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

                                    FORM 10-Q
     (Mark One)
     [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1999
                         OR
     [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) of the SECURITIES
     EXCHANGE ACT OF 1934 For the transition period from _______to_________

                                     1-14074
                            ------------------------
                            (Commission File Number)


                           ContiFinancial Corporation
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)


            Delaware                                  13-3852588
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
 incorporation or organization)

277 Park Avenue
New York, New York                                         10172
------------------------------------------------------------------
(Address of principal executive offices)                (Zip Code)

Registrant's telephone number, including area code:              (212) 207-2800
                                                                 --------------

                                    no change
              ----------------------------------------------------
              (Former name, former address and former fiscal year,
                         if changed since last report)

         Indicate by check mark whether 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|_|

The Company had 46,661,592 shares of common stock outstanding as of November 10,
1999.

<PAGE>



                           ContiFinancial Corporation

                                Table of Contents


                                     PART I

                                                                            Page
                                                                            ----
Item 1.  Financial Statements (unaudited)
            Consolidated Balance Sheets                                       3
            Consolidated Statements of Operations                             4
            Condensed Consolidated Statements of Cash Flows                   5
            Notes to Unaudited Condensed Consolidated Financial Statements    6
Item 2.  Management's Discussion and Analysis of Financial Condition and
            Results of Operations
            Recent Developments, Financial Results and Liquidity              17
            Selected Financial Data                                           20
            Results of Operations                                             23
            Liquidity and Capital Resources                                   28
            Year 2000                                                         30
            Forward-looking Statements                                        30
Item 3.  Quantitative and Qualitative Disclosures About Market Risk           32

                                     PART II

Item 1.  Legal Proceedings                                                    34

Item 4.  Submission of Matters to a Vote of Security Holders                  34
Item 6.  Exhibits and Reports on Form 8-K                                     36

Signatures                                                                    37


                                       2
<PAGE>

                           CONTIFINANCIAL CORPORATION
       Consolidated Balance Sheets as of September 30, 1999 and March 31,
                     1999 (in thousands, except share data)

<TABLE>
<CAPTION>
                                                                                          September 30,     March 31,
                                                                                              1999             1999
                                                                                           -----------    -----------
                                           Assets                                          (unaudited)
<S>                                                                                        <C>            <C>
Cash and cash equivalents                                                                  $    64,278    $   112,839
Restricted cash                                                                                  1,531          4,072
Receivables held for sale:
   Receivables held for sale                                                                   252,643      1,089,410
   Allowance for loan losses                                                                    (5,312)        (7,364)
                                                                                           -----------    -----------
Receivables held for sale, net                                                                 247,331      1,082,046
Other receivables                                                                              122,836         95,984
Due from affiliates                                                                              2,317         53,680
Interest-only and residual certificates                                                        400,989        722,012
Capitalized servicing rights                                                                    70,579        105,273
Premises and equipment, net of accumulated depreciation of $13,441 and $13,454
   as of September 30, 1999 and March 31, 1999, respectively                                    20,291         23,792
Cost in excess of equity acquired                                                               12,627         85,388
Equity investments in unconsolidated subsidiaries                                                1,258          4,978
Taxes receivable                                                                                    --         13,024
Other assets                                                                                    34,130         52,076
                                                                                           -----------    -----------
         Total assets                                                                      $   978,167    $ 2,355,164
                                                                                           ===========    ===========
                            Liabilities and Stockholders' Equity
Liabilities:
Accounts payable                                                                           $    53,689    $    90,412
Receivables sold under agreements to repurchase                                                138,244        804,524
Due to affiliates                                                                                  139          8,918
Short-term debt                                                                                422,262        512,797
Taxes payable                                                                                    4,327             --
Long-term debt                                                                                 699,191        699,225
Other liabilities                                                                               18,835         31,316
                                                                                           -----------    -----------
         Total liabilities                                                                   1,336,687      2,147,192
                                                                                           -----------    -----------
Commitments and contingencies
Minority interest in subsidiaries                                                                4,157          4,721

Stockholders' equity (deficit):
   Preferred stock (par value $0.01 per share; 25,000,000 shares authorized; none
      issued at September 30, 1999 and March 31, 1999)                                              --             --
   Common stock (par value $0.01 per share;  250,000,000 shares authorized;
    47,657,539 shares issued at September 30, 1999 and March 31, 1999)                             477            477

   Paid-in capital                                                                             396,771        398,209
   Accumulated deficit                                                                        (734,725)      (163,301)
   Treasury stock (978,511 and 910,169 shares of common stock, at cost, at September 30,
     1999 and March 31, 1999, respectively)                                                    (25,200)       (25,106)

   Deferred compensation                                                                            --         (7,028)
                                                                                           -----------    -----------
         Total stockholders' equity (deficit)                                                 (362,677)       203,251
                                                                                           -----------    -----------
         Total liabilities and stockholders' equity (deficit)                              $   978,167    $ 2,355,164
                                                                                           ===========    ===========
</TABLE>

    The accompanying notes to the unaudited condensed consolidated financial
              statements are an integral part of these statements.


                                       3
<PAGE>

                           CONTIFINANCIAL CORPORATION
                      Consolidated Statements of Operations
         for the three and six months ended September 30, 1999 and 1998
                        (in thousands, except share data)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                              Three Months Ended                Six Months Ended
                                                                  September 30,                   September 30,
                                                                  -------------                   -------------
                                                               1999           1998            1999             1998
                                                         ------------    ------------    ------------    ------------
<S>                                                      <C>             <C>             <C>             <C>
Gross income (loss):
    Gain (loss) on sale of receivables                   $   (187,876)   $     16,316    $   (296,827)   $     53,888

    Commercial real estate valuation adjustments                   --        (129,034)             --        (129,034)

    Interest                                                   32,443          90,899          84,632         162,879
    Net servicing income                                        1,430          28,966          14,337          55,686
    Gain on sale of subsidiary (Note 5)                            --              --          22,121              --
    Other income                                                1,084           3,708           4,097           9,552
                                                         ------------    ------------    ------------    ------------
         Total gross income (loss)                           (152,919)         10,855        (171,640)        152,971
                                                         ------------    ------------    ------------    ------------
Expenses:
   Compensation and benefits                                   44,735          51,842          95,791          95,166
   Interest                                                    38,103          66,140          80,769         121,522
   Provision for loan losses                                    2,605           2,329           4,558           3,051
   General and administrative                                  41,827          40,071          84,965          72,582
   Other charges (Note 3)                                      53,465          36,090         123,394          36,090
                                                         ------------    ------------    ------------    ------------
         Total expenses                                       180,735         196,472         389,477         328,411
                                                         ------------    ------------    ------------    ------------
Loss before income taxes and minority interest               (333,654)       (185,617)       (561,117)       (175,440)
Provision (benefit) for income taxes (Note 6)                      74         (71,362)         10,342         (67,261)
                                                         ------------    ------------    ------------    ------------
Loss before minority interest                                (333,728)       (114,255)       (571,459)       (108,179)

Minority interest in earnings (losses) of subsidiaries            (21)             (4)            (35)             52
                                                         ------------    ------------    ------------    ------------
         Net loss                                        $   (333,707)   $   (114,251)   $   (571,424)   $   (108,231)
                                                         ============    ============    ============    ============

Basic loss per common share                              $      (7.18)   $      (2.48)   $     (12.30)   $      (2.33)
                                                         ============    ============    ============    ============

Diluted loss per common share                            $      (7.18)   $      (2.48)   $     (12.30)   $      (2.33)
                                                         ============    ============    ============    ============

Basic weighted average number of shares outstanding        46,467,695      46,153,506      46,458,192      46,419,684
                                                         ============    ============    ============    ============
Diluted weighted average number of shares outstanding
                                                           46,467,695      46,153,506      46,458,192      46,419,684
                                                         ============    ============    ============    ============
</TABLE>


    The accompanying notes to the unaudited condensed consolidated financial
              statements are an integral part of these statements.


                                       4
<PAGE>

                           CONTIFINANCIAL CORPORATION
                 Condensed Consolidated Statements of Cash Flows
              for the six months ended September 30, 1999 and 1998
                                 (in thousands)
                                   (unaudited)
<TABLE>
<CAPTION>
                                                                            Six Months Ended
                                                                             September  30,
                                                                            1999        1998
                                                                        ---------    ---------
<S>                                                                     <C>          <C>
Net cash provided by (used in) operating activities                     $   7,817    $(290,309)
                                                                        ---------    ---------

Cash flows from investing activities:
   Proceeds from sale of majority-owned subsidiary, net (Note 5)           34,196           --
   Acquisitions of majority-owned subsidiaries (net of cash acquired)        (804)     (22,086)
   Acquisitions of minority-owned subsidiaries                                 --       (1,140)
   Purchase of premises and equipment, net                                 (2,534)      (8,375)
   Proceeds from sale of unconsolidated subsidiaries                        3,000           --
   Other, net
                                                                              473           --
                                                                        ---------    ---------
         Net cash provided by (used in) investing activities               34,331      (31,601)
                                                                        ---------    ---------
   Cash flows from financing activities:
   Increase (decrease) in short-term debt                                 (90,709)     158,340
   Increase in long-term debt                                                  --      199,778
   Debt issuance costs                                                         --      (11,692)
   Repurchase of common stock                                                  --      (22,052)
   Other, net                                                                  --          (12)
                                                                        ---------    ---------
         Net cash provided by (used in) financing activities              (90,709)     324,362
                                                                        ---------    ---------
Net increase (decrease) in cash and cash equivalents                      (48,561)       2,452
Cash and cash equivalents at beginning of  period                         112,839      173,588
                                                                        ---------    ---------
Cash and cash equivalents at end of period                              $  64,278    $ 176,040
                                                                        =========    =========
</TABLE>


    The accompanying notes to the unaudited condensed consolidated financial
              statements are an integral part of these statements.


                                       5
<PAGE>

                           CONTIFINANCIAL CORPORATION
         Notes to Unaudited Condensed Consolidated Financial Statements
                               September 30, 1999
                (in thousands, except share data and where noted)

1.  BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements of
ContiFinancial Corporation and its majority-owned subsidiaries (collectively,
"ContiFinancial" or the "Company") have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission and, in the opinion of
management, reflect all normal recurring adjustments which are necessary for a
fair presentation of the financial position, results of operations, and cash
flows for each period shown. The preparation of financial statements requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and the results of operations. Actual results could
differ from these estimates. In addition, results for interim periods are not
necessarily indicative of results for the full year. These unaudited condensed
consolidated financial statements should be read in conjunction with the audited
Consolidated Financial Statements and notes thereto included in the Company's
Annual Report on Form 10-K for the fiscal year ended March 31, 1999 (the "Annual
Report"). All significant intercompany accounts and transactions have been
eliminated in consolidation.

2.  RECENT DEVELOPMENTS, FINANCIAL RESULTS AND LIQUIDITY

In fiscal 1999 and continuing in the first two quarters of fiscal 2000 the
Company has incurred significant losses of $426.3 million and $571.4 million,
respectively. Over this period the Company has experienced a significant decline
in liquidity. As a result of these factors there is substantial doubt as to the
Company's ability to continue as a going concern. At September 30, 1999
stockholders' equity has been reduced to a deficit balance of $362.7 million.

During fiscal 1999 and fiscal 2000, the Company recorded fair value adjustments
to interest-only and residual certificates totaling approximately $329 million
and $325 million, respectively, resulting from higher-than-estimated credit
losses and prepayment speeds, and an increase in the discount rate used in the
valuation from 10% to 12% to reflect the capital market's deteriorating view of
the "sub-prime" industry in which the Company operates. The Company believes its
interest-only and residual certificates are fairly valued at September 30, 1999
but can provide no assurances that future prepayment and loss experience or
changes in the required market discount rate will not necessitate additional
write-downs. If there are such additional write-downs in future periods, the
Company's income would be reduced, likely resulting in a net loss for such
period.

The Company's operations were also significantly and adversely affected by
difficult capital market conditions that commenced in the second quarter of
fiscal 1999, with the effects of these events, and their repercussions,
continuing to affect the Company's results through the first two quarters of
fiscal 2000. During the second quarter of fiscal 1999, the economic instability
in Asia and Russia precipitated a global debt crisis (the "Debt Crisis") which
caused a "flight to quality" by investors. During this period, fixed income
investors purchased large amounts of U.S. Treasury securities, causing U.S.
Treasury yields to decrease significantly. As investor demand for U.S. Treasury
securities increased, the demand for other fixed income securities declined
dramatically, causing yields on such other securities to rise relative to U.S.
Treasury securities. Since almost all of the Company's loan originations were
ultimately funded by the issuance of securities backed by the loans it
originates (securitization), these unusual interest rate movements affected the
market value of all of the Company's originations, causing significant losses
and leading to a critical loss of liquidity.


                                       6
<PAGE>

                           CONTIFINANCIAL CORPORATION
         Notes to Unaudited Condensed Consolidated Financial Statements
                               September 30, 1999
                (in thousands, except share data and where noted)

While the Debt Crisis abated for other sectors of the economy in fiscal 1999,
its impact and subsequent repercussions continued to affect the "sub-prime"
industry in which the Company operates. The sudden and significant loss of
liquidity experienced throughout the industry, occurring within the context of
increasing market skepticism about the quality of earnings reported under
"gain-on-sale accounting", intensified capital market concerns about the
industry and severely curtailed access to the capital markets as a source of new
liquidity.

In order to attempt to strengthen the Company's ability to operate in this
difficult environment, in the third quarter of fiscal 1999, the Company began to
search for an investor who could contribute additional equity capital to the
Company or a buyer who would be interested in purchasing the Company's business.

On May 14, 1999, the Company signed an indication of interest letter with
Residential Funding Corporation ("RFC") under which RFC indicated its interest
in acquiring all of the outstanding common stock of the Company. On July 2,
1999, a second indication of interest letter was signed with RFC, again for the
acquisition of all of the outstanding common stock of the Company, but on
revised business terms. Definitive documentation for the acquisition was then
negotiated with RFC. On July 14, 1999, just prior to the expected signing of the
definitive documentation, RFC informed the Company that it had determined not to
proceed with the acquisition.

In light of the failure to consummate the transaction with RFC, and the
impending expiration of certain of the Company's credit facilities, the
Company's Board of Directors hired Mr. Alan Fishman as the new Chief Executive
Officer of the Company on July 20, 1999.

Following a review of the Company's situation, Mr. Fishman and other members of
the Company's senior management pursued a plan (the "Restructuring Plan") of
focusing the Company's operations on the most promising of its origination
channels, reducing the size of the Company, negotiating for the restructuring or
extension of the Company's credit facilities and then recommencing the search
for an equity investor in the Company, a buyer of the Company's business or of
certain of the Company's assets.

Pursuant to the Restructuring Plan, in August 1999, the Company entered into a
definitive agreement with Greenwich Capital Financial Products, Inc.
("Greenwich"), an affiliate of Greenwich Capital Markets, Inc., to provide
ContiFinancial with a $500 million revolving servicing-released whole loan
purchase facility with a maximum aggregate purchase commitment of up to $1.5
billion, at ContiFinancial's option, through March 31, 2000. Greenwich also
agreed to provide a warehouse facility of up to $250 million on a revolving
basis. This facility also expires on March 31, 2000. In addition to the two
facilities, Greenwich purchased on a whole loan basis, through an affiliate,
approximately $772 million of home equity loans which were funded under
ContiFinancial's prior warehouse facilities. The Company expects these
arrangements with Greenwich will provide the Company with the necessary
warehouse financing to support the reduced amount of originations contemplated
as the Restructuring Plan is being implemented.

Also in August 1999, the Company began the implementation of a workforce
reduction plan which will result in the reduction of approximately 30% of the
Company's employees by the end of the Company's fiscal year in order to achieve
the strategic goals of focusing the Company's origination in the channels with
the greatest potential and reducing the overall size of the Company. See Note 3.


                                       7
<PAGE>

                           CONTIFINANCIAL CORPORATION
         Notes to Unaudited Condensed Consolidated Financial Statements
                               September 30, 1999
                (in thousands, except share data and where noted)

On August 19, 1999, the Company agreed with the lenders under its Revolving
Credit Facility and Commercial Paper Program (collectively, the "Bank
Facilities") to extend the maturity date of the Bank Facilities from August 20,
1999 to March 31, 2000 and to convert both facilities into term arrangements.
The Company also agreed to certain modifications of the Bank Facilities
including a $20 million minimum liquidity covenant. The agreement also included
providing collateral to the lenders in the form of a lien on certain Excess
Spread Receivables with a June 30, 1999 book value of approximately $147
million. The book value of these Excess Spread Receivables as of September 30,
1999 was approximately $103 million. The interest rate on each facility remains
at LIBOR plus 300 basis points. The Company was in compliance with the amended
covenants of the Bank Facilities as of September 30, 1999.

With the objectives of the Restructuring Plan of refocusing the Company's
operations, reducing the size of the Company and restructuring and extending the
Company's credit facilities being substantially accomplished, the Company has
re-launched its efforts to explore strategic alternatives. The Company has
retained financial advisors Lehman Brothers, Inc. and The Blackstone Group L.P.
(the "Advisors") as advisors in the process. With the assistance of the
Advisors, the Company is pursuing various strategic alternatives including but
not limited to a sale of the Company, sales of one or more of the business
operations and/or assets of the Company or a recapitalization of the Company
with additional equity capital.

During the restructuring process, the Company expects that it will be cash flow
negative and will operate at a loss. The Company's continued operations during
the restructuring process are dependent on the continued availability of the
Bank Facilities and the warehouse financing and the supplemental servicer
agreement under the Greenwich arrangements (see Note 9). During this period, the
Company's cash reserves may not be sufficient to meet the Company's cash needs.
There can be no assurance that an equity investor or buyer of the Company's
business or its assets can be found on a timely basis.

As a result of the developments described above, the Company determined, during
the first quarter of fiscal 2000, that the carrying value of Cost in excess of
equity acquired on the Company's balance sheet has been impaired and should be
written-down (see Note 3 and Management's Discussion and Analysis of Financial
Condition and Results of Operations). During the first and second quarters, the
Company has also determined that it may not be able to achieve the results
assumed in its prior loan loss projections; therefore, assumptions as to future
loss frequencies and severities were increased, resulting in fair value
adjustments to interest-only and residual certificates (see Note 4 and
Management's Discussion and Analysis of Financial Condition and Results of
Operations).

For the six months ended September 30, 1999, the Company incurred a net loss of
$571.4 million, primarily due to the fair value adjustment to interest-only and
residual certificates, the write-down of Cost in excess of equity acquired, and
restructuring and severance costs as discussed above. As a result of this net
loss, stockholders' equity has been reduced to a deficit balance of $362.7
million.

The accompanying consolidated financial statements have been prepared assuming
the Company will continue as a going concern. Accordingly, the financial
statements do not include any adjustments relating to the recoverability and
classification of asset carrying amounts or the amount and classification of
liabilities that might result should the Company be unable to continue as a
going concern.


                                       8
<PAGE>

                           CONTIFINANCIAL CORPORATION
         Notes to Unaudited Condensed Consolidated Financial Statements
                               September 30, 1999
                (in thousands, except share data and where noted)

3.  OTHER CHARGES

Other charges included in the Company's Consolidated Statements of Operations
for the three and six months ended September 30, 1999 and 1998 consisted of the
following:

<TABLE>
<CAPTION>
                                                        -------------------------------------------
                                                         Three Months Ended      Six Months Ended
                                                            September 30,          September 30,
                                                        ------------------------------------------
                                                            1999      1998      1999         1998
                                                            ----      ----      ----         ----
<S>                                                      <C>        <C>        <C>        <C>
Other Charges:

Write-down of cost in excess of equity acquired          $  2,569   $  2,782   $ 62,522   $  2,782

Restructuring charges (excluding compensation related)     12,056      5,340     18,715      5,340

Severance for approximately 760 employees                   8,653         --      8,653         --
Staff retention costs                                      17,143         --     17,143         --
Write-offs and reserves of receivables from affiliates
   and others                                              13,044     27,968     14,227     27,968
Other                                                          --         --      2,134         --
                                                         --------   --------   --------   --------
Total Other Charges                                      $ 53,465   $ 36,090   $123,394   $ 36,090
                                                         ========   ========   ========   ========
</TABLE>

Based on the recent developments discussed in Note 2, management made a
determination that the carrying value of cost in excess of equity acquired
related to most of the Company's operations had been significantly impaired and
appropriate write-downs of $2.6 million and $62.5 million for the three and six
months ended September 30, 1999, respectively, had to be recorded. For the three
months ended September 30, 1999, the writedown of $2.6 million primarily relates
to a majority owned subsidiary of the Company based on the Company's expectation
of the net proceeds to be realized from the sale of this entity.

The restructuring charges of $12.1 and $18.7 million, for the three and six
months ended September 30, 1999, respectively, primarily represent legal and
consulting fees related to restructuring.

In August 1999, the Company began the implementation of a workforce reduction
plan which has resulted in a reduction of the workforce of approximately 11% as
of September 30, 1999, and is expected to result in the reduction of
approximately 30% of the Company's employees by the end of the Company's fiscal
year in order to achieve the strategic goals of the Company's restructuring plan
as discussed in Note 2. A charge of $8.7 million for severance costs was
recorded for approximately 760 employees representing a cross section of
individuals from all operations of the Company. At September 30, 1999, $4.3
million of this charge remains in Other liabilities.

In July 1999 and August 1999, the Company established the CFN and CMC 1999
Retention Bonus Plans (the "Plans") for the purpose of retaining the valuable
services of the Company's key employees through certain dates. In order to
guarantee payment to employees of amounts that will become due to them under the
Plans, the Company established and funded irrevocable trusts with the amount
necessary to satisfy the Company's maximum liability under the Plans.


                                       9
<PAGE>

                           CONTIFINANCIAL CORPORATION
         Notes to Unaudited Condensed Consolidated Financial Statements
                               September 30, 1999
                (in thousands, except share data and where noted)

4.  INTEREST-ONLY AND RESIDUAL CERTIFICATES

Interest only and residual certificates (also referred to as excess spread
receivables or ESR) represents the present value of the estimated stream of
future cash flows that the Company expects to receive over the life of a
securitization, taking into consideration estimated prepayment speeds and credit
losses. At September 30, 1999 and March 31, 1999, the Company's ESR portfolio
consisted of the following:

                                                   September 30,       March 31,
                                                        1999              1999
                                                        ----              ----
Home equity:
    ContiMortgage/ContiWest                            $344,581         $611,320
    Other servicers                                      17,760           24,800
                                                       --------         --------
       Total home equity                                362,341          636,120
Home improvement                                         20,488            4,046
Commercial real estate                                    6,935            6,263
Auto                                                      6,142           69,804
Other                                                     5,083            5,779
                                                       --------         --------
       Total ESR portfolio                             $400,989         $722,012
                                                       ========         ========


                                       10
<PAGE>

                           CONTIFINANCIAL CORPORATION
         Notes to Unaudited Condensed Consolidated Financial Statements
                               September 30, 1999
                (in thousands, except share data and where noted)

The changes in ESR from March 31, 1999 to September 30, 1999 are presented in
the table below:

Interest-only and residual certificates:

Balance as of March 31, 1999                                          $ 722,012
   New securitizations                                                   43,543
   ESR received in strategic alliance asset swap                         17,964
   Net cash distributions from REMICs and trusts                        (42,604)
   Sale of subsidiary                                                   (62,446)
   Accruals of interest income                                           25,112
   Clean-up call on previously sold ESR                                  22,076
   Fair value adjustments                                              (324,668)
                                                                       --------
Balance as of September 30, 1999                                      $ 400,989
                                                                      =========

In accordance with SFAS No. 134, "Accounting for Mortgage-Backed Securities
Retained after the Securitization of Mortgage Loans Held for Sale by a Mortgage
Banking Enterprise", the Company continues to classify ESR as "trading
securities". As such, they are carried at fair value in the Consolidated Balance
Sheets. Unrealized changes in ESR fair value are included in Gain (loss) on sale
of receivables on the accompanying Consolidated Statements of Operations in the
period of the change.

The Company has, from time to time, completed sales of ESR as either sales with
limited recourse or Net Interest Margin Securities ("NIMS") sales. Nevertheless,
there is only a limited market for the sale of ESR. Consequently, the Company
estimates the fair value of ESR through the application of a discounted cash
flow analysis, which requires the use of various assumptions, specifically
regarding prepayments, losses and discount data.

A significant factor affecting the level of estimated future ESR cash flows is
the rate at which the underlying principal of the securitized loans is reduced.
Prepayments represent principal reductions in excess of contractually scheduled
reductions, and prepayment speeds are generally expressed as an annualized
Conditional (or Constant) Prepayment Rate ("CPR"). In determining the fair value
of the ContiMortgage/ContiWest ESR portfolio as of September 30, 1999, the
Company's weighted average estimated future CPR was approximately 29% as
compared to approximately 28% at March 31, 1999.

Another significant factor that is considered in estimating the fair value of
ESR is the estimate of future credit losses. As credit enhancement, the ESR is
subordinate to the rights of the holders of the senior pass-through securities.
Aggregate lifetime credit losses (historical plus future) as a percentage of the
original pool balances for the ContiMortgage/ContiWest ESR portfolio was
estimated to be 4.50% at September 30, 1999 as compared to 2.91% at March 31,
1999. Based on the developments during the first quarter of fiscal 2000, as
discussed in Note 2, management made a determination that the Company most
likely would not be able to achieve the results in its prior loan loss
projections; therefore, assumptions as to future loss severities were increased,
resulting in a fair value adjustment to interest-only and residual certificates
of $151.2 million for the three months ended June 30, 1999. During the second
quarter of fiscal 2000, management made a further determination that assumptions
as to future loss frequencies should be increased, resulting in a fair value
adjustment to interest-only and residual certificates of $173.5 million. The
basis for this increased expectation in loss frequency was driven by the
following factors: (i) the recent performance of the Company's more seasoned
REMICs resulted in management increasing its assumptions of loss frequencies
across the entire portfolio, and (ii) new data from third parties regarding loss
frequency expecta-


                                       11
<PAGE>

                           CONTIFINANCIAL CORPORATION
         Notes to Unaudited Condensed Consolidated Financial Statements
                               September 30, 1999
                (in thousands, except share data and where noted)

tions on subprime collateral in general. The cumulative impact
of the fair value adjustments to interest-only and residual certificates for the
six months ended September 30, 1999 is $324.7 million.

The Company determines the discount rate used in estimating fair value by
selecting a rate that it believes is commensurate with the risks involved. The
Company recognizes that the ESR discount rate when interacting with the other
two assumptions, losses and prepayment, is a "risk-adjusted" rate. In
determining this rate the Company considers many factors including a comparison
to the yields on other financial instruments with prepayment or credit risk. The
future cash flows estimated as of September 30, 1999 and March 31, 1999, taking
into consideration estimated prepayment rates and credit losses, were discounted
at 12% to arrive at the fair value amounts presented in the accompanying
Consolidated Balance Sheets.

Assumptions regarding future CPR and credit losses are subject to volatility
that could materially affect operating results. Both the amount and timing of
estimated ESR cash flows are dependent on the performance of the underlying
loans, and actual cash flows may vary significantly from expectations. If actual
prepayment speeds or credit losses in future periods were to be higher than the
assumptions used in the Company's fair value estimate, or if the estimated
market discount rate were to increase, the ESR carrying value would have to be
written down through a charge to earnings, which could cause the Company to
report losses in future periods. Given the size of ContiMortgage/ContiWest's
servicing portfolio, even a modest change in ESR fair value assumptions can have
a relatively large impact on the ESR fair value. The table below illustrates the
impact of a positive or negative change in a single assumption used to determine
fair value for the ContiMortgage/ContiWest related ESR while keeping the
absolute value of the other two assumptions constant. The impact of changes in
these assumptions are not linear. As of September 30, 1999, changes in the
assumptions would have approximately the following impact on fair value:

          Factor                        Change                     Fair
          ------                        ------                     ----
                                                                   value
                                                                   -----
                                                                   impact
                                                                   ------

          Annual CPR                    +100 basis points          $(21.3
                                                                   million)
          Annual  CPR                   - 100 basis points         $ 25.0
                                                                   million
          Lifetime credit losses        +  10 basis points         $(15.4
                                                                   million)
          Lifetime credit losses        -   10 basis points        $ 16.6
                                                                   million
          Discount rate                 +100 basis points          $(24.5
                                                                   million)
          Discount rate                 - 100 basis points         $ 27.1
                                                                   million


                                       12
<PAGE>

                           CONTIFINANCIAL CORPORATION
         Notes to Unaudited Condensed Consolidated Financial Statements
                               September 30, 1999
                (in thousands, except share data and where noted)

5.  GAIN ON SALE OF SUBSIDIARY

On June 11, 1999, the Company sold its interest in its wholly-owned subsidiary,
Triad Financial Corporation ("Triad") to Fairlane Credit LLC, a wholly-owned
subsidiary of Ford Motor Credit Company. The sale of Triad resulted in a gain of
approximately $22 million and provided gross proceeds of approximately $134
million through sale proceeds, repayment of intercompany debt and net return of
intercompany warehouse financing. Of this amount, approximately $95 million was
used to pay down the Company's Bank Facilities.

6.  TAXES

SFAS No. 109 requires that deferred tax assets be reduced by a valuation
allowance if it is more likely than not that some portion of the deferred tax
assets will not be realized. The Company has provided a valuation allowance for
the entire amount of the net deferred tax asset since it is more likely than not
that the net deferred tax asset will not be realized.

Due to the Company's ownership of REMIC residual certificates, the Federal tax
provision for the three and six months ended September 30, 1999 is based on
excess inclusion generated by the ownership of these certificates.

7.  EARNINGS PER SHARE

For the three and six months ended September 30, 1999 and 1998, diluted loss per
share equals basic loss per share, as the dilutive calculation would have an
antidilutive impact as a result of the net loss incurred in those periods.


                                       13
<PAGE>

                           CONTIFINANCIAL CORPORATION
         Notes to Unaudited Condensed Consolidated Financial Statements
                               September 30, 1999
                (in thousands, except share data and where noted)

8.  DEBT

Short-term and long-term debt at September 30, 1999 and March 31, 1999 consisted
of the following:

<TABLE>
<CAPTION>
                                                           September 30,         March 31,
                                                              1999               1999
<S>                                                          <C>                <C>
Short-term debt:
   Commercial paper                                          $258,925           $312,477
   Revolving Credit Facility                                  163,000            200,000
   Current portion of long-term debt                              337                320
                                                             --------           --------
Total short-term debt                                        $422,262           $512,797
                                                             ========           ========

Long-term debt:
   8 3/8% Senior Notes, $300 million face amount, due 2003   $299,463           $299,405
   7 1/2% Senior Notes, $200 million face amount, due 2002    199,618            199,547
   8 1/8% Senior Notes, $200 million face amount, due 2008    199,800            199,792
   Capitalized lease                                              310                481
                                                             --------           --------
Total long-term debt                                         $699,191           $699,225
                                                             ========           ========
</TABLE>

The Company is required to comply with various financial covenants under its
outstanding Senior Notes and Bank Facilities. As of December 31, 1998 and
continuing through September 30, 1999, the Company's leverage ratio exceeded the
leverage ratio test under the covenants of its outstanding Senior Notes. As a
result, the Company is prevented from issuing additional unsecured debt until
its leverage ratio is below such test.

As of December 31, 1998, amended financial covenants were received changing the
leverage and fixed charge ratios and the minimum net worth test in the Bank
Facilities, and lenders agreed to exclude certain charges from the covenant
ratio calculations. As of March 31, 1999, the Bank Facilities were amended to
eliminate the financial covenants and borrowing base provisions, among other
things. As part of the bank amendment, the Company agreed to reduce commitments
under the Bank Facilities by 75% of the total proceeds received by the Company
for the sale of Triad Financial Corporation ("Triad"). On June 11, 1999, the
sale of Triad was closed, and the Bank Facilities commitments were reduced by
approximately $95 million. If the above mentioned amendments had not been
obtained, the Company would not have been in compliance with the covenants.

As part of the December amendments to the Revolving Credit Facility, the Company
had agreed to prepay the Revolving Credit Facility on August 20, 1999, which
made the Revolving Credit Facility coterminous with the Commercial Paper
Program. As part of the March amendments, the interest rate of the Revolving
Credit Facility and the Commercial Paper Program were increased to LIBOR plus
300 basis points.

On August 19, 1999, the Company agreed with the lenders under its Bank
Facilities to extend the maturity date of the Bank Facilities from August 20,
1999 to March 31, 2000 and to convert both facilities into term arrangements
("Term Facility"). The Company also agreed to certain modifications of the Bank
Facilities including a $20 million minimum liquidity covenant. The agreement
also includes providing collateral to the lenders in the form of a lien on
certain Excess Spread Receivables with a June 30, 1999 book value of
approximately $147 million. The book value of these Excess Spread Receivables as
of September 30, 1999


                                       14
<PAGE>

                           CONTIFINANCIAL CORPORATION
         Notes to Unaudited Condensed Consolidated Financial Statements
                               September 30, 1999
                (in thousands, except share data and where noted)

was approximately $103 million. The interest rate on each facility remains at
LIBOR plus 300 basis points. The Company was in compliance with the amended
covenants of the Bank Facilities as of September 30, 1999.

9.  SUBSEQUENT EVENTS

Servicing Advance Financing

On November 10, 1999, the Company entered into a new arrangement with Greenwich
to provide monthly servicer advances, up to an aggregate outstanding amount of
$125 million, to certain REMICs for which ContiMortgage is the servicer. This
arrangement replaced the ContiGroup arrangement which expired on October 15,
1999. Greenwich has agreed to make these advances, for a fee, through November
9, 2000.

Litigation

On or about October 21, 1999, a purported class action entitled O'Hopp v.
ContiFinancial Corporation, et al., No. 99cv06794, was filed in the United
States District Court for the Eastern District of New York on behalf of Dea
O'Hopp, a stockholder of the Company, and similarly situated individuals,
against the Company, Continental Grain Corporation (sued in its capacity as a
"controlling person") and former Company officers and/or directors James E.
Moore and Daniel J. Willett. On or about October 29, 1999, a virtually identical
complaint was filed against the same defendants in the United States District
Court for the Southern District of New York in an action entitled I&M Associates
v. ContiFinancial Corporation, et al., No. 99 Civ. 10941. Both actions allege,
among other things, violations of Section 10(b) of the Exchange Act and Rule
10b-5 promulgated thereunder, based on allegedly false or misleading statements
and failures to disclose allegedly material information in Company press
releases, SEC filings and statements made to analysts during the period from
January 19, 1998 through July 21, 1999. These misstatements and omissions,
plaintiffs allege, artificially inflated the Company's stock price during the
relevant time period. The plaintiffs seek damages in an unspecified amount. The
Company intends to defend these actions vigorously. Given the preliminary stage
of the litigation, the Company is unable to evaluate the potential materiality
of such suits, if any.

New York Stock Exchange Listing

The Company recently received notification from the New York Stock Exchange that
the Company currently does not meet listing standards of the Exchange requiring
a minimum average share price of $1.00 over a consecutive 30 trading day period,
and total market capitalization of not less than $50 million in conjunction with
stockholders' equity of not less than $50 million. The Company is required to
bring its average share price to the minimum specified by the Exchange within
six months and, in accordance with the rules of the Exchange, the Company is
working with the Exchange on a business plan to address the market
capitalization and stockholders' equity issue within the applicable time frame.
However, it is unlikely that the Company will be successful in meeting these
requirements. The Company will examine alternatives to the Exchange for the
continued trading of the Company's common stock.


                                       15
<PAGE>

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

This discussion should be read in conjunction with the accompanying unaudited
Condensed Consolidated Financial Statements and notes thereto included herein,
and the Company's audited Consolidated Financial Statements and notes thereto
included in the Company's Annual Report. Certain statements under this caption
constitute "forward-looking statements" under federal securities laws. See
"Forward-looking Statements."

Recent Developments, Financial Results and Liquidity

In fiscal 1999 and continuing in the first two quarters of fiscal 2000 the
Company has incurred significant losses of $426.3 million and $571.4 million,
respectively. Over this period the Company has experienced a significant decline
in liquidity. As a result of these factors there is substantial doubt as to the
Company's ability to continue as a going concern (see Note 2 to the Consolidated
Financial Statements). At September 30, 1999 stockholders' equity has been
reduced to a deficit balance of $362.7 million.

During fiscal 1999 and fiscal 2000, the Company recorded fair value adjustments
to interest-only and residual certificates totaling approximately $329 million
and $325 million, respectively, resulting from higher-than-estimated credit
losses and prepayment speeds, and an increase in the discount rate used in the
valuation from 10% to 12% to reflect the capital market's deteriorating view of
the "sub-prime" industry in which the Company operates. The Company believes its
interest-only and residual certificates are fairly valued at September 30, 1999
but can provide no assurances that future prepayment and loss experience or
changes in the required market discount rate will not necessitate additional
write-downs. If there are such additional write-downs in future periods, the
Company's income would be reduced, likely resulting in a net loss for such
period.

The Company's operations were also significantly and adversely affected by
difficult capital market conditions that commenced in the second quarter of
fiscal 1999, with the effects of these events, and their repercussions,
continuing to affect the Company's results through the first two quarters of
fiscal 2000. During the second quarter of fiscal 1999, the economic instability
in Asia and Russia precipitated a global debt crisis (the "Debt Crisis") which
caused a "flight to quality" by investors. During this period, fixed income
investors purchased large amounts of U.S. Treasury securities, causing U.S.
Treasury yields to decrease significantly. As investor demand for U.S. Treasury
securities increased, the demand for other fixed income securities declined
dramatically, causing yields on such other securities to rise relative to U.S.
Treasury securities. Since almost all of the Company's loan originations were
ultimately funded by the issuance of securities backed by the loans it
originates (securitization), these unusual interest rate movements affected the
market value of all of the Company's originations, causing significant losses
and leading to a critical loss of liquidity.

While the Debt Crisis abated for other sectors of the economy in fiscal 1999,
its impact and subsequent repercussions continued to affect the "sub-prime"
industry in which the Company operates. The sudden and significant loss of
liquidity experienced throughout the industry, occurring within the context of
increasing market skepticism about the quality of earnings reported under
"gain-on-sale accounting", intensified capital market concerns about the
industry and severely curtailed access to the capital markets as a source of new
liquidity.


                                       16
<PAGE>

In order to attempt to strengthen the Company's ability to operate in this
difficult environment, in the third quarter of fiscal 1999, the Company began to
search for an investor who could contribute additional equity capital to the
Company or a buyer who would be interested in purchasing the Company's business.

On May 14, 1999, the Company signed an indication of interest letter with
Residential Funding Corporation ("RFC") under which RFC indicated its interest
in acquiring all of the outstanding common stock of the Company. On July 2,
1999, a second indication of interest letter was signed with RFC, again for the
acquisition of all of the outstanding common stock of the Company, but on
revised business terms. Definitive documentation for the acquisition was then
negotiated with RFC. On July 14, 1999, just prior to the expected signing of the
definitive documentation, RFC informed the Company that it had determined not to
proceed with the acquisition.

In light of the failure to consummate the transaction with RFC, and the
impending expiration of certain of the Company's credit facilities, the
Company's Board of Directors hired Mr. Alan Fishman as the new Chief Executive
Officer of the Company on July 20, 1999.

Following a review of the Company's situation, Mr. Fishman and other members of
the Company's senior management pursued a plan (the "Restructuring Plan") of
focusing the Company's operations on the most promising of its origination
channels, reducing the size of the Company, negotiating for the restructuring or
extension of the Company's credit facilities and then recommencing the search
for an equity investor in the Company, a buyer of the Company's business or of
certain of the Company's assets.

Pursuant to the Restructuring Plan, in August 1999, the Company entered into a
definitive agreement with Greenwich Capital Financial Products, Inc.
("Greenwich"), an affiliate of Greenwich Capital Markets, Inc., to provide
ContiFinancial with a $500 million revolving servicing-released whole loan
purchase facility with a maximum aggregate purchase commitment of up to $1.5
billion, at ContiFinancial's option, through March 31, 2000. Greenwich also
agreed to provide a warehouse facility of up to $250 million on a revolving
basis. This facility also expires on March 31, 2000. In addition to the two
facilities, Greenwich purchased on a whole loan basis, through an affiliate,
approximately $772 million of home equity loans which were funded under
ContiFinancial's prior warehouse facilities. The Company expects these
arrangements with Greenwich will provide the Company with the necessary
warehouse financing to support the reduced amount of originations contemplated
as the Restructuring Plan is being implemented.

Also in August 1999, the Company began the implementation of a workforce
reduction plan which will result in the reduction of approximately 30% of the
Company's employees by the end of the Company's fiscal year in order to achieve
the strategic goals of focusing the Company's origination in the channels with
the greatest potential and reducing the overall size of the Company. See Note 3
to the Consolidated Financial Statements.

On August 19, 1999, the Company agreed with the lenders under its Revolving
Credit Facility and Commercial Paper Program (collectively, the "Bank
Facilities") to extend the maturity date of the Bank Facilities from August 20,
1999 to March 31, 2000 and to convert both facilities into term arrangements.
The Company also agreed to certain modifications of the Bank Facilities
including a $20 million minimum liquidity covenant. The agreement also included
providing collateral to the lenders in the form of a lien on certain Excess
Spread Receivables with a June 30, 1999 book value of approximately $147
million. The book value of these Excess Spread Receivables as of September 30,
1999 was approximately $103 million. The interest rate on each facility remains
at LIBOR plus 300 basis points. The Company was in compliance with the amended
covenants of the Bank Facilities as of September 30, 1999.


                                       17
<PAGE>

With the objectives of the Restructuring Plan of refocusing the Company's
operations, reducing the size of the Company and restructuring and extending the
Company's credit facilities being substantially accomplished, the Company has
re-launched its efforts to explore strategic alternatives. The Company has
retained financial advisors Lehman Brothers, Inc. and The Blackstone Group L.P.
(the "Advisors") as advisors in the process. With the assistance of the
Advisors, the Company is pursuing various strategic alternatives including but
not limited to a sale of the Company, sales of one or more of the business
operations and/or assets of the Company or a recapitalization of the Company
with additional equity capital.

During the restructuring process, the Company expects that it will be cash flow
negative and will operate at a loss. The Company's continued operations during
the restructuring process are dependent on the continued availability of the
Bank Facilities and the warehouse financing and supplemental servicer agreement
under the Greenwich arrangements (see Note 9 to the Consolidated Financial
Statements). During this period, the Company's cash reserves may not be
sufficient to meet the Company's cash needs. There can be no assurance that an
equity investor or buyer of the Company's business or its assets can be found on
a timely basis.

As a result of the developments described above, the Company determined, during
the first quarter of fiscal 2000, that the carrying value of Cost in excess of
equity acquired on the Company's balance sheet has been impaired and should be
written-down (see Note 3 to the Consolidated Financial Statements). During the
first and second quarters, the Company has also determined that it may not be
able to achieve the results assumed in its prior loan loss projections;
therefore, assumptions as to future loss frequencies and severities were
increased, resulting in fair value adjustments to interest-only and residual
certificates (see Note 4 to the Consolidated Financial Statements).

For the six months ended September 30, 1999, the Company incurred a net loss of
$571.4 million, primarily due to the fair value adjustment to interest-only and
residual certificates, the write-down of Cost in excess of equity acquired, and
restructuring and severance costs as discussed above. As a result of this net
loss, stockholders' equity has been reduced to a deficit balance of $362.7
million.


                                       18
<PAGE>

Selected Financial Data
                           ContiFinancial Corporation
                  Loan Originations, Securitizations and Sales
                             (dollars in thousands)
                                   (unaudited)

<TABLE>
<CAPTION>
                                              For the three months               For the six months
                                                    ended              %                ended               %
                                                  September 30,       Incr.          September 30,         Incr.
                                              -------------------                  ---------------
                                              1999           1998    (Decr.)       1999        1998       (Decr.)
                                              ----           ----    -------       ----        ----       -------
<S>                                        <C>          <C>          <C>       <C>          <C>          <C>
Loan Originations
Home equity, home improvement
   and other residential mortgage loans:
   Brokers .............................   $  208,425   $  401,301   (48.1%)   $  609,540   $  777,196   (21.6%)
   Correspondents ......................      142,095    1,585,875   (91.0%)      700,307    2,935,304   (76.1%)
   Direct retail .......................      425,490      498,906   (14.7%)      942,574      964,831    (2.3%)
                                           ----------   ----------   -----     ----------   ----------   -----

Total home equity, home improvement
and other residential mortgage loans ...      776,010    2,486,082   (68.8%)    2,252,421    4,677,331   (51.8%)
                                           ----------   ----------             ----------   ----------   -----
Commercial real estate mortgage loans:
   Conduit (ContiMAP(R)and affiliates) .           --      656,524   (100.0%)          --    1,375,307   (100.0%)
   Keystone ............................      248,716      269,543    (7.7%)      568,041      487,495    16.5%
                                           ----------   ----------             ----------   ----------   -----
Total commercial real estate loans .....      248,716      926,067   (73.1%)      568,041    1,862,802   (69.5%)
                                           ----------   ----------             ----------   ----------   -----
Triad auto loans .......................           --      102,407   (100.0%)      88,675      172,953   (48.7%)
                                           ----------   ----------             ----------   ----------   -----
      Total loan originations ..........   $1,024,726   $3,514,556   (70.8%)   $2,909,137   $6,713,086   (56.7%)
                                           ==========   ==========             ==========   ==========   =====

Securitizations and Sales
Whole loan sales to Greenwich affiliate    $  771,801   $       --     n/a     $  771,801   $       --     n/a

ContiMortgage/ContiWest securitizations            --    2,100,000   (100.0%)     800,000    3,850,000   (79.2%)
Other home equity, home improvement and
   other residential mortgage sales ....      539,123      193,360   178.8%     1,123,488      389,543   188.4%
                                           ----------   ----------             ----------   ----------   -----
Total home equity, home improvement and
   other residential mortgage sales ....    1,310,924    2,293,360   (42.8%)    2,695,289    4,239,543   (36.4%)
                                           ----------   ----------             ----------   ----------   -----
Commercial real estate mortgage loans:
   Whole loan sales ....................       81,248           --     n/a        461,900           --     n/a
   Conduit (ContiMAP(R)and affiliates) .           --      581,343   (100.0%)          --      581,343   (100.0%)
   Keystone ............................      248,716      269,543    (7.7%)      568,041      487,495    16.5%
                                           ----------   ----------             ----------   ----------   -----
Total commercial real estate mortgage
 loans .................................      329,964      850,886   (61.2%)    1,029,941    1,068,838    (3.6%)
                                           ----------   ----------             ----------   ----------   -----
Triad auto loans .......................           --       80,007   (100.0%)          --      137,674   (100.0%)
Strategic alliances ....................           --       56,939   (100.0%)      12,783      157,188   (91.9%)
                                           ----------   ----------             ----------   ----------   -----
      Total securitizations and sales ..   $1,640,888   $3,281,192   (50.0%)   $3,738,013   $5,603,243   (33.3%)
                                           ==========   ==========             ==========   ==========   =====
</TABLE>

n/a - not applicable

                                       19
<PAGE>

                            ContiMortgage Corporation
                       Delinquencies, Defaults and Losses
                             (dollars in thousands)
                                   (unaudited)


<TABLE>
<CAPTION>
ContiMortgage                                      September 30,        March 31,      September 30,
Servicing Portfolio                                     1999               1999            1998
                                                        ----               ----            ----
<S>                                              <C>               <C>               <C>
Number of loans serviced (at period end)                179,692           194,032           188,625
Serviced loan portfolio (at period end)          $   11,981,339    $   12,966,131    $   12,535,874
                                                 ==============    ==============    ==============

Weighted Average Seasoning (age in months) (1)               21                17                15

Delinquencies:
   30 - 59 days                                            2.11%             1.39%             2.02%
   60 - 89 days                                            0.65%             0.51%             0.74%
   90 days and over                                        0.05%             0.44%             0.57%
                                                 --------------    --------------    --------------
Total delinquencies (%)                                    2.81%             2.34%             3.33%
                                                 ==============    ==============    ==============
Total delinquencies ($)                          $      336,138    $      303,802    $      417,862
                                                 ==============    ==============    ==============

Defaults:

   Foreclosure                                             2.79%             2.29%             1.95%
   Bankruptcy                                              2.03%             1.65%             1.53%
   Real estate owned                                       1.31%             1.04%             0.93%
   Loss mitigation and legal (2)                           1.38%             1.24%             0.91%
                                                 --------------    --------------    --------------
Total defaults (%)                                         7.51%             6.22%             5.32%
                                                 ==============    ==============    ==============
Total defaults ($)                               $      899,973    $      806,656    $      666,687
                                                 ==============    ==============    ==============
</TABLE>

 (1) This caption has been added to illustrate the significant change in the age
of the portfolio and provide a frame of reference for the location of the
portfolio within the default cycle.
 (2) This category includes non-performing accounts specifically identified for
accelerated resolution under the Company's loss mitigation program. Resolution
strategies include refinances, reinstatements, and full payoffs; forbearance
plans; pre-foreclosure sales for less than full payoff; third party foreclosure
sales; deed-in-lieu (or "cash for keys"); and charge-offs.


                                       20
<PAGE>

                            ContiMortgage Corporation
                  Delinquencies, Defaults and Losses Continued
                             (dollars in thousands)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                        For the three   For the twelve
ContiMortgage                                                            months ended    months ended
Loan Loss Experience                                                     September 30,   September 30,
                                                                            1999            1999
                                                                            ----            ----
<S>                                                                      <C>            <C>
Average serviced loan portfolio                                          $12,327,641    $12,687,135
                                                                         ===========    ===========
Net losses:
   REMICs and loans held pending securitization                               49,116        180,019
   Loans and properties purchased out of REMICs                                3,002          5,951
                                                                         -----------    -----------
      Total net losses                                                   $    52,118    $   185,970
                                                                         ===========    ===========
Realized net losses as a percentage of average amount outstanding (2):
   REMICs and loans held pending securitization                                 1.59%          1.42%
   Loans and properties purchased out of REMICs                                 0.10%           .05%
                                                                         -----------    -----------
Total realized net losses as a percentage of average amount
       outstanding                                                              1.69%          1.47%
                                                                         ===========    ===========
</TABLE>

(2)  Amounts for the three months ended September 30, 1999 are annualized.


                                       21
<PAGE>

Results of Operations

Three and Six Months Ended September 30, 1999 Compared with the Three and Six
Months Ended September 30, 1998

The Company incurred a net loss of $333.7 million and $571.4 million for the
three and six months ended September 30, 1999 compared to a net loss of $114.3
million and $108.2 million for the three and six months ended September 30,
1998, a decrease of $219.5 million and $463.2 million, respectively. The
Company's total gross income (loss) decreased to a loss of $152.9 million and
$171.6 million for the three and six months ended September 30, 1999,
respectively, from income of $10.9 million and $153.0 million for the comparable
periods last year. Total expenses decreased to $180.7 million for the three
months ended September 30, 1999 from $196.5 million for the comparable period
last year, and increased to $389.5 million for the six months ended September
30, 1999 from $328.4 million for the comparable period last year.

Explanation of the significant revenue and expense captions and the drivers of
those changes are described below.

Gain (Loss) on Sale of Receivables:

The following table sets forth the components of gain (loss) on sale of
receivables for the three and six months ended September 30, 1999 and 1998:

<TABLE>
<CAPTION>
                                                     Three Months Ended         Six Months Ended
                                                       September 30,              September 30,
                                                       -------------              -------------
(dollars in thousands)                               1999         1998         1999         1998
                                                     ----         ----         ----         ----
<S>                                                <C>          <C>          <C>          <C>
Home equity/home improvement                       $ (15,928)   $  83,591    $  24,479    $ 171,112
Commercial real estate                                 1,538        1,490        3,362        2,752
Auto and Other                                            --        9,542           --       17,879
                                                   ---------    ---------    ---------    ---------
       Gain (loss) before fair value adjustments     (14,390)      94,623       27,841      191,743
Fair value adjustments                              (173,486)     (78,307)    (324,668)    (137,855)
                                                   ---------    ---------    ---------    ---------
       Gain (loss) after fair value adjustments    $(187,876)   $  16,316    $(296,827)   $  53,888
                                                   =========    =========    =========    =========
</TABLE>

Gain (loss) before fair value adjustments was unfavorable by $109.0 million for
the three months ended September 30, 1999 as compared to the same three months
of fiscal 1999, whereas total securitizations and sales decreased 50%, from $3.3
billion to $1.6 billion for the same respective periods. Gain (loss) before fair
value adjustments was unfavorable by $163.9 million for the six months ended
September 30, 1999 as compared to the same six months of fiscal 1999, whereas
total securitizations and sales decreased 33%, from $5.6 billion to $3.7 billion
for the same respective periods. In the three months ended September 30, 1999
Greenwich purchased on a whole loan basis, through an affiliate, approximately
$772 million of home equity loans which were funded under ContiFinancial's prior
warehouse facilities. The consideration for the sale was the net cash proceeds
and the residual from the securitization Greenwich's affiliate subsequently
executed with the purchased collateral. The loss on this transaction was $20.3
million. The loss was primarily the result of both the prefunding and higher
level of overcollateralization levels required by the monoline insurer
supporting the transaction due to the Company's impaired financial condition and
the perceived quality of the collateral securitized, and the higher level of
transaction costs to execute the securiti-


                                       22
<PAGE>

zation. For ContiMortgage/ContiWest transactions, gain (loss) before fair value
adjustments expressed as a percentage of total securitizations and sales
resulted in a loss of 1.22% compared to a gain of 3.6% for the respective three
months ended September 30, 1999 and 1998. For the six months ended September 30,
1999 and 1998, ContiMortgage/ContiWest transactions gain (loss) before fair
value adjustments expressed as a percentage of total securitizations and sales
resulted in a gain of 0.9% compared to a gain of 4.0%, respectively. This
decrease in profitability between the two periods reflects higher loss
assumptions (see below) and higher investor spread requirements.

For the three months ended June 30, 1999, the Company recorded fair value
write-downs of $151.2 million on Interest-only and residual certificates,
primarily reflecting increased estimates of credit losses in the
ContiMortgage/ContiWest portfolio. In response to events occurring in the first
fiscal quarter, as more fully described in Note 2 to the Consolidated Financial
Statements, management made a determination that the Company most likely would
not be able to achieve the results assumed in its prior loan loss projections;
therefore, assumptions as to future loss severities were increased. For the
three months ended June 30, 1998, the fair value adjustments of $59.5 million
resulted primarily due to increased estimates of future prepayment speeds and
losses in the ContiMortgage/ContiWest portfolio.

During the second quarter of fiscal 2000, management made a further
determination that assumptions as to future loss frequencies should be
increased, resulting in a fair value adjustment to interest-only and residual
certificates of $173.5 million for the three months ended September 30, 1999.
The basis for this increased expectation in loss frequency was driven by the
following factors: (i) the recent performance of the Company's more seasoned
REMICs resulted in management increasing its assumptions of loss frequencies
across the entire portfolio, and (ii) new data from third parties regarding loss
frequency expectations on subprime collateral in general.

The cumulative impact of the fair value adjustments to interest-only and
residual certificates for the six months ended September 30, 1999 is $324.7
million.

Interest Income and Expense:

In the normal course of its activities, the Company carries inventories of loans
pending sale or securitization and earns a positive spread between the interest
income earned on those loans and the cost of financing such loans. Interest
income also includes accrued imputed interest on Excess Spread Receivables
("ESR"). In addition to the cost of financing loans pending sale or
securitization, interest expense includes the cost of financing the Company's
longer term capital requirements, including the cost of strategic acquisitions.

Interest income during the three and six months ended September 30, 1999
declined $58.5 million or 64.3%, and $78.2 million or 48.0%, respectively,
compared to the three and six months ended September 30, 1998. Interest expense
fell $28.0 million or 42.4%, and $40.8 million or 33.5%, respectively, for the
three and six months ended September 30, 1999 compared to the comparable period
in the prior year. These decreases reflect the decline in loan originations that
began in the second half of fiscal 1999 and continued during the first quarter
of fiscal 2000, the elimination of substantially all financing commitments to
strategic alliance clients, and the reduction in the balance of ESR.


                                       23
<PAGE>

Net servicing Income:

Net servicing income consists of servicing fees and prepayment penalties
collected from borrowers, and capitalized servicing activity. Net servicing
income declined $27.5 million and $41.3 million or 95.1% and 74.3% in the three
and six months ended September 30, 1999 compared to the three and six months
ended September 30, 1998. The following table presents the components of
servicing income for the two periods:

<TABLE>
<CAPTION>
                                                           Three months ended                Six months ended
                                                              September 30,                    September 30,
                                                              -------------                    -------------
(in thousands)                                             1999            1998             1999           1998
                                                           ----            ----             ----           ----
<S>                                                    <C>             <C>                    <C>      <C>
Capitalized servicing created                          $         --    $     31,651           7,052    $     52,653
Premiums paid for capitalized prepayment penalties
                                                                 --         (13,954)         (1,736)        (18,621)
Amortization of capitalized servicing                       (15,344)         (9,787)        (31,361)        (17,872)
Fees and prepayment penalty collections                      24,774          21,056          53,882          39,526
Impairment of capitalized servicing                          (8,000)             --         (13,500)             --
                                                       ------------    ------------    ------------    ------------
 Net servicing income                                  $      1,430    $     28,966    $     14,337    $     55,686
                                                       ============    ============    ============    ============
Total ContiMortgage/ContiWest securitization volume    $         --    $  2,100,000    $    800,000    $  3,850,000
Average ContiMortgage servicing portfolio (excluding
    warehouse)                                         $ 11,302,293    $ 10,220,169    $ 11,539,326    $  9,687,734
</TABLE>

The absence of capitalized servicing created during the quarter ended September
30, 1999 was attributable to the appointment of a servicer other than the
Company on a loan sale to Greenwich during that quarter. The appointment of
another servicer, because of the Company's impaired financial condition, was
necessary to obtain the monoline insurance guaranty on the transaction. The
increase in amortization of capitalized servicing of $5.6 million in the quarter
ended September 30, 1999 versus the comparable fiscal 1999 quarter was due
predominantly to the 20% increase in the amount of capitalized servicing created
during fiscal 1999, which affects the level of subsequent amortization, as
compared to the amount of capitalized servicing created in fiscal 1998 (such
capitalized amounts being $76.6 million and $63.6 million, respectively).
Further, the prepayment penalty component of capitalized servicing created was
higher in fiscal 1999 than fiscal 1998, and since prepayment penalties have set
expiration dates that may be as short as six months, capitalized prepayment
penalties are, on average, amortized over a much shorter period than normal
servicing fees.

The Company recorded an estimated impairment reserve of $5.5 million during the
first quarter of fiscal 1999 because certain securitized portfolios have reached
delinquency levels that may trigger the loss of the servicing rights related to
those pools. The Company also recorded an estimated impairment reserve of $8.0
million in the second quarter of fiscal 2000 due to the expectation that
servicing costs on a per loan basis will increase in the future. Given its
current financial condition, the Company is unable to increase its servicing
portfolio and as a result the portfolio will increase in age. As the portfolio
ages, the portion of the portfolio that is delinquent, which is more costly to
service, will increase.

Fees and prepayment penalties collected in the three and six months ended
September 30, 1999 increased by $3.7 million and $14.4 million, respectively,
compared to the three and six months ended September 30, 1998


                                       24
<PAGE>

primarily due to an increase in the average balance of the
ContiMortgage/ContiWest portfolio of loans serviced for others and a higher
level of ancillary income such as prepayment penalties and late fees.

The following table presents an analysis of capitalized servicing rights
activity during the six months ended September 30, 1999:

(in thousands)
Balance as of March 31, 1999                                         $ 105,273
   New securitization                                                    7,052
   Capitalized servicing received in strategic alliance asset swap       3,115
   Amortization of capitalized servicing rights                        (31,361)
   Impairment of capitalized servicing                                 (13,500)
                                                                     ----------
Balance as of September 30, 1999                                     $  70,579
                                                                     =========


Compensation and Benefits and General and Administrative Expenses:

<TABLE>
<CAPTION>
                                                              Three Months Ended                  Six Months Ended
                                                                September 30,                      September 30,
(dollars in thousands)                                    1999                1998             1999              1998
                                                          ----                ----             ----              ----
<S>                                                      <C>                <C>              <C>               <C>
Compensation and benefits                                $  44,735          $ 51,842         $ 95,791          $ 95,166
                                                         =========          ========         ========          ========
General and administrative expenses                      $  41,827          $ 40,071         $ 84,965          $ 72,582
                                                         =========          ========         ========          ========
Quarter-end head count                                       2,766             3,583
Average head count for the quarter                           2,898             3,394
</TABLE>

In the three months ended September 30, 1999 compensation and benefits decreased
by $7.1 million or 13.7% due to a workforce reduction of approximately 11%.

General and administrative expenses increased in the three and six months ended
September 30, 1999 by $1.8 million and $12.4 million, respectively, or 4.4% and
17.1%, respectively. The increase for the six months ended September 30, 1999
compared to the prior comparable period primarily reflects the expansion of the
Company's direct-to-consumer retail operations during fiscal 1999 and the
expansion of the Company's servicing operations due to the increase in the size
of the servicing portfolio. Direct-to-consumer retail operations require a
higher level of G&A Expense than non-retail operations that are conducted
through correspondents and brokers.


                                       25
<PAGE>

Other Charges:

Other charges for the three and six months ended September 30, 1999 and 1998
consisted of the following:

<TABLE>
<CAPTION>
                                                              -------------------   --------------------
                                                               Three Months Ended      Six Months Ended
                                                                  September 30,         September 30,
                                                              --------------------  --------------------
(dollars in thousands)                                           1999       1998      1999       1998
                                                                 -----     -----     ------    --------
<S>                                                           <C>        <C>        <C>        <C>
Other Charges:
     Write-down of cost in excess of equity acquired
                                                              $  2,569   $  2,782   $ 62,522   $  2,782
     Restructuring charges (excluding compensation related)
                                                                12,056      5,340     18,715      5,340
     Severance for approximately 760 employees                   8,653         --      8,653         --
     Staff retention costs                                      17,143         --     17,143         --
     Write-offs and reserves of receivables from affiliates
        and others                                              13,044     27,968     14,227     27,968
     Other                                                          --         --      2,134         --

Total Other Charges                                           $ 53,465   $ 36,090   $123,394   $ 36,090
</TABLE>

Based on the recent developments discussed in Note 2, management made a
determination that the carrying value of cost in excess of equity acquired
related to most of the Company's operations had been significantly impaired and
appropriate write-downs of $2.6 million and $62.5 million for the three and six
months ended September 30, 1999, respectively, had to be recorded. For the three
months ended September 30, 1999, the writedown of $2.6 million primarily relates
to a majority owned subsidiary of the Company based on the Company's expectation
of the net proceeds to be realized from the sale of this entity.

The restructuring charges of $12.1 and $18.7 million, for the three and six
months ended September 30, 1999, respectively, primarily represent legal and
consulting fees related to restructuring.

In August 1999, the Company began the implementation of a workforce reduction
plan which has resulted in a reduction of the workforce of approximately 11% as
of September 30, 1999, and is expected to result in the reduction of
approximately 30% of the Company's employees by the end of the Company's fiscal
year in order to achieve the strategic goals of the Company's restructuring plan
as discussed in Note 2 to the Consolidated Financial Statements. A charge of
$8.7 million for severance costs was recorded for approximately 760 employees
representing a cross section of individuals from all operations of the Company.
At September 30, 1999, $4.3 million of this charge remains in Other liabilities.

In July 1999 and August 1999, the Company established the CFN and CMC 1999
Retention Bonus Plans (the "Plans") for the purpose of retaining the valuable
services of the Company's key employees through certain dates. In order to
guarantee payment to employees of amounts that will become due to them under the
Plans, the Company established and funded irrevocable trusts with the amount
necessary to satisfy the Company's maximum liability under the Plans.


                                       26
<PAGE>

Liquidity and Capital Resources

The following discussion of Liquidity and Capital Resources should be read in
conjunction with "Recent Developments, Financial Results and Liquidity" at the
beginning of this Item 2. "Management's Discussion and Analysis of Financial
Condition and Results of Operations".

Funding Requirements

The Company requires continued access to short- and long-term sources of funding
for its operations. The Company's primary cash requirements include the funding
of (i) mortgage loan originations and purchases pending their pooling and sale,
(ii) on going administrative and other operating expenses which will include
payments relating to the Restructuring Plan, (iii) payments related to tax
obligations, (iv) interest and principal payments relating to the Company's
long-term debt and short-term borrowed funds, (v) the costs of sales under the
Company's Purchase and Sale Facilities and Repurchase Agreements (collectively,
the "Warehouse Facilities"), and (vi) the cost of any subsequent contingent
purchase price payments on prior acquisitions.

The Company has taken steps to improve the cash flow characteristics of its
business activities by shedding businesses that required significant capital
outlays and focusing its financial resources on its core home equity business.
Within the home equity business, the Company took further steps to reduce the
capital requirements by implementing a whole loan sale strategy to accelerate
recapture of origination costs. Furthermore, development of the Company's retail
home equity origination platform provides a source of cash income through
origination points and fees. The reduction in correspondent origination volume
has significantly reduced the total amount of premiums paid to originate a loan.
As competition has decreased, the cost of originating correspondent loans has
also dropped significantly, benefiting the Company through lower purchase
premiums.

Sources of Liquidity and Capital

During the quarter ended September 30, 1999, the Company's primary sources of
liquidity were whole loan sales to the Greenwich purchase facilities and to
other third party loan purchasers.

On August 12, 1999, the Company entered into a definitive agreement with
Greenwich to provide the Company with a $500 million revolving
servicing-released whole loan purchase facility of up to $1.5 billion, at
ContiFinancial's option, through March 31, 2000. Greenwich provides a warehouse
facility of up to $250 million on a revolving basis. Both facilities ("Greenwich
Facilities") expire on March 31, 2000. In addition to the two facilities,
Greenwich purchased on a whole loan basis, through an affiliate, approximately
$772 million of home equity loans which were funded under ContiFinancial's prior
warehouse facilities.

As of September 30, 1999 the Company had $250 million of committed and $60
million of uncommitted capacity under the warehouse facilities. As of September
30, 1999, the Company had utilized $200 million of the capacity under the
Warehouse Facilities.

As discussed in the "Recent Developments, Financial Results and Liquidity", the
Company is operating on a negative cash flow basis and is dependent on the
Greenwich Facilities for its continued operations. In order to fund new loans
and asset originations and purchases, the Company is dependent on its ability to


                                       27
<PAGE>

fund loans under the Greenwich Facilities. The Company is also dependent on
continued access to the Bank Facilities or obtaining new bank facilities in
order to meet its cash needs.

The Company is required to comply with various financial covenants under its
outstanding Senior Notes and Bank Facilities. As of December 31, 1998 and
continuing through September 30, 1999, the Company's leverage ratio exceeded the
leverage ratio test under the covenants of its outstanding Senior Notes. As a
result, the Company is prevented from issuing additional unsecured debt until
its leverage ratio is below such test.

As of December 31, 1998, amended financial covenants were received changing the
leverage and fixed charge ratios and the minimum net worth test in the Bank
Facilities, and lenders agreed to exclude certain charges from the covenant
ratio calculations. As of March 31, 1999, the Bank Facilities were amended to
eliminate the financial covenants and borrowing base provisions, among other
things. As part of the bank amendment, the Company agreed to reduce commitments
under the Bank Facilities by 75% of the total proceeds received by the Company
for the sale of Triad Financial Corporation ("Triad"). On June 11, 1999, the
sale of Triad was closed, and the Bank Facilities commitments were reduced by
approximately $95 million. If the above mentioned amendments had not been
obtained, the Company would not have been in compliance with the covenants.

As part of the December amendments to the Revolving Credit Facility, the Company
had agreed to prepay the Revolving Credit Facility on August 20, 1999, which
made the Revolving Credit Facility coterminous with the Commercial Paper
Program. As part of the March amendments, the interest rate of the Revolving
Credit Facility and the Commercial Paper Program were increased to LIBOR plus
300 basis points.

On August 19, 1999, the Company agreed with the lenders under its Bank
Facilities to extend the maturity date of the Bank Facilities from August 20,
1999 to March 31, 2000 and to convert both facilities into term arrangements.
The Company also agreed to certain modifications of the Bank Facilities
including a $20 million minimum liquidity covenant. The agreement also includes
providing collateral to the lenders in the form of a lien on certain Excess
Spread Receivables with a June 30, 1999 book value of approximately $147
million. The book value of these Excess Spread Receivables as of September 30,
1999 was approximately $87 million. The interest rate on each facility remains
at LIBOR plus 300 basis points. The Company was in compliance with the amended
covenants of the Bank Facilities as of September 30, 1999.

At September 30, 1999, the Company had outstanding $422.0 million on its Bank
Facilities.

On November 10, 1999, the Company entered into a new arrangement with Greenwich
to provide monthly servicer advances, up to an aggregate outstanding amount of
$125 million, to certain REMICs for which ContiMortgage is the servicer. This
arrangement replaced the ContiGroup arrangement which expired on October 15,
1999. Greenwich has agreed to make these advances, for a fee, through November
9, 2000.

On June 11, 1999, the Company sold its interest in Triad to Fairlane Credit LLC,
a wholly-owned subsidiary of Ford Motor Credit Company. The sale of Triad
resulted in a gain to the Company of approximately $22 million and provided
gross proceeds of approximately $134 million through sale proceeds, repayment of
intercompany debt and net return of intercompany warehouse financing. Of this
amount, approximately $95 million was used to pay down the Company's Bank
Facilities, thereby reducing the commitments under the Bank Facilities by the
pay down amount.


                                       28
<PAGE>

On July 15, 1999, Standard & Poor's lowered its senior unsecured debt and
long-term debt credit ratings to CC, Moody's Investors Service downgraded the
Company's long-term debt ratings to Caa2 and Fitch IBCA reduced the Company's
long-term debt rating to C.

The Company recently received notification from the New York Stock Exchange that
the Company currently does not meet listing standards of the Exchange requiring
a minimum average share price of $1.00 over a consecutive 30 trading day period,
and total market capitalization of not less than $50 million in conjunction with
stockholders' equity of not less than $50 million. The Company is required to
bring its average share price to the minimum specified by the Exchange within
six months and, in accordance with the rules of the Exchange, the Company is
working with the Exchange on a business plan to address the market
capitalization and stockholders' equity issue within the applicable time frame.
However, it is unlikely that the Company will be successful in meeting these
requirements. The Company will examine alternatives to the Exchange for the
continued trading of the Company's common stock.

Year 2000

The "Year 2000" issue, the ability of systems to identify dates in the 21st
century, is a critical business and operational issue being addressed by the
Company's ongoing entities. During the three months ended September 30, 1999 the
Company's Year 2000 Project Team continued to monitor and implement changes to
upgrade the Company's facilities, computer systems and applications for Year
2000 compliance. As of September 30, 1999, the Company believes that all
material hardware, software and computerized systems are Year 2000 compliant.
The Company will continue to monitor and test critical applications through
1999. Modifications will be implemented, as required, to ensure Year 2000
compliance.

The Company estimates that the direct cost of its Year 2000 remediation,
including contingency planning, will be approximately $2.0 million. To date, the
Company has spent approximately $1.7 million on the Year 2000 issue.

The Company's contingency plan documentation covers a broad range of problems
that could occur relative to the turn of the century. In addition, ContiMortgage
has a disaster recovery plan in place to support a computer related outage.

The Company presently believes, based on the information obtained during the
systems inventory and assessment phase, that the Year 2000 issue will not have a
material adverse impact on its computer systems or operations. However, the
interdependent nature of the Company's operations, in particular its substantial
reliance on third party vendors, makes it impossible to say with certainty that
the Year 2000 issue will not have a material adverse impact on those computer
systems and operations.

Forward-looking Statements

Certain statements contained in this Quarterly Report on Form 10-Q, including,
but not limited to, statements relating to the Company's strategic objectives,
raising additional equity and future performance, which are not historical fact,
may be deemed to be forward-looking statements under the federal securities
laws. There are many important factors that could cause the Company's actual
results to differ materially from those indicated in the forward-looking
statements, including the ability of the Company to successfully complete a
transaction with a buyer or equity investor. Such factors also include, but are
not limited to, general economic conditions; interest rate risk; prepayment
speeds; delinquency and default rates; credit


                                       29
<PAGE>

losses; changes (legislative and otherwise) in the asset securitization
industry; demand for the Company's services; residential and commercial real
estate values; the ability of the Company to negotiate agreements to sell whole
loans; the impact of certain covenants in debt agreements of the Company; the
degree to which the Company is leveraged; its needs for financing; the continued
availability of the Company's credit facilities; the risk of margin calls on the
Company's credit facilities and hedge positions; capital markets conditions,
including the markets for asset-backed securities and commercial mortgage loans;
the performance of the Company's subsidiaries and affiliates; the Company's Year
2000 issues; and other risks identified in the Company's Securities and Exchange
Commission filings. In addition, it should be noted that past financial and
operational performance of the Company is not necessarily indicative of future
financial and operational performance.


                                       30
<PAGE>

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The primary market risk exposure that the Company faces is interest rate risk.
The Company is most vulnerable to changes in U.S. Treasury yields, LIBOR yields,
and the yield spread requirements of the investors who buy the Company's
securities and loans. The Company's material exposures of interest rate
sensitive financial instruments, which are entered into for other than trading
purposes, are its committed pipeline of loans, its loan inventories (including
off-balance-sheet exposures), its interest-only and residual certificates, its
capitalized servicing rights, and the various derivative financial instruments
that the Company uses to manage the interest rate risk related to the
aforementioned other financial instruments. The overall objective of the
Company's interest rate risk management policies is to mitigate the effect of
changing interest rates on the fair value of its other financial instruments.

The Company does not have an ongoing hedging program to manage interest rate
risk associated with its interest-only and residual certificates and its
capitalized servicing rights. The primary risk involved is that a decline in
interest rates could result in an acceleration of prepayment speeds that would
adversely impact the fair value of these assets. However, because of the
relatively short average lives of the Company's home equity loans, prepayment
speeds related to the Company's portfolios are not as interest rate sensitive as
those of traditional mortgage products; therefore, the Company believes it would
require a substantial and sustained decline in interest rates, beyond what the
Company would consider to be a "reasonably possible near-term change," to impact
prepayment speeds to a material extent. The Company is also exposed to basis
risk in its portfolio of interest-only and residual certificates in that a
portion of the Company's securities have interest rates that adjust on a monthly
basis, whereas the interest rates on the loans that collateralize the securities
may be fixed or have adjustment intervals and indices that are different than
those of the underlying securities.

As part of its interest rate risk management process, the Company performs
various sensitivity analyses that attempt to quantify the net change in fair
value of its interest rate sensitive financial instruments. These analyses
assume hypothetical scenarios of instantaneous and permanent shifts in the U.S.
Treasury and/or LIBOR yield curves. The Company employs various discounted cash
flow models to determine the fair value of its interest rate sensitive financial
instruments under these scenarios. The primary assumptions used in the
discounted cash flow models are prepayment rates, credit losses, discount rates
and investor yield spread requirements. See Note 4 to the Consolidated Financial
Statements.

Using the sensitivity analysis described above, as of September 30, 1999, the
Company estimates that a parallel, instantaneous and permanent increase in the
U.S. Treasury yield curve of 50 basis points (.50%), all else being constant,
would result in an aggregate decrease in the fair value of its interest rate
sensitive financial instruments (derivative and other) of approximately $2
million; an instantaneous and permanent increase in the LIBOR yield curve of 50
basis points (.50%), all else being constant, would result in an aggregate
decrease in the fair value of its interest rate sensitive financial instruments
(derivative and other) of approximately $13 million; an instantaneous and
permanent increase in the discount rate of 120 basis points (1.20%), all else
being constant, would result in an aggregate decrease in the fair value of its
interest rate sensitive financial instruments (derivative and other) of
approximately $34 million; and an instantaneous and permanent increase in the
investor yield spread requirement of 50 basis points (.50%), all else being
constant, would result in an aggregate decrease in the fair value of its
interest rate sensitive financial instruments (derivative and other) of
approximately $3 million.

The Company assumed there would be no material change in prepayment speeds under
the interest rate change scenarios presented above. The Company estimates that a
100 basis points (1.0%) increase in pre-


                                       31
<PAGE>

payment speeds would decrease the fair value of the interest-only and residual
certificates by approximately $26 million and would decrease the fair value of
the capitalized servicing rights by $1.0 million (net of the estimated benefit
from increased prepayment penalty income). See Note 4 to the Consolidated
Financial Statements for the effect of changes in prepayment speeds and other
assumptions on the interest-only and residual certificates.

These sensitivity analyses are limited by the fact that that they are performed
at a particular point in time and do not incorporate other factors that may
impact the fair value of the Company's interest rate sensitive financial
instruments in each scenario. The above scenarios do not reflect the Company's
expectations regarding future movements in interest rates or prepayment speeds.
Consequently, the preceding estimates should not be viewed as a forecast.


                                       32
<PAGE>

                            PART II OTHER INFORMATION

Item 1.   Legal Proceedings

          On or about October 21, 1999, a purported class action entitled O'Hopp
          v. ContiFinancial Corporation, et al., No. 99cv06794, was filed in the
          United States District Court for the Eastern District of New York on
          behalf of Dea O'Hopp, a stockholder of the Company, and similarly
          situated individuals, against the Company, Continental Grain
          Corporation (sued in its capacity as a "controlling person") and
          former Company officers and/or directors James E. Moore and Daniel J.
          Willett. On or about October 29, 1999, a virtually identical complaint
          was filed against the same defendants in the United States District
          Court for the Southern District of New York in an action entitled I&M
          Associates v. ContiFinancial Corporation, et al., No. 99 Civ. 10941.
          Both actions allege, among other things, violations of Section 10(b)
          of the Exchange Act and Rule 10b-5 promulgated thereunder, based on
          allegedly false or misleading statements and failures to disclose
          allegedly material information in Company press releases, SEC filings
          and statements made to analysts during the period from January 19,
          1998 through July 21, 1999. These misstatements and omissions,
          plaintiffs allege, artificially inflated the Company's stock price
          during the relevant time period. The plaintiffs seek damages in an
          unspecified amount. The Company intends to defend these actions
          vigorously. Given the preliminary stage of the litigation, the Company
          is unable to evaluate the potential materiality of such suits, if any.


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

          (a) The annual meeting of shareholders of the Company was held
          September 14, 1999.

          (b) Directors whose term of office as a director continued after the
          meeting including the Class I Directors elected (see (c)(i) below):


Class I Directors        Class II Directors             Class III Directors
-----------------        ------------------             -------------------
Mark R. Baker            Paul J. Fribourg               John P. Tierney
Alan H. Fishman          John W. Spiegel                Michael J. Zimmerman
Donald L. Staheli        Lawrence G. Weppler

          (c) Holders of common shares voted at this meeting on the following
          matters, which were set forth in full in the registrant's proxy
          statement dated August 25, 1999:

 (i)  Election of Class I Directors

    Nominee                               For             Withheld
    -------                               ---             --------
    Mark R. Baker                      37,611,976          42,420
    Alan H. Fishman                    37,612,376          42,020


                                       33
<PAGE>

<TABLE>
<CAPTION>
                                                                   For           Against          Abstain
                                                                   ---           -------          -------
<S>                                                            <C>               <C>               <C>
(ii) Amend the 1995 Long-Term Stock Incentive
Plan (Re: Limits):                                             37,544,226        96,670            13,500

(iii) Amend the 1995 Long-Term Stock Incentive
Plan (Re: Increase):                                           37,018,185        623,526           12,685

(iv) Amend the 1995 Long-Term Stock Incentive Plan
(Re: Goals):                                                   37,420,625        221,686           12,085

(v) Amend the Section 162(m) Bonus Plan:                       37,574,144         69,052            11,200

(vi) Appointment of Auditors:                                  37,626,613         25,583             2,200
</TABLE>

          Appointment of the firm of Arthur Andersen LLP as the independent
          accountants for the Company for the fiscal year ending March 31, 2000.

     (d) Subsequent to the vote, on October 13, 1999, the following directors
     resigned from the board:

          Donald Staheli
          John P. Tierney
          Lawrence Weppler

     (e) Subsequent to the vote, on October 13, 1999, the following persons have
     been elected as directors by the board of directors to fill vacancies on
     the board of directors:

          James Larocca
          Thomas Robards


                                       34
<PAGE>

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

                  (a) Exhibits

                  Exhibit
                     No.                             Description

                10.33   Fourth Amendment to the Credit Agreement

                10.34   Fourth Amendment to the Amended and Restated Letter of
                        Credit and Reimbursement Agreement

                10.35   Pledge and Security Agreement between the Company and
                        Credit Suisse First Boston

                10.36   Master Repurchase Agreement between Greenwich Capital
                        Financial Products, Inc. and the Company

                10.37   Master Mortgage Loan Purchase Facility between Greenwich
                        Capital Financial Products, Inc. and the Company

                10.38   Amended and Restated Pledge and Security Agreement
                        between the Company and Greenwich Capital Financial
                        Products, Inc., et al

                11.1    Computation of the Company's Earnings Per Common Share

                12.1    Ratio of Earnings to Fixed Charges

                27.1    Financial Data Schedule

                (b)Reports on Form 8-K.

                None.


                                       35
<PAGE>

                                   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.


                           ContiFinancial Corporation



Signature                          Title                           Date

/s/ William P. Higgins   Senior Vice President and             November 15, 1999
------------------------  Controller (Principal Accounting     -----------------
William P. Higgins          Officer)


/s/ Frank W. Baier       Senior Vice President and Chief       November 15, 1999
------------------------  Financial Officer (Principal         -----------------
Frank W. Baier              Financial Officer)