SECURITIES AND EXCHANGE COMMISSION
                                Washington, D.C.

                                    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, 1998

                       Commission File Number 333-14041-03

                  TRUST CREATED BY BLOCK MORTGAGE FINANCE, INC.

                 (under a Pooling and Servicing Agreement dated
                as of January 1, 1998, which Trust is the issuer
                     of Block Mortgage Finance Asset Backed
                          Certificates, Series 1998-1)



             (Exact name of Registrant as specified in its Charter)

     New York                                                    33-0805105
------------------------------                              --------------------
State or other jurisdiction of                              I.R.S.  Employer of
incorporation or organization                               Identification No.)

Bankers Trust Company of California, N.A.
3 Park Plaza, 16th Floor
Irvine, California
Attention: Block Mortgage Finance Asset Backed
           Certificates, Series 1998-1                               92614      
--------------------------------------------------------------------------------
(Address of principal executive offices)                           (Zip Code)

Registrant's telephone number, including area code:  (714) 253-7575

Securities registered pursuant to Section 12(b) of the Act: Not applicable.

Securities registered pursuant to Section 12(q) of the Act: Not applicable.

     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 (section 229.405 of this chapter) 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 10-K or any amendment to this Form 10-K.  [X]

     Aggregate market value of the voting stock held by non-affiliates of the
registrant as of December 31, 1998: Not applicable.

      Number of shares of common stock as of December 31, 1998: Not applicable.

                       DOCUMENTS INCORPORATED BY REFERENCE

                                      None

<PAGE>



                                     PART I

ITEM 1.    BUSINESS.

     The Registrant issued Asset Backed Certificates, Series 1998-1 (the
"Securities") pursuant to a Pooling and Servicing Agreement dated as of January
1, 1998 (the "Cut-off Date") among Block Mortgage Finance, Inc., as Depositor,
Block Financial Corporation, as Master Servicer, Companion Mortgage Corporation,
as Seller, and Bankers Trust Company of California, N.A., as Trustee. The assets
of the Trust consist primarily of a pool of fixed rate and adjustable rate
mortgage loans (the "Mortgage Loans") having an aggregate principal balance as
of the Cut-off Date of approximately $184,325,817.06. The Mortgage Loans are
secured by one- to four-family residential properties (each, a "Mortgaged
Property"). Certificateholders receive monthly Statements to Certificateholders
regarding distributions.

     Further information with respect to the performance of the Trust is
summarized in the monthly Statements to Certificateholders, which are filed on
Form 8-K.

ITEM 2.    PROPERTIES.

     Information regarding the Mortgaged Properties securing the Mortgage Loans
is set forth in the Prospectus Supplement and the monthly Statements to
Certificateholders, which are filed on Form 8-K. The Trust will acquire title to
real estate only upon default of the mortgagors under the Mortgage Loans.

     All real estate acquired and held by the Trust as of February 26, 1999 is
improved with single family dwellings. The following table describes real estate
acquired and held by the Trust as of February 26, 1999:


FIXED RATE MORTGAGE LOANS
-------------------------------------------------------------------------------
PRINCIPAL BALANCE                    $806,754.99
PERCENTAGE OF POOL                       
BALANCE                                  0.5944%
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
NUMBER OF LOANS                               11
PERCENTAGE OF LOANS                      
IN POOL                                  0.4455%
-------------------------------------------------------------------------------

ADJUSTABLE RATE MORTGAGE
 LOANS
-------------------------------------------------------------------------------
PRINCIPAL BALANCE                    $447,750.00
PERCENTAGE OF POOL                       
BALANCE                                  0.3299%
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
NUMBER OF LOANS                               7
PERCENTAGE OF LOANS                     
IN POOL                                  0.2835%
-------------------------------------------------------------------------------


ITEM 3.    LEGAL PROCEEDINGS.

     There are no material pending legal proceedings involving the Trust or,
with respect to the Trust or the Mortgage Loans, the Trustee, the Master
Servicer or the Depositor, other than ordinary routine litigation incidental to
the Trustee's, the Master Servicer's or the Depositor's duties under the Pooling
and Servicing Agreement.

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

     No matters were submitted to a vote of Certificateholders during the fiscal
year covered by this report.


<PAGE>



                                     PART II

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

     The Registrant's Asset Backed Certificates, Series 1998-1 represent
non-recourse obligations of the Trust, such Trust having assets which consist of
the Mortgage Loans. Strictly speaking, Registrant has no "common equity," but
for purposes of this Item only, Registrant's Asset Backed Certificates, Series
1998-1 are treated as "common equity."

      (a)  Market Information.  There is no established public trading market
           for Registrant's Securities.

      (b)  Certificateholders.  The approximate  number of registered holders of
           each  class of  Certificates  as of  February  28,  1999 is set forth
           below:

           Class                    Certificateholders
           -----                    ------------------
           A-1                            8
           A-2                            2
           A-3                            2
           A-4                            3
           A-5                            2
           A-6                            3
           R                              2

      (c) Dividends. Not applicable. The information regarding dividends
          required by sub-paragraph (c) of Item 201 of Regulation S-K is
          inapplicable because the Trust does not pay dividends. However,
          information as to distributions to Certificateholders is provided in
          the monthly Statements to Certificateholders for each month of the
          fiscal year in which a distribution to Certificateholders was made.

ITEM 6.    SELECTED FINANCIAL DATA.

     Not Applicable. Because of the limited activities of the Trust, information
with respect to the performance of the Trust is summarized in the monthly
Statements to Certificateholders, which are filed on a monthly basis on Form
8-K. However, certain selected aggregate information with respect to the Trust
for 1998 is filed as an exhibit to this report.

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

     Not Applicable. The information required by Item 303 of Regulation S-K is
not meaningful in light of the nature of the Trust. Information concerning the
Mortgage Loans and distributions to the Certificateholders is contained in the
monthly Statements to Certificateholders which are filed on Form 8-K.

ITEM 7A.   QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.

     Not applicable. The Trust does not engage in the types of transactions
required to be disclosed under this Item.

ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

     Not Applicable. Information with respect to the Trust is contained in the
monthly Statements to Certificateholders filed on a monthly basis on Form 8-K.

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

      None.


<PAGE>



                                    PART III

ITEM 10.   DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT.

      Not Applicable.  The Trust does not have officers or directors.

ITEM 11.   EXECUTIVE COMPENSATION.

     Not Applicable. The Trust does not have officers or directors to whom
compensation needs to be paid.

ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

      (a) Security ownership of certain beneficial owners. Not Applicable. Under
          the Pooling and Servicing Agreement governing the Trust, the holders
          of the Certificates generally do not have the right to vote and are
          prohibited from taking part in management of the Trust.

      (b) Security ownership of management.  Not Applicable. The Trust does not
          have any officers or directors.

      (c) Changes in control.  Not Applicable.  Because Certificateholders do
          not possess, directly or indirectly, the power to direct or cause
          the direction of the management and policies of the Trust, other
          than with respect to certain required consents to amendments to the
          Pooling and Servicing Agreement and the ability to act as a group
          in the event of the occurrence of certain events which if
          continuing would constitute events of default under the Pooling and
          Servicing Agreement, the information requested with respect to Item
          403(c) of Regulation S-K is inapplicable.

ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     Not Applicable. The Trust does not have officers or directors and under the
Pooling and Servicing Agreement governing the Trust. In addition, the Registrant
does not have knowledge of any transaction required to be disclosed by Items
404(a)(3) or (a)(4) of Regulation S-K.

                                     PART IV

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

      (a) The following is a list of documents filed as part of this report:


           EXHIBITS

      4.1  Pooling and Servicing Agreement dated as of January 1, 1998 (hereby
           incorporated herein by reference as Exhibit 4 to Depositor's Current
           Report on Form 8-K dated January 27, 1998).

      99.1 Master Servicer Annual Officer's Certificate dated March 30, 1999.

      99.2 Report of Independent  Accountants  pertaining to Companion Servicing
           Company, L.L.C., dated March 31, 1999.

      99.3 Aggregate Information from Statements to Certificateholders
           Relating to 1998 Distributions to Holders of Block Mortgage Finance
           Asset Backed Certificates, Series 1998-1.

      99.4 Consolidated financial statements of MBIA Insurance Corporation and
           its subsidiaries as of December 31, 1998 and 1997 and for the three
           years ended December 31, 1998 (hereby incorporated herein by
           reference to the Annual Report on Form 10-K of MBIA Inc. for the
           year ended December 31, 1998 under Commission file number 001-09583).


<PAGE>



      (b)  Reports on Form 8-K

           Current  Report on Form 8-K dated  October 26, 1998  (filing  monthly
           Statements to Certificateholders)
           Current  Report on Form 8-K dated  November 25, 1998 (filing  monthly
           Statements to  Certificateholders)  Current  Report on Form 8-K dated
           December 28, 1998 (filing monthly Statements to Certificateholders)

      (c)  The exhibits required to be filed by Registrant  pursuant to Item 601
           of  Regulation  S-K are listed  above and in the  Exhibit  Index that
           immediately follows the signature page hereof.

      (d)  Not  Applicable.   The  Trust  does  not  have  any  subsidiaries  or
           affiliates. Therefore, no financial statements are filed with respect
           to subsidiaries or affiliates.

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

      No  Annual  report,  proxy  statement,  form of proxy or other  soliciting
material  has  been  sent to  Security  Holders,  and the  Registrant  does  not
contemplate sending any such materials subsequent to the filing of this report.

                                    SIGNATURE

      Pursuant  to the  requirements  of Section  13 or 15(d) of the  Securities
Exchange Act of 1934, Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

           Block  Financial  Corporation,  not in its  individual  capacity  but
           solely  as a duly  authorized  agent of the  Registrant  pursuant  to
           Section  8.17 of the  Pooling  and  Servicing  Agreement  dated as of
           January 1, 1998.


                By: /s/ Bret G. Wilson
                Name: Bret G. Wilson
                Title: Vice President

Date: March 31, 1999




<PAGE>



                                  EXHIBIT INDEX

EXHIBIT         DOCUMENT



      4.1      Pooling and Servicing Agreement dated as of January 1, 1998
               (hereby incorporated herein by reference as Exhibit 4 to
               Depositor's Current Report on Form 8-K dated January 27, 1998).

      99.1     Master Servicer Annual Officer's Certificate dated March 30,
               1999.

      99.2     Report of Independent Accountants pertaining to Companion
               Servicing Company, L.L.C., dated March 31, 1999.

      99.3     Aggregate Information from Statements to Certificate-holders
               Relating to 1998 Distributions to Holders of Block Mortgage
               Finance Asset Backed Certificates, Series 1998-1.

      99.4     Consolidated financial statements of MBIA Insurance Corporation
               and its subsidiaries as of December 31, 1998 and 1997 and for the
               three years ended December 31, 1998 (hereby incorporated herein
               by reference to the Annual Report on Form 10-K of MBIA Inc. for
               the year ended December 31, 1998 under Commission file number
               001-09583).