SECURITIES AND EXCHANGE COMMISSION
                                Washington, D.C.

                                    FORM 10-K

        ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) of THE SECURITIES
                              EXCHANGE ACT OF 1934

                   For the fiscal year ended December 31, 1998

                       Commission File Number 333-14041-04

                  TRUST CREATED BY BLOCK MORTGAGE FINANCE, INC.

                 (under a Pooling and Servicing Agreement dated
                  as of July 1, 1998, which Trust is the issuer
                     of Block Mortgage Finance Asset Backed
                          Certificates, Series 1998-2)

                             ----------------------

             (Exact name of Registrant as specified in its Charter)


      New York                                                   36-4238147
------------------------------                              --------------------
State or other jurisdiction of                              (I.R.S. Employer of
incorporation or organization                               Identification No.)

The First National Bank of Chicago
One First National Plaza
Chicago, Illinois
Attention: Corporate Trust Administration
           Block Mortgage Finance Asset Backed
           Certificates, Series 1998-2                           60670-0126
--------------------------------------------------------------------------------
(Address of principal executive offices)                         (Zip Code)

Registrant's telephone number, including area code:  (312) 407-0192

Securities registered pursuant to Section 12(b) of the Act: Not applicable.

Securities registered pursuant to Section 12(q) of the Act: Not applicable.

      Indicate by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes X No __

     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K (section 229.405 of this chapter) is not contained herein,
and will not be contained,  to the best of registrant's knowledge, in definitive
proxy or information  statements  incorporated  by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [X]

     Aggregate  market value of the voting stock held by  non-affiliates  of the
registrant as of December 31, 1998: Not applicable.

     Number of shares of common stock as of December 31, 1998: Not applicable.

                       DOCUMENTS INCORPORATED BY REFERENCE

                                      None
<PAGE>


                                     PART I

ITEM 1.   BUSINESS.

     The  Registrant  issued  Asset  Backed  Certificates,  Series  1998-2  (the
"Securities")  pursuant to a Pooling and Servicing Agreement dated as of July 1,
1998 (the  "Cut-off  Date") among Block  Mortgage  Finance,  Inc., as Depositor,
Block Financial Corporation, as Master Servicer, Companion Mortgage Corporation,
as Seller, and The First National Bank of Chicago, as Trustee. The assets of the
Trust  consist  primarily of a pool of fixed rate and  adjustable  rate mortgage
loans (the  "Mortgage  Loans") having an aggregate  principal  balance as of the
Cut-off Date of approximately $252,650,565.18. The Mortgage Loans are secured by
one- to  four-family  residential  properties  (each,  a "Mortgaged  Property").
Certificateholders  receive monthly Statements to  Certificateholders  regarding
distributions.

     Further  information  with  respect  to the  performance  of the  Trust  is
summarized in the monthly Statements to  Certificateholders,  which are filed on
Form 8-K.

ITEM 2.   PROPERTIES.

     Information  regarding the Mortgaged Properties securing the Mortgage Loans
is set  forth  in the  Prospectus  Supplement  and  the  monthly  Statements  to
Certificateholders, which are filed on Form 8-K. The Trust will acquire title to
real estate only upon default of the mortgagors under the Mortgage Loans.

     All real estate  acquired  and held by the Trust as of February 26, 1999 is
improved with single family dwellings. The following table describes real estate
acquired and held by the Trust as of February 26, 1999:



FIXED RATE MORTGAGE LOANS
--------------------------------------------------------------------------------
  PRINCIPAL BALANCE                     $465,190.00
  PERCENTAGE OF POOL                        
  BALANCE                                   0.2588% 
  ------------------------------------------------------------------------------
  NUMBER OF LOANS                                 9
  PERCENTAGE OF LOANS                       
  IN POOL                                   0.2921%
  ------------------------------------------------------------------------------

ADJUSTABLE RATE MORTGAGE LOANS
--------------------------------------------------------------------------------
  PRINCIPAL BALANCE                              $0
  PERCENTAGE OF POOL                             
  BALANCE                                        0%
  ------------------------------------------------------------------------------
  NUMBER OF LOANS                                0
  PERCENTAGE OF LOANS                            
  IN POOL                                        0%
  ------------------------------------------------------------------------------


ITEM 3.   LEGAL PROCEEDINGS.

     There are no material  pending  legal  proceedings  involving the Trust or,
with  respect  to the Trust or the  Mortgage  Loans,  the  Trustee,  the  Master
Servicer or the Depositor,  other than ordinary routine litigation incidental to
the Trustee's, the Master Servicer's or the Depositor's duties under the Pooling
and Servicing Agreement.

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

     No matters were submitted to a vote of Certificateholders during the fiscal
year covered by this report.


<PAGE>



                                     PART II

ITEM 5.   MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
          MATTERS.

     The  Registrant's  Asset  Backed  Certificates,   Series  1998-2  represent
non-recourse obligations of the Trust, such Trust having assets which consist of
the Mortgage Loans.  Strictly  speaking,  Registrant has no "common equity," but
for purposes of this Item only,  Registrant's Asset Backed Certificates,  Series
1998-2 are treated as "common equity."

     (a)  Market Information.  There is no established public trading market for
          Registrant's Securities.

     (b)  Certificateholders.  The approximate  number of registered  holders of
          each class of Certificates as of December 31, 1998 is set forth below:

          Class                    Certificateholders
          -----                    ------------------

          A-1                                3
          A-2                                3
          A-3                                2
          A-4                                3
          A-5                                1
          A-6                                1
          A-7                                4
          A-8                                1
          R                                  2

     (c)  Dividends.   Not applicable.   The  information  regarding   dividends
          required  by  sub-paragraph  (c)  of  Item  201 of  Regulation  S-K is
          inapplicable  because  the  Trust  does  not pay  dividends.  However,
          information as to distributions to  Certificateholders  is provided in
          the monthly  Statements  to  Certificateholders  for each month of the
          fiscal year in which a distribution to Certificateholders was made.

ITEM 6.   SELECTED FINANCIAL DATA.

     Not Applicable. Because of the limited activities of the Trust, information
with  respect  to the  performance  of the Trust is  summarized  in the  monthly
Statements  to  Certificateholders,  which are filed on a monthly  basis on Form
8-K. However,  certain selected aggregate  information with respect to the Trust
for 1998 is filed as an exhibit to this report.

ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS.

     Not Applicable.  The information  required by Item 303 of Regulation S-K is
not meaningful in light of the nature of the Trust.  Information  concerning the
Mortgage Loans and distributions to the  Certificateholders  is contained in the
monthly Statements to Certificateholders which are filed on Form 8-K.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.

     Not applicable.   The Trust  does not  engage in the types of  transactions
required to be disclosed under this Item.

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

     Not Applicable.  Information  with respect to the Trust is contained in the
monthly Statements to Certificateholders filed on a monthly basis on Form 8-K.




<PAGE>


ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
          FINANCIAL DISCLOSURE.

     None.

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT.

     Not Applicable. The Trust does not have officers or directors.

ITEM 11.  EXECUTIVE COMPENSATION.

     Not  Applicable.  The Trust does not have  officers  or  directors  to whom
compensation needs to be paid.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

     (a)  Security  ownership  of  certain  beneficial owners.   Not Applicable.
          Under the Pooling and Servicing  Agreement  governing  the Trust,  the
          holders of the  Certificates  generally  do not have the right to vote
          and are prohibited from taking part in management of the Trust.

     (b)  Security ownership of management.  Not Applicable.  The Trust does not
          have any officers or directors.

     (c)  Changes in control.  Not Applicable. Because Certificateholders do not
          possess,  directly  or  indirectly,  the  power to direct or cause the
          direction of the management and policies of the Trust, other than with
          respect to certain required  consents to amendments to the Pooling and
          Servicing  Agreement and the ability to act as a group in the event of
          the occurrence of certain events which if continuing  would constitute
          events of default  under the  Pooling  and  Servicing  Agreement,  the
          information requested with respect to Item 403(c) of Regulation S-K is
          inapplicable.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     Not Applicable. The Trust does not have officers or directors and under the
Pooling and Servicing Agreement governing the Trust. In addition, the Registrant
does not have  knowledge  of any  transaction  required to be disclosed by Items
404(a)(3) or (a)(4) of Regulation S-K.

                                     PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

     (a)  The following is a list of documents filed as part of this report:


          EXHIBITS

          4.1  Pooling and Servicing Agreement dated as of July 1, 1998  (hereby
               incorporated  herein by  reference  as  Exhibit 4 to  Depositor's
               Current Report on Form 8-K dated July 21, 1998).

          99.1 Master  Servicer  Annual Officer's Certificate  dated March 30,
               1999.

          99.2 Report  of  Independent  Accountants   pertaining  to   Companion
               Servicing Company, L.L.C., dated March 31, 1999.

          99.3 Aggregate  Information  from  Statements  to   Certificateholders
               Relating  to 1998  Distributions to  Holders  of  Block  Mortgage
               Finance Asset Backed Certificates, Series 1998-2.



<PAGE>


          99.4 Consolidated financial statements of MBIA  Insurance  Corporation
               and its subsidiaries as of December 31, 1998 and 1997 and for the
               three years ended December 31, 1998 (hereby  incorporated  herein
               by reference  to the Annual  Report on Form 10-K of MBIA Inc. for
               the year ended  December  31, 1998 under  Commission  file number
               001-09583).

     (b)  Reports on Form 8-K

          Current Report on Form 8-K  dated October 26, 1998    (filing  monthly
          Statements to Certificateholders)
          Current Report on Form 8-K dated November 25, 1998    (filing  monthly
          Statements to Certificateholders)  
          Current  Report on Form 8-K dated December 28, 1998   (filing  monthly
          Statements to Certificateholders)

     (c)  The exhibits  required to be filed by Registrant pursuant to  Item 601
          of  Regulation  S-K are  listed  above and in the  Exhibit  Index that
          immediately follows the signature page hereof.

     (d)  Not  Applicable.    The  Trust  does  not  have  any  subsidiaries  or
          affiliates.  Therefore, no financial statements are filed with respect
          to subsidiaries or affiliates.

                    SUPPLEMENTAL INFORMATION TO BE FURNISHED
                  WITH REPORTS FILED PURSUANT TO SECTION 15(D)
                    BY REGISTRANTS WHICH HAVE NOT REGISTERED
                  SECURITIES PURSUANT TO SECTION 12 OF THE ACT

     No  Annual  report,  proxy  statement,  form of proxy  or other  soliciting
material  has  been  sent to  Security  Holders,  and the  Registrant  does  not
contemplate sending any such materials subsequent to the filing of this report.

                                    SIGNATURE

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

          Block Financial Corporation, not in its individual capacity but solely
          as a duly authorized agent of the Registrant  pursuant to Section 8.17
          of the Pooling and Servicing Agreement dated as of July 1, 1998.


               By:    /s/ Bret G. Wilson
               Name:  Bret G. Wilson
               Title: Vice President
                                       

Date:  March 31, 1999




<PAGE>



                                  EXHIBIT INDEX

EXHIBIT        DOCUMENT



     4.1  Pooling  and  Servicing  Agreement  dated  as of July 1, 1998  (hereby
          incorporated  herein by reference as Exhibit 4 to Depositor's  Current
          Report on Form 8-K dated July 21, 1998).

     99.1 Master Servicer Annual Officer's Certificate dated  March 30, 1999.

     99.2 Report of Independent  Accountants  pertaining to Companion  Servicing
          Company, L.L.C., dated March 31, 1999.

     99.3 Aggregate Information from Statements to Certificate-holders  Relating
          to 1998  Distributions  to Holders  of Block  Mortgage  Finance  Asset
          Backed Certificates, Series 1998-2.

     99.4 Consolidated  financial statements of MBIA Insurance  Corporation  and
          its  subsidiaries  as of December  31, 1998 and 1997 and for the three
          years ended December 31, 1998 (hereby incorporated herein by reference
          to the  Annual  Report on Form 10-K of MBIA  Inc.  for the year  ended
          December 31, 1998 under Commission file number 001-09583).