EXHIBIT 99
                          OCWEN ASSET INVESTMENT CORP.

                              INVESTMENT GUIDELINES


                                   I. PREFACE

         Ocwen Asset  Investment  Corp., a Virginia  corporation (the "Company")
has elected to be taxed as a real estate  investment trust ("REIT")  pursuant to
the  Internal  Revenue  Code of 1986,  as amended.  The day to day  business and
investment affairs of the Company will be managed by Ocwen Capital  Corporation,
a  Florida  corporation  (the  "Manager")  in  accordance  with  the  terms of a
Management  Agreement.  The  management  of the  Company  shall at all  times be
conducted  pursuant to the  supervision of the Board of Directors of the Company
and the Guidelines set forth here.

         At a meeting  duly called and held on May 12,  1997,  these  Guidelines
were duly adopted by the Company's  Board of Directors.  The  Guidelines  may be
amended from time to time at the discretion of the Board of Directors, and these
Guidelines will be reviewed periodically by the Board of Directors.  Capitalized
terms used herein but not defined  herein  shall have the  meanings  assigned to
them in the Company's Prospectus,  dated May 14, 1997, filed with the Securities
and Exchange  Commission as part of the Company's  Registration  Statement  (No.
333-21965) on Form S-11.

                                II. INTRODUCTION

         The Company's  objective is to build a diverse portfolio in Real Estate
Related  Assets  with  a  view  to  maximizing   income  for   distribution   to
shareholders,  consistent with acceptable levels of risk.  Pending investment in
Real Estate  Related  Assets,  the Company  shall  invest in readily  marketable
securities,   consistent  with   maintaining  the  Company's  REIT  status,   or
interest-bearing deposit accounts.

         The Company intends to invest in Subordinated  Interests and Distressed
Real Property when opportunities that the Company considers  advantageous become
available.  To invest in appropriate assets efficiently during approximately the
first year of the Company's  operation,  and from time to time  thereafter,  the
Company intends also to invest in Other Real Estate Assets,  including  Mortgage
Loans,  MBS and other real property  interests.  Until  appropriate  real estate
related  acquisitions  are made,  however,  the net proceeds of the Common Stock
offering  may be  invested in readily  marketable  securities,  consistent  with
maintaining  the Company's REIT  qualification,  or in interest  bearing deposit
accounts.  The Board of Directors acknowledge that it may take considerable time
for the Manager,  and therefor the  Company,  to find  appropriate  investments,
during which time the Company's  assets will be invested in relatively low yield
instruments.

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         The Company at all times shall comply with the federal, state and local
statutes,  rules and regulations  applicable to it. The Company shall maintain a
system  of  internal   accounting  controls  sufficient  to  provide  reasonable
assurances  that   transactions  are  executed  in  accordance  with  applicable
statutes,  rules and regulations and these Guidelines.  The Company at all times
shall  act and  make  investments  so  that  it  shall  not be  deemed  to be an
"investment  company" under the Investment Company Act of 1940 (the "1940 Act").
The 1940 Act  requires,  among other  activities,  that the Company  must invest
fifty-five  percent  (55%) of its  assets in  mortgages  and other  liens on and
interests  in real  estate,  and an  additional  twenty-five  percent  (25%)  in
Qualifying  Interests  or other real estate  related  assets  within one year of
Closing, or May 19, 1998.

                 III. INVESTMENTS IN REAL ESTATE RELATED ASSETS

                            A. SUBORDINATED INTERESTS

         The  Company   shall  be  permitted  to  purchase   rated  and  unrated
Subordinated  Interests  that are  subordinated  to one or more other classes of
MBS,  including Sub IOs and  Subordinated  Interests that are designated a REMIC
Residual Interest.

         Before acquiring a Subordinated Interest, the Company performs a number
of due diligence  tasks to evaluate the investment and to verify the information
and material  provided by the seller to the Company.  With respect to RMBS,  the
Manager  creates two sample pools:  1) a random sample and 2) an adverse sample,
with  characteristics  (such as high  loan-to-value  ratios or poor  delinquency
histories)  that make them likely to perform more poorly than the average  loans
in the pool under consideration. The Manager will obtain broker's price opinions
("BPOs")  from one of its  approved  brokers for each of the loans in the sample
pools.  The Manager  evaluates  each BPO to verify its  reasonableness,  and, if
appropriate,  additional  information is obtained until the Manager is satisfied
that a  reasonable  determination  of the  value of the  loan  can be made.  The
Manager also  estimates  the  potential  for increases or decreases in estimated
property values based on local real estate trends.

         Losses on mortgage  loans are measured in two ways,  loss frequency and
loss  severity.  Loss  frequency  (the monthly  percentage  of the loan balances
projected  to default  during the life of the  securitization)  is  estimated by
using industry  standard  predictive  models,  supplemented by Ocwen Financial's
historical data and experience.

         Loss  severity (the amount of loss expected to be realized on defaulted
loans) is estimated by projecting  the net  resolution  proceeds  expected to be
derived  from the  defaulted  loans  based  upon Ocwen  Financial's  proprietary
in-house  computer  models.  This net resolution  analysis reviews all potential
forms of resolution,  including full payoff,  discounted payoff,  reinstatement,
foreclosure and sale, deed-in-lieu and sale, and takes into account, among other
things,  real estate value,  carrying costs (that is, property taxes,  insurance
and maintenance) and average months to foreclose in the particular state.

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         With respect to CMBS, the Company  determines on a  loan-by-loan  basis
which loans will undergo a full-scope review and which loans will undergo a more
streamlined  "desktop  analysis."  Considerations  that influence the choice for
scope of review are loan size, debt service coverage ratio, loan to value ratio,
loan  maturity,  lease  rollover,  property  type  and  geographic  location.  A
full-scope review may include,  among other factors, a property site inspection,
tenant-by-tenant  rent roll analysis,  review of historical  income and expenses
for each property  securing the loan, a review of major leases for each property
(if   applicable);   recent   appraisals  (if   applicable),   engineering   and
environmental  reports (if applicable),  and a BPO review.  For those loans that
are selected for the more streamlined desktop analysis, the Manager's evaluation
may include a review of the property  operating  statements,  summary loan level
data, third party reports, and a BPO review, each as available. If the Manager's
review  of  such   information   does  not  reveal  any  unusual  or  unexpected
characteristics  or  factors,  no further  due  diligence  is  performed.  After
completing  the review of the  documentation  and the property  inspection,  the
information  compiled  will be analyzed to determine  collateral  value for each
property securing the loans. Based on these factors,  the Manager will determine
a resolution  value for each loan for purposes of  projecting  future cash flows
after adjustments for estimated future losses.

         After completing the foregoing evaluations,  the Manager will model the
structure of the RMBS or CMBS securitization  based on the disclosure  documents
that  reveal the payment  structure  of the MBS and the  characteristics  of the
underlying  mortgage  collateral.  This  modeling  is done in order to  estimate
future  cash  flows  to  be  received  by  the  Subordinated  Interests,   after
adjustments for estimated  future losses.  Using that  information,  the Manager
will  determine  the  price  at  which  it  would  effect  the  purchase  of the
Subordinated Interest on behalf of the Company.

         The Company also intends in many instances to acquire Special Servicing
rights with respect to the mortgage  loans  underlying  MBS in which the Company
owns a  Subordinated  Interest.  Such  Special  Servicing  rights  will give the
Company,  among other things,  some control over the timing of  foreclosures  on
such mortgage  loans and,  thus, may enable the Company to reduce losses on such
mortgage loans. The Board of Directors recognize that no assurances can be made,
however,  that the Company will be able to acquire such Special Servicing rights
or that losses on the mortgage loans will not exceed the Company's expectations.
Although the Company's strategy is to purchase Subordinated Interests at a price
designed to return the Company's  investment and generate a profit thereon,  the
Board of Directors  recognize that there can be no assurance that such goal will
be met or, indeed, that the Company's investment in a Subordinated Interest will
be returned in full or at all.

         The Board has delegated to the Manager broad discretion in reaching its
investment  determination with respect to Subordinated Interests.  Factors to be
considered  in  deciding  whether  to invest  in,  and what  price to pay for, a
Subordinated  Interest will include the possibility of receipt of taxable income
from a Subordinated Interest that is in excess of the economic income therefrom,
the status of such  investments  under the 1940 Act;  whether  the  Company  can
obtain Special Servicing rights with respect to the underlying  collateral;  the
extent of the Company's portfolio then invested in Subordinated  Interests;  the
expected current yield and yield to maturity of the Subordinated Interests;  the
yield character of the balance of the

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Company's  portfolio;  and  the  credit  quality  of the  underlying  collateral
(including,  for a mortgage  loan, the  loan-to-value  ratio,  the purpose,  the
principal amount, the terms, the geographic  diversification and, in the case of
commercial loans, the credit-worthiness of the tenants).

                                  B. OTHER MBS

         The  Company may invest not only in classes of  Subordinated  Interests
but also in other  classes of MBS. For  example,  the Company may invest in IOs,
which are entitled to no (or only nominal)  payments of  principal,  but only to
payments of interest If the mortgage loans underlying an IO prepay slowly,  then
the weighted  average life of the IO will be extended,  which will  increase the
yield to  maturity on the IO.  Conversely,  faster  prepayments  have an adverse
effect on the yield to maturity of an IO. The Company also may invest in Inverse
IOs,  which bear  interest at a floating  rate that varies  inversely  with (and
often at a multiple of) changes in a specified index. The yield to maturity of a
class of Inverse IOs is not only very  sensitive to the rate of  prepayments  on
the underlying mortgage loans, but also changes in the related index.

         The Manager may invest in other  classes of MBS which are new issues or
are trading in the secondary market via primary and secondary  dealers.  Each of
the MBS classes will be screened and analyzed to determine if its structure fits
the Company's investment plan.

         Utilizing the disclosed information,  prior to settlement of the trade,
the Manager will reverse  engineer the  transaction,  verify yield tables,  cash
flows,  and average life profiles under stress  scenarios  with existing  models
such as Bloomberg and Salomon's Yield Book.

         The Manager will  typically run the entire  current  portfolio with and
without  the  potential  purchase  and view  total  rate of return  and yield to
maturity  profiles  under various  interest rate shocks.  Typical  interest rate
shock  scenarios  consist of up 300 basis  points and down 300 basis points with
100 basis point  increments for a one year horizon.  Each of these scenarios use
prepayment  assumptions  that are  generally  based on the  weighted  average of
several dealers projections.

         The  Manager  will  evaluate  the  bond's  default  risk  by  reviewing
underlying  collateral and/or by checking rating status of non-agency securities
for payment  guarantee.  The Manager will measure a bond's cash flow risk,  call
and  reinvestment  risk by  examining  prepayment  assumptions,  cash  flows and
weighted  average life profiles under different  interest rate shock  scenarios.
The  Manager  will review  previous  and current  market  conditions  to project
possible liquidity  profiles in different  interest rate scenarios.  The Manager
will gauge current market conditions to review bid ask spread on the investment.

                          C. DISTRESSED REAL PROPERTIES

         The Company will be permitted to invest in Distressed Real Properties.

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         The Company's policy will be to conduct an investigation and evaluation
of the properties in a portfolio of Distressed Real Property  before  purchasing
such a  portfolio.  Prior to  purchasing  assets,  the  Manager  will  generally
identify and contact real estate brokers and/or appraisers in the market area of
the subject  properties  to obtain rent and sale  comparables  and BPOs for each
asset in a portfolio.  This information is used to supplement due diligence that
is performed by the Manager's employees.

         The Company's due diligence will generally include the review of market
studies for each market within a portfolio.  The studies  typically will include
area economic data, employment trends, absorption rates and market rental rates.
Due diligence will also include site  inspections by the Manager's  employees or
agents of most  properties in a portfolio  and a review of all  available  asset
files and documentation.  To the extent possible those will include examinations
of available legal documents,  litigation files, correspondence,  title reports,
operating statements,  appraisals and engineering and environmental reports. The
information  compiled  is then  analyzed  to  determine  a  valuation  for  each
property.

         The property  valuation  process  utilizes a variety of tools which may
include various  proprietary  financial models that have been developed by Ocwen
Financial and will be available to the Company through a licensing agreement and
will be used and  applied by the  Manager.  Sources of  information  examined to
determine value may include:  (a) current and historical  operating  statements;
(b) existing appraisals; (c) BPOs; (d) rent and sales comparables;  (e) industry
statistics and reports  regarding  operating  expenses such as those compiled by
the  Institute  of  Real  Estate  Management;   (f)  leases;  and  (g)  deferred
maintenance observed during site inspections or described in structural reports,
and reports and correspondence found in the loan files.

         The Manager develops projections of net operating income and cash flows
taking  into  account  lease  rollovers,  tenant  improvement  costs and leasing
commissions.  The Manager will compare its  estimates of revenue and expenses to
historical operating  statements and estimates provided in BPOs,  appraisals and
general  industry  and  regional  statistics.  Market  capitalization  rates and
discount rates are then applied to the cash flow projections to estimate values.
These  values are then  compared to available  appraisals,  BPOs and market sale
comparables to determine  recommended  bid prices for each asset.  The bids take
into account  projected  holding  periods,  capital costs and  projected  profit
expectations.  Recommended  bid prices are then reviewed with senior  management
and a  decision  whether  to bid is made.  The  amount  offered  by the  Company
generally will be the price that the Manager estimates is sufficient to generate
an acceptable risk-adjusted return on the Company's investment.

         After the Company acquires Distressed Real Property, the Company's goal
will be to improve  management  of the  property so as to increase the cash flow
from the  property.  Following  increased  cash flows and  stabilization  of the
property,  the Company may begin to seek an  opportunity  to sell the  property.
Although  the  period  during  which  the  Company  will  hold  Distressed  Real
Properties will vary considerably from asset to asset, the Company believes that
most such  properties  will be held in its  portfolio  more than four  years and
generally fewer than ten years.

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         If the Company is offered the opportunity to purchase a Distressed Real
Property  that is likely  to be held for fewer  than  four  years,  the  Company
intends to establish a corporation in which the Operating  Partnership will hold
a 95%  non-voting  ownership  interest to make the purchase.  Such a corporation
will not be  eligible  for  taxation  as a qualified  REIT  subsidiary,  and any
profits  that it earns on its  activities  will be subject to federal  corporate
income  tax  before  they  are  distributable  to the  Company.  If the  Company
purchases a Distressed Real Property with the intent to hold it in the Operating
Partnership  for more than four  years,  but an  opportunity  arises to sell the
property  sooner,  the  Company  will  consider  certain  strategies,  such as a
like-kind  exchange,  to reduce any  negative tax  consequences  relating to the
sale.

         The  Company  will  maintain  comprehensive  insurance  on  each of the
Distressed Real Properties,  including liability insurance and fire and extended
coverage,  in amounts  sufficient to permit the replacement of the properties in
the event of a total loss, subject to applicable  deductibles.  The Company will
endeavor to obtain coverage of the type and in the amount  customarily  obtained
by owners of properties  similar to the Distressed  Real  Properties.  There are
certain types of losses,  however,  generally of a catastrophic  nature, such as
earthquakes,  floods and hurricanes, that may be uninsurable or not economically
insurable.  Inflation,  changes in building codes and ordinances,  environmental
considerations,  and  other  factors  also  might  make it not  feasible  to use
insurance  proceeds to replace a property if it is damaged or  destroyed.  Under
such circumstances,  the insurance proceeds received by the Company might not be
adequate  to  restore  its  economic  position  with  respect  to  the  affected
Distressed Real Property.

              D. REAL PROPERTIES WITH KNOWN ENVIRONMENTAL PROBLEMS

         The Company may acquire or  originate  mortgage  loans  secured by real
estate with known  environmental  problems that  materially  impair the value of
such real estate. The Company may also purchase such real estate.
In each instance, the following procedures must be followed.

         First,  due  diligence  will be  performed on the property as described
under  "Distressed Real Properties"  above.  Second,  the Manager will engage an
environmental  engineering  consultant  to  determine  the  scope  of the  risks
affecting the property,  describe the remediation  alternatives,  and prepare an
estimate of the costs of such remediation  alternatives and the time required to
effect such remediation alternatives.

         The Company will not acquire title to the property (or mortgage) in its
own  name or the name of Ocwen  Partnership,  L.P.  Instead,  the  Company  will
establish a single  purpose  entity to hold the  property  or mortgage  (and any
other properties with known material environmental problems or mortgages on such
properties).

         The  Company  will  limit  its  investments  in such  real  estate  and
mortgages  to  no  more  than  10%  of  the  Company's  overall  portfolio.   If
fluctuations  in the value of the Company's  portfolio  cause this percentage to
rise  above  10%,  the  Company  will  (a)  buy  no  additional  environmentally
distressed  real  properties or mortgages  until such time as the percentage has
been  reduced  and (b) if Manager  determines  that  market  conditions  are not
adverse and if selling an environmentally

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distressed  real  property or mortgage  would not  jeopardize  the Company's tax
status or subject the  Company to  taxation,  then the Company  will sell one or
more of its environmentally distressed properties or mortgages.

                           E. FOREIGN REAL PROPERTIES

         The Company  will be  permitted  to purchase  real  properties  located
outside the United States or mortgages on such foreign real  properties,  if the
following procedures are followed.

         First,  the  due  diligence  described  above  under  "Distressed  Real
Properties" will be performed.  Second, a local law firm will be hired to advise
the Company concerning the applicable laws, including real property laws, of the
local  jurisdiction and to provide a legal opinion about the Company's rights to
the  property.  Third,  the Manager will  consider ways to minimize the currency
conversion  risks  associated  with  the  investment,  such as the  purchase  of
currency swaps or the financing of the acquisition in the denominated currency.

         The  Company  will  limit  its  investments  in such  real  estate  and
mortgages  to  no  more  than  25%  of  the  Company's  overall  portfolio.   If
fluctuations  in the value of the Company's  portfolio  cause this percentage to
rise above 25%, the Company will (a) buy no additional  foreign real  properties
or  mortgages  until such time as the  percentage  has been  reduced  and (b) if
Manager determines that market conditions are not adverse and if selling foreign
real  property or mortgages  would not  jeopardize  the  Company's tax status or
subject the Company to  taxation,  then the Company will sell one or more of its
foreign  real  properties  or  mortgages.  The Company may be subject to foreign
income tax with respect to its investments in foreign real estate.  However, any
foreign  tax credit that  otherwise  would be  available  to the company for US.
federal income tax purposes will not flow through to the Company's stockholders.

                          F. PERFORMING MORTGAGE LOANS

         The Company will be  permitted  to purchase or originate  single-family
residential mortgage loans,  cooperative loans, multifamily residential mortgage
loans and commercial performing mortgage loans.

         When  deciding  whether  to  purchase  a large  pool  of  single-family
mortgage loans or commercial (including multifamily) mortgage loans, the Manager
will perform due diligence  tasks  similar to those  performed on RMBS and CMBS,
respectively, as described above under "Subordinated Interests."

         Moreover,  the Manager will  negotiate the agreement  pursuant to which
the loans are  purchased,  to include  customary and usual  representations  and
warranties  from the seller of the mortgage loans  concerning and  underwriting,
origination and characteristics of the mortgage loans.


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                    G. CONSTRUCTION LOANS AND MEZZANINE LOANS

         The Company may take advantage of opportunities to provide construction
or rehabilitation financing on commercial property, lending generally 85% to 90%
of total  project  costs,  and taking a first lien  mortgage  to secure the debt
("Construction   Loans").  The  Company  also  may  invest  in  loans  that  are
subordinate to first lien mortgage loans on commercial  real estate  ("Mezzanine
Loans").  For example, on a commercial property subject to a first lien mortgage
loan with a principal  balance  equal to 70% of the value of the  property,  the
Company  could  lend the owner of the  property  (typically  a  partnership)  an
additional 15% to 20% of the value of the property.  Typically the loan would be
secured,  either by the property subject to the first lien (giving the Company a
second lien position) or by a controlling  equity  interest in the owner. If the
equity  interest  is pledged,  then the  Company  would be in a position to make
decisions  with  respect  to the  operation  of the  property  in the event of a
default by the owner.  These  Construction  and Mezzanine  Loans generally would
provide the operating income or gross revenues from the property, payable to the
Company on an ongoing  basis,  and a percentage  of any increase in value of the
property,  payable upon maturity or refinancing of the loan, or otherwise  would
allow the Company to charge an interest  rate that would  provide an  attractive
risk-adjusted return.

         The Due Diligence to be performed with respect to the  Construction and
Mezzanine  Loans will  include  many of the tasks and  evaluations  performed in
connection with Distressed Real  Properties;  however,  such due diligence shall
further  include an  underwriting  evaluation  and  analysis of each  individual
borrower.

                         H. NONPERFORMING MORTGAGE LOANS

         The Company  will be permitted  to invest in  nonperforming  commercial
mortgage loans. If purchased in pools,  the due diligence to be performed before
purchasing  such loans will be similar to that  described  for the  purchase  of
Distressed Properties, above.

                         I. SALE LEASEBACK TRANSACTIONS

         The  Company  will  be  permitted  to  participate  in  sale  leaseback
transactions in which the Company will purchase real estate (either  improved or
unimproved)  and  then  will  lease  the  property  back to the  seller  under a
long-term triple net lease. The Company also may provide financing  necessary to
build  commercial  improvements  on the land, to refinance  existing debt on the
property or to provide additional funds to operate the business.

          IV. RESTRICTIONS ON INVESTMENTS IN REAL ESTATE RELATED ASSETS

         Except for the Initial  Investments,  Real Estate  Related Assets shall
not be acquired  from the  Manager or an  Affiliate  of the Manager  without the
prior approval of a majority of the Independent Directors and a Price Evaluation
in the case of securities or appraisals in the event of real estate loans.

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                               V. USE OF LEVERAGE

         The  Company  will be  permitted  to  leverage  its  portfolio  through
borrowings,  through  the use of  reverse  repurchase  agreements,  bank  credit
facilities  (which  may have  fixed or  adjustable  interest  rates and  varying
maturities) and mortgage loans on real estate owned by the Company. In addition,
the Company will be permitted to purchase real estate,  mortgage loans and other
mortgage  collateral  for purposes of  securitization.  Until the  collateral is
securitized,  the  Company may enter into  warehouse  lines of credit or reverse
repurchase  agreements  on such pools of real estate,  mortgage  loans and other
mortgage  collateral.  The securitization  transaction will be designed with the
REIT status of the Company in mind, generally as debt issued by a qualified REIT
subsidiary of the Company,  or in another transaction  structure,  which will be
reviewed early in the process by a tax lawyer experienced in securitization.  At
the closing of a  securitization,  the Company's assets will be leveraged by the
issuance of CMOs or MBS.  The  Company  also is  permitted  to issue CMOs or MBS
collateralized  by  previously  issued  CMOs  or MBS in  transactions  known  as
"resecuritizations." Borrowings that are materially different from the foregoing
must be approved in advance by a majority of the Board of Directors.

         The  purposes  of  the  Company's  leverage  will  be to  earn  income,
facilitate  portfolio  management  (including managing the effect of maturity or
interest  rate  sensitivity)  and mitigate  risk (such as the risk of changes in
interest rates).  The Manager will have the ability to borrow for such purposes,
subject to periodic review by the Board of Directors. Moreover, even if interest
rates or  market  conditions  are  adverse,  the  Company  may  borrow to obtain
sufficient  cash to make  required  distributions  of dividends or to fund share
repurchases  and tender offers if the Board of Directors deems such borrowing to
be in the best interest of the stockholders.

         After most of the net proceeds of the Company's initial public offering
are  invested in real estate  related  assets,  the  Company  may  increase  its
Indebtedness,  as defined  below,  such that the ratio of the Company's  overall
Indebtedness to its Equity,  as defined below,  does not exceed four to one. For
these purposes  "Indebtedness"  includes only full recourse debt of the Company,
and not any debt issued in a  securitization  transaction or otherwise for which
recourse  is  limited to a fixed pool of  assets.  Likewise  for these  purposes
"Equity" excludes any assets pledged to secure limited recourse debt.

         Notwithstanding  the foregoing,  if the Company's ratio of Indebtedness
to Equity is four to one, and the Company's  equity  declines,  the Company will
not be required to reduce its Indebtedness  immediately,  but will not incur any
additional   Indebtedness   until  such  time  as  incurring   such   additional
Indebtedness will result in a ratio of four to one or less.

         The  Company  will not  borrow  funds  from the  Manager  or any of the
Manager's Affiliates.

                  VI. INTEREST RATE RISK MANAGEMENT GUIDELINES

         The  Company  will  seek to build a  balance  sheet  and  undertake  an
interest rate risk management  program which is likely, in management's view, to
enable the Company to generate  positive earnings given a variety of potentially
adverse circumstances.  To the extent consistent with its election to qualify as
a REIT, the Company intends to follow an interest rate risk  management  program
intended  to  protect  against  the  effects  of major  interest  rate  changes.
Specifically,  the  Company's  interest  rate risk  management  program  will be

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formulated  with the  intent to offset  the  potential  adverse  effects  on net
interest  income  resulting  from the  mismatch  between  the time to  repricing
between the interest rates on the Company's assets and the interest rates on its
liabilities.

         Pursuant to the  Company's  overall  business  strategy,  a substantial
portion of the Company's  borrowings will be short-term or adjustable-rate.  See
"V. Use of Leverage".  The Company will attempt to mitigate the risk of the cost
of its variable rate  liabilities  increasing at a faster rate than the earnings
on its assets during periods of rising interest rates by purchasing from time to
time interest rate caps and interest rate swaps.

         An interest rate cap  agreement  will be a legal  contract  between the
Company and a third party firm (the  "counterparty").  The Company  will make an
up-front cash payment to the  counterparty  and the  counterparty  will agree to
make  payments  to the Company in the future  should the rate of a given  index,
typically one or three month LIBOR,  rise above the "strike"  rate  specified in
the contract.  Each contract will have a specified notional face amount.  Should
the index rise above the  contractual  strike  rate,  the Company  will earn cap
income.  Payments  on  an  annualized  basis  will  equal  the  product  of  the
contractual  notional face amount times the difference  between the actual index
and the strike rate.

         An interest rate swap agreement  will be a legal  contract  between the
Company and a counterparty  wherein the Company will pay a specified  fixed rate
to the  counterparty  and  the  counterparty  will  pay a  floating  rate to the
Company.  The periodic payments between the Company and the counterparty will be
based on a notional amount.  Payments will generally be made on a net settlement
basis and will be equal to the product of the  contractual  notional face amount
times the difference between the fixed rate and the floating index.

         In all of its interest rate risk management  transactions,  the Company
will  follow   certain   procedures   designed  to  limit  credit   exposure  to
counterparties,  including  counterparties  whose  financial  strength meets the
Company's requirements.

         No strategy can  completely  insulate the Company  from  interest  rate
changes and defaults from counterparties. Further, certain of the Federal income
tax  requirements  that the Company must satisfy to qualify as a REIT will limit
the Company's  ability to fully hedge its interest  rate risk.  The Company will
monitor, and may have to limit, its interest rate risk program to assure that it
does not realize  excessive hedging income, or hold hedging assets having excess
value  in  relation  to  total  assets,  which  would  result  in the  Company's
disqualification as a REIT or, in the case of excess hedging income, the payment
of a penalty tax for  failure to satisfy  certain  REIT  income  tests under the
Code, provided such failure was for reasonable cause. In addition, interest rate
risk management involves  transaction costs which increase  significantly as the
period covered by the hedging protection increases.

         The Company  may elect to conduct a portion of its  hedging  activities
through  one or more  subsidiary  corporations  if  continuing  to conduct  such
activities by the Company would  jeopardize the Company's status as a REIT. Such

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subsidiary  would not be a  Qualified  REIT  Subsidiary  and would be subject to
Federal and state income taxes.

         The Company  intends  generally to hedge as much of the  interest  rate
risk as management  determines is in the best interests of the  stockholders  of
the  Company,  given  the  cost of such  hedging  transactions  and the  need to
maintain  the  Company's  status as a REIT.  This  determination  may  result in
management  electing to have the Company bear a level of interest rate risk that
could otherwise be hedged when management believes, based on all relevant facts,
that bearing such risk is advisable.

                              VII. 1940 COMPLIANCE

         The Company shall conduct its operations so as not to become  regulated
as an investment company under the Investment Company Act of 1940. The Company's
investment  activities  shall be  directed  such that the Company  shall  invest
fifty-five percent (55%) of its assets in mortgages and other lines of interests
in real  estate,  and an  additional  twenty-five  percent  (25%) in  Qualifying
Interests or other real estate  related assets within one year of Closing or May
19, 1998.

                           VIII. CONFLICTS OF INTEREST

         The  Company  will  acquire  Subordinated  Interests,  Distressed  Real
Properties  or Other Real Estate  Related  Assets from the Manager or one of its
affiliates  only  if  a  majority  of  the  Independent  Directors  approve  the
transaction in advance. In making their decision, the Independent Directors will
consider  information provided by the Manager and such other information as they
deem  appropriate  to determine  whether the  investment is consistent  with the
Guidelines, whether the price is fair and whether the investment is otherwise in
the  best  interests  of the  Company.  To  determine  whether  the  price  of a
Distressed  Real  Property is fair,  the  Independent  Directors  may consider a
number of factors,  including an appraisal of an MAI  appraiser who is certified
or  licensed  in the  state  and  whose  compensation  is not  dependent  on the
transaction.  In approving the  acquisition of  Subordinated  Interests or other
classes  of MBS,  the  Independent  Directors  will  consider  data such as that
presented in the tables under "Initial  Investments"  and "Yield  Considerations
Related to the Initial  Investments"  as well as price  quotes  from  investment
bankers (such as the placement agents or underwriters of such MBS).

         From  time to time,  mortgage  lenders  offer for sale  large  pools of
mortgage loans and REO Properties  pursuant to a competitive bidding process. In
such a case,  Ocwen  Financial  Corporation  ("OFC") may choose an  unaffiliated
entity with which to submit a joint bid for the pool, as long as OFC takes title
only to the mortgage loans and not to the real estate.  In the  alternative  OFC
may, but is not  required to,  invite the Company to submit a joint bid for such
pool. If the Company and OFC are successful  bidders on a pool of Mortgage Loans
and real estate,  in general the Company would take title to the real estate and
OFC would take title to the Mortgage Loans.

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         The Company  may,  but does not  currently  intend to,  participate  in
mortgage loans together as a co-participant  with OFC or its affiliates.  To the
extent  that  the  Company  does so  participate,  generally,  the  terms of the
participation  would be  structured  so that OFC would  service  the loans for a
market  servicing fee and after such servicing fee, the remaining  proceeds from
the loan would be shared pari passu in  accordance  with their  interests in the
loan. Any such co-participating  transactions with OFC or its affiliates will be
reviewed  by the  Independent  Directors  as part of their  quarterly  review to
ensure compliance with the Guidelines.

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