000.

     As a result of its trader election,  CRIIMI MAE recognized a mark-to-market
tax loss in its income tax  return on its  Trading  Assets on January 1, 2000 of
approximately  $478 million (the "January 2000 Loss").  Such loss is expected to
be recognized  evenly for tax purposes over four years  beginning  with the year
2000 (i.e.,  approximately $120 million per year). The Company expects such loss
to be ordinary. Additionally, as a result of its trader election, the Company is
required to mark-to-market  its Trading Assets on a tax basis at the end of each
tax year.  Any  increase or  decrease  in the value of the  Trading  Assets as a
result of the  year-end  mark-to-market  requirement  will  generally  result in
either a tax gain (if an  increase  in  value) or a tax loss (if a  decrease  in
value).  Such tax gains or losses,  as well as any realized gains or losses from
the  disposition  of Trading  Assets  during each year,  are also expected to be
ordinary  gains  or  losses.  Assets  transferred  to CBO  REIT  as  part of the
Company's Reorganization Plan are no longer required to be marked-to-market on a
tax basis since CBO REIT is not a trader in securities  for tax  purposes.  As a
result,  the  mark-to-market  of such assets  ceased as of April 17,  2001.  The
transfer  of  assets  to CBO  REIT  is  discussed  in  this  Note 1  under  "The
Reorganization Plan".

     Since gains and losses  associated with trading  activities are expected to
be ordinary,  any gains will  generally  increase  taxable income and any losses
will generally  decrease  taxable income.  Since the Company is a REIT which was
generally  required to distribute 95% of its taxable income to shareholders  for
years  ending  on or before  December  31,  2000 and is  generally  required  to
distribute 90% for years  beginning  after 2000, any increases in taxable income
from  trading   activities  will  generally   result  in  an  increase  in  REIT
distribution  requirements  and any  decreases  in taxable  income from  trading
activities will generally result in a decrease in REIT distribution requirements
(or, if taxable  income is reduced to zero  because of a net  operating  loss or
loss carry forward, eliminate REIT distribution requirements).

     Gains and losses from the mark-to-market requirement (including the January
2000 Loss) are  unrealized.  This creates a mismatch  between REIT  distribution
requirements  and cash  flow  since  the  REIT  distribution  requirements  will
generally  fluctuate due to mark-to-market  adjustments,  but the cash flow from
the Company's  Trading  Assets will not fluctuate as a result of  mark-to-market
adjustments.

     The  Company   generated  a  net   operating   loss  for  tax  purposes  of
approximately  $(96.9)  million and $(49.6)  million for the year ended December
31, 2001 and 2000,  respectively.  As such,  the  Company's  taxable  income was
reduced to zero and, accordingly,  the Company's REIT distribution  requirements
were  eliminated  for 2001 and  2000.  As of  December  31,  2001 the  Company's
accumulated and unused net operating loss ("NOL") was $(146.5) million. See Note
9 for further discussion.

     Any  accumulated  and  unused  net  operating  losses,  subject  to certain
limitations,  generally  may be  carried  forward  for up to 20 years to  offset
taxable income until fully utilized. Accumulated and unused net operating losses
cannot be  carried  back  because  CRIIMI MAE is a REIT.  If a Trading  Asset is
marked down  because of an increase in interest  rates,  rather than from credit
losses,  such  mark-to-market  losses may be recovered over time through taxable
income.  Any  recovered  mark-to-market  losses will  generally be recognized as
taxable income,  although there is expected to be no  corresponding  increase in
cash flow.

<PAGE>

     There is no  assurance  that the  Company's  position  with  respect to its
election as a trader in  securities  will not be  challenged by the IRS, and, if
challenged,  will be defended  successfully by the Company.  As such, there is a
risk that the  January  2000 Loss will be limited or  disallowed,  resulting  in
higher  tax basis  income  and a  corresponding  increase  in REIT  distribution
requirements.  It is possible  that the amount of any  under-distribution  for a
taxable year could be corrected  with a "deficiency  dividend" as defined in the
Internal  Revenue  Code Section  860,  however,  interest may also be due to the
Internal Revenue Service on the amount of this under-distribution.

     If CRIIMI MAE is  required  to make  taxable  income  distributions  to its
shareholders  to  satisfy  required  REIT  distributions,  all or a  substantial
portion of these distributions, if any, are currently expected to be in the form
of non-cash dividends.  There is no assurance that such non-cash dividends would
satisfy the REIT distribution  requirements and, as such, the Company could lose
its  REIT  status  or may not be able  to  satisfy  its  obligations  under  the
operative documents evidencing the New Debt.

     The Company's  future use of NOLs for tax purposes  could be  substantially
limited in the event of an  "ownership  change" as defined  under Section 382 of
the Internal Revenue Code. As a result of these  limitations  imposed by Section
382 of the  Internal  Revenue  Code,  in the event of an ownership  change,  the
Company's  ability to use its NOL  carryforwards  in future years may be limited
and, to the extent the NOL  carryforwards  cannot be fully  utilized under these
limitations within the carryforward periods, the NOL carry forwards would expire
unutilized.  Accordingly,  after any ownership change,  the Company's ability to
use its NOLs to reduce or offset taxable income would be  substantially  limited
or not available under Section 382. In general, a company reaches the "ownership
change"  threshold if the "5% shareholders"  increase their aggregate  ownership
interest  in the  company  over a  three-year  testing  period  by more  than 50
percentage  points.  The ownership interest is measured in terms of total market
value of the Company's capital stock.

     The  Company  is not aware of any  acquisition  of shares of the  Company's
capital  stock that has created an  "ownership  change"  under  Section 382, but
believes that it may be close to approaching the 50% threshold for an "ownership
change" under Section 382. The Company is concerned that future  acquisitions of
common  stock,  preferred  stock or a  combination  of both by an  existing  "5%
shareholder" or a new "5% shareholder" could cause an "ownership  change". If an
"ownership  change" occurs,  the Company's  ability to use its NOLs to reduce or
offset its taxable income would be substantially  limited or not available under
Section 382 of the Internal  Revenue Code on a  prospective  basis.  The Company
would then have REIT distribution  requirements based upon its taxable income at
the beginning of the year such  ownership  change occurs.  As stated above,  any
such distributions are expected to be in the form of non-cash taxable dividends.

     If an "ownership  change" occurs under  Internal  Revenue Code Section 382,
the Company's  prospective use of its accumulated NOL and the remaining  January
2000 Loss of a combined  total  amount of  approximately  $(386)  million (as of
December 31,  2001) will be limited.  If the Company had lost its ability to use
its  accumulated  NOL as of January 1, 2001, the Company's  taxable income would
have been $22.6  million.  This increase in taxable  income would have created a
100 percent  distribution  requirement.  If the Company was unable to distribute
the taxable income to its shareholders,  it would have been subject to corporate
Federal and state income taxes of up to approximately $9.3 million in 2001.

     Currently,  the  Company  does not know of any  acquisition  of  shares  of
Company's capital stock that will create an "ownership change" under Section 382
of the Internal Revenue Code. The Company has adopted a shareholder  rights plan
designed to deter an ownership  change  within the meaning of Section 382 of the
Internal  Revenue  Code,  however  there can be no  assurance  that an ownership
change will not occur.  See Note 10 for a further  discussion of the shareholder
rights plan.

2.   INVESTMENT COMPANY ACT OF 1940

     Under the  Investment  Company  Act of 1940,  as amended  (the  "Investment
Company Act"), an investment company is required to register with the SEC and is
subject to extensive restrictive and potentially adverse regulation relating to,
among other things, operating methods, management,  capital structure, dividends
and transactions with affiliates.  However,  as described below,  companies that
are primarily engaged in the business of acquiring  mortgages and other liens on
and  interests in real estate  ("Qualifying  Interests")  are excluded  from the
requirements of the Investment Company Act.

<PAGE>

     To qualify for the  Investment  Company Act  exclusion,  CRIIMI MAE,  among
other things,  must maintain at least 55% of its assets in Qualifying  Interests
(the "55%  Requirement")  and is also required to maintain an additional  25% in
Qualifying  Interests or other real  estate-related  assets  ("Other Real Estate
Interests" and such requirement,  the "25%  Requirement").  According to current
SEC  staff  interpretations,  CRIIMI  MAE  believes  that all of its  government
insured mortgage securities  constitute  Qualifying Interests with the exception
of one such  security  which  constitutes  an Other  Real  Estate  Interest.  In
accordance with current SEC staff interpretations, the Company believes that all
of its Subordinated CMBS constitute Other Real Estate Interests and that certain
of its Subordinated CMBS also constitute Qualifying Interests. On certain of the
Company's  Subordinated  CMBS,  the Company,  along with other  rights,  has the
unilateral right to direct  foreclosure with respect to the underlying  mortgage
loans. Based on such rights and its economic interest in the underlying mortgage
loans,  the Company  believes  that the  related  Subordinated  CMBS  constitute
Qualifying Interests.  As of December 31, 2001, the Company believes that it was
in compliance with both the 55% Requirement and the 25% Requirement.

     If the SEC or its staff were to take a different  position  with respect to
whether such  Subordinated  CMBS constitute  Qualifying  Interests,  the Company
could,  among other things, be required either (i) to change the manner in which
it conducts its  operations to avoid being required to register as an investment
company or (ii) to register as an investment company, either of which could have
a material adverse effect on the Company. If the Company were required to change
the manner in which it conducts its business, it would likely have to dispose of
a significant portion of its Subordinated CMBS or acquire significant additional
assets  that  are  Qualifying  Interests.  Alternatively,  if the  Company  were
required to register as an  investment  company,  it expects that its  operating
expenses would significantly  increase and that the Company would have to reduce
significantly  its  indebtedness,   which  could  also  require  it  to  sell  a
significant  portion of its  assets.  No  assurances  can be given that any such
dispositions or acquisitions of assets,  or deleveraging,  could be accomplished
on favorable  terms,  or at all.  There are  restrictions  under  certain of the
operative  documents  evidencing the New Debt which could limit possible actions
the  Company may take in  response  to any need to modify its  business  plan in
order to  register  as an  investment  company  or avoid  the need to  register.
Certain dispositions or acquisitions of assets could require approval or consent
of certain  holders of New Debt. Any such results could have a material  adverse
effect on the Company.

     Further, if the Company were deemed an unregistered investment company, the
Company  could be subject to  monetary  penalties  and  injunctive  relief.  The
Company  would be unable to  enforce  contracts  with  third  parties  and third
parties could seek to obtain  rescission of transactions  undertaken  during the
period the Company was deemed an  unregistered  investment  company,  unless the
court found under the circumstances  enforcement (or denial of rescission) would
produce a more equitable result than nonenforcement (or grant of rescission) and
would not be inconsistent with the Investment Company Act.

3.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Consolidation and Minority Interests

     The  consolidated  financial  statements  reflect the  financial  position,
results  of  operations  and cash  flows of CRIIMI  MAE;  CM  Management;  CMSLP
Management Company,  Inc.; CMSLP Holding Company, Inc.; CRIIMI, Inc.; CRIIMI MAE
Financial Corporation; CRIIMI MAE Financial Corporation II; CRIIMI MAE Financial
Corporation III; CRIIMI MAE QRS 1, Inc.; CBO REIT,  Inc.; CM Securities  Trading
Co.; and CRIIMI MAE CMBS Corporation for all periods presented. In addition, the
consolidated  financial  statements reflect the financial  position,  results of
operations and cash flows of CRIIMI MAE Services Limited  Partnership  ("CMSLP")
from  July  2001  and  Shoppes  Limited   Partnership  from  October  2001.  All
significant  intercompany  accounts and  transactions  have been  eliminated  in
consolidation.

Method of Accounting

     The  consolidated  financial  statements  of CRIIMI MAE are prepared on the
accrual basis of accounting in accordance with accounting  principles  generally
accepted in the United States ("GAAP").  The preparation of financial statements
in conformity  with GAAP requires  management to make estimates and  assumptions
that affect the reported  amounts of assets and  liabilities  at the date of the
financial  statements and the reported  amounts of revenues and expenses  during
the reporting period. Actual results could differ from those estimates.

<PAGE>

Reclassifications

     Certain 2000 and 1999 amounts have been reclassified to conform to the 2001
presentation.

Other Cash and Cash Equivalents and Servicing Cash and Cash Equivalents

     Cash and cash equivalents consist of U.S. Government and agency securities,
certificates  of deposit,  time  deposits  and  commercial  paper with  original
maturities of three months or less.

Restricted Cash and Cash Equivalents

     Restricted  cash and cash  equivalents  consist  of cash,  certificates  of
deposit and interest  bearing  securities  maturing within three months from the
date of purchase that are legally restricted pursuant to covenants under the New
Debt or,  pursuant to various  stipulation  and consent orders which provide for
adequate protection with certain of the Company's creditors which litigation was
not resolved prior to the Company's emergence from Chapter 11.

Transfer of Financial Assets

     The  Company  transfers  assets  (mortgages  and  mortgage  securities)  in
securitization  transactions where the transferred assets become the sole source
of repayment  for newly issued debt.  These  transfers of financial  assets were
accounted  for in accordance  with  Statement of Financial  Accounting  Standard
("SFAS") No. 125 "Accounting for Transfers and Servicing of Financial Assets and
Extinguishment of Liabilities" ("FAS 125"), as amended by Statement of Financial
Accounting  Standard  No.  140,  "Accounting  for  Transfers  and  Servicing  of
Financial  Assets and  Extinguishments  of  Liabilities - a Replacement  of FASB
Statement No. 125".  When both legal and control rights to a financial asset are
transferred,  the  transfer is treated as a sale.  Transfers  are assessed on an
individual component basis. In a securitization,  the cost basis of the original
assets  transferred is allocated to each of the new financial  components  based
upon the relative fair value of the new  financial  components.  For  components
where  sale  treatment  is  achieved,  a gain  or  loss  is  recognized  for the
difference  between that  component's  allocated cost basis and fair value.  For
components  where  sale  treatment  is  not  achieved,   an  asset  is  recorded
representing the allocated cost basis of the new financial  components  retained
and the related incurrence of debt is also recorded.  In transactions where none
of the components  are sold,  the Company  recognizes the incurrence of debt and
the character of the collateralizing assets remains unchanged.

Income Recognition and Carrying Basis

     Subordinated CMBS and Other Mortgage-Backed Securities

     Prior to April 1, 2001, CRIIMI MAE recognized income from Subordinated CMBS
using the  effective  interest  method,  using the  anticipated  yield  over the
projected life of the investment.  Changes in anticipated  yields were generally
calculated due to revisions in estimates of future credit losses,  actual losses
incurred,  revisions in estimates of future  prepayments and actual  prepayments
received.   Changes  in  anticipated  yields  resulting  from  prepayments  were
recognized  through a cumulative  catch-up  adjustment at the date of the change
which  reflected  the change in income of the security from the date of purchase
through the date of change in anticipated yield. The new yield was then used for
income  recognition  for  the  remaining  life  of the  investment.  Changes  in
anticipated yields resulting from reduced estimates of losses were recognized on
a prospective basis. When other than temporary impairment was recognized,  a new
yield was calculated on the CMBS based on its new cost basis (fair value at date
of impairment) and expected  future cash flows.  This revised yield was employed
prospectively.   Effective  April  1,  2001,   CRIIMI  MAE  adopted  EITF  99-20
"Recognition  of  Interest  Income and  Impairment  on  Purchased  and  Retained
Beneficial Interests in Securitized Financial Assets" to recognize income on its
Subordinated  CMBS. Under EITF 99-20,  when there has been a change in estimated
future cash flows from the cash flows  previously  projected  (due to prepayment
speeds and/or credit  losses),  the Company will calculate a revised yield based
on the current  amortized  cost of the  investment  and the revised  future cash
flows. This revised yield is applied prospectively to recognize interest income.
CRIIMI MAE  classifies its  Subordinated  CMBS as available for sale and carries
them at fair market value where temporary  changes in fair value are recorded as
a component of shareholders' equity.

<PAGE>

     Interest   income  on  other   mortgage-backed   securities   consists   of
amortization   of  the  discount  or  premium  on   primarily   investment-grade
securities,  plus the stated investment interest payments received or accrued on
other mortgage-backed securities. The difference between the cost and the unpaid
principal  balance at the time of  purchase  is carried as a discount or premium
and amortized over the remaining  contractual  life of the investment  using the
effective  interest  method.  The effective  interest method provides a constant
yield of income over the term of the investment.

     The Company's other mortgage-backed  securities are classified as Available
for Sale. As a result,  the Company carries these securities at fair value where
changes in fair value are recorded as a component of shareholders'  equity. Upon
the  sale of such  securities,  any  gain or loss is  recognized  in the  income
statement.

     Insured Mortgage Securities

     Insured mortgage securities income consists of amortization of the discount
or premiums plus the stated mortgage interest payments received or accrued.  The
difference  between  the cost and the  unpaid  principal  balance at the time of
purchase is carried as a discount or premium and  amortized  over the  remaining
contractual  life of the  mortgage  using the  effective  interest  method.  The
effective  interest  method provides a constant yield of income over the term of
the mortgage.  Changes in  anticipated  yields are generally  calculated  due to
revisions in estimates of future prepayments and actual payments received.

     The Company's  insured mortgage  securities are classified as Available for
Sale. As a result,  the Company carries its insured mortgage  securities at fair
value where  changes in fair value are recorded as a component of  shareholders'
equity.

     CRIIMI  MAE's  consolidated   investment  in  insured  mortgage  securities
consists of participation  certificates  evidencing a 100% undivided  beneficial
interest in Government Insured Multifamily  Mortgages issued or sold pursuant to
programs   of  the  Federal   Housing   Administration   ("FHA")   ("FHA-Insured
Certificates")  and  mortgage-backed  securities  guaranteed  by the  Government
National  Mortgage  Association  ("GNMA") ("GNMA  Mortgage-Backed  Securities").
Payment of principal and interest on FHA-Insured  Certificates is insured by the
U.S.  Department of Housing and Urban Development ("HUD") pursuant to Title 2 of
the  National   Housing  Act.   Payment  of  principal   and  interest  on  GNMA
Mortgage-Backed  Securities  is  guaranteed  by GNMA  pursuant to Title 3 of the
National Housing Act.

     Equity Investments

     CRIIMI,  Inc., a wholly  owned  subsidiary  of CRIIMI MAE,  owns all of the
general partnership  interests in American Insured Mortgage Investors,  American
Insured  Mortgage  Investors  -  Series  85,  L.P.,  American  Insured  Mortgage
Investors L.P. - Series 86 and American Insured Mortgage Investors L.P. - Series
88 (collectively,  the "AIM Funds"). The AIM Funds own mortgage assets which are
substantially  similar to the insured  mortgage  securities owned by CRIIMI MAE.
CRIIMI,   Inc.  receives  the  general  partner's  share  of  income,  loss  and
distributions  (which  ranges from 2.9% to 4.9%) from each of the AIM Funds.  In
addition,  CRIIMI MAE and CM Management each own 50% of the limited  partnership
that owns a 20%  limited  partnership  interest in the adviser to the AIM Funds.
CRIIMI MAE is utilizing  the equity  method of  accounting  (because it does not
control  these  investees)  for its  investment  in the AIM Funds  and  advisory
partnership,  which provides for recording CRIIMI MAE's share of net earnings or
losses in the AIM Funds and advisory  partnership  reduced by distributions from
the limited partnerships and adjusted for purchase accounting amortization.

     Beginning  July 1,  2001,  CRIIMI  MAE  began  accounting  for  CMSLP  on a
consolidated  basis as opposed to accounting  for CMSLP under the equity method.
This change in accounting  method was a result of a reorganization  in which the
partnership  interests in CMSLP are now held by two  wholly-owned and controlled
TRSs of CRIIMI MAE. Prior to July 1, 2001,  CRIIMI MAE accounted for CMSLP under
the equity  method as the Company did not control the voting common stock of the
general partner of CMSLP. CMSLP's assets, liabilities, revenues and expenses are
labeled as "servicing" on the Company's consolidated financial statements.

<PAGE>

Impairment

     Subordinated CMBS and Other Mortgage-Backed Securities

     CRIIMI  MAE  assesses  each  Subordinated  CMBS for  other  than  temporary
impairment when the fair market value of the asset declines below amortized cost
and when one of the  following  conditions  also exists:  1) fair value has been
below amortized cost for a significant  period of time and the Company concludes
that it no longer has the ability or intent to hold the  security for the period
that fair value is expected  to be below  amortized  cost  through the period of
time the  Company  expects  the value to recover to  amortized  cost,  or 2) the
Company's  revised  projected  cash  flows  related  to the CMBS and the  CMBS's
current cost basis result in a decrease in the yield that was previously used to
recognize  income.  This  decrease in yield would  primarily  be a result of the
credit quality of the security  declining and the Company  determining  that the
current  estimate of expected  future  credit  losses  exceeds  credit losses as
originally projected or expected credit losses will occur sooner than originally
projected.  The amount of  impairment  loss is  measured by  comparing  the fair
value, based on available market information and management's  estimates, of the
Subordinated  CMBS to its  current  amortized  cost  basis;  the  difference  is
recognized  as a loss in the income  statement.  The  Company  assesses  current
economic  events and conditions that impact the value of its  Subordinated  CMBS
and the  underlying  real estate in making  judgments as to whether or not other
than  temporary  impairment  has  occurred.  See  Note  5  for a  discussion  of
impairment charges recognized in 2001, 2000 and 1999.

     CRIIMI MAE assesses its Other MBS for other than temporary  impairment when
the fair market value of the security  declines below  amortized cost and CRIIMI
MAE concludes that it no longer has the ability to hold the security through the
market downturn. The amount of impairment loss is measured by comparing the fair
value of the security to its current cost basis; the difference is recognized as
a loss in the income statement.

     Insured Mortgage Securities

     CRIIMI MAE assesses each insured mortgage security for other than temporary
impairment when the fair market value of the asset declines below amortized cost
for a significant  period of time and CRIIMI MAE concludes that it no longer has
the  ability to hold the  security  through the market  downturn.  The amount of
impairment  loss is measured by comparing the fair value of an insured  mortgage
security to its current  amortized cost basis; the difference is recognized as a
loss in the income  statement.  The Company did not recognize any  impairment on
its insured mortgage securities in 2001, 2000 and 1999.

     Equity Investments

     Impairment is recognized  on CRIIMI MAE's  investments  accounted for under
the equity method if a decline in the market value of the  investment  below its
carrying  basis is  judged  to be  "other  than  temporary".  In this  case,  an
unrealized  loss is  recognized  as the  difference  between  the fair value and
carrying amount.  The Company did not recognize  impairment losses on its equity
investments in 2001, 2000 and 1999.

Receivables

     Receivables  primarily consist of interest and principal receivables on the
Company's  assets. In addition,  prepayments in the insured mortgage  securities
portfolio, if any, that have not yet been received by CRIIMI MAE are included.

Other Assets

     Other assets  primarily  include Merger assets and related costs,  deferred
financing costs,  deferred costs,  investment in mezzanine loans and real estate
owned ("REO"), as further discussed below.

     In October 2001,  CRIIMI MAE acquired  certain  partnership  interests in a
partnership  that was  indebted  on a mezzanine  loan  payable to the Company in
exchange for curing a default on the first mortgage loan through a cash payment.
This partnership and another  wholly-owned  subsidiary of CRIIMI MAE own 100% of
the partnership  interests in the partnership  which is the obligor on the first
mortgage  loan.  The first  mortgage  loan is secured  by a  shopping  center in
Orlando, Florida. As a result of this transaction,  the Company, through certain
of its wholly-owned subsidiaries,  owns 100% of the partnership interests in the
partnership  and is  consolidating  its  accounts  as of October  1,  2001.  The
mezzanine loan is eliminated in consolidation. The

<PAGE>

Company  accounts  for these  assets  as REO,  and the REO will be held for
investment.  As of December 31, 2001,  the Company has  $8,565,035 in REO assets
included in other assets ($8,343,307  relating to the actual building and land),
$7,109,252 in a mortgage payable,  and $83,498 of liabilities  included in other
liabilities  on its  balance  sheet.  At the date of  acquisition,  the  Company
adjusted the book values of the assets acquired and the assumed mortgage payable
to fair value.  Adjusting the first  mortgage to fair value resulted in the debt
being  recorded  at  $7,130,638  compared  to the  unpaid  principal  balance of
$8,892,603.  This  discount on the debt of  $1,761,965  will be  amortized  into
interest expense over the life of the mortgage,  or 6.5 years. During the period
October 1 through  December  31,  2001,  the  Company  recognized  a net loss of
approximately  $265,688  from  the  operations  of the REO,  including  interest
expense of $165,677.  This net loss is included in the consolidated statement of
income. REO property held for investment is carried at cost and depreciated over
its estimated  useful life and will be evaluated  for  impairment by the Company
when events or changes in circumstances indicate that the carrying amount of the
asset may not be recoverable.  At such time, if the expected future undiscounted
cash flows from the  property  are less than the cost basis,  the assets will be
marked down to fair value.  Costs  relating to  development  and  improvement of
property are  capitalized,  provided that the resulting  carrying value does not
exceed fair value. Costs relating to holding the assets are expensed.

     The Merger assets acquired and costs incurred in connection with the Merger
were recorded using the purchase method of accounting.  The amounts allocated to
the assets  acquired were based on  management's  estimate of their fair values,
with the excess of purchase  price over fair value  allocated to  goodwill.  The
goodwill and intangible  assets  acquired by CRIIMI MAE are amortized  using the
straight-line  method over 10 years.  As discussed  later in this footnote,  the
Company  wrote-off  $9.8 million of goodwill and  intangible  assets  related to
these  Merger  assets on  January  1, 2002 upon the  adoption  of  Statement  of
Financial  Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible
Assets." The value of the AIM Funds'  subadvisory  contracts are amortized using
the effective  interest method over 10 years through 2005. This  amortization is
reflected through CRIIMI MAE's equity in earnings from investments.

     Deferred  financing  costs  are  costs  incurred  in  connection  with  the
establishment  of CRIIMI MAE's financing  facilities and are amortized using the
effective  interest  method over the terms of the  borrowings.  Also included in
deferred costs are mortgage  selection  fees,  which were paid to the adviser or
were paid to the former general partners or adviser to the predecessor  entities
of CRI Liquidating (collectively,  the "CRIIMI Funds"). These deferred costs are
being amortized using the effective interest method on a specific mortgage basis
from the date of the  acquisition  of the related  mortgage over the term of the
mortgage  from  CRIIMI  MAE.  Upon  disposition  of  a  mortgage,   the  related
unamortized fee is treated as part of the mortgage asset carrying value in order
to measure the gain or loss on the disposition.

Servicing Other Assets and Servicing Liabilities

     Beginning  July 1,  2001,  CRIIMI  MAE  began  accounting  for  CMSLP  on a
consolidated  basis as opposed to accounting  for CMSLP using the equity method.
This change in accounting  method was a result of a reorganization  in which the
partnership  interests of CMSLP are now held by two  wholly-owned and controlled
TRSs of CRIIMI MAE. Prior to July 1, 2001,  CRIIMI MAE accounted for CMSLP under
the equity  method as the Company did not control the voting common stock of the
general partner of CMSLP. CMSLP's assets, liabilities, revenues and expenses are
labeled as "servicing" on the Company's consolidated financial statements.

     Servicing  other assets is  comprised  of assets owned by CMSLP,  including
receivables,  other assets,  fixed assets,  acquired mortgage  servicing rights,
rights under four AIM Fund subadvisory  contracts,  investments in interest-only
certificates,  and investments in CMBS. Servicing  liabilities consist primarily
of accounts and notes payable incurred by CMSLP.  Unless otherwise  stated,  the
accounting  policies  related to assets and liabilities of CMSLP are the same as
CRIIMI MAE.  Significant  accounting  policies related to servicing other assets
and servicing liabilities are as follows:

     Acquired Mortgage Servicing Rights

     These assets are  amortized in  proportion  to, and over the period of, the
estimated net servicing income (servicing  revenue in excess of servicing costs)
from the servicing rights. Mortgage servicing rights are carried at the lower of
amortized cost or fair value,  and are assessed for impairment based on the fair
value of those  rights.

<PAGE>

Fair  values are  estimated  based on market  prices for  similar  mortgage
servicing rights and on the discounted  anticipated  future net cash flows which
involve consideration of historical loan prepayment experience,  interest rates,
default  assumptions,  loan  modifications,  assumption  activities,  and  other
economic factors. For purposes of impairment  evaluation and measurement,  CMSLP
stratifies   the   mortgage   servicing   rights  based  on   predominant   risk
characteristics.  CMSLP has defined its  principal  risk  characteristic  as the
servicing contract because each commercial mortgage servicing contract is unique
and requires focused attention on non-standard clauses. Management's anticipated
returns on these  investments  are based upon a number of  assumptions  that are
subject  to certain  business  and  economic  uncertainties  and  contingencies,
including,  without limitation,  prevailing interest rates (the decline of which
may lead to increased  prepayments  of the  underlying  mortgage  loans,  to the
extent that lockout clauses have expired) and the general  condition of the real
estate market.

     Components of Servicing Other Assets and Servicing Liabilities

     At December 31, 2001, the following  comprised  servicing  other assets and
servicing liabilities:
<TABLE>
<CAPTION>
         <S>                                                           <C>
         Acquired mortgage servicing rights                            $   4,096,333 (1)
         AIM Fund subadvisory contracts                                    1,906,542
         Investment in interest-only certificates and CMBS                 2,395,576
         Receivables and other assets                                      7,612,446
         Fixed assets, net                                                 2,239,927
                                                                       -------------
         Total servicing other assets                                  $  18,250,824
                                                                       =============
         Accounts and notes payable                                    $   3,660,173
                                                                       =============
</TABLE>

     (1) As discussed below,  CMSLP sold all of its rights and obligations under
its CMBS master and primary contracts in February 2002.


Servicing Revenue, Servicing General and Administrative Expenses, Servicing
Restructuring Expense and Servicing Amortization, Depreciation and Impairment

     Servicing  revenue  represents  revenue  earned by CMSLP,  which  primarily
consists of mortgage servicing fees, interest income,  assumption fees and other
ancillary  servicing fees, and AIM Fund subadvisory fees.  Servicing general and
administrative  expenses represents general and administrative expenses incurred
by  CMSLP.  Servicing  amortization,   depreciation  and  impairment  represents
expenses incurred by CMSLP, including amortization of mortgage servicing rights,
impairment on mortgage  servicing  rights and  depreciation  and amortization of
fixed and other assets. Unless otherwise stated, the accounting policies related
to  revenues  and  expenses  of CMSLP  are the same as CRIIMI  MAE.  Significant
accounting policies affecting servicing revenues and expenses are as follows:

     Servicing Restructuring Expense

     On December  17, 2001,  CMSLP  announced  its  intention to sell all of its
rights and  obligations  under its CMBS master and primary  servicing  contracts
because the contracts were not profitable,  given the relatively small volume of
master and primary CMBS servicing that CMSLP was performing.  In connection with
this  determination,  34 employees were  terminated.  All rights and obligations
under these  servicing  contracts  were sold in February  2002.  CMSLP  received
approximately  $11.3 million in cash, which included  reimbursement of advances.
This is  expected  to result in a gain on sale of  approximately  $4.3  million,
subject to  adjustment  for certain  post-closing  contingencies,  in the second
quarter of 2002. In addition, CMSLP may receive up to an additional $0.9 million
from the sale in the third  quarter  of 2002,  which  would be  reflected  as an
additional gain on sale, following the completion of a post-closing  contingency
period.

     As a result of the  restructuring  plan,  CMSLP  recorded  a  restructuring
expense  of  $437,723  in the  fourth  quarter  of 2001.  A summary of the costs
comprising the total charge incurred in the fourth quarter is as follows:


<PAGE>
<TABLE>
<CAPTION>
                  <S>                                                           <C>
                  Employee severance and other termination benefits             $ 240,903
                  Non-cancelable lease costs                                      133,834
                  Other                                                            62,986
                                                                                ---------
                  Total                                                         $ 437,723
                                                                                =========

</TABLE>

     During  the  fourth  quarter of 2001,  approximately  $55,936 in  severance
costs,  $33,462 in  non-cancelable  lease costs, and $52,986 in other costs were
paid. The remaining  $295,339 of the restructuring  accrual remains in Servicing
Liabilities at December 31, 2001.

     Servicing and Subadvisory Fees

     CMSLP receives  servicing fees for property,  standby and special servicing
provided  on  behalf  of CMBS  investors,  represented  principally  by  certain
affiliated entities, in connection with loans originated or acquired by mortgage
lenders.  Mortgage  servicing fees are generally  calculated on the  outstanding
principal  balances of the loans  serviced and are earned on a monthly  basis as
mortgage loan principal and interest collections are due.

     CMSLP  also earns  fees  based on the  invested  assets of the AIM Funds as
CMSLP is the subadvisor to these funds. As the subadvisor,  CMSLP is responsible
for managing the assets of the AIM Funds.  These duties include the  maintenance
and disposition of the AIM Funds' mortgage assets.

     Assumption Fees

     An  assumption  fee is income  that  CMSLP  receives  for the  underwriting
involved in  processing  records  for a new buyer in assuming an existing  loan.
Typically,  the fee is either  based on a  percentage  of the  unpaid  principal
balance of the loan to be assumed  (usually  1 percent)  or is a fixed  standard
cost,  as  provided  for in the loan  documents  that is then  shared with other
servicers.  This income is recognized  after the assumption of the loan has been
approved by CMSLP and  documentation  of the  assumption  has been completed and
executed.

     Components  of  Servicing  Revenue,  Servicing  General and  Administrative
     Expenses, Servicing Restructuring Charges and Servicing Amortization,
     Depreciation and Impairment

     For the six  months  ended  December  31,  2001,  the  following  comprised
servicing revenue and servicing expenses:
<TABLE>
<CAPTION>
         <S>                                                           <C>
         Mortgage servicing fees                                       $  3,570,603
         Assumption fees and other servicing income                       2,178,077
         Interest income                                                    834,664
         AIM Fund subadvisory fees                                          302,713
                                                                       ------------
            Total servicing revenue                                    $  6,886,057
                                                                       ============

         Servicing general and administrative expenses                 $  5,882,889
                                                                       ============

         Servicing Restructuring Charges                               $    437,723
                                                                       ============

         Amortization of mortgage servicing rights                     $    734,258
         Depreciation and amortization of fixed and other assets            466,403
         Impairment on mortgage servicing rights and CMBS                   498,525
                                                                       ------------
            Total servicing amortization, depreciation and impairment  $  1,699,186
                                                                       ============
</TABLE>

Discounts and Deferred Financing Costs on Debt

     Discounts and deferred  financing  costs  incurred in  connection  with the
issuance of debt are  amortized  using the  effective  interest  method over the
projected term of the related debt,  which is based on management's  estimate of
prepayments  on the  underlying  collateral  and are  included as a component of
interest expense. In addition,  as discussed in Note 7, there are extension fees
payable  under  the  terms of the New Debt in  future  years.  The

<PAGE>

Company has estimated the amounts of these extension fees and is amortizing
the fees using the effective interest method over the term of the related debt.

Interest Rate Protection Agreement

     Currently,  the Company uses interest rate caps to hedge the variability in
interest payments  associated with its Variable-Rate  Secured Borrowing.  During
1998, the Financial  Accounting  Standards  Board  ("FASB")  issued SFAS No. 133
"Accounting for Derivative  Instruments and Hedging  Activities" ("FAS 133"). In
June 1999, the FASB issued SFAS No. 137, "Accounting for Derivative  Instruments
and Hedging  Activities-Deferral  of the  Effective  Date of FASB  Statement No.
133". In June 2000, the FASB issued SFAS 138, "Accounting for Certain Derivative
Instruments and Certain Hedging  Activities,  an amendment of FASB Statement No.
133".  Prior to FAS 133, the Company  capitalized  the  purchase  price of these
interest  rate caps and  amortized the amount over the term of the interest rate
cap. The Company has determined that these interest rate caps are effective cash
flow hedges  under FAS 133.  From  January 1, 2001  through  June 30,  2001,  in
accordance with FAS 133, all changes in the fair value of the interest rate caps
related to intrinsic value were recorded in other  comprehensive  income ("OCI")
and all  changes in fair value  related  to time  value  were  recorded  through
earnings as those changes in fair value were considered  ineffective.  Beginning
July 1, 2001, the Company recorded all changes in fair value (both intrinsic and
time value)  through OCI in accordance  with a FASB  Derivatives  Implementation
Group interpretation. Amounts recorded in OCI will be reclassified into earnings
in the period in which earnings are affected by the hedged cash flows,  which is
monthly as the Variable-Rate Secured Borrowing's interest rate resets monthly to
one-month LIBOR as does the interest rate cap. Upon the termination of a hedging
relationship, the amount in OCI will be amortized over the remaining life of the
previously hedged cash flows. The Company adopted FAS 133 on January 1, 2001. In
accordance  with the  transition  provisions of FAS 133, the Company  recorded a
cumulative-effect-type adjustment of $(135,142) in earnings to recognize at fair
value the  interest  rate caps  designated  as cash flow hedges as of January 1,
2001. As of December 31, 2001, the Company had recorded $(1,073,392) in earnings
and  $(383,200)  in OCI.  This loss is  reflected  in Hedging Loss on the income
statement  and the interest rate cap is carried as a part of Other Assets on the
balance sheet.

Bankruptcy Accounting during Chapter 11 Proceedings

     Liabilities Subject to Chapter 11 Proceedings

     Liabilities which were subject to Chapter 11 proceedings,  including claims
that became  known after the  Petition  Date,  were  reported at their  expected
allowed  claim  amount  in  accordance   with  SFAS  No.  5,   "Accounting   for
Contingencies".  To the extent that the amounts of claims changed as a result of
actions in the Chapter 11 or other factors,  the recorded  amount of liabilities
subject to the Chapter 11 proceeding  was adjusted.  The gain or loss  resulting
from the entries to record the adjustment was recorded as a reorganization item.

     Reorganization Items

     Reorganization items were items of income and expense that were realized or
incurred by CRIIMI MAE because it was in  reorganization.  These  included,  but
were not limited, to the following:

o Short-term interest income that would not have been earned but for the Chapter
  11 proceedings.
o Professional fees and similar types of expenditures directly relating to the
  Chapter 11 proceedings.
o Employee Retention Program costs and severance payments.
o Loss accruals or realized gains or losses resulting from activities of the
  reorganization process such as the sale of certain assets, rejection of
  certain executory contracts and the write-off of debt issuance costs and debt
  discounts.

<PAGE>

     During the years ended  December  31,  2001,  2000,  and 1999,  the Company
recorded  reorganization  items,  as  summarized  below,  due to the  Chapter 11
filings of CRIIMI MAE, CM Management and Holdings II.
<TABLE>
<CAPTION>
 Reorganization Items                                        2001                     2000                  1999
 --------------------                                  ---------------         ---------------        ---------------
 <S>                                                   <C>                     <C>                    <C>
 Short-term interest income                             $  2,491,311            $   6,850,362         $    1,518,667
 Professional fees                                        (3,870,185)              (9,317,772)           (17,822,154)
 Employee Retention Program                                       --                 (851,948)            (1,589,236)
 Other                                                      (800,875)              (1,136,319)            (3,005,405)
 Excise tax accrued                                               --                 (495,000)            (1,105,000)
                                                       ---------------         ---------------        ---------------
    Subtotal                                              (2,179,749)              (4,950,677)           (22,003,128)
 Impairment on CMBS regarding Reorganization (2)                  --              (15,832,817)          (156,896,831)
 Net recovery (loss) on real estate owned (1)                366,529                 (924,283)                    --
 Net gain on sale of CMBS                                         --                1,481,029                     --
 Loss on originated loans                                         --              (45,845,712)                    --
                                                       --------------          ---------------        ---------------
 Total Reorganization Expense, net                      $ (1,813,220)           $ (66,072,460)         $(178,899,959)
                                                       ==============          ================       ===============
</TABLE>

(1) The Company  recognized  impairment  on its  investment  in real estate
owned in 2000. This asset was sold in July 2000.

(2) The Company recognized  impairment on the CMBS subject to the CMBS Sale
in 1999 and additional impairment on the remaining CMBS subject to the CMBS Sale
in 2000. The final bonds subject to the CMBS Sale were sold in November 2000.

Shareholders' Equity

     On October 17, 2001, CRIIMI MAE effected a one-for-ten reverse stock split.
All share and per share  information  in these Notes to  Consolidated  Financial
Statements  and the  accompanying  Consolidated  Financial  Statements  has been
retroactively  adjusted to reflect the reverse  stock split.  Share  information
adjustments  include,  without  limitation,  adjustments to the number of common
shares  issued and  outstanding,  issued as dividends on and upon  conversion of
shares of preferred stock, and issuable under outstanding  options. See Notes 10
and 11 for further discussion.

Per Share Amounts

     Basic earnings per share ("EPS")  amounts for 2001, 2000 and 1999 represent
net income, or loss,  available to common  shareholders  divided by the weighted
average common shares  outstanding  during the year. The weighted average common
shares outstanding  amounts include the weighted average amount of common shares
payable  or  paid to  preferred  shareholders  related  to  dividends  as of the
respective  dividend  declaration dates.  Diluted EPS amounts for 2001, 2000 and
1999 represent basic EPS adjusted for dilutive common stock  equivalents,  which
for CRIIMI MAE could  include stock  options and certain  series of  convertible
preferred stock. See Note 12 for a reconciliation of basic EPS to diluted EPS.

Income Taxes

     CRIIMI MAE has elected to qualify as a REIT for tax purposes under Sections
856-860 of the Internal Revenue Code for the 2001 and 2000 tax years. To qualify
for tax  treatment as a REIT under the Internal  Revenue  Code,  CRIIMI MAE must
satisfy certain criteria including certain requirements  regarding the nature of
their ownership,  assets, income and distributions of taxable income. The income
from certain CRIIMI MAE activities,  including  origination and servicing,  will
not be  considered  as  Qualifying  Income under  Section  856.  CRIIMI MAE will
monitor and minimize the levels of  Non-Qualifying  Income in order to meet REIT
qualification criteria. See Note 1 for additional discussion.

     During  the  year  ended  December  31,  2001,  no  excess   inclusion  was
distributed. During the year ended December 31, 2000, excess inclusion income of
$0.1474  per common  share was  distributed  with the Series G  Preferred  Stock
dividend.   Excess   inclusion   income   results  from  the   Company's   prior
resecuritization of mortgage assets in its portfolio. A shareholder's  allocable
share of excess  inclusion  represents the minimum taxable income  reportable by
the  shareholder for that year; it may not be offset by an NOL and may represent
Unrelated  Business  Taxable Income ("UBTI") for some  shareholders.  The excess
inclusion distributed in 2000 was generated in 1999.

<PAGE>

Consolidated Statements of Cash Flows

     Since the  consolidated  statements  of cash flows are  intended to reflect
only cash receipt and cash payment activity, the consolidated statements of cash
flows do not reflect  investing and financing  activities that affect recognized
assets and liabilities while not resulting in cash receipts or cash payments. On
the Effective  Date, cash of  approximately  $127.2 million was used to payoff a
portion  of the  aggregate  principal  relating  to debt  incurred  prior to the
Chapter 11 filing.  The aggregate  New Debt  principal of  approximately  $429.2
million  was  incurred  by the  Company on the  Effective  Date to  satisfy  the
remaining  principal  owed on the debt incurred  prior to the Chapter 11 filing.
The cash outflow of $127.2 million is included in principal  payments on secured
borrowings and other debt obligations in the financing activities section of the
consolidated  statements  of cash flows.  The  aggregate  New Debt  principal of
$429.2 million  resulted in no cash inflow to the Company and,  accordingly,  is
not  reflected  in the  consolidated  statements  of  cash  flows.  Also  on the
Effective Date, cash of  approximately  $44.7 million was used to payoff accrued
interest on debt incurred prior to the Chapter 11 filing,  cash of approximately
$3.9 million was used to pay an emergence financing origination fee related to a
portion of the New Debt, and cash of approximately  $7.4 million was used to pay
accrued payables owed by the Company related to the Chapter 11 filing. This cash
activity is reflected in the operating  activities  section of the  consolidated
statements of cash flows within the net income line or the  (decrease)  increase
in payables and accrued expenses line.

     In 2000,  based upon  stipulation  agreements with certain of the Company's
lenders, the Company reflected the receipt of interest on certain of its CMBS of
$82.0  million,  along with the  corresponding  pay down of interest  payable of
$50.2 million.  Net cash flow of $32 million was used to pay down  approximately
$19 million debt related to the respective variable rate financing facilities of
those  lenders.  Additionally,  CMBS asset sales  generated  approximately  $418
million in  proceeds,  approximately  $342 million of which was used to pay down
debt. Only the net proceeds were remitted to the Company,  and as such, only the
net proceeds are reflected in the consolidated statements of cash flows.

     The following is the supplemental cash flow information:
<TABLE>
<CAPTION>

                                                                 2001                2000                1999
                                                                 ----                ----                ----
    <S>                                                          <C>                 <C>                 <C>
    Cash paid for interest                                  $  129,864,255      $  137,110,022      $  112,561,866
    Non-cash investing and financing activities:
         Fair value of assets acquired                           8,784,105                  --                  --
         Fair value of liabilities acquired                       (569,991)                 --                  --
         Fair value of debt assumed                             (7,130,638)                 --                  --

</TABLE>


<PAGE>

Comprehensive Income

     Comprehensive  income  includes net  earnings as currently  reported by the
Company  (before  dividends  accrued or paid on preferred  shares)  adjusted for
other comprehensive  income. Other comprehensive income for the Company consists
of (a) changes in unrealized  gains and losses related to the Company's CMBS and
Other MBS and Insured  Mortgage  Securities  which were  disposed of or impaired
during the period with the  resulting  gain or loss  reflected  in net  earnings
(reclassification  adjustments),  (b) the change in the unrealized  gain or loss
related to those  investments  that were not disposed of or impaired  during the
period,  and (c) certain changes in the fair value of the interest rate caps the
Company accounts for under SFAS 133. The table below details other comprehensive
income for the periods presented:

<TABLE>
<CAPTION>
                                                                         2001              2000               1999
                                                                         ----              ----               ----
<S>                                                                      <C>               <C>                <C>
Reclassification adjustment for losses (gains) from dispositions
    included in net income                                            $   350,066      $    282,723       $   (760,694)
Reclassification adjustment for impairment losses recognized on
    CMBS included in net income                                              --         180,177,910        111,745,210
Unrealized holding (losses) gains on mortgage securities arising
    during the period                                                  (3,390,785)       23,941,476        (67,150,995)
Unrealized (losses) gains on interest rate cap                           (383,200)               --                 --
                                                                      ------------     ------------       ------------
Net adjustment to other comprehensive income                          $(3,423,919)     $204,402,109       $ 43,833,521
                                                                      ============     ============       ============
</TABLE>

Change in Accounting Principle related to Special Servicing Fee Revenue
Recognition

     As of July 1, 2001,  CMSLP  changed its  accounting  policy  related to the
recognition of special servicing fee revenue. Special servicing fees are paid to
CMSLP when  mortgage  loans  collateralizing  CMBS owned by the  Company  are in
default.  Typically,  CMSLP  is paid 25 basis  points  of the  unpaid  principal
balance of the defaulted mortgage loans for as long as the loans are in default.
The fees are paid to compensate the special  servicer for managing and resolving
the  defaulted  loan.  Historically,  CMSLP had deferred  special  servicing fee
revenue and recorded that revenue into earnings using the method consistent with
the Company's  policy of recognizing  interest  income over the life of the CMBS
owned by CRIIMI  MAE on the level  yield  basis.  CMSLP is now  recording  these
special servicing fees in earnings on a current basis. This change in accounting
policy was made to better  match  revenues  and  expenses  related to the actual
special servicing of the defaulted loans. The special servicing fees are paid on
a current  basis by the trusts  holding the  mortgage  loans and those  payments
directly reduce the cash flow paid on the Company's CMBS. Therefore, the special
servicing  fees paid are built into the GAAP yields the  Company  uses to record
interest  income  on its  CMBS.  CMSLP  has  changed  its  accounting  policy to
recognize  the  special  servicing  fees in  earnings  on a current  basis as it
believes this policy better matches the special servicing fees it earns with the
direct costs  expended  for special  servicing  the loans.  The CMBS and special
servicing contracts are separate legal instruments or contracts.

     The Company is required to reflect this change in accounting principle as a
cumulative  catch-up  as of  January  1,  2001.  As of January 1, 2001 CMSLP had
approximately  $2.0 million in deferred revenue related to the special servicing
fee revenue.  As a result, this amount was recorded into income and is reflected
as a cumulative  change in accounting  principle for the year ended December 31,
2001. The results of operations for the year ended December 31, 2001 reflect the
recognition of special  servicing fee revenue on a current basis.  As previously
discussed,  prior to July 1,  2001,  CMSLP was  accounted  for using the  equity
method and, as a result, the impact of the new accounting  principle (except for
the cumulative  catch-up) is reflected in equity in income from  investments for
the six  months  ended  June 30,  2001 and on a  consolidated  basis for the six
months  ended  December 31, 2001.  The  proforma net income  disclosures  on the
income  statement  related to this change in  accounting  principle  present the
Company's net income assuming this new accounting  principle had been applied to
those  periods  presented.  Net income would have been $2.8 million less for the
year ended December 31, 2001 had this new accounting principle not been adopted.

New Accounting Statements

<PAGE>

     In July 2000,  FASB issued EITF 99-20  "Recognition  of Interest Income and
Impairment  on  Purchased  and  Retained  Beneficial  Interests  in  Securitized
Financial  Assets."  This  statement  requires  that all changes in  assumptions
regarding  expected  future  cash flows  related to such assets that are used to
calculate  income  yields be recognized  prospectively  through  revised  income
yields  unless  impairment  is  required  to be  recognized,  at  which  time an
investment  is written  down to fair value.  EITF 99-20  impacts  the  Company's
income recognition for its CMBS portfolio.  Previously,  in accordance with SFAS
No. 91 "Accounting for Nonrefundable  Fees and Costs Associated with Originating
or Acquiring  Loans and Initial  Direct Costs of Leases" ("FAS 91"), the Company
recognized changes in income yields due to changes in expected prepayment speeds
as a cumulative  catch-up in the period of change.  In addition,  in  accordance
with American Institute of Certified Public Accountants Practice Bulletin 6, the
Company  recognized  changes related to expected future cash flows due to credit
losses  prospectively  if the change  resulted in fewer  credit  losses and as a
cumulative  catch-up  if the  change  resulted  in more  credit  losses,  unless
impairment was required to be recognized at which time the CMBS was written down
to fair  value.  EITF  99-20 was  adopted  by the  Company  on April 1, 2001 and
resulted in no adjustment to interest  income or impairment.  Additionally,  the
Company does not expect the adoption of EITF 99-20 to have a significant  impact
on the Company's CMBS income recognition in the future.

     In June of  2001,  the  FASB  issued  SFAS  No.  142  "Goodwill  and  Other
Intangible  Assets"  ("FAS 142").  FAS 142,  among other  things,  prohibits the
amortization of existing  goodwill and certain types of other intangible  assets
and establishes a new method of testing goodwill for impairment.  Under FAS 142,
the method for testing  goodwill for impairment will occur at the reporting unit
level (as  defined in FAS 142) and will be  performed  using a fair value  based
approach.  FAS 142 will be  effective  for the  Company on January 1, 2002.  The
transition  provisions of FAS 142 require the Company to reclassify $8.4 million
of intangible  assets  related to the Merger in 1995 to goodwill.  When combined
with the current  goodwill of $1.4 million,  this will result in $9.8 million of
goodwill on the Company's books. Effective upon adoption on January 1, 2002, the
Company  wrote off this goodwill and recorded a resulting  impairment  charge of
approximately $9.8 million for this change in accounting principle. The goodwill
relates to the Portfolio  Investment reporting unit (as defined in Note 17). The
fair value of the reporting  unit was determined  using a market  capitalization
approach and the impairment was primarily a result of the  significant  decrease
in the  Company's  common  stock price since the Merger in 1995.  This change in
accounting  principle will reduce the Company's annual  amortization  expense by
approximately $2.8 million.


<PAGE>

4.  FAIR VALUE OF FINANCIAL INSTRUMENTS

     The following estimated fair values of CRIIMI MAE's consolidated  financial
instruments  are presented in accordance  with GAAP,  which define fair value as
the  amount at which a  financial  instrument  could be  exchanged  in a current
transaction between willing parties, in other than a forced sale or liquidation.
These values do not represent the liquidation  value of the Company or the value
of the securities under a portfolio liquidation.
<TABLE>
<CAPTION>

                                                    As of December 31, 2001         As of December 31, 2000
                                                Amortized Cost     Fair Value    Amortized Cost    Fair Value
                                                --------------     ----------    --------------    ----------
<S>                                             <C>                <C>           <C>               <C>
ASSETS:
Subordinated CMBS and Other MBS (1)               $ 546,981,955   $ 536,204,992    $ 109,256,045  $ 109,266,975
Subordinated CMBS pledged to Securitized
   Mortgage Obligation - CMBS                       283,993,690     296,477,050      281,278,097    283,336,965
Subordinated CMBS pledged to creditors                       --              --      464,242,328    464,242,328
Insured mortgage securities                         350,982,991     343,091,303      390,840,884    385,751,407
Interest rate protection agreement                      448,789          65,589          157,323         22,181
Servicing other assets                             See footnote    See footnote               --             --
                                                            (2)             (2)
Servicing cash and cash equivalents                   6,515,424       6,515,424               --             --
Restricted cash and cash equivalents                 38,214,277      38,214,277       95,846,001     95,846,001
Other cash and cash equivalents                      10,783,449      10,783,449      106,569,778    106,569,778

LIABILITIES:
Variable-rate secured borrowing                     244,194,590     244,194,590               --             --
Series A senior secured notes                        99,505,457      95,276,475               --             --
Series B senior secured notes                        63,937,383      54,826,306               --             --
Securitized mortgage obligations:
   Collateralized bond obligations-CMBS             283,047,470     296,477,050      280,520,265    283,336,965
   Collateralized mortgage obligations-
       insured mortgage securities                  326,558,161     351,983,544      364,649,925    378,303,100
Mortgage Payable                                      7,109,252       7,109,252               --             --
Variable-rate secured borrowings-CMBS                        --              --      367,535,895            N/A
Senior unsecured notes                                       --              --      100,000,000     94,750,000
Other financing facilities                                   --              --       91,049,522            N/A

</TABLE>

(1) This amount includes  approximately  $8.6 million of amortized cost and
$8.5  million of fair value  related to Other MBS as of  December  31,  2001 and
approximately  $4.3 million of amortized  cost and fair value as of December 31,
2000.
(2) CMSLP owns Subordinated CMBS and interest-only strips with an aggregate
amortized  cost  basis  and  fair  value  of  $2.3  million  and  $2.4  million,
respectively, as of December 31, 2001.

     The following  methods and assumptions were used to estimate the fair value
of each class of financial instruments:

Subordinated CMBS and Other Mortgage-Backed Securities

     The Company  calculated the estimated fair market value of its Subordinated
CMBS  portfolio as of December 31, 2001 and 2000,  using a discounted  cash flow
methodology.  The  projected  cash  flows  used by the  Company  were  the  same
collateral  cash  flows  used to  calculate  the  anticipated  weighted  average
unleveraged  yield to  maturity.  The cash  flows were then  discounted  using a
discount rate that, in the Company's  view, was  commensurate  with the market's
perception of risk and value. The Company used a variety of sources to determine
its discount rate including:  (i)  institutionally  available  research reports,
(ii)  recent  trades,   and  (iii)   communications   with  dealers  and  active
Subordinated  CMBS investors  regarding the valuation of comparable  securities.
Since the Company calculated the estimated fair market value of its Subordinated
CMBS  portfolio as of December 31, 2001 and 2000,  it has disclosed the range of
discount rates by rating  category used in determining  these fair market values
in Note 5.

     The CMBS market was adversely affected by the turmoil which occurred in the
capital  markets  commencing in late summer of 1998 that caused spreads  between
CMBS  yields  and  the  yields  on  U.S.  Treasury  securities  with  comparable
maturities to widen,  resulting in a decrease in the value of CMBS. As a result,
the  creation  of new CMBS  and the  trading  of  existing  CMBS  came to a near
standstill.  Buying  and  trading  activity  in

<PAGE>

investment  grade CMBS and new  issuances of CMBS have  recovered  over the
last several years. The market for Subordinated CMBS has,  however,  been slower
to  recover.  It is  difficult,  if not  impossible,  to predict  when or if the
Subordinated CMBS market will recover to spring 1998 levels.  Even if the market
for  Subordinated  CMBS recovers,  the liquidity of such market has historically
been limited.  Additionally,  during adverse market conditions, the liquidity of
such market has been severely limited.  Therefore,  management's estimate of the
value of the Company's Subordinated CMBS could vary significantly from the value
that could be realized in a current  transaction  between a willing  buyer and a
willing seller in other than a forced sale or liquidation.

     The fair  value of the other  MBS is an  estimate  based on the  indicative
market price from publicly  available  pricing  services.  The Company  normally
applies a slight  discount  to such  prices as the  Company  believes  it better
reflects fair value  between  willing  buyers and sellers due to the  relatively
smaller sizes of this component of the Trading Assets.

Insured Mortgage Securities

     The Company  calculated  the  estimated  fair  market  value of its insured
mortgage  securities  portfolio  as of  December  31,  2001  and  2000,  using a
discounted  cash  flow  methodology.  The cash  flows  were  discounted  using a
discount rate that, in the Company's  view, was  commensurate  with the market's
perception of risk and value. The Company used a variety of sources to determine
its discount rate including: (i) institutionally  available research reports and
(ii)  communications with dealers and active insured mortgage security investors
regarding the valuation of comparable securities.

Servicing, Restricted and Other Cash and Cash Equivalents

     The carrying amount  approximates  fair value because of the short maturity
of these instruments.

Obligations Under Financing Facilities

     The fair value of the securitized  mortgage  obligations as of December 31,
2001 and 2000 was calculated using a discounted cash flow methodology similar to
the discussion on Subordinated  CMBS above.  The fair values of the Series A and
Series B Senior Secured Notes are based on quoted market prices from  investment
banking institutions. The carrying amount of the Variable-Rate Secured Borrowing
approximates  fair value  because  the current  rate on the debt resets  monthly
based on market rates. The fair value of the mortgage payable is estimated based
on current market interest rates of mortgage debt.

Interest Rate Protection Agreement

     The fair value of the  interest  rate  protection  agreement  used to hedge
CRIIMI MAE's Variable-Rate Secured Borrowing is the estimated amount that CRIIMI
MAE would  receive to terminate  the agreement as of December 31, 2001 and 2000,
taking into account current interest rates and the current  creditworthiness  of
the  counterparty.  The amount was determined based on a quote received from the
counterparty to the agreement.

<PAGE>

5.       SUBORDINATED CMBS

         As of December 31, 2001, the Company owned, for purposes of GAAP, CMBS
rated from A to CCC and unrated with a total fair value amount of approximately
$824 million (representing approximately 63% of the Company's total consolidated
assets), an aggregate amortized cost of approximately $822 million, and an
aggregate face amount of approximately $1.6 billion. Such CMBS represent
investments in CBO-1, CBO-2 and Nomura. The December 31, 2001 total fair value
includes approximately 33% of the Company's CMBS which are rated BB+, BB, or
BB-, 23% which are rated B+, B, B- or CCC and 8% which are unrated. The
remaining approximately 36% represents investment grade securities that the
Company reflects on its balance sheet as a result of CBO-2. The weighted average
interest rate of these CMBS as of December 31, 2001 was 6.3% and the weighted
average life was 13 years.

         The aggregate investment by the rating of the Subordinated CMBS is as
follows:

<TABLE>
<CAPTION>
                                   Weighted                                     Discount Rate or     Amortized Cost   Amortized Cost
             Face Amount as of  Average Pass-    Weighted    Fair Value as of   Range of Discount     as of 12/31 01  as of 12/31/00
Security        12/31/01 (in    Through Rate   Average Life    12/31/01 (in       Rated Used to       (in millions)   (in millions)
 Rating          millions)       12/31/01          (1)           millions)     Calculate Fair Value        (3)              (4)
---------   ------------------  -------------  ------------  ----------------  --------------------  ---------------  --------------
<S>         <C>                 <C>            <C>           <C>               <C>                   <C>              <C>

A+ (2)(7)         $   62.6         7.0%          4 years        $ 61.8                    7.3%           $  58.7           $  58.0

BBB+ (2)(7)          150.6         7.0%         10 years         135.6                    8.6%             131.1             130.1

BBB (2)(7)           115.2         7.0%         10 years          99.1                    9.2%              94.2              93.2

BB+                  319.0         7.0%         11 years         209.8             12.8%-13.1%             219.0             215.5

BB                    70.9         7.0%         12 years          44.2                   13.6%              46.0              45.4

BB-                   35.5         7.0%         12 years          20.5                   14.6%              20.5              21.3

B+                    88.6         7.0%         13 years          45.2                   16.4%              45.2              48.6

B                    177.2         7.0%         14 years          83.7             17.1%-17.4%              83.7              87.9

B-                   118.3         7.1%         15 years          48.0             19.7%-20.1%              48.1              51.3

CCC                   70.9         7.0%         16 years          13.1                   40.0%              13.1              17.0

Unrated/Issuer's     362.8         4.0%         18 years          63.2             35.0%-53.7%              62.8              82.2
Equity
                 ----------                                    --------                                  --------         ---------
Total (5)         $1,571.6         6.3%         13 years       $ 824.2 (6)                                $822.4 (5)       $ 850.5
                 ==========                                    ========                                  ========         =========

</TABLE>

(1)       Weighted average life represents the weighted average expected
          life of the Subordinated CMBS prior to consideration of losses,
          extensions or prepayments.

(2)       In connection with a resecuritization of CMBS effected by the
          Company in 1998 ("CBO-2"), $62.6 million (originally A rated,
          currently A+ rated) and $60.0 million (originally BBB rated, currently
          BBB+ rated) face amount of investment grade securities were sold with
          call options and $345 million (originally A rated, currently A+ rated)
          face amount were sold without call options. Also in connection with
          CBO-2, in May 1998, the Company initially retained $90.6 million
          (originally BBB rated, currently BBB+ rated) and $115.2 million
          (originally BBB- rated, currently BBB rated) face amount of
          securities, both with call options, with the intention to sell the
          securities at a later date. Such sale occurred March 5, 1999. Since
          the Company retained call options on certain sold bonds (the A+, BBB+
          and BBB bonds), the Company did not surrender control of these assets
          pursuant to the requirements of FAS 125 and thus these securities are
          accounted for as a financing and not a sale. Since the transaction is
          recorded as a partial financing and a partial sale, CRIIMI MAE has
          retained the securities with call options in its Subordinated CMBS
          portfolio reflected on its balance sheet.

<PAGE>

(3)       Amortized cost reflects approximately $30.8 million of
          impairment charges related to certain CMBS (the CBO-1 B- and unrated
          bonds and the CBO-2 BB- through unrated bonds) which were recognized
          in the fourth quarter of 2001 and approximately $3.9 million of
          impairment charges related to certain CMBS (the CBO-1 B- and unrated
          bonds and the Nomura unrated bond) which were recognized in the third
          quarter of 2001, in addition to the losses discussed in (4) below.
          These impairment charges are discussed later in this section.

(4)       Amortized cost reflects $143.5 million of non-cash impairment
          charges related to the retained CMBS (excluding the A+ and BBB+ rated
          tranches) which were recognized in the fourth quarter of 2000. At
          December 31, 2000, the Company revised its overall expected loss
          estimate related to its CMBS portfolio from $225 million to $298
          million with such total losses expected to occur over the expected
          life of the investment. In addition, the Company expected such revised
          losses to occur sooner than originally expected because of the slowing
          U.S. economy and recession. This revised loss estimate was a result of
          an increase in the number of loans that were placed in special
          servicing due primarily to monetary loan defaults. As of December 31,
          2000, $310.6 million in mortgage loans underlying the Company's CMBS
          portfolio were in special servicing. As of March 31, 2001, this amount
          had grown to $443.5 million, or 2.2% of the mortgage loans underlying
          the CMBS portfolio, an increase from 1.3% when the Company revised its
          yields as of April 1, 2000.

(5)       See Notes 1 and 9 to Notes to Consolidated Financial Statements for
          information regarding the Subordinated CMBS for tax
          purposes.

(6)       As of December 31, 2001, the aggregate fair values of the CBO-1,
          CBO-2 and Nomura bonds were approximately $37.7 million,
          $777.8 million and $8.7 million, respectively.

(7)       In June 2001, Standard & Poor's upgraded its ratings on the
          following CMBS: The Company's CBO-2 CMBS with original ratings of A,
          BBB and BBB- were upgraded to A+, BBB+ and BBB, respectively.

     Mortgage Loan Pool

     CRIIMI MAE,  through  CMSLP,  performs  servicing  functions on  commercial
mortgage  loans totaling $19.3 billion and $20.2 billion as of December 31, 2001
and 2000, respectively.  The mortgage loans underlying CRIIMI MAE's Subordinated
CMBS  portfolio  were secured by properties  of the types and in the  geographic
locations identified below:

<TABLE>
<CAPTION>
                             12/31/01          12/31/00                                        12/31/01          12/31/00
       Property Type      Percentage(i)     Percentage(i)          Geographic Location (ii)  Percentage(i)     Percentage(i)
       -------------      -------------     -------------          ------------------------  -------------     -------------
       <S>                <C>               <C>                    <C>                       <C>               <C>
       Retail.........          30%               30%              California..............        16%               17%
       Multifamily....          29%               30%              Texas...................        13%               13%
       Hotel..........          14%               14%              Florida.................         8%                8%
       Office.........          13%               13%              New York................         5%                5%
       Other (iv).....          14%               13%              Pennsylvania............         5%                5%
                               ----              ----              Other(iii)..............        53%               52%
           Total......         100%              100%                                             ----              ----
                               ====              ====                 Total................       100%              100%
                                                                                                  ====              ====


</TABLE>

(i)      Based on a percentage of the total unpaid principal balance of the
         underlying loans.
(ii)     No significant concentration by region.
(iii)    No other individual state makes up more than 5% of the total.
(iv)     The Company's ownership interest in one of the 20 CMBS transactions
         underlying CBO-2 includes subordinated CMBS in which the Company's
         exposure to losses arising from certain healthcare and senior housing
         mortgage loans is limited by other subordinated CMBS (referred to
         herein as the "Subordinated Healthcare/Senior-Housing CMBS").  The
         Subordinated Healthcare/Senior-Housing CMBS are not owned by and are
         subordinate to CRIIMI MAE's CMBS.  As a result, CRIIMI MAE's investment
         in such underlying CMBS will only be affected if interest shortfalls
         and/or realized losses on such healthcare and senior housing mortgage
         loans are in excess of the Subordinated Healthcare/Senior-Housing CMBS.
         As of February 28, 2002, the Company reviewed the loans currently under
         surveillance by the healthcare and senior housing mortgage loans
         servicer.  Based on its review, the Company does not believe that the
         aggregate remaining shortfalls and/or realized losses on such
         healthcare and senior housing mortgage loans currently in special
         servicing is greater than the current outstanding Subordinated
         Healthcare/Senior-Housing CMBS.  As a result, the Company's current
         estimate of future credit losses as of December 31, 2001 does not
         include any provision for shortfalls and/or realized losses arising
         from the healthcare and senior housing mortgage loans in this CMBS
         transaction.  It should be noted that changes in the future performance
         of the healthcare and senior housing mortgage loans that result in
         greater shortfalls and/or losses may result in future losses and/or
         possible impairment to CRIIMI MAE's CMBS.

     Specially Serviced Mortgage Loans

     CMSLP performs special  servicing  services on the loans underlying  CRIIMI
MAE's  Subordinated CMBS portfolio.  A special servicer typically provides asset
management   and   resolution   services  with  respect  to   nonperforming   or
underperforming  loans within a pool of mortgage loans.  When serving as special
servicer of a mortgage loan pool,  CMSLP has the  authority,  subject to certain
restrictions in the CMBS pool documents, to deal directly with any borrower that
fails to perform under certain terms of

<PAGE>

its mortgage loan,  including the failure to make  payments,  and to manage
any loan workouts and foreclosures.  As special servicer, CMSLP earns fee income
on services provided in connection with any loan servicing function  transferred
to it from the master  servicer.  CRIIMI MAE  believes  that because it owns the
first  loss  unrated  or lowest  rated  bond of all but one  CMBS,  CMSLP has an
incentive  to quickly  resolve any loan  workouts.  As of December  31, 2001 and
2000,  specially  serviced  mortgage loans  included in the commercial  mortgage
loans described above are as follows:
<TABLE>
<CAPTION>
                                                                                    12/31/01                    12/31/00
                                                                                    --------                    --------
                     <S>                                                            <C>                         <C>
                     Specially serviced loans due to monetary default (a)       $701.7 million              $259.1 million
                     Specially serviced loans due to covenant default/other       90.0 million                51.5 million
                                                                                ---------------             ---------------
                     Total specially serviced loans (b)                         $791.7 million              $310.6 million
                                                                                ===============             ===============
                     Percentage of total mortgage loans (b)                         4.1%                         1.5%
                                                                                ===============             ===============
</TABLE>

(a) Includes $94.5 million and $48.3 million,  respectively, of real estate
    owned by underlying  trusts.

(b) As of February  28,  2002,  total  specially  serviced  loans were $902
    million, or 4.8% of the total mortgage loans (as discussed further below).

     The specially  serviced mortgage loans as of December 31, 2001 were secured
by properties of the types and located in the states identified below:


<TABLE>
<CAPTION>

                 Property Type      $ (in millions)   Percentage             Geographic Location     $ (in millions)   Percentage
                 -------------      ---------------   ----------             -------------------     ---------------   ----------
                 <S>                <C>               <C>                    <C>                     <C>               <C>

                 Hotel............       $  407.8          51%               Florida..............      $ 109.8            14%
                 Retail...........          241.0          30%               Texas................        103.6            13%
                 Multifamily......           44.9           6%               Oregon...............         94.8            12%
                 Office...........           44.7           6%               Georgia..............         41.4             5%
                 Healthcare.......           31.7           4%               California...........         41.2             5%
                 Industrial.......           14.1           2%               New York.............         40.4             5%
                 Other............            7.5           1%               Other................        360.5            46%
                                          -------         ----                                          -------           ----
                     Total........        $ 791.7         100%                  Total.............      $ 791.7           100%
                                          =======         ====                                          =======           ====

</TABLE>

     As reflected above, as of December 31, 2001,  approximately $407.8 million,
or 51%, of the specially  serviced  mortgage loans represent  mortgages on hotel
properties. The hotel properties are geographically diverse, with a mix of hotel
property types and franchise affiliations.  Of the mortgage loans underlying the
Company's  CMBS,  there are loans  representing  a total  outstanding  principal
amount of $1.3  billion  secured  by limited  service  hotels,  of which  $278.2
million,  or 21.5%,  are in special  servicing as of December 31, 2001.  Limited
service  hotels are generally  hotels with  room-only  operations or hotels that
offer a bedroom and bathroom for the night, but limited other amenities, and are
often in the budget or economy  group.  Of the  mortgage  loans  underlying  the
Company's  CMBS,  there are loans  representing  a total  outstanding  principal
amount of $1.51 billion secured by full service hotels, of which $129.6 million,
or 8.6%, are in special  servicing as of December 31, 2001.  Full service hotels
are generally  mid-price,  upscale or luxury hotels with  restaurant  and lounge
facilities and other amenities.

     Also,  as of December  31,  2001,  of the  mortgage  loans  underlying  the
Company's  CMBS,  there are loans  representing  a total  outstanding  principal
amount of $5.7  billion  secured by retail  properties,  of which  approximately
$241.0 million are in special servicing. The retail loans comprise approximately
30% of the  specially  serviced  loans as of December 31,  2001.  The Company is
monitoring its exposure to certain retailers that are currently in bankruptcy or
are otherwise experiencing financial difficulties.

     As of February 28, 2002,  specially  serviced loans totaled $902.0 million.
During the period September 30, 2001 (the date the Company last revised the loss
estimates)  through  February  28,  2002,  there was a $292.7  million,  or 48%,
increase in specially  serviced  loans due to additional  defaults on underlying
mortgage loans secured by a variety of property  types,  but primarily hotel and
retail  properties.  The properties  that secure these loans have been adversely
impacted by a variety of factors,  including the economic slowdown and recession
which,  especially for hotel  properties,  has been exacerbated by the terrorist
attacks of September  11, 2001. Of the monetary  defaults on the mortgage  loans
underlying the Company's CMBS which  transferred into special  servicing between
September 30, 2001 and February 28, 2002, an approximate $358.9 million, or 76%,
are loans secured by hotel  properties.  During this same period,  approximately
$132.3  million of loans in special  servicing due to monetary  default and real
estate owned transferred out of special

<PAGE>

servicing due to correction,  dispositions or sale, resulting in a total
special servicing  portfolio of $902.0 million as of February 28, 2002, of which
$834.1 million reflect monetary defaults and real estate owned.

     Of the  transfers  into  special  servicing  due to monetary  default  from
September 30, 2001 through February 28, 2002, $255 million were comprised of six
different borrowing relationships more fully described as follows:

         o    25 hotel loans totaling $98.3 million spread across three
              CMBS transactions. In one of these CMBS transactions, which
              contains 10 loans totaling $38.8 million, the Company holds only a
              25% ownership interest in the non-rated class. The 25 loans were
              transferred into special servicing due to the bankruptcy filing of
              each special purpose borrowing entity and their parent company in
              December 2001. The parent company was able to obtain
              debtor-in-possession financing that is expected to pay
              post-petition interest on $71 million of these loans through
              December 2002. The remaining $27 million of loans were deemed by
              the borrower to be highly leveraged, and therefore, not able to
              support additional debt. Interest will not be paid current on
              these loans.
         o    Ten loans totaling $65.0 million spread across two CMBS
              transactions secured by hotel properties in the Pacific west and
              northwest states. These loans are past due for the October 2001
              payment. The borrower has indicated that the properties have
              experienced reduced operating performance due to new competition,
              the economic recession, and reduced travel resulting from the
              September 11, 2001 terrorist attacks.  These loans are related to
              17 other loans, secured by similar properties, totaling
              approximately $78 million that transferred into special servicing
              in January 2001.
         o    Five loans totaling $46.5 million secured by hotel
              properties in Florida and Texas. The loans are past due for the
              September 2001 payment.
         o    Nine loans totaling $19.8 million secured by limited service
              hotels in the midwest. The loans are past due for the December
              2001 payment. The borrower cites reduced occupancy related to the
              recent downturn in travel as the cause for a drop in operating
              performance at the properties. CMSLP is attempting to negotiate a
              workout with the borrower.
         o    Two loans totaling $15.6 million secured by hotels in Texas.
              The loans were transferred to special servicing in December 2001
              for imminent payment default. Since that time, the borrower has
              made a payment and the loans are now due for the February 2002
              payment.
         o    Eight loans totaling $10.0 million secured by free-standing
              retail stores in Maryland and Virginia. Each property is occupied
              by a national retailer. The loans are past due for the December
              2001 payment. CMSLP has entered into a workout with the borrower
              whereby rents are being deposited directly into a lockbox.
              Additional payments are being collected to bring the loans current
              during 2002.

     For  all of  its  existing  and  recent  transfers  to  special  servicing,
including  these large  borrower  relationships,  CMSLP is pursuing remedies
available to it in order to maximize the recovery of the outstanding debt.

Appraisal Reductions and Losses on CMBS

     The effect of an appraisal  reduction  generally is that the servicer stops
advancing  interest  payments  on the  amount  by which the  aggregate  of debt,
advances and other expenses exceeds the appraisal amount, thus reducing the cash
flows to CRIIMI  MAE as the holder of the first  loss  unrated  or lowest  rated
bonds,  as if such  appraisal  reduction  was a realized  loss.  As an  example,
assuming a weighted average coupon of 6%, a $1 million appraisal reduction would
reduce net cash flows to the Company by $60,000 on an annual basis. An appraisal
reduction  may result in a higher or lower  realized  loss based on the ultimate
disposition or work-out of the mortgage loan.  Appraisal reductions for the CMBS
transactions in which the Company  retains an ownership  interest as reported by
the underlying trustees or as calculated by CMSLP* were as follows:

<TABLE>
<CAPTION>
                                                                   CBO-1           CBO-2         Nomura           Total
                                                                   -----           -----         ------           -----
<S>                                                              <C>             <C>
Year 1999                                                      $        --      $        --     $     --       $        --
Year 2000                                                        1,872,000       18,871,000           --        20,743,000
Year 2001                                                       15,599,000       31,962,000      874,000        48,435,000
                                                               -----------     ------------     --------       -----------
Cumulative Appraisal Reductions through December 31, 2001 (a)  $17,471,000      $50,833,000     $874,000       $69,178,000
                                                               ===========      ===========     ========       ===========

</TABLE>

         * Not all underlying CMBS transactions require the calculation of an
           appraisal reduction; however, where CMSLP obtains a third party
           appraisal, it calculates one.

         (a) During the period January 1, 2002 through February 28, 2002, there
             were an additional $15.7 million of appraisal reductions.

<PAGE>

     The Company's unrated  bonds/issuer's  equity from CBO-1,  CBO-2 and Nomura
are expected to experience principal write-downs. The following table summarizes
the actual  realized  losses on CMBS through  December 31, 2001 and the expected
future losses through the life of the CMBS:
<TABLE>
<CAPTION>

                                                             CBO 1          CBO 2        Nomura        Total
                                                             -----          -----        ------        -----
<S>                                                          <C>            <C>          <C>           <C>
Year 1999 actual realized losses                         $    738,000   $        --     $      --     $   738,000
Year 2000 actual realized losses                            3,201,000     1,087,000            --       4,288,000
Year 2001 actual realized losses                              545,000     8,397,000       238,000       9,180,000
                                                        -------------   -----------     ---------     -----------
Cumulative actual realized losses through the year 2001     4,484,000     9,484,000       238,000      14,206,000
Expected loss estimates for the year 2002                  29,878,000    31,915,000     1,032,000      62,825,000
Expected loss estimates for the year 2003                  18,058,000    51,619,000     1,077,000      70,754,000
Expected loss estimates for the years 2004-2006            27,676,000    94,095,000    12,896,000     134,667,000
Expected loss estimates for the year 2007-2009              5,606,000    15,508,000     7,028,000      28,142,000
Expected loss estimates for the remaining life of
   investment (for the years 2010-2027)                     7,386,000    12,794,000     3,904,000      24,084,000
                                                        -------------  ------------   -----------    ------------
Cumulative actual and expected loss estimates through
   life of CMBS                                          $ 93,088,000  $215,415,000   $26,175,000    $334,678,000
                                                        =============  ============   ===========    ============
 </TABLE>

     At  September  30,  2001,  the Company  revised its overall  expected  loss
estimate related to its CMBS portfolio from $298 million to $307 million.  As of
December  31,  2001,  the Company  further  revised its  overall  expected  loss
estimate  related to its CMBS portfolio from $307 million to $335 million,  with
such  total  losses  occurring  or  expected  to occur over the life of the CMBS
investment.  These  revisions to loss estimates were the result of the continued
slowing U.S.  economy and recession  during 2001,  which were exacerbated by the
terrorist  attacks on September 11, 2001 and  subsequent  terrorist  actions and
threats.  Principally as a result of the slowing  economy and terrorist  actions
and threats,  the underlying  mortgage loans have had a greater than  previously
anticipated number of monetary defaults. Additionally,  recent appraisal amounts
on properties  underlying certain defaulted loans have been significantly  lower
than  anticipated,  thereby  increasing  the  estimated  principal  loss  on the
commercial  loans. The Company's  overall expected loss estimate of $335 million
through the life of its CMBS  portfolio  represents  the  Company's  estimate of
total  principal  write-downs  to its CMBS due to  realized  losses  related  to
underlying  mortgage  loans,  and is included in the  calculation of the current
weighted average anticipated yield to maturity, as discussed below.

     As the  Company  had  determined  that there had been an adverse  change in
expected  future  cash flows and that its current  estimate  of expected  credit
losses  exceeded  credit losses as previously  projected,  the Company  believed
certain  of the  CMBS had  been  impaired  under  EITF  99-20  and FAS 115 as of
September  30, 2001 and again as of December 31, 2001.  As the fair value of the
impaired  CMBS was  approximately  $3.9  million  and  $30.8  million  below the
amortized   cost  basis  as  of  September  30,  2001  and  December  31,  2001,
respectively,  the Company  recorded  other than temporary  non-cash  impairment
charges through the income  statement of those same amounts during the third and
fourth  quarters of 2001.  There can be no assurance that the Company's  revised
estimate of expected  losses will not be exceeded as a result of  additional  or
continuing  adverse  events  or  circumstances,  such as a  continuing  economic
slowdown and recession.


<PAGE>

Yield to Maturity

     The following table summarizes  yield-to-maturity  information  relating to
the Company's Subordinated CMBS on an aggregate pool basis:
<TABLE>
<CAPTION>
                                                                                           Current
                                                               Anticipated               Anticipated
                                                                Yield to                  Yield to
                                                                Maturity                  Maturity
         Pool                                               as of 1/1/01 (1)          as of 1/1/02 (1)
         ----                                               ----------------          ----------------
         <S>                                                <C>                       <C>
      Retained Securities from
        CRIIMI 1998 C1 (CBO-2)                                  11.8% (2)                 12.1% (3)

      Retained Securities from
        CRIIMI 1996 C1 (CBO-1)                                  21.0% (2)                 14.3% (3)

      Nomura Asset Securities Corp.
        Series 1998-D6 Tranche B7 (Nomura)                      25.3% (2)                 28.7% (3)
                                                                ---------                 ---------

      Weighted Average (4)                                      12.4% (2)                 12.4% (3)

</TABLE>

(1)  Represents the anticipated weighted average yield over the expected
     average life of the Company's CMBS portfolio as of January 1, 2001 and
     2002, based on management's estimate of the timing and amount of future
     credit losses.

(2)  As previously discussed, as of December 31, 2000, the Company
     revised its overall expected loss estimate related to its CMBS portfolio
     from $225 million to $298 million which resulted in non-cash impairment
     recognition of $143.5 million related to the CMBS. As a result of
     recognizing impairment, the Company revised its anticipated yields as of
     January 1, 2001, which were used to recognize interest income beginning
     January 1, 2001. These anticipated revised yields took into account the
     lower cost basis as of December 31, 2000, and contemplated larger than
     previously anticipated losses and those losses occurring sooner than
     previously anticipated. While the Company expected lower cash flows from
     its CMBS portfolio than its previous estimates, yields actually increased
     because of a reduction in the carrying value of the Company's CMBS
     portfolio to fair value (i.e., cash flows divided by a much lower asset
     base cause yields to increase).

(3)  As previously discussed, as of December 31, 2001, the Company again
     revised its overall expected loss estimate related to its CMBS portfolio
     from $307 million to $335 million which resulted in non-cash impairment
     recognition to certain of the CMBS. As a result of this change in expected
     future cash flows and the recognition of impairment, the Company revised
     its anticipated yields as of January 1, 2002, which will be used to
     recognize interest income beginning January 1, 2002. These anticipated
     revised yields take into account the lower cost basis on the impaired CMBS
     as of December 31, 2001, and contemplate larger than previously anticipated
     losses and those losses generally occurring sooner than previously
     anticipated.

(4)  The accounting treatment under GAAP requires that the income on
     Subordinated CMBS be recorded based on the effective interest method using
     the anticipated yield over the expected life of these mortgage assets. This
     method can result in GAAP income recognition which is greater than or less
     than cash received. For the years ended December 31, 2001 and 2000, the
     amount of income recognized in excess of cash received on all of the
     Subordinated CMBS owned by the Company due to the effective interest rate
     method was approximately $10.2 million and $15.2 million, respectively.

Determining Fair Value of Retained Interests (Subordinated CMBS)

     The Company uses a discounted  cash flow  methodology  for  determining the
fair  value  of  its  retained  Subordinated  CMBS.  The  discounted  cash  flow
methodology  includes the use of a  third-party  proprietary  cash flow model to
project the gross cash flows from the underlying  commercial mortgage pools that
serve as collateral for the Company's Subordinated CMBS. The gross mortgage cash
flows are based on the respective loan  attributes of each commercial  mortgage,
such as the interest rate,  original loan amount and term to maturity (contained
within a commercial mortgage pool) and are projected assuming no prepayments and
no losses as is the market  convention.  The corresponding  distribution of each
commercial mortgage pool's principal and interest payments are based on specific
documents unique to each CMBS transaction,  referred to as pooling and servicing
agreements.  The value of the resulting  CMBS cash flow  distributions  are then
determined  by  applying  a  discount  rate  that,  in the  Company's  view,  is
commensurate  with the market's  perception  of risk of comparable  assets.  The
Company used a variety of sources to  determine  its  discount  rate  including
institutionally-available  research reports and communications  with dealers and
subordinated  CMBS investors  regarding the valuation of comparable  securities.
Since the Company calculated the estimated fair market value of its Subordinated
CMBS  portfolio as of December 31, 2001 and 2000,  it has disclosed the range of
discount rates by rating category used in determining these fair market values.

<PAGE>

Key Assumptions in Determining Fair Value

     The gross mortgage cash flows from each commercial  mortgage pool and their
corresponding  distribution on the CMBS may be affected by numerous  assumptions
and variables including:

(i)      the receipt of mortgage payments earlier than projected ("prepayment");
(ii)     delays in the receipt of monthly cash flow distributions to CMBS
         as a result of mortgage loan defaults and/or extensions in the loan's
         term to maturity (see "extension risk" below);
(iii)    changes in the timing and/or amount of credit losses on the
         commercial mortgage loans ("credit risk"), which are a function of:

         o  the percentage of mortgage loans that  experience a default either
            during the mortgage  term or at maturity  (referred to in the
            industry as a "default percentage");
         o  the recovery period represented by the time that elapses between the
            default of a commercial mortgage loan and the subsequent foreclosure
            and liquidation of the corresponding real estate (a period of time
            referred to in the industry as a "lag"); and,
         o  the percentage of mortgage loan principal lost as a result of the
            deficiency in the liquidation proceeds resulting from the
            foreclosure and sale of the commercial real estate (referred to in
            the industry as a "loss severity");

(iv)     the discount rate used to derive fair value which is comprised of the
         following:

         o  a benchmark risk-free rate, calculated by using the current,
            "on-the-run" U.S. Treasury curve and interpolating a comparable
            risk-free rate based on the weighted-average life of each CMBS;
            plus,
         o  a credit risk premium; plus,
         o  a liquidity premium.

Sensitivities of Key Assumptions

     Since the Company uses a  discounted  cash flow  methodology  to derive the
fair value of its Subordinated  CMBS, changes in the timing and/or the amount of
cash  flows  received  from  the  underlying  commercial  mortgages,  and  their
allocation  to the CMBS,  will  directly  impact  the value of such  securities.
Accordingly, delays in the receipt of cash flows and/or decreases in future cash
flows  resulting  from higher than  anticipated  credit losses will result in an
overall  decrease  in  the  fair  value  of  the  Company's  Subordinated  CMBS.
Furthermore,  any  increase/(decrease)  in  the  required  rate  of  return  for
Subordinated  CMBS will  result in a  corresponding  (decrease)/increase  in the
value of such securities.  The Company has included the following  narrative and
numerical disclosures to demonstrate the sensitivity of such changes to the fair
value of the Company's Subordinated CMBS.

     Impact of Prepayment Risk on Fair Value

     The Company's  investments in Subordinated CMBS are purchased at a discount
to their face amount due to their  subordinated  claim to principal and interest
cash flows and priority of  allocation  of realized  losses.  As a result of the
discounted  purchase price, the return of principal sooner than anticipated from
prepayments,  and/or in amounts  greater than  initially  assumed by the Company
when determining the discounted  purchase price,  would result in an increase in
the value of the Company's  Subordinated  CMBS. Such appreciation in value would
result from the higher  subordination level of the CMBS transaction  relative to
comparable CMBS and the potential for an upgrade in the ratings  category of the
security.  Since the  effects  of  prepayments  would  enhance  the value of the
Company's  Subordinated CMBS, the effects of increased prepayments were excluded
from the sensitivity  analysis below.  (It should be noted that the effects of a
decline  in  prepayments  is  reflected  in the  Sensitivity  of Fair  Value  to
Extension Risk below).


<PAGE>

Key Assumptions Resulting in an Adverse Impact to Fair Value

     Factors  which  could  adversely  affect  the  valuation  of the  Company's
Subordinated  CMBS  include:  (i) the  receipt  of future  cash  flows less than
anticipated  due to higher credit losses (i.e.,  higher credit losses  resulting
from a larger  percentage of loan defaults,  and/or losses occurring sooner than
projected,  and/or  longer  periods of recovery  between the date of default and
liquidation,  and/or higher loss of principal, see "Sensitivity of Fair Value to
Changes in Credit  Losses"  below),  (ii) an  increase in the  required  rate of
return (see  "Sensitivity  of Fair Value to Changes in the Discount Rate" below)
for  Subordinated  CMBS,  and/or  (iii) the  receipt  of cash  flows  later than
anticipated (see "Sensitivity of Fair Value to Extension Risk" below).

     Sensitivity of Fair Value to Changes in Credit Losses

     For purposes of this disclosure,  the Company used a market  convention for
simulating  the  impact  of  increased  credit  losses  on  Subordinated   CMBS.
Generally,  the industry  uses a  combination  of an assumed  percentage of loan
defaults  (referred to in the industry as a Constant  Default Rate or "CDR"),  a
period  between the date of default and the sale and  application of liquidation
proceeds to the CMBS  (referred to in the  industry as a "lag"),  and an assumed
percentage of principal loss on each commercial mortgage loan assumed to default
which is applied at the date of  liquidation  (referred  to in the industry as a
"loss  severity").  For  purposes of this  disclosure,  the Company  assumed the
following  loss  scenarios,  each of which was  assumed to begin 12 months  from
December 31, 2001: (i) 1.5% per annum of each commercial mortgage was assumed to
default,  a 12 month  period of time was  assumed to elapse  between the date of
default and the date of  liquidation  (however,  it was assumed  that the master
servicer  continued to advance  scheduled  principal  and  interest  payments on
behalf  of the  borrower  during  this  time),  and 30% of the then  outstanding
principal  amount  of each  commercial  mortgage  loan  was  assumed  to be lost
(referred to in the industry as a 1.5% CDR, 12 month lag, and 30% loss severity,
and referred to herein as the "1.5% CDR Loss Scenario"), and (ii) 2.5% per annum
of each  commercial  mortgage was assumed to default,  a 12 month period of time
was assumed to elapse  between  the date of default and the date of  liquidation
(however, it was assumed that the master servicer continued to advance scheduled
principal and interest payments on behalf of the borrower during this time), and
30% of the then outstanding  principal  amount of each commercial  mortgage loan
was assumed to be lost (referred to in the industry as a 2.5% CDR, 12 month lag,
and 30% loss severity,  and referred to herein as the "2.5% CDR Loss Scenario").
The delay in receipt and the  reduction in amount of cash flows  resulting  from
the 1.5%  CDR Loss  Scenario  and the  2.5%  CDR  Loss  Scenario,  respectively,
resulted  in a  corresponding  decline  in  the  fair  value  of  the  Company's
Subordinated  CMBS by  approximately  $24.9  million (or 3.0  percent) and $66.7
million (or 8.1 percent), respectively.

     The  aggregate  amount of  credit  losses  assumed  under the 1.5% CDR Loss
Scenario and the 2.5% CDR Loss Scenario totaled approximately $403.1 million and
$669.7 million,  respectively.  These amounts are in comparison to the aggregate
remaining  amount  of  anticipated   credit  losses  assumed  by  the  Company's
management  as of  December  31,  2001 of  approximately  $335  million  used to
calculate GAAP income  yields.  It should be noted that the amount and timing of
the anticipated credit losses assumed by the Company's management related to the
GAAP income  yields are not directly  comparable to those assumed under the 1.5%
CDR Loss Scenario and the 2.5% CDR Loss  Scenario).  As discussed  above,  gross
cash flows are used to calculate fair value.

     Sensitivity of Fair Value to Changes in the Discount Rate

     The  required  rate of  return  used to  determine  the  fair  value of the
Company's Subordinated CMBS is comprised of many variables,  such as a risk-free
rate,  a liquidity  premium  and a credit  risk  premium.  These  variables  are
combined to determine a total rate that, when used to discount the  Subordinated
CMBS's assumed  stream of future cash flows,  results in a net present  value of
such  cash  flows.  The   determination  of  such  rate  is  dependent  on  many
quantitative and qualitative factors,  such as, but not limited to, the market's
perception of the issuers and the credit  fundamentals  of the  commercial  real
estate  underlying each pool of commercial  mortgage loans. For purposes of this
disclosure,  the Company  assumed that the discount  rate used to determine  the
fair value of its Subordinated  CMBS increased by 100 basis points and 150 basis
points.  The  increase  in the  discount  rate  by 100  and  150  basis  points,
respectively,  resulted in a corresponding decline in the value of the Company's
Subordinated  CMBS by  approximately  $44.9  million (or 5.4  percent) and $65.6
million (or 8.0 percent), respectively.

<PAGE>

     The  sensitivities  above are hypothetical and should be used with caution.
As  the  figures  indicate,  changes  in  fair  value  based  on  variations  in
assumptions  generally  cannot be extrapolated  because the  relationship of the
change in  assumption  to the change in fair value may not be linear.  Also,  in
this table,  the effect of a variation  in a particular  assumption  on the fair
value  of the  retained  interest  is  calculated  without  changing  any  other
assumption;  in reality,  changes in one factor may result in changes in another
(for example, increases in market interest rates may result in lower prepayments
and  increased   credit   losses),   which  might  magnify  or  counteract   the
sensitivities.

Sensitivity of Fair Value to Extension Risk

     For purposes of this disclosure, the Company assumed that the maturity date
of each commercial  mortgage loan underlying its Subordinated  CMBS was extended
for a period of 12 months and 24 months  beyond the  contractual  maturity  date
specified  in each  mortgage  loan.  The delay in the timing and receipt of such
cash flows for an extended period of time consisting of 12 months and 24 months,
respectively,  resulted in a corresponding decline in the value of the Company's
Subordinated  CMBS by  approximately  $7.9  million (or 0.96  percent) and $14.2
million (or 1.72 percent), respectively.

Redesignation of CMSLP as Special Servicer

     Although  CMSLP did not file for  protection  under  Chapter 11, it and the
bonds it serviced  were under a high degree of scrutiny  from  servicing  rating
agencies  because of CMSLP's  relationship  with  CRIIMI  MAE. In order to allay
rating agency concerns stemming from CRIIMI MAE's Chapter 11 filing, in November
1998,  CRIIMI MAE designated  ORIX as special  servicer on CMBS  securitizations
totaling approximately $29 billion, subject to certain requirements contained in
the  respective  servicing  agreements.   CMSLP  continued  to  perform  special
servicing as sub-servicer for ORIX on all but four of these securitizations.  In
conjunction with the Company's emergence from Chapter 11, CMSLP was redesignated
as special servicer on the Company's  remaining CMBS  securitizations  effective
August 27, 2001.


6.    INSURED MORTGAGE SECURITIES

     CRIIMI MAE's consolidated  portfolio of mortgage securities is comprised of
GNMA  Mortgage-Backed  Securities and  FHA-Insured  Certificates.  Additionally,
mortgage securities include Federal Home Loan Mortgage Corporation (Freddie Mac)
participation  certificates  which are  collateralized  by GNMA  Mortgage-Backed
Securities,  as discussed  below.  As of December 31, 2001,  87% of CRIIMI MAE's
investment  in  mortgage   securities  were  GNMA   Mortgage-Backed   Securities
(including   securities   which   collateralized   Freddie   Mac   participation
certificates)  and  approximately  13%  were  FHA-Insured   Certificates.   GNMA
Mortgage-Backed   Securities  and  FHA-Insured   Certificates  are  collectively
referred to herein as "mortgage securities."

CRIIMI MAE owns the following mortgage securities directly or indirectly through
its wholly-owned subsidiaries referenced below:


<PAGE>
<TABLE>
<CAPTION>
                                                                     As of December 31, 2001
                                                                     -----------------------
                                                                                            Weighted
                                            Number of                                       Average
                                             Mortgage                                      Effective    Weighted Average
                                            Securities    Fair Value    Amortized Cost   Interest Rate   Remaining Term
                                           -----------  --------------- ---------------- -------------- ----------------
<S>                                        <C>          <C>             <C>              <C>            <C>
CRIIMI MAE                                      1         $  5,254,885     $  5,372,303      8.00%         33 years
CRIIMI MAE Financial Corporation               30          106,445,595      107,546,937      8.44%         27 years
CRIIMI MAE Financial Corporation II            42          182,696,905      188,339,465      7.19%         25 years
CRIIMI MAE Financial Corporation III           19           48,693,918       49,724,286      7.97%         28 years
                                           -------      --------------- ---------------- ----------     ------------
                                               92 (1)(2)  $343,091,303     $350,982,991      7.70% (3)     26 years (3)
                                           =======      =============== ================ ==========     ============

                                                                     As of December 31, 2000
                                                                     -----------------------
                                                                                            Weighted
                                            Number of                                       Average
                                             Mortgage                                      Effective    Weighted Average
                                            Securities    Fair Value    Amortized Cost   Interest Rate   Remaining Term
                                           -----------  --------------- ---------------- -------------- ----------------

CRIIMI MAE                                      1         $  5,345,888     $  5,402,205      8.00%         34 years
CRIIMI MAE Financial Corporation               35          124,117,999      124,785,552      8.39%         28 years
CRIIMI MAE Financial Corporation II            45          197,158,703      200,934,734      7.20%         26 years
CRIIMI MAE Financial Corporation III           22           59,128,817       59,718,390      7.83%         28 years
                                           -------      --------------- ---------------- ----------     ------------
                                              103 (4)     $385,751,407     $390,840,881      7.69% (3)     27 years (3)
                                           =======      =============== ================ ==========     ============

</TABLE>

(1)  During the year ended December 31, 2001, there were 9 prepayments of
     mortgage loans underlying mortgage securities held by CRIIMI MAE's
     subsidiaries referenced above. These prepayments generated net proceeds of
     approximately $29.9 million and resulted in net financial statement gains
     of approximately $53,000, which are included in net (losses) gains on
     mortgage security and originated loan dispositions in the accompanying
     consolidated statement of income for the year ended December 31, 2001.

(2)  During the year ended December 31, 2001, one of the Company's
     subsidiaries referenced above received payments from HUD relating to the
     assignment of two mortgage loans with a combined amortized cost of
     approximately $5.5 million. These assignments resulted in a net financial
     statement loss of approximately ($95,000), which is included in net
     (losses) gains on mortgage security and originated loan dispositions in the
     accompanying consolidated statement of income for the year ended December
     31, 2001.

(3)  Weighted averages were computed using total face value of the mortgage
     securities.

(4)  During the year ended December 31, 2000, there were six prepayments
     of mortgage loans underlying mortgage securities held by CRIIMI MAE's
     subsidiaries referenced above. These prepayments generated net proceeds of
     approximately $12.6 million and resulted in net financial statement gains
     of approximately $280,000, which are included in gains on mortgage security
     dispositions on the accompanying consolidated statement of income for the
     year ended December 31, 2000.

     As shown in the table referenced  above,  the total mortgage  securities of
$343.1 million includes an unencumbered  insured  mortgage  security with a fair
value of $5.3 million.  The remaining $337.8 million of mortgage  securities are
pledged to secure  certain  collateralized  mortgage  obligations  or securities
issued in connection  with three  securitization  transactions.  As discussed in
Note 7,  the  secured  obligations  total  approximately  $326.6  million  as of
December  31, 2001.  CRIIMI MAE receives the net cash flows after debt  service,
generally excess interest and prepayment penalties,  from the three wholly-owned
subsidiaries  that  pledged  these  insured  mortgage  securities  to secure the
related obligations, along with the cash flow from the one unencumbered mortgage
security,  which  represent the total cash flows that the Company  receives from
these mortgage  securities.  These net cash flows after debt service are applied
as  principal  amortization  payments (in  connection  with cash flow from other
miscellaneous assets) on Series A Senior Secured Notes.

     Descriptions of the mortgage  securities  owned,  directly or indirectly by
CRIIMI MAE,  which  exceed 3% of the total  carrying  value of the  consolidated
mortgage securities as of December 31, 2001,  summarized  information  regarding
other mortgage  securities and mortgage  securities  income earned in 2001, 2000
and 1999, including interest earned on the disposed mortgage securities,  are as
follows:


<PAGE>

<TABLE>
<CAPTION>
                                              Mortgage Securities as of December 31, 2001               Mortgage Income Earned
                              --------------------------------------------------------------------  --------------------------------
                                                                          Effective     Maturity
                                Face           Fair       Amortized Cost   Interest      Final
                               Value (1)     Value(2)(4)     (1)(3)          Rate      Date Range    2001      2000        1999
                              ------------   ------------ --------------  ---------    -----------  -------   -------    --------
<S>                           <C>            <C>          <C>                                       <C>       <C>        <C>
CRIIMI MAE

GNMA Mortgage-Backed
 Securities
   Other (1 mortgage
     security)               $  5,372,303   $  5,254,885   $  5,372,303       8.00%    02/2035  $  431,096     $433,385     $435,493
                              -----------    -----------    -----------                         ----------    ---------   ----------

CRIIMI MAE Financial
Corporation

FHA-Insured Certificates
   Other (16 mortgage                                                        7.35%-   02/2019-
     securities)               45,644,046     45,986,971     45,727,435      11.00%    04/2034   4,225,863    4,262,094    4,295,199

GNMA Mortgage-Backed
 Securities
   Bellhaven Nursing Center    13,852,292     13,694,357     13,852,292     8.63%     12/2031    1,164,470    1,172,021    1,178,951
   Other (13 mortgage                                                       7.93%-    06/2018-
     securities)               47,644,065     46,764,267     47,967,210      8.78%     04/2035   3,817,987    3,862,001    3,902,597
                              -----------    -----------    ------------                        ----------   ----------   ----------

                              107,140,403    106,445,595    107,546,937                          9,208,320    9,296,116    9,376,747
                             ------------   ------------   -------------                        ----------   ----------   ----------

CRIIMI MAE Financial
Corporation II

GNMA Mortgage-Backed
 Securities
   Oakwood Garden Apartments  12,473,329      12,212,757     12,711,676      7.51%    10/2023      901,325      916,455      930,496
   San Jose South             27,115,928      26,549,468     27,318,857      7.66%    10/2023    1,974,586    2,007,005    2,037,043
   Somerset Park Apartments   28,189,673      27,587,238     28,663,650      7.41%    07/2028    2,065,888    2,089,020    2,110,507
   Yorkshire Apartments       14,369,116      14,059,340     14,432,569      7.21%    07/2031    1,009,096    1,017,995    1,026,277
   Other (38 mortgage                                                        7.14%-  06/2018-
   securities)               104,508,110     102,288,102    105,212,713       7.90%   05/2029    7,646,453    7,741,289    7,829,298
                            ------------   -------------  -------------                         ----------   ----------   ----------
                             186,656,156     182,696,905    188,339,465                         13,597,348   13,771,764   13,933,621
                            ------------   -------------  -------------                         ----------   ----------   ----------

CRIIMI MAE Financial
Corporation III

GNMA Mortgage-Backed
   Securities
   Other (19 mortgage                                                       7.45%-   08/2015-
     securities)              49,638,865      48,693,918     49,724,286     10.94%    02/2035    3,986,181    4,023,395    4,057,798
                           -------------   -------------  --------------                       -----------   ----------   ----------

Total Insured Mortgage
   Securities               $348,807,727    $343,091,303   $350,982,991                         27,222,945   27,524,660   27,803,659
                           =============   =============  =============


Insured Mortgage Security Dispositions                                                           1,629,774    3,143,568    5,601,512
                                                                                               -----------  -----------  -----------


Insured Mortgage Securities Interest Income                                                    $28,852,719  $30,668,228  $33,405,171
                                                                                               ===========  ===========  ===========
</TABLE>


(1)  Principal and interest on mortgage securities is payable at level
     amounts over the life of the mortgage asset. Total annual debt service
     payable to CRIIMI MAE and its financing subsidiaries for the mortgage
     securities held as of December 31, 2001 is approximately $31.4 million.
(2)  Reconciliations of the carrying amount of CRIIMI MAE's insured
     mortgage securities for the years ended December 31, 2001 and 2000 follow:


<PAGE>

<TABLE>
<CAPTION>
                                                                        For the year ended December 31,
                                                                          2001                  2000
                                                                     ----------------      ----------------
<S>                                                                  <C>                   <C>
Balance at beginning of year                                           $ 385,751,407         $ 394,857,239

Additions during the year:
    Amortization of discount                                                  15,688                16,554
    Adjustment to net unrealized gains on mortgage securities                     --             7,522,396

Deductions during the year:
    Principal payments                                                   (4,308,118)           (4,264,161)
    Mortgage dispositions                                               (35,469,292)          (12,292,734)
    Adjustment to net unrealized losses on insured mortgage
      securities                                                         (2,802,216)                   ---
    Accretion of premium                                                    (96,166)              (87,887)
                                                                     ----------------      ----------------
Balance at end of year                                                 $ 343,091,303         $ 385,751,407
                                                                     ================      ================

</TABLE>


(3)  All mortgages are collateralized by first or second liens on
     residential apartment, retirement home, nursing home or townhouse complexes
     which have diverse geographic locations and are FHA-Insured Certificates or
     GNMA Mortgage-Backed Securities. Payment of the principal and interest on
     FHA-Insured Certificates is insured by HUD pursuant to Title 2 of the
     National Housing Act. Payment of the principal and interest on GNMA
     Mortgage-Backed Securities is guaranteed by GNMA pursuant to Title 3 of the
     National Housing Act.

(4)  None of these mortgage securities are delinquent as of December 31, 2001.


7.   OBLIGATIONS UNDER FINANCING FACILITIES

     Discussed below are the Company's obligations under financing facilities as
of December 31, 2001 and 2000. All such obligations  existing  immediately prior
to the Effective Date, to the extent  constituting  allowed claims, were paid in
full on the  Effective  Date as part of the  Reorganization  Plan  (except for a
claim related to First Union),  through either a cash payment or issuance of New
Debt, or a combination of both. See Note 15 for additional  information  related
to the settlement of the First Union claim.

Obligations Outstanding as of December 31, 2001 and 2000

     The following table summarizes CRIIMI MAE's debt outstanding as of December
31, 2001 and 2000:


<PAGE>

<TABLE>
<CAPTION>
                                                                  Year ended December 31, 2001
                                       -------------------------------------------------------------------------------------
                                                             Effective                       Average
                                           Ending         Interest Rate     Average         Effective          Stated
                                          Balance          at Year End      Balance           Rate           Maturity Date
                                       -----------------   -----------   ---------------    ---------  ---------------------
<S>                                    <C>                 <C>           <C>                <C>
Variable-rate secured borrowing (11)    $   244,194,590        6.5%     $ 179,214,481 (8)      8.2%            April 2005
Series A senior secured notes (11)           99,505,457       12.2%        71,723,157 (8)     12.2%            April 2006
Series B senior secured notes (11)           63,937,383       21.1%        43,876,198 (8)     21.0%            April 2007

Securitized mortgage obligations:
          CMBS (3)                          283,047,470        9.1%       282,017,637          9.1%     Nov 2006-Nov 2011
          Freddie Mac funding note (4)      180,291,091        7.5%       187,895,844          7.5%             Sept 2031
          Fannie Mae funding note (5)        48,062,403        7.4%        53,304,433          7.4%            March 2035
          CMO (6)                            98,204,667        7.5%       107,514,532          7.5%              Jan 2033
Mortgage payable (10)                         7,109,252       12.0%         1,777,203         12.0%              May 2008
Variable-rate secured borrowings
       CMBS (1) (2)                                  --          --       108,784,948 (9)      6.7%  March 1999-Sept 2000

Bank term loan  (2)                                  --          --           386,389 (9)      7.0%              Dec 1998

Working capital line of credit (2)                   --          --        11,888,889 (9)      7.5%              Dec 1998

Bridge loan (2)                                      --          --        14,786,663 (9)      8.0%              Feb 1999

Senior unsecured notes (2)                           --          --        29,722,222 (9)      9.1%              Dec 2002
                                       ----------------                --------------

          Total Debt                   $  1,024,352,313        9.1%    $1,092,892,596          8.9%
                                       ================                ==============


                                                                  Year ended December 31, 2000
                                       -------------------------------------------------------------------------------------
                                                           Effective                         Average
                                           Ending         Interest Rate     Average         Effective          Stated
                                          Balance          at Year End       Balance           Rate           Maturity Date
                                       -----------------  ------------   ---------------    ---------   --------------------

Securitized mortgage obligations:
       CMBS (3)                          $  280,520,265        9.1%     $ 279,680,235         9.1%        Nov 2006-Nov 2011
       Freddie Mac funding note (4)         192,168,879        7.5%       196,385,577         7.5%                Sept 2031
       Fannie Mae funding note (5)           57,765,188        7.4%        58,988,331         7.4%               March 2035
       CMO (6)                              114,715,858        7.5%       115,196,505         7.5%                 Jan 2033
       CMO-loan originations (7)                     --          --       334,884,751         6.6%                       --
Variable-rate secured borrowings -
       CMBS (1)(2)                          367,535,895        7.9%       547,769,490         7.5%     March 1999-Sept 2000
Senior unsecured notes (2)                  100,000,000        9.1%       100,000,000         9.1%                 Dec 2002
Bank term loan (2)                            1,300,000        8.0%         1,300,000         7.6%                 Dec 1998
Working capital line of credit (2)           40,000,000        8.4%        40,000,000         8.2%                 Dec 1998
Bridge loan (2)                              49,749,522        9.0%        49,749,522         8.6%                 Feb 1999
                                       ----------------                --------------
          Total Debt                     $1,203,755,607        8.2%    $1,723,954,411         8.1%
                                       ================                ==============

</TABLE>

(1) Certain debt balances were reduced to reflect  application  of net cash
flow received during the Chapter 11 proceeding.

(2) These  facilities  were in default as of  December  31, 2000 due to the
Company's  Chapter  11  filing.  All  outstanding  unpaid  amounts  under  these
facilities,  to the extent they constituted allowed claims, were paid in full in
connection with the Reorganization Plan, except for the allowed claim related to
First Union, as discussed in Note 15, through either cash payment or issuance of
New Debt or a combination of both.

(3) As of  December  31,  2001 and  2000,  the face  amount of the debt was
$328,446,000  and  $328,446,000,  respectively,  with  unamortized  discount  of
$45,398,530 and $47,925,735,  respectively.  During the years ended December 31,
2001 and 2000, discount amortization of $2,527,205 and $2,354,298, respectively,
was recorded as interest expense.

<PAGE>

(4)  As of December 31, 2001 and 2000, the face amount of the note was
     $185,616,298 and $198,070,722, respectively, with unamortized discount of
     $5,325,207 and $5,901,843, respectively. During the years ended December
     31, 2001 and 2000, discount amortization of $576,636 and $1,820,547,
     respectively, was recorded as interest expense.

(5)  As of December 31, 2001 and December 31, 2000, the face amount of
     the note was $49,182,632 and $59,112,927, respectively, with unamortized
     discount of $1,120,229 and $1,347,739, respectively. During the years ended
     December 31, 2001 and 2000, discount amortization of $227,510 and $158,774,
     respectively, was recorded as interest expense.

(6)  As of December 31, 2001 and 2000, the face amount of the note was
     $100,727,532 and $117,729,663, respectively, with unamortized discount of
     $2,522,865 and $3,013,805, respectively. During the years ended December
     31, 2001 and 2000, discount amortization of $490,940 and $475,379,
     respectively, was recorded as interest expense.

(7)  As of December 31, 2001 and 2000, the face amount of the debt was
     $-0- and $-0-, respectively, with unamortized discount of $-0- and $-0-,
     respectively. During the years ended December 31, 2001 and 2000, discount
     amortization of $-0- and $1,187,656, respectively, was recorded as interest
     expense.

(8)  The average balances of the New Debt from their effective date of
     April 17, 2001 to December 31, 2001 were $253,539,866 for the Variable-Rate
     Secured Borrowing, $102,056,666 for the Series A Senior Secured Notes and
     $62,432,534 for the Series B Senior Secured Notes.

(9)  The average balances of these facilities prior to the Effective Date
     (for the period January 1, 2001 to April 17, 2001) were: $364,733,653 for
     the variable-rate secured borrowings, $1,300,000 for the bank term loan,
     $40,000,000 for the working capital line of credit, $49,749,522 for the
     bridge loan and $100,000,000 for the senior unsecured notes.

(10) As of December 31, 2001, the unpaid principal balance of this
     mortgage payable is $8,824,288 and the unamortized discount is $1,715,036.
     The coupon rate on the mortgage debt is 7.34%. The effective interest rate
     on the debt is 12.00% as a result of the discount amortization. The
     discount is being amortized to interest expense through maturity in 2008.
     During the year ended December 31, 2001, discount amortization of $46,929
     was recorded as interest expense.

(11) The effective interest rate at December 31 and during the period
     reflects the accrual of expected extension fees that will be payable.
     During 2001, the Company recognized interest expense of $2,372,379,
     $337,390, and $432,390 related to the expected extension fees for the
     Variable-Rate Secured Borrowing, the Series A Senior Secured Notes, and the
     Series B Senior Secured Notes, respectively.

(12) Stated maturities per respective loan agreements.  The maturities of CRIIMI
     MAE's debt are as follows:


     2002                             $   99,163,840
     2003                                 85,443,854
     2004                                104,326,019
     2005                                265,348,988
     2006                                133,600,338
     Thereafter                          392,551,141
                                    -----------------
                                      $1,080,434,180 (a)(b)(c)(d)(e)
                                    =================

<PAGE>

(a)  The projected principal payments on the Variable-Rate Secured
     Borrowing are based on the applicable amortization schedule provided in the
     operative documents. In addition, the projected principal payments include
     estimated principal payments from excess cash flow required to be applied
     toward the redemption of principal under the operative documents until a
     total of $50 million of the principal has been repaid, which is expected to
     occur in 2003. These principal payments are based on the Company's estimate
     of future cash flows as of March 15, 2002, which are subject to continuous
     change due to, without limitation, changes in interest rates, realized
     losses, appraisal reductions, interest shortfalls, credit performance of
     underlying loans, unanticipated expenses on foreclosed and non-performing
     loans, accumulated advances, prepayments, the Company's obligations in
     connection with the REO, the Company's general and administrative and other
     operating expenses, and cash dividends, if any, paid to shareholders.
     There can be no assurance that projected cash flows will approximate the
     actual cash flows.

(b)  The stated annual interest rate on the Variable-Rate Secured Borrowing is
     LIBOR plus 3.25%. The average stated interest rate assumes that
     LIBOR is unchanged from the December 31, 2001 LIBOR rate of 1.87% over the
     remaining term of the debt. Any changes in the LIBOR rate will affect the
     actual principal payments on the Company's Variable-Rate Secured Borrowing
     in the future.

(c)  The projected principal payments on the Series A Senior Secured
     Notes are based, in part, on the Company's estimate of the cash flows from
     the collateral securing the Series A Senior Secured Notes as of March 15,
     2002. In addition, there are principal payment obligations of $5 million,
     $15 million, and $15 million due on April 15, 2003, 2004 and 2005,
     respectively. If the Company fails to make any one of these payments, the
     interest rate on the unpaid principal amount would increase by 200 basis
     points if certain miscellaneous collateral is not sold or otherwise
     disposed of by the noteholders. These projected cash flows are subject to
     continuous change due to, without limitation, changes in interest rates,
     realized losses, appraisal reductions,  interest shortfalls, credit
     performance of underlying loans, unanticipated expenses on foreclosed and
     non-performing loans, accumulated advances, prepayments, the Company's
     obligations in connection with the REO, the Company's general and
     administrative and other operating expenses, and cash dividends, if any,
     paid to shareholders. There can be no assurance that the projected cash
     flows will approximate the actual cash flows.

(d)  The Series B Senior Secured Notes have no contractual principal
     payment requirements until maturity on April 15, 2007. The Series B
     Senior Secured Notes accrete interest at an annual rate of 7%. This
     accreted interest is added to the principal balance semi-annually on the
     interest payment dates. For purposes of this disclosure, the Company has
     not included any future accreted interest in the contractual principal
     payment amount at maturity. The Company estimates as of March 15, 2002 that
     the total principal payment due at maturity, including accreted interest,
     will be approximately $93 million.

(e)  The projected principal payments on the securitized mortgage
     obligations are based on the projected cash flows that were used to
     estimate the December 31, 2001 fair values of the related securities, which
     collateralize this debt. The 2002 amounts include known prepayments, which
     occurred in January and February 2002.

New Debt Effective as of Emergence from Chapter 11

     The New  Debt,  which  closed  on the  Effective  Date,  consists  of three
components,  as  identified  below.  Substantially  all cash flows  relating  to
existing  assets  are,  and  are  currently  expected  to be,  used  to  satisfy
principal,  interest  and fee  obligations  under the New Debt.  The New Debt is
secured,  by substantially  all of the Company's  assets.  There are restrictive
covenants,   including   financial   covenants  and  certain   restrictions  and
requirements with respect to cash accounts and the collection,  management,  use
and  application of funds in connection  with the New Debt. The terms of the New
Debt  significantly  restrict the amount of cash  dividends  that can be paid to
shareholders.  One such restriction provides that any cash dividends required to
maintain  REIT  status   (assuming  the  Company  has  the  cash  to  make  such
distributions  and that it is  permitted  to make such  distributions  under the
terms of the New Debt) would be paid first to holders of certain of the New Debt
who convert their  secured notes into one or two new series of preferred  stock,
which  new  series of  preferred  stock  would be senior to all other  series of
preferred stock of the Company, in the form of redemption payments. Another such
restriction  provides  that if  realized  losses  (as  defined  in the New  Debt
documents,  and including appraisal  reduction amounts on properties  underlying
the CMBS  collateral)  on CMBS exceed  certain  thresholds,  then the Company is
prohibited from paying cash dividends to its shareholders, except as required to
maintain  REIT status , with any such cash  dividends  to be paid in  accordance
with the terms set forth in the preceding sentence. As of December 31, 2001, the
Company had exceeded the loss threshold  amounts under the applicable  operative
documents  evidencing the New Debt.  See Note 1 for a further  discussion of the
restrictions resulting from exceeding the loss threshold amounts. In addition to
the further  descriptions of the New Debt components set forth below,  reference
is made to the New Debt  operative  documents  filed as  exhibits  to a  Current
Report on Form 8-K in June 2001 for a more detailed  description of the New Debt
including payment terms, restrictions including restrictive covenants, events of
default, and collateral.  See "Reorganization"  discussion below relating to the
collateral structure for the New Debt.

     Variable-Rate Secured Borrowing

     The   Variable-Rate   Secured  Borrowing  (in  the  form  of  a  repurchase
transaction),  in an original  principal amount of $262.4 million,  provides for
(i)  interest  at a rate of one month  LIBOR plus 3.25%  payable  monthly,  (ii)
principal repayment/amortization  obligations,  including, without limitation, a
requirement  to pay down an aggregate $50 million in principal by April 16, 2003
(the failure to pay down this amount will not constitute an event of default but
will result in the  continuation or  reinstatement  of certain  restrictions and
additional  restrictions),  (iii) extension fees of 1.5% of the unpaid principal
balance  payable  at the end of each  of 24,  30,  36 and 42  months  after  the
Effective  Date,  and (iv)  maturity  on April 16,  2005  assuming  the  Company
exercises  its  options  to extend  the

<PAGE>

maturity  date of the  debt.  A monthly  principal  payment  sufficient  to
amortize  the  related  debt over a 15-year  period,  and  additional  principal
amortization  payments  resulting  from a cash flow sweep are required until the
original  principal  balance  has been  reduced by $50  million.  Thereafter,  a
monthly principal payment sufficient to amortize the related debt over a 13-year
period  will be  required  subject to the  reinstatement  of the cash flow sweep
under certain limited circumstances.  The Variable Rate Secured Borrowing had an
outstanding  principal  balance of $244.2  million as of December 31,  2001.  In
connection with this Variable-Rate  Secured Borrowing,  the outstanding stock of
CBO REIT  held by  CRIIMI  MAE was  transferred  to the  lenders  pursuant  to a
repurchase agreement. The obligations under the repurchase agreement are secured
by a first or  third  priority  lien on  certain  CMBS,  the  stock  in  certain
subsidiaries,  and certain deposit accounts. The foregoing transferred stock and
assets securing the Variable-Rate Secured Borrowing also secure the Series A and
Series B Senior Secured Notes which constitute the balance of the New Debt.

     Series A Senior Secured Notes

     The Series A Senior  Secured  Notes,  representing  an  aggregate  original
principal  amount of $105 million,  provide for (i) interest at a rate of 11.75%
per annum payable monthly,  (ii) principal  repayment/amortization  obligations,
including,  without limitation, a principal payment obligation of $5 million due
April 15, 2003 (the failure to make this payment will not constitute an event of
default but will result in a 200 basis point  increase in the  interest  rate on
the unpaid principal amount if certain  miscellaneous  collateral is not sold or
otherwise  disposed of), (iii)  extension  fees of 1.5% of the unpaid  principal
balance  payable at the end of each of 48, 54, and 60 months after the Effective
Date, and (iv) maturity on April 15, 2006. The cash flow from the  miscellaneous
assets referenced below, which secure both the Series A Senior Secured Notes and
the Series B Senior  Secured  Notes,  will be applied,  on a monthly  basis,  as
principal amortization payments on the Series A Senior Secured Notes. The Series
A Senior Secured Notes had an aggregate  outstanding  principal balance of $99.5
million as of December 31, 2001, and are secured by a first priority lien on the
stock transferred in connection with the Variable-Rate  Secured Borrowing,  by a
first  or  second   priority  lien  on  certain  CMBS,   the  stock  in  certain
subsidiaries,  and certain  deposit  accounts  (these  assets also  securing the
Variable-Rate  Secured  Borrowing),  and by a first  priority  lien  on  certain
miscellaneous assets.

     Series B Senior Secured Notes

     The Series B Senior  Secured  Notes,  representing  an  aggregate  original
principal amount of approximately  $61.8 million,  provide for (i) interest at a
rate of 13% per annum,  payable  semi-annually,  with additional interest at the
rate of 7% per annum  accreting over the debt term,  (ii) extension fees of 1.5%
of the  unpaid  principal  balance  payable  at the end of each of 48, 54 and 60
months after the Effective  Date (with the payment 60 months after the Effective
Date also  including an amount based on the unpaid  principal  balance 66 months
after the Effective  Date),  and (iii)  maturity on April 15, 2007. The Series B
Senior  Secured Notes had an aggregate  outstanding  principal  balance of $63.9
million as of December 31, 2001,  and are secured by a second  priority  lien on
the stock  transferred in connection with the  Variable-Rate  Secured  Borrowing
(this asset also  securing the Series A Senior  Secured  Notes),  by a second or
third  priority lien on certain  CMBS,  the stock in certain  subsidiaries,  and
certain deposit accounts (those assets also securing the  Variable-Rate  Secured
Borrowing and the Series A Senior Secured Notes),  and by a second priority lien
on certain  miscellaneous assets (these assets also securing the Series A Senior
Secured Notes).

Reorganization

     On the Effective Date of the  Reorganization  Plan, the Company effected an
affiliate  reorganization  in order to  indirectly  secure the New Debt with the
equity interests in CBO-1 and CBO-2.  Pursuant to the affiliate  reorganization,
CRIIMI MAE Inc.  formed CBO REIT, all shares of which were  initially  issued to
CRIIMI MAE Inc.,  pledged certain previously pledged bonds (the "Pledged Bonds")
and all  outstanding  shares of two qualified REIT  subsidiaries  (which own the
equity  interests in CBO-1 and CBO-2) (the "QRS Shares") to secure the New Debt,
pledged the shares held by CRIIMI MAE in CBO REIT (the "REIT  Shares") to secure
the New Debt  represented  by the  Series A Senior  Secured  Notes and  Series B
Senior  Secured Notes,  contributed  the Pledged Bonds and the QRS Shares to CBO
REIT,  and  transferred  the REIT Shares,  in a repurchase  transaction,  to the
lenders which  provided the New Debt  represented by the  Variable-Rate  Secured
Borrowing. Subject to the terms of the documents evidencing the New Debt, CRIIMI
MAE Inc.  has  retained  the right to  exercise  all voting and other

<PAGE>

corporate rights and powers of ownership with respect to the REIT Shares.

Information Regarding Certain Collateral Securing New Debt

Set forth below is certain information relating to the carrying value of certain
assets securing all three components of the New Debt.

<TABLE>
<CAPTION>
                                                                  Carrying Value at December 31, 2001
      Collateral                                                           ($ in millions)
      ----------                                                  -----------------------------------
      <S>                                                         <C>
      Certain CMBS (1)                                                         $454.7
      CBO REIT Stock (2)                                                    Not Available
      CMBS Corp Stock (3)                                                   Not Available
      QRS 1, Inc. Stock (4)                                                 Not Available

</TABLE>

          (1)  Represents  certain bonds pledged by CRIIMI MAE (i.e.,  the CBO-2
     B-, B, B+, BB-, BB, BB+ rated bonds and the Nomura  unrated bond) to secure
     the New  Debt.  Such  bonds  are  currently  owned  by CBO  REIT,  Inc.,  a
     subsidiary of CRIIMI MAE.


          (2) Represents all outstanding shares of CBO REIT, Inc. held by CRIIMI
     MAE first pledged by CRIIMI MAE to secure the Series A Senior Secured Notes
     and Series B Senior  Secured Notes and then  transferred by CRIIMI MAE in a
     repurchase   transaction  in  connection  with  the  Variable-Rate  Secured
     Borrowing.  CBO REIT, Inc.  currently owns the pledged bonds  identified in
     footnote (1) above.


          (3) Represents all outstanding  shares of CRIIMI MAE CMBS Corp pledged
     by CRIIMI MAE to secure the New Debt.  Such shares are  currently  owned by
     CBO REIT,  Inc.  CRIIMI MAE CMBS Corp owns the CCC rated and unrated  bonds
     from CBO-2 (representing the equity interests in CBO-2). The carrying value
     of these CBO-2 bonds was approximately $35.4 million at December 31, 2001.


          (4)  Represents  all  outstanding  shares  of  CRIIMI  MAE QRS 1, Inc.
     pledged  by CRIIMI MAE to secure the New Debt.  Such  shares are  currently
     owned by CBO  REIT,  Inc.  CRIIMI  MAE QRS 1,  Inc.  owns the B- rated  and
     unrated bonds from CBO-1  (representing the equity interests in CBO-1). The
     carrying  value of these CBO-1  bonds was  approximately  $37.7  million at
     December 31, 2001.


Other Debt Related Information

     Fluctuations  in interest rates will continue to impact the value of CRIIMI
MAE's mortgage assets and could impact the net interest margin through increased
cost of funds on the  variable-rate  debt in place.  CRIIMI MAE has an  interest
rate cap agreement in place in order to partially  limit the adverse  effects of
rising interest rates on the variable rate debt in place. When the cap agreement
expires,  CRIIMI MAE will have interest rate risk to the extent  interest  rates
increase  on  any  variable-rate  borrowings  unless  the  cap  is  replaced  at
equivalent  rates or other steps are taken to mitigate  this risk.  Furthermore,
CRIIMI MAE has  interest  rate risk to the extent that the LIBOR  interest  rate
increases  between  the  current  rate and the cap rate.  See Note 8 for further
discussion  of  interest  rate caps.  As of  December  31,  2001,  CRIIMI  MAE's
debt-to-equity   ratio   was   approximately   3.9   to  1  and   CRIIMI   MAE's
non-match-funded debt-to-equity ratio was approximately 1.6 to 1.

     The following  table lists the fair market value of the collateral  related
to the Company's  Securitized  Mortgage  Obligations as of December 31, 2001 and
2000 (in millions):
<TABLE>
<CAPTION>

       Securitized Mortgage Obligations         December 31, 2001    December 31, 2000
       --------------------------------         -----------------    -----------------
       <S>                                      <C>                  <C>
       CMBS                                           $ 296                $ 283
       Freddie Mac Funding Note                         183                  197
       Fannie Mae Funding Note                           49                   59
       CMO                                              106                  124

</TABLE>

     Changes in  interest  rates will have no impact on the cost of funds or the
collateral requirements on these Securitized Mortgage Obligations.

<PAGE>

Debt Prior to Emergence from Chapter 11

     Variable-Rate Secured Borrowings-CMBS

     When  CRIIMI  MAE  purchased   Subordinated  CMBS,  it  initially  financed
(generally through  short-term,  variable-rate  secured borrowings) a portion of
the purchase  price of the  Subordinated  CMBS.  These secured  borrowings  were
either  provided by the issuer of the CMBS pool or through  other  lenders under
master secured  borrowing  agreements.  The secured  borrowings  were secured by
certain rated CMBS with an aggregate fair value of approximately $464 million as
of December 31, 2000. The allowed claims related to the foregoing  variable-rate
secured  borrowings were paid in full on the Effective Date in cash or through a
combination of cash and the new Variable-Rate Secured Borrowing.

     Senior Unsecured Notes

     In November 1997,  CRIIMI MAE issued senior unsecured notes due on December
1, 2002 in an aggregate  principal amount of $100 million.  Such unsecured notes
were effectively  subordinated to the claims of any secured lender to the extent
of the value of the  collateral  securing  such  indebtedness.  Interest  on the
unsecured notes was payable  semi-annually  in arrears on June 1 and December 1,
commencing  June 1, 1998 at a fixed  annual rate of 9.125%.  The allowed  claims
related to such unsecured  notes were paid in full on the Effective Date through
a combination of cash, Series A Senior Secured Notes and Series B Senior Secured
Notes.

     Bank Term Loan

     In  connection  with the Merger,  CM  Management  assumed  certain  debt of
certain mortgage businesses  affiliated with CRI in the principal amount of $9.1
million (the "Bank Term  Loan").  The Bank Term Loan was secured by certain cash
flows  generated by CRIIMI MAE's direct and indirect  interests in the AIM Funds
and was  guaranteed by CRIIMI MAE. The collateral for this loan was carried at a
cost basis of  approximately  $11.4  million on the balance sheet as of December
31, 2000 and was reflected in equity  investments.  The loan required  quarterly
principal payments of $650,000 and was scheduled to mature on December 31, 1998.
The amount outstanding as of December 31, 2000 was $1.3 million. Interest on the
loan was based on LIBOR,  plus a spread of 1.25%.  The allowed  claim related to
the Bank Term Loan was paid in full, in cash, on the Effective Date.

     Working Capital Line of Credit

     In 1996,  CRIIMI MAE entered  into an  unsecured  working  capital  line of
credit  provided  by  two  lenders  which  provided  for up to  $40  million  in
borrowings.  The credit  facility  matured on  December  31,  1998.  Outstanding
borrowings  under this line of credit were based on interest at one-month  LIBOR
plus a spread of 1.75%.  As of December 31, 2000, $40 million in borrowings were
outstanding under this facility.

     The Company's  litigation with First Union (one of the two lenders) was not
settled  or  resolved  prior  to  the  Effective   Date;   and  therefore,   the
classification  of First  Union's  claim under the  Reorganization  Plan was not
determined at the Effective Date. See Note 15 for further information  regarding
the settlement of the First Union litigation.

     The  allowed  claim  related  to the other  lender  was paid in full on the
Effective Date through a combination of cash,  Series A Senior Secured Notes and
Series B Senior Secured Notes.

     Bridge Loan

     In August  1998,  CRIIMI MAE  entered  into a bridge  loan for $50  million
provided by a lender.  The total unpaid  principal  balance and accrued interest
was due in February 1999.  Outstanding  borrowings under this loan were based on
interest at  one-month  LIBOR plus a spread of 2.25%.  As of December  31, 2000,
approximately $50 million in borrowings was outstanding under this loan.

<PAGE>

     The  allowed  claim  related  to the  bridge  loan  was paid in full on the
Effective Date through a combination of cash,  Series A Senior Secured Notes and
Series B Senior Secured Notes.

8.   INTEREST RATE PROTECTION AGREEMENT

     CRIIMI MAE has  entered  into an  interest  rate  protection  agreement  to
partially  limit the adverse  effects of potential  rising interest rates on its
Variable-Rate Secured Borrowing. Interest rate caps provide protection to CRIIMI
MAE to the extent interest rates, based on a readily determinable  interest rate
index,  increase above the stated  interest rate cap, in which case,  CRIIMI MAE
will receive payments based on the difference  between the index and the cap. At
December  31,  2001,  CRIIMI MAE held one cap with a  notional  amount of $188.0
million, which hedged approximately 77% of the Company's variable-rate debt.
<TABLE>
<CAPTION>
Notional Amount           Effective Date        Maturity Date          Cap            Index
---------------           --------------        --------------         ----           -----
<S>                       <C>                   <C>                    <C>            <C>
$   188,000,000 (1)       April 2, 2001         April 2, 2003          5.25% (2)      1 month LIBOR

</TABLE>

(1)      CRIIMI MAE's designated interest rate protection agreement hedges
         CRIIMI MAE's variable-rate borrowing costs.
(2)      The one month LIBOR rate was 1.87% at December 31, 2001.

         CRIIMI MAE is exposed to credit loss in the event of non-performance by
the counterparty to the interest rate protection agreement should interest rates
exceed the cap. However, management does not anticipate non-performance by the
counterparty. The counterparty has long-term debt ratings of A+ or above by S&P
and A1 or above by Moody's. Although CRIIMI MAE's cap is not exchange-traded,
there are a number of financial institutions which enter into these types of
transactions as part of their day-to-day activities.

9.   DIFFERENCES BETWEEN FINANCIAL STATEMENT NET INCOME (LOSS) AND TAXABLE LOSS

     The differences  between  financial  statement (GAAP) net income (loss) and
taxable  income  (loss) are  generally  attributable  to differing  treatment of
unrealized/realized  gains and losses associated with certain assets; the bases,
income,  impairment,  and/or credit loss recognition  related to certain assets;
and  amortization  of various  costs.  The  distinction  between GAAP net income
(loss) and taxable  income  (loss) is  important to the  Company's  shareholders
because dividends or distributions are declared and paid on the basis of taxable
income,  or taxable loss.  The Company does not pay Federal income taxes so long
as it satisfies the  requirements  for exemption  from taxation  pursuant to the
REIT  requirements of the Code. The Company  calculates its taxable  income,  or
taxable  loss,  as if the  Company  were a regular  domestic  corporation.  This
taxable income or taxable loss level determines the amount of dividends, if any,
the  Company  is  required  to pay out over time in order to  eliminate  its tax
liability.

     As a result of its trader  election in early 2000,  CRIIMI MAE recognized a
mark-to-market  tax loss of approximately $478 million on certain Trading Assets
on January 1, 2000 (the "January 2000 Loss").  The January 2000 Loss is expected
to be recognized  evenly over four years (2000,  2001,  2002, and 2003), for tax
purposes  (i.e.,  approximately  $120 million per year)  beginning with the year
2000.

     A summary  of the  Company's  2001 and 2000 net  operating  losses  for tax
purposes is as follows:


<PAGE>
<TABLE>
<CAPTION>
                                                                                           2001                 2000
                                                                                           ----                 ----
  <S>                                                                                      <C>                  <C>
  January 2000 Loss                                                                  $ 478.2 million       $ 478.2 million
  LESS:   Portion recognized in 2000                                                  (119.6) million       (119.6) million
  LESS:   Portion recognized in 2001                                                  (119.5) million           --
                                                                                     ------------------    -----------------
  Balance Remaining of January 2000 Loss to be Recognized in Future Periods          $ 239.1 million       $ 358.6 million
                                                                                     ==================    =================

  Taxable Income for the year before recognition of January 2000 Loss (1)            $  22.7 million       $  20.1 million
  LESS:   January 2000 loss recognized                                                (119.5) million       (119.6) million
  PLUS:  Mark-to-market unrealized (loss) gain on Trading Assets                        (0.1) million         49.9 million
                                                                                     ------------------    -----------------
  Net Operating Loss for the year ended December 31                                  $( 96.9) million      $ (49.6) million
                                                                                     ==================    =================

  Accumulated Net Operating Loss through December 31                                 $(146.5) million      $ (49.6) million
  Net Operating Loss Utilization                                                         0 million             0 million
                                                                                     ------------------    -----------------
  Net Operating Loss Carried Forward for Use in Future Periods                       $(146.5) million      $ (49.6) million
                                                                                     ==================    =================

</TABLE>

(1)      Taxable income for the year ended December 31, 2001 includes an
         approximate $8.6 million loss on certain Trading Assets in connection
         with the transfer of certain Trading Assets on April 17, 2001 to CBO
         REIT following the reorganization effected to facilitate the collateral
         structure for the New Debt. Assets transferred to CBO REIT are no
         longer required to be marked-to-market on a tax basis.

     During the year ended  December 31, 2001,  no excess  inclusion  income was
distributed. During the year ended December 31, 2000, excess inclusion income of
$0.1474  per common  share was  distributed  with the Series G  Preferred  Stock
dividend.   Excess   inclusion   income   results  from  the   Company's   prior
resecuritization of mortgage assets in its portfolio. A shareholder's  allocable
share of excess  inclusion  represents the minimum taxable income  reportable by
the  shareholder for that year; it may not be offset by an NOL and may represent
Unrelated  Business Taxable Income for some  shareholders.  The excess inclusion
distributed  in 2000 was  generated  in 1999.  Excess  inclusion  of $0.1456 per
common share was  distributed  in 1998 along with the cash dividends paid during
that year. Because the Series F Preferred Stock dividend paid in 1999 related to
1998's taxable income, no excess inclusion was distributed in 1999.

10.    COMMON STOCK

     On October 17, 2001,  the Company  implemented a one-for-ten  reverse stock
split designed,  in part, to satisfy the New York Stock Exchange ("NYSE") market
price  listing  requirement.  There can be no  assurance  that such market price
listing requirement or that all other NYSE requirements will continue to be met.
All share and per share  information  in these notes to  consolidated  financial
statements  and the  accompanying  consolidated  financial  statements  has been
retroactively  adjusted to reflect the reverse  stock split.  Share  information
adjustments  include,  without  limitation,  adjustments to the number of common
shares  issued and  outstanding,  issued as dividends on and upon  conversion of
shares of preferred stock and issuable under outstanding options. CRIIMI MAE had
300,000,000  and  120,000,000  authorized  shares and  12,937,341  and 6,235,317
issued and outstanding shares of $0.01 par value common stock as of December 31,
2001 and 2000, respectively.

     As discussed in Note 1 under "The  Reorganization  Plan",  the terms of the
New Debt significantly restrict the amount of cash dividends that can be paid to
shareholders.  Presently,  cash  distributions  may only be paid if  required to
maintain REIT status,  with such payments being made first, and possibly solely,
to holders of certain of the New Debt who convert  their  secured notes into one
or two new series of preferred stock (see Note 1 - "The  Reorganization  Plan").
Preferred  stock  dividends were paid in shares of common stock during 2001. The
following table summarizes the 2001 common stock activity:


<PAGE>

<TABLE>
<CAPTION>
                                                                      Common Shares      Balance of Common
         Date                           Description                       Issued         Shares Outstanding
------------------------  -----------------------------------------  -----------------   -------------------
<S>                       <C>                                        <C>                 <C>
       12/31/00           Beginning balance                                                   6,235,317
       01/02/01           Director Stock Plan                                  200
       01/09/01           Conversion of Series E Preferred Stock           136,986
       02/01/01           Conversion of Series E Preferred Stock           138,889
 02/21/01 to 03/06/01     Conversions of Series G Preferred Stock        3,254,704
       03/15/01           Conversion of Series E Preferred Stock           138,889
------------------------------------------------------------------------------------------------------------
       03/31/01           Balance                                                             9,904,985
------------------------------------------------------------------------------------------------------------
       04/17/01           Dividend to Series C, D & E Preferred Stock      563,265
       06/01/01           Dividend to Series B Preferred Stock           1,454,508
       06/29/01           Dividend to Series E Preferred Stock              40,605
------------------------------------------------------------------------------------------------------------
       06/30/01           Balance                                                            11,963,363
------------------------------------------------------------------------------------------------------------
       07/02/01           Dividend to Series F Preferred Stock             185,996
       07/02/01           Dividend to Series G Preferred Stock             189,450
       09/28/01           Dividend to Series E Preferred Stock              64,373
------------------------------------------------------------------------------------------------------------
       09/30/01           Balance                                                            12,403,182
------------------------------------------------------------------------------------------------------------
       10/10/01           Dividend to Series B Preferred Stock             413,145
       10/10/01           Dividend to Series F Preferred Stock              33,334
       10/10/01           Dividend to Series G Preferred Stock              88,717
       10/17/01           Cash paid in lieu of fractional shares
                          in connection with the one-for-ten
                          reverse split                                     (1,037)
------------------------------------------------------------------------------------------------------------
       12/31/01           Ending Balance                                                     12,937,341
------------------------------------------------------------------------------------------------------------

</TABLE>

Shareholder Rights Plan

     On January 23, 2002, the Company's Board of Directors adopted a Shareholder
Rights Plan (the "Rights  Plan") to preserve the Company's net operating  losses
for tax purposes.  As discussed in Note 1, the Company's  future use of its NOLs
could be substantially  limited in the event of an "ownership change" within the
meaning of Section 382 of the Internal Revenue Code. The Rights Plan is designed
to deter an "ownership change" within the meaning of Section 382 of the Internal
Revenue Code by discouraging  any person or group from acquiring five percent or
more of the Company's outstanding common shares.

     Under the  Rights  Plan,  one right was  distributed  for each share of the
Company's  common stock to  shareholders  of record as of February 4, 2002.  The
rights trade with the underlying  shares of CRIIMI MAE common stock.  The rights
will become exercisable if a person or group acquires beneficial ownership of 5%
of CRIIMI MAE's  outstanding  common stock or announces a tender offer for 5% or
more of the common  stock (an  "Acquiring  Person").  An  Acquiring  Person also
includes  a  person  or group  that  held 5% or more of the  common  stock as of
January 23, 2002, and that acquires additional common shares. An exception could
be made if the transaction is approved by CRIIMI MAE's board of directors.

     If the rights  become  exercisable,  each right will  entitle its holder to
purchase  one  one-thousandth  of a  share  of a new  series  of  the  Company's
preferred  stock at an  exercise  price of $23 per  share.  If a person or group
becomes an Acquiring  Person in a transaction  that has not been approved by the
board of  directors,  then each right,  other than those owned by the  Acquiring
Person,  would entitle the holder to purchase  $46.00 worth of CRIIMI MAE common
stock for the $23.00 exercise price.

     The Company  generally  will be entitled to redeem the rights at $0.001 per
right. The rights will expire 10 years after the date of issuance.  However, the
Board of  Directors  may amend the Rights  Plan to provide  that the rights will
expire at an earlier  date.  The Rights Plan was filed with the  Securities  and
Exchange Commission as an exhibit

<PAGE>

to a Current Report on Form 8-K on January 25, 2002.

11.    PREFERRED STOCK

     On December 3, 2001, the Company's Board of Directors  decided to defer the
payment of dividends on CRIIMI MAE's Series B Cumulative  Convertible  Preferred
Stock ("Series B Preferred Stock"),  Series E Cumulative  Convertible  Preferred
Stock  ("Series E Preferred  Stock"),  Series F Redeemable  Cumulative  Dividend
Preferred Stock ("Series F Preferred Stock"), and Series G Redeemable Cumulative
Dividend  Preferred Stock ("Series G Preferred Stock") for the fourth quarter of
2001. In connection with the redemption of the Series E Preferred Stock on March
21, 2002, the Board contemporaneously declared  dividends on shares of Series B
Preferred  Stock,  Series F Preferred Stock and Series G Preferred Stock for the
fourth  quarter  of 2001 and the first  quarter  of 2002,  which  dividends  are
payable in shares of common stock.  Such common stock  dividends will be paid on
April 15, 2002 to holders of record on April 1, 2002.

     As of  December  31, 2001 and 2000,  75,000,000  and  25,000,000  shares of
preferred  stock,  respectively,  were  authorized.  As of December 31, 2001 and
2000,  3,000,000  shares were  designated as Series B Preferred  Stock,  203,000
shares  were  designated  as Series E  Preferred  Stock,  1,610,000  shares were
designated as Series F Preferred  Stock, and 3,760,000 shares were designated as
Series G Preferred Stock.

     The  following  is a brief  summary  of  certain  terms of each of the four
series of preferred  stock and is  qualified by and subject to the  descriptions
contained in the Company's  Articles of Amendment and  Restatement,  as amended,
and  reference  is made to such  Articles of  Amendment  and  Restatement  for a
complete  description of the relative  rights and  preferences of each series of
CRIIMI MAE's preferred stock.

Series B Cumulative Convertible Preferred Stock

     The Series B Preferred  Stock pays a dividend in an amount equal to the sum
of (i) $0.68 per share per  quarter  plus (ii) the  product of the  excess  over
$0.30, if any, of the quarterly cash dividend  declared and paid with respect to
each share of common stock times a  conversion  ratio of 0.4668 times one plus a
conversion  premium of 3%, subject to adjustment  upon the occurrence of certain
events.  Since the Series B Preferred  Stock voted to accept the  Reorganization
Plan, the relative  rights and  preferences of the Series B Preferred Stock were
amended  to permit  the  payment  of  dividends  in cash or  common  stock (or a
combination thereof) at the Company's election.  The Series B Preferred Stock is
(i)  convertible  at the option of the holders and (ii) subject to redemption at
CRIIMI MAE's sole discretion  after the tenth  anniversary of issuance in August
2006.  Each share of Series B Preferred  Stock was originally  convertible  into
0.22844  shares of common stock,  subject to adjustment  upon the  occurrence of
certain  events.  Due to  certain  adjustment  provisions  in  Exhibit  A of the
Company's  Articles  of  Amendment  and  Restatement  related  to the  Series  B
Preferred Stock, the payment of dividends to holders of common stock in the form
of preferred stock in 1999 and 2000, the payment of dividends on other series of
preferred  stock in shares of common stock during  2001,  and the reverse  stock
split effected in 2001 resulted in  adjustments to the Series B conversion price
such that one share of Series B  Preferred  Stock was  convertible  into  0.4668
shares  of  common  stock as of  December  31,  2001.  There  will be a  further
adjustment to the conversion  price of the Series B Preferred  Stock as a result
of the payment of dividends  on shares of Series F Preferred  Stock and Series G
Preferred  Stock on  April  15,  2002,  as  referenced  above.  The  liquidation
preference and the redemption  price on the Series B Preferred  Stock equals $25
per share, together with accrued and unpaid dividends.

     As of December 31, 2001 and 2000,  there were 1,593,982  shares of Series B
Preferred  Stock issued and  outstanding.  The following  table  summarizes  the
dividend payment activity for 2001 for the Series B Preferred Stock:


<PAGE>

<TABLE>
<CAPTION>
                                                                                               Number of
                                                                           Time Period for    Shares of
                                       Dividends per         Amount of     which dividends   Common Stock
    Declaration Date    Payment Date   Series B Share (c)  Dividends (c)     are accrued        Issued
    -------------------------------------------------------------------------------------------------------
    <S>                 <C>            <C>                 <C>              <C>              <C>
      May 10, 2001      June 1, 2001     $ 6.80            $ 10,839,078     9/1/98-3/31/01    1,454,508    (a)
    September 4, 2001 October 10, 2001   $ 1.36            $  2,167,816     4/1/01-9/30/01      413,145    (b)

</TABLE>

(a)  Represents the number of shares of common stock issued in connection
     with the payment of dividends to holders of Series B Preferred Stock. The
     Company determined the number of shares of common stock to issue by
     dividing the dollar amount of the dividend payable by the volume-weighted
     average of the sale prices of the common stock for the 10-trading day
     period commencing after the declaration date.

(b)  Represents the number of shares of common stock issued in connection
     with the payment of dividends to holders of Series B Preferred Stock. The
     Company determined the number of shares of common stock to issue by
     dividing the dollar amount of the dividend payable by the volume-weighted
     average of the sale prices of the common stock for the 10-trading day
     period (interrupted by the closing of equity markets due to the terrorist
     attacks) beginning one trading day after the dividend declaration date. As
     a result of the temporary closing of the U.S. equity markets from September
     11 through September 14, the original payment date of September 28, 2001
     was extended to October 10, 2001.

(c)  Although the payment of dividends for the fourth quarter of 2001 was
     initially deferred, the Company accrued $1,083,908 for the Series B
     Preferred Stock fourth quarter dividends at a dividend rate of $0.68 per
     share as of December 31, 2001. On March 21, 2002, the Board declared
     dividends on shares of Series B Preferred Stock of $1,083,908 and
     $1,083,908 for the fourth quarter of 2001 and the first quarter of 2002,
     respectively. The dividends are payable in shares of common stock on
     April 15, 2002 to holders of record on April 1, 2002. The Company will
     determine the number of shares of common stock to issue for the dividend by
     dividing $2,167,816 by the volume-weighted average of the sale prices of
     the common stock for the 10-trading day period commencing on March 22,
     2002.

     Since the holders of the Series B Preferred  Stock  accepted the  Company's
Reorganization  Plan,  the  relative  rights  and  preferences  of the  Series B
Preferred  Stock  were  amended to permit the  payment of  dividends,  including
accrued and unpaid dividends, in common stock or cash, or a combination of both,
at the election of the Company.

Series C and Series D Cumulative Convertible Preferred Stock

     As of  February  22,  2000,  all of the  outstanding  shares  of  Series  C
Cumulative  Convertible  Preferred  Stock  ("Series  C  Preferred  Stock")  were
exchanged for Series E Preferred Stock. On April 17, 2001, the date of emergence
from Chapter 11, the Company paid, as an allowed  claim,  dividends and interest
of $1,161,137  (through the issuance of common stock aggregating 167,794 shares)
on the former Series C Preferred Stock which  represented  dividends accrued and
unpaid through  February 22, 2000 (the date the Series C Preferred  Stock shares
were exchanged for Series E Cumulative  Convertible Preferred Stock shares) plus
interest on accrued and unpaid  dividends  from  February 23, 2000 through April
17, 2001.

     As of July 26, 2000, all of the  outstanding  shares of Series D Cumulative
Convertible  Preferred  Stock  ("Series D Preferred  Stock") were  exchanged for
Series E Preferred  Stock. On April 17, 2001, the date of emergence from Chapter
11, the Company paid, as an allowed claim,  dividends and interest of $1,310,122
(through the issuance of common stock aggregating  189,324 shares) on the former
Series D Preferred Stock which represented  dividends accrued and unpaid through
July 26, 2000 (the date the Series D Preferred  Stock shares were  exchanged for
Series E Preferred  Stock shares) plus interest on accrued and unpaid  dividends
from July 27, 2000 through April 17, 2001.

Series E Cumulative Convertible Preferred Stock

     On February 22,  2000,  CRIIMI MAE and the holder of its Series C Preferred
Stock entered into a Preferred Stock Exchange  Agreement (the "Series C Exchange
Agreement")  pursuant to which 103,000  shares of Series C Preferred  Stock were
exchanged  (the  "Series C  Exchange")  for  103,000  shares of a new  series of
preferred stock designated as Series E Cumulative  Convertible  Preferred Stock.
On July 26,  2000,  CRIIMI MAE and the holder of its  Series D  Preferred  Stock
entered  into a  Preferred  Stock  Exchange  agreement  (the  "Series D Exchange
Agreement") pursuant


<PAGE>

to which 100,000 shares of Series D Preferred  Stock were exchanged (the "Series
D Exchange"  and  together  with the Series C  Exchange,  the  "Exchanges")  for
100,000  shares  of Series E  Preferred  Stock.  The  principal  purpose  of the
Exchanges was to effect an extension of the  mandatory  conversion  dates,  upon
which the Series C  Preferred  Stock and  Series D  Preferred  Stock  would have
converted into common stock.

     On the Effective Date of the Reorganization Plan,  amendments to the Series
E Preferred  Stock  relative  rights and  preferences,  relating  principally to
conversion and dividend rights and terms, were effected.  The Series E Preferred
Stock paid a dividend in an amount equal to the sum of (i) 250 basis points plus
(ii)  LIBOR as of the second  LIBOR  Market Day  preceding  commencement  of the
calendar  quarter which  includes such  quarterly  dividend  payment.  Since the
holder of the Series E Preferred Stock voted to accept the Reorganization  Plan,
the relative rights and preferences of the Series E Preferred Stock were amended
to permit the payment of  dividends  in cash or common  stock (or a  combination
thereof) at the Company's election.

    On March 21, 2002, the Company redeemed all 173,000  outstanding  shares of
its Series E Preferred  Stock at the stated  redemption  price of $106 per share
plus accrued and unpaid dividends  through and including the date of redemption.
The  total  redemption  price was  $18,734,107  ($396,107  of which  represented
accrued and unpaid dividends). The $1.0 million difference between the aggregate
liquidation  value and the  redemption  price will be reflected as a dividend on
preferred  stock in the  first  quarter  of 2002.  The  shares  were held by the
Company's principal creditor.

     Up to 50,750  shares of Series E  Preferred  Stock  were  convertible  into
common stock during each of the periods  beginning upon the expiration of three,
nine,  twelve and fifteen  months after the  Effective  Date.  In  addition,  an
additional  15,000  shares of Series E  Preferred  Stock were  convertible  into
common stock during the period August 17, 2001 through  December 17, 2001. As of
December 31, 2001,  30,000 shares of Series E Preferred Stock had been converted
into 414,764 shares of common stock.  Each share of Series E Preferred Stock was
convertible  into common  stock based on a formula,  the  numerator of which was
$100 and the  denominator of which was a closing trade price of the common stock
within the conversion pricing period that was mutually acceptable or the average
of the closing trade prices of the common stock over the  applicable  twenty-one
(or such  fewer  number  as was  mutually  acceptable)  day  period  immediately
preceding the date of delivery.  There was a mandatory  conversion date of April
17, 2003. The Series E Preferred  Stock was subject to redemption by CRIIMI MAE.
The  liquidation  preference and the redemption  price on the Series E Preferred
Stock  were  $100 and $106,  respectively,  together  with  accrued  and  unpaid
dividends.

     As of December 31, 2001 and 2000,  there were  173,000 and 203,000  shares,
respectively,  of Series E Preferred Stock issued and outstanding. The following
table  summarizes  the  dividend  payment  activity  for 2001  for the  Series E
Preferred Stock:

<TABLE>
<CAPTION>
                                                                      Time period for    Number of Shares of
                                                   Amount of          which dividends    Common Stock Issued
    Declaration Date           Payment Date        Dividends (b)       are accrued               (a)
--------------------------------------------------------------------------------------------------------------
<S>                            <C>                 <C>                <C>                <C>
     March 26, 2001           April 17, 2001         $ 1,426,538      2/22/00-4/17/01          206,147
      June 4, 2001            June 29, 2001          $   262,308      4/18/01-6/30/01           40,605
    September 4, 2001       September 28, 2001       $   278,088      7/01/01-9/30/01           64,373

</TABLE>

(a)  Represents the number of shares of common stock issued in connection
     with the payment of dividends to holders of Series E Preferred Stock. The
     Company determined the number of shares of common stock to issue by
     dividing the dollar amount of the dividend payable by the average of the
     closing sale prices of the common stock for the 5-trading days prior to the
     dividend payment date.

(b)  Although the payment of dividends for the fourth quarter of 2001 was
     initially deferred, the Company accrued $225,477 for the Series E Preferred
     Stock fourth quarter dividends as of December 31, 2001. In connection with
     the redemption of the Series E Preferred Stock, the Company paid all
     accrued and unpaid dividends in cash on the Series E Preferred Stock
     through and including March 21, 2002, the redemption date. The total
     dividends paid were $396,107.

     On  October  26,  2001,  Section  9(a)(ii)  of  Exhibit B to the  Company's
Articles of Amendment and Restatement was amended to provide for an exception to
the 5% ownership  restriction upon conversion(s) such that holder(s) of Series E
Preferred  Stock may, upon receipt of the prior  written  consent of the Company
(which  consent may be withheld  by the Company in its sole  discretion)  and if
consistent with and otherwise  permitted by the Company's  Articles of Amendment
and  Restatement,  convert  shares of  Series E  Preferred  Stock  such that the


<PAGE>

holder(s)  of Series E Preferred  Stock own 5% or more but less than 9.8% of the
Company's then  outstanding  common stock for such period of time as is provided
in the written consent.

Series F Redeemable Cumulative Dividend Preferred Stock

     On September 14, 1999, the Company  declared a dividend on its common stock
for the purpose of  distributing  approximately  $15.7 million in  undistributed
1998 taxable income.  The dividend was paid to common  shareholders of record on
October 20, 1999, provided that the shareholders  maintained  ownership of their
common stock through the payment date. The dividend was paid on November 5, 1999
in 1,606,595 shares of Series F Preferred Stock.

     Holders of record of CRIIMI MAE common  stock who  maintained  ownership of
their  common  stock  through  November  5, 1999,  received  for each share held
3/100ths of a share of Series F Preferred Stock (i.e.,  three shares of Series F
Preferred  Stock for  every 100  shares of  common  stock  held).  The  Series F
Preferred  Stock  was  convertible  into  shares  of  common  stock  during  two
10-business  day  conversion  periods.  The  first  conversion  period  was from
November 15, 1999 through November 30, 1999 and the second conversion period was
from January 21, 2000 through  February 3, 2000.  Conversions  were based on the
volume-weighted  average  of  the  sale  prices  of the  common  stock  for  the
10-trading  days prior to the date  converted,  subject to a floor of 50% of the
volume-weighted  average of the sale  prices of the common  stock on November 5,
1999. During the first conversion  period,  756,453 shares of Series F Preferred
Stock were  converted,  resulting  in the  issuance of 640,144  shares of common
stock.  During  the  second  and final  conversion  period  (January  21 through
February 3, 2000) for the Series F Preferred Stock,  263,788  additional  shares
were  converted,  resulting in the issuance of 239,657  shares of common  stock.
Accrued and unpaid dividends were not paid on shares of Series F Preferred Stock
converted into common stock during the conversion periods.  After February 3,
2000, the Series F Preferred  Stock is not  convertible  into common stock.

     Since  the  holders  of  Series  F  Preferred  Stock  voted to  accept  the
Reorganization  Plan,  the  relative  rights  and  preferences  of the  Series F
Preferred  Stock  were  amended to permit the  payment of  dividends  in cash or
common stock (or a combination thereof) at the Company's election.  The Series F
Preferred  Stock is  redeemable  at the  Company's  option  in cash or shares of
parity  stock,  at the election of the  Company,  at a price of $10.00 per share
together with an amount (in cash and/or common stock,  as  applicable)  equal to
any accrued and unpaid  dividends  through the  dividend  declaration  date next
preceding  the  redemption  date.  The Series F  Preferred  Stock  provides  for
dividends at a fixed annual rate of 12%. The  liquidation  value of the Series F
Preferred  Stock is $10.00 per share plus  accrued and unpaid  dividends.

     As of December  31, 2001 and 2000,  there were  586,354  shares of Series F
Preferred  Stock issued and  outstanding.  The following  table  summarizes  the
dividend payment activity for 2001 for the Series F Preferred Stock:

<TABLE>
<CAPTION>

                                        Dividends                     Time period for        Number of
                                      per Series F     Amount of    which dividends are  Shares of Common
 Declaration Date    Payment Date        Share       Dividends (c)        accrued          Stock Issued
---------------------------------------------------------------------------------------------------------------
<S>                  <C>              <C>            <C>            <C>                  <C>
   June 4, 2001      July 2, 2001         $    1.99    $  1,166,844   11/5/99-6/30/01         185,996      (a)
September 4, 2001  October 10, 2001       $    0.30     $   175,906    7/1/01-9/30/01          33,334      (b)


</TABLE>

(a)  Represents the number of shares of common stock issued in connection
     with the payment of dividends to holders of Series F Preferred Stock. The
     Company determined the number of shares of common stock to issue by
     dividing the dollar amount of the dividend payable by the volume-weighted
     average of the sale prices of the common stock for the 10-trading day
     period commencing after the declaration date.

(b)  Represents the number of shares of common stock issued in connection
     with the payment of dividends to holders of Series F Preferred Stock. The
     Company determined the number of shares of common stock to issue by
     dividing the dollar amount of the dividend payable by the volume-weighted
     average of the sale prices of the common stock for the 10-trading day
     period (interrupted by the closing of equity markets due to the terrorist
     attacks) beginning one trading day after the dividend declaration date. As
     a result of the temporary closing of the U.S. equity markets from September
     11 through September 14, the original payment date of September 28, 2001
     was extended to October 10, 2001.

<PAGE>

(c)  Although the payment of dividends for the fourth quarter of 2001 was
     initially deferred, the Company accrued $175,906 for the Series F Preferred
     Stock fourth quarter dividends at a dividend rate of $0.30 per share as of
     December 31, 2001. On March 21, 2002, the Board declared dividends on
     shares of Series F Preferred Stock of $175,906 and $175,906 for the fourth
     quarter of 2001 and the first quarter of 2002, respectively. The dividends
     are payable in shares of common stock on April 15, 2002 to holders of
     record on April 1, 2002. The Company will determine the number of shares
     of common stock to issue for the dividend by dividing $351,812 by the
     volume-weighted average of the sale prices of the common stock for the 10
     trading day period commencing on March 22, 2002.


Series G Redeemable Cumulative Dividend Preferred Stock

     On September 11, 2000, the Company  declared a dividend on its common stock
for the purpose of  distributing  approximately  $37.5 million in  undistributed
1999 taxable income.  The dividend was paid to common  shareholders of record on
October 27, 2000, provided that the shareholders  maintained  ownership of their
common  stock  through the payment  date.  The dividend was paid on November 13,
2000 in 3,741,191 shares of Series G Preferred Stock.

     Holders of record of CRIIMI MAE common  stock who  maintained  ownership of
their common  stock  through  November  13,  2000,  received for each share held
6/100ths of a share of Series G Preferred  Stock  (i.e.,  six shares of Series G
Preferred  Stock for  every 100  shares of  common  stock  held).  The  Series G
Preferred Stock was  convertible  into shares of common stock during a period of
10 consecutive  trading days  commencing on February 21, 2001 and ended on March
6,  2001.  Conversions  were  based on the  volume-weighted  average of the sale
prices of the common stock for the 10-trading  days prior to the date converted,
subject to a floor of 50% of the  volume-weighted  average of the sale prices of
the common stock on November 13, 2000. During the conversion  period,  2,496,535
shares of Series G Preferred Stock were converted,  resulting in the issuance of
3,254,704 shares of common stock.  Accrued and unpaid dividends were not paid on
shares of Series G  Preferred  Stock  converted  into  common  stock  during the
conversion  period.  After March 6, 2001,  the Series G  Preferred  Stock is not
convertible into common stock.

     Holders of Series G  Preferred  Stock will be  entitled  to  receive,  when
declared by the Board of  Directors,  cumulative  dividends,  payable in cash or
common stock (or a combination  thereof) at the Company's  option,  at an annual
rate of 15%.  Since the holders of the Series G Preferred  Stock voted to accept
the  Reorganization  Plan, the relative  rights and  preferences of the Series G
Preferred  Stock were  amended to permit the  payments of  dividends  in cash or
common stock (or a combination thereof) at the Company's election.  The Series G
Preferred Stock is redeemable,  at the Company's option, in whole or in part, at
any time  after  issuance  in cash or  shares of parity  capital  stock,  at the
election of the Company,  at a price of $10.00 per share together with an amount
(in cash and/or common  stock,  as  applicable)  equal to any accrued and unpaid
dividends  through the dividend  declaration  date next preceding the redemption
date.  The  liquidation  value of the Series G Preferred  Stock is $10 per share
plus accrued and unpaid dividends.

     As of  December  31,  2001 and 2000,  there were  1,244,656  and  3,741,191
shares,  respectively,  of Series G Preferred Stock issued and outstanding.  The
following table summarizes the dividend payment activity for 2001 for the Series
G Preferred Stock:

<TABLE>
<CAPTION>
                                                                      Time period for    Number of Shares
                                       Dividends per     Amount of    which dividends    of Common Stock
   Declaration Date    Payment Date   Series G Share   Dividends (c)    are accrued          Issued
   ------------------------------------------------------------------------------------------------------------
   <S>                 <C>            <C>              <C>            <C>                <C>
     June 4, 2001      July 2, 2001     $   0.955      $ 1,188,646     11/13/00-6/30/01       189,450       (a)
   September 4, 2001 October 10, 2001   $   0.375      $   466,746      7/01/01-9/30/01        88,717       (b)

</TABLE>

(a)  Represents the number of shares of common stock issued in connection
     with the payment of dividends to holders of Series G Preferred Stock. The
     Company determined the number of shares of common stock to issue by
     dividing the dollar amount of the dividend payable by the volume-weighted
     average of the sale prices of the common stock for the 10-trading day
     period commencing after the declaration date.

<PAGE>

(b)  Represents the number of shares of common stock issued in connection
     with the payment of dividends to holders of Series G Preferred Stock. The
     Company determined the number of shares of common stock to issue by
     dividing the dollar amount of the dividend payable by the volume-weighted
     average of the sale prices of the common stock for the 10-trading day
     period (interrupted by the closing of equity markets due to the terrorist
     attacks) beginning one trading day after the dividend declaration date. As
     a result of the temporary closing of the U.S. equity markets from September
     11 through September 14, the original payment date of September 28, 2001
     was extended to October 10, 2001.

(c)  Although the payment of dividends for the fourth quarter of 2001 was
     initially deferred, the Company accrued $466,746 for the Series G Preferred
     Stock fourth quarter dividends at a dividend rate of $0.375 per share as of
     December 31, 2001. On March 21, 2002, the Board declared dividends on
     shares of Series G Preferred Stock of $466,746 and $466,746 for the fourth
     quarter of 2001 and the first quarter of 2002, respectively. The dividends
     are payable in shares of common stock on April 15, 2002 to holders of
     record on April 1, 2002. The Company will determine the number of shares
     of common stock to issue for the dividend by dividing $933,492 by the
     volume-weighted average of the sale prices of the common stock for the 10
     trading day period commencing on March 22, 2002.


<PAGE>


12.      EARNINGS PER SHARE

     The following table reconciles basic and diluted earnings per share ("EPS")
for the years ended  December 31, 2001,  2000,  and 1999.  The per share amounts
have been adjusted to reflect the  one-for-ten  reverse stock split  effected on
October 17, 2001.

<TABLE>
<CAPTION>

                                                           (Loss)/income          Shares          Per Share Amount
                                                          ----------------     -------------- --------------------------
Year ended December 31, 2001
------------------------------------
<S>                                                       <C>                  <C>            <C>
Net loss before cumulative effect
of changes in accounting principles                       $  (26,082,918)         11,087,790      $  (2.35)

Cumulative effect of change in
accounting principle related to SFAS 133                        (135,142)         11,087,790         (0.01)

Cumulative effect of change in
accounting principle related to servicing
fee revenue                                                    1,995,262          11,087,790          0.18
                                                         ----------------     --------------     ----------
Basic earnings per share:
  Loss to common shareholders                                (24,222,798)         11,087,790         (2.18)
Dilutive effect of securities:
   Stock options                                                       --                 --             --
   Convertible preferred stock                                         --                 --             --
                                                          ----------------     --------------     ----------
Diluted earnings per share (1):
  Loss to common shareholders and
    assumed conversions                                   $  (24,222,798)         11,087,790      $  (2.18)
                                                          ================     ==============     ==========
Year ended December 31, 2000
------------------------------------

Net loss before extraordinary item                         $(170,304,166)          6,214,479       $(27.40)
Extraordinary gain                                            14,808,737           6,214,479         $2.38
                                                          ----------------     --------------     ----------
Basic earnings per share:
  Loss to common shareholders                               (155,495,429)          6,214,479        (25.02)
Dilutive effect of securities:
   Stock options                                                       --                 --            --
   Convertible preferred stock                                         --                 --            --
                                                          ----------------     --------------     ----------
Diluted earnings per share (1):
  Loss to common shareholders and
    assumed conversions                                    $(155,495,429)          6,214,479       $(25.02)
                                                          ================     ==============     ==========
Year ended December 31, 1999
------------------------------------

Basic earnings per share:
  Loss to common shareholders                              $(132,368,965)          5,399,978       $(24.51)

Dilutive effect of securities:
   Stock options                                                       --                 --            --
   Convertible preferred stock                                         --                 --            --
                                                          ----------------     --------------     ----------
Diluted earnings per share (1):
  Loss to common shareholders and
    assumed conversions                                    $(132,368,965)          5,399,978       $(24.51)
                                                          ================     ==============     ==========
</TABLE>


(1)  The common stock equivalents for the Preferred Stock are not
     included in the calculation of diluted EPS for 2001, 2000 or 1999 because
     the effect would be anti-dilutive.


<PAGE>


     The following table presents the basic EPS assuming that servicing  revenue
resulting from the change in accounting was recognized on a current basis at the
beginning of each of the periods presented.

<TABLE>
<CAPTION>
                                                      2001              2000               1999
                                                ----------------- ------------------ ------------------
      <S>                                       <C>               <C>                <C>
      Pro forma net loss to common
        shareholders before extraordinary
        item and changes in accounting
        principles                                 $(26,082,918)     $(169,925,028)     $(131,835,569)
                                                ================= ================== ==================
      Pro forma basic and diluted loss per
        share                                      $      (2.35)     $      (27.34)     $      (24.41)
                                                ================= ================== ==================

      Pro forma net loss to common
        shareholders                               $(26,218,060)     $(155,116,291)     $(131,835,569)
                                                ================= ================== ==================
      Pro forma basic and diluted loss per
        share                                      $      (2.36)     $      (24.96)     $      (24.41)
                                                ================= ================== ==================

</TABLE>

13.      STOCK BASED COMPENSATION PLANS

     CRIIMI MAE has three stock  option  plans:  the 2001 Stock  Incentive  Plan
("2001 Stock Plan"),  the Second  Amended and Restated Stock Option Plan for Key
Employees  ("Key Employee Plan") and the 1996  Non-Employee  Director Stock Plan
("Director Plan").

     Under the 2001  Stock  Plan,  a  maximum  of  610,000  shares  (subject  to
adjustment)  are available for grant pursuant to stock awards and stock options.
As of December 31, 2001,  options to purchase 285,000 shares had been granted to
employees.  Under the 2001 Stock Plan, options granted must have an option price
of not less than  fair  market  value of a share of common  stock on the date of
grant. On November 16, 2001, CRIIMI MAE granted options to purchase an aggregate
285,000  shares under the 2001 Stock Plan.  These  options vest ratably with 33%
vesting  on the date of grant and 33%  vesting  on each of the first and  second
anniversaries  of the date of grant. The options expire in 10 years, and have an
exercise price of $2.78 per share,  which was the closing price of the Company's
common  stock on the date of grant.  No option or award of stock may be  granted
under the 2001 Stock Plan after July 1, 2011.

     Under the Key  Employee  Plan,  a maximum of  450,000  shares  (subject  to
adjustment)  are available for grant pursuant to stock  options.  As of December
31, 2001,  options to purchase  448,161  shares had been  granted to  employees.
Under the Key Employee  Plan,  options  granted prior to July 28, 1995,  have an
option  price of $97.70,  and options  granted  after July 28, 1995 must have an
option  price of not less than fair market  value of a share of common  stock on
the date of grant and expire  after eight years.  On June 18,  2001,  CRIIMI MAE
granted  options to purchase an aggregate  134,500 shares under the Key Employee
Plan. These options vested on the date of grant,  expire in 8 years, and have an
exercise price of $5.70 per share,  which was the closing price of the Company's
common  stock on the date of  grant.  No  option  may be  granted  under the Key
Employee Plan after June 30, 2002.

     Under the Director Plan, a maximum of 87,313 shares (subject to adjustment)
are  available  for grant  pursuant  to stock  awards and stock  options.  As of
December 31, 2001,  options to purchase  2,040 shares and stock awards for 1,200
shares had been granted to directors. These options have an exercise price equal
to the market price of a share of common  stock on the date of grant,  vested on
the date of grant, and expire after ten years.

     A summary of CRIIMI  MAE's stock  option and award plans as of December 31,
2001, 2000 and 1999, and changes during the years then ended is presented in the
table below:


<PAGE>

<TABLE>
<CAPTION>
                                          2001 Stock Plan             Key Employee Plan            Directors' Plan
                                      ------------------------     -------------------------   ------------------------
                                                    Average                       Average                     Average
                                        Shares       Price           Shares        Price         Shares        Price
                                      ------------------------     -------------------------   ------------------------
   <S>                                <C>           <C>              <C>          <C>            <C>          <C>
   Balance, January 1, 1999                    -       $   -          136,194     $ 149.06             600    $ 128.96
            Granted                            -           -           74,359        25.26             200       35.63
            Exercised                          -           -                -            -               -           -
            Forfeited                          -           -          (25,502)      114.12               -           -
                                     -----------  ----------        ----------    --------     -----------    --------
   Balance, December 31, 1999                                         185,051       104.13             800      105.63
            Adjustment of 2/00 (1)             -           -           30,386       104.13             131      105.63
            Granted                            -           -           12,135        10.63             200       13.75
            Exercised                          -           -                -            -               -           -
            Forfeited                          -           -          (19,747)       68.46               -           -
                                      ----------  ----------         ---------    --------      ----------     -------
   Balance, December 31, 2000                  -                      207,825       102.08           1,131       87.25
            Adjustment of 3/01 (2)             -           -          103,844       102.08             609       87.25
            Granted                      285,000        2.78          134,500         5.70             300        7.30
            Exercised                          -           -                -            -               -           -
            Forfeited                          -           -          (14,302)       75.61               -           -
                                      ----------  -----------       ----------  ----------     -----------    --------
   Balance, December 31, 2001            285,000      $ 2.78          431,867       $72.94           2,040      $75.49
                                      ==========  ==========        ==========  ==========     ===========    ========

   Exercisable, December 31, 1999             --          --           49,275     $ 144.35             800    $ 105.63
                                      ==========  ==========        =========   ==========     ===========    ========
   Exercisable, December 31, 2000             --          --          116,180     $ 124.60           1,131    $  87.25
                                      ==========  ==========        =========   ==========     ===========    ========
   Exercisable, December 31, 2001         94,998      $ 2.78          389,435      $ 78.53           2,040    $  75.49
                                      ==========  ==========        =========   ==========     ===========    ========

</TABLE>

(1)  Adjustment  as a result of  anti-dilution  provision  associated  with
Series  F  Preferred  Stock  dividend  paid to  holders  of  common  stock.

(2)  Adjustment  as a result of  anti-dilution  provision  associated  with
Series G Preferred Stock dividend paid to holders of common stock.

     In addition to the option  information  included in the table  above,  with
respect to options granted to the principals at the time of the Merger,  options
to acquire  316,593 and 271,921 shares were  outstanding as of December 31, 2000
and 1999, respectively.  There were no exercises during the years ended December
31, 2001, 2000 and 1999. These Merger options expired during 2001.

     The following table summarizes  information about stock options outstanding
at December 31, 2001:
<TABLE>
<CAPTION>

                                          Options Outstanding                           Options Exercisable
                         ------------------------------------------------------    ------------------------------
                                             Weighted             Weighted                           Weighted
                                              Average              Average                            Average
         Range of          Number            Remaining            Exercise           Number          Exercise
      exercise prices    outstanding     Contractual Life           Price          exercisable         Price
    -------------------- ------------    ------------------    ----------------    ------------    --------------
    <S>                  <C>             <C>                   <C>                 <C>             <C>
    $2.78 - $15.94           465,664            8.8                   $ 4.44          255,548            $ 5.17
    $15.95 - $31.87           67,390            5.2                    31.25           45,072             31.25
    $31.88 - $47.81              348            7.0                    35.63              348             35.63
    $47.82 - $111.56          17,165            1.9                   101.69           17,165            101.69
    $111.57 - $143.44          3,840            3.2                   127.50            3,840            127.50
    $143.45 - $159.38        164,500            3.9                   158.20          164,500            158.20
                           ---------       -------------         -------------       ---------       -----------
    $2.78 - $159.38          718,907            7.1                  $ 45.13          486,473           $ 63.73
                         ===========       =============         =============       =========       ===========

</TABLE>

     The Company has adopted  the  disclosure-only  provisions  of SFAS No. 123,
"Accounting for Stock-Based  Compensation." As a result, CRIIMI MAE accounts for
these  Agreements and Plans under  Accounting  Principles  Board Opinion No. 25,
under which no compensation cost has been recognized.  SFAS No. 123 requires pro
forma  disclosure  of the impact on net income and  earnings per share as if the
options were  recorded at their  estimated  fair value at the issuance  date and
amortized over the options'  vesting  period.  Had  compensation  cost for these
Plans

<PAGE>

been determined  consistent with SFAS No. 123, CRIIMI MAE's net income and
earnings per share would have been recorded at the following pro forma amounts:

<TABLE>
<CAPTION>
                                                                 Years ended December 31,
                                                        2001               2000               1999
                                                  -----------------  -----------------  -----------------
<S>                                               <C>                <C>                <C>
Pro forma net loss to common shareholders            $(25,493,873)     $(156,370,899)     $(133,490,853)
                                                  =================  =================  =================

Pro forma basic loss per share                       $      (2.30)     $     ( 25.16)     $      (24.72)
                                                  =================  =================  =================

Pro forma diluted loss per share                     $      (2.30)     $      (25.16)     $      (24.72)
                                                  =================  =================  =================

</TABLE>

     The weighted  average fair value of the options  granted was $2.66,  $8.30,
and $20.30  during 2001,  2000,  and 1999,  respectively.  The fair value of the
2001,  2000 and 1999 option  grants was estimated on the date of grant using the
Black-Scholes   option  pricing  model  with  the  following   weighted  average
assumptions:

<TABLE>
<CAPTION>
                                            2001                  2000                     1999
                                      ------------------    ------------------     ----------------------
     <S>                              <C>                   <C>                    <C>
     Risk-free interest rate                4.29%                 6.44%                    5.37%
     Expected life                       4.78 years            5.29 years               6.23 years
     Expected volatility                    91.4%                 96.2%                    95.2%
     Dividend yield                          --%                   --%                      --%

</TABLE>

<PAGE>


14.     TRANSACTIONS WITH RELATED PARTIES


     Below is a summary of the related party  transactions  that occurred during
the years ended  December 31,  2001,  2000 and 1999.  These items are  described
further in the text which follows:
<TABLE>
<CAPTION>
                                                                       For the years ended December 31,
                                                                  2001                2000              1999
                                                             ----------------    ---------------   ----------------
 <S>                                                         <C>                 <C>               <C>
 Amounts received or accrued from related parties:
   CRIIMI Inc.
     Income (1)                                                  $   751,021        $   746,570        $   972,180
     Return of Capital (2)                                         1,723,949          1,573,335          5,278,811
                                                             ----------------    ---------------   ----------------

     Total                                                       $ 2,474,970        $ 2,319,905        $ 6,250,991
                                                             ================    ===============   ================

   CRI/AIM Investment Limited Partnership (1)                    $   284,411        $   341,965        $   444,393
                                                             ================    ===============   ================

 Expense reimbursements to CRIIMI MAE Management:
   AIM Funds (4)                                                 $   183,898        $   168,978        $   183,579
   CMSLP (2)(3)(4)                                                   248,428 (6)         39,602            946,461
                                                             ----------------    ---------------   ----------------

     Total                                                       $   432,326        $   208,580        $ 1,130,040
                                                             ================    ===============   ================
 Payments to CRI:
   Expense reimbursement - CRIIMI MAE (4)(5)                     $   218,038 (7)    $   151,171        $   182,691
                                                             ================    ===============   ================
 Payments to Capital Hotel Group:
   Management fee (4)                                                $    --           $ 34,698          $  61,077
                                                             ================    ===============   ================
</TABLE>


(1)      Included as equity in earnings from investments on the accompanying
         consolidated statements of income.
(2)      Included as a reduction of equity investments on the accompanying
         consolidated balance sheets.
(3)      Effective October 1, 2001, CRIIMI MAE entered into an Administrative
         Services and Loan Servicing Agreement with CMSLP to provide CRIIMI MAE
         with certain loan servicing and surveillance services to assist CRIIMI
         MAE in monitoring certain investments (the "Services Agreement"). In
         addition, CRIIMI MAE provides CMSLP with the following services: human
         resources, payroll, structured finance, information  technology,
         treasury, legal and administrative. CMSLP and CRIIMI MAE compensate
         each other for these services at an amount that the Company
         believes would be charged to, or by an unaffiliated third party for
         comparable services.
(4)      Included in general and administrative expenses on the accompanying
         consolidated statements of income.
(5)      Prior to CRIIMI MAE becoming a self-administered REIT, amounts were
         paid to CRI as reimbursement for expenses incurred by the adviser on
         behalf of CRIIMI MAE. In connection with the Merger, on June 30, 1995,
         CRIIMI MAE was no longer required to reimburse the adviser, as these
         expenses are now directly incurred by CRIIMI MAE. However, pursuant
         to an agreement between CRIIMI MAE and CRI (the "CRI Administrative
         Services Agreement"), CRI provides CRIIMI MAE with certain
         administrative and office facility services and other services,
         at cost, with respect to certain aspects of CRIIMI MAE's business.
         CRIIMI MAE uses the services provided under the CRI Administrative
         Services Agreement to the extent such services are not performed by
         CM Management or provided by another service provider. The CRI
         Administrative Services Agreement is terminable on 30 days notice at
         any time by CRIIMI MAE.
(6)      Includes payroll reimbursement for services provided by CM Management
         employees to CMSLP through June 30, 2001. Since CMSLP has been
         accounted for on a consolidated basis since July 1, 2001, there are no
         related party transactions with CMSLP after that date.
(7)      Includes a payment of approximately $48,000 to CRI related to a
         pre-petition claim on April 17, 2001.

15.      LITIGATION

Bankruptcy Proceedings and Other Litigation

     On the Petition  Date,  the Debtors  filed  voluntary  petitions for relief
under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court. On November 22,
2000,  the  Bankruptcy  Court  entered  an  order  (the  "Confirmation   Order")
confirming the  Reorganization  Plan before it. The Company emerged from Chapter
11 on April 17, 2001,

<PAGE>

at which date all material  litigation  matters existing  subsequent to the
Petition Date had been settled or resolved except for the First Union litigation
referenced below.

     First Union

     First Union and the Company entered into a settlement agreement dated as of
February 6, 2002 (the "Settlement Agreement").  On March 5, 2002, the Bankruptcy
Court  entered an order  approving  the  Settlement  Agreement.  The  Settlement
Agreement became effective on March 20, 2002 (the "Settlement  Effective Date").
The dispute  concerned  whether  First Union was a secured or unsecured creditor
in connection with certain credit and custodian agreements between CRIIMI MAE
and First Union.  First Union's claim amount was approximately $18.6 million.

     On the  Settlement  Effective  Date,  a previously  issued  Series A Senior
Secured Note having a December 31, 2001 face amount of $7,484,650 and previously
issued Series B Senior  Secured Notes having a December 31, 2001  aggregate face
amount of  $4,809,273  (collectively,  the "Notes") were released from escrow to
First Union.  On the Settlement  Effective  Date,  First Union sold the Notes to
ORIX. The proceeds from the sale of the Notes,  combined with the escrowed cash,
resulted in total proceeds of approximately  $18.8 million.  CRIIMI MAE retained
the  approximate  $238,000 of cash in excess of the First Union claim  amount of
$18.6  million.  In  addition,   approximately   $22,938,260  of  the  Company's
restricted cash became unrestricted.

     Reference is made to the Settlement  Agreement,  previously  filed with the
Bankruptcy Court (and with the Securities and Exchange  Commission as an exhibit
to a Current Report on Form 8-K filed on February 13, 2002), for a more detailed
description of the terms and conditions of the Settlement Agreement.

16.     SUMMARY OF QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

     The following is a summary of unaudited quarterly results of operations for
the years ended December 31, 2001, 2000 and 1999:

<TABLE>
<CAPTION>
                                                                               2001
                                             -------------------------------------------------------------------------
                                              First Quarter     Second Quarter       Third Quarter    Fourth Quarter
                                             ----------------   ----------------    ----------------  ----------------
<S>                                          <C>                <C>                 <C>               <C>
Interest Income                                 $ 33,811,044      $ 33,718,486         $ 33,588,020     $ 33,258,002
Net income (loss)                                  6,030,160 (1)    (2,375,818) (1)        (723,708)     (27,153,432)
Basic net earnings (loss) per share                     0.80 (1)         (0.21) (1)           (0.06)           (2.10)
Diluted net earnings (loss) per share                   0.64 (1)         (0.21) (1)           (0.06)           (2.10)


                                                                               2000
                                             -------------------------------------------------------------------------
                                              First Quarter    Second Quarter        Third Quarter    Fourth Quarter
                                             ----------------  ----------------     ----------------  ----------------

Interest Income                                 $ 55,454,598      $ 51,274,382         $ 49,066,581     $ 39,456,080
Net income (loss)                                  4,035,611         3,742,484          (44,463,063)    (118,810,461)
Basic net earnings (loss) per share                     0.66              0.60                (7.13)          (19.05)
Diluted net earnings (loss) per share                   0.56              0.54                (7.13)          (19.05)


                                                                               1999
                                             -------------------------------------------------------------------------
                                              First Quarter    Second Quarter        Third Quarter    Fourth Quarter
                                             ----------------  ----------------     ----------------  ----------------

Interest Income                                 $ 56,226,280      $ 55,555,456         $ 55,436,380       $ 55,105,112
Net income (loss)                                 13,416,949        (2,033,199)           8,100,173       (151,852,888)
Basic net earnings (loss) per share                     2.53             (0.38)                1.51             (27.19)
Diluted net earnings (loss) per share                   2.30             (0.38)                1.36             (27.19)

</TABLE>

(1) The net income has been  adjusted to reflect  the change in  accounting
principle related to servicing revenue.

<PAGE>

17.     SEGMENT REPORTING

     Management  assesses Company  performance and allocates capital principally
on the  basis of two  lines  of  business:  portfolio  investment  and  mortgage
servicing.  These two lines of business are managed  separately  as they provide
different sources and types of revenues for the Company.

     Portfolio  investment  primarily includes (i) acquiring  Subordinated CMBS,
(ii)  securitizing  pools of  mortgage  loans  and pools of CMBS,  (iii)  direct
investments  in government  insured  securities and entities that own government
insured securities and (iv) securities trading activities.  The Company's income
is primarily generated from these assets.

     Mortgage  servicing,  which  consists  of  all  the  operations  of  CMSLP,
primarily includes  performing  servicing functions with respect to the mortgage
loans  underlying the Company's  Subordinated  CMBS. CMSLP performs a variety of
servicing including special  servicing and loan management. For these services,
CMSLP earns a servicing fee which is calculated as a percentage of the principal
amount of the servicing  portfolio  typically  paid when the related  service is
rendered.   These  services  may  include  either  routine   monthly   services,
non-monthly  periodic  services  or  event-triggered  services.  In  acting as a
servicer,  CMSLP also earns interest income on the investment of escrows held on
behalf of  borrowers  and other  income  which  includes,  among  other  things,
assumption  fees and  modification  fees.  Through June 30,  2001,  CMSLP was an
unconsolidated affiliate of CRIIMI MAE. Therefore, up through June 30, 2001, the
results of its  operations  were reported in the Company's  income  statement in
equity in (losses) earnings from investments. Beginning in the third quarter of
2001, CMSLP's results were consolidated into CRIIMI MAE's consolidated financial
statements  as a result of a change in the  ownership  of CMSLP.  See Note 3 for
further  discussion.   Revenues,  expenses  and  assets  are  accounted  for  in
accordance with the accounting  policies set forth in Note 3. Overhead expenses,
such as administrative  expenses, are allocated either directly to each business
line or through estimates based on factors such as number of personnel or square
footage of office  space.  As  discussed in Note 3, CMSLP sold all of its rights
and  obligations  under its CMBS  master  and  primary  servicing  contracts  in
February 2002.

     The following  tables detail the Company's  financial  performance by these
two primary  lines of business for the years ended  December 31, 2001,  2000 and
1999. The basis of accounting used in the tables is GAAP.


<PAGE>

<TABLE>
<CAPTION>
                                                                              2001
                                          --------------------------------------------------------------------------------
                                            Portfolio       Mortgage     Reclassification
                                            Investment     Servicing           (2)         Elimination (1)  Consolidated
                                          --------------- ------------- ------------------ --------------- ---------------
<S>                                       <C>             <C>           <C>                <C>             <C>
Interest income:
   Subordinated CMBS                       $ 105,522,833     $  310,690     $    (186,357)    $  (124,333)   $ 105,522,833
   Insured mortgage securities                28,852,719              -                 -               -       28,852,719
   Other                                               -      2,203,907          (648,307)     (1,555,600)               -
Servicing income                                       -      6,419,399         3,315,456      (2,848,798)       6,886,057
Net gain on mortgage security dispositions       (41,982)             -                 -               -          (41,982)
Other income                                   4,833,529      3,771,670        (2,480,792)     (3,569,612)       2,554,795
                                          --------------- ------------- ------------------ --------------- ---------------
   Total revenue
                                             139,167,099     12,705,666                 -      (8,098,343)     143,774,422
                                          --------------- ------------- ------------------ --------------- ---------------
General and administrative expenses          (11,548,759)             -                 -               -      (11,548,759)
Interest expense                             (97,787,568)             -                 -               -      (97,787,568)
Reorganization items                          (1,813,220)             -                 -               -       (1,813,220)
Other expenses                                (2,877,576)             -                 -               -       (2,877,576)
Servicing general and administrative
   expenses                                            -    (12,165,374)                -       6,282,485       (5,882,889)
Servicing non-cash expenses                            -     (3,378,076)                -       1,678,890       (1,699,186)
CMSLP Restructuring                                    -       (437,723)                -               -         (437,723)
Impairment on CMBS                           (34,654,930)             -                 -               -      (34,654,930)
Emergence loan origination fee                (3,936,616)             -                 -               -       (3,936,616)
Hedging loss                                  (1,073,392)             -                 -               -       (1,073,392)
                                          --------------- ------------- ------------------ --------------- ---------------
   Total expenses
                                            (153,692,061)   (15,981,173)                -       7,961,375     (161,711,859)
                                          --------------- ------------- ------------------ --------------- ---------------

Net (loss) income before extraordinary
   item and cumulative effect of
   changes in accounting principles       $  (14,524,962) $  (3,275,507)      $         -     $  (136,968)   $ (17,937,437)
                                          =============== ============= ================== =============== ===============

  Total assets                            $1,289,827,494  $  25,176,629       $         -     $         -   $1,315,004,123
                                          =============== ============= ================== =============== ===============
</TABLE>

-----------------------------------------

(1)  The Company performs the mortgage servicing function through CMSLP
     which, through June 30, 2001, was accounted for under the equity method.
     The elimination column reclassifies CMSLP under the equity method as it was
     accounted for in the Company's consolidated financial statements. Beginning
     in the third quarter of 2001, CMSLP's results were consolidated into CRIIMI
     MAE Inc.'s consolidated financial statements.

(2)  For consolidated financial statement purposes, all revenue earned by the
     mortgage servicing function is classified as servicing income.


<PAGE>

<TABLE>
<CAPTION>

                                                                                 2000
                                                -----------------------------------------------------------------------
                                                   Portfolio          Mortgage
                                                   Investment        Servicing     Elimination (1)      Consolidated
                                                -----------------  --------------  -----------------  -----------------
<S>                                             <C>                <C>             <C>                <C>
Interest income:
   Subordinated CMBS                            $    137,072,372      $  262,668    $     (262,668)    $   137,072,372
   Insured mortgage securities                        30,668,228               -                 -          30,668,228
   Originated loans                                   27,511,041               -                 -          27,511,041
   Other                                                       -       3,925,309        (3,925,309)                  -
Servicing income                                               -       5,843,233        (5,843,233)                  -
Net gain on mortgage security dispositions               279,815               -                 -             279,815
Gain on originated loan dispositions                     244,580               -                 -             244,580
Other income                                           5,616,723       4,653,457        (3,842,855)          6,427,325
                                                -----------------  --------------  -----------------  -----------------
   Total revenue
                                                     201,392,759      14,684,667       (13,874,065)        202,203,361
                                                -----------------  --------------  -----------------  -----------------

General and administrative expenses                  (11,301,385)    (11,986,788)       11,986,788         (11,301,385)
Interest expense                                    (139,366,369)              -                 -        (139,366,369)
Reorganization items                                 (66,072,460)              -                 -         (66,072,460)
Impairment on CMBS                                  (143,478,085)              -                 -        (143,478,085)
Other expenses                                        (5,377,576)     (2,178,652)        2,178,652          (5,377,576)
                                                -----------------  --------------  -----------------  -----------------
   Total expenses
                                                    (365,595,875)    (14,165,440)       14,165,440        (365,595,875)
                                                -----------------  --------------  -----------------  -----------------

Net (loss) income before extraordinary item
   and cumulative effect of changes in
   accounting principles                        $  (164,203,116)      $  519,227   $       291,375    $   (163,392,514)
                                                =================  ==============  =================  =================

  Total assets                                  $ 1,535,468,572      $25,930,760   $    (3,559,687)    $ 1,557,839,645
                                                =================  ==============  =================  =================

</TABLE>

(1)  The Company performs the mortgage servicing function through CMSLP
     which, during the period covered, was accounted for under the equity
     method. The elimination column reclassifies CMSLP under the equity method
     as it is accounted for in the Company's consolidated financial statements.


<PAGE>

<TABLE>
<CAPTION>
                                                                              1999
                                             -----------------------------------------------------------------------
                                                Portfolio         Mortgage
                                                Investment        Servicing     Elimination (1)     Consolidated
                                             -----------------  --------------  ----------------- ------------------
<S>                                          <C>                <C>             <C>               <C>
Interest income:
   Subordinated CMBS                          $   154,205,383      $  282,148            (282,148)  $    154,205,383
   Insured mortgage securities                     33,405,171               -                   -         33,405,171
   Originated loans                                34,712,674               -                   -         34,712,674
   Other                                                    -       3,384,533          (3,384,533)                 -
Servicing income                                            -       6,701,244          (6,701,244)                 -
Net gain on mortgage security dispositions          2,127,691               -                   -          2,127,691
Gain on originated loan dispositions                  403,383               -                   -            403,383
Other income                                        4,038,061       4,359,320          (6,616,875)         1,780,506
                                             -----------------  --------------  ----------------- ------------------
   Total revenue
                                                  228,892,363      14,727,245         (16,984,800)       226,634,808
                                             -----------------  --------------  ----------------- ------------------

General and administrative expenses               (12,049,256)    (13,016,747)         13,016,747        (12,049,256)
Interest expense                                 (151,336,830)               -                  -       (151,336,830)
Losses on warehouse obligations                    (8,000,000)               -                  -         (8,000,000)
Reorganization items                             (178,899,959)               -                  -       (178,899,959)
Other expenses                                     (2,877,576)     (4,139,118)          4,139,118         (2,877,576)
                                             -----------------  --------------  ----------------- ------------------
   Total expenses
                                                 (353,163,621)    (17,155,865)         17,155,865       (353,163,621)
                                             -----------------  --------------  ----------------- ------------------

Net (loss) income before extraordinary
   item and cumulative effect of changes
   in accounting principles                   $  (124,271,258)   $ (2,428,620)     $      171,065   $   (126,528,813)
                                             =================  ==============  ================= ==================

Total assets                                  $ 2,272,100,775    $ 23,679,706      $   (2,119,235)  $  2,293,661,246
                                             =================  ==============  ================= ==================

</TABLE>

(1)   The Company performs the mortgage servicing function through CMSLP
     which, during the period covered, was accounted for under the equity
     method. The elimination column reclassifies CMSLP under the equity method
     as it is accounted for in the Company's consolidated financial statements.