UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended:      September 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from 
to 
Commission file number: 1-13563
LASER MORTGAGE MANAGEMENT, INC.
(Exact name of registrant as specified in its charter)

| | MARYLAND
(State or other jurisdiction of incorporation or
organization) |  | 22-3535916
(I.R.S. Employer
Identification No.) | 
| | ----------------------------------------------------------------------- |  | ----------------------------------------------- | 

c/o Mariner Mortgage Management LLC
65 East 55th Street
New York, New York 10022
(Address of principal executive offices)
(Zip Code)
(212) 758-6200
(Registrant's telephone number, including area code)

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

Yes X  No

Indicate the number of shares outstanding of each of the issuers classes
of stock, as of the last practicable date: 14,038,983 shares of common stock,
$0.001 par value, outstanding as of November 8, 2000

LASER MORTGAGE MANAGEMENT, INC.
FORM 10-Q
INDEX

|PART I. | FINANCIAL INFORMATION | 3
|------- | --------------------- | -

| | Item 1. | Financial Statements
Balance Sheet at September 30, 2000 (Unaudited) and December 31, 1999 | 3
3
| | ------- | ------------------------------------------------------------------------------------------ | ---

| | Statement of Operations (Unaudited) for the Three
Months and Nine Months
Ended September 30, 2000 and September 30, 1999 | 4
| | ------------------------------------------------------------------------------------------------------------------------ | -

| | Statement of Stockholders' Equity (Unaudited) for the
Nine Months Ended September 30, 2000 | 5
| | ------------------------------------------------------------------------------------------ | -

| | Statement of Cash Flows (Unaudited) for the Three Months and Nine Months
Ended September 30, 2000 and September 30, 1999 | 6
| | ------------------------------------------------------------------------------------------------------------------------ | -

| | Notes to Financial Statements | 7
| | ----------------------------- | -

| | Item 2. | Management's Discussion and Analysis of Financial Condition and Results of
Operations | 16
| | ------- | ------------------------------------------------------------------------------------- | --

| | Item 3. | Quantitative and Qualitative Disclosures About Market
Risk | 28
| | ------- | ---------------------------------------------------------- | --

|PART II. | OTHER INFORMATION | 30
|-------- | ----------------- | --

| | Item 1. | Legal Proceedings | 30
| | ------- | ----------------- | --

| | Item 2. | Changes in Securities and Use of Proceeds | 30
| | ------- | ----------------------------------------- | --

| | Item 3. | Defaults Upon Senior Securities | 30
| | ------- | ------------------------------- | --

| | Item 4. | Submission of Matters to a Vote of Security Holders | 30
| | ------- | --------------------------------------------------- | --

| | Item 5. | Other Information | 30
| | ------- | ----------------- | --

| | Item 6. | Exhibits and Reports on Form 8-K | 30
| | ------- | -------------------------------- | --

PART I. FINANCIAL INFORMATION
Item 1.  Financial Statements

`LASER MORTGAGE MANAGEMENT, INC.
BALANCE SHEET AT                                             SEPTEMBER 30, 2000       DECEMBER 31, 1999
                                                                 (Unaudited)
ASSETS

Cash and cash equivalents................................    $     11,299,110        $   16,065,024
Investment in securities at fair value...................         318,110,715            97,147,637
Investment in mortgage loans at amortized cost...........           3,059,052             3,804,632
Receivable for securities sold...........................           9,890,209                    --
Accrued interest and principal paydown receivable........           2,144,164               840,459
Margin deposits on repurchase agreements.................                  --               425,000
Prepaid assets...........................................           1,836,705                    --
                                                             ----------------        --------------
            Total assets.................................    $    346,339,955        $  118,282,752
                                                             ================        ==============

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES:
  Repurchase agreements..................................         280,783,000            44,018,000
  Accrued interest payable...............................             450,166               149,260
  Accounts payable and accrued expenses..................             690,918             1,081,061
  Payable to manager.....................................             112,005                42,754
                                                             ----------------        --------------
         Total liabilities...............................         282,036,089            45,291,075
                                                             ----------------        --------------

STOCKHOLDERS' EQUITY:
  Common stock: par value $.001 per share;
    100,000,000 shares authorized, 20,118,749 and
    20,118,749 shares issued, respectively...............              20,119                20,119
  Additional paid-in capital.............................         283,012,967           283,012,967
  Accumulated other comprehensive loss...................         (21,371,733)          (12,422,818)
  Accumulated distributions and losses...................        (164,509,056)         (167,921,096)
  Treasury stock at cost (6,079,766 and 5,254,166
    shares respectively)...............                           (32,848,431)          (29,697,495)
                                                             ----------------        --------------
         Total stockholders' equity......................          64,303,866            72,991,677
                                                             ----------------        --------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY...............    $    346,339,955        $  118,282,752
                                                             ==================      ===============


                       See notes to financial statements.`

`LASER MORTGAGE MANAGEMENT, INC.

STATEMENT OF OPERATIONS (UNAUDITED) FOR THE

                                                 THREE MONTHS ENDED              NINE MONTHS ENDED
                                                     SEPTEMBER 30,                 SEPTEMBER 30,
                                                2000             1999          2000            1999

Interest income:
  Mortgage loans and securities........    $  6,004,785    $  3,854,058    $ 11,251,204    $ 26,074,650
  Cash and cash equivalents............         120,743         595,217       1,176,664       1,559,424
                                           ------------    ------------    ------------    ------------
           Total interest income.......       6,125,528       4,449,275      12,427,868      27,634,074
                                           ------------    ------------    ------------    ------------

Interest expense:
  Securities sold short................          --              --             242,101          --
  Repurchase agreements................       3,874,009       1,996,483       6,207,614      15,972,392
                                           ------------    ------------    ------------    ------------
           Total interest expense......       3,874,009       1,996,483       6,449,715      15,972,392
                                           ------------    ------------    ------------    ------------

Net interest income....................       2,251,519       2,452,792       5,978,153      11,661,682

Gain (loss) on sale of securities,
  swaps and termination of
  repurchase agreement.................         371,115      (2,191,446)     (1,641,134)    (23,415,673)

General and administrative expenses....         318,587         945,328         924,979       3,191,367
                                           ------------    ------------    ------------    ------------

Net income (loss)......................    $  2,304,047    $   (683,982)   $  3,412,040    $(14,945,358)
                                          =============    =============   =============   ============

Unrealized gain (loss) on securities:
  Unrealized holding gain (loss)
  arising during period................    $    138,877    $   (210,679)   $(10,590,049)   $(16,523,241)


Add: reclassification adjustment
  for (gain) loss included in net
   income (loss)........................       (371,115)      2,191,446       1,641,134      23,415,673
                                           ------------    ------------    ------------    ------------
Other comprehensive (loss) income......        (232,238)      1,980,767      (8,948,915)      6,892,432
                                           ------------    ------------    ------------    ------------


Comprehensive income (loss)............    $  2,071,809    $  1,296,785    $ (5,536,875)   $ (8,052,926)
                                           =============   =============   ============    ============

Net income (loss) per share:
  Basic................................    $       0.16    $      (0.04)   $       0.24    $      (0.85)
                                           =============   =============   ============    ============

  Diluted..............................    $       0.16    $      (0.04)   $       0.24    $      (0.85)
                                           =============   =============   ============    ============

Weighted average number of shares
  outstanding:

  Basic................................      14,038,983      17,223,109      14,481,532      17,601,921
                                           =============   =============   ============    ============

  Diluted..............................      14,038,983      17,223,109      14,481,532      17,601,921
                                           =============   =============   ============    ============

                       See notes to financial statements.`

`STATEMENT OF STOCKHOLDERS' EQUITY (UNAUDITED) FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000



                                                  Common      Additional      Comprehensive
                                                  Stock         Paid-in          Income
                                                Par Value       Capital          (Loss)

BALANCE
     DECEMBER 31, 1999.......................  $   20,119     $283,012,967

Comprehensive income
  Net income.................................                                 $  3,412,040
  Other comprehensive loss
     Unrealized loss on securities,
        Net of reclassification adjustment...                                   (8,948,915)
                                                                              -------------

Comprehensive loss...........................                                $  (5,535,875)
                                                                             ==============
Repurchase of common stock...................
                                               -----------    ------------

BALANCE SEPTEMBER 30, 2000...................  $   20,119     $283,012,967
                                               ==========     ============

Unrealized holding losses arising during
period.......................................                                  (10,590,049)
Add:  reclassification adjustment for losses
     included in net loss....................                                     1,641,134
                                                                               -------------
Net unrealized losses on securities..........                                  $ (8,948,915)
                                                                               =============

                                           Accumulated
                                              Other
                                          Comprehensive        Accumulated    Treasury
                                              Income          Distributions     Stock
                                              (Loss)           and Losses      at Cost          Total

BALANCE
     DECEMBER 31, 1999................... $   (12,422,818)    $(167,921,096) $(29,697,495)   $72,991,677

Comprehensive income
  Net income.............................                         3,412,040                    3,412,040
  Other comprehensive loss
     Unrealized loss on securities,
        Net of reclassification
         adjustment......................      (8,948,915)                                    (8,948,915)


Comprehensive loss.......................

Repurchase of common stock...............                                      (3,150,936)    (3,150,936)
                                            --------------    -------------  -------------    -----------

BALANCE SEPTEMBER 30, 2000............... $   (21,371,733)    $(164,509,056) $(32,848,431)  $ 64,303,866
                                          ================    ============== ==============  ===========

Unrealized holding losses arising
during period............................
Add:  reclassification adjustment
     for losses included in net..........

Net unrealized losses on securities......


                       See notes to financial statements.`

`STATEMENT OF CASH FLOWS (UNAUDITED) FOR THE

                                                         THREE MONTHS ENDED         NINE MONTHS ENDED
                                                             SEPTEMBER 30,            SEPTEMBER 30,
                                                         2000        1999         2000           1999

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss).................................   $2,304,047    $(683,982)   $3,412,040   $(14,945,358)
  Adjustments to reconcile net income (loss)
   to net cash provided by (used in) operating
    activities:
  Amortization of mortgage premiums and
    discounts, net...............................       (66,142)     485,020      (434,889)     2,215,858
    (Gain) loss on sale of securities............      (371,115)   2,191,446     1,641,134     23,415,673
    (Increase) decrease in accrued interest
      receivable.................................       134,512    2,685,154    (1,303,705)     8,062,783
    Decrease in variation margin on interest
      rate swaps.................................         --           --          425,000         --
    Decrease in margin deposits on repurchase
      agreements ................................         --           --            --         7,117,098
    Decrease (increase) in other assets..........        18,030       66,244    (1,836,705)       (45,451)
    (Decrease) increase in accrued interest
      payable....................................       (17,568)    (114,931)      300,907     (2,138,936)
    Increase (decrease) in accounts payable and
      accrued expenses...........................       168,930      504,909      (390,143)    (1,197,363)
    Increase (decrease) in payable to Manager....        50,210         --          69,251     (1,125,000)
                                                     ----------    ----------   -----------    ------------
      Net cash provided by operating activities..     2,220,904    5,133,860     1,882,890     21,359,304
                                                      ==========   ===========  ===========    ============

CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchase of securities.........................   (53,274,121)       --     (424,419,633)         --
  Proceeds from sale of securities...............    21,647,051    6,245,873   182,955,851     577,131,882
  (Increase) decrease in receivables for
    securities sold..............................    (9,890,209)  75,368,727    (9,890,209)         (3,512)
  Decrease in payables for securities purchased     (81,110,628)      --            --              --
  Principal payments on securities...............     6,743,043    6,491,188    11,091,124      62,911,590
  Other payables.................................         --          --            --           1,932,774
                                                     ----------    ----------   -----------    ------------
     Net cash (used in) provided by investing
       activities................................  (115,884,864)  88,105,788  (240,262,867)    641,972,734
                                                   =============  ============ ============    ============

CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from repurchase agreements............   631,106,000  425,974,000 1,042,248,625   3,240,819,246
  Principal payments on repurchase agreements....  (509,992,000)(509,420,610) (805,483,625) (3,849,811,157)
  Payments for repurchase of common stock........        --       (9,958,238)   (3,150,937)    (10,173,282)
  Distributions paid to stockholders.............        --          --             --         (35,607,766)
                                                     ----------    ----------   -----------    ------------
    Net cash provided by (used in) financing
       activities................................  121,114,000   (93,404,848)  233,614,063    (654,772,959)
                                                   ===========   ===========   ===========    ============

 NET INCREASE (DECREASE) IN CASH AND CASH
    EQUIVALENTS..................................    7,450,040      (165,200)   (4,765,914)      8,559,079

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD...    3,849,070    39,117,107    16,065,024      30,392,828
                                                     ----------    ----------   -----------    ------------

CASH AND CASH EQUIVALENTS, END OF
PERIOD........................................... $ 11,299,110  $ 38,951,907  $ 11,299,110   $  38,951,907
                                                  ============  ============= ============   ==============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

  Interest paid.................................. $  3,891,577  $  2,111,414  $  6,148,809   $  18,111,328
                                                  ============  ============= ============   ==============
  Noncash financing activities:
    Net change in unrealized gain (loss) on
      available-for-sale securities.............. $  (232,238)  $  1,980,767  $ (8,948,915)  $   6,892,432
                                                  ============  ============= ============   ==============

                       See notes to financial statements.`

LASER MORTGAGE MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

1.         
 ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

LASER Mortgage Management, Inc. (the "Company") was incorporated in Maryland on
September 3, 1997. The Company commenced its operations on November 26, 1997
(see Note 5).

Basis of Presentation - The accompanying unaudited financial
statements have been prepared in conformity with the instructions to Form 10-Q
and Article 10, Rule 10-01 of Regulation S-X for interim financial statements.
The interim financial statements for the three-month and nine-month periods are
unaudited; however, in the opinion of the Companys management, all
adjustments, consisting only of normal recurring accruals, necessary for a fair
statement of the results of operations have been included. These unaudited
financial statements should be read in conjunction with the audited financial
statements included in the Companys Annual Report on Form 10-K for the
year ended December 31, 1999. The nature of the Companys business is such
that the results of any interim period are not necessarily indicative of results
for a full year. Prior period financial statements have been reclassified, where
appropriate to conform to the 2000 presentation.

A
summary of the Company's significant accounting policies follows:

Cash and Cash Equivalents - Cash and cash equivalents include cash
on hand and overnight repurchase agreements. The carrying amounts of cash
equivalents approximate their value.

Investments - The Company invests primarily in mortgage-backed
securities and mortgage loans. The mortgage-backed securities include mortgage
pass-through certificates, collateralized mortgage obligations and other
securities representing interests in, or obligations backed by, pools of
mortgage loans (collectively, "Mortgage Securities"). The Company also
invests in other debt and equity securities ("Other Securities" and,
together with Mortgage Securities, "Securities"). The mortgage loans
are secured by first or second liens on single-family residential, multi-family
residential, commercial or other real property ("Mortgage Loans" and,
together with Securities, "Investments").

Statement of Financial Accounting Standards No. 115, Accounting for Certain
Investments in Debt and Equity Securities ("SFAS No. 115"), requires the Company to
classify its Securities as either trading investments, available-for-sale
investments or held-to-maturity investments. Although the Company generally
intends to hold most of its Securities until maturity, it may, from time to
time, sell any of its Securities as part of its overall management of its
balance sheet. Accordingly, this flexibility requires the Company to classify
all of its Securities as available-for-sale. All Securities classified as
available-for-sale are reported at fair value, with unrealized gains and losses
reported as a separate component of stockholders equity within accumulated
other comprehensive income (loss).

Unrealized losses on Securities that are considered other-than-temporary, as
measured by the amount of decline in fair value attributable to factors other
than temporary factors, are recognized in income and the cost basis of the
Securities is adjusted. Other-than-temporary unrealized losses are based on
managements assessment of various factors affecting the expected cash flow
from the Securities, including the level of interest rates, an
other-than-temporary deterioration of the credit quality of the underlying
mortgages and/or the credit protection available to the related mortgage pool
and a significant change in the prepayment characteristics of the underlying
collateral. The Companys Mortgage Loans are held as long-term investments
and are carried at their unpaid principal balance, net of unamortized discount
or premium.

Interest income is accrued based on the outstanding principal or notional amount
of the Investments and their contractual terms. Premiums and discounts
associated with the purchase of the Investments are amortized into interest
income over the lives of the Investments using the effective yield method.

Investment transactions are recorded on the date the Investments are purchased
or sold. Purchases of newly-issued securities are recorded when all significant
uncertainties regarding the characteristics of the securities are removed,
generally shortly before settlement date. Realized gains and losses on
Investment transactions are determined on the specific identification basis.

Interest Rate Swaps - In 1998, the Company entered into
interest rate swap agreements ("swaps") to reduce the mismatch in the
maturity and repricing characteristics of its fixed-rate agency pass-through
securities and its short-term repurchase obligations used for funding. The
objective was to change the interest rate characteristics of the securities from
fixed to floating rate. Swaps were designated as hedges of certain of its fixed
rate agency pass-through securities. The Company monitored the correlation and
effectiveness for swap transactions by ensuring that the notional amount of the
swap was less than the principal amount of the assets being hedged, the maturity
of the swaps did not exceed the maturity of the assets being hedged and the
interest rate index on the asset being hedged correlated with the interest rate
index for the paying leg of the swap.

The
Company carried the swaps that met the above criteria and the hedged securities
at their fair value and reported unrealized gains and losses in other
comprehensive income. Net payments or receipts on swaps that qualified for hedge
accounting were recognized as adjustments to interest income as they accrued.
Swaps that did not meet these criteria were carried at fair value with changes
reflected in income currently.

The
gain or loss on the terminated swaps were deferred and amortized as a yield
adjustment over the shorter of the remaining original term of the swap or the
remaining holding period of the investment securities. Gains and losses on swaps
associated with sold securities were recognized as part of the gain or loss on
sale.

Income Taxes - The Company has elected to be taxed as a Real
Estate Investment Trust ("REIT") and intends to comply with the provisions of
the Internal Revenue Code of 1986, as amended (the "Code") with respect thereto.
Accordingly, the Company should not be subjected to Federal income tax to the
extent of its distributions to stockholders and as long as certain asset, income
and stock ownership tests are met.

Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles ("GAAP")
requires the Company to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.

Comprehensive Income - The Company has adopted SFAS No. 130,
Reporting Comprehensive Income. This statement requires the reporting of
comprehensive income in addition to net income from operations. Comprehensive
income is a more inclusive financial reporting methodology that includes
disclosure of certain financial information (such as unrealized gains or losses
on securities) that historically has not been recognized in the calculation of
net income.

2.         
 AVAILABLE-FOR-SALE INVESTMENTS

The
following tables set forth the fair value of the Companys Securities,
excluding interest-only securities ("IOs") and interest rate caps, as
of September 30, 2000 and December 31, 1999:

`September 30, 2000

                                Agency Fixed/
                                Floating Rate                       Non-
                                  Mortgage        Mortgage        Mortgage
                                 Securities     Subordinates    Subordinates       Total

Securities, principal amount   $292,520,905     $33,570,410     $6,379,668     $332,470,983
Unamortized discount             (4,629,456)     (8,668,076)      (661,965)     (13,959,497)
Unamortized premium               3,098,656           4,735             --        3,103,391
                                ------------   ------------     ----------     ------------
Amortized cost                  290,990,105      24,907,069      5,717,703      321,614,877
Gross unrealized gains            2,386,228          41,143             --        2,427,371
Gross unrealized losses             (14,358)    (17,561,891)    (2,624,479)     (20,200,728)
                                ------------    -----------   ------------     -------------
Estimated fair value           $293,361,975     $ 7,386,321     $3,093,224     $303,841,520
                                ============    ===========   ============      ===========`

The
Company was notified in June 2000 of a default in a $50.0 million mortgage loan
in a trust fund of which the Company owns subordinated interests. The assets
that are affected by this reduction are subordinated classes of Commercial
Mortgage Pass-Through Certificates, Series 1997-D5 that represent beneficial
ownership interests in a trust fund created by Asset Securitization Corporation
("ASC"), an affiliate of Nomura Securities International, Inc. at the
time of the offering. Thereafter, a representative of Nomura Securities notified
a representative of the Company that the recovery on this loan may be
negligible. As a result, the Company's management is of the opinion that
the ASC securities owned by the Company may have little or no value.
Accordingly, management has decided to reduce the carrying value of these assets
to $1.00, pending further developments. The amount of the write-down,
approximately $9.0 million, is included in "Unrealized holding gain (loss)
arising during period" in the accompanying statement of operations. A
recovery on this investment may be possible, but management is unable to predict
the likelihood of this occurrence.

In
accordance with SFAS No. 115, an entity should recognize an other-than-temporary
impairment when it intends to sell a specifically identified available-for-sale
debt security at a loss shortly after the balance sheet date. The write-down for
the impairment should be recognized in earnings in the period in which the
decision is made. The Company reclassified an amount of approximately $2.1
million from unrealized loss to realized loss for securities sold in October
1999, as the decision to sell them was made in September 1999.

`December 31, 1999

                                  Agency
                                  Fixed/
                                 Floating
                                   Rate                            Non-
                                 Mortgage          Mortgage      Mortgage
                                Securities      Subordinates  Subordinates    Total

Securities, principal amount    $67,029,843     $59,760,702     $6,436,914  $133,227,459
Unamortized discount             (1,131,485)    (24,333,991)      (661,965)  (26,127,441)
Unamortized premium                 314,971              --             --       314,971
                                -----------     ------------    ----------- -------------
Amortized cost                   66,213,329      35,426,711      5,774,949   107,414,989
Gross unrealized losses          (1,411,395)    (16,866,092)      (559,880)  (18,837,367)
                                -----------     ------------    ----------- -------------
Estimated fair value            $64,801,934     $18,560,619     $5,215,069   $88,577,622
                                 ===========    ===========     =========== =============`

The
fair value of the Company's IOs, all of which are floating rate, as of September
30, 2000 and December 31, 1999 are summarized as follows:

`September 30, 2000     December 31, 1999

                                                  Total                   Total

           Securities, notional amount          $43,188,719            $56,322,389
                                               ============           ============
           Amortized cost, after provision
             for impairment                      14,872,545              2,155,466
           Gross unrealized gains                        --              6,414,549
           Gross unrealized losses               (1,648,188)                    --
                                               ------------           ------------
           Estimated fair value                $ 13,224,357           $  8,570,015
                                               ============           ============`

During the nine months ended September 30, 2000, the Company purchased an
interest rate cap with a notional amount of $100 million. At September 30, 2000,
the Companys interest rate cap was classified as trading and, therefore,
reported at fair value in accordance with SFAS 115. For the three and nine
months ended September 30, 2000, the Company recognized market losses of
approximately $0.7 million and $1.9 million, respectively, on the interest rate
cap.

The
fair value of the Company's interest rate cap as of September 30, 2000 is
summarized as follows:

`September 30, 2000

                  Amortized cost            $        2,960,000
                  Unrealized losses                 (1,915,162)
                                            ------------------
                  Estimated fair value      $        1,044,838
                                            ==================`

Financial Accounting Standards Board ("FASB") Statement No. 107,
Disclosures About Fair Value of Financial Instruments, defines the fair value of
a financial instrument as the amount at which the instrument could be exchanged
in a current transaction between willing parties, other than in a forced or
liquidation sale.

The
fair values of the Companys Investments are based on prices provided by
dealers who make markets in these financial instruments. The fair values
reported reflect estimates and may not necessarily be indicative of the amounts
the Company could realize in a current market exchange. Cash and cash
equivalents, interest receivable, repurchase agreements and other liabilities
are reflected in the financial statements at their fair value because of the
short-term nature of these instruments.

3.          
MORTGAGE LOANS

The
following tables pertain to the Companys Mortgage Loans as of September
30, 2000 and December 31, 1999 which are carried at their amortized cost:

`September 30, 2000     December 31, 1999

Mortgage Loans, principal amount            $2,977,880             $3,653,788
Unamortized discount                                --                     --
Unamortized premium                             81,172                150,844
                                           -----------             ----------
Amortized cost                              $3,059,052             $3,804,632
                                            ==========             ==========`

As
of September 30, 2000 and December 31, 1999, the amortized cost of the Mortgage
Loans approximated their fair value.

4.        
   REPURCHASE AGREEMENTS

The
Company has entered into repurchase agreements to finance most of its
Investments. The repurchase agreements are collateralized by the market value of
the Company's Investments and bear interest rates that generally move in close
relation to one-month LIBOR.

As
of September 30, 2000, the Company had outstanding $280.8 million of repurchase
agreements with a weighted average borrowing rate of 6.60% and a weighted
average remaining maturity of 19 days. At September 30, 2000, Investments
actually pledged had an estimated fair value of $292.7 million.

As
of December 31, 1999, the Company had outstanding $44.0 million of repurchase
agreements with a weighted average borrowing rate of 5.90% and a weighted
average remaining maturity of 12 days. At December 31, 1999, Investments
actually pledged had an estimated fair value of $45.4 million.

5.         
  COMMON STOCK

Sales of Common Stock - The Company's common stock was sold
through several transactions as follows:

The
Company was initially capitalized with the sale of 6,000 shares of common stock
on September 2, 1997, for a total of $15,005.

The
Company received commitments on September 15, 1997 for the purchase, in a
private placement, of 1,014,000 shares of common stock, at $15.00 per share, for
a total of $15,210,000 from certain officers, directors, proposed directors,
employees and affiliates of the Company and LASER Advisers Inc., the
Company's former investment adviser (the "Former Manager"). The
sale of these shares was consummated at the time of the closing of the public
offering.

The
Company received commitments on November 7, 1997 from several mutual funds under
common management for the purchase, in a private placement, of 3,333,333 shares
of common stock, at $15.00 per share, for a total of $49,999,995. The sale of
these shares was consummated at the time of the closing of the public offering.

The
Company sold 15,000,000 shares of common stock through a public offering for
$225,000,000. Syndication costs of $18,364,795 were deducted from the gross
proceeds of the offering.

On
each of January 2, 1998, April 1, 1998 and July 1, 1998, 25,000 shares (75,000
shares in the aggregate) of common stock were issued as deferred stock awards to
certain employees of the Company. On each of October 1, 1998 and January 1,
1999, an additional 5,000 shares were issued as deferred stock awards to certain
employees of the Company, and on February 28, 1999, an additional 13,750 shares
were issued as deferred stock awards to an employee of the Company.

Dividends/Distributions - The Company did not declare or pay any
dividends or distributions during the nine months ended September 30, 2000. The
Company declared distributions in cash of $2.00 per share during the year ended
December 31, 1999.

Stock Repurchases  - In March 1998, the Board of Directors of the
Company approved the repurchase of up to $20 million of the Companys
common stock. In June and November 1998, the Board of Directors increased the
amount of common stock authorized to be repurchased to $30 million and $40
million, respectively. Pursuant to the repurchase program, during the nine
months ended September 30, 2000, the Company repurchased 825,600 shares of
common stock for approximately $3.1 million or a weighted average share price of
$3.82 per share (excluding commission) and during the year ended December 31,
1999, the Company repurchased 2,953,700 shares of common stock for approximately
$10.0 million or a weighted average share price of $3.50 per share (excluding
commission). The Company did not make any stock repurchases during the three
months ended September 30, 2000. The repurchased shares have been returned to
the Companys authorized but unissued shares of common stock as treasury
shares.

6.         
 TRANSACTIONS WITH AFFILIATES AND TERMINATION
             
OF MANAGEMENT AGREEMENT

Pursuant to the terms of a Management Agreement (the "LASER Advisers
Management Agreement") with the Company, the Former Manager was
responsible for the day-to-day operations of the Company and performed (or
caused to be performed) such services and activities relating to the assets and
operations of the Company as was appropriate, subject to the supervision of the
Companys Board of Directors. For performing these services, the Former
Manager received an annual base management fee of 1.00% of Average
Stockholders' Equity. The term "Average Stockholders'
Equity" for any period meant stockholders' equity, calculated in
accordance with GAAP, excluding any mark-to-market adjustments of the investment
portfolio.

The
Former Manager also was entitled to receive a quarterly incentive fee in an
amount equal to 20% of the Net Income of the Company for the preceding fiscal
quarter, in excess of the amount that would produce an annualized Return on
Average Stockholders Equity for such fiscal quarter equal to the Ten-Year
U.S. Treasury Rate plus 1%. The term "Return on Average Stockholders'
Equity" is calculated for any quarter by dividing the Company's Net
Income for the quarter by its Average Stockholders' Equity for the quarter.
For such calculations, the "Net Income" of the Company means the
taxable income of the Company within the meaning of the Code, less capital gains
and capital appreciation included in taxable income, but before the Former
Manager's incentive fees and before deduction of dividends paid. The
incentive fee payments to the Former Manager were computed before any income
distributions were made to stockholders. As used in calculating the Former
Manager's fee, the term "Ten-Year U.S. Treasury Rate" means the
arithmetic average of the weekly yield to maturity for actively traded current
coupon U.S. Treasury fixed interest rate securities (adjusted to constant
maturities of ten years) published by the Federal Reserve Board during a
quarter, or, if such rate is not published by the Federal Reserve Board,
published by any Federal Reserve Bank or agency or department of the federal
government selected by the Company.

The
Company and the Former Manager terminated the LASER Advisers Management
Agreement effective as of February 28, 1999. In connection therewith, the
Company agreed to pay to the Former Manager: (a) $416,505, which represented the
base management fee payable under the LASER Advisers Management Agreement for
the fourth quarter of 1998; (b) $708,495, which the Company and the Former
Manager agreed to as the quarterly incentive fee for the fourth quarter of 1998;
and (c) $500,000 for services performed under the LASER Advisers Management
Agreement for the period January 1, 1999 through February 28, 1999 and for
certain transition services with respect to internalizing the advisory function.

On
November 1, 1999, the Company announced that Mariner Mortgage Management, L.L.C.
("Mariner") agreed to serve as the external manager of the Company and
be responsible for day-to-day management of the Company"s investments.
William J. Michaelcheck, the Chairman of Mariner, was appointed President and
Chief Executive Officer of the Company and Charles R. Howe, Chief Financial
Officer of Mariner, serves as the Company's Chief Financial Officer. The Company
terminated its consulting arrangement with BlackRock Financial Management, Inc.
("BlackRock").

Under the Company"s management agreement with Mariner (the "Mariner
Management Agreement"), Mariner was entitled to receive an (1) annual base
management fee payable monthly in cash equal to 0.45% of the aggregate value of
the Companys outstanding equity as of the end of such month and (2)
incentive fee payable annually in newly issued stock of the Company. The
incentive fee was payable based on the number of shares outstanding on November 1, 2000,
multipled by:

| |  | 10% of the difference between the market price of the Companys common
stock (plus any distributions) on November 1, 2000 (or such earlier date when
the agreement is terminated) and $3.63 per share (which approximates the average
closing price of the Companys common stock for the fifteen days ended
October 29, 1999) up to the equivalent of $4.00 per share;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 15% of the difference over $4.00 per share up to
$4.50 per share; and
| | - | ---------------------------------------------------------------------

| |  | 20% of the difference over $4.50 per share.
| | - | -------------------------------------------

The
Mariner Management Agreement had a one-year term, but was terminable by the
Company without cause or penalty on 30 days notice. Mariner could
terminate the agreement in limited circumstances. In addition, Mariner was
entitled to receive a minimum fee if the Company adopted a plan of liquidation
prior to the expiration of the Mariner Management Agreement.

Pursuant to the Mariner Management Agreement, the Company incurred base
management fees of $50,210 and $176,973 for the three and nine months ended
September 30, 2000. At September 30, 2000, base management fees of $112,005 were
payable to Mariner. No incentive fee was earned for the three and nine months
ended September 30, 2000. At December 31, 1999, base management fees
of $42,754 were payable to Mariner under this agreement.

7.         
  EARNINGS PER SHARE (EPS)

In
February 1997, the FASB issued Statement of Financial Accounting No. 128,
Earnings Per Share ("SFAS No. 128") which requires dual presentation
of Basic EPS and Diluted EPS on the face of the income statement for all
entities with complex capital structures. SFAS No. 128 also requires a
reconciliation of the numerator and denominator of the Basic EPS to the
numerator and denominator of Basic EPS and Diluted EPS computation. There are no
differences between Basic EPS and Diluted EPS for the three and nine months
ended September 30, 2000, as shown in the table below.

`For the Three Months Ended                    For the Nine Months Ended
                           September 30, 2000                           September 30, 2000
                    Loss            Shares      Per-Share        Loss            Shares      Per-Share
                 (Numerator)     (Denominator)    Amount      (Numerator)    (Denominator)     Amount


Basic EPS         $2,304,047     $14,038,983      $0.16        $3,412,040    $14,481,532        $0.24

Diluted EPS       $2,304,047     $14,038,983      $0.16        $3,412,040    $14,481,532        $0.24`

For
the three and nine months ended September 30, 2000, the Company had no deferred
common stock reserved for issuance.

For
the three and nine months ended September 30, 2000, options to purchase 7,500
shares were outstanding during the period and were anti-dilutive because the
strike price ($15.00) was greater than the average daily market price of the
Companys common stock for the period. Therefore, these options were
excluded from Diluted EPS.

There are no differences between Basic EPS and Diluted EPS for the three months
and nine months ended September 30, 1999, as shown in the table below.

`For the Three Months Ended                        For the Nine Months Ended
                          September 30, 1999                               September 30, 1999
                    Loss            Shares     Per-Share            Loss            Shares       Per-Share
                 (Numerator)    (Denominator)   Amount           (Numerator)     (Denominator)    Amount

Basic EPS         $ (683,982)     17,223,109   $ (0.04)        $(14,945,358)      17,601,921    $ (0.85)

Diluted EPS        $(683,982)     17,223,109   $ (0.04)        $(14,945,358)      17,601,921    $ (0.85)`

For
the three and nine months ended September 30, 1999, the Company had no deferred
common stock reserved for issuance.

For
the three and nine months ended September 30, 1999, options to purchase 72,000
shares were outstanding during the period and were anti-dilutive because the
strike price ($15.00) was greater than the average daily market price of the
Companys common stock for the period. Therefore, these options were
excluded from Diluted EPS.

8.          
LONG-TERM STOCK INCENTIVE PLAN

The
Company has adopted a Long-Term Stock Incentive Plan for directors, executive
officers and key employees (the "Incentive Plan"). The Incentive Plan
authorizes the Compensation Committee of the Board of Directors to grant awards,
including deferred stock, incentive stock options as defined under Section 422
of the Code ("ISOs") and options not so qualified ("NQSOs").
The Incentive Plan authorizes the granting of options or other awards for an
aggregate of 2,066,666 shares of the Companys common stock.

The
Company adopted the disclosure-only provisions of Statement of Financial
Accounting Standards No. 123, Accounting for Stock-Based Compensation
("SFAS No. 123") for the options. Accordingly, no compensation cost
for the Incentive Plan has been determined based on the fair value at the grant
date for awards consistent with the provisions of SFAS No. 123. For the
Companys pro forma net earnings, the compensation cost will be amortized
over the four-year vesting period of the options. The Companys net loss
per share would have been increased to the pro forma amounts indicated below:

`For the Three Months Ended     For the Nine Months Ended
                                                   September 30, 2000             September 30, 2000

   Net earnings (loss) - as reported                $     2,304,047               $      3,412,040
   Net earnings (loss) - pro forma                  $     2,298,456               $      3,406,449
   (Loss) earnings per share - as reported          $          0.16               $           0.24
   (Loss) earnings per share - pro forma            $          0.16               $           0.24


                                               For the Three Months Ended     For the Nine Months Ended
                                                   September 30, 1999            September 30, 1999

   Net loss - as reported                           $     (683,982)               $   (14,945,358)
   Net loss - pro forma                             $     (684,049)               $   (14,945,425)
   Loss per share - as reported                     $        (0.04)               $         (0.85)
   Loss per share - pro forma                       $        (0.04)               $         (0.85)`

The
fair value of each option grant is estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted average
assumptions used for grants for the three months and nine months ended September
30, 2000 and 1999: dividend yield of 0%; expected volatility of 22%; risk-free
interest rate of 5.82%; and expected lives of ten years.

The
following table summarizes information about stock options outstanding as of
September 30, 2000 and 1999:

`Weighted
                                                      Average        Weighted
                         Range of                    Remaining       Average
                         Exercise      Options      Contractual      Exercise
                          Prices     Outstanding    Life (Yrs.)       Price

   September 30, 2000    $  15.00        7,500         7.4           $  15.00
   September 30, 1999    $  15.00       72,000         8.2           $  15.00`

The
options become exercisable at the rate of 25% on each of January 2, 1998,
January 2, 1999, January 2, 2000 and January 2, 2001, subject to the holder's
continued employment or service. During the year ended December 31, 1999, 64,500
stock options terminated.

9.         
 TAXABLE INCOME

Revenue Procedure 99-17 provides securities and commodities traders with the
ability to elect mark-to-market treatment for 1998 by including a statement with
their timely filed 1998 tax return. The election applies for all future years as
well unless revoked with the consent of the Internal Revenue Service. The
Company elected mark-to-market treatment as a securities trader, and
accordingly, will recognize gains and losses prior to the actual disposition of
its securities. Moreover, some if not all of those gains and losses, as well as
some if not all gains or losses from actual dispositions of securities, will be
treated as ordinary in nature, and not capital, as they would be in the absence
of this election. There is no assurance, however, that the Company's election
will not be challenged on the ground that it is not in fact a trader in
securities, or that it is only a trader with respect to some, but not all, of
its securities. As such, there is a risk that the Company will not be able to
mark-to-market its securities, or that it will be limited in its ability to
recognize certain losses.

Net
operating losses ("NOLs") may be carried forward for 20 years. Taxable
income (loss) requires an annual calculation; consequently, for the year ended
December 31, 2000, taxable income (loss) may be different from net income (loss)
as calculated according to GAAP income (loss) as a result of differing treatment
of unrealized gains and losses on securities transactions. For the
Companys tax purposes, unrealized gains (losses) will be recognized at the
end of the year and will be aggregated with operating gains (losses) to produce
total taxable income (loss) for the year. For the year ended December 31, 1999,
the NOL was $(60.0) million.

Taxable income (loss) requires an annual calculation; consequently, for the year
ended December 31, 2000, taxable income (loss) may be different from GAAP income
(loss) as a result of differing treatment of unrealized gains and losses on
securities transactions. For the Company's tax purposes, unrealized gains
(losses) will be recognized at the end of the year and will be aggregated with
operating gains (losses) to produce total taxable income (loss) for the year.

10.         
 RECENT ACCOUNTING PRONOUNCEMENTS

In
June 1998, the FASB issued Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities" ("SFAS No. 133")
which, as issued, was effective for all fiscal quarters of fiscal years
beginning after June 15, 1999. SFAS No. 133 generally requires that entities
recognize all derivative financial instruments as assets or liabilities,
measured at fair value, and include in earnings the changes in the fair value of
such assets and liabilities. SFAS No. 133 also provides that changes in the fair
value of assets or liabilities being hedged with recognized derivative
instruments be recognized and included in earnings. In June 1999, the FASB
issued SFAS No. 137, "Accounting for Derivative Instruments and Hedging
Activities - Deferral of the Effective Date of FASB Statement No. 133," which
deferred the effective date of FASB No. 133 for one year to fiscal years
beginning after June 15, 2000. The Company has not yet completed its evaluation
of SFAS No. 133, as amended by SFAS No. 138, and therefore, at this time, cannot
predict what, if any, effect its adoption will have on the Company's financial
condition or results of operations.

11.         
 SUBSEQUENT EVENTS

On
October 6, 2000, the Company announced that the Board of Directors authorized
management to prepare a plan of liquidation and an on-going business plan for
the Company. The Board of Directors intends to consider both alternatives within
the next few months. The Company also announced the appointment of two new
directors, Mark Hobbs and Arthur House, and its acceptance of the resignation of
two directors, Frederick Khedouri and Stuart Coleman.

On
October 23, 2000, the Company filed suit in federal court in the Southern
District of New York against Asset Securitization Corp., Nomura Asset Capital
Corp. and Nomura Securities International Inc. alleging that the defendants
defrauded the Company into purchasing over $19.0 million worth of mortgage
pass-through certificates by failing to disclose among other things, that one of
largest loans in the mortgage pool was seriously troubled. The Company is
seeking rescission of the purchase of the mortgage pass-through certificates.

On
November 3, 2000, the Company announced that the management agreement with
Mariner was extended for an additional one-year term, with the Company retaining
the right to terminate the management agreement on 30 days' notice.  A copy of
the Amendment to the Management Agreement has been filed on Form 8-K with the
SEC. LASER's Board of Directors presently intends to reconsider the issue of the
Company's management after a decision has been reached regarding the future
direction of the Company.

* * * * *

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

The
following discussion should be read in conjunction with the Company's financial
statements and notes thereto.

Forward-Looking Statements

"Safe Harbor" statement under the Private Securities Litigation Reform Act of
1995: Statements in this discussion regarding the Company and its business,
which are not historical facts, are "forward-looking statements" that involve
risks and uncertainties. Risks and uncertainties, which could cause results to
differ from those discussed in the forward-looking statements herein, are listed
in the Company's Annual Report filed on Form 10-K.

General

LASER Mortgage Management, Inc. (the "Company"), a Maryland corporation, is a
specialty finance company, organized in September 1997, that invests primarily
in mortgage-backed securities and mortgage loans. The mortgage-backed securities
include mortgage pass-through certificates, collateralized mortgage obligations,
other securities representing interests in, or obligations backed by, pools of
mortgage loans and mortgage derivative securities (collectively, the "Mortgage
Securities"). The mortgage loans are secured by first or second liens on
single-family residential, multi-family residential, commercial or other real
property (the "Mortgage Loans" and, together with the Mortgage Securities, the
"Mortgage Assets").

Mariner, an affiliate of Mariner Investment Group, Inc., manages the Company's
day-to-day operations.

The
Company is authorized to acquire the following types of investments:

| |  | fixed and adjustable rate mortgage pass-through certificates ("Pass-Through
Certificates"), which are securities collateralized by pools of Mortgage Loans
issued and sold to investors by private, non-governmental issuers
("Privately-Issued Certificates") or by various U.S. government agencies or
instrumentalities, such as the Federal Home Loan Mortgage Corporation ("FHLMC"),
the Federal National Mortgage Association ("FNMA") and the Government National
Mortgage Association ("GNMA") (collectively, "Agency Certificates");
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | collateralized mortgage obligations, including regular interests in real estate
mortgage investment conduits ("CMOs"), which are fixed and adjustable rate debt
obligations collateralized by Mortgage Loans or Pass-Through Certificates;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Mortgage Loans;
| | - | ---------------

| |  | mortgage derivative securities ("Mortgage Derivatives"), including
interest-only securities ("IOs") which receive only certain interest payments
from a pool of Mortgage Securities or Mortgage Loans;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | subordinate interests ("Subordinate Interests"), which are classes of Mortgage
Securities junior to other classes of Mortgage Securities in the right to
receive payments from the underlying Mortgage Loans; and
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | other fixed-income securities in an amount not to
exceed 5% of total assets.
| | - | ----------------------------------------------------------------------------

The
Company maintained a portfolio at its peak of approximately $3.8 billion of
Mortgage Assets in June 1998. From June 1998 through March 2000, the Company
delevered its portfolio by selling certain securities and repaying borrowings in
an attempt to reduce the portfolio's susceptibility to basis and interest rate
risk and to create additional liquidity. In November 1999, the Company announced
that its Board of Directors authorized management to conduct a competitive sale
of its less liquid portfolio assets as part of its ongoing program to reduce the
volatility of the Company's assets. As of September 30, 2000, the Company had
approximately $3.0 million of these assets remaining to be sold. During the
three months ended September 30, 2000, the Company relevered its portfolio of
Agency Securities in an effort to increase its return on equity without taking a
substantial credit and interest rate risk. To increase its portfolio of
Agency Certificates, the Company increased it borrowings.

The
Company has elected to be taxed and intends to continue to qualify as a real
estate investment trust (a "REIT") under the Internal Revenue Code of 1986, as
amended (the "Code"), commencing with its short taxable year ended December 31,
1997, and such election has not been revoked. The Company has qualified as a
REIT for the taxable years since its inception, and generally will not be
subject to federal income tax provided that it distributes its income to its
stockholders and maintains its qualification as a REIT.

Recent Developments

On October 6,
2000, the Company announced that the Board of Directors authorized management to
prepare a plan of liquidation and an on-going business plan for the Company. The
Board of Directors intends to consider both alternatives within the next few
months. The Company also announced the appointment of two new directors, Mark
Hobbs and Arthur House, and its acceptance of the resignation of two directors,
Frederick Khedouri and Stuart Coleman.

On October 23,
2000, the Company filed suit in federal court in the Southern District of New
York against Asset Securitization Corp., Nomura Asset Capital Corp. and Nomura
Securities International Inc. alleging that the defendants defrauded the Company
into purchasing over $19.0 million worth of mortgage pass-through certificates
by failing to disclose among other things, that one of largest loans in the
mortgage pool was seriously troubled. The Company is seeking rescission of the
purchase of the mortgage pass-through certificates.

On November 3,
2000, the Company announced that the management agreement with Mariner was
extended for an additional one-year term, with the Company retaining the right to
terminate the management agreement on 30 days' notice.  A copy of the Amendment
to the Management Agreement has been filed on Form 8-K with the SEC.  LASER's
Board of Directors presently intends to reconsider the issue of the Company's
management after a decision has been reached regarding the future direction of
the Company.

Results of Operations for the Three and Nine Months Ended
September 30, 2000 Compared to the Three and Nine Months Ended September 30,
1999

Net Income (Loss) Summary

For
the three months ended September 30, 2000, the Company had net income of $2.3
million, or $0.16 per weighted average share, compared to a net loss of $(0.7)
million, or $(0.04) per weighted average share for the three months ended
September 30, 1999. The weighted average number of shares of common stock
outstanding for the three months ended September 30, 2000 and 1999 was
14,038,983 and 17,223,109, respectively. No dividends were declared during the
three months ended September 30, 2000 and 1999. Return on average equity was
3.68% and (0.83%) on an unannualized basis for the three months ended September
30, 2000 and 1999, respectively.

For
the nine months ended September 30, 2000, the Company had net income of $3.4
million, or $0.24 per weighted average share, compared to a net loss of $(14.9)
million, or $(0.85) per weighted average share for the nine months ended
September 30, 1999. The weighted average number of shares of common stock
outstanding for the nine months ended September 30, 2000 and 1999 was 14,481,532
and 17,601,921, respectively. No dividends were declared during the nine months
ended September 30, 2000. Distributions declared per share were $2.00, and
$35.6 million in total, for the nine months ended September 30, 1999. Return on
average equity was (4.67%) and (15.75%) on an unannualized basis for the nine
months ended September 30, 2000 and 1999, respectively.

The
realized gains (losses) during the three months ended September 30, 2000, were
approximately $0.4 million, or $0.03 per weighted average share, compared to a
loss of approximately $(2.2) million, or $(0.13) per weighted average share for
the three months ended September 30, 1999. Excluding realized gains and losses,
the Company's income for the three months ended September 30, 2000 was
approximately $1.9 million, or $0.14 per weighted average share, compared to
approximately $1.5 million, or $0.09 per weighted average share, for the three
months ended September 30, 1999. The realized losses during the nine months
ended September 30, 2000 were approximately $(1.6) million, or $(0.11) per
weighted average share, compared to losses of approximately $(23.4) million, or
$(1.33) per weighted average share, for the nine months ended September 30, 1999.
Excluding realized gains and losses, the Company's income for the nine months
ended September 30, 2000 was approximately $5.0 million, or $0.35 per weighted
average share, compared to approximately $8.5 million, or $0.48 per weighted
average share for the nine months ended September 30, 1999.

Taxable Income (Loss) and GAAP Income (Loss)

Revenue Procedure 99-17 provides securities and commodities traders with the
ability to elect mark-to-market treatment for 1998 by including a statement with
their timely filed 1998 tax return. The election applies for all future years as
well unless revoked with the consent of the Internal Revenue Service. The
Company elected mark-to-market treatment as a securities trader and,
accordingly, will recognize gains and losses prior to the actual disposition of
its securities. Moreover, some if not all of those gains and losses, as well as
some if not all gains or losses from actual dispositions of securities, will be
treated as ordinary in nature, and not capital, as they would be in the absence
of this election. There is no assurance, however, that the Company's election
will not be challenged on the ground that it is not in fact a trader in
securities, or that it is only a trader with respect to some, but not all, of
its securities. As such, there is a risk that the Company will not be able to
mark-to-market its securities, or that it will be limited in its ability to
recognize certain losses.

NOLs
may be carried forward for 20 years. Taxable income (loss) requires an annual
calculation; consequently, for the year ended December 31, 2000, taxable income
(loss) may be different from net income (loss) as calculated according to GAAP
income (loss) as a result of differing treatment of unrealized gains and losses
on securities transactions. For the Company's tax purposes, unrealized gains
(losses) will be recognized at the end of the year and will be aggregated with
operating gains (losses) to produce total taxable income (loss) for the year.
As of December 31, 1999, the NOL carry forward is estimated at approximately
$(112.5) million. The Company believes that during 1999 it experienced an
"ownership change" within the meaning of Section 382 of the Code. Consequently,
its use of NOL's generated before ownership change to reduce taxable income after
the ownership change will be subject to limitations under Section 382.

Taxable income (loss) requires an annual calculation; consequently, for the year
ended December 31, 1999, taxable income (loss) may be different from GAAP income
(loss) as a result of differing treatment of unrealized gains and losses on
securities transactions. For the Company's tax purposes, unrealized gains
(losses) will be recognized at the end of the year and will be aggregated with
operating gains (losses) to produce total taxable income (loss) for the year.

Taxable income and GAAP income (loss) could also differ for other reasons. For
example, the Company may take credit provisions which would affect GAAP income
whereas only actual credit losses are deducted in calculating taxable income. In
addition, general and administrative expenses may differ due to differing
treatment of leasehold amortization, certain stock option expenses and other
items. For the nine months ended September 30, 2000, the Company took a $9.0
million credit provision on a mortgage security. See "Credit Considerations."
For the nine months ended September 30, 1999, the Company did not take any credit
provisions.

The
distinction between taxable income and GAAP income (loss) is important to the
Company's stockholders because dividends or distributions are declared on the
basis of taxable income. While the Company does not pay taxes so long as it
satisfies the requirements for exemption from taxation pursuant to the REIT
Provisions of the Code, each year the Company completes a corporate tax form
wherein taxable income is calculated as if the Company were to be taxed. This
taxable income level helps to determine the amount of dividends the Company
intends to pay out over time.

Interest Income and Average Earning Asset Yield

The
Company had average earning assets of $325 million and $219 million for the
three and nine months ended September 30, 2000, respectively, compared to
average earning assets of $210 million and $477 million for the three and nine
months ended September 30, 1999, respectively. The table below shows, for the
three and nine months ended September 30, 2000 and 1999, the Company's average
balance of cash equivalents, loans and securities, the yields earned on each
type of earning asset, the yield on average earning assets and interest
income.

`AVERAGE EARNING ASSET YIELD
                                                  (dollars in thousands)

                                                                                         Yield
                                                                             Yield on      on
                                          Average                Yield on     Average    Average
                             Average     Amortized    Average    Average     Amortized  Interest
                              Cash       Cost of     Earnings     Cash        Cost of    Earning Interest
                            Equivalents  Securities    Assets   Equivalents  Securities  Assets   Income


For the three months
 ended September 30, 2000     $7,402    $318,293     $325,695     6.38%        7.55%     7.52%   $6,126
For the three months
 ended September 30, 1999    $44,205    $166,034     $210,239     5.27%        9.08%     8.28%   $4,449

For the nine months
 ended September 30, 2000    $25,954    $193,419     $219,372     6.07%        7.80%     7.52%  $12,428
For the nine months
 ended September 30, 1999    $40,603    $436,042     $476,645     5.06%        7.89%     7.65%  $27,634`

Interest Expense and the Cost of Funds

For
the three months ended September 30, 2000 and 1999, the Company had average
borrowed funds of $247 million and $148 million, respectively, and total
interest expense of $3.9 million and $2 million, respectively, with an average
cost of funds of 6.11% and 5.27%, respectively. For the nine months ended
September 30, 2000 and 1999, the Company had average borrowed funds of $134
million and $384 million, respectively, and total interest expense of $6 million
and $16 million, respectively, with an average cost of funds of 5.97% and 5.48%,
respectively. The Company believes that its largest expense is usually the cost
of borrowed funds. Interest expense is calculated in the same manner for tax and
GAAP purposes.

The
Company expects that changes in the Companys cost of funds will closely
correlate with changes in one-month LIBOR, although the Company may choose to
extend the maturity of its liabilities at any time, subject to the lenders
consent. The Companys average cost of funds was 0.51% less than one-month
LIBOR for the three months ended September 30, 2000 compared to 0.01% less than
one-month LIBOR for the three months ended September 30, 1999 and was 0.36% less
than one-month LIBOR for the nine months ended September 30, 2000 compared to
0.41% above one-month LIBOR for the nine months ended September 30, 1999. The
Company generally has structured its borrowings to adjust with one-month LIBOR.
During the three months ended September 30, 2000, average one-month LIBOR, which
was 6.33%, was 0.34% lower than average six month LIBOR, which was 6.67%. During
the three months ended September 30, 1999, average one-month LIBOR, which was
5.28%, was 0.52% lower than average six month LIBOR, which was 5.80%.

The
table below shows, for the three and nine months ended September 30, 2000 and
1999, the Companys average borrowed funds and average cost of funds
compared to average one and six-month LIBOR.

`AVERAGE COST OF FUNDS
                                                                  (dollars in thousands)

                                                                         Average     Average     Average
                                                                       One-Month     Cost of     Cost of
                                                                         LIBOR        Funds       Funds
                                                                       Relative to   Relative   Relative to
                   Average            Average    Average    Average     Average    to Average    Average
                  Borrowed  Interest  Cost of   One-Month   Six-Month  Six-Month    One-Month   Six-Month
                    Funds    Expense   Funds     LIBOR       LIBOR      LIBOR        LIBOR       LIBOR

For the three
 months ended
 September 30,
  2000            $247,918  $ 3,874    6.11%      6.62%     6.84%      (0.22)%      (0.51)%       (0.73)%
For the three
 months ended
 September 30,
 1999             $148,273  $ 1,996    5.27%      5.28%     5.80%      (0.52)%      (0.01)%       (0.53)%

For the nine
 months ended
 September 30,
 2000             $134,310  $ 6,208    5.97%      6.33%     6.67%      (0.34)%      (0.36)%       (0.69)%
For the nine
 months ended
 September 30,
 1999             $384,259  $15,972    5.48%      5.07%     5.35%      (0.28)%        0.41%         0.13%`

Interest Rate Swaps

During
the nine months ended September 30, 2000, the Company purchased an interest rate
cap with a notional amount of $100 million. At September 30, 2000, the
Companys interest rate cap was classified as trading and, therefore
reported at fair value. For the three months ended September 30, 2000, the
Company recognized market losses of $1.9 million on the interest rate cap.

The
Company did not enter into any swaps during the three and nine months ended
September 30, 2000 and 1999.

Net Interest Income

Net
interest income, which equals interest income less interest expense, totaled
$2.3 million for the three months ended September 30, 2000 compared to $2.5
million for the three months ended September 30, 1999. Net interest income
totaled $6.0 million for the nine months ended September 30, 2000 compared to
$11.7 million for the nine months ended September 30, 1999. Net interest rate
spread, which equals the yield on the Companys interest earning assets
(excluding cash) less the average cost of funds for the period was 1.41% and
1.55% for the three and nine months ended September 30, 2000, respectively,
compared to 3.04% and 2.20% for the three and nine months ended September 30,
1999, respectively.

The
table below shows interest income by earning asset type, average earning assets
by type, total interest income, interest expense, average repurchase agreements,
average cost of funds, and net interest income for the three and nine months
ended September 30, 2000 and 1999.

`NET INTEREST INCOME
                             (dollars in thousands)


                       Average                                    Interest         Net
                      Amortized     Interest       Average         Income        Income on       Total
                      Cost of       Income on        Cash          on Cash      Contractual     Interest
                     Securities    Investments    Equivalents    Equivalents    Commitments      Income

For the three
 months ended
 September 30,
 2000                 $318,293        $6,005        $7,402           $121           $--          $6,126
For the three
 months ended
 September 30,
 1999                 $166,034        $3,854       $44,205           $595           $--          $4,449
For the nine
 months ended
 September 30,
 2000                 $193,419       $11,251       $25,954         $1,174           $--         $12,428
For the nine
 months ended
 September 30,
 1999                 $436,042       $26,075       $40,603         $1,559           $--         $27,634



                    Yield on
                    Average        Average
                    Interest     Balance of                    Average        Net
                    Earning      Repurchase      Interest      Cost of      Interest
                     Assets      Agreements      Expense        Funds        Income

For the three
 months ended
 September 30,
 2000                7.52%         $247,918       $3,874        6.11%        $2,252
For the three
 months ended
 September 30,
 1999                8.28%         $148,273       $1,996        5.27%        $2,453
For the nine
 months ended
 September 30,
 2000                7.52%         $134,310       $6,208        5.97%        $5,978
For the nine
 months ended
 September 30,
 1999                7.65%         $384,259       $15,972       5.48%       $11,662`

Credit Considerations

The
Company was notified in June 2000 of a default in a $50,000,000 mortgage loan in
a trust fund of which the Company owns subordinated interests. The assets that
are affected by this reduction are subordinated classes of Commercial Mortgage
Pass-Through Certificates, Series 1997-D5 that represent beneficial ownership
interests in a trust fund created by Asset Securitization Corporation ("ASC"),
an affiliate of Nomura Securities International, Inc. at the time of the
offering. Thereafter, a representative of Nomura Securities notified a
representative of the Company that the recovery on this loan may be negligible.
As a result, the Company's management is of the opinion that the ASC securities
owned by the Company may have little or no value. Accordingly, management has
decided to reduce the carrying value of these assets to $1.00, pending further
developments. The amount of the write-down, $9,049,309, is included in
Unrealized holding gain (loss) arising during period in the accompanying
statement of operations. A recovery on this investment may be possible, but
management is unable to predict the likelihood of this occurrence. See "Recent
Developments."

At
September 30, 2000 and December 31, 1999, the Company had limited its exposure to credit losses on its
portfolio by holding 92%, and 64%, respectively, of its investments in Agency
Certificates.

General and Administrative Expenses

General and administrative expenses ("operating expense" or "G&A expense") were
$319,000 and $925,000 for the three and nine months ended September 30, 2000,
respectively. G&A expenses were $945,000 and $3.2 million for the three and nine
months ended September 30, 1999, respectively, consisting of fees paid to
BlackRock Financial Management, Inc. of $375,000 and $1.13 million, salary
expenses of $150,000 and $350,000 and fees paid to the Former Manager of $0 and
$500,000 and professional and other miscellaneous fees. There were no
differences in the calculation of G&A expense for taxable and GAAP income
purposes. The "Efficiency Ratio" is the G&A expense divided by the net interest
income.

`G&A EXPENSE RATIOS
                             (dollars in thousands)
                                                         Total        Total
                                                         G&A          G&A
                                                         Expense/     Expenses/
                 Manage-               Other    Total    Average      Average       Efficiency
                  ment     Consulting   G&A      G&A     Assets       Equity        Ratio
                  Fee         Fee     Expense  Expense  (Annualized) (Annualized) (Annualized)

For the three
 months ended
 September 30,
 2000             $50       $--       $269      $319     0.39%         2.04%         18.89%
For the three
 months ended
 Septempber 30,
 1999             $--       $375      $570      $945     1.50%         4.50%         38.54%

For the nine
 months ended
 September 30,
 2000             $177      $--       $748      $925     0.56%          1.69%        15.47%
For the nine
 months ended
 September 30,
 1999             $500    $1,125    $1,475    $3,191     0.81%          4.43%        27.37%`

Net Income (Loss) and Return on Average Equity

Net
income was $2.3 million and $3.4 million for the three and nine months ended
September 30, 2000, respectively, compared to net losses of $(0.68) million and
$(14.95) million for the three and nine months ended September 30, 1999,
respectively. Return on average equity, on an unannualized basis, for the three
and nine months ended September 30, 2000 was 3.68% and 4.67%, respectively,
compared to (0.83)% and (15.75)% for the three and nine months ended
September 30, 1999, respectively.

The
table below shows, on an unannualized basis, for the three and nine months ended
September 30, 2000 and 1999 the Company's net interest income, gain (loss) on
sale of securities and G&A expense each as a percentage of average equity, and
the return on average equity.

`COMPONENTS OF RETURN ON AVERAGE EQUITY

                                             Gain (Loss)
                               Net Interest   on Sale of     Impairment
                                 Income/      Securities/     Loss on                         Return on
                                 Average       Average      Interest-Only    G&A Expense/      Average
                                  Equity       Equity         Securities     Average Equity    Equity

For the three months ended
 September 30, 2000                3.59%        0.59%            --             0.51%           3.68%
For the three months ended
 September 30, 1999                2.98%       (2.66)%           --             1.15%          (0.83)%

For the nine months ended
 September 30, 2000                8.18%       (2.25)%           --             1.27%           4.67%
For the nine months ended
 September 30, 1999               12.29%      (24.67)%           --             3.36%         (15.75)%`

Distributions and Taxable Income

The
Company has elected to be taxed as a REIT under the Code. Accordingly, the
Company intends to distribute substantially all of its taxable income for each
year to stockholders, including income resulting from gains on sales of
securities. For the three and nine months ended September 30, 2000 and 1999, the
Company estimated that it had no taxable income. For the three and nine months
ended September 30, 2000, the Company did not pay any dividends or
distributions. For the three months ended September 30, 1999, the Company did
not pay any dividends or distributions. For the nine months ended September 30,
1999, the Company made distributions totaling $35.6 million.

Financial Condition

Investments

As
of September 30, 2000 and December 31, 1999 the Company's portfolio consisted
of:

`Dollar Amount                          Dollar Amount
Securities                      (in millions)          Percentage      (in millions)       Percentage
----------                      -------------          ----------      --------------      ----------
                                     As of September 30, 2000              As of December 31, 1999
                                     ------------------------              -----------------------
Agency Certificates........          $294                  92%              $65                 64%
Subordinate Interests......             7                   2%               19                 19%
IOs........................            13                   4%                8                  8%
Caps.......................             1                   --               --                  --
Mortgage Loans.............             3                   1%                4                  4%
Other fixed-income assets..             3                   1%                5                  5%
                                   ------------------------------------------------------------------
   Total...................          $321                 100%             $101                100%
                                    ======             ========        ===========        ===========

----------------
(1)  Included no emerging market securities.`

In
an effort to increase its return on equity without taking what Mariner
considered to be a substantial credit and interest rate risk, the Company
increased its portfolio of Mortgage Assets during the nine months ended
September 30, 2000, by relevering its portfolio of Agency Certificates. To
increase its portfolio of Agency Certificates, the Company increased its
borrowings.

Discount
balances are accreted as an increase in interest income over the life of
discount investments and premium balances are amortized as a decrease in
interest income over the life of premium investments. At September 30, 2000 and
December 31, 1999, the Company had on its balance sheet (excluding IOs) $14
million and $26 million, respectively, total unamortized discount (which is the
difference between the remaining principal value and the current historical
amortized cost of investments acquired at a price below principal value) and $3
million and $0.9 million, respectively, unamortized premium (which is the
difference between the remaining principal amount and the current historical
amortized cost of investments acquired at a price above principal value). The
Company also had $28.3 million unamortized discount on IOs at September 30, 2000
compared to $54.2 million unamortized discount at December 31, 1999.

Mortgage
principal repayments received were $11 million for the nine months ended
September 30, 2000. Given the Companys current portfolio composition, if
mortgage principal repayment rates increase over the life of the Mortgage
Securities comprising the current portfolio, all other factors being equal, the
Companys net interest income should decrease during the life of such
Mortgage Securities as the Company will be required to amortize its net premium
balance into income over a shorter time period. Similarly, if mortgage principal
prepayment rates decrease over the life of such Mortgage Securities, all other
factors being equal, the Companys net interest income should increase
during the life of such Mortgage Securities as the Company will amortize its net
premium balance over a longer time.

The
tables below summarize the Company's investments at September 30, 2000 and
December 31, 1999.

`SECURITIES (EXCLUDING IOs)
                                        (dollars in thousands)

                                                             Amortized                 Estimated    Weighted
                                                              Cost to                 Fair Value    Average
                      Principal      Net       Amortized     Principal    Estimated   to Principal   Life
                       Amount      Discount       Cost        Amount      Fair Value    Amount      (Years)

September 30, 2000     $332,471   $(10,856)     $321,615        96.73%     $303,842      91.39%       4.8
December 31, 1999      $133,227   $(25,822)     $107,415        80.63%      $88,578      66.48%       7.1

                                                                                            MORTGAGE LOANS
                                                                                        (dollars in thousands)


                                                             Amortized                 Estimated    Weighted
                                                              Cost to                 Fair Value    Average
                      Principal      Net       Amortized     Principal    Estimated   to Principal   Life
                       Amount      Discount       Cost        Amount      Fair Value    Amount      (Years)

September 30, 2000     $2,978         $81       $3,059       102.72%       $3,059       102.72%       1.0
December 31, 1999      $3,653        $151       $3,804       104.13%       $3,804       103.27%       1.0`

At
September 30, 2000, the Company had borrowing outstanding from three lenders
compared to two lenders at December 31, 1999. Such borrowings are generally
short-term (less than 30-day terms) and may not be renewed by the lender at its
discretion.

`IO SECURITIES
                             (dollars in thousands)

                                                            Amortized                 Estimated   Weighted
                                    Net                      Cost to                 Fair Value    Average
                     Notional     Premium     Amortized     Notional     Estimated   to Notional    Life
                      Amount     (Discount)    Cost          Amount      Fair Value    Amount      (Years)

September 30, 2000    $ 43,189    $(28,316)     $14,872      34.43%      $13,224       30.62%        9.0
December 31, 1999     $ 56,322    $(54,167)    $  2,155       3.83%       $8,570       15.21%        7.1`

The table below
shows unrealized gains and losses on the securities in the Companys
portfolio at September 30, 2000 and December 31, 1999.

`UNREALIZED GAINS AND LOSSES
                                                                         (dollars in thousands)

                                                                At September 30, 2000    At December 31, 1999

Unrealized Gain                                                          $2,427                $6,414
Unrealized Loss                                                         (23,764)              (18,837)
Net Unrealized Loss                                                     (21,337)              (12,423)
Net Unrealized Loss as % of  Investments
  Principal/Notional Amount                                               (5.64)%               (6.43)%
Net Unrealized Loss as % of Investments Amortized Cost                    (6.29)%              (10.96)%`

The
following table sets forth a schedule of Pass-Through Certificates and Mortgage
Loans owned by the Company at September 30, 2000 and December 31, 1999
classified by issuer and by ratings categories.

`PASS-THROUGH CERTIFICATES AND MORTGAGE LOANS BY ISSUER AND CREDIT RATING
                             (dollars in thousands)

                                 At September 30, 2000                 At December 31, 1999
                                   Carrying Value       Portfolio Mix    Carrying Value      Portfolio Mix
Agency Certificates.............   $     293,521             92%         $   64,801               64%
Privately Issued Certificates:
A Rating........................           7,386              2%                 --               --
BBB/Baa Rating..................              --             --              23,776                23%
BB/Ba Rating and Other..........           3,093              1%              8,570                8%
IOs.............................          13,224              4%                 --               --
Caps............................           1,045             --                  --               --
Mortgage Loans..................           3,059              1%              3,804                5%
                                      ----------          -------         ---------            -------
   Total                              $  321,328            100%          $ 100,951              100%
                                      ==========          =======         =========            =======`

The
following tables set forth information about the Companys portfolio of
Subordinate Interests, IOs, and other fixed-income assets as of September 30,
2000 and December 31, 1999.

`SUBORDINATE INTERESTS
                             (dollars in thousands)

                                    Market Value at
                                    ---------------

   Description       September 30, 2000       December 31, 1999
   -----------       ------------------       -----------------
   Commercial        $7,386                   $18,561

                                  IO SECURITIES
                             (dollars in thousands)

                                     Market Value at

   Description          Coupon        September 30, 2000     December 31, 1999
   -----------          ------        ------------------     -----------------
   Residential          Floating      $13,224                $8,570

                            OTHER FIXED-INCOME ASSETS
                             (dollars in thousands)

                                       Market Value at
                                       ---------------

                  Description       September 30, 2000     December 31, 1999
                  -----------       ------------------     -----------------
                  CBO/CLO           $3,093                 $5,215`

Borrowings

To
date, the Companys debt has consisted entirely of borrowings
collateralized by a pledge of the Companys investments. These borrowings
appear on the balance sheet as repurchase agreements. Substantially all of the
Companys investments are currently accepted as collateral for such
borrowings. The Company has not established, and currently does not intend to
establish, permanent lines of credit. The Company has obtained, and believes it
will be able to continue to obtain, short-term financing in amounts and at
interest rates consistent with the Companys financing objectives. At
September 30, 2000, the Company had borrowings outstanding from three lenders,
compared to two lenders at December 31, 1999. Such borrowings are generally
short-term (less than 30-day terms) and may not be renewed by the lender at its
discretion. Certain lenders have reduced the funds made available to the Company
for pledges of certain less liquid securities.

For
the nine months ended September 30, 2000, the term to maturity of the
Companys borrowings has ranged from one to 30 days, with a weighted
average remaining maturity of 19 days at September 30, 2000. At September 30,
2000, the Company had outstanding $280.8 million of repurchase agreements. At
September 30, 2000, the weighted average cost of funds for all of the
Companys borrowings was 6.61% and investments actually pledged had an
estimated fair value of $292.8 million.

On
March 29, 1999, to improve its liquidity, the Company terminated a repurchase
agreement with a broker-dealer with respect to $500 million of the Company's
Agency Certificates and recognized a loss of approximately $(8.5)
million.

For
the year ended December 31, 1999, the term to maturity of the Companys
borrowings has ranged from one day to five years, with a weighted average
remaining maturity of 15 days at December 31, 1999. At December 31, 1999, the
Company had outstanding $44 million of repurchase agreements. At December 31,
1999, the weighted average cost of funds for all of the Companys
borrowings was 5.90% and investments actually pledged had an estimated fair
value of $45.4 million.

Liquidity

Liquidity, which is the Companys ability to turn non-cash assets into
cash, allows the Company to purchase additional securities and to pledge
additional assets to secure existing borrowings should the value of pledged
assets decline. Potential immediate sources of liquidity for the Company include
cash balances and unused borrowing capacity. Unused borrowing capacity varies
over time as the market value of the Companys securities varies. The
Companys balance sheet also generates liquidity on an on-going basis
through mortgage principal repayments and net earnings held prior to payment as
dividends. Should the Companys needs ever exceed these on-going sources of
liquidity plus the immediate sources of liquidity discussed above, management
believes that the Companys securities could in most circumstances be sold
to raise cash; however, if the Company is forced to liquidate Mortgage Assets
that qualify as qualified real estate assets to repay borrowings, there can be
no assurance that it will be able to maintain its REIT status.

The
availability of financing for the Company's portfolio has been stable during the
first three quarters of 2000.

In
November 1999, the Board of Directors increased the amount of Common Stock
authorized to be repurchased under the Companys stock repurchase program
to $40 million. Pursuant to the repurchase program, for the three months ended
September 30, 2000, the Company did not repurchase any shares of Common Stock
and for the nine months ended September 30, 2000, the Company repurchased 825,600
shares of Common Stock for approximately $3.1 million. Such shares were
purchased at a weighted average price per share of $3.82. For the year ended
December 31, 1999, the Company used the proceeds of sales of, and payments from,
its portfolio securities to repurchase 2,953,700 shares of Common Stock for
approximately $10.3 million in open market transactions. Such purchases were
made at a weighted average price per share of $3.50 (excluding commission
costs). The repurchased shares have been returned to the Companys
authorized but unissued shares of Common Stock as treasury shares.

Stockholders Equity

The
Company uses "available-for-sale" treatment for its securities; these
assets are carried on the balance sheet at estimated market value rather than
historical amortized cost. Based upon such "available-for-sale"
treatment, the Companys equity base at September 30, 2000 was $64.3
million, or $4.58 per share, compared to $73.6 million, or $4.91 per share, at
December 31, 1999. If the Company had used historical amortized cost accounting,
the Companys equity base at September 30, 2000 would have been $85.64
million, or $6.10 per share compared to $85.4 million, or $5.75 per share, at
December 31, 1999.

With
the Companys "available-for-sale" accounting treatment,
unrealized fluctuations in market values of assets do not impact GAAP net income
or taxable income but rather are reflected on the balance sheet by changing the
carrying value of the assets and reflecting the change in stockholders
equity under "Accumulated other comprehensive income (loss)" and in
the statement of operations under "Other comprehensive (loss) income."
By accounting for its assets in this manner, the Company hopes to provide useful
information to stockholders and creditors and to preserve flexibility to sell
assets in the future without having to change accounting methods.

As a
result of this mark-to-market accounting treatment, the book value and book
value per share of the Company are likely to fluctuate far more than if the
Company used historical amortized cost accounting. As a result, comparison with
companies that use historical cost accounting for some or all of their balance
sheet may be misleading.

Unrealized changes in the estimated net market value of securities have one
direct effect on the Companys potential earnings and dividends: positive
mark-to-market changes will increase the Companys equity base and allow
the Company to increase its borrowing capacity while negative changes in the net
market value of the Companys securities might impair the Companys
liquidity position, requiring the Company to sell assets with the likely result
of realized losses upon sale. "Accumulated other comprehensive income
(loss)" was $(21.4) million, or (6.29)% of the amortized cost of securities
at September 30, 2000 and $(12.4) million, or (12.31)% of the amortized cost of
securities at December 31, 1999.

In
accordance with SFAS No. 115, an entity should recognize an other-than-temporary
impairment when it intends to sell a specifically identified available-for-sale
debt security at a loss shortly after the balance sheet date. The write-down for
the impairment should be recognized in earnings in the period in which the
decision is made. The Company reclassified an amount of approximately $2.1
million from unrealized loss to realized loss for securities sold in October
1999, as the decision to sell them was made in September 1999.

The
table below shows the Companys equity capital base as reported and on a
historical amortized cost basis at September 30, 2000 and at December 31,
1999. The historical cost equity basis is influenced by issuances of Common
Stock, the level of GAAP earnings as compared to dividends declared, and other
factors. The GAAP reported equity base is influenced by these factors plus
changes in the "Accumulated Other Comprehensive Income (Loss)"
account.

`STOCKHOLDERS' EQUITY
                          (dollars in thousands, except per share data)

                                                 Net Unrealized      GAAP       Historical      GAAP
                                    Historical      Losses on      Reported     Amortized     Reported
                                    Amortized        Assets         Equity         Cost        Equity
                                   Cost Equity      Available        Base         Equity     (Book Value
                                       Base          for Sale    (Book Value)   Per Share    Per Share)

At September 30, 2000                 $ 85,640       $(21,337)       $64,304        $6.10         $4.58
At December 31, 1999                  $ 85,416       $(12,423)      $ 72,993        $5.75         $4.91`

Capital and Leverage Strategies

The
Companys operations are leveraged approximately 5.4 to 1 at September 30,
2000 compared to 1.6 to 1 at December 31, 1999. At September 30, 2000, the
Companys equity-to-assets ratio was 18.56%, and has ranged from a high of
approximately 65% to a low of approximately 15% during the past nine months.
Initially, the Company financed its acquisition of Mortgage Assets through
proceeds of its initial public offering and several concurrent private
placements, and currently finances any acquisitions primarily by borrowing
against or "leveraging" its existing portfolio and using the proceeds
to acquire additional Mortgage Assets. The Companys target for its
equity-to-assets ratio depends on market conditions and other relevant factors.

During
the three and nine months ended September 30, 2000, the Company, in an effort to
increase its return on equity without taking what Mariner considered to be a
substantial credit and interest rate risk, relevered it portfolio of Agency
Certificates. To increase its portfolio of Agency Certificates, the Company
increased it borrowings.

The
equity-to-assets ratio is total stockholders equity as a percentage of
total assets. The Companys total stockholders equity, for purposes
of this calculation, equals the Companys stockholders equity
determined in accordance with GAAP. For purposes of calculating the
equity-to-assets ratio, the Companys total assets include the value of the
Companys investment portfolio on a marked-to-market-basis. For purchased
Mortgage Assets, the Company obtains market quotes for its Mortgage Assets from
independent broker-dealers that make markets in securities similar to those in
the Companys portfolio. The Board of Directors has discretion to deviate
from or change the Companys indebtedness policy at any time. However, the
Company endeavors to maintain an adequate capital base to protect against
interest rate environments in which the Companys financing and hedging
costs might exceed interest income from its Mortgage Assets. These conditions
could occur, for example, when, due to interest rate fluctuations, interest
income on the Companys Mortgage Assets (which occur during periods, such
as the first three quarters of 1998, of rapidly rising interest rates or during
periods when the Mortgage Loans in the portfolio are prepaying rapidly) lags
behind interest rate increases in the Companys variable rate borrowings.

Inflation

Virtually all of the Companys assets and liabilities are financial in
nature. As a result, interest rates are expected to influence the Companys
performance more directly than inflation. While changes in interest rates do not
necessarily correlate with inflation rates or changes in inflation rates,
interest rates ordinarily increase during periods of high or increasing
inflation and decrease during periods of low or declining inflation.
Accordingly, management believes that the Companys financial condition or
results of operations will be influenced by inflation to the extent interest
rates are affected by inflation.

Recent Accounting Pronouncements

In
June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities" ("SFAS No. 133"),
which, as issued, was effective for all fiscal quarters of fiscal years
beginning after June 15, 1999. SFAS No. 133 generally requires that entities
recognize all derivative financial instruments as assets or liabilities,
measured at fair value, and include in earnings the changes in the fair value of
such assets and liabilities. SFAS No. 133 also provides that changes in the fair
value of assets or liabilities being hedged with recognized derivative
instruments be recognized and included in earnings. In June 1999, the FASB
issued SFAS No. 137, "Accounting for Derivative Instruments and Hedging
Activities - Deferral of the Effective Date of FASB Statement No. 133,"
which deferred the effective date of FASB No. 133 for one year to fiscal years
beginning after June 15, 2000. The Company has not yet completed its evaluation
of SFAS No. 133, as amended by SFAS No. 138, and therefore, at this time, cannot
predict what, if any, effect its adoption will have on the Companys
financial condition or results of operations.

Item 3.    Quantitative and Qualitative
Disclosures About Market Risk

Market Risk

Market risk is the exposure to loss resulting from changes in interest rates,
foreign currency exchange rates, commodity prices and equity prices. The primary
market risk to which the Company is exposed is interest rate risk, which is
highly sensitive to many factors, including governmental monetary and tax
policies, domestic and international economic and political considerations and
other factors beyond the control of the Company. Changes in the general level of
interest rates can affect the Companys net interest income, which is the
difference between the interest income earned on interest-earning assets and the
interest expense incurred in connection with its interest-bearing liabilities,
by affecting the spread between the Companys interest-earning assets and
interest-bearing liabilities. Changes in the level of interest rates also can
affect, among other things, the value of the Companys Mortgage Securities
and its ability to realize gains from the sale of such assets.

The
Company may utilize a variety of financial instruments, including interest rate
swaps, caps, floors and other interest rate exchange contracts, in order to
limit the effects of interest rates on its operations. The use of these types of
derivatives to hedge interest-earning assets and/or interest-bearing liabilities
carries certain risks, including the risk that losses on a hedge position will
reduce the funds available for payments to holders of securities and, indeed,
that such losses may exceed the amount invested in such instruments. As
described previously, the Company has experienced significant losses as a result
of its hedging activities. The profitability of the Company may be adversely
affected during any period as a result of changing interest rates.

The
following table quantifies the potential changes in net interest income and net
portfolio value should interest rates go up or down (shocked) 200 basis points,
assuming the yield curves of the rate shocks will be parallel to each other. Net
portfolio value is defined as interest-earning assets net of interest-bearing
liabilities. All changes in income and value are measured as percentage changes
from the projected net portfolio value at the base interest rate scenario. The
base interest rate scenario assumes interest rates at September 30, 2000 and
various estimates regarding prepayment and all activities are made at each level
of rate shock. Actual results could differ significantly from these estimates.

`Change in Interest Rate                  Net Portfolio Value
-----------------------                  -------------------
- 200 Basis Points                       0.5%
- 100 Basis Points                       1.0%
Base Interest Rate                        --
+ 100 Basis Points                       (1.5)%
+ 200 Basis Points                       (3.5)%`

Asset and Liability Management

Asset and liability management is concerned with the timing and magnitude of the
repricing of assets and liabilities. The Companys objective is to attempt
to control risks associated with interest rate movements. Methods for evaluating
interest rate risk include an analysis of the Companys interest rate
sensitivity "gap," which is defined as the difference between
interest-earning assets and interest-bearing liabilities maturing or repricing
within a given time period. A gap is considered positive when the amount of
interest-rate sensitive assets exceeds the amount of interest-rate sensitive
liabilities. A gap is considered negative when the amount of interest-rate
sensitive liabilities exceeds the amount of interest-rate sensitive assets.
During a period of rising interest rates, a negative gap would tend to adversely
affect net interest income, while a positive gap would tend to result in an
increase in net interest income. During a period of declining interest rates, a
negative gap would tend to result in an increase in net interest income, while a
positive gap would tend to affect net interest income adversely. Because
different types of assets and liabilities with the same or similar maturities
may react differently to changes in overall market rates or conditions, changes
in interest rates may affect net interest income positively or negatively even
if an institution were perfectly matched in each maturity category.

The
following table sets forth the estimated maturity or repricing of the
Companys interest-earning assets and interest-bearing liabilities at
September 30, 2000. The amounts of assets and liabilities shown within a
particular period were determined in accordance with the contractual terms of
the assets and liabilities, except (i) floating-rate securities are included in
the period in which their interest rates are first scheduled to adjust and not
in the period in which they mature and (ii) fixed-rate Mortgage Assets reflect
estimated prepayments, which were estimated based on analyses of broker
estimates. Management believes that these assumptions approximate actual
experience and considers them reasonable; however, the interest rate sensitivity
of the Companys assets and liabilities in the table could vary
substantially if different assumptions were used or actual experience differs
from the historical experience on which the assumptions are based.

`September 30, 2000
                                                                    More than 1
                                            Within 3    4 to 12      Year to 3      3 Years
                                             Months      Months        Years        and Over    Total
                                            --------    --------    ------------    --------    ------
                                                        (dollars in thousands)
Rate-Sensitive Assets:
Mortgage Assets...........................       $0       $3,093      $60,204       $257,873   $321,170

Rate-Sensitive Liabilities:
Repurchase agreements..................... (280,783)          --           --            --    (280,783)

Interest rate sensitivity gap............. (280,783)       3,093       60,204        257,873     40,387

Cumulative interest rate sensitivity gap..              (277,690)    (217,486)        40,387

Cumulative interest rate sensitivity
 gap as a percentage of total
 rate-sensitive assets....................     (87)%        (86)%         (67)%          13%`

PART II.    OTHER INFORMATION

Item 1.  Legal Proceedings

On
October 23, 2000, the Company filed suit in federal court in the Southern District of New York
against Asset Securitization Corp., Nomura Asset Capital Corp. and Nomura
Securities International Inc. alleging that the defendants defrauded the Company
into purchasing over $19.0 million worth of mortgage pass-through certificates
by failing to disclose among other things, that one of the largest loans in the
mortgage pool was seriously troubled. The Company is seeking rescission of the
purchase of the mortgage pass-through certificates.

Item 2.  Changes in Securities and Use of
Proceeds

Not
applicable.

Item 3.  Defaults Upon Senior
Securities

Not
applicable.

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

Not
applicable.

Item 5.  Other Information

On
October 6, 2000 the Company filed a Current Report on Form 8-K regarding a press
release issued by the Company announcing that the Companys Board of
Directors authorized management to prepare a plan of liquidation and an on-going
business plan for the Company. The Company also announced the appointment of two
new directors, Mark Hobbs and Arthur House, and its acceptance of the
resignation of two directors, Frederick Khedouri and Stuart Coleman.

On
November 3, 2000 the Company filed a Current Report on Form 8-K regarding a
press release issued by the Company announcing that the Company had extended the
management agreement with Mariner for an additional one-year term, with the
Company retaining the right to terminate the management agreement on 30 days'
notice. A copy of the Amendment to the Management Agreement has been filed on
Form 8-K with the SEC. LASER's Board of Directors presently intends to
reconsider the issue of the Company's management after a decision has been
reached regarding the future direction of the Company.

Item 6.  Exhibits and Reports on Form 8-K

(a) Exhibits

Exhibit 27.1 - Financial Data Schedule

(b) Reports

On
October 6, 2000 the Company filed a Current Report on Form 8-K pursuant to Item
5 relating to certain announcements by the Company.

On
November 3, 2000 the Company filed a Current Report on Form 8-K pursuant to Item
5 relating to the extension of the management agreement with Mariner Mortgage
Management, L.L.C.

SIGNATURES

Pursuant to the requirements of the Securities Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.

| | LASER MORTGAGE MANAGEMENT, INC.
| | -------------------------------

|Dated:  November 14, 2000 | By: /s/ William J. Michaelcheck
(principal executive officer)
(authorized officer of registrant)
|------------------------- | ------------------------------------------------------------------------------------------------

EXHIBIT INDEX

|Exhibit Number | Exhibit
|-------------- | -------

| | 3.1 | Articles of Incorporation of the Registrant
(Incorporated by reference to Exhibit 3.1 to the Registration Statement on Form
S-11 (File No. 333-35673))
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------

| | 3.2 | Bylaws of the Registrant (Incorporated by reference to
Exhibit 3.2 to the Registration Statement on Form S-11 (File No. 333-35673))
| | --- | -----------------------------------------------------------------------------------------------------------------------------------

| | 27.1* | Summary Financial Data
| | ----- | ----------------------

---

* Filed herewith.