<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C.  20549

                                   FORM 10-K

                       FOR ANNUAL AND TRANSITION REPORTS
                    PURSUANT TO SECTIONS 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934

[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934

For the fiscal year ended January 31, 1997

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the transition period from                  to
                               -----------------   ------------------------
Commission File No. 33-98644


                              MCA FINANCIAL CORP.
             (Exact name of registrant as specified in its charter)


                      Michigan                           38-3014001
             (State or Other Jurisdiction             (I.R.S. Employer
            of Incorporation or Organization)        Identification No.)

             23999 Northwestern Hwy.
              Southfield, Michigan                        48075
         (Address of Principal Executive Offices)      (Zip Code)


       Registrant's telephone number, including area code: (810) 358-5555

       Securities registered pursuant to Section 12(b) of the Act:  None

        Securities registered pursuant to Section 12(g) of the Act: None

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 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]

The aggregate market value of the registrant's outstanding voting stock held by
non-affiliates as of April 1, 1997, computed by reference to the book value of
the Company's common stock as of January 31, 1997 (because there is no market
for the Registrant's common stock) was $1,314,870.

At April 1, 1997, there were outstanding 523,283 shares of the registrant's
common stock (including shares subject to forfeiture).

Documents Incorporated By Reference:  None.


<PAGE>   2


ITEM 1. BUSINESS.


GENERAL

     MCA Financial Corp. ("MCAFC" or the "Company") is a holding company which,
through its principal subsidiaries and certain affiliates, engages in mortgage
banking, land contract and mortgage syndication, loan originating and servicing
and real estate acquisitions, rehabilitation, leasing and sales.  MCAFC is a
Michigan corporation which was formed in 1989 and was inactive until 1991 when
it became a holding company for its principal subsidiaries.

     Currently, MCAFC operates through the following wholly-owned subsidiaries:



     -    MCA Mortgage Corporation ("MCA Mortgage") is a Michigan corporation
          that was incorporated in 1985 and has conducted a mortgage banking
          business since that date.  It was known as Primary Mortgage
          Corporation until that date and was known as Mortgage Corporation of
          America from August 1985 until March 1993.

     -    Mortgage Corporation of America ("MCA") is a Michigan corporation that
          was incorporated in 1984 and has conducted a mortgage banking business
          since that date.  It was known as First American Mortgage Corporation,
          Inc. until September 1989 and as First American Mortgage Associates,
          Inc. from September 1989 until October 1993.

     -    RIMCO Realty & Mortgage Company, doing business as MCA Realty
          Corporation ("MCA Realty"), is a Michigan corporation that was
          incorporated in 1993 and was acquired by MCAFC on January 31, 1995.
          MCA Realty is engaged in the purchase and sale of residential real
          estate.

     -    Mortgage Corporation of America, Inc. ("MCA-Ohio") is an Ohio
          Corporation that was incorporated in 1993 and has conducted a mortgage
          banking business, emphasizing non-conforming loans, since that date.
          It was known as Charter 1st  Mortgage Banc, Inc. from May 1993 until
          July 1995 when it was acquired by MCA.


     MCAFC has two other subsidiaries, Complete Financial Corporation and
Securities Corporation of America, both Michigan corporations, which are
currently inactive.  Unless otherwise indicated, MCAFC and its subsidiaries are
hereinafter collectively referred to as the "Company."

MORTGAGE BANKING

     Mortgage banking is the business of acting as a financial intermediary in
the origination of mortgage loans, the holding or warehousing of such loans,
the subsequent marketing of such loans to investors and the ongoing management
or servicing of such loans during the repayment term.  Mortgage bankers earn
revenue in each of the four phases of the mortgage banking process:
origination, warehousing, marketing, and servicing.

     Origination.  The origination of mortgage loans produces revenue through
fees paid by the borrower upon applying for a loan and at the loan closing.
The origination process involves providing competitive mortgage loan rates,
soliciting loan applications, performing title and credit review and funding
loans at closing.  The Company originates mortgage loans through direct
solicitation of borrowers by its own sales force and through referrals from
real estate brokers, builder-developers and others (commonly referred to as
retail origination).  In connection with the origination of each loan, the
Company prepares mortgage documentation, conducts credit checks, has the
property appraised by independent appraisers and closes the loan.  The
Company's underwriting standards and procedures with respect to loans it
originates, as described above, conform to the requirements of its mortgage
loan investors.  Referrals from real estate

                                       2

<PAGE>   3
brokers account for the largest portion of the Company's originated loans.  In
addition, advertising is used in the local markets where offices are located
and generates additional origination activity.  

     The following tables set forth the aggregate amount of retail loans and
the percentage of such retail loans that related to properties in the various
states in which the Company operates.


<TABLE>
<CAPTION>
Year        State       $ Amount of Retail Loans      Percentage of Retail Loans
----        -----       ------------------------      --------------------------
<S>        <C>            <C>                               <C>
1997       Michigan            $247 million                      40%
           Indiana               72 million                      12%
           Florida              103 million                      17%
           Ohio                  35 million                       6%
           Illinois              82 million                      13%
</TABLE>

<TABLE>
<CAPTION>
Year        State       $ Amount of Retail Loans      Percentage of Retail Loans
----        -----       ------------------------      --------------------------
<S>        <C>            <C>                               <C>
1996       Michigan            $193 million                      39%
           Indiana               57 million                      11%
           Florida               85 million                      17%
           Ohio                  46 million                       9%
           Illinois              55 million                      11%
</TABLE>


<TABLE>
<CAPTION>
Year        State       $ Amount of Retail Loans      Percentage of Retail Loans
----        -----       ------------------------      --------------------------
<S>        <C>            <C>                               <C>
1995       Michigan            $234 million                      59%
           Indiana               51 million                      13%
           Washington            31 million                       8%
           Ohio                  48 million                      12%
</TABLE>

    The remaining retail loans for fiscal 1997, 1996 and 1995 related to
properties located in various other states.

     The Company currently purchases a substantial portion of its originated
mortgage loans through "wholesale" operations.  Wholesale operations involve
the origination of loans by unrelated mortgage companies which prepare the
necessary documentation, but leave the credit evaluation, property appraisal
and loan funding functions for the Company to perform.  The standards of loan
documentation by such unrelated mortgage company originators may not be as
stringent as the standards applied by the Company on its own direct
originations.  For each wholesale loan the Company's credit evaluation and
property appraisal procedures are the same as for its retail originations.


    The following tables set forth the aggregate amount of wholesale loans and
the percentage of such wholesale loans that related to properties in the 
various states in which the Company operates.

<TABLE>
<CAPTION>
Year        State    $ Amount of Wholesale Loans  Percentage of Wholesale Loans
----        -----    ---------------------------  -----------------------------
<S>        <C>            <C>                       <C>
1997       Florida            $ 33 million                 17%
           Michigan             61 million                 31%
           Illinois             34 million                 18%
           Ohio                 41 million                 21%
</TABLE>

<TABLE>
<CAPTION>
Year        State    $ Amount of Wholesale Loans  Percentage of Wholesale Loans
----        -----    ---------------------------  -----------------------------
<S>        <C>            <C>                       <C>
1996       Florida            $ 11 million                  8%   
           Michigan             66 million                 47%
           Illinois             28 million                 20%
           Ohio                 25 million                 18%
</TABLE>


<TABLE>
<CAPTION>
Year        State    $ Amount of Wholesale Loans  Percentage of Wholesale Loans
----        -----    ---------------------------  -----------------------------
<S>        <C>            <C>                       <C>
1995       Florida            $ 45 million                 33%
           Michigan             35 million                 25%
           Indiana              17 million                 12%
           Oregon                9 million                  7%
</TABLE>

The remaining wholesale loans for fiscal 1997, 1996 and 1995 related to
properties located in various other states.

     The Company is engaged in the origination of conventional mortgage loans,
secured by one- to four-family residential properties (including condominiums),
that conform to the requirements for sale to either the Federal National
Mortgage Association ("Fannie Mae") or the Federal Home Loan Mortgage
Corporation ("Freddie Mac").  The Company also originates non-conforming
conventional loans that exceed the maximum amounts qualifying for sale to
Freddie Mac or Fannie Mae (currently $214,600) but that otherwise conform to
their requirements ("jumbo loans").  The Company's principal mortgage banking
subsidiary, MCA Mortgage, is an approved seller/servicer for Freddie Mac, the
Government National Mortgage Association ("Ginnie Mae") and Fannie Mae, while
its other principal subsidiary, MCA, is an approved seller/servicer for Freddie
Mac.  In addition, MCA Mortgage and MCA are qualified to originate mortgage
loans insured by the Federal Housing Administration ("FHA") and mortgage loans
partially guaranteed by the Veterans Administration ("VA"), which qualify for
pooling by Ginnie Mae and qualify for sale to other institutional investors.
The Company also originates loans which do not conform to Freddie Mac or Fannie
Mae requirements.  These "non-conforming" loans are typically made to
self-employed individuals and others unable to meet the underwriting standards
for conventional lending.  Generally, these loans carry higher interest rates
and fees

                                       3

<PAGE>   4



commensurate with the additional credit risk.  These loans are typically sold
on the secondary market to a different group of investors than the conventional
loans originated by the Company.  The Company expanded its originations in this
market through the acquisition of MCA-Ohio in July 1995, a company which has
been engaged in this type of lending since 1993.

                                       4

<PAGE>   5

     The following table sets forth for the periods indicated the number,
dollar volume and percentage of total volume of the Company's loan production
(dollars in thousands except Average Loan Balances):



<TABLE>
<CAPTION>

                                                   Fiscal Year ended January 31,
                                                ----------------------------------
                                                   1997        1996        1995
RETAIL LOANS
------------
<S>                                              <C>         <C>         <C>
Conventional Loans:
     Number of Loans. . . . . . . . . . . .         3,076       2,715       2,241
     Volume of Loans. . . . . . . . . . . .      $272,943    $243,154    $186,452
     Percent of Total Volume                        33.71%      38.47%      33.04%
FHA/VA Loans:
     Number of Loans. . . . . . . . . . . .         3,765       2,669       2,681
     Volume of Loans. . . . . . . . . . . .      $291,601    $202,803    $186,136
     Percent of Total Volume. . . . . . . .         36.01%      32.07%      32.99%
Non-Conforming Loans:
     Number of Loans. . . . . . . . . . . .           418         581       1,425
     Volume of Loans. . . . . . . . . . . .      $ 32,012    $ 34,133    $ 42,301
     Percent of Total Volume. . . . . . . .          3.96%       5.40%       7.50%
Jumbo Loans
     Number of Loans. . . . . . . . . . . .            68          40          41
     Volume of Loans. . . . . . . . . . . .        17,491    $ 11,478    $ 11,397
     Percent of Total Volume. . . . . . . .          2.16%       1.81%       2.02%

Average Loan Balance  . . . . . . . . . . .      $ 83,806    $ 81,860    $ 66,732
Total Volume of Loans . . . . . . . . . . .      $614,047    $491,568    $426,286

<CAPTION>

WHOLESALE LOANS(1)
------------------
<S>                                             <C>          <C>         <C>
Conventional Loans:
     Number of Loans. . . . . . . . . . . .           546         617         655
     Volume of Loans. . . . . . . . . . . .      $ 48,048    $ 60,590    $ 54,740
     Percent of Total Volume. . . . . . . .          5.93%       9.58%       9.70%
FHA/VA Loans:
     Number of Loans. . . . . . . . . . . .           427         309       1,059
     Volume of Loans. . . . . . . . . . . .      $ 37,904    $ 27,158    $ 73,746
     Percent of Total Volume. . . . . . . .          4.68%       4.30%      13.07%
Non-Conforming Loans:
     Number of Loans. . . . . . . . . . . .         1,803         995         122
     Volume of Loans. . . . . . . . . . . .      $108,928    $ 52,485    $  9,463
     Percent of Total Volume. . . . . . . .         13.45%       8.30%       1.68%
Jumbo Loans
     Number of Loans. . . . . . . . . . . .             4           2          *
     Volume of Loans. . . . . . . . . . . .      $    829    $    480          *
     Percent of Total Volume. . . . . . . .           .10%        .07%         *

Average Loan Balance  . . . . . . . . . . .      $ 70,400    $ 73,174    $ 75,136
Total Volume of Loans(1)  . . . . . . . . .      $195,709    $140,713    $137,949

<CAPTION>

TOTAL LOANS
-----------
<S>                                             <C>          <C>         <C>
Number of Loans . . . . . . . . . . . . . .        10,107       7,928       8,224
Volume of Loans . . . . . . . . . . . . . .      $809,756    $632,281    $564,235
Average Loan Balance  . . . . . . . . . . .      $ 80,118    $ 79,753    $ 68,608
</TABLE>


*Indicates that these types of loans were not originated by the Company during
the applicable period.
(1)  During fiscal 1997, no single company was responsible for greater than 10%
of the Company's wholesale originations.  During fiscal 1996, Watson Financial
Group ("Watson") was responsible for 13% of the Company's wholesale
originations.  Watson is not affiliated with the Company.  During fiscal 1995,
no single company was responsible for greater than 10% of the Company's
wholesale originations.


                                       5
<PAGE>   6

     At January 31, 1997, the Company had applications in process for
approximately 2,022 mortgage loans, aggregating approximately $154 million.  At
January 31, 1996, the Company had applications in process for approximately
1,947  mortgage loans, aggregating approximately $186 million.  Based on
experience, the Company anticipates that 75% to 80% of the loan applications
will close within 45 to 90 days.

     Warehousing.  Warehousing is the term used to describe the process of
holding mortgage loans pending their sale to investors (typically financial
institutions) or into the secondary market.  During the warehousing period the
Company earns income equal to the difference between the interest received on
the mortgage loans and the interest paid on short-term advances from banks
which are used typically to fund the mortgage loans.  During periods when
short-term warehouse borrowing rates exceed long-term mortgage lending rates,
the warehousing of mortgage loans can result in a loss.

     Pending sale and delivery to investors, the Company's mortgage loans are
funded almost entirely by borrowings under warehousing lines of credit from
banks.  The Company typically holds mortgage loans for a period of up to 60
days after closing in order to prepare them for sale.  Borrowed funds are
repaid when the Company receives payment upon the sale of the loans.
Accordingly, the Company is dependent on loan sales to free warehousing credit
lines in order that new loans can be closed.

     Among its short-term financing sources, the Company maintains a loan
agreement with Texas Commerce Bank N.A. and a mortgage loan agreement with
Paine Webber Real Estate Securities.  As is customary in the industry, these
credit facilities can be terminated on demand or upon relatively short notice.
In such an event, the Company would seek replacement or new credit facilities
from other lenders for these existing lines of credit on terms at least as
favorable.  See Item 7, "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity and Capital Resources."

     Marketing.  The offering, sale, packaging and delivery of closed mortgage
loans to investors is the activity which distinguishes a mortgage banker as a
financial intermediary from a portfolio lender or permanent investor.
Marketing mortgage loans is the most complex aspect (both financially and
operationally) of the mortgage banking business.  It requires matching the
needs of the retail origination market (consisting of home buyers and
homeowners seeking new mortgages) with the needs of the secondary market for
mortgage loans (consisting of securities broker-dealers, depository
institutions, insurance companies, pension funds and other investors).
Conventional mortgage loans (i.e., those not guaranteed or insured by agencies
of the federal government), which are secured by one-to-four family residential
properties (including condominiums) and which comply with applicable
requirements, are packaged for direct sale to mortgage investors.  In addition,
there is an active private market for mortgage loans which have not been pooled
or securitized.

     Factors which may influence the market value of packaged loans include the
general level of interest rates, the types of loans (e.g., conventional
mortgage loans or larger jumbo loans), interest payment and principal
amortization schedules (e.g., self-amortizing or balloon, fixed-rate or indexed
adjustable-rate, equal monthly payment or adjustable payment), type of
mortgaged property (e.g., one-to four family detached, row or townhouse,
condominium or planned unit development), ratio of loan proceeds to appraised
property value, property location, credit profile, and whether loans are
packaged into pools (represented by securities) or sold separately on a whole
loan basis.


                                       6

<PAGE>   7


     The following table sets forth for the periods indicated, the Company's
loan production by type of interest payment and principal amortization schedule
as well as loan to value ratio information (dollars in thousands):



<TABLE>
<CAPTION>

                                                                 Year ended January 31,
                                                -----------------------------------------------------
                                                  1997       1996       1995       1994        1993
                                                -------     ------    -------     ------     -------

<S>                                             <C>        <C>        <C>        <C>        <C>
30-year Fixed Rate:
 Number of Loans . . . . . . . . . . . .           6,092      5,349      4,569      5,084        818
 Volume of Loans . . . . . . . . . . . .        $492,949   $424,994   $339,394   $448,762   $ 94,297
 Percent of Total Volume . . . . . . . .           60.88%     67.22%     60.15%     65.28%     46.43%
15-year Fixed Rate:
 Number of Loans . . . . . . . . . . . .             785        611        844      1,953        678
 Volume of Loans . . . . . . . . . . . .        $ 49,149   $ 40,137   $ 49,536   $142,340   $ 50,985
 Percent of Total Volume . . . . . . . .            6.07%      6.35%      8.78%     20.70%     25.11%
Adjustable Rate ("ARMS"):
 Number of Loans . . . . . . . . . . . .           1,487      1,239      1,217        299        248
 Volume of Loans . . . . . . . . . . . .        $143,453   $114,619   $108,983   $ 34,073   $ 26,534
 Percent of Total Volume . . . . . . . .           17.71%     18.13%     19.32%      4.96%     13.07%
Other (1):
 Number of Loans . . . . . . . . . . . .               0         69        352        194        245
 Volume of Loans . . . . . . . . . . . .               0   $  5,225   $  6,154   $  3,121   $  3,408
 Percent of Total Volume . . . . . . . .               0%      0.82%      1.09%      0.45%      1.68%
Balloon Payment:
 Number of Loans   . . . . . . . . . . .            1743        660      1,242      1,380        464
 Volume of Loans   . . . . . . . . . . .        $124,205   $ 47,306   $ 60,167   $ 59,188   $ 27,863
 Percent of Total Volume . . . . . . . .           15.34%      7.48%     10.66%      8.61%     13.71%

Total Number of Loans  . . . . . . . . .          10,107      7,928      8,224      8,910      2,448
Total Volume . . . . . . . . . . . . . .        $809,756   $632,281   $564,235   $687,484   $203,087
Total Loan to Value Percent. . . . . . .           84.13%      83.8%      90.5%      94.5%       n/a*
</TABLE>

-------------------
*n/a = not available for this period.

(1) This category represents mortgages and land contracts with other than 15 or
30 year terms, which have no balloon payment.



                                       7

<PAGE>   8


     The following table sets forth for the periods indicated, the number,
dollar volume and percent of total volume of the Company's loan production by
occupancy status and type of mortgaged property (dollars in thousands):



<TABLE>
<CAPTION>

                                                               Year Ended January 31
                                            -------------------------------------------------------
                                               1997       1996       1995       1994       1993
                                             --------   --------   --------   --------   --------
Detached - Single Family
------------------------
<S>                                          <C>        <C>        <C>        <C>        <C>
Owner Occupied:
 Number of Loans . . . . . . . . . . . . .      8,939      6,943      6,916      7,441      1,864
 Volume of Loans . . . . . . . . . . . . .   $724,011   $578,154   $506,714   $636,440   $178,515
 Percent of Total Volume                        89.41%     91.44%     89.81%     92.58%     87.90%
Non-owner occupied:
 Number of Loans. . . . . . . . . . . . .         442        133        947      1,088        447
 Volume of Loans                             $ 20,733   $  6,121   $ 28,603   $ 23,441   $ 14,427
 Percent of Total Volume                         2.56%      0.97%      5.07%      3.41%      7.11%
Other (1):
 Number of Loans. . . . . . . . . . . . .          76         66         39         64          9
 Volume of Loans. . . . . . . . . . . . .    $  6,022   $  5,929   $  3,310   $  4,894        698
 Percent of Total Volume. . . . . . . . .        0.75%      0.94%      0.59%      0.71%      0.34%

Multi-Unit and Commercial
-------------------------
Owner Occupied:
 Number of Loans. . . . . . . . . . . . . .       523        360        262        265        101
 Volume of Loans. . . . . . . . . . . . . .  $ 52,489   $ 28,919   $ 19,909   $ 18,895   $  7,655
 Percent of Total Volume. . . . . . . . . .      6.48%      4.57%      3.53%      2.75%      3.77%
Non-owner occupied:
 Number of Loans. . . . . . . . . . . . . .       127        426         60         52         27
 Volume of Loans. . . . . . . . . . . . . .  $  6,501   $ 13,158   $  5,699   $  3,814   $  1,792
 Percent of Total Volume. . . . . . . . . .      0.80%      2.08%      1.00%      0.55%      0.88%
</TABLE>

-----------------
(1)  Includes second homes and vacant land.

     The sale of mortgage loans produces a net gain or loss equal to the sum of
(i) the difference between the principal amount of the loans and the net price
at which the loans are sold (the cash gain or loss on sales) and (ii) the
present value of the difference (the "premium on sale of mortgage loans"), if
any, between the stated interest rate collected by the mortgage banker from the
mortgage loan borrowers and the interest rate paid by the mortgage banker to
the purchasers of the loans, net of a normal servicing fee.

     The Company typically holds its mortgage loans for up to 60 days before
selling them to investors.  The Company sells conforming loans either directly
on a loan-by-loan basis to Freddie Mac, Fannie Mae or other financial
institutions, or by a process of "securitization" of loan pools.  Conforming
loans and loans qualifying for securitization through Ginnie Mae programs may
be grouped in pools and assigned to Freddie Mac, Fannie Mae or Ginnie Mae, as
applicable, which issues a mortgage-backed security ("MBS") representing an
undivided interest in the loan pool.  For issuing the MBS, Freddie Mac, Fannie
Mae or Ginnie Mae receives an annual fee, up to .50% of the declining principal
amount of the loan pool.  The Company, through investment bankers, may then
sell these MBSs to investors or hold them for investment.

     Loan pools may be sold to Freddie Mac or Fannie Mae, or securitized in the
form of Ginnie Mae mortgaged-backed securities and sold to institutional
investors with or without recourse in the event of default by the borrowers.
If a loan pool is sold without recourse, Freddie Mac will typically charge a
fee for issuing the MBS which is .05% to

                                       8

<PAGE>   9



 .07% higher than if such loan pool were sold with recourse.  The Company
decides to sell loan pools with or without recourse based primarily upon
capital market conditions and perceived risks of the terms of such mortgage
loan documents.  To date all of the loan pools sold by the Company to Freddie
Mac or Fannie Mae or through Ginnie Mae programs have been sold on a
non-recourse basis.

     Mortgage loans are also sold on a loan-by-loan basis to banks, mortgage
companies and other private investors and, in the case of conforming loans, may
be sold to Freddie Mac or Fannie Mae.  Such individual loan sales are typically
made by the Company on a non-recourse basis.  During fiscal 1997, 1996 and
1995, the Company made $809.8 million, $632.3 million and $564.2 million of
non-recourse loans, respectively, and did not sell any loans with recourse.
Loans underwritten and sold may be subject to repurchase if the underwriting
standards of the investor are not met, potentially resulting in actual loss
and/or the limitation of the Company's liquidity.

     The Company packages substantially all of its FHA-insured and
VA-guaranteed mortgage loans into pools of loans sold in the form of
pass-through mortgage-backed securities guaranteed by Ginnie Mae.  With respect
to loans secured through Ginnie Mae programs, the Company is insured against
foreclosure loss by the FHA or partially guaranteed against foreclosure loss by
the VA (at present generally 25% to 100% of the loan).  Since the Company is
not an end investor in these types of loans, its risk with respect to these
loans is minimal.  FHA-insured and VA-guaranteed mortgage loans represent
approximately 33% of the Company's originations in any given year.  The
discontinuance of these programs would have a limited impact upon the Company
due to the Company's ability to originate a substantial volume of conventional
loans which enables the Company to market mortgage loans to Freddie Mac, Fannie
Mae or other investors.

     The Company commits to sell loans in an amount equal to the closed loans
held in inventory, plus a portion of the loans that the Company has committed
to make but has not yet closed.  This enables the Company to mitigate the
interest rate risk resulting from the fact that market interest rates may
change between the time that the Company commits to make or purchase a loan and
the time the Company commits to sell or sells such loans.  The portion of loans
that have not yet closed which the Company commits to sell depends on numerous
factors, including the total amount of the Company's outstanding commitments to
make loans, the portion of such loans that is likely to close, the timing of
such closings and anticipated changes in interest rates.  The Company
constantly monitors these factors and adjusts its commitments position
accordingly.  The Company's commitment position may consist of mandatory
forward commitments on mortgage-backed securities or mortgage loans, options on
mortgage-backed securities or treasury futures contracts, or outright futures
contracts.  See Note 9 of Notes to Consolidated Financial Statements for a
discussion of financial instruments with off-balance-sheet risk.

     Non-conforming loans are sold to a different group of investors.  They are
typically packaged with other similar loans and sold servicing released, in
bulk, to obtain a more favorable price.  In the fourth quarter, the Company
entered into an agreement with another party to sell substantial portions of
the Company's non-conforming production for purposes of securitization.  This
entitles the Company to the difference between the weighted average coupon rate
of the loan it originated and the security's stated yield, less a normal
servicing fee and certain other fees.

     Servicing.  At January 31, 1997, the Company owned servicing rights for
mortgages with outstanding balances of approximately $1.48 billion and to land
contracts with outstanding net balances of approximately $117 million.  The
Company intends to increase significantly its servicing of residential mortgage
loans, and to maintain a mortgage and land contract servicing system that
emphasizes cash management and compliance with investor servicing requirements.
To this end, the Company intends to purchase conventional mortgage loan
servicing rights from other unaffiliated loan servicers.

     The Company also obtains additional servicing through the retention of
servicing with respect to mortgages and land contracts that it originates and
sells to others.  For residential mortgage loans which it originates, the
Company retains the servicing related to most of these loans temporarily, then
sells the servicing rights from time to time on the open market.  The Company
intends to restrict its purchases of mortgage servicing to servicing that can
be purchased at a price that provides targeted rates of return, and is
compatible with the Company's systems and processes.  During fiscal 1997, the
Company purchased servicing with respect to approximately $830 million of
mortgage loans and has sold servicing with respect to approximately $1.8
billion of mortgage loans.

     A loan servicing portfolio creates an earning asset in the form of income
created from servicing fees, which range generally from 0.25% to 0.50% per year
for mortgage loans and from 0.25% to 2.5% per year for land contracts, based

                                       9

<PAGE>   10



on the declining principal balance of the mortgage loans or the declining net
principal balances of land contracts serviced, and the potential interest
earnings on escrow funds held until the time payment for taxes and insurance
must be made.  Based upon current market conditions, the Company estimates that
servicing rights for residential mortgage loans and land contracts have a
market value from 1.25% to 2.5% and from 1.25% to 4.0%, respectively, of the
principal balance of the mortgage loans and the declining net principal
balances of land contracts serviced.

     One of the Company's strategies is to build and retain its servicing
portfolio.  The Company believes that it has developed systems that enable it
to service mortgage and land contract loans efficiently and therefore enhance
the returns it can earn from investments in servicing rights.  In addition, the
Company believes that the earnings from its servicing portfolio may to some
extent offset the effect of interest rate fluctuations on loan origination
revenue.  In general, the value of the Company's loan servicing portfolio may
be adversely affected as mortgage interest rates decline and expected loan
prepayments increase.  Income generated from the Company's loan servicing
portfolio also may decline in such an environment.  On the other hand, these
effects may be offset somewhat by an increase in originations and servicing
income attributable to new loans which historically increase in periods of
declining mortgage interest rates.  However, there can be no assurance that low
mortgage rates will result in increased loan originations, particularly during
periods of slow or negative economic growth.  As of January 31, 1997, the
weighted average rate on mortgages serviced by the Company but owned by others
was 8.04% and the weighted average rate on mortgages and land contracts
serviced by the Company but owned by MCA Mortgage or MCA-sponsored pass-through
pools was 10.98%.

     The following table sets forth information about the Company's retail and
wholesale loan origination and servicing activities:


<TABLE>
<CAPTION>
                                                                       Year Ended January 31
                                                     -------------------------------------------------------------
                                                         1997         1996         1995         1994        1993
                                                     ----------   ----------   ----------   ----------   ---------
                                                          (dollars in thousands, except average loan balance)
<S>                                                  <C>          <C>          <C>          <C>          <C>
Beginning loan
 servicing portfolio . . . . . . . . . . . . .       $2,206,460   $1,303,628   $1,105,534   $  234,743   $  44,380
Add:
 Loans purchased and
  originated by the
  Company for resale. . . . . . . . . . . .             727,007      632,281      536,881      687,484     203,087
 Loans purchased by the
  Company for syndication. . . . . . . .                 20,849       25,597       27,354       19,188      16,475
 Mortgage servicing
  purchased (net of sales)                             (862,569)     618,780     (166,577)     471,587      98,808
                                                     ----------   ----------   ----------   ----------   ---------
                                                     $2,091,747   $2,580,286   $1,503,192   $1,413,002   $ 362,750
Less:
 Amortization . . . . . . . . . . . . . . . . . .       (53,761)     (43,491)     (43,228)     (36,832)     (1,146)
 Prepayments of loans. . . . . . . . . . . .           (237,196)    (172,100)    (107,571)    (210,305)     (7,773)
 Loans sold with
  servicing sold. . . . . . . . . . . . . . . . .      (199,748)    (158,235)     (48,765)     (60,331)   (119,088)
                                                     ----------   ----------   ----------   ----------   ---------
Ending loan servicing
     portfolio. . . . . . . . . . . . . . . . . . .  $1,601,042   $2,206,460   $1,303,628   $1,105,534   $ 234,743
                                                     ==========   ==========   ==========   ==========   =========
Number of loans serviced
    (end of period). . . . . . . . . . . . . .           21,248       27,357       16,372       15,900       4,063

Average loan balance. . . . . . . . . . . .          $   75,350   $   80,650   $   79,625   $   69,530   $  57,776
</TABLE>




                                       10

<PAGE>   11


     The following table sets forth, for the periods indicated, the mortgage
delinquency rate of the Company's loan servicing portfolio and information
relating to foreclosed properties:



<TABLE>
<CAPTION>
 
                                                               Year ended January 31,
                                                      --------------------------------------------
                                                      1997      1996      1995      1994      1993
                                                      ----      ----      ----      ----      ----

<S>                                                 <C>       <C>       <C>       <C>      <C>
Delinquent mortgage loans at
Period end:
  30 days:
   Number of loans . . . . . . . . . . . . .           838       227       359       259       157
   Percent of total loans                             3.94%     0.83%     2.19%     1.87%     3.86%
  60 days:
   Number of loans . . . . . . . . . . . . .           216        49        97        77        26
   Percent of total loans                             1.02%     0.18%     0.59%     0.56%     0.64%
  90 days or more:
   Number of loans . . . . . . . . . . . . .           367        75       143        43        45
   Percent of total loans                             1.73%     0.27%     0.87%     0.31%     1.11%
  Total delinquencies:
   Number of loans . . . . . . . . . . . . .          1421       351       599       379       228
   Percent of total loans                             6.69%     1.28%     3.65%     2.74%     5.61%

Foreclosed Properties:
  Beginning inventory  . . . . . . . . . . .           122        84        83        84        34
  Properties acquired  . . . . . . . . . . .           106       136        89       122       162
  Ending inventory   . . . . . . . . . . . .           113       122        84        83        84
  Aggregate carrying
   value, net (-000's) . . . . . . . . . . .       $ 2,576   $ 2,288   $ 1,500   $ 1,495   $ 1,701
  Average carrying value . . . . . . . . . .       $22,798   $18,754   $17,854   $18,012   $20,246
</TABLE>



OTHER BUSINESS ACTIVITIES

     Securitization and Syndication of Real Estate Interests.  The Company is
involved in marketing real estate interests in the form of pass-through
securities which represent the ownership of undivided fractional interests in a
defined pool of real estate related loans and loan participations.  The
Company's primary objective in marketing these securities is to provide
investors with consistent high income without undue risk of loss.  To
accomplish this, the Company has developed a program of acquiring for resale
real estate related investments consisting primarily of land contract seller's
interests and real estate mortgage notes.  The Company emphasizes investments
in land contract seller's interests because of the traditional absence of
competition from financial institutions in this market, which generally results
in higher yields, and the belief that legal rights and remedies available to
land contract sellers are more flexible and lead to collection of delinquent
accounts with greater success than can be realized with respect to mortgage
notes.  In addition, a land contract may be used only as an instrument
facilitating the sale and exchange of real property.  Therefore, the nature of
the debt owed by the land contract purchaser is a result of the purchaser's
desire to own, through installment payments, the realty involved.

                                       11

<PAGE>   12



     Through January 31, 1997, the Company had sponsored 114 offerings of
pass-through certificates.  For each offering, a subsidiary acts as the sponsor
and servicing agent for the land contracts, mortgages and other real estate
interests which are held for the benefit of the certificate holders.  Pursuant
to the master pooling and servicing agreement relating to the pools, the
sponsor is obligated to purchase all outstanding participation certificates
held by investors in that pass-through pool at such time as the aggregate net
receivable balance of each pass-through pool is less than 10% of the original
face amount.  At January 31, 1997, the maximum amount of these future purchase
commitments totaled approximately $9.4 million.  The sponsor can satisfy its
repurchase obligation for such a paid-down pool by arranging a purchase of the
underlying real estate interests by another pass-through pool or a mortgage
investor.

     The following table shows the growth of the Company's originations and
purchases of loans for syndication in pass-through pools during the fiscal
years indicated:


<TABLE>
<CAPTION>
                                                                        Year ended January 31,
                                                        --------------------------------------------------------
                                                        1997         1996         1995         1994         1993
                                                        ----         ----         ----         ----         ----       

<S>                                                 <C>           <C>          <C>          <C>         <C>
Number of Land Contracts
 purchased for syndication  . . . . . . . .                 855          933        1,002          798          308
Average balance . . . . . . . . . . . . . .         $    24,418  $    23,485  $    22,453  $    17,759  $    31,413
Total amount of Land
 Contracts purchased for
 syndication. . . . . . . . . . . . . . . .          20,877,360  $21,911,707  $22,498,079  $14,172,104  $ 9,675,388

Number of Mortgage Notes
 purchased for syndication  . . . . . . . .                  46           78          212          344          260
Average loan balance. . . . . . . . . . . .         $    62,930  $    47,246  $    22,906  $    14,580  $    26,152
Total amount of Mortgage
 Notes purchased for
 syndication  . . . . . . . . . . . . . . .         $ 2,894,797  $ 3,685,207  $ 4,856,239  $ 5,015,723  $ 6,799,612

Total number of loans
 purchased for syndication  . . . . . . . .                 901        1,011        1,214        1,142          568
Average loan balance  . . . . . . . . . . .         $    26,384  $    25,318  $    22,513  $    16,802  $    29,005
Total amount purchased for
 syndication  . . . . . . . . . . . . . . .         $23,772,157  $25,596,914  $27,354,318  $19,187,827  $16,475,000
</TABLE>



     Purchase and Resale of Real Property.  The Company purchases and sells
income-producing real estate, with sales made primarily to limited partnerships
for which an affiliated company acts as general partner.  This activity
produces income to the Company in the form of gains on the sale of such real
estate.  In addition, MCA Realty purchases distressed residential real estate,
which is rehabilitated and sold to non-related individuals.  During the year
ended January 31, 1997, the Company acquired and sold 820 single family homes
for a total gain of $8.2 million, $7.5 million of which represented sales to
the limited partnerships described above.  During fiscal 1996, 1995, and 1994,
the Company acquired and sold 723, 735, and 415 single-family homes for total
gains of $7.3 million,  $7.4 million, and $4.9 million, respectively, of which
$6.5 million, $7.3 million and $4.8 million, respectively, represented sales to
related parties.  See Note 14 of Notes to Consolidated Financial Statements for
a summary of selected consolidated segment financial information.

     The income producing real estate which is purchased by the Company and its
affiliates is acquired through the assistance of both affiliated and
unaffiliated real estate brokers.  Approximately 60% and 40%, respectively, is
acquired through affiliated and nonaffiliated brokers.  There appears to be
increased competition for these income-producing real estate properties as real
estate values continue to escalate and the economy continues to grow.

                                       12

<PAGE>   13



     Most of the income-producing real estate is sold by the Company and its
affiliates on land contracts to limited partnerships controlled by an affiliate
of the Company.  These transactions are not arm's length transactions with
independent third party appraisals.  The land contracts are then sold by the
Company to real estate pass-through pools of which MCA is the sponsor of the
pools.  The remaining balance of income-producing real estate is sold to
unrelated third parties.

     Because most of the income-producing real estate sales are directed to
affiliated partnerships, the normal real estate concerns associated with
purchasers and fluctuating market values are not applicable.  These
partnerships are engaged in the business of renting income producing properties
to individuals.  The day-to-day real estate rental concerns are those of the
syndicated real estate limited partnerships of the affiliates and not those of
the Company.  However, the payments to the Company pursuant to the land
contract receivables are dependent upon the ability of these partnerships to
generate rental income.

     Other.  During fiscal 1996, the Company made a common stock investment of
approximately $1.0 million in a Delaware Limited Liability Company.  This
start-up company participates in the used vehicle retail industry through
providing floor plan financing and joint venture activities with existing
dealers.  The Company's investment in the Class B Securities issued by this
Limited Liability Company provides it the right to participate in earnings and
distributions, if any, subject to the preferential right of certain other  
shareholders.

COMPETITION

     The Company competes with other mortgage bankers, state and national
banks, thrift institutions and insurance companies for loan originations and
purchases.  While there are several dominant competitors in the industry, the
Company believes it is a mid-range mortgage company in its markets.  Many of
its competitors have substantially greater resources than the Company.
However, the Company believes that it offers a more diversified and, in some
cases, unique product line to its customers.  The Company competes, in part,
through print and electronic media advertising campaigns, by motivating its
sales force through incentive compensation based on volume of loan
originations, by maintaining a network of branch locations designed to provide
sales support for its originators and by maintaining close relationships with
real estate brokers and builder-developers.

REGULATION

     The Company is subject to the rules and regulations of, and examinations
by, Freddie Mac, Fannie Mae, Ginnie Mae and the Department of Housing and Urban
Development ("HUD") with respect to the processing, origination and purchase,
sale and servicing of mortgage loans and contracts.  These rules and
regulations prohibit discrimination, provide for inspection and appraisals of
properties, require credit reports on prospective borrowers and, in some cases,
fix maximum interest rates, fees and loan amounts.  The Company is required to
meet certain financial requirements and to submit certified financial
statements to these agencies annually.  Mortgage loan origination activities
are subject to the Equal Credit Opportunity Act, Federal Truth-in-Lending Act,
Real Estate Settlement Procedures Act and the regulations promulgated
thereunder which prohibit discrimination and require the disclosure of certain
information to borrowers concerning credit and settlement costs.  Mortgage
loans, other than first mortgages, are also subject to the usury statutes of
the states in which the Company does business.  Additionally, there are various
state laws affecting the Company's mortgage banking operations, including
licensing requirements and substantive limitations on the interest and fees
that may be charged.  MCA Mortgage and MCA are registered with the Commissioner
of the Michigan Financial Institutions Bureau under the Michigan Mortgage
Brokers, Lenders, and Servicers Licensing Act and are subject to the provisions
of such law.  MCA Realty is a licensed real estate broker in the state of
Michigan.  Expansion of the Company's operations has subjected it to similar
regulations in the states of Indiana, Illinois, Idaho, Kentucky, Maryland,
Ohio, Florida, West Virginia, California, North Carolina and Pennsylvania.


                                       13

<PAGE>   14


EMPLOYEES

     At January 31, 1997, 452 individuals were employed by the Company, of
which 433 were full-time employees, including 157 mortgage and land contract
originators and mortgage and land contract servicers.  The remaining full-time
employees are administrative and management personnel.  None of the Company's
employees is represented by a bargaining agent.  The Company believes its
relations with its employees are good.

ITEM 2.  PROPERTIES.

         The Company's executive and administrative offices and its mortgage
banking and real estate operations are located in approximately 39,000 square
feet of leased office space in Southfield, Michigan.  The basic annual rent for
the Southfield office space is approximately $482,000.  The lease for this
office expires on September 30, 1999.  The Company believes that its offices are
adequate for present purposes and for any foreseeable increase in its business
activities.  As of January 31, 1997, the Company leased office space in 29 other
locations: 12 in Michigan, 4 in Indiana, 5 in Florida, 3 in Ohio, 2 in Illinois
and one in each of Kentucky, North Carolina and California.  These locations are
used by certain of the Company's mortgage and land contract originators.

ITEM 3.  LEGAL PROCEEDINGS.

         The Company is a party to various routine legal proceedings arising out
of the ordinary course of its business.  Management believes that none of these
actions, individually or in the aggregate will have a material adverse effect on
the financial condition or results of operations of the Company.


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

         There were no matters submitted to a vote of the security holders
during the fourth quarter of the fiscal year ended January 31, 1997.



                                    PART II


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

        There is no established public trading market for any class of common
equity of the Company.  As of April 1, 1997, there were 67 shareholders of
record of the Company's common stock.  The Company has never paid a dividend on
its common stock and has no present plans to pay dividends in the future.  The
Company is restricted in its ability to pay dividends under the terms of
Indentures with respect to its outstanding 11% Asset-Backed Subordinated
Debentures, Series 1994 due June 30, 2000 and its 11% Subordinated Debentures,
Series 1996 due June 30, 2002.




                                       14

<PAGE>   15


ITEM 6. SELECTED FINANCIAL DATA.


     The following table sets forth selected historical financial data of the
Company for each of the periods indicated in the five-year period ended January
31, 1997, which were derived from the audited consolidated financial statements
of the Company.  The audited consolidated financial statements of the Company
for each of the periods in the three-year period ended January 31, 1997 are
included elsewhere in this Annual Report on Form 10-K.  This table should be
read in conjunction with the audited consolidated financial statements of the
Company and the notes thereto.


<TABLE>
<CAPTION>

                                                                                     Year ended January 31,
                                                               ------------------------------------------------------------
Income Data:                                                    1997          1996            1995         1994       1993
                                                                -----         -----           -----        -----      -----

Revenues:                                                                  (Dollars in thousands, except per share data)
<S>                                                           <C>             <C>            <C>         <C>          <C>
Gain on sale of land  contracts. . . . . . . . . . .          $  3,438        $ 2,981        $  2,983    $   1,753    $ 1,433
Gain on sale of real estate. . . . . . . . . . . . .               708            751              --           67        299
Gain on sale of real
 estate-related parties. . . . . . . . . . . . . . .             7,539          6,529           7,365        4,811      3,249
Gain on bulk sales of
 servicing rights  . . . . . . . . . . . . . . . . .             5,231          4,726           7,475        5,579        997
Mortgage origination fees and gain on  . . . . . . .            24,862         14,339           5,584       11,282      6,280
 sale of mortgages
Servicing fees . . . . . . . . . . . . . . . . . . .             8,499          6,244           4,617        1,917        851
Interest income. . . . . . . . . . . . . . . . . . .             8,168          5,903           5,106        3,948        856
Other. . . . . . . . . . . . . . . . . . . . . . . .               481            478             241          177        428
                                                              --------        -------        --------    ---------    -------
   Total revenues. . . . . . . . . . . . . . . . . .            58,926         41,951          33,371       29,534     14,393
Expenses . . . . . . . . . . . . . . . . . . . . . .            57,522         40,823          33,547       28,562     13,477
                                                              --------        -------        --------    ---------    -------
Income (loss) before
 federal income taxes. . . . . . . . . . . . . . . .             1,404          1,128            (176)         972        916
Provision for federal 
income taxes . . . . . . . . . . . . . . . . . . . .               639            512             102          421        330
                                                              --------        -------        --------    ---------    -------
   Net income (loss) . . . . . . . . . . . . . . . .          $    765        $   616        $   (278)   $     551    $   586
                                                              ========        =======        ========    =========    =======

Net income (loss) per share. . . . . . . . . . . . .          $   1.61        $  1.44        $   (.69)   $    1.60    $  2.15
Ratio of earnings over fixed charges (2) . . . . . .             1.11x          1.13x              --         1.20x      1.82x
Earnings (deficiency of  earnings) over
fixed charges. . . . . . . . . . . . . . . . . . . .             1,404          1,128            (176)         972        916
</TABLE>




<TABLE>
<CAPTION>

                                                                               Year ended January 31,
Balance Sheet Data:                                          ----------------------------------------------------
Assets:                                                         1997        1996     1995     1994      1993
                                                             -------      -------   ------  -------    ------ 
<S>                                                         <C>          <C>       <C>       <C>      <C>
 Cash. . . . . . . . . . . . . . . . . . . . . . . .        $  3,097     $  2,730  $ 2,931  $ 4,782    $ 3,699
 Mortgages held for resale.. . . . . . . . . . . . .          54,430       63,306   15,702   39,250     14,084
 Other.. . . . . . . . . . . . . . . . . . . . . . .          87,465       69,155   58,479   32,813     10,849
                                                            --------     --------  -------  -------    -------
    Total assets . . . . . . . . . . . . . . . . . .        $144,992     $135,191  $77,112  $76,845    $28,632
                                                            ========     ========  =======  =======    =======
 Liabilities: 
 Notes payable(3). . . . . . . . . . . . . . . . . .        $ 83,975     $ 86,598  $44,843  $54,549    $13,824
 11% Subordinated Debentures
 due 1997, 2000 and 2002 . . . . . . . . . . . . . .          15,542        9,174    4,938    4,938      3,171
 10% Subordinated Notes Payable. . . . . . . . . . .          15,000          --       --       --         --
</TABLE>


                                       15

<PAGE>   16
<TABLE>
<S>                                                     <C>        <C>       <C>      <C>        <C>
Other. . . . . . . . . . . . . . . . . . . .              19,570     29,258   18,041    8,495      6,465
                                                        --------   --------  -------  -------    -------
   Total liabilities . . . . . . . . . . . .            $134,087   $125,030  $67,822  $67,982    $23,460
Redeemable Common Stock(4) . . . . . . . . .                 256         --       --      300        300
Stockholders' equity . . . . . . . . . . . .              10,649     10,161    9,290    8,563      4,872
                                                        --------   --------  -------  -------    -------
 Total liabilities and
 stockholders' equity. . . . . . . . . . . .            $144,992   $135,191  $77,112  $76,845    $28,632
                                                        ========   ========  =======  =======    =======
</TABLE>


<TABLE>
<CAPTION>

          
                                                                         Year ended January 31,
                                                              --------------------------------------------- 
Operating Data:                                                1997      1996      1995      1994      1993
                                                               ----     -----      ----      ----      ----  
<S>                                                          <C>       <C>      <C>        <C>      <C> 
Loan production:
 Number of loans originated                                    10,107     7,928     8,224     8,910     2,448
 Average loan balance. . . . . . . . . . . . . . . .         $     80  $     80  $     69  $     77  $     83
 Total loans originated. . . . . . . . . . . . . . .         $809,756  $632,281  $564,235  $687,484  $203,087
Number of full-time
employees. . . . . . . . . . . . . . . . . . . . . .              433       412       336       448       202
</TABLE>


(1)  On July 19, 1994 the Company purchased substantially all of the revenue
     producing activities of Liberty National Mortgage Corporation.  See Note
     15 of Notes to Consolidated Financial Statements.
(2)  The ratio of earnings to fixed charges was computed by dividing (a) net
     income (loss) for the period plus fixed charges by (b) fixed charges,
     which consist of interest expense, amortization of debt expense and that
     portion of rentals that represents interest.  The ratio of earnings over
     fixed charges and preferred dividends was 1.12x, 1.12x, 1.19x, and 1.79x
     for the years ended January 31, 1997, 1996, 1994, 1993, respectively.
     Earnings were insufficient to cover fixed charges for the year ended
     January 31, 1995.  The deficiency of earnings over fixed charges and
     preferred dividends was $.6 million for the year ended January 31, 1995.
(3)  See Note 3 of Notes to Consolidated Financial Statements.
(4)  See Note 5 of Notes to Consolidated Financial Statements


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


LIQUIDITY AND CAPITAL RESOURCES

         The Company's primary financing needs are for mortgage banking
activities, loan funding activities, operating cash flows and the purchase of
mortgage servicing rights.

         Loan funding activities are primarily financed through the use of
mortgage warehouse lines of credit with commercial banks.  See Note 3 of Notes
to Consolidated Financial Statements.  The Company also provides funding for
loans by using a technique known as "table funding," which is common in the
mortgage banking industry.  In this case, funds are advanced directly to the
title company for closing from a third party source of funds, typically another
mortgage bank or a financial institution.  This technique avoids the use of the
Company's warehouse lines of credit, but proves less profitable as a result of
fees charged by the third party provider of funds.  For the past year, the
Company financed approximately 95% of its mortgage originations using its
warehouse lines of credit and approximately 5% with table funding sources.

         The Company currently has a $115 million loan agreement with Texas
Commerce Bank N.A.  This revolving warehousing line of credit provides financing
for funding and originating a variety of residential mortgage loans including,
but not limited to, conforming mortgages, non-conforming mortgages and land

                                       16

<PAGE>   17



contracts.  Interest on bank borrowings are based on LIBOR plus .85 to 2.5%
depending on the type of loan.  Mortgage loans held for resale are pledged as
collateral.  This facility is scheduled to expire on September 3, 1997.

         The Company also has a $10 million warehousing line of credit with
Paine Webber Real Estate Securities, Inc. ("Paine Webber").  Interest on
borrowings under this facility are based on Libor plus 1.5%.  This facility is
scheduled to expire on November 1, 1997. The Company expects to renew these
warehousing lines of credit upon their respective expirations.   At January 31,
1997 a total of $52.8 million was outstanding under these facilities.

         The Company also has a $15 million loan and financing agreement with
the Board of Trustees of the Policeman and Firemen Retirement System of the City
of Detroit.  This subordinated term loan has been provided to expand the
Company's non-conforming lending business.  Interest on this borrowing is 10%
and is payable quarterly.  Commencing July 1, 2001 equal quarterly installments
of principal and interest will be paid until the loan terminates and is repaid
in full on June 30, 2006.  Under conditions of this agreement, the lender was
issued 30,197 shares of the Company's common stock.  This represented 6% of the
outstanding unrestricted shares at July 18, 1996.  As part of the agreement the
lender has the right to "put" these shares back to the Company on August 1, 2006
or upon default under a number of different scenarios.

         The Company also utilizes mortgage loan repurchase agreements with
Paine Webber pursuant to which Paine Webber purchases mortgage loans until such
time as the loans are pooled for resale to an end investor at which time the
Company repurchases such loans.  Such agreements provide for interest payments
based on the federal funds rate.  These agreements can be terminated on demand.

         The Company utilizes a strategy of retaining servicing rights on a
portion of its loan originations in order to provide a steady stream of
servicing revenues and cash flow in future years and as a hedge against
inflation and rising interest rates.  To help facilitate this strategy, the
Company utilizes four funding sources: proceeds from a $4.9 million debenture
offering that was completed in July 1993, a bank credit facility, which was
first made available to the Company in April 1993 and proceeds from additional
$10 million and $6 million debenture offerings.  The $4.9 million and the $10.0
million series of debentures, as well as the credit facility are collateralized
by certain of the Company's servicing rights and rights to servicing income.
The debenture offering completed in April 1993 was terminated March 17, 1997.
The credit facility, which is currently at $28.5 million, is with Comerica Bank
and is enhanced by a stand-by Note Purchase Agreement between Comerica Bank and
the Policemen and Firemen Retirement System of the City of Detroit (the "Fund")
whereby the Fund has agreed to provide payment to Comerica Bank upon the
occurrence of certain events of default by the Company.  This credit enhancement
permits the Company to obtain a more favorable interest rate and
collateralization terms from the lending bank.  In consideration for the credit
enhancement provided, the Company agreed to pay certain fees to the Fund and
provide it with an option to purchase up to 5% of the Company's outstanding
common stock, at 70% of the public offering price per share, if the Company
completes a firm commitment underwritten sale of its common stock prior to April
30, 2000.  At January 31, 1997, $28.3 million was outstanding under the Comerica
Bank credit facility.

         During the years ended January 31, 1997 and 1996, mortgage servicing
rights with respect to approximately 75% and 75%, respectively, of loan
originations, or $607 million and $474 million principal amount, respectively,
were retained by the Company and financed primarily through operations, the
debenture offerings and the Comerica Bank credit facility. The Company intends
to continue the level of retained servicing and may purchase additional mortgage
servicing rights.

         As in mortgage banking, the Company also has a need to finance loan
funding activities with respect to its land contract and mortgage syndication
until such time as the loans are packaged and sold to investors.  The principal
sources of this financing are two limited partnerships which have been
established in order to provide up to $4 million for this purpose.  These
partnerships will terminate in December 1997.  The Company also has $4

                                       17

<PAGE>   18



million available as part of its $115 million facility with Texas Commerce
Bank.  The Company is considering several alternatives to extend or replace
these financing sources at the time of their respective terminations.
There is no assurance that the Company will be successful in extending or
replacing these financing sources, however.

     The Company has $1.0 million available under a credit facility with a
commercial bank for the acquisition and rehabilitation of residential real
property prior to resale.  At January 31, 1997, $.28 million was
outstanding under this facility.  See Note 3 of Notes to Consolidated
Financial Statements.

     The Company also has $1 million available under a $1.5 million credit
facility with a commercial bank which is similar in structure to a mortgage
warehouse line of credit.  This portion of the credit facility is used
exclusively for the warehousing of land contracts.  The additional $0.5
million is available for working capital.  At January 31, 1997, $.25
million was outstanding under this facility.  See Note 3 of Notes to
Consolidated Financial Statements.  This facility was terminated in April
1997.

     During fiscal 1997, the Company's operating activities used $23.6 million. 
Of this, $15.5 million was used to fund the increase in accounts receivable -
mortgages sold. The increase in accounts receivable, primarily receivables
related to bulk sales of servicing rights, used $7.3 million.  The Company used
$8.0 million to increase excess interest spread receivable and $9.5 million to
decrease accounts payable. These uses of cash were offset by a $8.9 million net
decrease in mortgages held for resale. The Company's investing activities
during fiscal 1997 provided $5.9 million.  Financing activities provided the
Company $18.1 million during fiscal 1997.  The Company used proceeds from notes
payable of $814.9 million to fund mortgage loans and invest in purchased
servicing rights. Proceeds from sales of mortgage loans and investments in
purchased servicing rights of $817.7 million were used to make payments on
notes payable.  Sales of the Company's 11% Subordinated Debentures due June 30, 
2000 and 2002 provided $6.4 million.  Proceeds from subordinated notes
payable also provided $15.0 million.


RESULTS OF OPERATIONS

     Revenue for the year ended January 31, 1997 increased by 40.5% to
$58.9 million.  Revenue for the year ended January 31, 1996, increased by
25.7% to $42.0 million as compared to $33.4 million for the fiscal year
ended January 31, 1995.  Net earnings increased by 24.3% to net earnings of
$765,338 for fiscal 1997 as compared to net earnings of $615,530 for fiscal
1996.  Net earnings in fiscal 1996 had increased from a net loss of
$227,546 in fiscal 1997.  In fiscal 1997 revenue increased in virtually
every revenue item.  The most substantial increase, $10,522,661, occurred
in mortgage origination fees and gain on sale of mortgages.  Interest
income and servicing fees increased $2,265,185 and $2,255,648,
respectively.   The increase in revenue during fiscal 1996 was the result
of increased mortgage origination fees to $14.34 million in fiscal 1996 as
compared to $5.58 million in fiscal 1995.  Servicing fees also increased to
$6.24 million in fiscal 1996 from $4.62 million in fiscal 1995.  The only
revenue item to substantially decrease was gain on bulk sales of servicing
rights which declined to $4.73 million in fiscal 1996 as compared to $7.48
million in fiscal 1995.  The increase in earnings in fiscal 1997 resulted
from increased overall revenues, specifically in non-conforming
originations.  The increase in earnings during fiscal 1996 is attributable
to a general decline in interest rates during the year resulting in
increased originations, gains on loan resale and increased non-conforming
originations.  The net loss during fiscal 1995 was due to significant
increases in long-term interest rates during the first six months of the
year.  This severely curtailed mortgage refinancings and increased
competitive pressures in the market.  The mortgage prepayment rate was
8.9%, 9.8% and 12.5% during fiscal 1995, 1996 and 1997, respectively.  The
amount of refinancing activity was $173 million during fiscal 1995, $172
million during fiscal 1996, and $194 million during 1997.

     Mortgage origination fees, including gains on sale from loan resale
transactions, for fiscal 1997, increased to $24.86 million as compared to
$14.34 million in fiscal 1996, an increase of 73.4%.  Such mortgage
origination fees had increased in fiscal 1996 from $5.58 million in fiscal
1995.  The total dollar volume of loans originated increased by 28.2% to
$810 million, for fiscal 1997, up from $632 million for fiscal 1996 which
represented a 12.1% increase from $564 million in fiscal 1995.  The total
number of loans produced increased

                                       18

<PAGE>   19



27.5% from 7,928 in fiscal 1996 to 10,107 in fiscal 1997.  The total number
of loans produced decreased 3.8% from 8,224 in fiscal 1995 to 7,928 in
fiscal 1996.  The average loan balance increased to $80,118 in fiscal 1997
from $79,753 in fiscal 1996 and $68,608 in fiscal 1995.  Increased mortgage
originations in fiscal 1997 resulted from steady (relatively low) interest
rates, strong home buying and building markets and the continued addition of
new loan origination branches.  The increase in the dollar volume of loan
originations during fiscal 1996 resulted from the general decline in long-term
interest rates and the continuity in production from branches opened in fiscal
1995 for a full year.  Included in mortgage origination fees are gains and
losses on sale from loan resale transactions of $4.40 million in fiscal 1997,
$3.77 million fiscal 1996 and $(.43) million in fiscal 1995.

     In fiscal 1997, wholesale originations totaled $195.71 million, in
fiscal 1996, approximately $140.71 million and in fiscal 1995,
approximately $137.95 million.  The increase in wholesale originations from
fiscal 1996 to fiscal 1997 was the result of the Company focusing its
wholesale efforts on non-conforming wholesale originations which increased
from $52.49 million to $108.93 million, respectively.  Non-conforming
wholesale originations in fiscal 1996 increased to $52.49 million from
$9.46 million in fiscal 1995.

     Mortgage origination revenues as a percent of total mortgage
origination volume increased from 1.0% in fiscal 1995 to 2.3% in fiscal
1996 to 3.1% in fiscal 1997.  The increase from fiscal 1995 to fiscal 1996
reflects an easing in the competitive pressures experienced in fiscal 1995
resulting from the decline in interest rates, increased production volume
in non-conforming mortgages, which typically have higher margins, and
increased gains from loan resale transactions.  The increase in fiscal 1997
was attributable, primarily, to the continued increase in the volume of
non-conforming loan production.

     The Company recorded revenues of $5.23 million related to the sale of
bulk servicing rights of $1.8 billion during fiscal 1997 as compared to
$4.73 million on bulk sales of $940 million.  Gains on bulk sales as a
percent of servicing rights sold decreased to .29% for fiscal 1997 from
0.5% in fiscal 1996.  This decrease was due to the net effect of an
increase of $500 million of bulk sales involving servicing previously
purchased.  The gain on bulk sales of this bulk-purchased servicing is
lower because the Company's basis is much greater than in originated
mortgages.  Revenues from bulk sales of servicing in fiscal 1995 were $7.48
million, 0.4% of servicing rights sold.  In fiscal 1996 and fiscal 1995,
respectively, the Company sold servicing rights of $.7 billion and $1.2
billion that had previously been purchased by the Company in bulk.

     Interest income increased from $5.11 million in fiscal 1995 to $5.90
million in fiscal 1996, an increase of 15.5%, and increased to $8.20
million in fiscal 1997, an increase of 39.0% as compared to fiscal 1996.
Interest income is earned primarily on loans held by the Company pending
resale in the secondary market.  The increases in fiscal 1997 and fiscal
1996 resulted from increased production volumes in general and specifically
increased non-conforming production volumes which typically carry higher
interest rates.

     Servicing fee revenue increased $4.62 million in fiscal 1995 to $6.24
million, an increase of 35.2%, and increased to $8.50 million in fiscal
1997, an increase of 36.2% as compared to fiscal 1996.  In fiscal 1995 as
compared to fiscal 1996, the Company's servicing portfolio increased from
$1.3 billion to $2.2 billion and from 16,372 loans serviced to 27,357 loans
serviced.  At the end of fiscal 1997, the Company's servicing portfolio was
$1.6 billion with $21,248 loans serviced.  The Company sold $1.0 billion of
servicing at the end of fiscal 1997.  Average servicing revenue per loan
remained constant at $286 per loan for fiscal 1995 and fiscal 1996 and
increased to $350 per loan for fiscal 1997.  The variance was primarily due
to the timing of bulk sales.  Servicing fees, measured in terms of an
average percentage applied to the amount of the outstanding mortgage, have
not materially changed from year to year.

     The aggregate of gains on the sale of real estate-related parties and
gains on the sale of real estate decreased from approximately $7.4 million
in fiscal 1995 to $7.3 million in fiscal 1996 and increased in fiscal 1997
to $8.2 million.  Of these amounts, gains on the sale of real
estate-related parties represented approximately $7.4 million in fiscal
1995, $6.5 million in fiscal 1996 and $7.5 million in fiscal 1997.  This
reflects the Company's

                                       19

<PAGE>   20



strategy to develop its business of real estate limited partnership
syndications through a former subsidiary.  During fiscal 1997, 1996, and
1995, 820, 723, and 735 income producing properties were sold.  Typically,
these properties are acquired in distressed situations, requiring
rehabilitation expenditures or having substantial tax delinquencies which
need to be paid.

     Gains on the sale of land contracts were stable during fiscal 1996 and
fiscal 1995, remaining approximately $3.0 million for both years and
increased to $3.4 million in fiscal 1997.  This reflects an increase in the
number of loan originators employed by the Company and increased marketing
efforts.  The Company syndicated 16 pass-through pools with a total of
$20.9 million of real estate related loans in fiscal 1997.  In fiscal 1996,
the Company syndicated 15 pass-through pools of real estate related loans
with a total of $21.9 million of loans, as compared to 15 pools with a
total of $22.5 million of loans in fiscal 1995.  Gains as a percentage of
total syndication amounts increased from 13.3% in fiscal 1995 to 13.6 % in
fiscal 1996, and 16.3% in fiscal 1997.  These percentages are consistent
with past results.

     Expenses for fiscal 1997 increased by $16.7 million over fiscal 1996
from a total of $40.8 million to a total of $57.5 million, an increase of
40.9%.  Expenses for fiscal 1996 increased by $7.3 million from a total of
$33.5 million in fiscal 1995 to $40.8 million in fiscal 1996, an increase
of 21.8%.  These increases were in line with the overall increase in
revenue during these three years.  Higher expenses directly resulted from
increases in virtually every category of revenue, reflecting the Company's
overall growth to meet increases in production levels and number of loans
serviced.  As a percentage of revenue, however, payroll and commissions
dropped from 46.7% to 42.6% and 40.8% for fiscal 1995, fiscal 1996 and
fiscal 1997, respectively.  These continued improvements in efficiency have
resulted from the Company's commitment to keeping up with the available
technology in the industry.  Interest expense increased in fiscal 1997 to
$11.4 million from $7.6 million in fiscal 1996 and $6.0 million in fiscal
1995, following increased production levels.  As a percentage of revenue,
interest expense has been 19.4%, 18.0% and 18.0% for fiscal 1997, 1996 and
1995, respectively.  General and administrative expense remained consistent
at 24.8%, 24.1% and 24.4%, as a percentage of revenue for fiscal 1997, 1996
and 1995, respectively.  Amortization expense increased from $1.9 million
in fiscal 1995 to $3.3 million in fiscal 1996 and $4.9 million in fiscal
1997.  The increases correspond with the balances in the servicing
portfolio and the corresponding runoff and increased amortization of
certain deferred charges and other assets.

     The Company is party to financial instruments with off-balance-sheet
risk in the normal course of business through the production and sale of
mortgage loans and the management of interest rate risk.  These financial
instruments include commitments to extend credit and forward contracts to
deliver and sell loans to investors.  The Company is exposed to credit loss
in the event of nonperformance by the counter-parties.  However, the
Company does not anticipate such nonperformance and the Company's exposure
to credit risk with respect to commitments to extend credit are limited due
to the non-recourse nature of the loans upon sale to investors meeting
certain requirements.  At January 31, 1995, 1996 and 1997, respectively,
the Company had approved loans that had not yet closed amounting to
approximately $23.08 million, $74.3 million and $40.1 million.  See Note 9
of Notes to Consolidated Financial Statements.

INFLATION

     Inflation affects the Company primarily in the mortgage banking
operations as a result of its impact on interest rates.  Historically,
interest rates have increased during periods of high inflation and this has
had a negative impact on the Company's mortgage origination volume.
Conversely, during periods of low inflation interest rates have also been
low and this has had a positive impact on mortgage originations.

     The total dollar volume of land contracts purchased and originated
have been consistent at $22.5 million, $21.9 million and $20.9 million for
fiscal 1995, fiscal 1996, and fiscal 1997, respectively.   The Company's
land contract originations volume tends to run counter-cyclical to the
mortgage origination cycle described above.  As mortgage interest rates
increase, especially above 11%, the use of land contract financing
increases and has a

                                       20

<PAGE>   21



positive impact on land contract originations.  As interest rates decrease,
mortgage financing activity increases and land contract originations tend
to decrease.

         The Company's strategy of increasing its servicing portfolio may also
act as an inflationary hedge.  As interest rates increase, prepayments decrease,
which decreases amortization expense and increases the earnings potential of the
servicing portfolio.  However, during periods of low inflation and decreasing
interest rates, prepayments increase, which increases amortization expense and
results in a decrease in the earnings potential of the servicing portfolio.

SEASONALITY

         The mortgage banking industry is usually subject to an unpredictable
degree of seasonal trends.  These trends reflect the general pattern of
nationwide home sales.  Such sales typically peak during the spring and summer
seasons and decline to lower levels from October through January. In an effort
to mitigate this, the Company has opened eight branch offices in Florida.

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

          The information called for by this Item 8 is hereby incorporated by
reference from the Company's Consolidated Financial Statements, including the
reports of independent certified public accountants thereon, beginning at page
F-1 of this Form 10-K.



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

         Not applicable.




                                       21

<PAGE>   22


                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

     Set forth below is certain information about the directors and
executive officers of MCAFC.

<TABLE>
<CAPTION>

Name and Age                   Principal Position(s) Held with MCAFC
<S>                            <C>
Patrick D. Quinlan, 50         Chairman, Chief Executive Officer and Director
Thomas P. Cronin, 50           Vice Chairman and Director
Lee P. Wells, 36               President, Chief Operating Officer and Director
Keith D. Pietila, 47           Executive Vice President, Chief Financial Officer and Director
Alexander J. Ajemian, 33       Senior Vice President, Controller and Treasurer
James B. Quinlan, 45           Director
C. Thompson Wells, Jr., 56     Director
D.   Michael Jehle, 47         Director
</TABLE>

     The Board of Directors is divided into three classes, with each class
serving a three-year term.  At each annual meeting of the shareholders,
directors in the class whose term expires are elected to serve a three-year
term.  Lee P. Wells and Thomas P. Cronin are serving for a term ending at
the annual meeting of shareholders to be held in 1997 and Patrick D.
Quinlan, C. Thompson Wells and D. Michael Jehle are serving for a term
ending at the annual meeting of shareholders to be held in 1998.  Keith D.
Pietila and James B. Quinlan are serving for a term ending at the annual
meeting of shareholders to be held in 1999.

     Executive officers serve at the pleasure of the Board of Directors.
The business experience of each director and executive officer during the
past five years is described below.

PATRICK D. QUINLAN has been Chairman of the Board, Chief Executive Officer
and a director of MCAFC since its inception and served as President of
MCAFC from its inception until July 1995.  Mr. Quinlan was a founder and
served as Chairman of the Board, President and a director of MCA Mortgage
from 1985 until July 1992.  Mr. Quinlan is the brother of James B. Quinlan.
See Item 12  "Security Ownership of Certain Beneficial Owners and
Management."

THOMAS P. CRONIN has been Vice Chairman of MCAFC since July 1995 and a
director of MCAFC since January 1993.  Mr. Cronin has been Chief Executive
Officer of MCA Mortgage since November 1993.  Mr. Cronin served as
President of MCA Mortgage from October 1992 until November 1993 and has
been a director of MCA Mortgage since August 1992.  From October 1990 until
October 1992, Mr. Cronin was an Executive Vice President of MCA.  From 1977
until 1990, Mr. Cronin was a member of the Chicago Board of Trade and a
licensed floor broker with the Commodity Futures Trading Commission.

LEE P. WELLS has been President and Chief Operating Officer of MCAFC since
July 1995 and has been a director of MCAFC since its inception.  Mr. Wells
served as Executive Vice President of MCAFC from its inception until July
1995, and served as Executive Vice President of MCA Mortgage from 1990
until November 1993 and was a director of MCA Mortgage from 1990 until July
1992.  Mr. Wells is responsible for land contract originations and
syndication of land contracts and mortgages into pass-through pools which
are sold to private mortgage investors.  From 1987 until 1990 Mr. Wells was
a Vice President of MCA Mortgage, and served as the Controller of MCA
Mortgage from 1987 until 1988.  Mr. Wells is the son of C. Thompson Wells,
Jr.  See Item 12 "Security Ownership of Certain Beneficial Owners and
Management."

                                       22

<PAGE>   23
 

KEITH D. PIETILA has been Executive Vice President and Chief Financial Officer
of MCAFC since July 1995 and has been a director of MCAFC since its inception.
Mr. Pietila served as Chief Operating Officer and Vice President of MCAFC from
MCAFC's inception until July 1995.  Mr. Pietila also was a Vice President, Chief
Financial Officer and Chief Operating Officer and a director of MCA Mortgage
from 1990 until July 1992.  Mr. Pietila has been a Director of U.S. Mutual
Financial Corporation since 1991.  From 1982 until 1990, Mr. Pietila was
employed by Acorn Building Components, Inc., and served in several positions,
the last of which was as Chief Operating Officer.

ALEXANDER J. AJEMIAN has been a Senior Vice President of MCAFC since July 1995
and has been Controller and Treasurer of MCAFC since its inception. Mr. Ajemian
served as Vice President of MCAFC from its inception until July 1995, served as
Vice President of MCA Mortgage since November 1992 and has served as Treasurer
of MCA Mortgage since November 1993.  Mr. Ajemian was the Controller of MCA
Mortgage from 1990 until July 1992 and was the Vice President and Assistant
Secretary of MCA Mortgage from 1991 until July 1992.  From 1986 until 1990, Mr.
Ajemian was in the audit department of BDO Seidman, independent certified public
accountants.  Mr. Ajemian is a Certified Public Accountant licensed in Michigan.

JAMES B. QUINLAN has been a director of MCAFC since its inception.  Mr. Quinlan
is the President of Standard Home Mortgage, Inc., a residential mortgage broker
located in Grosse Pointe, Michigan.  Mr. Quinlan served as Senior Vice President
of MCAFC from 1991 until August 1993.  Mr. Quinlan has served as a director of
MCA Mortgage since 1985 and served as a Senior Vice President of MCA Mortgage
from 1985 until August 1993.  Mr. Quinlan also served as Treasurer of MCA
Mortgage from 1985 until August 1993.  Mr. Quinlan is the brother of Patrick D.
Quinlan and the brother-in-law of David C. Wells.  See Item 12 "Security
Ownership of Certain Beneficial Owners and Management."

C. THOMPSON WELLS, JR., has been a director of MCAFC since its inception and
previously served in the same capacity with MCA Mortgage from 1990 until July
1992.  Since 1987, Mr. Wells has been the President of Wells' System, Inc., a
consulting firm, and has been involved in child care centers as the Chief
Executive Officer of three primary entities: Discovery Learning Centers,
Discovery Learning Centers Limited Partnership and Kids at Work, operating
through 25 other related secondary entities. Of these entities four filed
bankruptcy petitions in 1991 and 1992.  Two entities have completed their
liquidations and the other two entities' petitions under the Bankruptcy laws
have been dismissed.  Mr. Wells is also the President and a director of  Austin
Kids, Inc., which filed a bankruptcy petition in December 1994 and for which an
order confirming its plan of reorganization was entered in April 1995. C.
Thompson Wells, Jr. is the father of Lee P. Wells.  See Item 12 "Security
Ownership of Certain Beneficial Owners and Management."

D. MICHAEL JEHLE has been a director of MCAFC since November 1993 and has served
as a director of MCA Mortgage since November 1993.  Mr. Jehle served as
President and Chief Operating Officer of MCA Mortgage from November 1993 to
November 1994 and since March 1996 has been the Chairman-Office of Production
for MCA Mortgage.  Mr. Jehle served as the President and Chief Executive Officer
of Rimco Financial Corporation from November 1994 to February 1996 and currently
serves as a director of Rimco Financial Corporation.  Prior to joining the
Company, Mr. Jehle was employed by First Fidelity Thrift and Loan in San Diego,
California, from 1991 to 1993 in both loan production and servicing capacities.
From 1989 to 1991, Mr. Jehle was self-employed in both residential and
commercial loan originations and prior to that he was President of ABQ
MoneyCenter, Inc., in San Diego, California.

Certain of the directors and executive officers of MCAFC are also directors or
officers of MCAFC's other subsidiaries.


                                       23

<PAGE>   24


ITEM 11.  EXECUTIVE COMPENSATION

     The following table sets forth, for the fiscal years shown, information
regarding amounts paid to or accrued for the Chief Executive Officer of MCAFC,
and the other four most highly compensated executive officers of MCAFC (the
"Named Executive Officers").

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>

                                                                       Long-Term
                                                                      Compensation
                             Annual Compensation                         Awards
                             -------------------             Other    ------------
Name                                                        Annual    Restricted   All Other
Principal                    Fiscal                         Compen-      Stock     Compen-
Position                     Year        Salary    Bonus    sation     Awards(1)  sation (2)
--------------               -----       ------    -----    -------   ----------  ---------
<S>                          <C>      <C>        <C>        <C>        <C>         <C>
Patrick D. Quinlan -         1997     $208,061  $    --      $--       $    --     $23,172
 Chairman                    1996      206,458       --       --            --      16,048
 and Chief Executive         1995      195,000       --       --            --      16,878
 Officer


Thomas P. Cronin -           1997     $224,136  $    --      $--       $    --     $ 9.670
 Vice Chairman               1996      218,099       --       --            --       9,670
                             1995      204,200       --       --       110,000       9,670

Lee P. Wells -               1997     $170,000  $26,675      $--       $    --     $ 1,766
 President and Chief         1996      159,583   19,500       --            --       2,146
 Operating Officer           1995      117,000   40,000       --            --       1,766


Keith D. Pietila -           1997     $160,000  $30,000      $--       $    --     $11,640
 Chief Financial             1996      153,333   25,000       --            --      11,552
 Officer and Executive       1995      124,800   22,000       --        66,000      10,818
 Vice President


Alexander J. Ajemian         1997     $100,000  $15,000      $--       $    --     $    --
 Controller,                 1996       94,375   10,000       --            --          --
 Treasurer and               1995       69,600       --       --        66,000          --
 Sr. Vice President
</TABLE>



     (1) During fiscal 1995, Mr. Pietila was awarded 6,000 shares of restricted
stock with a value of $66,000, with 2,000 shares vesting in each of fiscal
1996, 1997 and 1998.  As of January 31, 1996, Mr. Pietila held 4,000 shares of
restricted stock with a value of $27,160.  During fiscal 1995, Mr. Cronin was
awarded 10,000 shares of restricted stock with a value of $110,000 with 6,000
shares vesting in fiscal 1996 and 2,000 shares vesting in each of fiscal 1997
and 1998.  As of January 31, 1996, Mr. Cronin held 4,000 shares of restricted
stock with a value of $27,160.  During fiscal 1995, Mr. Ajemian was awarded
6,000 shares of restricted stock with a value of $66,000, with 2,000 shares
vesting in each of fiscal 1996, 1997 and 1998.  As of January 31, 1996, Mr.
Ajemian held 4,000 shares of restricted stock with a value of $27,160.
Dividends are payable on the restricted stock when paid on the Company's Common
Stock.

                                       24

<PAGE>   25


     (2) Represents for each of the Named Executive Officers, premiums paid by
the Company for life insurance for the last fiscal year.

     (3) Represents award of 2,000 shares of unrestricted stock valued at $9.00
per share.

     For the year ended January 31, 1997, the Company paid non-employee
directors an annual fee of $20,000 and paid James B. Quinlan an additional
annual fee of $10,000 for serving on the board of MCA Mortgage.  This policy is
subject to review annually.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

     Patrick D. Quinlan, Keith D. Pietila and Lee P. Wells served on the
Compensation Committee of the Board of Directors of the Company during the year
ended January 31, 1997.  Each of Messrs. Quinlan, Pietila and Wells is a
director and executive officer of the Company.  Messrs. Quinlan and Wells are
executive officers and directors of Rimco Financial Corporation and certain of
its subsidiaries and Mr. Jehle is a director of Rimco Financial Corporation.
Messrs. Wells and Pietila are also directors and officers of Property
Corporation of America ("PCA") and Mr. Quinlan is a director of PCA.  Mr.
Pietila is an officer and director of U.S. Mutual Financial Corporation.

     During fiscal 1997 the Company recognized a gain of $7,539,447 on the sale
of properties purchased from unrelated third parties and subsequently sold to
limited partnerships whose general partner is owned by Patrick D. Quinlan and
Lee P. Wells.  During fiscal 1997, the Company paid commissions in connection
with the acquisition of these properties totaling $1,968,000 to Rimco Financial
Corp. which is owned equally by Patrick D. Quinlan, Lee P. Wells and Leroy G.
Rogers.

     The Company provides accounting and administrative services to U.S. Mutual
Financial Corporation ("U.S. Mutual") and receives a base monthly fee of $3,000
plus additional amounts as periodically agreed to by the respective parties.
U.S. Mutual is a publicly-owned corporation; however Patrick D. Quinlan
together with his wife, Cheryl J. Quinlan, and James B. Quinlan, their brother
John E. Quinlan and their mother Bonnie B. Quinlan collectively own
approximately 15% of the outstanding voting stock of U.S. Mutual, and it is
therefore considered an affiliate of the Company, as defined by the Securities
and Exchange Commission.  The service arrangement between the Company and U.S.
Mutual can be terminated by either party at any time.  The Company earned
$36,000 in management fees for administrative services provided to U.S. Mutual
during fiscal 1997.  Keith D. Pietila is a director of U.S. Mutual.

     From time to time the Company has retained Consulting Services of America,
Inc. ("CSA") as a consultant for specific long range planning and other
projects.  John E. Quinlan, the brother of Patrick and James Quinlan, is a
shareholder, director and executive officer of CSA.  For their services, CSA
charges the Company its normal billing rate of $150 per hour, and receives a
minimum retainer of $5,000 per month.  During fiscal 1997, the Company paid
$105,000 in consulting fees to CSA.

     In February 1993, Patrick D. Quinlan and Lee P. Wells each purchased 500
shares of common stock of PCA for $5,000 in cash, as part of the reorganization
of PCA.  In connection with such reorganization, the Company exchanged its PCA
common stock for shares of PCA non-voting preferred stock.  As a result of the
reorganization, Messrs. Quinlan and Wells became the owners of all of the
outstanding voting common stock of PCA and the Company's property management
subsidiary became a wholly-owned subsidiary of PCA.

     In July 1995, Janet K. Wells purchased 20,000 shares of common stock of
the Company for $30 per share in exchange for promissory notes with an
aggregate principal amount of $600,000, secured by mortgages on certain
appraised real estate.  The appraisal was performed by the Real Estate
Appraisal Group, an unaffiliated licensed real estate appraisal firm, and the
value of the stock was negotiated by the parties with approval by the Company's
Board of Directors.

     From time to time the Company has made working capital loans to related
entities, and these entities have entered into transactions in the ordinary
course of business with the Company pursuant to which the Company accrues net
payables to

                                       25

<PAGE>   26



these entities.  At January 31, 1997, the Company's accounts receivable from
these related entities, net of accounts payable to these entities, were
$571,000 due from Rimco Financial Corp., a company owned by Patrick D. Quinlan,
Lee P. Wells and Leroy G. Rogers, and $1,674,000 due from PCA, the common stock
of which is owned by Patrick D. Quinlan and Lee P. Wells.  In addition, there
is $3,384,000 due from investor pass-through pools sponsored by MCA Mortgage or
MCA and limited partnerships sponsored by other affiliates of the Company.  On
January 31, 1995, MCAFC purchased all of the issued and outstanding common
stock of Rimco Realty & Mortgage Company from Rimco Financial Corp. for
$12,918.  The payment for such shares was in the form of a reduction in debt
owed by Rimco Financial Corp. to MCAFC.  Rimco Realty & Mortgage Company was
engaged in the purchase and sale of residential real estate and now operates as
MCA Realty Corporation.


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

         The following table sets forth certain information as of April 1, 1997,
regarding each person known by the Company to own more than five (5%) percent
of the issued and outstanding shares of Common Stock of the Company, each
current director, each of the Named Executive Officers and all directors and
executive officers of the Company as a group.  Unless otherwise noted, each
person is the record owner of the shares indicated and possesses the sole
voting and investment power with respect to such shares. Unless otherwise
noted, the address for each person is 23999 Northwestern Hwy., Southfield,
Michigan 48075.


<TABLE>
<CAPTION>

                                   Amount and
                                    Nature of         Percent
                                   Beneficial            of
Name and Address                    Ownership         Class(1)
-----------------                 ------------        --------
<S>                               <C>                 <C>
 Patrick D. Quinlan                112,135(2)          21.43%

 James B. Quinlan                   55,734(3)          10.65%
 17150 Kercheval Ave.
 Grosse Pointe, Michigan  48230

 C. Thompson Wells, Jr.             86,200(4)          16.47%

 Lee P. Wells                       48,372(2)           9.24%

 NML, Inc.                          33,700(2)           6.44%

 David C. Wells                     28,347(5)           5.42%

 Keith D. Pietila                   28,167(6)           5.38%

 Thomas P. Cronin                   13,200(6)           2.52%

 D. Michael Jehle                   11,000(6)           2.10%

 Janet K. Wells                     86,200(4)          16.47%
 3 Sycamore
 Grosse Pointe, Michigan 48230

 Alexander J. Ajemian                8,280(6)           1.58%
</TABLE>


                                       26

<PAGE>   27


     All executive officers and
     directors as a group (8 persons)      397,293(2)(4)(6)       75.92%

----------
(1)  As of April 1, 1997, there were 523,283 shares of Common Stock of the
     Company outstanding.  This number includes 20,002 shares of Common Stock
     which are subject to forfeiture.
(2)  Patrick D. Quinlan owns 50% of NML, Inc. and Lee P. Wells owns 50% of
     NML, Inc.
(3)  These 55,734 shares are held by Standard Home Mortgage, Inc., a
     corporation wholly owned by James B. Quinlan.  Of these shares, 1,334
     shares are subject to forfeiture.
(4)  Janet K. Wells holds 86,200 shares in a revocable trust and has voting
     and investment power with respect to these shares.  Ms. Wells is the wife
     of C. Thompson Wells, Jr., who disclaims beneficial ownership of these
     shares.
(5)  Includes 1,334 shares subject to forfeiture.
(6)  Includes the following shares that were issued pursuant to compensation
     arrangements and are subject to forfeiture: Mr. Pietila - 2,000 shares;
     Mr. Cronin - 2,000 shares; Mr. Jehle - 2,668 shares; Mr. Ajemian - 2,000
     shares; and all executive officers and directors as a group - 10,002
     shares.


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     From time to time, the Company and its subsidiaries have entered into
various contracts and other transactions with affiliates of the company,
including certain officers and directors of the Company.  The terms and
conditions of such transactions were not negotiated at arm's length and may not
have been as favorable to the Company as terms and conditions that would have
been obtained with unaffiliated parties.  The additional disclosure provided
under Item 11 "Executive Compensation - Compensation Committee Interlocks and
Insider Participation" is incorporated herein by reference.



                                    PART IV

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

(a) Financial Statements, Schedules and Exhibits

    1.  The following consolidated financial statements are filed herewith:

           Consolidated Balance Sheets as of January 31, 1997 and  1996.

           Consolidated Statements of Operations for the years ended January
           31, 1997, 1996, and 1995.

           Consolidated Statements of Stockholders' Equity for the years ended
           January 31,1997, 1996, and 1995.

           Consolidated Statements of Cash Flows for the years ended January
           31,1997, 1996, and 1995.

           Notes to Consolidated Financial Statements

    2.   Financial Statement Schedules

    3.   Exhibits:


                                       27

<PAGE>   28


      The exhibits filed with this report are listed on the "Exhibit Index" 
      on pages E-1 through E-6.  

(b) Reports on Form 8-K.
      The Company filed no reports on Form 8-K during the quarter ended 
      January 31, 1997.


<PAGE>   29
                  INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                                                        PAGE

CONSOLIDATED FINANCIAL STATEMENTS                                       

        Report of independent certified public accountants              F-2

        Consolidated balance sheets                                     F-3

        Consolidated statements of operations                           F-4

        Consolidated statements of stockholders' equity                 F-5

        Consolidated statements of cash flows                           F-6

        Notes to consolidated financial statements                      F-9


                                     F-1

<PAGE>   30
               Report of Independent Certified Public Accountants


To the Board of Directors of
   MCA FINANCIAL CORP.


        
We have audited the accompanying consolidated balance sheets of MCA Financial
Corp. and Subsidiaries as of January 31, 1997 and 1996, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the three years in the period ended January 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of MCA
Financial Corp. and its Subsidiaries as of January 31, 1997 and 1996, and the  
consolidated results of their operations and their consolidated cash flows for
each of the three years in the period ended January 31, 1997, in conformity
with generally accepted accounting principles.

As described in Note 1, in February 1996, the Company adopted Statement of
Financial Accounting Standards No. 122, "Accounting for Certain Mortgage
Servicing Rights".


Moore Stephens                                  Grant Thornton LLP
Doeren Mayhew, P.C.                             Detroit, Michigan
April 28, 1997
Troy, Michigan        

                                     F-2
<PAGE>   31
                              MCA FINANCIAL CORP.

                          CONSOLIDATED BALANCE SHEETS

                                     ASSETS

<TABLE>
<CAPTION>
                                                                JANUARY 31,
                                                            1997            1996
                                                        ------------    ------------
<S>                                                     <C>             <C>
Cash                                                    $  3,096,993    $  2,730,408
Land contracts held-for-resale                            10,351,425      11,484,877
Mortgages held-for-resale                                 54,430,155      63,306,372
Accounts receivable - mortgages sold                      15,489,908             -
Accounts receivable                                       16,997,311       9,722,527
Accounts receivable - related parties                      6,827,285       8,256,090
Mortgage servicing rights - net                           16,324,263      27,293,358
Excess interest spread receivable                          7,987,053             -
Investments                                                2,571,750       2,492,816
Property and office equipment                              5,582,612       4,856,330
Deferred charges and other assets                          5,333,058       5,047,863
                                                        ------------    ------------
        Total assets                                    $144,991,813    $135,190,641
                                                        ============    ============

                      LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES
   Notes payable                                        $ 83,975,834    $ 86,597,703
   Subordinated debentures                                15,542,000       9,174,000
   Subordinated notes payable                             15,000,000             -
   Accounts payable                                       15,705,913      25,206,687
   Accounts payable - related parties                      1,043,842       1,693,311
   Accrued interest and other expenses                     2,419,048       2,058,080
   Deferred federal income tax                               400,000         300,000
                                                        ------------    ------------
        Total liabilities                                134,086,637     125,029,781
                                                        ------------    ------------

REDEEMABLE COMMON STOCK                                      256,373             -

COMMITMENTS AND CONTINGENCIES                                    -               -

STOCKHOLDERS' EQUITY
   Common stock
     Authorized 3,750,000 shares at January 31,
     1997 and 1996. No par, stated value $.01 each.
     Issued and outstanding, 503,281 shares at
     January 31, 1997 and 448,617 shares at
     January 31, 1996                                          5,033           4,486
   Preferred stock (Series A)
     Authorized 350,000 shares, $10 stated value,
     issued and outstanding 203,022 shares at
     January 31, 1997 and 1996                             2,030,220       2,030,220
   Preferred stock (Series B)
     Authorized 750,000 shares, $10 stated value,
     issued and outstanding 336,619 shares at
     January 31, 1997 and 1996                             3,366,190       3,366,190
   Additional paid-in capital                              3,664,976       1,457,251
   Retained earnings                                       1,582,384       1,302,713
                                                        ------------    ------------

        Total stockholders' equity                        10,648,803      10,160,860
                                                        ------------    ------------

        Total liabilities and stockholder's equity      $144,991,813    $135,190,641
                                                        ============    ============
</TABLE>

          See accompanying notes to consolidated financial statements

                                      F-3
<PAGE>   32
                              MCA FINANCIAL CORP.

                     CONSOLIDATED STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>

                                                                        YEAR ENDED JANUARY 31,
                                                           1997                   1996                    1995
                                                        ----------             -----------             -----------

<S>                                                     <C>                    <C>                      <C>

REVENUES

  Gain on sale of land contracts                       $ 3,437,662             $ 2,981,138             $ 2,983,022
  Gain on sale of real estate                              707,754                 750,800                      --
  Gain on sale of real estate - related parties          7,539,447               6,529,708               7,365,199
  Gain on bulk sales of servicing rights                 5,231,163               4,725,872               7,475,444
  Mortgage origination fees and gain on sale 
    of mortgages                                        24,861,881              14,339,220               5,584,454
  Servicing fees                                         8,499,396               6,243,748               4,616,738
  Interest income                                        8,167,899               5,902,714               5,106,041
  Other income                                             481,138                 477,810                 240,783
                                                        ----------              ----------              ----------
        Total revenues                                  58,926,340              41,951,010              33,371,681
                                                        ----------              ----------              ----------

EXPENSES

  Payroll                                               15,775,097              11,955,536              10,985,576
  Interest                                              11,426,082               7,565,044               6,018,518
  Commissions                                            8,257,703               5,929,844               4,591,079
  Professional services                                  1,879,525               1,447,810               1,511,215
  Depreciation                                             687,333                 554,904                 351,964
  Amortization                                           4,869,475               3,259,131               1,924,872
  General and administrative                            14,626,787              10,111,211               8,163,619
                                                        ----------              ----------              ----------
        Total expenses                                  57,522,002              40,823,480              33,546,843
                                                        ----------              ----------              ----------

INCOME (LOSS) BEFORE FEDERAL INCOME TAXES                1,404,338               1,127,530                (175,162)

PROVISION FOR FEDERAL INCOME TAXES                         639,000                 512,000                 102,384
                                                        ----------              ----------              ----------

NET INCOME (LOSS)                                      $   765,338             $   615,530             $  (277,546)
                                                        ==========              ==========              ==========
EARNINGS (LOSS) PER SHARE                              $      1.61             $      1.44             $      (.69)
                                                        ==========              ==========              ==========

</TABLE>

          See accompanying notes to consolidated financial statements

                                        
                                      F-4




<PAGE>   33
                              MCA FINANCIAL CORP.

                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                   YEAR ENDED JANUARY 31, 1997, 1996 AND 1995


<TABLE>
<CAPTION>

                                                                                                PREFERRED
                                                                ADDITIONAL                      STOCK
                                COMMON          PREFERRED       PAID-IN         RETAINED        SUB-
                                STOCK           STOCK           CAPITAL         EARNINGS        SCRIPTIONS      TOTAL
                                ------          ---------       ----------      --------        ----------      -----
<S>                             <C>             <C>             <C>             <C>             <C>             <C>

Balance - February 1, 1994      $4,023          $4,698,870      $2,848,350      $1,897,815       $(886,000)     $ 8,563,058

  Net loss                          --                  --              --        (277,546)             --         (277,546)
  Issuance of common stock          26                  --          28,211              --              --           28,237
  Issuance of preferred stock       --             697,540        (159,531)             --         886,000        1,424,009
  Preferred stock dividends         --                  --              --        (447,446)             --         (447,446)
                                ------          ----------      ----------      ----------      ----------      -----------

Balance - January 31, 1995       4,049           5,396,410       2,717,030       1,172,823              --        9,290,312

  Net income                        --                  --              --         615,530              --          615,530
  Issuance of common stock         444                  --         764,300              --              --          764,744
  Repurchase of common stock        (7)                 --         (24,079)             --              --          (24,086)
  Preferred stock dividends         --                  --              --        (485,640)             --         (485,640)
                                ------          ----------      ----------      ----------      ----------      -----------

Balance - January 31, 1996       4,486           5,396,410       3,457,251       1,302,713              --       10,160,860

  Net income                        --                  --              --         765,338              --          765,338
  Issuance of common stock         547                  --         207,725              --              --          208,272
  Preferred stock dividends         --                  --              --        (485,667)             --         (485,667)
                                ------          ----------      ----------      ----------      ----------      -----------

Balance - January 31, 1997      $5,033          $5,396,410      $3,664,976      $1,582,384      $       --      $10,648,803
                                ======          ==========      ==========      ==========      ==========      ===========

</TABLE>


          See accompanying notes to consolidated financial statements


                                      F-5
<PAGE>   34

                              MCA FINANCIAL CORP.

                     CONSOLIDATED STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>

                                                                                        YEAR ENDED JANUARY 31,
                                                                             1997               1996               1995
                                                                           --------           --------           -------- 

<S>                                                                  <C>                 <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net income (loss)                                                   $     765,338       $     615,530      $    (277,546)

    Adjustments to reconcile net income (loss)
      to net cash provided by (used in) operating
      activities:
      Depreciation and amortization                                      5,556,808           3,814,035          2,276,836  
      Stock award compensation                                             207,970             165,744             28,237
      Decrease (increase) in land contracts                      
        held-for-resale                                                  1,133,452          (2,175,379)        (5,439,497)   
      Origination and purchase of mortgages
        held-for-resale                                               (794,266,291)       (632,281,000)      (564,235,000)  
      Sale of mortgages held-for-resale                                803,142,508         585,277,031        587,782,628
      Increase in accounts receivable -
        mortgages sold                                                 (15,489,908)               --                 -- 
      Decrease (increase) in accounts receivable                        (7,274,784)          4,432,277         (7,325,104)
      Decrease (increase) in accounts receivable - 
        related parties                                                  1,428,805            (986,951)        (1,333,086)
      Increase in excess interest spread receivable                     (7,987,053)               --                 --
      Increase in deferred charges and other assets                     (1,104,199)         (2,123,743)        (1,538,268) 
      Increase (decrease) in accounts payable                           (9,500,774)          9,852,602          9,047,933
      Increase (decrease) in accounts payable -
        related parties                                                   (649,469)            193,729            194,211 
      Increase in accrued interest and other expenses                      360,968           1,071,831            205,166
      Increase in deferred Federal income taxes                            100,000             100,000             20,000  
                                                                     -------------         -----------        -----------
  Net cash provided by (used in) operating activities                  (23,579,629)        (32,044,292)        19,406,510


</TABLE>


          See accompanying notes to consolidated financial statements


                                      F-6

<PAGE>   35
                              MCA FINANCIAL CORP.

                     CONSOLIDATED STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>
                                                             YEARS ENDED JANUARY 31,
                                                      1997             1996             1995
                                                    -------           ------           ------

<S>                                          <C>               <C>              <C>     
Net cash provided by (used in) operating
  activities - total from previous page      $ (23,576,629)    $(32,044,294)    $   19,406,510

CASH FLOWS FROM INVESTING ACTIVITIES:
  Acquisition of MCA Realty Corporation             -                -                 163,341
  Investment in mortgage servicing rights-net    7,175,299      (12,125,632)       (10,645,117)
  Decrease (increase) in investments               (78,934)          36,912           (224,702)
  Capital expenditures                          (1,207,774)      (1,073,420)          (232,962)
                                             -------------     ------------     --------------

     Net cash provided by (used in)
       investing activities                      5,888,591      (13,162,140)       (10,939,440)


CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from notes payable                  814,899,838      548,960,490        529,181,111
  Payments on notes payable                   (817,727,548)    (597,680,156)      (540,175,700)
  Proceeds from subordinated debentures          6,368,000        4,236,000             -
  Proceeds from subordinated notes payable      15,000,000            -                 -
  Redemption of common stock                         -                -               (300,000)
  Repurchase of common stock                         -              (25,086)            -
  Proceeds from issuance of preferred stock          -                -              1,583,540
  Preferred stock issuance costs                     -                -               (159,531)
  Dividends on preferred stock                    (485,667)        (485,640)          (447,446)
                                             -------------     ------------     --------------

Net cash provided by (used in)  
  financing activities                          18,054,623       45,005,608        (10,318,026)
                                             -------------     ------------     --------------

NET INCREASE (DECREASE) IN CASH                    366,585         (200,826)        (1,850,956)

CASH - BEGINNING                                 2,730,408        2,931,234          4,782,190
                                             -------------     ------------     --------------

CASH - ENDING                                $   3,096,993     $  2,730,408     $    2,931,234
                                             =============     ============     ==============

</TABLE>

          See accompanying notes to consolidated financial statements

                                      F-7
<PAGE>   36
                              MCA FINANCIAL CORP.

               CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED


                SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

<TABLE>
<CAPTION>

                                            YEAR ENDED JANUARY 31,
                                         1997        1996         1995
                                    -----------   ----------   ----------

<S>                                 <C>           <C>          <C>
Cash paid during the period for:       
        
        Interest                    $10,950,833   $7,435,339   $5,943,047      
                                    ===========   ==========   ==========
        Income taxes                $   412,000   $   66,506   $  325,878
                                    ===========   ==========   ==========
</TABLE>


During the year ended January 31, 1997, the Company issued 24,467 shares of
common stock to employees and recognized $207,970 in compensation expense. The
Company also issued 30,197 shares of redeemable common stock as part of a loan
agreement with The Board of Trustees of the Policemen and Firemen Retirement
System of the City of Detroit and recorded $256,675 in deferred charges.
Capital leases totaling $205,841 were entered into for the purchase of various
property and equipment during the year ended January 31, 1997.

During the year ended January 31, 1996, the Company issued 24,410 shares of
common stock to employees and recognized $164,744 in compensation expense. The
Company also issued 20,000 shares of common stock to a shareholder/director of
the Company in exchange for $600,000 in notes receivable. Prior to January 31,  
1996, the notes receivable were assigned to Investor Pass-Through Trusts in
satisfaction of amounts due the Trust by MCAFC. In December of 1995, the 
Company exchanged a $1,000,000 investment in a real estate partnership acquired
from a related party in exchange for a reduction in amounts due the Company for
an interest in a limited liability company whose primary activity involves
providing financing for automobile dealerships. During the year ended January
31, 1996, capital leases totaling $474,077 were entered into for the purchase
of various property and equipment.

During the year ended January 31, 1995, the Company issued 2,567 shares of
common stock to employees and recognized $28,237 in compensation expense. The
Company also entered into capital lease arrangements for the purchase of various
property and equipment in the amount of $767,145. On January 31, 1995, the
Company acquired MCA Realty Corporation (see note 15) in a non-cash transaction.
The following assets and liabilities were acquired in exchange for a $945,117
net reduction in accounts receivable from RIMCO Financial Corporation:

<TABLE>
        <S>                                     <C>
 
        Cash                                    $ 163,341
        Accounts receivable                       414,126
        Property and equipment                    947,967
        Deferred charges and other                 18,918
        Notes payable                            (521,634)
        Accounts payable                          (77,601)
                                                ---------
                                                $ 945,117
                                                =========
</TABLE>

          See accompanying notes to consolidated financial statements

                                      F-8


                                                        
<PAGE>   37
                              MCA FINANCIAL CORP.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        JANUARY 31, 1997, 1996 AND 1995

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         PRINCIPLES OF CONSOLIDATION

         The consolidated financial statements at January 31, 1997, 1996 and
         1995 include the accounts of MCA Financial Corp. (MCAFC) and its wholly
         owned subsidiaries MCA Mortgage Corp. (MCAMC), Mortgage Corporation of
         America (MCA), MCA Realty Corporation (MRC) and Complete Financial
         Corp. (CFC). Mortgage Corporation of America - Ohio (MCA-Ohio) is a
         wholly owned subsidiary of MCA.

         Intercompany accounts and transactions are eliminated in consolidation.

         NATURE OF OPERATIONS

         MCAFC and its subsidiaries (the Company) is a diversified mortgage
         banking and real estate services enterprise. The Company generates
         revenue from four primary sources including mortgage banking, land
         contract syndication, loan servicing and real estate sales.

         The Company originates first mortgage loans on residential properties.
         Loans are delivered, primarily on a pre-sold basis, to various
         institutional investors throughout the United States. These mortgage
         loans are typically sold on a non-recourse basis. Loans underwritten
         and sold may be subject to repurchase if the underwriting standards of
         the investor are not met. These transactions are accounted for as sales
         of loans since the Company is able to estimate its obligation under the
         recourse provisions, which historically have been immaterial. Gains and
         losses from loan sale transactions are recognized when the mortgage
         loans are sold and amount to approximately $12,513,000, $6,068,000 and
         $430,000 for the years ending January 31, 1997, 1996 and 1995,
         respectively.

         MCA purchases land contracts and mortgage notes at a discount from face
         value and packages (securitizes) these real estate investments into
         Investor Pass-through Trusts. MCA is the sponsor of the Trusts, which
         are sold as securities to investors by independent security
         broker-dealers. The Trusts hold the entire interest, including any
         residual, in the transferred loans. Gain on sale is recognized when the
         Trusts have broken escrow (investor funds have been received).


                                     F-9
<PAGE>   38
                              MCA FINANCIAL CORP.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        JANUARY 31, 1997, 1996 AND 1995


NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED
          
          NATURE OF OPERATIONS -- CONTINUED
          --------------------

          MCAMC and MCA service the land contracts and mortgages for various
          investors. Servicing revenues are recognized monthly according to the
          servicing contracts related to the various portfolio interests.

          MCAFC, MCA and MRC purchase residential and commercial income
          properties which are sold to limited partnerships. Revenues related to
          limited partnership sales are recognized when the sales are closed.

          Substantially all of the real estate and land contracts held by the
          limited partnerships and Investor Pass-through Trusts are located in,
          or relate to, properties located in the greater Detroit, Michigan
          metropolitan area.

          LAND CONTRACTS HELD-FOR-RESALE
          ------------------------------

          Land contracts held-for-resale are recorded at the lower of cost or
          market and consisted of the following at:


          <TABLE>
          <CAPTION>
                                                       JANUARY 31,
                                                  1997            1996
                                                  ---------       ---------
          <S>                                     <C>             <C>

          Land contracts receivable               $11,684,696     $12,158,775
          Discount                                   (197,796)       (416,418)
          Senior liens payable                     (1,135,475)       (257,480)
                                                  -----------     -----------
                                                  $10,351,425     $11,484,877
                                                  ===========     ===========

          </TABLE>


          MORTGAGES HELD-FOR-RESALE
          -------------------------

          Mortgages held-for-resale are recorded at the lower of cost or market
          which is determined by the aggregate method (unrealized losses are
          offset by unrealized gains). Cost approximated market value,
          therefore, no valuation allowance was necessary at January 31, 1997
          and 1996.



                                     F-10
<PAGE>   39
                              MCA FINANCIAL CORP.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        JANUARY 31, 1997, 1996 AND 1995


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

        ACCOUNTS RECEIVABLE - MORTGAGES SOLD

        Accounts receivable - mortgages sold represents amounts due from the
        purchaser on sales of non-conforming mortgages. Management believes the
        outstanding balance is fully collectible at January 31, 1997, and
        accordingly no allowance for doubtful accounts has been provided.

        ACCOUNTS RECEIVABLE

        Accounts receivable consisted of the following at:

        <TABLE>
        <CAPTION>
                                                                                 JANUARY 31,
                                                                            1997             1996
                                                                        -----------        ----------
        <S>                                                             <C>                <C>
        Accounts receivable - sales of mortgage servicing rights        $14,136,266        $5,912,243
        Accrued fees and commissions                                        919,155         1,505,378
        Accounts receivable - syndication sales                             154,352           662,577
        Accounts receivable - escrows on closed loans                       983,971           563,061
        Accounts receivable - shareholders                                  233,342           182,679
        Accrued interest                                                    181,420           211,843
        Employee commission draws                                           128,178           113,799
        Other                                                               260,627           570,947
                                                                        -----------        ----------
                                                                        $16,997,311        $9,722,527
                                                                        ===========        ==========
</TABLE>

        Accounts receivable - related parties consist mainly of non-interest
        bearing advances and other administrative charges to Investor
        Pass-through Trusts and limited partnerships sponsored by the Company,
        and other related entities.

        Included in accounts receivable - related parties at January 31, 1997
        and 1996, respectively, are approximately $571,000 and $793,000 due from
        an entity owned by certain directors and shareholders of the Company;
        $1,674,000 and $1,676,000 due from Property Corporation of America
        (PCA), an entity owned by certain directors and shareholders of the
        Company, and $3,384,000 and $4,568,000 due from investor pass-through
        trusts and limited partnerships is substantially dependent upon
        successful syndication of partnership interests and operating cash flows
        generated by rental operations.

        The Company uses the allowance method to account for possible losses of
        accounts receivable, and no allowance was deemed necessary at January
        31, 1997 and 1996.


                                      F-11
<PAGE>   40
                              MCA FINANCIAL CORP.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        JANUARY 31, 1997, 1996 AND 1995


NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED

    MORTGAGE SERVICING RIGHTS

    In February 1996, the Company adopted SFAS No. 122, "Accounting for Mortgage
    Servicing Rights". This requires the capitalization of a mortgage servicing
    asset for every origination whether it be originated or purchased. SFAS No.
    122 also dictates prescribed rules for the amortization, periodic valuation,
    and the required valuation adjustment. As discussed in Note 1, the Company
    adopted SFAS 122 in February 1996.  The effect of the adoption was to
    increase earnings by approximately $.73 million for Fiscal 1996 or $1.54
    per share. Prior to adoption, a value was capitalized for purchased mortgage
    servicing rights. This capitalization was in accordance with SFAS Statement
    of Financial Accounting Standards No. 65, "Accounting for Certain Mortgage
    Banking Practices". 

    The following is an analysis of the changes in mortgage servicing rights:

<TABLE>
<S>                                                     <C>
        Balance - January 31, 1994                      $ 8,257,305

           Additions                                     22,145,428
           Scheduled amortization                        (1,334,724)
           Amortization due to changes in 
             prepayment and other assumptions                  --
           Sales                                        (11,500,311)
                                                        -----------
        Balance - January 31, 1995                       17,567,698

           Additions                                     25,711,919
           Scheduled amortization                        (1,991,974)
           Amortization due to changes in 
             prepayment and other assumptions              (468,007)
           Sales                                        (13,526,278)
                                                        -----------

        Balance - January 31, 1996                       27,293,358

           Additions                                     10,780,600
           Scheduled amortization                        (3,699,194)
           Amortization due to changes in 
             prepayment and other assumptions                   --
           Sales                                        (18,050,501)
                                                        -----------

        Balance - January 31, 1997                      $16,324,263
                                                        ===========

</TABLE>



                                      F-12


<PAGE>   41
                              MCA FINANCIAL CORP.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        JANUARY 31, 1997, 1996 AND 1995

NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED
          
          MORTGAGE SERVICING RIGHTS -- CONTINUED
          -------------------------

          Amortization of purchased servicing rights is based on the ratio of
          net servicing income received in the current period to total net
          servicing income projected to be realized from the purchased
          servicing rights on a discounted basis. Projected net servicing income
          is determined on the basis of the estimated balance of the underlying
          mortgage loan portfolio, which declines over time from prepayment and
          scheduled amortization. The Company estimates future prepayment rates
          based on current interest rate levels and other economic conditions,
          as well as relevant characteristics of the servicing portfolio, such
          as loan types, interest rate stratification and recent prepayment
          experience. Amortization of purchased servicing rights was $3,699,194,
          $2,459,981 and $1,334,724 for the years ended January 31, 1997, 1996
          and 1995, respectively. Accumulated amortization of purchased
          servicing rights was $5,806,181, $2,887,705 and $427,704 at January
          31, 1997, 1996 and 1995, respectively.

          Properties securing the mortgage loans in the Company's servicing
          portfolio are located throughout the United States.

          At January 31, 1997, the net book value of the mortgage servicing
          rights portfolio approximated fair value.

          EXCESS INTEREST SPREAD RECEIVABLE
          ---------------------------------

          The Company sells mortgage loans in bulk to a third party for purposes
          of securitization. By agreement, the Company is entitled to the
          difference between the weighted average coupon rate of the loans it
          originated in the security and the security's stated yield, less a
          normal servicing fee and certain other fees. The Company determines
          fair value based on a discounted cash flow analysis. The analysis
          takes into consideration projected prepayments, defaults, interest
          rate and credit risks. Income is recognized at the time of sale and is
          included in mortgage origination fees and gain on sale of mortgages.

          INVESTMENTS
          -----------

          Partnership investments consist of partnership interests in limited
          partnerships and are accounted for under the equity method. The
          partnerships invest primarily in residential rental properties.
          Presented below is summary unaudited financial information for the
          above limited partnerships as of, and for the year ended:


                                      F-13
<PAGE>   42

                              MCA FINANCIAL CORP.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        JANUARY 31, 1997, 1996 AND 1995


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

         INVESTMENTS - CONTINUED



        <TABLE>
        <CAPTION>
                                                             DECEMBER 31,
                                                           1996         1995
                                                         --------     --------
        <S>                                             <C>           <C>
        Total assets                                    $8,586,116    $9,327,310
        Total liabilities                                2,945,782     2,885,888
        Partnership equity                               5,640,334     6,441,422
        Net income                                         432,499       510,748

        </TABLE>

        
        Included in investments at January 31, 1997 and 1996 is a $1,000,000
        membership interest investment in a LLC which was made in December
        1995. This start-up Company participates in the used vehicle retail
        industry through providing floor plan financing and participating in
        joint venture activities with existing dealers. The Company's
        investment in the Class B interest issued by this LLC provides it the
        right to participate in earnings and distributions, if any, subject to 
        preferential rights of certain other members. This investment is
        being accounted for on the cost method.

        PROPERTY AND OFFICE EQUIPMENT

        Property and office equipment are recorded at cost. Depreciation is
        calculated principally using the straight-line method based upon the
        estimated useful lives of the assets, ranging from seven to ten years.
        Property and office equipment consisted of the following at:

        <TABLE>
        <CAPTION>
                                                           JANUARY 31,
                                                     1997           1996
                                                   --------      ---------
        <S>                                        <C>           <C>
        Property and office equipment under
        capital lease                              $ 2,370,809   $ 2,475,010
        Property and office equipment                3,729,214     2,653,472
        Building and improvements                    1,498,614     1,090,714
                                                   -----------   -----------
                                                     7,598,637     6,219,196
        Less accumulated depreciation               (2,016,025)   (1,362,866)
                                                   -----------   -----------
                                                   $ 5,582,612   $ 4,856,330
                                                   ===========   ===========

        </TABLE>


        Depreciation expense for the year ended January 31, 1997, 1996 and 1995
        amounted to $687,313, $554,904 and $351,964, respectively.




                                     F-14
<PAGE>   43
                              MCA FINANCIAL CORP.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        JANUARY 31, 1997, 1996 AND 1995


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

        REVENUE RECOGNITION

        Gains on the sale of mortgage servicing rights are recognized when title
        and all risks and rewards have irrevocably passed to the buyer and there
        are no significant unresolved contingencies. Mortgage origination fees
        on loans held-for-sale are recognized as income at the time the loan is
        sold.

        FAIR VALUE OF FINANCIAL INSTRUMENTS

        Statements of Financial Accounting Standards ("SFAS") No. 107 issued by
        the Financial Accounting Standards Board ("FASB"), "Disclosures About
        Fair value of Financial Instruments", requires the disclosure of fair
        value information about financial instruments, whether or not recognized
        in the statement of financial condition, where it is practicable to
        estimate that value. In cases where quoted market prices are not
        available, fair values are based on estimates using present value or
        other valuation techniques. SFAS 107 excludes certain financial
        instruments and all nonfinancial instruments from its disclosure
        requirements. Accordingly, the aggregate fair value amounts presented do
        not represent the underlying value of the Company.

        The following methods and assumptions were used by the Company to
        estimate the fair value of each class of financial instruments for which
        it is practicable to estimate that value:

        CASH AND CASH EQUIVALENTS

        For these short-term instruments, the carrying amount is a reasonable
        estimate of fair value.

        LAND CONTRACTS HELD-FOR-RESALE
        
        This portfolio consists of land contracts held-for-resale underlying
        single family residential properties. These are valued based on the fair
        value of obligations with similar credit characteristics.

        MORTGAGES HELD-FOR-RESALE

        This portfolio consists of single family mortgage loans held-for-sale
        and is valued using fair values attributable to similar mortgage
        loans.

                                      F-15
<PAGE>   44
                              MCA FINANCIAL CORP.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        JANUARY 31, 1997, 1996 AND 1995


NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

          FAIR VALUE OF FINANCIAL INSTRUMENTS - CONTINUED

            MORTGAGE SERVICING RIGHTS
             
            The fair value of the mortgaged servicing rights is determined using
            the discounted present value of the net cash flows. Market estimates
            are used for servicing costs, prepayment speeds and discount rates.

            EXCESS INTEREST SPREAD RECEIVABLE

            The fair value is determined by using the discounted present value
            of the net cash flows. Market estimates are used for servicing
            costs, prepayment spreads and discount rates.

            NOTES PAYABLE, SUBORDINATED DEBENTURES AND SUBORDINATED NOTES
            PAYABLE 

            The carrying amount for these instruments approximates fair value.

            The following table sets forth the fair value of the Company's
            financial instruments: 

<TABLE>
<CAPTION>
                                                                         JANUARY 31,
                                                             1997                           1996
                                                    -----------------------         -----------------------
                                                    CARRYING         FAIR           CARRYING         FAIR
                                                    VALUE            VALUE          VALUE            VALUE
                                                    --------         -------        --------         -------
<S>                                                 <C>              <C>            <C>              <C>

Assets:
  Cash and cash equivalents                         $ 3,096,993      $ 3,096,993    $ 2,730,408      $ 2,730,408
  Land contracts held-for-resale                     10,351,425       10,351,425     11,484,877       11,484,877
  Mortgage held-for-resale                           54,430,155       54,430,155     63,306,372       63,306,372
  Mortgage servicing rights                          16,324,263       16,324,263     27,293,358       27,293,358
  Excess interest spread receivable                   7,987,053        7,987,053             --               --


Liabilities:
  Notes payable, subordinated debentures and 
    subordinated notes payable                      114,517,834      114,517,834    95,771,703       95,771,703


</TABLE>


                                      F-16

<PAGE>   45
                              MCA FINANCIAL CORP.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        JANUARY 31, 1997, 1996 AND 1995

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

         USE OF ESTIMATES

         The preparation of financial statements in conformity with generally
         accepted accounting principles requires management to make estimates
         and assumptions that affect reported amounts of assets and liabilities
         and the 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.


         EARNINGS PER SHARE

         Earnings per share are computed based on the weighted average number of
         common and common equivalent shares outstanding during the period. The
         weighted average number of shares used in the determination of earnings
         per share was 475,949, 426,762 and 403,622 for the years ended January
         31, 1997, 1996 and 1995.

         RECLASSIFICATION

         Certain amounts in the prior year's financial statements have been
         reclassified to conform to the January 31, 1997 presentation.

         NEW PRONOUNCEMENTS

         In June 1996, the FASB issued "SFAS No. 125 - Accounting for Transfers
         and Servicing of Financial Assets and Extinguishments of Liabilities."
         This statement provides consistent standards for distinguishing
         transfers of financial assets that are sales from transfers that are
         secured borrowings. This statement was to have been effective
         prospectively from December 31, 1996, but was deferred when the FASB
         issued "SFAS No. 127 - Deferral of the Effective Date of Certain
         Provisions of FASB Statement No. 125." The effective date of the
         certain provisions have been deferred one year. The Company adopted
         certain of the provisions for transactions entered into during
         January, 1997.  The effect of this adoption was not significant to net
         income.  Management does not believe adoption of the remaining
         provisions will have a material effect on the financial statements.

                                      F-17
<PAGE>   46
                              MCA FINANCIAL CORP.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        JANUARY 31, 1997, 1996 AND 1995

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

         NEW PRONOUNCEMENTS - CONTINUED

         In February 1997, the FASB issued SFAS No. 128. "Earnings Per Share,"
         which replaces the presentation of primary earnings per share ("EPS")
         with a presentation of basic EPS, requires dual presentation of basic
         and diluted EPS on the face of the statement of earnings regardless of
         whether basic and diluted EPS are the same, and requires a
         reconciliation of the numerator and denominator used in computing basic
         and diluted EPS. Basic EPS excludes dilution and is computed by
         dividing earnings available to common stockholders by the weighted
         average number of common shares outstanding for the period. Diluted EPS
         is computed similarly to fully diluted EPS pursuant to APB Opinion 15.
         Diluted EPS reflects the potential dilution that could occur if
         securities or other contracts to issue common stock were exercised or
         converted into common stock or resulted in the issuance of common stock
         that then shared in the earnings of the entity. This Statement is
         effective for financial statements issued for periods ending after
         December 15, 1997, including interim periods, earlier application is
         not permitted, and requires restatement of all prior period EPS data
         presented.


NOTE 2 - RESTRICTED CASH

         Included in cash and accounts payable are advance payments by borrowers
         on loans serviced by the Company in the amount of approximately
         $511,000 and $378,000, respectively, at January 31, 1997 and 1996.

                                      F-18
<PAGE>   47

                              MCA FINANCIAL CORP.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        JANUARY 31, 1997, 1996 AND 1995


NOTE 3 - NOTES PAYABLE


<TABLE>
<CAPTION>
                                                                                  JANUARY 31,
                                                                             1997            1996
                                                                           --------        --------
        <S>                                                                <C>             <C>
        Note payable under $115 million mortgage
         warehouse credit facility, subject to renewal on
         September 3, 1997, interest is computed at LIBOR
         plus .85% to 2.5% depending on type of loan and
         payable monthly, principal payable upon sale of
         mortgage collateral (mortgages held-for-resale)
         to institutional investors                                       $ 48,369,064     $      -

        Note payable under $25 million mortgage warehouse
         credit facility, interest is computed at the bank's
         prime rate less 1/2% and payable monthly; principal
         payable upon sale of mortgage collateral (mortgages
         held-for-resale) to institutional investors or on
         demand. This facility was terminated January 8, 1997                     -         22,557,781

        Note payable under $28.5 million revolving credit
         facility, subject to renewal on October 31, 1997,
         interest is computed at the Federal Funds rate plus
         1.5% (6.8% at January 31, 1997), collateralized by
         mortgage servicing rights                                          28,305,175      28,500,000

        Note payable under $30 million mortgage warehouse
         facility, interest is computed at the federal
         funds rate plus 1.5% and deducted from the proceeds
         of investor fundings, principal payable upon sale 
         of mortgage collateral (mortgages held-for-resale)
         to institutional investors or on demand. This facility
         was terminated August 31, 1996                                           -         26,554,708
                                                                           -----------     -----------          
              Total - this page                                             76,674,239      77,612,489 

</TABLE>


                                      F-19
<PAGE>   48

                              MCA FINANCIAL CORP.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        JANUARY 31, 1997, 1996 AND 1995


NOTE 3 - NOTES PAYABLE - CONTINUED



<TABLE>
<CAPTION>
                                                                                  JANUARY 31,
                                                                             1997            1996
                                                                           --------        --------
        <S>                                                                <C>             <C>
        Total - previous page                                              $ 76,674,239    $ 77,612,489

        Note payable under $10 million mortgage warehouse
         facility, subject to renewal on November 1, 1997,
         interest is computed at LIBOR plus 1.5% (6.94%
         at January 31, 1997), principal payable upon sale
         of mortgage collateral (mortgages held-for-resale)
         to institutional investors.                                          4,426,335       3,729,748

        Note payable under $1 million line-of-credit for
         the acquisition and rehabilitation of residential
         real property subject to renewal on February 1,
         1998, interest is computed at the bank's prime
         rate plus 1% (9.25% at January 31, 1997) collateralized
         by a first security interest in residential real property              284,200            -


        Revolving line-of-credit/note payable, $.5 million
         credit line for working capital, $1 million note
         payable for purchases of land contracts, interest
         is computed at the bank's prime rate plus 1% (9.25%
         at January 31, 1997). Land contracts are assigned to
         the bank as collateral, personally guaranteed by
         certain officers of the Company, payable upon sale
         of collateral. This facility was terminated April 14, 1997             250,000       1,500,000
                                                                             ----------      ----------       
                 Total-this page                                             81,634,774      82,842,237
</TABLE>


                                      F-20
<PAGE>   49

                              MCA FINANCIAL CORP.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        JANUARY 31, 1997, 1996 AND 1995


NOTE 3 - NOTES PAYABLE - CONTINUED


<TABLE>
<CAPTION>
                                                                                  JANUARY 31,
                                                                             1997            1996
                                                                           --------        --------
        <S>                                                                <C>             <C>
        Total - previous page                                              $ 81,634,774     $ 82,842,237

        Note payable under $1.5 million line-of-credit for
         the acquisition and rehabilitation of residential
         real property interest is computed at 12%, 
         collateralized by residential real property and 
         personally guaranteed by certain officers of the 
         Company, principal payable upon sale of collateral. 
         This facility was terminated December 13, 1996                        -               1,448,042
        
        Note payable under $1.5 million line-of-credit for
         the acquisition and rehabilitation of residential
         real property, interest is computed at the bank's 
         prime rate plus 3/4%, collateralized by residential 
         real property and personally guaranteed by certain 
         officers of the Company, principal payable upon 
         sale of collateral.  This facility was terminated 
         September 17, 1996                                                     -                408,773

        Land contracts payable to certain Investor Pass-through
         Trusts sponsored by the Company for purchase of a building,
         interest at 11%, collateralized by the building, principal
         payable based on 30 year amortization, balloon payment
         required in 10 years                                                   452,898          542,556

        Other notes payable, including obligations under capital
         leases, expiring at various times through 2002                       1,888,162        1,356,095
                                                                           ------------     ------------

                                                                           $ 83,975,834     $ 86,597,703    
                                                                           ============     ============
</TABLE>



                                      F-21
<PAGE>   50
                              MCA FINANCIAL CORP.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        JANUARY 31, 1997, 1996 AND 1995

NOTE 3 - NOTES PAYABLE - CONTINUED

        In connection with the $28.5 million credit facility, the Company
        entered into an arrangement with the Policemen and Firemen Retirement
        System of the City of Detroit (The "Fund") whereby the Fund has agreed
        to provide payment upon the occurrence of certain events of default by
        the Company. In consideration for this, the Company pays certain fees to
        the Fund, and has provided it with an option to purchase up to five
        percent of the Company's outstanding common stock, at seventy percent of
        the public offering price per share, if the Company completes a firm
        commitment underwritten sale of its common stock prior to April 30,
        2000.

        The above notes payable place certain financial restrictions on the
        Company. If for any reason the warehouse credit facilities are
        terminated, the Company's ability to fund mortgage loans will be
        adversely impacted. The Company anticipates renewal of all of its
        existing credit facilities.

NOTE 4 - SUBORDINATED DEBENTURES

        In December 1991, the Company began offering up to $7,500,000 of 11%
        Asset-Backed Subordinated Debentures due March 15, 1997. Interest on the
        Debentures is payable quarterly. The Debentures are subordinate in right
        of payment to all current and future senior indebtedness of the Company.
        Payment of principal and interest on the Debentures is collateralized by
        a security interest in and lien upon certain existing and future
        contract rights to service mortgages and land contracts. These rights
        must at all times have a formula value, as determined by provisions of
        the Indenture, of at lease 105% of the principal amount of Debentures
        outstanding. Under certain limited conditions, the Debentures are
        redeemable commencing June 15, 1993 only up to $25,000 per holder in
        each calendar year and only up to an aggregate of $100,000 per calendar
        year for all holders. The right of redemption does not exist if the
        Company is in default under any senior indebtedness. Through January 31,
        1997 there have been $17,000 in redemptions. The Debentures also place
        restrictions on dividends and certain equity transactions should the
        Company's consolidated retained earnings fall below $1,000,000. The
        Debentures are registered with the Securities and Exchange Commission.
        These debentures were redeemed in full on March 17, 1997.


        Through January 31, 1997, the Company has incurred approximately
        $866,000 in fees related to the debenture offering. These costs are
        included in deferred charges and other assets and are being amortized
        over the life of the debentures on the straight-line method. Accumulated
        amortization was $840,000 and $686,000 at January 31, 1997 and 1996. 



                                     F-22
<PAGE>   51
                              MCA FINANCIAL CORP.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        JANUARY 31, 1997, 1996 AND 1995

NOTE 4 - SUBORDINATED DEBENTURES - CONTINUED

        In December 1994, the Company began offering up to $10,000,000 of 11%
        Asset-Backed Subordinated Debentures due June 30, 2000. Interest on the
        Debentures is payable quarterly. The Debentures are subordinate in right
        of payment to all current and future senior indebtedness of the Company.
        Payment of principal and interest on the Debentures is collateralized by
        a security interest in and lien upon certain existing and future
        contract rights to service mortgages and land contracts and specified
        mortgage notes and land contract vendors' interests relating to
        one-to-four family residential and commercial real estate. This
        collateral must at all times have a formula value, as determined by 
        provisions of the Indenture, of at least 105% of the principal amount
        of Debentures outstanding. Under certain limited conditions, the
        Debentures are redeemable only up to $25,000 per holder in
        each calendar year and only up to an aggregate of $100,000 per calendar
        year for all holders. The right of redemption does not exist if the
        Company is in default under any senior indebtedness. Through January
        31, 1997 there have been no redemptions. The Debentures are registered
        with the Securities and Exchange Commission.

        Through January 31, 1997, the Company has incurred approximately
        $1,513,000 in fees related to the debenture offering. These costs are
        included in deferred charges and other assets and are being amortized
        over the life of the debentures on the straight-line method. Accumulated
        amortization was $405,000 and $109,000 at January 31, 1997 and 1996.

        In June 1996, the Company began offering up to $6,000,000 of unsecured
        11% subordinated debentures due June 30, 2002. Interest on the
        Debentures is payable quarterly. The debentures are subordinate in right
        of payment to all current and future indebtedness of the Company. Under
        certain limited conditions, the Debentures are redeemable only up to
        $25,000 per holder in each calendar year and only up to an aggregate of
        $100,000 per calendar year for all holders. The right of redemption does
        not exist if the Company is in default under any senior indebtedness.
        The Debentures are registered with the Securities and Exchange
        Commission.

        Through January 31, 1997, the Company has incurred approximately $67,000
        in fees related to the debenture offering. These costs are included in
        deferred charges and other assets and are being amortized over the life
        of the debentures on the straight-line method. Accumulated amortization
        was $1,000 at January 31, 1997.

                                      F-23
<PAGE>   52
                              MCA FINANCIAL CORP.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        JANUARY 31, 1997, 1996 AND 1995

NOTE 5 -- SUBORDINATED NOTES PAYABLE

        In July 1996, the Company entered into a loan and financing agreement
        with The Board of Trustees of the Policemen and Firemen Retirement
        System of the City of Detroit ("The Fund") to provide the Company $15
        million to expand its non-conforming lending business. Interest on this
        borrowing is 10% and is payable quarterly. Commencing July 1, 2001 equal
        quarterly installments of principal and interest will be paid until the
        loan terminates and is repaid in full on June 30, 2006. As a result of
        this agreement, the Fund was issued 30,197 shares, or 6% of the
        Company's common stock at the time. Anti-dilution provisions of the
        agreement may require the Company to issue additional shares in the
        future. The Fund has the right to "put" these redeemable shares back to
        the Company, under a number of different scenarios, on August 1, 2006,
        or upon an event of default with a minimum guaranteed repurchase of
        $1,400,000.

NOTE 6 -- PREFERRED STOCK

        In March 1992 MCAFC began offering up to 350,000 units consisting of one
        share of Series A 9%, $10 stated value, cumulative convertible preferred
        stock and one warrant to purchase one share of common stock of the
        Company. The stock is convertible only in the event of an initial public
        offering of the Company's common stock. The warrants are conditional on
        an initial public offering of the Company's common stock within one year
        of the redemption of the warrant holders Series A preferred stock. The
        preferred stock is redeemable at any time at the option of the Company
        only. Redemption prices per share increase $.20 per year from $10.20 in
        1993 to $11 in 1997 and thereafter. Through January 31, 1997 there have
        been no redemptions. Dividends are payable quarterly.

        In June 1993, MCAFC began offering up to 750,000 units consisting of one
        share of Series B 9%, $10 stated value, cumulated convertible preferred
        stock. The stock is convertible only in the event of an initial public
        offering of the Company's common stock. The preferred stock is
        redeemable at any time on or after July 15, 1994 at the option of the
        Company only at a redemption price of $10 per share. Through January 31,
        1997 there have been no redemptions. Dividends are payable quarterly.

        Through January 31, 1997 the Company has incurred approximately $603,000
        in fees related to the preferred stock offering. These costs have been
        offset against additional paid-in capital.


                                      F-24

<PAGE>   53
                              MCA FINANCIAL CORP.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        JANUARY 31, 1997, 1996 AND 1995

NOTE 7 -- FEDERAL INCOME TAXES

          Deferred income taxes are provided for on the liability method and
          reflect the net tax effects of temporary differences between the
          carrying cost and amounts of assets and liabilities for financial
          reporting purposes and the amounts used for income tax purposes.
          Significant components of the deferred tax liability are as follows:


<TABLE>
<CAPTION>

                                                     January 31,
                                                1997            1996
                                                -----------     ------------
<S>                                             <C>             <C>

Depreciation of property and 
  office equipment                              $ 518,000       $ 416,000
Amortization of goodwill                         (120,000)       (108,000)
Other                                             2,000            (8,000)
                                                ---------       ---------
                                                $ 400,000       $ 300,000
                                                =========       =========
</TABLE>


          Components of income tax expense are:

<TABLE>
<CAPTION>

                                                     January 31,
                                1997            1996            1995     
                                -----------     -----------     ------------
<S>                             <C>             <C>             <C>
Current                         $539,000        $412,000        $ 82,384
Deferred                         100,000         100,000          20,000
                                --------        --------        --------
                                $639,000        $512,000        $102,384
                                ========        ========        ========
</TABLE>


          The income tax provision reconciled to the tax computed at the
          statutory federal rate is as follows for the years ended January 31:

<TABLE>

<S>                             <C>             <C>             <C>
Tax (benefit) at statutory
 rate                           $478,000        $383,000        $(59,000)
Non-deductible items             161,000         169,000         107,000
Adjustment of prior year
 accrual                              --              --          38,000
Other                                 --         (40,000)         16,384
                                --------        --------        --------
                                $639,000        $512,000        $102,384
                                ========        ========        ========
</TABLE>


                                      F-25

<PAGE>   54
                              MCA FINANCIAL CORP.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        JANUARY 31, 1997, 1996 AND 1995

NOTE 8 - RELATED PARTY TRANSACTIONS

         The Company purchased various real estate parcels during the years
         ended January 31, 1997, 1996 and 1995. These parcels purchased from
         unrelated third parties were subsequently sold to limited partnerships,
         for which PCA is the general partner. Gains totaling $7,539,447,
         $6,529,708 and $7,365,199 for the years ended January 31, 1997, 1996
         and 1995 were recognized on the sales, respectively.


         During the years ended January 31, 1997, 1996 and 1995 the Company
         agreed to pay commissions of $1,968,000, $1,735,000 and $1,315,000,
         respectively for the acquisition of properties acquired from unrelated
         third parties to a Company owned by three shareholders of MCAFC. These
         commissions reduced "Gain on Sale of Real Estate" in the consolidated
         Statements of Operations.

         MCA earned $36,000 for management fees for administrative services
         provided to U.S. Mutual Financial Corporation (USMFC) during each of
         the years ended January 31, 1997, 1996 and 1995, respectively. Certain
         shareholders of the Company are directors or major shareholders of
         USMFC.

         Included in accounts payable at January 31, 1997 and 1996 are
         approximately $1,044,000 and $1,500,000 attributable to transactions
         with partnerships, trusts and other related entities. Such transactions
         include rental payments received on behalf of these entities and
         disbursed in subsequent months.

                                      F-26
<PAGE>   55
                              MCA FINANCIAL CORP.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        JANUARY 31, 1997, 1996 AND 1995

NOTE 9 -  FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

          The Company is party to financial instruments with off-balance sheet
          risk in the normal course of business through the production and sale
          of mortgage loans and the management of interest rate risk. These
          financial instruments include commitments to extend credit and forward
          contracts to deliver and sell loans to investors.


          The Company is exposed to credit loss in the event of nonperformance
          by the counter-parties to the various agreements. However, the Company
          does not anticipate nonperformance by the counter-parties. The
          Company's exposure to credit risk with respect to commitments to
          extend credit are limited due to the non-recourse nature of the loans
          upon sale to investors. At January 31, 1997 and 1996, respectively,
          the Company has approved loans that had not yet closed amounting to
          approximately $40,081,000 and $74,259,000. The Company manages credit
          risk with respect to forward contracts by entering into agreements
          only with investors meeting certain requirements. In the event of
          default by the counter-party the Company's exposure to credit risk is
          the difference between the contract price and the current market
          price.


NOTE 10 - LEASE COMMITMENTS

          The Company leases office space and equipment under long-term capital
          and operating leases with varying terms which expire through 2002.
          Rent expense on operating leases approximated $2,282,000, $1,803,000
          and $1,251,000 for the years ended January 31, 1997, 1996 and 1995,
          respectively, and is included in the caption "General and
          Administrative" expense in the Consolidated Statements of Operations.

                                      F-27


<PAGE>   56
                              MCA FINANCIAL CORP.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        JANUARY 31, 1997, 1996 AND 1995

NOTE 10 -- LEASE COMMITMENTS - CONTINUED

        As of January 31, 1997, approximate future minimum lease payments under
        capital leases and future minimum lease payments under operating leases
        that have initial or remaining noncancelable terms in excess of one year
        as of follows:


<TABLE>
<CAPTION>
                                              Capital         Operating
                                              Leases          Leases
                                              --------        ----------
<S>                                           <C>             <C>
1998                                          $536,145        $1,314,462
1999                                           164,757           990,970
2000                                             1,555           645,592
2001                                                --            32,679
2002                                                --            15,000
                                              --------        ----------
        Total minimum lease payments           702,457        $2,998,703
                                                              ==========
Less: amount representing interest              66,159
                                              --------
        Present value of minimum lease
          payments                            $636,298
                                              ========

</TABLE>


NOTE 11 -- COMMITMENTS AND CONTINGENCIES

        In accordance with the terms of the investor Pass-through Trust
        Participation Agreements, the Company is obligated to purchase all
        outstanding participation certificates held by investors at such time as
        the aggregate net receivable balances of each Trust is less than 10% of
        the original face amount of the Trust. At January 31, 1997 and 1996, the
        maximum amount of these future purchase commitments totaled
        approximately $9,381,000 and $8,011,000.

        Although the Company is approved as a correspondent with numerous
        mortgage investors, three investors purchased substantially all of the
        Company's mortgage loans originated during fiscal 1997, 1996 and 1995.
        Management believes that the loss of these investors would have a
        material adverse effect on the Company.

        The Company is a party to various routine legal proceedings arising out
        of the ordinary course of its business. Management believes that none of
        these actions, individually or in the aggregate, will have a material
        adverse affect on the financial condition or results of operations of
        the Company.


                                      F-28


<PAGE>   57
                              MCA FINANCIAL CORP.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        JANUARY 31, 1997, 1996 AND 1995

NOTE 12 -- EMPLOYEE BENEFIT PLAN

           The Company has a 401(k) plan covering substantially all its
           employees. The Company has the option of making an annual
           discretionary profit sharing contribution and is matching each
           employee's contribution up to a predetermined limit.

           The Company's combined contribution to the plan amounted to $86,000,
           $22,000 and $17,000 for the years ended January 31, 1997, 1996 and
           1995.

NOTE 13 -- RESTRICTED STOCK AWARDS

           At the discretion of the Board of Directors, shares may be issued to
           employees and non-employees as incentives for performance. The number
           of shares awarded, and the terms under which such shares become
           vested (nonforfeitable), are determined on an individual basis. The
           Company recognizes the issuance of restricted shares when they become
           vested.

           As of January 31, 1997, a total of 20,002 shares have been awarded
           and remain unvested. The aggregate number of shares and the years in
           which they become vested in each of the periods succeeding January
           31, 1997 are as follows:

           1998                                         $12,168
           1999                                           7,834




                                      F-29
<PAGE>   58

                              MCA FINANCIAL CORP.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        JANUARY 31, 1997, 1996 AND 1995


NOTE 14 - SEGMENT INFORMATION

        The Company and its subsidiaries operate primarily in two business
        segments. Operations in mortgage banking involve the origination and
        purchase of mortgage loans in the secondary mortgage market, servicing
        of mortgage loans, and the purchase and sale of mortgage servicing
        rights. Operations in the real estate industry consist of the purchase
        and resale and the securitization and syndication of real estate
        interests. The following is a summary of selected consolidated segment
        information for the mortgage banking and real estate industry segments
        for the years ended:


<TABLE>
<CAPTION>

                                                                JANUARY 31,
                                                        1997           1996             1995
                                                     ---------       ---------       ---------

        <S>                                          <C>             <C>             <C>
        REVENUE
          Mortgage banking                           $ 46,512,944    $ 31,051,952    $22,512,856
          Real estate                                  12,413,396      10,899,058     10,858,825
                                                     ------------    ------------    -----------

              Total                                  $ 58,926,340    $ 41,951,010    $33,371,681
                                                     ============    ============    ===========

        INCOME (LOSS) BEFORE INCOME TAXES
          Mortgage banking                           $    824,964    $ (1,195,323)   $(3,057,212)
          Real estate                                     579,374       2,322,853      2,882,050
                                                     ------------    ------------    -----------

              Total                                  $  1,404,338    $  1,127,530    $  (175,162)
                                                     ============    ============    ===========


        IDENTIFIABLE ASSETS
          Mortgage banking                           $115,310,484    $104,990,975    $46,523,533
          Real estate                                  19,256,062      27,147,572     23,238,535
          Other                                        10,425,267       3,052,094      7,349,452
                                                     ------------    ------------    -----------

              Total                                  $144,991,813    $135,190,641    $77,111,520
                                                     ============    ============    ===========


</TABLE>


                                      F-30
<PAGE>   59
                              MCA FINANCIAL CORP.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        JANUARY 31, 1997, 1996 AND 1995

NOTE 15 -- BUSINESS ACQUISITION

           On July 19, 1994, the Company purchased substantially all of the
           revenue producing activities of Liberty National Mortgage Corporation
           (Liberty) in a transaction accounted for using the purchase method.
           These assets included certain furniture and equipment located in
           Liberty branch offices in Michigan, Maryland, West Virginia and
           Illinois and the right-to-process and close certain mortgage loans in
           process originated by Liberty. The purchase price of the furniture
           and equipment was determined by independent appraisal and payable
           within 45 days of this agreement. The appraised value was $85,000. At
           the closing of this agreement a down payment of $350,000 was made as
           an advance against amounts due as a result of future Liberty branch
           loan closings. This down payment is included in deferred charges and
           other assets in the accompanying consolidated balance sheet. Liberty
           was paid based on a negotiated formula tied to loan closings at
           Liberty branches over an eighteen month period. The total purchase
           price, was $885,000. This consists of the $85,000 referred to above
           which was capitalized and amortized as furniture and equipment,
           approximately $200,000 for loans-in-process, which upon closing were
           capitalized and amortized as a cost of the loan origination, and
           $500,000 for future branch loan closings, $150,000 of which was paid
           during July and August, 1994 and $350,000, which was paid at the
           closing. The benefits to be derived from the acquisition of these
           production offices will extend beyond the eighteen month earn-out
           period, and, accordingly have been capitalized as goodwill (included
           in deferred charges and other assets on the balance sheet) and
           amortized over a five year period, subject to periodic re-evaluation.
           In connection with the acquisition, the Company acquired
           approximately $4,000,000 of loans held-for-resale which were funded
           by the Company's warehouse credit facilities and subsequently
           purchased by outside investors under terms similar to any Company
           originated loan.

           The following unaudited pro-forma summary presents the consolidated
           results of operations as if the acquisition had occurred at February
           1, 1993, after giving effect to certain adjustments. These pro-forma
           results have been prepared for comparative purposes and do not
           purport to be indicative of what would have occurred had the
           acquisition been made as of those dates or of results which may occur
           in the future.



                                     F-31
<PAGE>   60
                              MCA FINANCIAL CORP.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        JANUARY 31, 1997, 1996 AND 1995

NOTE 15 - BUSINESS ACQUISITION - CONTINUED

<TABLE>
<CAPTION>

                                          YEAR ENDED JANUARY 31, 1995
                                          ---------------------------
                                       MCAFC            PRO-FORMA       MCAFC
                                    (HISTORICAL)       ADJUSTMENTS   (PRO-FORMA)
                                    ------------       -----------   -----------

<S>                                 <C>               <C>           <C>
REVENUES
   Gain on sale of land contracts    $ 2,983,022       $        -    $ 2,983,022
   Gain on sale of real estate         7,365,199                -      7,365,199
   Gain on bulk sales of servicing     
      rights                           7,475,444 1)      1,737,609     9,213,053
   Mortgage origination fees           5,584,454 1)      1,862,821     7,447,275
   Servicing fees                      4,616,738 1)        429,081     5,045,819
   Interest income                     5,106,041 1)        245,634     5,351,675
   Other income                          240,783           128,035       368,818
                                     -----------        ----------    ----------
        Total revenues                33,371,681         4,403,180    37,774,861
                                     -----------        ----------    ----------

EXPENSES
   Payroll                            10,985,576 1)      1,705,338    12,690,914
   Interest                            6,018,518 1)        171,221     6,189,739
   Commissions                         4,591,079 1)        836,669     5,427,748
   Professional services               1,511,215 1)         80,798     1,592,013
   Depreciation                          351,964 1)         49,275       401,239
   Amortization                        1,924,872 1)2)      110,000     2,034,872
   General administrative              8,163,619           843,557     9,007,176
                                     -----------        ----------    ----------
        Total expenses                33,546,843         3,796,858    37,343,701
                                     -----------        ----------    ----------

INCOME (LOSS) BEFORE FEDERAL
   INCOME TAXES                         (175,162)          606,322       431,160

        Provision (credit) for
          Federal income taxes           102,384 3)        206,149       308,533
                                     -----------        ----------    ----------
        

NET INCOME (LOSS)                    $  (277,546)       $  400,173    $  122,627
                                     ===========        ==========    ==========
Earnings (loss) per share            $      (.69)       $      .99    $      .30
                                     ===========        ==========    ==========
</TABLE>

Summary of Pro-Forma Adjustments:

        1) To include historical operating results of the Liberty National
           Mortgage Corporation for the year ended December 31, 1993 and the
           period ended May 31, 1994. (Certain amounts have been reclassified to
           conform to the MCAFC historical presentation.)
        2) Amortization of $500,000 of goodwill over five years.
        3) Estimated Federal income tax accrual.

                                      F-32
<PAGE>   61
                              MCA FINANCIAL CORP.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        JANUARY 31, 1997, 1996 AND 1995

NOTE 15 - BUSINESS ACQUISITION - CONTINUED

        On January 31, 1995, the Company acquired all of the issued and
        outstanding common stock of RIMCO Realty & Mortgage from RIMCO Financial
        Corporation (an entity owned by three shareholder of the Company) in
        exchange for a $945,117 reduction in amounts due the Company. Amounts
        assigned in the accompanying consolidated balance sheet to assets
        purchased and liabilities assumed were based on the seller's historical
        cost which is less than fair value.
<PAGE>   62
               Report of Independent Certified Public Accountants
                          on Supplementary Information


To the Board of Directors
  MCA FINANCIAL CORP.


Our audit was conducted for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole of MCA Financial Corp. and
subsidiaries as of and for the year ended January 31, 1997, which are presented
in the preceding section of this report. The accompanying consolidated balance
sheet and statement of operations are presented for purposes of additional
analysis and are not a required part of the basic consolidated financial
statements. Such information has been subjected to the auditing procedures
applied in the audit of the basic consolidated financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
consolidated financial statements taken as a whole.


Moore Stephens                          Grant Thornton LLP
Doeren Mayhew, P.C.                     Detroit, Michigan
April 28, 1997
Troy, Michigan


                                      F-34
<PAGE>   63


                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) 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, on April 29, 1997.

                             MCA FINANCIAL CORP.


                             By: /s/ Patrick D. Quinlan
                                -----------------------------
                                Patrick D. Quinlan, Chairman

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on April 29, 1997.



<TABLE>
<CAPTION>
      Signature                 Title (Capacity)
      ---------                 ----------------
<S>                            <C>                                              <C>
                             
/s/ Patrick D. Quinlan         Chairman and Director                            April 29, 1997
----------------------         (Principal Executive Officer)
 Patrick D. Quinlan 

                             
 /s/ Keith D. Pietila          Executive Vice President and Director            April 29, 1997
----------------------         (Principal Financial and Accounting Officer)
  Keith D. Pietila 


  /s/ Lee P. Wells             Director                                         April 29, 1997
----------------------
  Lee P. Wells


                               Director                                         April 29, 1997
----------------------
  C. Thompson Wells

                               Director                                         April 29, 1997
----------------------
  Thomas P. Cronin

 /s/ D. Michael Jehle          Director                                         April 29, 1997
----------------------
   D. Michael Jehle

                               Director                                         April 29, 1997
----------------------
   James B. Quinlan

</TABLE>


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

No Annual Report or Proxy Materials have been or will be sent to security
holders.


                                      S-1

<PAGE>   64
                                EXHIBIT INDEX




Exhibit
Number                       Description of Exhibit

3.1    Restated Articles of Incorporation, as amended (previously filed as
       Exhibit 3.1 to the Registrant's Quarterly Report on Form 10-QSB for the
       period ended April 30, 1993, and incorporated herein by reference).

3.2    Bylaws, as amended. (previously filed as Exhibit 3.2 to Amendment No. 1
       to the Registrant's Registration Statement on Form SB-2, File No.
       33-79190, and incorporated herein by reference).

4.1    Indenture, dated as of December 30, 1994, between the Registrant and
       First Fidelity Bank, N.A., as Trustee, relating to the Registrant's 11%
       Asset-Backed Subordinated Debentures Due June 30, 2000 (previously filed
       as Exhibit 4.1 to the Registrant's Registration Statement on Form S-1,
       File No. 33-98644, and incorporated herein by reference).

4.2    First Supplemental Indenture between the Registrant and First Fidelity
       Bank, N.A. dated as of October 10, 1995.

4.3    Indenture, dated as of January 1, 1992, between the Registrant and IBJ
       Schroder Bank & Trust Company relating to the Registrant's 11%
       Asset-Backed Subordinated Debentures Due 1997 (previously filed as
       Exhibit 4 to Amendment No. 2 to the Registrant's Registration Statement
       on Form S-18, File No. 33-43765C, and incorporated herein by reference).

10.1   Lease Agreement, dated April 1, 1991, between Mortgage Corporation of
       America and Multi-City Investment Company, as amended by First Amendment
       (previously filed as Exhibit 10.15 to the Post-Effective Amendment No. 1
       to the Registrant's Registration Statement on Form S-18, File No.
       33-43765C, and incorporated herein by reference).

10.2   Second, Third, Fourth, Fifth and Sixth Amendments to Exhibit 10.1
       (previously filed as Exhibit 10.12 to the Registrant's Annual Report on
       Form 10-KSB for the fiscal year ended January 31, 1994, and incorporated
       herein by reference).

10.3   Agreement and Plan of Reorganization by and among the Registrant, Metro
       Rental Properties, Inc., Patrick D. Quinlan, Lee P. Wells and C. Thompson
       Wells, Jr. (previously filed as Exhibit 10.20 to the Registrant's Annual
       Report on Form 10-KSB for the fiscal year ended January 31, 1993, and
       incorporated herein by reference). 

10.4   Revolving Credit Loan Agreement, dated April 30, 1993 by and among the 
       Registrant, MCA  Mortgage Corporation, First American Mortgage


                                      E-1
<PAGE>   65
 

       Associates, Inc., Complete Financial Corporation, Securities Corporation
       of America and Comerica Bank (previously filed as Exhibit 10.17 to the
       Registrant's Registration Statement on Form SB-2, File No. 33-63206C, and
       incorporated herein by reference).

10.5   First Amendment to Revolving Credit Loan Agreement, dated December 27,
       1993, by and among the Registrant, MCA Mortgage Corporation, Mortgage
       Corporation of America, Complete Financial Corporation, Securities
       Corporation of America and Comerica Bank, amending Exhibit 10.4
       (previously filed as Exhibit 10.18 to the Registrant's Annual Report on
       Form 10-KSB for the fiscal year ended January 31, 1994, and incorporated
       herein by reference).

10.6   Second Amendment to Revolving Credit Loan Agreement, dated February 25,
       1994, by and among the Registrant, MCA Mortgage Corporation, Mortgage
       Corporation of America, Complete Financial Corporation, Securities
       Corporation of America and Comerica Bank, amending Exhibit 10.4
       (previously filed as Exhibit 10.19 to the Registrant's Annual Report on
       Form 10-KSB for the fiscal year ended January 31, 1994, and incorporated
       herein by reference).

10.7   Credit Enhancement Umbrella Agreement, dated April 30, 1993, by and among
       the Registrant, MCA Mortgage Corporation, First American Mortgage
       Associates, Inc. and The Board of Trustees of the Policemen and Firemen
       Retirement System of the City of Detroit (previously filed as Exhibit
       10.18 to the Registrant's Registration Statement on Form SB-2, File No.
       33-63206C, and incorporated herein by reference).

10.8   First Amendment to Credit Enhancement Umbrella Agreement, dated December
       27, 1993, by and among the Registrant, MCA Mortgage Corporation, Mortgage
       Corporation of America and the Board of Trustees of the Policemen and
       Firemen Pension Fund of the City of Detroit, amending Exhibit No. 10.7
       (previously filed as Exhibit 10.21 to the Registrant's Annual Report on
       Form 10-KSB for the fiscal year ended January 31, 1994, and incorporated
       herein by reference).

10.9   Piggyback Rights Agreement, dated April 30, 1993, between the Registrant
       and The Board of Trustees of the Policemen and Firemen Retirement System
       of the City of Detroit (previously filed as Exhibit 10.19 to the
       Registrant's Registration Statement on Form SB-2, File No. 33-63206C, and
       incorporated herein by reference).

10.10   Form of Stock Redemption Agreement, dated January 20, 1994, between the
       Registrant and each of Patrick D. Quinlan, James B. Quinlan, Keith D.
       Pietila, Thomas P. Cronin, Lee P. Wells and David C. Wells (previously
       filed as Exhibit 10.24 to the Registrant's Annual Report on Form 10-KSB
       for the fiscal year ended January 31, 1994, and incorporated herein by
       reference).


                                      E-2

<PAGE>   66



10.11  Agreement and Plan of Reorganization, dated January 27, 1994, by and
       among the Registrant, North-Side Homes, Inc., Patrick D. Quinlan, Lee P.
       Wells, Roger Smigiel, Leroy G. Rogers, David C. Wells and Janet K. Wells
       (previously filed as Exhibit 10.25 to the Registrant's Annual Report on
       Form 10-KSB for the fiscal year ended January 31, 1994, and incorporated
       herein by reference).

10.12  Mortgage Loan Participation Agreement, dated May 19, 1993, between MCA
       Mortgage Corporation and Paine Webber Real Estate Securities Inc.
       (previously filed as Exhibit 10.26 to the Registrant's Annual Report on
       Form 10-KSB for the fiscal year ended January 31, 1994, and incorporated
       herein by reference).

10.13  Conforming Mortgage Loan Participation Agreement, dated May 19, 1993,
       between MCA Mortgage Corporation and Paine Webber Real Estate Securities
       Inc. (previously filed as Exhibit 10.27 to the Registrant's Annual Report
       on Form 10-KSB for the fiscal year ended January 31, 1994, and
       incorporated herein by reference).

10.14  Escrow Agreement between the Registrant and Comerica Bank, as Escrow
       Agent (previously filed as Exhibit 10.23 to Amendment No. 1 to the
       Registrants Registration Statement on Form SB-2, File No. 33-79190, and
       incorporated herein by reference).

10.15  Agreement and Plan of Acquisition and Merger dated as of June 20, 1994
       among MCA Financial Corp., Complete Financial Corporation and Liberty
       National Mortgage Corporation (previously filed as Exhibit 2 to the
       Registrant's Current Report on Form 8-K dated July 27, 1994, and
       incorporated herein by reference).

10.16  Warehousing Credit and Security Agreement dated as of July 1, 1994
       between MCA Mortgage Corporation, PNC Mortgage Bank, N.A. and Marine
       Midland Bank (replacing agreements previously filed as Exhibits 10.13,
       10.14, 10.15 and 10.23 to Registration Statement No. 33-79190)
       (previously filed as Exhibit 10.1 to the Registrant's Quarterly Report on
       Form 10-QSB for the period ended July 31, 1994, and incorporated herein
       by reference).

10.17  Whole loan Financing Program dated as of October 6, 1993 among MCA
       Mortgage Corporation, DLJ Mortgage Capital, Inc. and Sears Savings Bank,
       FSB (previously filed as Exhibit 10.2 to the Registrant's Quarterly
       Report on Form 10-QSB for the period ended July 31, 1994, and
       incorporated herein by reference).


10.18  Amendment to Whole loan Financing Program dated as of April 30, 1994
       among MCA Mortgage Corporation and DLJ Mortgage Capital, Inc., amending
       Exhibit No. 10.17 (previously filed as Exhibit 10.27 to Amendment No. 2
       to the Registrant's Registration Statement on Form SB-2, File No.
       33-79190, and incorporated herein by reference).


                                      E-3

<PAGE>   67



10.19  Third Amendment to Revolving Credit Loan Agreement, dated May 26, 1994,
       by and among the Registrant, MCA Mortgage Corporation, Mortgage
       Corporation of America, Complete Financial Corporation, Securities
       Corporation of America and Comerica Bank, amending Exhibit 10.4
       (previously filed as Exhibit 10.1 to the Registrant's Quarterly Report on
       Form 10-QSB for the period ended April 30, 1994, and incorporated herein
       by reference).

10.20  Fourth Amendment to Revolving Credit Loan Agreement, dated September 30,
       1994, by and among the Registrant, MCA Mortgage Corporation, Mortgage
       Corporation of America, Complete Financial Corporation, Securities
       Corporation of America and Comerica Bank, amending Exhibit 10.4
       (previously filed as Exhibit 10.29 to Amendment No. 2 to the Registrant's
       Registration Statement on Form SB-2, File No. 33-79190, and incorporated
       herein by reference).

10.21  Second Amendment to Credit Enhancement Umbrella Agreement, dated May 26,
       1994, by and among the Registrant, MCA Mortgage Corporation, Mortgage
       Corporation of America and the Board of Trustees of the Policemen and
       Firemen Pension Fund of the City of Detroit, amending Exhibit No. 10.7
       (previously filed as Exhibit 10.2 to the Registrant's Quarterly Report on
       Form 10-QSB for the period ended April 30, 1994, and incorporated herein
       by reference).

10.22  Third Amendment to Credit Enhancement Umbrella Agreement, dated September
       8, 1994, by and among the Registrant, MCA Mortgage Corporation, Mortgage
       Corporation of America and the Board of Trustees of the Policemen and
       Firemen Pension Fund of the City of Detroit, amending Exhibit No. 10.7
       (previously filed as Exhibit 10.31 to Amendment No. 2 to the Registrant's
       Registration Statement on Form SB-2, File No. 33-79190, and incorporated
       herein by reference).

10.23  Line of Credit Agreement, dated October 1994, among MCA Mortgage
       Corporation, Rimco Financial Corp. and Sterling Bank & Trust FSB
       (previously filed as Exhibit 10.32 to the Registrant's Annual Report on
       Form 10-KSB for the fiscal year ended January 31, 1995, and incorporated
       herein by reference).

10.24  Stock Purchase Agreement, dated January 31, 1995, between the Registrant
       and Rimco Financial Corp. (previously filed as Exhibit 10.33 to the
       Registrant's Annual Report on Form 10-KSB for the fiscal year ended
       January 31, 1995, and incorporated herein by reference).

10.25  Line of Credit Agreement, dated March 17, 1995, among MCA Financial
       Corp., RIMCO Realty & Mortgage Co. and Comerica Bank (previously filed as
       Exhibit 10.01 to the Registrants Quarterly Report on Form 10-Q for the
       period ended April 30, 1995, and incorporated herein by reference)

10.26  First Amendment to Escrow Agreement, dated September 18, 1995, between
       the Registrant and Comerica Bank, as Escrow Agent, amending



                                      E-4

<PAGE>   68



       Exhibit No. 10.14 (previously filed as Exhibit 10.26 to the Registrant's
       Registration Statement on Form S-1, File No. 33-98644, and incorporated
       herein by reference).

10.27  Seventh and Eighth Amendments to Exhibit 10.1.

10.28  Mortgage Loan Repurchase Agreement, dated November 1, 1995, between MCA
       Mortgage Corporation, Mortgage Corporation of America and Paine Webber
       Real Estate Securities Inc.

10.29  Loan and Financing Agreement, dated July 18, 1996, by and among the
       Company and its subsidiaries and the Board of Trustees of the Policemen
       and Firemen Retirement System of the City of Detroit.  Previously filed
       as Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q, and
       incorporated herein by reference.

10.30  Subordinated Promissory Note, dated July 18, 1996, by and among the
       Company and its subsidiaries, and the Board of Trustees of the Policemen
       and Firemen Retirement System of the City of Detroit.  Previously filed
       as Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q, and
       incorporated herein by reference.

10.31  Piggyback Rights Agreement, dated July 18, 1996, by and among the Company
       and the Board of Trustees of the Policemen and Firemen Retirement System
       of the City of Detroit.  Previously filed as Exhibit 10.3 to the
       Registrant's Quarterly Report on Form 10-Q, and incorporated herein by
       reference.

10.32  Put Agreement, dated July 18, 1996, by and among the Company and the
       Board of Trustees of the Policemen and Firemen Retirement System of the
       City of Detroit. Previously filed as Exhibit 10.4 to the Registrant's
       Quarterly Report on Form 10-Q, and incorporated herein by reference.

10.33  Escrow Agreement, dated July 18, 1996, by and among the Company and its
       subsidiaries, the Board of Trustees of the Policemen and Firemen
       Retirement System of the City of Detroit.  Previously filed as Exhibit
       10.5 to the Registrant's Quarterly Report on Form 10-Q, and incorporated
       herein by reference.

10.34  Loan Agreement, dated September 3, 1996, by and among the Company, MCA
       Mortgage Corporation, Mortgage Corporation of America and Texas Commerce
       Bank National Association.  Previously filed as Exhibit 10.6 to the
       Registrant's Quarterly Report on Form 10-Q, and incorporated herein by
       reference.

10.35* Securitization Access Agreement, dated November 1, 1996, by and among
       MCA Financial Corp., MCA Mortgage Corporation, Mortgage Corporation of
       America, Advanta Mortgage Conduit Services, Inc. and Advanta Mortgage
       Corp. USA.


                                      E-5

<PAGE>   69



10.36*   Amended and Restated Securitization Access Agreement, amended as of
         February 21, 1997, by and among MCA Financial Corp., MCA Mortgage
         Corporation, Mortgage Corporation of America, Advanta Mortgage Conduit
         Services Inc. and Advanta Mortgage Corp. USA.

12*      Computation of Ratio of Earnings to Fixed Charges.

21       Subsidiaries of the Registrant (previously filed as Exhibit 10.21 to
         the Registrant's Registration Statement on Form S-1, File No. 33-98644,
         and incorporated herein by reference).

27*      Financial Data Schedule

----------
*Filed herewith




                                      E-6