================================================================================
                                  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 quarter ended June 30, 2002

         |_|      Transition Report Pursuant to Section 13 or 15(d) of
                  the Securities Exchange Act of 1934

                         Commission file number 33-83524


                          MERIT SECURITIES CORPORATION
             (Exact name of registrant as specified in its charter)


<TABLE>
<S>                                                                                   <C>
                           Virginia                                                   52-1549373
                (State or other jurisdiction of                                    (I.R.S. Employer
                incorporation or organization)                                   Identification No.)

        4551 Cox Road, Suite 300, Glen Allen, Virginia                                  23060
           (Address of principal executive offices)                                   (Zip Code)

                                                   (804) 217-5800
                                (Registrant's telephone number, including area code)
</TABLE>



Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past ninety days. |_|Yes |X|No

As of July 31, 2002,  the latest  practicable  date,  there were 1,000 shares of
Merit Securities Corporation common stock outstanding.

The registrant  meets the conditions set forth in General  Instructions H (1)(a)
and (b) of Form 10-Q and is  therefore  filing  this Form 10-Q with the  reduced
disclosure format.

================================================================================
<PAGE>



                          MERIT SECURITIES CORPORATION

                                    FORM 10-Q


                                      Index


                                                                           Page

PART I.   FINANCIAL INFORMATION

Item 1.  Financial Statements
           Condensed Consolidated Balance Sheets at
           June 30, 2002 and December 31, 2001(as
           restated) (unaudited)..............................................1

           Condensed Consolidated Statements of Operations
           for the three months and six months ended June 30,
           2002 and 2001(as restated)  (unaudited)............................2

           Condensed Consolidated Statements of Cash Flows
           for the six months ended June 30, 2002 and 2001
           (as restated)  (unaudited).........................................3

         Notes to Unaudited Condensed Consolidated Financial Statements.......4

Item 2.  Management's Discussion and Analysis of
         Financial Condition and Results of Operations........................6

Item 3.  Quantitative and Qualitative Disclosures about Market Risk...........8

PART II. OTHER INFORMATION

Item 1.  Legal Proceedings...................................................10

Item 5.  Other Information...................................................10

Item 6.  Exhibits and Reports on Form 8-K....................................10

SIGNATURES...................................................................13
<PAGE>


PART I.    FINANCIAL INFORMATION

Item 1.    Financial Statements

MERIT SECURITIES CORPORATION
Condensed CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(amounts in thousands except share data)




<TABLE>
<CAPTION>
                                                                         June 30,                December 31,
                                                                           2002                      2001
                                                                   ---------------------     ---------------------
ASSETS:                                                                                         (As Restated,
                                                                                                 See Note 4)
                   <S>                                                        <C>                    <C>

     Collateral for collateralized bonds                               $   1,517,707             $   1,634,460
     Loans                                                                    12,013                     4,435
                                                                   ---------------------     ---------------------
                                                                       $   1,529,720             $   1,638,895
                                                                   =====================     =====================


LIABILITIES AND SHAREHOLDER'S EQUITY

LIABILITIES:
     Non-recourse debt - collateralized bonds                          $   1,460,694             $   1,542,924

SHAREHOLDER'S EQUITY:
     Common stock, no par value, 10,000 shares authorized,
       1,000 shares issued and outstanding                                        10                        10
     Additional paid-in capital                                               69,189                    92,774
     Accumulated other comprehensive (loss) income                            (2,499)                    3,187
     Retained earnings                                                         2,326                         -
                                                                   ---------------------     ---------------------
                                                                              69,026                    95,971
                                                                   ---------------------     ---------------------
                                                                       $   1,529,720             $   1,638,895
                                                                   =====================     =====================
</TABLE>


See notes to unaudited condensed consolidated financial statements.
<PAGE>


MERIT SECURITIES CORPORATION
Condensed CONSOLIDATED STATEMENTS
     OF OPERATIONS (UNAUDITED)
(amounts in thousands)


<TABLE>
<CAPTION>
                                                  Three Months Ended                         Six Months Ended
                                                       June 30                                   June 30
                                         -------------------------------------     -------------------------------------
                                              2002                 2001                 2002                 2001
                                         ----------------     ----------------     ----------------     ----------------
                                                               (As Restated,                             (As Restated,
                                                                See Note 4)                               See Note 4)
              <S>                                  <C>             <C>                      <C>               <C>
Interest income:
     Collateral for collateralized
       bonds                               $     27,936         $     39,973         $     54,750         $     84,727
       Loans                                         27                    -                   27                    -
                                         ----------------     ----------------     ----------------     ----------------
                                                 27,963               39,973               54,777               84,727
                                         ----------------     ----------------     ----------------     ----------------

Interest and related expense:
     Interest expense on
       collateralized bonds                      16,485               28,752               33,354               64,629
     Other
                                                    559                  466                  994                  878
                                         ----------------     ----------------     ----------------     ----------------
                                                 17,044               29,218               34,348               65,507
                                         ----------------     ----------------     ----------------     ----------------

Net interest margin before
       provision for losses                      10,919               10,755               20,429               19,220
Provision for losses                             (5,279)              (4,555)             (11,156)              (9,110)
                                         ----------------     ----------------     ----------------     ----------------
Net interest margin                               5,640                6,200                9,273               10,110

Impairment charges                               (4,442)              (1,783)              (6,403)              (3,566)
Affiliate interest expense                           (4)                  -                    (4)                  -
                                         ----------------     ----------------     ----------------     ----------------
Income before extraordinary item                  1,194                4,417                2,866                6,544
Extraordinary item - loss on
       extinguishment of debt                      (540)                   -                 (540)                   -
                                         ----------------     ----------------     ----------------     ----------------
Net income                                 $        654         $      4,417         $      2,326         $      6,544
                                         ================     ================     ================     ================
</TABLE>


See notes to unaudited condensed consolidated financial statements.
<PAGE>



MERIT SECURITIES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS (UNAUDITED)
(amounts in thousands)


<TABLE>
<CAPTION>
                                                                                 Six Months Ended
                                                                                     June 30,
                                                               -----------------------------------------------------
                                                                           2002                       2001
                                                                   ----------------------     ----------------------
                                                                                                  (As Restated,
                                                                                                   See Note 4)
                    <S>                                                          <C>                      <C>
Operating activities:
    Net income                                                         $        2,326             $        6,544
    Adjustments to reconcile net income to net cash provided
      by operating activities:
      Loss on extinguishment of debt                                              540                          -
      Impairment charge                                                         6,403                      3,566
      Provision for losses                                                     11,156                      9,110
      Amortization, net                                                         4,692                      5,008
      Net (increase) decrease in accrued interest receivable
        and funds held by trustee                                              (1,947)                     1,545
      Decrease in accrued interest payable                                        (88)                      (589)
      Other                                                                      (222)                       293
                                                                   ----------------------     ----------------------
        Net cash provided by operating activities                              22,860                     25,477
                                                                   ----------------------     ----------------------


Investing activities:
    Collateral for collateralized bonds:
      Purchase of loans                                                      (158,933)                         -
      Principal payments on collateral                                        242,160                    307,171
      Proceeds from sale of collateralized bonds                              605,272                          -
                                                                   ----------------------     ----------------------
        Net cash provided by investing activities                             688,499                    307,171
                                                                   ----------------------     ----------------------

Financing activities:
    Collateralized bonds:
      Principal payments on collateralized bonds                             (687,774)                  (320,301)
      Capital distributions                                                   (23,585)                   (12,357)
                                                                   ----------------------     ----------------------
        Net cash used for financing activities                               (711,359)                  (332,658)
                                                                   ----------------------     ----------------------

Net change in cash                                                                  -                        (10)
Cash, beginning of period                                                           -                         10
                                                                   ----------------------     ----------------------

Cash, end of period                                                    $            -             $            -
                                                                   ======================     ======================


Supplemental disclosure of cash flow information:
    Cash paid for interest                                             $       31,926             $       63,329
                                                                   ======================     ======================
</TABLE>


See notes to unaudited condensed consolidated financial statements.
<PAGE>


MERIT SECURITIES CORPORATION
NOTES TO UNAUDITED CONDENSED
  CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2002
(amounts in thousands except share data)


NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying  condensed consolidated financial statements have been prepared
in accordance  with the  instructions to Form 10-Q and do not include all of the
information and notes required by accounting  principles  generally  accepted in
the United States of America,  hereinafter  referred to as  "generally  accepted
accounting   principles"  for  complete  financial  statements.   The  financial
statements include the accounts of Merit Securities  Corporation (the "Company")
and its wholly owned subsidiary,  Financial Asset  Securitization,  Inc. (FASI).
The Company is a wholly  owned,  limited-purpose  finance  subsidiary  of Issuer
Holding Corporation  ("IHC"). IHC was formed on September 4, 1996 to acquire all
of the  outstanding  stock of the Company and certain other  affiliates of Dynex
Capital, Inc. ("Dynex").  IHC is a wholly owned subsidiary of Dynex. The Company
was organized to facilitate the securitization of loans through the issuance and
sale of  collateralized  bonds  (the  "Bonds").  All  significant  inter-company
balances and  transactions  have been  eliminated  in the  consolidation  of the
Company.

In the opinion of  management,  all material  adjustments,  consisting of normal
recurring  adjustments,  considered  necessary  for a fair  presentation  of the
condensed  consolidated  financial statements have been included.  The Condensed
Consolidated  Balance  Sheet  at  June  30,  2002,  the  Condensed  Consolidated
Statements  of  Operations  for the three and six months ended June 30, 2002 and
2001,  the  Condensed  Consolidated  Statements of Cash Flows for the six months
ended June 30, 2002 and 2001, and the related notes to financial  statements are
unaudited.  Operating  results  for the six months  ended June 30,  2002 are not
necessarily  indicative  of the results that may be expected for the year ending
December 31, 2002.

     On March 31, 2002,  the Company  purchased  from Dynex  Capital,  Inc., its
parent, 10,000 shares of common stock of Financial Asset Securitization, Inc.

Certain reclassifications have been made to the financial statements for 2001 to
conform to the presentation for 2002.


NOTE 2  -- COLLATERAL FOR COLLATERALIZED BONDS

Collateral for collateralized bonds consists of loans and debt securities backed
primarily by  adjustable-rate  and  fixed-rate  mortgage  loans secured by first
liens on single family residential housing and manufactured  housing installment
loans  secured by a UCC  filing.  All  collateral  for  collateralized  bonds is
pledged to secure repayment of the related  collateralized  bonds. All principal
and interest  (less  servicing-related  fees) on the collateral is remitted to a
trustee and is available for payment on the collateralized  bonds. The Company's
exposure to loss on collateral for collateralized  bonds is generally limited to
the amount of collateral pledged in excess of the related  collateralized  bonds
issued, as the collateralized  bonds issued are non-recourse to the Company. The
collateral for collateralized bonds can be sold by the Company, but only subject
to the lien of the collateralized bond indenture.

The following table  summarizes the components of collateral for  collateralized
bonds as of June 30, 2002 and  December  31, 2001.  Debt  securities  pledged as
collateral for collateralized  bonds are considered  available for sale, and are
therefore recorded at fair value.

<TABLE>
<CAPTION>
------------------------------------------------------------ -------------------------------------
                                                             June 30, 2002    December 31, 2001
------------------------------------------------------------ -------------------------------------
                                                                              (As Restated,
                                                                               See Note 4)
             <S>                                                    <C>             <C>
   Loans, at amortized cost                                  $   1,155,265   $    1,186,400
   Debt securities, at fair value                                  377,823          463,424
--------------------------------------------------------------------------------------------------
                                                                 1,533,088        1,649,824
  Reserve for loan losses                                          (15,381)         (15,364)
--------------------------------------------------------------------------------------------------
                                                             $   1,517,707    $   1,634,460
--------------------------------------------------------------------------------------------------
</TABLE>



The following table summarizes the amortized cost basis,  gross unrealized gains
and losses and estimated fair value of debt securities pledged as collateral for
collateralized bonds as of June 30, 2002:

<TABLE>
<CAPTION>
-------------------------------------------- ----------------------- --------------- -------------- ----------------
                                                                         Gross            Gross
                                                   Amortized           unrealized      unrealized   Estimated fair
                                                      cost               gains           losses          value
-------------------------------------------- ----------------------- --------------- -------------- ----------------

                    <S>                                 <C>                 <C>              <C>        <C>
    Debt securities as of June 30, 2002            $    380,322                -       $   (2,499)    $ 377,823
-------------------------------------------- ----------------------- --------------- -------------- ----------------
</TABLE>

Securitization.  On April 25, 2002, the Company completed the  securitization of
$602,000 of single-family mortgage loans and the associated issuance of $605,000
of  collateralized  bonds.  Of the  $602,000  of  single-family  mortgage  loans
securitized, $447,000 million were loans which were already owned by the Company
and $155,000  represented new loans purchased.  The securitization was accounted
for as a financing;  thus the loans and  associated  bonds were  included in the
accompanying  condensed  consolidated balance sheet as assets and liabilities of
the Company.


NOTE 3 -- USE OF ESTIMATES

Fair Value.  The  Company  uses  estimates  in  establishing  fair value for its
financial instruments. Estimates of fair value for collateral for collateralized
bonds are determined by calculating  the present value of the projected net cash
flows of the instruments using appropriate discount rates,  prepayment rates and
credit loss assumptions. Discount rates used are those management believes would
be used by willing buyers of these  financial  instruments at prevailing  market
rates.  The  discount  rate  used  in the  determination  of fair  value  of the
collateral for collateralized  bonds at both June 30, 2002 and December 31, 2001
was 16%.  Prepayment  rate  assumptions at June 30, 2002, and December 31, 2001,
were generally at a "constant  prepayment rate," or CPR ranging from 30%-60% for
2002  and  2001,  for  collateral  for   collateralized   bonds   consisting  of
single-family  mortgage loans, and a CPR equivalent ranging from 9%-12% for 2002
and 2001, for collateral for  collateralized  bonds  consisting of  manufactured
housing loan collateral.  CPR assumptions for each year are based in part on the
actual  prepayment rates  experienced for the prior six-month period and in part
on management's  estimate of future  prepayment  activity.  The loss assumptions
utilized  vary  depending  on the  collateral  pledged.  The cash  flows for the
collateral  for  collateralized  bonds were projected to the estimated date that
the  security  could be called and  retired by the  Company if there is economic
value to the Company in calling and retiring the security.

Variations  in  market  discount  rates,   prepayment   rates  and  credit  loss
assumptions  may  materially  impact the resulting  fair values of the Company's
financial  instruments.   Since  the  fair  value  of  the  Company's  financial
instruments is based on estimates, actual gains and losses recognized may differ
from  those  estimates   recorded  in  the  condensed   consolidated   financial
statements.
<PAGE>


NOTE 4 -- RESTATEMENT OF FINANCIAL STATEMENTS

Subsequent  to the  issuance of its  financial  statements  for the three months
ended  March  31,  2002  and the year  ended  December  31,  2001,  the  Company
determined that the assets previously reported as debt securities subject to the
requirements  of SFAS No.115,  " Accounting for Certain  Investments in Debt and
Equity  Securities"  were,  in  fact,  collateralized   borrowings,   where  the
collateral  being  pledged  as  securities  were  loans  that  should  have been
accounted  for  under  the   requirements   of  SFAS  No.  5,   "Accounting  for
Contingencies"  or SFAS No. 114,  "Accounting  by Creditors for  Impairment of a
Loan." As a result, the accompanying condensed consolidated financial statements
for the  three  and six  month  period  ended  June 30,  2001 and the  condensed
consolidated  balance  sheet as of December 31, 2001 have been restated from the
amounts previously reported to correct the accounting for these investments.

A summary of the significant effects of the restatement is as follows:

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
                                                                    December 31,          December 31,
(amounts in thousands)                                                  2001                  2001
-----------------------------------------------------------------------------------------------------------
                                                                   (as previously
                                                                     reported)           (as restated)
-----------------------------------------------------------------------------------------------------------
             <S>                                                           <C>                  <C>
Collateral for collateralized bonds                                 $   1,595,653         $   1,634,460
Total assets                                                            1,600,088             1,638,895

Accumulated other comprehensive loss                                      (35,620)               (3,187)
Total shareholder's equity                                                 57,164                95,971
-----------------------------------------------------------------------------------------------------------
</TABLE>


<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
                                         Three Months Ended                          Six Months Ended
                                               June 30                                   June 30
                                  -----------------------------------        ------------------------------
                                      2001                  2001                  2001               2001
                                 (as previously                              (as previously
                                    reported            (as restated)           reported         (as restated)
             <S>                         <C>                  <C>                  <C>                  <C>
     Provision for losses        $     (6,338)           $   (4,555)            $ (12,676)         $  (9,110)
     Net interest margin                4,417                 6,200                 6,544             10,110
     Impairment charges                     -                (1,783)                    -             (3,566)
     ----------------------------------------------------------------------------------------------------------
</TABLE>

This  restatement  had no  effect on income  before  extraordinary  items or net
income.


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

As  discussed  in  Note 4 to the  condensed  consolidated  financial  statements
included in Item 1, the Company has  restated  its  financial  statements  as of
December  31, 2001 and for the three and  six-month  period ended June 30, 2001.
The following management  discussion and analysis takes into account the effects
of the restatement.  The Company intends to amend its Annual Report of Form 10-K
for the year ended  December 31, 2001 and its quarterly  report on Form 10-Q for
the  quarterly  period  ended March 31, 2002 to include the  restated  financial
statements as soon as practicable.

The Company was organized to facilitate the  securitization of loans through the
issuance  and sale of  collateralized  bonds  (the  "Bonds").  The Bonds will be
secured  primarily  by: (i) mortgage  loans  secured by first or second liens on
residential property, (ii) Federal National Mortgage Association Mortgage-Backed
Certificates,  (iii)  Federal  Home Loan  Mortgage  Corporation  Mortgage-Backed
Certificates,  (iv) Government  National  Mortgage  Association  Mortgage-Backed
Certificates,     (v)    other    mortgage    pass-through    certificates    or
mortgage-collateralized  obligations.  In  the  future,  the  Company  may  also
securitize other types of loans.

After  payment  of  the  expenses  of an  offering  and  certain  administrative
expenses,  the net  proceeds  from an offering of Bonds will be used to purchase
Collateral  from IHC or various  third  parties.  IHC can be expected to use the
proceeds  to reduce  indebtedness  incurred  to obtain  such loans or to acquire
additional Collateral.  After the issuance of a series of Bonds, the Company may
sell the  Collateral  securing that series of Bonds,  subject to the lien of the
Bonds.


                               FINANCIAL CONDITION

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------
                                                        June 30,               December 31,
(amounts in thousands except per share data)              2002                     2001
------------------------------------------------    ------------------    ---------------------

                 <S>                                       <C>                      <C>
Collateral for collateralized bonds                  $   1,517,707            $   1,634,460
Non-recourse debt - collateralized bonds                 1,460,694                1,542,924
Shareholder's equity                                        69,026                   95,971

Collateralized bond series outstanding                           4                        5

-----------------------------------------------------------------------------------------------
</TABLE>

Collateral for collateralized bonds
As of  December  31,  2001,  the Company  had 5 series of  collateralized  bonds
outstanding.  As of June 30,  2002,  the Company had 4 series of  collateralized
bonds  outstanding.  The collateral for  collateralized  bonds decreased to $1.5
billion at June 30, 2002  compared to $1.6 billion at December  31,  2001.  This
decrease of $100 million is primarily  the result of $242.2  million in paydowns
on the collateral.  These were partially  offset by $154.8 million of additional
collateral acquired in April 2002.

Non-recourse debt - collateralized bonds
Collateralized  bonds  decreased  to $1.46  billion at June 30,  2002 from $1.54
billion at December  31, 2001 as a result of $257.6  million in paydowns  during
the six months ended June 30, 2002, the call and retirement of $429.6 million of
bonds  and the  issuance  of  $605.3  million  in  bonds  in the  securitization
completed in April.

Shareholder's Equity
Shareholder's  equity decreased to $69 million at June 30, 2002 from $96 million
at December 31, 2001.  This  decrease was  primarily the result of net income of
$2.3 million,  offset by an increase of $5.7 million in net  unrealized  loss on
investments available-for-sale,  and a $24.1 million capital distribution to IHC
during the period for the six months ended June 30, 2002.


                              RESULTS OF OPERATIONS

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
                                                 Three Months Ended                    Six Months Ended
                                                      June 30,                             June 30,
                                          ----------------------------------  ------------------------------------
(amounts in thousands)                         2002              2001               2002               2001
----------------------------------------------------------------------------  ------------------------------------
                 <S>                                <C>               <C>               <C>                <C>
Interest income                             $     27,936      $     39,973      $     54,750       $     84,727
Interest expense on collateralized bonds          16,485            28,752            33,354             64,629
Provision for losses                               5,279             4,555            11,156              9,110
Net interest margin                                5,640             6,200             9,273             10,110
Net income                                           654             4,417             2,326              6,544
------------------------------------------------------------------------------------------------------------------
</TABLE>

Interest  income on the collateral for  collateralized  bonds decreased to $54.8
million for the six months  ended June 30, 2002 from $84.7  million for the same
period in 2001. This decrease was primarily a result of prepayments and paydowns
on principal and lower interest rates between the respective periods.

Interest expense on collateralized  bonds decreased to $33.4 million for the six
months ended June 30, 2002 from $64.6  million for the six months ended June 30,
2001. This decrease  resulted almost equally from the decline in  collateralized
bonds  due  to   prepayments   and  paydowns  on  the  related   collateral  for
collateralized bonds coupled with an overall decline in the cost of funds on the
collateralized bonds.

Provision  for losses  increased to $11.2  million for the six months ended June
30,  2002 from $9.1  million  for the same  period in 2001.  This  increase  was
primarily a result of increasing the reserve for probable losses on various loan
pools  pledged as  collateral  for  collateralized  bonds  where the Company has
retained  credit risk,  specifically  the Company's  investment in  manufactured
housing loan pools.

Net  interest  margin  decreased  to $9.3  million  from $10.1  million  for the
six-month  periods  ended June 30, 2002 and 2001,  respectively.  An increase in
provision for losses and the decline in interest  earning  assets were partially
offset by reduced borrowing costs on collateralized bonds outstanding.

Credit Exposures
With collateralized bond structures, the Company retains credit risk relative to
the  amount  of  overcollateralization  required  in  conjunction  with the bond
issuance.  Losses are generally first applied to the overcollateralized  amount,
or in some instances surplus cash and then the  overcollateralized  amount, with
any losses in excess of that amount  borne by the bond insurer or the holders of
the  collateralized  bonds.  The Company only incurs credit losses to the extent
that  losses  are  incurred  in the  repossession,  foreclosure  and sale of the
underlying  collateral.  Such losses generally equal the excess of the principal
amount  outstanding,  less any proceeds from mortgage or hazard insurance,  over
the liquidation value of the collateral. To compensate the Company for retaining
this loss  exposure,  the  Company  generally  receives  an excess  yield on the
collateralized loans relative to the yield on the collateralized  bonds. At June
30, 2002, the Company  retained $117.8 million in aggregate  principal amount of
overcollateralization.  The Company had  reserves,  or  otherwise  had  provided
coverage on $21.8 million at June 30, 2002. During the first six months of 2002,
the Company  provided  for  additional  reserves of $11.2  million and  incurred
credit losses of $10.9 million.

Other  forms of credit  enhancement  that  benefit the  Company,  based upon the
performance of the underlying loans, may provide  additional  protection against
losses. These additional protections include loss reimbursement  guarantees with
a remaining balance of $30.3 and a remaining deductible aggregating $2.0 million
on $108 million of securitized single family mortgage loans which are subject to
such  reimbursement  agreements  and $326 million of  securitized  single family
mortgage  loans which are subject to various  mortgage pool  insurance  policies
whereby  losses would need to exceed the remaining  stop loss of at least 39% on
such policies before the Company would incur losses.

Other Matters
At June 30, 2002,  the Company had  securities of  approximately  $308.6 million
remaining for issuance under a registration  statement filed with the Securities
and Exchange Commission. The Company anticipates issuing additional Bonds in the
future.


Item 3. - Quantitative and Qualitative Disclosures about Market Risk

Market  risk  generally  represents  the risk of loss that may  result  from the
potential  change in the value of a financial  instrument due to fluctuations in
interest and foreign exchange rates and in equity and commodity  prices.  Market
risk is inherent to both derivative and  non-derivative  financial  instruments,
and  accordingly,  the scope of the  Company's  market risk  management  extends
beyond derivatives to include all market risk sensitive  financial  instruments.
Net interest income comprises the primary  component of the Company's  earnings.
As a result,  the  Company is  subject  to risk  resulting  from  interest  rate
fluctuations  to the  extent  that  there is a gap  between  the  amount  of the
Company's interest-earning assets and the amount of interest-bearing liabilities
that are prepaid, mature or re-price within specified periods.

The Company and IHC monitor the  aggregate  cash flow,  projected  net yield and
market value of the collateral for  collateralized  bonds under various interest
rate and prepayment assumptions.

Approximately $607 million of the Company's  collateral for collateralized bonds
as of June 30, 2002, is comprised of loans or securities  that have coupon rates
which adjust over time (subject to certain periodic and lifetime limitations) in
conjunction with changes in short-term interest rates. Approximately 74% and 15%
of the ARM loans underlying the Company's  collateral for  collateralized  bonds
are indexed to and reset based upon the level of  six-month  LIBOR and  one-year
CMT, respectively.

Generally,  during a period of rising  short-term  interest rates, the Company's
net  interest  spread  earned on its  collateralized  bonds will  decrease.  The
decrease of the net  interest  spread  results from (i) the lag in resets of the
ARM loans  underlying the collateral  for  collateralized  bonds relative to the
rate  resets on the  collateralized  bonds and (ii) rate resets on the ARM loans
which are generally limited to 1% every six months or 2% every twelve months and
subject  to  lifetime  caps,  while  the  associated  borrowings  have  no  such
limitation.  As short-term interest rates stabilize and the ARM loans reset, the
net interest margin may be restored to its former level as the yields on the ARM
loans adjust to market conditions.  Conversely, net interest margin may increase
following a fall in short-term interest rates. This increase may be temporary as
the  yields on the ARM loans  adjust to the new  market  conditions  after a lag
period. In each case, however, the Company expects that the increase or decrease
in the net interest spread due to changes in the short-term interest rates to be
temporary.  The net  interest  spread may also be  increased or decreased by the
proceeds or costs of interest rate swap and cap  agreements,  to the extent that
the Company has entered into such agreements.

The remaining portion of the Company's collateral for collateralized bonds as of
June 30,  2002,  approximately  $931  million,  is  comprised of loans that have
coupon rates that are fixed.  The Company has limited its interest  rate risk on
such  collateral  primarily  through the issuance of  fixed-rate  collateralized
bonds.  Overall,  the Company's  interest rate risk is primarily  related to the
rate of  change in  short-term  interest  rates  and to the level of  short-term
interest rates.

The Company  focuses on the  sensitivity  of its cash flow,  and  measures  such
sensitivity to changes in interest rates.  Changes in interest rates are defined
as instantaneous,  parallel,  and sustained interest rate movements in 100 basis
point  increments.  The Company  estimates its net interest margin cash flow for
the next twenty-four  months assuming no changes in interest rates from those at
period end. Once the base case has been estimated,  cash flows are projected for
each of the defined  interest rate  scenarios.  Those scenario  results are then
compared against the base case to determine the estimated change to net interest
income.

The following  table  summarizes  the  Company's  net interest  margin cash flow
sensitivity analysis as of June 30, 2002. This analysis represents  management's
estimate  of the  percentage  change in net  interest  margin  cash flow given a
parallel shift in interest  rates.  The "Base" case represents the interest rate
environment as it existed as of June 30, 2002. The analysis is heavily dependent
upon the assumptions used in the model. The effect of changes in future interest
rates,  the shape of the yield  curve or the mix of assets and  liabilities  may
cause actual results to differ from the modeled results. . In addition,  certain
financial  instruments  provide a degree of "optionality."  The most significant
option affecting the Company's  portfolio is the borrowers' option to prepay the
loans. The model applies prepayment rate assumptions  representing  management's
estimate of prepayment activity on a projected basis for each collateral pool in
the investment portfolio. The model applies the same prepayment rate assumptions
for all five cases indicated  below.  The extent to which borrowers  utilize the
ability to  exercise  their  option may cause  actual  results to  significantly
differ from the analysis.


                 ----------------------------------------------
                           Basis Point % Change in Net
                       Increase (Decrease) Interest Margin
                        in Interest Rates from Base Case
                 ----------------------------------------------

                                  +200 (19.4)%
                                  +100 (10.3)%
                                  Base     -
                                  -100  11.0%
                                  -200  23.0%
                 ----------------------------------------------
<PAGE>


PART II.          OTHER INFORMATION

Item 1.           Legal Proceedings:

                  None

Item 5.           Other Information:

                  None

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

  (a)  Exhibits

     3.1 Articles of  Incorporation  of the Registrant  (Incorporated  herein by
reference to the Exhibits to Registrant's Registration Statement No. 33-83524 on
Form S-3 filed August 31, 1994).

     3.2  Bylaws of the  Registrant  (Incorporated  herein by  reference  to the
Exhibits to Registrant's  Registration  Statement No. 33-83524 on Form S-3 filed
August 31, 1994).

     3.3  Amended and  Restated  Articles of  Incorporation  of the  Registrant,
effective  April 19, 1995  (Incorporated  herein by  reference to Exhibit to the
Registrant's Current Report on Form 8-K, filed April 21, 1995).

     4.1 Indenture  between  Registrant and Trustee,  dated as of August 1, 1994
(Incorporated  herein by reference to the Exhibits to Registrant's  Registration
Statement No. 33-83524 on Form S-3 filed August 31, 1994).

     4.2  Form  of  Supplement   Indenture   between   Registrant   and  Trustee
(Incorporated  herein by reference to the Exhibits to Registrant's  Registration
Statement No. 33-83524 on Form S-3 filed August 31, 1994).

     4.3 Copy of the Indenture, dated as of November 1, 1994, by and between the
Registrant   and  Texas   Commerce   Bank  National   Association,   as  Trustee
(Incorporated  herein by reference to Exhibit to the Registrant's Current Report
on Form 8-K, filed December 19, 1994).

     4.4 Copy of the Series 4 Indenture Supplement, dated as of June 1, 1995, by
and between the  Registrant  and Texas  Commerce Bank National  Association,  as
Trustee (including schedules and exhibits)  (Incorporated herein by reference to
Exhibit to the Registrant's Current Report on Form 8-K, filed July 10, 1995).

     4.5 Copy of the Series 10  Indenture  Supplement,  dated as of  December 1,
1997,  by  and  between  the   Registrant   and  Texas  Commerce  Bank  National
Association,  as Trustee (related  schedules and exhibits available upon request
of the Trustee).  (Incorporated  herein by reference to Exhibit of  Registrant's
Current Report on Form 8-K, filed January 6, 1998).

     4.6 Copy of the Series 11 Indenture Supplement,  dated as of March 1, 1998,
by and between the Registrant and Texas Commerce Bank National  Association,  as
Trustee (related  schedules and exhibits available upon request of the Trustee).
(Incorporated  herein by reference to Exhibit of Registrant's  Current Report on
Form 8-K, filed June 12, 1998).

     4.7 Copy of the Series 12 Indenture Supplement,  dated as of March 1, 1999,
by and between the Registrant and Texas Commerce Bank National  Association,  as
Trustee (related  schedules and exhibits available upon request of the Trustee).
(Incorporated  herein by reference to Exhibit of Registrant's  Current Report on
Form 8-K, filed April 12, 1999).

     4.8 Copy of the Series 13 Indenture Supplement, dated as of August 1, 1999,
by and between the Registrant and Texas Commerce Bank National  Association,  as
Trustee (related  schedules and exhibits available upon request of the Trustee).
(Incorporated  herein by reference to Exhibit of Registrant's  Current Report on
Form 8-K, filed September 13, 1999).

     4.9 Copy of the Series 14  Indenture  Supplement,  dated as of  November 1,
1999,  by  and  between  the   Registrant   and  Texas  Commerce  Bank  National
Association,  as Trustee (related  schedules and exhibits available upon request
of the Trustee).  (Incorporated  herein by reference to Exhibit of  Registrant's
Current Report on Form 8-K, filed November 12, 1999).

     99.1 Standard  Provisions to Servicing  Agreement  (Incorporated  herein by
reference to the Exhibits to Registrant's Registration Statement No. 33-83524 on
Form S-3 filed August 31, 1994).

     99.2 Form of Servicing Agreement  (Incorporated  herein by reference to the
Exhibits to Registrant's  Registration  Statement No. 33-83524 on Form S-3 filed
August 31, 1994).

     99.3 Standard Terms to Master Servicing Agreement  (Incorporated  herein by
reference to the Exhibits to Registrant's Registration Statement No. 33-83524 on
Form S-3 filed August 31, 1994).

     99.4 Form of Master Servicing Agreement  (Incorporated  herein by reference
to the Exhibits to Registrant's  Registration Statement No. 33-83524 on Form S-3
filed August 31, 1994).

     99.5 Form of  Prospectus  Supplement  of Bonds  secured by  adjustable-rate
mortgage  loans  (Incorporated  herein by reference to Exhibits to  Registrant's
Pre-Effective Amendment No. 4 to Registration Statement No. 33-83524 on Form S-3
filed December 5, 1994).

     99.6 Form of Financial  Guaranty Assurance Policy  (Incorporated  herein by
reference to the Exhibits to Registrant's Registration Statement No. 33-83524 on
Form S-3 filed August 31, 1994).

     99.7 Form of GEMICO Mortgage Pool Insurance Policy  (Incorporated herein by
reference to the Exhibits to Registrant's Registration Statement No. 33-83524 on
Form S-3 filed August 31, 1994).

     99.8 Form of PMI Mortgage Insurance Co. Pool Insurance Policy (Incorporated
herein by reference to the Exhibits to Registrant's  Registration  Statement No.
33-83524 on Form S-3 filed August 31, 1994).

     99.9 Form of Prospectus  Supplement of Bonds secured by fixed-rate mortgage
loans   (Incorporated   herein  by   reference   to  Exhibits  to   Registrant's
Pre-Effective Amendment No. 4 to Registration Statement No. 33-83524 on Form S-3
filed December 5, 1994).

     99.10 Copy of the Saxon Mortgage Funding  Corporation  Servicing  Guide for
Credit  Sensitive  Loans,  February  1,  1995  Edition  (Incorporated  herein by
reference to Exhibit to the Registrant's Current Report on Form 8-K, filed March
8, 1995).

     99.11 Copy of Financial  Guaranty  Insurance  Policy No.  50364-N issued by
Financial  Guaranty  Assurance  Inc.,  dated April 7, 1995,  with respect to the
Series 3 Bonds (Incorporated  herein by reference to Exhibit to the Registrant's
Current Report on Form 8-K, filed April 21, 1995).

     99.12 Copy of Financial  Guaranty  Insurance  Policy No.  50382-N issued by
Financial  Guaranty  Assurance  Inc.,  dated June 29, 1995,  with respect to the
Series 4 Bonds (Incorporated  herein by reference to Exhibit to the Registrant's
Current Report on Form 8-K, filed July 10, 1995).

     99.13 Copy of the Standard  Terms to Master  Servicing  Agreement,  June 1,
1995 Edition  (Incorporated  herein by reference to Exhibit to the  Registrant's
Current Report on Form 8-K, filed July 10, 1995).

     99.14 Copy of Financial  Guaranty Insurance Policy No. 19804 issued by MBIA
Insurance  Corporation  (Incorporated  herein by  reference  to  Exhibit  to the
Registrant's Current Report on Form 8-K, filed November 15, 1995).

     99.15 Copy of Financial  Guaranty Insurance Policy No. 20596 issued by MBIA
Insurance  Corporation  (Incorporated  herein by  reference  to  Exhibit  to the
Registrant's Current Report on Form 8-K, filed March 21, 1996).

     99.16 Copy of Financial  Guaranty Insurance Policy No. 21296 issued by MBIA
Insurance  Corporation  (Incorporated  herein by  reference  to  Exhibit  to the
Registrant's Current Report on Form 8-K, filed June 19, 1996).

  (b)  Reports on Form 8-K

       None.
<PAGE>


                                   SIGNATURES

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


                          MERIT SECURITIES CORPORATION



                          By:    /s/ Stephen J. Benedetti
                                 -----------------------------------------------
                                     Stephen J. Benedetti
                                     Executive Vice President
                                     (Principal Executive Officer)


                                /s/ Stephen J. Benedetti
                                ------------------------------------------------
                                    Stephen J. Benedetti
                                    Treasurer
                                    (Principal Financial & Accounting Officer)

Dated:  August 26, 2002