UNITED STATES
                   SECURITIES AND EXCHANGE COMMISSION

                         Washington, D.C. 20549

                                FORM 10-Q


           QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                   THE SECURITIES EXCHANGE ACT OF 1934

              For the quarterly period ended MARCH 31, 1999

                    Commission File Number: 0-19822


                    LITCHFIELD FINANCIAL CORPORATION
         (Exact name of registrant as specified in its charter)


                 MASSACHUSETTS                   04-3023928
        (State or other jurisdiction       (I.R.S. Employer Identification No.)
         of incorporation or organization)


         430 MAIN STREET, WILLIAMSTOWN, MA               01267
       (Address of principal executive offices)         (Zip Code)


   Registrant's telephone number, including area code: (413) 458-1000


          (Former name, former address and former fiscal year,
                      if changed since last report)

Indicate by check mark whether the  registrant  (1) has filed all reports
required  to be filed by Section 13 or 15(d) of the  Securities  Exchange
Act of 1934 during the  preceding 12 months (or for such  shorter  period
that the  registrant  was  required  to file such  reports),  and (2) has
been subject to such filing requirements for the past 90 days.

                                Yes X No


As of May 9,  1999,  there  were  6,891,622  shares  of  common  stock of
Litchfield Financial Corporation outstanding.



                                                             FORM 10-Q



                    LITCHFIELD FINANCIAL CORPORATION
                                FORM 10-Q

                      QUARTER ENDED MARCH 31, 1999

                                  INDEX

                                                              PAGE
PART I - FINANCIAL INFORMATION

     Item 1. Financial Statements.................................  3

     Item 2. Management's Discussion and Analysis of
             Financial Condition and Results of Operations........ 14

     Item 3. Quantitative and Qualitative Disclosures
             About Market Risk.................................... 21


PART II - OTHER INFORMATION

     Item 1. Legal Proceedings.................................... 22

     Item 2. Changes in Securities and Use of Proceeds............ 22

     Item 3. Defaults Upon Senior Securities...................... 22

     Item 4. Submission of Matters to a Vote of Security Holders.. 22

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

     Item 6. Exhibits and Reports on Form 8-K..................... 37


SIGNATURES........................................................ 38



                     PART I - FINANCIAL INFORMATION
                      Item 1. Financial Statements

                    LITCHFIELD FINANCIAL CORPORATION
                       Consolidated Balance Sheets
           (In thousands, except share and per share amounts)

                                                  March 31,    December 31
                                                   1999            1998
                                                  ----------     -----------
                                                  (unaudited)


Cash and cash equivalents......................    $ 13,358    $ 10,537
Restricted cash................................      28,118      27,898
Loans held for sale, net of allowance for loan
   losses of $237 in 1999 and $549 in 1998........   16,111      19,750
Other loans, net of allowance for loan losses of
   $2,371 in 1999 and $2,477 in 1998...........     209,345     191,292
Retained interests in loan sales, net of
   estimated recourse obligations of
   $4,525 in 1999 and $3,681 in 1998...........      30,556      28,883
Other..........................................      15,867      15,522
                                                   --------    --------
      Total assets.............................    $313,355    $293,882
                                                   ========    ========

                     LIABILITIES AND STOCKHOLDERS EQUITY
Liabilities:
   Lines of credit.............................    $ 66,924    $ 49,021
   Accounts payable and other liabilities......       6,887       9,812
   Dealer/developer reserves...................      10,187       9,979
   Deferred income taxes.......................       8,764       8,388
   Long-term notes.............................     134,588     134,588
                                                   --------    --------
      Total liabilities........................     227,350     211,788
                                                   ========    ========

Stockholders' equity
   Preferred stock, $.01 par value; authorized
      1,000,000 shares, none issued
      and outstanding..........................        ---         ---
   Common stock, $.01 par value; authorized
      12,000,000 shares, 6,886,939 shares
      issued and outstanding in 1999 and
      6,886,329 shares issued and outstanding
      in 1998..................................          69          69
   Additional paid in capital..................      58,046      58,040
   Accumulated other comprehensive income......       2,875       1,250
   Retained earnings...........................      25,015      22,735
                                                   --------    --------
      Total stockholders' equity...............      86,005      82,094
                                                   --------    --------
      Total liabilities and stockholders'
          equity...............................    $313,355    $293,882
                                                   ========    ========













 See accompanying notes to unaudited consolidated financial statements.


                    LITCHFIELD FINANCIAL CORPORATION
                    Consolidated Statements of Income
           (In thousands, except share and per share amounts)
                                Unaudited



                                                Three Months Ended March 31,

                                                         1999         1998
   Revenues:
     Interest and fees on loans..................     $ 7,887       $ 5,233
     Gain on sale loans..........................       2,617         2,227
     Servicing and other income..................         571           493
                                                       ------        ------
                                                       11,075         7,953


   Expenses:
     Interest expense............................       4,628         2,997
     Salaries and employee benefits..............       1,266         1,133
     Other operating expenses....................         978           953
     Provision for loan losses...................         500           350
                                                       ------        ------
                                                        7,372         5,433

   Income before income taxes....................       3,703         2,520
   Provision for income taxes....................       1,425           970
                                                       ------        ------
   Net income....................................     $ 2,278       $ 1,550
                                                       ======        ======


   Earnings per common share amounts:
      Basic......................................      $  .33        $  .27
      Diluted....................................      $  .32        $  .26

   Weighted average number of shares:
      Basic......................................   6,886,559     5,659,756
      Diluted....................................   7,192,378     6,020,158



















 See accompanying notes to unaudited consolidated financial statements.








                     LITCHFIELD FINANCIAL CORPORATION
             Consolidated Statement of Stockholders' Equity
                  (In thousands, except share amounts)
                                Unaudited








<TABLE>
<S>                            <C>    <C>        <C>           <C>       <C>

                                                 Accumulated
                                     Additional    Other
                             Common   Paid In   Comprehensive  Retained
                             Stock    Capital      Income      Earnings   Total

Balance, December 31,1998..    $69   $58,040       $1,250      $22,735   $82,094

  Issuance of 610 shares of
     common stock..........    ---         6          ---          ---         6

  Other comprehensive
      income, net of tax...    ---       ---        1,625          ---     1,625

  Tax benefit from stock
      options exercised....    ---       ---          ---            2         2


  Net income...............    ---       ---          ---        2,278     2,278
                            ------    ------       ------       ------    ------
                               $69   $58,046       $2,875      $25,015   $86,005
                            ======    ======       ======       ======    ======

</TABLE>


 See accompanying notes to unaudited consolidated financial statements.



                    LITCHFIELD FINANCIAL CORPORATION
             Consolidated Statements of Comprehensive Income
                             (In thousands)
                                Unaudited








                                           Three Months Ended March 31,

                                                        1999         1998

Net income......................................      $2,278       $1,550
Unrealized gain (loss) on retained interests
  in loan sales, net of tax expense of $1,017
  for 1999 and tax benefit of $15 for 1998......       1,625         (24)
                                                       -----        -----
Comprehensive income............................      $3,903       $1,526
                                                       =====        =====

 See accompanying notes to unaudited consolidated financial statements.



                    LITCHFIELD FINANCIAL CORPORATION

                  Consolidated Statements of Cash Flows
                             (In thousands)
                                Unaudited


                                                 Three Months Ended March 31,

                                                      1999         1998

Cash flows from operating activities:
   Net income.....................................   $ 2,278       $ 1,550
   Adjustments to reconcile net income to net
   cash provided by operating activities:
        Gain on sale of loans......................    (2,617)       (2,227)
        Amortization and depreciation.............       321           223
        Amortization of retained interests in
          loan sales..............................     1,726         1,436
        Provision for loan losses.................       500           350
        Deferred income taxes.....................       376           339
        Net changes in operating assets and
          liabilities:
             Restricted cash......................      (220)         (885)
             Loans held for sale..................     3,877           994
             Retained interests in loan sales.....      (483)         (563)
             Dealer/developer reserves............       208           (39)
                 liabilities......................    (3,550)         (647)
                                                      -------        ------
        Net cash provided by operating activities      2,416           531
                                                      -------        ------

Cash flows from investing activities:
   Net originations, purchases and principal
      payments on other loans.....................   (31,129)      (30,777)
   Other loans sold...............................    13,182           ---
   Collections on retained interests in
      loan sales..................................       581           931
   Capital expenditures and other assets..........      (138)         (860)
                                                     -------        ------
        Net cash used in investing activities.....   (17,504)      (30,706)
                                                     -------        ------

Cash flows from financing activities:
   Net borrowings on lines of credit..............    17,903        23,045
   Payments on term note..........................       ---          (782)
   Net proceeds from issuance of common stock.....         6            46
                                                      ------        ------
        Net cash provided by financing activities..    17,909        22,309

Net increase (decrease) in cash and cash
   equivalents....................................     2,821        (7,866)
Cash and cash equivalents, beginning of period....    10,537        19,295
                                                      ------        ------
Cash and cash equivalents, end of period..........   $13,358       $11,429
                                                      ======        ======

Supplemental Schedule on Noncash Financing and
   investing Activities:
   Exchange of loans for retained interests in
      loan sales..................................   $   333       $   447
   Transfers from loans to real estate acquired
      through forclosure..........................   $   573       $   797


Supplemental Cash Flow Information:
   Interest paid..................................   $ 4,825       $ 3,255
   Income taxes paid..............................   $ 1,353       $    31



 See accompanying notes to unaudited consolidated financial statements.


                                                               FORM 10-Q

                    LITCHFIELD FINANCIAL CORPORATION
        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

A. Basis of Presentation

     The   accompanying   unaudited   consolidated   interim   financial
statements  as of March 31,  1999 and for the three month  period  ended
March  31,  1999  and  1998,  have  been  prepared  in  accordance  with
generally   accepted   accounting   principles  for  interim   financial
information  and with the  instructions  to Form 10-Q and Rule  10-01 of
Regulation   S-X.   Accordingly,   they  do  not   include  all  of  the
information  and  footnotes  required by generally  accepted  accounting
principles  for  complete  financial  statements.   In  the  opinion  of
management,  all adjustments  (consisting of normal accruals) considered
necessary  for  a  fair  presentation  have  been  included.   Operating
results  for the  three  month  period  ended  March 31,  1999,  are not
necessarily  indicative  of the  results  expected  for the year  ending
December 31, 1999. For further  information,  refer to the  consolidated
financial   statements   and  notes   thereto   included  in  Litchfield
Financial  Corporation's  annual  report on Form 10-K for the year ended
December 31, 1998.

     In June,  1998,  the Financial  Accounting  Standards  Board issued
Statement of Financial  Accounting  Standards  No. 133  ("Statement  No.
133"),  "Accounting for Derivative  Instruments and Hedging Activities."
Statement  No. 133 is  effective  for all fiscal  quarters of all fiscal
years beginning  after June 15, 1999,  with early adoption  permitted as
of the  beginning of any quarter  after the date of issuance.  Statement
No. 133  establishes  accounting and reporting  standards for derivative
instruments,  including certain derivatives  embedded in other contracts
and for hedging  activities.  It requires  that an entity  recognize all
derivatives  as  either  assets  or  liabilities  in  the  statement  of
financial  position  and measure  those  instruments  at fair value.  If
certain   conditions   are  met,  a  derivative   may  be   specifically
designated  as (a) a hedge of the  exposure to changes in the fair value
of a recognized  asset or liability or an unrecognized  firm commitment,
(b) a hedge of the  exposure  to  variable  cash  flows of a  forecasted
transaction,  or (c) a hedge of the foreign  currency  exposure of a net
investment in a foreign operation,  an unrecognized firm commitment,  an
available-for-sale    security,   or   a    foreign-currency-denominated
forecasted  transaction.  The  accounting  for changes in the fair value
of a derivative  depends on the intended use of the  derivative  and the
resulting  designation.  The  provisions of Statement No. 133 can not be
applied retroactively to financial statements of prior periods.

     The Company plans to adopt  Statement No. 133 in the fiscal quarter
beginning  January 1,  2000.  At the date of  initial  application,  the
Company must recognize any  freestanding  derivative  instruments in the
balance sheet as either assets or  liabilities  and measure them at fair
value.  The Company  shall also  recognize  offsetting  gains and losses
on hedged assets,  liabilities,  and firm commitments by adjusting their
carrying  amounts  at that  date as a  cumulative  effect of a change in
accounting  principal.  Whether such  transition  adjustment is reported
in net income,  other  comprehensive  income,  or allocated between both
is based on the hedging  relationships,  if any,  that  existed for that
derivative  instrument  and were the basis for  accounting  prior to the
application  of  Statement  No.  133.  The  Company  is  evaluating  the
effect that the  implementation  of  Statement  No. 133 will have on its
results of operations and financial position.

B.  Gain on Sale of  Loans and Retained Interests in Loan Sales

     Gains on sales of loans are  based on the  difference  between  the
allocated  cost  basis of the  assets  sold and the  proceeds  received,
which  includes  the fair  value of any assets or  liabilities  that are
newly  created as a result of the  transaction.  The  previous  carrying
amount is allocated  between the assets sold and any retained  interests
based on their  relative  fair values at the date of transfer.  Retained
interests  in  transferred   assets  consist  primarily  of  subordinate
portions of the  principal  balance of  transferred  assets and interest
only strips, which are initially recorded at fair value.

     The  Company  estimates  fair  value  using  discounted  cash  flow
analysis,  since quoted  market  prices are not readily  available.  The
Company's  analysis  incorporates  estimates  that  market  participants
would be  expected  to use in their  estimates  of  future  cash  flows,
including  assumptions  about  interest  rates,  defaults and prepayment
rates.  Estimates  made are based on, among other things,  the Company's
past  experience  with similar types of financial  assets.  The interest
rates paid to investors  range from 6.5% to 9.0%. The  prepayment  rates
were  17.5% for Land Loan  sales and 18.0% for VOI Loan  sales.  For the
Hypothecation  Loan  sales,  the  prepayment  rates  for the  underlying
collateral  used  were  17.5% for Land  Loans  and 18.0% for VOI  Loans.
The Company  estimates  default rates to be 1.9% on Land Loans,  3.0% on
VOI Loans and 0.5% on  Hypothecation  Loans.  In  valuing  its  retained
interests   in  loan  sales,   the  Company   selects   discount   rates
commensurate  with the  duration  and risks  embedded in the  particular
assets.  Specifically,  the Company  uses  discount  rates  ranging from
the  investor  pass-through  rates  (for  restricted  cash)  to the  Baa
corporate  bond rate plus 325 basis  points  (for  interest  only strips
and retained  principal  certificates) to estimate the fair value of its
retained interests.

     There is no servicing  asset or liability  arising from loan sales,
because  the  Company   estimates   that  the   benefits  of   servicing
approximate the costs to meet its servicing responsibilities.

     On a quarterly  basis,  the Company  assesses the carrying value of
retained  interests  in  loans  sold by  comparing  actual  and  assumed
prepayment  rates on a disaggregated  basis  reflecting  factors such as
origination   dates  and  types  of  loans.   The  Company  adjusts  the
carrying   value  of  retained   interests   for   unfavorable   changes
considered other than temporary.

     Since its inception,  the Company has sold $545,831,000 of loans at
face value  ($492,960,000  through  December 31,  1998).  The  principal
amount  remaining on the loans sold was  $260,076,000  at March 31, 1999
and   $238,132,000  at  December  31,  1998.  The  Company   guarantees,
through  replacement  or  repayment,  loans in default up to a specified
percentage  of  loans  sold.   Dealer/developer   guaranteed  loans  are
secured by  repurchase  or  replacement  guarantees  in addition  to, in
most instances, dealer/developer reserves.

     The  Company's  exposure  to loss on  loans  sold in the  event  of
nonperformance by the consumer,  the  dealer/developer on its guarantee,
and  the   determination   that  the  collateral  is  of  no  value  was
$14,289,000  at March 31,  1999  ($12,750,000  at  December  31,  1998).
Such  amounts  have  not  been  discounted.   The  Company   repurchased
$192,000  and $118,000 of loans under the  recourse  provisions  of loan
sales   during  the  three   months  ended  March  31,  1999  and  1998,
respectively,  and  $491,000  during the year ended  December  31, 1998.
In  addition,  when  the  Company  sells  loans  through  securitization
programs,  the  Company  commits  either to  replace or  repurchase  any
loans that do not conform to the  requirements  thereof in the operative
loan  sale  documents.   As  of  March  31,  1999,  $25,913,000  of  the
Company's  cash was  restricted  as credit  enhancements  in  connection
with  certain   securitization   programs.  To  date,  the  Company  has
participated  $11,414,000  of A&D and Other Loans  ($10,505,000  through
December 31, 1998).

     The  Company's  Serviced  Portfolio is  geographically  diversified
with  collateral  and  consumers  located  in 50  states.  The  Serviced
Portfolio  consists of the principal  amount of loans  serviced by or on
behalf of the Company,  except loans  participated  without  recourse to
the  company.  At March  31,  1999,  13.9%  and  10.7%  of the  Serviced
Portfolio  by  collateral  location  was  located in Texas and  Florida,
respectively,   and  15.6%  and  13.5%  of  the  Serviced  Portfolio  by
borrower  location were located in Florida and Texas,  respectively.  At
December  31, 1998,  14.7%,  10.3%,  10.2% of the Serviced  Portfolio by
collateral  location  were  located in Texas,  Florida  and  California,
respectively,   and  16.1%  and  14.4%  of  the  Serviced  Portfolio  by
borrower  location  was located in Florida and Texas,  respectively.  No
other  state  accounted  for  more  than  7.5% of the  total  by  either
collateral or borrower location.


C. Allowance for Loan Losses and Estimated Recourse Obligations


     An  analysis  of the  total  allowances  for all  loan  losses  and
recourse obligations follows:



                                                    March 31,      December 31,
                                                       1999            1998
                                                    ----------    -------------
     Allowance for losses on loans held for sale.. $  237,000      $  549,000
     Allowance for losses on other loans..........  2,371,000       2,477,000
     Estimated recourse obligations on retained
        interests in loan sales...................  4,525,000       3,681,000
                                                    ---------       ---------
                                                   $7,133,000      $6,707,000
                                                    =========       =========




D.  Debt


     The Company  finances a portion of its liquidity needs with secured
lines  of  credit  with  eight  participating   institutions.   Interest
rates on the lines of credit  range from the  Eurodollar  or LIBOR rates
plus 2.00% to the prime rate plus  1.25%.  The  Company is not  required
to maintain  compensating  balances or forward sales  commitments  under
the terms of these lines of credit.


     The lines of credit mature as follows:




                            Date            Amount
                         ----------     -------------
                         April 1999      $  3,000,000
                         September 1999    40,000,000
                         March 2000        25,000,000
                         April 2000        68,000,000
                                          -----------
                                         $136,000,000
                                          ===========




     Financial  data relating to the  Company's  secured lines of credit
is as follows:

   (Dollars in thousands)



                                             March 31,      December 31,
                                                 1999           1998
                                              ---------       ---------
   Lines of credit available............     $136,000       $116,000
   Borrowings outstanding at end
     of period .........................      $66,924        $49,021
   Weighted average interest rate
     at end of period...................         7.3%           7.6%
   Maximum borrowings outstanding
     at any month end...................      $76,579        $73,666
   Average amount outstanding
     during the period..................      $17,532        $37,485
   Weighted average interest rate
     during the period (determined by
     dividing interest expense by
     average borrowings)................         7.2%           7.9%



     As of March 31,  1999 and  December  31,  1998,  the Company had no
unsecured lines of credit.

     The Company  has an  additional  revolving  line of credit and sale
facility as part of an asset backed  commercial  paper  facility  with a
multi-seller  commercial  paper  issuer  ("Conduit  A").  In June  1998,
the  Company   amended  the   facility  to  increase   the  facility  to
$150,000,000,  subject to certain  terms and  conditions.  The  facility
matures in June 2001.

     In connection with the facility,  the Company formed a wholly-owned
subsidiary,   Litchfield  Mortgage   Securities   Corporation  1994,  to
purchase loans from the Company.  In October 1998,  Litchfield  Mortgage
Securities   Corporation  1994  was  merged  with  and  into  Litchfield
Mortgage  Securities  Company 1994,  LLC ("LMSC").  LMSC either  pledges
the  loans on a  revolving  line of credit  with  Conduit A or sells the
loans  to  Conduit  A.  Conduit  A  issues  commercial  paper  or  other
indebtedness  to fund  the  purchase  or  pledge  of  loans  from  LMSC.
Conduit A is not affiliated  with the Company or its  affiliates.  As of
March 31, 1999 and  December 31, 1998,  the  outstanding  balance of the
sold or pledged  loans  securing  this  facility  was  $145,533,000  and
$137,532,000,  respectively.  Outstanding  borrowings  at March 31, 1999
were $65,000.  There were no  outstanding  borrowings  under the line of
credit  at  December  31,  1998.  Interest  is  payable  on the  line of
credit at an interest rate based on certain commercial paper rates.

     In March 1997, the Company  closed an additional  revolving line of
credit and sale facility of  $25,000,000  with another  multi-seller  of
commercial  paper conduit  ("Conduit  B"). The  facility,  which matures
in March  2000,  is  subject  to certain  terms and  conditions,  credit
enhancement    requirements   and   loan   eligibility   criteria.   The
outstanding  aggregate  balance of the loans  pledged and sold under the
facility at any time cannot exceed $25,000,000.


     In connection with the facility,  the Company formed a wholly-owned
subsidiary,  Litchfield  Capital  Corporation  1996,  to purchase  loans
from the  Company.  In  October  1998,  Litchfield  Capital  Corporation
1996,  was merged with and into  Litchfield  Capital  Company 1996,  LLC
("LCC").  LCC either  pledges  the loans on a  revolving  line of credit
with  Conduit  B or sells  the  loans to  Conduit  B.  Conduit  B issues
commercial  paper or other  indebtedness  to fund the purchase or pledge
of loans  from LCC.  Conduit B is not  affiliated  with the  Company  or
its  affiliates.  As of  March  31,  1999 and  December  31,  1998,  the
outstanding  aggregate  balance of the loans  sold or pledged  under the
facility was $9,647,000  and  $10,632,000,  respectively.  There were no
outstanding  borrowings  under the line of  credit as of March 31,  1999
or December  31,  1998.  Interest is payable on the line of credit at an
interest rate based on certain commercial paper rates.

     The  Company  also  finances  a  portion  of  its  liquidity   with
long-term  debt.  The  following  table shows the total  long-term  debt
outstanding at March 31, 1999 and December 31, 1998:

                                     March 31,     December 31,
                                      1999          1998
         (Dollars in thousands)
         9.3% Notes...............  $ 20,000     $ 20,000
         8.45% Notes due 2002.....    51,282       51,282
         8.875% Notes due 2003....    15,066       15,066
         8.25% Notes due 2003.....    10,000       10,000
         9.25% Notes due 2003.....    20,000       20,000
         10% Notes due 2004.......    18,240       18,240
                                     -------      -------
                                    $134,588     $134,588
                                     =======      =======



     The  Company  shall have the option to redeem all or any portion of
the long-term notes at  predetermined  redemption  prices.  The earliest
call date of each issuance is as follows:

              9.3% Notes.........................   April 1998
              8.45% Notes due 2002...............November 1999
              8.875% Notes due 2003..............    June 1996
              8.25% Notes due 2003...............November 2000
              9.25% Notes due 2004...............December 2000
              10% Notes due 2004.................   April 1998



E. Derivative Financial Instruments Held for Purposes Other than
Trading

     The Company  entered  into two  interest  rate swap  agreements  to
manage its basis exposures.  The swap agreements  involve the payment of
interest to the  counterparty  at the prime rate on a notional amount of
$110,000,000  and the receipt of interest at the  commercial  paper rate
plus a spread of 277 basis  points on a notional  amount of  $80,000,000
and the LIBOR rate plus a spread of 267 basis points on notional  amount
of  $30,000,000.  The swap agreements  expire in June 2000.  There is no
exchange of the notional  amounts  upon which the interest  payments are
based.

     The  differential  to be paid or received as interest  rates change
is accrued and  recognized as an adjustment to interest  income from the
excess servicing  asset.  The related amount  receivable from or payable
to the  counterparty  is included in other assets or other  liabilities.
The  fair  values  of the  swap  agreements  are not  recognized  in the
financial  statements.  The  Company  intends to keep the  contracts  in
effect until they mature in June 2000.

     The Company  entered  into an interest  rate cap  agreement  with a
bank in order to manage its  exposure to certain  increases  in interest
rates.  The interest rate cap entitles the Company to receive  payments,
based on an amortizing  notional  amount,  when  commercial  paper rates
exceed  8.0%.  If  payments  were to be  received as a result of the cap
agreement,  they would be accrued as a reduction  of  interest  expense.
The notional amount  outstanding at March 31, 1999 was $3,548,000.  This
agreement expires in July 2005.

     The Company does not use  interest  rate swap  agreements  or other
derivative  instruments  for  speculation.  The  Company  is  exposed to
credit  loss in the event of  non-performance  by the swap  counterparty
or the cap provider.


F. Subsequent Events

     On April 14, 1999,  the Company filed a  Registration  Statement on
Form  S-3  with  the   Securities  and  Exchange   Commission   covering
$100,000,000  in  aggregate  principal  amount  of (i)  trust  preferred
securities  for issuance by Litchfield  Capital  Trust I and  Litchfield
Capital Trust II,  subsidiaries  of the Company and  statutory  business
trusts  created under the laws of the state of Delaware (the  "Trusts"),
(ii) junior  subordinated  debt  securities  of the  Company,  and (iii)
guarantee  of  preferred  securities  of the Trusts by the  Company.  In
connection  with this  offering,  the  Trusts  will  sell the  preferred
securities to the public and common  securities to the Company,  use the
proceeds  from  those  sales to buy an  equivalent  principal  amount of
junior  subordinated  debentures  issued by the Company  and  distribute
the   interest   payments  it   receives  on  the  junior   subordinated
debentures to the holders of preferred and common securities.





                                                                FORM 10-Q

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

Forward-looking Statements

    Except for the historical  information  contained or  incorporated by
reference in this Form 10-Q,  the matters  discussed or  incorporated  by
reference herein are  forward-looking  statements.  Such  forward-looking
statements  involve  known and  unknown  risks,  uncertainties  and other
factors that may cause the actual  results,  performance or  achievements
of the Company,  or industry  results,  to be materially  different  from
any future results,  performance or achievements  expressed or implied by
such  forward-looking  statements.  Such factors  include,  among others,
the  risk  factors  set  forth  under  "Risk  Factors"  as  well  as  the
following:  general  economic and business  conditions;  industry trends;
changes in  business  strategy or  development  plans;  availability  and
quality  of  management;  and  availability,   terms  and  deployment  of
capital.  Special  attention  should  be  paid  to  such  forward-looking
statements  including,  but not  limited to,  statements  relating to (i)
the  Company's  ability to execute its growth  strategies  and to realize
its  growth   objectives  and  (ii)  the  Company's   ability  to  obtain
sufficient  resources  to finance its working  capital  needs and provide
for its  known  obligations.  Refer to the  Company's  annual  report  on
Form 10-K for the year  ended  1998 for a  complete  list of  factors  as
discussed under "Risk Factors".

Overview

     Litchfield  Financial  Corporation  (the "Company") is a diversified
finance  company that provides  financing to  creditworthy  borrowers for
assets  not  typically  financed  by banks.  The  Company  provides  this
financing   by  making   loans  to   businesses   secured   by   consumer
receivables or other assets and by purchasing consumer loans.

     The Company  provides  financing  to rural land  dealers,  timeshare
resort  developers  and other finance  companies  secured by  receivables
("Hypothecation  Loans").  The  Company  also  purchases  consumer  loans
("Purchased Loans") consisting  primarily of loans to purchasers of rural
("Land Loans") and vacation  properties and vacation ownership  interests
("VOI  Loans")  popularly  known as  timeshare  interests,  and  provides
loans to dealers  and  developers  for the  acquisition  and  development
("A&D  Loans") of rural land and  timeshare  resorts.  In  addition,  the
Company  purchases  other  loans,  such as consumer  home  equity  loans,
mortgages  and  construction  loans  and  tax  lien   certificates,   and
provides financing to other businesses.

     The Company  extends  Hypothecation  Loans to land  dealers,  resort
developers   and  other  finance   companies   secured  by   receivables.
Hypothecation  Loans  typically  have advance  rates of 75% to 90% of the
current balance of the pledged  receivables  and variable  interest rates
based on the prime rate plus 2% to 4%.

     The  Company  also  purchases  Land Loans and VOI Loans.  Land Loans
are  typically  secured by one to twenty acre rural  parcels.  Land Loans
are  secured  by  property  located in 38  states,  predominantly  in the
southern United States.  VOI Loans typically  finance consumer  purchases
of  ownership  interests  in fully  furnished  vacation  properties.  VOI
Loans are  secured by  property  located in 18 states,  predominantly  in
California,   Florida  and   Pennsylvania.   The  Company  requires  most
dealers or developers  from whom it buys loans to guarantee  repayment or
replacement  of any loan in default.  Ordinarily,  the Company  retains a
percentage of the purchase price as a reserve until the loan is repaid.


     The  Company  also  makes  A&D  Loans  to land  dealers  and  resort
developers  for  the  acquisition  and  development  of  rural  land  and
timeshare resorts in order to finance  additional  receivables  generated
by  the  A&D  Loans.  At  the  time  the  Company  makes  A&D  Loans,  it
typically  receives  an  exclusive  right  to  purchase  or  finance  the
related  consumer  receivables  generated  by the sale of the  subdivided
land or  timeshare  interests.  A&D  Loans  typically  have loan to value
ratios  of 60% to 80% and  variable  interest  rates  based on the  prime
rate plus 2% to 4%.

     The  principal  sources of the  Company's  revenues are interest and
fees on loans,  gains on sales of loans and  servicing  and other income.
Gains  on  sales  of  loans  are  based  on the  difference  between  the
allocated  cost  basis  of the  assets  sold and the  proceeds  received,
which  includes  the fair  value of any  assets or  liabilities  that are
newly  created  as a result of the  transaction.  Because  a  significant
portion of the  Company's  revenues is comprised of gains  realized  upon
sales of loans,  the  timing of such  sales has a  significant  effect on
the Company's results of operations.


Results of Operations

     The  following  table  sets  forth the  percentage  relationship  to
revenues,  unless otherwise  indicated,  of certain items included in the
Company's statements of income.



                                                     Three Months
                                                        Ended
                                                       March  31,
                                                      ----------

                                                       1999    1998

 Revenues
         Interest and fees on loans.............      71.2%   65.8%
         Gain on sale of loans..................      23.6    28.0
         Servicing and other income.............       5.2     6.2
                                                     -----   -----
                                                     100.0   100.0
                                                     -----   -----
 Expenses
         Interest expense.......................      41.8    37.7
         Salaries and employee benefits.........      11.4    14.2
         Other operating expenses...............       8.9    12.0
         Provision for loan losses..............       4.5     4.4
                                                     -----   -----
                                                      66.6    68.3
                                                     -----   -----

     Income before income taxes.................      33.4    31.7
     Provision for income taxes.................      12.9    12.2
                                                     -----   -----
     Net income.................................      20.5%   19.5%
                                                     =====   =====



     Revenues  increased  39.3% to $11,075,000 for the three months ended
March  31,  1999,  from  $7,953,000  for the same  period  in  1998.  Net
income for the three  months  ended  March 31,  1999  increased  47.0% to
$2,278,000  compared  to  $1,550,000  for the same  period  in 1998.  Net
income as a  percentage  of revenues was 20.5% for the three months ended
March 31,  1999  compared to 19.5% for the three  months  ended March 31,
1998.  Loan  purchases and  originations  grew 45.2% to  $97,991,000  for
the three  months  ended  March 31,  1999 from  $67,493,000  for the same
period in 1998. The Serviced  Portfolio  increased  47.8% to $500,465,000
at March 31, 1999 from $338,502,000 at March 31, 1998.

     Interest and fees on loans  increased  50.7% to  $7,887,000  for the
three  months  ended March 31, 1999 from  $5,233,000  for the same period
in 1998,  primarily as the result of the higher average  balance of other
loans  during  the 1999  period,  which  was only  partially  offset by a
decrease in the average  rate.  The average  rate earned on the  Serviced
Portfolio  decreased  to 11.5% at March 31,  1999 from 12.0% at March 31,
1998,  primarily  due to the  reduction  in the prime rate and the effect
of the growth in  Hypothecation  Loans as a percentage of the  portfolio.
Hypothecation  Loan  yields are  usually  less than Land Loan or VOI Loan
yields, but servicing costs and loan losses are generally less as well.

     Gain on the sale of loans  increased  17.5%  to  $2,617,000  for the
three months ended March 31, 1999 from  $2,227,000  in the same period in
1998.  The volume of loans sold increased  185.8% to $52,871,000  for the
three  months  ended  March 31,  1999 from  $18,502,000  during the three
months  ended March 31,  1998.  The increase in the gain on sale of loans
was  not   proportionate  to  the  increase  in  the  loans  sold  volume
primarily  due to the mix of loans  sold  during the three  months  ended
March 31,  1999.  The yield on  Hypothecation  and home equity loan sales
is  generally   lower  than  the  yield  on  Land  and  VOI  loan  sales.
Hypothecation  and home equity loans sold were  $36,683,000 for the three
months  ended  March  31,  1999.  There  were  no  Hypothecation  or home
equity loans sold for the three  months  ended March 31,  1998.  Land and
VOI loans sold were  $16,188,000  for the three  months  ended  March 31,
1999 as  compared to  $18,502,000  for the three  months  ended March 31,
1998.

     Servicing  and other  income  increased  15.8% to  $571,000  for the
three months ended March 31, 1999,  from  $493,000 for the same period in
1998 largely due to the  increase in the other fee income and  prepayment
penalties from  Hypothecation  Loans.  Although loans serviced for others
increased 41.2% to  $260,075,000  as of March 31, 1999 from  $184,157,000
at March 31, 1998,  servicing income remained  relatively constant due to
an increase in  Hypothecation  Loans  serviced  for others and a decrease
in the average servicing fee per loan.

     Interest  expense  increased  54.4% to  $4,628,000  during the three
months  ended  March 31,  1999  from  $2,997,000  for the same  period in
1998.  The increase in interest  expense  primarily  reflects an increase
in average  borrowings  which was only  partially  offset by lower rates.
During  the three  months  ended  March  31,  1999,  borrowings  averaged
$211,149,000  at an average rate of 8.4%, as compared to  $119,195,000 at
an  average  rate of 8.9%  during  the  same  period  in  1998.  Interest
expense includes the amortization of deferred debt issuance costs.

     Salaries and employee  benefits  increased  11.7% to $1,266,000  for
the three  months  ended  March 31,  1999  from  $1,133,000  for the same
period in 1998  because  of an  increase  in the number of  employees  in
1999 and, to a lesser extent,  an increase in salaries.  Personnel  costs
as a  percentage  of  revenues  decreased  to 11.4% for the three  months
ended  March 31,  1999  compared  to 14.2%  for the same  period in 1998.
Also,  as  a  percentage  of  the  Serviced  Portfolio,  personnel  costs
decreased to 1.1% for the three  months ended March 31, 1999  compared to
1.4% for the same period in 1998.  Total  salaries and employee  benefits
plus other  operating  expensed as a percentage of revenues  decreased to
20.3% for the three  months  ended March 31, 1999 from 26.2% for the same
period in 1998.


     Other  operating  expenses  increased 2.6% to $978,000 for the three
months  ended March 31, 1999 from  $953,000  for the same period in 1998.
Other  operating  expenses  increased  due to the growth in the  Serviced
Portfolio that was only  partially  offset by the decrease in third party
servicing  expenses related to bringing  customer service and collections
in-house.   As  a  percentage  of  revenues,   other  operating  expenses
decreased to 8.9% for the three  months ended March 31, 1999  compared to
12.0%  for the  corresponding  period  in 1998.  As a  percentage  of the
Serviced  Portfolio,  other operating  expenses decreased to 0.8% for the
three  months  ended  March 31,  1999  from  1.2% for the same  period in
1998.

     During the three  months  ended March 31, 1999,  the  provision  for
loan  losses  increased  42.9% to  $500,000  from  $350,000  for the same
period in 1998 primarily due to the growth of the Serviced Portfolio.


 Liquidity and Capital Resources

     The  Company's  business  requires  continued  access  to short  and
long-term  sources of debt  financing and equity  capital.  The Company's
principal cash requirements  arise from loan  originations,  repayment of
debt on maturity  and payments of operating  and interest  expenses.  The
Company's  primary  sources  of  liquidity  are  loan  sales,  short-term
borrowings  under secured  lines of credit and long-term  debt and equity
offerings.

     Since its inception,  the Company has sold  $545,831,000 of loans at
face value  ($492,960,000  through  December  31,  1998).  The  principal
amount  remaining  on the loans sold was  $260,076,000  at March 31, 1999
and  $238,132,000  at December 31, 1998. In connection  with certain loan
sales,  the Company  commits to repurchase  from investors any loans that
become 90 days or more past due.  This  obligation  is subject to various
terms and conditions,  including,  in some instances, a limitation on the
amount  of loans  that may be  required  to be  repurchased.  There  were
approximately  $14,289,000  of loans at March 31,  1999 which the Company
could be required to  repurchase  in the future  should such loans become
90  days  or  more  past  due.  The  Company  repurchased   $192,000  and
$118,000  of such  loans  under the  recourse  provisions  of loan  sales
during the three months ended March 31, 1999 and 1998,  respectively.  As
of March 31, 1999,  $25,913,000  of the Company's  cash was restricted as
credit  enhancement  for certain  securitization  programs.  To date, the
Company   has   participated   $11,414,000   of  A&D  and   Other   Loans
($10,505,000 through December 31, 1998).

     The Company funds its loan purchases in part with  borrowings  under
various  lines of credit.  Lines are paid down when the Company  receives
the  proceeds  from  the  sale of the  loans  or when  cash is  otherwise
available.  These lines of credit totaled  $136,000,000  and $116,000,000
at March  31,  1999 and  December  31,  1998,  respectively.  Outstanding
borrowings  on these  lines  of  credit  were  $66,859,000  at March  31,
1999.   Interest   rates  on  these  lines  of  credit   range  from  the
Eurodollar  or LIBOR rate plus 2.00% to the prime  rate plus  1.25%.  The
Company is not  required  to  maintain  compensating  balances or forward
sales commitments under the terms of these lines of credit.

     The Company also  finances  its loan  purchases  with two  revolving
line of credit and sale  facilities  as part of asset  backed  commercial
paper  facilities  with  multi-seller   commercial  paper  issuers.  Such
facilities  totaled  $175,000,000  at March  31,  1999 and  December  31,
1998.  As of March  31,  1999 and  December  31,  1998,  the  outstanding
balances  of  loans  sold  or  pledged   under  these   facilities   were
$155,180,000  and  $148,164,000,   respectively.  Outstanding  borrowings
under these lines of credit at March 31,  1999 were  $65,000.  There were
no  outstanding  borrowings  under these line of credit at  December  31,
1998.  Interest  is  payable  on these  lines of credit  based on certain
commercial paper rates.

     In June 1998,  the Company issued  1,000,000  shares of common stock
at $19 per share.  The net  proceeds  of the  offering  were  $17,717,000
and were used to pay down certain  lines of credit.  In  connection  with
the  underwriters   option  to  purchase   additional  shares  to  cover
over-allotments,  the  Company  issued an  additional  166,500  shares in
July 1998.  Net  proceeds of these  shares  totaled  $2,990,000  and were
also used to pay down certain lines of credit.

     The  Company  also  finances  its  liquidity  needs  with  long-term
debt.   Long-term  debt  totaled  $134,588,000  at  March  31,  1999  and
December 31, 1998.

     The Company  entered into two  interest  rate swap  agreements.  The
swap  agreements  involve the payment of interest to the  counterparty at
the prime rate on a notional  amount of  $110,000,000  and the receipt of
interest  at the  commercial  paper rate plus a spread and the LIBOR rate
plus a  spread  on  notional  amounts  of  $80,000,000  and  $30,000,000,
respectively.  The  swap  agreements  expire  in June  2000.  There is no
exchange of the notional amounts upon which interest payments are based.

     The Company  entered  into an  interest  rate cap  agreement  with a
bank in order to manage its  exposure  to certain  increases  in interest
rates.  The  interest  rate  cap  entitles  the  Company  to  receive  an
amount,  based on an amortizing notional amount,  which at March 31, 1999
was  $3,548,000,  when  commercial  paper rates exceed 8%. This agreement
expires in July 2005.

     Historically,   the  Company   has  not   required   major   capital
expenditures to support its operations.

Credit Quality and Allowances for Loan Losses

     The  Company  maintains  allowances  for loan  losses  and  recourse
obligations on retained  interests in loan sales at levels which,  in the
opinion of  management,  provide  adequately  for current  and  estimated
future  losses  on such  assets.  Past-due  loans  (loans 31 days or more
past  due  which  are  not  covered  by   dealer/developer   reserves  or
guarantees)  as a percentage  of the  Serviced  Portfolio as of March 31,
1999,  increased  to .98%  from .95% at  December  31,  1998.  Management
evaluates  the  adequacy  of  the  allowances  on a  quarterly  basis  by
examining current  delinquencies,  the  characteristics  of the accounts,
the value of the underlying  collateral,  and general economic conditions
and   trends.   Management   also   evaluates   the   extent   to   which
dealer/developer  reserves and  guarantees can be expected to absorb loan
losses.   When  the  Company   does  not  receive   guarantees   on  loan
portfolios   purchased,   it  adjusts  its  purchase   price  to  reflect
anticipated  losses and its required yield.  This purchase  adjustment is
recorded  as an  increase  in the  allowance  for loan losses and is used
only  for the  respective  portfolio.  A  provision  for loan  losses  is
recorded in an amount  deemed  sufficient  by  management to maintain the
allowances  at  adequate  levels.  Total  allowances  for loan losses and
recourse  obligations  on retained  interests in loan sales  increased to
$7,133,000  at March 31, 1999  compared  to  $6,707,000  at December  31,
1998.  The allowance  ratio (the  allowances  for loan losses  divided by
the  amount  of the  Serviced  Portfolio)  at  March  31,  1999  remained
relatively constant at 1.43% as compared to 1.44% at December 31, 1998.

     As  part   of  the   Company's   financing   of   Purchased   Loans,
arrangements  are  entered  into  with  dealers  and  resort  developers,
whereby  reserves are  established  to protect the Company from potential
losses  associated  with such loans.  As part of the Company's  agreement
with the dealers and resort  developers,  a portion of the amount payable
to each dealer and resort  developer for a Purchased  Loan is retained by
the  Company  and is  available  to the Company to absorb loan losses for
those  loans.  The Company  negotiates  the amount of the  reserves  with
the dealers and  developers  based upon  various  criteria,  two of which
are the  financial  strength of the dealer or  developer  and credit risk
associated  with the loans  being  purchased.  Dealer/developer  reserves
amounted to  $10,187,000  and  $9,979,000  at March 31, 1999 and December
31,  1998,  respectively.   The  Company  generally  returns  any  excess
reserves  to the  dealer/developer  on a  quarterly  basis as the related
loans are repaid by borrowers.

Year 2000 Compliance

     Many  currently  installed  computer  systems and software  products
are coded to accept  only  two-digit  entries  in the date code field and
cannot  distinguish  21st  century  dates from 20th century  dates.  As a
result,  many  companies' software and  computer  systems may need to be
upgraded or replaced in order to comply with  "Year 2000" requirements.

     State of  Readiness.  The year 2000  readiness  process  consists of
the following  phases:  (i)  identification  of all IT Systems and non-IT
Systems;  (ii)  assessment of repair or replacement  requirements;  (iii)
repair  or  replacement;  (iv)  testing;  (v)  implementation;  and  (vi)
creation of  contingency  plans in the event of year 2000  failures.  The
Company  has  evaluated  the  year  2000  readiness  of  the  information
technology  systems used in its  operations  ("IT Systems") and it non-IT
Systems,  such as  building  security,  voice  mail  and  other  systems.
Non-compliant   IT  Systems  and  non-IT   Systems  are  expected  to  be
remedied by the end of the second quarter 1999.

     The  Company's  current   financial  and  accounting   software  was
installed  in October  1998,  and the  supplier  has informed the Company
that such  software  is year 2000  compliant.  The  Company  uses a third
party  servicer to perform  some  functions,  such as receipt and posting
of loan  payments  and other  loan  related  activity.  The  third  party
servicer  has  represented  to the Company that its systems are year 2000
compliant.   In  addition,  the  Company  relies  upon  various  vendors,
governmental  agencies,  utility  companies,   telecommunication  service
companies,  delivery  service  companies and other service  providers who
are  outside of its  control.  There is no  assurance  that such  parties
will not  suffer a year 2000  business  disruption,  which  could  have a
material  adverse  effect  on  the  Companys   financial  condition  and
results of operations.

     During 1998, the Company  circulated a questionnaire  to vendors and
customers  with whom the Company  has  material  relationships  to obtain
information   about   year  2000   compliance.   The   Company  is  still
receiving and evaluating  this  information  to identify any  significant
risks.  We plan to require  all our  business  partners  to  address  any
significant  risks  by July 1,  1999.  We plan to  replace  any  material
non-compliant business partners by October 1, 1999.

     Costs.   To  date,   the  Company  has  not  incurred  any  material
expenditures  in connection  with  identifying  or  evaluating  year 2000
compliance   issues.   Most  of  its   expenses   have   related  to  the
opportunity  cost of time spent by  employees  of the Company  evaluating
year  2000  compliance  matters  generally.  The  Company  believes  that
internally  generated  funds or available  cash should be  sufficient  to
cover the projected costs  associated with any  modifications to existing
software to make it year 2000  compliant.  However,  no assurances can be
given  that  such  modifications  can  be  made  in  a  timely  and  cost
effective  manner.  Failure  to make  timely  modifications  could,  in a
worse case  scenario,  result in the  inability to process loans and loan
related  data and could have a material  adverse  effect on the  Company.
At  this  time,  the  Company  does  not  possess  all  the   information
necessary  to  estimate  the  potential  impact of year  2000  compliance
issues relating to its other  IT-Systems,  non-IT  Systems,  its vendors,
its customers  and other  parties.  Such impact,  including the effect of
a year 2000 business  disruption,  could have a material  adverse  effect
on the Company's financial condition and results of operations.


     Contingency   Plan.  The  Company  has  not  yet  developed  a  year
2000-specific  contingency  plan. If further year 2000 compliance  issues
are  discovered,  the Company then will evaluate the need for one or more
contingency plans relating to such issues.

Inflation

     Inflation  has  not  had  a  significant  effect  on  the  Company's
operating results to date.









































Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Exposure to Market Risk

   The  Company  performs  an  interest  rate  sensitivity   analysis  to
identify the potential  interest rate exposures.  Specific  interest rate
risks  analyzed  include  asset/liability  mismatches,  basis risk,  risk
caused by floors and caps,  duration  mismatches  and  re-pricing  lag in
response to changes in a base index.

   A  simulated  earnings  model  is  used  to  identify  the  impact  of
specific  interest  rate  movements on earnings per share for the next 12
months.  The model  incorporates  management's  expectations about future
origination  levels,  origination  mix,  amortization  rates,  prepayment
speeds,  timing of loan  sales,  timing  of  capital  issues,  extensions
and/or  increases in lines of credit,  pricing of  originations  and cost
of debt and lines of credit.

   The  Company's  objective in managing the interest  rate  exposures is
to maintain,  at a reasonable  level, the impact on earnings per share of
an immediate and sustained  change of 100 basis points in interest  rates
in either  direction.  The  Company  periodically  reviews  the  interest
rate  risk and  various  options  such as  capital  structuring,  product
pricing,  hedging and spread  analysis to manage the  interest  rate risk
at reasonable levels.

   As of  March  31,  1999,  the  Company  had  the  following  estimated
sensitivity profile:


         Interest  rate  changes  (in basis points)       100          (100)
         Impact on earnings per share                  ($0.01)        $0.06
         Impact on interest income and
           pre-tax earnings                          ($62,000)     $417,000

























PART II - OTHER INFORMATION


Item 1.  Legal Proceedings

        None

Item 2.  Changes in Securities and Use of Proceeds

        None

Item 3.  Defaults Upon Senior Securities

        None

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

        At the Company's  Annual  Meeting of  Stockholders  held on April
        23,  1999,  Gerald  Segel and Heather  Sica were elected to serve
        as  directors  of the Company for a term of three  years.  Gerald
        Segel was elected by a vote of  5,194,699  shares  voting for his
        election  and 14,604  shares  withheld.  Heather Sica was elected
        by a vote  of  5,096,991  shares  voting  for  her  election  and
        112,312 shares withheld.

        The Company  solicited  proxies for the Annual  Meeting  pursuant
        to  Regulation  14 under  the  Securities  Exchange  Act of 1934.
        There  was  no   solicitation  in  opposition  to  the  Company's
        nominees for director, and the nominees were elected.




















<TABLE>
       Item 5.  Other Information
                    SUMMARY CONSOLIDATED FINANCIAL INFORMATION
                          (Dollars in thousands, except per share data)

                                                                                 Three Months Ended
                                   Year Ended December 31,                            March 31,

Statement of Income
Data (1):                  1998       1997        1996       1995       1994        1999        1998

<S>                    <C>         <C>        <C>        <C>        <C>        <C>         <C>


Revenues:
  Interest and fees
    on loans........... $  25,736  $  19,374  $  14,789  $  11,392  $   5,669  $   7,887   $   5,233
  Gain on sale of
    loans..............    10,691      8,564      7,331      5,161      4,847      2,617       2,227
  Servicing and other
    income.............     2,379      1,753      1,576        908        459        571         493
                          -------   --------    -------    -------    -------    -------     -------
     Total revenues....    38,806     29,691     23,696     17,461     10,975     11,075       7,953
                          -------   --------    -------    -------    -------    -------     -------
Expenses:
  Interest expense.....    14,265     10,675      7,197      6,138      3,158      4,628       2,997
  Salaries and
    employee benefits..     4,806      3,399      2,824      2,798      1,776      1,266       1,133
  Other operating
    expenses...........     3,834      3,480      3,147      2,120      1,164        978         953
  Provision for
    loan losses........     1,532      1,400      1,954        890        559        500         350
                           ------     ------     ------     ------     ------    -------     -------
     Total expenses....    24,437     18,954     15,122     11,946      6,657      7,372       5,433
                           ------     ------     ------     ------     ------    -------     -------
Income before income
  taxes and
  extraordinary item...    14,369     10,737      8,574      5,515      4,318      3,703       2,520
Provision for
  income taxes.........     5,537      4,134      3,301      2,066      1,619      1,425         970
                           ------     ------     ------     ------     ------     ------      ------
Income before
  extraordinary item...     8,832      6,603      5,273      3,449      2,699      2,278       1,550
Extraordinary item (2).      ( 77)      (220)       ---        ---       (126)       ---         ---
                           -------    -------    -------    -------    -------    -------     -------
     Net income........ $   8,755  $   6,383  $   5,273  $   3,449  $   2,573  $   2,278   $   1,550
                           =======    =======    =======    =======    =======    =======     =======
Basic per common share amounts:
 Income before
  extraordinary item... $    1.41  $    1.19  $     .97  $     .80  $     .66  $     .33   $     .27
 Extraordinary item....      (.01)      (.04)      ---        ---        (.03)       ---         ---
                           -------    -------   -------    -------    -------    -------     -------
 Net income per share.. $    1.40  $    1.15  $     .97  $     .80  $     .63  $     .33   $     .27
                           =======    ========   =======    =======    =======    =======     =======
Basic weighted average
  number of shares
  outstanding.......... 6,273,638  5,572,465  5,441,636  4,315,469  4,116,684  6,886,559   5,659,756

Diluted per common
share amounts:
  Income before
   extraordinary item.. $    1.34   $   1.12  $     .93  $     .76   $    .63  $     .32   $     .26
  Extraordinary item...      (.01)      (.04)       ---        ---       (.03)       ---         ---
                           -------     ------    -------     ------    -------    -------     -------
  Net income per share. $    1.33   $   1.08  $     .93  $     .76   $    .60  $     .32   $     .26
                           =======     ======    =======    =======    =======    =======     =======
Diluted weighted
average number of
shares outstanding..... 6,604,367   5,909,432 5,682,152  4,524,607   4,282,884 7,192,378   6,020,158

Cash dividends declared
 per Common share...... $     .07   $     .06 $     .05  $     .04   $     .03 $     ---   $     ---


Other Statement of
Income Data:
Income before
 extraordinary item
 as a percentage
 of  revenues..........      22.8%       22.3%    22.3%       19.8%       24.6%     20.6%       19.5%
Ratio of EBITDA to
 interest   expense
 (3)...................      2.13        2.17     2.38        2.05        2.64      2.10        2.14
Ratio of earnings
 to fixed charges (4)..      2.01        2.01     2.19        1.90        2.37      1.98        2.01
Return on average
 assets (5)............       3.7%        3.8%     4.0%        3.7%        4.6%      3.0%        3.1%
Return on average
 equity (5)............      13.2%       14.1%    13.3%       16.6%       17.2%     11.0%       11.8%
</TABLE>

__________



(1) Certain  amounts in the 1994 through  1996  financial  information  have
been restated to conform to the 1997 through 1999 presentation.
(2)  Reflects  loss on early  extinguishment  of a portion of the 1992 Notes
(as defined  herein),  net of applicable  tax benefit of $76,000,  for 1994,
of the  remainder  of the 1992  Notes,  net of  applicable  tax  benefit  of
$138,000,  for  1997,  and of the term  note  payable,  net  applicable  tax
benefit of $48,000, for 1998.
(3)   The ratio of EBITDA to interest  expense is required to be  calculated
for the twelve month period  immediately  preceding each  calculation  date,
pursuant  to the terms of the  indentures  to which the  Company is subject.
EBITDA is defined  as  earnings  before  deduction  of taxes,  depreciation,
amortization  of debt costs,  and interest  expense (but after deduction for
any extraordinary item).
(4)   For purposes of  calculating  the ratio of earnings to fixed  charges,
earnings consist of income before income taxes and  extraordinary  items and
fixed  charges.   Fixed  charges   consist  of  interest   charges  and  the
amortization of debt expense.
(5)   Calculations are based on income before extraordinary item.

<TABLE>
<S>                     <C>       <C>     <C>         <C>       <C>       <C>

        SUMMARY CONSOLIDATED FINANCIAL INFORMATION - (Continued)
              (Dollars in thousands, except per share data)


                                     December 31,                        March. 31,
Balance Sheet Data (6):    1998     1997      1996      1995      1994      1999
Total assets..........  $293,882  $186,790  $152,689  $112,459  $ 63,487  $313,355
Loans held for sale(7)    19,750    16,366    12,260    14,380    11,094    16,111
Other loans (7).......   191,292    86,307    79,996    33,613    15,790   209,345
Retained interests in
loan sales (7)........    28,883    30,299    28,912    22,594    11,996    30,556
Secured debt..........    49,021     5,387    43,727     9,836     5,823    66,924
Unsecured debt........   134,588   105,347    46,995    47,401    29,896   134,588
Stockholders' equity..    82,094    52,071    42,448    37,396    16,610   86,005

</TABLE>

<TABLE>

<S>                     <C>       <C>       <C>       <C>       <C>       <C>
                                                                      Three months
                                                                         ended
                                  Year Ended December 31,              March 31,

Other Financial Data:      1998     1997      1996      1995      1994       1999
Loans purchased and
originated (8)........  $375,292  $184,660  $133,750  $121,046  $ 59,798  $ 97,991
Loans sold (8)........   144,762    98,747    54,936    65,115    40,116    52,871
Loans participated(8).     3,569     6,936       ---       ---       ---       909
Serviced Portfolio (9)   466,912   304,102   242,445   176,650   105,013   500,465
Loans serviced for
others................   238,132   179,790   129,619   111,117    72,731   260,076
Dealer/developer
reserves..............     9,979    10,655    10,628     9,644     6,575    10,187
Allowance for loan
losses (10)...........     6,707     5,877     4,528     3,715     1,264     7,133
Allowance ratio (11)..      1.44%     1.93%     1.87%     2.10%     1.20%     1.43%
Delinquency ratio (12)      0.95%     1.20%     1.34%     1.73%      .93%      .98%
Net charge-off ratio
(8)(13)...............       .58%      .74%      .94%      .67%      .38%      .55%
Non-performing asset
ratio (14)............       .84%     1.03%     1.57%     1.35%     1.02%      .90%
</TABLE>

__________

(6) In  1997  the  Company  adopted  Statement  of  Financial  Accounting
    Standards  No.  125,  "Accounting  for  Transfers  and  Servicing  of
    Financial Assets and  Extinguishments of Liabilities."  Consequently,
    certain   amounts   included  in  the  1994  through  1996  financial
    statements  have been  reclassified  to conform with the 1997 through
    1999 presentations:  "Subordinated pass through  certificates held to
    maturity,"  "Excess  servicing  asset" and "Allowance for loans sold"
    have been  reclassified  as  "Retained  interests  in loan sales." In
    addition,  "Loans  held for  investment"  have been  reclassified  as
    "Other loans."
(7) Amount  indicated  is  net  of  allowance  for  losses  and  recourse
    obligation on retained interests in loan sales.
(8) During the relevant period.
(9) The  Serviced  Portfolio  consists of the  principal  amount of loans
    serviced by or on behalf of the Company,  except  loans  participated
    without recourse to the Company.
(10)  The  allowance  for  loan  losses   includes   estimated   recourse
    obligations for loans sold.   See Note C to financial statements.
(11)  The allowance  ratio is the  allowances  for loan losses divided by
    the amount of the Serviced Portfolio.
(12)  The  delinquency  ratio is the amount of  delinquent  loans divided
    by the amount of the Serviced  Portfolio.  Delinquent loans are those
    which  are 31  days  or more  past  due  which  are  not  covered  by
    dealer/developer  reserves or  guarantees  and not  included in other
    real estate owned.
(13)  The net  charge-off  ratio is  determined by dividing the amount of
    net charge-offs for the period by the average Serviced  Portfolio for
    the period.  The March 31, 1999 amount is calculated on an annualized
    basis.
(14)  The  non-performing  asset ratio is  determined by dividing the sum
    of the amount of those  loans  which are 91 days or more past due and
    other real estate owned by the amount of the Serviced Portfolio.


                                BUSINESS


Overview


     Litchfield  Financial  Corporation  (the "Company") is a diversified
finance  company that provides  financing to  creditworthy  borrowers for
assets  not  typically  financed  by banks.  The  Company  provides  this
financing by making loans to businesses  secured by consumer  receivables
or other assets and by purchasing consumer loans.

     The Company  provides  financing  to rural land  dealers,  timeshare
resort  developers  and other finance  companies  secured by  receivables
("Hypothecation  Loans").  The  Company  also  purchases  consumer  loans
("Purchased Loans") consisting  primarily of loans to purchasers of rural
("Land Loans") and vacation  properties and vacation ownership  interests
("VOI  Loans")  popularly  known as  timeshare  interests,  and  provides
loans to dealers  and  developers  for the  acquisition  and  development
("A&D  Loans") of rural land and  timeshare  resorts.  In  addition,  the
Company  purchases  other  loans,  such as consumer  home  equity  loans,
mortgages  and  construction  loans  and  tax  lien   certificates,   and
provides financing to other businesses.

     The  principal  sources of the  Company's  revenues are interest and
fees on loans,  gains on sales of loans and  servicing  and other income.
Gains  on  sales  of  loans  are  based  on the  difference  between  the
allocated  cost  basis  of the  assets  sold and the  proceeds  received,
which  includes  the fair  value of any  assets or  liabilities  that are
newly  created  as a result of the  transaction.  Because  a  significant
portion of the  Company's  revenues is comprised of gains  realized  upon
sales of loans,  the  timing of such  sales has a  significant  effect on
the Company's results of operations.



Characteristics of the Serviced Portfolio, Loan Purchases and
Originations


    The  following  table  shows  the  growth  in  the  diversity  of the
Serviced  Portfolio from primarily  Purchased Loans to a mix of Purchased
Loans, Hypothecation Loans, A&D Loans and Other Loans:

                                    December 31,               March 31,
                         ------------------------------------  ---------

                          1998    1997    1996    1995    1994    1999
                          ----    ----    ----    ----    ----    ----
Purchased Loans.......... 38.4%   56.6%   67.1%   81.6%   85.3%   37.1%
Hypothecation Loans...... 35.2    26.9    20.7    12.5     9.0    36.8
A&D Loans................ 11.2    13.7     8.7     3.1     3.3    12.7
Other Loans.............. 15.2     2.8     3.5     2.8     2.4    13.4
                         ------  ------  ------  -----   ------  ------
          Total......... 100.0%  100.0%  100.0%  100.0%  100.0%  100.0%
                         ======  ======  ======  ======  ======  ======






     The  following  table  shows  the  growth  in the  diversity  of the
Company's  originations  from  primarily  Purchased  Loans  to a  mix  of
Purchased Loans, Hypothecation Loans, A&D Loans and Other Loans:


                                                        Three Months
                                                             Ended
                             Year Ended December 31,        March 31,
                      --------------------------------     -----------
                      1998   1997   1996   1995   1994     1999  1998
                      ----   ----   ----   ----   ----     ----  ----
Purchased Loans.....  14.9%  30.3%  49.9%  71.4%  67.6%    17.5%  25.8%
Hypothecation Loans.  48.6   37.1   29.6   20.9   22.2     50.4   58.2
A&D Loans...........  10.2   24.0   14.4    3.1    6.0     17.4   11.5
Other Loans.........  26.3    8.6    6.1    4.6    4.2     14.7    4.5
                     ------ ------ ------ ------ ------   ------  -----
     Total.......... 100.0% 100.0% 100.0% 100.0% 100.0%   100.0%  100.0%
                     ====== ====== ====== ====== ======   ======  ======




   (1) Purchased Loans

    The  Company  provides  indirect  financing  to  consumers  through a
large  number of  experienced  land  dealers and resort  developers  from
which it  regularly  purchases  Land and VOI Loans.  The land dealers and
resort  developers make loans to consumers  generally using the Company's
standard forms and subject to the Company's  underwriting  criteria.  The
Company  then  purchases  such  loans  from the land  dealers  and resort
developers  on an  individually  approved  basis in  accordance  with its
credit guidelines.

    Each  land  dealer  and  resort   developer  from  whom  the  Company
purchases  loans  is  interviewed  by the  Company  and  approved  by its
credit  committee.  Management  evaluates  each land  dealer's and resort
developer's  experience,  financial  statements and credit references and
inspects  a   substantial   portion  of  the  land  dealer's  and  resort
developer's  inventory  of  land  or  VOIs  prior  to  approval  of  loan
purchases.

    In order to enhance  the  creditworthiness  of loans  purchased  from
land dealers and resort  developers,  the Company typically requires land
dealers  and  resort  developers  to  guarantee  payment of the loans and
typically  retains a portion  of the  amount  payable  by the  Company to
each land  dealer and  resort  developer  on  purchase  of the loan.  The
retained  portion,  or reserve,  is released to the land dealer or resort
developer as the related loan is repaid.

    Prior to  purchasing  Land or VOI Loans,  the Company  evaluates  the
credit  and  payment  history of each  borrower  in  accordance  with its
underwriting  guidelines,  performs  borrower  interviews  on a sample of
loans,  reviews the  documentation  supporting the loans for completeness
and  obtains  an  appropriate  opinion  from  local  legal  counsel.  The
Company purchases only those loans which meet its credit standards.

    The Company also  purchases  portfolios of seasoned  loans  primarily
from land  dealers  and  resort  developers.  The land  dealers or resort
developers  generally  guarantee the loans sold and the Company generally
withholds a reserve as  described  above.  Management  believes  that the
portfolio  acquisition  program is  attractive to land dealers and resort
developers   because  it  provides   them  with   liquidity  to  purchase
additional   inventory.   The  Company  also   purchases   portfolios  of
seasoned  loans  from   financial   institutions   and  others.   Sellers
generally do not  guarantee  such loans,  but  estimated  loan losses are
considered in establishing the purchase price.

    In evaluating  such  seasoned  portfolios,  the Company  conducts its
normal  review  of the  borrower's  documentation,  payment  history  and
underlying  collateral.  However,  the  Company may not always be able to
reject individual loans.

    The  Company's  portfolio of  Purchased  Loans is secured by property
located in 40 states.

                                  Principal Amount of Loans
                         ------------------------------------------------
                                       December 31,             March 31,
                            1998    1997   1996   1995    1994    1999
                            ----    ----   ----   ----    ----    ----
   Southwest...............  32%     30%   26%     16%     19%     33%
   South...................  30      31    31      31      37      29
   West....................  19      17    20      20       3      18
   Mid-Atlantic.............  8      10    10      16      16       9
   Northeast...............  11      12    13      17      25      11
                            ----   ----   ----    ----    ----    ----
        Total.............  100%   100%   100%    100%    100%    100%
                            ====   ====   ====    ====    ====    ====



      a. Land Loans

    Dealers  from whom the  Company  purchases  Land Loans are  typically
closely-held  firms  with  annual  revenues  of less than  $3.0  million.
Dealers  generally  purchase  large rural tracts  (generally  100 or more
acres) from farmers or other owners and  subdivide  the property into one
to  twenty  acre  parcels  for  resale  to   consumers.   Generally   the
subdivided property is not developed  significantly  beyond the provision
of graded access roads. In recreational  areas,  sales are made primarily
to  urban  consumers  who  wish to use the  property  for a  vacation  or
retirement  home or for  recreational  purposes such as fishing,  hunting
or  camping.  In other  rural  areas,  sales  are more  commonly  made to
persons who will  locate a  manufactured  home on the parcel.  During the
three  months ended March 31, 1999,  the Company  acquired  approximately
$16.9  million of Land  Loans.  The  aggregate  principal  amount of Land
Loans  purchased  from  individual  dealers during the three months ended
March 31,  1999 varied  from a low of  approximately  $6,300 to a high of
approximately  $3.4 million.  As of March 31, 1999 and December 31, 1998,
the five largest  dealers  accounted for  approximately  19.0% and 20.6%,
respectively,  of the principal  amount of the Land Loans in the Serviced
Portfolio.  No  single  dealer  accounted  for more than 4.8% and 5.4% at
March 31, 1999 and at December 31, 1998, respectively.

    As of  March  31,  1999 and  December  31,  1998,  33.7%  and  34.3%,
respectively,  of the Serviced  Portfolio  consisted  of Land Loans.  The
average principal balance of such Land Loans were  approximately  $13,400
and $13,100 at March 31, 1999 and December 31,  1998,  respectively.  The
following  table sets forth as of March 31,  1999,  the  distribution  of
Land Loans in the Company's Serviced Portfolio:



                                    Percentage of              Percentage of
Principal Balance        Principal    Principal    Number of      Number of
                           Amount      Amount        Loans          Loans


Less than $10,000........$ 29,143,000     17.3%       5,615          44.6%
$10,000-$19,999..........$ 62,324,000     37.0        4,374          34.7
$20,000 and greater......$ 77,211,000     45.7        2,605          20.7
                          -----------    ------      ------         ------
   Total.................$168,678,000    100.0%      12,594         100.0%
                          ===========    ======      ======         ======



    As of March 31, 1999 and  December 31,  1998,  the  weighted  average
interest  rate of the  Land  Loans  included  in the  Company's  Serviced
Portfolio was 12.0%.  The weighted  average  remaining  maturity was 12.2
and 12.0 years at March 31, 1999 and  December  31,  1998,  respectively.
The following  table sets forth as of March 31, 1999 the  distribution of
interest rates payable on the Land Loans:



                                                         Percentage of
                                          Principal         Principal
Interest Rate                              Amount             Amount
-------------                             ---------        ------------
Less than 12.0%........................ $ 59,556,000           35.3%
12.0%-13.9%............................   85,349,000           50.6
14.0% and greater......................   23,773,000           14.1
                                        ------------          ------
     Total............................. $168,678,000          100.0%
                                        ============          ======



    As of March 31, 1999 and December 31, 1998,  the Company's  Land Loan
borrowers  resided in 50 states,  the  District of Columbia  and nine and
two territories or foreign countries, respectively.


      b. VOI Loans

    The Company purchases VOI Loans from various resort  developers.  The
Company  generally  targets  small to medium size resorts with  completed
amenities and  established  property owners  associations.  These resorts
participate  in  programs  that  permit  purchasers  of VOIs to  exchange
their  timeshare  intervals  for  timeshare  intervals  in other  resorts
around the world.  During the three  months  ended  March 31,  1999,  the
Company  acquired  approximately  $292,000 of VOI Loans.  As of March 31,
1999 and December 31, 1998,  the five largest  developers  accounted  for
approximately 34.3% and 35.1%,  respectively,  of the principal amount of
the VOI Loans in the Serviced  Portfolio.  No single developer  accounted
for more than  9.5% and 9.4% at March 31,  1999 and  December  31,  1998,
respectively.

    As  of  March  31,  1999  and  December  31,  1998,  3.4%  and  4.1%,
respectively,  of the  Serviced  Portfolio  consisted  of VOI Loans.  The
average  principal  balance  of such VOI Loans was  approximately  $3,300
and $3,400,  at March 31, 1999 and December 31, 1998,  respectively.  The
following  table sets forth as of March 31, 1999 the  distribution of VOI
Loans:



                                    Percentage of              Percentage of
Principal Balance        Principal    Principal    Number of      Number of
                           Amount      Amount        Loans          Loans

Less than $4,000......  $ 6,908,000       40.3%      3,392         66.2%
$4,000-$5,999.........    5,725,000       33.5       1,159         22.6
$6,000 and greater....    4,492,000       26.2         575         11.2
                        -----------      ------      -----        ------
     Total............  $17,125,000      100.0%      5,126        100.0%
                        ===========      ======      =====        ======





    As of March 31, 1999 and  December 31,  1998,  the  weighted  average
interest  rate  of the  VOI  Loans  included  in the  Company's  Serviced
Portfolio  was 14.6%,  and the weighted  average  remaining  maturity was
3.6 and 3.7 years,  respectively.  The  following  table sets forth as of
March 31,  1999 the  distribution  of interest  rates  payable on the VOI
Loans:


                                                        Percentage of
                                          Principal         Principal
Interest Rate                              Amount             Amount
-------------                             ---------        ------------

Less than 14.0%.....................    $ 7,260,000           42.4%
14.0%-15.9%.........................      3,932,000           23.0
16.0% and greater...................      5,933,000           34.6
                                        -----------          ------
     Total..........................    $17,125,000          100.0%
                                        ===========          ======


      As of March 31, 1999 and  December  31,  1998,  the  Company's  VOI
borrowers  resided in 50  states,  the  District  of  Columbia  and three
territories or foreign countries.


   (2) Hypothecation Loans

    The Company  extends  Hypothecation  Loans to land dealers and resort
developers and other businesses  secured by receivables.  The Company has
expanded its marketing of  Hypothecation  Loans to include loans to other
finance companies  secured by other types of collateral.  These loans may
be  larger  than  the  Company's  average  Hypothecation  Loans  and  may
provide  the  Company  with an option to take an equity  position  in the
borrower.  During the three  months  ended  March 31,  1999,  the Company
extended  or  acquired   approximately  $49.4  million  of  Hypothecation
Loans,  of which $8.9  million,  or 18.0%,  were  secured by Land  Loans,
$28.7  million,  or 58.1%,  were secured by VOI Loans and $11.8  million,
or 23.9%,  were  secured by other  types of  collateral  such as tax lien
certificates, accounts receivable and mortgages.

    The Company  generally extends  Hypothecation  Loans based on advance
rates  of  75%  to  90%  of  the  eligible  receivables  which  serve  as
collateral.  The  Company's  Hypothecation  Loans are  generally  made at
variable  rates based on the prime rate of interest  plus 2% to 4%. As of
March 31, 1999 and  December  31,  1998,  the Company had $184.0  million
and $164.5  million of  Hypothecation  Loans  outstanding,  none of which
were 31 days or more past due.  During the three  months  ended March 31,
1998, the Company  acquired a $17.0 million  participation  interest in a
Hypothecation  Loan from another financial  institution.  As planned,  in
May of 1998,  the Company  purchased the  underlying  receivables,  which
the  Company  has  reclassified  as  Other  Loans.  The  proceeds  of the
receivables   purchased   were   applied   to  pay  off   the   Company's
participation  interest.  At March 31, 1999,  Hypothecation  Loans ranged
in size from less than $500 to $25.0  million  with an average  principal
balance  of  $2,000,000.   At  December  31,  1998,  Hypothecation  Loans
ranged  in size from less  than  $500 to $21.5  million  with an  average
balance   of   $1,678,000.   The   five   largest   Hypothecation   Loans
represented  15.1% and 15.5% of the Serviced  Portfolio at March 31, 1999
and December 31, 1998, respectively.


  (3) A&D Loans

    The Company  also makes A&D Loans to dealers and  developers  for the
acquisition  and  development of rural and timeshare  resorts in order to
finance  additional  receivables  generated by the A&D Loans.  During the
three  months ended March 31,  1999,  the Company  made $17.0  million of
A&D Loans to land dealers and resort  developers,  of which $1.0 million,
or 6.0%, were secured by land and $16.0 million,  or 94.0%,  were secured
by resorts under development.

    The  Company  generally  makes A&D Loans to land  dealers  and resort
developers  based  on  loan to  value  ratios  of 60% to 80% at  variable
rates  based on the prime  rate  plus 2% to 4%. As of March 31,  1999 and
December  31,  1998,  the  Company had $63.5  million and $52.3  million,
respectively,  of A&D Loans  outstanding,  none of which  were 31 days or
more past due. At March 31, 1999 and December  31,  1998,  A&D Loans were
secured by timeshare resort  developments and rural land  subdivisions in
17  states  and  one   territory   and  16  states  and  one   territory,
respectively.  A&D  Loans  ranged in size  from  $6,600 to $10.6  million
with an  average  principal  balance  of  $1,025,000  at March 31,  1999.
A&D Loans  ranged in size from  $1,700 to $9.5  million  with an  average
principal  balance of $780,000 at December  31,  1998.  The five  largest
A&D Loans  represented 5.9% and 4.7%, of the Serviced  Portfolio at March
31, 1999 and December 31, 1998, respectively.

  (4) Other Loans

    At March 31, 1999,  Other Loans consisted  primarily of consumer home
equity,   mortgage  and  construction  loans,  other  secured  commercial
loans and tax lien  certificates.  Historically,  the Company has made or
acquired  certain other secured and unsecured  loans as it has identified
additional  lending  opportunities  or lines  of  business  for  possible
future  expansion as it did with VOI Loans and  Hypothecation  Loans.  In
May of  1998,  the  Company  purchased  232  builder  construction  loans
totaling  $32.7  million,   a  portion  of  which  had  previously   been
collateral  for the  Hypothecation  Loan in  which  the  Company  owned a
participation  interest.  At March 31, 1999 and December  31,  1998,  the
Company  had 169  and  176 of the  builder  construction  loans  totaling
$37.0  million and $33.9  million,  respectively.  In October  1998,  the
Company began  purchasing  tax lien  certificates.  At March 31, 1999 and
December  31, 1998 the  Company  held $17.3  million  and $21.2  million,
respectively,  of such  certificates.  The Company had $67.2  million and
$71.0  million of Other  Loans,  1.60% and 1.33% of which were 91 days or
more past due at March 31, 1999 and December 31, 1998,  respectively.  At
March  31,  1999,  Other  Loans  ranged  in size  from  less than $500 to
$891,000 with an average  principal  balance of $16,500.  At December 31,
1998,  Other Loans  ranged in size from less than $500 to  $875,000  with
an average  principal  balance of $23,200.  The five largest  Other Loans
represent  0.8% of the Serviced  Portfolio at March 31, 1999 and December
31, 1998.

Loan Underwriting

    The  Company  has   established   loan   underwriting   criteria  and
procedures  designed to reduce credit  losses on its Serviced  Portfolio.
The loan underwriting  process includes  reviewing each borrower's credit
history.  In  addition,   the  Company's   underwriting  staff  routinely
conducts  telephone  interviews  with a sample of borrowers.  The primary
focus of the  Company's  underwriting  is to assess the  likelihood  that
the borrower  will repay the loan as agreed by examining  the  borrower's
credit history through credit reporting bureaus.

    The  Company's  loan  policy is to  purchase  Land and VOI Loans from
$3,000  to  $50,000.  On a case by case  basis,  the  Company  will  also
consider  purchasing  such  loans in excess of  $50,000.  As of March 31,
1999,  the  Company  had 162 Land Loans  exceeding  $50,000  representing
1.3% of the number of such loans in the Serviced  Portfolio,  for a total
of $11.4 million.  There were no VOI Loans exceeding  $50,000 as of March
31,  1999.  The  Company  will  originate  Hypothecation  Loans up to $15
million and A&D Loans up to $10 million.  From time to time,  the Company
may have an opportunity to originate  larger  Hypothecation  Loans or A&D
Loans in which  case the  Company  would seek to  participate  such loans
with other  financial  institutions.  As of March 31, 1999, the Company's
five  largest   Hypothecation   Loan  relationships  had  aggregate  loan
balances  ranging  from $11.4  million to $25.0  million  and its largest
A&D Loan  relationship  had an aggregate  loan balance of $12.2  million.
Construction  Loans  greater than  $200,000  and any other loans  greater
than  $100,000  must  be  approved  by  the  Credit  Committee  which  is
comprised  of  the  Chief   Executive   Officer,   four   Executive  Vice
Presidents and a Senior Vice President.

Collections and Delinquencies

    Management  believes that the  relatively  low  delinquency  rate for
the Serviced  Portfolio is  attributable  primarily to the application of
its underwriting  criteria,  as well as to dealer guarantees and reserves
withheld  from dealers and  developers.  No  assurance  can be given that
these delinquency rates can be maintained in the future.

    Collection  efforts  are  managed  and  delinquency   information  is
analyzed at the Company's  headquarters.  Unless circumstances  otherwise
dictate,   collections   are  generally   made  by  mail  and  telephone.
Collection  efforts  begin when an  account  is seven  days past due,  at
which  time the  Company  sends out a late  notice.  When an  account  is
fifteen  days past due,  the Company  attempts to contact the borrower to
determine  the  reason  for the  delinquency  and to attempt to cause the
account to become  current.  If the status of the  account  continues  to
deteriorate,  an analysis of the account is performed  by the  collection
manager to determine  the  appropriate  action.  When the loan is 90 days
past due in  accordance  with its  original  terms  and it is  determined
that the  amounts  cannot  be  collected  from the  dealer  or  developer
guarantees  or reserves,  the loan is generally  placed on a  non-accrual
status  and the  collection  manager  determines  the action to be taken.
The  determination  of how to work out a  delinquent  loan is based  upon
many factors,  including the  borrower's  payment  history and the reason
for the current  inability  to make timely  payments.  When a  guaranteed
loan  becomes 60 days (90 days in some  cases)  past due,  in addition to
the Company's  collection  procedures,  the Company generally obtains the
assistance of the dealer or developer in collecting the loan.

    The  Company  extends a limited  number of its loans for  reasons the
Company  considers  acceptable  such as temporary  loss of  employment or
serious  illness.   In  order  to  qualify  for  a  one  to  three  month
extension,  the  customer  must make three  timely  payments  without any
intervention  from the  Company.  For  extensions  of four to six months,
the  customer  must  make  four  to six  timely  payments,  respectively,
without any  intervention  from the Company.  The Company will not extend
a loan more than two times for an  aggregate  six months over the life of
the  loan.  The  Company  has  extended  approximately  1.0% of its loans
through March 31, 1999.  The Company does not generally  modify any other
loan terms such as interest rates or payment amounts.

    Regulations  and  practices  regarding the rights of the mortgagor in
default  vary  greatly  from state to state.  To the extent  permitted by
applicable law, the Company collects late charges and  return-check  fees
and records  these items as  additional  revenue.  Only if a  delinquency
cannot  otherwise be cured will the Company  decide that  foreclosure  is
the  appropriate  course  of  action.  If  the  Company  determines  that
purchasing  a property  securing a mortgage  loan will  minimize the loss
associated  with such  defaulted  loan,  the Company may accept a deed in
lieu of  foreclosure,  take legal  action to  collect  on the  underlying
note or bid at the foreclosure sale for such property.

    Serviced Portfolio


    The   following   table  shows  the   Company's   delinquencies   and
delinquency rates, net of dealer/developer  reserves and guarantees,  for
the Serviced Portfolio:

<TABLE>
<S>                   <C>          <C>          <C>          <C>          <C>          <C>
                                                                                       Three Months
                                                                                          Ended
                                          Year Ended December 31,                       March 31,
                          ------------------------------------------------------------
                           1998         1997       1996           1995        1994         1999
                           ----         ----       ----           ----        ----         ----
Serviced Portfolio....$466,912,000 $304,102,000 $242,445,000 $176,650,000 $105,013,000 $500,465,000
Delinquent loans (1)..   4,456,000    3,642,000    3,255,000    3,062,000      981,000    4,920,000
Delinquency as a
  Percentage of
  Serviced Portfolio..        .95%        1.20%        1.34%        1.73%         .93%         .98%
</TABLE>

__________

(1)   Delinquent  loans  are  those  which  are 31 days or more  past due
   which are not covered by  dealer/developer  reserves or guarantees and
   not included in other real estate owned.



Land Loans


    The   following   table  shows  the   Company's   delinquencies   and
delinquency rates, net of dealer/developer  reserves and guarantees,  for
Land Loans in the Serviced Portfolio:

<TABLE>
<S>                   <C>          <C>           <C>          <C>          <C>          <C>
                                                                                       Three Months
                                                                                         Ended
                                         Year Ended December 31,                       March 31,
                          ------------------------------------------------------------
                           1998         1997       1996           1995        1994         1999
                           ----         ----       ----           ----        ----         ----
Land Loans in
  Serviced
  Portfolio.......... $160,098,000 $142,828,000  $119,370,000 $97,266,000  $90,502,000  $168,678,000
Delinquent Land
  Loans (1)..........    2,728,000    2,453,000     1,920,000   1,059,000      981,000     3,132,000
Delinquency as
a Percentage of
  Land Loans in
  Serviced
Portfolio............        1.70%         1.72%         1.61%      1.09%        1.08%         1.86%
</TABLE>

__________

(1)   Delinquent  loans  are  those  which  are 31 days or more  past due
   which are not covered by  dealer/developer  reserves or guarantees and
   not included in other real estate owned.





VOI Loans

    The   following   table  shows  the   Company's   delinquencies   and
delinquency rates, net of dealer/developer  reserves and guarantees,  for
VOI Loans in the Serviced Portfolio:

<TABLE>
<S>                   <C>          <C>          <C>          <C>          <C>        <C>
                                                                                       Three Months
                                                                                         Ended
                                         Year Ended December 31,                       March 31,
                          ------------------------------------------------------------
                           1998         1997       1996           1995        1994         1999



VOI Loan in Serviced
  Portfolio.......... $19,119,000  $29,232,000  $43,284,000  $46,700,000  $2,851,000 $17,125,000
Delinquent VOI
  Loans (1)..........     350,000      739,000    1,316,000    1,958,000         ---     292,000
Delinquency as a
  Percentage of
VOI Loans in
Serviced Portfolio...        1.83%       2.53%        3.04%        4.19%         ---       1.70%
</TABLE>

______

(1)   Delinquent loans are those which are 31 days or more past due
   which are not covered by dealer/developer reserves or guarantees and
   not included in other real estate owned.

   Hypothecation, A&D and Other Loans

    The Company did not have any  delinquent  Hypothecation  Loans or A&D
Loans for the years ended  December  31, 1994  through  December 31, 1998
or for the three months  ended March 31,  1999.  The Company did not have
significant  amounts  of  delinquent  Other  Loans  for the  years  ended
December  31, 1994  through  December  31,  1997.  At December  31, 1998,
there were  $71.0  million of Other  Loans of which  $1,378,000  or 1.94%
were 31  days or more  past  due  and  not  covered  by  dealer/developer
reserves or guarantees  and not included in other real estate  owned.  At
March  31,  1999,  there  were  $67.2  million  of  Other  Loans of which
$1,497,000  or 2.23%  were 31 days or more  past due and not  covered  by
dealer/developer  reserves or  guarantees  and not included in other real
estate owned.

Allowance  for  Loan  Losses  and  Estimated  Recourse  Obligations,  Net
Charge-offs and Dealer Reserves

    The  following  is an analysis of the total  allowances  for all loan
losses:
<TABLE>
<S>                   <C>         <C>         <C>         <C>         <C>          <C>

                                    Year Ended December 31,                       March 31,
                          ------------------------------------------------------------
                         1998         1997       1996        1995        1994       1999
                         ----         ----       ----        ----        ----       ----

Allowance beginning
  of period.......... $5,877,000  $4,528,000  $3,715,000  $1,264,000  $1,064,000   $6,707,000
Net charge-offs of
  uncollectible
  accounts........... (2,239,000) (2,010,000) (1,965,000    (946,000)   (359,000)    (661,000)
Provision for
  loan losses.......   1,532,000   1,400,000   1,954,000     890,000     559,000      500,000
Allocation of
  purchase
  adjustment(1).....   1,537,000   1,959,000     824,000   2,507,000         ---      587,000
                       ---------   ---------   ---------   ---------   ---------    ---------
Allowance, end of
period.............   $6,707,000  $5,877,000  $4,528,000  $3,715,000  $1,264,000   $7,133,000
                      ==========  ==========  ==========  ==========  ==========   ==========
</TABLE>

__________

(1)   Represents allocation of purchase adjustment related to the
   purchase of certain nonguaranteed loans.

    The  following  is an analysis of net  charge-offs  by major loan and
collateral types experienced by the Company:

<TABLE>
<S>                       <C>           <C>         <C>          <C>         <C>       <C>

                                     Year Ended December 31,                         March 31,
                          ------------------------------------------------------------
                           1998         1997       1996        1995        1994         1999
                           ----         ----       ----        ----        ----         ----

Land Loans............  $1,358,000  $  986,000 $  669,000  $  546,000   $  359,000    $  344,000
VOI Loans.............     556,000     939,000  1,284,000      45,000          ---        78,000
Hypothecation Loans...         ---         ---        ---         ---          ---           ---
A&D Loans.............         ---      (2,000)    (8,000)    352,000          ---           ---
Other Loans...........     325,000      87,000     20,000       3,000          ---       239,000
                        ----------  ---------- ----------  ----------    ---------     ---------
Total net charge-offs.  $2,239,000  $2,010,000 $1,965,000  $  946,000   $  359,000    $  661,000
                        ==========  ========== ==========  ==========    =========     =========
Net charge-offs as a
 percentage of the
 average Serviced
 Portfolio............        .58%        .74%       .94%        .67%         .38%          .55%

</TABLE>

    As part  of the  Company's  financing  of Land  and  VOI  Loans,  the
Company  enters  into  arrangements  with most land  dealers  and  resort
developers  whereby the Company  retains a portion of the amount  payable
to a dealer  when  purchasing  a Land or VOI Loan to protect  the Company
from  potential  losses  associated  with such  loans and uses the amount
retained to absorb loan  losses.  The  Company  negotiates  the amount of
the  reserves  with the land  dealers  and resort  developers  based upon
various  criteria,  two of which are the  financial  strength of the land
dealer  or resort  developer  and the  credit  risk  associated  with the
loans being  purchased.  Dealer reserves for Land Loans were  $8,219,000,
$8,321,000  and   $7,555,000  at  December  31,  1998,   1997  and  1996,
respectively,  and $8,610,000 at March 31, 1999.  Developer  reserves for
VOI Loans were  $1,760,000,  $2,299,000  and  $3,072,000  at December 31,
1998,  1997 and 1996,  respectively,  and  $1,577,000  at March 31, 1999.
Most  dealers  and  developers   provide  personal  and,  when  relevant,
corporate guarantees to further protect the Company from loss.


Loan Servicing and Sales

    The Company  retains the right to service all the loans it  purchases
or originates.  Servicing  includes  collecting  payments from borrowers,
remitting   payments  to  investors   who  have   purchased   the  loans,
accounting for principal and interest,  contacting  delinquent  borrowers
and supervising  foreclosure and  bankruptcies in the event of unremedied
defaults.  Substantially  all servicing  results from the origination and
purchase of loans by the  Company,  and the Company has not  historically
purchased  loan servicing  rights except in connection  with the purchase
of  loans.  Servicing  rates  generally  approximate  .5%  to 2%  of  the
principal balance of a loan.

    Historically,  the Company  subcontracted  the servicing of its loans
to an  unaffiliated  third  party.  In July  1998,  the  Company  resumed
certain  customer  service and  collection  functions.  The  unaffiliated
third  party  will  continue  to  provide  certain  data  processing  and
payment  processing  functions.  The Company retains  responsibility  for
servicing all loans as a master servicer.

    In 1990, the Company began  privately  placing issues of pass-through
certificates  evidencing an undivided  beneficial  ownership  interest in
pools of  mortgage  loans  which have been  transferred  to  trusts.  The
principal  and a  portion  part of the  interest  payments  on the  loans
transferred  to the trust are  collected  by the Company as the  servicer
of the loans,  remitted  to the trust for the  benefit of the  investors,
and then  distributed  by the trust to the investors in the  pass-through
certificates.
    As of March 31,  1999,  the Company had sold or  securitized  a total
of  approximately  $545.8  million in loans at face value.  In certain of
the Company's  issues of pass-through  certificates,  credit  enhancement
was achieved by dividing the issue into a senior  portion  which was sold
to the  investors  and a  subordinated  portion which was retained by the
Company.  In certain other of the Company's  private  placements,  credit
enhancement was achieved through cash collateral.

   If  borrowers  default in the payment of  principal or interest on the
loans  underlying  these  issues  of  pass-through  certificates,  losses
would be absorbed first by the  subordinated  portion or cash  collateral
account  retained  by  the  Company  and  might,  therefore,  have  to be
charged  against the estimated  recourse  obligations to the extent dealer
guarantees and reserves are not available.

    The Company also has a $150.0  million  revolving  line of credit and
sale  facility for its Land Loans as part of an asset  backed  commercial
paper  facility  with  a  multi-seller   commercial  paper  conduit.  The
facility  expires in June 2001.  As of March 31,  1999,  the  outstanding
balance of the sold or pledged  loans  securing  this facility was $145.5
million.  The  Company  has an  additional  revolving  line of credit and
sale   facility  for  its  VOI  Loans  of  $25.0   million  with  another
multi-seller  commercial  paper  conduit.  The facility  expires in March
2000.  As of March 31, 1999,  the  outstanding  aggregate  balance of the
sold loans under the facility was $9.6 million.

Marketing and Advertising

    The  Company  markets  its  program to rural land  dealers and resort
developers   through   brokers,    referrals,    dealer   and   developer
solicitation,  and  targeted  direct  mail.  The  Company  employs  three
marketing  executives  based  in  Lakewood,   Colorado,   five  marketing
executives  based  in  Williamstown,   Massachusetts  and  two  marketing
executives based in Hoover,  Alabama.  In the last five years the Company
has closed loans with over 350 different dealers and developers.

    Management  believes that the Company  benefits from name recognition
as a result of its referral,  advertising  and other  marketing  efforts.
Referrals  have  been  the  strongest  source  of new  business  for  the
Company and are  generated  in the states in which the  Company  operates
by dealers,  brokers,  attorneys and financial  institutions.  Management
and  marketing  representatives  also  conduct  seminars  for dealers and
brokers and attend  trade shows to improve  awareness  and  understanding
of the Company's programs.

Regulation

    The  Company is  licensed  as a lender,  mortgage  banker or mortgage
broker in 21 of the  states  in which it  operates,  and in those  states
its  operations   are  subject  to   supervision  by  state   authorities
(typically  state  banking or  consumer  credit  authorities).  Expansion
into  other  states  may  be  dependent   upon  a  finding  of  financial
responsibility,  character  and fitness of the Company and various  other
matters.   The  Company  is  generally  subject  to  state   regulations,
examination  and reporting  requirements,  and licenses are revocable for
cause.  The  Company is subject to state  usury laws in all of the states
in which it operates.

    The consumer  loans  purchased or financed by the Company are subject
to  the   Truth-in-Lending   Act.  The   Truth-in-Lending   Act  contains
disclosure  requirements  designed  to provide  consumers  with  uniform,
understandable  information  with respect to the terms and  conditions of
loans  and  credit  transactions  in order to give  them the  ability  to
compare  credit  terms.  Failure to comply with the  requirements  of the
Truth-in-Lending  Act may give rise to a limited  right of  rescission on
the part of the  borrower.  The  Company  believes  that its  purchase or
financing  activities  are in  substantial  compliance  in  all  material
respects with the Truth-in-Lending Act.

    Origination  of the loans  also  requires  compliance  with the Equal
Credit  Opportunity  Act of 1974, as amended  ("ECOA"),  which  prohibits
creditors from  discriminating  against  applicants on the basis of race,
color,  sex, age or marital status.  Regulation B promulgated  under ECOA
restricts  creditors  from obtaining  certain types of  information  from
loan  applicants.  It also  requires  certain  disclosures  by the lender
regarding  consumer rights and requires  lenders to advise  applicants of
the reasons for any credit  denial.  In instances  where the applicant is
denied  credit or the  interest  rate  charged  increases  as a result of
information  obtained from a consumer  credit  agency,  another  statute,
the Fair Credit  Reporting Act of 1970, as amended,  requires the lenders
to supply the applicant with a name and address of the reporting agency.

Competition

    The  finance  business  is  highly   competitive,   with  competition
occurring  primarily  on the basis of  customer  service and the term and
interest  rate  of the  loans.  Traditional  competitors  in the  finance
business include commercial banks,  credit unions,  thrift  institutions,
industrial  banks  and  other  finance  companies,  many  of  which  have
considerably  greater financial,  technical and marketing  resources than
the  Company.  There can be no  assurance  that the Company will not face
increased  competition  from  existing or new financial  institutions  or
finance  companies.  In  addition,  the  Company  may  enter new lines of
business that may be highly  competitive  and may have  competitors  with
greater financial resources than the Company.

    The  Company  believes  that it  competes  on the basis of  providing
competitive  rates and prompt,  efficient  and complete  service,  and by
emphasizing  customer  service  on a timely  basis to  attract  borrowers
whose needs are not met by traditional financial institutions.

Employees

    As of March  31,  1999,  the  Company  had 102  full-time  equivalent
employees.  None of the  Company's  employees  is covered by a collective
bargaining  agreement.  The  Company  considers  its  relations  with its
employees to be good.

Facilities

    The  Company  owns  a  leasehold  interest  in  approximately  26,000
square  feet of office  space in  Williamstown,  Massachusetts,  which is
used as the  Company's  headquarters.  The  initial  ten year  lease term
expires  in May 2007 and is  renewable  at the  Company's  option for two
additional  ten year  periods.  The initial  land lease  provides  for an
annual  rental of $20,000.  The Company  also  occupies an  aggregate  of
approximately  5,100 square feet of office  space in Lakewood,  Colorado,
pursuant  to a lease  expiring in January  2001,  with an option to renew
until 2004,  providing  for an annual  rental of  approximately  $56,000,
including utilities and exterior  maintenance  expenses.  A subsidiary of
the Company occupies an aggregate of  approximately  6,100 square feet of
office  space  in  Hoover,  Alabama,  pursuant  to a  lease  expiring  in
December 1999, providing for an annual rental of approximately $88,000.


Item 6.   Exhibits and Reports on Form 8-K

     The following exhibits are filed herewith:
               10.185     Amended and Restated Loan Agreement, dated as
                     of March 31, 1999, among the Company, LFC Realty,
                     Inc., and Bank of Scotland.

               10.186     Amended  No. 2 to Second  and  Restated  Security
                     Agreement  dated January 20, 1999 among  BankBoston,
                     N.A and the Company.

               10.187     Note  Purchase  Agreement  dated  as of
                     March  23,  1999, among   the   Company,    Litchfield
                     Hypothecation Corporation 1997-B and Union Bank.

               10.188     Limited  guarantee  dated as of March 1, 1999
                     between the Company and Union Bank.

               10.189     Note  Purchase  Agreement  dated  as of  March  23,
                     1999, among   the   Company,    Litchfield   Hypothecation
                     Corporation 1998-A and BSB Bank & Trust.

               10.190     Limited  guarantee  dated as of March 1, 1999  between
                     the Company and BSB Bank & Trust.

               10.191     Note  Purchase  Agreement  dated  as of  March  23,
                     1999, among   the   Company,    Litchfield   Hypothecation
                     Corporation 1998-B and Union Bank.

               10.192     Limited  guarantee  dated as of March 1, 1999 between
                     the Company and Union Bank.

               11.1       Statement re: computation of earnings per share

               27.1       Financial Data Schedule

     The  Company  did not file any  reports  on Form 8-K during the three
              months ended March 31, 1999.




                                                     Exhibit 10.185














                            SIGNATURES

Pursuant to the  requirements  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.


                                  LITCHFIELD FINANCIAL CORPORATION




DATE:  May 13, 1999               /s/ Richard A. Stratton
                                  ------------------------
                                  RICHARD A. STRATTON
                                  Chief Executive Officer,
                                  President and Director





DATE:  May 13, 1999               /s/ Ronald E. Rabidou
                                  ----------------------
                                  RONALD E. RABIDOU
                                  Chief Financial Officer,Executive
                                  Vice President and Treasurer
























                AMENDED AND RESTATED LOAN AGREEMENT


      AMENDED AND RESTATED LOAN AGREEMENT, dated as of March 31,
1999, among LITCHFIELD FINANCIAL CORPORATION, a Massachusetts
corporation ("LFC"), LFC REALTY, INC., a Delaware corporation
("Realty"), (LFC and Realty are each referred to herein as a
"Borrower, and collectively as "Borrowers") and BANK OF SCOTLAND
(the "Bank").

                        W I T N E S S E T H :

      WHEREAS, LFC and the Bank are parties to that certain Loan
Agreement, dated as of September 13, 1996, as amended (the
"Existing Agreement") pursuant to which the Bank established a
revolving credit facility in favor of LFC; and

      WHEREAS, the parties wish to amend and restate the Existing
Agreement and add Realty as a Borrower hereunder upon and subject
to the terms set forth herein.

      NOW, THEREFORE, it is agreed:

DEFINITIONS.
-----------

10.169.1   Terms used in this Agreement which are defined in
Annex I hereto shall have the meanings specified in such Annex I
(unless otherwise defined herein) and shall include in the
singular number the plural and in the plural number the singular.

10.169.2   Unless otherwise specified, each reference in this
Agreement or in any other Loan Document to a Loan Document shall
mean such Loan Document as the same may from time to time be
amended, restated, supplemented or otherwise modified.

10.169.3   All references to Sections in this Agreement or in
Annex I hereto shall be deemed references to Sections in this
Agreement unless otherwise specified.

THE LOAN FACILITIES.
--------------------

10.170     The  Loans.
           -----------

10.170.1   Subject to the terms and conditions set forth herein,
the Bank agrees at any time and from time to time during the
Commitment Period (but excluding the last day thereof) to make
loans to the Borrowers (each a "Tranche A Revolving Credit Loan"
and collectively, the "Tranche A Revolving Credit Loans") up to
its Tranche A Commitment, provided that, in no event shall the
aggregate principal amount of Tranche A Revolving Credit Loans
outstanding at any time exceed the lesser of (x) the Tranche A
Commitment then in effect and (y) the then current Tranche A
Borrowing Base.




10.170.2   Subject to the terms and conditions set forth herein,
the Bank agrees at any time and from time to time during the
Commitment Period (but excluding the last day thereof) to make
loans to the Borrowers (each a "Tranche B Revolving Credit Loan"
and collectively, the "Tranche B Revolving Credit Loans") up to
its Tranche B Commitment, provided that, in no event shall the
aggregate principal amount of Tranche B Revolving Credit Loans
outstanding at any time exceed the lesser of (x) the Tranche B
Commitment then in effect and (y) the then current Tranche B
Borrowing Base.


10.170.3   Subject to the terms and conditions set forth herein,
the Bank agrees at any time and from time to time during the
Commitment Period (but excluding the last day thereof) to make
loans to the Borrowers (each a "Tranche C Revolving Credit Loan"
and collectively, the "Tranche C Revolving Credit Loans") up to
its Tranche C Commitment, provided that, in no event shall the
aggregate principal amount of Tranche C Revolving Credit Loans
outstanding at any time exceed the lesser of (x) the Tranche C
Commitment then in effect and (y) the then current Tranche C
Borrowing Base.

10.170.4   Notwithstanding anything to the contrary contained in
this Agreement, in no event shall the aggregate principal amount
of all the Revolving Credit Loans outstanding at any time exceed
the Commitment.  During the Commitment Period, the Borrowers may
utilize the Commitment by borrowing, prepaying the Revolving
Credit Loans in whole or in part without premium or penalty, and
reborrowing, all in accordance with the terms and conditions
hereof.

10.170.5   No more than five (5) Eurodollar Loans may be
outstanding at any time.

10.170.6   Upon the terms and subject to the conditions of this
Agreement, the Borrowers may convert all or any part (in integral
multiples of $500,000) of any outstanding Tranche A Revolving
Credit Loan of one Type into a Tranche A Revolving Credit Loan of
another Type on any Business Day (which, in the case of a
conversion of an outstanding Eurodollar Loan shall be the last
day of the Interest Period applicable to such Eurodollar Loan).
LFC shall give the Bank prior notice of each such conversion in
accordance with Section 2.2.

10.171     Notice of Borrowing or Conversion
           ---------------------------------

10.171.1   Whenever the Borrowers desire to obtain a Revolving
Credit Loan hereunder, to continue an outstanding Tranche A
Revolving Credit Loan which is a Eurodollar Loan, or to convert
an outstanding Tranche A Revolving Credit Loan into a Tranche A
Revolving Credit Loan of another Type, LFC shall give irrevocable
written notice to the Bank (i) on or prior to 12:00 (noon) (New
York time) on the Business Day on which the requested Revolving
Credit Loan is to be made as or converted to a Base Rate Loan,
and (ii)  on or prior to 12:00 (noon) (New York time) on the
second Business Day before the day on which the requested Tranche
A Revolving Credit Loan is to be made or continued as or
converted to a Eurodollar Loan.   Such notice shall be in the
form attached hereto as Exhibit B and specify (A) the date of the
proposed borrowing, continuation, or conversion, which shall be a
Business Day during the Commitment Period (each, a "Borrowing
Date"), (B) the amount of the proposed borrowing, continuation, or
conversion ((I) each Eurodollar Loan shall be in a minimum amount
of $1,000,000, and if greater, in an integral multiples of
$500,000 in excess thereof, and (II) each Base Rate Loan shall be
in a minimum amount of $500,000 and, if greater, in an integral
multiple of $100,000 in excess thereof or, if less, equal to the
Unutilized Commitment applicable to such Class), (C) the Class of
such borrowing, and (D) the Type of borrowing and, if applicable,
the Interest Period applicable thereto.  If such written notice
fails to specify the Type of Revolving Credit Loan requested,
then the Borrowers shall be deemed to have requested a Base Rate
Loan.


10.171.2   Subject to the provisions of the definition of the term
"Interest Period" herein, the duration of each Interest Period
for a Eurodollar Loan shall be as specified in the applicable
Notice of Borrowing or Conversion.  If no Interest Period is
specified in a Notice of Borrowing or Conversion with respect to
a requested Eurodollar Loan, then the Borrowers shall be deemed
to have selected an Interest Period of one month's duration.  If
the Bank receives a Notice of Borrowing or Conversion after the
time specified in subsection (a) above, such Notice shall not be
effective.  If the Bank does not receive an effective Notice of
Borrowing or Conversion with respect to an outstanding Eurodollar
Loan, or if, when such Notice must be given prior to the end of
the Interest Period applicable to such outstanding Loan, the
Borrowers shall have failed to satisfy any of the conditions
hereof, the Borrowers shall be deemed to have elected to convert
such outstanding Loan in whole into a Base Rate Loan on the last
day of the then current Interest Period with respect thereto.

10.171.3   Subject to the terms and conditions hereof (including
without limitation Section 6 hereof), the Bank will make the
amount of any Loan available to the Borrowers in same day funds
at the Closing Office on the date properly specified in the
notice for the proposed borrowing against delivery to the Bank of
such instruments, documents and papers as are provided for
herein.

10.172     The Note
           --------

10.172.1   The Borrowers' obligation (which is a joint and several
obligation of each Borrower) to pay the principal of, and
interest on, the Revolving Credit Loans shall be evidenced by the
Revolving Credit Note.

10.172.2   (i) The Revolving Credit Note shall:  (A) be dated the
Closing Date; (B) be in an original principal amount equal to
$40,000,000; (C) be payable in an amount equal to the outstanding
principal amount of the Loans evidenced thereby on the last day
of the Commitment Period; (D) bear interest as provided in
Section 3; and (E) be entitled to the benefits of this Agreement
and shall be secured by the Security Documents.




10.172.3   The principal amount of all Loans outstanding from time
to time, and interest accrued thereon, shall be recorded on the
records of the Bank and, prior to any transfer of, or any action
to collect, any Revolving Credit Note, the unpaid principal
amount of the Loans evidenced by such Revolving Credit Note shall
be endorsed on the reverse side of such Revolving Credit Note,
together with the date of such endorsement and the date to which
the interest has been paid; any failure to make such endorsement
and provide such other information, however, shall not affect any
Borrower's obligations hereunder or under the Revolving Credit
Note.

10.172.4   Mandatory Prepayments of Revolving Credit Loans.
           ------------------------------------------------

10.172.5   The Borrowers shall immediately prepay the Revolving
Credit Loans to the extent that the aggregate outstanding
principal amount thereof on any day shall exceed the amount of
the Commitment in effect on such day.

10.172.6   The Borrowers shall immediately prepay each Class of
Revolving Credit Loan to the extent the aggregate outstanding
principal amount thereof on any day shall exceed the applicable
Class Commitment in effect on such day.

10.172.7   The Borrowers shall immediately prepay each Class of
Revolving Credit Loans to the extent that the aggregate
outstanding principal amount thereof on any day shall exceed the
applicable Class Borrowing Base on such day.

10.172.8   Subject to the terms and conditions of this Agreement,
amounts prepaid under subsection 2.4(c) of this Section 2.4 may
be reborrowed.

10.172.9   In the event Ironwood Acceptance Company, L.L.C., an
Arizona limited liability company ("Ironwood"), or any of its
successors or assignees, proposes to exercise its right under the
terms of that certain Administration Agreement, dated as of
October 7, 1998, by and among the Priority Trust, Wilmington
Trust Company, LFC and Ironwood (the "Administration Agreement"),
to purchase the beneficial interest in the Priority Trust, LFC
shall give to the Bank prompt written notice of such proposed
sale and in any event at least 15 Business Days prior to the
closing date for such sale, together with a pro forma Borrowing
Base Certificate as of the date of such proposed purchase.  Such
Borrowing Base Certificate shall not include in the calculation
of the Tranche A Borrowing Base any amounts attributable to the
Priority Trust Security Value.  In the event that as a result of
the sale of the beneficial interest in Priority Trust, the then
outstanding amount of any Class of Revolving Credit Loans will
exceed the applicable Class Borrowing Base at such time, then the
Borrowers shall, contemporaneously with such sale of the Priority
Trust, prepay such Class of Revolving Credit Loans in an amount
equal to such excess.  Without limiting the foregoing, in the
event that at the time of such proposed sale of the beneficial
interest in the Priority Trust there is a continuing Default
under this Agreement, at the written request of the Bank, the
Borrowers shall, contemporaneously with such sale of the Priority
Trust, use all of the proceeds of such sale to repay the then
outstanding Revolving Credit Loans.  Subject to the Borrowers'
compliance with the requirements set forth in the two proceeding
sentences, on the date of the consummation of the sale of the
Priority Trust in accordance with the terms hereof, the Bank
shall release its lien on the beneficial interest in the Priority
Trust and release to the Borrowers any certificate pledged to it
which represents any beneficial interest in the Priority Trust
together with any related documents reasonably requested by the
Borrowers.




10.172.10  to the extent there is no continuing Default, the
Borrowers may exercise their right to convert any of the VFNs to
another series of notes issued under the applicable indenture
pursuant to the terms of the applicable VFN Documents, provided
that the Borrowers shall give at least 10 Business Days  prior
written notice thereof to the Bank together with a pro forma
Borrowing Base Certificate as of the date of such conversion
which shall reflect the reduced VFN Security Value resulting from
such conversion.  In the event that as a result of such
conversion of a VFN, the then outstanding amount of any Class of
Revolving Credit Loans will exceed the applicable Class Borrowing
Base at such time, then the Borrowers shall, contemporaneously
with such conversion of such VFN, prepay such Class of Revolving
Credit Loans in an amount equal to such excess.  Without limiting
the foregoing, in the event that at the time of such proposed
conversion of any VFN there is a continuing Default under this
Agreement, at the written request of the Bank, the Borrowers
shall not convert such VFN.  Upon such prepayment (or upon such
conversion if no prepayment is necessary hereunder) the Bank
shall return to the Borrowers the VFN which is proposed to be
converted together with any related documents reasonably
requested by the Borrowers.  The Borrowers shall, to the extent a
new VFN is issued in replacement of the VFN being converted,
pledge and deliver the original of such replacement VFN to the
Bank immediately upon its receipt of the same.


10.172.11  On the Revolving Credit Maturity Date, the Borrowers
shall pay in full the unpaid principal balance of the Loans,
together with all unpaid interest thereon and all fees and other
amounts due with respect thereto.

10.173     Voluntary Repayment of Revolving Credit Loans.
           ----------------------------------------------
The Borrowers shall have the right, at any time and
from time to time, upon at least one Business Day's prior notice
to the Bank in writing or by telephone (confirmed as soon as
possible thereafter in writing) to prepay any Class of the
Revolving Credit Loans, in whole, or in part in amounts equal to
$500,000 or, if greater, integral multiples of $100,000 in excess
thereof, or, if less, the aggregate outstanding principal amount
of the applicable Class, and, subject to payment of any amounts
required under Section 3.5, without premium or penalty, provided
that at the time of any such prepayment of any Class of the
Revolving Credit Loans in full, the Borrowers shall pay all
interest accrued on the amount of such prepayment.  Subject to
the terms and conditions of this Agreement, amounts prepaid under
this Section 2.5 may be reborrowed.

10.174   Reduction of Commitments.
         ------------------------
The Borrowers shall have the right at any time and
from time to time upon at least 3 Business Days' prior written
notice to the Bank to reduce permanently in amounts equal to
$1,000,000 or integral multiples thereof or terminate the
Unutilized Commitment of any Class (after giving effect to all
pending requests for Revolving Credit Loans).




10.175   Borrowers' Representative.
         --------------------------
Realty hereby appoints LFC as its agent with respect
to the receiving and giving of any notices, requests,
instructions, reports, schedules, revisions, financial statements
or any other written or oral communications hereunder.  LFC shall
keep complete, correct and accurate records of all Revolving
Credit Loans and the application of proceeds thereof and all
payments in respect of the Revolving Credit Loans and other
amounts due hereunder.  LFC shall determine the allocation of
proceeds of Revolving Credit Loans among the Borrowers.  The Bank
is hereby entitled to rely on any communication given or
transmitted by LFC as if such communication were given or
transmitted by each and every Borrower; provided however, that
any communication given or transmitted by any Borrower other than
LFC shall be binding with respect to such Borrower.  Any
communication given or transmitted by Bank to LFC shall be deemed
given and transmitted to each and every Borrower.
Notwithstanding the foregoing, all Obligations of the Borrowers
hereunder shall be joint and several.


INTEREST.
---------

10.176     Rate of Interest
           ----------------
10.176.1   Each Borrower agrees, on a joint and several basis, to
pay interest in respect of the unpaid principal amount of (i)
each Tranche A Revolving Credit Loan which is a Base Rate Loan,
(ii) each Tranche B Revolving Credit Loan, and (iii) each Tranche
C Revolving Credit Loan from time to time outstanding until
maturity (whether by acceleration or otherwise), at a rate per
annum equal (subject to the provisions of Section 3.3) to the
Base Rate, which interest rate shall automatically change as and
when the Base Rate changes.

10.176.2   Each Borrower agrees, on a joint and several basis, to
pay interest with respect to unpaid principal amount of each
Tranche A Revolving Credit Loan which is a Eurodollar Loan, for
each Interest Period applicable thereto, at a rate per annum
equal (subject to provisions of Section 3.3) to the Eurodollar
Rate plus 2.625%.

10.177     Interest Payment Dates
           ----------------------
10.177.1   Accrued interest in respect of each Base Rate Loan,
prior to maturity, shall be payable in arrears on each Quarterly
Payment Date, on the date of each prepayment, at maturity
(whether by acceleration or otherwise) and, after maturity, upon
demand.

10.177.2   Accrued interest in respect of each Eurodollar Loan,
prior to maturity, shall be payable in arrears, on the last day
of the Interest Period applicable to such Eurodollar Loan, and if
such Interest Period is longer than three months, at intervals of
three months after the first day thereof.  Accrued interest in
respect of each Eurodollar Loan, at maturity (whether by
acceleration or otherwise) and, after maturity, shall be payable
upon demand.

10.178     Overdue Payment of Principal and Interest.
           ------------------------------------------
Each Loan and each other amount due under this
Agreement or any other Loan Document shall bear interest for each
day on which an Event of Default exists under Section 9.1 or
Section 9.7 hereof (after as well as before judgment or
commencement of any bankruptcy or insolvency proceedings),
payable on demand, at a rate per annum (the "Past-Due Rate")
equal to the sum of (x) the rate of interest otherwise payable on
such date, plus (y) 2% per annum.


10.179    Capital Adequacy.
          -----------------
 If the Bank shall have determined that the
applicability after the date hereof of any law, rule, regulation
or guideline adopted pursuant to or arising out of the July 1988
report of the Basle Committee on Banking Regulations and
Supervisory Practices entitled "International Convergence of
Capital Measurement and Capital Standards", or the adoption after
the date hereof of any other law, rule, regulation or guideline
regarding capital adequacy, or any change in any of the foregoing
or in the enforcement or interpretation or administration of any
of the foregoing by any court, Government Authority, central bank
or comparable agency charged with the enforcement or
interpretation or administration thereof, or compliance by the
Bank (or any lending office of the Bank) or any holding company
of the Bank with any request or directive regarding capital
adequacy (whether or not having the force of law) of any such
authority, central bank or comparable agency, has or would have
the effect of reducing the rate of return on the Bank's capital
or on the capital of the Bank's holding company, if any, as a
consequence of its Loans, Commitments or other obligations
hereunder to a level below that which the Bank or the Bank's
holding company could have achieved but for such applicability,
adoption, change or compliance (taking into consideration the
Bank's policies and the policies of the Bank's holding company
with respect to capital adequacy) by an amount deemed by the Bank
to be material, then, upon demand by the Bank, the Borrowers
shall pay to the Bank from time to time such additional amount or
amounts as will compensate the Bank or the Bank's holding company
for any such reduction suffered, together with interest on each
such amount from the date demanded until payment in full thereof
(after as well as before judgment) at the Base Rate.  A
certificate of the Bank to the Borrowers as to any such
additional amount or amounts (including calculations thereof in
reasonable detail) shall be submitted by the Bank to the
Borrowers, which certificate, in the absence of manifest error,
shall be conclusive and binding on the Borrowers.  In determining
such amount or amounts, the Bank may use any method of averaging
and attribution as it (in its sole and absolute discretion) shall
deem applicable.


10.180    Eurodollar Indemnity.
          --------------------
 If the Borrowers for any reason (including, without
limitation, pursuant to Sections 2.4, 5.1 and 9 hereof) make any
payment of principal with respect to any Eurodollar Loan on any
day other than the last day of an Interest Period applicable to
such Eurodollar Loan, or fail to borrow or continue or convert to
a Eurodollar Loan after giving a Notice of Borrowing or
Conversion thereof pursuant to Section 2.2, or fail to prepay a
Eurodollar Loan after having given notice thereof, the Borrowers
shall pay to the Bank any amount required to compensate the Bank
for any additional losses, costs or expenses which it may
reasonably incur as a result of such payment or failure,
including, without limitation, any loss (including loss of
anticipated profits), costs or expense incurred by reason of the
liquidation or re-employment of deposits or other funds required
by the Bank to fund or maintain such Eurodollar Loan.  The
Borrowers shall pay such amount upon presentation by the Bank of
a statement setting forth the amount and the Bank's calculation
thereof pursuant hereto, which statement shall be deemed true and
correct absent manifest error.

10.181    Changed Circumstances, Illegality.
          ----------------------------------
Notwithstanding any other provision of this
Agreement, in the event that:

10.181.1   on any date on which the Eurodollar Rate would
otherwise be set the Bank shall have determined in good faith
(which determination shall be final and conclusive) that adequate
and fair means do not exist for ascertaining the Eurodollar Rate,
or

10.181.2   at any time the Bank shall have determined in good
faith (which determination shall be final and conclusive) that:

10.181.2.1 the making or continuation of or
conversion of any Loan to a Eurodollar Loan
has been made impracticable or unlawful by
(1) the occurrence of a contingency that
materially and adversely affects the
interbank Eurodollar market or (2) compliance
by the Bank in good faith with any applicable
law or governmental regulation, guideline or
order or interpretation or change thereof by
any governmental authority charged with the
interpretation or administration thereof or
with any request or directive of any such
governmental authority (whether or not having
the force of law); or

10.181.2.2 the Eurodollar Rate shall no longer
represent the effective cost to the Bank for
U.S. dollar deposits in the interbank market
for deposits in which it regularly
participates;

           then, and in any such event, the Bank shall forthwith
so notify LFC thereof.  Until the Bank notifies LFC that the
circumstances giving rise to such notice no longer apply, the
obligation of the Bank to allow selection by the Borrowers of
Eurodollar Loans shall be suspended.  If, at the time the Bank so
notifies LFC, the Borrowers have previously given the Bank a
Notice of Borrowing or Conversion with respect to one or more
Eurodollar  Loans but such Loans have not yet gone into effect,
such notification shall be deemed to be a request for Base Rate
Loans.

10.181.3   In the event of a determination of illegality pursuant
to subsection 3.6(b)(i) above, the Borrowers shall, with respect
to the outstanding Eurodollar Loans, prepay the same, together
with interest thereon and any amounts required to be paid
pursuant to Section 3.5, on such date as shall be specified in
such notice (which shall not be earlier than the date such notice
is given) and may, subject to the conditions of this Agreement,
borrow a Base Rate Loan in accordance with Section 2.1 hereof by
giving a Notice of Borrowing or Conversion pursuant to Section
2.2 hereof.

10.182    Increased Costs.
          ---------------
In case any change in law, regulation, treaty or
official directive or the interpretation or application thereof
by any court or by any governmental authority charged with the
administration thereof or the compliance with any guideline or
request of any central bank or other governmental authority
(whether or not having the force of law):
10.183     subjects the Bank to any tax with respect to payments
of principal or interest or any other amounts payable hereunder
by the Borrowers or otherwise with respect to the transactions
contemplated hereby (except for taxes on the overall net income
of the Bank  imposed by the United States of America or any
foreign country, any political subdivision thereof or any other
governmental authority), or

10.183.1   imposes, modifies or deems applicable any deposit
insurance, reserve, special deposit or similar requirement
against assets held by, or deposits in or for the account of, or
loans by, the Bank (other than such requirements as are already
included in the determination of the Eurodollar Rate), or

10.183.2   imposes upon the Bank any other condition with respect
to its obligations or performance under this Agreement,

           and the result of any of the foregoing is to increase
the cost to the Bank, reduce the income receivable by the Bank or
impose any expense upon the Bank with respect to any Loans or its
obligations under this Agreement, the Bank shall notify LFC
thereof.  The Borrowers agree, on a joint and several basis, to
pay to the Bank the amount of such increase in cost, reduction in
income or additional expense as and when such cost, reduction or
expense is incurred or determined, upon presentation by the Bank
of a statement in the amount and setting forth in reasonable
detail the Bank's calculation thereof and the assumptions upon
which such calculation was based, which statement shall be deemed
true and correct absent manifest error.

FEES.
----
10.184    Facility Fee.
          -------------
The Borrowers agree, on a joint and several basis,
to pay to the Bank a facility fee with respect to this Agreement
for the period commencing on the Closing Date to and including
the Revolving Credit Maturity Date, computed at a rate per annum
equal to 0.375% of the Commitment (as the same may be reduced
from time to time hereunder) during the period for which payment
is made.  Such facility fee shall be payable quarterly in arrears
on each Quarterly Payment Date commencing on the last day of the
quarter ending March 31, 1999, on each date that the Commitment
is reduced or terminated, and on the Revolving Credit Maturity
Date.

10.185    Arrangement Fee.
          ----------------
The Borrowers agree, on a joint and several basis,
to pay to the Bank, on or prior to the Closing Date, an
arrangement fee of $37,500 the prior receipt of which the Bank
hereby acknowledges.

10.186    PAYMENTS, ETC
Subject to the limitations set forth in the
definition of the term "Interest Period", whenever any payment to
be made hereunder or under the Note shall be stated to be due on
a day which is not a Business Day, the due date thereof shall be
extended to the next succeeding Business Day and interest shall
be payable at the applicable rate during such extension.
Interest on Base Rate Loans and the facility fee hereunder and
under the other Loan Documents shall be calculated on the basis
of actual number of days elapsed in a year of  365 days.
Interest on Eurodollar Loans shall be calculated on the basis  of
actual number of days elapsed in a year of 360 days.  If for any
reason a Loan is repaid on the same day on which it is made, one
day's interest (subject to the other provisions of this
Agreement) shall be paid on that Loan.  The Borrowers hereby
authorize and direct the Bank to charge any account of any
Borrower maintained at any office of the Bank with the amount of
any principal, interest or fee when the same becomes due and
payable under the terms hereof or of the Note; provided, however,
that the Bank shall not be under any obligation to charge any
such account.

10.187    Net Payments; Application.
          --------------------------

10.187.1  All payments hereunder and under the other Loan
Documents shall be made by the Borrowers to the Bank in freely
transferable U.S. dollars and in same day funds at the Closing
Office without setoff or counterclaim and in such amounts as may
be necessary in order that all such payments (after (i)
withholding for or on account of any present or future taxes,
levies, imposts, duties or other similar charges of whatsoever
nature imposed on the amounts described above by any government
or political subdivision or taxing authority thereof or therein,
other than any tax (other than such taxes referred to in clause
(ii) below) imposed on the Bank pursuant to the income tax laws
of the jurisdiction where the Bank's principal or lending office
or offices are located, and (ii) deduction of an amount equal to
any taxes on or measured by the net income payable to the Bank
with respect to the amount by which the payments required to be
made by this Section 5.2 exceed the amount otherwise specified to
be paid under this Agreement and the Note) shall not be less than
the amounts otherwise specified to be paid under this Agreement
and the Note. With respect to each such deduction or
withholding, the Borrowers shall promptly (and in no event later
than 30 days thereafter) furnish to the Bank such certificates,
receipts and other documents as may be required to establish any
tax credit, exemption or reduction in rate to which the Bank or
holder of the Note may be entitled. The Bank agrees to furnish
to the Borrowers, as soon as practicable after any written
request of the Borrowers to such effect, any executed form
reasonably requested by the Borrowers such as Internal Revenue
Service Form 4224 or 1001, and any other applicable form as to
the Bank's entitlement, if any, to exemption from, or a reduced
rate of, or its subjection to, United States withholding tax on
amounts payable to it hereunder or under the Note and the Bank
undertakes to use its best efforts promptly to notify LFC of any
material change in any information, statement or form so
furnished to the Borrowers; provided, however, that any failure
on the part of the Bank to furnish any such information,
statements or forms shall in no way affect the obligations of the
Borrowers or the rights of the Bank under the terms of this
Agreement or of the Note.

10.187.2  Unless otherwise specifically provided herein, all
payments under or pursuant to, or in satisfaction of, any of the
Borrowers' obligations under this Agreement or under the Note
(including any received in connection with the foreclosure upon
or other realization on any Collateral) will be applied in the
following order of priority:  (i) to any amounts not otherwise
listed in this Section 5.2(b) then due and payable under this
Agreement, the Note or the Security Documents, including, without
limitation, any amounts due under Section 12.3, (ii) to any fees
then due and payable pursuant to Section 4.1 or 4.2 of this
Agreement (in such order as the Bank may elect), (iii) to any
interest on the Note then due and payable (in such order with
respect to Class as the Bank may elect), (iv) to any principal
amount of the Revolving Credit Loans then due (in such order with
respect to Class as the Bank may elect), and (v) to reduce the
unpaid principal amount of the Revolving Credit Loans (in such
order with respect to Class as the Bank may elect).

           CONDITIONS PRECEDENT TO INITIAL LOAN.
           -------------------------------------

           The Bank shall not be obligated to make the initial
Revolving Credit Loan hereunder unless on the date of such
Revolving Credit Loan (unless otherwise specifically indicated)
the following conditions have been fulfilled to the satisfaction
of the Bank or waived:

10.188    Default, etc.
          -------------
On the date of such Revolving Credit Loan (and after
giving effect to all Revolving Credit Loans requested to be made
on such date), there shall exist no Default or Event of Default
and all representations and warranties made by the Borrowers
herein or in the other Loan Documents or otherwise made by the
Borrowers in writing in connection herewith or therewith shall be
true and correct in all material respects with the same effect as
though such representations and warranties have been made at and
as of such time.

10.189    Note.
          -----
On the date of such Loan, the Bank shall have
received the Revolving Credit Note, duly executed and completed
by the Borrowers.

10.190    [Intentionally deleted]

10.191    Supporting Documents of the Borrowers.
          --------------------------------------
There shall have been delivered to the Bank, such
information and copies of documents, approvals (if any) and
records (certified where appropriate) of corporate and legal
proceedings as the Bank may have reasonably requested relating to
the Borrowers' entering into and performance of the Loan
Documents or the transactions contemplated by this Agreement.
Such documents shall, in any event, include:

10.191.1   to the extent requested by the Bank, certified copies
of the Charter Documents of each of the Borrowers, LTSC, LMSC,
LHCs, the Priority Trust and LCC;

10.191.2   certificates of authorized officers of each of the
Borrowers, certifying the corporate resolutions of such Borrower
relating to the entering into and performance of the Loan
Documents by such Borrower and the transactions contemplated
thereby;

10.191.3   certificates of authorized officers of each of the
Borrowers, with respect to the incumbency and specimen signatures
of its officers or representatives authorized to execute such
documents and any other documents and papers, and to take any
other action, in connection therewith; and

10.191.4   a certificate of an authorized officer of each of the
Borrowers certifying with respect to such Borrower, as of the
Closing Date, compliance with the conditions of Section 6.1,
6.10, 6.12(b) and 6.18 and also the absence of any material
adverse changes of the type referred to in Section 6.8.

10.191.5  Security Documents.
          -------------------
There shall have been delivered to the Bank:

10.191.6  An Amended and Restated  Security Agreement executed by
the Borrowers, substantially in the form of Exhibit C hereto (as
further amended, supplemented or otherwise modified from time to
time, the "Security Agreement"), covering all of the Borrowing
Base Collateral.

10.191.7  An  Amended and Restated Pledge Agreement executed by
the Borrowers, substantially in the form of Exhibit D hereto (as
the same may from time to time be amended, restated, supplemented
or otherwise modified, the "Pledge Agreement") covering (i) the
Subordinated Interest Certificate, (ii) the certificate
representing 100% of the beneficial interest in the Priority
Trust, (iii) the VFNs, and (iv) the Class B Certificates;
together with undated powers of transfer, duly executed in blank
by the Borrowers;

10.191.8   Two Amended and Restated Collateral Assignment of
Membership Interests, each substantially in the form of Exhibit E
hereto (as the same may from time to time be amended, restated,
supplemented or otherwise modified, the "Membership Assignment"),
executed by the Borrowers, covering 100% of the membership
interest in LMSC and LCC, respectively;

10.191.9   One or more control agreements with banks or other
financial institutions relating to deposit accounts containing
proceeds of the Collateral, as the Bank may request.

10.191.10  Copies of such consents of third parties as are
required or as the Bank may reasonably request, including,
without limitation, with respect to the conveyance to any of the
Borrowers of (i) the Uncertificated Residual Rights, and (ii) the
Subordinated Interest Certificate, and evidence of such
conveyance.

10.192    UCC.
          ----
The Borrowers shall have delivered to the Bank
evidence satisfactory to the Bank of all filings of financing
statements under the applicable Uniform Commercial Code,
satisfactory Lien search requests on Form UCC-11 confirming the
absence of any Liens (except those in favor of or consented to by
the Bank) on any Collateral and evidence satisfactory to the Bank
of all other action with respect to the Liens created by the
Security Documents necessary or appropriate to perfect such Liens.

10.193

10.194     Financial Statements.
           ---------------------

10.194.1   LFC shall have delivered to the Bank a copy of its
consolidated audited financial statements for the year ending
December 31, 1997, and a copy of its quarterly report on Form
10-Q for the fiscal quarter ended September 30, 1998, in each
case, satisfactory in form and substance to the Bank and, with
respect to the quarterly report on Form 10-Q, certified by the
CFO of each of the Borrowers as having been prepared in
accordance with GAAP, consistently applied and as fairly
presenting the financial condition and results of operation as at
the dates and for the periods indicated.The computations of the
ratios required by Sections 8.18-8.22 for the most recent
applicable period shall have been delivered to the Bank,
certified by each Borrower's chief financial officer.

10.195    Adverse Change.
          ---------------
There shall have been, in the Bank's opinion, no
Material Adverse Change since December 31, 1997 with respect to
the Consolidated Group taken as a whole or with respect to any of
the Borrowers, any LHC, the Priority Trust, LMSC, LTSC or LCC.

10.196    Insurance.
          ----------
There shall have been delivered to the Bank a
certificate of an authorized officer of LFC that all insurance
policies referred to in Section 7.4 are in full force and effect
and that all premiums required to be paid thereon have been paid
in full.

10.197    Approvals and Consents.
          -----------------------
All orders, permissions, consents, approvals,
licenses, authorizations and validations of, and filings,
recordings and registrations with, and exemptions by, any
Government Authority, or any other Person, required to authorize
or required in connection with the execution, delivery and
performance of this Agreement or the other Loan Documents and the
transactions contemplated hereby and thereby by the Borrowers,
each LHC, the Priority Trust, LMSC, LTSC and LCC shall have been
obtained (and, if so requested, furnished to the Bank).

10.198    Legal Opinions.
          --------------
The Bank shall have received legal opinions in form
and substance satisfactory to it, addressed to the Bank and dated
the Closing Date, of the General Counsel of LFC.

10.199    Change in Law.
          --------------

10.199.1   On the date of such Loan, no change shall have occurred
in applicable law, or in applicable regulations thereunder or in
interpretations thereof by any Government Authority which, in the
opinion of the Bank, would make it illegal for the Bank to effect
the Loan required to be made on such date.

10.199.2   No suit, action or proceeding shall be pending or
threatened by or before any Government Authority seeking to
restrain or prohibit the consummation of the transactions
contemplated by this Agreement.

10.200    All Proceedings to be Satisfactory.
          -----------------------------------
All corporate, partnership (if any), business trust
and legal proceedings and all instruments in connection with the
transactions contemplated by this Agreement and the other
documents referred to herein shall be satisfactory in form and
substance to the Bank, and the Bank shall have received all
information and copies of all documents which the Bank may
reasonably have requested in connection herewith, such documents
where appropriate to be certified by proper corporate officials
or governme.  The legal fees and expenses (through the Closing
Date) of the Bank's special counsel in connection with the
transactions contemplated by this Agreement shall (to the extent
demand for payment thereof shall have been made) have been paid
in full.

10.201    Other Agreements.
          -----------------
The Borrowers shall have delivered to the Bank
copies and, if required hereunder, originals of the Borrowing
Base Collateral Documents and such agreements and instruments
ancillary thereto as the Bank may request, certified by the
Borrowers as true, correct, complete and in full force and
effect.  Notwithstanding the foregoing, with respect to the
Required Consumer Loan Documents, upon the written request of the
Bank, the Borrowers shall have segregated, marked (to indicate
the lien of the Bank thereon) and stored in a place designated by
the Bank, a portion of or all of the Required Consumer Loan
Documents, provided that, upon the written request of the Bank,
all such segregated, marked or stored Required Consumer Loan
Documents shall forthwith be delivered to the Bank.


10.202    Borrowing Base.
          ---------------
The Bank shall have received a Borrowing Base
Certificate, dated the date of the Loans, together with such
supplemental or supporting documentation as the Bank may
reasonably request.

10.203    Borrowing Base Collateral.
          --------------------------
The terms of the Borrowing Base Collateral shall be
satisfactory to the Bank.

10.204    Troubled Loan Certificate.
          -------------------------
The Bank shall have received a Troubled Loan
Certificate as of February 28, 1999 evidencing compliance with
Section 8.21.

10.205    Extraordinary Assets.
          ---------------------
The Bank shall have received an Extraordinary Asset
Certificate as of February 28, 1999 evidencing compliance with
Section 8.22.

10.206    Transfer of Class B Certificate.
          --------------------------------
The Borrowers shall have delivered to the Bank
evidence satisfactory to the Bank of the irrevocable and
unconditional sale to LFC by LTSC of the Class B Certificate in
consideration of an unsecured promissory note not in excess of
$10,557,005.19, which promissory note shall be absolutely and
fully subordinated to the Obligations and shall be satisfactory
to the Bank in all respects.

           All documents and papers required by this Section 6
shall be in form and substance satisfactory to the Bank and
delivered to the Bank at its Closing Office or as the Bank may
otherwise direct.

           Section 6A.    CONDITIONS PRECEDENT TO SUBSEQUENT LOANS
                          ----------------------------------------

           The Bank shall not be obligated to make any Loan after
the Closing Date unless, at the time of such Loan (except as
hereinafter indicated) the following conditions (unless waived in
writing by the Bank) have been satisfied:

6A.1 Certain Conditions.
     ------------------

At the time of such Loan, and immediately after
giving effect thereto, (a) all deficiencies, if any, with respect
to conditions precedent to any prior Loan or to the effectiveness
of this Agreement shall have been corrected, (b) all of the
conditions specified in Sections 6.1, 6.12, 6.13, 6.14, 6.15,
6.16 and 6.17 shall be satisfied in full (with any reference in
any of such Sections to Loans effected on the Closing Date to be
deemed a reference to the Loans then requested),  (c) each of the
documents specified in Section 6.2, 6.4, 6.5, 6.6, 6.9, 6.10 or
6.20 of this Agreement shall be in full force and effect and no
party thereto shall have failed to perform in any material
respect any of its obligations thereunder, (d) no issuer thereof
shall have rescinded or qualified any of the statements,
certificates, letters, reports or opinions referred to in Section
6 hereof, and (e) there shall have been, in the Bank's opinion,
no Material Adverse Change since the Closing Date in respect of
the Consolidated Group or the Borrowers, any LHC, the Priority
Trust, LMSC, LTSC or LCC.

6A.2 Subsequent Opinions of Counsel.
     -------------------------------

If reasonably requested by the Bank, the Bank shall
have received from counsel referred to in Section 6.11 or other
counsel satisfactory to the Bank such favorable supplemental
legal opinions addressed to the Bank and dated the date of such
Loan and covering such matters incidental to the transactions
contemplated by this Agreement as the Bank in its reasonable
judgment believes required to confirm, as of such Borrowing Date
(and after giving effect to the events occurring, and the passing
of time since, the Closing Date), any opinions given on the
Closing Date, each of which opinions shall be in form and
substance satisfactory to the Bank.


6A.3 Officer's Certificate.
     ----------------------
           a) If requested by the Bank, the Bank shall have
received a certificate of authorized officers of each of the
Borrowers certifying, as of the date of the Loan then being
requested, compliance with the provisions of Section 6.1 (with
the reference therein to Loans being deemed a reference to the
Loans then being requested on the date of said certificate) and
further to the effect that the conditions specified in Section
6A.1 are satisfied at such time.

          (b)    The making of each Loan subsequent to the
Closing Date shall constitute a representation and warranty by
each of the Borrowers to the Bank that, at the time of said
subsequent Loan (and after giving effect thereto), (i) all
representations and warranties contained herein or in the other
Loan Documents or otherwise made by the Borrowers in connection
herewith or therewith are true and correct in all material
respects with the same effect as though such representations and
warranties were being made at and as of such time; provided,
however, to the extent any assets of LFC have been transferred to
Realty in accordance with Section 8.9 hereof and the Security
Documents, all representations and warranties of the Borrowers
shall be interpreted to reflect such change in ownership, (ii) no
Default or Event of Default exists, and (iii) the conditions
specified in Section 6A.1 are satisfied at such time.

6A.4 Borrowing Base
     --------------

On the date of such Loan (and after giving effect
thereto), the Bank shall have received the Borrowing Base
Certificate dated the date of such Loan, together with such
supplemental and supporting documentation as the Bank may
reasonably request.

6A.5 Fees and  Expenses.
     -------------------
To the extent demand therefor shall have been made,
all legal fees and expenses of the Bank's special counsel in
connection with the transactions contemplated by this Agreement
shall have been paid in full.All of the documents, agreements,
certificates, financial statements, legal opinions, analyses,
reports and other papers referred to in this Section 6A shall be
in form and substance satisfactory to the Bank and shall be
delivered to the Bank at its Closing Office, or at such other
office as the Bank may from time to time specify to the Borrowers.


           AFFIRMATIVE COVENANTS.
           ----------------------

           Each of the Borrowers covenants and agrees hereby that,
so long as this Agreement is in effect and until the Commitment
is terminated and all of the Loans, together with interest,
commissions, fees and all other obligations incurred hereunder
are paid in full, it will perform, and will cause each of its
Subsidiaries to perform, the obligations set forth in this
Section 7.

10.207    Financial Statements.
          ---------------------

The Borrowers will furnish to the Bank:

10.207.1   As soon as practicable and in any event within 45 days
after the close of each quarter of each Fiscal Year, as at the
end of and for the period commencing at the end of the previous
Fiscal Year and ending with the end of such quarter, as the case
may be, an unaudited consolidated balance sheet of the
Consolidated Group and a consolidated statement of income and
change in retained earnings of the Consolidated Group, together
with a quarterly cash flow statement, such statements to be
accompanied by separate balance sheets and income statements for
each of Realty,  each LHC, the Priority Trust, LMSC, LTSC and
LCC, all in reasonable detail and certified by the CFO subject to
normal year-end audit and adjustments and setting forth in
comparative form the corresponding figures as of one year prior
thereto or for the appropriate periods of the preceding fiscal
year, as the case may be (which balance sheet and statements may,
if the Borrower wishes, be provided on quarterly reporting Form
10-Q), each such delivery of financial statements to be
accompanied by a certificate signed by the CFO of LFC, in form
and substance satisfactory to the Bank, setting forth
calculations (together with appropriate supporting information)
with respect to compliance with each of Sections 8.18-8.22;
10.207.2   As soon as practicable and in any event within ninety
(90) days after the close of each Fiscal Year, as at the end of
and for the Fiscal Year just closed, a consolidated balance sheet
of the Consolidated Group, and a consolidated statement of income
and retained earnings of the Consolidated Group for such Fiscal
Year, setting forth the corresponding figures of the previous
annual audit  in comparative form, all in reasonable detail and
accompanied by the Auditors' opinion (without any qualification
unacceptable to the Bank) that such financial statements have
been prepared in accordance with GAAP consistently applied and
fairly present the financial condition and results of operations
of the Consolidated Group at Fiscal Year-End and for the Fiscal
Year indicated, such financial statements to be accompanied by
separate balance sheets and income statements for each of Realty,
each LHC, the Priority Trust, LMSC, LTSC and LCC, and further
accompanied by a certificate of the CFO or CEO of LFC that no
Event of Default or Default exists or, if in the opinion of such
CFOs or CEOs, any Event of Default or Default exists, specifying
the nature thereof, the period of existence thereof, and what
action the Borrowers propose to take with respect thereto and
further accompanied by a certificate of the CFO of LFC, in form
and substance satisfactory to the Bank, setting forth the
calculations (together with appropriate supporting information)
with respect to compliance with each of Sections 8.18-8.22;

10.207.3   As soon as practicable and in any event within 25 days
after the end of each month, a certificate in form and substance
satisfactory to the Bank signed by the CEO or the CFO of LFC
stating (i) that a review of the activities of the Consolidated
Group during such month has been made under their supervision
with a view to determining whether the Borrowers have observed,
performed and fulfilled all of its obligations under this
Agreement and the other Loan Documents, and (ii) that there
exists no Event of Default or Default, or if any Event of Default
or Default exists, specifying the nature thereof, the period of
existence thereof and what action the Borrowers propose to take
with respect thereto;

10.207.4   Promptly upon receipt thereof, copies of all detailed
financial reports and management letters, if any, submitted to
any member of the Consolidated Group by the Auditors, in
connection with each annual or interim audit of their respective
books by such Auditors;

10.207.5   As soon as possible and in any event (A) within 30 days
after any Borrower or any of its ERISA Affiliates knows that any
Termination Event described in clause (i) of the definition of
Termination Event with respect to any Pension Plan has occurred
or is expected to occur and (B) within 10 days after any Borrower
or any of its ERISA Affiliates knows that any other Termination
Event with respect to any Pension Plan has occurred or is
expected to occur, a statement of the CFO of LFC describing such
Termination Event and the action, if any, which the Borrowers or
such ERISA Affiliate propose to take with respect thereto;

10.207.6   Promptly and in any event within five Business Days
after receipt thereof by any Borrower or any of its ERISA
Affiliates from the PBGC, copies of each notice received by such
Borrower or any such ERISA Affiliate of the PBGC's intention to
terminate any Pension Plan or to have a trustee appointed to
administer any Pension Plan, any notice of noncompliance issued
by the PBGC with respect to a proposed standard termination of a
Pension Plan, and any notice issued by the PBGC with respect to a
proposed distress termination of a Pension Plan;

10.207.7   Promptly and in any event within 30 days after the
filing thereof with the Internal Revenue Service, copies of each
Schedule B (Actuarial Information) to the annual report (Form
5500 Series) with respect to each Pension Plan;

10.207.8   Promptly and in any event within five Business Days
after receipt thereof by any Borrower or any of its ERISA
Affiliates from a Multiemployer Plan sponsor, a copy of each
notice received by such Borrower or any of its ERISA Affiliates
concerning (x) the imposition or amount of withdrawal liability
under Subtitle E of Title IV of ERISA or (y) any determination by
a Multiemployer Plan sponsor that such Multiemployer Plan is, or
is expected to be, in "reorganization" (within the meaning of
Section 4241 of ERISA) or "insolvent" (within the meaning of
Section 4245 of ERISA), or has incurred or is expected to incur
an "accumulated funding deficiency" (within the meaning of
Section 302 of ERISA or Section 412 of the Code);

10.207.9   Copies of each material notice, including notice of
default, early amortization event or non-compliance or similar
events, received by any Borrower or any of its Subsidiaries
relating to any VFN, the Uncertificated Residual Rights, the
Class B Certificates, the EagleFunding Residual Rights, the
Primary Assignment Assets, the financing facilities related to
such Borrowing Base Collateral, or the Borrowing Base Collateral
Documents (other than any notice relating to defaults under the
Required Consumer Loan Documents which occur in the ordinary
course of business and are not material to the value of Eligible
Consumer Loans in the aggregate); and

10.207.10  with reasonable promptness, such other information
respecting the business, properties, operations, prospects or
condition (financial or otherwise) of the Consolidated Group or
any member thereof, or relating to any Collateral, as the Bank
may from time to time reasonably request.

10.208    Notice of Litigation
          ---------------------

LFC will promptly give written notice to the Bank of
(i) any action or proceeding or, to the extent either Borrower
may have any notice thereof, any claim which may reasonably be
expected to be commenced or asserted against any Borrower or any
Subsidiary, in which the amount involved is $150,000 or more, or
(ii) any dispute which may exist between any Borrower or any
Subsidiary and any Government Authority (including, without
limitation, any audit by the IRS) or (iii) any dispute which may
exist between any Borrower or any Subsidiary and any employees of
such Borrower or such Subsidiary or any union representing,
claiming to represent or seeking to represent any such employees,
which dispute may substantially affect the normal business
operations of the Consolidated Group or any member thereof, or
any of their respective properties and assets.  The Borrowers
will give written notice to the Bank of the following promptly
after obtaining knowledge thereof: (i) any action, proceeding or
claim commenced or asserted, or reasonably likely to be commenced
or asserted, against Ironwood; (ii) any dispute which may exist
between Ironwood or any Government Authority (including, without
limitation, any audit by the IRS); or (iii) any dispute which may
substantially affect the normal business operations or expected
services to be provided by Ironwood.

10.209    Payment of Charges

Each of the Borrowers will duly pay and discharge,
and will cause each of its Subsidiaries to duly pay and discharge
(i) all taxes, assessments and governmental charges or levies
imposed upon or against it or its property or assets, or upon any
property leased by it, prior to the date on which penalties
attach thereto, unless and to the extent only that such taxes,
assessments and governmental charges or levies are being
contested in good faith and by appropriate proceedings diligently
conducted and such Borrower or such Subsidiary has set aside on
its books adequate reserves therefor in accordance with GAAP, and
(ii) all lawful claims, whether for labor, materials, supplies,
services or anything else, which might or could, if unpaid,
become a lien or charge upon such property or assets, unless and
to the extent only that the validity thereof is being contested
in good faith and by appropriate proceedings diligently
conducted, and (iii) all its trade bills when due in accordance
with their original terms, including any applicable grace
periods, unless and to the extent only that such trade bills are
being contested in good faith and by appropriate proceedings
diligently conducted.

10.210    Insurance.

Each of the Borrowers will keep, and will cause each
of its Subsidiaries to keep, (i) its insurable property insured
at all times with financially sound and responsible insurance
carriers against loss or damage by fire and other risks,
casualties and contingencies in such manner and to the extent
that like properties are customarily so insured by other
corporations engaged in the same or similar business similarly
situated, and (ii) adequate insurance at all times with
financially sound and responsible insurance carriers against
liability on account of damage to persons and properties and
under all applicable workmen's compensation laws, in such manner
and to the extent that like properties are customarily so insured
by other corporations engaged in the same or similar business
similarly situated.

10.211    Maintenance of Records.

Each of the Borrowers will keep, and will cause each
of its Subsidiaries to keep, at all times books of record and
account in which full, true and correct entries will be made of
all dealings or transactions in relation to its business and
affairs, and each of the Borrowers will provide, and will cause
each of its Subsidiaries to provide, adequate protection against
loss or damage to such books of record and account.

10.212    Preservations of Corporate Existence.

Each of the Borrowers will maintain and preserve its
corporate existence and right to carry on its business and duly
procure all necessary renewals and extensions thereof, and
maintain, preserve and renew all rights, powers, privileges and
franchises which in the opinion of the Board of Directors of such
Borrower continue to be advantageous to it and comply in all
material respects with all applicable Legal Requirements, and, in
each such case, cause each of its Subsidiaries so to do.  Without
limiting the generality of the foregoing, each Borrower agrees to
(and to cause each Subsidiary to) qualify to do business as a
foreign corporation in each jurisdiction where the nature of its
business and the operations conducted by it therein require it to
be so qualified.

10.213    Preservation of Assets.

Each of the Borrowers will keep and will cause each
of its Subsidiaries so to keep, its property in good repair,
working order and condition and from time to time make all
needful and proper repairs, renewals, replacements, extensions,
additions, betterments and improvements thereto, so that the
business carried on by it may be properly and advantageously
conducted at all times in accordance with prudent business
management.

10.214    Inspection of Books and Assets.

10.214.1  Upon three Business Days' notice, each Borrower will
allow any representative, officer or accountant of the Bank,
during normal business hours, to visit and inspect any of its
property, to examine its books of record and account, and to
discuss its affairs, finances and accounts with its officers, and
at such reasonable time and as often as the Bank may request and,
in each such case, cause each of its Subsidiaries so to do.

10.214.2   Upon three Business Days' notice and the prior
submission by the Bank to any Borrower of its proposed agenda
therefor, such Borrower will allow any representative, officer or
accountant of the Bank from time to time to discuss the Financial
Statements, the other financial information from time to time
delivered hereunder and the financial condition of members of the
Consolidated Group (collectively, the "Financial Information")
with the Auditors; provided, however, that if no Default or Event
of Default then exists the Bank shall not have the right to
require such discussions more than once per year.  The Borrowers
hereby irrevocably authorize the Auditors to discuss all of the
foregoing with all such Persons.  The Borrowers shall have the
right to have one or more of its officers present at any such
discussions.

10.214.3   Upon three Business Days notice, the Borrowers shall
cause Ironwood to allow the Bank or any representative, officer,
accountant or other auditor of or for the Bank to visit and
inspect any of the property of Ironwood, to examine Ironwoods
books of record and account, and to discuss its affairs and
procedures relating to Tax Certificates or any Collateral;
provided however, that if no Default or Event of Default then
exists, the Borrowers shall not be obligated to cause Ironwood to
permit such visits and inspections more than once per year; and
provided further, that, if Borrowers request, Borrowers shall be
permitted to accompany Bank on such visits.  In connection with
any visit or inspection referred to in subsection (a) above, the
Bank or its representatives, officers, accountants or other
auditors shall be permitted to make such verifications and tests
of the Collateral as the Bank shall deem appropriate.

10.215    Payment of Indebtedness.

The Borrowers will duly and punctually pay, or cause
to be paid, the principal of and the interest on all Indebtedness
for Borrowed Money heretofore or hereafter incurred or assumed by
any Borrower or any of its Subsidiaries, or in respect of which
any Borrower or any of its Subsidiaries shall otherwise be
liable, when and as the same shall become due and payable, unless
such Indebtedness for Borrowed Money shall be renewed or
extended, and will (and will cause each Subsidiary to) faithfully
observe, perform and discharge all the covenants, conditions and
obligations which are imposed on any Borrower or any of its
Subsidiaries by any and all indentures and other agreements
securing, relating to, or evidencing such Indebtedness for
Borrowed Money or pursuant to which such Indebtedness for
Borrowed Money is incurred, and no Borrower will permit (and will
ensure that none of its Subsidiaries permit) any act or omission
to occur or exist which is or may be declared to be a default
thereunder.

10.216    Further Assurances.

  Each of the Borrowers will, and will cause each of
its Subsidiaries to, make, execute or endorse, and acknowledge
and deliver or file, all such vouchers, invoices, notices, and
certifications and additional agreements, undertakings,
conveyances, transfers, assignments, or further assurances, and
take any and all such other action, as the Bank may from time to
time deem necessary or proper in connection with this Agreement,
the obligations of the Borrowers hereunder or under the Note or
any of the other Loan Documents, or for the better assuring and
confirming unto the Bank all or any part of the security for the
Loans.

10.217    Notice of Default.

Forthwith upon any officer of any Borrower obtaining
knowledge of the existence of an Event of Default, LFC will
deliver to the Bank a certificate signed by an officer of LFC
specifying the nature thereof, the period of existence thereof,
and what action the Borrowers propose to take with respect
thereto.

10.218    Reserves.

Each of the Borrowers will set up, and will cause
each of its Subsidiaries to set up, on its books from its
earnings, reserves for bad debt in accordance with GAAP and in an
aggregate amount deemed adequate in the judgment of the Borrowers
and accepted by the Auditors in their annual audits.

10.219    Arms-length Transactions.

Each of the Borrowers will conduct, and cause each
of its Subsidiaries to conduct, all transactions with any of its
Affiliates on an arms-length basis.

10.220    Environmental Matters.

With respect to any Property for which any Borrower
or any Subsidiary may be responsible, LFC will promptly notify
the Bank (with a description in reasonable detail) of:

           (i)    the receipt by any Borrower or any Subsidiary
of any material Environmental Claim;

           (ii)   the discovery of any Contaminant or Release on,
in, under or emanating from any Properties or operations of any
of the Borrowers or any of their respective Subsidiaries
liability for which might have a Material Adverse Effect;

           (iii)  (x) the material violation of, or any condition
which might result in a material violation of, any Environmental
Law or (y) any change in any Environmental Law or in the
administration or interpretation thereof, which in either case
might subject any member of the Consolidated Group material
Environmental Costs;

           (iv)   the commencement of any judicial or
administrative proceeding or investigation alleging a violation
of any Environmental Law; or

           (v)    any material change in the representations and
warranties in Section 10.12;

           and each of the Borrowers will, and will cause each of
its respective Subsidiaries to, commence within 90 days after any
such request, and diligently prosecute to completion, such
Remedial Action as the Bank may request in respect of any of the
matters addressed in such notice.  As used in this Section 7.14
in relation to any Environmental Claim or any violation of
Environmental Law or any change in the representations and
warranties in Section 10.12 hereof, the term "material" shall
mean that such Environmental Claim, violation or change (i)
involves, or might reasonably be expected to involve
Environmental Costs in excess of $250,000, or (ii) occurs outside
the ordinary course of business, or (iii) gives rise, or might
reasonably be expected to give rise, to a Default or Event of
Default, or (iv) would otherwise be of concern to a prudent
lender.  In addition, LFC will give the Bank prompt notice of any
Environmental Claim relating to any Collateral, any property
which secures any Collateral or any property to which any Tax
Certificate relates, of the discovery of any contaminant or
release on, in or emanating from any Collateral or any such other
property, or any other liability or potential liability under any
Environmental Law which in any way relates to, or could be
imposed on, the owner of the Collateral or any such other
property, in each case, promptly obtaining knowledge thereof.

10.221    Solvency.

Each of the Borrowers will continue to be Solvent
and ensure that each of its  Subsidiaries will continue to be
Solvent.

10.222    Borrowing Base Certificate.

LFC will furnish the Bank (a)  within 25 days of the
end of each month and, if a Default or Event of Default then
exists, from time to time upon the Bank's request, a Borrowing
Base Certificate as of the close of business on the last Business
Day of such month (or, if a Default or Event of Default exists,
as of such date specified by the Bank), (b) on or prior to the
twenty-fifth (25th) day of each month (and, if a Default or Event
of Default then exists, from time to time upon the Bank's
request), computer print-outs as of the end of the immediately
preceding month (or, if a Default or Event of Default exists, as
of such date specified by the Bank) of all loans and other
Receivables which support, underlie or are components of the
Borrowing Base Collateral, in the same form required by (i)
Section 6.10(a) and Section 6.10(b) of the Receivables Purchase
Agreement and Section 6.10(a) and Section 6.10(b) of the
Receivables Loan Agreement (in the case of Borrowing Base
Collateral consisting of  Uncertificated Residual Rights), (ii)
Section 3.1(b) of the Class B Servicing Agreement (in the case of
Borrowing Base Collateral consisting of the Class B
Certificates), (iii) Section 2.06(a) of the Asset Purchase
Agreement (in the case of Borrowing Base Collateral consisting of
EagleFunding Residual Rights), and  (iv) Section 3.1 of each VFN
Servicing Agreement (in the case of Borrowing Base Collateral
consisting of the VFNs), (c) on or prior to the twenty-fifth
(25th) day of each month (and, if a Default or Event of Default
then exists, from time to time upon the Bank's request), computer
print-outs of the end of the immediately preceding month (or, if
a Default or Event of Default exists, as of such date specified
by the Bank) of (A) the Eligible TLCs, the Purchase Price of such
Eligible TLCs and the applicable Coupon Rate and any additional
information reasonably requested by the Bank, and (B) the Dealer
Loan Collateral and any additional information reasonably
requested by the Bank, and (d) within 25 days of the end of each
month, a report in form and substance satisfactory to the Bank as
to the existence, Primary Assignment Asset Book Value and aging
of, and payments made on, the Primary Assignment Assets.  If at
any time the Bank reasonably determines that the Borrowing Base
overstates the value of any item of Borrowing Base Collateral
(whether due to what the Bank has determined to be a mistake in
valuation by the Borrowers, due to any property related to any
item of Borrowing Base Collateral ceasing to provide the basis
for valuation of such item reflected in such certificate, due to
a mistake by the Borrowers in treating an item as eligible for
inclusion in the relevant Class Borrowing Base, or otherwise),
the value of such item shall be such amount as the Bank shall
reasonably determine or such item shall be eliminated from the
computation of the applicable class Borrowing Base, as
appropriate.

10.223    Extraordinary Asset Certificate.

LFC will furnish to the Bank within 25 days after
the end of each month (and, if a Default or Event of Default
exists, more frequently if the Bank so requests) an Extraordinary
Asset Certificate substantially in the form of Exhibit F setting
forth, as of close of business on the last day of such month (or,
if a Default or Event of Default exists, as of such date
specified by the Bank) (i) the Portfolio Amount; and (ii) all
Extraordinary Loans (specifying in reasonable detail each such
asset and the principal amount or, as appropriate, book value
thereof).

10.224    Notification of Account Debtors.

Upon request of the Bank made at any time when a
Default or Event of Default exists, promptly notify (in manner,
form and substance satisfactory to the Bank) all Persons who are
at any time obligated with respect to the Dealer Loan Collateral,
Primary Assignment Assets and, if any Receivables are distributed
to the Bank, all Persons who are obligated thereunder, that the
Bank possesses a security interest in (or assignment of the
proceeds of) such Dealer Loan Collateral, Primary Assignment
Assets or Receivables  (as the case may be) and that all payments
in respect thereof are to be made to such account as the Bank
directs.

10.225     Troubled Loan Certificate.

LFC will furnish to the Bank (i) within 15 days
after the end of each fiscal quarter, (ii) whenever the amount
calculated pursuant to clause (A) of Section 8.21 hereof exceeds
9% of LFC's consolidated Tangible Net Worth, within 15 days after
the end of each month, and (iii) if a Default or Event of Default
exists, from time to time upon the Bank's request, a Troubled
Loan Certificate substantially in the form of Exhibit G hereto
setting forth, as of the last day of such quarter or month, as
the case may be (or, if a Default or Event of Default exists, as
of such date specified by the Bank), (x) LFC's consolidated
Tangible Net Worth and (y) the amount of Receivables specified in
Sections 8.21 (A)(i), A(ii), and A(iii), respectively, and the
amount of Dealer Recourse and Dealer Reserve specified in Section
8.21(A)(iv).

10.226    Receivable Deliquencies.

LFC will furnish to the Bank, within 10 days after
the end of each month, a report in the form of Exhibit H hereto
showing delinquent Receivables.

10.227     LFC's Duties as Servicer; LFC's and LMSC's Rights and
Obligations.

10.227.1   LFC, as Servicer under the Receivables Purchase
Agreement and the Receivables Loan Agreement, will give the
directions which it is required to give under Section 2.05(c) of
each of those Agreements as in effect on the date hereof.

10.227.2   The Borrowers will ensure that LFC is at all times the
Servicer under each of the Receivables Loan Agreement and
Receivables Purchase Agreement.

10.227.3   (i) LFC shall perform and abide by, and shall ensure
that LMSC performs and abides by, each of its respective
obligations, covenants and agreements under the Receivables Loan
Agreement and Receivables Purchase Agreement; (ii) at the request
of the Bank, LFC shall enforce its rights, and shall ensure that
LMSC enforces its rights, under the Receivables Purchase
Agreement; (iii) without the prior written consent of the Bank,
LFC will not, and shall ensure that LMSC does not, in any manner
waive any of its or LMSC's rights or release any other party from
its obligations to any Borrower or LMSC, under or in respect of
the Receivables Loan Agreement and Receivables Purchase
Agreement; and (iv) upon request of the Bank, the Borrowers will
send to the Bank copies of notices, documents and other papers
furnished and received by any Borrower or by LMSC with respect to
the Receivables Purchase Agreement or Receivables Loan Agreement.

10.228. Special Purpose Nature of LMSC

10.228.1   The Borrowers will ensure that LMSC engages in no
activities other than activities incident to and required by (i)
the Receivables Purchase Agreement as in effect on the date
hereof (without giving effect to any amendment, supplement or
other modification thereof after the date hereof); (ii) the
Receivables Loan Agreement as in effect on the date hereof
(without giving effect to any amendment, supplement or other
modification thereof after the date hereof); and (iii) the
Pooling and Servicing Agreement, dated as of June 1, 1994, among
LFC, LMSC, and The Chase Manhattan Bank (National Association),
as Trustee (the "P/S Trustee"), and the agreements executed and
delivered by LMSC in connection with the transactions
contemplated thereby, (iv) the Series Trust Agreement, dated as
of June 1, 1994, among LFC, LMSC, and the P/S Trustee in
connection with the Litchfield Mortgage Trust 1994-1, and the
agreements executed and delivered by LMSC in connection with the
transactions contemplated thereby and (v) the Series Trust
Agreement, dated as of September 27, 1994, among LFC, LMSC, and
the P/S Trustee in connection with the Litchfield Mortgage Trust
1994-2, and the agreements executed and delivered by LMSC in
connection with the transactions contemplated thereby.  In
addition, the Borrowers shall ensure that (x) other than pursuant
to the agreements specified in the immediately preceding
sentence, LMSC will not incur any indebtedness or liabilities,
and, (y) other than as necessary to preserve its corporate status
and franchises, LMSC will incur no obligations.

10.228.2   The Borrowers will ensure that LMSC does not engage in
any transaction in violation of its Charter Documents.

10.229.  Separate and Independent Existence of LMSC

10.229.1   The Borrowers shall (i) cause LMSC to comply with all
covenants and agreements made by LMSC in Section 5.01(a)-(h) and
5.01(j) and (n) of the Receivables Loan Agreement as in effect on
the date hereof (without giving effect to any amendment,
supplement or other modification thereof after the date thereof
or of the Receivables Purchase Agreement or any termination of
the Receivables Loan Agreement or the Receivables Purchase
Agreement), and (ii) cause LFC to comply with all covenants and
agreements made by LFC in the sections of the Receivables Loan
Agreement listed in (i) above.  The Borrowers' obligations
pursuant to this Section 7.23(a) shall not be affected or
diminished by any waiver to or consent to departure from or
relating to any such covenant or agreement set forth in the
Receivables Loan Agreement given by any Person, and shall as
fully and absolutely be binding upon the Borrowers as if the
covenants and agreements referred to therein were made expressly
for the benefit of the Bank and set forth in full herein.

10.229.2   The Borrowers shall not permit LMSC to convey,
transfer, lease or otherwise dispose of any of its assets except
for any such conveyance, transfer, lease or other disposition
required by the Receivables Loan Agreement or Receivables
Purchase Agreement, in each case as in effect on the date hereof
(without giving effect to any amendment, supplement or other
modification thereof after the date hereof.)

10.229.3   The Borrowers will ensure that LMSC does not amend,
supplement or otherwise  modify or waive any term or condition of
the Mortgage Purchase Agreement dated September 29, 1995 between
LMSC and LFC without the prior written consent of the Bank.

10.229.4   The Borrowers shall ensure that LMSC does not nullify
or circumvent any provision as to its special and limited nature
set forth in its Charter Documents (as in effect on the date
hereof).

10.230     LFC's Duties as Servicer; LFC's and LCC's Rights and
Obligations

10.230.1   LFC, as Servicer under the Asset Purchase Agreement,
will perform all of its obligations under the Asset Purchase
Agreement and other EagleFunding Documents.

10.230.2   The Borrowers will ensure that LFC is at all times the
Servicer under the Asset Purchase Agreement.

10.230.3   (i) LFC shall perform and abide by, and shall ensure
that LCC performs and abides by, each of its respective
obligations, covenants and agreements under the Asset Purchase
Agreement and other EagleFunding Documents; (ii) at the request
of the Bank, LFC shall enforce its rights, and shall ensure that
LCC enforces its rights, under the Asset Purchase Agreement and
other EagleFunding Documents;  (iii) without the prior written
consent of the Bank, LFC will not, and shall ensure that LCC does
not, in any manner waive any of its or LCC's rights or release
any other party from its obligations to any Borrower or LCC,
under or in respect of the Asset Purchase Agreement or other
EagleFunding Documents; and (iv) upon request of the Bank, the
Borrowers will send to the Bank copies of notices, documents and
other papers furnished and received by any Borrower or by LCC
with respect to the Asset Purchase Agreement or other
EagleFunding Documents.

10.231.    Special Purpose Nature of LCC

10.231.1   The Borrowers will ensure that LCC engages in no
activities other than activities incident to and required by the
Asset Purchase Agreement or other EagleFunding Documents,  as
they are in effect on the date hereof (without giving effect to
any amendment, supplement or other modification thereof after the
date hereof).   In addition, the Borrowers shall ensure that (x)
other than pursuant to the Asset Purchase Agreement and other
EagleFunding Documents, as in effect on the date hereof, LCC will
not incur any indebtedness or liabilities, and, (y) other than as
necessary to preserve its corporate status and franchises, LCC
will incur no obligations.

10.231.2   The Borrowers will ensure that LCC does not engage in
any transaction in violation of its Charter Documents.

10.232     Separate and Independent Existence of LCC

10.232.1   The Borrowers shall (i) cause LCC to comply with all
covenants and agreements made by LCC in the Asset Purchase
Agreement and other EagleFunding Documents (without giving effect
to any amendment, supplement or other modification thereof after
the date thereof), and (ii) cause LFC to comply with all
covenants and agreements made by LFC in the Asset Purchase
Agreement and other EagleFunding Documents.  The Borrowers'
obligations pursuant to this Section 7.26(a) shall not be
affected or diminished by any waiver to or consent to departure
from or relating to any such covenant or agreement set forth in
the Asset Purchase Agreement or other EagleFunding Document given
by any Person, and shall as fully and absolutely be binding upon
the Borrowers as if the covenants and agreements referred to
therein were made expressly for the benefit of the Bank and set
forth in full herein.

10.232.2   The Borrowers shall not permit LCC to convey, transfer,
lease or otherwise dispose of any of its assets except for any
such conveyance, transfer, lease or other disposition required by
the Asset Purchase Agreement or other EagleFunding Documents, in
each case as in effect on the date hereof (without giving effect
to any amendment, supplement or other modification thereof after
the date hereof) and except for the transfer of the Subordinated
Interest Certificate to LFC.

10.232.3   The Borrowers will ensure that LCC does not amend,
supplement or otherwise  modify or waive any term or condition of
the Asset Sale and Contribution Agreement, dated March 21, 1997,
by and between LFC and LCC without the prior written consent of
the Bank.

10.232.4   The Borrowers shall ensure that LCC does not nullify or
circumvent any provision as to its special and limited nature set
forth in its Charter Documents (as in effect on the date hereof).

10.233.    Priority Trust

10.233.1   The Borrowers will ensure that the Priority Trust
engages in no activities other than activities set forth in
Section 1.3 of the Trust Agreement, dated October 7, 1998,
between LFC and Wilmington Trust Company (without giving effect
to any amendment, supplement or other modification thereof after
the date hereof).  In addition, the Borrowers shall ensure that
the Priority Trust will not incur any indebtedness, liabilities,
or obligations, other than as incidental to carrying out its
purpose set forth in Section 1.3 of the Trust Agreement
referenced in this Section 7.27(a).

10.233.2   The Borrowers will ensure that the Priority Trust does
not engage in any transaction in violation of its Charter
Documents (as in effect on the date hereof without giving effect
to any amendment, supplement or other modification thereof after
the date hereof).




10.233.3   The Borrowers shall ensure that the Priority Trust does
not, without the prior written consent of the Bank, amend the
Administration Agreement or waive any of its rights under the
Administration Agreement. The Borrowers shall cause the Priority
Trust to enforce all of its rights under the Administration
Agreement.


10.234     LFC's Duties as Servicer; LFC's and LHC's Rights and
Obligations.

10.234.1   LFC, as Master Servicer under each of the VFN Servicing
Agreements will perform all of its obligations under such
agreements.

10.234.2   The Borrowers will ensure that LFC is at all times the
Master Servicer under the agreements referenced in Section
7.28(a).

10.234.3   (i) LFC shall perform and abide by, and shall ensure
that each LHC performs and abides by, each of its respective
obligations, covenants and agreements under the VFN Documents
applicable to it; (ii) at the request of the Bank, LFC shall
enforce its rights, and shall ensure that each LHC enforces its
rights, under the applicable VFN Documents;  (iii) without the
prior written consent of the Bank, the Borrowers will not, and
shall ensure that no LHC will, in any manner waive any of its or
such LHC's rights or release any other party from its obligations
to any Borrower or such LHC, under or in respect of the
applicable VFN Documents; and (iv) upon request of the Bank, the
Borrowers will send to the Bank copies of notices, documents and
other papers furnished and received by any Borrower or by any LHC
with respect to the VFN Documents.

10.235. Special Purpose Nature of each LHC

10.235.1   The Borrowers will ensure that no LHC engages in any
activities other than activities incident to and required by the
VFN Documents,  as they are in effect on the date hereof (without
giving effect to any amendment, supplement or other modification
thereof after the date hereof).  In addition, the Borrowers shall
ensure that (x) other than pursuant to the VFN Documents, as in
effect on the date hereof, no LHC will incur any indebtedness or
liabilities, and, (y) other than as necessary to preserve its
corporate status and franchises, no LHC will incur any
obligations.

10.235.2   The Borrowers will ensure that no LHC engages in any
transaction in violation of its Charter Documents.

10.236     Separate and Independent Existence of each LHC




10.236.1   The Borrowers shall (i) cause each LHC to comply with
all covenants and agreements made by such LHC in the VFN
Documents to which it is a party (without giving effect to any
amendment, supplement or other modification thereof after the
date thereof), and (ii) cause LFC to comply with all covenants
and agreements made by LFC in any of the VFN Documents.  The
Borrowers' obligations pursuant to this Section 7.30(a) shall not
be affected or diminished by any waiver to or consent to
departure from or relating to any such covenant or agreement set
forth in the applicable VFN Document given by any Person, and
shall as fully and absolutely be binding upon the Borrowers as if
the covenants and agreements referred to therein were made
expressly for the benefit of the Bank and set forth in full
herein.


10.236.2   The Borrowers shall not permit any LHC to convey,
transfer, lease or otherwise dispose of any of its assets except
for any such conveyance, transfer, lease or other disposition
required by the VFN Documents, in each case as in effect on the
date hereof (without giving effect to any amendment, supplement
or other modification thereof after the date hereof).

10.236.3   The Borrowers will ensure that no LHC amends,
supplements or otherwise  modifies or waives any term or
condition of the VFN Documents which are applicable to it without
the prior written consent of the Bank.

10.236.4   The Borrowers shall ensure that no LHC nullifies or
circumvents any provision as to its special and limited nature
set forth in its Charter Documents (as in effect on the date
hereof).

10.237     LFC's Duties as Servicer; LFC's and LTSC's Rights and
Obligations.

10.237.1   LFC, as Servicer under the Class B Servicing Agreement,
will perform all of its obligations under Class B Servicing
Agreement and other Class B Certificate Agreements.

10.237.2   The Borrowers will ensure that LFC is at all times the
Servicer under the Class B Certificate Agreements.

10.237.3   (i) LFC shall perform and abide by, and shall ensure
that LTSC performs and abides by, each of its respective
obligations, covenants and agreements under the Class B Servicing
Agreement and other Class B Certificate Agreements; (ii) at the
request of the Bank, LFC shall enforce its rights, and shall
ensure that LTSC enforces its rights, under the Class B
Certificate Agreements;  (iii) without the prior written consent
of the Bank, the Borrowers will not, and shall ensure that LTSC
does not, in any manner waive any of LFC's or LTSC's rights or
release any other party from its obligations to any Borrower or
LTSC, under or in respect of any of the Class B Certificate
Agreements; and (iv) upon request of the Bank, the Borrowers will
send to the Bank copies of notices, documents and other papers
furnished and received by any Borrower or by LTSC with respect to
any of the Class B Certificate Agreements.

      0.1   Special Purpose Nature of LTSC

10.237.4   The Borrowers will ensure that LTSC engages in no
activities other than activities incident to and required by the
Class B Certificate Agreements,  as they are in effect on the
date hereof (without giving effect to any amendment, supplement
or other modification thereof after the date hereof).  In
addition, the Borrowers shall ensure that (x) other than pursuant
to the Class B Certificate Agreements, as in effect on the date
hereof, LTSC will not incur any indebtedness or liabilities, and,
(y) other than as necessary to preserve its corporate status and
franchises, LTSC will incur no obligations.




10.237.5   The Borrowers will ensure that LTSC does not engage in
any transaction in violation of its Charter Documents.


10.238    Separate and Independent Existence of LTSC

10.238.1   The Borrowers shall (i) cause LTSC to comply with all
covenants and agreements made by LTSC in the Class B Certificate
Agreements (without giving effect to any amendment, supplement or
other modification thereof after the date thereof), and (ii)
comply with all covenants and agreements made by LFC in the Class
B Certificate Agreements.  The Borrowers' obligations pursuant to
this Section 7.33(a) shall not be affected or diminished by any
waiver to or consent to departure from or relating to any such
covenant or agreement set forth in the Class B Certificate
Agreements given by any Person, and shall as fully and absolutely
be binding upon the Borrowers as if the covenants and agreements
referred to therein were made expressly for the benefit of the
Bank and set forth in full herein.

10.238.2   The Borrowers shall not permit LTSC to convey,
transfer, lease or otherwise dispose of any of its assets except
for any such conveyance, transfer, lease or other disposition
required by the Class B Certificate Agreements, in each case as
in effect on the date hereof (without giving effect to any
amendment, supplement or other modification thereof after the
date hereof).

10.238.3   The Borrowers will ensure that LTSC does not amend,
supplement or otherwise  modify or waive any term or condition of
any of the Class B Certificate Agreements without the prior
written consent of the Bank.

10.238.4   The Borrowers shall ensure that LTSC does not nullify
or circumvent any provision as to its special and limited nature
set forth in its Charter Documents (as in effect on the date
hereof).

NEGATIVE COVENANTS

      Each of the Borrowers covenants and agrees that so long as
this Agreement is in effect and until the Commitment is
terminated and all of the Loans, together with interest,
commissions, fees and all other obligations incurred hereunder,
are paid in full, each of the Borrowers will perform, and will
cause each of its Subsidiaries to perform, the obligations set
forth in this Section 8 (unless it shall first have procured the
written consent of the Bank to do otherwise).




10.239   Engage in Same Type of Business.

None of the Borrowers will (i) enter into, or permit any
of its Subsidiaries to enter into, any business which is
substantially different from the business of the Borrowers and
its Subsidiaries as set forth on Schedule 10.19, or (ii) make or
acquire loans other than loans of the type and as otherwise
described on Schedule 10.19; provided however, that the Borrowers
and their Subsidiaries (other than LHCs, the Priority Trust, LCC,
LTSC and LMSC) shall be permitted to make and acquire loans which
are different from those described on Schedule 10.19 (each such
loan, a "New Business Loan") so long as the aggregate outstanding
principal amount of New Business Loans held by the Borrowers and
its Subsidiaries does not at any time exceed 25% of the Portfolio
Amount.


10.240     Liens.

10.240.1   The Borrowers will not contract, create, incur, assume
or suffer to exist any Lien upon or with respect to, or by
transfer or otherwise subject to the prior payment of any
indebtedness (other than the Loans), any of the Collateral (or
any proceeds of any of the foregoing) whether now owned or
hereafter acquired, or permit any of their respective
Subsidiaries so to do, other than Liens in favor of the Bank.

10.240.2   The Borrowers will not contract, create, incur, assume
or suffer to exist (and shall ensure that LMSC does not contract,
incur, assume or suffer to exist) any Lien upon or with respect
to, or by transfer or otherwise subject to the prior payment of
any indebtedness (other than the Loans, or indebtedness under the
Receivables Loan Agreement (as amended by Amendment No. 1 thereto
dated as of December 18, 1995, and Amendment No. 2 thereto dated
as of September 27, 1996, the "Current Receivables Loan
Agreement") or under the Receivables Purchase Agreement (as
amended by Amendment No. 1 thereto dated as of December 18, 1995,
and Amendment No. 2 thereto dated as of September 27, 1996, the
"Current Receivables Purchase Agreement")) any of the Pledged
Assets (as defined in the Current Receivables Loan Agreement) or
any of the Purchased Assets (as defined in the Current
Receivables Purchase Agreement), or, except as required by the
Current Receivables Loan Agreement or Current Receivables
Purchase Agreement, any other asset of LMSC.

10.240.3   The Borrowers will not contract, create, incur, assume
or suffer to exist (and shall ensure that LCC does not contract,
incur, assume or suffer to exist) any Lien upon or with respect
to, or by transfer or otherwise subject to the prior payment of
any indebtedness (other than the Loans, or indebtedness under the
Asset Purchase Agreement and related documents (as in effect on
the date hereof)) any of the Purchased Interests (as defined in
the Asset Purchase Agreement, as in effect on the date hereof),
or except as required by the Asset Purchase agreement, any other
asset of LCC.

10.240.4   The Borrowers will not contract, create, incur, assume
or suffer to exist (and shall ensure that the Priority Trust does
not contract, incur, assume or suffer to exist) any Lien upon or
with respect to, or by transfer or otherwise subject to the prior
payment of any indebtedness (other than the Loans) any of the
Trust Estate (as defined in the Trust Agreement, dated October 7,
1998, between LFC and Wilmington Trust Company, as in effect on
the date hereof), or any other asset of LCC.

10.240.5   The Borrowers will not contract, create, incur, assume
or suffer to exist (and shall ensure that no LHC contracts,
incurs, assumes or suffers to exist) any Lien upon or with
respect to, or by transfer or otherwise subject to the prior
payment of any indebtedness (other than the Loans, or
indebtedness under the applicable VFN Documents (as in effect on
the date hereof)) any of the trust estate which serves as
collateral security for the VFNs and the other notes issued under
the VFN Documents, or any other asset of any LHC.
10.169.1



10.240.6   The Borrowers will not contract, create, incur, assume
or suffer to exist (and shall ensure that LTSC does not contract,
incur, assume or suffer to exist) any Lien upon or with respect
to, or by transfer or otherwise subject to the prior payment of
any indebtedness (other than the Loans, or indebtedness under the
applicable Class B Certificate Agreements (as in effect on the
date hereof)) any of the Trust Estate (as defined in the Class B
Trust Agreement), or any other asset of LTSC.

10.240.7   The Borrowers will not contract, create, incur, assume
or suffer to exist any lien upon or with respect to the capital
stock of Realty.

10.241     Other Indebtedness; Prepayment of Long Term Debt.

10.241.1   The Borrowers will not contract, create, incur, assume
or suffer to exist any Indebtedness for Borrowed Money or permit
any of their respective Subsidiaries so to do; except

      (i)   indebtedness of the Borrowers represented by the Loans;

(ii)         indebtedness existing on the Closing Date and
indicated on Schedule 8.3 to this Agreement;

(iii)       trade payables incurred in the ordinary course of
business; provided that such trade payables (except to the extent
being contested in good faith by appropriate proceedings
diligently conducted and for which appropriate reserves have been
established in accordance with GAAP) are not more than 60 days
past due;

(iv)        other indebtedness incurred by the Borrowers or their
respective Subsidiaries (other than any LHC, the Priority Trust,
LMSC, LTSC and LCC) after the Closing Date but only if no Default
or Event of Default shall have occurred and is continuing on the
date such indebtedness is incurred or would result therefrom; and

(v)         indebtedness of any LHC permitted under Section
7.29(a) hereof.




10.241.2   Borrowers will not (i) amend the terms of any notes,
documents, instruments or agreements related to Long Term Debt
that would shorten the maturity date of any portion of principal
at any time payable thereunder to a date which is earlier than
the date  (the "Post-Termination Date") which is 91 days after
the Revolving Credit Maturity Date, or (ii) make any payment on
account of the principal of or retire (by acquisition, purchase,
payment, prepayment, redemption or otherwise) all or any part of
any Long Term Debt, other than (a) the amounts specified in
Section 10.17 with respect to the Long Term Debt so specified
therein on the dates specified therein, (b) in addition to the
amounts specified in clause (a) preceding and clause (c)
following, $4,700,000 in the aggregate of Long Term Debt and (c)
with the proceeds of any loan which refinances such Long Term
Debt,  provided that, no such refinancing loan shall require that
any amount of principal (other than principal to be repaid
thereunder after the Post- Termination Date) be repaid sooner (or
in any greater amount) than was required under the Long Term Debt
which it refinances.


10.242.   Activity of the Borrowers.

LFC shall remain the primary operating company as among
the Borrowers, their respective Subsidiaries and other Affiliates
and LFC shall remain the sole primary servicer, purchaser and
originator of Receivables owned, directly or indirectly, by any
of the Borrowers, any of their Subsidiaries, or any trust, pool
or similar entity created or capitalized by any of the Borrowers,
any Subsidiary or any Affiliate of any of the Borrowers (it being
understood that LFC shall be permitted to retain sub-servicers
consistent with past practice).  Realty shall remain a real
estate investment trust (in accordance with all applicable Legal
Requirements) whose primary business is to purchase real estate
related assets from LFC.

10.243     Servicing and Originating

10.243.1   LFC shall service the Receivables included in the
Portfolio Amount in accordance with each agreement relating
thereto to which it is a party and in accordance with customary
and normal standards of practice for the prudent servicing of
assets of such type.

10.243.2   Without the prior written consent of the Bank (such
consent not to be unreasonably withheld), the Borrowers will not
make or permit any of their respective Subsidiaries to make any
material change in any of its or their credit or lending policies
or procedures as in effect on the date hereof.

10.244     [intentionally deleted]

10.245     Accounting Changes

10.245.1   The Borrowers will not make or permit any of their
respective Subsidiaries to make any significant change in
accounting treatment and reporting practices, except as permitted
or required by GAAP.

10.245.2   The Borrowers will not change their respective Fiscal
Years or permit any of their respective Subsidiaries to change
its Fiscal Year.




10.246     Consolidation and Merger

No Borrower will wind up, liquidate or dissolve its affairs
or enter into any transaction of merger or consolidation or
permit any of its Subsidiaries so to do (or agree to do any of
the foregoing at any future time) except that (i) any
wholly-owned Subsidiary (other than the Priority Trust, LMSC, LCC,
LTSC and any LHC) of any Borrower may merge into any Borrower if
both before and after giving effect thereto no Default or Event
of Default has occurred or would result therefrom; provided that
the Borrower shall at all times be the continuing corporation,
and (ii) any wholly-owned Subsidiary of any Borrower may merge
into any other wholly-owned Subsidiary of a Borrower; provided
that the Borrowers shall not permit the Priority Trust, LMSC,
LCC, LTSC or any LHC to merge with or into any other wholly-owned
Subsidiary of any Borrower.  Written notice of any merger
permitted by this Section 8.8, however, shall be given by the
Borrowers to the Bank before the effective date of such merger or
within five Business Days thereafter.


10.247     Sale of Assets

10.247.1   The Borrowers will not convey, sell, lease or otherwise
dispose of (or agree to do any of the foregoing at any future
time) or permit any of their respective Subsidiaries so to do,
(i) all or a substantial part of its property or assets or any
part of such property or assets material to the conduct of its
business substantially as now conducted or as conducted after the
Closing Date, or (ii) any of its assets (other than equipment
which is obsolete or no longer used or useful in the conduct of
its business)), except in the ordinary course of business
(including, without limitation, in securitization or whole loan
sale transactions).

10.247.2   As long as no Event of Default has occurred and is
continuing hereunder, LFC may, from time to time, pursuant to and
in accordance with the terms of the Participation Agreement,
transfer to Realty some or all of its interest in certain of the
Collateral or a participation interest therein, provided, that:
(i) LFC shall give written notice to the Bank of any proposed
transfer at least 10 days prior to the date of such proposed
transfer; (ii) on about the effective date of such transfer, LFC
shall provide to the Bank a certificate of its CFO to the effect
that (A) such transfer will not be in violation of or give rise
to a default or event of default under the documentation relating
the Collateral to be transferred, (B) no Event of Default has
occurred and is continuing hereunder or would arise as a result
of such transfer; and (C) and the representations and warranties
of the Borrowers contained herein or in the other Loan Documents
are true and correct in all material respects with the same
effect as though such representations were being made at and as
of such time; (iii) any such transfer shall be subject to the
first priority security interest of the Bank in such Collateral
and LFC and Realty shall comply with the terms of the Loan
Documents to ensure that the Bank continues to have a first
priority security interest in such Collateral (subject to any
Permitted Liens which may have priority) proposed to be
transferred; and (iv) LFC and Realty shall execute and file any
and all documents, certificates and financing statements which
the Bank determines to be necessary or desirable for the
continuation of the Bank's first priority security interest in
such Collateral (subject to any Permitted Liens which may have
priority).  Any such transfer from LFC to Realty pursuant to the
Participation Agreement which satisfies all the foregoing
conditions shall be referenced to as a "Permitted Realty
Transfer."

10.248[intentionally deleted]




10.249.    Compliance with ERISA

No Borrower will (i) terminate, or permit any of its
Subsidiaries to terminate, any Pension Plan so as to result in
any material (in the opinion of the Bank) liability of such
Borrower or any such Subsidiary to the PBGC, (ii) permit to exist
the occurrence of any Reportable Event (as defined in Section
4043 of ERISA), or any other event or condition, which presents a
material (in the opinion of the Bank) risk of such a termination
by the PBGC of any Pension Plan, (iii) allow, or permit any such
Subsidiary to allow, the aggregate amount of "benefit
liabilities" (within the meaning of Section 4001(a)(16) of ERISA)
under all Pension Plans of which any Borrower or any ERISA
Affiliate is a "contributing sponsor" (within the meaning of
Section 4001(a)(13) of ERISA) to exceed $100,000, (iv) allow, or
permit any such Subsidiary to allow, any Plan to incur an
"accumulated funding deficiency" (within the meaning of Section
302 of ERISA or Section 412 of the Code), whether or not waived,
(v) engage, or permit any such Subsidiary or any Plan to engage,
in any "prohibited transaction" (within the meaning of Section
406 of ERISA or Section 4975 of the Code) resulting in any
material (in the opinion of the Bank and considered by itself or
together with all other such liabilities of any Borrower and all
ERISA Affiliates) liability to any Borrower or any ERISA
Affiliate, (vi) allow, or permit any such Subsidiary to allow,
any Plan to fail to comply with the applicable provisions of
ERISA and the Code in any material respect, (vii) fail, or permit
any such Subsidiary to fail, to make any required contribution to
any Multiemployer Plan, or (viii) completely or partially
withdraw, or permit any such Subsidiary to completely or
partially withdraw, from a Multiemployer Plan, if such complete
or partial withdrawal will result in any material (in the opinion
of the Bank) withdrawal liability under Title IV of ERISA.


10.250     Related Transactions

10.250.1   The Borrowers will not enter into any transaction with
any of their respective Subsidiaries or other member of the
Consolidated Group or any Affiliate of any of their respective
Subsidiaries or other member of the Consolidated Group (or with
any relative of such Affiliate) or any Person with which any
officer or director of any such Subsidiaries or other member of
the Consolidated Group has a financial interest on more favorable
terms than if such Person was totally unrelated, or permit any of
their respective Subsidiaries so to do.

10.250.2   The Borrowers will not make, or cause any of their
respective Subsidiaries to make, any payments, directly or
indirectly, to any of their Subsidiaries or Affiliate or any
officer, director or principal stockholder of any of the
Borrowers or any Affiliate, except as permitted by Sections
8.9(b), 8.12(a) and 8.16.

10.251.    Subsidiaries.

LFC will not sell, assign, transfer or otherwise dispose
of, or in any way part with control of, any shares of capital
stock of or membership interest in or beneficial ownership
interest in, as applicable, Realty, any LHC, the Priority Trust,
LMSC, LTSC or LCC or any indebtedness or obligations of any
character of any of its Subsidiaries, or permit Realty, any LHC,
the Priority Trust, LMSC, LTSC or LCC so to do with respect to
any shares of capital stock of any other Subsidiary or any
indebtedness or obligations of any character of any Borrower or
any of its other Subsidiaries, or issue, or permit Realty, any
LHC, the Priority Trust, LMSC, LTSC or LCC to issue any
additional shares of capital stock, beneficial ownership interest
or membership interest; provided that, LFC may sell its
beneficial interest in the Priority Trust to Ironwood in
accordance with the Administration Agreement subject to LFC's
compliance with the terms of Section 2.4(e) hereof.

10.252.    Borrowing Base

The Borrowers will not permit the principal amount of
outstanding Tranche A Revolving Credit Loans, Tranche B Revolving
Credit Loans and Tranche C Revolving Credit Loans to exceed the
amount of the Tranche A Borrowing Base, Tranche B Borrowing Base
and Tranche C Borrowing Base, respectively, at any time.
10.169




10.253.    Investments

The Borrowers will not invest in (by capital
contribution or otherwise), or acquire for investment or purchase
or make any commitment to purchase the obligations or stock of,
any Person or permit any of their respective Subsidiaries so to
do, if at the time of such investment (both before and after
giving effect thereto) a Default or Event of Default has occurred
or would have occurred had such investment been made on the last
day of the most recently ended fiscal quarter.  The Bank hereby
acknowledges and agrees that the foregoing provisions of this
Section 8.15 shall not legally prohibit the Borrowers or any of
their respective Subsidiaries from taking any of the actions
required pursuant to a binding agreement relating to a
securitization or whole loan transaction of the Borrowers or such
Subsidiary entered into by the Borrowers or such Subsidiary;
however, the Borrowers acknowledge that, notwithstanding the
foregoing provisions of this sentence, if the Borrowers or any of
their respective Subsidiaries takes any such action or makes any
investment in violation of the first sentence of this Section
8.15, same shall nonetheless be an Event of Default for all
purposes of this Agreement and the other Loan Documents.

10.254.    Dividends, Distributions and Purchases of Capital Stock

The Borrowers will not declare or pay any dividends
(other than dividends payable in shares of its common stock), or
return any capital to its stockholders as such or authorize or
make any other distribution, payment or delivery of property or
cash to their respective stockholders as such, or redeem, retire,
purchase or otherwise acquire, directly or indirectly, for a
consideration (otherwise than in exchange for, or from the
proceeds of the substantially concurrent sale of, other shares of
the same type of capital stock or of common stock of the
Borrowers), any shares of any class of their respective capital
stock now or hereafter outstanding, or any warrants or other
securities (now or hereafter outstanding) convertible into or
exercisable for any equity or other securities of the Borrowers
or a Subsidiary thereof, or redeem, retire, purchase or otherwise
acquire, directly or indirectly, for a consideration, any
subordinated debt or make any payments on account of the
principal thereof, or set aside any funds for any of the
foregoing purposes; provided, however, that (x) the Borrowers may
pay dividends on their respective common stock and (y) LFC may
make payments to repurchase up to an aggregate amount of 5% of
its common stock from the date hereof until the Revolving Credit
Maturity Date if, at the time of each such payment referred to in
clause (x) and (y) above (both before and after giving effect
thereto), no Default or Event of Default (i) has occurred and is
continuing or (ii) would have occurred had such dividend been
paid or such repurchase payment been made (as the case may be) on
the last day of the most recently ended fiscal quarter.

10.255.    Leasebacks

The Borrowers will not enter into, or permit any of its
Subsidiaries to enter into, any arrangement with any bank,
insurance company or other lender or investor providing for the
leasing to any Borrower or any of its Subsidiaries of real
property (i) which at the time has been or is to be sold or
transferred by any Borrower or any of its Subsidiaries to such
lender or investor, or (ii) which has been or is being acquired
from another person by such lender or investor or on which one or
more buildings or facilities have been or are to be constructed
by such lender or investor for the purpose of leasing such
property to a Borrower or any Subsidiary of a Borrower.




10.256.   Tangible Net Worth

The Borrowers will not permit the consolidated Tangible
Net Worth of LFC, at any time to be less than $30,000,000 plus
50% of the cumulative amount of LFC's consolidated positive net
income (determined in accordance with GAAP) for each fiscal year
commencing with the Fiscal Year ending December 31, 1996.


10.257.    Debt: Net Worth Ratio

The Borrowers will not permit the ratio (expressed as a
percentage) of (x) the sum of all liabilities of the Consolidated
Group (including, without limitation, all Indebtedness for Money
Borrowed of the Consolidated Group other than any such
indebtedness consisting of recourse made available by any
Borrower or any Subsidiary of any Borrower consistent with past
practices to Persons to which such Borrower or such Subsidiary
conveyed Receivables pursuant to a securitization or whole loan
sale transaction) to (y) the LFC's consolidated Tangible Net
Worth at any time to be more than 500% as at the end of any
fiscal quarter of LFC.

10.258.    Interest Coverage Ratio

10.258.1   The Borrowers will not permit the Interest Coverage
Ratio of the Consolidated Group for any Four Quarter Period to be
less than 1.8:1.0.

10.258.2   In the event that Borrowers does not deliver any
financial statement or certificate required to be delivered after
the end of any month or fiscal quarter pursuant to Section
7.1(a), 7.1(c), 7.16 or 7.17 within 10 days after the date
required therefor pursuant to said clause, the Borrowers shall be
deemed to be in default of Sections 8.18-8.22 (inclusive) for
purposes of Section 9.3 hereof.

10.259.    Limit on Troubled Loans

The Borrowers will not permit at any time the sum of (A)
(i) the aggregate principal amount of Receivables which are 90 or
more days past due from their Due Date in payment of any amount
payable with respect thereto plus (without duplication) (ii) the
aggregate principal amount of all Receivables which are on
non-accrual status or which pursuant to LFC's servicing
guidelines should be on non-accrual status plus (without
duplication) (iii) the aggregate book value of all REO Properties
minus (iv) the amount at such time of Dealer Recourse and Dealer
Reserve in respect of any such Receivables to exceed (B) 10% of
the LFC's consolidated Tangible Net Worth at such time.

Exposure to Extraordinary Transactions.

The Borrowers will not permit, at any time,  (x) the aggregate
principal amount of Extraordinary Loans that the Borrowers or any
of their respective Subsidiaries holds or services, or in respect
of which any Person has recourse (contingent or otherwise) to the
Borrowers or any of their respective Subsidiaries to exceed (y)
15% of the Portfolio Amount at such time.




10.261.    Ammendments to Documents

The Borrowers will not (A) amend, supplement, or
otherwise modify, directly or indirectly, (i) any of their
respective Charter Documents (or permit any of the Priority
Trust, LMSC, any LHC, LTSC or LCC to amend, supplement or
otherwise modify, directly or indirectly, its respective Charter
Documents) or (ii) any agreement or provision which subordinates
any obligation to any of the Obligations or (B) amend,
supplement, otherwise modify, waive, or terminate, or agree to,
consent to or otherwise permit there to be (or permit any
Subsidiary of any Borrower to agree to consent to or otherwise
permit there to be) any amendment, modification, supplement,
waiver or termination of any provision of, the Receivables
Purchase Agreement, the Receivables Loan Agreement, the VFN
Documents, the EagleFunding Documents, the Administration
Agreement, the Class B Certificate Agreements, the Participation
Agreement or any agreement or other instrument relating to any of
the foregoing except for, in the case of any such amendment,
supplement, modification or waiver, any such amendment,
modification, supplement or waiver of any agreement referred to
in this clause (B) which does not and will not, directly or
indirectly reduce, delay or otherwise have any adverse effect
upon (and does not and will not have the direct or indirect
effect of reducing, delaying or otherwise adversely affecting)
any payment required in respect of the Uncertificated Residual
Rights or VFNs or EagleFunding Residual Rights or the Class B
Certificate or the Eligible TLCs or any other right of any
Borrower or any Subsidiary of any Borrower or the Bank with
respect to any such agreement, Uncertificated Residual Right,
VFN, Eagle Funding Residual Right, the Class B Certificate or the
Eligible TLCs.


EVENTS OF DEFAULT

      Upon the occurrence of any of the following specified events
(each an "Event of Default"):

10.262.  Principal and Interest

The Borrowers shall default in the due and punctual
payment of (i) any principal due on any Loan;  or (ii) any
interest on any Loan or in the due and punctual payment of the
facility fee, arrangement fee or any other amount due hereunder;
provided that failure to duly and punctually make an interest
payment shall not be an Event of Default under this Section 9.1
if such interest payment is paid within five days after the date
it is due and the Borrowers have not been late in making an
interest payment on the Note more than once in the preceding 12
months; or

10.263.  Representations and Warranties

Any representation, warranty or statement made by any
Borrower in any Loan Document or otherwise in writing by any
Borrower in connection with any of the foregoing, or in any
certificate or other statement furnished pursuant to or in
connection with any of the foregoing, shall be breached or shall
prove to be untrue in any material respect on the date as of
which made; or

10.264     Certain Covenants

Any Borrower or any Subsidiary of any Borrower shall
default in the due performance or observance of any term,
covenant or agreement on its part to be performed or observed
pursuant to Section 7.1, Section 7.11, Section 7.16, Section
7.17, Section 7.18, Section 7.19 or Section 8; or




10.265     Other Covenants

Any Borrower or any Subsidiary of any Borrower shall
default in the due performance or observance of any term,
covenant or agreement on its part to be performed or observed
pursuant to any of the provisions of this Agreement (other than
those referred to in Sections 9.1, 9.2 or 9.3) and such default
(if capable of cure) shall continue unremedied for a period of 30
days after the earlier of the date on which the Bank gives the
Borrowers notice of such default or the date an officer of any
Borrower or any Subsidiary of any Borrower becomes aware thereof;
or


10.266    Other Obligations

(i) Any indebtedness of any Borrower or any Subsidiary of
any Borrower in aggregate principal amount in excess of $500,000
shall be duly declared to be or shall become due and payable
prior to the stated maturity thereof, or (ii) any obligation of
any Borrower or any Subsidiary of any Borrower in respect of
indebtedness in excess of $500,000 in aggregate principal amount
shall not be paid as and when the same becomes due and payable
including any applicable grace period, or there shall occur and
be continuing any event which constitutes an event of default
under any instrument, agreement or evidence of indebtedness
relating to any indebtedness of any Borrower or any Subsidiary of
any Borrower in excess of $500,000 in aggregate principal amount,
the effect of which is to permit (with or without the giving of
notice, the passage of time or both) the holder or holders of
such instrument, agreement or evidence of indebtedness, or a
trustee, agent or other representative on behalf of such holder
or holders, to cause the indebtedness evidenced thereby to become
due prior to its stated maturity; or

10.267. A Change of Control Event shall occur; or

10.268. Insolvency

Any Borrower or any Subsidiary of any Borrower shall
dissolve or suspend or discontinue its business, or shall make an
assignment for the benefit of creditors or a composition with
creditors, shall be unable or admit in writing its inability to
pay its debts as they mature, shall file a petition in
bankruptcy, shall become insolvent (howsoever such insolvency may
be evidenced), shall be adjudicated insolvent or bankrupt, shall
petition or apply to any tribunal for the appointment of (or
there shall be appointed pursuant to contract) any administrator,
receiver, liquidator or trustee of or for it or any substantial
part of its property or assets, shall commence any proceedings
relating to it under any bankruptcy, reorganization, arrangement,
readjustment of debt, receivership, dissolution or liquidation
law or statute of any jurisdiction, whether now or hereafter in
effect; or there shall be commenced against any Borrower or any
Subsidiary of any Borrower any such proceeding which shall remain
undismissed for a period of 60 days or more, or any order,
judgment or decree approving the petition in any such proceeding
shall be entered; or any Borrower or any Subsidiary of any
Borrower shall by any act or failure to act indicate its consent
to, approval of or acquiescence in, any such proceeding or in the
appointment of any receiver, liquidator or trustee of or for it
or any substantial part of its property or assets, or shall
suffer any such appointment to continue undischarged or unstayed
for a period of 60 days or more; or any Borrower or any
Subsidiary of any Borrower shall take any action for the purpose
of effecting any of the foregoing; or any court of competent
jurisdiction shall assume jurisdiction with respect to any such
proceeding or a receiver or trustee or other officer or
representative of a court or of creditors, or any court,
governmental officer or agency, shall under color of legal
authority, take and hold possession of any substantial part of
the property or assets of any Borrower or any Subsidiary of any
Borrower; or there shall happen or exist under the laws of any
applicable jurisdiction, with respect to any member of the
Consolidated Group, any event analogous to and having a
substantially similar effect to any of the foregoing events; or




10.269     Security Documents

The breach by any Borrower of any term or provision of
any Security Document, which default in the judgment of the Bank
is material; or any Security Document is at any time not in full
force and effect; or any of the Security Documents shall fail to
grant to the Bank the Lien and security interest purported to be
created thereby; or


10.270     Judgments

10.270.1   Any final non-appealable judgment for the payment of
money in excess of $500,000 shall be rendered against any
Borrower or any Subsidiary of any Borrower; or

10.270.2   Final judgment for the payment of money in excess of
$500,000 shall be rendered against any Borrower or any Subsidiary
of any Borrower, and the same shall remain undischarged for a
period of 30 days during which execution shall not be effectively
stayed or contested in good faith; or

10.271.    Change in Management

Any two of the following individuals shall cease to be
senior officers of LFC with an active management role:  Richard
Stratton, Heather Sica, James Shippee, and Ron Rabidou; or

10.272     Environmental Problems

Any Borrower or any Subsidiary of any Borrower incurs or
(in the opinion of the Bank) is reasonably likely to incur,
Environmental Costs in excess of $500,000 in the aggregate during
any 18-month period;

then, and in any such event, and at any time thereafter, if any
Event of Default shall then be continuing the Bank may by written
notice to LFC; (i) declare the principal of and accrued interest
on the Loans to be, whereupon the same shall forthwith become,
due and payable without presentment, demand, protest or other
notice of any kind, all of which are hereby waived by the
Borrowers; and/or (ii) declare the Commitment, including each
Class Commitment, of the Bank terminated, whereupon the
Commitment and each Class Commitment of the Bank shall forthwith
terminate immediately; provided that if any Event of Default
described in Section 9.7 shall occur with respect to the
Borrowers, the result which would otherwise occur only upon the
giving of written notice by the Bank to the Borrowers as herein
described shall occur automatically, without the giving of any
such notice.


REPRESENTATIONS AND WARRANTIES

      In order to induce the Bank to enter into this Agreement and
to make the Loans provided for herein, each of the Borrowers
makes the following representations, covenants and warranties,
both as of the date hereof and (after giving effect to the
transactions contemplated hereby to occur on the Closing Date) as
of the Closing Date (unless such representation, covenant or
warranty is expressly made as of a specified date, in which case
the same shall be made as of such date), which representations,
covenants and warranties shall survive the execution and delivery
of this Agreement and the other documents and instruments
referred to herein:


10.273     Status; Validity.


10.273.1   LFC and Realty are duly organized and validly existing
corporations in good standing under the laws of Massachusetts and
Delaware, respectively, and have the corporate power and
authority to own or hold under lease their respective properties
and assets, to transact the businesses in which each is engaged,
to enter into and perform this Agreement and the other Loan
Documents and to borrow hereunder.  Each Borrower is duly
qualified or licensed as a foreign corporation in good standing
in each jurisdiction where failure to so qualify would have a
Material Adverse Effect.  The chief executive office of each of
the Borrowers, each LHC, the Priority Trust, LMSC, LTSC and LCC
is located in Williamstown, Massachusetts.

10.273.2   Each LHC is a duly organized and validly existing
corporation in good standing under the laws of Delaware and has
the corporate power and authority to own or hold under lease its
property and assets, and to transact the business in which it is
engaged, and is duly qualified or licensed as a foreign
corporation in good standing in each jurisdiction where failure
so to qualify would have a Material Adverse Effect.

10.273.3   Each of LMSC, LTSC and LCC is a duly organized and
validly existing limited liability company in good standing under
the laws of Delaware and has the corporate power and authority to
own or hold under lease its property and assets, and to transact
the business in which it is engaged, and is duly qualified or
licensed as a foreign limited liability company in good standing
in each jurisdiction where failure so to qualify would have a
Material Adverse Effect.

10.273.4   The Priority Trust is a duly organized and validly
existing business trust in good standing under the laws of
Delaware and has the corporate power and authority to own or hold
under lease its property and assets, and to transact the business
in which it is engaged, and is duly qualified or licensed as a
foreign business trust in good standing in each jurisdiction
where failure so to qualify would have a Material Adverse Effect.

10.273.5   The execution, delivery and performance by each
Borrower of this Agreement and the other Loan Documents and the
other documents, agreements or instruments provided for therein,
the consummation of the transactions contemplated thereunder and
the use of the proceeds of the Loans have been duly authorized by
all necessary corporate and stockholder action on the part of
such Borrower and each relevant Subsidiary of such Borrower.
This Agreement and the other Loan Documents and the other
documents, agreements or instruments provided for therein are the
legal, valid and binding obligations of each Borrower,
enforceable in accordance with their respective terms subject, as
to enforceability, to applicable bankruptcy, insolvency,
reorganization and similar laws affecting the enforcement of
creditors' rights generally and to general principles of equity
(regardless of whether such enforcement is considered in a
proceeding in equity or at law).




10.273.6   LFC is the primary operating company as among the
Borrowers, its Subsidiaries and any other Affiliate of any
Borrower, and is the sole primary servicer, purchaser and
originator of Receivables owned, directly or indirectly, by any
of the Borrowers, any Subsidiary, any Affiliate of any Borrower
or any trust or pool or similar entity created or capitalized by
any of the Borrowers, any Subsidiary or any Affiliate of any
Borrower, it being understood that LFC shall be permitted to
retain subservicers consistent with past practice.  Realty is a
real estate investment trust (in compliance with all applicable
Legal Requirements) whose primary business is to purchase real
estate related assets from LFC.


10.274.    Compliance with Other Instruments

No Borrower and no Subsidiary of any Borrower is in
material default under any Material Agreement to which it is a
party, and neither the execution, delivery or performance of this
Agreement and the other Loan Documents nor the consummation of
the transactions herein or therein contemplated, nor compliance
with the terms and provisions hereof or thereof, will contravene
any provision of any Legal Requirement or will conflict with or
will result in any breach of, any of the terms, covenants,
conditions or provisions of, or constitute a default under, or,
except as provided by the Security Documents, result in the
creation or imposition of (or the obligation to create or impose)
any Lien upon any of the property or assets of such Person
pursuant to the terms of any indenture, mortgage, deed of trust
or Material Agreement to which such Person is a signatory or by
which such Person is bound or to which such Person may be subject
or violate any provision of the Charter Documents of such Person.

10.275     Litigation

Except as disclosed on Schedule 10.3 to this Agreement, as
of the date hereof and as of the Closing Date, there are no
actions, suits or proceedings pending or, to the knowledge of the
Borrowers, threatened, against or affecting any Borrower or any
Subsidiary before any Government Authority, which, if adversely
determined, would have a Material Adverse Effect on any Borrower
or any Subsidiary, or on the Consolidated Group.

10.276.    Compliance with Law

Except for matters which could not result in a Material
Adverse Change in respect of any Borrower or any Subsidiary of
any Borrower or the Consolidated Group (a) all business and
operations of each Borrower and each Subsidiary of each Borrower
have been and are being conducted in accordance with all
applicable Legal Requirements; (b) each Borrower and each
Subsidiary of each Borrower has obtained all permits, licenses
and authorizations, or consents which are otherwise necessary,
for such Person to conduct its business as it is conducted; and
(c) neither any Borrower nor any Subsidiary of any Borrower is a
party to, has been threatened with, and there are no facts
existing as a basis for any governmental or other proceeding
which might result in a suspension, limitation or revocation of
any such permit, license or authorization.

10.277.    LCC, LMSC, LTSC and Priority Trust




10.277.1   One hundred percent (100%) of the membership interest
in each of LCC, LTSC and LMSC is owned, beneficially and of
record, by LFC and such interests are not represented by one or
more certificates.  One hundred percent (100%) of the beneficial
interest in the Priority Trust is owned, beneficially and of
record, by LFC and such interest is represented by a
certificate.  One hundred percent (100%) of the issued and
outstanding capital stock of each LHC is owned, beneficially and
of record, by LHC.  Such membership interests in LCC, LTSC and
LMSC, the beneficial interest in the Priority Trust and the
stocks of LHCs are owned by LFC free and clear of all Liens
(other than Liens in favor of the Bank).


10.277.2   Other than as disclosed in the Financial Statements
referred to in Section 10.11, no member of the Consolidated Group
has outstanding any option, warrant, bonds, debentures or other
right, put, call or commitment to issue, or any obligation or
commitment to purchase any of its authorized capital stock or
other equity interest, or any securities convertible into or
exchangeable for any of its authorized capital stock or other
equity interest.

10.277.3   None of LMSC, LTSC or LCC has any (and so long as the
membership interests in LMSC. LTSC or LCC are pledged to the Bank
as Collateral, will not have) outstanding option, warrant, bonds,
debentures or other right, put, call or commitment to issue, or
any obligation or commitment to purchase any of its membership
interests, or any securities convertible into or exchangeable for
any of its membership interests.  No LHC has any (and so long as
any VFN is pledged to the Bank as Collateral, will not have)
outstanding option, warrant, bonds, debentures or other right,
put, call or commitment to issue, or any obligation or commitment
to purchase any of its capital stock, or any securities
convertible into or exchangeable for any of its capital stock.
The Priority Trust does not have any (and so long as any
beneficial interest in the Priority Trust is pledged to the Bank
as Collateral, will not have) outstanding option, warrant, bonds,
debentures or other right, put, call or commitment to issue, or
any obligation or commitment to purchase any of the beneficial
interest in the Priority Trust, or any securities convertible
into or exchangeable for any beneficial interest in the Priority
Trust.

10.278     Governmental Approvals

No order, permission, consent, approval, license,
authorization, registration or validation of, or filing with, or
exemption by, any Government Authority is required to authorize,
or is required in connection with the execution, delivery and
performance of this Agreement or the other Loan Documents by any
Borrower or any Subsidiary of any Borrower, or the taking of any
action hereby or thereby contemplated.

10.279     Federal Reserve Margin Regulations; Proceeds.

10.279.1   No member of the Consolidated Group is engaged
principally, or as one of its important activities, in the
business of extending credit for the purpose of purchasing or
carrying any margin stock (within the meaning of Regulation  of
the Board of Governors of the Federal Reserve System). No part
of the proceeds of any Loans will be used to purchase or carry
any such margin stock or to extend credit to others for the
purpose of purchasing or carrying any such margin stock.

10.279.2   The proceeds of the Loans shall be used solely for the
Borrowers' working capital needs.

10.280.    Taxes




10.280.1   All tax returns of any nature whatsoever, including but
not limited to, all US income, payroll, stock transfer, and
excise tax returns and all appropriate state and local income,
sales, excise, payroll, franchise and real and personal property
tax returns, and corresponding returns under the laws of any
jurisdiction, which are required to be filed by any Borrower or
any Subsidiary of any Borrower have been or will be filed by the
due date or extended due date of such returns.


10.280.2   Except for amounts which in the aggregate do not exceed
$100,000, all taxes due and payable with respect to each member
of the Consolidated Group have been paid, and there are no
liabilities, interest or penalties payable with respect to any
taxes which remain unpaid.

10.281     Investment Company Act

Neither any Borrower nor any Subsidiary of any Borrower
nor the entering into of the Loan Documents nor the issuance of
the Note, is subject to any of the provisions of the Investment
Company Act of 1940, as amended.  Neither any Borrower nor any
Subsidiary of any Borrower is a "holding company" as defined in
the Public Utility Holding Company Act of 1935, as amended, or
subject to any other federal or state statute or regulation
limiting its ability to incur Indebtedness for Money Borrowed.

10.282.    Properties of the Borrowers

10.282.1   The Borrowers and their respective Subsidiaries have
good and marketable title to, or valid leasehold interests in,
all of their material properties and assets.

10.282.2   The Borrowers have full, valid and exclusive right,
title and interest (in fee simple where applicable) to all of the
Borrowing Base Collateral.  The Borrowers' ownership rights in
and to all of the foregoing are subject to no Liens, burdens or
defects.

10.282.3   The Borrowing Base Collateral Documents are in full
force and effect; there have been no amendments to, or waivers of
any provisions of, such documents other than amendments or
waivers, in the ordinary course of business, of the Required
Consumer Loan Documents which are not material to the value of
the Eligible Consumer Loans in the aggregate.

10.283.    Financial Condition

10.283.1   The audited consolidated Financial Statements of the
Consolidated Group for its Fiscal Year ended December 31, 1997
and the financial statements for the nine months ended September
30, 1998 contained in LFC's quarterly report on Form 10-Q for the
quarter ended September 30, 1998 have been delivered to the Bank,
have been prepared in accordance with GAAP and fairly present the
financial condition and the results of operations of the
Consolidated Group as of the dates and for the periods covered
thereby (subject, in the case of such unaudited statements, to
normal year-end audit and adjustment).  There are no contingent
obligations, material liabilities or any material unrealized or
anticipated losses from unfavorable commitments which are not
disclosed in such Financial Statements.




10.283.2   There has been no Material Adverse Change in respect of
the Consolidated Group, or any member thereof, since December 31,
1997.


10.283.3   At the time of, and after giving effect to, each Loan,
each Borrower, (i) is Solvent, and (ii) possesses, in the opinion
of the Borrowers, sufficient capital to conduct the business in
which it is engaged or presently proposes to engage.

10.284     Environmental Matters.

10.284.1   Each Borrower and each Subsidiary of any Borrower (and
any predecessor in interest of any of them) has been and
continues to be in material compliance with all applicable
Environmental Laws;

10.284.2   Each Borrower and each Subsidiary of any Borrower has
obtained all material permits and approvals required under
Environmental Laws, including all material environmental, health
and safety permits, licenses, approvals, authorization,
variances, agreements, and waivers of Government Authorities
("Environmental Permits") necessary for the conduct of its
business and the operation of its facility, and all such
Environmental Permits are in good standing and each Borrower and
each Subsidiary of any Borrower is in compliance with all
material terms and conditions of such Environmental Permits;

10.284.3   No Borrower and no Subsidiary of any Borrower nor any
of their respective Properties or operations is subject to any
outstanding written order from or agreement with any Government
Authority or other Person or is subject to any judicial or
docketed administrative proceeding respecting any (x)
Environmental Law, (y) Remedial Action or (z) Environmental Claim
or Environmental Costs;

10.284.4   To each Borrower's knowledge, there are no conditions
or circumstances now or formerly associated with any Property or
operations by any Borrower or any Subsidiary of any Borrower (or
any predecessor in interest of any of them) which may prevent or
interfere with material compliance by any Borrower or any of its
Subsidiaries with any applicable Environmental Laws or form the
basis of any material Environmental Claim or give rise to any
material Environmental Costs;

10.284.5   No Environmental Claim (including, without limitation,
in respect of any alleged violation of any Environmental Laws) is
pending or threatened against, or has been received by, any
Borrower or any Subsidiary of any Borrower;

10.284.6   No Environmental Lien and no unrecorded Environmental
Lien has attached to any Property of any Borrower or any
Subsidiary of any Borrower and to each Borrower's knowledge,  no
action has been taken by any Person which could subject any such
Property to any Environmental Lien;




10.284.7   No Borrower and no Subsidiary of any Borrower (nor any
predecessor in interest of any of them) has transported or
arranged for the transportation of any Contaminant to any
location which is (i) listed on the National Priorities List
under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, (ii) listed for possible
inclusion on the National Priorities List by the United States
Environmental Protection Agency, or (iii) listed on any similar
state list or (iv) to each Borrower's knowledge,  the subject of
federal, state or local enforcement actions or other
investigations which may lead to Environmental Claims against any
Borrower or any Subsidiary of any Borrower or the imposition of
Environmental Costs on any Borrower or any Subsidiary of any
Borrower; and


10.284.8   Except as complies with all Environmental Laws, no
Property is located in, and no operations by any Borrower or any
Subsidiary of any Borrower (or any predecessor in interest of any
of them) affect, any Environmentally Sensitive Area.

10.285     Disclosure

Neither this Agreement or any other Loan Document nor any
statement, list, certificate or other document or information, or
any schedules to this Agreement or any other Loan Document
delivered or to be delivered to the Bank contains or will contain
any untrue statement of a material fact or omits or will omit to
state a material fact necessary to make statements contained
herein or therein, in light of the circumstances in which they
are made, not misleading.

10.286     Compliance with ERISA

The Borrowers and each ERISA Affiliate and each Plan and
the trusts maintained pursuant to such plans are in compliance in
all material respects with the presently applicable provisions of
Sections 401 through and including 417 of the Code, and of ERISA
and (i) no event which constitutes a Reportable Event as defined
in Section 4043 of ERISA has occurred and is continuing with
respect to any Plan which is or was covered by Title IV of ERISA,
(ii) no Plan which is subject to Part 3 of Subtitle B of Title 1
of ERISA has incurred any "accumulated funding deficiency"
(within the meaning of Section 302 of ERISA or Section 412 of the
Code) whether or not waived, and (iii) no written notice of
liability has been received with respect to any Borrower or any
Subsidiary of any Borrower for any "prohibited transaction"
(within the meaning of Section 4975 of the Code or Section 406 of
ERISA), nor has any such prohibited transaction resulting in
liability to any Borrower or any ERISA Affiliate occurred.

           Neither any Borrower nor any ERISA Affiliate (i) has
incurred any liability to the PBGC (or any successor thereto
under ERISA), or to any trustee of a trust established under
Section 4049 of ERISA, in connection with any Plan (other than
liability for premiums under Section 4007 or ERISA), (ii) has
incurred any withdrawal liability under Subtitle E of Title IV of
ERISA in connection with any Plan which is a Multiemployer Plan,
nor (iii) has contributed or has been obligated to contribute on
or after September 26, 1980, to any "multiemployer plan" (within
the meaning of Section 3(37) of ERISA) which is subject to Title
IV of ERISA.




           The consummation of the transactions contemplated by
this Agreement (i) will not give rise to any liability on behalf
of any Borrower or any of its ERISA Affiliates under Title IV of
ERISA to the PBGC (other than ordinary and usual PBGC premium
liability), to the trustee of a trust established pursuant to
Section 4049 of ERISA, or to any Multiemployer Plan, and (ii)
will not constitute a "prohibited transaction" under Section 406
of ERISA or Section 4975 of the Code.


10.287.    The Security Documents

(a) Each Security Document when delivered will grant a
Lien in the properties or rights intended to be covered thereby
(the "Collateral") which (i) will constitute a valid and
enforceable security interest under the Uniform Commercial Code
of the State (x) in which the Collateral is located and (y) by
which any Security Document is governed (as applicable, the
"UCC"), (ii) will be entitled to all of the rights, benefits and
priorities provided by the UCC, and (iii) when such Security
Documents or financing statements with respect thereto are filed
and recorded as required by the UCC, will be superior and prior
to the rights of all third Persons now existing or hereafter
arising whether by way of mortgage, pledge, lien, security
interest, encumbrance or otherwise, except for Permitted Liens.
All such action as is necessary in law has been taken, or prior
to the Closing Date (or, in the case of Liens to be granted
subsequent to the Closing Date, prior to the date required
therefor in accordance with the terms hereof) will have been
taken, to establish and perfect the security interest of the Bank
in the Collateral and to entitle the Bank to exercise the rights
and remedies provided in each of the Security Documents and the
UCC, and no filing, recording, registration or giving of notice
or other action is required in connection therewith except such
as has been made or given or will have been made or given prior
to such date(s). All filing and other fees and all recording or
other tax payable with respect to the recording of any of the
Security Documents and UCC financing statements have been paid or
provided for.

10.288     [Intentionally deleted.]

10.289.    Long Term Debt

No principal amount of any Long Term Debt is payable on
or prior to the Revolving Credit Maturity Date other than:

10.289.1   On April 1 of each year, up to $920,000 in respect of
LFC's 10% Notes due 2004;

10.289.2   On June 1 of each year, up to $878,500 in respect of
LFC's 8 7/8% Notes due 2003;

10.289.3   On March 1 of 2001, $7,500,000 in respect of LFC's 9.3%
Notes due 2004;

10.289.4   On December 1 of each year, up to $2,587,500 in respect
of LFC's 8.45% Notes due 2002;

10.289.5   On November 1 of each year, up to $500,000 in respect
of LFC's 8.25%  Notes due 2003; and

10.289.6   On December 1 of each year, up to $1,000,000 in respect
of LFC's 9.25% Notes due 2003.




10.290.    Qualification


10.290.1   Solely by reason of (and without regard to any other
activities of the Bank in any state in which Collateral is
located) the entering into, performance and enforcement of this
Agreement, the Note, the Security Documents and the other Loan
Documents by the Bank will not constitute doing business by the
Bank in Massachusetts or any such other state or result in any
liability of the Bank for taxes or other governmental charges in
any such state; and qualification by the Bank to do business in
such jurisdiction is not necessary in connection with, and the
failure to so qualify will not affect, the enforcement of, or
exercise of any rights or remedies under, any of such documents.

10.290.2   No "business activity," "doing business" or similar
report or notice is required to be filed by the Bank in any such
jurisdiction in connection with the Loans or the transactions
contemplated by this Agreement, and the failure to file any such
report or notice will not affect the enforcement of, or the
exercise of any rights or remedies under, this Agreement, the
Security Documents or any of the other Loan Documents.

10.291.    Business of Consolidated Group

Schedule 10.19 hereto sets forth a complete and accurate
description of the business of the Borrowers and their respective
Subsidiaries as of the date hereof including a full description
of the types of loans made and loans and assets acquired by the
Borrowers and their respective Subsidiaries.

10.292.     Dealer Recourse

Schedule 10.20 sets forth a complete and accurate
description of the Borrowers' policies for determining when
Dealer Recourse should no longer be treated as available to the
Borrowers or their respective Subsidiaries and when the amount of
Dealer Recourse which the Borrowers treat as available from a
Dealer should be reduced.  The Borrowers have treated and will
treat Dealer Recourse as described in Schedule 10.20 in each
statement, report and calculation furnished and which will be
furnished to the Bank.

10.293.    Identity of Spread Account: Excess Servicing Assets

The "Custody Receivables Account" specified in each
Borrowing Base Certificate is the "Spread Account" (as defined in
each of the Receivables Purchase Agreement and the Receivables
Loan Agreement).   The only Person other than LMSC with any
interest in the Spread Account or the Agent's Account (as defined
in the Receivables Loan Agreement and the Receivables Purchase
Agreement, in each case as in effect on the date hereof) are
LMSC, the Agent and the Lender in their capacities as such under
the Receivables Loan Agreement, and the Agent and the Purchaser
in their capacities as such under the Receivables Purchase
Agreement.  All rights of LMSC to receive remittances from the
Spread Account are set forth in Sections 2.06(b) and 2.06(c) of
(i) the Receivables Loan Agreement and (ii) the Receivables
Purchase Agreement.  The rights of LMSC under Sections
2.05(c)(vii) and 2.05(c)(viii) of (i) the Receivables Loan
Agreement and (ii) the Receivables Purchase Agreement constitute
the entirety of the "Excess Servicing Asset" specified in the
most recent Borrowing Base Certificate.  No Person other than
LMSC has any interest in the Excess Servicing Asset.




10.294    Borrowing Base Collateral Documents

Schedule E hereto lists all of the Borrowing Base
Collateral Documents in effect as of the date hereof.  All of the
representations and warranties of the Borrowers or their
respective Subsidiaries set forth in any of the Borrowing Base
Collateral Documents are materially true and correct as of the
date hereof.  No default under or material violation of the terms
of any of the Borrowing Base Collateral Documents (other than any
default under Required Consumer Loan Documents in the ordinary
course of business which is not material to the value of the
Eligible Consumer Loans in the aggregate) has occurred and is
continuing as of the date hereof.


[Intentionally deleted.]

MISCELLANEOUS

10.295. Calculations and Financial Data

Calculations hereunder (including, without limitation,
calculations used in determining, or in any certificate of the
Borrowers reflecting, compliance by the Borrowers with the
provisions of this Agreement) shall be made and financial data
required hereby shall be prepared both as to classification of
items and as to amount in accordance with GAAP consistent with
the audited Financial Statements described in Section 10.11(a);
provided that for purposes of Sections 8.18 through 8.22
(inclusive) no effect shall be given to any change in GAAP from
those in effect on December 31, 1995.

10.296  Ammendment and Waiver

Except as otherwise provided, no provision of any of the
Loan Documents may be changed, waived, discharged or terminated
orally, but only by an instrument in writing signed by the Bank
and the Borrowers, except that waivers of provisions relating to
the Borrowers' performance or non-performance of their
obligations hereunder or thereunder need not be signed by the
Borrowers.  Any such change, waiver, discharge or termination
shall be effective only in the specific instance and for the
specific purposes for which made or given.

10.297.    Expenses; Indemnification

10.297.1   Whether or not the transactions hereby contemplated shall
be consummated, the Borrowers shall pay all reasonable out-of-pocket
costs and expenses of the Bank incurred in connection with (x) the
preparation, execution, delivery, administration, filing and
recording of, and (y) the amendment (including any waiver or consent)
or modification of (including any amendment, waiver, consent or
modification at any time requested by the Borrowers, whether or not
the same is finalized or executed), and enforcement of or
preservation of any rights under, this Agreement and the other Loan
Documents,  including, without limitation, (A) the reasonable fees
and expenses of Sullivan & Worcester LLP, special counsel for the
Bank and any special or local counsel retained by the Bank,  (B) the
reasonable fees and expenses of any appraisers retained by the Bank
if applicable with respect to any collateral granted to the Bank
after the date hereof, and (C) travel, title insurance, mortgage
recording and filing costs.




10.297.2   The Borrowers agree to pay, and to save the Bank harmless
from (x) all present and future stamp, filing and other similar
taxes, fees or charges (including interest and penalties, if any),
which may be payable in connection with the Loan Documents or the
issuance of the Note or any modification of any of the foregoing, and
(y) all finder's and broker's fees in connection with the
transactions contemplated by this Agreement and the other Loan
Documents.


10.297.3   The Borrowers agree to indemnify, pay and hold harmless the
Bank, any Bank Assignee and each holder of a Note and their
respective present and future officers, directors, employees and
agents (collectively, the "Indemnified Parties") from and against all
liability, losses, damages and expenses (including, without
limitation, legal fees and expenses) arising out of, or in any way
connected with, or as a result of (i) the execution and delivery of
the Letter Agreement, of this Agreement and the other Loan Documents
or the documents or transactions contemplated hereby and thereby or
the performance by the parties hereto or thereto of their respective
obligations hereunder and thereunder or relating thereto; or (ii) any
claim, action, suit, investigation or proceeding (in each case,
regardless of whether or not the Indemnified Party is a party thereto
or target thereof) in any way relating to any Collateral, the
Borrowers, any Subsidiary or any Affiliate of any of the foregoing;
or (iii) any actual or alleged violation by the Borrowers, any
Affiliate or Subsidiary (or any predecessor in interest of any of
them) of any Environmental Law or any claim being made or action
being brought against any Indemnified Party under or in respect of
any Environmental Law or any alleged violation thereof by any
Indemnified Party; provided that the Borrowers shall not be liable to
any Indemnified Party for any portion of such liabilities, losses,
damages and expenses sustained or incurred as a direct result of the
gross negligence or willful misconduct of the Bank or such
Indemnified Party if such gross negligence or willful misconduct is
determined to have occurred by a final and non-appealable decision of
a court of competent jurisdiction.  No Indemnified Party shall be
entitled to any indirect or consequential damages.

10.297.4   All obligations provided for in this Section 12.3 and
Sections 3.4, 3.5, 3.7, 4.1, 4.2 and 5.2 shall survive any
termination of this Agreement and the Commitment, and the payment in
full of the Loans.

10.298     Benefits of Agreement; Descriptive Headings.




10.298.1   This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the parties hereto and their
respective successors and assigns, and, in particular, shall inure to
the benefit of the holders from time to time of the Note; provided,
however, that the Borrowers may not assign or transfer any of their
rights or obligations hereunder without the prior written consent of
the Bank and any such purported assignment or transfer shall be
void.  In furtherance of the foregoing, the Bank shall be entitled at
any time to grant participations in or assign, sell or otherwise
transfer the whole or any part of its rights and/or obligations under
this Agreement, the Loan Documents or any Loan or the Note to any
Person.  No such participation shall relieve the Bank from its
obligations hereunder and the Borrowers need deal solely with the
Bank with respect to waivers, modifications and consents to this
Agreement, the Loan Documents or the Note.  Any such participant,
assignee, purchaser or transferee is referred to in this Agreement as
a "Bank Assignee".  The Borrowers agree that the provisions of
Sections 3.4, 3.5, 3.6, 3.7, 5.2 and 12.3 shall run to the benefit of
each Bank Assignee and its participations or interests herein, and
the Bank may enforce such provisions on behalf of any such Bank
Assignee; provided, however, that if the Bank grants a participation
in the whole or any part of its rights and/or obligations pursuant to
this Section 12.4, then the amounts that the Borrowers are required
to pay pursuant to this Agreement (including, without limitation,
additional amounts made pursuant to Section 5.2) shall not exceed the
amounts that the Borrowers would have been required to pay to the
Bank pursuant to this Agreement had the Bank not granted such
participation.  The Borrowers hereby further agree that any such Bank
Assignee may, to the fullest extent permitted by applicable law,
exercise the right of set off with respect to such participation (and
in an amount up to the amount of such participation) as fully as if
such Bank Assignee were the direct creditor of the Borrowers.  Upon a
participation, assignment, sale or transfer in accordance with the
foregoing, the Borrowers shall execute such documents and do such
acts as the Bank may reasonably request to effect same.  The Bank may
furnish any information concerning the Borrowers or any Subsidiary of
any Borrower in its possession from time to time to Bank Assignees
(including prospective Bank Assignees).  The Bank shall notify
Borrowers of any participation, assignment, sale or transfer granted
by it pursuant to this Section 12.4 but the Borrowers' approval shall
not be required for any such participation, assignment, sale or
transfer.  The Borrowers shall not be responsible for any due
diligence costs or legal expenses of such Bank Assignees in
connection with their entering into such participation, assignment,
sale or transfer.


10.298.2   The descriptive headings of the various provisions of this
Agreement and the other Loan Documents are inserted for convenience
of reference only and shall not be deemed to affect the meaning or
construction of any of the provisions hereof.

10.298.3   Notwithstanding anything to the contrary contained herein
or in any of the Loan Documents, unless the Bank or the Borrowers
otherwise request with respect to any specific exhibit, exhibits to
this Agreement shall not be required to be attached to the execution
or any other copy of this Agreement, and any references in this
Agreement or the other Loan Documents to such exhibits as "Exhibits
hereto," "Exhibits to this Agreement" or words of similar effect
shall be deemed to refer to such document as executed by the parties
thereto and delivered on the Closing Date.

10.299 Notices, Requests, Demands, etc.

Except as otherwise expressly provided herein, all notices,
requests, demands or other communications to or upon the respective
parties hereto shall be deemed to have been duly given or made when
delivered (if sent by Federal Express or other similar overnight
delivery service), or three Business Days after mailing (when mailed,
postage prepaid, by registered or certified mail, return receipt
requested), or (in the case of telex, telegraphic, telecopier or
cable notice) when delivered to the telex, telegraph, telecopier or
cable company, or (in the case of telex or telecopier notice sent
over a telex or telecopier owned or operated by a party hereto) when
sent; in each case addressed as follows, except that notices and
communications to the Bank pursuant to Sections 2 and 9 shall not be
effective until received by the Bank: (i) if to the Bank, at the
Closing Office, and (ii) if to the Borrowers, at LFC's address
specified with its signature below (Attention: President), or to such
other addresses as any of the parties hereto may hereafter specify to
the others in writing, provided that communications with respect to a
change of address shall be deemed to be effective when actually
received.




10.300.   Governing Law

THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND THE RIGHTS
AND OBLIGATIONS OF THE PARTIES HEREUNDER AND UNDER THE OTHER LOAN
DOCUMENTS SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS EXECUTED WHOLLY WITHIN THE STATE OF NEW YORK (REGARDLESS OF
THE PLACE WHERE THIS AGREEMENT IS EXECUTED); except (as to any other
Loan Document) to the extent specifically set forth otherwise in that
Loan Document.


10.301   Counterparts; Telecopies.

This Agreement and the other Loan Documents may be executed in
any number of counterparts by the different parties hereto and
thereto on separate counterparts, each of which when so executed and
delivered shall be deemed to be an original, but all the counterparts
for each such Loan Document shall together constitute one and the
same instrument.  Telecopied signatures hereto and to the other Loan
Documents shall be of the same force and effect as an original of a
manually signed copy.

10.302     Waivers

 No failure or delay on the part of the Bank in exercising any
right, power or privilege under this Agreement or any other Loan
Document, and no course of dealing between the Borrowers or any
Subsidiary of any Borrower and the Bank shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, power
or privilege hereunder preclude any other or further exercise thereof
or the exercise of any other right, power or privilege. The rights
and remedies herein expressly provided are cumulative and not
exclusive of any rights or remedies which the Bank would otherwise
have pursuant to such documents or at law or equity. No notice to or
demand on the Borrowers in any case shall entitle the Borrowers to
any other or further notice or demand in similar or other
circumstances or constitute a waiver of the right of the Bank to any
other or further action in any circumstances without notice or demand.

10.303     Recoveries

Any Recoveries (after deduction and payment of all expenses
and costs permitted by this Agreement, the Security Documents or
applicable law), shall be applied against the Loans.




10.304     Jurisdiction

 EACH BORROWER HEREBY AGREES THAT ANY LEGAL ACTION OR
PROCEEDING AGAINST IT WITH RESPECT TO THIS AGREEMENT, THE NOTE OR ANY
OF THE OTHER LOAN DOCUMENTS OR THE DOCUMENTS DELIVERED IN CONNECTION
THEREWITH MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF
THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK AS
THE BANK MAY ELECT, and, by execution and delivery hereof, each
Borrower accepts and consents for itself and in respect to its
property, generally and unconditionally, the jurisdiction of the
aforesaid courts and agrees that such jurisdiction shall be
exclusive, unless waived by the Bank in writing, with respect to any
action or proceeding brought by it against the Bank and any questions
relating to usury.  Each of the Bank and each Borrower agrees that
Sections 5-1401 and 5-1402 of the General Obligations Law of the
State of New York shall apply to the Loan Documents and waives any
right to stay or to dismiss any action or proceeding brought before
said courts on the basis of forum non conveniens.  In furtherance of
the foregoing, each Borrower hereby irrevocably designates and
appoints Battle Fowler LLP, 75 East 55th Street, New York, New York
10022, as agent of the Borrowers to receive service of all process
brought against the Borrowers with respect to any such proceeding in
any such court in New York, such service being hereby acknowledged by
the Borrowers to be effective and binding service in every respect.
Each Borrower hereby irrevocably consents that all process served or
brought against it or its agent for service of process with respect
to any such proceeding in any such court in New York shall be
effective and binding service in every respect if sent by registered
mail, or (if permitted by law) by Federal Express or other similar
overnight delivery service, to LFC at its address set forth next to
its signature below or to such other address as the Bank is notified
of in accordance with the provisions of Section 12.5 or to its agent
as aforesaid. Nothing herein shall affect the right of the Bank to
serve process in any other manner permitted by law or shall limit the
right of the Bank to bring proceedings against the Borrowers in the
courts of any other court or tribunal otherwise having jurisdiction.


10.305    Severability.

 If any provision of this Agreement shall be held or deemed to
be or shall, in fact, be illegal, inoperative or unenforceable, the
same shall not affect any other provision or provisions herein
contained or render the same invalid, inoperative or unenforceable to
any extent whatever.

10.306     Right of Set-off

In addition to any rights now or hereafter granted under
applicable law or otherwise and not by way of limitation of any such
rights, upon the occurrence of an Event of Default the Bank is hereby
authorized at any time or from time to time, without notice to the
Borrowers or to any other Person, any such notice being hereby
expressly waived, to set-off and to appropriate and apply any and all
deposits (general or special, time or demand, provisional or final)
and any other indebtedness at any time held or owing by the Bank to
or for the credit or the account of any Borrower against and on
account of the obligations and liabilities of the Borrowers now or
hereafter existing under any of the Loan Documents irrespective of
whether or not any demand shall have been made thereunder and
although said obligations, liabilities or claims, or any of them,
shall be contingent or unmatured. The Bank, if it exercises any
rights granted under this Section 12.12, shall thereafter notify LFC
of such action; provided that the failure to give such notice shall
not affect the validity of such set-off and application.

10.307 No Third Party Beneficiaries.

This Agreement is solely for the benefit of the Bank, the
Borrowers and their respective successors and assigns (except as
otherwise expressly provided herein) and nothing contained herein
shall be deemed to confer upon anyone other than the Bank, the
Borrowers and their respective successors and assigns any right to
insist on or to enforce the performance or observance of any of the
obligations contained herein.  All conditions to the obligations of
the Bank to effect the Loans provided for herein are imposed solely
and exclusively for the benefit of the Bank and its successors and
assigns and no other Person shall have standing to require
satisfaction of such conditions in accordance with their terms and no
other Person shall under any circumstances be deemed to be
beneficiary of such conditions.

10.308     Effectiveness

This Agreement shall become effective when and as of the date
(the "Effective Date") that all of the parties hereto shall have
signed a copy hereof (whether the same or different counterparts) and
the Borrowers shall have delivered it to the Bank at the Closing
Office.

10.309.    Survival; Integration




10.309.1   Each of the representations, warranties, terms, covenants,
agreements and conditions contained in this Agreement shall
specifically survive the execution and delivery of this Agreement and
the other Loan Documents and the making of the Loans and shall,
unless otherwise expressly provided, continue in full force and
effect until the Commitment has been terminated and the Loans
together with interest thereon, the Commitment commissions, the fees
and compensation of the Bank, and all other sums payable hereunder or
thereunder have been indefeasibly paid in full.


10.309.2   This Agreement, together with the other Loan Documents,
comprises the complete and integrated agreement of the parties on the
subject matter hereof and thereof and supersedes the Letter
Agreement, the Existing Agreement and all other prior agreements,
written or oral, on the subject matter hereof and thereof.  In the
event of any direct conflict between the provisions of this Agreement
and those of any other Loan Document, the provisions of this
Agreement shall control and govern; provided that the inclusion of
supplemental rights or remedies in favor of the Bank in any other
Loan Document shall not be deemed a conflict with this Agreement.
Each Loan Document was drafted with the joint participation of the
respective parties thereto and shall be construed neither against nor
in favor of any party, but rather in accordance with the fair meaning
thereof.

10.310     Domicile of Loans

The Bank may make, maintain or transfer any of its Loans
hereunder to, or for the account of, any branch office, subsidiary or
affiliate of the Bank.

10.311     Waiver of Jury Trial

EACH OF THE BORROWERS AND THE BANK HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE ANY AND ALL RIGHTS THEY MAY HAVE
TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON, OR ARISING
OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT, OR ANY OTHER
LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER VERBAL OR WRITTEN), OR ACTIONS OF THE BORROWER OR
SUBSIDIARY OR THE BANK.  THIS PROVISION IS A MATERIAL INDUCEMENT FOR
THE BANK ENTERING INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.




10.312.   Joint and Several Obligations

Each and every representation, warranty, covenant and
agreement made by any of the Borrowers, hereunder and under the other
Loan Documents shall be joint and several, whether or not so
expressed, and such obligations of any of the Borrowers shall not be
subject to any counterclaim, setoff, recoupment or defense based upon
any claim any Borrower may have against any other Borrower or the
Bank, and shall remain in full force and effect without regard to,
and shall not be released, discharged or in any way affected by, any
circumstance or condition affecting any other Borrower, including
without limitation (a) any waiver, consent, extension, renewal,
indulgence or other action or inaction under or in respect of this
Agreement or any other Loan Document, or any agreement or other
document related thereto with respect to any other Borrower, or any
exercise or nonexercise of any right, remedy, power or privilege
under or in respect of any such agreement or instrument with respect
to the other Borrower, or the failure to give notice of any of the
foregoing to the other Borrower; (b) any invalidity or
unenforceability, in whole or in part, of any such agreement or
instrument with respect to any other Borrower; (c) any failure on the
part of any other Borrower for any reason to perform or comply with
any term of any such agreement ro instrument; (d) any bankruptcy,
insolvency, reorganization, arrangement, readjustment, composition,
liquidation or similar proceeding with respect to any other Borrower
or its properties or creditors; or (e) any other occurrence
whatsoever, whether similar or dissimilar to the foregoing, with
respect to any other Borrower.  Each Borrower hereby waives any
requirement of diligence or promptness on the part of Bank in the
enforcement of the their respective rights hereunder or under any
other Loan Document with respect to the obligations of itself or of
the other Borrowers.  Without limiting the foregoing, any failure to
make any demand upon, to pursue or exhaust any rights or remedies
against a Borrower, or any delay with respect thereto, shall not
affect the obligations of the other Borrower hereunder or under any
other Loan Document.



      [Remainder of Page Intentionally Left Blank]



      IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their respective
duly authorized officers as of the date first above written.


                                    LITCHFIELD FINANCIAL
CORPORATION
430 Main Street
Williamstown, Massachusetts  01267
fax:  413/458-1015                  By: /s/ Heather A. Sica
                                    Title:  Executive Vice
President

                                    LFC REALTY, INC.
430 Main Street
Williamstown, Massachusetts  01267  By: /s/ Heather A. Sica
fax:  413/458-1015                  Title:  Executive Vice
President


                                    BANK OF SCOTLAND
565 Fifth Avenue
New York, New York 10017
fax: 212/557-9460                   By: /s/ Steve Campbell
                                    Title:  Vice President
























                                                     Exhibit 10.186




AMENDMENT NO. 2 TO
SECOND AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT


      THIS AMENDMENT NO. 2 (the "Amendment") to the Second Amended
and Restated Loan and Security Agreement dated May 28, 1997, as
amended by Amendment No. 1 to Second Amended and Restated Loan
and Security Agreement dated as of October 1, 1998 (collectively,
the "Agreement") is dated as of January ____, 1999, and is among
BANKBOSTON, N.A., a national banking association with its head
office at 100 Federal Street, Boston, Massachusetts 02110 and
with a place of business in Providence, Rhode Island as agent
(the "Agent"); various financial institutions as are or may
become parties hereto including without limitation, KEYBANK
NATIONAL ASSOCIATION ("KeyBank") (collectively, the "Lenders");
and LITCHFIELD FINANCIAL CORPORATION with its principal place of
business at 430 Main Street, Williamstown, Massachusetts (the
"Borrower").

Preliminary Statement

      Pursuant to the terms of the Agreement, BankBoston, N.A. and
Fleet Bank-NH as Lenders have provided to the Borrower a
revolving credit facility in the original principal amount of up
to $50,000,000.  The Borrower has requested that the definition
of the "Borrowing Base" (and certain other definitions related
thereto) be amended to increase the availability under the
facility to $60,000,000.  KeyBank has agreed to become a Lender
and to advance funds, subject to the terms and conditions of the
Agreement, in an amount up to $10,000,000.  This Amendment is
intended to modify and amend the Agreement in certain particulars
to accomplish the foregoing.  Capitalized terms not otherwise
defined herein shall have the meaning of such terms in the
Agreement.

Agreement

      It is, therefore, agreed:

      The definition of "Loans" in the Preliminary Statement of
the Agreement, and Section 1.15(a) of the Agreement, are each
hereby amended by deleting "$50,000,000" and replacing the same
with "$60,000,000."  A corresponding change shall be made to each
document or agreement in which the aggregate amount of the
revolving credit facilities available to the Borrower is
described including, without limitation, (i) the Second Amended
and Restated Collateral Assignment of Contracts dated May 28,
1997; (ii) the Agency Agreement; (iii) the Custodial Agreement;
and (iv) the Collateral Account Agreement, each of which being
dated May 28, 1997.


      The following sections of the Agreement are hereby amended
by increasing the maximum amount which may be advanced against
various forms of Collateral in accordance with the following
table:
Section   Loan Collateral Type          From          To
1.4       Acquisition & Development     $10,000,000   $12,000,000
1.5       Construction                  $ 8,000,000   $ 9,600,000
1.8       Healthcare                    $10,000,000   $12,000,000
1.9       Home Equity                   $ 8,000,000   $ 9,600,000
1.11      Specialty Finance             $ 5,000,000   $ 6,000,000
1.13      Tax Certificate               $10,000,000   $12,000,000

      New Section 1.53(a) is hereby added to the Agreement as
follows:
      "1.53(a)  KeyBank Note shall have the meaning provided in
Section 2.1 herein."

      Section 1.55 of the Agreement is hereby amended by deleting
"$50,000,000" therefrom and replacing the same with "$60,000,000."
      Section 1.81 of the Agreement is hereby modified by
replacing the term "Total Serviced Portfolio" with the term
"Total Loan Portfolio".
      Section 2.1 of the Agreement is hereby deleted and replaced
with the following:
      2.1  The Notes.  Prior to or simultaneously with the
execution of this Agreement, (a) Borrower has executed a
Revolving Line of Credit Promissory Note payable to BankBoston in
the original principal amount of up to $30,000,000 (the
"BankBoston Note"), (b) Borrower has executed a Revolving Line of
Credit Promissory Note payable to Fleet in the original principal
amount of up to $20,000,000 (the "Fleet Note"), and (c) Borrower
is executing a Revolving Line of Credit Promissory Note payable
to KeyBank in the original principal amount of up to $10,000,000
(the "KeyBank Note" and collectively with the BankBoston Note and
the Fleet Note, the "Notes").

      The introductory paragraph of Section 9.1 is hereby amended
to read as follows:
9.1  Remedies Upon Default.  If an Event of Default shall occur,
Agent and Lenders shall not have any obligation to permit any
further borrowing hereunder.  Upon the occurrence of an Event of
Default specified in Section 8.4 or 8.8 hereof, all the
Indebtedness, including any Notes then outstanding, shall
automatically become due and payable, together with interest
thereon, without presentment, demand, protest or notice of any
kind, all of which being hereby waived by the Borrower.  Upon the
occurrence of any other Event of Default Agent and Lenders may
declare the Indebtedness, including the Notes, immediately due
and payable, without presentment, protest, demand or notice of
any kind, all of which are hereby expressly waived by Borrower.
In either such event the Agent and the Lenders shall have all
rights and remedies of a secured party under the UCC and any
other applicable law then in effect; and may pursue any and all
remedies provided for hereunder and in any one or more of the
Loan Documents or at law or in equity, including, without
limitation, the following:

      Exhibit 1.16 to the Agreement is hereby replaced with
Exhibit 1.16 as annexed hereto.
      From and after the date hereof, KeyBank shall be deemed to
be a "Lender" and be entitled to all of the benefits and subject
to all of the obligations of a Lender as may be set forth in the
Agreement and any documents ancillary thereto.
      Except as expressly modified above, the Agreement is hereby
restated and reaffirmed by the parties in all particulars.
      This Amendment No. 2 may be executed in multiple
counterparts, each being deemed an original and this being one of
the counterparts but all of which shall constitute one and the
same instrument.
      Signed as a sealed instrument.

                               BORROWER:
                               LITCHFIELD FINANCIAL CORPORATION

                               By:  /s/ Heather A. Sica
                                    --------------------
                               Name:  Heather A. Sica
                               Title:  Executive Vice President

                               AGENT:
                               BANKBOSTON, N.A.


                               By: /s/ Thomas J. Morris
                                   --------------------
                               Name:  Thomas J. Morris
                               Title:  Director

                               LENDERS:
                               BANKBOSTON, N.A.

                               By: /s/ Thomas J. Morris
                                   --------------------
                               Name:  Thomas J. Morris
                               Title:  Director

                               FLEET BANK-NH

                               By: /s/ David Canedy
                                   ----------------
                               Name:  David Canedy
                               Title:  Vice President

                               KEYBANK NATIONAL ASSOCIATION


                               By: /s/ John W. Kingston
                                   ---------------------
                               Name:  John W. Kingston
                               Title:  Vice President



                                                     Exhibit 10.187


               LITCHFIELD HYPOTHECATION CORP. 1997-B


                       NOTE PURCHASE AGREEMENT


                                    March 23, 1999

           LITCHFIELD HYPOTHECATION CORP.1997-B, a Delaware
corporation, and its successors and assigns (the "Issuer"), and
LITCHFIELD FINANCIAL CORPORATION, a Massachusetts corporation
("Litchfield"), hereby agree with UNION BANK OF CALIFORNIA, N.A.
(the "Purchaser"), as follows:

           1.   The Notes.  The Issuer has authorized the
execution and delivery to The Chase Manhattan Bank, as trustee
(the "Trustee"), of an Indenture of Trust, dated as of August 1,
1997, as amended (the "Indenture"), providing for the issuance
and sale by the Issuer of its Hypothecation Loan Collateralized
Notes (the "Notes"), in one or more series, secured by the Trust
Estate granted to the Trustee by the Issuer pursuant to the
Indenture, which includes, among other assets, a pool of certain
hypothecation Loans owned by the Issuer and serviced by
Litchfield Financial Corporation, a Massachusetts corporation (in
such capacity, the "Servicer"). Unless otherwise specifically
defined herein, all capitalized terms shall have the meanings
ascribed to them in the Indenture.

           2.   Purchase and Sale.  In reliance upon the
representations and warranties contained herein and subject to
the terms and conditions set forth herein, (i) the Issuer agrees
to sell to the Purchaser, and the Purchaser agrees to purchase
from the Issuer,  $7,240,512.37 principal amount of Hypothecation
Loan Collateralized Notes, Series A and (ii) the Seller agrees to
sell to the Purchaser, and the Purchaser agrees to purchase from
the Seller,  $4,134,487.63 principal amount of Hypothecation Loan
Collateralized Notes, Series C (the foregoing notes are referred
to herein collectively as the "Notes") at an aggregate price (the
"Purchase Price") equal to the aggregate outstanding principal
amount of the Notes on the Closing Date (as hereinafter
defined).  The Purchase Price shall be allocated among the Seller
and the Issuer in proportion to the principal amount of Notes
sold by each. The Purchase Price shall be payable to or upon the
instructions of the Issuer and the Seller on the Closing Date by
wire transfer in immediately available Federal funds.




           3.   The Closing; Delivery of the Notes.     The
closing of the purchase and sale of the Notes pursuant hereto
(the "Closing") shall be held on March 23, 1999 (the "Closing
Date").  The Closing shall take place by mail or at such place as
the parties hereto shall designate.  At the Closing, the Issuer
and the Seller, respectively, will deliver to the Purchaser,
against payment of the Purchase Price therefor, one Series A Note
in the denomination of $ 7,240,512.37 and one Series C Note in
the denomination of $4,134,487.63 registered in the Purchaser's
name, or in the name of its nominee; provided however, that if
the Purchaser requests the Issuer or the Seller in writing not
less than one Business Day prior to the Closing Date to deliver
to the Purchaser Notes in other denominations (authorized
pursuant to the Indenture) that equal in the aggregate the
denominations specified above, the Seller and the Issuer shall
comply with such request.


           4.   Conditions of the Purchaser's Obligation.     The
obligation of the Purchaser set forth in Section 2 to purchase
the Notes on the Closing Date shall be subject to the accuracy as
of the date hereof and as of the Closing Date of (i) the
representations and warranties of the Issuer set forth in Section
5 hereof, (ii) the representations and warranties of the Seller
in the Purchase and Sale Agreement and in Section 5 hereof, and
(iii) the representations and warranties of the Servicer in the
Servicing Agreement, and shall also be subject to the following
additional conditions:

           (a)  Each of this Purchase Agreement, the Notes, the
      Indenture, the Servicing Agreement, and the Purchase and
      Sale Agreement (collectively, the "Agreements") shall have
      been duly authorized, executed and delivered by each of the
      parties thereto and be in full force and effect; and

           (b)  The Purchaser shall have received copies of all
      documents and other information as it may reasonably
      request, in form and substance reasonably satisfactory to
      it, with respect to such transactions and the taking of all
      proceedings in connection therewith.

           5.   Representations and Warranties.  (a) The Issuer
represents and warrants to the Purchaser as of the date hereof as
follows:




           (i)  Each of the Agreements to which the Issuer is a
      party has been duly authorized, executed and delivered by
      the Issuer and, assuming due execution and delivery by the
      other parties thereto, constitutes a legal, valid and
      binding agreement of the Issuer enforceable against the
      Issuer in accordance with its terms, subject to applicable
      bankruptcy, insolvency and similar laws affecting creditors'
      rights generally, and subject, as to enforceability, to
      general principles of equity (regardless of whether
      enforcement is sought in a proceeding in equity or at law).
      The Notes have been validly issued and are entitled to the
      benefits of the Indenture and constitute valid instruments
      enforceable in accordance with their terms subject to
      applicable bankruptcy, insolvency and similar laws affecting
      creditors' rights generally, and subject, as to
      enforceability, to general principles of equity (regardless
      of whether enforcement is sought in a proceeding in equity
      or at law).


           (ii)  Neither the issuance or sale of the Notes, nor
      the consummation of any other of the transactions
      contemplated in any of the Agreements to which the Issuer is
      a party, nor the execution, delivery or performance of the
      terms of any of the Agreements to which the Issuer is a
      party, has or will result in the breach of any term or
      provision of the certificate of incorporation or by-laws of
      the Issuer, or conflict with, result in a breach or
      violation on the part of the Issuer of or the acceleration
      of indebtedness under or constitute a default under, the
      terms of any indenture or other agreement or instrument to
      which the Issuer is a party or by which it is bound, or any
      statute or regulation applicable to the Issuer or any order
      applicable to the Issuer of any court, regulatory body,
      administrative agency or governmental body having
      jurisdiction over the Issuer.

           (iii)  No consent, approval, authorization of,
      registration or filing with, or notice to, any governmental
      or regulatory authority, agency, department, commission,
      board, bureau, body or instrumentality is required on the
      part of the Issuer for the execution and delivery or by the
      Issuer with any of the Agreements to which the Issuer is a
      party or the Notes, or the issuance of the Notes, or the
      consummation by the Issuer of any transaction contemplated
      under any of the Agreements to which the Issuer is a party,
      or such consent, approval or authorization has been obtained
      or such registration, filing or notice has been made (or,
      with respect to assignments of mortgages and financing
      statements, will be made by the Issuer as contemplated by
      the Indenture).

           (iv)  There is no action, suit or proceeding against,
      or investigation of, the Issuer pending or, to the best of
      its knowledge, threatened, before any court, administrative
      agency or other tribunal which, either individually or in
      the aggregate, (A) may result in any material adverse change
      in the financial condition, properties, or assets of the
      Issuer or in any material and adverse impairment of the
      right or ability of the Issuer to perform its obligations
      under the Agreements, or (B) asserts the invalidity of any
      of the Agreements to which either the Issuer is a party or
      the Notes or (C) seeks to prevent the consummation of any of
      the transactions contemplated by any of the Agreements to
      which the Issuer is a party.




           (v)  Based in part on the representations and
      warranties contained in Section 6 hereof, the Issuer is not,
      and the sale of the Notes in the manner contemplated by this
      Purchase Agreement will not cause the Issuer to be, subject
      to registration or regulation as an investment company or
      affiliate of any investment company under the Investment
      Company Act of 1940, as amended.


           (vi)  Each Loan included in the Trust Estate securing
      the Notes has been delivered to the Trustee or its
      collateral agent, together with an assignment thereof by the
      Issuer, which immediately prior to such assignment will own
      full legal and equitable title to each Loan, free and clear
      of any lien, charge, encumbrance or participation or
      ownership interest in favor of any other Person.  Upon
      endorsement and delivery to the Trustee or its collateral
      agent of the executed original promissory notes and
      execution and delivery of the Indenture, all of the Issuer's
      right, title and interest in and to the Loans will be
      validly and effectively transferred to the Indenture Trustee
      as collateral security for the benefit of the Holders of the
      Notes.

           (vii)  On the Closing Date after giving effect to the
      sale of the Notes to the Purchaser hereunder, the aggregate
      principal amount of all Hypothecation Loan Collateralized
      Notes outstanding shall be $38,929,826.47, of which
      $7,240,512.37 aggregate principal amount shall be Series A
      Notes owned of record by the Purchaser, $12,205,028.91
      aggregate principal amount shall be Series A Notes owned by
      Green Tree Financial Servicing Corporation ("Green Tree"),
      $219,914.52 aggregate principal amount shall be Series B
      Variable Funding Notes owned of record by the Seller,
      $4,134,487.63 aggregate principal amount shall be Series C
      Notes owned of record by the Purchaser, $10,542,751.91
      aggregate principal amount shall be Series C Notes owned of
      record by Green Tree and $4,587,131.13 aggregate principal
      amount shall be Series C Notes owned of record by Berkshire
      Bank.  Such outstanding amounts are fully authorized (and do
      not exceed any limitations under the Indenture).

 (b) The Seller represents and warrants to the Purchaser as of
the date hereof as follows:

           (i)  Each of the Agreements to which the Seller is a
      party has been duly authorized, executed and delivered by
      the Seller and, assuming due execution and delivery by the
      other parties thereto, constitutes a legal, valid and
      binding agreement of the Seller enforceable against the
      Seller in accordance with its terms, subject to applicable
      bankruptcy, insolvency and similar laws affecting creditors'
      rights generally, and subject, as to enforceability, to
      general principles of equity (regardless of whether
      enforcement is sought in a proceeding in equity or at law).

           (ii)  Neither the sale of the Notes, nor the
      consummation of any other of the transactions contemplated
      in any of the Agreements to which the Seller is a party, nor
      the execution, delivery or performance of the terms of any
      of the Agreements to which the Seller is a party, has or
      will result in the breach of any term or provision of the
      certificate of incorporation or by-laws of the Seller, or
      conflict with, result in a breach or violation on the part
      of the Seller of or the acceleration of indebtedness under
      or constitute a default under, the terms of any indenture or
      other agreement or instrument to which the Seller is a party
      or by which it is bound, or any statute or regulation
      applicable to the Seller or any order applicable to the
      Seller of any court, regulatory body, administrative agency
      or governmental body having jurisdiction over the Seller.

           (iii)No consent, approval, authorization of,
      registration or filing with, or notice to, any governmental
      or regulatory authority, agency, department, commission,
      board, bureau, body or instrumentality is required on the
      part of the Seller for the execution and delivery or by the
      Seller with any of the Agreements to which the Seller is a
      party, or the sale of the Notes, or the consummation by the
      Seller of any transaction contemplated under any of the
      Agreements to which the Seller is a party, or such consent,
      approval or authorization has been obtained or such
      registration, filing or notice has been made (or, with
      respect to assignments of mortgages and financing
      statements, will be made by the Seller as contemplated by
      the Indenture).

           (iv) There is no action, suit or proceeding against, or
      investigation of, the Seller pending or, to the best of its
      knowledge, threatened, before any court, administrative
      agency or other tribunal which, either individually or in
      the aggregate, (A) may result in any material adverse change
      in the financial condition, properties, or assets of the
      Seller or in any material and adverse impairment of the
      right or ability of the Seller to perform its obligations
      under the Agreements, or (B) asserts the invalidity of any
      of the Agreements to which either the Seller is a party or
      the Notes or (C) seeks to prevent the consummation of any of
      the transactions contemplated by any of the Agreements to
      which either the Seller is a party.




           (v)  Neither the Seller nor any Affiliate of the Seller
      nor any Person authorized or employed by the Seller will,
      directly or indirectly, offer or sell any Note or similar
      security in a manner which would render the sale of the
      Notes pursuant to this Purchase Agreement a violation of
      Section 5 of the 1933 Act, or require registration pursuant
      thereto.  Based in part on the representations and
      warranties contained in Section 6 hereof, the offering and
      sale of the Notes by the Seller to Purchaser at closing are
      exempt from the registration requirements of the 1933 Act
      and the Indenture is not required to be qualified under the
      Trust Indenture Act of 1939, as amended.


      The Issuer and the Seller agree that the representations and
warranties set forth in this Section 5 shall be fully assignable
to the initial party to whom the Purchaser may sell the Notes.

           6.   The Purchaser's Representations.    The Purchaser
represents to the Issuer as follows:




           (a)  The Purchaser is acquiring the Notes for its own
      account. The Purchaser understands that the Notes are not
      being registered under the Securities Act of 1933, as
      amended (the "1933 Act"), or any State securities or "Blue
      Sky" law and are being sold to the Purchaser in reliance
      upon the Purchaser's representations contained herein in a
      transaction that is exempt from the registration
      requirements of the 1933 Act and any applicable State law.
      The Purchaser agrees that the Notes may not be Transferred


      unless subsequently registered under the 1933 Act
      and any applicable State securities or "Blue Sky" law or
      unless exemptions from the registration requirements of the
      1933 Act and applicable State laws are available. Subject to
      the express provisions of this Purchase Agreement and the
      Indenture, the disposition of the Notes shall at all times
      be within the control of the owner thereof.  Notwithstanding
      anything to the contrary, express or implied, in this
      Agreement, the Indenture or otherwise, the Purchaser
      understands that none of the Trust, the Note Registrar or
      the Indenture Trustee is obligated to register the Notes
      under the 1933 Act or any other securities law and that any
      Transfer in violation of the provisions of the Indenture
      shall be void ab initio. The foregoing shall in no way limit
      the ability or the right of the Purchaser to sell
      participation interests in any Notes owned by the Purchaser.


           (b)  The Purchaser is either (i) an "accredited
      investor" as defined in rule 501(a) under the 1933 Act or
      (ii) a Qualified Institutional Buyer as defined in Rule 144A
      under the 1933 Act.

           (c)  The Purchaser is authorized to enter into this
      Purchase Agreement and to purchase the Notes.  This Purchase
      Agreement has been duly authorized executed and delivered by
      the Purchaser and constitutes the Purchaser's legal, valid
      and binding agreement enforceable against the Purchaser in
      accordance with its terms, subject to applicable bankruptcy,
      insolvency, and similar laws affecting creditors' rights
      generally, and subject, as to enforceability, to general
      principles of equity (regardless of whether enforcement is
      sought in a proceeding in equity or at law).

           (d)  The Purchaser has sufficient knowledge and
      experience in financial and business matters as to be
      capable of evaluating the merits and risks of an investment
      in the Notes and the Purchaser is able to bear the economic
      risk of investment in the Notes.  The Purchaser acknowledges
      that in connection with the making of its investment
      decision, the Purchaser has been afforded the opportunity to
      ask questions of, and receive answers regarding, and to
      conduct its investigation of, the Issuer, the Loans and the
      Loan Collateral, the Trust Estate, the Notes and the
      Servicer as is sufficient and necessary for the Purchaser to
      make an informed investment decision with respect to the
      Notes.

           (e)  No placement agent, broker, finder or investment
      banker has been employed by or has acted for the Seller or
      the Purchaser in connection with the transactions with the
      Purchaser contemplated in this Purchase Agreement or
      otherwise in connection with the Notes; and the Purchaser is
      solely responsible for, and the Purchaser shall indemnify
      the Seller for the fees, expenses or commissions of any
      placement agent, broker, finder or investment banker and any
      other person or entity claiming to have acted in such
      capacity for or under the authority of the Purchaser.





           (f)  The Purchaser agrees to treat, and to take no
      action inconsistent with the treatment of, the Notes as debt
      of the Issuer for tax purposes.


           7.   Notices. All notices and other communications
hereunder shall be in writing and shall be sent by first class
registered or certified mail, return receipt requested, or by
facsimile transmission, provided such transmission is confirmed
by overnight mail delivered by a nationally recognized overnight
delivery service, addressed (a) if to the Purchaser, Union Bank
of California, N.A., 445 South Figueroa Street, 15th Floor, Los
Angeles, California 90071, Attention: Stephen R. Sweeney, and (b)
if to the Issuer or Litchfield, c/o Litchfield Financial
Corporation, 430 Main Street, Williamstown, Massachusetts 01267,
Attention: Executive Vice President, or to such other address as
the Issuer or Litchfield shall have furnished to the Purchaser in
writing.  Any notice so given by registered or certified mail
shall be deemed to have been given five days after being
deposited in a depository of the United States mails.  Any notice
given by means of a nationally recognized overnight delivery
service shall be deemed to have been given upon receipt thereof.

           8.   Miscellaneous.  (a)  This Purchase Agreement shall
be construed and enforced in accordance with and governed by the
law of the State of New York.

           (b)  Any action or proceeding relating in any way to
this Purchase Agreement may be brought and enforced in the courts
of the State of New York or of the United States for the Southern
District of New York and each of the Issuer, Litchfield and the
Purchaser irrevocably submits to the jurisdiction of each such
court (and any appellate court from any thereof) in respect of
any such action or proceeding.

           Each of the Issuer, Litchfield and the Purchaser
irrevocably waives, to the fullest extent permitted by applicable
law, any objection that it may now or hereafter have to the
laying of venue of any such action or proceeding in the Supreme
Court of the State of New York or the United States District
Court for the Southern District of New York, and any claim that
any such action or proceeding brought in any such court has been
brought in an inconvenient forum.

           (c)  This Agreement supersedes all prior agreements and
understandings relating to the subject matter hereof.

           (d)  The headings in this Purchase Agreement are for
the purposes of reference only and shall not limit or define the
meaning hereof.

           (e)  This Purchase Agreement shall be binding upon the
respective successors and assigns of the parties hereto and shall
inure to the benefit of and be enforceable by any registered
owner or owners at the time of each Note then issued, or any part
thereof.  This Purchase Agreement may be assigned by the
Purchaser to an eligible purchaser of the Notes in connection
with a permitted transfer of the Notes in accordance with the
Indenture.

           (f)  This Purchase Agreement may be amended, waived,
discharged or terminated only by an instrument in writing signed
by the party against which enforcement of such amendment, waiver,
discharge or termination is sought.

           (g)  This Purchase Agreement may be executed
simultaneously in several counterparts, or by different parties
in separate counterparts, each of which counterparts shall be an
original, but all of which shall constitute one instrument.

           9.   No Recourse.   It is expressly understood and
agreed by the parties hereto that (a) the representations,
undertakings and agreements herein made on the part of the Issuer
are made and intended not as personal representations,
undertakings and agreements by Litchfield but are made and
intended for the purpose of binding only the Issuer, (b) nothing
herein contained shall be construed as creating any liability on
Litchfield to perform any covenant either expressed or implied
contained herein, all such liability, if any, being expressly
waived by the parties hereto, and (c) under no circumstances
shall Litchfield be personally liable for the payment of any
indebtedness or expenses of the Issuer or be liable for the
breach or failure of any obligation, representation, warranty or
covenant made or undertaken by the Issuer under this Agreement;
it being understood that the foregoing shall in no way limit the
obligations of Litchfield under the Guarantee or the Purchase and
Sale Agreement.

           IN WITNESS WHEREOF, the parties hereto have caused this
Purchase Agreement to be duly executed on the date first written
above.

                          LITCHFIELD HYPOTHECATION CORP. 1997-B

                          By:  /s/ Heather A. Sica
                               --------------------
                          Title: Executive Vice President

                          LITCHFIELD FINANCIAL CORPORATION

                          By:  /s/ Heather A. Sica
                               --------------------
                          Title: Executive Vice President

                          UNION BANK OF CALIFORNIA, N.A.

                          By: /s/ Stephen R. Sweeney
                          --------------------------
                          Title: Vice President





                                                     Exhibit 10.188





                         LIMITED GUARANTEE


           LIMITED GUARANTEE dated as of March 1, 1999 by
LITCHFIELD FINANCIAL CORPORATION, a Massachusetts corporation
(the "Guarantor"), in favor of UNION BANK OF CALIFORNIA, N.A., a
California banking corporation with an address at 445 South
Figueroa Street, 15th Floor, Los Angeles, California 90071("Union
Bank"), as a Noteholder under the Indenture hereinafter referred
to.

WHEREAS,   Litchfield   Hypothecation   Corp.1997-B,   a   Delaware
       corporation (the "Issuer") and a wholly-owned  subsidiary of
       the  Guarantor,  and The Chase  Manhattan  Bank,  as trustee
       (the  "Trustee") are  parties to an  Indenture  of Trust (the
       "Indenture")  (capitalized terms used but not defined herein
       shall have the meanings  attributed thereto in the Indenture
       or in  Appendix  A  thereto),  dated as of  August  1,  1997
       providing  for the  issuance by the Issuer from time to time
       of   its    Hypothecation    Loan    Collateralized    Notes
       (collectively, the "Notes");

           WHEREAS, the Issuer and the Trustee have executed and
delivered Amendment No. 1 to the Indenture, dated as of March 1,
1999 ("Amendment No. 1 to the Indenture") providing for the
issuance by the Issuer of Series A Notes in an initial aggregate
principal amount of $7,240,512.37(the "Additional Series A
Notes") and to authorize the Trustee to authenticate and deliver
the Additional Series A Notes to Union Bank; and

           WHEREAS, pursuant to the Indenture, the Issuer has
issued the Additional Series A Notes which Additional Series A
Notes the Issuer has sold to Union Bank pursuant to a Note
Purchase Agreement dated as of March 23, 1999 (the "Note Purchase
Agreement"); and

           WHEREAS, pursuant to the Indenture, the Issuer has
issued and the Guarantor has purchased certain Series C Notes in
the original principal amount of $4,134,487.63(the "Series C
Notes") which Series C Notes the Guarantor has sold to Union Bank
pursuant to the Note Purchase Agreement; and

           WHEREAS, it is a condition to the purchase by Union
Bank of the Additional Series A Notes and the Series C Notes
(collectively, the "Guaranteed Notes) that the Guarantor issue a
guarantee in the form hereof of certain of the obligations of the
Issuer under the Guaranteed Notes.

           NOW, THEREFORE, in consideration of the premises and in
order to induce Union Bank to purchase the Guaranteed Notes, the
Guarantor hereby agrees as follows:




           Section 1.  Guarantee.  The Guarantor hereby
irrevocably and unconditionally guarantees the punctual payment
when due, whether at stated maturity, after maturity, by
acceleration or otherwise, of principal of and interest on the
Guaranteed Notes (the "Guaranteed Obligations") in an aggregate
amount not to exceed $568,750(the "Guaranteed Amount"). The
Guarantor hereby agrees that it shall make the payment of a
Guaranteed Obligation upon receipt of written demand therefor
from Union Bank (a "Demand Notice") which Demand Notice shall
specify that an Event of Default has occurred and is continuing
under either or both of Sections 7.1(a) and 7.1(b) of the
Indenture due to the failure of the Issuer to make the applicable
payment of principal and/or interest due and owing to Union Bank
under the Guaranteed Notes and the Indenture. The obligation of
the Guarantor hereunder shall in no event exceed the Guaranteed
Amount.  The Guaranteed Amount shall be reduced by (i) the amount
of any payments made by Guarantor hereunder or (ii) the portion
allocable to the Guaranteed Notes of any unreimbursed Servicer
Advances pursuant to the Indenture.


           Notwithstanding the limitation contained in the
preceding sentence, the Guarantor shall also pay all costs and
expenses, including attorneys' fees, costs relating to all costs
and expenses arising out of or with respect to the validity,
enforceability, collection, defense, administration or
preservation of this Guarantee.

           GUARANTOR ACKNOWLEDGES AND AGREES THAT ANY REPURCHASE
OF THE HYPOTHECATION LOANS BY THE GUARANTOR PURSUANT TO THE TERMS
OF THE INDENTURE OR ANY OTHER DOCUMENT PROVIDING GUARANTOR WITH
SUCH OPTION OR OBLIGATION OR THE PAYMENT OR PERFORMANCE BY
GUARANTOR OF ANY OTHER OBLIGATION OF ISSUER UNDER THE INDENTURE
OR THE GUARANTEED NOTES SHALL NOT REDUCE THE OBLIGATIONS OF
GUARANTOR TO UNION BANK UNDER THIS GUARANTEE AND UNION BANK'S
CONSENT TO SUCH REPURCHASE SHALL NOT CONSTITUTE A WAIVER OF UNION
BANK'S RIGHTS HEREUNDER.




           Section 2.  Waiver.  The Guarantor hereby absolutely,
unconditionally and irrevocably waives, to the fullest extent
permitted by law, (i) promptness, diligence, notice of acceptance
and any other notice with respect to this Guarantee,(ii) any
requirement that Union Bank protect, secure, perfect or insure
any security interest or lien or any property subject thereto or
exhaust any right or take any action against the Issuer or any
other person or any collateral, (iii) any and all right to assert
any defense, set-off, counterclaim or cross-claim of any nature
whatsoever with respect to this Guarantee, the obligations of the
Guarantor hereunder or the obligations of any other person or
party (including, without limitation, the Issuer) relating to
this Guarantee or the obligations of the Guarantor hereunder or
otherwise with respect to the Guaranteed Obligations in any
action or proceeding brought by Union Bank to collect the
Guaranteed Obligations or any portion thereof or to enforce the
obligations of the Guarantor under this Guarantee, and (iv) any
other action, event or precondition to the enforcement of this
Guarantee or the performance by the Guarantor of the obligations
hereunder.


           Section 3.  Guarantee Absolute.  (a)  The Guarantor
guarantees that, to the fullest extent permitted by law, the
Guaranteed Obligations will be paid or performed strictly in
accordance with their terms, regardless of any law, regulation or
order now or hereafter in effect in any jurisdiction affecting
any of such terms or the rights of Union Bank with respect
thereto.

           (b)  No invalidity, irregularity, voidability, voidness
or unenforceability of the Indenture or the Guaranteed Notes or
of all or any part of the Guaranteed Obligations or of any
security therefor, shall affect, impair or be a defense to this
Guarantee.

           (c)  The liability of the Guarantor under this
Guarantee shall be absolute and unconditional irrespective of:

(i) any change in the manner, place or terms of payment or performance,
      and/or any change or extension of the time of payment or
      performance of, renewal or alteration of, any Guaranteed
      Obligation, any security therefor, or any liability incurred
      directly or indirectly in respect thereof, or any other
      amendment or waiver of or any consent to departure from the
      Indenture or the Guaranteed Notes , including any increase
      in the Guaranteed Obligations resulting from the extension
      of additional credit to the Issuer;

(ii) any sale, exchange, release, surrender, realization upon any
      property by whomsoever at any time pledged or mortgaged to
      secure, or howsoever securing, all or any of the Guaranteed
      Obligations, and/or any offset thereagainst, or failure to
      perfect, or continue the perfection of, any lien in any such
      property, or delay in the perfection of any such lien, or
      any amendment or waiver of or consent to departure from any
      other guarantee for all or any of the Guaranteed Obligations;




(iii) any exercise or failure to exercise any rights against the Issuer
      or others (including the Guarantor);


(iv) any settlement or compromise of any  Guaranteed Obligation, any
      security therefor or any liability (including any of those
      hereunder) incurred directly or indirectly in respect
      thereof or hereof, and any subordination of the payment of
      all or any part thereof to the payment of any  Guaranteed
      Obligations (whether due or not) of the Issuer to creditors
      of the Issuer other than the Guarantor;

(v) any manner of application of any collateral, or proceeds thereof,
      to all or any of the Guaranteed Obligations, or any manner
      of sale or other disposition of any collateral for all or
      any of the Guaranteed Obligations or any other assets of the
      Issuer or any of its subsidiaries; or

(vi) any change, restructuring or termination of the existence of the
      Issuer.

           (d)  Union Bank may at any time and from time to time
(whether or not after revocation or termination of this
Guarantee) without the consent of, or notice (except as shall be
required by applicable statute and cannot be waived) to, the
Guarantor, and without incurring responsibility to the Guarantor
or impairing or releasing the obligations of the Guarantor
hereunder, apply any sums by whomsoever paid or howsoever
realized to any Guaranteed Obligation regardless of what
Guaranteed Obligations remain unpaid.




           (e)  This Guarantee shall continue to be effective or
be reinstated, as the case may be, if claim is ever made upon
Union Bank for repayment or recovery of any amount or amounts
received by Union Bank in payment or on account of any of the
Guaranteed Obligations and Union Bank repays all or part of said
amount by reason of any judgment, decree or order of any court or
administrative body having jurisdiction over Union Bank, or any
settlement or compromise of any such claim effected by Union Bank
with any such claimant (including the Issuer), then and in such
event the Guarantor agrees that any such judgment, decree, order,
settlement or compromise shall be binding upon the Guarantor,
notwithstanding any revocation hereof or the cancellation of the
Guaranteed Notes, and the Guarantor shall be and remain liable to
Union Bank hereunder for the amount so repaid or recovered to the
same extent as if such amount had never originally been received
by Union Bank.


           Section 4.  Continuing Guarantee.  This Guarantee is a
continuing one and shall (i) remain in full force and effect
until the indefeasible payment and satisfaction in full of the
Guaranteed Obligations, (ii) be binding upon the Guarantor, its
successors and assigns, and (iii) inure to the benefit of, and be
enforceable by, Union Bank and its successors, transferees and
assigns.  All obligations to which this Guarantee applies or may
apply under the terms hereof shall be conclusively presumed to
have been created in reliance hereon.

           Section 5.  Representations, Warranties and Covenants.
The Guarantor hereby represents, warrants and covenants to and
with Union Bank that:

           (a)  The Guarantor has the corporate power to execute
      and deliver this Guarantee and to incur and perform its
      obligations hereunder;

           (b)  The Guarantor has duly taken all necessary
      corporate action to authorize the execution, delivery and
      performance of this Guarantee and to incur and perform its
      obligations hereunder;

           (c)  No consent, approval, authorization or other
      action by, and no notice to or of, or declaration or filing
      with, any governmental or other public body, or any other
      person, is required for the due authorization, execution,
      delivery and performance by the Guarantor of this Guarantee
      or the consummation of the transactions contemplated hereby;
      and










           (d)  The Guarantor shall provide to Union Bank (i)
within 60 days of the end of each fiscal quarter, the report on
form 10-Q of the Guarantor and (ii) within 135 days of the end of
each fiscal year of the Guarantor, the report on form 10-K of the
Guarantor.


           Section 6.  Terms.  (a) The words "include," "includes"
and "including" shall be deemed to be followed by the phrase
"without limitation".

           (b)  All references herein to Sections and subsections
shall be deemed to be references to Sections and subsections of
this Guarantee unless the context shall otherwise require.

           Section 7.  Amendments and Modification.  No provision
hereof shall be modified, altered or limited except by written
instrument expressly referring to this Guarantee and to such
provision, and executed by the party to be charged.

           Section 8.  Waiver of Subrogation Rights. Guarantor
hereby waives until the Guaranteed Obligations are paid in full
any right of indemnity, reimbursement, contribution, or
subrogation arising as a result of payment by Guarantor
hereunder, and will not prove any claim in competition with Union
Bank in respect of any payment hereunder in bankruptcy or
insolvency proceedings of any nature.  Guarantor will not claim
any set-off or counterclaim against Issuer in respect of any
liability of Guarantor to Issuer.  Guarantor waives any benefit
of and any right to participate in any collateral which may be
held by Union Bank.

           Section 9.  Statute of Limitations.  Any acknowledgment
or new promise, whether by payment of principal or interest or
otherwise and whether by the Issuer or others (including the
Guarantor), with respect to any of the Guaranteed Obligations
shall, if the statute of limitations in favor of the Guarantor
against Union Bank shall have commenced to run, toll the running
of such statute of limitations and, if the period of such statute
of limitations shall have expired, prevent the operation of such
statute of limitations.

           Section 10.  Rights and Remedies Not Waived.  No act,
omission or delay by Union Bank shall constitute a waiver of its
rights and remedies hereunder or otherwise.  No single or partial
waiver by Union Bank of any default hereunder or right or remedy
which it may have shall operate as a waiver of any other default,
right or remedy or of the same default, right or remedy on a
future occasion.

           Section 11.  Admissibility of Guarantee.  The Guarantor
agrees that any copy of this Guarantee signed by the Guarantor
and transmitted by telecopier for delivery to Union Bank shall be
admissible in evidence as the original itself in any judicial or
administrative proceeding, whether or not the original is in
existence.

           Section 12.  Notices.  All notices, requests and
demands to or upon Union Bank or the Guarantor under this
Agreement shall be in writing and given as provided in the
Indenture (with respect to the Guarantor, to the address of the
Issuer as set forth in the Indenture and with respect to Union
Bank, at its address set forth above).

           Section 13.  Counterparts.  This Guarantee may be
executed in any number of counterparts and by the different
parties hereto on separate counterparts, each of which when so
executed and delivered shall be an original and all of which
shall together constitute one and the same agreement.
           Section 14.  CONSENT TO JURISDICTION; WAIVER OF JURY
TRIAL; ETC.  (a)  ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO
THIS GUARANTEE MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW
YORK OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT
OF NEW YORK AND, BY EXECUTION AND DELIVERY OF THIS GUARANTEE, THE
GUARANTOR HEREBY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE
JURISDICTION OF THE AFORESAID COURTS.  THE GUARANTOR HEREBY
IRREVOCABLY WAIVES, IN CONNECTION WITH ANY SUCH ACTION OR
PROCEEDING, (i) TRIAL BY JURY, (ii) TO THE EXTENT IT MAY
EFFECTIVELY DO SO UNDER APPLICABLE LAW, ANY OBJECTION, INCLUDING
ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF
FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE
JURISDICTIONS AND (iii) THE RIGHT TO INTERPOSE ANY SET-OFF,
COUNTERCLAIM OR CROSS-CLAIM (UNLESS SUCH SET-OFF, COUNTERCLAIM OR
CROSS-CLAIM COULD NOT, BY REASON OF ANY APPLICABLE FEDERAL OR
STATE PROCEDURAL LAWS, BE INTERPOSED, PLEADED OR ALLEGED IN ANY
OTHER ACTION).

           GUARANTOR ACKNOWLEDGES THAT THE TRANSACTION OF WHICH
THIS GUARANTEE IS A PART IS A COMMERCIAL TRANSACTION, AND HEREBY
VOLUNTARILY WAIVES GUARANTOR'S RIGHTS TO NOTICE AND HEARING UNDER
ANY APPLICABLE STATE OR FEDERAL LAW WITH RESPECT TO ANY
PREJUDGMENT REMEDY WHICH UNION BANK MAY DESIRE TO USE.

           (b)  The Guarantor irrevocably consents to the service
of process of any of the aforementioned courts in any such action
or proceeding by the mailing of copies thereof by certified mail,
postage prepaid, to the Guarantor at its address determined
pursuant to Section 12 hereof.

           (c)  Nothing herein shall affect the right of Union
Bank to serve process in any other manner permitted by law or to
commence legal proceedings or otherwise proceed against the
Guarantor in any other jurisdiction.

           (d)  The Guarantor hereby waives presentment, notice of
dishonor and protests of all instruments included in or
evidencing any of the Guaranteed Obligations, and any and all
other notices and demands whatsoever (except as expressly
provided herein).

           Section 15.  GOVERNING LAW.  THIS GUARANTEE AND THE
GUARANTEED OBLIGATIONS SHALL BE GOVERNED IN ALL RESPECTS BY THE
LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS EXECUTED
AND TO BE PERFORMED IN SUCH STATE, WITHOUT GIVING EFFECT TO THE
CONFLICT OF LAW PRINCIPLES THEREOF.

           Section 16.  Captions; Separability.  (a)  The captions
of the Sections and subsections of this Guarantee have been
inserted for convenience only and shall not in any way affect the
meaning or construction of any provision of this Guarantee.
           (b)  If any term of this Guarantee shall be held to be
invalid, illegal or unenforceable, the validity of all other
terms hereof shall in no way be affected thereby.

           Section 17.  Acknowledgment of Receipt.  The Guarantor
acknowledges receipt of a copy of this Guarantee.

           Section 18.  This Guarantee shall inure to the benefit
of and be enforceable by Union Bank, its successors, transferees
and assigns, and it shall be binding upon Guarantor and the
successors and assigns of Guarantor.

           IN WITNESS WHEREOF, the Guarantor has duly executed or
caused this Guarantee to be duly executed in the State of New
York as of the date first above set forth.

                               LITCHFIELD FINANCIAL CORPORATION


                                    By:  /s/ Heather A. Sica
                                         --------------------
                                    Title: Executive Vice President








                                                     Exhibit 10.189










LITCHFIELD HYPOTHECATION CORP. 1998-A



                       NOTE PURCHASE AGREEMENT




                                    March 23, 1999



           LITCHFIELD HYPOTHECATION CORP. 1998-A, a Delaware
corporation, and its successors and assigns (the "Issuer"), and
LITCHFIELD FINANCIAL CORPORATION, a Massachusetts corporation
(the "Seller"), hereby agree with BSB BANK & TRUST (the
"Purchaser"), as follows:

           1.   The Notes.  The Issuer has authorized the
execution and delivery to The Chase Manhattan Bank, as trustee
(the "Trustee"), of an Indenture of Trust, dated as of June 1,
1998, as amended by Amendment No 1. thereto dated as of September
1, 1998, Amendment No. 2 thereto dated as of November 1, 1998 and
Amendment No. 3 thereto dated as of March 1, 1999 (collectively,
the "Indenture"), providing for the issuance and sale by the
Issuer of its Hypothecation Loan Collateralized Notes, in one or
more series, secured by the Trust Estate granted to the Trustee
by the Issuer pursuant to the Indenture, which includes, among
other assets, a pool of certain hypothecation Loans owned by the
Issuer and serviced by Litchfield Financial Corporation, a
Massachusetts corporation (in such capacity, the "Servicer").
Unless otherwise specifically defined herein, all capitalized
terms shall have the meanings ascribed to them in the
Indenture.

           2.   Purchase and Sale.  In reliance upon the
representations and warranties contained herein and subject to
the terms and conditions set forth herein, the Issuer agrees to
sell to the Purchaser, and the Purchaser agrees to purchase from
the Issuer,  $5,000,000 principal amount of Hypothecation Loan
Collateralized Notes, Series A (the "Notes") at an aggregate
price (the "Purchase Price") equal to the aggregate outstanding
principal amount of the Notes on the Closing Date (as hereinafter
defined).  The Purchase Price shall be allocated among the Seller
and the Issuer in proportion to the principal amount of Notes
sold by each. The Purchase Price shall be payable to or upon the
instructions of the Issuer and the Seller on the Closing Date by
wire transfer in immediately available Federal funds.




           3.   The Closing; Delivery of the Notes.     The
closing of the purchase and sale of the Notes pursuant hereto
(the "Closing") shall be held on March 3, 1999 (the "Closing
Date").  The Closing shall take place by mail or at such place as
the parties hereto shall designate.  At the Closing, the Issuer
and the Seller, respectively, will deliver to the Purchaser,
against payment of the Purchase Price therefor, one Series A Note
in the denomination of $5,000,000 registered in the Purchaser's
name, or in the name of its nominee; provided however, that if
the Purchaser requests the Issuer or the Seller in writing not
less than one Business Day prior to the Closing Date to deliver
to the Purchaser Notes in other denominations (authorized
pursuant to the Indenture) that equal in the aggregate the
denominations specified above, the Seller and the Issuer shall
comply with such request.


           4.   Conditions of the Purchaser's Obligation.     The
obligation of the Purchaser set forth in Section 2 to purchase
the Notes on the Closing Date shall be subject to the accuracy as
of the date hereof and as of the Closing Date of (i) the
representations and warranties of the Issuer set forth in Section
5 hereof, (ii) the representations and warranties of the Seller
in the Purchase and Sale Agreement and in Section 5 hereof, and
(iii) the representations and warranties of the Servicer in the
Servicing Agreement, and shall also be subject to the following
additional conditions:

           (a)  Each of this Purchase Agreement, the Notes, the
      Indenture, the Servicing Agreement, and the Purchase and
      Sale Agreement (collectively, the "Agreements") shall have
      been duly authorized, executed and delivered by each of the
      parties thereto and be in full force and effect; and

           (b)  The Purchaser shall have received copies of all
      documents and other information as it may reasonably
      request, in form and substance reasonably satisfactory to
      it, with respect to such transactions and the taking of all
      proceedings in connection therewith.

           5.   Representations and Warranties.  (a) The Issuer
represents and warrants to the Purchaser as of the date hereof as
follows:




           (i)  Each of the Agreements to which the Issuer is a
      party has been duly authorized, executed and delivered by
      the Issuer and, assuming due execution and delivery by the
      other parties thereto, constitutes a legal, valid and
      binding agreement of the Issuer enforceable against the
      Issuer in accordance with its terms, subject to applicable
      bankruptcy, insolvency and similar laws affecting creditors'
      rights generally, and subject, as to enforceability, to
      general principles of equity (regardless of whether
      enforcement is sought in a proceeding in equity or at law).
      The Notes have been validly issued and are entitled to the
      benefits of the Indenture and constitute valid instruments
      enforceable in accordance with their terms subject to
      applicable bankruptcy, insolvency and similar laws affecting
      creditors' rights generally, and subject, as to
      enforceability, to general principles of equity (regardless
      of whether enforcement is sought in a proceeding in equity
      or at law).


           (ii)  Neither the issuance or sale of the Notes, nor
      the consummation of any other of the transactions
      contemplated in any of the Agreements to which the Issuer is
      a party, nor the execution, delivery or performance of the
      terms of any of the Agreements to which the Issuer is a
      party, has or will result in the breach of any term or
      provision of the certificate of incorporation or by-laws of
      the Issuer, or conflict with, result in a breach or
      violation on the part of the Issuer of or the acceleration
      of indebtedness under or constitute a default under, the
      terms of any indenture or other agreement or instrument to
      which the Issuer is a party or by which it is bound, or any
      statute or regulation applicable to the Issuer or any order
      applicable to the Issuer of any court, regulatory body,
      administrative agency or governmental body having
      jurisdiction over the Issuer.

           (iii)  No consent, approval, authorization of,
      registration or filing with, or notice to, any governmental
      or regulatory authority, agency, department, commission,
      board, bureau, body or instrumentality is required on the
      part of the Issuer for the execution and delivery or by the
      Issuer with any of the Agreements to which the Issuer is a
      party or the Notes, or the issuance of the Notes, or the
      consummation by the Issuer of any transaction contemplated
      under any of the Agreements to which the Issuer is a party,
      or such consent, approval or authorization has been obtained
      or such registration, filing or notice has been made (or,
      with respect to assignments of mortgages and financing
      statements, will be made by the Issuer as contemplated by
      the Indenture).

           (iv)  There is no action, suit or proceeding against,
                or investigation of, the Issuer pending or, to the
                best of its knowledge, threatened, before any
                court, administrative agency or other tribunal
                which, either individually or in the aggregate,
                (A) may result in any material adverse change in
                the financial condition, properties, or assets of
                the Issuer or in any material and adverse
                impairment of the right or ability of the Issuer
                to perform its obligations under the Agreements,
                or (B) asserts the invalidity of any of the
                Agreements to which either the Issuer is a party
                or the Notes or (C) seeks to prevent the
                consummation of any of the transactions
                contemplated by any of the Agreements to which the
                Issuer is a party.
           (v)   (v)  Based in part on the representations and
                warranties contained in Section 6 hereof, the
                Issuer is not, and the sale of the Notes in the
                manner contemplated by this Purchase Agreement
                will not cause the Issuer to be, subject to
                registration or regulation as an investment
                company or affiliate of any investment company
                under the Investment Company Act of 1940, as
                amended.

           (vi)  Each Loan included in the Trust Estate securing
      the Notes has been delivered to the Trustee or its
      collateral agent, together with an assignment thereof by the
      Issuer, which immediately prior to such assignment will own
      full legal and equitable title to each Loan, free and clear
      of any lien, charge, encumbrance or participation or
      ownership interest in favor of any other Person.  Upon
      endorsement and delivery to the Trustee or its collateral
      agent of the executed original promissory notes and
      execution and delivery of the Indenture, all of the Issuer's
      right, title and interest in and to the Loans will be
      validly and effectively transferred to the Indenture Trustee
      as collateral security for the benefit of the Holders of the
      Notes.

           (vii) On the Closing Date after giving effect to the
sale of the Notes to the Purchaser hereunder, the aggregate
principal amount of all Hypothecation Loan Collateralized Notes
outstanding shall be $29,181,670.90, of which $5,000,000
aggregate principal amount shall be Series A Notes owned of
record by the Purchaser, $10,782,573.07 aggregate principal
amount shall be Series A Notes owned of record by BankBoston,
N.A., $1,962,801.70 aggregate principal amount shall be Series A
Notes owned of record by MetroWest Bank, $941,548.14 aggregate
principal amount shall be Series A Notes owned of record by the
Seller, $6,067,004.76 aggregate principal amount shall be Series
B Variable Funding Notes owned of record by the Seller,
$2,385,954.55 aggregate principal amount shall be Series C Notes
owned of record by BankBoston, N.A., and $2,041,788.68 aggregate
principal amount shall be Series C Notes owned of record by
MetroWest Bank.

(b) The Seller represents and warrants to the Purchaser as of the
date hereof as follows:

           (i)  Each of the Agreements to which the Seller is a
      party has been duly authorized, executed and delivered by
      the Seller and, assuming due execution and delivery by the
      other parties thereto, constitutes a legal, valid and
      binding agreement of the Seller enforceable against the
      Seller in accordance with its terms, subject to applicable
      bankruptcy, insolvency and similar laws affecting creditors'
      rights generally, and subject, as to enforceability, to
      general principles of equity (regardless of whether
      enforcement is sought in a proceeding in equity or at law).

           (ii)  Neither the sale of the Notes, nor the
      consummation of any other of the transactions contemplated
      in any of the Agreements to which the Seller is a party, nor
      the execution, delivery or performance of the terms of any
      of the Agreements to which the Seller is a party, has or
      will result in the breach of any term or provision of the
      certificate of incorporation or by-laws of the Seller, or
      conflict with, result in a breach or violation on the part
      of the Seller of or the acceleration of indebtedness under
      or constitute a default under, the terms of any indenture or
      other agreement or instrument to which the Seller is a party
      or by which it is bound, or any statute or regulation
      applicable to the Seller or any order applicable to the
      Seller of any court, regulatory body, administrative agency
      or governmental body having jurisdiction over the Seller.

           (iii)No consent, approval, authorization of,
      registration or filing with, or notice to, any governmental
      or regulatory authority, agency, department, commission,
      board, bureau, body or instrumentality is required on the
      part of the Seller for the execution and delivery or by the
      Seller with any of the Agreements to which the Seller is a
      party, or the sale of the Notes, or the consummation by the
      Seller of any transaction contemplated under any of the
      Agreements to which the Seller is a party, or such consent,
      approval or authorization has been obtained or such
      registration, filing or notice has been made (or, with
      respect to assignments of mortgages and financing
      statements, will be made by the Seller as contemplated by
      the Indenture).

           (iv)  There is no action, suit or proceeding against,
                or investigation of, the Seller pending or, to the
                best of its knowledge, threatened, before any
                court, administrative agency or other tribunal
                which, either individually or in the aggregate,
                (A) may result in any material adverse change in
                the financial condition, properties, or assets of
                the Seller or in any material and adverse
                impairment of the right or ability of the Seller
                to perform its obligations under the Agreements,
                or (B) asserts the invalidity of any of the
                Agreements to which either the Seller is a party
                or the Notes or (C) seeks to prevent the
                consummation of any of the transactions
                contemplated by any of the Agreements to which
                either the Seller is a party.
           (v)   (v) Neither the Seller nor any Affiliate of the
                Seller nor any Person authorized or employed by
                the Seller will, directly or indirectly, offer or
                sell any Note or similar security in a manner
                which would render the sale of the Notes pursuant
                to this Purchase Agreement a violation of Section
                5 of the 1933 Act, or require registration
                pursuant thereto.  Based in part on the
                representations and warranties contained in
                Section 6 hereof, the offering and sale of the
                Notes by the Seller to Purchaser at closing are
                exempt from the registration requirements of the
                1933 Act and the Indenture is not required to be
                qualified under the Trust Indenture Act of 1939,
                as amended.

      The Issuer and the Seller agree that the representations and
warranties set forth in this Section 5 shall be fully assignable
to the initial party to whom the Purchaser may sell the Notes.

           6.   The Purchaser's Representations.    The Purchaser
represents to the Issuer as follows:
           (a)  The Purchaser is acquiring the Notes for its own
account. The Purchaser understands that the Notes are not being
registered under the Securities Act of 1933, as amended (the
"1933 Act"), or any State securities or "Blue Sky" law and are
being sold to the Purchaser in reliance upon the Purchaser's
representations contained herein in a transaction that is exempt
from the registration requirements of the 1933 Act and any
applicable State law.  The Purchaser agrees that the Notes may
not be Transferred unless subsequently registered under the 1933
Act and any applicable State securities or "Blue Sky" law or
unless exemptions from the registration requirements of the 1933
Act and applicable State laws are available. Subject to the
express provisions of this Purchase Agreement and the Indenture,
the disposition of the Notes shall at all times be within the
control of the owner thereof.  Notwithstanding anything to the
contrary, express or implied, in this Agreement, the Indenture or
otherwise, the Purchaser understands that none of the Trust, the
Note Registrar or the Indenture Trustee is obligated to register
the Notes under the 1933 Act or any other securities law and that
any Transfer in violation of the provisions of the Indenture
shall be void ab initio. The foregoing shall in no way limit the
ability or the right of the Purchaser to sell participation
interests in any Notes owned by the Purchaser.

           (b)  The Purchaser is either (i) an "accredited
      investor" as defined in rule 501(a) under the 1933 Act or
      (ii) a Qualified Institutional Buyer as defined in Rule 144A
      under the 1933 Act.

           (c)  The Purchaser is authorized to enter into this
      Purchase Agreement and to purchase the Notes.  This Purchase
      Agreement has been duly authorized executed and delivered by
      the Purchaser and constitutes the Purchaser's legal, valid
      and binding agreement enforceable against the Purchaser in
      accordance with its terms, subject to applicable bankruptcy,
      insolvency, and similar laws affecting creditors' rights
      generally, and subject, as to enforceability, to general
      principles of equity (regardless of whether enforcement is
      sought in a proceeding in equity or at law).

           (d)  The Purchaser has sufficient knowledge and
      experience in financial and business matters as to be
      capable of evaluating the merits and risks of an investment
      in the Notes and the Purchaser is able to bear the economic
      risk of investment in the Notes.  The Purchaser acknowledges
      that in connection with the making of its investment
      decision, the Purchaser has been afforded the opportunity to
      ask questions of, and receive answers regarding, and to
      conduct its investigation of, the Issuer, the Loans and the
      Loan Collateral, the Trust Estate, the Notes and the
      Servicer as is sufficient and necessary for the Purchaser to
      make an informed investment decision with respect to the
      Notes.

           (e)  No placement agent, broker, finder or investment
      banker has been employed by or has acted for the Seller or
      the Purchaser in connection with the transactions with the
      Purchaser contemplated in this Purchase Agreement or
      otherwise in connection with the Notes; and the Purchaser is
      solely responsible for, and the Purchaser shall indemnify
      the Seller for the fees, expenses or commissions of any
      placement agent, broker, finder or investment banker and any
      other person or entity claiming to have acted in such
      capacity for or under the authority of the Purchaser.

           (f)  The Purchaser agrees to treat, and to take no
      action inconsistent with the treatment of, the Notes as debt
      of the Issuer for tax purposes.

           7.   Notices.  All notices and other communications
hereunder shall be in writing and shall be sent by first class
registered or certified mail, return receipt requested, or by
facsimile transmission, provided such transmission is confirmed
by overnight mail delivered by a nationally recognized overnight
delivery service, addressed (a) if to the Purchaser, BSB Bank &
Trust, 58-68 Exchange Street, Binghamton, New York 13902-1056,
Attention: Glenn R. Small, and (b) if to the Issuer or the
Seller, c/o Litchfield Financial Corporation, 430 Main Street,
Williamstown, Massachusetts 01267, Attention: Executive Vice
President, or to such other address as the Issuer or the Seller
shall have furnished to the Purchaser in writing.  Any notice so
given by registered or certified mail shall be deemed to have
been given five days after being deposited in a depository of the
United States mails.  Any notice given by means of a nationally
recognized overnight delivery service shall be deemed to have
been given upon receipt thereof.

           8.   Miscellaneous.  (a)  This Purchase Agreement shall
be construed and enforced in accordance with and governed by the
law of the State of New York.

           (b)  Any action or proceeding relating in any way to
this Purchase Agreement may be brought and enforced in the courts
of the State of New York or of the United States for the Southern
District of New York and each of the Issuer, the Seller and the
Purchaser irrevocably submits to the jurisdiction of each such
court (and any appellate court from any thereof) in respect of
any such action or proceeding.

           Each of the Issuer, the Seller and the Purchaser
irrevocably waives, to the fullest extent permitted by applicable
law, any objection that it may now or hereafter have to the
laying of venue of any such action or proceeding in any state
court of the State of New York or the United States District
Court for the Southern District of New York, and any claim that
any such action or proceeding brought in any such court has been
brought in an inconvenient forum.

           (c)  This Agreement supersedes all prior agreements and
understandings relating to the subject matter hereof.

           (d)  The headings in this Purchase Agreement are for
the purposes of reference only and shall not limit or define the
meaning hereof.

           (e)  This Purchase Agreement shall be binding upon the
respective successors and assigns of the parties hereto and shall
inure to the benefit of and be enforceable by any registered
owner or owners at the time of each Note then issued, or any part
thereof.  This Purchase Agreement may be assigned by the
Purchaser to an eligible purchaser of the Notes in connection
with a permitted transfer of the Notes in accordance with the
Indenture.

           (f)  This Purchase Agreement may be amended, waived,
discharged or terminated only by an instrument in writing signed
by the party against which enforcement of such amendment, waiver,
discharge or termination is sought.

           (g)  This Purchase Agreement may be executed
simultaneously in several counterparts, or by different parties
in separate counterparts, each of which counterparts shall be an
original, but all of which shall constitute one instrument.

           9.   No Recourse.   It is expressly understood and
agreed by the parties hereto that (a) the representations,
undertakings and agreements herein made on the part of the Issuer
are made and intended not as personal representations,
undertakings and agreements by the Seller but are made and
intended for the purpose of binding only the Issuer, (b) nothing
herein contained shall be construed as creating any liability on
the Seller to perform any covenant either expressed or implied
contained herein, all such liability, if any, being expressly
waived by the parties hereto, and (c) under no circumstances
shall the Seller be personally liable for the payment of any
indebtedness or expenses of the Issuer or be liable for the
breach or failure of any obligation, representation, warranty or
covenant made or undertaken by the Issuer under this Agreement;
it being understood that the foregoing shall in no way limit the
obligations of the Seller under the Guarantee or the Purchase and
Sale Agreement.

           IN WITNESS WHEREOF, the parties hereto have caused this
Purchase Agreement to be duly executed on the date first written
above.

                          LITCHFIELD HYPOTHECATION CORP. 1998-A

                          By:  /s/ Heather A. Sica
                               -------------------
                          Name:  Heather A. Sica
                          Title:  Executive Vice President


                          LITCHFIELD FINANCIAL CORPORATION

                          By:  /s/ Heather A. Sica
                               -------------------
                          Name:  Heather A. Sica
                          Title:  Executive Vice President


                          BSB BANK & TRUST

                          By:  /s/ Glenn R. Small
                               ------------------
                          Name:  Glenn R. Small
                          Title:  Executive Vice President











                                                     Exhibit 10.190















LIMITED GUARANTEE

           LIMITED GUARANTEE dated as of March 1, 1999 by
LITCHFIELD FINANCIAL CORPORATION, a Massachusetts corporation
(the "Guarantor"), in favor of  BSB Bank & Trust, a New York
banking corporation with an address at 58-68 Exchange Street,
Binghamton, New York ("BSB"), as a Noteholder under the Indenture
hereinafter referred to.

           WHEREAS,  Litchfield Hypothecation Corp. 1998-A, a
Delaware corporation (the "Issuer") and a wholly-owned subsidiary
of the Guarantor, is a party to an Indenture of Trust dated as of
June 1, 1998, as amended by Amendment No. 1 thereto dated as of
September 1, 1998, Amendment No. 2 thereto dated as of November
1, 1998 and Amendment No. 3 thereto dated as of March 1, 1999
(the "Indenture") (capitalized terms used but not defined herein
shall have the meanings attributed thereto in the Indenture or in
Appendix A thereto) with The Chase Manhattan Bank (the "Trustee")
pursuant to which on the date hereof  the Issuer has issued that
certain Series A Note in the original principal amount of
$5,000,000 (the "Guaranteed Notes"); and

           WHEREAS,  the Issuer, the Guarantor  and BSB are
parties to a Note Purchase Agreement, dated the date hereof,
pursuant to which and subject to the terms and conditions
contained therein, BSB shall purchase the Guaranteed Notes from
the Issuer; and

           WHEREAS, it is a condition to the purchase by BSB of
the Guaranteed Notes that the Guarantor issue a guarantee in the
form hereof of certain of the obligations of the Issuer under the
Guaranteed Notes.

           NOW, THEREFORE, in consideration of the premises and in
order to induce BSB to purchase the Guaranteed Notes, the
Guarantor hereby agrees as follows:

           Section 1. Guarantee.  The Guarantor hereby irrevocably
and unconditionally guarantees the punctual payment when due,
whether at stated maturity, after maturity, by acceleration or
otherwise, of  principal of and interest on the Guaranteed Notes
(the "Guaranteed Obligations") in an aggregate amount not to
exceed $250,000 (the "Guaranteed Amount").  The Guarantor hereby
agrees that it shall make the payment of a Guaranteed Obligation
upon receipt of written demand therefor from BSB  (a "Demand
Notice") which Demand Notice shall specify that an Event of
Default has occurred and is continuing under either or both of
Sections 7.1(a) and 7.1(b) of the Indenture due to the failure of
the Issuer to make the applicable payment of principal and/or
interest due and owing to BSB under the Guaranteed Notes and the
Indenture.  The obligation of the Guarantor hereunder shall in no
event exceed the Guaranteed Amount.  The Guaranteed Amount shall
be reduced by (i) the amount of any payments made by Guarantor
hereunder or (ii) the amount of any unreimbursed Servicer
Advances pursuant to the Indenture.

           Notwithstanding the limitation contained in the
preceding sentence, the Guarantor shall also pay all costs and
expenses, including attorneys' fees, costs relating to all costs
and expenses arising out of or with respect to the validity,
enforceability, collection, defense, administration or
preservation of this Guarantee.


           GUARANTOR ACKNOWLEDGES AND AGREES THAT ANY REPURCHASE
OF THE HYPOTHECATION LOANS BY THE GUARANTOR PURSUANT TO THE TERMS
OF THE INDENTURE OR ANY OTHER DOCUMENT PROVIDING GUARANTOR WITH
SUCH OPTION OR OBLIGATION OR THE PAYMENT OR PERFORMANCE BY
GUARANTOR OF ANY OTHER OBLIGATION OF ISSUER UNDER THE INDENTURE
OR THE GUARANTEED NOTES SHALL NOT REDUCE THE OBLIGATIONS OF
GUARANTOR TO BSB UNDER THIS GUARANTEE AND BSB'S CONSENT TO SUCH
REPURCHASE SHALL NOT CONSTITUTE A WAIVER OF BSB'S RIGHTS
HEREUNDER.

           Section 2. Waiver.  The Guarantor hereby absolutely,
unconditionally and irrevocably waives, to the fullest extent
permitted by law, (i) promptness, diligence, notice of acceptance
and any other notice with respect to this Guarantee,(ii) any
requirement that BSB protect, secure, perfect or insure any
security interest or lien or any property subject thereto or
exhaust any right or take any action against the Issuer or any
other person or any collateral, (iii) any and all right to assert
any defense, set-off, counterclaim or cross-claim of any nature
whatsoever with respect to this Guarantee, the obligations of the
Guarantor hereunder or the obligations of any other person or
party (including, without limitation, the Issuer) relating to
this Guarantee or the obligations of the Guarantor hereunder or
otherwise with respect to the Guaranteed Obligations in any
action or proceeding brought by BSB to collect the Guaranteed
Obligations or any portion thereof or to enforce the obligations
of the Guarantor under this Guarantee, and (iv) any other action,
event or precondition to the enforcement of this Guarantee or the
performance by the Guarantor of the obligations hereunder.

           Section 3. Guarantee Absolute.  (a)  The Guarantor
guarantees that, to the fullest extent permitted by law, the
Guaranteed Obligations will be paid or performed strictly in
accordance with their terms, regardless of any law, regulation
or order now or hereafter in effect in any jurisdiction affecting
any of such terms or the rights of BSB with respect thereto.

               (b) No invalidity, irregularity, voidability,
voidness or unenforceability of the Indenture or  the Guaranteed
Notes or of all or any part of the Guaranteed Obligations or of
any security therefor, shall affect, impair or be a defense to
this Guarantee.

               (c) The liability of the Guarantor under this
Guarantee shall be absolute and unconditional irrespective of:

   (i) any change in the manner, place or terms of payment or performance,
      and/or any change or extension of the time of payment or
      performance of, renewal or alteration of, any Guaranteed
      Obligation, any security therefor, or any liability incurred
      directly or indirectly in respect thereof, or any other
      amendment or waiver of or any consent to departure from the
      Indenture or the Guaranteed Notes, including any increase in
      the Guaranteed Obligations resulting from the extension of
      additional credit to the Issuer;

   (ii) any sale, exchange, release, surrender, realization upon any
      property by whomsoever at any time pledged or mortgaged to
      secure, or howsoever securing, all or any of the Guaranteed
      Obligations, and/or any offset thereagainst, or failure to
      perfect, or continue the perfection of, any lien in any such
      property, or delay in the perfection of any such lien, or
      any amendment or waiver of or consent to departure from any
      other guarantee for all or any of the Guaranteed Obligations;

                   (iii) any exercise or failure to exercise any rights
       against the Issuer or others (including the Guarantor);

   (iv) any settlement or compromise of any Guaranteed Obligation, any
      security therefor or any liability (including any of those
      hereunder) incurred directly or indirectly in respect
      thereof or hereof, and any subordination of the payment of
      all or any part thereof to the payment of any  Guaranteed
      Obligations (whether due or not) of the Issuer to creditors
      of the Issuer other than the Guarantor;

                (v) any manner of application of any collateral,
      or proceeds thereof, to all or any of the Guaranteed
      Obligations, or any manner of sale or other disposition of
      any collateral for all or any of the Guaranteed Obligations
      or any other assets of the Issuer or any of its
      subsidiaries; or

   (vi) any change, restructuring or termination of the existence of
      the Issuer.

               (d) BSB may at any time and from time to time
(whether or not after revocation or termination of this Guarantee)
without the consent of, or notice (except as shall be required by
applicable statute and cannot be waived) to, the Guarantor, and
without incurring responsibility to the Guarantor or impairing or
releasing the obligations of the Guarantor hereunder, apply any
sums by whomsoever paid or howsoever realized to any Guaranteed
Obligation regardless of what Guaranteed Obligations remain
unpaid.

               (e)   This Guarantee shall continue to be effective
or be reinstated, as the case may be, if claim is ever made upon
BSB for repayment or recovery of any amount or amounts received
by BSB in payment or on account of any of the Guaranteed
Obligations and BSB repays all or part of said amount by reason
of any judgment, decree or order of any court or administrative
body having jurisdiction over BSB, or any settlement or
compromise of any such claim effected by BSB with any such
claimant (including the Issuer), then and in such event the
Guarantor agrees that any such judgment, decree, order,
settlement or compromise shall be binding upon the Guarantor,
notwithstanding any revocation hereof or the cancellation of the
Guaranteed Notes, and the Guarantor shall be and remain liable to
BSB hereunder for the amount so repaid or recovered to the same
extent as if such amount had never originally been received by
BSB.

           Section 4.  Continuing Guarantee.  This Guarantee is a
continuing one and shall (i) remain in full force and effect
until the indefeasible payment and satisfaction in full of the
Guaranteed Obligations, (ii) be binding upon the Guarantor, its
successors and assigns, and (iii) inure to the benefit of, and be
enforceable
by, BSB and its successors, transferees and assigns.  All
obligations to which this Guarantee applies or may apply under
the terms hereof shall be conclusively presumed to have been
created in reliance hereon.

           Section 5.  Representations, Warranties and Covenants.
The Guarantor hereby represents, warrants and covenants to and
with BSB that:

           (a) The Guarantor has the corporate power to execute
      and deliver this Guarantee and to incur
and perform its obligations hereunder;

           (b) The Guarantor has duly taken all necessary
      corporate action to authorize the execution,
delivery and performance of this Guarantee and to incur and
perform its obligations hereunder;

            (c) No consent, approval, authorization or other
action by, and no notice to or of, or  declaration
or filing with, any governmental or other public body, or any
other person, is required for the due authorization, execution,
delivery and performance by the Guarantor of this Guarantee or
the consummation of the transactions contemplated hereby; and

               (d) The Guarantor shall provide to BSB (i) within
60 days of the end of each fiscal quarter, the report on
form 10-Q of the Guarantor and (ii) within 135 days of the end of
each fiscal year of the Guarantor, the report on form 10-K of the
Guarantor.

           Section 6.  Terms.  (a) The words "include," "includes"
and "including" shall be deemed to be followed by the phrase
"without limitation".

               (b) All references herein to Sections and
subsections shall be deemed to be references to Sections and
subsections of this Guarantee unless the context shall otherwise
require.

           Section 7.  Amendments and Modification.  No provision
hereof shall be modified, altered or limited except by written
instrument expressly referring to this Guarantee and to such
provision, and executed by the party to be charged.

           Section 8.  Waiver of Subrogation Rights. Guarantor
hereby waives until the Guaranteed Obligations are paid in full
any right of indemnity, reimbursement, contribution, or
subrogation arising as a result of payment by Guarantor
hereunder, and will not prove any claim in competition with BSB
in respect of any payment hereunder in bankruptcy or insolvency
proceedings of any nature.  Guarantor will not claim any set-off
or counterclaim against Issuer in respect of any liability of
Guarantor to Issuer.  Guarantor waives any benefit of and any
right to participate in any collateral which may be held by BSB .

           Section 9.  Statute of Limitations.  Any acknowledgment
or new promise, whether by payment of principal or interest or
otherwise and whether by the Issuer or others (including the
Guarantor), with respect to any of the Guaranteed Obligations
shall, if the statute of limitations in favor of the Guarantor
against BSB shall have commenced to run, toll the running of such
statute of limitations and, if the period of such statute of
limitations shall have expired, prevent the operation of such
statute of limitations.

           Section 10.  Rights and Remedies Not Waived.    No act,
omission or delay  by BSB shall constitute a waiver of its rights
and remedies hereunder or otherwise.  No single or partial waiver
by BSB of any default hereunder or right or remedy which it may
have shall operate as a waiver of any other default, right or
remedy or of the same default, right or remedy on a future
occasion.

           Section 11.  Admissibility of Guarantee.  The Guarantor
agrees that any copy of this Guarantee signed by the Guarantor
and transmitted by telecopier for delivery to BSB shall be
admissible in evidence as the original itself in any judicial or
administrative proceeding, whether or not the original is in
existence.

           Section 12.  Notices.  All notices, requests and
demands to or upon BSB or the Guarantor under this Agreement
shall be in writing and given as provided in the Indenture (with
respect to the Guarantor, to the address of the Issuer as set
forth in the Indenture and with respect to BSB, at its address
set forth above).

           Section 13.  Counterparts.  This Guarantee may be
executed in any number of counterparts and by the different
parties hereto on separate counterparts, each of which when so
executed and delivered shall be an original and all of which
shall together constitute one and the same agreement.

           Section 14.  CONSENT TO JURISDICTION; WAIVER OF JURY
TRIAL; ETC.  (a)  ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO
THIS GUARANTEE MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW
YORK OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT
OF NEW YORK AND, BY EXECUTION AND DELIVERY OF THIS
GUARANTEE, THE GUARANTOR HEREBY ACCEPTS FOR ITSELF AND IN RESPECT
OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE
JURISDICTION OF THE AFORESAID COURTS.  THE GUARANTOR HEREBY
IRREVOCABLY WAIVES, IN CONNECTION  WITH ANY SUCH ACTION OR
PROCEEDING, (i) TRIAL BY JURY, (ii) TO THE EXTENT IT MAY
EFFECTIVELY DO SO UNDER APPLICABLE LAW, ANY OBJECTION, INCLUDING
ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF
FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE
JURISDICTIONS AND (iii) THE RIGHT TO INTERPOSE ANY SET-OFF,
COUNTERCLAIM OR CROSS-CLAIM (UNLESS SUCH SET-OFF, COUNTERCLAIM OR
CROSS-CLAIM COULD NOT, BY REASON OF ANY APPLICABLE FEDERAL OR
STATE PROCEDURAL LAWS, BE INTERPOSED, PLEADED OR ALLEGED IN ANY
OTHER ACTION).

           GUARANTOR ACKNOWLEDGES THAT THE TRANSACTION OF WHICH
THIS
GUARANTEE IS A PART IS A COMMERCIAL TRANSACTION, AND HEREBY
VOLUNTARILY WAIVES GUARANTOR'S RIGHTS TO NOTICE AND HEARING UNDER
ANY APPLICABLE
STATE OR FEDERAL LAW WITH RESPECT TO ANY PREJUDGMENT REMEDY WHICH
BSB MAY DESIRE TO USE.

               (b) The Guarantor irrevocably consents to the
service of process of any of the aforementioned courts in any
such action or proceeding by the mailing of copies thereof by
certified mail, postage prepaid, to the Guarantor at its address
determined pursuant to Section 12 hereof.

               (c) Nothing herein shall affect the right of BSB
to serve process in any other manner permitted by law or to
commence legal proceedings or otherwise proceed against the
Guarantor in any other jurisdiction.

               (d) The Guarantor hereby waives presentment, notice
of dishonor and protests of all instruments included in or
evidencing any of the Guaranteed Obligations, and any and all
other notices and demands whatsoever (except as expressly
provided herein).

           Section 15.  GOVERNING LAW.  THIS GUARANTEE AND THE
GUARANTEED OBLIGATIONS SHALL BE GOVERNED IN ALL RESPECTS BY THE
LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS EXECUTED
AND TO BE PERFORMED IN SUCH STATE, WITHOUT GIVING EFFECT TO THE
CONFLICT OF LAW PRINCIPLES THEREOF.

           Section 16.  Captions; Separability.  (a)  The captions
of the Sections and subsections of this Guarantee have been
inserted for convenience only and shall not in any way affect the
meaning or construction of any provision of this Guarantee.

                (b) If any term of this Guarantee shall be held to
be invalid, illegal or unenforceable, the validity of all other
terms hereof shall in no way be affected thereby.

           Section 17.  Acknowledgment of Receipt.  The Guarantor
acknowledges receipt of a copy of this Guarantee.
           Section 18.  This Guarantee shall inure to the benefit
of and be enforceable by BSB , its successors, transferees and
assigns, and it shall be binding upon Guarantor and the
successors and assigns of Guarantor.

           IN WITNESS WHEREOF, the Guarantor has duly executed or
caused this Guarantee to be duly executed as of the date first
above set forth.

                               LITCHFIELD FINANCIAL CORPORATION



                               By: /s/ Heather A. Sica
                                   -------------------
                               Name:  Heather A. Sica
                               Title: Executive Vice President


                                                     Exhibit 10.191


               LITCHFIELD HYPOTHECATION CORP. 1998-B

                       NOTE PURCHASE AGREEMENT

                                    March 23, 1999


           LITCHFIELD HYPOTHECATION CORP.1998-B, a Delaware
corporation, and its successors and assigns (the "Issuer"), and
LITCHFIELD FINANCIAL CORPORATION, a Massachusetts corporation
("Litchfield" or the "Seller"), hereby agree with UNION BANK OF
CALIFORNIA, N.A. (the "Purchaser"), as follows:

           1.   The Notes.  The Issuer has authorized the
execution and delivery to The Chase Manhattan Bank, as trustee
(the "Trustee"), of an Indenture of Trust, dated as of June 1,
1998 (the "Indenture"), providing for the issuance and sale by
the Issuer of its Hypothecation Loan Collateralized Notes (the
"Notes"), in one or more series, secured by the Trust Estate
granted to the Trustee by the Issuer pursuant to the Indenture,
which includes, among other assets, a pool of certain
hypothecation Loans owned by the Issuer and serviced by
Litchfield Financial Corporation, a Massachusetts corporation (in
such capacity, the "Servicer"). Unless otherwise specifically
defined herein, all capitalized terms shall have the meanings
ascribed to them in the Indenture.

           2.   Purchase and Sale.  In reliance upon the
representations and warranties contained herein and subject to
the terms and conditions set forth herein, the Seller agrees to
sell to the Purchaser, and the Purchaser agrees to purchase from
the Seller,  $3,725,000 principal amount of Hypothecation Loan
Collateralized Notes, Series C (the foregoing notes are referred
to herein collectively as the "Notes") at an aggregate price (the
"Purchase Price") equal to the aggregate outstanding principal
amount of the Notes on the Closing Date (as hereinafter
defined).  The Purchase Price shall be payable to or upon the
instructions of the Issuer and the Seller on the Closing Date by
wire transfer in immediately available Federal funds.

           3.   The Closing; Delivery of the Notes.     The
closing of the purchase and sale of the Notes pursuant hereto
(the "Closing") shall be held on March 23, 1999 (the "Closing
Date").  The Closing shall take place by mail or at such place as
the parties hereto shall designate.  At the Closing, the Seller
will deliver to the Purchaser, against payment of the Purchase
Price therefor, one Series C Note in the denomination of
$3,725,000 registered in the Purchaser's name, or in the name of
its nominee; provided however, that if the Purchaser requests the
Seller in writing not less than one Business Day prior to the
Closing Date to deliver to the Purchaser Notes in other
denominations (authorized pursuant to the Indenture) that equal
in the aggregate the denominations specified above, the Seller
shall comply with such request.

           4.   Conditions of the Purchaser's Obligation.     The
obligation of the Purchaser set forth in Section 2 to purchase
the Notes on the Closing Date shall be subject to the accuracy as
of the date hereof and as of the Closing Date of (i) the
representations and warranties of the Issuer set forth in Section
5 hereof, (ii) the representations and warranties of the Seller
in the Purchase and Sale Agreement and in Section 5 hereof, and
(iii) the representations and warranties of the Servicer in the
Servicing Agreement, and shall also be subject to the following
additional conditions:

           (a)  Each of this Purchase Agreement, the Notes, the
      Indenture, the Servicing Agreement, and the Purchase and
      Sale Agreement (collectively, the "Agreements") shall have
      been duly authorized, executed and delivered by each of the
      parties thereto and be in full force and effect; and

           (b)   The Purchaser shall have received copies of all
                documents and other information as it may
                reasonably request, in form and substance
                reasonably satisfactory to it, with respect to
                such transactions and the taking of all
                proceedings in connection therewith.

           5.   Representations and Warranties.  (a) The Issuer
           represents and warrants to the Purchaser as of the date
           hereof as follows:
           (i)  Each of the Agreements to which the Issuer is a
party has been duly authorized, executed and delivered by the
Issuer and, assuming due execution and delivery by the other
parties thereto, constitutes a legal, valid and binding agreement
of the Issuer enforceable against the Issuer in accordance with
its terms, subject to applicable bankruptcy, insolvency and
similar laws affecting creditors' rights generally, and subject,
as to enforceability, to general principles of equity (regardless
of whether enforcement is sought in a proceeding in equity or at
law).  The Notes have been validly issued and are entitled to the
benefits of the Indenture and constitute valid instruments
enforceable in accordance with their terms subject to applicable
bankruptcy, insolvency and similar laws affecting creditors'
rights generally, and subject, as to enforceability, to general
principles of equity (regardless of whether enforcement is sought
in a proceeding in equity or at law).

           (ii)  Neither the issuance or sale of the Notes, nor
      the consummation of any other of the transactions
      contemplated in any of the Agreements to which the Issuer is
      a party, nor the execution, delivery or performance of the
      terms of any of the Agreements to which the Issuer is a
      party, has or will result in the breach of any term or
      provision of the certificate of incorporation or by-laws of
      the Issuer, or conflict with, result in a breach or
      violation on the part of the Issuer of or the acceleration
      of indebtedness under or constitute a default under, the
      terms of any indenture or other agreement or instrument to
      which the Issuer is a party or by which it is bound, or any
      statute or regulation applicable to the Issuer or any order
      applicable to the Issuer of any court, regulatory body,
      administrative agency or governmental body having
      jurisdiction over the Issuer.

           (iii)  No consent, approval, authorization of,
      registration or filing with, or notice to, any governmental
      or regulatory authority, agency, department, commission,
      board, bureau, body or instrumentality is required on the
      part of the Issuer for the execution and delivery or by the
      Issuer with any of the Agreements to which the Issuer is a
      party or the Notes, or the issuance of the Notes, or the
      consummation by the Issuer of any transaction contemplated
      under any of the Agreements to which the Issuer is a party,
      or such consent, approval or authorization has been obtained
      or such registration, filing or notice has been made (or,
      with respect to assignments of mortgages and financing
      statements, will be made by the Issuer as contemplated by
      the Indenture).

           (iv)  There is no action, suit or proceeding against,
                or investigation of, the Issuer pending or, to the
                best of its knowledge, threatened, before any
                court, administrative agency or other tribunal
                which, either individually or in the aggregate,
                (A) may result in any material adverse change in
                the financial condition, properties, or assets of
                the Issuer or in any material and adverse
                impairment of the right or ability of the Issuer
                to perform its obligations under the Agreements,
                or (B) asserts the invalidity of any of the
                Agreements to which either the Issuer is a party
                or the Notes or (C) seeks to prevent the
                consummation of any of the transactions
                contemplated by any of the Agreements to which the
                Issuer is a party.
           (v)   (v)  Based in part on the representations and
                warranties contained in Section 6 hereof, the
                Issuer is not, and the sale of the Notes in the
                manner contemplated by this Purchase Agreement
                will not cause the Issuer to be, subject to
                registration or regulation as an investment
                company or affiliate of any investment company
                under the Investment Company Act of 1940, as
                amended.

           (vi)  Each Loan included in the Trust Estate securing
      the Notes has been delivered to the Trustee or its
      collateral agent, together with an assignment thereof by the
      Issuer, which immediately prior to such assignment will own
      full legal and equitable title to each Loan, free and clear
      of any lien, charge, encumbrance or participation or
      ownership interest in favor of any other Person.  Upon
      endorsement and delivery to the Trustee or its collateral
      agent of the executed original promissory notes and
      execution and delivery of the Indenture, all of the Issuer's
      right, title and interest in and to the Loans will be
      validly and effectively transferred to the Indenture Trustee
      as collateral security for the benefit of the Holders of the
      Notes.

      (vii) On the Closing Date after giving  effect to the sale of
the  Notes to the  Purchaser  hereunder,  the  aggregate  principal
amount of all Hypothecation Loan  Collateralized  Notes outstanding
shall  be   $12,274,249.86,   of  which   $8,549,249.86   aggregate
principal  amount  shall be  Series  A Notes  owned  of  record  by
BankAtlantic  and $3,725,000  aggregate  principal  amount shall be
Series C Notes owned by the  Purchaser.  Such  outstanding  amounts
are fully  authorized (and do not exceed any limitations  under the
Indenture).

(b) The Seller represents and warrants to the Purchaser as of the
date hereof as follows:

           (i)  Each of the Agreements to which the Seller is a
      party has been duly authorized, executed and delivered by
      the Seller and, assuming due execution and delivery by the
      other parties thereto, constitutes a legal, valid and
      binding agreement of the Seller enforceable against the
      Seller in accordance with its terms, subject to applicable
      bankruptcy, insolvency and similar laws affecting creditors'
      rights generally, and subject, as to enforceability, to
      general principles of equity (regardless of whether
      enforcement is sought in a proceeding in equity or at law).

           (ii)  Neither the sale of the Notes, nor the
      consummation of any other of the transactions contemplated
      in any of the Agreements to which the Seller is a party, nor
      the execution, delivery or performance of the terms of any
      of the Agreements to which the Seller is a party, has or
      will result in the breach of any term or provision of the
      certificate of incorporation or by-laws of the Seller, or
      conflict with, result in a breach or violation on the part
      of the Seller of or the acceleration of indebtedness under
      or constitute a default under, the terms of any indenture or
      other agreement or instrument to which the Seller is a party
      or by which it is bound, or any statute or regulation
      applicable to the Seller or any order applicable to the
      Seller of any court, regulatory body, administrative agency
      or governmental body having jurisdiction over the Seller.

           (iii)No consent, approval, authorization of,
      registration or filing with, or notice to, any governmental
      or regulatory authority, agency, department, commission,
      board, bureau, body or instrumentality is required on the
      part of the Seller for the execution and delivery or by the
      Seller with any of the Agreements to which the Seller is a
      party, or the sale of the Notes, or the consummation by the
      Seller of any transaction contemplated under any of the
      Agreements to which the Seller is a party, or such consent,
      approval or authorization has been obtained or such
      registration, filing or notice has been made (or, with
      respect to assignments of mortgages and financing
      statements, will be made by the Seller as contemplated by
      the Indenture).

           (iv)  There is no action, suit or proceeding against,
                or investigation of, the Seller pending or, to the
                best of its knowledge, threatened, before any
                court, administrative agency or other tribunal
                which, either individually or in the aggregate,
                (A) may result in any material adverse change in
                the financial condition, properties, or assets of
                the Seller or in any material and adverse
                impairment of the right or ability of the Seller
                to perform its obligations under the Agreements,
                or (B) asserts the invalidity of any of the
                Agreements to which either the Seller is a party
                or the Notes or (C) seeks to prevent the
                consummation of any of the transactions
                contemplated by any of the Agreements to which
                either the Seller is a party.

           (v)   (v) Neither the Seller nor any Affiliate of the
                Seller nor any Person authorized or employed by
                the Seller will, directly or indirectly, offer or
                sell any Note or similar security in a manner
                which would render the sale of the Notes pursuant
                to this Purchase Agreement a violation of Section
                5 of the 1933 Act, or require registration
                pursuant thereto.  Based in part on the
                representations and warranties contained in
                Section 6 hereof, the offering and sale of the
                Notes by the Seller to Purchaser at closing are
                exempt from the registration requirements of the
                1933 Act and the Indenture is not required to be
                qualified under the Trust Indenture Act of 1939,
                as amended.

      The Issuer and the Seller agree that the representations and
warranties set forth in this Section 5 shall be fully assignable
to the initial party to whom the Purchaser may sell the Notes.

           6.   The Purchaser's Representations.    The Purchaser
represents to the Issuer as follows:
           (a)  The Purchaser is acquiring the Notes for its own
      account. The Purchaser understands that the Notes are not
      being registered under the Securities Act of 1933, as
      amended (the "1933 Act"), or any State securities or "Blue
      Sky" law and are being sold to the Purchaser in reliance
      upon the Purchaser's representations contained herein in a
      transaction that is exempt from the registration
      requirements of the 1933 Act and any applicable State law.
      The Purchaser agrees that the Notes may not be Transferred
      unless subsequently registered under the 1933 Act and any
      applicable State securities or "Blue Sky" law or unless
      exemptions from the registration requirements of the 1933
      Act and applicable State laws are available. Subject to the
      express provisions of this Purchase Agreement and the
      Indenture, the disposition of the Notes shall at all times
      be within the control of the owner thereof.  Notwithstanding
      anything to the contrary, express or implied, in this
      Agreement, the Indenture or otherwise, the Purchaser
      understands that none of the Trust, the Note Registrar or
      the Indenture Trustee is obligated to register the Notes
      under the 1933 Act or any other securities law and that any
      Transfer in violation of the provisions of the Indenture
      shall be void ab initio. The foregoing shall in no way limit
      the ability or the right of the Purchaser to sell
      participation interests in any Notes owned by the Purchaser.

           (b)  The Purchaser is either (i) an "accredited
      investor" as defined in rule 501(a) under the 1933 Act or
      (ii) a Qualified Institutional Buyer as defined in Rule 144A
      under the 1933 Act.

           (c)  The Purchaser is authorized to enter into this
      Purchase Agreement and to purchase the Notes.  This Purchase
      Agreement has been duly authorized executed and delivered by
      the Purchaser and constitutes the Purchaser's legal, valid
      and binding agreement enforceable against the Purchaser in
      accordance with its terms, subject to applicable bankruptcy,
      insolvency, and similar laws affecting creditors' rights
      generally, and subject, as to enforceability, to general
      principles of equity (regardless of whether enforcement is
      sought in a proceeding in equity or at law).

           (d)  The Purchaser has sufficient knowledge and
      experience in financial and business matters as to be
      capable of evaluating the merits and risks of an investment
      in the Notes and the Purchaser is able to bear the economic
      risk of investment in the Notes.  The Purchaser acknowledges
      that in connection with the making of its investment
      decision, the Purchaser has been afforded the opportunity to
      ask questions of, and receive answers regarding, and to
      conduct its investigation of, the Issuer, the Loans and the
      Loan Collateral, the Trust Estate, the Notes and the
      Servicer as is sufficient and necessary for the Purchaser to
      make an informed investment decision with respect to the
      Notes.

           (e)  No placement agent, broker, finder or investment
      banker has been employed by or has acted for the Seller or
      the Purchaser in connection with the transactions with the
      Purchaser contemplated in this Purchase Agreement or
      otherwise in connection with the Notes; and the Purchaser is
      solely responsible for, and the Purchaser shall indemnify
      the Seller for the fees, expenses or commissions of any
      placement agent, broker, finder or investment banker and any
      other person or entity claiming to have acted in such
      capacity for or under the authority of the Purchaser.

           (f)  The Purchaser agrees to treat, and to take no
      action inconsistent with the treatment of, the Notes as debt
      of the Issuer for tax purposes.

           7.   Notices. All notices and other communications
hereunder shall be in writing and shall be sent by first class
registered or certified mail, return receipt requested, or by
facsimile transmission, provided such transmission is confirmed
by overnight mail delivered by a nationally recognized overnight
delivery service, addressed (a) if to the Purchaser, Union Bank
of California, N.A., 445 South Figueroa Street, 15th Floor, Los
Angeles, California 90071, Attention: Stephen R. Sweeney, and (b)
if to the Issuer or Litchfield, c/o Litchfield Financial
Corporation, 430 Main Street, Williamstown, Massachusetts 01267,
Attention: Executive Vice President, or to such other address as
the Issuer or Litchfield shall have furnished to the Purchaser in
writing.  Any notice so given by registered or certified mail
shall be deemed to have been given five days after being
deposited in a depository of the United States mails.  Any notice
given by means of a nationally recognized overnight delivery
service shall be deemed to have been given upon receipt thereof.

           8.   Miscellaneous.  (a)  This Purchase Agreement shall
be construed and enforced in accordance with and governed by the
law of the State of New York.

           (b)  Any action or proceeding relating in any way to
this Purchase Agreement may be brought and enforced in the courts
of the State of New York or of the United States for the Southern
District of New York and each of the Issuer, Litchfield and the
Purchaser irrevocably submits to the jurisdiction of each such
court (and any appellate court from any thereof) in respect of
any such action or proceeding.

           Each of the Issuer, Litchfield and the Purchaser
irrevocably waives, to the fullest extent permitted by applicable
law, any objection that it may now or hereafter have to the
laying of venue of any such action or proceeding in the Supreme
Court of the State of New York or the United States District
Court for the Southern District of New York, and any claim that
any such action or proceeding brought in any such court has been
brought in an inconvenient forum.

           (c)  This Agreement supersedes all prior agreements and
understandings relating to the subject matter hereof.

           (d)  The headings in this Purchase Agreement are for
the purposes of reference only and shall not limit or define the
meaning hereof.

           (e)  This Purchase Agreement shall be binding upon the
respective successors and assigns of the parties hereto and shall
inure to the benefit of and be enforceable by any registered
owner or owners at the time of each Note then issued, or any part
thereof.  This Purchase Agreement may be assigned by the
Purchaser to an eligible purchaser of the Notes in connection
with a permitted transfer of the Notes in accordance with the
Indenture.

           (f)  This Purchase Agreement may be amended, waived,
discharged or terminated only by an instrument in writing signed
by the party against which enforcement of such amendment, waiver,
discharge or termination is sought.

           (g)  This Purchase Agreement may be executed
simultaneously in several counterparts, or by different parties
in separate counterparts, each of which counterparts shall be an
original, but all of which shall constitute one instrument.

           9.   No Recourse.   It is expressly understood and
agreed by the parties hereto that (a) the representations,
undertakings and agreements herein made on the part of the Issuer
are made and intended not as personal representations,
undertakings and agreements by Litchfield but are made and
intended for the purpose of binding only the Issuer, (b) nothing
herein contained shall be construed as creating any liability on
Litchfield to perform any covenant either expressed or implied
contained herein, all such liability, if any, being expressly
waived by the parties hereto, and (c) under no circumstances
shall Litchfield be personally liable for the payment of any
indebtedness or expenses of the Issuer or be liable for the
breach or failure of any obligation, representation, warranty or
covenant made or undertaken by the Issuer under this Agreement;
it being understood that the foregoing shall in no way limit the
obligations of Litchfield under the Guarantee or the Purchase and
Sale Agreement.

           IN WITNESS WHEREOF, the parties hereto have caused this
Purchase Agreement to be duly executed on the date first written
above.

                          LITCHFIELD HYPOTHECATION CORP. 1998-B

                          By:  /s/ Heather A. Sica
                               --------------------
                          Name:  Heather A. Sica
                          Title:  Executive Vice President


                          LITCHFIELD FINANCIAL CORPORATION

                          By:  /s/ Heather A. Sica
                               -------------------
                          Name:  Heather A. Sica
                          Title:  Executive Vice President

                          UNION BANK OF CALIFORNIA, N.A.

                          By:  /s/ Stephen R. Sweeney
                               ----------------------
                          Name:  Stephen R. Sweeney
                          Title:  Vice President



                                                     Exhibit 10.192



LIMITED GUARANTEE

           LIMITED GUARANTEE dated as of March 1, 1999 by
LITCHFIELD FINANCIAL CORPORATION, a Massachusetts corporation
(the "Guarantor"), in favor of UNION BANK OF CALIFORNIA, N.A., a
California banking corporation with an address at 445 South
Figueroa Street, 15th Floor, Los Angeles, California 90071("Union
Bank"), as a Noteholder under the Indenture hereinafter referred
to.

WHEREAS,   Litchfield   Hypothecation   Corp.1998-B,   a   Delaware
       corporation (the "Issuer") and a wholly-owned  subsidiary of
       the  Guarantor,  and The Chase  Manhattan  Bank,  as trustee
       (the  "Trustee")are  parties to an  Indenture  of Trust (the
       "Indenture")  (capitalized terms used but not defined herein
       shall have the meanings  attributed thereto in the Indenture
       or in  Appendix  A  thereto),  dated  as  of  June  1,  1998
       providing  for the  issuance by the Issuer from time to time
       of   its    Hypothecation    Loan    Collateralized    Notes
       (collectively, the "Notes");

           WHEREAS, pursuant to the Indenture, the Issuer has
issued and the Guarantor has purchased certain Series C Notes in
the original principal amount of $3,725,000.00(the "Guaranteed
Notes")which Series C Notes the Guarantor has sold to Union Bank
pursuant to a Note Purchase Agreement, dated as of March 23, 1999
by and among the Issuer, the Guarantor and Union Bank; and

           WHEREAS, it is a condition to the purchase by Union
Bank of the Guaranteed Notes that the Guarantor issue a guarantee
in the form hereof of certain of the obligations of the Issuer
under the Guaranteed Notes.

           NOW, THEREFORE, in consideration of the premises and in
order to induce Union Bank to purchase the Guaranteed Notes, the
Guarantor hereby agrees as follows:

           Section 1.  Guarantee.  The Guarantor hereby
irrevocably and unconditionally guarantees the punctual payment
when due, whether at stated maturity, after maturity, by
acceleration or otherwise, of principal of and interest on the
Guaranteed Notes (the "Guaranteed Obligations") in an aggregate
amount not to exceed $186,250(the "Guaranteed Amount"). The
Guarantor hereby agrees that it shall make the payment of a
Guaranteed Obligation upon receipt of written demand therefor
from Union Bank (a "Demand Notice") which Demand Notice shall
specify that an Event of Default has occurred and is continuing
under either or both of Sections 7.1(a) and 7.1(b) of the
Indenture due to the failure of the Issuer to make the applicable
payment of principal and/or interest due and owing to Union Bank
under the Guaranteed Notes and the Indenture. The obligation of
the Guarantor hereunder shall in no event exceed the Guaranteed
Amount.  The Guaranteed Amount shall be reduced by (i) the amount
of any payments made by Guarantor hereunder or (ii) the portion
allocable to the Guaranteed Notes of any unreimbursed Servicer
Advances pursuant to the Indenture.
           Notwithstanding the limitation contained in the
preceding sentence, the Guarantor shall also pay all costs and
expenses, including attorneys' fees, costs relating to all costs
and expenses arising out of or with respect to the validity,
enforceability, collection, defense, administration or
preservation of this Guarantee.

           GUARANTOR ACKNOWLEDGES AND AGREES THAT ANY REPURCHASE
OF THE HYPOTHECATION LOANS BY THE GUARANTOR PURSUANT TO THE TERMS
OF THE INDENTURE OR ANY OTHER DOCUMENT PROVIDING GUARANTOR WITH
SUCH OPTION OR OBLIGATION OR THE PAYMENT OR PERFORMANCE BY
GUARANTOR OF ANY OTHER OBLIGATION OF ISSUER UNDER THE INDENTURE
OR THE GUARANTEED NOTES SHALL NOT REDUCE THE OBLIGATIONS OF
GUARANTOR TO UNION BANK UNDER THIS GUARANTEE AND UNION BANK'S
CONSENT TO SUCH REPURCHASE SHALL NOT CONSTITUTE A WAIVER OF UNION
BANK'S RIGHTS HEREUNDER.

           Section 2.  Waiver.  The Guarantor hereby absolutely,
unconditionally and irrevocably waives, to the fullest extent
permitted by law, (i) promptness, diligence, notice of acceptance
and any other notice with respect to this Guarantee,(ii) any
requirement that Union Bank protect, secure, perfect or insure
any security interest or lien or any property subject thereto or
exhaust any right or take any action against the Issuer or any
other person or any collateral, (iii) any and all right to assert
any defense, set-off, counterclaim or cross-claim of any nature
whatsoever with respect to this Guarantee, the obligations of the
Guarantor hereunder or the obligations of any other person or
party (including, without limitation, the Issuer) relating to
this Guarantee or the obligations of the Guarantor hereunder or
otherwise with respect to the Guaranteed Obligations in any
action or proceeding brought by Union Bank to collect the
Guaranteed Obligations or any portion thereof or to enforce the
obligations of the Guarantor under this Guarantee, and (iv) any
other action, event or precondition to the enforcement of this
Guarantee or the performance by the Guarantor of the obligations
hereunder.

           Section 3.  Guarantee Absolute.  (a)  The Guarantor
guarantees that, to the fullest extent permitted by law, the
Guaranteed Obligations will be paid or performed strictly in
accordance with their terms, regardless of any law, regulation or
order now or hereafter in effect in any jurisdiction affecting
any of such terms or the rights of Union Bank with respect
thereto.

           (b)  No invalidity, irregularity, voidability, voidness
or unenforceability of the Indenture or the Guaranteed Notes or
of all or any part of the Guaranteed Obligations or of any
security therefor, shall affect, impair or be a defense to this
Guarantee.

           (c)  The liability of the Guarantor under this
Guarantee shall be absolute and unconditional irrespective of:

(i) any change in the manner, place or terms of payment or performance,
      and/or any change or extension of the time of payment or
      performance of, renewal or alteration of, any Guaranteed
      Obligation, any security therefor, or any liability incurred
      directly or indirectly in respect thereof, or any other
      amendment or waiver of or any consent to departure from the
      Indenture or the Guaranteed Notes , including any increase
      in the Guaranteed Obligations resulting from the extension
      of additional credit to the Issuer;

(ii) any sale, exchange, release, surrender, realization upon any
      property by whomsoever at any time pledged or mortgaged to
      secure, or howsoever securing, all or any of the Guaranteed
      Obligations, and/or any offset thereagainst, or failure to
      perfect, or continue the perfection of, any lien in any such
      property, or delay in the perfection of any such lien, or
      any amendment or waiver of or consent to departure from any
      other guarantee for all or any of the Guaranteed Obligations;

(iii) any exercise or failure to exercise any rights against the Issuer
      or others (including the Guarantor);

(iv) any settlement or compromise of any  Guaranteed Obligation, any
      security therefor or any liability (including any of those
      hereunder) incurred directly or indirectly in respect
      thereof or hereof, and any subordination of the payment of
      all or any part thereof to the payment of any  Guaranteed
      Obligations (whether due or not) of the Issuer to creditors
      of the Issuer other than the Guarantor;

(v) any manner of application of any collateral, or proceeds thereof,
      to all or any of the Guaranteed Obligations, or any manner
      of sale or other disposition of any collateral for all or
      any of the Guaranteed Obligations or any other assets of the
      Issuer or any of its subsidiaries; or

(vi) any change, restructuring or termination of the existence of the
      Issuer.

           (d)  Union Bank may at any time and from time to time
(whether or not after revocation or termination of this
Guarantee) without the consent of, or notice (except as shall be
required by applicable statute and cannot be waived) to, the
Guarantor, and without incurring responsibility to the Guarantor
or impairing or releasing the obligations of the Guarantor
hereunder, apply any sums by whomsoever paid or howsoever
realized to any Guaranteed Obligation regardless of what
Guaranteed Obligations remain unpaid.

           (e)  This Guarantee shall continue to be effective or
be reinstated, as the case may be, if claim is ever made upon
Union Bank for repayment or recovery of any amount or amounts
received by Union Bank in payment or on account of any of the
Guaranteed Obligations and Union Bank repays all or part of said
amount by reason of any judgment, decree or order of any court or
administrative body having jurisdiction over Union Bank, or any
settlement or compromise of any such claim effected by Union Bank
with any such claimant (including the Issuer), then and in such
event the Guarantor agrees that any such judgment, decree, order,
settlement or compromise shall be binding upon the Guarantor,
notwithstanding any revocation hereof or the cancellation of the
Guaranteed Notes, and the Guarantor shall be and remain liable to
Union Bank hereunder for the amount so repaid or recovered to the
same extent as if such amount had never originally been received
by Union Bank.

           Section 4.  Continuing Guarantee.  This Guarantee is a
continuing one and shall (i) remain in full force and effect
until the indefeasible payment and satisfaction in full of the
Guaranteed Obligations, (ii) be binding upon the Guarantor, its
successors and assigns, and (iii) inure to the benefit of, and be
enforceable by, Union Bank and its successors, transferees and
assigns.  All obligations to which this Guarantee applies or may
apply under the terms hereof shall be conclusively presumed to
have been created in reliance hereon.

           Section 5.  Representations, Warranties and Covenants.
The Guarantor hereby represents, warrants and covenants to and
with Union Bank that:

           (a)  The Guarantor has the corporate power to execute
      and deliver this Guarantee and to incur and perform its
      obligations hereunder;

           (b)  The Guarantor has duly taken all necessary
      corporate action to authorize the execution, delivery and
      performance of this Guarantee and to incur and perform its
      obligations hereunder;

           (c)  No consent, approval, authorization or other
      action by, and no notice to or of, or declaration or filing
      with, any governmental or other public body, or any other
      person, is required for the due authorization, execution,
      delivery and performance by the Guarantor of this Guarantee
      or the consummation of the transactions contemplated hereby;
      and

           (d)  The Guarantor shall provide to Union Bank (i)
      within 60 days of the end of each fiscal quarter, the report
      on form 10-Q of the Guarantor and (ii) within 135 days of
      the end of each fiscal year of the Guarantor, the report on
      form 10-K of the Guarantor.

           Section 6.  Terms.  (a) The words "include," "includes"
and "including" shall be deemed to be followed by the phrase
"without limitation".

           (b)  All references herein to Sections and subsections
shall be deemed to be references to Sections and subsections of
this Guarantee unless the context shall otherwise require.

           Section 7.  Amendments and Modification.  No provision
hereof shall be modified, altered or limited except by written
instrument expressly referring to this Guarantee and to such
provision, and executed by the party to be charged.

           Section 8.  Waiver of Subrogation Rights. Guarantor
hereby waives until the Guaranteed Obligations are paid in full
any right of indemnity, reimbursement, contribution, or
subrogation arising as a result of payment by Guarantor
hereunder, and will not prove any claim in competition with Union
Bank in respect of any payment hereunder in bankruptcy or
insolvency proceedings of any nature.  Guarantor will not claim
any set-off or counterclaim against Issuer in respect of any
liability of Guarantor to Issuer.  Guarantor waives any benefit
of and any right to participate in any collateral which may be
held by Union Bank.

           Section 9.  Statute of Limitations.  Any acknowledgment
or new promise, whether by payment of principal or interest or
otherwise and whether by the Issuer or others (including the
Guarantor), with respect to any of the Guaranteed Obligations
shall, if the statute of limitations in favor of the Guarantor
against Union Bank shall have commenced to run, toll the running
of such statute of limitations and, if the period of such statute
of limitations shall have expired, prevent the operation of such
statute of limitations.

           Section 10.  Rights and Remedies Not Waived.  No act,
omission or delay by Union Bank shall constitute a waiver of its
rights and remedies hereunder or otherwise.  No single or partial
waiver by Union Bank of any default hereunder or right or remedy
which it may have shall operate as a waiver of any other default,
right or remedy or of the same default, right or remedy on a
future occasion.

           Section 11.  Admissibility of Guarantee.  The Guarantor
agrees that any copy of this Guarantee signed by the Guarantor
and transmitted by telecopier for delivery to Union Bank shall be
admissible in evidence as the original itself in any judicial or
administrative proceeding, whether or not the original is in
existence.

           Section 12.  Notices.  All notices, requests and
demands to or upon Union Bank or the Guarantor under this
Agreement shall be in writing and given as provided in the
Indenture (with respect to the Guarantor, to the address of the
Issuer as set forth in the Indenture and with respect to Union
Bank, at its address set forth above).

           Section 13.  Counterparts.  This Guarantee may be
executed in any number of counterparts and by the different
parties hereto on separate counterparts, each of which when so
executed and delivered shall be an original and all of which
shall together constitute one and the same agreement.

           Section 14.  CONSENT TO JURISDICTION; WAIVER OF JURY
TRIAL; ETC.  (a)  ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO
THIS GUARANTEE MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW
YORK OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT
OF NEW YORK AND, BY EXECUTION AND DELIVERY OF THIS GUARANTEE, THE
GUARANTOR HEREBY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE
JURISDICTION OF THE AFORESAID COURTS.  THE GUARANTOR HEREBY
IRREVOCABLY WAIVES, IN CONNECTION WITH ANY SUCH ACTION OR
PROCEEDING, (i) TRIAL BY JURY, (ii) TO THE EXTENT IT MAY
EFFECTIVELY DO SO UNDER APPLICABLE LAW, ANY OBJECTION, INCLUDING
ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF
FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE
JURISDICTIONS AND (iii) THE RIGHT TO INTERPOSE ANY SET-OFF,
COUNTERCLAIM OR CROSS-CLAIM (UNLESS SUCH SET-OFF, COUNTERCLAIM OR
CROSS-CLAIM COULD NOT, BY REASON OF ANY APPLICABLE FEDERAL OR
STATE PROCEDURAL LAWS, BE INTERPOSED, PLEADED OR ALLEGED IN ANY
OTHER ACTION).

           GUARANTOR ACKNOWLEDGES THAT THE TRANSACTION OF WHICH
THIS GUARANTEE IS A PART IS A COMMERCIAL TRANSACTION, AND HEREBY
VOLUNTARILY WAIVES GUARANTOR'S RIGHTS TO NOTICE AND HEARING UNDER
ANY APPLICABLE STATE OR FEDERAL LAW WITH RESPECT TO ANY
PREJUDGMENT REMEDY WHICH UNION BANK MAY DESIRE TO USE.

           (b)  The Guarantor irrevocably consents to the service
of process of any of the aforementioned courts in any such action
or proceeding by the mailing of copies thereof by certified mail,
postage prepaid, to the Guarantor at its address determined
pursuant to Section 12 hereof.

           (c)  Nothing herein shall affect the right of Union
Bank to serve process in any other manner permitted by law or to
commence legal proceedings or otherwise proceed against the
Guarantor in any other jurisdiction.

           (d)  The Guarantor hereby waives presentment, notice of
dishonor and protests of all instruments included in or
evidencing any of the Guaranteed Obligations, and any and all
other notices and demands whatsoever (except as expressly
provided herein).

           Section 15.  GOVERNING LAW.  THIS GUARANTEE AND THE
GUARANTEED OBLIGATIONS SHALL BE GOVERNED IN ALL RESPECTS BY THE
LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS EXECUTED
AND TO BE PERFORMED IN SUCH STATE, WITHOUT GIVING EFFECT TO THE
CONFLICT OF LAW PRINCIPLES THEREOF.

           Section 16.  Captions; Separability.  (a)  The captions
of the Sections and subsections of this Guarantee have been
inserted for convenience only and shall not in any way affect the
meaning or construction of any provision of this Guarantee.
           (b)  If any term of this Guarantee shall be held to be
invalid, illegal or unenforceable, the validity of all other
terms hereof shall in no way be affected thereby.

           Section 17.  Acknowledgment of Receipt.  The Guarantor
acknowledges receipt of a copy of this Guarantee.

           Section 18.  This Guarantee shall inure to the benefit
of and be enforceable by Union Bank, its successors, transferees
and assigns, and it shall be binding upon Guarantor and the
successors and assigns of Guarantor.

           IN WITNESS WHEREOF, the Guarantor has duly executed or
caused this Guarantee to be duly executed in the State of New
York as of the date first above set forth.

                               LITCHFIELD FINANCIAL CORPORATION



                               By: /s/ Heather A. Sica
                                   -------------------
                               Name:  Heather A. Sica
                               Title: Executive Vice President








                           Exhibit 11.1
                 Litchfield Financial Corporation
                 Computation of Earnings Per Share



                                           Three Months Ended
                                               March 31,
                                           1999             1998
                                           ----             ----

Basic:
     Weighted average number of
        common shares outstanding.......   6,886,559        5,659,756
                                          ==========       ==========

     Net income.........................  $2,278,000       $1,550,000
                                          ==========       ==========

     Net income per common share.         $      .33       $      .27
                                          ==========       ==========

Diluted:
     Weighted average number of
        common shares outstanding.......   6,886,559        5,659,756
     Weighted average number of
        common stock equivalents
        outstanding:
        Stock options...................     305,819          360,402
                                           ----------      -----------

     Weighted average common and
        common equivalent shares
        outstanding.....................   7,192,378        6,020,158
                                          ==========       ==========

     Net income.........................  $2,278,000       $1,550,000
                                          ==========       ==========

     Net income per common share........  $      .32       $      .26
                                          ==========       ==========